TIDMHAYD
RNS Number : 6204K
Haydale Graphene Industries PLC
23 September 2016
23 September 2016
Haydale Graphene Industries plc
("Haydale" or the "Group")
Preliminary Results for the Year Ended 30 June 2016
Haydale Graphene Industries plc (AIM: HAYD), the Group focused
on enabling technology for the commercialisation of graphene and
other nanomaterials, is pleased to announce its annual results for
the year ended 30 June 2016.
Operational Highlights:
-- Collaboration agreement with world leading resin company,
Huntsman Advanced Materials to develop graphene enhanced resins
initially with its market leading Araldite(R) epoxy resin,
targeting thermal conductivity in the industrial composites,
automotive and aerospace markets;
-- Collaboration agreement between Haydale and Graphit Kropfmühl
("GK"), part of AMG Advanced Metallurgical Group N.V., focusing on
the development of new value added nano-material products using
Haydale's functionalisation process and GK graphitic material,
primarily from its mine in Sri Lanka;
-- Establishing a European Centre of Excellence under the GK
agreement including sale and subsequent delivery of one R&D
(HT60) and one larger (HT200) capacity reactor at commercial
rates;
-- Joint development agreement with one of the world's largest
glass fibre reinforced plastic ("GRP") companies, Flowtite
Technology AS, to develop the next generation GRP pipe systems for
water and sewerage applications;
-- Strengthened our ink capability through a commercial tie up
with Taiwan specialist ink manufacturer Dowton Electronic Materials
Co., Ltd., for the development, production, sales and marketing of
a Haydale-branded graphene enhanced screen printable ink which will
be aimed initially at the biomedical market; and
-- Patent granted by the European Patent Office and already extended to China and Australia.
Post Period End Highlights:
-- Acquisition of Innophene Co., Ltd ("Innophene"), based in
Bangkok, Thailand, which will become our Far Eastern "Centre of
Excellence", enabling the Group to rapidly respond to customers'
needs in the APAC region and provides us with high quality, low
cost processing, treatment and R&D expertise to accelerate
product development;
-- Conditional acquisition of ACMC Holding, Inc., and its wholly
owned trading subsidiary, Advanced Composites Materials, LLC
("ACM"), which will become the Group's North American "Centre of
Excellence" and is the low risk entry point into the US market,
where the initial focus is on increasing ACM's existing $3.8
million of annual sales of silicon carbide nanomaterials, in both
the US and across our other geographic territories;
-- Appointment of Trevor Rudderham as CEO of Haydale
Technologies Inc, our US subsidiary that is acquiring ACM, to run
and grow the Group's North American operations; and
-- Launch of new graphene enhanced Polylactic Acid ("PLA") 3D
printing filament to be launched at the TCT show in Birmingham on
28 September.
Financial Highlights:
This year's results are consistent with our internal projections
and market expectations:
-- Group income up 30% year on year to GBP1.92 million (2015: GBP1.48 million);
-- Adjusted EBITDA loss of GBP3.36 million (2015: GBP2.38 million);
-- Investment in R&D increased to GBP0.94m (2015 GBP0.56m);
-- Continued investment in our reactor and processing capacity
totalled GBP0.47 million (2015: GBP1.18 million);
-- Cash balance at year end of GBP2.86 million (2015: GBP2.05 million); and
-- Successful placing and open offer in November 2015 to raise GBP6.0 million (before costs)
Commenting on the results Ray Gibbs, CEO of Haydale, said:
"The year has been a transitional one moving the business from
an R&D focussed operation into a sales and marketing
organisation delivering sales of graphene enhanced products. As is
normal with a new technology, gaining market acceptance can be a
long and difficult task and there are many challenges to meet.
However, having invested heavily during the year, we now have the
tools to overcome these barriers to entry. We have added to our
technical sales teams, substantially increased our production
capability, secured a proven, robust supply chain and invested in
overseas sales operations to open and serve markets in the Far East
and North America. We are set for growth starting with the launch
this month of the exciting new product, our branded graphene
enhanced 3D PLA printing filament.
The current financial year is entirely focussed on accelerating
conversion of our extensive research and product development into a
sales pipeline with commercial revenues of graphene enhanced
products. Our routes to market are established in key markets with
best in class partners. We have income visibility from our long
term grant awards, the ongoing traditional composite consulting
services at HCS, advanced leads for the sale of additional reactors
into strategic locations and following completion of the
acquisition of ACM, we expect to have material high quality
recurring revenues from complementary sales of advanced silicon
carbide whiskers and fibres. We look forward to the future with
confidence."
The Market Abuse Regulation ("MAR") became effective from 3 July
2016. Market soundings, as defined in MAR, were taken in respect of
the proposed placing of new ordinary shares (relating to the
proposed acquisition of ACM) which was announced at 7a.m. today
("Placing Announcement") with the result that certain persons
became aware of inside information, as permitted by MAR. That
inside information was set out in the Placing Announcement and this
announcement. Therefore, those persons that received inside
information in a market sounding are no longer in possession of
inside information relating to the Company and its securities.
- Ends -
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
Emma Earl
Cantor Fitzgerald Europe (Broker) +44 (0) 20 7894 7000
David Foreman (Corporate Finance)
Will Goode (Corporate Finance)
David Banks (Sales)
Hermes Financial PR
+44 (0) 7889 153
628
Trevor Phillips +44 (0) 7979 604
Chris Steele 687
About Haydale
Haydale has developed a patented scalable plasma process to
functionalise graphene and other nanomaterials. This enabling
technology can provide Haydale with a rapid and highly
cost-efficient method of supplying tailored solutions to enhance
applications for both raw material suppliers and product
manufacturers.
Functionalisation is carried out through a patented low-pressure
plasma process that treats both mined, organic fine powder and
other synthetically produced nanomaterial powders, producing
high-quality few layered graphenes and graphene nanoplatelets. The
process can functionalise with a range of chemical groups, with the
level of functionalisation tailored to the customer's needs. Good
dispersion improves the properties and performance of the host
material and ensures the final product performs as specified.
The Haydale plasma process does not use wet chemistry, nor does
it damage the material being processed; rather, it can clean up any
impurities inherent in the raw material. The technology is a low
energy user and most importantly environmentally friendly. The
Haydale process is a patented enabling technology, allowing the
Group to work with a raw material producer who seeks to add value
to the base product and tailor the outputs to meet the target
applications of the end user.
Haydale, based in South Wales and housed in a purpose-built
facility for processing and handling nanomaterials, is facilitating
the application of graphenes and other nanomaterials in fields such
as inks, sensors, energy storage, composites, paints and
coatings.
www.haydale.com Twitter: @haydalegraphene
CHAIRMAN'S STATEMENT
I am very pleased to present the Company's full year results to
30 June 2016. This period has seen the continued implementation of
our strategy to promote Haydale as the pre-eminent solutions
provider in the commercialisation of graphene and other advanced
nanomaterials. In order to introduce products using these advanced
materials we continue to engage in partnerships, collaborations and
other commercial arrangements with "best in class" companies in our
chosen market sectors. A prime example of this is our agreement
with Huntsman Advanced Materials who, with global sales of over $10
billion, are one of the world's leading advanced materials
suppliers. Another example is the Amiantit Company who are one of
the world's largest glass fibre reinforced plastic ("GRP") pipe
companies. We expect to commence generating commercial revenues
from these current collaborations in the 2017 calendar year.
These two organisations alone will require a secure and robust
supply chain and that is why our agreement with AMG Advanced
Metallurgical Group N.V. ("AMG") announced in May 2016 is so
important. This agreement secures a partner capable of
"industrialising" our products and becoming our European "Centre of
Excellence". AMG are committing significant resources in setting up
a new facility at their subsidiary, Graphite Kropfmühl ("GK"), in
Hauzenburg, Bavaria. This facility will be able to satisfy the
requirements of our customers and joint development partners. On
top of this we have access to a substantial range of graphitic
materials from AMG which as a starter material are crucial in
delivering the required future expected volumes. Ensuring we have
strategically located, dedicated processing centres with a secure,
sustainable, consistent, quality material supply is at the heart of
our commercialisation strategy.
Fundraising and corporate activity
In November 2015 we announced the successful placing and open
offer that raised GBP6.0 million (before costs) required to fund
the ongoing working capital, investment in people, additional
plasma reactors and accelerate the product development work on
graphene enhanced resins for composites. Additionally, the funding
allowed us to continue our global expansion strategy, particularly
in Asia, where the culture of doing business is significantly
different from that in the Western world. The Asian market demands
extensive proof of capability before engaging in commercial
discussions. They also demand rapid service and turnaround which
requires dedicated local support.
I reported last year that part of our strategy was to consider
suitable acquisitions where these provide access to sales with
complementary products in our primary target markets of inks and
coatings, and composites. We have successfully completed the
integration of our first acquisition, UK based Haydale Composite
Solutions Limited ("HCS") (formerly EPL Composite Solutions
Limited) which was based on a formula of a cash and share payment
for the target vendors over a 2 year earn out. This formula worked
well and we have repeated the structure on the announcement today
of the acquisition of ACMC Holding, Inc., and its wholly owned
trading subsidiary, Advanced Composites Materials, LLC. (together
"ACM"), a profitable, high quality USA based silicon carbide
producer, for a maximum consideration of up to $7.0 million
(approximately GBP5.2 million) payable over the next 3.5 years.
Having spent over a year evaluating the North American market, we
concluded that the best way to secure a strategic foothold is to
acquire a complementary business offering significant growth
potential and synergistic products, whilst also allowing for
substantial cross selling opportunities within the Haydale
Group.
I am delighted to report that we have also appointed Trevor
Rudderham as CEO of Haydale Technologies Inc, our US subsidiary
that is acquiring ACM, to run the Group's North American
operations. We have ambitious sales targets for our North American
operations and we estimate the USA represents around 40% of the
world market for our advanced materials. We believe that the
acquisition of ACM, which will become the Group's North American
"Centre of Excellence", is our low risk entry point into the US
market where increasing ACM's existing $3.8 million of annual sales
of silicon carbide nanomaterials, in both the US and across our
other geographic territories, is our initial focus. We will then
look to increase sales of our graphene enhanced products to US
customers. The strategic report covers the acquisition of ACM in
more detail.
Post year end, we also acquired Innophene Co., Ltd
("Innophene"), based in Bangkok, Thailand, which will become our
Far Eastern Centre of Excellence. Innophene allows us to rapidly
respond to customers' needs in the region and provides us with high
quality R&D expertise to accelerate our product development.
Now we have this extra capability we expect to see increased sales
activity in this territory over the coming months.
Sales and Marketing
I am particularly proud of the progress made transitioning the
Group from research and development to a sales focussed operation.
As our suite of products become market ready we will be utilising
the existing significant sales and marketing capabilities of
Huntsman and our collaboration partner, AMG. Our newly announced
graphene loaded polylactic acid (PLA) 3D printing filament will be
promoted through distributors in Europe. In Asia we have secured a
quality distributor in Taiwan, set up sales and marketing
infrastructure in Korea and in Innophene, an operational foothold
from which a new centre of excellence will be established to serve
the region.
There still remains today a lack of market understanding over
the performance of and use of graphene and other new advanced
materials such as emerging 2D and 3D nanomaterials. Our work has
however confirmed that combining one or more nanomaterials with
graphene produces outstanding performance enhancements. We continue
to obtain third party verification of our claims in the performance
improvements we can make to, for example, epoxy and polyester
resins together with glass and carbon fibre structures. Our aim
continues to be to demonstrate the significant performance
improvements obtained in the tailored addition of graphene and
other nanomaterials by commercialising them as quickly and
effectively as possible.
The market continues to stress that there is eager anticipation
of the first substantive application that capitalises on the
outstanding properties of graphene. We expect substantial take up
in the graphene 3D PLA printing filament to be launched at the end
of September 2016. Our patented process granted by the European
Patent Office has already been extended to China and Australia
whilst other territories are expected to follow. Our patents and
know how provide the novel enabling technology which delivers
materials improvements required for commercialisation. We are well
placed in the nanomarket where we have access to a multitude of
sustainable materials, coupled with a variety of chemical
functionalisation that when used with the developed know how of
mixing and processing techniques, provides a powerful combination
to deliver the performance improvements industry seeks.
As is normal with a new technology, gaining market acceptance is
often a long and difficult task and there are many challenges to
meet. We now have the tools to overcome these barriers to entry. We
have increased our technical team, substantially increased our
production capability, obtained a proven supply chain and invested
in overseas sales representation to open markets in the Far East
and North America. This progress is further outlined in the
Strategic Report.
Financial results
Income for the year ended 30 June 2016 increased 30 per cent.
year on year to GBP1.92 million (2015: GBP1.48 million), being
generated from a mixture of reactor sales, grant income and HCS's
traditional composite consulting business. Adjusted EBITDA (EBITDA
adjusted for share-based payment charges and profit/loss on
disposal of property, plant and equipment of GBP0.22 million (2015:
GBP0.26 million)) was a loss of GBP3.36 million (2015: GBP2.38
million). Our cash outflow from operating activities was GBP3.28
million (2015: GBP2.73 million) and we continued to invest in our
reactor and processing capacity during the year, which totalled
GBP0.47 million (2015: GBP1.18 million). We ended the year with
cash of GBP2.86 million (2015: GBP2.05 million).
Operational highlights
During the year under review, the operational highlights for the
Group can be summarised as follows:
-- Announcement of a collaboration agreement with a world
leading resin company, Huntsman Advanced Materials. The agreement
specified a joint development of "graphene" enhanced resins such as
Huntsman's market leader epoxy resin Araldite(R) in key composite
markets, focussing initially on thermal conductivity. This work is
the platform for development of a range of new graphene enhanced
Araldite(R) resins which will be targeted at the industrial
composites, automotive and aerospace markets;
-- Confirmation of granted patent by the European Patent Office
of the Haydale Plasma functionalisation process for, crucially,
carbon and other nanoparticles, plus granted patents in China and
Australia;
-- Delivery, commissioning and installation of a HT60 R&D
reactor to UK based, Centre of Process and Innovation ("CPI");
-- Grant funded development projects secured totalling over GBP0.8 million;
-- Announcement of a joint development agreement with Lincoln
based SHD Composites Limited to launch graphene loaded resin
impregnated woven fabrics (known as "pre preg"). The target markets
include aerospace, automotive and sporting goods, together with the
$1.25 billion "out of autoclave" carbon fibre curing resin
industrial tooling market;
-- Set up and commissioning of composite pipe testing facility
at Haydale Composite Solutions ("HCS") to enable the development
and approval of graphene enhanced polymer pipes for the oil and gas
industry;
-- Our focus on conductive ink has culminated in a second patent
application from the Swansea University pipeline agreement, this
time in wearable heated apparel aimed at high performance material
for elite sports. We have strengthened our ink capability through a
commercial tie up with Taiwan specialist ink manufacturer Dowton
Electronic Materials Co., Ltd., for the development, production,
sales and marketing of a Haydale-branded graphene enhanced screen
printable ink which will be aimed initially at the biomedical
market;
-- Joint development agreement between HCS and Flowtite
Technology AS, the wholly owned GRP pipe technology and R&D
Centre of The Saudi Arabian Amiantit Company, one of the world's
largest glass fibre reinforced plastic ("GRP") pipe companies. The
programme is to develop the next generation GRP pipe systems for
water and sewerage applications; and
-- Collaboration agreement between Haydale and GK, part of AMG
Advanced Metallurgical Group N.V., focusing on the development of
new value added nano-material products using Haydale's
functionalisation process and certain GK graphitic feedstock
material, primarily from its mine in Sri Lanka. Under the agreement
Haydale supplies, under licence, one R&D reactor (HT60) and one
larger capacity reactor (HT200) at commercial rates to GK for use
in new R&D programs and the commencement of processing
commercial volumes.
Outlook
This year's results are consistent with our projections and
market expectations. The current financial year is entirely
focussed on the conversion of our extensive research and product
development into a sales pipeline and commercial revenues of
graphene enhanced products. We have income visibility from our long
term grant awards, the ongoing traditional composite consulting
services at HCS, advanced leads for the sale of additional reactors
into strategic locations and we now have material recurring
revenues from ACM's sales of advanced silicon carbide whiskers and
fibres.
We have ambitious plans for growth in the Far East following
intensive customer evaluations, especially in Korea, Taiwan and our
new "Centre of Excellence" in Thailand. The acquisition of
Innophene, which completed in early September 2016, is another
significant strategic move in the geographic expansion and creation
of appropriate operations to service the local markets. We have
quality, experienced local management to deliver on our growth
plans, which include the supplying, installing and commissioning of
an HT60 plasma reactor into Innophene's facility in Bangkok to
satisfy locally the processing requirements of demanding Korean and
Taiwanese customers seeking rapid materials evaluation and
treatment.
The announcement today of the acquisition of ACM provides
Haydale with an established base in North America which will be the
first US "Centre of Excellence", situated in the high growth tech
region of South Carolina. Our strategy is to take advantage of a
fragmented and largely untapped graphene and nano technology
market. This operation has quality technical and now commercial
management to deliver aggressive growth plans. In addition to ACM,
we are currently in preliminary discussions with two strategically
important parties in the US regarding acquiring Haydale plasma
reactors.
We are now set with capability and planned facilities in the key
geographic and strategic territories allowing us to promote our
technological solution and value add products to a significant and
expectant market. Our supply partners provide a sustainable
material source and the reactors are capable of scaling to meet
initial demand. These initiatives, together with other development
opportunities under consideration, lead the Board to believe that
the Group is in a strong position to grow its operations, both at
home and overseas, and to deliver its business plan for the benefit
of all shareholders. In support of these strategic aims we have,
since the year end:
-- Announced we will be launching graphene enhanced PLA
filaments for 3D printing at the TCT show in Birmingham on 28 and
29 September 2016;
-- Completed the acquisition of Innophene on 9 September 2016; and
-- Today announced the conditional acquisition of ACM.
We announced in July that Dr Chris Spacie was stepping down as a
plc director to concentrate principally on delivering capacity and
processing improvements on the plasma reactors. I would like to
thank him for the valuable contribution he has made to the Board
over the years and the impact on processing controls and plasma
reactor improvements since 2013.
When I joined the Board in November 2013, my intended tenure was
to be for at least a 2 year period. Having now served almost 3
years, I believe now to be the right time to step aside and let a
new Chairman preside over the next phase of Haydale's growth. The
business has moved on considerably since I joined, and the
admission to AIM in April 2014 has provided access to capital and
the platform to propel Haydale forward and grow. It is very
pleasing to see that we now have geographic coverage in the
strategic territories the Board considers our major business
opportunities exist. I am also proud to have led the Company during
a period of so many collaborations with major multinationals being
entered into and the endorsement of our products, service and
technical offering to date by these partners. Our partners provide
the means to generate sales and we remain confident that our
growing product portfolio will generate increased revenue in 2017.
I will continue the Chairman role for the present, but intend to
step aside once a suitable candidate has been found to navigate the
business through commercialisation, the natural evolution and next
phase of the Company's life.
Finally, I would therefore like to thank the staff, my fellow
Board members and the Group's external advisers for their hard work
and dedication in positioning the Group for its next stage of
development; sales growth. This year is the period when we seek to
generate significant sales increase and given the recent overseas
investment, the ongoing equipment, new staff and promotion we have
the platform to achieve our objectives.
John Knowles
Chairman
23 September 2016
STRATEGIC REPORT
The directors present their Strategic Report for the year ended
30 June 2016.
PRINCIPAL ACTIVITIES
Haydale Graphene Industries Plc ("HGI", "Haydale" or the
"Group") is the AIM listed group that has developed a patented
scalable plasma process to functionalise graphene and other
nanomaterials which, together with extensive mixing and dispersion
know-how, allows graphene and other nanomaterials to be
incorporated into existing products to provide industry with value
added commercial products. The Group has evolved considerably in
the last 2 1/2 years and now has subsidiaries and a physical
presence in its chosen key markets and geographies worldwide. In
summary, these subsidiaries are:
Haydale subsidiary Location Principal activities
----------------------- ------------------- ------------------------------
Haydale Limited Ammanford, Wales Main R&D operation
which also sources,
handles, functionalises
and processes nanomaterials
Haydale Composite Loughborough, Composites design,
Solutions Limited England R&D and testing specialist,
("HCS") covering the full
product development
lifecycle
Haydale Technologies Seoul, South Dedicated sales servicing
(Korea) Limited Korea the fast moving Korean,
("HTK") Chinese and Japanese
markets
Innophene Co., Bangkok, Thailand Provides a low cost
Ltd ("Innophene") R&D Centre of Excellence,
- to be renamed servicing the APAC
Haydale Technologies region and supporting
(Thailand) Company HTK's sales team
Limited ("HTT")
Haydale Technologies, South Carolina, HTI has conditionally
Inc. ("HTI") USA acquired ACM which
provides new premises
suitable for establishing
the Group's US Centre
of Excellence
Taking each subsidiary above in turn:
Haydale Limited is the main R&D operation which also
sources, handles, functionalises and processes nanomaterials using
a suite of prototyping and analytical equipment, as well as its own
patented plasma reactors, to facilitate the commercial application
of graphene and other nanomaterials for both internal product
development and third party customers worldwide. Haydale Limited's
facility has the capability to produce carbon based conductive inks
and has mixing equipment for preparing thermoset masterbatch
samples with high loadings of functionalised nanomaterials.
Haydale Limited has also entered into a collaboration agreement
with Graphit Kropfmuhl GmbH ("GK"), part of AMG Advanced
Metallurgical Group N.V. ("AMG") to develop new valued added
nanomaterial products using Haydale's HDPlas(R) functionalisation
process and Haydale Limited will supply an HT60 R&D reactor and
a larger capacity HT200 reactor to a purpose built GH facility in
Germany, creating the Group's European Centre of Excellence.
HCS is a recognised composite, design, R&D and testing
house, that spans the complete product development lifecycle.
Historic customers included significant corporations such as
National Grid, SSE, Eirgrid, Chevron, Anglian Water, Severn Trent
Water, Yorkshire Water and 3M. More recently HCS has been
developing next generation products using Haydale's functionalised
nanomaterials with leading epoxy resin producer Huntsman Advanced
Materials ("Huntsman"), the owners of the Araldite(R) brand, and
Flowtite Technology AS, the wholly owned GRP Pipe technology and
R&D centre of The Saudi Arabian Amiantit Company
("Amiantit").
HCS has developed a reputation for delivering innovative
solutions in the commercial applications of advanced polymer
composite materials working with global companies for more than 20
years, primarily in the thermoset market. There are, on average,
over 7 million tonnes of thermoset resin produced globally each
year. Historically, HCS's business has focused on a range of market
sectors where thermoset resins have tended to dominate, including
the oil, gas and water industries, infrastructure for electricity
and energy sectors plus the marine and transportation markets. HCS
also works with OEMs and end-users to develop and provide composite
solutions with demonstrable clear technical, economic and
environmental benefits over existing structures currently
manufactured in traditional materials such as steel, aluminium,
wood or concrete.
Following its acquisition by HGI in 2014, HCS's focus has
expanded into developing products which incorporate graphene and
other nanomaterials (principally Carbon Nano Tubes ("CNTs")) using
both thermoset and thermoplastic resins in order to enhance
specific properties of the resulting composite structure, including
thermal conductivity, electrical conductivity and mechanical or
physical characteristics (such as strength, stiffness and fracture
toughness).
In anticipation of being able to serve a global market, the
Group now has operations in the Far East, through HTK, its
subsidiary in South Korea, and its newly acquired business in
Thailand, Innophene Co., Ltd, ("Innophene"). HTK has a sales office
in Seoul and employs a sales and marketing person dedicated to
serving the Korean, Chinese and Japanese markets. Innophene, to be
renamed Haydale Technologies (Thailand) Company Limited ("HTT"),
has sales personnel as well as an R&D team capable of serving
the fast moving Far Eastern markets.
HTI, the Group's US subsidiary and the entity which has today
conditionally acquired ACMC Holding, Inc., and its wholly owned
trading subsidiary, ACM, has previously contracted with a sales and
marketing agent but has now appointed Trevor Rudderham as CEO and
hired a salesman tasked with increasing sales at ACM and
introducing Haydale graphene products into the US.
Commercialising Graphene and the performance conundrum
Having the ability and knowledge to incorporate the most
appropriate nanomaterials in a (hybrid) combination is something
which the Haydale management feels is unique in the market today
opening up a range of opportunities to position the company as the
solution based enabling technology to commercialise graphene and
other nanomaterials. Now strategically well positioned
geographically, Haydale can source the most appropriate graphene
and other nanomaterials feedstock from suppliers that, in
conjunction with its unique patented plasma treatment (known as
functionalisation), and its extensive knowledge based mixing and
processing capability, can provide a tailored customer focussed
solution. The Group's technology and know-how enables nanoparticles
to be dispersed uniformly into the target host material where, most
importantly, homogeneous dispersion is essential in enabling the
well documented significant properties of graphene and other
nanomaterials to be realised.
The Group's management continues to promote the real benefits of
graphene and other nanomaterials rather than the lab based, highly
technical and specialised potential which has the tendency to
generate significant amounts of hype. Through its work on the
resins program for Huntsman we have developed considerable know how
and in house knowledge on the mixing and processing techniques
required to properly disperse graphene and other nanomaterials into
a thermoset or thermoplastic resin. What has become abundantly
clear from our work is that adding a second nanomaterial alongside
graphene into a concentrated masterbatch can have significant
effects on performance, over and above that from mixing graphene
alone. This process, which we term "material hybridisation" is
where we see the future for the commercialisation of many composite
materials and indeed inks.
Followers of the graphene story will know that it has many
vaunted properties (e.g. increasing strength and stiffness, high
conductivity, impermeability to gases, to name but a few) but as an
inert substance it does not mix readily with other materials.
Furthermore, producing a consistent, commercially available single
layer of graphene (where 3 million sheets stacked together are only
1 millimetre thick) is proving a significant technical challenge
and which general observers may perceive as not currently
commercially viable. Yet almost every day, new possible
applications are announced as potential new uses. There has been a
significant amount of hype generated by this material, often
arising from passionate researchers excited by its properties,
which can have a positive effect if used in the correct way. The
challenge is how to translate these properties measured in the
laboratory into commercial applications. This is Haydale's key
differentiator; with its unique plasma functionalisation technology
incorporating the recently developed materials hybridisation
know-how.
Haydale is focussed not on the technically challenging single
sheet graphene but stacks of graphene layers in the range of 5 to
100 sheets, generally acknowledged, depending on the number of
sheets, as few layered graphene ("FLGs") or graphene nanoplatelets
("GNPs"). Both FLGs and GNPs are generally produced in different
ways by a number of manufacturers from a carbon feedstock of either
mined organic graphite or a hydrocarbon vapour/gas. The FLGs and
GNPs can be produced by a "top down" production method, involving
the exfoliation of mined graphite to produce flakes which often
involves multi stage production. Alternatively, they can be
produced by a "bottom up" method, such as chemical vapour
deposition from a carbon source such as methane. The bottom up
(synthetic) process generally uses an energy consumptive hot
reactor (900 degrees Celsius or more), that needs post production
cleaning processes and hence a cost structure which generally
means, without significant economies of scale, the material cannot
compete on price with the GNPs from mined graphite. Hence the need
for the synthetically produced material to find applications that
are not competing with the mined organic GNPs.
With so many different nanomaterials on the market being
described as "graphene" and no industry standardisation, we believe
the buyer can easily get confused where prices of similarly
labelled products can range from $50 to over $2,000 per kg. The
temptation is to plump for the cheapest one available, but often
this is not the best option. Haydale has years of experience
evaluating the market place where all materials are different and
vary in performance as well as price. Understanding the
price/performance matrix is critical in evaluating the material
that best suits the application whilst being economically viable.
Moreover, we know which suppliers can produce scalable, consistent
quality product; the key to commercialising these carbon based
materials.
The fact that Haydale is not a manufacturer of raw graphene is
sometimes lost on the general market and we spend considerable time
and effort in educating potential users of that fact and our
differentiated position as a solutions provider allows us to
produce the right material (hybrid or not) for end product
improvement. We have a patented enabling technology coupled with
new in house mixing and processing know how that sets us apart in
the market today. We have the capability now to source and use
organic or synthetically produced flake graphene together with
CNTs, and to modify their surface with specific chemical functional
groups tailored to the requirements of the end user's application
when mixed together as a hybrid masterbatch.
Our market focus is targeted on sectors where we consider early
adoption of new innovative materials is commonplace. Often, take up
of a new material is hampered by conservatism coupled with the
perceived need to invest significant sums in new plant and
equipment and discard the existing machinery. We consider that our
focussed markets of composites, inks and coatings have less inbuilt
inertia to change and are early adopters of such new materials.
Their processing does not normally require capital equipment
change. Critically our focus is to develop every day applications
in non-regulated markets as adoption generally does not need long
term testing certification. This approach should enable HCS
especially to quickly get GNP-loaded intermediate products into the
market, initially with the imminent launch of graphene enhanced 3D
printing PLA filaments.
OPERATING REVIEW
In the year under review, and in the three months' post
year-end, the Company has made significant progress in building its
human resources, production and sales capability. Crucially we have
made two strategic acquisitions post year end that now completes
our required geographic coverage in the key territories of The Far
East, UK, Europe and the USA. The objective now is to accelerate
the transition of the business from an R&D focussed operation
into a sales and marketing organisation. We have the business units
in place with quality management, the supply chain and
collaboration partners with sales reach to commence commercial
sales of products. The objective has been to underpin the strategic
markets we are focussed on to deliver the growth required to move
to an operating profit as highlighted in the Chairman's Statement.
One of the fundamental items of this strategy is to have a
sustainable supply chain secured for anticipated demand and
multiple sites that answer the customers' requirements for a
disaster recovery plan.
R&D Reactors, Materials and the Supply Chain
Access to the right sustainable nanomaterials is crucial in
being able to offer the ultimate customer focussed solution in a
global market over the long term. In May 2016, the Group concluded
a collaboration agreement with Graphit Kropfmuhl GmbH ("GK"), part
of AMG Advanced Metallurgical Group N.V., focusing on the
development of new value added nanomaterial products using
Haydale's functionalisation process and certain GK graphitic
feedstock material, primarily from its mine in Sri Lanka. Under the
agreement, Haydale has supplied, under licence, two plasma
reactors, an R&D reactor (HT60) and a larger capacity reactor
(HT200) at commercial rates to GK for use in new R&D programmes
and the commencement of processing commercial volumes.
Following a successful public tender in November 2015, Haydale
supplied, installed and commissioned a HT60 reactor to the UK
based, Centre of Process and Innovation ("CPI"). The CPI
collaborates with universities, SMEs and large corporates to help
overcome innovation challenges and develop the next generation of
products and processes. It is an excellent "shop window" for our
technology and we understand it is performing well and
functionalising not only carbon based materials but also Boron
Nitride, known as the "white graphene". Pleasingly, other academic
and renowned research institutes have enquired on the availability
of HT60s for their own R&D requirements.
We have evaluated and qualified many different suppliers to
provide us with a broad range of materials to ensure we provide
what best suits the end users' application. This is an ongoing
process and we have a dedicated team to conduct the review as there
are increasing numbers of new materials being made available,
although a significant portion have yet to be qualified at a
commercial level. All of our accredited suppliers have to be able
to demonstrate continuity of supply and consistency of product
which are critical components in the supply chain.
Composites and 3D Printing
An advanced composite typically consists of 50% long fibre
reinforcement and 50% polymer resin. The role of the long fibres is
to provide the strength, stiffness and impact resistance in the
structure while the polymer resin is to provide environmental
resistance and to transfer external loads into the fibres.
Traditionally, the polymer resin is usually discounted when
determining the strength and stiffness of a composite material,
being largely seen as the glue that binds the fibres together and
gives the material its shape. The composite market is growing
rapidly, and at over $90 billion p.a., is significant and remains
one of our most substantial sales opportunities.
We believe that, for the first time, with the advent of
Haydale's functionalised GNPs and hybrid materials, HCS has the
ability to change and influence the polymer resin properties by the
addition of functionalised graphene. It has been demonstrated that,
by adding functionalised graphene and other nano fillers, HCS can
dramatically improve the resin properties of mechanical, thermal
conductivity, electrical conductivity and physical properties. This
offers improved polymer resins and hence improvements in the
composite. There is more work to be done in this area but we are
extremely encouraged by initial indicative results, especially in
the surface finish and thermal properties of the composite
material.
Through our collaboration with one of the world's leading resin
companies, Huntsman, we anticipate that their ready formed sales
and distribution network will be the sales channel for the next
generation of performance resins developed by them and enhanced
with our GNPs. We already know that the graphene based additives we
use significantly improves the thermal conductivity of Huntsman's
Araldite(R) epoxy resin. A resin which can be heated up and cooled
down quicker has many applications in the composite tooling market
as well as in the automotive industry.
We have invested heavily during the last 18 months in developing
our knowledge and know how around the introduction of graphenes and
other nanomaterials into thermoset and thermoplastic resins. Whilst
this significant internal investment has diverted some resources
from securing more of HCS's traditional third party composite
consultancy contracts, we anticipate recovering a significant
proportion of our investment during the current financial year,
with material sales at high margins expected in future years.
We have researched the unregulated high growth 3D printing
market and its products for some 18 months. The culmination of this
programme was us utilising our mixing and dispersion knowledge and
know how that enabled us to successfully add under 1 per cent. of
our functionalised GNPs into PLA (Polylactic Acid) and produce a
graphene loaded 3D printing PLA filament. PLA is a standard 3D
printing medium in global use currently. We have announced the
launch of this product following successful trials and distributor
feedback confirming product demand, and so we will demonstrate our
PLA at the TCT Show in Birmingham on 28/29 September. This
unregulated market offers significant near term sales with high
margins and with additional materials being evaluated, (such as
Nylon 6, ABS and Polypropylene), we consider that the 3D additive
manufacturing market will be an important revenue driver for the
Group. In addition, Innophene has developed a "non-black" 3D PLA
derived from their transparent conductive ink which will increase
Haydale's product range through the use of added pigment
colouration to the PLA. In time, we will also make the ink products
available from Innophene and the UK for sale in the USA through our
sales and marketing resource in country. The USA is a significant
market for our ink products and with our footprint now firmly
established at ACM, we expect sales to commence in the first half
of 2017.
Inks and Coatings
Our work on inks to date focussed on grant funded projects
primarily in bio-medical sensors. We have made, in conjunction with
our project partners, workable bio-medical sensors. Notably the
work we have been doing with Fraunhofer and our other partners on a
general pathogen reel-to-reel bio-medical sensor is proving
extremely positive. Here, BioChips that have been used primarily in
medical research can, due to advances in printing technology, be
manufactured at considerably lower cost enabling them to now be
suitable for industrial applications such as drug development to
combat viral infections. Additionally, applications in the field of
comprehensive water monitoring are now conceivable. The projected
completion date of this collaborative research project is in 2017
and we are optimistic of delivering a commercial product from this
work when it completes in approximately 15 months' time. We have
previously reported on our ink production capabilities but have
recently been focussing on developing the patent applied for
pressure sensor where we have been receiving numerous and
potentially significant enquiries for this novel product.
During the year under review, we have announced a collaboration
with Taiwan based Dowton, where the market is receptive to screen
based printable conductive ink, again in the conductive sensor
market. We have now repeat sampled a range of distributors and
printers, where the application appears to be specifically suitable
for the bio-medical sensor market. Whilst the lead time is
potentially long for the required medical approvals, we continue to
look for other market opportunities for the range of inks that we
now have in areas such as wearable technology and sports
apparel.
Other markets
Energy Harvesting
In a massively crowded market the area where we have chosen to
focus is supercapacitors, which require a rapid delivery of
concentrated energy. The work is showing promise particularly in
improved capacitance achieved by adding FLG loaded pastes. Ongoing
work is required before we consider an approach to one of the
battery companies specialising in supercapacitors.
Elastomers
We have over the past year been investigating the use of certain
functionalised nanomaterials into natural rubber with a view to
increasing (again) the thermal, electrical and mechanical
performance of materials aimed at the Elastomers market. Initial
work has been very encouraging and we have commenced discussions
with certain compounders and distributors to accessing what we view
as a potentially very significant market given elastomers are used
extensively in the automotive industry and in every day products
from sealing rings, to coatings and even rubber gloves.
Sales strategy
As part of the sales process we have worked hard on promoting
Haydale and its capabilities. Raising awareness and demonstrating
that our materials enhance real products in the everyday world has
been a key pillar of our strategy. We have, in the past few months,
announced a series of promotional and marketing initiatives such
as:
-- Sponsorship of the Manchester Science Museum Graphene
exhibition which has raised our profile both in the UK and
internationally. To coincide with the opening, we demonstrated the
BAC Mono supercar which incorporated our graphene loaded carbon
fibre body panels live on BBC News to provide visual evidence of
the work being done to improve performance of certain of the
vehicle's composite parts;
-- A collaboration agreement with the National Graphene
Institute in Manchester (that has already lead to new potential
project opportunities); and
-- Added graphene into a composite wing of a "drone" built by
the University of Lancaster and flown at the Farnborough Air Show
in July, to much acclaim by the pilot in terms of improved handling
and control.
Sales in the Territories
Korea is becoming a key market for Haydale. Since opening an
office in Seoul in 2015, we have developed at least 10 key
potential commercial customers, a number of whom supply to the two
dominant electronics giants in South Korea. Sales of functionalised
materials have been made with encouraging feedback although as yet
no significant commercial orders have been received. Nevertheless,
the ability to utilise our existing knowledge and know-how learnt
at HCS in improving thermal and electrical properties of
thermoplastic and thermoset based composites gives us considerable
confidence that commercial orders will be received in due course.
The market continues to move quickly and having a physical presence
in country assists us in trying to meet those needs. With the
addition of the newly acquired Innophene, we expect the speed of
response from our new operation to meet that expected by the Korean
customers. In a demonstration of the cross selling opportunities
available in our enlarged group structure, our Korean sales and
marketing manager has already introduced the silicon carbide
product offering of ACM into a significant Korean customer and
evaluation is underway.
The North American market appears generally untapped and of
equal importance to both Europe and the Far East. The decision to
employ a full time staff member and acquire ACM is a game changing
moment for our US operation. We have reviewed our position in the
US and decided we needed a business to establish a foothold in
America. Haydale Technologies Inc., having acquired ACM, will
operate from Greenville, South Carolina, with ACM's facility being
capable of housing our plasma reactors and we expect to place one
there in 2017. We expect the new acquisition to open sales and
collaboration opportunities in what we perceive as a fragmented
market offering significant revenue opportunities.
The sale of one of our HT60 reactors, through a competitive
tender process, to the CPI in Sedgefield was achieved before the
grant of Haydale's process patent and the establishment of a second
UK processing base was an important milestone for the Gorup. The
CPI has acknowledged that our reactor has bridged a technology gap
in their offering which we consider to be a significant endorsement
of our process. Feedback from the CPI has been very positive with
the machine performing well and functionalising a number of new and
novel materials, including the "white graphene" Boron Nitride.
Funded and Private Venture projects
Sampling of functionalised materials continues as a means to
engage with industrial corporations and manufacturers and to enter
collaborations and consortia on dedicated projects. Some of these
are grant funded projects while others are important in their own
right and hence financed through our own resources. During the year
under review, we have secured focussed and important grant funded
work from which our future income is expected be over GBP0.8m. We
will continue to seek this important source of funded work
especially as the outcome is always to demonstrate a commercial
product application. The projects we are now undertaking include UV
visible bruisable composites (in conjunction with Alex Thomson
Racing), carbon/carbon brake pads for the aircraft industry, heated
composite structures for de-icing applications and hydrogen
pressure vessels for hydrogen powered fuel cell vehicles. Included
in the awards were two collaborative 18-month research projects
managed by the National Aerospace Technology Exploitation Programme
("NATEP") for aircraft lightning strike protection utilising
graphene enhanced composites, and conductive adhesives. These
projects are being managed by Haydale's recently formed Aerospace
and Defence division run by Ebby Shahidi, who joined us during the
year, having been the former Technology Director of Cytec
Industrial Materials.
Operations and technical
One of our key drivers has been the ability to increase the
plasma reactor capacity by reducing processing time and yet
increasing the batch volume. This has been successfully done for
certain materials and consequently we now have an established
processing and treatment facility in Ammanford capable of
processing tonnes of nanomaterials per year into an intermediate
product to the customers' specification. The processing capacity
depends on a range of factors, in particular the nature of the
nanomaterial being processed and the graphene loading required. The
plasma process patent granted to Haydale offers not only the
opportunity to exploit the graphene market but other non-carbon
based 2D materials. During the year the importance of processing
nanomaterials has become an area of equal importance to graphene
for the future growth of Haydale. The plasma patent was also
granted in Australia, and crucially the significant market of
China.
In the year under review, the Group's headcount increased from
32 to 46 as we tackle internal and externally funded projects.
Following our two recently announced acquisitions, Innophene and
ACM, we anticipate that this will increase to over 60 by the end of
2016. The Group has experienced a significant transformation since
our IPO a little over two years ago when we had only 11 employees
and operated from one site. We now rely considerably less on
consultants for discrete projects, preferring to have the skills
developed internally and using their specialist experience in
specific areas and in some cases opening sales avenues. To ensure
we convert the high levels of enquiries we receive into targeted
sales opportunities, we would like to add to our development and
product personnel, including an experienced Sales and Marketing
Director. However, there is no present intention to increase the
Group's headcount materially above 60 in the near future.
To accommodate the growth in personnel in Ammanford, staff are
now housed in three units with a combined floor space of 10,000 sq.
ft. HCS's facilities in Loughborough are approaching capacity and
we will be carefully evaluating its growth requirements during
2017.
Patents, IP and Licensing
This will become an increasingly important part of the Group's
revenue mix in the coming years as Haydale's strategy is not to be
a volume producer of the functionalised nanomaterials or
masterbatch. We intend, however, to produce sufficient volumes to
meet pre-production trials before handing over to our licensed
industrial partners. We know that multinational organisations such
as Huntsman demand a robust and quality supply chain, as well as
suitable disaster recovery plans. Accordingly and in anticipation
of requiring increased volumes of functionalised materials, we
entered into the collaboration agreement with GK in May 2016 which
included the supply to GK of an HT60 and HT200 plasma reactor. To
fully exploit our granted process patent we believe that there is a
need to create centres of excellence in our key geographic markets
of the UK, Europe, the Far East and the USA. These centres will,
under licence, service and supply their local markets with
intermediate products (such as inks and resins) and it is
anticipated that each centre will, over time, operate both an HT60
and HT200 plasma reactor.
In Europe, the granting of our European patent on the plasma
functionalisation process by the European Patent Office in November
2015 strengthens our licensing capability and protects our
technology. This assisted in licensing the technology to GK, our
GNP supply partner, and they are a key channel for European sales
and processing of volume related sales from their site in
Hauzenburg, Bavaria. In May 2016, we signed a joint collaboration
agreement that will establish a European centre of excellence in
that region to service mainland Europe's demand for functionalised
nanomaterials. GK has agreed to help establish key accounts across
Europe especially as they have significant customer reach through
sales of their existing graphitic materials.
Key Performance Indicators ("KPIs")
The Board consider there are a number of important KPIs which
are non-financial, such as: the nature and size of development
projects; the speed of response to inbound enquiries; product
performance improvements of the host material once enhanced with
our functionalised materials vs the control; the ability to convert
non-disclosure agreements and letters of intent for collaborations
to development project discussions and binding commercial
contracts. Performance against these non-financial KPIs is in line
with the Board's expectations for the year under review.
The important financial KPIs are the income, cash position and
the operating cash flows of the Group. In addition, as revenues
increase, an important KPI will be the quantum of the order book
and we have commenced internal reporting on this metric. For the
year ended 30 June 2016, the Group's income of GBP1.92 million was
in line with management's expectation with cash and deposit
balances amounting to GBP2.86 million at 30 June 2016 (2015:
GBP2.05 million), again in line with budgets. The operating cash
outflow for the year ended 30 June 2016 of GBP3.36 million (2015:
GBP2.38 million loss) was also in line with the budgeted cashflow
for the year.
Acquisitions
After the year end we announced two acquisitions to cement the
geographic expansion of our business and now have the capability to
exploit our targeted four major markets of the UK, Europe, USA and
the Far East.
Innophene
On 9 September 2016 we completed the acquisition of Bangkok
based Innophene. Consideration for the acquisition was the issue of
176,952 new ordinary shares in Haydale ("Haydale Shares"),
representing approximately 1% of the Company's issued share
capital.
Innophene's portfolio of ink products and its PLA "non-black" 3D
printing resin will extend the Group's products available for sale.
Innophene's access to The Thailand Science Park in Bangkok, with
its extensive analytical and processing capabilities, provides a
platform for it to become the Group's Far East Centre of
Excellence.
Crucially, the acquisition will also provide Haydale with
research and development capability for current and potential Far
East customers. This will require the delivery, under licence, of
an HT60 plasma reactor to Innophene's site on the Thailand Science
Park to provide low cost processing and treatment services. A
second reactor (HT200) is likely to follow in 2017 to meet
anticipated demand in the region.
ACM
The announcement today of the conditional acquisition of ACM in
South Carolina for an initial consideration of approximately $5.0
million finally establishes our USA base from which we will start
to expand our graphene capabilities in the North American market
and cross sell ACM's nanomaterials through our other
territories.
The acquisition of ACM will be funded through a mixture of cash
and the issuance of new Haydale Shares, with the cash element being
satisfied from an agreed new $1.7 million bank facility with ACM's
existing bankers, United Community Bank (secured on the ACM fixed
assets), and a placing, subscription and open offer of new Haydale
Shares with existing and new investors to raise up to GBP2.6
million announced today. ACM's existing management (who are also
the vendors) and technical team are keen to stay and assist in
growing the US business, where they have the opportunity to
increase their consideration by up to $2.0 million dependent on
agreed sales growth at ACM over the next 3-4 years.
ACM reported audited revenues of approximately $3.8 million in
the year ended 31 December 2015 and has an existing order book in
excess of $4.5 million. ACM's annual sales are underpinned by a
recently renewed 3-year contract with a Japanese customer who
accounted for approximately $2.0 million of ACM's revenue in
2015.
There are substantial cross selling opportunities to increase
ACM's existing profits through targeted sales of their silicon
carbide products and we have already introduced a Korean client to
ACM who requires an enhanced scratch resistant cookware coating
that ACM has previously supplied another user. Pleasingly,
following a rapid response by ACM to the inbound enquiry, the
coating is now under evaluation in Korea with encouraging
results.
FINANCIAL REVIEW
Statement of Comprehensive Income
In the year under review, the Group's three key areas of focus
were: (i) the development of novel graphene and other nanomaterial
enhanced products; (ii) continuing the scale up of its patented
plasma reactors for both internal capacity needs and third party
sales opportunities; and (iii) securing new grant funded projects
as well as delivering on the existing projects.
During the period, HCS in Loughborough built on the work it
started during the previous financial year, specifically in
improving the thermal, electrical and mechanical performance of
certain thermoset epoxy resins. In particular, significant
investment was made in new highly skilled personnel, in new
processes and new test equipment to ensure that the Group retained
all of the key IP, knowledge and know-how in the development
surrounding these higher performing resins. Work at Ammanford also
continued in improving our graphene enhanced inks, primarily for
the Far East markets.
The team at Ammanford continues to invest and deliver
incremental improvements in reducing processing cycle times and
increase load capacities in both plasma reactor models, the HT60
and HT200. Importantly, sales of an HT60 reactor to the CPI in the
UK as well as an HT60 and HT200 to GK in Germany demonstrated the
Group's advancement in capacity scale up.
GBP0.80 million of new grant funded projects were secured during
the year, building upon the GBP0.83 million of projects awarded in
the previous year. Grant funded projects are extremely important to
the Group in that they are typically longer term (12-24 months)
contributors to our fixed overhead base. They allow us work
alongside world renowned businesses in their particular field of
expertise and they are expected to lead to the development of a
commercial product at the end of the project.
The Group's income for the year increased 30 per cent. year on
year to GBP1.92 million (2015: GBP1.48 million), GBP0.59 million of
which was sale of reactors. Importantly, the Group has GBP0.16
million of deferred income at the year end to release during the
current financial year in respect of reactor sales made in the year
under review. The provision of composite consultancy services by
HCS to third parties was, as budgeted, GBP0.54 million during the
year ended 30 June 2016, a planned reduction on prior years due to
the focus on internally generated novel products and their
surrounding IP and know-how. In the year to 30 June 2016, the
Group's income generated from grant funded projects totaled GBP0.75
million (2015: GBP0.83 million) and arose where a consortium of,
often world renowned and strategically important international
companies collaborate to develop new products with viable market
needs.
Overall R&D spend for the year increased by almost
two-thirds to GBP0.94 million (2015: GBP0.56 million), of which
GBP0.51 million was expensed during the year, with the balance of
GBP0.43 million being capitalised and is expected to be amortised
over 20 years. This planned increase in internal development is
expected to deliver material levels of sales of new products in the
current and future financial years. The Group's other
administrative costs for the year totaled GBP5.09 million (2015:
GBP3.66 million) and included a full year of costs from HCS
acquired in November 2014. Included within administrative costs
were the Group's IP and patent costs, which doubled to GBP0.10
million from GBP0.06 million in the prior year. Overall, the loss
from operations for the year was GBP4.01 million (2015: GBP3.01
million loss), and included non-cash items of GBP0.76 million
(2015: GBP0.61 million). The loss per share was similar to that
recorded last year at GBP0.26 (2015: GBP0.25 loss).
Statement of Financial Position and Cashflows
As at 30 June 2016, net assets amounted to GBP6.60 million
(2015: GBP4.29 million), including cash balances of GBP2.86 million
(2015: GBP2.05 million). Other current assets increased to GBP1.44
million at the year end (2015: GBP0.95 million) complementing a
reduction in current liabilities to GBP1.00 million as at 30 June
2016 (2015: GBP1.33 million). Expenditure on capital equipment
again utilised a significant portion of cash during the year at
GBP0.47 million (2015: GBP1.18 million). In November 2015, the
Company settled the entire deferred contingent consideration due on
its acquisition of HCS in November 2014 of GBP0.77 million.
Net cash outflow from operating activities for the year was
GBP3.28 million (2015: GBP2.73 million), the principal contributing
factor being the loss from operations loss of GBP4.01 million
(2015: GBP3.01 million).
Capital Structure and Funding
As at 30 June 2016, the Company had 15,236,946 ordinary shares
in issue (2015: 11,446,446). During the year, the Company issued
3,790,500 new ordinary shares, 3,750,000 of which were issued in
connection with the Company's GBP6.0 million oversubscribed placing
and open offer in November 2015. The balance of 40,500 shares
issued were in respect of option exercises. Since the year end, on
9 September, the Company issued 176,952 new ordinary shares as
consideration for the acquisition of Innophene such that as at the
date of this report, the Company has 15,413,898 ordinary shares in
issue.
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide return to equity holders of the Company and benefits to
other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital. The Group manages this objective
through tight control of its cash resources to meet its forecast
future cash requirements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2016
Year Year
ended ended
30 June 30 June
2016 2015
GBP'000 GBP'000
REVENUE 1,169 644
Other income 754 831
TOTAL INCOME 1,923 1,475
Administrative expenses
-------------------------------------------- ----------- ------------
Research and development expenditure (514) (559)
Share based payment expense (326) (258)
Other administrative expenses (5,092) (3,663)
----------------------------------------------- ----------- ------------
(5,932) (4,480)
LOSS FROM OPERATIONS (4,009) (3,005)
Finance costs (14) (24)
LOSS BEFORE TAXATION (4,023) (3,029)
Taxation 386 140
LOSS FOR THE YEAR FROM CONTINUING
OPERATIONS (3,637) (2,889)
Other comprehensive income:
Items that may be reclassified
to profit or loss:
Exchange differences on translation (44) -
of foreign operations
----------- ------------
TOTAL COMPREHENSIVE LOSS FOR
THE YEAR FROM CONTINUING OPERATIONS (3,681) (2,889)
=========== ============
Loss for the year attributable
to:
Owners of the parent (3,598) (2,889)
Non-controlling interest (39) -
________ __________
(3,637) (2,889)
Total comprehensive loss attributable
to:
Owners of the parent (3,637) (2,889)
Non-controlling interest (44) -
_________ __________
(3,681) (2,889)
Loss per share attributable
to owners of the Parent
Basic (GBP) (0.26) (0.25)
Diluted (GBP) (0.26) (0.25)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2016
Company Registration No. 07228939 30 June 30 June
2016 2015
GBP'000 GBP'000
ASSETS
Non-current assets
Goodwill 685 685
Intangible assets 1,141 775
Property, plant and equipment 1,576 1,576
Investments - 117
3,402 3,153
Current assets
Inventories 398 283
Trade receivables 49 257
Other receivables 613 277
Corporation tax 379 129
Cash and bank balances 2,862 2,049
4,301 2,995
TOTAL ASSETS 7,703 6,148
LIABILITIES
Non-current liabilities
Provision for contingent consideration - 260
Bank loans 104 270
104 530
Current liabilities
Provision for contingent consideration - 510
Bank loans 166 162
Trade and other payables 656 619
Deferred income 176 26
Corporation tax - 8
998 1,325
TOTAL LIABILITIES 1,102 1,855
TOTAL NET ASSETS 6,601 4,293
EQUITY
Capital and reserves attributable
to equity holders of the parent
Share capital 305 229
Share premium account 11,840 6,254
Share-based payment reserve 656 329
Foreign exchange reserve (39)
Retained earnings (6,117) (2,519)
Non-Controlling Interest (44) -
TOTAL EQUITY 6,601 4,293
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2016
Share-based Foreign Retained Total Non- Total
payment Exchange profits Attributable Controlling Equity
Share Share reserve Reserve to equity Interest
capital premium holders
GBP'000 GBP'000 GBP'000 of parent GBP'000 GBP'000
GBP'000 GBP'000 GBP'000
At 1 July
2014 225 6,134 71 - 370 6,800 - 6,800
Total
comprehensive
loss for the
year - - - - (2,889) (2,889) - (2,889)
Recognition
of
share-based
payments - - 258 - - 258 - 258
Issue of
ordinary
share capital 4 120 - - - 124 - 124
At 30 June
2015 229 6,254 329 - (2,519) 4,293 - 4,293
Comprehensive
loss for the
year - - - - (3,598) (3,598) (39) (3,637)
Other
Comprehensive
loss - - - (39) - (39) (5) (44)
Total
Comprehensive
loss for the
year - - - (39) (3,598) (3,637) (44) (3,681)
Recognition
of
share-based
payments - - 327 - - 327 - 327
Issue of
ordinary
share capital 76 5,586 - - - 5,662 - 5,662
At 30 June
2016 305 11,840 656 (39) (6,117) 6,646 (44) 6,601
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2016
Year Year
ended ended
30 June 30 June
2016 2015
GBP'000 GBP'000
Cash flow from operating activities
Loss before taxation (4,023) (3,029)
Adjustments for:-
Amortisation of intangible
assets 63 64
Depreciation of property, plant
and equipment 370 288
Impairment on available for 117 -
sale asset
Reduction in deferred consideration (117) -
(Profit)/Loss on disposal of
property, plant and equipment (107) 19
Share-based payment charge 327 258
Finance costs 14 24
Operating cash flow before
working capital changes (3,356) (2,376)
Increase in inventories (115) (98)
Increase in trade and other
receivables (128) (126)
Decrease in payables and deferred
income 187 (210)
Cash used in operations (56) (434)
Income tax received 128 76
Net cash flow from operating
activities (3,284) (2,734)
Cash flow used in investing
activities
Purchase of property, plant
and equipment (470) (1,182)
Purchase of Intangible Assets (429)
Proceeds from disposal of property, 207 -
plant and equipment
Acquisition of subsidiary - (244)
Settlement of deferred consideration (350) -
Net cash flow in investing
activities (1,042) (1,426)
Cash flow used in financing
activities
Finance costs (14) (24)
Proceeds from issue of share
capital (net of share issue
costs) 5,359 124
New bank loans raised - 500
Repayments of borrowings (162) (68)
Net cash flow from financing
activities 5,183 532
Effects of exchange rates changes (44) -
Net increase / (decrease) in
cash and cash equivalents 813 (3,628)
Cash and cash equivalents at
beginning of the financial
year 2,049 5,677
Cash and cash equivalents at
end of the financial year 2,862 2,049
1. General information
Haydale Graphene Industries Plc (the "Company") and its
subsidiaries (together the "Group") are focussed on enabling
technology for the commercialisation of graphene and other
nanomaterials.
The Company is a public limited company which is listed on the
AIM Market of the London Stock Exchange plc and is incorporated and
registered in England and Wales. The Company's registered office is
Clos Fferws, Parc Hendre, Capel Hendre, Ammanford, Carmarthenshire,
SA18 3BL.
2. Group Annual Report and Statutory Accounts
The financial information of the Group set out above does not
constitute "statutory accounts" for the purposes of Section 435 of
the Companies Act 2006. The financial information for the year
ended 30 June 2016 has been extracted from the Group's audited
financial statements which were approved by the Board of directors
on 23 September 2016 and will be delivered to the Registrar of
Companies for England and Wales in due course. The report of the
auditor on these financial statements is unqualified, did not
include any references to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and
did not contain a statement under Section 498 (2) or Section 498
(3) of the Companies Act 2006.
3. Basis of preparation
Whilst the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards ('IFRSs') as adopted by the European Union, this
announcement does not itself contain sufficient information to
comply with those IFRSs. This financial information has been
prepared in accordance with the accounting policies set out in the
30 June 2016 report and financial statements.
4. Revenue and interest income
(i) Goods
Revenue represents sales to external customers at invoiced
amounts less value added tax or local taxes on sales. Revenue is
recognised generally on delivery, or customer acceptance for where
customer acknowledges the transfer of risk and reward of ownership
and are liable for insuring the goods.
(ii) Services
Engineering design and research revenue is recognised on the
percentage of completion method unless the outcome of the contract
cannot be reliably determined, in which case contract revenue is
only recognised to the extent of contract costs incurred that are
recoverable. Foreseeable losses, if any, are provided for in full
as and when it can be reasonably ascertained that the contract will
result in a loss.
The stage of completion is determined based on the proportion of
contract costs incurred compared to total estimated contract
costs.
(iii) Interest income
Interest income is recognised as finance income on an accruals
basis using the effective interest rate method.
5. Segment analysis
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the chief operating decision maker (which
takes the form of the board of directors of Haydale Graphene
Industries Plc) as defined in IFRS 8, in order to allocate
resources to the segment and to assess its performance.
The directors of the Group consider the principal activity of
the Group to be the sale and distribution of specialist research
and development materials in the field of nano-technology, and
therefore consider this currently to be the sole operating and
reportable segment. Overseas sales relate to the fulfilment of
sales generated outside the UK but actioned within the UK.
Geographical information
All revenues of the Group are derived from its principal
activity, the sale and distribution of nano-technology products or
the delivery of research projects into those same materials. All
assets are located within the United Kingdom and all losses are
generated in that territory. The Group's revenue from external
customers by geographical location are detailed below.
2016 2015
GBP'000 GBP'000
By destination
United Kingdom 397 409
Europe 743 222
North America 3 11
Rest of the
World 26 2
1,169 644
During the year end 30 June 2016, 35% (2015: 32%) of the Group's
revenue depended on a single customer and 27% (2015: 25%) of the
Group's revenue depended on a second single customer.
Revenue within Europe was predominantly split between Germany
(57%) and Ireland (41%) (2015: Ireland 93%).
All amounts shown as other income within the Statement of
Comprehensive Income are generated within and from the
United Kingdom.
Revenue from goods was GBP626,000 or 54% (2015: GBP56,000 or 9%)
and revenue from services was GBP543,000 or 46% (2015: GBP588,000
or 91%).
2016 2015
GBP'000 GBP'000
Services 543 588
Reactors 591 -
Goods 35 56
1,169 644
6. Loss before taxation
Loss before taxation is arrived at after charging:
2016 2015
GBP'000 GBP'000
Research and development:
- current period's expenditure 480 524
- amortisation of capitalised
expenditure 34 35
- amortisation of other intangibles 29 29
Depreciation of property, plant
and equipment 370 288
Loss on disposal of property,
plant and equipment (107) 19
Foreign Exchange (118) 41
Operating lease rentals:
- land and buildings 98 93
- plant and machinery 23 17
7. Loss per share
The calculations of loss per share are based on the following
losses and number of shares:
2016 2015
GBP'000 GBP'000
Loss after tax attributable
to owners of the
Haydale Graphene
Industries Plc Group (3,598) (2,889)
Weighted average
number of shares:
* Basic and Diluted 13,713,757 11,376,248
Loss per share:
* Basic (GBP) and Diluted (GBP) (0.26) (0.25)
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. At
30 June 2016, there were 1,458,775 (2015: 1,321,655) options and
warrants outstanding.
8. Intangible assets
Customer Development Goodwill Total
Relationships expenditure GBP'000 GBP'000
GBP'000 GBP'000
Cost
At 1 July 2014 - 700 51 751
Additions 285 - 634 919
At 1 July 2015 285 700 685 1,670
Additions - 429 - 429
At 30 June
2016 285 1,129 685 2,099
Accumulated amortisation
At 1 July 2014 - 146 - 146
Charge for
the period 29 35 - 64
At 1 July 2015 29 181 - 210
Charge for
the year 29 34 - 63
At 30 June
2016 58 215 - 273
Net book value
At 30 June
2016 227 914 685 1,826
At 30 June
2015 256 519 685 1,460
At 30 June
2014 - 554 51 605
Goodwill
Goodwill arose on the acquisition of EPL Composite Solutions Ltd
(now Haydale Composite Solutions Limited "HCS") on 1 November 2014
(GBP634,000), Haydale Ltd on 21 May 2010 (GBP24,000) and of the
trade and assets of Intelligent Nano Technology Ltd (GBP27,000) on
12 May 2010.
Customer Relationships
The Customer relationships intangible asset arose on the fair
value of assets on the acquisition of EPL Composite Solutions Ltd
(now Haydale Composite Solutions Limited) on 1 November 2014.
Development costs
Development costs brought forward arose on the fair value of
assets on the acquisition of Haydale Ltd on 21 May 2010 for
development of nano-technology projects, where it is anticipated
that the costs will be recovered through future commercial
activity.
Development expenditure of GBP429,000 was capitalised during the
year in accordance with IAS 38 in connection with the Group's
expenditure with the development of graphene enhanced epoxy resins,
where the Directors believe that future economic benefit is
probable. Capitalised development expenditure is not amortised
until the products or services are ready for sale or use.
Amortisation
Capitalised development costs are amortised over the estimated
useful life of 20 years. The amortisation charge is recognised in
administrative expenses.
The Customer relationships intangible is amortised over the
estimated useful life of 10 years. The amortisation charge is
recognised in administrative expenses.
9. Property, plant and equipment
Leasehold Plant Fixtures Motor Total
improvements and machinery and fittings vehicles GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 July
2014 198 605 56 2 861
Acquired
on acquisition
of Subsidiary - 174 - - 174
Additions 61 1,086 35 - 1,182
Disposals - (35) - - (35)
At 1 July
2015 259 1,830 91 2 2,182
Additions 188 273 8 - 469
Disposals - (99) - - (99)
At 30 June
2016 447 2,004 99 2 2,552
Accumulated depreciation
At 1 July
2014 39 261 33 1 334
Charge for
the year 24 241 22 1 288
Disposals - (16) - - (16)
At 1 July
2015 63 486 55 2 606
Charge for
the year 28 323 19 - 370
At 30 June
2016 91 809 74 2 976
Net book value
At 30 June
2016 356 1,195 25 - 1,576
At 30 June
2015 196 1,344 36 0 1,576
At 30 June
2014 159 344 23 1 527
Included within plant and machinery are assets under
construction totalling GBP15,000 (2015: GBP192,000).
10. Inventories
2016 2015
GBP'000 GBP'000
Raw materials 72 42
Work in progress 300 229
Finished goods 26 12
398 283
Raw materials and finished goods comprise functionalised carbon,
chemicals and associated raw materials. Work in progress comprises
recoverable costs on long-term contracts.
11. Trade receivables
2016 2015
GBP'000 GBP'000
Trade receivables 49 257
49 257
12. Other receivables
2016 2015
GBP'000 GBP'000
Other receivables 411 166
Prepayments and accrued
income 202 111
613 277
13. Share capital and share premium
Number Share Share Total
of shares capital premium GBP'000
No. GBP'000 GBP'000
At 1 July 2014 11,247,823 225 6,134 6,359
Issue of GBP0.02 ordinary
shares 198,623 4 120 124
At 30 June 2015 11,446,446 229 6,254 6,483
Issue of GBP0.02 ordinary
shares 3,790,500 76 5,586 5,662
At 30 June 2016 15,236,946 305 11,840 12,145
During the year, the Company issued 3,790,500 new ordinary
shares of 2p each, 3,750,000 of which were issued at GBP1.60 in
connection with the Company's GBP6.0 million placing and open offer
in November 2015, with the balance of 40,500 ordinary shares issued
were in respect of the exercise of options.
In November 2014, 198,623 GBP0.02 ordinary shares were issued at
a price of GBP0.6225 per share following the acquisition of EPL
Composite Solutions Ltd (now Haydale Composite Solutions Ltd),
whereby the company repaid the directors' loans of the acquired
entity.
Issue costs amounting to GBP376,372 (2015: GBPnil) have been
charged to the share premium account in the year.
14. Trade and other payables
2016 2015
GBP'000 GBP'000
Trade payables 260 273
Tax and social security 67 81
Accruals and other
creditors 329 265
656 619
15. Bank loans
2016 2015
GBP'000 GBP'000
Bank loans 270 432
The borrowings are repayable
as follows:-
* within one year 166 162
* in the second year 104 162
* in the third to fifth years inclusive - 108
270 432
All borrowings are denominated in pounds sterling. The directors
consider that there is no material difference between the fair
value and carrying value of the Group's borrowings.
2016 2015
% %
Average interest rates
paid 2 2
In December 2014 a bank loan of GBP500,000 was drawn during the
year and securitised by cash deposits. The loan accrues interest at
1.5% above the Bank of England base rate and is repayable in equal
monthly instalments until February 2018.
16. Deferred income
Deferred income is recognised for both capital and revenue
grants from governments and other funding parties, and released as
income in accordance with the relevant conditions of the grant
concerned.
2016 2015
GBP'000 GBP'000
Grants 19 26
Commercial Deferred Income 157 -
-------- ----------
176 26
======== ==========
Grants
In the year ended 30 June 2015, Haydale Limited received a
business innovation grant totalling GBP33,000, which is being
credited to the statement of comprehensive income in line with the
depreciation of the associated acquired machinery. The amount
credited to the statement of comprehensive income during the year
was GBP6,521.88.
Commercial Deferred Income
As at 30 June 2016, deferred income GBP157,315 arose in relation
to a sale where a cash receipt was received in advance (GBP146,315)
and a provision for potential warranty claims (GBP11,000), which
will expire by 31 May 2017.
17. Capital commitments
The Group had the following capital commitments in the
respective years:
2016 2015
GBP'000 GBP'000
Contracted but not
provided for 22 125
18. Acquisition
On 1 November 2014, the Company reached agreement to acquire the
entire issued share capital of EPL Composites Solutions Ltd (now
Haydale Composite Solutions Ltd) for a maximum consideration of
GBP1.19 million. As at 30 June 2015, deferred contingent
consideration of GBP0.77 million remained outstanding. During the
year under review, the Company settled GBP0.35 million of the
consideration in cash, GBP0.30 was reinvested in shares with the
balance of GBP0.12 million being waived.
19. Post Balance Sheet Events
On 9 September 2016, the Group announced the completion of the
acquisition of Innophene Co., Ltd, a business focussed on the
production of graphene enhanced conductive ink and composites,
based on the Thailand Science Park, Bangkok, consideration for
which was settled by the issue of 176,952 new ordinary shares in
Haydale to the vendors.
The Group today announced the conditional acquisition of US
based ACMC Holding, Inc., and its wholly owned trading subsidiary,
Advanced Composite Materials, LLC for up to $7.0 million,
consideration for which is to be funded by an issue of new equity
via a placing, subscription and open offer to raise up to GBP2.6
million and the issue of $1.0 million of new ordinary shares in
Haydale to the vendors.
As at the date of this announcement, a detailed assessment of
the fair value of the identifiable net assets of these companies
has not been completed.
20. Going Concern
The directors have prepared and reviewed financial forecasts.
After due consideration of these forecasts, current cash resources
and the net proceeds of the fundraising agreed today and scheduled
to be received by the Company on or around 12 October 2016, the
directors consider that the Company and the Group have adequate
financial resources to continue in operational existence for the
foreseeable future (being a period of at least 12 months from the
date of this report), and for this reason the financial statements
have been prepared on the going concern basis.
21. Further information
A copy of this preliminary statement will be available to
download on the Group's website www.haydale.com. Copies of the
Annual Report and Accounts, together with the notice convening the
annual general meeting, will be posted to shareholders in due
course at which time the Annual Report and Accounts will be made
available to download on the Group's website, www.haydale.com, in
accordance with AIM Rule 26.
22. Notice of Adoption of Financial Reporting Standard 101 ("FRS
101"): Reduced Disclosure Framework
The parent company's financial statements contained in the
Company's Annual Report for the year ended 30 June 2015 were
prepared in accordance with UK Generally Accepted Accounting
Practice ("UK GAAP").
A new UK GAAP accounting framework introduced by the Financial
Reporting Council ("FRC") became mandatorily effective for the
financial statements of UK companies with accounting periods
commencing on or after 1 January 2015. Under this new framework,
the Company is required to elect to prepare its parent company
financial statements on one of the bases permitted by the FRC. The
consolidated financial statements of the Company's group will
continue to be prepared in accordance with EU-adopted IFRS and are
unaffected by this new accounting framework.
The Company proposes to adopt FRS 101, a reduced disclosure
regime, for its parent company financial statements for the year
ended 30 June 2016 and on an ongoing basis until such time as the
Company notifies shareholders of any change to its chosen
accounting framework for the parent company financial
statements.
The Company's election to adopt FRS 101 for its parent company's
financial statements does not require shareholder approval.
However, as stipulated in FRS 101, the Company is required to
notify all shareholders of this election. Any shareholder or
shareholders holding in aggregate 5 per cent or more of the total
allotted shares in the Company may serve an objection. Objections
must be served in writing and delivered to the Company Secretary at
Clos Fferws, Parc Hendre, Capel Hendre, Ammanford, Carmarthenshire,
SA18 3BL not later than 23 October 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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