REG - HeiQ PLC - Results for the year ended 31 December 2021
28/04/2022 07:15
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RNS Number : 6192J HeiQ PLC 28 April 2022
28 April 2022
HeiQ Plc
("HeiQ" or "the Company")
Results for the year ended 31 December 2021
Strengthening of core business and executing on growth strategy
HeiQ Plc (LSE: HEIQ), an established global brand in materials and textile
innovation that operates in high-growth markets, is pleased to announce its
preliminary results for the full year ended 31 December 2021. The Company's
audited annual report and accounts will be published in May and a further
announcement will be made in due course.
Financial highlights:
· Revenue up 15% to US$57.9 million, ahead of expectations (2020:
US$50.4 million)
· Gross profit margin down 9.2% to 46.6% (2020: 55.8%) due to higher raw
materials and logistics cost (price increased as of January 2022)
· Adjusted EBITDA decreased by 54% to US$6.5 million (2020: US$14.1
million), in line with market expectations and reflecting planned increase in
SG&A costs to strengthen innovation and support future growth
· Profit before tax of US$2.7 million (2020: US$7.1 million) and profit
after tax of US$2.5 million (2020: US$5.0 million)
· A well-funded balance sheet with net cash of US$12.9 million
· Operating cash flow increased by 215% to US$3.5 million (2020: US$1.1
million)
· Diluted EPS down 53% to US$0.0201 (2020: US$0.0432)
Operational highlights:
· Completed 3 industrial biotech and bio-antimicrobials capability
building acquisitions in six months for US$27.5 million, strengthening HeiQ's
hygiene offering
· Launched 20 new products to market and filed 5 new patents
· Potential blockbuster technologies progressing very positively:
o Launched HeiQ AeoniQ, the world's first climate positive fibre with an
implied valuation of US$200million and >US$10million investments from HUGO
BOSS and The LYCRA Company
o Patent pending proof of concept for lithium metal batteries achieved for
HeiQ GrapheneX
o Third party high impact publication on HeiQ Synbio as best solution to
address nosocomial healthcare acquired infections and multi-resistances in
hospitals.
· Expanded HeiQ Portugal to form a service centre for finance,
marketing, and IT
· Progressed HeiQ's market leading ESG position by commercializing
impactful technologies
· Significantly expanded HeiQ's capabilities and team by growing from
140 to more than 200 HeiQans (+20 sales and +30 Innovation)
Post period-end highlights:
· Made significant investment in the advancement of disruptive
technology platforms and their commercialisation
· Secured investment to commercialize HeiQ AeoniQ, including building a
US$5m pilot commercialization plant to be launched to market with high impact
brand partners
· Investing in a US$2m pilot commercialization plant for HeiQ GrapheneX
membrane technology and in the process of securing joint development partners
· First-quarter trading in line with expectations and ahead of same
period previous year
Carlo Centonze, co-founder and CEO, HeiQ plc, said: "Following a momentous
2020, we made continued progress in executing our strategic objectives in
2021, as part of our goal to become a leading materials innovation company.
Through the transformative acquisitions of Chrisal, RAS, and Life during the
period, our capabilities platform has been significantly strengthened and
enhanced, paving the way for additional future success. We continued to make
strong progress with our HeiQ GrapheneX and HeiQ Synbio blockbuster
technologies, and together with the launch of HeiQ AeoniQ, our climate
positive yarn, we are today in a position of tremendous opportunity for value
creation.
"In 2022, with the support of our robust foundation from recent acquisitions
and innovation, we will continue executing our growth strategy, ensuring we
are always one step ahead. The consolidated growth across our core products in
existing and new markets has enabled us to be cash generative and will see us
continue to invest in the advancement of our disruptive technology platforms
and their commercialization. As a result, we will be targeting double digit
growth across our existing products in 2022.
"This continues to be an exciting time for HeiQ, with the megatrend tailwinds
favouring our offerings. Combined with our existing progress and momentum, the
outlook for the Group and our stakeholders is bright and I look forward to
keeping shareholders up to date with our progress in the next year."
Analyst Briefing
Carlo Centonze, CEO, and Xaver Hangartner, CFO will host a webinar for equity
analysts at 09:30am BST today. Any equity analysts wishing to register should
contact SEC Newgate at HeiQ@secnewgate.co.uk where further details will be
provided.
Whilst substantially complete, the audit sign-off process has not yet been
finalised. No material amendments to the preliminary disclosures contained
within this announcement are expected within the audited financial statements
to be published in May.
For further information, please contact:
HeiQ Plc +41 56 250 68 50
Carlo Centonze (CEO)
Cenkos Securities plc (Joint Broker) +44 (0) 207 397 8900
Stephen Keys / Callum Davidson
SEC Newgate (Media Enquiries) +44 (0) 20 3757 6882
Elisabeth Cowell / Axaule Shukanayeva / Molly Gretton HeiQ@s (mailto:HeiQ@secnewgate.co.uk) ecnewgate (mailto:HeiQ@secnewgate.co.uk)
.co.uk (mailto:HeiQ@secnewgate.co.uk)
CHAIR'S STATEMENT
Strengthening our core business
2021 was a year of continuous progress and consolidation for the Group. HeiQ's
growth platform has been significantly strengthened and enhanced with three
major acquisitions of Chrisal, RAS and Life during the period.
The complementary product portfolios of these three newly acquired entities
have expanded our capabilities, expertise and product offerings in hygiene
specialities and provided us access to new applications and markets. Having an
established culture of innovation in their DNA, these businesses have been
integrated into HeiQ within a very short space of time.
Another highlight was the launch of our disruptive HeiQ AeoniQ technology, a
high-performance climate positive cellulose yarn with potentially
revolutionary environmental benefits and we had brand partners such as HUGO
BOSS and The LYCRA Company investing into the scale-up to realise the enormous
potential of this game-changing technology together.
While achieving these value adding milestones, we also had to overcome
significant challenges presented by the COVID-19 pandemic. We have faced
constraints in the form of much longer lead times through all global raw
material supply chains, production shutdown due to lockdowns of our customers
and up to 500% higher logistics costs, as well as longer delivery times of
products to our customers. Nevertheless, with the determination and
adaptability of our team, we have been able to maintain supply to our
customers, although at higher cost. My special thanks go to our customers,
suppliers and distribution partners for their ongoing support of HeiQ in a
highly challenging environment.
Broadening our hygiene technology solutions offering
HeiQ has earned its place as an innovator among lifestyle brands and as a
leader in multiple textile functionalities. In recent years, we have been
growing our reputation as the leader in providing hygiene solutions, not only
for textiles but also for coatings, plastics, hospital cleaning products,
industrial water treatment and consumer goods. A much higher awareness of
hygiene and ongoing consumer demand for hygiene solutions continue to drive
our offering in this space. With studies suggesting that by 2050 there will be
an estimated 10 million deaths per year due to antimicrobial resistance, HeiQ
has the mission to introduce our effective and sustainable hygiene solutions
to market. Our strategic entrance into the medical mask business in the
previous years, which contributed to about 10% of our business, is now giving
us access to customers for our new hygiene offerings and a much bigger and
sustainable annual revenue potential.
People and sustainability
During 2021 we made substantial investments into our workforce and increased
our personnel by about 50% to create a stronger global organization capable of
growing our innovation product range, market share and geographical footprint.
Today we are a truly global and diverse organization with more than 200
HeiQans spanning 29 nationalities, working across 19 legal entities. Having
adopted flexible working arrangements, our highly motivated, professional and
agile teams are accustomed and skilled at working and interacting with our
customers both online and offline, irrespective of time zones.
Sustainability is at the core of everything we do and it has been a driving
force for HeiQ since day one. We made substantial progress in 2021 by
collecting carbon emissions data at the Group level which will enable us to
set carbon reduction targets. We deployed our expertise into market
technologies with a launch of HeiQ AeoniQ with its tremendous downstream ESG
potential. We conducted a survey of our employees and customers to learn about
which ESG areas they want us to focus on.
Dividend
In order to continue to prioritize investment in our disruptive technology
growth opportunities such as HeiQ AeoniQ, HeiQ GrapheneX and HeiQ Synbio, the
Board has decided not to pay a dividend for the year 2021.
Board
In addition to completing these three acquisitions, during the period, the
Board's focus was on delivering HeiQ's strategy to create clear management
structures, workflows and scalability. The Board is committed to the
principles which underpin good corporate governance and have revised and
upgraded the corresponding policies and processes in place.
Outlook
HeiQ is well positioned for the future. We are an agile, nimble, responsive
and dynamic business, with several very relevant technology propositions, ever
growing ESG credentials, increasingly strong brand equity and established
positions in high-growth markets. Having first movers' advantage, we have a
strong sense of upcoming consumer trends and the ability to quickly respond to
those trends and develop the technologies that will be in high demand in a few
years' time. We enjoy the trust of our customers thanks to our track record of
being a true innovator and differentiator.
We have a rich R&D pipeline with high commercial potential and we are
opening doors to many exciting new markets. As we continue to integrate our
acquisitions and leverage our capabilities, we will proactively seek to
increase our penetration in these new markets.
I would like to convey my sincere thanks to our amazing HeiQ team for their
highly motivated engagement during 2021.
Our goals for 2022 are ambitious and although times remain uncertain and may
continue to be challenging, HeiQ has the strong foundation, growth strategy,
drive and innovative culture to succeed in achieving its goals. I am confident
that we will continue to grow as a key innovation player in multiple
industries.
Esther Dale-Kolb
Chair
CHIEF EXECUTIVE OFFICER'S REVIEW
Accelerating towards our ambitions
Following a momentous 2020, we made strong progress in accelerating HeiQ
towards its strategic objectives throughout 2021. We completed three
transformative acquisitions in six months and significantly expanded our
capabilities and team growing from 140 to more than 200 HeiQans (+20 sales and
+30 Innovation). We launched our disruptive HeiQ AeoniQ climate positive yarn,
securing investment from our first commercialization partners, and made strong
progress with our HeiQ GrapheneX and HeiQ Synbio blockbuster technologies. In
many ways, 2021 reminded me a lot of the exhilaration I experienced during
take off accelerations in my service as a Swiss army pilot.
We achieved topline growth despite having faced our strongest ever headwinds
in the form of supply chain disruptions and lockdowns, demonstrating the
strong continued demand for our IP. Having said that, our gross margin has
been temporarily impacted by these factors. Now Europe is being rocked by the
war in Ukraine, with as yet unknown consequences for the oil price, food
availability, supply and logistics. We managed to overcome the challenges of
2021 thanks to an extremely agile and resilient team and an outstanding
commitment by each and every HeiQan. I would like to thank them all and trust
that with all hands on deck in 2022 we can ride any storm thrown at us again.
As an ongoing measure, we have adjusted our prices wherever and as soon as
possible to compensate the increased raw material and logistic costs,
diversified our supplier base and invested in a global ERP to streamline our
operations.
Our business is in a strong position to weather external pressures. In
addition to our core products, we own seven technology platforms and have a
healthy innovation pipeline. One of our platforms, our climate positive HeiQ
AeoniQ fiber, received an implied valuation of US$ 200 million with
investments from Hugo Boss and The LYCRA Company. A subsidiary holding the
technology platform being valued more than our listed entity (as of March
2022) demonstrates the potential value of our IP.
With US$ 14.6 million cash, >US$ 9 million available credit lines and with
only US$ 1.7 million of borrowings, our balance sheet gives us scope to act on
the value creating opportunities in our pipeline. Our cash generative business
(cashflow from operating activities) has financed our innovations since 2010,
and with only US$ 55 million raised since inception in 2005 we have maintained
a lean IP value creation approach.
Operational and financial performance
In 2021 the Group achieved record revenue of US$ 57.9 million. Our goal to
generate revenues of US$ 300 million in the medium term has not changed.
Our business model is to grow organically, complemented by making selective
capability building acquisitions, and commercializing or licensing our
disruptive innovations.
Acquisitions of the complementary green hygiene IP platforms of Chrisal, RAS
and Life have allowed us to become one of the top 3 hygiene specialities
player with the most sustainable product range, giving us an entry into
multiple new lucrative markets, beyond textiles. 2021 saw our brand equity
grow exponentially once again. Our credentials as a green innovator are
acknowledged by textile brands and increasingly by consumers too. This will
allow us to maintain premium margins and deploy innovations with impact.
Our major contract wins with ICP in hygiene paper coatings and our acquisition
of RAS with durable hard surface hygiene coatings have led to the creation of
our new Coatings & Plastics business unit, which includes a low
eEmissivity technology platform "ECOS" with the potential to grow into our
fourth blockbuster technology for defence, building and automotive markets.
People and sustainability
HeiQ remains a nimble and agile company, with the potential to make a
significant positive environmental impact through our work with large retail
brands to create technology solutions that make their downstream products more
sustainable.HeiQ AeoniQis a prime example of this.
Being sustainable is core to our ethos, as well as a source of competitive
advantage. Sustainable alternatives capable of disrupting existing markets are
a key opportunity for the Group, including:
· natural vs. oil based polymers
· bio-based vs. Quarternary ammonium salt based actives
· botanical technologies vs. metals
· probiotic bacteria vs. chemical biocides and disinfectants
Sustainability progress summary
With the expansion of our team this year, we achieved a new level of
diversity. With 29 nationalities now represented across HeiQ, our shared
values and mission are more important than ever. Our inclusive culture and
flat hierarchy are vital for fostering idea exchange, particularly important
for an innovative business known for our speed to market. Despite a
competitive job market, we have still managed to bring in some exciting
talent.
Current trading and outlook
Having laid a strong foundation with our acquisitions and innovation, we have
ambitious plans and will continue to stay one step ahead.
Organic growth across our products in existing and new markets allows us to be
cash generative, enabling substantial investment in the advancement of our
disruptive technology platforms and their commercialization or royalty
licensing. As such, we are targeting double-digit growth of across our
existing products in the next year.
We have a tremendous opportunity for value creation with HeiQ AeoniQ, HeiQ
GrapheneX and HeiQ Synbio. We will continue to invest in the commercialization
of AeoniQ, including building a US$ 5m pilot commercialization plant and
launching it to market with a dozen brand partners. We will also invest in a
US$ 2m pilot commercialization plant for our GrapheneX membrane technology and
aim to secure a JDA with leading battery and rugged electronics players. With
the recently published paradigm shifting study by the Charité hospital in
Berlin on HeiQ Synbio we will push for strong claims approval and
commercialization to healthcare globally.
The complementary skillsets and locations of our businesses will allow us to
disrupt new markets and deploy our technologies globally. But we must remain
lean and agile while growing, so another key goal is to strengthen our
integration across all subsidiaries by harmonizing digital technologies and
operating procedures. We will continue to prioritize attracting the talent we
need to fuel our growth, transformation and innovation strategy, which we have
been successful so far.
The megatrend tailwinds favor HeiQ's offerings. Combined with our existing
progress and momentum, the outlook for the Group and our stakeholders is
bright.
Carlo Centonze
CEO
FINANCIAL REVIEW
Strengthening of foundation while driving growth in times of uncertainty
2021 was a transitional, yet successful year for HeiQ where we were able to
grow revenues by 15% from USD 50 million in 2020 to USD 58 million in 2021.
HeiQ achieved various milestones on its growth path despite being challenged
by the different waves of the COVID-19 pandemic and its impact on global
economies throughout the year. By acquiring three companies in adjacent
fields, we were not only able to strengthen our range of solutions for
hygiene, but also enter new markets like coatings, plastics and symbiotic
cleaners.
However our investments were not limited to acquisitions. We also continued to
invest significantly in our organization with over 60 more employees in 2021.
Our innovation pipeline progressed significantly - spearheaded by HeiQ AeoniQ
which was announced to market in Q4 2021. As we developed our innovation
pipeline, we continue to evolve from a "specialty chemicals" business with
strong IP into an innovator that monetises its IP through licensing, in
addition to our own commercialisation. In the 2021 Statement of Comprehensive
Income however, our own commercialization of IP dominates the picture. We
expect to see an increasing portion of revenues derived from monetization of
IP in 2022.
In order to have the required scalability of our organization in place on our
journey towards the USD 300 million revenue target, we kicked-off a group-wide
digitalization program to give the entire group unified, state-of-the art
tools that are scalable as we grow.
HeiQ experienced strong topline growth (+15%) in FY21, whilst pressure on
gross margins caused by headwinds from higher raw materials and logistics
costs previously flagged in the interim results have continued into the second
half of the year (Gross Margin 2021: 46.6% vs. 55.8% in 2020). The investments
in people, innovation pipeline and organization have been driving the increase
(+51%) in selling and general administrative expenses (SG&A).
Year ended Year ended
31 December 31 December
2021 2020 (restated)
USD '000 USD '000 Growth
Revenue 57,874 50,401 15%
Cost of sales (30,898) (22,268)
Gross profit 26,976 28,133 -4%
Gross profit margin 46.6% 55.8%
Other operating income 6,426 4,744
Selling and general administrative expenses (24,465) (16,117)
Other operating expenses (5,820) (5,127)
Operating profit 3,117 11,633 -73%
Operating profit margin 5.4% 23.1%
Deemed cost of listing - (1,402)
Transaction costs (206) (1,871)
Other income 199 -
Other costs (361) (69)
Finance income 534 68
Finance costs (597) (1,184)
Share of (losses) / profits of associates - (15)
Income before taxation 2,686 7,160
Taxation (212) (2,112)
Income after taxation 2,474 5,048 -51%
Adjusted EBITDA 6,483 14,104 -54%
EBITDA margin (adjusted) 11.2% 28.0%
Contribution from entities acquired in 2021
In 2021, HeiQ acquired controlling stakes in three companies: Chrisal NV
(Belgium - 51% acquired), RAS AG (Germany - 100% acquired) as well as Life
Material Technologies Limited (Hong Kong - 100% acquired). Revenue
contribution in 2021 of the acquired entities amounts to USD 10.0 million and
the contribution to profit before tax amounts to USD 1.3 million after
deduction of transaction costs totalling USD 0.2 million.
The total consideration including contingent payments for all three companies
is expected to amount to USD 27.5 million in total, with USD 11.5 million
settled in cash and USD 16.0 million in HeiQ plc shares. As of December 31,
2021 USD 21.6 million had been settled (USD 10.1 million in cash, USD 11.5
million in shares), USD 0.6 million was settled in shares on February 25, 2022
and USD 5.3 million are still contingent and are to be settled in Q2 2022 (USD
1.4 million in cash and USD 3.9 million in shares). Total net assets of USD
10.2 million and goodwill of USD 18.6 million have been recorded, while
non-controlling interests amount to USD 1.3 million.
Revenues
Revenues increased in 2021 by 15% and amounted to USD 57.9 million for the
year (2020: USD 50.4 million), despite the challenges experienced through
unstable markets, local lock-downs and supply chain issues.
Backed by the acquisitions of HeiQ Chrisal and HeiQ RAS, revenues in Europe
have been growing significantly from USD 10.4 million in 2020 to USD 16.2
million in 2021 (+56%). Revenues in the Americas have also seen a strong
growth by 9% and amounted to USD 21.7 million in 2021 (2020: USD 19.8
million). This growth was driven by organic growth accounting for
approximately 70% of the growth whereas acquisition contributed about 30% to
it. Asia, our third key region, saw slightly lower revenues of USD 19.6
million in 2021 (2020: USD 19.9 million). This was mainly driven by high,
non-recurring revenues in 2020 which could not be compensated for entirely as
well as lockdowns in Southeast Asia.
In 2021 we saw a healthy allocation of revenues between our three key regions
with the Americas accounting for 37% of revenues (2020: 39%), Asia 34% (2020:
39%) and Europe accounting for 28% (2020: 21%) which makes us less exposed to
regional political or economic developments.
Sales by form:
Functional Ingredients remain the key form of how we bring functionality to
our customers and with revenues of USD 43.7 million accounted for 75% of total
sales in 2021 (2020: USD 42.0 million or 83% of revenues). 2021 includes
acquired revenues of USD 4.0 million and thus on a like for like basis shows a
decrease of USD -2.3 million which was caused by declining demand of
functional ingredients related to face mask applications and other pandemic
related items compared to 2020.
Revenues from Functional Materials amount to USD 0.9 million in 2021 and
achieved a growth of 11% compared to 2020 (USD 0.8 million). While in 2020,
this category was dominated by filter materials sold for face masks, in 2021
the main materials sold are masterbatches as well as our insulation technology
XReflex and show also replacement of non-recurring sales with recurring
business.
Revenues from Functional Consumer Goods amount to USD 10.1 million in 2021
(2020: USD 7.4 million) and thus achieved significant growth (USD +2.6 million
or +35%) driven by revenues related to the product range of HeiQ Chrisal (USD
3.8 million). Excluding acquired revenues, the category would show a decrease
of USD -1.2 million (-16%) which reflects non-recurring opportunities that we
were able materialize back in 2020. Accordingly, the composition of this
category changed significantly as the Synbio products of HeiQ Chrisal (like
household cleaners) have been added.
Consistent with our strategy to grow monetization of IP and knowledge through
services and licencing, revenues grew by USD 3.1 million to reach USD 3.3
million in 2021 (2020: USD 0.2 million). While USD 1.7 million of service
revenues have been onboarded through the acquisition of HeiQ RAS, significant
contributions also relate to royalty related exclusivity fees recognized in
2021 (USD 0.6 million).
Sales by function:
Hygiene accounted for revenues of USD 29.3 million in 2021 (2020: USD 29.2
million) - an increase of 1%. This is equivalent to 51% of total revenues in
2021 and includes acquired sales of in total USD 8.3 million. The organic
growth of USD - 8.2 million reflects the non-recurring opportunities that we
were able to materialize in 2020 and that we were not fully able to compensate
with the growth of the recurring business.
Resource Efficiency, with a share of 23% of total revenues, was our second
largest functionality for which revenues amounted to USD 13.5 million in 2021
(2020: USD 10.0 million) representing a growth of 35%. Acquired revenues for
resource efficiency amount to USD 1.7 million in 2021 whereas the organic
growth amounts to USD 1.8 million and reflects that post-pandemic economic
recovery we have seen in 2021 in the industries relevant to this category.
Comfort, with 22% share of total revenues, achieved significant growth of 76%
in 2021 and respective revenues amount to USD 13.0 million in 2021 (2020: USD
7.4 million). This growth of USD 5.6 million was achieved organically and
reflects the strong demand for our comfort technologies.
Revenues for protection of USD 2.1 million in 2021 (2020: USD 3.9 million)
accounted for 4% of total revenues in 2021 and does not include any acquired
revenues. Also this category was supported in 2020 by non-recurring
opportunities.
Gross Profit
Gross profit for the year 2021 amounted to USD 27.0 million (2020: USD 28.1
million), representing a gross profit margin of 46.6% (2020: 55.8%). The
decrease in margin was mainly caused by increased material costs. While
material costs accounted for 35% of sales in 2020, this ratio increased to 42%
in 2021 (45% excluding acquisitions). This higher portion of material costs
was driven by two factors: 1) inflation of raw material prices across the
board and on a global scale throughout the year and 2) change in the product
mix sold as non-recurring sales in 2020 were replaced with recurring business
at lower marginality. Besides material costs, also freight costs increased
substantially in 2021 compared to 2020 in general.
Selling and general administration expenses (SG&A)
SG&A costs amounted to USD 24.5 million in 2021 - an increase of USD 8.4
million or 52% compared to 2020 (USD 16.1 million). The main portion of the
increase in SG&A costs relates to the acquisitions made in 2021 - with the
acquisitions we have onboarded SG&A costs totalling USD 5.3 million for
the year 2021. The remaining organic increase of USD 3 million (+19%) is
driven by the growth of the organization with personnel expenses increasing by
USD 1.2 million (FTE: + 33). Marketing expenses increased significantly as
well (USD +0.8 million) like other, general SG&A expense (USD +1 million)
as organization has been strengthened across the board.
As a percentage of sales, overall SG&A costs increased from 32% in 2020 to
42% in 2021 (40% excluding the effect of acquisitions). The increase aligns
with our strategic investments as it represents mainly investments in human
capital required for future growth.
Other operating income and expenses
Other operating income and expense consist mainly of foreign exchange impacts
on operating assets. In 2021, foreign exchange gains of USD 5.0 million offset
foreign exchange losses of USD 4.7 million. Other operating income and
expenses not related to foreign exchange gains and losses amounted to USD 0.2
million (net income).
Operating profit / adjusted EBITDA
As a result of a lower average gross margin and higher SG&A costs in 2021
relative to 2020, operating profit decreased by USD 8.5 million from USD 11.6
million in 2020 to USD 3.1 million in 2021. Adjusted EBITDA amounted to USD
6.5 million in 2021 - a decrease of USD 7.6 million compared to the previous
year (2020: USD 14.1 million).
HeiQ adjusts EBITDA for share options and rights granted to Directors and
employees.
Adjusted EBITDA
USD '000 2021 2020 (restated)
Operating profit 3'117 11'633
Depreciation 2'110 1'144
Amortization 758 110
Share options and rights granted to Directors and employees 498 1'217
Adjusted EBITDA 6'483 14'104
Cashflow
Net cash generated from operating activities in the year 2021 amounts to USD
3.5 million vs. USD 1.1 million in 2020 (+215%). Besides the acquisition of
businesses, significant investments have also been made in internally
developed intangible assets - our innovation pipeline (USD 3.0 million in
2021) while cash payments for financing activities have been reduced
significantly and amounted to USD 1.3 million for 2021. Overall, cash
generated from the operating business has been invested into growth
(investments into intangible asset development and equipment) as well as for
repayment of leases and borrowings.
Statement of financial position
HeiQ continues to operate with a strong balance sheet. Total assets grew from
USD 69.6 million to USD 101.9 million (+ USD 32.3 million resp. 46.3%) while
total liabilities amounted to USD 37.2 million as of December 31, 2021 - plus
USD 17.2 million or 86% compared to 2020 (USD 20.0 million). The increases in
the financial positions were driven mainly by the three acquisitions concluded
in 2021 for a total consideration of USD 27.5 million.
The equity ratio remained strong at 63% of total assets as of December 31,
2021 (2020: 71%) and with USD 14.6 million of cash as of December 31, 2021
(2020: USD 25.7 million) HeiQ remains well positioned for further investments
in view of its strategic growth targets.
Non-current assets increased significantly from USD 14.3 million (December 31,
2020) to USD 49.2 million as of December 31, 2021 as a result of the
acquisitions and their related intangible assets.
At USD 52.7 million as of December 31, 2021, current assets remained stable
(2020: USD 55.3 million). After high inventory levels at the end of 2020,
inventory value at the end of 2021 remained stable despite 15% higher revenues
in 2021 compared to 2020. Receivables increased by USD 4.6 million or 34% as
of December 31, 2021, driven by higher revenues (+15%), with a particular
growth in sales towards the end of the year. Cash as at December 31, 2021 was
USD 14.6 million. This demonstrates a continuing healthy cash position for the
business although reflects a higher than expected cash burn because of lower
gross margins and increases in SG&A costs previously mentioned, as well as
higher overdue accounts receivables.
The increase in total liabilities was mainly driven by the acquisitions, the
growth of the business and liabilities related to leased assets. Other current
liabilities of USD 6.0 million include not yet settled purchase price
payments.
Xaver Hangartner,
Chief Financial Officer
Consolidated statement of comprehensive income
For the year ended December 31, 2021
Year ended Year ended
December 31, December 31,
2021 2020
(Restated*)
Note US$'000 US$'000
Revenue 7 57,874 50,401
Cost of sales 8 (30,898) (22,268)
Gross profit 26,976 28,133
Other operating income 7 6,426 4,744
Selling and general administrative expenses 8 (24,465) (16,117)
Other operating expenses 8 (5,820) (5,127)
Operating profit 3,117 11,633
Deemed cost of listing 5 - (1,402)
Transaction costs 5 (206) (1,871)
Other income 7 199 -
Other costs 8 (361) (69)
Finance income 21 534 68
Finance costs 21 (597) (1,184)
Share of (losses) / profits of associates - (15)
Income before taxation 2,686 7,160
Taxation 9 (212) (2,112)
Income after taxation 2,474 5,048
Earnings per share (cents) - 10 4.53
basic
2.07
Earnings per share (cents) - diluted 10 4.32
2.01
Other comprehensive income:
Exchange differences on translation of foreign operations 2,469
(1,662)
Items that may be reclassified to profit or loss in subsequent periods 2,469
(1,662)
Actuarial gains / (losses) from defined benefit pension plans (731)
899
Items that will not be reclassified to profit or loss in subsequent periods 899
(731)
Total comprehensive income for the year 1,763 6,786
Income attributable to:
Equity holders of HeiQ 2,676 5,125
Non-controlling interests (202) (77)
2,474 5,048
Comprehensive income/(loss) attributable to:
Equity holders of the Company 1,913 6,863
Non-controlling interests (202) (77)
1,711 6,786
* The financial statements for 2020 have been restated for the correction of
an error as described in Note 30.
Consolidated statements of financial position
As at December 31, 2021
As at As at
December 31, December 31,
2021 2020
(Restated)
Note US$'000 US$'000
ASSETS
Intangible assets 11 32,212 5,264
Property, plant and equipment 12 6,865 5,467
Right-of-use assets 13 9,079 2,564
Deferred tax assets 9 701 826
Other non-current assets 14 333 206
Non-current assets 49,190 14,327
Inventories 15 13,770 13,540
Trade receivables 16 18,050 13,437
Other receivables and prepayments 16 6,275 2,609
Cash and cash equivalents 14,560 25,695
Current assets 52,655 55,281
Total assets 101,845 69,608
EQUITY AND LIABILITIES
Share capital 17 51,523 49,559
Capital reserve 17 144,191 134,537
Other reserve 18 (1,144) (2,043)
Share-based payment reserve 18 474 50
Merger reserve 5 (126,912) (126,912)
Currency translation reserve 18 1,275 2,937
Retained deficit 18 (5,823) (8,499)
Equity attributable to HeiQ shareholders 63,584 49,629
Non-controlling interests 1,053 (20)
Total equity 64,637 49,609
Lease liabilities 13 8,176 2,304
Long-term borrowings 21 670 1,400
Deferred tax liability 9 1,894 857
Other non-current liabilities 20 2,619 3,425
Total non-current liabilities 13,359 7,986
Trade and other payables 22 9,359 5,815
Accrued liabilities 22 4,538 3,214
Income tax liability 9 51 1,495
Deferred revenue 22 1,774 -
Short-term borrowings 21 1,004 173
Lease liabilities 13 1,054 349
Other current liabilities 22 6,069 967
Total current liabilities 23,849 12,013
Total liabilities 37,208 19,999
Total liabilities and equity 101,845 69,608
The Notes form an integral part of these Consolidated Financial Statements.
The Financial Statements were approved and authorized for issue by the Board
of Directors on and signed on its behalf by:
Xaver Hangartner, Chief Financial Officer, April 27, 2022
Consolidated statement of changes in shareholders' equity
For the year ended December 31, 2021
Share Capital Other Share- based payment reserve Merger Currency translation Retained deficit Non- controlling interests Total
capital reserve reserve reserve reserve equity
Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at January 1, 2020 (as restated) 2,696 25,168 (1,312) - - 467 (13,624) 23 13,340
Income after taxation (restated) - - - - - - 5,125 (77) 5,048
Other comprehensive (loss)/income - - (731) 2,469 - - 1,738
- -
Total comprehensive (loss)/income for the year - - (731) 2,469 5,125 (77) 6,786
- -
Reverse acquisition adjustment 39,587 89,866 - - (126,912) - - - 2,542
Issuance of shares 17 7,276 20,763 - - - - 28,039
- -
Cost of share issues - (1,260) - - - - (1,260)
- -
Share-based payment charges 17 - - - 50 - - - - 50
Capital contributions from non-controlling interests - - - - - 34 34
- -
Transactions with owners 7,276 19,503 - 50 - - - 34 26,863
Balance as at December 31, 2020 (as restated) 49,559 134,537 (2,043) 50 (126,912) 2,937 (8,499) (20) 49,609
Income after taxation 2,676 (202) 2,474
Other comprehensive (loss)/income 899 - - (1,662) - (763)
Total comprehensive (loss)/income for the year - - 899 - - (1,662) 2,676 (202) 1,711
Issuance of shares 17 1,964 9,654 - - - - - - 11,618
Share-based payment charges 17 - - - 424 - - - - 424
Amounts arising on business combinations 5 - - - - - - - 1,275 1,275
Transactions with owners 1,964 9,654 - 424 - - - 1,275 13,317
Balance as at December 31, 2021 51,523 144,191 (1,144) 474 (126,912) 1,275 (5,823) 1,053 64,637
Consolidated statement of cash flows
For the year ended December 31, 2021
Year ended Year ended
December 31, December 31,
2021 2020
(Restated)
Cash flows from operating activities US$'000 US$'000
Income before taxation 2,686 7,160
Cash flow from operations reconciliation:
Depreciation and amortization 2,868 1,254
Impairment expense 144 -
Gain on disposal of property, plant and equipment (54) -
Loss on disposal of property, plant and equipment 20 46
Loss on disposal of investments - 22
Gain on earnout consideration 80 -
Finance costs 221 399
Finance income (18) (68)
Pension expense 156 176
Non-cash equity compensation 498 1,217
Share of loss / (profit) of associates - 15
Deemed cost of listing - 1,402
Foreign exchange differences (360) (164)
Working capital adjustments:
(Increase)/decrease in inventories 1,420 (8,295)
(Increase) in trade and other receivables (5,372) (4,788)
Increase in trade and other payables 3,654 2,777
Cash generated from operations 5,943 1,153
Taxes paid (2,462) (48)
Net cash generated from operating activities 3,481 1,105
Cash flows from investing activities
Consideration for acquisition of businesses (Note 25) (10,994) (1,424)
Cash assumed on acquisition of businesses (Note 25) 2,137 27,111
Purchase of property, plant and equipment (994) (932)
Proceeds from the disposal of property, plant and equipment 138 10
Development of intangible assets (2,969) (635)
Proceeds from the disposal of investments - 7
Finance income 18 68
Net cash from / (used in) investing activities (12,664) 24,205
Cash flows from financing activities
Finance costs (221) (399)
Repayment of leases (790) (354)
Proceeds from borrowings 472 2
Repayment of borrowings (803) (2,737)
Net cash used in financing activities (1,342) (3,488)
Net (decrease) / increase in cash and cash equivalents (10,525) 21,822
Cash and cash equivalents - beginning of the year 25,695 3,603
Effects of exchange rate changes on the balance of cash held in foreign (610) 270
currencies
Cash and cash equivalents - end of the year 14,560 25,695
Note: Non-cash transactions: Certain shares were issued in 2020 for a non-cash
consideration as described in Note 17.
Notes to the Consolidated Financial Statements for the year ended December 31, 2021
1. General information
HeiQ Plc (the "Company'') and its subsidiaries (together, the "Group'') is an
IP innovator and established global brand in materials and textile innovation,
adding hygiene, comfort, protection and sustainability to the products we use
every day. Active in multiple markets: textiles, carpets, antimicrobial
plastics, conductive coatings, medical devices, probiotic household cleaners,
personal care and hospital hygiene, HeiQ has created some of the most
effective, durable and high-performance technologies in these markets today.
The principal activity of the Company is that of a holding company for the
Group, as well as performing all administrative, corporate finance, strategic
and governance functions of the Group.
The Company was incorporated on May 14, 2014 as Auctus Growth Limited, in
England and Wales under the Companies Act 2006 with company number 09040064.
The Company was re-registered as a public company on July 24, 2014. On
December 4, 2020, following a reverse takeover of Swiss based HeiQ Materials
AG, the Company's name was changed to HeiQ Plc. The Company's registered
office is 5th Floor, 15 Whitehall, London, SW1A 2DD.
After the reverse takeover, the Company's enlarged share capital was
re-admitted to the standard segment of the Official List and initiation of
trading on the London Stock Exchange's Main Market commenced on December 7,
2020 under the ticker 'HEIQ'. The ISIN of the Ordinary Shares is GB00BN2CJ299
and the SEDOL Code is BN2CJ29.
2. Basis of preparation and measurement
a. Basis of preparation
The Consolidated Financial Statements have been prepared in accordance with UK
adopted international accounting standards, including interpretations issued
by the International Financial Reporting Interpretations Committee, applicable
to companies reporting under IFRS and the Companies Act 2006 applicable to
companies reporting under IFRS.
Unless otherwise stated, the Consolidated Financial Statements are presented
in United States dollars (US$) which is the presentation currency of the
Group, and all values are rounded to the nearest thousand dollars except where
otherwise indicated.
The individual entities' functional currencies are listed below:
Subsidiary: Functional currency
HeiQ plc, United Kingdom GBP
HeiQ Materials AG, Switzerland CHF
HeiQ ChemTex Inc., United States of America USD
HeiQ Pty Ltd, Australia AUD
HeiQ GrapheneX AG, Switzerland CHF
HeiQ Company Limited, Taiwan TWD
HX Company Limited, Taiwan TWD
HeiQ Medica S.L., Spain EUR
HeiQ Iberia Unipessoal Lda, Portugal EUR
HeiQ Chrisal N.V., Belgium EUR
HeiQ RAS AG, Germany EUR
HeiQ Regulatory GmbH, Germany EUR
HeiQ (China) Material Tech LTD, China CNY
Life Material Technologies Limited, Hong Kong USD
Life Natural Limited, Hong Kong USD
Life Materials Latam Ltda, Brazil BRL
LMT Holding Limited, Thailand THB
Life Material Technologies Limited, Thailand THB
HeiQ AeoniQ GmbH EUR
On a single entity level, transactions in foreign currencies are translated
into the functional currency at the rate of exchange on the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies
are translated at the exchange rate ruling at the reporting date. The
resulting gain or loss is reflected in the "Consolidated Statement of
Comprehensive Income" within operating income or operating expense, if the
balance sheet account is of operating nature - e.g. trade and other
receivables/payables and within either "Finance income" or "Finance costs", if
the balance sheet account is of non-operating nature - e.g. cash and cash
equivalents, loans receivable, payable.
Single entities with functional currencies other than US$ are translated into
US$ as part of the consolidation where assets and liabilities are translated
at closing rate for the year-ended, and profit and loss items are translated
at an average rate for the year. Equity transactions are translated at a
historic rate. The residual value flows into the currency translation reserve.
The Consolidated Financial Statements have been prepared under the historical
cost convention except for certain financial and equity instruments that have
been measured at fair value.
The Consolidated Financial Statements have been prepared on the going concern
basis, which contemplates the continuity of normal business activity and the
realization of assets and the settlement of liabilities in the normal course
of business. The Directors have reviewed the Group's overall position and
outlook and are of the opinion that the Group is sufficiently well funded to
be able to operate as a going concern for at least the next twelve months from
the date of approval of these financial statements.
The preparation of Financial Statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgment in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgment and complexity, or
areas where assumptions and estimates are significant to the Consolidated
Financial Statements are disclosed in Note 3.
b. Basis of consolidation
The Consolidated Financial Statements comprise the financial statements of the
Company and its subsidiaries listed in Note 6 "Subsidiaries" to the
Consolidated Financial Statements.
The basis of consolidation of the acquisition of HeiQ Materials AG by the
Company in December 2020 is described in the basis of preparation above in
Note 5(f).
Business combinations other than noted above are accounted for under the
acquisition method.
A subsidiary is defined as an entity over which the Company has control. The
Company controls an entity when the Group is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date that control ceases.
Intra-group transactions, balances and unrealized gains on transactions are
eliminated; unrealized losses are also eliminated unless cost cannot be
recovered. Where necessary, adjustments are made to the financial statements
of subsidiaries to ensure consistency of accounting policies with those of the
Group.
The total comprehensive income of non-wholly owned subsidiaries is attributed
to owners of the parent and to the non-controlling interests in proportion to
their relative ownership interests.
c. Transaction costs
Transaction costs of equity transactions relating to the issue and
Re-admission of the Company's shares are accounted for as a deduction from
equity where they relate to the issue of new shares and listing costs are
charged to the Group Income Statement.
d. New standards, interpretations and amendments effective for the current period
Adopted
One new standard impacting the Group that has been adopted in the annual
financial statements for the year ended December 31, 2021:
• COVID-19-Related Rent Concessions beyond June 30, 2021 (Amendments to IFRS
16).
The Group has considered the above new standard and has concluded that it is
not relevant to the Group.
New standards, interpretations and amendments not yet effective for the current period
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early. The most significant of
these are as follows:
Effective for annual periods beginning on or after January 1, 2022:
• Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to
IAS 16);
• Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1,
IFRS 9, IFRS 16 and IAS 41); and
• References to Conceptual Framework (Amendments to IFRS 3).
Effective for annual periods beginning on or after January 1, 2023:
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2);
• Definition of Accounting Estimates (Amendments to IAS 8); and
• Deferred Tax Related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12).
Management anticipates that these new standards, interpretations and
amendments will be adopted in the financial statements as and when they are
applicable and adoption of these new standards, interpretations and
amendments, will be reviewed for their impact on the financial statements
prior to their initial application.
The Directors do not expect these new accounting standards and amendments will
have a material impact on the Group's financial statements.
3. Significant accounting policies
The preparation of the Consolidated Financial Statements in compliance with
IFRS requires the Directors to exercise judgment in applying the Company's
accounting policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the
Consolidated Financial Statements are disclosed in Note 4 "Significant
judgments, estimates and assumptions" to the Consolidated Financial
Statements.
a. Foreign currency transactions and translation
The results and financial position of all Group entities that have a
functional currency different from the presentation currency are translated
into US$, the presentation currency, as follows:
· assets and liabilities are translated at the closing rate at the date
of the "Statement of Financial Position";
· income and expenses are translated at average exchange rates (unless
this average is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income and expenses
are translated at the dates of the transactions); and
· all resulting exchange differences are recognized in other
comprehensive income.
On consolidation, the Group recognizes in "other comprehensive income" the
exchange differences arising from the translation of the net investment in
foreign entities, and of monetary items receivable from foreign subsidiaries
for which settlement is neither planned nor likely to occur in the foreseeable
future.
b. Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses, if any. The cost of an item of property, plant and
equipment initially recognized includes its purchase price and any cost that
is directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by the
Group.
Property, plant and equipment are generally depreciated on a straight-line
basis over their estimated useful lives:
Machinery and equipment 5 - 15 years
Motor vehicles 4 - 5 years
Computers and software 3 - 5 years
Furniture and fixtures 5 - 10 years
Land and buildings 10 - 20 years
Property, plant and equipment held under leases are depreciated over the
shorter of the lease term and estimated useful life.
Research and development expenditure
Research expenditure is recognized as an expense when it is incurred.
Development expenditure is recognized as an expense except that costs incurred
on development projects are capitalized as long-term assets to the extent that
such expenditure is expected to generate future economic benefits. Development
expenditure is capitalized if, and only if an entity can demonstrate all of
the following:
· its ability to measure reliably the expenditure attributable to the
asset under development;
· the product or process is technically and commercially feasible;
· its future economic benefits are probable;
· its ability to use or sell the developed asset; and
· the availability of adequate technical, financial and other resources
to complete the asset under development.
Capitalized development expenditure is measured at cost less accumulated
amortization and impairment losses, if any. Certain internal salary costs are
included where the above criteria are met. These internal costs are
capitalized when they are incurred in respect of products developed for sale.
Development expenditure initially recognized as an expense is not recognized
as assets in subsequent periods.
Capitalized development expenditure in respect of such products is amortized
on a straight-line method over a period of five to ten years when the products
or services are ready for sale or use. In the event that it is no longer
probable that the expected future economic benefits will be recovered, the
development expenditure is written down to its recoverable amount.
c. Intangible assets
All intangible assets, except goodwill, are stated at cost less accumulated
amortization and any accumulated impairment losses.
Goodwill
Goodwill represents the amount by which the fair value of the cost of a
business combination exceeds the fair value of the net assets acquired.
Goodwill is not amortized and is stated at cost less any accumulated
impairment losses.
The recoverable amount of goodwill is tested for impairment annually or when
events or changes in circumstance indicate that it might be impaired.
Impairment charges are deducted from the carrying value and recognized
immediately in the income statement. For the purpose of impairment testing,
goodwill is allocated to each of the Group's cash generating units expected to
benefit from the synergies of the combination. If the recoverable amount of
the cash generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the unit. An
impairment loss recognized for goodwill is not reversed in a subsequent
period.
Acquisition-related intangible assets
Net assets acquired as part of a business combination includes an assessment
of the fair value of separately identifiable acquisition-related intangible
assets, in addition to other assets, liabilities and contingent liabilities
purchased. Acquisition-related intangible assets are amortized on a
straight-line basis over their useful lives which are individually assessed.
The estimated useful lives are as follows:
Brand
names
10 years
Customer relations
5 years
Technologies
10 years
Other intangible
assets 5 - 10
years
Other intangible assets
Other intangible assets include those arising from internal development,
acquired rights, licenses, patent costs, concessions, website designs and
domains and trademarks.
Internally generated intangible assets 5-10 years
Other acquired
assets
5-10 years
d. Impairment of financial assets
The expected credit loss model defined in IFRS 9 "Financial Instruments"
requires the Group to account for expected credit losses and changes in those
expected credit losses at each reporting date to reflect changes in credit
risk since initial recognition of the financial assets. The credit event does
not have to occur before credit losses are recognized. IFRS 9 "Financial
Instruments" allows for a simplified approach for measuring the loss allowance
at an amount equal to lifetime expected credit losses for trade receivables
and contract assets.
The Group has one type of financial asset subject to the expected credit loss
model: trade receivables.
The expected loss rates are based on the Group's historical credit losses. The
historical loss rates are then adjusted for current and forward-looking
information on macroeconomic factors affecting the Group's customers.
e. Impairment of non-financial assets
At each reporting date, the Directors assess whether indications exist that an
asset may be impaired. If indications do exist, or when annual impairment
testing for an asset is required, the Directors estimate the asset's
recoverable amount. An asset's recoverable amount is the higher of an asset's
or cash-generating unit's fair value less costs to sell and its value-in-use,
and is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or groups
of assets. Where the carrying amount of an asset or cash-generating unit
exceeds its recoverable amount, the Directors consider the asset impaired and
write the subject asset down to its recoverable amount. In assessing
value-in-use, the Directors discount the estimated future cash flows to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. In
determining fair value less costs to sell, the Directors consider recent
market transactions, if available. If no such transactions can be identified,
the Directors utilize an appropriate valuation model.
When applicable, the Group recognizes impairment losses of continuing
operations in the "Statement of Comprehensive Income" in those expense
categories consistent with the function of the impaired asset.
f. Right-of-use assets
A right-of-use asset is recognized at the commencement date of a lease. The
right-of-use asset is measured at cost, which comprises the initial amount of
the lease liability, adjusted for, as applicable, any lease payments made at
or before the commencement date net of any lease incentives received, any
initial direct costs incurred, and an estimate of costs expected to be
incurred for dismantling and removing the underlying asset, and restoring the
site or asset.
Right-of-use assets are depreciated on a straight-line basis over the
unexpired period of the lease or the estimated useful life of the asset,
whichever is the shorter. Right-of use assets are subject to impairment or
adjusted for any re-measurement of lease liabilities.
The Group has elected not to recognize a right-of-use asset and corresponding
lease liability for short-term leases with terms of 12 months or less and
leases of low-value assets. Lease payments on these assets are expensed to
profit or loss as incurred.
g. Leases
The determination of whether an arrangement is, or contains, a lease is based
on the substance of the arrangement at inception date: whether fulfilment of
the arrangement is dependent on the use of a specific asset or assets or the
arrangement conveys a right to use the asset.
Identifying leases
The Group accounts for a contract, or a portion of a contract, as a lease when
it conveys the right to use an asset for a period of time in exchange for
consideration. Leases are those contracts that satisfy the following criteria:
· there is an identified asset;
· the Group obtains substantially all the economic benefits from use of
the asset; and
· the Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive substitution rights.
If the supplier does have those rights, the contract is not identified as
giving rise to a lease.
In determining whether the Group obtains substantially all the economic
benefits that arise from use of the asset, the Group considers only the
economic benefits that arise from use of the asset, not those incidental to
legal ownership or other potential benefits.
In determining whether the Group has the right to direct use of the asset, the
Directors consider whether the Group directs how and for what purpose the
asset is used throughout the period of use. If there are no significant
decisions to be made because they are pre-determined due to the nature of the
asset, the Directors consider whether the Group was involved in the design of
the asset in a way that predetermines how and for what purpose the asset will
be used throughout the period of use. If the contract or portion of a contract
does not satisfy these criteria, the Group applies other applicable IFRSs
rather than IFRS 16 "Leases".
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is
typically the case) this is not readily determinable, in which case the
Group's incremental borrowing rate on commencement of the lease is used, which
the Directors have assessed to be between 1.75% and 5%, depending on the
nature of the asset and location.
Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also
includes:
· amounts expected to be payable under any residual value guarantee;
· the exercise price of any purchase option granted in favor of the
Group if it is reasonably certain to assess that option; and
· any penalties payable for terminating the lease, if the term of the
lease has been estimated on the basis of termination option being exercised.
Right-of-use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
· lease payments made at or before commencement of the lease;
· initial direct costs incurred; and
· the amount of any provision recognized where the Group is
contractually required to dismantle, remove or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortized on a straight-line
basis over the remaining term of the lease or over the remaining economic life
of the asset if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease (because, for
example, it re-assesses the probability of a lessee extension or termination
option being exercised), it adjusts the carrying amount of the lease liability
to reflect the payments to make over the revised term, which are discounted at
the same discount rate that applied on lease commencement. The carrying value
of lease liabilities is similarly revised when the variable element of future
lease payments dependent on a rate or index is revised. In both cases an
equivalent adjustment is made to the carrying value of the right-of-use asset,
with the revised carrying amount being amortized over the remaining (revised)
lease term.
h. Taxation
Deferred taxation
Deferred tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the Consolidated Financial Statements. Deferred tax is
determined using tax rates (and laws) that have been enacted or substantially
enacted by the reporting date and expected to apply when the related deferred
tax is realized or the deferred liability is settled.
Deferred tax assets are recognized to the extent that it is probable that the
future taxable profit will be available against which the temporary
differences can be utilized.
Income taxation
Current income tax assets and liabilities are measured at the amount to be
recovered from, or paid to, the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively
enacted at the reporting date in the jurisdictions where the Group operates
and generates taxable income.
i. Revenue from contracts with customers and other income
Revenue from customer contracts is generally recognized at point in time, once
the performance obligation has been fulfilled. This includes the sale of
functional ingredients, materials or consumer goods. Services rendered are
typically also recognized at point in time.
Revenue from licenses, including those which grant exclusivity rights which
are a separable performance obligation from the delivery of goods are
typically recognized over time according to the contractual definition of the
exclusivity period.
The Group's revenue represents the fair value of the consideration received or
receivable for the rendering of services, licenses and similar fees as well as
for the sale of functional products in different forms (mainly ingredients,
materials and consumer goods), net of value added tax and other similar
sales-based taxes, rebates and discounts after eliminating intercompany sales.
For fixed-price contracts, the customer pays the fixed amount based on a
payment schedule. If the services rendered by the Group exceed the payment, an
amount recoverable on contract assets is recognized. Conversely, if the
payments exceed the services rendered, a liability is recognized. If the
contract is time-and-materials based and includes an hourly fee, revenue is
recognized over time for the amount to which the Group has the right to
invoice.
Take or pay arrangements
Certain customers have agreed, under a "take or pay" contract, to purchase a
specified minimum quantity of a range of particular products over a specified
period of time, typically in exchange for a specified exclusivity during the
same period. However, the customer has to pay for the full quantity stated in
the contract, irrespective of whether the customer takes delivery of the
minimum quantity to which they are entitled. Upon payment of the full amount,
the contract allows customers to defer its unexercised rights and to consume
the remaining units to a later date, although there is no compulsion to do so.
If the Group expects to benefit from such future exercise by the customer, it
recognizes the expected amount as revenue in proportion to the pattern of
rights exercised by the customer (by comparing the goods delivered to date
with those expected to be delivered overall). In cases where the contract
period is not identical with the financial reporting period, revenue and costs
are recognized at the end of the respective contractual period. In cases where
the obligation to grant exclusivity can be valued separately from the
obligation to supply physical products, the exclusivity portion is accounted
for as described above over time.
j. Share-based payments
All of the Group's share-based awards are equity settled. Equity-settled
share-based payments to employees are measured at the fair value of the equity
instruments at the grant date. Equity-settled share-based payments to
non-employees are measured at the fair value of services received, or if this
cannot be measured, at the fair value of the equity instruments granted at the
date that the Group obtains the goods or counterparty renders the service. The
fair value of such shares issued has been estimated by reference to the cash
consideration received for shares issued or material third party transactions
at or close to the dates for such non-cash issues.
The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based
on the Directors' estimate of equity instruments that will eventually vest,
with a corresponding increase in equity. Where the conditions are non-vesting,
the expense and equity reserve arising from share-based payment transactions
is recognized in full immediately on grant.
At the end of each reporting period, the Directors revise their estimate of
the number of equity instruments expected to vest. The impact of the revision
of the original estimates, if any, is recognized in profit or loss such that
the cumulative expense reflects the revised estimate, with a corresponding
adjustment to other reserves.
k. Employee benefits
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis
and are expensed as the related service is provided. A liability is
recognized for the amount expected to be paid under short-term cash bonus or
profit-sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Long-term benefits
Defined benefit plans
The Group operates a defined benefit pension plan in Switzerland, which
requires contributions to be made to a separately administered fund. The cost
of providing benefits under the defined benefit plan is determined using the
projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the
asset ceiling, excluding amounts included in net interest on the net defined
benefit liability and the return on plan assets (excluding amounts included in
net interest on the net defined benefit liability), are recognized immediately
in the statement of financial position with a corresponding debit or credit to
other reserve through "Other Comprehensive Income" in the period in which they
occur. Re-measurements are not reclassified to profit or loss in subsequent
periods.
Past-service costs are recognized in profit or loss on the earlier of:
· the date of the plan amendment or curtailment; and
· the date that the Group recognizes related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined
benefit liability or asset. The Group recognizes the following changes in the
net defined benefit obligation under "cost of sales", "administration
expenses" and "selling and distribution expenses" in the consolidated
statement of profit or loss (by function):
· service costs comprising current service costs, past-service costs,
gains and losses on curtailments and non-routine settlements; and
· net interest expense or income.
Defined contribution plans
The income statement expense for the defined contribution pension plans
operated represent the contributions payable for the year.
l. Finance income and expenses
Finance expenses comprise interest payable, lease expenses recognized in
profit or loss using the effective interest method, unwinding of the discount
on provisions, and net foreign exchange losses that are recognized in the
income statement.
Finance income comprise interest receivable on cash deposits and net foreign
exchange gains.
Interest income and interest payable is recognized in profit or loss as it
accrues, using the effective interest method.
Foreign currency gains and losses are reported on a net basis.
m. Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows,
cash and cash equivalents include cash on hand, deposits held at call with
financial institutions, other short-term highly liquid investments with
original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of
changes in value, and bank overdrafts.
n. Trade and other receivables
Trade receivables are recognized initially at fair value and subsequently
measured at amortized cost using the effective interest method, less provision
for impairment.
o. Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is
based on the weighted average principle and includes expenditure incurred in
acquiring the inventories and other costs in bringing them to their existing
location and condition.
p. Provisions
A provision is recognized when the Group has a present obligation, legal or
constructive, as a result of a past event and it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate can be made. Provisions are reviewed at
each reporting date and adjusted to reflect the current best estimate. If it
is no longer probable that an outflow of economic resources will be required
to settle the obligation, the provision is reversed. Where the effect of the
time value of money is material, provisions are discounted using a current
pre-tax rate that reflects, where appropriate, the risks specific to the
liability. When discounting is used, the increase in the provision due to the
passage of time is recognized as an interest expense.
Contingent liabilities
Contingent liabilities are possible obligations whose existence depends on the
outcome of uncertain future events or present obligations where the outflow of
resources is uncertain or cannot be measured reliably. Contingent liabilities
are not recognized in the Consolidated Financial Statements but are disclosed
unless they are remote.
q. Segmental reporting
The Directors consider that the Group has one reportable segment, that of
materials innovation focused on scientific research, specialty materials
manufacturing and consumer ingredient branding. Accordingly, all revenues,
operating results, assets and liabilities are allocated to this activity.
The Group analyses and measures its sales performance into geographic regions,
specifically Europe, North & South America and Asia as well as by form
(ingredients, materials, consumer goods or services) and function (Hygiene,
Comfort, Protection, Sustainability).
4. Significant accounting judgments, estimates and assumptions
The Directors have made the following judgments which may have a significant
effect on the amounts recognized in the Consolidated Financial Statements:
a. Basis of consolidation
The Directors consider that the share-for-share exchange between Auctus Growth
Plc and HeiQ Materials AG to be a reverse acquisition as HeiQ Materials AG is
considered to be the acquirer. Further details of the basis of consolidation
and how the Directors developed the most appropriate accounting policy are
outlined in the basis of consolidation within accounting policy Note 2(b). The
difference between the consideration shares transferred in the combination
("Consideration Shares'') and the fair value of the net assets acquired has
been charged to the consolidated statement of income as a deemed cost of
listing.
b. Defined benefit plans (pension benefits)
The cost of the Group's defined benefit pension plan and other post-employment
medical benefits and the present value of the pension obligation are
determined using actuarial valuations. An actuarial valuation involves making
various assumptions that may differ from actual developments in the future.
These include the determination of the discount rate, future salary increases,
mortality rates and future pension increases. Due to the complexities involved
in the valuation and its long-term nature, a defined benefit obligation is
highly sensitive to changes in these assumptions. All assumptions are reviewed
at each reporting date.
Further details about pension obligations are provided in Note 20 "Pensions
and other post-employment benefit plans".
c. Impairment of non-financial assets
Management has applied judgment in its testing for impairment of non-financial
assets as described in Note 11.
5. Business combinations
Business combinations in 2021
a. Acquisition of Chrisal NV
On March 9, 2021, HeiQ Iberia Unipessoal Lda acquired 51% of the share capital
and voting rights of Chrisal NV, a company incorporated in Belgium. Chrisal NV
is a biotechnology company and a leader in innovative ingredients and consumer
products that incorporate the benefits of probiotics and synbiotics. It has
technology platforms with the purpose of creating healthy and sustainable
microbial ecosystems. The application of its proprietary technology includes
cosmetics, personal care, textiles, wound dressings, water purification, air
treatment and cleaning products. The company has its office, manufacturing
site and bottling facility in Lommel, Belgium.
The purchase consideration was payable partly in cash (€5,000,000,
equivalent to approximately US$6,054,000) and partly by the issue of 1,101,928
new ordinary shares for €2,500,000 (US$2,982,000), equivalent to a total
consideration of US$ 9,036,000.
The acquisition is part of the Group's strategy of becoming a global leader in
materials innovation and allows access to the broader market of microbial
surface management and a bio-based green complementary technology platform to
its successful antimicrobials.
Goodwill of US$ 6,163,000 was recognized and is attributable to the acquired
workforce, anticipated future profit from expansion opportunities and
synergies of the business. The goodwill arising from the acquisition has been
allocated to the Chrisal CGU. Fair value adjustments have been recognized for
property, plant and equipment and acquisition-related intangible assets which
are in alignment with accounting policies of the Group.
Transaction costs relating to the acquisition of US$46,000 have been charged
to the Statement of Comprehensive Income in the period relating to the
acquisition of Chrisal NV.
Chrisal NV contributed US$3,825,000 of revenue for the period between the date
of acquisition and the balance sheet date and US$565,000 of income before tax.
If the acquisition of Chrisal NV had been completed on the first day of the
financial year, Group revenues would have been US$849,000 higher and Group
profit attributable to equity holders of the parent would have been US$206,000
lower.
b. Acquisition of RAS AG
On April 29, 2021, the Company completed the acquisition of 100% of the share
capital and voting rights of RAS AG, a company based in Regensburg, Germany.
The acquisition was for a consideration of €5.1 million (approximately
US$6.1 million), with €1.25 million (US$1.48 million) payable in cash and
€3.85 million (US$4.66 million) through the issue of 1,701,821 new ordinary
shares by the Company. It includes an additional earn-out consideration
dependent on RAS AG's growth and 2021 calendar year EBIT. The earn-out
consideration is capped at an additional €5 million payable in shares for
achieving a €2 million EBIT in 2021 and will be satisfied through the
issuance of new ordinary shares. On the basis of internal forecasts, the
Company has estimated the additional earn-out consideration at €2.7 million
(US$3.2 million) - a correction of the €2.55 million (US$3.0) disclosed at
interim - resulting in an overall consideration of €7.8 million (US$9.37
million).
RAS AG is a materials innovation company that drives the development of
resource-efficient and sustainable products. RAS AG develops and manufactures
highly functionalized materials for this purpose. This includes the
manufacture of antimicrobial, hygiene-enhancing additives and durable
antimicrobial coating systems which are sold worldwide under the trademark
agpure®, and transparent electrically conductive and infrared reflective
coatings sold under the ECOS® trademark. The acquisition is in line with
HeiQ's strategic goal to gain market share in hygiene solutions by providing
antimicrobial surface hygiene technologies to the healthcare and other
sectors. This is building on the acquisition of Chrisal N.V. Belgium concluded
earlier in the year, which gives HeiQ expanded access to the healthcare sector
through probiotic and synbiotic cleaners.
Goodwill of US$ 7,234,000 was recognized and is attributable to the acquired
workforce, anticipated future profit from expansion opportunities and
synergies of the business. The goodwill arising from the acquisition has been
allocated to the RAS CGUs. Fair value adjustments have been recognized for
acquisition-related intangible assets which are in alignment with accounting
policies of the Group.
Transaction costs relating to the acquisition of US$50,000 have been charged
to the Statement of Comprehensive Income in the period relating to the
acquisition of RAS AG.
RAS AG contributed US$2,829,000 of revenue for the period between the date of
acquisition and the balance sheet date and US$907,000 of profit before tax. If
the acquisition of RAS AG had been completed on the first day of the financial
year, Group revenues would have been US$937,000 higher and Group profit
attributable to equity holders of the parent would have been US$570,000
higher.
HeiQ Regulatory GmbH, a joint-venture company previously accounted for under
the equity-method, became a wholly-owned subsidiary on acquisition of RAS AG.
c. Acquisition of Life Material Technologies Limited
On June 15, 2021, the Company completed the acquisition of 100% of the share
capital and voting rights of Life Material Technologies Limited, Hong Kong
("LIFE").
The acquisition was for an upfront consideration of US$6.45 million, with
US$2.55 million payable in cash (the "Cash Consideration") and US$3.9 million
to be satisfied through the issue of new ordinary shares by HeiQ (the "Share
Consideration"). Additional earn-out consideration of US$2,038,000 is payable
in cash (US$1,400,000) and through the issue of new ordinary shares
(US$638,000) in 2022. A further US$614,000 working capital adjustment is
payable in shares in 2022. An additional US$762,000 is payable annually as
remuneration in shares over a five-year period.
The Share Consideration was settled on July 9, 2021 by the issue of 1,887,883
new ordinary shares ("Consideration Shares") to the sellers of LIFE, at a
price of £1.496201 per share, which was the intraday volume-weighted average
price (the "VWAP") of HeiQ shares on the London Stock Exchange in the last
five trading days preceding the closing of the Acquisition.
LIFE is a materials technology company that has developed a strong portfolio
of smart ingredients and formulations with applications in numerous
industries. This includes the development and distribution of bio-based
antimicrobial additives and treatments used by manufacturers of plastics,
coatings, textiles, ceramics and paper, that inhibit or manage bacteria,
fungi, algae, and other micro-organisms that come in contact with treated
materials. LIFE has one of the broadest technology platforms in the industry,
using inorganic, organic and bio-based botanical active substances.
Goodwill of US$ 5,202,000 was recognized and is attributable to the acquired
workforce, anticipated future profit from expansion opportunities and
synergies of the business. The goodwill arising from the acquisition has been
allocated to the Life CGU. Fair value adjustments have been recognized for
acquisition-related intangible assets which are in alignment with accounting
policies of the Group.
Transaction costs relating to the acquisition of US$110,000 have been charged
to the Statement of Comprehensive Income in the period relating to the
acquisition of LIFE.
LIFE contributed US$3,367,000 of revenue for the period between the date of
acquisition and the balance sheet date and US$419,000 of profit before tax. If
the acquisition of LIFE had been completed on the first day of the financial
year, Group revenues would have been US$2,072,000 higher and Group profit
attributable to equity holders of the parent would have been US$566,000
higher.
d. Summary of acquisitions in 2021
The following table summarizes the consideration paid, the fair value of
assets acquired, liabilities assumed, goodwill arising on acquisition and
non-controlling interests at the acquisition date:
Chrisal NV RAS AG Life Material Technologies Limited Total
US$'000 US$'000 US$'000 US$'000
Consideration:
Cash paid to shareholders 6,054 1,482 2,550 10,086
Shares issued to shareholders 2,983 4,656 3,900 11,539
Contingent consideration payable in cash - - 1,400 1,400
Contingent consideration payable in shares - 3,232 638 3,870
Working capital adjustment payable in shares - - 614 614
Total Consideration payable 9,037 9,370 9,102 27,509
Fair value of net assets acquired:
Property, plant and equipment 1,872 179 29 2,080
Intangible Assets 20 159 401 580
Other non-current assets - - 17 17
Inventory 1,277 411 570 2,258
Cash 1,773 291 73 2,137
Trade and other receivables 874 1,184 1,480 3,538
Trade and other payables (1,900) (611) (460) (2,971)
Deferred revenue (739) - - (739)
IAS 19 Pension liability - - (92) (92)
Borrowings (369) - (210) (579)
Income tax liability (198) (420) (20) (638)
Right of use assets 1,375 139 122 1,636
Capital lease liability (1,375) (139) (122) (1,636)
Intangible assets identified on acquisition:
Customer Relationship 667 380 610 1,657
Brands 521 - 1,048 1,569
Technology-based assets 869 1,071 561 2,501
Deferred tax liability on intangible assets (514) (508) (111) (1,133)
Total net assets 4,153 2,136 3,896 10,185
Non-controlling interests (1,279) - 4 (1,275)
Goodwill 6,163 7,234 5,202 18,599
Total 9,037 9,370 9,102 27,509
e. Deferred consideration in relation to acquisitions
The deferred consideration includes earnout payments and a working capital
adjustment in relation to the 2021 acquisitions of RAS AG and Life Material
Technologies Limited as presented in the table above in Note 5e. Since these
liabilities are due in 2022, the fair value of the consideration approximates
its nominal value.
Additionally, a further amount of deferred consideration pertains to the
acquisition of assets from Chem-Tex Inc. in 2017 and is payable other than in
a short timeframe. The fair value of the deferred consideration has been
discounted using an imputed interest rate of 6% (being the Group's estimated
cost of debt) to take into account the time value of money.
The deferred consideration and related financing expense are summarized below:
Chem-Tex RAS AG Life Material Technologies Limited Total
As at January 1, 2020 2,103 - - 2,103
Amortization of fair value discount 245 - - 245
Consideration settled in cash (1,267) - - (1,267)
Foreign exchange revaluation 35 - - 35
As at December 31, 2020 1,116 - - 1,116
Amortization of fair value discount 58 - - 58
Additions from acquisitions as per Note 5e - 3,232 2,652 5,884
Gain on earnout calculation - (80) - (80)
Consideration settled in cash (908) - - (908)
Foreign exchange revaluation 13 - - 13
As at December 31, 2021 279 3,152 2,652 6,083
Current liability 191 3,152 2,652 5,995
Non-current liability 88 - - 88
Total 279 3,152 2,652 6,083
The maturity profile of other non-current liabilities is shown in paragraph
(g) "Liquidity risk" of Note 25 "Financial risk management" to the
Consolidated Financial Statements.
Business combinations in 2020
f. Reverse acquisition
On 7 December 2020, HeiQ Plc became the legal parent of HeiQ Materials AG by
way of reverse acquisition. The cost of the acquisition is deemed to have been
incurred by HeiQ Materials AG, the legal subsidiary, in the form of equity
instruments issued to the owners of the legal parent. This acquisition has
been accounted for as a reverse acquisition.
The accounting policy adopted by the Directors applies the principles of IFRS
3 in identifying the accounting acquirer and the presentation of the
Consolidated Financial Statements of the legal parent (HeiQ plc) as a
continuation of the accounting acquirer's Financial Statements (HeiQ Materials
AG). This policy reflects the commercial substance of this transaction as the
original shareholders of the subsidiary undertakings were the most significant
shareholders post transaction, owning 84.8% of the enlarged issued share
capital of the Company.
The fair value of the shares in HeiQ Materials AG has been determined from the
admission price of the HeiQ Plc shares on Re-admission to trading on the
London Stock Exchange's Main Market of £1.12 per share. The value of the
consideration shares was £119,571,088 (equivalent to US$156,889,584). The
fair value of the notional number of equity instruments that the legal
subsidiary would have had to have issued to the legal parent to give the
owners of the legal parent the same percentage ownership in the combined
entity was 15.2 per cent of the market value of the shares after issues, being
£21,428,000 (US$28,124,000). The difference between the notional
consideration paid by HeiQ Plc for HeiQ Materials AG and the HeiQ Plc net
assets acquired of £20,360,000 (US$26,722,000) has been charged to the
Consolidated Statement of Comprehensive Income as a deemed cost of listing
amounting to £1,068,000 (equivalent to US$1,402,000) with a corresponding
entry to the reverse acquisition reserve.
The transaction costs associated with the reverse acquisition and readmission
totaled US$1,871,000 and have been charged to profit and loss.
Details of net assets acquired and the deemed cost of listing are as follows:
US$'000
Consideration effectively transferred 28,124
Net assets acquired:
Cash and cash equivalents 27,105
Trade and other receivables 163
Trade and other payables (546)
Net assets acquired 26,722
Deemed cost of listing 1,402
The amounts transferred to the reverse acquisition were as follows:
US$'000
HeiQ equity capital pre-combination 29,095
Deemed cost of acquisition 1,402
Consideration shares issued on acquisition (156,894)
Retained losses of Company at combination (515)
Merger reserve at December 31, 2020 and December 31, 2021 (126,912)
g. Acquisition of MasFabE
On December 15, 2020, the Group completed the acquisition of a 50.01% interest
in a leading Spanish mask manufacturer MasFabEs S.L. for a consideration of
€132,751 (equivalent to US$156,570). The company was renamed HeiQ Medica
S.L. and will manufacture medical devices with the Group's cutting-edge
textile technologies.
The following table summarizes the consideration paid for the goodwill, the
fair value of assets acquired, liabilities assumed and non-controlling
interests at the acquisition date:
US$'000
Fair value of consideration 157
Net assets acquired: 1,195
Property, plant and equipment
Inventories 1,152
Cash 6
Net working capital (886)
Deferred tax asset 112
Borrowings (1,512)
Total identifiable net assets acquired at fair value 67
Non-controlling interests (33)
Goodwill recognized on acquisition 123
6. Subsidiaries
Details of the Company's subsidiaries as at December 31, 2021 are as follows:
Company Country of registration or incorporation Registered office Principal activity Percentage of ordinary shares held
HeiQ Materials AG Switzerland Rütistrasse 12, 8952 Schlieren Zurich Development, production and sale of chemicals 100%
HeiQ ChemTex Inc. United States 2725 Armentrout Dr, Concord, NC 28025 Development, production and sale of chemicals 100%
HeiQ Pty Ltd Australia Level 20/181 William Street, Melbourne, VIC 3000 Research and development 100%
HeiQ GrapheneX AG Switzerland Rütistrasse 12, 8952 Schlieren Zurich Inactive 100%
HeiQ Company Limited Taiwan No. 14 & 16, Ln. 50, Wufu 1st Rd. Luzhu District, Taoyuan City 33850 Distribution 100%
HX Company Limited Taiwan No. 14 & 16, Ln. 50, Wufu 1st Rd. Luzhu District, Taoyuan City 33850 Trading and production 66.70%
HeiQ Medica S.L. Spain Plaza de la Estación s/n, 29560 Pizarra Manufacturer of medical devices 50.1%
HeiQ Iberia Unipessoal Lda Portugal Rua Engº Frederico Ulrich, nº 2650, 4470-605 Maia Sales agency and internal services company 100%
Chrisal NV Belgium Priester Daensstraat 9, 3920 Lommel, Belgium Biotechnology 51%
HeiQ RAS AG Germany Rudolf Vogt Straße 8-10, 93053 Regensburg Materials innovation 100%
HeiQ Regulatory GmbH Germany Rudolf Vogt Straße 8-10, 93053 Regensburg Materials innovation 100%
HeiQ (China) Material Tech LTD China Room 2501, Xuhui Commercial Mansion, No. 168 Yude Road, Shanghai Distribution 100%
Life Material Technologies Limited Hong Kong Alexandra House, 6th Floor, 16-20 Chater Road, Central Materials technology 100%
Life Natural Limited Hong Kong Alexandra House, 6th Floor, 16-20 Chater Road, Central Inactive 100%
Life-Materials Latam Ltda, Brazil Rua Cerro Cora Sales office 85%
1851Villa Romano, Sao Paulo SP Brasil CEP 05061350
LMT Holding Limited Thailand 222 Lumpini Building 2, 247 Rajdamri Road Holding 96.45%
Lumpini, Phatumwan, Bangkok 10330
Life Material Technologies Limited Thailand 222 Lumpini Building 2, 247 Rajdamri Road Trading 99.995%
Lumpini, Phatumwan, Bangkok 10330
HeiQ AeoniQ GmbH Austria Industriestrasse 35, 3130 Herzogenburg Materials Innovation 100%
7. Revenue and other operating income
The Group's activities are materials innovation which focuses on scientific
research, manufacturing and consumer ingredient branding. The primary source
of revenue is the production and sale of functional ingredients, materials and
finished goods. Other sources of revenues include research and development
services as well as laboratory work. Revenues were mainly generated in the
regions of Europe, North & South America and Asia.
The following table reconciles HeiQ Group's revenue for the periods presented:
Year ended Year ended
December 31, December 31,
2021 2020
Revenues by function US$'000 US$'000
Comfort 12,979 7,356
Hygiene 29'314 29,151
Protection 2,076 3,879
Resource Efficiency 13,505 10,015
Total revenue 57,874 50,401
Year ended Year ended
December 31, December 31,
2021 2020
Revenues by form US$'000 US$'000
Revenue recognized at point in time
Functional ingredients 43,661 42,023
Functional materials 850 764
Functional consumer goods 10,069 7,444
Services, royalties and others 2,692 170
Revenue recognized over time
Licenses 602 -
Total revenue 57,874 50,401
Year ended Year ended
December 31, December 31,
2021 2020
Revenue by region US$'000 US$'000
North & South America 21,689 19,813
Asia 19,636 19,887
Europe 16,237 10,429
Others 312 272
Total revenue 57,874 50,401
During the year ended December 31, 2021, no customers individually totaled
more than 10% of total revenues (2020: none).
Year ended Year ended
December 31, December 31,
2021 2020
Other operating income US$'000 US$'000
Foreign exchange gains 5,032 3,986
Other operating income 1,394 758
Total other operating income 6,426 4,744
Year ended Year ended
December 31, December 31,
2021 2020
Other income US$'000 US$'000
Gain on disposal of property plant and equipment 54 -
Gain on earnout consideration payable (Note 5f) 80 -
Other non-operating income 65 -
Total other income 199 -
Expenses by nature
Year ended Year ended
December 31, December 31,
2021 2020
Cost of goods sold US$'000 US$'000
Material expenses 24,581 17,452
Personnel expenses 2,164 1,279
Depreciation of property, plant and equipment 706 382
Other costs of goods 3,447 3,155
Total cost of goods sold 30,898 22,268
Year ended Year ended
December 31, December 31,
2021 2020
Selling and general administration expense US$'000 US$'000
Personnel expenses 13,074 9,091
Depreciation of property, plant and equipment 549 394
Amortization 758 110
Depreciation of right-of-use assets 855 368
Other 9,229 4,913
Total selling and general administration expense 24,465 16,117
Year ended Year ended
December 31, December 31,
2021 2020
Personnel expenses US$'000 US$'000
Wages & salaries 12,708 8,290
Social security & other payroll taxes 1,387 415
Pension costs 645 448
Share-based payments 498 1,217
Total personnel expenses 15,238 10,370
The average monthly number of employees was as follows: 221
97
Year ended Year ended
December 31, December 31,
2021 2020
Other operating expenses US$'000 US$'000
Foreign exchange losses 4,671 5,124
Impairment expense 144 -
Other 1,005 3
Total other operating expenses 5,820 5,127
Year ended Year ended
December 31, December 31,
2021 2020
Other costs US$'000 US$'000
Loss on disposal of property, plant and equipment 20 46
Other non-recurring costs 341 23
Total other costs 361 69
Year ended Year ended
December 31, December 31,
2021 2020
Auditor's remuneration US$'000 US$'000
Audit of company 304 108
Total audit 304 108
Audit related assurance services 6 -
Other assurance services - 115
Total assurance services 6 115
8. Taxation
For the year ending December 31, 2021, the Group had a tax expense of
US$212,000 (2020: US$2,112,000). The effective tax rate was (7.9%) (2020:
29.5%). The effective tax rate was primarily impacted by temporary
differences.
The components of the provision for taxation on income included in the
"Statement of Profit or Loss and Other Comprehensive Income" are summarized
below:
Year ended Year ended
December 31, December 31,
2021 2020
Current income tax expense US$'000 US$'000
Swiss corporate income taxes (282) 304
United States state and federal taxes (33) 1,112
Taiwan corporate income taxes 200 161
Belgium corporate income taxes 186 -
Germany corporate income taxes 301 -
Others 39 -
Total current income tax expense 411 1,577
Deferred income tax expense
Switzerland (190) 588
China (146) -
United States 138 -
Spain 108 -
Others (109) (53)
Total deferred income tax expense (199) 535
Total income tax expense 212 2,112
Year ended Year ended
December 31, December 31,
2021 2020
Tax liability US$'000 US$'000
Opening balance - (prepaid taxes) 1,495 (42)
Assumed on business combinations 638 -
Income tax expense for the year 411 1,577
Taxes paid (2,462) (48)
Foreign currency differences (31) 8
Closing balance 51 1,495
The differences between the statutory income tax rate and the effective tax
rates are summarized as follows:
Year ended
December 31, 2021
US$'000
Expected tax at statutory Swiss income tax rate of 20% 537 20.0%
Increase/(decrease) in tax resulting from:
Effect of different tax rates in foreign jurisdictions 25 0.9%
Tax credits (58) (2.1%)
Unrecognized tax losses 378 13.6%
Non-deductible expenditure 58 2.2%
Tax exempt income (105) (3.9%)
Temporary differences (614) (22.9%)
Other - net (9) 0.1%
212 7.9%
Year ended
December 31, 2020
US$'000
Expected tax at statutory Swiss income tax rate of 20% 1,432 20.0%
Increase/(decrease) in tax resulting from:
Effect of different tax rates in foreign jurisdictions 175 2.5%
Tax credits (60) (0.8%)
Recognized tax losses (329) (4.6%)
Non-deductible expenditure 567 7.9%
Other - net 327 4.5%
2,112 29.5%
The Group had net deferred tax liabilities of US$1,193,000 at December 31,
2021 (2020: US$31,000). The deferred tax assets relate to taxable temporary
differences.
The components of the net deferred income tax assets included in non-current
assets are as follows:
Year ended Year ended
December 31, December 31,
2021 2020
US$'000 US$'000
Deferred tax assets
Pension fund obligations 429 655
Tax losses 178 171
Share-based payments 88 -
Others 6 -
Total deferred tax assets 701 826
Deferred tax liabilities
Capital allowances and depreciation (1,894) (857)
Deferred tax liabilities (1,894) (857)
Net deferred tax assets (liabilities) (1,193) (31)
As at December 31, 2021, the Group had approximately US$178,000 of tax losses
available to be carried forward against future profits (2020: US$171,000).
In applying judgment in recognizing deferred tax assets, management has
critically assessed all available information, including future business
profit projections and the track record of meeting forecasts. Management
expects the deferred tax asset to be substantially recovered in 2022.
Some tax losses were not recognized as deferred tax assets. During the period
ended 31 December 2021, such tax losses amounted to US$378,000 (2020:
US$42,000). They arose from aggregated losses of US$1,134,000 (2020:
US$154,000).
9. Earnings per share
Year ended Year ended
December 31, December 31,
2021 2020
US$'000 US$'000
Profit after tax attributable to owners of the Company 2,676 5,125
Basic earnings per share (cents) 2.07 4.53
Diluted earnings per share (cents) 2.01 4.32
Basic weighted average shares in issue 128,871,639 113,143,731
Diluted weighted average shares in issue 132,718,333 118,666,601
Basic earnings per share is calculated by dividing the profit/loss after tax
attributable to the equity holders of the Company by the weighted average
number of shares in issue during the year.
Diluted earnings per share is calculated by dividing the profit/loss
attributable to the equity holders of the Company by the weighted average
number of ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would be issued on conversion of all
the dilutive potential ordinary shares into ordinary shares.
In calculating the weighted average number of ordinary shares outstanding (the
denominator of the earnings per share calculation) during the period in which
the reverse acquisition occurs:
(a) the number of ordinary shares outstanding from the beginning of that
period to the acquisition date shall be computed on the basis of the weighted
average number of ordinary shares of the legal acquiree (accounting acquirer)
outstanding during the period multiplied by the exchange ratio established in
the merger agreement; and
(b) the number of ordinary shares outstanding from the acquisition date to the
end of that period shall be the actual number of ordinary shares of the legal
acquirer (the accounting acquiree) outstanding during that period.
10. Intangible assets
Goodwill Internally developed assets Brand names and customer elations Acquired technologies Other intangible assets Total
Cost US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at January 1, 2020 3,393 1,128 295 - 417 5,233
Additions through business combinations 123 - - - - 123
Additions arising from internal development - 602 - - -
602
Other acquisitions - - - - 33 33
Currency translation differences - 121 - - 41 162
As at December 31, 2020 3,516 1,851 295 - 491 6,153
Reclasses* - (725) - - 725 -
Additions through business combinations 18,599 - 3,226 2,501 580
24,906
Additions arising from internal development - 2,390 - - -
2,390
Other acquisitions - - - - 579 579
Currency translation differences - (7) - - (43) (50)
As at December 31, 2021 22,115 3,509 3,521 2,501 2,332 33,978
Amortization
As at January 1, 2020 - 384 78 - 249 711
Amortization for the year - 11 29 - 70 110
Currency translation differences - 37 - - 31 68
As at December 31, 2020 - 432 107 - 350 889
Reclasses* - (19) - - 19 -
Amortization for the year - 50 367 177 164 758
Impairment expense for the year 123 21 - - - 144
Currency translation differences - (10) - - (15) (25)
As at December 31, 2021 123 474 474 177 518 1,766
Net book value
As at December 31, 2021 21,992 3,035 3,047 2,324 1,814 32,212
As at December 31, 2020 3,516 1,419 188 - 141 5,264
*Regulatory registrations have been reclassed from internally developed assets
to other intangible assets.
Internally generated assets represent expenditure incurred on development
projects and IT.
Other intangible assets include acquired rights, licenses, patent costs,
concessions, website designs and domains and trademarks.
Goodwill
Goodwill acquired in a business combination is allocated, at acquisition, to
the cash generating units ("CGUs") that are expected to benefit from that
business combination. Management considers that the goodwill is attributable
to the textile innovation CGU, because that is where the benefits are expected
to arise from expansion opportunities and synergies of the business. The
Directors consider that the Group has one reportable segment, that of textile
innovation focused on scientific research, specialty materials manufacturing
and consumer ingredient branding.
The Group tests goodwill annually for impairment or more frequently if there
are indications that these assets might be impaired. The recoverable amounts
of the CGU are determined from fair value less costs to sale. The value of the
goodwill comes from the future potential of the assets rather than using the
assets as they are (i.e. there is assumed expansionary capex which supports
growth in revenues and the value of the business and therefore goodwill).
The key assumptions for the fair value less costs to sale approach are those
regarding sales prices, margins and a discount rate.
The Group monitors its pre-tax Weighted Average Cost of Capital and those of
its competitors using market data. In considering the discount rate applying
to the CGU, the Directors have considered the relative size and risks its CGU.
The impairment review uses a discount rate adjusted for post-tax cash flows.
The Group prepares cash flow forecasts derived from the most recent financial
plan approved by the Board and extrapolates revenues, gross and net margins
and cash flows for the following five years based on forecast growth rates of
the CGU. Cash flows beyond this period are also considered in assessing the
need for any impairment provisions.
A summary of the key assumptions used in such impairment testing is set out in
Note 4 c above. With the exception of the goodwill recognized in respect of
the acquisition of MasFabEs, no impairment was considered necessary as a
result of these tests.
In the case of MasFabEs, the Company tested goodwill for impairment and
determined that the recoverable amount recognized on acquisition was less than
its carrying amount and accordingly an impairment provision of $123,000 was
made in the year ended December 31, 2021.
Impairment of intangible assets
IFRS requires the Directors to undertake an annual test for impairment of
indefinite lived assets and, for finite lived assets, to test for impairment
if events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable.
Impairment testing is an area involving judgment in determining estimates,
requiring assessment as to whether the carrying value of assets can be
supported by the net present value of future cash flows derived from such
assets using cash flow projections which have been discounted at an
appropriate rate. In calculating the net present value of the future cash
flows, certain assumptions are required to be made in respect of highly
uncertain matters including management's expectations of:
· Gross margins;
· the level of capital expenditure to support long-term growth; and
· the selection of discount rates to reflect the risks involved.
The Directors prepare and approve cash flow projections which are used in the
fair value calculations. Changing the assumptions selected by the Directors,
in particular the discount rate, gross margins and growth rate assumptions
used in the cash flow projections, could significantly affect their impairment
evaluation and hence the Group's results.
The sensitivity of impairment tests to changes to underlying assumptions is
summarized below. Impairment of goodwill would result from the following
changes to assumptions:
Assumption Chem-Tex Chrisal NV RAS AG Life Materials
Existing Sensitivity Existing Sensitivity Existing Sensitivity Existing Sensitivity
Gross margin 33% 27% 59.40% 58% 91.00% 71% 58.20% 28%
Capex (annual spend) US$ 207,000 US$ 1,000,000 US$ 138,000 US$ 180,000 US$ 57,000 US$ 1,400,000 US$ 91,000 US$ 2,800,000
Discount factor 14% 22% 14% 15% 14% 23% 14% 38%
Growth is calculated in accordance with the commercial plan for the financial
years 2022, 2023 and 2024, and 2 per cent annually in 2025 and 2026.
Internally developed assets and other intangibles with finite lives
The Group tests internally developed assets and other intangibles with finite
lives for impairment only if there are indications that these assets might be
impaired. The Company has concluded that no impairment is necessary. The Group
has processes in place for continually reviewing development expenditure to
ensure that projects under development are still viable.
Property, plant and equipment
Machinery and equipment Motor vehicles Computers and software Furniture and fixtures Land and buildings Total
Cost US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at January 1, 2020 5,189 343 665 100 - 6,297
Acquisition on business combination 1,224 - 1 12 - 1,237
Additions 629 191 77 35 - 932
Disposals (628) (46) (2) (18) - (694)
Currency translation differences 365 4 69 3 - 441
As at December 31, 2020 6,779 492 810 132 - 8,213
Acquisition on business combination 191 19 24 171 1,675 2,080
Additions 596 67 104 213 14 994
Disposals (30) (37) - (15) (68) (150)
Currency translation differences (248) (5) (24) (27) (98) (402)
As at December 31, 2021 7,288 536 914 474 1,523 10,735
Depreciation
As at January 1, 2020 1,917 180 285 31 - 2,413
Acquisition on business combination 42 - - - - 42
Charge for the year 538 84 142 12 - 776
Eliminated on disposal (607) (24) - (7) - (638)
Currency translation differences 112 2 37 2 - 153
As at December 31, 2020 2,002 242 464 38 - 2,746
Charge for the year 797 118 168 55 117 1,255
Eliminated on disposal (13) (26) - (7) - (46)
Currency translation differences (63) (4) (13) (5) (85)
As at December 31, 2021 2,723 330 619 86 112 3,870
Net book value
As at December 31, 2021 4,565 206 295 388 1,411 6,865
As at December 31, 2020 4,777 250 346 94 - 5,467
11. Right-of-use assets
Land and buildings Motor vehicles Office equipment Total
Cost US$'000 US$'000 US$'000 US$'000
As at January 1, 2020 3,757 111 22 3,890
Additions 76 - 32 108
Disposals due to expiry of lease (306) (43) (14) (363)
Currency translation differences 174 8 1 183
As at December 31, 2020 3,701 76 41 3,818
Additions through business combinations 1,186 300 150 1,636
Additions 5,147 289 393 5,829
Disposals due to expiry of lease - (33) (9) (42)
Currency translation differences (120) (21) 2 (139)
As at December 31, 2021 9,914 611 577 11,102
Depreciation
As at January 1, 2020 1,077 80 19 1,176
Depreciation for the year 345 16 7 368
Disposals due to expiry of lease (306) (43) (14) (363)
Currency translation differences 66 7 - 73
As at December 31, 2020 1,182 60 12 1,254
Depreciation for the year 655 89 111 855
Disposals due to expiry of lease - (32) (9) (41)
Currency translation differences (34) (8) (3) (45)
As at December 31, 2021 1,803 109 111 2,023
Net book value
As at December 31, 2021 8,111 502 466 9,079
As at December 31, 2020 2,519 16 29 2,564
Future minimum lease payments associated with these leases were as follows:
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Not later than one year 1,115 385
Later than one year and not later than five years 3,689 1,346
Later than five years 5,525 1,162
Total minimum lease payments 10,329 2,893
Less: Future finance charges (1,099) (240)
Present value of minimum lease payments 9,230 2,653
Current liability 1,054 349
Non-current liability 8,176 2,304
9,230 2,653
12. Other non-current assets
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Deposits 140 55
Amounts due from third parties - 151
Other non-current assets 193 -
Other non-current assets 333 206
13. Inventories
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Functional ingredients 7,480 10,209
Functional materials 4,310 1,289
Functional consumer goods 1,822 2,042
Services 158 -
Total inventories 13,770 13,540
Trade receivables
The majority of trade receivables are current, and the Directors believe these
receivables are collectible. The Directors consistently assess the
collectability of these receivables. As at December 31, 2021, the Directors
considered a portion of these receivables uncollectible and recorded a
provision in the amount of US$1,473,000 (2020: US$551,000).
As at As at
December 31, December 31,
2021 2020
Trade receivables US$'000 US$'000
Not past due 7,623 3,975
< 30 days 2,930 1,304
31-60 days 55 763
61-90 days 1,115 115
91-120 days 351 482
>120 days 7,449 7,349
Total trade receivables 19,523 13,988
Provision for expected credit loss (1,473) (551)
Total trade receivables (net) 18,050 13,437
The Group uses a simplified approach to recognize lifetime expected losses on
trade and other receivables. Expected losses consider payment performance
history, external information available regarding credit ratings as well as
future expected credit losses.
The provision for expected loss rates is based on the Group's historical
credit loss record. Most significantly, in the case of take-or-pay contracts,
the rate of provision is 5% for amounts more than one year past due, 20% for
amounts more than two years past due and 25% for amounts more than three years
past due.
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Other receivables - from tax authorities 1,734 1,372
Prepayments and other receivables 4,541 1,237
Total other receivables and prepayments 6,275 2,609
14. Share capital and share options
Movements in the Company's share capital were as follows:
Note Number of shares Share capital Share premium Totals
No. US$'000 US$'000 US$'000
Balance as of January 1, 2020 2,668,999 350 1,305 1,655
Consolidation of shares (1,779,346) - - -
Placing of shares 11,789,142 4,641 12,684 17,325
Subscription for shares 6,068,000 2,389 6,529 8,918
Issue of shares to acquire HeiQ Materials AG 106,759,900 42,027 114,865 156,892
Shares issued in lieu of fees 385,209 152 414 566
Costs of share issues - - (1,260) (1,260)
Balance as at December 31, 2020 125,891,904 49,559 134,537 184,096
Issue of shares to acquire Chrisal NV 1,101,928 456 2,526 2,982
Issue of shares to acquire RAS AG 1,701,821 710 3,946 4,656
Issue of shares to acquire Life Materials 1,887,883 798 3,182 3,980
Balance as at December 31, 2021 130,583,536 51,523 144,191 195,714
The par value of all shares is £0.30. All shares in issue were allotted,
called up and fully paid.
As more fully described in Note 5 above, the Company issued new ordinary
shares for the following acquisitions:
i. On March 9, 2021, the Company acquired a 51% in interest in Chrisal
N.V. payable partly in cash (€5,000,000, equivalent to approximately
US$6,054,000) and partly by the issue of 1,101,928 new ordinary shares for
€2,500,000 (US$2,982,000), equivalent to a total consideration of US$
9,036,000.
ii. On April 29, 2021, the Company acquired a 100% interest in RAS AG for
a purchase consideration of €5.1 million (approximately US$6.1 million),
with €1.25 million (US$1.48 million) payable in cash and €3.85 million
(US$4.66 million) through the issue of 1,701,821 new ordinary shares by the
Company.
iii. The Company issued a further 1,887,883 new ordinary shares on July 9,
2021 to the sellers of LIFE, at a price of £1.496201 per share, equivalent to
US$4,085,000.
Share Option Scheme
The Company has adopted the HeiQ plc Option Scheme.
Under the Option Scheme, awards may be made only to employees and executive
directors. The Board will administer the Option Scheme with all decisions
relating to awards made to executive directors taken by the Remuneration
Committee.
Awards under the plan will be market value options, but participants resident
in jurisdictions where local securities laws or other regulations are
considered problematic may be awarded cash-based equivalents. Any awards made
are not pensionable.
All awards made will be subject to one or more performance conditions at the
discretion of the Board. Ordinary Shares received on exercise of any options
awarded under the Option Scheme may be required to be held for a period of
time before they can be disposed of (other than disposals to satisfy any tax
payable on exercise).
The total number of Ordinary Shares which can be issued under the Option
Scheme (together with any other employees' share scheme operated by the
Company) may not exceed 10 per cent. of the Company's ordinary share capital
from time to time.
A total of 6,260,000 awards were made under the Option Scheme pursuant to
re-admission on 7 December 2020.
The key performance indicators attaching to these awards relate to targets for
sales growth (65 per cent. of the award) and operating margin (35 per cent. of
the award) over a period of three years.
An option-holder has no voting or dividend rights in the Company before the
exercise of a Share option.
The weighted average share price at grant date of options granted at grant
date was £1.12 and the estimated fair value of each share option granted was
£0.269. This estimated fair value was calculated by applying a Black-Scholes
option pricing model. A 0.25% risk-free interest rate and an expected
volatility of the Company's share price has been used in these calculations.
On October 19, 2021 a total of 2,447,658 share options were issued, with
service periods covering January 2022 to December 2024 and an exercise price
of £0.903 per share option.
No options were exercised, forfeited or lapsed during the year ended December
31, 2021. Accordingly, as at December 31, 2021 8,707,658 options remained in
place (2020: 6,200,000) out of which 5,204,978 options are expected to vest
(2020: 6,200,000), with a weighted average exercise price of £1.13 (2020:
£1.23).
The expense and equity reserve arising from these share-based payment
transactions recognized in the year ended December 31, 2021 was US$424,000
(year ended December 31, 2020: US$50,000).
An additional expense of US$74,000 relates to share-based payments payable in
2022 as deferred consideration in relation to the acquisition of Life
Materials AG.
Other share-based transactions
During the year ended December 31, 2020, HeiQ Materials AG issued 18,000
shares to employees in respect of contractual obligations for a total
consideration of US$1,167,000.
15. Reserves
The share-based payment reserve arises from the requirement to fair value the
issue of share options at grant date. Further details of share options are
included at Note 17.
The currency translation reserve represents cumulative foreign exchange
differences arising from the translation of the financial statements of
foreign subsidiaries and is not distributable by way of dividends.
The share premium account represents the amount received on the issue of
ordinary shares by the Company in excess of their nominal value and is
non-distributable.
The other reserve comprises the cumulative re-measurement of defined benefit
obligations and plan assets to fair value and which are recognized as a
component of other comprehensive income. Such actuarial gains and losses from
defined benefit pension plans are not reclassified to profit or loss in
subsequent periods.
The retained deficit comprises all other net gains and losses and transactions
with owners not recognized elsewhere.
The merger reserve was created in accordance with IFRS3 'Business
Combinations'. The merger reserve arises due to the elimination of the
Company's investment in HeiQ Materials AG. Since the shareholders of HeiQ
Materials AG became the majority shareholders of the enlarged Group, the
acquisition is accounted for as though there is a continuation of the legal
subsidiary's financial statements. In reverse acquisition accounting, the
business combination's costs are deemed to have been incurred by the legal
subsidiary.
16. Pensions and other post-employment benefit plans
The Group operates a defined benefit pension plan in Switzerland, which
requires contributions to be made to a separately administered fund. The cost
of providing benefits under the defined benefit plan is determined using the
projected unit credit method.
Correspondingly the value of the defined benefit obligation at valuation date
is equal to the present value of the accrued pro-rated service considering
expected salary at eligibility date and the future pension increase.
The pension scheme was with Swisscanto pension fund ("Swisscanto
Sammelstiftung") until December 31, 2021 and with AXA pension fund from
January 1, 2022 following a change in pension fund provider. The Directors
have adopted the actuarial valuation as of January 1, 2022.
Pension plan description
The pension plans grant disability and death benefits which are defined as a
percentage of the salary insured. Although the Swiss plan operates like a
defined contribution plan under local regulations, it is accounted for as a
defined benefit pension plan under IAS19 'Employee Benefits' because of the
need to accrue a minimum level of interest on the mandatory part of the
pension accounts. Upon reaching the retirement age, the savings capital will
be converted with a fixed conversion rate into an old-age pension. In the
event that an employee leaves employment prior to reaching a pensionable age,
the cumulative balance of the savings account is withdrawn from the pension
plan and invested into the pension plan of the employee's new employer.
Regulatory framework
Pension plan legal structure
HeiQ Materials AG is affiliated to a collective foundation. The collective
foundation operates one defined benefit pension plan for HeiQ Materials AG.
Under Swiss law, all employees are required to be a member of the pension
plan. There are minimum benefits requested by law (for old-age, disability,
death and termination). The pension plans cover more than legally requested.
Each affiliated company has a pension plan committee. The committee is
represented by 50% of employer representatives and the remaining 50% are
employee representatives.
Responsibilities of the board of trustees (and/or the employer on the board of
trustees)
The highest corporate body of the collective foundation is the board of
trustees. The board of trustees is elected out of the affiliated companies and
is also represented by 50% of employee and employer representatives (on the
level of the collective foundation). This board handles the general management
of the pension scheme, ensures compliance with the statutory requirements,
defines the strategic objectives and policies of the pension scheme and
identifies the resources for their implementation. This board decides also on
the asset allocation and is responsible to the authorities for the correct
administration of the collective foundation.
Special situation
The pension scheme has no minimum funding requirement (when the pension fund
is in a surplus position), although the pension scheme has a minimum
contribution requirement as specified below. Under local requirements, where a
pension fund is operated in a surplus position, limited restrictions apply in
term of the trustee's ability to apply benefits to the members of the locally
determined "free reserves". In instances where the pension fund enters into an
underfunded status the active members, along with the employer, are required
to make additional contributions until such time the pension fund is in a
fully funded position.
Funding arrangements that affect future contributions
Swiss law provides for minimum pension obligations on retirement. Swiss law
also prescribes minimum annual funding requirements. An employer may provide
or contribute a higher amount than as specified under Swiss law - such amounts
are specified under the terms and conditions of each of the Swiss employee's
individual terms and conditions of employment.
In addition, employers are able to make one off contributions or prepayments
to these funds. Although these contributions cannot be withdrawn, they are
available to the Company to offset its future employer cash contributions to
the plan. Although a surplus can exist in the fund, Swiss law requires minimum
annual funding requirements to continue.
For the active members of the pension plan, annual contributions are required
by both the employer and employee. The employer contributions must be at least
equal to the employee contributions, but may be higher, separately mentioned
in the constitution of the pension plan.
Minimum annual contribution obligations are determined with reference to an
employee's age and current salary, however as indicated above these can be
increased under the employee's terms and conditions of employment.
In the event of the winding up of HeiQ Materials AG, or the pension fund, HeiQ
Materials AG has no right to any refund of any surplus in the pension fund.
Any surplus balance is allocated to the members (active and pensioners).
General risk
The Group faces the risk that its equity ratio can be affected by a poor
performance of the assets of the pension fund or change of assumptions.
Therefore, sensitivities of the main assumptions have been calculated and
disclosed (see below).
The following tables summarize the components of net benefit expense
recognized in the statement of profit or loss and the funded status and
amounts recognized in the statement of financial position for the plan:
Net benefit obligations
The components of the net defined benefits obligations included in non-current
liabilities are as follows:
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Fair value of plan assets 10,858 6,311
Defined benefit obligation (13,003) (9,587)
Funded status (net liability) (2,146) (3,276)
Duration (years) 16.5 18.9
Expected benefits payable in following year (393) (269)
Year ended Year ended
December 31, December 31,
2021 2020
Development of obligations and assets US$'000 US$'000
Present value of funded obligations, beginning of year (9,588) (6,374)
Employer service cost (521) (391)
Employee contributions (342) (237)
Past service cost 28 -
Curtailments / Settlements 65 -
Interest cost (14) (21)
Benefits paid (2,589) (1,044)
Actuarial (loss)/gain on benefit obligation (256) (809)
Currency (loss)/gain 214 (711)
Present value of funded obligations, end of year (13,003) (9,587)
Defined benefit obligation participants (13,003) (8,942)
Defined benefit obligation pensioners - (645)
Present value of funded obligations, end of year (9,587)
(13,003)
Fair value of plan assets, beginning of year 6,311 4,454
Expected return on plan assets 10 14
Employer's contributions 342 237
Employees' contributions 342 237
Benefits (paid)/refunded 2,589 1,044
Admin expense (20) (15)
Actuarial gain/(loss) on plan assets 1,380 (141)
Currency gain/(loss) (96) 481
Fair value of plan assets, end of year 10,858 6,311
Movements in net liability recognized in statement of financial position:
Year ended Year ended
December 31, December 31,
2021 2020
US$'000 US$'000
Net liability, beginning of year (3,276) (1,920)
Expense recognized in profit and loss (453) (413)
Employer's contributions (following year expected contributions) 340 237
Prepaid (accrued) pension cost: 111 176
- operating income (expense) (107) (169)
- finance expense (4) (7)
Total gains recognized within other comprehensive income 1,124 (950)
Currency loss 120 (230)
Net liability, end of year (2,146) (3,276)
Actual return on plan assets
16,69% -2.37%
Expected employer's cash contributions for following year 361
295
The assets of the scheme are invested on a collective basis with other
employers. The allocation of the pooled assets between asset categories is
as follows.
Asset allocation As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Cash 3.6% 0.5%
Bonds 31.7% 24.5%
Equities 34.8% 34.5%
Property (incl. mortgages) 27.0% 24.2%
Other 2.9% 16.3%
Total 100.0% 100.0%
Amounts recognized in other
comprehensive income Year ended Year ended
December 31, December 31,
2021 2020
US$'000 US$'000
Actuarial (losses)/gains arising from plan experience (553)
(1,449)
Actuarial gains / (losses) arising from demographic assumptions -
744
Actuarial gains / (losses) arising from financial assumptions (256)
449
Re-measurement of defined benefit obligations (809)
(256)
Re-measurement of assets 1,380 (141)
Deferred tax asset recognized (225) 286
Other - (96)
Total recognized in OCI 899 (760)
Principal actuarial assumptions (beginning of year):
The principal assumptions used in determining pension and post-employment
benefit obligations for the plan are shown below:
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Discount rate 0.35% 0.30%
Interest credit rate 1.00% 1.00%
Expected net return on plan assets 0.35% 0.30%
Average future salary increases 2.00% 1.50%
Future pension increases 0.00% 0.00%
Mortality tables used BVG 2020 GT BVG 2015 GT
Average retirement age 65/64 65/64
Expected life expectation at regular retirement age (male / female)
22.70 / 25.48 22.83 / 25.85
Sensitivities
A quantitative sensitivity analysis for significant assumptions is as follows:
Sensitivities
As at As at
December 31, December 31,
2021 2020
Impact on defined benefit obligation US$'000 US$'000
Discount rate + 0.25% (524) (401)
Discount rate - 0.25% 560 432
Salary increase + 0.25% 72 61
Salary increase - 0.25% (70) (59)
Pension increase + 0.25% 216
278
Pension decrease - 0.25% (not lower than 0%) - -
A negative value corresponds to a reduction of the defined benefit obligation,
a positive value to an increase of the defined benefit obligation.
The sensitivity analyses above have been determined based on a method that
extrapolates the impact on the defined benefit obligation as a result of
reasonable changes in key assumptions occurring at the end of the reporting
period. The sensitivity analyses are based on a change in a significant
assumption, keeping all other assumptions constant. The sensitivity analyses
may not be representative of an actual change in the defined benefit
obligation as it is unlikely that changes in assumptions would occur in
isolation from one another.
Other pension plans
Life Materials Technologies Limited, Thailand, also has a pension scheme which
gives rise to defined benefit obligations under IAS 19. This pension plan
contributed a net defined benefit obligation of US$ 92,000 to the net assets
acquired in the business combination. Pension expense in profit and loss was
US$43,000 which results in a US$ 135,000 net defined liability as at December
31, 2021.
17. Other non-current liabilities
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Defined benefit obligation IAS 19 Switzerland (Note 19) 2,146 3,276
Defined benefit obligation IAS 19 Thailand (Note 19) 135 -
Deferred consideration in relation to Chemtex acquisition (see Note 5f) 88 149
Other 250 -
Other non-current liabilities 2,619 3,425
18. Borrowings and financing
As at December 31, 2021, the Group's borrowings consist primarily of:
- a credit facility taken out in 2021 which incurs interest at 1% and
is secured by buildings. It is repayable in 2022. As at December 31, 2021,
€63,000 (US$71,000) is outstanding; and
- A bank loan taken out in October 2020 which incurs interest at 2.25%
and which is secured on property owned by a company which is controlled by a
minority shareholder of HeiQ Medica. It is repayable in equal monthly
instalments of €8,000 (US$9,500) over eight years up to September 2028. As
at December 31, 2020, €685,000 (US$779,000) is outstanding - the short-term
portion being €95,000 (US$108,000) and the long-term portion being
€590,000 (US$671,000).
- A loan of €459,000 (US$522,000) payable to a company controlled by
a minority shareholder of HeiQ Medica. The loan is repayable by December 31,
2022 and does not incur any interest.
In 2020, the Group's borrowings consisted primarily of:
- A bank loan taken out in October 2020 which incurs interest at 2.25%
and which is secured on property owned by a company which is controlled by a
minority shareholder of HeiQ Medica. It is repayable in equal monthly
instalments of €8,000 (US$9,500) over eight years up to September 2028. As
at December 31, 2020, €777,000 (US$951,000) is outstanding - the short-term
portion being €93,000 (US$114,000) and the long-term portion being
€684,437 (US$838,000).
- A loan of €459,000 (US$562,000) payable to a company controlled by
a minority shareholder of HeiQ Medica. The loan is repayable by December 31,
2022 and does not incur any interest.
- A short-term bank loan of €45,000 (US$55,000) which was repaid in
January 2021 and did not incur any interest.
The following table provides a reconciliation of the Group's future maturities
of its total borrowings for each year presented:
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Not later than one year 1,004 173
Later than one year but less than five years 457 1,043
After more than five years 213 357
Total borrowings 1,674 1,573
The following table represents the Group's finance costs for each year
presented:
Year ended Year ended
December 31, December 31,
2021 2020
US$'000 US$'000
Amortization of deferred finance costs - acquisition costs 58 245
Lease finance expense 145 52
Interest on borrowings 108 108
Bank fees 55 46
Loss on foreign currency transactions 231 733
Total finance costs 597 1,184
The following table represents the Group's finance income for each year
presented:
Year ended Year ended
December 31, December 31,
2021 2020
US$'000 US$'000
Interest income 4 -
Gains on foreign currency transactions 516 68
Other 14 -
Total finance income 534 68
19. Current liabilities
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Trade payables 4,090 3,590
Payables to tax authorities 1,167 485
Other payables 4,102 1,740
Total trade and other payables 9,359 5,815
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Costs of goods sold 2,481 1,093
Personnel expenses 1,525 2,052
Other operating expenses 532 69
Total accrued liabilities 4,538 3,214
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Prepayments from customers in relation to sales contracts 1,774 -
Total deferred revenue 1,774 -
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Deferred consideration in relation to acquisitions (Note 5f) 5,995 967
Deferred consideration in relation to share-based payments (Note 17) 74 -
Other current liabilities 6,069 967
20. Fair value and financial instruments
a) Fair value
The fair value of an asset or liability is the price that would be received to
sell that asset or paid to transfer that liability in an orderly transaction
occurring in the principal market (or most advantageous market in the absence
of a principal market) for such asset or liability. In estimating fair
value, the Directors utilize valuation techniques that are consistent with the
market approach, the income approach and/or the cost approach. Such
valuation techniques are consistently applied. Inputs to valuation techniques
include the assumptions that market participants would use in pricing an asset
or liability. IFRS 13 "Fair Value Measurement" establishes a fair value
hierarchy for valuation inputs that gives the highest priority to quoted
prices in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs. The fair value hierarchy is defined as
follows:
Level 1: Inputs are unadjusted, quoted prices in active markets for identical
assets at the measurement date.
Level 2: Inputs (other than quoted prices included in Level 1) can include the
following:
· observable prices in active markets for similar assets;
· prices for identical assets in markets that are not active;
· directly observable market inputs for substantially the full term of
the asset; and
· market inputs that are not directly observable but are derived from
or corroborated by observable market data.
Level 3: Unobservable inputs which reflect the Directors' best estimates of
what market participants would use in pricing the asset at the measurement
date.
All financial instruments measured at fair value use Level 2 valuation
techniques for the each of the years ended December 31, 2020 and December 31,
2021.
Level 2 fair value measurements are those including inputs other than quoted
prices included within Level 1 that are observable for the asset or liability
directly or indirectly.
There were no transfers between fair value levels during the year ended
December 31, 2021 (2020: $nil).
b) Financial instruments
For trade receivables, the Group applies the simplified approach permitted by
IFRS 9 "Financial Instruments", which requires expected lifetime losses to be
recognized from initial recognition of the receivables.
Financial liabilities are initially measured at fair value and subsequently
measured at amortized cost.
The Group is not a financial institution. The Group does not apply hedge
accounting and its customers are considered creditworthy and in general pay
consistently within agreed payments terms. In 2021, few customers have shown
delays in payment which are closely monitored.
A classification of the Group's financial instruments is included in the table
below:
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Cash and cash equivalents held at amortized cost 14,560 25,695
Trade receivables and accrued income held at amortized cost 18,050 13,437
Financial assets at amortized cost 6,607 2,815
Financial liabilities at amortized cost (23,255) (14,820)
Borrowings and leases (10,904) (4,225)
Total 5,058 22,902
21. Financial risk management
For the purposes of capital management, capital includes issued capital and
all other equity reserves attributable to the equity holders of the Company.
The primary objective of the Directors' capital management is to ensure that
the Group maintains a strong credit rating and healthy capital ratios in order
to support its business and maximize shareholder value.
To maintain or adjust the capital structure, the Directors may adjust the
dividend payment to shareholders, return capital to shareholders or issue new
shares. No changes were made in the objectives, policies or processes during
the year.
The Directors manage the Group's capital structure and adjust it in light of
changes in economic conditions and the requirements of the financial
covenants. The Group includes in its net debt, interest-bearing loans and
borrowings, trade and other payables, less cash and short-term deposits.
The Group's principal financial liabilities comprise of borrowings and trade
and other payables, which it uses primarily to finance and financially
guarantee its operations.
The Group's principal financial assets include cash and cash equivalents and
trade and other receivables derived from its operations.
a. Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates and interest rates will affect the Group's income or the value
of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable
parameters, while optimizing the returns.
b. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates. As the Group's borrowings are either on fixed interest terms or
interest-free, the Group is not subject to interest rate risk.
c. Credit risk
Credit risk is the risk that a customer or counterparty to a financial
instrument will not meet its obligations under a contract and arises primarily
from the Group's cash in banks and trade receivables.
d. Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of
an exposure will fluctuate due to changes in foreign exchange rates. The
Group's exposure to the risk of changes in foreign exchange rates relates
primarily to its financing activities (when financial liabilities and cash are
denominated other than in a company's functional currency).
Most of the Group's transactions are carried out in US Dollars ($). Foreign
currency risk is monitored closely on an ongoing basis to ensure that the net
exposure is at an acceptable level.
The Group maintains a natural hedge whenever possible, by matching the cash
inflows (revenue stream) and cash outflows used for purposes such as capital
and operational expenditure in the respective currencies. The Group's net
exposure to foreign exchange risk was as follows:
Functional currency
AUD EUR GBP US$ Others Total
As at December 31, 2021 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Financial assets denominated in $ 3,489 3,443 399 22,713 649 30,693
Financial liabilities denominated in $ (24) (889) (25,268) (4,341) (103) (30,625)
Net foreign currency exposure 3,465 2,554 (24,869) 18,372 546 68
Functional currency
CNY EUR GBP US$ Others Total
As at December 31, 2020 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Financial assets denominated in $ 248 2,145 717 17,190 5 20,305
Financial liabilities denominated in $ (102) (268) (475) (129) 23 (951)
Net foreign currency exposure 146 1,877 242 17,061 28 19,354
Foreign currency sensitivity analysis:
The following tables demonstrate the sensitivity to a reasonably possible
change in foreign currency exchange rates, with all other variables held
constant.
The impact on the Group's profit before tax is due to changes in the fair
value of monetary assets and liabilities. The Group's exposure to foreign
currency changes for all other currencies is not material.
A 10 per cent. movement in each of the Australian dollar (AUD), Chinese yuan
(CNY), euro (EUR), British pound (GBP) and US dollar ($) would
increase/(decrease) net assets by the amounts shown below. This analysis
assumes that all other variables, in particular interest rates, remain
constant.
AUD EUR GBP US$ Others
As at December 31, 2021 US$'000 US$'000 US$'000 US$'000 US$'000
Effect on net assets:
Strengthened by 10% 347 255 (2,487) 1,837 54
Weakened by 10% (347) (255) 2,487 (1,837) (54)
CNY EUR GBP US$ Others
As at December 31, 2020 US$'000 US$'000 US$'000 US$'000 US$'000
Effect on net assets:
Strengthened by 10% 15 188 24 1,706 3
Weakened by 10% (15) (188) (24) (1,706) (3)
e. Cash and cash equivalents
The Company considers the credit risk in relation to its cash holdings is low
because the counterparties are banks with high credit ratings.
f. Trade receivables
Trade receivables are due from customers and collectability is dependent on
the financial condition of each individual company as well as the general
economic conditions of the industry. The Directors review the financial
condition of customers prior to extending credit and generally does not
require collateral in support of the Group's trade receivables. The majority
of trade receivables are current or overdue for less than 30 days and the
Directors believe these receivables are collectible. Amounts overdue longer
than 120 days relate to a limited number of customers with long trading
history. Collection of these receivables is expected in course of the year
2022. As at December 31, 2021, the Group had two customers that individually
accounted for more than 10% of total receivables, totaling 36.4% of total
trade receivables (2020: two customers that individually accounted for more
than 10% of total receivables, totaling 38%).
g. Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they are due. The Directors manage this risk by:
· maintaining adequate cash reserves through the use of the Group's
cash from operations and bank borrowings; and
· continuously monitoring projected and actual cash flows to ensure the
Group maintains an appropriate amount of liquidity.
Less than 2 to 5 > 5 Total
1 year years years
Year ended December 31, 2021 US$'000 US$'000 US$'000 US$'000
Trade and other payables 9,359 - - 9,359
Borrowings 1,004 457 213 1,674
Leases (gross cash flows) 1,115 3,689 5,525 10,329
Other liabilities 10,658 - 88 10,746
Retirement obligations - - 2,281 2,281
As at December 31, 2021 22,136 4,146 8,107 34,389
2 to 5 > 5 Total
years years
Less than
1 year
Year ended December 31, 2020 US$'000 US$'000 US$'000 US$'000
Trade and other payables 5,815 - - 5,815
Borrowings 1,573 - - 1,573
Leases (gross cash flows) 385 1,346 1,162 2,893
Other liabilities 4,283 5,675 - 9,958
Retirement obligations - - 3,276 3,276
As at December 31, 2020 12,056 7,021 4,438 23,515
22. Notes to the statements of cash flows
Net debt reconciliation:
Opening balances New agreements Assumed on acquisition of subsidiaries Cash movements Foreign exchange differences Closing balances
Year ended December 31, 2021 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cash and cash equivalents 25,695 - - (10,525) (610) 14,560
Leases (2,652) (5,829) (1,636) 790 97 (9,230)
Borrowings (1,573) (472) (579) 803 147 (1,674)
Totals 21,470 (6,301) (2,215) (8,932) (366) 3,656
Opening balances New agreements Assumed on acquisition of subsidiaries Cash movements Foreign exchange differences Closing balances
Year ended December 31, 2020 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cash and cash equivalents 3,603 - - 21,822 270 25,695
Leases (2,784) (222) - 354 - (2,652)
Borrowings (2,478) (61) (1,512) 2,735 (257) (1,573)
Totals (1,659) (283) (1,512) 24,911 13 21,470
Reconciliation of cash on business combinations:
Cash assumed on acquisition of Chrisal NV 1,773
Cash assumed on acquisition of RAS AG 291
Cash assumed on acquisition of Life Material Technologies Ltd 73
Cash assumed on acquisitions of businesses 2,137
Consideration payment for acquisition of Chrisal NV (6,054)
Consideration payment for acquisition of RAS AG (1,482)
Consideration payment for acquisition of Life Materials Technologies Ltd (2,550)
Consideration payment for acquisition of Chem-Tex assets (908)
Consideration payment for acquisitions of businesses (10,994)
23. Contingencies and provisions
The Group is, from time to time, involved in claims and legal proceedings. As
per 31 December 2021, there is a potential claim with regards to a customer
contract in the amount of up to US$ 175,000. Further, in April 2022 the Group
was contacted by the United States Environmental Protection Agency ("EPA") in
connection with potential alleged violations of the Federal Insecticide,
Fungicide and Rodenticide Act ("FIFRA") pertaining to alleged mislabelling.
However, at this point in time, the Group is not able to assess the likelihood
of a favourable or unfavourable outcome or to quantify any possible financial
impact.
The Group cannot reasonably predict the likelihood or outcome of these
activities. However, the Group does not believe that adverse decisions in any
pending or threatened proceedings related to any matter, or any amount which
may be required to be paid by reasons thereof, will have a material effect on
the financial condition or future results of operations.
As at December 31, 2021, no amounts have been accrued related to such matters
(31 December, 2020: $nil).
24. Related party transactions
A company controlled by a director of HeiQ Materials AG supplied materials and
services totaling US$32,000 in the year ended December 31, 2020 (2020:
US$145,000). HeiQ Materials AG in turn supplied US$88,000 (2020: nil).
In 2022 goods that were in stock as of December 31, 2021 have been sold to a
company controlled by a minority shareholder at cost value. However, the
minority shareholder is not considered a related party to the Group. The value
of the transaction amounts to US$ 900,000.
Details of the remuneration of the directors are contained in the Remuneration
Committee Report.
25. Material subsequent events
On February 25, 2022 HeiQ Plc issued 347,552 new ordinary shares of £0.30
each in the Company. These shares have been allotted to the vendors of Life
Material Technologies Limited to satisfy a closing working capital adjustment
in connection with the Company's acquisition of Life in June 2021.
26. Ultimate controlling party
As at December 31, 2021, the Company did not have any single identifiable
controlling party.
27. Correction of prior period errors
During the compilation of the financial statements for the year ended 31
December 2021, the Company discovered an understatement of inventory balances
in prior years in respect of direct overhead expenses which had not been
included in the inventory valuation. The cumulative effect of these errors as
at 31 December 2020 was $212,000.
The effect of the adjustments are shown in the following table:
Impact of adjustment on the Group's statement of financial position
As at December 31, 2020 Prior year adjustment As at December 31, 2020
US$'000 US$'000 US$'000
(As previously stated) (As re- stated)
Assets
Inventories 13,328 212 13,540
Total Assets 69,396 212 69,608
Capital and reserves
Retained deficit 8,711 (212) 8,499
Total Equity 49,397 (212) 49,609
The effect of the prior year adjustment as at 31 December 2019 was an
understatement of inventories of US$78,000 and a corresponding overstatement
of retained losses of the same amount.
The statement of comprehensive income for the year ended 31 December 2020 has
been adjusted through a reduction in cost of sales of $134,000 and a
corresponding increase in income before taxation. The adjustment had no impact
on the taxation expense.
Impact of adjustment on the Group's statement of comprehensive income
Year ended December 31, 2020 Prior year adjustment Year ended December 31, 2020
US$'000 US$'000 US$'000
(As previously stated) (As re- stated)
Net result for the year
Cost of sales (22,402) 134 (22,268)
Income before taxation 7,026 134 7,160
Income after taxation 4,914 134 5,048
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