REG - HeiQ PLC - Accounts Update

HeiqAnnouncement

29/09/2023 07:00

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RNS Number : 0824O  HeiQ PLC  29 September 2023

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time.

 

29 September 2023

HeiQ Plc

("HeiQ" or the "Company" or the "Group")

Accounts update

Further to its AGM Statement announced on 29 June 2023, the Company provides
the following update on the progress of its audited accounts for the year
ended 31 December 2022 ("2022 Accounts") alongside an update on current
trading for the six months ended 30 June 2023.

Accounts update

The Company is concluding its annual report and audit in conjunction with its
auditor, Deloitte LLP and expects to publish its Full Year 2022 Accounts
shortly, together with its interim results, following which the Company
expects trading in its shares to recommence.

Following the completion of several acquisitions, the Group has grown
significantly in terms of capabilities and technology platforms but also in
terms of organizational complexity. The Company has seen a number of
businesses with different systems, processes and cultures join the Group since
2017 and, in particular, during 2021. To integrate the different businesses,
the Group commenced the harmonization of processes, systems, and operating
practices across the organization in 2022. While this is a challenging project
for any organization, the significant changes in market conditions in the year
have made this process more onerous. All of these factors contributed to a
significantly extended year end reporting timetable for 2022, with a related
impact on the timing of the external audit work.

 

Previous announcements detailed the challenging market conditions that HeiQ
has been enduring, which have impacted top line performance and Group
profitability. Whilst management considers the Company to be performing better
than many of its peers, the significant disruption in market demand across
HeiQ's value chains has impacted the Company's financial performance for
FY2022. HeiQ expects to report FY2022 revenue in line with the most recently
published guidance but gross profit and loss from operations for FY 2022 are
expected to be materially below previous market guidance as the significant
drop in market demand has required HeiQ to review aspects of the accounting
processes which rely on significant judgement. Key factors impacting
profitability are set out below:

 

·      Goodwill from acquisitions: The challenging market dynamics
impaired the ability of its recently acquired businesses to achieve their
initial business plans. Reviewing key judgements inherent in the Company's
impairment review, including operating margins and long-term growth rates, has
caused significant goodwill impairments in the period.

·      Inventory valuation: Judgements surrounding allowances required
for inventory have also been reassessed to reflect management's updated views
on recoverability and caused the recording of significant allowances on
inventory.

 

Furthermore, in the process of reviewing significant judgements with the
auditors also for the prior year, the Company has had to record prior year
restatements. Specifically, restatements have been recorded around impairment
of goodwill from acquisitions as well as in relation to the accounting
treatment of a significant take-or-pay contract. This contract has been
renegotiated in 2023 and accounts receivable have been waived in exchange for
a right of first refusal on the supply of a wide product range to a large
industry player. While the Group is confident that the amendment to this
contract will be beneficial going forward, the historical accounting treatment
of this contract has been reviewed and it was determined that a restatement of
prior year reported revenue and profits is appropriate, as recognition
criteria had not been met.

 

 

The cash balance as of 31 December 2022 was US$8.5 million, in line with
market guidance. To manage its cash balance, the Group has access to credit
facilities totalling CHF9 million (approximately US$9.8 million). The
facilities are in place with two different banks and both contracts have
materially the same conditions. The facilities are not limited in time, can be
terminated by either party at any time and allow overdrafts and fixed cash
advances with a duration of up to twelve months. In case one or the other
party terminates the agreement, fixed cash advances become due upon their
defined maturity date. While the facilities are not committed, the Board has
not received any indication from financing partners that the facilities are at
risk of being terminated. Nevertheless, the Board acknowledges the uncommitted
status of the facilities which could be terminated requiring the refinancing
of debts, and which casts material uncertainty on the going concern
assessment. The Board therefore expects the auditor to make reference to this
material uncertainty in their audit opinion. The Board is in discussions with
financial institutions to replace the currently uncommitted credit facilities
by committed, long-term facilities, but the outcome of these discussions
remain uncertain.

 

As at June 30, 2023, the Company had cash balances amounting to US$7.3 million
with a total of CHF6.3 million drawn under the facilities.

 

Current trading and outlook

Since the start of FY 2023, HeiQ has focused on reducing its cost base and
reorganizing the business, and the Company is pleased to report that it is
already seeing the benefits of this. Whilst the Board has not yet seen the
challenges abate in H1 2023, the action taken since the start of the year
means the Company is expected to be in a better position in H2 2023 to manage
the ongoing challenging macro-economic environment, continue building value in
core innovations and preserve the Company's ability to deliver when the market
demand turns.

 

For H1 2023, the Company expects to report sales of US$21 million (H1 2022:
US$30 million) and a decrease in margins in a buyers-market, driven by current
overcapacity. For H2 2023, the Company expects a stabilization of the
financial performance and operating cashflows based on implemented cost
measures becoming effective.

 

The Board believes that the medium and long-term opportunities for the
Company's technology offering remain strong and the leadership team is focused
on gaining market share for the commercialized core businesses, while also
prioritizing innovation projects which have near-term market potential or
significant long-term value creation potential. Each of HeiQ's key technology
development projects has a significant market opportunity, and the Company's
business infrastructure has been established to ensure effective rollout
globally once market conditions change.

 

Further detail will be included in the Company's audited results for FY 2022
as well as its interim results. Financial reporting on H1 2023 performance
will be published together with the Annual Accounts 2022.

PDMR Notifications

The Company also announces that, on 26 September 2022, options over 224,000
new ordinary shares in HeiQ ("Options") were made to each of Carlo Centonze
and Xaver Hangartner pursuant to the Company's 2022 Option Plan.  The Options
have a strike price of 70.2p per share, being the trailing 5-day mid-market
share price at the time of grant, a vesting period of three years and are
subject to performance criteria as set out below.

•Vesting of 65% of the Options are conditional upon sales growth targets.
Performance is measured over the years 2022-2024 and the performance target is
7.5% for each individual year or 24.2% compound sales growth over the three
years 2022-2024.

•Vesting of 35% of the remaining Options are conditional upon annual
operating margin targets. Performance is measured each year 2022-2024 and the
performance target is 25%.

Further information is set out below pursuant to the requirements of the UK
Market Abuse Regulation.

 1    Details of the person discharging managerial responsibilities / person closely
      associated
 a)   Name                                                         Mr. Carlo Centonze
 2    Reason for the notification
 a)   Position/status                                              Chief Executive Officer
 b)   Initial notification /Amendment                              Initial Notification

 3    Details of the issuer, emission allowance market participant, auction
      platform, auctioneer or auction monitor
 a)   Name                                                         HeiQ plc
 b)   LEI                                                          213800IGT65IMJDO4S03
 4    Details of the transaction(s): section to be repeated for (i) each type of
      instrument; (ii) each type of transaction; (iii) each date; and (iv) each
      place where transactions have been conducted
 a)   Description of the financial instrument, type of instrument  Options over new ordinary shares of 30 pence each in the Company

      Identification code

                                                                   GB00BN2CJ299
 b)   Nature of the transaction                                    Grant of options pursuant to 2022 Company Share Option Plan

 c)   Price(s) and volume(s)

Price(s)                           Volume(s)
                                                                   Exercise price of 70.2p per share  224,000
 d)   Aggregated information                                       N/A

      - Aggregated volume

      - Price
 e)   Date of the transaction                                      26 September 2022

 f)   Place of the transaction                                     Outside a trading venue

d)

 

Aggregated information

- Aggregated volume

- Price

N/A

 

e)

 

Date of the transaction

26 September 2022

f)

Place of the transaction

Outside a trading venue

 

 1    Details of the person discharging managerial responsibilities / person closely
      associated
 a)   Name                                                         Xaver Hangartner
 2    Reason for the notification
 a)   Position/status                                              Chief Financial Officer
 b)   Initial notification /Amendment                              Initial Notification

 3    Details of the issuer, emission allowance market participant, auction
      platform, auctioneer or auction monitor
 a)   Name                                                         HeiQ plc
 b)   LEI                                                          213800IGT65IMJDO4S03
 4    Details of the transaction(s): section to be repeated for (i) each type of
      instrument; (ii) each type of transaction; (iii) each date; and (iv) each
      place where transactions have been conducted
 a)   Description of the financial instrument, type of instrument  Options over new ordinary shares of 30 pence each in the Company

      Identification code

                                                                   GB00BN2CJ299
 b)   Nature of the transaction                                    Grant of options pursuant to 2022 Company Share Option Plan

 c)   Price(s) and volume(s)

Price(s)                           Volume(s)
                                                                   Exercise price of 70.2p per share  224,000
 d)   Aggregated information                                       N/A

      - Aggregated volume

      - Price
 e)   Date of the transaction                                      26 September 2022

 f)   Place of the transaction                                     Outside a trading venue

d)

 

Aggregated information

- Aggregated volume

- Price

N/A

 

e)

 

Date of the transaction

26 September 2022

f)

Place of the transaction

Outside a trading venue

 

 

 

 

For further information, please contact:

 HeiQ Plc                                          +41 56 250 68 50

 Carlo Centonze (CEO)
 Cavendish Securities plc (Broker)                 +44 (0) 207 397 8900

 Stephen Keys / Callum Davidson
 SEC Newgate (Media Enquiries)                     +44 (0) 20 3757 6882

 Elisabeth Cowell / Molly Gretton / Tom Carnegie   HeiQ@s (mailto:HeiQ@secnewgate.co.uk) ecnewgate (mailto:HeiQ@secnewgate.co.uk)
                                                   .co.uk (mailto:HeiQ@secnewgate.co.uk)

 

About HeiQ

HeiQ is a Swiss-based international company that innovates pioneering and
differentiating materials in partnership with established global brands. We
bridge the academic and commercial worlds to conceive performance-enhancing
materials and technologies, working with aligned brands to research,
manufacture and bring products to market, aiming for lab to consumer in
months. Our goal is to improve the lives of billions by innovating the
materials that go into everyday products, making them more hygienic,
comfortable, protective, and sustainable.

Our strong IP portfolio positions us as an innovation leader for niche,
premium and high-margin products in the textile chemicals, man-made fibers,
paints and coatings, antimicrobial plastics, probiotics and household cleaner
markets. We have also expanded into healthcare facilities, probiotic cleaning,
and hygiene coatings markets to help make hospitals and healthcare
environments more hygienic.

We have developed over 200 technologies in partnership with 300 major brands.
With a substantial research and development pipeline, including key technology
development projects HeiQ AeoniQ, HeiQ ECOS, HeiQ GrapheneX, and HeiQ Synbio,
HeiQ aims to deliver shareholder value through sales growth and entry into new
lucrative markets through disruptive innovation and M&A.

We have built a strong reputation for ESG & sustainable innovation, having
won multiple awards including the Swiss Technology Award twice and the Swiss
Environmental Award. Under experienced leadership, we are committed to driving
our profit in close connection with people and the planet. For more
information, please visit www.heiq.com.

 

 

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