TIDMHAYD
RNS Number : 8411P
Haydale Graphene Industries PLC
15 October 2019
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via a Regulatory Information
Service ("RIS"), this inside information is now considered to be in
the public domain.
For immediate release 15 October 2019
Haydale Graphene Industries plc
('Haydale' or the 'Group' or the 'Company')
Full Year Results
Haydale (AIM: HAYD), the global advanced materials group, is
pleased to announce its full year results for the year ended 30
June 2019.
Operational Highlights
-- Board members reduced and new leadership team installed;
-- Formation of a global cross site / cross commodity sales team
each with specific product/market expertise.
-- Recruitment of a UK Sales Director with significant industry,
product and market knowledge of composites.
-- Review of the Group's business unit structure to ensure
streamlining and efficiencies largely complete in the US and UK,
with the APAC region review ongoing;
-- The redirection of the Ammanford (UK Inks) business from a
cost centre to a profit centre in progress
-- Focus shifted to commercial revenue and grant income or free
of charge R&D only if the commercial
opportunity is apparent;
-- Significant in year investment in the US blanks tooling
business ($1.2 million) to capture more of the value chain;
-- Functionalisation capabilities enhanced with several new
treatments creating a variety of offerings to meet customer
requirements;
-- Incorporation of nano materials into bespoke solutions has become a core competence;
-- Development of tooling and component enhanced pre-preg for
niche automotive; anticipated to the reach wider automotive
industry in due course.
Financial Highlights
-- Commercial revenues GBP3.47 million (2018: GBP3.4 million);
-- Initial growth of GBP0.5m in the US business following a
total of $1.5m investment in capital equipment, offset by a
reduction in the refocused UK (RPC) business now targeting
repeatable product related commercial sales;
-- cGBP1.6 million of annualised cost savings achieved to date;
-- Adjusted operating loss before non-cash items (depreciation,
amortization, share based payment charges, impairments and one-off
restructuring costs of GBP0.35 million was GBP4.18 million (FY18:
GBP4.88 million)
-- The Board, following extensive discussions with its advisors
and auditors, impaired intangible assets relating to the UK (RPC)
composites business by GBP1.78 million not withstanding the
impairment, the Board considers the composite business to have a
good pipeline of opportunities. This was driven by the Group's
current market cap despite a good pipeline of opportunities.
Post Period End Highlights:
-- Launch of advanced nano-materials additives for eleastomers at IRC, September 2019
Commenting on the results David Banks, Non-exective Chairman of
Haydale, said:
"The year under review has been a challenging one for Haydale.
At management level, we have recruited a new Executive team lead by
Keith Broadbent, who was promoted from COO to CEO in March 2019,
and Laura Redman-Thomas, who joined as our CFO in December 2018. At
an operational level, we have streamlined the business and
rationalised our cost base, created a rigorous product and
commodity analysis with subsequent clear focus, both inwardly and
outwardly, introducing best manufacturing procedures and processes,
created a Group sales force and refinanced the business with the
fundraising announced in March."
- Ends -
For further information:
Haydale Graphene Industries plc
Keith Broadbent, Haydale CEO Tel: +44 (0) 1269 842 946
Gemma Smith, Head of Marketing www.haydale.com
Arden Partners plc (Nominated Adviser
& Broker)
Ruari McGirr / Paul Shackleton / Tel: +44 (0) 20 7614 5900
Ben Cryer
Notes to Editors
Haydale is a global technologies and materials group that
facilitates the integration of graphene and other nanomaterials
into the next generation of commercial technologies and industrial
materials. With expertise in graphene, silicon carbide and other
nanomaterials, Haydale is able to deliver improvements in
electrical, thermal and mechanical properties, as well as
toughness. Haydale has granted patents for its technologies in
Europe, USA, Australia, Japan and China and operates from six sites
in the UK, USA and the Far East.
For more information please visit: www.haydale.com
Twitter: @haydalegraphene
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.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present Haydale Graphene Industries Plc's
("Haydale", the "Group" or the "Company") full year audited results
to 30 June 2019 ("FY19").
The year under review has been a challenging one for Haydale. At
management level, we have recruited a new Executive team lead by
Keith Broadbent, who was promoted from COO to CEO in March 2019,
and Laura Redman-Thomas, who joined as our CFO in December 2018. At
an operational level, we have streamlined the business and
rationalised our cost base, created a rigorous product and
commodity analysis with subsequent clear focus, both inwardly and
outwardly, introducing best manufacturing procedures and processes,
created a Group sales force and refinanced the business with the
fundraising announced in March 2019.
Summary financials
Total income for FY19 of GBP4.25 million (FY18: GBP4.23
million), comprised commercial revenues of GBP3.47 million (FY18:
GBP3.40 million) and grant income of GBP0.79 million (FY18: GBP0.83
million).
FY19 has been a year of change and rationalisation, delivering
an annualised cost base reduction of GBP1.6 million. During the
year there was significant ($1.2 million) investment in the US
blanks (SiC) business, further development of the ink market, the
cost centres in the UK and Thailand were converted to profit
centres and a global sales strategy was introduced.
As a result of these improvements the revenue in the second half
of FY19 was up 12% on the first half of the year and 35% over the
same time period in FY18 driven predominantly by the US SiC
business. The FY19 GBP0.5 million revenue upside in the US SiC
business and GBP0.14 million in APAC inks was offset by the GBP0.58
million reduction in the UK composites business where the focus was
redirected towards commercial sales and well-funded, commercially
viable grant related projects for longer-term growth.
The gross profit for the year was broadly in line with the prior
year at GBP1.9 million (FY18: GBP2.0 million). Total administrative
expenses for the year were adversely impacted by non-recurring
one-off restructuring costs relating to actions by management to
re-align the Group's cost base, such that total administrative
expenses for the year including GBP0.35 million of exceptional
items were GBP8.53 million (FY18: GBP8.85 million). Total
comprehensive loss for the year was GBP7.12 million (FY18: GBP5.41
million), including the GBP2.13 million of restructuring costs and
a non-cash, accounting adjustment for an impairment of intangible
assets of GBP1.78 million. The loss from trading activities,
including one-off restructuring costs, was GBP5.85 million (FY18:
GBP6.02 million).
Operations
During the year under review we re-evaluated our products and
services in order to align our cost base with our addressable
markets. We are now using tailored advanced materials, including
graphene, boron nitride and silicon carbide micro-fibre (SiC) to
enable our customers to improve the quality and electrical, thermal
and/or mechanical performance of their products. We have six
international operating sites, with two in the UK and one in each
of the USA, Thailand, South Korea and Taiwan.
In the Far East, our Thailand operation continues to grow
following the successful commissioning of one of our HT60 plasma
reactors for one of Thailand's leading Petro-chemical processors as
well as our long-term consulting contracts. The customer intends to
add value to certain by-products arising from their manufacturing
process using our functionalisation capabilities.
Following a product review carried out in the year, we now have
speciality inks and coatings capabilities in both the Far East and
UK, covering the biomedical sensor market where commercial progress
continues. Pleasingly, our inks and coatings expertise are now
supplemented by piezo resistive and heating applications that are
already in commercial applications across several sectors.
Our USA facility, Haydale Ceramic Technologies ("HCT"),
manufactures a range of our proprietary SiC micro-fibres which add
strength, toughness and anti- scratch properties to existing
materials. Despite taking longer than we had expected to increase
sales, HCT continues to supply against its existing long term
contracts with world-wide businesses that incorporate HCT's SiC in
the manufacture of their hard-edged cutting tools. As previously
announced, in order to supplement the sale of our proprietary SiC
"powder", we took the decision in FY18 to add value to our SiC
micro-fibres by investing in our own in-house manufacturing
capabilities at our US site to address a growing market in selling
our own proprietary SiC cutting tools ("blanks"). The machinery is
now commissioned, and we are expecting to ramp up production in the
current financial year after positive feedback from our
customers.
The graphene teams at our Loughborough and Ammanford sites have
been developing customer solutions for resins that incorporate our
functionalised graphene for the pre-preg carbon fibre market for
enhanced electrical, thermal and mechanical applications following
the positive work with NICHE and BAC Motors. In addition, following
successful trials, the teams have developed a range of graphene
enhanced elastomers that were launched post the period end at the
IRC 2019 show at the KIA Oval earlier in September.
The new Graphene Engineering Innovation Centre (GEIC) opened in
December 2018 at the University of Manchester, where Haydale is a
Tier 1 Partner. The GEIC has installed one of our HT60 plasma
reactors for graphene functionalization and is showcasing it to
other partners and customers.
We continue to enhance the functionalisation performance of our
reactors with further upgrades and are working on some exciting
product improvement opportunities for the myriad of companies now
looking at collaborating with the GEIC and its Tier-1 Graphene
partners and with our other customers across the globe.
Outlook
We enter FY20 with two new graphene-enhanced product lines in
pre-preg and Elastomers and a focussed sales force with the
industry contacts to promote them.
I foresee significant growth opportunities for Haydale with the
new and adapted approach of using our global footprint as one team,
with cross-selling and cross R&D focus, a re-orientation to
organic growth and cost monitoring. Business development
surrounding the major advances we have seen in the core skills on
inks, functionalisation and dispersion of graphene, in conjunction
with the new market segment of SiC, sets Haydale up for the next
phase of evolution and scale up. Under the new executive team the
Group has focussed its development activities on areas where is
considerers there to be immediate commercial potential.
The Executives strategic review of the Group's operations in the
US and UK is largely complete, and the review of the group's Far
East operations is ongoing.
I would like to thank our new executive team who have worked
tirelessly to address the Group's challenges in order to put in
place the solid foundations required to deliver on our anticipated
growth. A number of challenges remain to be addressed, and I am
confident in their ability to overcome them. I would also like to
thank the staff, our advisors and my fellow non-executive directors
for their hard work and dedication. I would also like to thank our
shareholders for their continued support.
David Banks
Chairman
14 October 2019
STRATEGIC REPORT
The directors present their Strategic Report for the year ended
30 June 2019
Haydale Graphene Industries Plc ("Haydale" or the "Group") is
the AIM listed group that uses tailored advanced materials,
including graphene, boron nitride and silicon carbide micro-fibre
(SiC) to enable its customers to improve the quality and
performance of their products and thereby creating additional value
and market edge. The Group's vision is to be in the vanguard of
nano advanced materials and dispersion to become a world leader in
the creation of material change through understanding the potential
of those materials through careful characterisation, and the
incorporation of its bespoke and unique patented functionalisation
process, as appropriate.
The Group's regulatory approved proprietary graphene-based and
other speciality inks and coatings for the print and biomedical
sensor markets that it has developed continue to progress
commercially and have now been supplemented by offerings in piezo
resistive and heating applications that are in commercial
applications across several sectors. Progress in enhanced resins
for the pre-preg carbon fibre market covering electrical, thermal
and mechanical applications has also moved into the commercial
phase.
In the USA, Haydale manufactures proprietary SiC micro-fibres
and whiskers that strengthen ceramics and hard-edged cutting tools
for fashioning jet engine turbine blades from solid super alloy
billets. This application has now benefitted from substantial
investment and moving up the value chain to produce blanks which
incorporate the fibres and have helped to further strengthen the
relationship with customers. Other applications including corrosion
barriers for oil and gas pipelines and coatings where high scratch
and wear resistant is required is another application that is
addressed.
The Group has operational activities in its six chosen
geographies worldwide. In summary, these are:
Haydale subsidiary Location Principal activities
-------------------------- ----------------------- ----------------------------------
Haydale Limited Ammanford, Wales Ex R&D operation now producing
inks and supporting master
batch production for direct
sales to customers and
other sites in the Group.
Specialist Functionalisation
centre.
Haydale Composite Loughborough, England Sale of pre-preg, and
Solutions Limited consulting services in
("HCS") advanced composites, elastomers
and other nano materials
and including test services.
Its R&D involvement in
grants focuses on products
that could lead to commercial
production.
Haydale Technologies Seoul, South Korea Dedicated sales servicing
(Korea) Limited ("HTK") the fast-moving Korean,
Chinese and Japanese markets.
Haydale Technologies Bangkok, Thailand Ex R&D facility now focused
(Thailand) Company on commercial applications
Limited ("HTT") with plasma functionalisation
facilities. Services the
APAC region and supporting
the Far East sales teams.
Haydale Technologies Kaohsiung, Taiwan Established in July 2017
Taiwan Ltd ("HTW") as the production facility
and technical centre for
sales of speciality inks,
initially into the biomedical
sensor market.
Haydale Technologies, South Carolina, USA Haydale Ceramic Technologies
Inc. ("HTI") is HTI's wholly owned
operating subsidiary which
produces and sells novel
SiC micro fibres and whiskers,
as well as ceramic blanks
to the cutting tool industry.
Background to urgent business restructure and re-alignment
The lead in to FY19 was the trading statement announcement on 13
June 2018 which explained a delay in expected sales in FY18 and the
intention of Ray Gibbs to resign as CEO in order to concentrate on
business development. On 7 September 2018 David Banks stepped up
from Non-executive Chairman to be appointed as Interim Executive
Chairman and Keith Broadbent was appointed to the main board as
Chief Operating Officer. On 9 November 2018, the Company announced
that the planned $1.5 million sale and leaseback of the capital
tools equipment at its US facility would not be available and that
the Group was considering alternative sources of finance. At the
same time a GBP1 million reduction of annualised SG&A costs was
announced as the start of a new direction of business prudence and
refocus. On 21 December 2018, an announcement was made that
additional working capital had been raised through a loan with the
Development Bank of Wales and a new equity subscription, concurrent
with a change to the board of Directors ("Board") with Laura
Redman-Thomas being appointed as the new CFO and Matt Wood stepping
down from that position, and Ray Gibbs and Roger Smith also
resigning from their Board positions.
The Group released its interim results on 22 February 2019 which
continued to show a challenge on cash and short- term revenues. A
proposed placing, subscription and open offer was announced on the
same day which completed on 12 March 2019, raising GBP5.8 million
(before costs). Following the General Meeting held on 12 March
2019, Keith Broadbent was appointed as the Group's new CEO and
David Banks reverted to Non-executive Chairman.
Overall the year has been one of major reorganisation and
resetting commercial priorities. In summary, this has meant that
over the last six months:
-- Board members reduced and new leadership team installed;
-- A full review of the Group's business unit structure to
ensure streamlining and efficiencies with a review of US and UK
largely completed, with the review of the APAC region ongoing -
with cGBP1.6 million of annual cost savings achieved to date;
-- A major change of strategy whereby the focus is securely on
commercial revenue, either project or product related, with grant
income or free of charge R&D only to be used in applications
where an immanent commercial opportunity was apparent;
-- Core focus established in:
o Growing the US business following significant investment
(c$1.5 million) on the blanks (SiC) business;
o The redirection of Ammanford from cost centre to profit
centre;
o Development of the ink market;
o Composites focus to be maintained but with reduced resource
given the timing of the major commercial revenues have been and are
expected to be longer than first planned; and
o Business unit strategy has been modified into a global sales
strategy - to sell technology across the various sites and
geographies i.e. cross selling.
-- Formation of a cross site / cross commodity sales team headed
by Neil Taylor, VP of HCT in the US (expertise SiC), and with a UK
Sales Director having been recruited post year end (Composites) and
a UK sales engineer part of the team (Inks).
This reorganisation will continue throughout the new financial
year as we look to opportunities to further rationalise in
conjunction with entering the growth phase.
Globalisation of the Strategic Business Units
As mentioned in previous reports, the setting up of two business
units in 2017 (Resins, Polymers and Composites ("RPC") and Advanced
Materials (including SiC and inks) ("AMAT") delivered some limited
success and growth in the business, but did not facilitate the
global approach necessary to leverage the Group's geographical and
technological commercial advances. Consequently, a part of this
dual BU structure has been split to provide a third reporting
entity, "APAC". This has created a more flexible structure which
aligns with commodity or product focus on one hand insofar as SiC,
Inks, Composites and Elastomers naturally have a site-based
expertise, but also encourages Project Managers and Sales personnel
to look to other geographical areas for potential revenue.
This change to allow greater potential of cross-selling has been
supplemented and re-enforced with the formation of a global sales
team with accountability across the Group; and a new VP Sales, Neil
Taylor, promoted from within the business; and a new UK Sales
Director, Simon Green, recruited externally. Initial success has
been reported previously with commercial activities on coatings
with SiC in progress in the UK, with live commercial enquiries
involving pre-preg composites and graphene offerings underway in
the US. The combination of the Group's ink expertise is being
pooled and leveraged. This methodology is set to continue as the
template for growth as the one company one team mantra takes
further hold.
Sharing best practice in Operational and other business systems
and practices such as Health and Safety and Quality (ISO9001)
continues to gather force. This, together with more central
reporting structures underway in finance, will assist in cross
group communication and enhanced governance.
Progress on Core Element - Plasma functionalisation
Building on the progress from last year, the HDPlas(TM)
functionalisation process continues to be the cornerstone of the
Company's offering. Good progress has been made with several new
and different key treatments enabling much more varied offerings to
customers' requirements. This enables a much greater range of
graphene and other nano material treatments and facilitates
potential improvements in dispersal and mechanical strength,
electrical conductivity, and thermal conductivity. The loaded
matrix can and is being added to commercial applications such as
pre-preg, compounded into polymers or elastomers, or sold as
Masterbatch in many ongoing programs.
Key to the investment this year has been the research allowing
ramp up technology to be much better understood and has, therefore
facilitated increased commercial quantity requirements as and when
required.
New applications for the plasma functionalisation process
include projects developing the treatment of materials to re-life
such as Carbon Black and processing larger types of components to
support external surface enhancements, including greater
adherence.
Marketing
The focus on Marketing for graphene profiling that has served
Haydale well in the past has fundamentally shifted to product
marketing for product sales. Alterations to the website in the year
will be further enhanced in the new financial year with an
incorporation of the US and Far East offering onto a single website
and presenting the one global face of Haydale.
SITE SPECIFIC PROGRESS
Loughborough, East Midlands (RPC)
In context of the overall strategic direction, the Loughborough
Site has seen an emphasis on reducing cost overhead, reducing grant
income in preference to commercial paid-for projects whilst
maintaining the progress in relation to the further development of
the main technologies. The focus continues with the application
specific customer solutions which now includes composites,
elastomers, inks and SiC. The incorporation of nano materials into
the bespoke solutions has become a core competence.
Highlights have included the progress from the funding grant
announced in October 2018 with the Niche Vehicle Network, BAC Mono
and Pentaxia as part of the consortia to further develop pre-preg
for tooling and automotive parts, to the showcase of the BAC Mono
"R" at Goodwood Festival of Speed with the composite parts integral
in the vehicle being exhibited (announced post period in July
2019). This product development of the tooling and component
enhanced pre-preg could well be a steppingstone for
graphene-enhanced composite body panels and tooling reaching the
wider automotive industry soon. Haydale's Composites Transition
Piece (CTP) was also a product of previous grant collaboration, and
now endorsed by the National Grid, is another example of product
development targeting commercial revenues. This, together with the
enhanced portfolio and other applications coming through the same
route, bodes well for future revenues and growth.
Ammanford, Wales (RPC)
Ammanford's transition from an R&D cost centre to a
commercial profit centre got underway in the second half of FY19.
The focus has been on ink sales initially and, to that end, we have
recruited an experienced Sales Engineer from that industry. As
previously announced, Haydale, in collaboration with The Welsh
Centre for Printing and Coating (WCPC), has developed and refined a
range of proprietary printing inks utilising functionalised
graphene. This includes the development of advanced ink technology
to be embedded into a range of apparel for elite athletes in
training for the 2020 Olympic and Paralympic Games.
In order to further support this transition and provide a
pipeline going forward, Haydale is a partner in the Smart Expertise
Program funded by the Welsh Government which is designed to speed
up the process required to take products from proof of concept into
volume and profitable products. This involves close collaboration
with our Taiwan operations whose focus is also inks.
As part of the bigger sales team led by Neil Taylor in the US,
the intention is to look to sell the full portfolio of products
across all SBU's including ink, composites, elastomers and SiC.
Significant progress has been made in many areas of the
functionalisation process, including the ability to increase
treatment levels across several materials. Examples include
treatment to increase hydrophobicity, as well as increase the
ability to treat low bulk density materials such as high grade
FLG's (few layered graphene) and recovered carbon blacks.
Additionally, Haydale is collaborating with the National Physical
Laboratory for further understanding of the functionalisation
process as part of an Innovate UK grant as the focus continues on
real life products. Key will be the ability to continue to improve
material throughput. Collaboration with our key OEM on plans to
design the next generation of HDPlas(TM) reactors to provide the
ability to meet commercial volumes in anticipation of the
breakthrough driven by the increasing scope of the core and
patented technology has also been a priority.
We continue to have an office in Harwell Business Park,
Oxfordshire, leased from June 2018, to provide a central location
for business development alongside significant potential customers
operating in the aerospace and advanced materials sectors.
Greer, South Carolina (AMAT)
The US operation, Haydale Ceramic Technologies LLC ("HCT"),
continues to deliver the bulk of revenues for the Group and, in
FY19, achieved sales of SiC of GBP2.7 million (FY18: GBP2.11
million). During the year, it developed and extended a previously
announced four-year agreement to supply SiC micro-fibre to a global
group selling tooling and wear-resistant solutions. HCT
renegotiated and extended the term of the agreement. This new sole
supply agreement has a potential sales value of more than US$3.3
million over a now five-year term, which represented an increase of
US$1.35 million in the order book at the time.
The commissioning and installation of the equipment invested in
last year at $1.5 million to produce engineered SiC ceramic blanks
for the cutting tool industry has been well received and qualified
with major jet engine and aerospace manufacturers worldwide and the
team are now working towards scaling up to commercial production
quantities. There have been some initial teething issues with the
ramp up, but progress is being made and the expectation of good
revenue growth is still very much anticipated. The support of
customers in this process has been significant as the teams work
together to realise the joint opportunities.
Efforts to introduce SiC in the powder-coating anti-corrosion
market have continued with revenues also expected to grow in the
current financial year. This application has been the subject of a
paid for commercial contract in the UK and work is underway between
the US and UK sites to develop a bespoke coating process to further
address this market opportunity.
HCT has a long-term sales order book for delivery of SiC and, as
at 12 September 2019, stood at approximately $3.55 million ($4.22
million, 10 September 2018).
Thailand Bangkok (APAC)
HTT, our high-class facility in the prestigious Thailand Science
Park in Bangkok, has progressed well in the year and is also moving
into more commercial project applications, including
functionalisation projects of some of the by-products of a large
petrochemical processor and entering first stages of their own
bespoke product sales, in particular, PATit. PATit is Haydale's
software driven anti-counterfeiting device that "reads" the unique
conductive transparent and opaque inks when printed onto a product
label, proving the authenticity (or otherwise) of the goods. There
is currently an agreement that has been signed with TKS Siampress
Management Co., Ltd to use the technology in commercial
applications on an exclusive basis in Thailand and one other
territory to be decided by the parties. Furthermore, there is
another customer working with the technology to develop a different
bespoke application.
The site continues additionally to be a technical and sales
support service for our Korean and Taiwan activities.
Taiwan Kaohsiung, (APAC)
HTW continues to provide graphene and other speciality inks in
lower quantities, principally to leading biomedical sensor printers
in the diabetes testing market. We are receiving regular repeat
orders from customers, albeit still in relatively small quantities
and the joint development agreement with STAR RFID. The previously
announced intention to relocate to bigger premises will be
dependent on the sales achieving commercial volumes and will be
reviewed as part of the ongoing strategic review.
Korea Seoul (APAC)
Our sales office in Seoul remains a good access route to Chinese
and Japanese markets as we continue to progress in the commercial
sphere. Our sales engineer is now part of the global sales
structure and this will assist revenue growth going forward. The
new PATit sales opportunity described above was one that originated
from this source.
FUTURE STRATEGIC DIRECTIONS
FY19 has been a transitional and challenging year for Haydale
and the much-discussed potential for a commercial focus to develop
a sales team and reduce overheads has been affected. This will be
the fulcrum of business in FY20 and onwards. The cross selling of
products: pre-preg and Inks in the US; Composite technologies in
the APAC regions; and SiC in the UK and Europe, is a crucial
element in this growth direction. The new global sales team that is
now in place has very specific objectives to leverage this
geographical reach and expertise across all the focus product
groups with robust back up of the core and unique functionalisation
process to underpin the drive.
Further improvements in characterisation, dispersion, capital
equipment modification, material treatment levels and innovations
continue as part of customer paid for process, and the concurrent
development of further know-how with additional potential IP is, of
course, an essential element of this new intensity, which in turn
helps support more business. Examples of this were evident at the
innovations in elastomers recently announced at the IRC 2019
(International Rubber Conference) where we launched a range of
functionalised nanomaterials pre-dispersed in process oils for
improvements in mechanical and thermal conductivity of customer's
rubber products We also continue to spread this learning, expertise
and best practice throughout the Group to our people.
Central to our future success is also our partnerships which
have continued to be developed over the last twelve months and
where we are looking to expand further. WCPC (Welsh Centre for
Printing and Coating) is part of Swansea University and is fully
committed through the part-funded Smart Expertise Program to
support the path to commercialism. The combination of WCPC's
significant expertise and equipment and Haydale's newly created
commercial focus assists in expediting products to quality volume
to deliver to customers' needs.
The relationship with University of Manchester's GBP60 million
Graphene Engineering Innovation Centre ("GEIC") is similarly a
major bridge in the commercialisation drive which, from June 2019,
has one of our HT60 functionalisation reactors installed and
commissioned. As a Tier One member of the GEIC, Haydale gains
access to the materials knowledge, applications engineers and both
analytical and processing equipment within the GEIC. This gives
Haydale, through the GEIC's world-renowned development facilities,
a quicker route to market and access to a greater reach and range
of customers.
We continue to target the less regulated markets, including
sporting goods, which provide potential significant short-term
revenue opportunities for Haydale. An example of which has been
supply during the year of graphene-enhanced masterbatch to a
customer involved in the hockey and lacrosse supply industry.
However, any significant sales orders are predicated on the
adoption of our products and technologies by our commercial
partners and customers, timing of which is outside our control. The
excellent work we have done over the last nine months to focus on
our core products and expertise, an example of which is our
datasheets on graphene enhanced pre-pregs and elastomers, has been
extremely well received by industry and our newly created sales
team are following up on these new leads.
Grant Funded Projects
Grant funded projects have continued over the last twelve months
with the new emphasis that only projects that lead to commercial
products in the short to medium term or add significantly to the
Group's knowledge bank on applications with commercial potential in
defined time scales will be undertaken. The type of projects
involved have included the large petrochemical customer work
detailed above in Thailand but most focus has been in the UK at our
Ammanford and Loughborough sites. An example of this includes the
development of graphene enhanced functionalised additives for use
in elastomers. This involves highly loaded nanomaterial dispersions
in process oils to offer enhanced mechanical, physical, electrical
and thermal properties of elastomer compounds. The technical
datasheet and product information was launched at IRC in September
2019.
Other examples include a plan of work to create a graphene
sensor that will be able to detect defects in composite materials
during both the manufacturing process and the normal service life
of a component, to improve the electrical conductivity of epoxy
resin structural adhesives using functionalised nanomaterials, and
a product readiness project to produce graphene enhanced composite
tooling using thermal pre-preg, and graphene enhanced components
using mechanically improved pre-preg.
Further work is also underway on the enhancement of the
electrical pre-preg offering for EMS shielding and lightning
strike, and it is anticipated this will result in another product
specified for FY20.
This structured approach to development is facilitating the
internal learning experiences and potential product to fit with the
organic growth momentum at the centre of our strategic drive.
Management and Personnel
We have looked to make reductions in overheads this year whilst
at the same time investing in the training of our staff as we
continue to build organisational capability.
In September 2018, Keith Broadbent was promoted to the newly
created role of the Group's Chief Operating Officer and as a
director of the Company and, following the equity fundraise in
March 2019, became the CEO of the Group, replacing David Banks who
reverted to his previous role as Non-executive Chairman.
In December 2018, several directors decided to stand down,
including Matt Wood, as part-time Finance Director, who was
replaced by Laura Redman-Thomas as full-time CFO. Ray Gibbs also
stepped down as a director of the Company in December 2018 and
Roger Smith, NED, stepped down in January 2019.
Having discussed with our advisers and key shareholders, it is
the Board's intention over the coming weeks to adopt a new EMI and
Group wide share option scheme in order to incentivise, retain and
recruit our staff. The new scheme will replace the Group's existing
share option schemes and all options granted under the previous
schemes are expected to be surrendered. Further details of the new
scheme and any grants of options made will be issued in due
course.
Cost Savings
Our focus on cost savings, which started in October 2018 and
continued following the Group's securing of a loan from the
Development Bank of Wales in December 2018 and through the equity
fund raising that completed in March 2019, has achieved annualised
savings to overheads of approximately GBP1.6 million to date. These
predominantly relate to Senior Management salary costs, consultancy
costs and travel.
Impairment Review
At the end of FY19, the Board, following extensive discussions
with its advisors including its auditors, took the decision to
impair the carrying value of intangible assets relating to the UK
(RPC) composites business by GBP1.78 million. This was despite good
pipeline opportunities and takes into consideration the company's
current share price, its resulting market cap and the change in the
composites business since its acquisition in 2014 from a
predominantly grant funded sales business to a product sales
business.
Patents, IP and Licensing
Haydale's critical IP remains its processing, mixing and
dispersion knowledge and know-how derived from the work we have
carried out in conjunction with Huntsman, together with the
FDA-approved ink formulations that have been developed in the Far
East.
The Group currently holds patents in the US, UK, Europe, China,
Japan and Australia.
Key Performance Indicators ("KPIs")
The Group's KPIs are its financial metrics, being its revenues,
gross profit margin, adjusted operating loss, cash position, total
borrowings and long-term sales order book as follows:
FY19 (GBP'000) FY18 (GBP'000)
---------------- ----------------
Revenue 3,467 3,403
Gross profit margin 55% 59%
Adjusted operating loss (4,180) (4,880)
Cash position 4,688 5,092
Borrowings 1,247 896
Long-term sales order book, inclusive
of grants* 3,557 4,674
* unwinding of multi-year contracts in the US of GBP0.8 million
and timing in UK Composites GBP0.29 million
FINANCIAL REVIEW
The Financial Review should be read in conjunction with the
consolidated financial statements of the Group and the notes
thereto. The consolidated financial statements are presented under
International Financial Reporting Standards as adopted by the
European Union and are set out on pages 35 to 78. The financial
statements of the Company continue to be prepared in accordance
with FRS 101 and are set out on pages 79 to 87.
Statement of Comprehensive Income
In the year under review, the Group's three principal areas of
income were: Sale of SiC fibers, whiskers and blanks, Specialty
Inks and graphene enhanced composites. There is a further category
of grant funded turnover which will be discussed separately
The Group's total income for the year ended 30 June 2019 of
GBP4.25 million (FY18: 4.23 million), comprised commercial revenues
of GBP3.47 million (FY18: 3.40 million) and grant income of GBP0.79
million (FY18: GBP0.83 million). The increase in revenue from the
US SiC business of GBP0.50 million and GBP0.14m increase in APAC
inks was offset by a GBP0.58 million reduction in the UK RPC
business, where the focus was redirected towards commercial sales
and well-funded, commercially viable grant related projects for
longer-term growth. Although revenue was flat year on year, the
Group's second half income increased by 12% compared to the first
half of the year and by 35% on the same period in FY18,
predominantly driven by growth in the US.
The Group's gross profit, which excludes the income from grant
funded projects was GBP1.90 million (FY18: GBP2.0 million)
delivering a gross profit margin of 55% (FY18: 59%). The reduction
in margin was primarily due to a different sales mix and a below
average yield from the US operations in the first half of FY19.
This was further impacted by higher than expected graphite costs in
the US, and pricing strategies as the business seeks to expand the
markets for its products.
The Group's adjusted operating loss before non-cash items, such
as depreciation, amortization, share based payment charges,
impairments, and one-off restructuring costs was a loss of GBP4.18
million (FY18: GBP4.88 million). The loss from trading, including
one-off restructuring costs of GBP0.35 million was GBP5.85 million
(FY18: GBP6.02m). The Directors consider that adjusted operating
loss is a more useful measure of the Group's performance and
comparative performance than loss from operations, as it excludes a
non-cash accounting adjustment for the impairment of intangible
assets.
As stated in the Strategic Report, at the year end, the Board,
following extensive discussions with its advisors including its
auditors, took the decision to impair the carrying value of
intangible assets relating to the UK (RPC) composites business by
GBP1.78 million. This was despite good pipeline opportunities and
takes into consideration the current share price, the resulting
market cap and the change in the composites business since its
acquisition in 2014 from a predominantly grant funded sales
business to a product sales business.
During the year, we invested significantly in the US blanks
business, realigned and refocused resource throughout the Group,
particularly reducing the cost base in the UK composites business.
R&D was redirected towards commercially viable products
expected to deliver future strategic growth. Overall third-party
R&D spend for the year was GBP0.76 million (FY18: GBP1.05
million), of which GBP0.49 million was expensed during the year
(FY18: GBP0.88 million), with the balance of GBP0.22 million being
capitalized, (FY18: GBP0.18 million).
The Group's adjusted administrative costs of GBP6.87 million
(FY18: GBP7.71 million) exclude non-cash items of depreciation,
amortization, share based payment charges, depreciation and
amortization as well as one-off restructuring costs of GBP0.35
million to facilitate strategic change and future cost base
reductions. Total administrative expenses for the year were GBP8.53
million (FY18: GBP8.85 million).
In the year the cost base was realigned achieving annualized
savings of approximately GBP1.6 million of which GBP0.50 million
was realized in the second half of FY19. Overall, the loss before
tax for the year was GBP7.76 million (FY18: GBP6.12 million) and
included non-cash items of GBP3.10 million and one-off costs of
GBP0.35 million. Non-cash items included impairment of intangible
assets, amortization, depreciation and share based payment
charges.
Total comprehensive loss for the year was GBP7.12 million (FY18:
GBP5.41 million), including the GBP1.78 million non-cash charge for
the impairment of intangible assets and one-off restructuring costs
of GBP0.35 million.
At the year end, the Group's contracted order book stood at
GBP3.56 million (FY18: GBP4.67 million) and, since the year end,
additional long-term orders have been secured resulting in an order
book as at 10 September 2019 of GBP3.55 million to be delivered
over the coming years.
The loss per share for the year reduced to GBP0.06 (FY18:
GBP0.21 loss).
Statement of Financial Position and Cashflows
As at 30 June 2019, net assets amounted to GBP11.25 million
(2018: GBP12.54 million), including cash balances of GBP4.69
million (2018: GBP5.09 million). Other current assets increased to
GBP3.13 million at the year-end (2018: GBP2.56 million), and
current liabilities increased to GBP3.12 million as at 30 June 2019
(2018: GBP2.51 million). Net cash outflow from operating
activities, before working capital movements for the year was
GBP4.59 million (2018: GBP4.83 million). The principal contributing
factors being the adjusted operating loss of GBP4.18 million (2018:
GBP4.88 million) plus the one-off restructuring costs of GBP0.35
million. Capital expenditure of GBP1.2 million (FY18: GBP0.72
million) was predominantly for the US blanks equipment which
utilized a significant portion of cash during the year.
Capital Structure and Funding
As at 30 June 2019, the Company had 317,723,848 ordinary shares
in issue (2018: 27,328,773). During the year, the Company issued
290,395,075 new ordinary shares in connection with the Company's
placing and offer for subscription which raised GBP5.81 million
(before expenses) and was completed on 13 March 2019. No options
were exercised into ordinary shares during the year (FY18: no
options were exercised).
The Group repaid borrowings of GBP0.5 million during the year
(FY18: GBP0.45 million), principally in relation to the Group's US
borrowing facilities which are secured on the Group's US based
tangible assets. A new loan was secured on 19(TH) December 2018
with the Welsh Development Bank for GBP0.75 million. The net result
left Haydale's financing costs in line with the previous year at
GBP0.12 million (FY18: GBP0.10 million). The Group's total
borrowings at the year-end were GBP1.25 million (2018: GBP0.90
million), GBP0.58 million of which was in the UK and the balance
held by the Group's US subsidiaries.
Haydale'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 2019
Note Year ended Year ended
30 June 30 June 2018
2019 GBP'000
GBP'000
REVENUE 5 3,467 3,403
Cost of sales (1,567) (1,403)
------------ ---------------
Gross profit 1,900 2,000
Other operating income 785 831
------------------------------------------------------- ------- ------------ ---------------
Adjusted Administrative expenses (6,865) (7,711)
Adjusted operating loss (4,180) (4,880)
Adjusting administrative items:
Share based payment expense (200) (291)
Restructuring costs (350) -
Depreciation and amortisation (1,118) (851)
(1,668) (1,142)
Total trading administrative expenses (8,533) (8,853)
LOSS FROM TRADING (5,848) (6,022)
Impairment 9 (1,784) -
Total administrative expenses (10,317) (8,853)
LOSS FROM OPERATIONS (7,632) (6,022)
Finance costs (123) (95)
LOSS BEFORE TAXATION 6 (7,755) (6,117)
Taxation 7 570 850
LOSS FOR THE YEAR FROM CONTINUING OPERATIONS (7,185) (5,267)
Other comprehensive income:
Items that may be reclassified to profit
or loss:
Exchange differences on translation of
foreign operations 60 (47)
Items that will not be reclassified to
profit or loss:
Remeasurements of defined benefit pension
schemes 2 (99)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
FROM CONTINUING OPERATIONS (7,123) (5,413)
Loss for the year attributable to:
Owners of the parent (7,185) (5,267)
Total comprehensive loss attributable
to:
Owners of the parent (7,123) (5,413)
Loss per share attributable to owners
of the Parent
Basic (GBP) 8 (0.06) (0.21)
Diluted (GBP) 8 (0.06) (0.21)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2019
Company Registration No. 07228939 Note 30 June Restated
2019 30 June
GBP'000 2018
GBP'000
ASSETS
Non-current assets
Goodwill 9 1,453 2,087
Intangible assets 9 1,024 2,130
Property, plant and equipment 10 5,556 5,061
Deferred tax asset - -
8,033 9,278
Current assets
Inventories 11 1,182 781
Trade receivables 637 705
Other receivables 472 603
Corporation tax 836 473
Cash and bank balances 4,688 5,092
7,815 7,654
TOTAL ASSETS 15,848 16,932
LIABILITIES
Non-current liabilities
Bank loans 14 388 640
Deferred tax - 125
Pension Obligation 1,085 1,120
1,473 1,885
Current liabilities
Bank loans 14 859 256
Trade and other payables 13 2,056 2,172
Deferred income 209 78
3,124 2,506
TOTAL LIABILITIES 4,597 4,391
TOTAL NET ASSETS 11,251 12,541
EQUITY
Capital and reserves attributable to
equity holders of the parent
Share capital 12 6,354 547
Share premium account 12 27,764 27,539
Share-based payment reserve 828 1,298
Foreign exchange reserve (100) (160)
Retained earnings (23,595) (16,683)
TOTAL EQUITY 11,251 12,541
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2019
Share Share Share-based Foreign Retained Total Equity
capital premium payment Exchange profits GBP'000
GBP'000 GBP'000 reserve Reserve GBP'000
GBP'000 GBP'000
At 1 July 2017 392 18,936 1,007 (113) (11,317) 8,905
Comprehensive Loss for
the year
Loss for the year - - - - (5,267) (5,267)
Other comprehensive
loss (47) (99) (146)
Total Comprehensive
loss 392 18,936 1,007 (160) (16,683) 3,492
Contributions by and
distributions to owners
Recognition of
share-based payments - - 291 - - 291
Issue of ordinary
share capital 155 9,123 - - - 9,278
Transaction costs
in respect of
share issues - (520) - - - (520)
At 30 June 2018 547 27,539 1,298 (160) (16,683) 12,541
Comprehensive Loss for
the year
Loss for the year (7,185) (7,185)
Other comprehensive
loss - - - 60 2 62
Total comprehensive
loss 547 27,539 1,298 (100) (23,866) 5,418
Contributions by and
distributions to owners
Recognition of
share-based payments - - 200 - - 200
Share based payment
charges - lapsed
options (670) 670 -
Issue of ordinary
share capital 5,807 225 - - - 6,032
Transaction costs
in respect of
share issues (399) (399)
At 30 June 2019 6,354 27,764 828 (100) (23,595) 11,251
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2019
Note Year Year
ended ended
30 June 30 June
2019 2018
GBP'000 GBP'000
Cash flow from operating activities
Loss before taxation (7,755) (6,117)
Adjustments for:-
Amortisation of intangible assets 9 2,007 149
Loss on disposal of intangible assets - 75
Depreciation of property, plant and
equipment 10 895 702
Loss/(Profit) on disposal of property,
plant and equipment 16 (60)
Share-based payment charge 200 291
Pension plan contributions (118) -
Finance costs 123 95
Pension - net interest expense 42 37
Operating cash flow before working capital
changes (4,590) (4,828)
(Increase)/Decrease in inventories (401) 190
Decrease in trade and other receivables 200 266
Increase in payables and deferred income 13 159
Cash used in operations (4,778) (4,213)
Income tax received 76 269
Net cash used in operating activities (4,702) (3,944)
Cash flow used in investing activities
Purchase of property, plant and equipment (1,205) (723)
Purchase of Intangible Assets (267) (175)
Proceeds from disposal of property,
plant and equipment - 83
Acquisition of subsidiary - deferred
consideration - (444)
Net cash used in investing activities (1,472) (1,259)
Cash flow used in financing activities
Finance costs (123) (95)
Proceeds from issue of share capital
(net of share issue costs) 5,634 8,757
New bank loans raised 750 -
Repayments of borrowings (500) (446)
Net cash flow from financing activities 5,761 8,216
Effects of exchange rates changes 9 (12)
Net (decrease) / increase in cash and
cash equivalents (404) 3,001
Cash and cash equivalents at beginning
of the financial year 5,092 2,091
Cash and cash equivalents at end of
the financial year 4,688 5,092
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2019
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 2019 has been extracted from the Group's audited
financial statements which were approved by the Board of directors
on 14 October 2019 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 2019 report and financial statements.
4. Going concern
The Group 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 30 June 2019,
amounts to GBP4.69 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, and current cash resources, the Directors
believe that the Group will be able to continue to trade for the
foreseeable future.
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.
For management purposes, the Group is organised into the
following reportable segments:
-- Resins, Polymers and Composites (focussing on the composites
market in Europe (known as RPC) ;
-- Advanced Materials (focussing on SiC & blank products for tooling) (known as AMAT); and
-- Asia-Pacific (focusing on Ink sales to the Asian markets) (known as APAC)
The strategic business units RPC & AMAT were created on 1
July 2017, prior to this date management did not distinguish
between different operating segments. The strategic business unit
APAC was created on 1 July 2018. Comparative figures have been
calculated on the basis that the operating segments existed in the
previous financial year.
Geographical information
All revenues of the Group are derived from its principal
activity, the sale and distribution of nano-technology and silicon
carbide products or the delivery of research projects into those
nano materials. The Group's revenue from external customers by
geographical location are detailed below.
2019 2018
GBP'000 GBP'000
By destination
United Kingdom 328 238
Europe 657 516
United States of America 632 532
China 3 448
Thailand 239 199
South Korea 414 93
Japan 1,133 1,299
Rest of the World 61 78
3,467 3,403
During 2019, GBP1.13 million or 33% (2018: GBP1.29 million or
38%) of the Group's revenue depended on a single customer. During
2019 GBP0.58 million or 17% (2018: GBP0.34 million or 10%) of the
Group's revenue depended on a second single customer.
Revenue within Europe was predominantly split between Germany
GBP0.58 million or 17% and Netherlands GBP0.05 million or 1% (2018:
Germany GBP0.34 million or 10%, and Ireland GBP0.17 million or 5%),
as a proportion of total group turnover for the year.
All amounts shown as other income within the Statement of
Comprehensive Income are generated within and from the United
Kingdom. These amounts include income earned as part of a number of
grant funded projects and a government grant which is being
released over a period of 5 years. The residual amount is reflected
in deferred income.
Revenue from goods was GBP2.98 million or 86% (2018: GBP2.48
million or 73%) and revenue from services was GBP0.34 million or
10% (2018: GBP0.80 million or 24%).
Dis-aggregation of revenues
The split of revenue by 2019 2018
type: GBP'000 GBP'000
Services 342 836
Reactor sales 77 89
Reactor rental 69 -
Goods 2,979 2,478
3,467 3,403
2019 RPC AMAT APAC TOTAL
GBP'000 GBP'000 GBP'000 GBP'000
Services 184 - 158 342
Reactor sales - - 77 77
Reactor rental 69 - - 69
Goods 188 2,619 172 2,979
441 2,619 407 3,467
2018 RPC AMAT APAC TOTAL
GBP'000 GBP'000 GBP'000 GBP'000
Services 682 - 141 836
Reactor sales - - 89 89
Reactor rental - - - -
Goods 336 2,122 33 2,478
1,018 2,122 263 3,403
Services and rector rental revenues are recognised over time,
whereas goods and reactor sales are recognised at a point in
time.
6. Loss before taxation
Loss before taxation is arrived at after charging:
2019 2018
GBP'000 GBP'000
Research and development:
- current period's expenditure 493 878
- impairment of intangibles - Note 9 1,785 -
- amortisation of other intangibles 222 149
Loss on disposal of intangibles - Note
9 - 75
Restructuring costs 350 -
Depreciation of property, plant and equipment 867 675
Loss/ (profit) on disposal of property,
plant and equipment 16 (9)
Foreign Exchange (24) (33)
Operating lease rentals:
- land and buildings 614 572
- plant and machinery 6 6
7. Income tax
Current tax credit 2019 2018
GBP'000 GBP'000
Total income tax credits:
* for the financial year 442 399
* under provision in the previous financial year - 63
_________ _________
Total Current Tax 442 462
_________ _________
Deferred tax credit
Origination and reversal of temporary
differences 128 388
Recognition of previously unrecognised - -
deferred tax assets
_________ _________
128 388
570 850
The reason for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the United
Kingdom applied to the losses for the year are as follows:
2019 2018
GBP'000 GBP'000
Loss for the year (7,185) (5,267)
Income tax credit (570) (850)
Loss before income taxes (7,755) (6,117)
Tax using the Group's domestic tax rates
of 19% (2018 - 19%) 1,474 1,162
Expenses not deductible for tax purposes (409) (274)
Different tax rates applied in overseas
jurisdictions 17 26
R&D enhancement 275 234
R&D costs capitalised 43 36
Surrender for R&D tax credit (44) (15)
Adjustment for under/(over) provision
in previous periods - 63
Movement in unrecognised losses carried
forward (681) (747)
Movement in unrecognised fixed asset
temporary differences (233) (23)
Deferred tax: Origination and reversal
of temporary differences 128 388
Recognition of previously unrecognised - -
deferred tax assets
Total tax credit 570 850
Changes in tax rates and factors affecting the future tax
charge
The main rate of corporation tax for UK companies is currently
19%. The Finance Bill 2016, which was substantively enacted in
September 2016, announced a reduction to the main rate of
corporation tax. The rate will reduce to 17% from 1 April 2020.
The main rate of corporate tax in the U.S reduced from 34% to
21% effective from 1 January 2018 as part of the U.S tax reforms.
This has reduced the deferred tax liability attributable to the
group's subsidiaries based in South Carolina.
The Group has tax losses that are available indefinitely for
offset against future taxable profits of the companies
approximately amounting to GBP21.85 million (2018: GBP15.78
million) and GBP4.53 million (2018: GBP3.84 million) of fixed asset
timing differences. The group currently expects to be able to
utilise its US tax losses in the foreseeable future and a deferred
tax asset has been recognised in respect of these tax losses up to
the value of the timing difference of fixed assets and therefore no
overall deferred tax asset has been created.
8. Loss per share
The calculations of loss per share are based on the following
losses and number of shares:
2019 Restated
GBP'000 2018
GBP'000
Loss after tax attributable
to owners of Haydale Graphene
Industries Plc (7,185) (5,267)
Weighted average number
of shares:
* Basic and Diluted 115,060,850 24,744,693
Loss per share:
Basic (GBP) and Diluted
(GBP) (0.06) (0.21)
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 2019, there were 2,632,199 (2018: 3,619,940) options and
warrants outstanding as detailed in note 16.
The loss per share for the comparative period was incorrectly
calculated as GBP0.22. The comparative figure has been recalculated
and amended to show the correct loss per share.
9. Intangible assets
Customer Development Goodwill Total
Relationships expenditure GBP'000 GBP'000
GBP'000 GBP'000
Cost
At 1 July 2017 1,154 1,428 2,114 4,696
Additions - 175 - 175
Additions from
acquisitions - (55) (27) (82)
At 1 July 2018 1,154 1,548 2,087 4,789
Additions - 267 - 267
At 30 June 2019 1,154 1,815 2,087 5,056
Accumulated amortisation
At 1 July 2017 173 257 - 430
Charge for the
period 115 34 - 149
Disposals - (7) - (7)
At 1 July 2018 288 284 - 572
Charge for the
year 115 107 - 222
Impairment 143 1,008 634 1,785
At 30 June 2019 546 1,399 634 2,579
Net book value
At 30 June 2019 608 416 1,453 2,477
At 30 June 2018 866 1,264 2,087 4,217
At 30 June 2017 981 1,171 2,114 4,266
10. Property, plant and equipment
Leasehold Plant and Fixtures Motor vehicles Assets under Total
improvements machinery and fittings GBP'000 construction GBP'000
GBP'000 GBP'000 GBP'000 GBP,000
Cost
At 1 July 2017 519 5,781 417 33 74 6,824
Additions 65 217 76 - 365 723
FX translation (1) (31) 21 (1) - (12)
Disposals - (124) (3) (2) - (129)
Transfers - 97 - - (97) -
At 1 July 2018 583 5,941 511 30 341 7,406
Additions 48 267 12 - 878 1,205
FX translation 4 179 20 - - 203
Disposals - - (21) - - (21)
Transfers - 1,188 - - (1,188) -
At 30 June 2019 635 7,575 522 30 31 8,793
Accumulated depreciation
At 1 July 2017 182 1,445 115 6 - 1,748
Charge for the
year 58 562 50 6 - 676
FX translation - (1) 27 - 26
Disposals - (100) (3) (2) (105)
At 1 July 2018 240 1,906 189 10 - 2,345
Charge for the
year 68 732 61 6 - 867
FX Translation 1 24 5 (1) - 29
Disposals - - (4) - - (4)
At 30 June 2019 309 2,662 251 15 - 3,237
Net book value
At 30 June 2019 326 4,913 271 15 31 5,556
At 30 June 2018 343 4,035 322 20 341 5,061
At 30 June 2017 337 4,336 302 27 74 5,076
11. Inventories
2019 2018
GBP'000 GBP'000
Raw materials 116 291
Work in progress 96 30
Finished goods 970 460
1,182 781
The total value of inventories recognised in cost of sales
during the year was GBP725,986 (2018: GBP924,091)
Raw materials and finished goods comprise functionalised carbon,
chemicals and associated raw materials. Work in progress comprises
recoverable costs on long-term contracts
12. Share capital and share premium
Number of Share capital Share premium Total
shares GBP'000 GBP'000 GBP'000
No.
At 1 July 2017 19,597,713 392 18,936 19,328
Issue of GBP0.02 ordinary
shares 7,731,060 155 8,603 8,758
At 30 June 2018 27,328,773 547 27,539 28,086
Issue of GBP0.02 ordinary
shares 290,395,075 5,807 225 6,032
At 30 June 2019 317,723,848 6,354 27,764 34,118
During the year, the Company issued 290,395,075 new ordinary
shares of 2p each as follows:
-- In January 2019, 1,250,000 shares were issued; and
-- In March 2019, 289,145,075 shares were issued in connection
with the Company's GBP5.8 million placing and open offer:
Issue costs amounting to GBP399,085 have been charged to the
profit and loss account during the year (2018: GBP520,342 was
charged to the share premium account).
13. Trade and other payables
2019 2018
GBP'000 GBP'000
Trade payables 473 687
Tax and social security 57 73
Accruals and other creditors 1,526 1,412
2,056 2,172
14. Bank loans
2019 2018
GBP'000 GBP'000
Bank loans 1,247 896
The borrowings are repayable
as follows:-
* within one year 859 256
* in the second year 267 267
* in the third to fifth years inclusive 121 373
1,247 896
The Group's borrowings are denominated in US dollars and Pounds
Sterling. The directors consider that there is no material
difference between the fair value and carrying value of the Group's
borrowings.
2019 2018
% %
Average interest rates paid 6.1 4
In October 2016, a five year bank loan of $1,720,000 (equivalent
to approximately GBP1.4 million at the time) was drawn by Haydale
Technologies Inc ("HTI"), the Company's US holding company
subsidiary, secured on the fixed assets of HTI and its newly
acquired operating subsidiary, Advanced Composite Materials. This
loan carries an interest rate of 4% and is repayable in equal
instalments. In addition to this HTI has secured a working capital
line of credit with a rate fixed at 5.25% on the remaining
balance.
In January 2019, a 15 month loan of GBP750,000 was taken out
with the Development Bank of Wales. The loan is accruing interest
at a rate of 11% per annum and is repayable in 12 equal monthly
instalments which commenced in April 2019.
15. Operating lease arrangements
The amounts of minimum lease payments under non-cancellable
operating leases are as follows:
2019 2019 2018 2018
Land and Plant and Land and Plant and
buildings machinery buildings machinery
GBP'000 GBP'000 GBP'000 GBP'000
* within one year 624 4 573 7
* within two to five years 473 4 976 8
* later than 5 years 139 - 177 -
Aggregate amounts payable 1,236 8 1,726 15
Payments recognised as an expense under these operating leases
were as follows:
2019 2019 2018 2018
Land and Plant and Land and Plant and
buildings machinery buildings machinery
GBP'000 GBP'000 GBP'000 GBP'000
Operating lease expense 614 6 572 6
A significant proportion of the lease arrangements relate to the
premises from which HTI and HCT operate in South Carolina, USA
totalling GBP0.70 million (2018: GBP1.11 million). The lease
expires on 31 December 2020. Other leases pertain to the office and
unit contracts for the two UK facilities of in aggregate GBP0.16
million (2018: GBP0.22 million). Of the GBP0.16 million, certain
leases are cancellable with three months' notice.
During the previous year a new lease agreement has been entered
into, in respect of offices at Harwell, Oxfordshire. The lease
expires in March 2028. The estimated committed costs are GBP0.33
million (2018: GBP0.36 million).
The facility in Thailand is leased and, at the date of these
results, will expire in 4 months. The cost is GBP0.01 million
(2018: GBP0.03 million).
Within the minimum lease payments for plant and machinery is the
cost relating the general office equipment.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR ZMMMGNDFGLZM
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