REG - Haydale Graphene Ind - Final Results
26/10/2023 07:00
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RNS Number : 3249R Haydale Graphene Industries PLC 26 October 2023
26 October 2023
Haydale Graphene Industries plc
('Haydale', the 'Company', or the 'Group')
Final Results
Haydale (AIM: HAYD), the global advanced materials group, is pleased to
announce its full year results for the year ended 30 June 2023 ("FY23").
Operational Highlights:
US sales continued to progress with growth in the core aerospace and
automotive markets.
· Established a regionalised manufacturer's representative network
which is already showing signs of generating improved commercial traction
within the North American steel mill, aerospace and automotive sectors for our
finished tooling.
· As part of the commercial rollout, published full tooling parts
catalogue and now building stock to support growth.
· We plan to drive further market penetration as additional
distribution agreements are concluded.
· Added additional internal sales support with plans to reinforce
technical support in Q2 FY24.
Consolidation in the UK of nanomaterial functionalisation technology offering
leading to key partnership arrangements anticipated to form bedrock of
continued commercial progress:
· continued to optimise and extend the functionality of the
HDPlas(®) HT1400 plasma reactor installed in 2022:
o can functionalise nanomaterials for third parties on an industrial scale;
and
o won an Engineering and Manufacturing Awards in September 2023 in the
manufacturing technology innovation class.
· Signed commercial agreements with industry partners Saint Gobain,
Cadent and Petronas:
o all have a commercial requirement that may potentially be met through the
application of our plasma functionalisation process to their materials or the
use of our wider product range; and
o can help take products to market through their market reach and
capability.
· Working with several other nanomaterial producers and end
customers where our HDPlas(®) process can bring additional value to their end
customers.
· Secured financial support from the Welsh Government to continue
the development of our key underfloor heating technology.
· Re-orientated our Thermal fluid technology to focus on Graphene
by signing an agreement with an industry partner with expertise and market
access.
Financial Highlights
- Revenue at £4.30 million (FY22: £2.90 million) up by 48.3% on
prior year, driven predominantly by a continued recovery in the US business.
- Full year impact of the planned FY22 investment in sales,
marketing, quality assurance and production capability saw adjusted
administrative expenses increase by 12.5% to £6.26 million (FY22: £5.52
million).
- Adjusted operating loss increased slightly by £0.16 million to
£3.49 million (FY22: £3.33 million).
- £5.1 million fundraising completed post period end.
Commenting on the results David Banks, Non-executive Chair of Haydale, said:
"We have made important progress in our next planned steps as a business by
forging commercial partnerships and collaborations with leading organisations
that the Board believe will ultimately help lead to commercial success.
With the fundamental building blocks in place and continuing progress in our
key markets, the Board remains confident that the Company will be able to take
advantage of the traction it is now seeing."
For further information:
Haydale Graphene Industries plc
Keith Broadbent, CEO Tel: +44 (0) 1269 842 946
Patrick Carter, CFO
www.haydale.com (http://www.haydale.com)
Cavendish Capital Markets Limited (Nominated Adviser & Broker)
Julian Blunt/Edward Whiley, Corporate Finance Tel: +44 (0) 20 7220 0500
Andrew Burdis, ECM
Notes to Editors
Haydale is a global technologies group and service provider that facilitates
the integration of graphene and other nanomaterials into the next generation
of industrial materials and commercial technologies. With expertise in
graphene, other nanomaterials and Silicon Carbide, Haydale is able to deliver
improvements in electrical, thermal and mechanical properties, Haydale has
been granted patents for its technologies in Europe, USA, Australia, Japan and
China and operates from five sites in the UK, USA and the Far East. For more
information please visit: www.haydale.com (http://www.haydale.com) or Twitter:
@haydalegraphene
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as ''believe'', ''could'', "should" ''envisage'',
''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', ''will'' or the
negative of those, variations or comparable expressions, including references
to assumptions. These forward-looking statements are not based on historical
facts but rather on the Directors' current expectations and assumptions
regarding the Company's future growth, results of operations, performance,
future capital and other expenditures (including the amount, nature and
sources of funding thereof), competitive advantages, business prospects and
opportunities. Such forward looking statements reflect the Directors'
current beliefs and assumptions and are based on information currently
available to the Directors.
A number of factors could cause actual results to differ materially from the
results discussed in the forward-looking statements including risks associated
with vulnerability to general economic and business conditions, competition,
environmental and other regulatory changes, actions by governmental
authorities, the availability of capital markets, reliance on key personnel,
uninsured and underinsured losses and other factors, many of which are beyond
the control of the Company. Although any forward looking statements
contained in this announcement are based upon what the Directors believe to be
reasonable assumptions, the Company cannot assure investors that actual
results will be consistent with such forward looking statements.
Accordingly, readers are cautioned not to place undue reliance on forward
looking statements. Subject to any continuing obligations under applicable
law or any relevant AIM Rule requirements, in providing this information the
Company does not undertake any obligation to publicly update or revise any of
the forward looking statements or to advise of any change in events,
conditions or circumstances on which any such statement is based.
chair's statement
Introduction
I am pleased to present Haydale Graphene Industries Plc's full year audited
results to 30 June 2023 ("FY23").
The Group continued to make positive progress during the year on its journey
to delivering sustainable commercial revenues. The US operation in
particular saw a strong bounce back in FY23 and, with its continued progress
into the manufacture of SiC cutting tools, is increasingly well positioned to
deliver strong growth moving forwards. The UK operation has started to see
the seeds planted in FY22 begin to come through in the second half of FY23 and
post year end period as we entered into a number of agreements that we believe
will form the bedrock of strong business partnerships going forwards to take
our offerings to the wider market. We anticipate the momentum across both the
nanomaterial and SiC markets will continue into the current financial year.
Summary financials
Commercial revenue for FY23 of £4.30 million (FY22: £2.90 million) was up by
48.3% on prior year. Gross profit margin was slightly down due to sales mix
at 56% (FY22: 60%) resulting in a gross profit of £2.39 million (FY22: £1.75
million). Other operating income for the year of £0.38 million (FY22:
£0.44 million) was in line with last year after adjusting for US Covid
support received in FY22. Adjusted administrative expenses increased by £0.74
million (12.5%) to £6.26 million (FY22: £5.52 million) primarily related to
the full year impact of FY22 planned investment in resource resulting in an
adjusted operating loss of £3.49 million (FY22: £3.33 million). Total
administrative expenses were £8.93 million (FY22: £7.24 million) as a result
of the above plus a number of additional non-trading items, namely increase in
share-based payments charges of £0.55 million and an increase in depreciation
and impairment of £0.40 million. Loss for the year was £6.17 million
(FY22: £4.81 million).
Operational Highlights
The Group made good progress towards its longer-term goals in the year as the
Company consolidated its position bringing increased focus onto its core
offerings and laying the foundations for continuing growth in FY24 and
beyond. The priorities of delivery of commercial revenue, focused
investment in our physical and human capacity and development of our
technology remains central to our strategy.
During the year we continued to optimise and extend the functionality of the
HDPlas(®) HT1400 plasma reactor acquired in 2022 which allows us to
manufacture functionalised nanomaterials on an industrial scale. With that
assurance, we have further developed our collaborations with industry partners
who, due to their market reach or capability, are potentially able to help
take our products to market. We have also concluded commercial project
arrangements with several nanomaterial producers and end customers where our
HDPlas(®) process can bring additional value to their end customers.
The SiC and ceramic cutting tools produced by our US facility saw growth in
their core aerospace and automotive markets. We started to roll out a
regionalised manufacturer's representative strategy towards the end of FY23
which is already showing signs of generating improved commercial traction
within the North American steel mill, aerospace and automotive sectors for our
finished tooling. We anticipate this will increase further during the
current financial year as additional distribution agreements are concluded.
Staff
I would like to thank our staff for their continued support and flexibility,
as their efforts are key to us achieving our aims. I would also like to thank
the executive management team who continue to drive the transition towards a
sustainable commercial operation.
Funding
On 3 October 2023, the Company completed an equity funding of £5.1 million
(gross) and I would like to welcome our new shareholders and to thank our
existing shareholders for their continued support.
Outlook
We have made important progress in our next planned steps as a business by
forging commercial partnerships and collaborations with leading organisations
that the Board believe will ultimately help lead to commercial success.
With the fundamental building blocks in place and continuing progress in our
key markets, the Board remains confident that the Company will be able to take
advantage of the traction it is now seeing.
David Banks
Chair
25 October 2023
STRATEGIC REPORT
FY23 has seen the Group's US operations continue its progress as demand
returns for SiC powders and tooling in the aerospace and automotive
industries. This has driven the overall FY23 revenue growth of the Group and
looks set to help support the Group moving forwards with the expansion into
the manufacture and sale of SiC tooling through a network of regional
manufacturer representatives recently engaged across the USA. The UK based
nanomaterial business has made significant steps in commercialising its
portfolio of technology, especially in terms of business collaborations with
significant industry players in key markets, having previously installed
sufficient capacity to be able to process commercial levels of plasma
functionalised nanomaterials for those partners and other third parties.
These collaborations are expected to form a solid base to the expected
progress in the current financial year.
Nanomaterials
The UK operations made significant progress over the year in progressing
commercialisation of its proprietary technology which resulted in a number of
key agreements being signed with industry partners in the last quarter of FY23
and first quarter of FY24. We anticipate these may lead to significant volume
sales as those products and relationships mature over the next few years.
Whilst progress on commercial arrangements has been strong, it is taking
longer than expected for this to translate into revenue and, primarily due to
one large functionalised product sale (goods) in FY22 not being repeated in
FY23, total sales reduced by £0.20 million on prior year. Other consultancy
revenues (services) grew by 11% on a like-for-like basis.
Patented Plasma Functionalisation Technology
At the core of all our product offerings and underpinning the Group's future
nanomaterial prospects, is Haydale's patented HDPlas(®) plasma
functionalisation process which improves the dispersibility of many
nanomaterials by changing their surface chemistry using a highly tunable,
repeatable process. Plasma functionalisation allows Haydale to tailor
advanced materials to enhance the properties of its customers' products to
achieve pre-agreed mechanical or conductive performance criteria. The process
is cost effective and environmentally friendly and our capacity to produce
industrial levels of functionalised nanomaterials underpins the business
model. Specifically, we have the expertise to:
· functionalise nanomaterials that are blended with resins,
composites and fluids to deliver enhanced electrical, mechanical (strength)
and thermal performance;
· formulate proprietary nanomaterial-based inks and coatings for
the print and sensor markets, including biomedical, RFID and piezo resistive
inks and sensors; and
· compound functionalised nanomaterials into a range of elastomers
to enable customers to use nanomaterials in elastomeric products.
The Group safeguards its nanomaterials business across its sites and the
territories in which it operates through the use of patents and trade secret
protocols which protect its intellectual property. It holds licences where
that intellectual property is for operational reasons with a third party.
Haydale currently has a portfolio of patents that are variously recognised in
the following territories - US, UK, Europe, China, Japan and Australia.
Haydale works closely with its patent advisors, Mewburn Ellis LLP, and
maintains a rolling programme of patent applications.
Plasma Functionalised Powder Sales
We have secured a number of commercial contracts during the year with
manufacturers of graphene to plasma functionalise their graphene powders to
their requirements and are in discussions with many others who recognise the
difference plasma functionalisation can make.
Of particular note, we have entered into contracts with a number of major
industrial customers who manufacture their own nanomaterials. For Saint
Gobain, who manufacture boron nitride, we are working with their end customers
to hone the final surface chemistry to match their desired outcomes. Our
ability to reliably adjust the surface chemistry has more recently led to our
securing a major collaboration with Petronas to help them take their own
graphene product, refined from a byproduct of their main petrochemical
business, and functionalise it so it can potentially be recycled into other
applications. We anticipate that all of these initiatives may lead to
significant volumes needing to be plasma functionalised over the coming years,
either directly by Haydale, or indirectly through the leasing of plasma
reactors on a volume based royalty model.
Plasma Functionalised Products Sales:
Heating
Haydale has been working in the energy and heating sectors for a number of
years. Geopolitical events and the UK Government's net zero strategy, have
brought an increased urgency for solutions in this space.
Over the past few years, the Company has developed a number of off-the-shelf
flexible heater graphene-based functional inks that can be printed onto a wide
variety of surfaces. Based on those inks we are developing a range of low
power heating products, potentially the most exciting of which is an energy
efficient, cost-effective and easy to install underfloor heating system that
could be used to supplement or replace domestic heating systems. The
technology could be rolled out underneath the floor covering (e.g. carpet or
tiles) and potentially run off a battery. With support from the Welsh
Government, working prototypes have been created and are currently being
tested in laboratory conditions to finalise the design before further
optimisation and seeking a CE mark. We are now looking at various
partnership options to take these to market.
We are also undertaking a number of paid projects for Cadent focused on
helping energy suppliers meet their obligations to their vulnerable customers
where they are under a legal requirement to be able to guarantee hot water and
heating in situations where the power or gas go down. The initial project
referred to last year involves a portable, battery powered water heater, a
prototype of which is currently undergoing testing. We have also recently
started work on a low power, portable over-the-radiator heating device which
is also looking promising. Other potential applications of the same low
power heating technology are currently in early-stage testing with partners.
In FY22 we announced we were working with a company that had acquired a patent
for a boron nitride based thermal fluid. This has not progressed as we had
hoped and is unlikely to lead to further revenues. We have however developed
our own graphene based thermal fluid (patent pending) which early trials
suggest performs with similarly positive thermal results and have now
partnered with a specialist heating fluid engineering firm to finesse the
formulation to work with the necessary additives so it meets applicable
industry standards and can ultimately be deployed into their customer base.
Sensors
Following on from the work historically undertaken in the biomedical ink
sector, we have a range of off-the-shelf functional inks appropriate for use
in biomedical and other sensor applications that can potentially detect a wide
range of medical conditions. These inks have a high sensitivity and are
therefore able to replace lower grade carbon inks and potentially metallic
based inks in existing sensor products. Our work with a leader in the
glucose monitoring and diabetes management sector is moving forwards following
positive results against their existing inks and, having successfully passed
an audit of the quality controls around production at our Ammanford site, we
are now working with them on further tests. In the interim, we are
separately working with a major European sensor manufacturer on an application
to detect chlorine in water which we understand has a potentially lower
barrier to entry, market wise.
Elastomers
Our collaboration with Vittoria Spa, a leading premium cycle tyre
manufacturer, has progressed and, having proved the benefits that plasma
functionalised graphene can bring to tyres (namely: grip, rolling resistance,
puncture resistance and durability), we are shipping tonnage materials. We
are also working with Vittoria on further enhancements for the next generation
of tyres and anticipate the existing graphene enhancements to start trickling
out to the wider market in due course.
Composites
In the second half of FY23, we released a graphene enhanced prepreg tooling
material, following two years of trialling with Prodrive Composites Ltd, which
is designed to deliver cost effective composite tooling with extended tooling
life. This, and related products which were released during the year, are now
seeing interest from the market which we hope will build through the current
year.
Focused research and development
We continue to work on customer-paid and grant-funded projects to develop
plasma functionalised nanomaterial solutions where there is a clear problem
statement and we believe there to be a volume demand at the end of the process
for any product created. We are selective and require a clear business case
to proceed. By being able to deliver a number of selective projects that
have resulted in a requirement for plasma functionalised material for third
party applications or intellectual property that vests in Haydale, we have
been able to build our underlying customer base. Key projects include the
development of material that might be appropriate for type IV and V hydrogen
storage tanks with Viritech for use in hydrogen powered vehicles and
anti-counterfeiting technology using our PATit plasma functionalised graphene
based conductive inks.
Asia Pacific
The performance of both the Thailand and Korea operations were at the lower
end of expectation and, whilst we have been able to leverage our presence in
these countries to secure several major clients for the Group as a whole
including Petronas and Vittoria sourced by the Thailand office, it has been
agreed that both entities are to be scaled back to a sales front office for
the foreseeable future. This has been a progressive process which we will
continue to monitor carefully. The Korea office concluded a beneficial
commercial settlement with iCraft to terminate the agreement after they
decided to focus on their core activities.
Silicon Carbide powders and tooling
Following prior year investment in the US and our move up the value chain into
the manufacture of cutting tools, we have seen our silicon carbide and tooling
business achieve significant growth in FY23. Although the raw SiC powder
market is limited in scope (historically dependent on a small number of key
customers) we continue to have additional sales in that area.
The SiC cutting tools is, by itself, a $900m market. Having previously
invested in the necessary plant to manufacture our own SiC tooling and signed
finishing service supply agreements to ensure we can meet capacity demands,
towards the end of FY23 we released our first cutting tools catalogue and
appointed four additional regional manufacturer representatives who act to
introduce our product directly to end users on a commission only basis and
thereby cost effectively extend our sales reach. The initial feedback we are
receiving is very positive and we understand our tooling is exceeding the
largest competitor in terms of durability and performance in a number of
applications. This is starting to lead to a potential sizeable demand for
product being reported by the manufacturer representatives which we anticipate
will feed through into orders in the US hence we are taking steps to ensure
inventory is available to support. We have recently secured an agreement
with a distributor for the UK and Eire and are in discussions for similar
arrangements in Asia. In addition, we have started acting as a seller of
complementary non-SiC tooling in a number of areas and are also looking to
develop further partnerships in this space through FY24.
Other products
There has been limited progress on CeramycGuard™, a one stop solution to
significantly extend the surface life of concrete assets, for which Haydale
holds the distribution rights for the UK market. Whilst accreditation with the
Drinking Water Inspectorate ("DWI") has not been progressed due to the DWI not
having the necessary capability at this time, we still believe that there
remains a key market in the wider, non-drinking water market.
Production Capacity
Haydale invested in production capacity for its plasma functionalisation
process and ink production in FY22 and now has sufficient capacity to meet its
forecasts for the next few years. Should additional capacity be required,
Haydale has a scaling plan to affordably and materially increase its own
internal capacity on relatively short timescales or, depending on client
volumes, arrange for a machine to be leased to a client and charge a
volume-based royalty.
Likewise, there is also more than sufficient capacity for the manufacture of
SiC powder and tooling in the US to meet the business plan for the next few
years.
Overheads
The Directors continued to invest in the human capital across the wider
business in FY23, strengthening the teams across UK and US operations and
across the spectrum of sales, marketing, human resources, quality control and
production. Whilst there will be further strategic hires required at the right
time to manage the anticipated growth, there is not expected to be a need for
any step change to deliver the business plan.
At the same time, the Group has also taken selective measures to reduce costs
around the organisation. The scope of these is being extended as more focus
is brought into the areas likely to lead to profit on a short-term basis.
FUTURE STRATEGIC DIRECTION
As noted above, the US operations have potential for strong growth in the
short term through the manufacture and sale of specialised SiC tooling and
complementary products. Having historically made the necessary capital
investments, the focus is now on building the manufacturing representative
network across the US and elsewhere to get the tooling into key end user
sites.
Whilst Haydale has world leading technology for the functionalisation of
nanomaterials, the focus for the UK is on building the business partnerships
that will get its plasma functionalised nanomaterial solutions into the market
and the organic growth that this will bring through repeat revenues at scale.
This is concurrent to developing our own strategic products based on our
existing solutions, such as underfloor heating, and we anticipate these,
together with third party plasma functionalisation services, will form the
basis of our future growth over the coming years in the UK.
The Directors remain mindful of the scaling challenges in both the US and UK
that need to be managed for the Company to deliver the growth it expects to
deliver as its early-stage industry partner relationships develop.
FINANCIAL REVIEW
In the year under review, the Group's principal areas of income were sales of
specialty inks, fluids and graphene enhanced composites and associated
consultancy services from the UK and APAC operations and sale of SiC fibres,
whiskers, particulate, blanks and tooling from the US operation. The Group's
revenue for the year ended 30 June 2023 of £4.30 million (FY22: £2.90
million) represents a 48% increase compared with the previous year. Revenue
derived from product sales increased by £1.33 million during the year, driven
by the US business performance (See Note 3 - Segmentation Analysis).
The Group's Gross Profit, which excludes Other Operating Income, was £2.39
million (FY22: £1.75 million) delivering a Gross Profit margin of 56% (FY22:
60%) which is slightly down due to sales mix.
Other operating income, which is principally grant funded projects, was £0.38
million (FY22: £0.44 million) consistent with prior year after taking account
of £0.06 million received in FY22 from US Covid Government Support packages.
Adjusted administrative expenses increased by £0.69 million (12.5%) to £6.26
million (FY22: £5.52 million) reflecting the full year impact of investment
decisions taken in FY22 partially offset by cost savings resulting in an
adjusted operating loss of £3.49 million (FY22: £3.33 million). Total
administrative expenses for the year were £8.93 million (FY22: £7.24
million) which, in addition to the above, reflects additional non-cash related
share-based payment expenses of £0.55 million. Also, the Group took the
decision to impair the fixed assets held in the US and accordingly a non-cash
charge of £0.53 million is included in total administrative expenses.
The Loss from Operations was £6.16 million (FY22: £5.06 million). Finance
costs, which include interest payable on the Group's debt, for the year were
£0.41 million (FY22: £0.19 million).
The Group continued to direct resources to research and development with the
focus for that investment on products and processes that could develop into
sustainable and profitable revenue streams. R&D spend for the year was
£1.52 million (FY22: £1.45 million(( 1 (#_ftn1) ))), of which £0.42
million was capitalized (FY22: £0.34 million). During the year the Group
claimed R&D tax credits of £0.40 million (FY22: £0.43 million) and it is
expected that this claim will be received during the current financial
year.
Total comprehensive loss for the year, including £1.12 million (FY22: £0.41
million) of one off charges relating to impairment of tangible assets and
share-based payment costs, was £5.80 million (FY22: £4.54 million).
The loss per share for the year was £0.01 loss (FY22: £0.01 loss).
Statement of Financial Position and Cashflows
As at 30 June 2023, net assets amounted to £6.97 million (2022: £7.05
million), including cash balances of £1.38 million (2022: £1.19 million).
Other current assets marginally decreased to £3.15 million at the year-end
(2022: £3.26 million) with modest reductions across most areas offset by an
increase in inventory of £0.22 million at the US facility during the year.
Current liabilities reduced slightly to £2.01 million (2022: £2.28 million)
principally due to a reduction in trade and other payables.
The Right of Use Asset in respect of its leased premises decreased to £2.20
million (FY22: £2.70 million) due to winding down of the leases agreements.
The Lease Liability which is split between Current and Non-Current Liabilities
similarly decreased to £2.44 million (FY22: £2.92 million). These
movements were non-cash items and did not impact the cash outflow in the
year. The Company will amortise these balances over the remaining life of
the leases which varies across the sites.
The Group's US Pension Obligations of £0.58 million (FY22: £1.36 million)
has reduced in the year due to a combination of positive movements on
investments, exchange and discount rate movements and contributions made.
Net cash outflow from operating activities before working capital movements
for the year increased to £3.67 million (FY22: £3.42 million), the principal
contributing factors being the Loss after Taxation of £6.17 million (FY22:
£4.81 million). Cash used in Operations increased by £0.92 million in the
year to £4.09 million (FY22: £3.17 million). The Group received an R&D
tax credit inflow of £0.43 million in the year (FY22: £0.37 million). Net
cash used in operating activities increased to £3.66 million (FY22 £2.80
million).
Capital expenditure in the year, excluding the IFRS 16 adjustments, was £0.20
million (FY22: £1.00 million).
Capital Structure and Funding
On 13 September 2022, the Company raised £5.51 million (gross) through the
placing, open offer and subscription of 275,516,784 new Ordinary Shares at
2.00 pence per share. Consequently, at 30 June 2023 the Company had
785,852,475 ordinary shares in issue (2022: 510,335,691). No options were
exercised into ordinary shares during the year (FY22: none).
The Group's total borrowings at the year-end were £1.37 million (2022: £1.35
million), of which £1.21 million was in the UK and the balance in the Group's
US subsidiaries. The UKRI Innovation loan has a quarterly liquidity covenant
until April 2024 with which the Group has been in full compliance through the
reporting period. There are no financial covenants extant in respect of the
UK bounceback loan of £0.03 million (FY22: £0.04 million) or the Group's US
borrowings.
Post Balance Sheet Event
On 3 October 2023, the Company raised £5.1 million (gross) through a placing,
retail offer and subscription of 1,012,609,000 new Ordinary Shares at 0.5
pence per share. The funds raised will be principally used to fund the
general working capital needs of the business. As part of this process, the
Company's share capital was restructured to in effect reduce the nominal value
of each ordinary share from 2.0 pence to 0.1 pence.
Save for 576 shares issued following an exercise of warrants, all other
warrants issued following the fundraise on 13 September 2022 of 138,758,392
lapsed on 14 September 2023 and are no longer exercisable.
Key Performance Indicators
The Group has historically reported financial metrics of revenues, gross
profit margin, adjusted operating loss, cash position and other metrics as its
key performance indicators and these are set out below.
FY23 (£m) FY22 (£m)
Revenue 4.30 2.90
Gross profit margin 56% 60%
Adjusted operating loss (3.49) (3.33)
Cash position 1.38 1.19
Borrowings 1.37 1.35
During the year under review, management also used a sales tracker, a
non-financial performance metric to monitor the revenue pipeline of the
business. The sales tracker monitors the number of accredited leads and
assigns a probability of revenue realisation to those leads.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2023
Year ended Year ended
30 June 2023 30 June 2022
Note £'000 £'000
REVENUE 3 4,301 2,901
Cost of sales (1,911) (1,156)
Gross profit 2,390 1,745
Other operating income 377 442
Adjusted administrative expenses (6,260) (5,520)
Adjusted operating loss (3,493) (3,333)
Adjusting administrative items:
Share based payment expense (589) (39)
Depreciation and amortisation (1,552) (1,308)
Impairment (531) (375)
(2,672) (1,722)
Total administrative expenses (8,932) (7,242)
LOSS FROM OPERATIONS (6,165) (5,055)
Finance costs (407) (187)
LOSS BEFORE TAXATION 4 (6,572) (5,242)
Taxation 407 433
LOSS FOR THE YEAR FROM CONTINUING OPERATIONS (6,165) (4,809)
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations (341) 374
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit pension schemes 702 (109)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR FROM CONTINUING OPERATIONS
(5,804) (4,544)
Loss for the year attributable to:
Owners of the parent (6,165) (4,809)
Total comprehensive loss attributable to:
Owners of the parent (5,804) (4,544)
Loss per share attributable to owners of the Parent
Basic (£) 5 (0.01) (0.01)
Diluted (£) 5 (0.01) (0.01)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
Company Registration No. 07228939 Note 30 June 30 June
2023 2022
£'000 £'000
ASSETS
Non-current assets
Goodwill 1,059 1,131
Intangible assets 1,386 1,312
Property, plant and equipment 5,915 7,579
8,360 10,022
Current assets
Inventories 1,733 1,515
Trade receivables 564 667
Other receivables 446 646
Corporation tax 406 427
Cash and bank balances 1,378 1,186
4,527 4,441
TOTAL ASSETS 12,887 14,463
LIABILITIES
Non-current liabilities
Bank loans 6 (1,363) (1,341)
Pension Obligation (577) (1,356)
Other payables (1,962) (2,440)
(3,902) (5,137)
Current liabilities
Bank loans 6 (11) (11)
Trade and other payables (1,899) (2,199)
Deferred income (103) (68)
(2,013) (2,278)
TOTAL LIABILITIES (5,915) (7,415)
TOTAL NET ASSETS 6,972 7,048
EQUITY
Capital and reserves attributable to equity holders of the parent
Share capital 15,717 10,207
Share premium account 31,912 31,912
Share-based payment reserve 833 244
Foreign exchange reserve (353) (12)
Retained losses (41,137) (35,303)
TOTAL EQUITY 6,972 7,048
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2023
Share-based payment reserve
£'000 Foreign Exchange Reserve
Share Share premium £'000 Retained losses Total Equity
capital £'000 £'000 £'000
£'000
At 30 June 2021 8,505 28,820 250 (386) (30,430) 6,759
Comprehensive loss for the year
Loss for the year - - - - (4,809) (4,809)
Other comprehensive income/(loss) - - - 374 (109) 265
8,505 28,820 250 (12) (35,348) 2,215
Contributions by and distributions to owners
Recognition of share-based payments - - 39 - - 39
Share based payment charges - lapsed options - - (45) - 45 -
Issue of ordinary share capital 1,702 3,401 - - - 5,103
Transaction costs in respect of share issues - (309) - - - (309)
At 30 June 2022 10,207 31,912 244 (12) (35,303) 7,048
Comprehensive loss for the year
Loss for the year - - - - (6,165) (6,165)
Other comprehensive income/(loss) - - - (341) 702 361
10,207 31,912 244 (353) (40,766) 1,244
Recognition of share-based payments
- - 589 - - 589
Issue of ordinary share capital
5,510 - - - - 5,510
Share issue cost - - - - (371) (371)
At 30 June 2023 15,717 31,912 833 (353) (41,137) 6,972
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2023
Year Year
ended ended
30 June 30 June
2023 2022
£'000 £'000
Cash flow from operating activities
Loss after taxation (6,165) (4,809)
Adjustments for:-
Amortisation and impairment of intangible assets 335 607
Depreciation and impairment of property, plant and equipment 1,747 1,076
Profit on disposal of plant and equipment and F&F - 8
Share-based payment charge 589 39
Finance costs 407 188
Pension: employer contribution (180) (92)
Taxation (407) (433)
Operating cash flow before working capital changes (3,674) (3,416)
Increase in inventories (218) (187)
Decrease/(increase) in trade and other receivables 304 (4)
(Decrease)/increase in payables and deferred income (503) 435
Cash used in operations (4,091) (3,172)
Income tax received 427 371
Net cash used in operating activities (3,664) (2,801)
Cash flow used in investing activities
Purchase of plant and equipment (203) (996)
Purchase of intangible assets (421) (340)
Net cash used in investing activities (624) (1,336)
Cash flow from financing activities
Finance costs (209) (63)
Finance costs - right of use asset (116) (125)
Payment of lease liability (261) (548)
Proceeds from issue of share capital 5,510 5,103
Share capital issues costs (371) (309)
New bank loans raised - 454
Repayments of borrowings (53) (842)
Net cash flow from financing activities 4,500 3,670
Effects of exchange rates changes (20) 9
Net increase/(decrease) in cash and cash equivalents 192 (458)
Cash and cash equivalents at beginning of the financial year 1,186 1,644
Cash and cash equivalents at end of the financial year 1,378 1,186
Abbreviated notes to the final results statement
1. General information
Haydale Graphene Industries plc is a public limited company incorporated and
domiciled in England and Wales and quoted on the AIM Market, hence there is no
ultimate controlling party.
2. Significant accounting policies
Basis of preparation
The Group consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards, International Accounting
Standards and Interpretations as adopted by the UK (collectively "IFRSs") and
with the requirements of the Companies Act 2006.
The Group's financial statements have been prepared under the historical cost
convention.
The consolidated financial statements are presented in sterling amounts.
Amounts are rounded to the nearest thousands, unless otherwise stated.
The financial information contained in this announcement does not constitute
the Group's statutory accounts for the year ended 30 June 2023 but is derived
from those accounts which have been audited and which will be filed with the
Registrar of Companies in due course.
The auditors' report on the Annual Report and Financial Statements for the
year ended 30 June 2023 was unqualified, did not draw attention to any matters
by way of emphasis and did not contain a statement under s498(2) or s498(3) of
the Companies Act 2006.
Going concern
The Directors have prepared and reviewed detailed financial forecasts of the
Group and, in particular, considered the cash flow requirements for the period
from the date of approval of the 2023 financial statements to the end of June
2025. These forecasts sit within the Group's latest estimate and within the
longer-term financial plan, both of which have been updated on a regular
basis. The directors are also mindful of the impact that the other risks and
uncertainties set out in the Annual Report may have on these estimates and in
particular the speed of adoption of new technology.
As part of this review the directors have considered several scenarios based
on various revenue, cost and funding sensitivities.
Revenue
Various sensitivities have been applied to forecasted revenue including a
stress test scenario which reduces forecasted revenue by circa 14 per cent in
FY24 and 9% in FY25, to the point where the Group would breach its available
cash resources in November 2024. With respect to this 'stress test' the
Group has circa 28 per cent of that sensitised revenue within forward orders,
contractual or some other form of customer assurance which have a high degree
of certainty.
Cost Mitigation
The directors have included some limited assumptions regarding cost savings
that might be achievable if the forecast fails to meet the forecasted or
sensitised estimates, and these have been phased in gradually over the
12-month period to October 2024.
Customer Solvency
As part of this review the directors have assessed the solvency of key
customers and their ability to deliver on their contractual or other
commitments on the basis of both publicly available information and taken
account of these assessments in their forecasts. Future revenue related to
certain contractual commitments have been heavily discounted given the lack of
available data and trading history with the Group.
Summary
Therefore, after due consideration of the forecasts prepared, the
sensitivities applied and the Group's current cash resources after the equity
fund raise in October 2023 and the terms of its debt facilities, 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.
Whilst the directors believe that the going concern basis is appropriate at
the date of this report, the Board is mindful that the net proceeds of the
fund raise will be insufficient to fund the cash requirements of the Group
through to a position where it is able to fund itself from its own cashflow.
The Board continues to pursue the possibility of securing additional debt
facilities to provide additional liquidity. In the event that such debt
facilities are not available or are unavailable in sufficient quantum it is
very likely that the Group would need to raise additional equity funding in
the future and, whilst the directors believe that future equity funding would
be available, there can be no guarantee that sufficient funds could be raised
at a later date. Any additional equity financing may be dilutive to
Shareholders.
3. 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 is the Chief Executive Officer and Chief
Financial Officer) 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
regions:
· UK & Europe (focusing on functionalisation of nano materials,
high performance ink & master batches, elastomers and the composites
market in Europe);
· North America (focusing on SiC & blank products for tooling);
and
· Asia Pacific (focusing on sales to the Asian markets)
2023 Adjustments, Central & Eliminations
UK & Europe North America Asia Pacific £'000
£'000 £'000 £'000 Consolidated
£'000
REVENUE 786 3,190 325 - 4,301
Cost of sales (467) (1,231) (213) - (1,911)
Gross profit 319 1,959 112 - 2,390
Other operating income 377 - - - 377
Adjusted administrative expenses (2,270) (1,836) (538) (1,616) (6,260)
Adjusted operating loss (1,574) 123 (426) (1,616) (3,493)
Administrative expenses
Share based payment expense (34) (43) (1) (511) (589)
Depreciation & amortisation (681) (693) (48) (130) (1,552)
Impairment - (531) - - (531)
(715) (1,267) (49) (641) (2,672)
Total administrative expenses (2,985) (3,103) (587) (2,257) (8,932)
OPERATING LOSS (2,289) (1,144) (475) (2,257) (6,165)
Finance costs (407)
LOSS BEFORE TAXATION (6,572)
Taxation 407
LOSS AFTER TAXATION (6,165)
Additions to non-current assets 658 - 80 - 738
Segment assets 3,607 6,447 312 2,521 12,887
Segment liabilities (2,391) (3,138) (99) (287) (5,915)
2022 Adjustments, Central & Eliminations
UK & Europe North America Asia Pacific £'000
£'000 £'000 £'000 Consolidated
£'000
REVENUE 984 1,673 244 - 2,901
Cost of sales (356) (670) (130) - (1,156)
Gross profit 628 1,003 114 - 1,745
Other operating income 373 69 - - 442
Adjusted administrative expenses (1,977) (1,648) (525) (1,370) (5,520)
Adjusted operating loss (976) (576) (411) (1,370) (3,333)
Administrative expenses
Share based payment expense (20) (4) 23 (38) (39)
Depreciation & amortisation (474) (629) (74) (131) (1,308)
Impairment - - (23) (352) (375)
(494) (633) (74) (521) (1,722)
Total administrative expenses (2,471) (2,281) (599) (1,891) (7,242)
OPERATING LOSS (1,470) (1,209) (485) (1,891) (5,055)
Finance costs (187)
LOSS BEFORE TAXATION (5,242)
Taxation 433
LOSS AFTER TAXATION (4,809)
Additions to non-current assets 1,533 72 36 - 1,641
Segment assets 4,159 7,225 341 2,738 14,463
Segment liabilities (2,386) (4,486) (114) (429) (7,415)
Geographical information
All revenues of the Group are derived from its principal activities. The
Group's revenue from external customers by geographical location are detailed
below.
2023 2022
£'000 £'000
By destination
United Kingdom 563 769
Europe 813 685
United States of America 1,822 1,051
China 180 127
Thailand 61 158
South Korea 145 86
Japan 678 -
Rest of the World 39 25
4,301 2,901
During 2023, £0.95 million (22%) (2022: £0.73 million (25%)) of the Group's
revenue depended on a single customer. During 2023 £0.68 million (16%) (2022:
£0.58 million (20%)) of the Group's revenue depended on a second single
customer.
All amounts shown as other operating income within the Statement of
Comprehensive Income are generated within and from the United Kingdom, EU and
the US. These amounts include income earned as part of a number of grant
funded projects in the United Kingdom and EU and a government grant in the
US.
Dis-aggregation of revenues
The split of revenue by type: 2023 2022
£'000 £'000
Services 387 306
Reactor rental 124 134
Goods 3,790 2,461
4,301 2,901
North America
2023 UK & Europe £'000 Asia Pacific £'000 Total
£'000 £'000
Services 303 - 84 387
Reactor rental 124 - - 124
Goods 359 3,190 241 3,790
786 3,190 325 4,301
2022 North America
UK & Europe £'000 Asia Pacific Total
£'000 £'000 £'000
Services 275 - 31 306
Reactor rental 134 - - 134
Goods 575 1,673 213 2,461
984 1,673 244 2,901
Services and reactor rental revenues are recognised over time, whereas goods
and reactor sales are recognised at a point in time.
The Group acquired non-current assets during the year, split by geographical
location as detailed below:
Non-current asset additions
2023 2022
£'000 £'000
By destination
United Kingdom 658 1,533
United States of America - 72
Thailand 80 36
738 1,641
The carrying value of the Group's non-current assets split by geographical
location is detailed below:
2023 2022
£'000 £'000
By destination
United Kingdom 2,500 2,732
United States of America 5,781 7,240
Thailand 76 49
South Korea 3 1
8,360 10,022
4. Loss before taxation
Loss before taxation is arrived at after charging:
2023 2022
£'000 £'000
Amortisation of intangibles 335 232
Impairment of intangibles - 375
Depreciation of property, plant and equipment 1,216 1,076
Impairment of tangibles 531 -
Foreign Exchange 105 58
Operating lease rental: plant and machinery 1 1
The service fees of the Group's auditor, Crowe U.K. LLP are analysed below:
Fees payable to the Company's auditor for the audit of the Group's
financial statements
62 56
There are no other fees payable to the Company's auditors and its associates
for other services (2022: £Nil).
5. Loss per share
The calculations of loss per share are based on the following losses and
number of shares:
2023 2022
£'000 £'000
Loss after tax attributable to owners of Haydale Graphene Industries Plc
(6,165) (4,809)
Weighted average number of shares:
- Basic and Diluted 729,239,439 483,770,289
Loss per share:
Basic (£) and Diluted (£) (0.01) (0.01)
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 2023, there were 242,033,392 (2022: 48,685,000) options and
warrants outstanding. All of the options are potentially dilutive.
6. Bank loans
2023 2022
£'000 £'000
Bank loans 1,374 1,352
The borrowings are repayable as follows:-
- within one year 11 11
- in the second year 605 15
- in the third year and above 758 1,326
1,374 1,352
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.
2023 2022
Average interest rates paid 6.85% 6.3%
In October 2016, a five year bank loan of $1,720,000 (equivalent to
approximately £1.4 million at the time) was drawn by HTI, the Company's US
holding company, secured on the fixed assets of HTI and its newly acquired
operating subsidiary, HCT. This loan carried an interest rate of 4% and was
repayable in equal instalments. HTI also had a working capital facility of up
to $900,000 which was secured on a combination of the fixed assets, inventory
and trade receivables of the US business. The rate of interest of this was
fixed at 5.25%. Both the above loans were repaid during the comparative year.
In June 2020, as part of the Government Bounce Back Loan scheme, HCS entered
into a six year loan agreement with NatWest for £50,000. The loan had a
repayment holiday and did not accrue interest during the first 12 months.
Following the initial 12 months, interest has been charged at 2.5% p.a. and
the loan and interest are repayable in equal instalments over the remaining
period.
In March 2021, HCS secured a five year loan of £1,100,000 from Innovate Loans
UK Limited. At the year end the Company had fully drawn down this
facility. The loan has a repayment holiday until March 2024 and is fully
repayable by March 2026. Interest will be charged at 7.4% p.a. for the
period of the loan. For the initial 36 months interest will be paid at 3.7%
p.a. and for the final 24 months interest with be paid at 10.7% p.a. There
are no penalties for early repayment.
During the prior year, the US operation secured a loan through the COVID-19
Economic Injury Disaster Loan scheme of $200,000. The loan is for a period of
30 year with a fixed interest rate of 3.75% and deferred repayments for the
first two years. At the year end the balance on the loan was £164,000.
(#_ftnref1) (1) Based on calculations submitted to HMRC for the R&D tax
credit.
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