REG - Iofina PLC - 2022 FULL YEAR RESULTS
25/04/2023 07:00
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RNS Number : 2882X Iofina PLC 25 April 2023
25 April 2023
Iofina plc
("Iofina", the "Company" or the "Group")
(AIM: IOF)
2022 FULL YEAR RESULTS
FIFTH SUCCESSIVE YEAR OF RECORD REVENUE AND EBITDA
Iofina plc, specialists in the exploration and production of iodine and
manufacturers of specialty chemical products, announces its audited full year
results for the 12 months to 31 December 2022 (the "Period").
Sustained demand and a strong Iodine spot price accelerated sales and profits
in 2022:
· Revenue increased by 8% to $42.2m to (2021: $39.0m)
· Gross profit increased by 47% to $15.8m (2021: $10.7m)
· Adjusted EBITDA improved by 65% to $11.5m (2021: $6.9m)
· Operating profit increased by 85% to $9.6m (2021: $5.2m)
· Profit before tax increased by 96% to $10.0m (2021: $5.1m)
Strong balance sheet and further reduction in net debt:
· Cash of $5.9m at year-end
· Net debt reduced from $3.0m to $0.9m
Investing for growth:
· Capital investment into chemical and iodine plants was $3.1m (2021:
$1.5m)
· Commenced site negotiations for future IOsorb® plants in the Period.
2023 so far:
· Production of 107.1 MT of crystalline iodine in Q1 from Iofina's five
IOsorb® plants
· The iodine global spot price remains steady at $70/kg and prices are
expected to stay at these levels into the second half of 2023
· IO#9 is currently scheduled to be operational before the end of Q2
2023
Commenting, President and CEO, Dr. Tom Becker, stated:
"We have delivered another strong year across the business in terms of
profitability and have invested in growth projects. Being a low cost producer
of iodine means we have continued to capitalise on sustained, higher iodine
market prices. Demand for our products coming through Iofina Chemical remains
robust and our improved cash position of $5.9m has reduced net debt to below
$1m.
"Having commenced the construction on IO#9 in Q4 2022, we remain on track to
have this in operation by the end of Q2 2023. The new plant is expected to add
100MT-150MT of crystalline iodine per annum, which will be a significant step
change in production. We are also pleased that negotiations are progressing
well with several interested parties for IO#10, with potential sites
identified and further testing underway. Outside of the construction of new
IOsorb® plants, the Board is also examining other potential growth projects
that complement Iofina's existing skill set and range of products, which would
present cross-selling opportunities.
"2023 has started well in terms of production from our existing plants and
corresponding sales, with the market remaining strong and the Company on track
to meet its H1 production targets. We look forward to confirming the
completion and switch on of IO#9 soon and updating shareholders on our further
progress."
Investor Presentation
Iofina will be hosting a presentation for retail investors via the Investor
Meet Company platform in early May. A further announcement will follow soon
to confirm the date and time for the event.
Enquiries:
Dr. Tom Becker
CEO & President
Iofina plc
Tel: +44 (0)20 3006 3135
Nomad & Broker:
Henry Fitzgerald-O'Connor/Patrick Dolaghan/Andrew Potts
Canaccord Genuity Limited
Tel: +44 (0)20 7523 8000
Financial Adviser:
Kingsley Wilson
Chrystal Capital Partners LLP
Tel: +44 (0)20 7850 4761
Media Contact:
Charles Goodwin/Shivantha Thambirajah/Jazmine Clemens
Yellow Jersey PR Limited
Tel: +44 (0)7747 788 221/+44 (0)7983 521 488
About Iofina:
Iofina plc (AIM: IOF) is a vertically integrated company that specialises in
the production of Iodine and the manufacturing of specialty chemical products.
Iofina is the second largest producer of iodine in North America and operates
the manufacturing entities Iofina Resources and Iofina Chemical.
LEI: 213800QDMFYVRJYYTQ84
ISIN: GB00B2QL5C79
Iofina Resources
Iofina Resources develops, builds, owns, and operates iodine extraction plants
using Iofina's WET® IOsorb® technology. Iofina currently operates five
producing IOsorb® plants in Oklahoma and is consistently using technology and
innovation to improve and expand its operations.
Iofina Chemical
Iofina Chemical has manufactured high quality halogen speciality chemicals
derived from raw iodine, as well as non-iodine-based products. Iofina
Chemical will be celebrating its 40(th) anniversary in 2023 as a preeminent
halogen-based specialty chemicals company.
www.iofina.com (http://www.iofina.com)
Contents
COMPANY
INFORMATION.......................................................................................................
..2
CHAIRMAN'S
STATEMENT........................................................................................................
..3
FINANCIAL
REVIEW..................................................................................................................
..7
DIRECTORS'
BIOGRAPHIES……...................................................................................................
10
STRATEGIC
REPORT....................................................................................................................
12
S172
STATEMENT…………………………………………………………………………………………………………………..22
CORPORATE
GOVERNANCE……………………………………………………………………………………………………24
DIRECTORS'
REPORT...................................................................................................................
25
CORPORATE GOVERNANCE
STATEMENT.....................................................................................
27
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
("ESG")…………………………………………………………..34
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF IOFINA
PLC.......................................37
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
..................................................... 48
CONSOLIDATED BALANCE SHEET
...............................................................................................
49
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY...................................... 50
CONSOLIDATED CASH FLOW STATEMENT
...................................................................................
51
COMPANY BALANCE SHEET
........................................................................................................
52
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY.............................................. 53
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS........................................................... 54
COMPANY INFORMATION
Directors
L J Baller
T M Becker
W D Bellamy
M T Lewin
J F Mermoud
Mary Fallin Christensen
Secretary
Simon Holden
Company number 5393357
Registered office 48 Chancery
Lane
London WC2A 1JF
Auditor
UHY Hacker Young LLP
Quadrant House
4 Thomas More Square
London E1W 1 YW
Nominated Adviser and Broker 88 Wood Street
Canaccord Genuity Limited London EC2V 7QR
Solicitors
Keystone Law Limited
48 Chancery Lane
London WC2A 1JF
Registrar
Link Asset Services (Holdings) Limited
10th Floor, Central Square
29 Wellington Square
Leeds LS1 4DL
Financial
PR Yellow
Jersey PR Limited
Thanet House
231-232 Strand
London WC2R 1DA
CHAIRMAN'S STATEMENT
Introduction
The 2022 financial year resulted in several significant milestones for
Iofina. We achieved a fifth straight year of record Adjusted EBITDA with an
increase of 65% to $11.5m, record sales of $42.2 m up 8.3% on 2021, and a
record average sales price of iodine was recorded. Profit before tax
increased by 96% to $10.0m.
Iofina produced 516 metric tonnes (MT) of crystalline iodine in 2022. Average
prices per kilogram achieved for sales of crystalline iodine, based on 100%
iodine, increased 98% on the previous year to an average of $71.20 for 2022
whilst non-iodine product sales increased by 26% from $8.6m to $10.8m.
Additional highlights include a bank debt to Adjusted EBITDA ratio of 0.59 for
year-end 2022 compared to 1.18 for year-end 2021 (2.62 for year-end 2020). In
addition, the Company was able to reduce its net debt from $3.0m to $0.9m
while increasing capital investments into chemical and iodine plants of $3.1m
(2021: $1.5m). Net cash inflow from operating activities was $5.6m. The
Company achieved these important milestones while having no lost time
accidents in 2022 across all facilities, which is our top priority. For the
second year in a row Iofina Chemical (IC) was awarded a SOCMA ChemStewards
Performance Award and for the first time successfully attained ISO 9001:2015
certification. We have built an excellent business with diversified, low-cost
production across a diverse array of IOsorb® plants and a specialty chemicals
business supplying customers globally across several end markets.
Iofina Chemical (IC)
IC had a successful year with its derivatives production, which was helped by
the high price of iodine. This helped to help drive both improved revenue
and profitability. We delivered an increase in Hydroiodic Acid (HI)
production to meet higher domestic and international demand and we also
increased Iodopropynyl butylcarbamate (IPBC) production to fulfil large
orders. IC returned to growth in our specialty chemical gases business going
back to 24/7 shifts in the second half of the year. There was some weakness
in numbers for Sodium iodide (NaI), Potassium iodide (KI), and Methyl Iodide
(Mel) but the increases in HI helped offset those slowdowns. These shifts in
product mixes year over year are common and we will continue to drive sales of
all products. During the year we saw higher levels of employee churn at our
plant due to a more competitive U.S. labour market, but by the end of the year
we were fully staffed for 2023. We also hired to a new Maintenance
Supervisor in the second half of the year which will ensure that IC will
continue to set the standard for preventive maintenance and safety.
2022 was a busy year for the engineering department at IC. We began by
successfully testing the new specialty gases pilot plant. The material quality
was verified by our customers to be relatively comparable to our current
process of record. We completed a key set of renovations to our Methyl
Iodide process to ensure safer operation. One of the other big projects was
running new equipment to determine the best conditions for the recovery of an
iodide recycle stream. We have successfully completed our testing in-house and
are now working with toll manufacturers to recover this product. Another
significant achievement in 2022 was renovating the lab air handling system
with four new hoods installed and renovating our original two hoods. We also
hired a new plant engineer in August and completed an AutoCAD class in October
which will help with process design and building design. IC's engineering
team exceeded most of their key performance indicators (KPI's) during the
year.
IC had a goal in 2022 to obtain ISO 9001:2015 certification, and following a
successful ISO audit in October, we completed ISO certification (an
internationally recognised standard that specifies requirements for a quality
management system) in December. Additionally, much work was done on
improving our quality management system with continued work on all aspects.
We have added a quality system session to IC's quarterly training days, to
ensure all employees understand the aspects of the quality management system.
IC exceeded its quality KPI's which during the year included on-time product
deliveries of 87.9%, a high customer satisfaction score, a high rate of
completing scheduled preventive maintenance, and kept our customer complaints
below 3% at 1.24%. The continued stress testing of IC's strategic direction
and quality policy will continue to be a focus as we continue to improve as an
organization.
Research and Development (R&D) continues to aid in process development and
new product opportunities as well as the production of laboratory size
quantities of customer orders typically for specialized iodides.
Unfortunately, from April through November the lab HVAC renovations impacted
expanded R&D efforts. Most of the year was spent producing lab size
products. Work continues on lithium iodide and other specialty iodides. The
expanded HVAC project added four new hoods available for R&D efforts in
2023. We have relied on R&D to help with our iodine waste stream
recovery project and work continues on the solids obtained from the
distillation to convert these to iodide products in 2023. Quality Control
and R&D implemented new instrumentation software and added a new moisture
analyser for our specialty chemical gases detection to ensure our testing
requirements are met and provide backup instrumentation to meet customer
needs.
A continued focus on safety remains key to our business and we completed a
second consecutive year with no lost time accidents at IC. At the year-end
we stood at 780 days with no loss time incidents at IC. Continuing safety
improvements are a priority for the Company and at IC additional monthly
online safety training was added to provide training on important safety,
plant and product awareness issues. Each month employees are required to
complete between two and three training courses. This helps to reinforce some
of the important topics covered during quarterly safety and quality
training. IC was awarded another SOCMA ChemStewards performance award for
our continued success of our Employee Health and Safety work.
Iodine Prices
Since the lows of early 2017, iodine prices have steadily increased from early
2020, reaching $35-37/kg. During the second half of 2020, as global
economies contracted, so did the demand for iodine, resulting in prices
reducing slightly. Iodine prices began 2021 at approximately $32.5-36/kg,
which was similar to where prices were pre-pandemic in early 2020 and ended
the year at $50/kg after a significant increase in global demand for iodine.
Prices increased during 2022 to end the year at approximately $70/kg. The
increase in demand for iodine was led by human health applications such as
povidone iodide (PVPI) and X-ray contrast imaging agents. At the time of
writing, iodine prices are remaining steady with spot pricing now generally at
$70/kg and above. The last time spot prices for iodine were above $60/kg was
in June 2013. Iofina expects iodine prices to remain steady in 2023 due to
global demand and environmental and geopolitical risks in Chile that slowed
increased production.
Iofina Resources (IR)
For IR's current assets, efforts were made to maintain and work with our oil
and gas partners to get the highest quality, quantity, and stable brines to
our production facilities. IR was successful in our efforts to improve the
consistency of brine water supply to our IOsorb® plants. We saw water volumes
improve and stabilize across the Mississippian Lime Field. IR continued to
work closely with our partner operators to optimize the water volumes and
highest possible iodine concentrations. Our expansion efforts are underway
with the construction of IO#9 beginning in November.
We have maintained great relationships with our partners that have resulted in
successful projects for brine manipulation within their systems, hardware
replacements and upgrades (i.e., valves, pipe work, flow meters, etc.),
handling IR's return water issues, and stabilizing existing brines with solid
iodine concentrations. IR's staff worked closely with our partners' field
engineers regarding their well work over program and to identify and
prioritize shut-in production wells that would be more beneficial to IR's
facilities, as well as having adequate oil production. Several new wells in
the IO#4 and IO#6 area are online and helping add brine and iodine to these
plants. Through persistence and coordination, we were able to successfully
finalize the IO#9 iodine extraction agreement. This was with a large, new
operator to IR. Although negotiations took significant time, our efforts were
successful and IR has established a strong working relationship with the
Operator which we believe may be beneficial in developing additional plants in
both Oklahoma and Texas.
Iofina had a strong end to 2022, with H2 iodine production surpassing our
initial target and product sales remaining robust. We produced 516MT in 2022
compared to 518.2MT in 2021. The increase of produced water to IO#2 and IO#7
due to our efforts had the biggest impact in H2. This increased flow was a
combination of the increase of investment by the Operator and working with the
Operator at the field level to optimize operations.
Efficiencies were improved due to completing five tower IOsorb® repacks in H1
2022, which played a critical role in exceeding the 2022 H2 projections. We
continued to collect and monitor data from each facility to improve
effectiveness and have moved more aggressively to repack plants resulting in
more partial repacks, reduced downtime and costs, and improved efficiencies.
IR added a new HSE manager in 2022. He has had an immediate impact the on
continual improvement of our safety culture. Several initiatives have been
successfully undertaken, including modification to personal protective
equipment (PPE) and respirator requirements, improved operating conditions in
the labs, and increased training and awareness to issues of health and safety
in our operations. As we move forward into 2023, we have chosen a software
platform that will improve our data collection and incident classification.
This platform also will provide near miss and incident corrective action
improvements by using a plan/do/check/review process to ensure sustainability
and accurate KPI reporting. There were no lost time injuries (LTI) and zero
reportable releases. IR has not experienced a LTI for 628 days.
In 2023, we are looking forward to building on the successes we achieved in
the second half of 2022. We should have continued solid production from our
existing plants, the completion of IO#9 construction in the 2nd quarter of
2023, progressing negotiations for IO#10 and beyond, and expanding our
exploration efforts.
Field exploration efforts for the targeted areas of interest for Oklahoma have
particularly been focused on future site locations and relationship
developments with key targeted operators with the goal to identify ideal
locations along with understanding their water transport systems (WTS) and
saltwater disposals (SWDs).
Through this research and development, we were able to pinpoint the IO#9
location and construction is near completion. Our sampling program will
continue to gather data needed for future locations in the field. Looking
for future iodine facility locations is a top priority. We have an agreement
for collecting weekly samples on ten brine aggregation points with multiple
partners. IR's exploration team has continued studies on SWD and manifold
locations, at SWD facilities in western Oklahoma, and we are working with
potential partners in the Company's northern area of interest. In Texas, we
have furthered our investigations by collecting weekly to monthly samples on
twelve individual sites of interest with multiple potential partners.
Additionally, we are furthering our research efforts on production wells
producing from new formations as well as new aggregate points within our
partner operator's WTS's.
We have started our fourth internship program with an Oklahoma university, and
it has progressed strongly. The interns are assisting Iofina in calculating
iodine values in our existing Brine Units for royalty calculations, have
assisted in a testing chemical recycling project, and they are working on
lithium sample processing techniques. This internship duration goes from May
1, 2022, to April 30, 2024 at which time we will evaluate whether to continue
to fund this program.
Outlook
I have stated in previous annual reports that "The next few years look to be
transformational for Iofina". As a Group we still believe this. While
disappointed that we have been unable to add a new IOsorb® plant each year,
we believe that IO#9 will be an important new plant in a new, strategic area
and will ignite our development plans. In 2022, we were able to evidence that
Iofina is a highly attractive and profitable Group, and we shared our story
with global institutional funds, family offices, and retail investors. Our
shareholder registry expanded in the financial year with the addition of new
institutional holdings. We will continue to hold roadshows and investor
programs in 2023 under the stewardship of Canaccord Genuity, the Company's
nominated adviser and broker.
In 2022 we explored options to facilitate increased investor access to Iofina
with a dual listing on NASDAQ. After reviewing the regulatory reporting
requirements, ADR fees, and compliance requirements, the Board decided the
expense and additional regulatory and administrative efforts placed on the
Group's management team would not be materially beneficial to shareholders. At
last year's annual general meeting, the Board received approval from
shareholders to buy back up to 19,185,841 ordinary shares. Whilst we have
not yet used this authority, instead focusing on reinvesting the Group's
profits into our operations, the Board will again this year seek shareholder
approval at the annual general meeting for the ability to repurchase shares as
appropriate.
In terms of our expansion, we are squarely focused on growing our current
iodine production and specialty chemical businesses, including developing new
and exciting chemical compounds. We shall continue to develop strategies to
reduce our reliance on our current oil and gas partners and explore new
geographic areas. We have continued to explore potential business
partnerships and combinations that could be beneficial to shareholders. We
continue to focus on calculated risks in our approach to growth. In 2022 we
implemented additional key performance indicators ("KPIs") and will continue
to do so in 2023.
I would like to thank all of our shareholders for their continued support. We
are looking forward to appraising the excellent opportunities we are seeing as
we move the Company forward in setting continued record years.
Lance J Baller
Non-Executive Chairman
Iofina plc
24 April 2023
FINANCIAL REVIEW
Summary 2022 v 2021
· Fifth successive year of record revenue and EBITDA
· Revenue increased by 8% from $39.0m to $42.2m
· Gross profit increased by 47% from $10.7m to $15.8m
· Adjusted EBITDA improved by 65% from $6.9m to $11.5m
· Profit before tax increased by 96% from $5.1m to $10.0m
· Net debt was reduced from $3.0m to $0.9m*
· Capital investment into chemical and iodine plants was $3.1m (2021:
$1.5m)
*excludes lease liabilities
Trading results
Turnover Crystallised 2022 Crystallised 2021
Iodine 85% Sales Iodine 85% Sales
MT $m MT $m
Crystallised iodine 220 13.3 411 12.6
Derivatives 221 16.3 321 15.1
Prilled iodine 1.8 2.7
Total iodine sales 441 31.4 732 30.5
Non-iodine 10.8 8.6
Total sales $42.2 $39.0
Revenue increased by 8% from $39.0m to $42.2m. A key factor driving the
results was a substantial increase in the iodine price over the first half of
the year to a level that has persisted since then. The reduction in iodine
sales volumes reflects exceptionally high demand in 2021 due to restocking by
customers who had held back in 2020 due to COVID uncertainties. Although 2022
volumes were lower turnover was nonetheless higher and gross margins were
greatly improved.
Average prices per kilogram achieved for sales of crystallised iodine based on
100% iodine were $36.03 for 2021, rising to an average of $71.20 for 2022, an
increase of 98%. Sales volumes at these higher price levels were 220 metric
tonnes ("MT") compared to 411 MT for 2021, but the value of this turnover was
higher at $13.3m compared to $12.6m for 2021.
Average prices per kilogram of derivative compounds, based on total weight
including non-iodine chemicals, were $42.90, up 54% from the 2021 average of
$27.94. Sales volumes of derivatives were 221 MT compared to 321 MT for 2021,
but the value of turnover was higher at $16.3m compared to $15.1m for 2021.
Non-iodine sales increased by 26% from $8.6m to $10.8m, reflecting higher
volumes and led by the specialty chemical gases business, which saw some
inventory rebuilding by a major customer.
Gross profit improved by $5.1m (47%) to $15.8m (2021 $10.7m), representing 38%
(2021 27%) of sales. This reflected the substantial selling price increases
described above, offset somewhat by mainly inflationary cost increases of 24%
for iodine production and 20% for the Iofina Chemical plant.
Crystallised iodine production was 516MT compared to 518MT for 2021, from the
same five plants. Iodine sales were split 50:50 between raw iodine and
derivatives for 2022, as opposed to 56:44 for 2021.
Adjusted EBITDA improved by 65% from $6.9m to $11.5m after deducting $4.4m in
SGA expenses (2021 $3.8m) from the gross profit of $15.8m (2021 $10.7m).
Operating profit after depreciation and amortisation of $1.8m (2021 $1.7m) was
$9.6m compared to $5.2m for 2021.
Release of plant acquisition accrual
An accrual balance of $0.45m relating to the acquisition of #IO2 plant is no
longer considered to be required, and has therefore been transferred to
income. No claims have been made, and the period of validity for such claims
has expired.
Interest swap derivative asset
The derivative asset resulting from the swap contract described in Note 20 has
been revalued as at 31 December 2022 by reference to market expectations for
future SOFR rates, and an amount of $0.25m has been credited to
comprehensive income (2021 $0.07m) and included in the balance sheet.
Profit before tax
Profit before tax improved by $4.9m from $5.1m (2021) to $10.0m (2022). The
improvement reflects successful trading at substantially higher iodine selling
prices, together with containment of inflationary cost pressures.
Tax
The Group is utilising previous years' accumulated US Federal tax losses
against current profits that would otherwise be taxable. Based on current
projections the Group expects that US Federal tax will not be payable in
respect of 2023, but is likely to become payable in respect of 2024.
Capital investment
The Group invested $3.1m in capital projects and equipment (2021: $1.5m), of
which $1.8m relates to construction of the new IO#9 iodine plant in Oklahoma.
Most of the balance of expenditure relates to new projects, process
improvements and replacements at the Iofina Chemical plant.
Cash flow
Cash started the year at $5.3m and ended $0.6m higher at $5.9m, after paying
off $1.4m of the bank term loan in accordance with the borrowing schedule and
investing $3.1m in capital projects. Net debt was reduced from $3.0m to $0.9m.
Net cash inflow from operating activities was $5.6m.
Malcolm Lewin
Chief Financial Officer
Iofina plc
24 April 2023
DIRECTORS' BIOGRAPHIES
Lance J. Baller, Non-Executive Chairman
Mr. Baller was co-founder, CEO and President of Iofina Plc prior to his
departure for health reasons in June 2013. Mr. Baller was the Group's Finance
Director from 2007 until his appointment as CEO in 2010. Mr. Baller returned
as Chairman in April 2014. Mr. Baller currently serves as CEO of Selectis
Health, Inc and as a director and as sole or principal shareholder of several
privately owned businesses, including Baller Enterprises, Inc. (personal
holding company), Titan Au, Inc, Empire Leasing LLC, Valdez Au, Inc, Extrac
Technologies Limited, Extrac, Inc, Wyoming Sand Company LLC (which all are in
gold, sand, rock, SiO2 and gravel mining), Ultimate Investment (personal
investment company) and Baller Family Foundation, Inc. (personal family
foundation) plus many others that he has founded and successfully sold over
the years. He is the former managing partner of Shortline Equity Partners,
Inc., a mid-market merger and acquisitions consulting and investment company.
Mr. Baller is also the former Managing Partner of Elevation Capital
Management, LLC and is the former alternative investment hedge fund manager of
the Elevation Fund. He is also a former Vice-President of Corporate
Development and Communications of Integrated Biopharma, Inc. and prior to that
a vice-president of the investment banking firms UBS and Morgan Stanley. Mr.
Baller has been a CEO, interim CEO, Chairman, CFO and secretary of various
private and public listed companies throughout his career. He has served as
Chairman to various companies and has led successful restructurings. Mr.
Baller has had extensive experience in all aspects of corporate finance. Mr.
Baller currently is on the board of trustees of Index Fund and Digital Funds
where he serves as the chairman of the audit committee and as the audit
committee financial expert under Sarbanes-Oxley.
Dr. Thomas M. Becker, Chief Executive Officer
Dr. Becker has served as President/CEO of Iofina plc since 2014 and has led
Iofina Chemical since March 2010. Previously, Dr. Becker was the Vice
President of Research and Development at H&S/Iofina Chemical. Iofina
bought H&S in July 2009. Dr. Becker has conducted extensive research in
both inorganic and organic halogen-based chemistry. Dr. Becker has written a
magnitude of published technical papers in his career. Prior to H&S Dr.
Becker worked as an Oak Ridge Scholar on behalf of the US EPA and for various
other chemical manufacturing companies. Dr. Becker earned a BS in Chemistry
from Indiana University, and a PhD in Chemistry from the University of
Cincinnati. He has extensive experience in scale-up of chemical processes from
laboratory to pilot to full scale production. Dr. Becker is a former member of
the Board of Governors of the Society of Chemical Manufacturers and Affiliates
("SOCMA").
Dr. William D. Bellamy, Non-Executive Director
Dr. Bellamy is the former Senior Vice President of the Water Business Group at
CH2M HILL, Inc. ("CH2M"), a company he has worked at for 30 years until his
recent retirement. CH2M is one of the largest consulting engineering companies
in the world, providing leadership and strategic direction for the water
business and application of technologies worldwide. Dr. Bellamy has
participated in energy and sustainability forums, including as a panellist at
the World Future Energy Conference in Abu Dhabi, the World Bank Sustainable
Cities Symposium and the Future of Water Economic Forum. Dr. Bellamy serves as
Professor of Practice at the University of Wyoming, where he teaches graduate
courses and is responsible for securing grants and research funding in the
areas of water resources, water treatment and sustainable energy development.
Dr. Bellamy has a PhD in Civil Engineering from Colorado State University, an
MSc in Civil (Environmental) Engineering from the University of Wyoming and a
BSc in Electrical (Bio-Medical) Engineering from the University of Wyoming.
Malcolm T. Lewin, Chief Financial Officer
Mr. Lewin was named CFO and a director of the Group in November 2016 after having joined Iofina as interim CFO in February 2016. Mr. Lewin is based in the UK and has over 30 years of experience in finance and accounting for both public and private companies. As well as being a partner in a chartered accounting firm for 11 years, he has acted for various companies listed on AIM and other exchanges. In particular, from 2000 to 2003 he was the Finance Director of Oxford Metrics plc, an AIM company supplying motion capture and visual geometry systems. From 2004 to 2006 he was the Finance Director of Real Estate Investors plc, an AIM property investment company with interests in quality commercial and industrial properties. From 2006 to 2011 he was a Director and CFO of Hunter Bay Minerals plc, a junior mining company listed on the Toronto Venture Exchange with interests in South America and Canada. From 2011 to 2014 he was CFO and Treasurer of VolitionRX Limited, an OTC life sciences company focused on developing blood tests for a broad range of cancer types and other conditions. Mr. Lewin has an MA in Classics from Oxford University and qualified as a chartered accountant with Coopers & Lybrand.
J. Frank Mermoud, Non-Executive Director
Mr. Mermoud has more than 30 years' experience in international business, facilitating trade and investment in both the public and private sectors. He has held senior international, economic and commercial policy positions within the United States Government having served as the Secretary of State's Special Representative for Commercial and Business Affairs at U.S. Department of State from 2002 to 2009. Mr. Mermoud is also a Non-Executive Director of Cub Energy Inc. an oil and gas company headquartered in Houston, Texas.
Mary Fallin Christensen, Non-Executive Director
Mary Fallin Christensen has served the State of Oklahoma for over 30 years. She was elected the first female Governor of the State in 2010, and was re-elected for a second term in 2014. Prior to serving as Governor, she held a number of state and federal positions, including serving as US Congresswoman for Oklahoma's 5th district between 2007-2011 and serving as Lieutenant Governor of Oklahoma between 1995-2006. Mary has been a major contributor to natural resources industries in Oklahoma, and implemented the State's first comprehensive energy plan as well as its State-wide water plan. She has held several positions, including Chair of the Southern State Energy Board, Chair of the Interstate Oil & Gas Compact Commission, and has served on the natural resource committee of the National Governors Association (NGA). Previously, she also served on the United States House of Representatives Committee on Small Business, was Small Business Chairman on the Republican Policy Committee, and was named the "Guardian of Small Business" by the National Federation of Independent Business. Mary has also served on numerous Boards of Directors for both commercial organizations and non-profits.
STRATEGIC REPORT
Principal activities and review of the business
Iofina plc ("Iofina" or the "Company") is the holding company of a group of
companies (the "Group") involved in the exploration and isolation of iodine
and the production of specialty chemicals. Iofina Resources, Inc. is the
Group's wholly owned subsidiary which uses proprietary Wellhead Extraction
Technology® (WET®) and WET® IOsorb® methods to produce iodine from
brine. Large volumes of brine water are sourced from partnerships with oil
and gas operators and saltwater disposal ("SWD") operators in the United
States and is used as a raw material to produce iodine at the Group's multiple
IOsorb® plants. The Group's unique business model isolates a resource,
iodine, from a produced waste stream that, without Iofina's technology, would
be lost. The Directors of the Company believe that Iofina's production
process, which utilizes brine water from third party oil and gas production,
is advantageous for long term sourcing of the raw material as well as
minimised production and expansion costs. Iodine containing or other specialty
chemicals are produced at and sold through the Company's wholly owned
subsidiary, Iofina Chemical, Inc., with the major raw material being the
Group's produced iodine. Additionally, the Group's crystalline IOflo® iodine
is sold directly to other iodine end-users.
Iodine is a rare element that is produced only in a few countries in the
world, with approximately 90 per cent of global production coming from Chile
(~60 per cent) and Japan (~30 per cent, including recycled waste streams)..
Iodine and its compounds have many human health related applications,
including x-ray contrast agents, pharmaceuticals, antiseptics, thyroid
function, and others. Additional high-volume uses of iodine include LCD screen
technology, material heat stabilisation, animal feed additives, biocides,
catalysts and more. The Group produces iodine in the United States where the
overall global iodine production is approximately six per cent of the world's
total production, but where there is a large consumption of the world's iodine
by various American users. Iofina believes it is the second largest producer
of iodine in North America.
The ability of the Group to expand its iodine production quickly, at low cost,
differentiates Iofina from other iodine producers. This has been proven from
the expansion of production and opening of IOsorb® plants IO#7 and IO#8 and
the current IO#9 project which is expected to open in late Q2 2023.
Additionally, the Directors believe that the Group's technology to produce
iodine is far more environmentally friendly compared to other producers. By
using a waste stream from the oil and gas industry to isolate iodine versus
isolating iodine from ores, Iofina's process is ecologically efficient in
obtaining a valuable product from a waste stream versus the environmentally
intensive processes of mining iodine from ores by Chilean producers.
Economically viable iodide rich brine co-produced during oil and gas
production is not common, and the Group's proprietary geological model to
locate and anticipate iodide rich sources is unique. The Directors of Iofina
are committed to producing its products in a sustainable and environmentally
friendly manner, and to improving communications regarding our long-term
strategy in respect of Iofina's sustainable practices and other ESG tenets.
The focus of Iofina's current business model is the production of iodine from
brine and the creation and sales of specialty chemicals through Iofina
Chemical. The Directors feel strongly that diversification within the business
while focusing on our core expertise is important. Iofina Resources
diversifies its iodine production through multiple IOsorb® production plants
with multiple brine suppliers in western Oklahoma. The technology the Group
has developed, utilizing a waste resource already being produced, allows
Iofina the ability to expand its operations quickly with minimal capital
expenditure. Continued prudent growth in the number of IOsorb® plants
increases production, profit and diversification. Continued expansion of the
Group's geological model provides opportunities for Iofina outside of its
current core area.
Iofina Chemical produces a wide range iodine-based products with applications
in various industries including agricultural, pharmaceutical, biocides and
others, whilst additional diversification is realised by the production of
non-iodine-based products at Iofina Chemical. The demand for various products
can change, and Iofina Chemical's ability to produce a variety of products
allows the Group to take advantage of growing markets while not being as
affected by temporarily depressed or declining markets.
Iodine prices have risen significantly in the last 24 months, exceeding $70/kg
by July 2022 and stabilising at these levels through early 2023 at the time of
publication. Pricing at these levels has not been seen since 2011, when a
combination of the Fukushima disaster in Japan and Chilean supply disruptions
resulted in a shortage of iodine and a price spike. Supply and demand changes,
as well as manufacturing cost increases, are the major factors influencing the
iodine price. Iodine prices slightly retreated in H2 2020 due to lower global
demand for both iodine and iodine-based products during the COVID-19 pandemic.
As an iodine manufacturer, iodine prices have a significant impact on the
Group's gross profit margins. Prices rose marginally in H1 2021 and then
significantly from H2 2021 through to H2 2022 with demand outpacing supply as
global economies recovered and expanded as COVID impacts waned.
During 2022, demand for iodine, particularly in X-ray contrast media
applications, continued to increase. Currently, iodine prices remain high
versus historical levels and the range of prices is larger than typical
historical prices. Spot prices began 2022 near $50/kg and reached $70/kg and
above by mid-year. Contracted iodine prices for large customers are
generally lower than spot prices, but these also increased significantly
during the year. Demand for Iofina's iodine and iodine derivatives was robust
in 2022 and this is still the case in early 2023. We expect iodine prices to
remain steady at least through H1 2023. Whilst the iodine market has expanded
in recent years, we note that additional Chilean production coming on stream
may increase overall global iodine supplies. Inflation in 2022 has remained
at much higher levels than recent years and has resulted in higher costs for
Iofina's raw materials, labour and energy.
The Directors recognized that, as the Company erected its IOsorb® plants, it
was imperative for Iofina's iodine production costs to be amongst the lowest
in the industry to be competitive. Between 2014 and 2017 numerous
initiatives were successfully implemented to optimise Iofina's technology and
lower production costs. Once the majority of these goals were achieved and
iodine market conditions became more favourable, the Directors commenced the
next phase of Iofina's business plan with the focus on growth. In early 2018,
the Group's newest iodine plant at the time, IO#7, was completed. By expanding
our operations and building IO#7, the Group has successfully lowered overall
iodine production costs with its most efficient plant at that time. The next
major growth development occurred in Q2 2019, when the Company performed an
equity raise to reduce debt and provide working capital for expansion
projects. The result was the construction of IO#8, which began in late 2019
and was completed in early April 2020.
The Group is committed to establishing new routes to growth and is
investigating locations and partnerships to expand iodine production.
Currently, the Company is building IO#9 and is in negotiations with partners
on sites for IO#10. Lessons learned from past expansion play a role in
management's iodine plant growth. Building of IOsorb® plants will be done
in a prudent manner to ensure to the best of our knowledge long-term, low-cost
iodine production. With an expanding iodine market and Iofina's improved
balance sheet, it is likely that Iofina will embark on IO#10 soon after IO#9's
completion, although this will only be done with the correct evaluations of
potential future sites and market conditions.
The Directors are aware of the risk of declining brine availability if our
partners do not maintain or increase their hydrocarbon production in areas
that supply the Group's IOsorb® plants. The Group continues to investigate
the economics and the technology to have better control of the iodide-rich
brine supplies that feed the current and future plants. Iofina Chemical
continues to be recognised as a world-renowned halogen specialty chemical
producer. Vertical integration of the Group's iodine into iodine derivatives
gives Iofina's customers stability of supply in addition to the long-standing
quality and technical support to Iofina's global customers for the goods sold
to them. Additionally, the non-iodine-based halogen derivatives produced by
Iofina Chemical gives the Group further diversity. Iofina Chemical invested in
multiple projects in 2022 and will continue to invest in areas to expand
current products and develop new products to Iofina using the Company's core
expertise.
Key Performance Indicators
The Directors review a range of financial indicators to assess and manage the
Group's performance, including the following relating to revenue and iodine
production:
Year ended Year ended
31 December 31 December
2022 2021
$'000 $,000
Revenue from sales of iodine and iodine derivatives $31,422 $30,473
Revenue from non-iodine products $10,776 $8,566
Total revenue $42,198 $39,039
Total pounds of product shipped (LBS '000) 1,640 2,580
Crystallised iodine produced (Metric Tonnes) 516 518
IOsorb® plants in operation (year-end) 5 5
Commentary on some of the above indicators is to be found in the Chairman's
Statement on pages 3 to 6.
Further commentary on the results for the year and the financial position at
the year-end is to be found in the Financial Review on pages 7 to 9.
Objectives
At the end of 2022 the Group had five operating IOsorb® iodine production
facilities in the core area of Northwestern Oklahoma and a sixth under
construction. While the theoretical capacity of these plants is very high, the
practical capacity of the plants is somewhat lower. Practical capacity takes
into account multiple causes of downtime, including weather, repairs and
maintenance, inadequate brine (low parts per million of iodine, heavily
contaminated brine or little to no supply), power outages and other
conditions. As we have proven our technology and continue to improve
operations at current facilities, more accurate practical capacity operating
targets have been realised as well as improvements for maximising practical
capacity.
Iofina Resources' unique business model allows the Group to determine sites
for new iodine production plants utilizing existing brine produced from oil
and gas production and quickly bring these sites into production. The
execution of this prudent growth strategy was continued with the start of
construction of IO#8 in late 2019 which was completed in April 2020. While
technology and efficiency improvements at current facilities remain an ongoing
priority, the Company continues to explore new iodine production
opportunities. This objective of strategic expansion in 2020 and beyond is
focused on sites that will continue to improve Iofina's output with low
production costs. In late 2022, the Group began construction on IO#9 with an
expectation to complete it in late Q2 2023.
Brine supply to our IOsorb® plants can be affected by regulatory changes and
adjustments to our partners' saltwater disposal systems and oil production
programs. Iofina continues to work with its partners to implement plans to
maximize brine input and iodine output at each of our existing sites. The
mutually beneficial relationship between Iofina and its brine supply partners,
which allows Iofina to create iodine and for the brine suppliers to realize
value from a waste stream, is a key component for existing projects and
potentially for future sites. Continued efforts by our business development
and geological teams have identified numerous further expansion opportunities.
The Company will continue to evaluate and potentially execute these with
current and new potential brine supply partners, when management determines
the proper timing for new sites.
Timing of future iodine production growth will be dependent on a series of
factors. These include the stability or increase of iodine prices, global
demand, availability and cost of production at new sites, partnership
agreements, oil prices and production in areas with high iodide content
brines, and the regulatory landscape with respect to brine injection. Lower
oil prices can lead to lower oil production if certain wells become
uneconomical, which in turn can affect brine supplies from our partners.
Therefore, the Group is increasingly focused on evaluating alternative brine
sourcing opportunities to have better control brine supply at future sites.
Whilst the Directors are focused on expanding production capacity in the right
manner, it is also important to maintain the Company's strong balance sheet
and cash flow. Expansion in 2023 will occur with the completion of IO#9 and
negotiations for sites for IO#10 are ongoing. The Directors will evaluate
market conditions and the detailed information on potential future plant sites
before spending capital on new IOsorb® plants.
Iofina Chemical has continued to invest in current product lines, safety
improvements, and new product R&D. These include investments in both
iodine-based products and other non-iodine specialty chemicals. Capital
investment projects in 2022 at Iofina Chemical included R&D upgrades and
ongoing methyl fluoride process improvements. In 2023, additional process
upgrades and product development projects are underway. The R&D and the
sales groups continue to investigate and research new opportunities for
applications of our existing portfolio of products, as well as identify and
produce new halogen-based derivatives to grow this side of the business. It is
also expected that Iofina Resources' expansion plans over the next few years
will result in the need for expansion of our customer base for our products.
The Iofina Chemical sales team developed new sales channels during the
reporting period, which it will continue to expand upon, including potential
direct sales of the Group's crystalline IOflo® iodine to new customers .
Managing existing client relations and developing new sales channels is a high
priority for the sales team. To help meet growth targets and maintain high
standards, the Group expects to add new talent to the sales team in 2023.
The Group reported in 2021 that IofinaEX, the hemp seed investment, has not
had any appreciable sales and was impaired to Nil. While the Group believes
these seeds are still viable for sale, there were no recognised hemp seed
sales in 2022.
Last, the Directors are committed to employee retention whilst controlling
costs. Employee safety and training are also key objectives for the Group. A
key component for the Group is the high operational gearing whereby the
Group's business model allows for the control of administrative and fixed
expenses whilst expanding operations.
Principal risks and uncertainties
Iofina plc is subject to a number of risks and uncertainties, which could have
a material effect on its business, operations or future performance, including
but not limited to:
Raw Materials: Brine water produced from oil and gas operations is the raw
material source for Iofina's iodine production. The Group continues to
evaluate opportunities to integrate its IOsorb® process into produced brine
water streams associated with hydrocarbon operations in the USA, as well as
other brine stream sources throughout the world. However, there is significant
risk and no guarantee as to the volume of commercial quantities of iodide rich
brine available to our current and future IOsorb® plants. Oil and gas prices
and demand for these hydrocarbons generally will dictate whether our partners
continue to expand their production or possibly reduce hydrocarbon output.
Changes in hydrocarbon production by our partners will change the total brine
availability to isolate iodine and thus the iodine output of our IOsorb®
plants. The salt-water disposal wells (SWDs) that our partners operate may
have temporary or permanent issues which would likely affect the brine supply
to IOsorb® plants. In the past, reduction of capital spent by our partners
for new drilling and recompletion of wells in our core area resulted in a
decline in total amounts of brine co-produced with oil and gas in our key
areas. Current brine volume availability to existing plants is relatively
steady but could change. Iofina maintains good relationships with our
partners who provide the brine water to our existing IOsorb® plants.
Maintaining a positive, mutually beneficial relationship with our brine
suppliers is a top priority for the Group. By continuing an aggressive water
testing program and active exploration utilising geology and data analytics
and incorporating reservoir and production engineering, we are constantly
evaluating new potential locations for iodine extraction in our core area and
in other locations.
Iofina Chemical sources raw materials throughout the globe. Understanding
the supply chain of these materials is important to minimise supply
disruptions. Global supply change disruptions and logistic bottlenecks can
adversely affect ability to obtain key raw materials and may result in
increased costs of these materials. Iofina Chemical has long term
relationships with many of its suppliers. Additionally, when possible,
Iofina Chemical sources materials from multiple suppliers to reduce risk.
Increased regulations can adversely affect availability and cost of
materials. Prices of raw materials and energy can change and if increases in
these prices are not able to be passed on to our customers, it would
negatively affect margins for our products.
Global Crises: Global crises, while rare, can impact businesses
significantly. The COVID-19 pandemic was an example of such an event.
Similar events in the future could have a negative effect on the markets we
serve and on the Group's profits. For instance, COVID-19 resulted in a
global economic slowdown and a reduced demand for many of Iofina's products.
These types of events can also result in delays in shipping, worker
limitations, business closures and other challenges which may negatively
affect the Group. The diversity of Iofina's products along with the uses of
products in areas like human health applications make Iofina less susceptible
than many other businesses. During the COVID-19 pandemic, Iofina quickly
implemented many protocols to minimize any negative impacts on the business,
but these protocols only reduce risk and cannot eliminate risk. COVID-19 or
other events such as political unrest, acts of aggression (wars), other health
crises, major weather events or others would likely have a negative effect for
the Group.
Currently, Russia's invasion of Ukraine is ongoing but has not directly
affected Iofina's operations. Additional political sanctions or negative
impacts to global economies as a result of this invasion may adversely impact
our business. Iofina does not have any current sales exposure with Russia.
Other geopolitical events could negatively affect the Group.
Environmental: The Group's operations are subject to the environmental risks
inherent in the exploration and chemical industries. The Group is subject to
environmental laws and regulations in connection with all its operations.
Although the Group intends to comply in respect of all applicable
environmental laws and regulations, there are certain risks inherent to its
activities, such as accidental spills, leakages or other circumstances that
could expose the Group to extensive liability. Accordingly, the Group promotes
wherever possible environmental sustainability in its working practices and
seeks to minimise, mitigate, or remedy any harmful effects from the Group's
operations on the environment at each of its operational sites. Regulations on
brine injections in the state of Oklahoma into the Arbuckle geological
formation in the Group's core area due to seismic activity were implemented
mainly in late 2015 to early 2016, and have affected Iofina's partners' brine
disposal into this formation near some of our sites. This reduced some brine
availability to Iofina at some sites. The Group and its partners have
implemented and continue to implement strategies to minimise the effect on the
availability of iodine rich brine to Iofina due to these regulations. Moving
forward the Group and its partners will continue to monitor these risks and
act accordingly. While the frequency and intensity of earthquakes have
significantly reduced in Oklahoma, and this reduction is likely a result of
regulated changes in brine disposal into the Arbuckle formation, there is
still risk of additional earthquakes and regulation moving forward. Changes in
laws or regulation of brine streams could affect brine availability or the
cost to produce iodine. As a specialty chemical manufacturer, new
regulations based on chemical use, adverse human health or environmental
impact are a risk and may lead to higher costs or controlled production.
Greenhouse Gas (GHG) regulations in the USA have not impacted Iofina's ability
to produce products it currently manufactures, however if production
allocations are reduced in the future, this would likely negatively affect
Iofina's production output. Other environmental regulations that restrict
manufacturing of chemicals that Iofina produces would have a negative impact
on the Group. The Group has a robust Environmental, Health and Safety
program and strives for continual improvement in this area. Additionally,
Iofina Chemical is a certified Chemstewards® facility and obtained ISO
9001:2015 certification in 2022.
Changes in Markets and Competition: Iofina is well diversified in the markets
we serve. As a result, small changes to these markets generally will not
materially affect our business. However, major disruptions in key markets
that use iodine or the other specialty compounds we manufacture could have a
material negative effect on the Group. The rising interest rate environment
implemented by central banks to combat inflation is likely at a minimum slow
down global economies or even create a recession. A significant contraction in
global economies may negatively affect demand and pricing of the Group's
goods. Additionally, increased competition in the markets we serve could
negatively impact prices or the ability to sell our goods. In particular,
large increases in iodine production from competitors could negatively affect
iodine prices and the Group's market share. The planned expansion of iodine
production in Chile may change the market's current supply and demand
dynamics. However, the exact change is subject to several factors, the scale
of expansion, the timing of increased supply and the overall global demand for
iodine at the time of new supplies coming onstream.
Iodine Price volatility: Iodine's price and demand are highly dependent on a
variety of factors, including international supply and demand, the level of
consumer product demand, the price and availability of alternatives, actions
taken by governments and global economic and political developments. Increases
in current iodine producers' production capacities or new iodine producers
entering the market could negatively impact prices. Fluctuations in iodine
prices and, in particular, a material decline in the price of iodine would
have a material adverse effect on the Group's business, financial condition
and operations. Iodine prices are currently elevated relative to historical
trends. After a lull in demand during the COVID-19 pandemic, demand for
iodine rose significantly in H1 2021. Continued strong demand for iodine and
iodine incorporated products have continued through today. As a result,
iodine prices rose significantly between H1 2021 and mid-year 2022. During H2
2022 through early 2023 iodine prices have generally stabilised.
Key customers: There are a limited number of potential customers who
purchase many of the products of the Group's chemical business, which makes
relationships with these customers, as well as the success of those customers'
businesses, critical to the Group's success. The loss of one or more major
customers could harm the business, operating results and financial condition
of the Group. Iofina is continuing to diversify its customer base in its
Chemical subsidiary. In addition, Iofina works closely with all of its
customers to develop strong relationships, with a significant focus on
ensuring that its products and services meet the needs of its customers and
are of the highest quality. In 2022, 11% of revenue recognised was
attributable to one long term customer and five other customers each
contributed to over 5% of sales. Relations with these customers are good.
Key Partners: Iofina partners with third-party oil and gas producers and
saltwater disposal operators to process iodine-rich brine they extract with
oil and gas production. Fluctuations of oil and gas prices in the US can
affect the financial stability of oil and gas producers. Any changes in
operator status or the financial strength of our partners is a risk to brine
production and availability. The Group has agreements with our partners to
reduce any risk of change in status. Material changes in these brine supply
contracts with our partners could negatively affect the Group. In 2022, Iofina
executed a new agreement for IO#9 with a new brine supply partner.
Regulation and Trade: The businesses are subject to various significant
international, federal, state and local regulations currently in effect
including but not limited to environmental, health and safety and
import/export regulations. These regulations are complex, change frequently,
can vary from country to country, state to state and have generally increased
over time. Iofina may incur significant expense in order to comply with these
regulations or to remedy violations of them. The current federal
administration in the USA has increased regulations in our industries versus
the previous administration. Any new regulation that would increase cost of
raw materials the Group uses, reduces availability of these raw materials or
caps production of products the Group produces would likely have a negative
effect on margins.
Any failure by Iofina to comply with applicable government regulations could
result in non-compliant portions of our operations being shut down, product
recalls or impositions of civil and criminal penalties and, in some cases,
prohibition from distributing our products or performing our services until
the products and services are brought into compliance, which could
significantly affect our operations.
IofinaEX is involved in the sale of hemp seeds, a highly regulated industry.
Laws and regulations for handling and selling hemp seeds may change and
evolve.
The Group closely monitors regulations across its businesses to ensure that it
complies with the relevant laws and regulations. While Iofina believes that it
is compliant with all laws and regulations, any instances of non-compliance
would be brought to the attention of the appropriate authorities as soon as
possible.
Trade relationships between the USA and other areas of the world, particularly
China, have become more unstable. Increased tariffs implemented by the USA
and retaliatory tariffs imposed by other governments against the USA have the
potential to adversely affect both raw material supply and final product sales
for Iofina in certain areas of the world. Iofina has been proactive in
reducing the impact of tariffs which directly impact the Company's supply and
sales lines.
Inventory Fluctuations: Inventory level changes can cause a financial
instability. High inventories negatively affect cash flow, while low
inventories can negatively affect sales volumes and customer relationships.
In 2021, the Group started the year with larger than normal iodine inventories
and ended the year with lower than normal iodine inventories. In 2022, the
Group ended the year with more normalised iodine inventories and slightly
elevated than ideal specialty chemical derivative end products and in-process
goods. These inventories are cyclical within our business and management
closely tracks these inventories along with known and anticipated demand for
products in order to maintain appropriate inventories.
Insurance may not cover all material losses: The Group strives to carry
standard insurance for our industry that would minimise loss when events
occur. However, certain scenarios or events may not be covered by insurance
and could have a negative material impact on the Group. For example,
cyber-attacks have increased globally and while the Group has increased
measures to thwart potential cyber-attacks, we cannot guarantee these measures
will prevent a cyber-attack for which we do not carry specific insurance.
Personnel: As a small technical organisation, the loss of key technical or
senior management employees could negatively affect the business.
Additionally, the USA labour market remains tight. This could result in
increased labour costs and a risk of delays or inability to produce product
due to labour shortages.
Significant Shareholders: Significant shareholders may have the ability to
affect changes that result in a material adverse effect to the organisation
including a change in senior management or control of the Group or its Board
of Directors.
Interest Rates and Inflation: As a result of the 2020 debt changes that served
to significantly reduce both overall debt and interest rates for the Group, a
significant portion of the debt carries variable interest rates. While
overall debt has continued to decline, interest rates continue to rise and
will likely negatively impact debt costs. In 2022, the Group obtained
credit lines in order to support growth projects at both Iofina Chemical and
Iofina Resources. These lines carry variable interest rates.
Inflation in the USA and globally was higher in H2 2021 and throughout 2022
relative to recent years. This has resulted in higher costs for goods,
energy, and labour. The ability to maintain margins in an increasing
inflationary environment is uncertain. Additionally, as prices rise, there
is a risk that some products the Group sells may be replaced by cheaper
alternatives which could result in an adverse effect to the business.
Litigation: While the Group has no pending litigation matters, there are
possibilities that future judgements or settlements could result in an adverse
effect to our business.
Going concern
The Group has performed well in 2022, and is performing as anticipated in 2023
and generating cash. In 2022 the Group achieved a profit before taxation of
$10.0m and a net cash inflow from operating activities of $5.6m. The markets
into which the Group sells its products continue to experience strong
demand. Iofina has obtained appropriate credit facilities to fund current
business growth objectives. The Group has prepared forecasts and
projections that indicate there are adequate resources to continue in
operational existence for the foreseeable future. The Directors consider it
appropriate to continue to adopt the going concern basis in preparing the
financial statements.
On behalf of the board
Dr. Thomas M. Becker
Chief Executive Officer and President
24 April 2023
STATEMENT IN ACCORDANCE WITH SECTION 172 OF THE COMPANIES ACT 2006
As required by section 172 of the Companies Act 2006, a director of a company
must act in a way they consider, in good faith, would most likely promote the
success of the company for the benefit of its shareholders. In doing this, the
Director must have regard, amongst other matters, to the:
(a) likely consequences of any decision in the long-term;
(b) interests of the company's employees;
(c) need to foster the company's business relationships with
suppliers, customers, and others;
(d) impact of the company's operations on the community and the
environment;
(e) company's reputation for high standards of business conduct;
and
(f) need to act fairly as between members of the company.
As a Board our aim is always to uphold the highest standards of governance and
business conduct, taking decisions in the interests of the long-term
sustainable success of the Group, generating value for our shareholders and
contributing to wider society. We recognise that our business can only grow
and prosper over the long term by understanding the views and needs of our
stakeholders. Engaging with stakeholders is key to ensuring the Board has
informed discussions and factors stakeholder interests into decision-making.
The Directors insist on high operating standards and fiscal discipline and
routinely engage with management and employees of the Group to understand the
underlying issues within the organization. Additionally, the Board looks
outside the organization at macro factors affecting the business. The
Directors consider all known facts when developing strategic decisions and
long-term plans, taking into account their likely consequences for the
Group.
The Directors and management are committed to the interests and well-being of
Iofina's employees. Iofina is committed to the highest levels of integrity
and transparency possible with employees and other stakeholders. Safety
initiatives, consistent training, strong benefits packages and open dialogue
between all employees are just some of the ways the Group ensures its
employees improve skill sets and work hand-in-hand with management to improve
all aspects of the Group's performance.
Other stakeholders include customers, suppliers, lenders, industry
associations, government and regulatory agencies, media, local communities and
shareholders. The Board, both individually and together, consider that they
have acted in the way they consider would be most likely to promote the
success of the Group as a whole. To do this, there is a process of dialogue
with stakeholders to understand the issues that they might have. Iofina
believes that any supplier/customer relationship must be mutually beneficial,
and the Group is known for its commitment to details to its customers.
Communications with the Group's lenders and shareholders occur on an ongoing
basis and as questions arise. The Group also communicates through media
interviews and Twitter.
The Directors are committed to positive involvement in the local communities
where we operate. Part of this commitment is our program 'Iofina Gives
Back', where Iofina supports local charities by donating time and goods.
Additionally, Iofina adheres to environmental regulations at its sites and
supports sustainability practices where possible.
Integrity is a key tenet for the Directors and the Company's employees. The
Company believes that any partnership must benefit both parties. We strive
to provide our stakeholders with timely and informative responses and are
always striving to meet or exceed customers' needs.
The Board recognises its responsibilities under section 172 as outlined above
and has acted at all times in a way consistent with promoting the success of
the Company with regard to all stakeholders.
CORPORATE GOVERNANCE
It is the Chairman's responsibility, working with Board colleagues, to ensure
that good standards of corporate governance are embraced throughout the Group.
As a Board, we set clear expectations concerning the Group's culture, values
and behaviours.
In September 2018, the Board adopted the Quoted Companies Alliance Corporate
Governance Code (the "QCA Code"). On our website
(https://iofina.com/corporate-governance/) we set out how we seek to comply
with the 10 principles of the QCA Code. The following sections of the
Corporate Governance Statement explain how the QCA Code is applied by the
Company.
The Board comprises six Directors: the Non-Executive Chairman, two full time
Executive Directors and three Non-Executive Directors (each of whom is
considered by the Board to be independent), reflecting a blend of different
experiences and backgrounds. The function of the Chairman is to supervise and
manage the Board and to ensure its effective control of the business. The
Board believes that its composition brings a desirable range of skills and
experience given the Group's challenges and opportunities as a publicly quoted
company, while at the same time ensuring that no individual (or group of
individuals) can dominate the Board's decision-making.
The Board meets regularly to review, formulate and approve the Group's
strategy, budgets, corporate actions and oversee the Group's progress towards
its goals. The Board has established the following committees to fulfil
specific functions, each with formally delegated duties and responsibilities
(details of which can be found on our website; see:
http://www.iofina.com/about/committees
(http://www.iofina.com/about/committees) ): the Audit Committee and the
Remuneration Committee. These committees meet on a regular basis and at least
two times a year. The Board has elected not to constitute a dedicated
nomination committee, instead retaining such decision making with the Board as
a whole. This approach is considered appropriate to enable all Board members
to take an active involvement in the consideration of Board candidates and to
support the Chair in matters of nomination and succession.
From time to time, separate committees may also be set up by the Board to
consider specific issues when the need arises.
DIRECTORS' REPORT
The Directors present their report and financial statements for the Group for
the year ended 31 December 2022.
Strategic report
Included in the Strategic Report on pages 12 to 21 is the review of the
business and principal risks and uncertainties.
Post balance sheet events
Post balance sheet events are set out in note 30.
Directors' responsibilities for the preparation of the financial statements
The Directors are responsible for preparing the Strategic Report and the
Directors' Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare Group and Company financial
statements for each financial year. The Directors are required by the AIM
Rules for Companies (as published by the London Stock Exchange) to prepare
Group financial statements in accordance with UK adopted International
Accounting Standards, and have elected under company law to prepare the
Company financial statements in accordance with International Accounting
Standards.
The financial statements are required by law and UK adopted International
Accounting Standards to present fairly the financial position of the Group and
the Company and the financial performance of the Group. The Companies Act 2006
provides, in relation to such financial statements, that references in the
relevant part of that Act to financial statements giving a true and fair view
are references to their achieving a fair presentation.
Under company law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and the Company and of the profit or loss of the Group
for that period.
In preparing the Group and Company financial statements, the directors are
required to:
a. select suitable accounting policies and then apply them
consistently;
b. make judgements and accounting estimates that are reasonable
and prudent;
c. state whether they have been prepared in accordance with UK
adopted International Accounting Standards; and
d. prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the Company will
continue in business.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and the Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and the Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Group and the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Iofina plc website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Results and dividends
The results for the year are set out in the consolidated statement of
comprehensive income and detailed in the Financial Review.
The directors do not recommend payment of a dividend.
Financial instruments and risk management
Note 14 details the risk factors for the Group and how these risks are
managed, including the degree to which it is appropriate to use financial
instruments to mitigate risks.
Directors
The directors who served during the year and subsequently were as follows:
Lance J. Baller, Non-Executive Chairman
Dr. William D. Bellamy, Non-Executive Director
J. Frank Mermoud, Non-Executive Director
Mary Fallin Christensen, Non-Executive Director
Dr. Thomas M. Becker, Chief Executive Officer and President
Malcolm T. Lewin, Chief Financial Officer
Statement as to disclosure of information to the auditor
The directors who were in office on the date of approval of these financial
statements have confirmed that, as far as they are aware, there is no relevant
audit information of which the auditor is unaware. Each of the directors has
confirmed that they have taken all the steps that they ought to have taken as
directors in order to make themselves aware of any relevant audit information
and to establish that it has been communicated to the auditor.
Auditor
UHY Hacker Young were appointed as auditors to the Company and in accordance
with Section 485 of the Companies Act 2006 a resolution proposing that they be
reappointed will be put to the next Annual General Meeting.
On behalf of the Board
Dr. Thomas M. Becker
Chief Executive Officer and President
24 April 2023
CORPORATE GOVERNANCE STATEMENT
The Board ensures that the Group is managed for the long-term benefit of all
shareholders with corporate governance being an essential element of this and
has adopted the Quoted Companies Alliance ("QCA") Corporate Governance Code
which is considered appropriate for an AIM quoted company. The Board is
responsible for the overall leadership, strategy, development and control of
the Group in order to achieve its strategic objectives.
The Group is led and controlled by the Board which currently consists of two
Executive Directors and four Non-Executive Directors. Board meetings are held
on a regular basis and no significant decision is made other than by the
Directors. All Directors participate in the key areas of decision making.
Business model, strategy and approach to risk
The Group focuses on the exploration and production of iodine and
halogen-based specialty chemical derivatives. We identify, develop, build, own
and operate iodine extraction plants, currently focused in North America,
based on Iofina's Wellhead Extraction Technology® (WET®) IOsorb®
technology. The Group has complete vertical integration from the production of
iodine in the field to the manufacture of the chemical end-products derived
from iodine to the consumer, and the recycling of iodine using iodinated
side-streams from waste chemical processes. We use patented or proprietary
processes throughout all business lines. Together these allow us to be the
Technology Leaders in Iodine®. The Group's strategy is to continue to focus
on the exploration and production of iodine and iodine specialty chemical
derivatives, delivering growth throughout our operations. Growth is intended
to be achieved with the continued upgrading and expanding of our plants, which
in turn will boost the level of iodine production.
All the Group's activities involve an ongoing assessment of risks, and the
Group seeks to mitigate such risks where possible. The Board has undertaken an
assessment of the principal risks and uncertainties facing the Group,
including those that would threaten its business model, future performance,
solvency and liquidity. Further, the Board has considered the longer-term
viability of the Group, including factors such as the prospects of the Group
and its ability to continue in operation for the foreseeable future. The Board
considers that the disclosures outlined in the Strategic Report on pages 12 to
21 are appropriate. The Board considers that these disclosures provide the
information necessary for shareholders and other stakeholders to assess the
Group's future viability and potential requirements for further capital to
fund its operations.
Having carried out a review of the level of risks that the Group is taking in
pursuit of its strategy, the Board is satisfied that the level of retained
risk is appropriate and commensurate with the financial rewards that should
result from achievement of its strategy.
Board of Directors
As of the date of this Report the Board comprises six Directors in total: the
Non-Executive Chairman, two Executive Directors (being the Chief Executive
Officer ("CEO") and the Chief Financial Officer ("CFO")) and three
Non-Executive Directors (each of whom are considered by the Board to be
independent), reflecting a blend of different experiences and backgrounds. The
skills and experience of the Board are set out in their biographical details
on pages 10 and 11. The experience and knowledge of each of the Directors give
them the ability to challenge strategy constructively and to scrutinize
performance.
The Board is responsible to the shareholders for the proper management of the
Group. The Board and the Group's management team are responsible for reviewing
and evaluating risk and the Executive Directors meet at least monthly to
review ongoing trading performance, discuss budgets and forecasts and new
risks associated with ongoing trading. The Board typically meets monthly to
set the overall direction and strategy of the Group, review operational and
financial performance and advise on management appointments (if necessary).
All key operational and investment decisions are subject to Board approval.
The Company Secretary is responsible for ensuring that Board procedures are
followed and applicable rules and regulations are complied with. The number of
meetings attended by each Director can be found on page 30.
There is a clear separation of the roles of CEO and Non-Executive Chairman.
The Chairman is responsible for overseeing the running of the Board, ensuring
that no individual or group dominates the Board's decision making and ensuring
the Non-Executive Directors are properly briefed on matters. The CEO has the
responsibility for implementing the strategy of the Board and managing the
day-to-day business activities of the Group.
Time commitment
On joining the Board, Non-Executive Directors receive a formal appointment
letter, which identifies the terms and conditions of their appointment and, in
particular, the time commitment expected of them. A potential Director
candidate (whether an Executive Director or Non-Executive Director) is
required to disclose all significant outside commitments prior to their
appointment. The Board is satisfied that both the Chairman and the other
Non-Executive Directors can devote sufficient time to the Group's business.
Independence of Directors
The Directors acknowledge the importance of the principles of the QCA Code
which recommends that a company should have at least two independent
Non-Executive Directors. The Board considers it has sufficient independence on
the Board and that all the Non-Executive Directors are of sufficient
competence and calibre to add strength and objectivity to the Board, and bring
considerable experience in industry, operational and financial development of
chemical products and companies. Specifically, the Board has considered and
determined that since the date of their respective appointments William
Bellamy, J. Frank Mermoud and Mary Fallin Christensen are independent in
character and judgement, specifically that they:
· have not been employees of the Company within the last five years;
· do not have a material business relationship with the Group;
· have no close family ties with any of the Group's advisers, Directors
or senior employees;
· do not hold cross-directorships or have significant links with other
Directors through involvement in other companies or bodies; and
· do not represent any shareholder.
The Board notes that the Independent Non-Executive Directors have received
share options in the Company. The Board does not believe the issue of options
affects their independence as they are of a modest amount and not deemed
material to the individual.
The Company Secretary maintains a register of outside interests and any
potential conflicts of interest are reported to the Board.
If they so wish, the Non-Executive Directors have opportunities to meet
without Executive Directors being present (including after Board and Committee
meetings). Because the Board is spread out geographically, the majority of
communications between Directors is conducted by video. However, the Board
does convene in person at least once a year, and this presents an opportunity
(before, after and between management and operational meetings) for the
Non-Executive Directors to meet in person without the Executive Directors
being present.
Professional development
Throughout their period in office, the Directors are continually updated on
the Group's business, the competitive and regulatory environments in which it
operates, corporate social responsibility matters and other changes affecting
the Group and the industry it operates in as whole. The updates are usually
provided by way of written briefings and meetings with senior management.
Directors are also advised on appointment of their legal and other duties and
obligations as a director of an AIM quoted company both in writing and in
communications (being face-to-face meetings whenever possible) with the
Company's Nominated Adviser. The Directors also have recourse to the Company
Secretary, a qualified and practising solicitor, who is a recognised
practitioner within the AIM community.
All the Directors are subject to election by shareholders at the first Annual
General Meeting of the Company ("AGM") after their appointment to the Board.
Each Director is required, under the Company's articles of association, to
seek re-election at least once every three years.
Board Committees
There are two committees - the Audit Committee and the Remuneration Committee.
Their full terms of reference are published on the Company's website at
https://iofina.com/committees/.
Audit Committee
During the financial period under review, the members of the Audit Committee
were Lance Baller, Dr William Bellamy, J. Frank Mermoud and Mary Fallin
Christensen. Mr Baller is the Chairman of the Audit Committee. The
responsibilities of the committee include the following:
· ensuring that the financial performance of the Group is properly
monitored, controlled and reported on;
· reviewing accounting policies, accounting treatment and disclosures
in the financial reports;
· meeting the auditors and reviewing reports from the auditors relating
to accounts and internal control systems; and
· overseeing the Group's relationship with external auditors, including
making recommendations to the Board as to the appointment or re-appointment of
the external auditors, reviewing their terms of engagement, and monitoring the
external auditors' independence, objectivity and effectiveness.
During the year, the committee met to review audit planning and findings. In
addition, it reviewed the appointment of auditors, and agreed unanimously to
re-elect UHY Hacker Young LLP.
Remuneration Committee
During the financial period under review, the members of the Remuneration
Committee were Dr William Bellamy, Lance Baller and J. Frank Mermoud. Dr
Bellamy is the Chairman of the Remuneration Committee. The responsibilities of
the committee include the following:
· reviewing the performance of the Executive Directors and setting the
scale and structure of their remuneration with due regard to the interest of
shareholders;
· overseeing the evaluation of the Executive Directors; and
· determining the vesting of awards, including the setting of any
performance criteria in relation to the exercise of share options, granted
under the Company's share option plan.
During the year, the committee met to discuss remuneration and bonuses for the
Executive Directors, and share option awards for the Directors and senior
management.
The Directors' remuneration information is presented on page 32.
Attendance at meetings
The Board meets regularly, typically on a monthly basis, together with further
meetings as required. The Audit and Remuneration Committees meet as required,
and try to hold a minimum of two meetings each year.
The Directors attended the following meetings during the year:
Board Audit Remuneration
Lance Baller 11 2 2
Dr Thomas Becker 11 - -
Malcolm Lewin 11 - -
Dr William Bellamy 9 2 2
J. Frank Mermoud 11 2 2
Mary Fallin Christensen 10 2 -
Risk management and internal control
The Board is responsible for the systems of internal controls and for
reviewing their effectiveness. The internal controls are designed to manage
rather than eliminate risk and provide reasonable but not absolute assurance
against material misstatement or loss. The Board reviews the effectiveness of
these systems annually by considering the risks potentially affecting the
Group.
Iofina employs strong financial and management controls within the business.
Examples of control procedures include:
· an annual budget set by the Board with regular review of progress;
· regular meetings of Executive Directors and senior management to
review management information and follow up on operational issues or
investigate any exceptional circumstances;
· clear levels of authority, delegation and management structure; and
· Board review and approval of significant contracts and overall
project spend.
The Company's system of internal control is designed to safeguard the
Company's assets and to ensure the reliability of information used within the
business. The system of controls manages appropriately, rather than
eliminates, the risk of failure to achieve business objectives and provides
reasonable, but not absolute, assurance against material misstatement or loss.
The Group does not consider it necessary to have an internal audit function
due to the small size of the administrative function. Instead, there is a
detailed monthly review and authorisation of transactions by the CFO and the
CEO.
The independent auditors do not perform a comprehensive review of internal
control procedures, but do report to the Audit Committee on the outcomes of
its annual audit process. The Board confirms that the effectiveness of the
system of internal control, covering all material controls including
financial, operational and compliance controls and risk management systems,
has been reviewed during the year under review and up to the date of approval
of the Annual Report.
The Group maintains appropriate insurance cover in respect of actions taken
against the Directors because of their roles, as well as against material loss
or claims against the Group. The insured values and type of cover are
comprehensively reviewed on a periodic basis.
Board effectiveness and performance evaluation
The Board is mindful that it needs to continually monitor and identify ways in
which it might improve its performance and recognises that board evaluation is
useful for enhancing a board's effectiveness.
The individual contributions of each of the members of the Board are regularly
assessed to ensure that: (i) their contribution is relevant and effective;
(ii) that they are committed; and (iii) where relevant, they have maintained
their independence. The Board intends to review the performance of the team as
a unit to ensure that the members of the Board collectively function in an
efficient and productive manner. As required pursuant to the Company's
articles of association, one-third of the Directors must stand for re-election
by shareholders annually in rotation and all Directors must stand for
re-election at least once every three years.
The Company considers that the Board and its individual members continue to
perform effectively, that the Chairman performs his role appropriately and
that the process for evaluation of his performance has been conducted in a
professional and rigorous manner.
Corporate Social Responsibility
The Board recognises the growing awareness of social, environmental and
ethical matters and it endeavours to take into account the interest of the
Group's stakeholders, including its investors, employees, suppliers and
business partners, when operating the business.
Employment
The Group endeavours to appoint employees with appropriate skills, knowledge
and experience for the roles they undertake and thereafter to develop and
incentivise staff. The Board recognises its legal responsibility to ensure the
wellbeing, safety and welfare of its employees and maintain a safe and healthy
working environment for them and for its visitors.
Investor Relations
The Board recognises the importance of communication with the Company's
shareholders to ensure that its strategy and performance is understood and
that it remains accountable to shareholders. Our website has a section
dedicated to investor matters and provides useful information for the
Company's shareholders (see: http://iofina.com/investors/
(http://iofina.com/investors/) ). The Board as a whole is responsible for
ensuring that a satisfactory dialogue with shareholders takes place, while the
Chairman and the CEO ensure that the views of the shareholders are
communicated to the Board as a whole. The Board ensures that the Group's
strategic plans have been carefully reviewed in terms of their ability to
deliver long-term shareholder value. Fully audited Annual Reports are
published, and Interim Results notified via Regulatory News Service
announcements. All financial reports and statements are available on the
Company's website (see: http://iofina.com/investors/financial-results
(http://iofina.com/investors/financial-results) ).
There is an opportunity at the Annual General Meeting for individual
shareholders to question the Chairman and the Executive Directors. Notice of
the meeting is sent to shareholders at least 21 clear days before the meeting.
Shareholders are given the opportunity to vote on each separate issue. The
Company counts all proxy votes and indicates the level of proxies lodged on
each resolution, after it has been dealt with by a show of hands.
Directors' remuneration
Remuneration provided to each Director was as follows:
2022 2021
Salary Bonus Total $ Salary Bonus Total $
Lance Baller 109,620 - 109,620 109,620 - 109,620
Dr. Thomas Becker 274,400 30,000 304,400 260,000 35,000 295,000
Malcolm Lewin 175,275 25,000 200,275 191,208 27,315 218,523
William Bellamy 30,000 - 30,000 30,000 - 30,000
Frank Mermoud 30,000 - 30,000 30,000 - 30,000
Mary Fallin Christensen 30,000 - 30,000 30,000 - 30,000
Total $649,295 $55,000 $704,295 $650,828 $62,315 $713,143
No pension contributions were paid on behalf of the directors in 2021 or 2022.
Directors' and officers' insurance is in place on a Group-wide basis.
The interests of the Directors in office as at 31 December 2022 in the shares
of the Company at the end of the financial year and the beginning of the
financial year or date of appointment, if later, were as
follows:
31 December
2022
1 January 2022
L J
Baller
5,500,000
5,175,000
Dr. T M
Becker
139,430
124,430
W D
Bellamy
46,875
46,875
M T
Lewin
93,750
93,750
J F
Mermoud
23,750
23,750
All outstanding options over shares granted to Directors up to 31 December
2022 are set out in the table below. No further options have been granted
between 31 December 2022 and the date of signing these financial statements.
No options were granted in 2021 and no Directors exercised options in 2022.
Name 2018 Options granted 2019 Options granted 2020 Options granted 2022 Options granted
Dr T Becker 660,000 242,000 266,200 266,200
M Lewin 330,000 165,000 181,500 181,500
L Baller 220,000 165,000 165,000 165,000
Dr W Bellamy 110,000 82,500 82,500 82,500
JF Mermoud - 82,500 82,500 82,500
M Fallin Christensen - - 82,500
82,500
1,320,000 737,000 860,200 860,200
Exercise price 16.2p 21.3p 12.5p 17.6p
Lapse date 13/06/28 24/07/29 15/12/30 8/3/32
On behalf of the Board
Dr. Thomas M. Becker
Chief Executive Officer and President
24 April 2023
Environmental, Social, and Governance ('ESG')
The Group has continually maintained a philosophy and commitment to perform
its operations in a safe, responsible manner with regard to all stakeholders
including, but not limited to, staff, shareholders, customers and our
communities.
The Group has long applied ESG tenets even before the term ESG became
commonplace. Iofina has chosen to produce our iodine from a brine water
source that is a by-product of the oil and gas industry. By partnering with
oil & gas operators, Iofina produces iodine from this brine water, and
this iodine would not be realised if Iofina was not operating its iodine
manufacturing plants. Most of the world's iodine is manufactured from iodate
deposits in ores in Chile through processes we believe are much more
negatively intensive to the environment than our WET® IOsorb® technology.
The Group also manufactures specialty chemicals through the Iofina Chemical
division. IC has held a long-established business philosophy to develop its
processes in aqueous-based chemistries whenever possible to reduce the use of
organic solvents. The vast majority of IC's processes are performed in
aqueous media.
The iodine compounds the Group produces have a positive impact on society,
with iodine being essential for human and animal health. Whether it is
directly through the ingestion of foods containing iodides or fortified salt
as a micro-nutrient to ensure proper thyroid function and to stimulate proper
human and animal development; or by using iodine-containing compounds in
medical uses, such as iodinated X-ray contrast agents, production of
pharmaceuticals or the use PVP-I in antiseptic applications, iodine plays many
important roles in a healthy society.
Environmental
The Group is committed to minimizing its energy consumption and waste
generation. Energy use and environmental impacts are key criteria when
ordering and replacing equipment at our manufacturing sites. As an example,
Iofina Resources is undergoing a long-term initiative to replace some large
older blowers with more efficient units. Iofina Chemical is upgrading a
process that will replace multiple reactors with a larger unit that will
require less energy to produce an equivalent amount of product. Upgrades
and new processes undergo a review which comprises evaluations to minimize
energy use and environmental impact.
The Group's total energy consumption at our manufacturing facilities in 2022
was:
Electricity (kWh) 11,390,576; Natural gas (CCF) 70945; for the 1496MT of goods
produced in 2022 by the Group.
The Company is continuing to develop metrics to measure the Group's
environmental impact.
Social
Health and Safety
The safety and health of Iofina's employees is the top priority for the
Group. This also extends to our contractors, visitors, and community.
Processing and creating specialty chemicals have inherent risks. Through
engineering designs, extensive training and procedures, and PPE to name a few,
our culture insists that as a group we work together to ensure everyone's
safety. We are proud of our safety record but recognize that continual
improvement is always necessary as we evolve. Iofina is proud to report that
in 2022 there were zero lost time incidents for the Group.
Iofina Lost Time Incidents
2021 2022
Lost Time Incidents 1 0
Incident Rate 1.04 0
Lost Time Incidents ('LTIs') are incidents where the person is unable to work
the next day of the incident. Incident rate is the number of LTIs per
200,000 hrs. worked.
Many other health and safety metrics are evaluated and corrective actions
performed to continually improve our systems in order to reduce incident
occurrences and severity. These health and safety matrices are routinely
reviewed and discussed with upper management.
Additionally, Iofina Chemical is honored to have received SOCMA Chemstewards
performance bronze awards in 2021 and 2022 for Resource Management and Waste
Minimization and Employee Training respectively.
Community
Iofina is committed to being a social responsible organization. Our program,
Iofina Gives Back, is an employee-driven program designed to support our local
communities. Some of the program's initiatives include the donation of items
and funds for disaster relief, local schools, toy/food drives, and
sponsorships that benefit first responder equipment and STEM scholarships.
Additionally, for many years, Iofina Resources has partnered with Northwestern
Oklahoma State University and the OCAST Intern Partnership Program, which is
designed to advance science and technology opportunities and provide
experience and educational opportunities for undergraduate students.
Multiple students involved in these internships with Iofina, have gone on to
achieve advanced level science degrees.
Diversity
Iofina is an Equal Opportunity Employer and all employment decisions at Iofina
are based on individual qualifications, particular job responsibilities, and
business needs without regard to race, color, religion, national origin, age,
gender, disability or any other status protected by laws where we operate. A
culture of respect at Iofina is our commitment to all our employees and we
demand that our team treats our fellow workers, and business partners in a
professional and non-discriminatory manner. Historically, the job applicants
that Iofina receives tend to underrepresent minorities and females when
compared to the general population. Iofina is investigating ways to find a
more diverse pool of job applicants.
Governance
The following are summaries of some of Iofina's Governance data and
practices. Corporate policies are reviewed by the Board.
Total Board Members %Male %Female %Non-executive % Executive CEO/Chairman separate roles
Board of Directors 6 83% 17% 67% 33% Yes
· The Group has adopted the QCA Corporate Governance Code
· The Group has adopted several policies including but not limited to:
o Whistleblowing Policy
o Anti-Fraud Policy
o Anti-Corruption and Bribery Policy
o Share Dealing Code
o AIM Rules Compliance Policy
Further detail regarding Corporate Governance practices can be found on pages
22 and 24 of this report.
Independent auditor's report to the members of Iofina PLC
Opinion
We have audited the financial statements of Iofina PLC (the 'Parent Company')
and its subsidiaries (the 'Group') for the year ended 31 December 2022 which
comprise the Consolidated Statement of Comprehensive Income, the Consolidated
Balance Sheet, the Consolidated Statement of Changes in Shareholders' Equity,
the Consolidated Cash Flow Statement, the Company Balance Sheet, the Company
Statement of Changes in Shareholders' Equity and notes to the financial
statements, including the significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and UK adopted International Accounting Standards.
In our opinion:
· the financial statements give a true and fair view of the state of
the Group's and of the Parent Company's affairs as at 31 December 2022 and of
the Group's profit and cash flows for the year then ended;
· the Group and Parent Company financial statements have been properly
prepared in accordance with UK adopted International Accounting Standards; and
· the Group financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the Group and Parent Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statement is appropriate.
Our evaluation of the director's assessment of the entity's ability to
continue to adopt the going concern basis of accounting included:
Evaluation of management assessment Key observations
Management have prepared detailed consolidated cash flow forecasts The cash flow forecasts demonstrates that the Group will have a cash flow
incorporating all entities within the Group covering the period to 31 December surplus throughout the forecast period. These incorporated all budgeted and
2024. These are based on their expectation of future costs, including budgeted committed expenditure, the schedule of repayment for the term loan and
operating and capital expenditure on all of the group's operating plants movements in working capital.
licence areas and expectations of future iodine production levels and
commodity price. In reviewing the cash flow forecasts, we separately sensitised the commodity
price to determine the maximum the price of iodine could fall by, assuming a
Our review included: constant volume, in order for the cash to be depleted to Nil by the end of the
forecast period. Overall, the price of Iodine would need to decrease by 66% in
· Assessing the transparency, completeness and accuracy of the matters 2023 and 83% in 2024 in order for EBITDA to be Nil for both years of the
covered in the going concern disclosure by evaluating management's cash flow forecasts. Given the price of Iodine has been increasing since 2018, this is
projections for the forecast period and the underlying assumptions; not considered likely.
· Review of the cash flow forecasts, the methodology behind these and The likelihood of this fall in Iodine prices lasting for the entire forecast
ensuring they are arithmetically correct and challenging the assumptions by period is considered by the Directors to be remote and in such circumstances
discussing them with management and corroborating them with our historical consider sufficient mitigating actions to be available to continue as a going
knowledge of the Group; concern.
· Obtaining post year end management information and comparing these to We have further sensitised the demand for crystallised iodine, reducing it to
forecasts to assess whether budgeting is reasonable and the results are in Nil. The results of this still showed a positive EBITDA for the group as a
line with expectations; and result of the flex in variable costs.
· We completed a sensitivity analysis on the budgets provided to assess
the change in revenue and iodine prices that would need to occur to push the
Group into a cash negative position.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the entity's ability to continue
as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our approach to the audit
As part of designing our audit, we determined materiality and assessed the
risks of material misstatement in the financial statements. In particular, we
looked at where the directors made subjective judgements, for example in
respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain.
We tailored the scope of our audit to ensure that we performed enough work to
be able to give an opinion on the financial statements as a whole, taking into
account an understanding of the structure of the Company and the Group, their
activities, the accounting processes and controls, and the industry in which
they operate. Our planned audit testing was directed accordingly and was
focused on areas where we assessed there to be the highest risk of material
misstatement.
Our Group audit scope includes all of the group companies. At the Parent
Company level, we also tested the consolidation procedures. The audit team
communicated regularly throughout the audit with the CFO in order to ensure we
had a good knowledge of the business of the Group. During the audit we
reassessed and re-evaluated audit risks and tailored our approach accordingly.
The audit testing included substantive testing on significant transactions,
balances and disclosures, the extent of which was based on various factors
such as our overall assessment of the control environment, the effectiveness
of controls and the management of specific risk.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant findings,
including any significant deficiencies in internal control that we identify
during the audit.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matters How our audit addressed the key audit matters
Revenue Recognition Our audit work included, but was not restricted to:
· Documenting our understanding of management's process for evaluating
revenue recognition and assessing the design effectiveness of related key
Under IFRS 15, the entity shall recognise revenue to depict the transfer of controls.
goods or services to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or · We tested the accuracy and occurrence of revenue by selecting a
services. sample of items from the Group's accounting system and tracing them to
supporting documentation.
· We audited the occurrence of revenue by consideration of our testing
The revenue stream for the group is derived from sale of iodine derivatives, in trade receivables in conjunction with using data analytics software. This
iodine chemicals and ancillary products, all of which are fundamental to the was used to assist in identifying the correlation between trade receivables
financial statements and a systematic error in the calculation could lead to a and revenue journals being made and subsequently the receipt of cash for those
material error. trade receivables and therefore whether any subsequent reversal of trade
receivables should have impacted the recognition of the revenue.
· We considered the appropriateness of revenue cut-off by testing pre
We therefore identified the risk over the cut off of revenue as a significant and post year-end revenue items on a sample basis to assess whether the
risk and also considered accuracy and occurrence assertions. revenue items were accounted for in the correct period.
· Whilst performing our audit testing we assessed whether the treatment
of revenue was in accordance with the correct recognition criteria as per the
Group accounting policy.
· Assessing whether the Company's accounting policy for revenue
recognition are in accordance with the requirements of IFRS 15.
The Group's accounting policy on revenue recognition is shown in Principal
Accounting Policies for the consolidated financial statements and related
disclosures are included in note 1d.
Key observations
As a result of the audit procedures we performed and, after considering
management's disclosures of the judgements applied by them, we have concluded
that revenue recognition is materially complete, accurate, has occurred and
recognised on an appropriate basis.
Valuation and Impairment review of property plant and equipment Our audit work included, but was not restricted to:
· We reviewed Management's assessment of forecasted cash flows and
challenged significant movements in forecasted cash flows compared to historic
Under International Accounting Standard 36 'Impairment of Assets' (IAS 36), performance.
companies are required to assess whether there is any indication that an asset
may be impaired at each reporting date. · We reviewed Management's forecasted cash flows that feed into the
discounted cash flow model and challenged significant assumptions with
Property, plant and equipment are a significant balance in the financial reference to historic results, market trends, appropriateness of discount
statements with a combined net book value of $20.6m (2021 - $19.1m). The rates and future expectations of commodity prices and sales growth.
balance is primarily comprised of the IOSorb plants, equipment and machinery
and construction in progress. · We challenged management and gained an understanding of what is
considered a cash generating unit.
· We performed a downside sensitivity analysis and held discussions
The estimated recoverable amount of these balances is subjective due to the with Management to assess the likelihood of certain circumstances
inherent uncertainty involved in forecasting and probability of the related crystallising.
future cash flows.
The Group's accounting policy on Impairment is shown in Principal Accounting
At each reporting date, the Group considers any indication of impairment to Policies for the consolidated financial statements and related disclosures are
the carrying value of its assets. The assessment is based on expected future included in note 1m.
cash flows of the IOSorb plants.
Key observations
The directors are required to conduct impairment tests where there is an
indication of impairment of the asset. The assessment was based on the future As a result of the audit procedures we performed and, after considering
cash flows of each site using a discounted cash flow model (being the 'value management's disclosures of the judgements applied by them, we have concluded
in use'). The value in use was then compared to the carrying value of fixed that no impairments are required.
assets for that site.
Significant management judgement and estimation uncertainty is involved in
this area, where the primary inputs are: We have confirmed the estimates and judgements utilised within the models
applied in relation to the impairment of property, plant and equipment are
• Estimating cash flow forecasts; and within acceptable ranges.
• Selecting appropriate assumptions such as growth rate and discount rate.
We therefore identified the risk over the valuation of property plant and
equipment as a significant risk.
Valuation of Inventory Our audit work included, but was not restricted to:
Inventory primarily consists of iodine and iodine derivatives. Inventory · We engaged component auditors to attend a stocktake at two of the
should be held at the lower of cost and net realisable value. Group's plant locations at the year end, where they observed an inventory
count and performed sample testing on inventory held.
The net realisable value is the estimated selling price in the ordinary course
of business less any applicable selling expenses. As at 31 December 2022, the · We discussed, understood and tested the Group's process for
inventory is valued at $10.2m (2021 - $6.3m). There is a risk that the calculating the cost of the finished goods based on the absorption cost
carrying value in the Group accounts is higher than the recoverable amount and including challenging the robustness of the key assumptions with management to
therefore materially misstated. Further, there is the added risk of the ensure they are appropriate.
complexity of the measurement of the costs of conversion of the inventory and
the estimates and judgements around this. · A sample of inventory items were tested to ensure the product was
held at the lower of Cost and Net Realisable Value.
We therefore identified the valuation of inventory as a key audit matter,
which was one of the most significant assessed risks of material misstatement. The Group's accounting policy on Inventories is shown in Principal Accounting
Policies for the consolidated financial statements and related disclosures are
included in note 1o.
Key observations
As a result of the audit procedures we performed and, after considering
Management's disclosures of the judgements applied by them, we have concluded
that the valuation of inventory is materially accurate and recognised on an
appropriate basis.
We have confirmed the estimates and judgements utilised within the models
applied in relation to the valuation of inventory are within acceptable
ranges.
Valuation and Impairment review of investments in subsidiaries and Our audit work included, but was not restricted to:
intercompany balances
· We utilised discounted cash flow forecasts to form an expectation of
the recoverable amount, and in addition considered the current performance of
the subsidiary entities.
Due to the material size of the investments in, and loans to, the subsidiaries
the directors should critically consider if any indicators of impairment exist · We performed a sensitivity analysis on the key inputs such as a
in relation to the balances. decline in iodine prices and sales growth and concluded that even with the
adverse movements mentioned above in the Group's key assumptions, no potential
The estimated recoverable amount of these balances is subjective due to the impairment was identified.
inherent uncertainty involved in forecasting the profitability of the
subsidiaries. · We obtained and reviewed the Directors' assessment of impairment with
regards to investment and loans due from its subsidiaries in support of the
Where indicators of impairment have been identified a robust review of the valuation and assessed whether this was in line with IAS 36 'Impairment of
investments held by the Parent Company and any amounts due from subsidiaries Assets'.
to the Parent Company should be undertaken by the directors to confirm the
value in use of these amounts and that there are no indications, or · We reviewed the 2022 forecasts against actual results to determine
requirements for, impairments of the amounts. the Directors' historic forecasting accuracy.
Significant management judgement and estimation uncertainty is involved in The Group's accounting policy on impairment is shown in Principal Accounting
this area, where the primary inputs are: Policies for the consolidated financial statements and related disclosures are
included in note 1m.
• Estimating cash flow forecasts;
• Selecting an appropriate assumptions such as growth rate and discount
rate. Key observations
As a result of the audit procedures we performed and, after considering
management's disclosures of the judgements applied by them, we have concluded
We therefore identified the valuation of investments in subsidiaries and that no impairments are required, in addition to the impairment of IofinaEX,
intercompany balances as a key audit matter, which was one of the most Inc in a prior year.
significant assessed risks of material misstatement.
We have confirmed the estimates and judgements utilised within the models
applied in relation to the valuation and impairment of investments in
subsidiaries and intercompany balances are within acceptable ranges.
Our application of materiality
The scope and focus of our audit was influenced by our assessment and
application of materiality. We apply the concept of materiality both in
planning and performing our audit, and in evaluating the effect of
misstatements on our audit and on the financial statements.
We define financial statement materiality as the magnitude by which
misstatements, including omissions, could reasonably be expected to influence
the economic decisions taken on the basis of the financial statements by
reasonable users.
In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Materiality Measure Group Parent
Overall materiality We determined materiality for the financial statements as a whole to be We determined materiality for the financial statements as a whole to be
$501,500 (2021: $389,000). $374,000 (2021: $311,200).
How we determine it For 2022 it is based on one of the key indicators, being 5% of profit before As the Parent is a holding company, materiality was based on 1% of gross
tax for the Group (2021: 1% of revenue). assets.
Rationale for benchmarks applied We believe 5% of profit before tax to be the most appropriate benchmark given
that the group's performance in the past few years has been steadily
increasing.
Performance materiality On the basis of our risk assessment, together with our assessment of the Group
and Company's control environment, our judgement is that performance
materiality for the financial statements should be 75% of materiality for the
Group and Company:
$376,000 (2021: $291,750) $280,000 (2021: $233,400)
Specific materiality We also determine a lower level of specific materiality for certain areas such
as directors' remuneration and related party transactions of $1,000.
Reporting threshold We agreed with the Audit Committee that we would report to them all
misstatements over 5% of Group and Company materiality identified during the
audit, as well as differences below that threshold that, in our view, warrant
reporting on qualitative grounds. We also report to the Audit Committee on
disclosure matters that we identified when assessing the overall presentation
of the financial statements.
$25,000 (2021: $19,450) $19,000 (2021: $15,560)
Other information
The other information comprises the information included in the annual report
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves.
If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and Parent
Company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the Parent Company,
or returns adequate for our audit have not been received from branches not
visited by us; or
· the Parent Company financial statements are not in agreement with the
accounting records and returns; or
· certain disclosures of directors' remuneration specified by law are
not made; or
· we have not received all the information and explanations we require
for our audit.
Responsibilities of directors
As explained more fully in the statement of directors' responsibilities set
out on page 25, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group's and the Parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the group or Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below:
Based on our understanding of the Group and the industry in which it operates,
we identified that the principal risks of non-compliance with laws and
regulations related to the use of regulated chemicals, tax legislation,
employment and health and safety regulations, anti-bribery, corruption and
fraud and we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered those laws and
regulations that have a direct impact on the preparation of the financial
statements such as the Companies Act 2006. We evaluated management's
incentives and opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and determined that
the principal risks were related to inflated revenue and profit.
Audit procedures performed included: review of the financial statement
disclosures to underlying supporting documentation, review of reports from the
regulators, including correspondence with SOCMA (Society of Chemical
Manufacturers and Affiliates), DEA (Drug Enforcement Administration) and OSHA
(Occupational Safety & Health Administration), review of correspondence
with legal advisors, enquiries of management and review of internal audit
committee reports in so far as they related to the financial statements, and
testing of journals and evaluating whether there was evidence of bias by the
Directors that represented a risk of material misstatement due to fraud.
There are inherent limitations in the audit procedures described above and the
further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we
would become aware of it. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at
www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a body, in
accordance with part 3 of Chapter 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the Parent Company's members
those matters we are required to state to them in an auditor's report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Parent Company and the Parent
Company's members as a body, for our audit work, for this report, or for the
opinions we have formed.
Colin Wright
(Senior Statutory Auditor)
For and on behalf of UHY Hacker Young
Chartered Accountants and Statutory Auditor
UHY Hacker Young
4 Thomas More Square
London E1W 1YW
24 April 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2022 2021
Note $'000 $,000
Revenue 3 42,198 39,039
Cost of sales 4 (26,369) (28,307)
Gross profit 15,829 10,732
Administrative expenses 4 (4,361) (3,789)
Depreciation and amortisation 4 (1,824) (1,731)
Operating profit 9,644 5,212
Other income/(expense):
Release of plant acquisition accrual 12 450 -
Paycheck Protection Program loans forgiven - 1,090
Fair value loss on investments in equity instruments
designated as fair value through profit and loss - (900)
Net other income 450 190
Profit before finance expense 10,094 5,402
Finance income 7 13 17
Interest payable 6 (326) (368)
Interest swap derivative asset 20 249 69
Profit before taxation 4 10,030 5,120
Taxation 8 (2,165) 4,066
Profit for the year attributable to owners of the parent $7,865 $9,186
Earnings per share attributable to owners of the parent:
- Basic 9 $0.041 $0.048
- Diluted 9 $0.040 $0.048
2022 2021
Adjusted EBITDA: $'000 $,000
Profit before finance expense 10,094 5,402
Depreciation and amortisation 1,824 1,731
EBITDA 11,918 7,133
Net other income (450) (190)
Adjusted EBITDA $11,468 $6,943
All activities are classed as continuing.
The accompanying notes form part of these financial statements.
CONSOLIDATED BALANCE SHEET
31 December 31 December
2022 2021
Note $'000 $'000
Assets
Non-current assets
Intangible assets 10 283 463
Goodwill 11 3,087 3,087
Property, plant and equipment 12 20,557 19,113
Deferred tax asset 25 1,932 4,066
Term loan - interest swap asset 20 249 -
Total non-current assets 26,108 26,729
Current assets
Inventories 13 10,184 6,296
Trade and other receivables 15 10,487 6,158
Cash and cash equivalents 17 5,927 5,262
Total current assets 26,598 17,716
Total assets $52,706 $44,445
Equity and liabilities
Current liabilities
Trade and other payables 18 7,538 5,802
Term loan - due within one year 20 1,429 1,429
Lease liabilities 19 101 58
Total current liabilities 9,068 7,289
Non-current liabilities
Term loan - due after one year 20 5,357 6,785
Lease liabilities 19 309 410
Total non-current liabilities 5,666 7,195
Total liabilities $14,734 $14,484
Equity attributable to owners of the parent
Issued share capital 23 3,107 3,107
Share premium 60,687 60,687
Share-based payment reserve 24 2,153 2,007
Retained losses (22,031) (29,896)
Foreign currency reserve (5,944) (5,944)
Total equity $37,972 $29,961
Total equity and liabilities $52,706 $44,445
The financial statements on pages 48 to 82 were approved and authorised for
issue by the Board and were signed on its behalf on 24 April 2023.
Dr. Thomas M. Becker - Chief Executive Officer and President
The accompanying notes form part of these financial
statements. Company
number 05393357
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to owners of the parent
Share Share Share-based Retained Foreign Total
capital premium payment losses currency equity
reserve reserve
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2021 $3,107 $60,687 $2,136 $(39,331) $(5,944) $20,655
Transactions with owners
Share-based expense - - 120 - - 120
Share options lapsed and forfeited (249) 249
Total transactions with owners - - (129) 249 - 120
Profit for the year attributable to owners of the parent - - - 9,186 - 9,186
Total comprehensive income attributable to owners of the parent - - - 9,186 - 9,186
Balance at 31 December 2021 $3,107 $60,687 $2,007 $(29,896) $(5,944) $29,961
Transactions with owners
Share-based expense - - 146 - - 146
Total transactions with owners - - 146 - - 146
Profit for the year attributable to owners of the parent - - - 7,865 - 7,865
Total comprehensive income attributable to owners of the parent - - - 7,865 - 7,865
Balance at 31 December 2022 $3,107 $60,687 $2,153 $(22,031) $(5,944) $37,972
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Cash flows from operating activities
Profit before taxation 10,030 5,120
Adjustments for:
Depreciation 1,643 1,551
Amortisation 180 180
Share-based payments 146 120
Paycheck Protection Program loans forgiven - (1,090)
Impairment of investment - 900
Revaluation of derivative asset (249) -
Finance expense 327 299
Finance income (13) (17)
Tax paid (31) -
Operating cash inflow before changes 12,033 7,063
in working capital
Changes in working capital
Increase in trade and other receivables (4,329) (2,873)
(Increase)/decrease in inventories (3,888) 3,360
Increase in trade and other payables 1,737 342
Net cash inflow from operating activities 5,551 7,892
Cash flows from investing activities
Interest received 13 17
Acquisition of property, plant and equipment (3,087) (1,485)
Net cash outflow from investing activities (3,074) (1,468)
Cash flows from financing activities
Term loan repayments (1,429) (1,429)
Revolving loan facility net payments - (2,718)
Interest paid (311) (386)
Lease payments (74) (110)
Net cash outflow from financing activities (1,814) (4,643)
Net increase in cash and cash equivalents 665 1,781
Cash and cash equivalents at beginning of year 5,262 3,481
Cash and cash equivalents at end of year $5,927 $5,262
COMPANY BALANCE SHEET
31 December 31 December
2022 2021
Note $'000 $'000
Assets
Non-current assets
Investment in subsidiary undertakings 28 17,199 17,199
Total non-current assets 17,199 17,199
Current assets
Due from subsidiaries 28 20,112 20,792
Trade and other receivables 15 2 3
Cash and cash equivalents 17 94 163
Total current assets 20,208 20,958
Total assets $37,407 $38,157
Equity and liabilities
Current liabilities
Trade and other payables 18 152 137
Total current liabilities 152 137
Equity attributable to the owners of the parent
Issued share capital 23 3,107 3,107
Share premium 60,687 60,687
Share-based payment reserve 24 2,153 2,007
Retained losses (22,933) (22,022)
Foreign currency reserve (5,759) (5,759)
Total equity 37,255 38,020
Total equity and liabilities $37,407 $38,157
The loss for the financial year dealt with in the financial statements of the
parent company was $911k (2021 loss $873k).
The financial statements on pages 48 to 82 were approved and authorised for
issue by the Board and were signed on its behalf on 24 April 2023
Dr. Thomas M Becker
Chief Executive Officer and President
Company number: 05393357
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to equity holders of the parent
Share Share Share based Retained Foreign Total
capital premium payment losses currency equity
reserve reserve
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2021 $3,107 $60,687 $2,136 $(21,398) $(5,759) $38,773
Transactions with owners
Share-based expense - - 120 - - 120
Share options lapsed and forfeited - - (249) 249 - -
Total transactions with owners - - (129) 249 - 120
Loss attributable to owners of the parent - - - (873) - (873)
Total comprehensive income for the year - - - (873) - (873)
Balance at 31 December 2021 $3,107 $60,687 $2,007 $(22,022) $(5,759) $38,020
Transactions with owners
Share-based expense - - 146 - - 146
Total transactions with owners - - 146 - - 146
Loss attributable to owners of the parent - - - (911) - (911)
Total comprehensive income for the year - - - (911) - (911)
Balance at 31 December 2022 $3,107 $60,687 $2,153 $(22,933) $(5,759) $37,255
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies
The Company is a public limited company incorporated and domiciled in the
United Kingdom. The Company is listed on the AIM Market of the London Stock
Exchange.
The registered office is located at 48 Chancery Lane, London, WC2A 1JF. The
principal activities of the Company have been and continue to be investment in
subsidiaries engaged in the production of iodine and iodine derivatives,
including the arrangement of finance for and the provision of management
services to subsidiaries.
a) Statement of compliance
These consolidated financial statements have been prepared in accordance with
UK adopted International Accounting Standards ('IFRS') and IFRS
Interpretations Committee ('IFRIC') and the Companies Act 2006 applicable to
companies reporting under IFRS.
The accounting policies set out below have been applied consistently to all
periods presented in these consolidated financial statements.
b) New standards, interpretations and amendments
Management continues to evaluate standards, amendments and interpretations
which are effective for reporting periods beginning after the date of these
financial statements and have not been adopted early, including:
- IFRS17 (Insurance Contracts)
- IAS1 Amendment (Classification of Liabilities)
- IAS1 Amendment (Disclosure of Accounting Policies)
- IAS8 Amendment (Definition of Accounting Estimates)
- IAS12 Amendment (Deferred Tax related to Assets and Liabilities)
Implementation of the above is not expected to have a material effect on the
Group's financial statements.
c) Basis of preparation of financial statements
The financial statements have been prepared on the historical cost convention
as modified by the revaluation of financial liabilities at fair value through
profit and loss.
The financial statements are presented in US Dollars, which is also the
Group's functional currency.
Amounts are stated in thousands of US Dollars, unless otherwise stated.
As permitted by Section 408 of the Companies Act 2006, the parent company's
income statement has not been included in these financial statements.
d) Revenue recognition
Revenue is measured as the amount of consideration we expect to receive in
exchange for transferring goods or providing services, and is recognized when
performance obligations are satisfied under the terms of contracts with our
customers. A performance obligation is deemed to be satisfied when transfer of
benefit of the product or service is transferred to our customer. The
transaction price of a contract, or the amount we expect to receive upon
satisfaction of all performance obligations, is determined by reference to the
contract's terms and includes adjustments, if applicable, for any variable
consideration, such as customer rebates or commissions, although these
adjustments are generally not material. Costs incurred to obtain contracts
with customers are expensed immediately.
Revenue consists of sales of iodine derivatives, iodine, chemicals and
ancillary products. All of our revenue is derived from contracts with
customers, and almost all of our contracts with customers contain one
performance obligation for the transfer of goods where such performance
obligation is satisfied at a point in time. Transfer of benefit of a product
is deemed to be transferred to the customer upon shipment or delivery.
Significant portions of our sales are sold free on board shipping point or on
an equivalent basis, while delivery terms of other transactions are based upon
specific contractual arrangements. Our standard terms of delivery are
generally included in our contracts of sale, order confirmation documents and
invoices, while the timing between shipment and delivery generally ranges
between 1 and 45 days. Costs for shipping and handling activities, whether
performed before or after the customer obtains control of the goods, are
accounted for as fulfilment costs.
e) Research and development expenditures
Expenditure on research (or the research phase of an internal project) is
recognised as an expense in the period in which it is incurred. Costs that are
directly attributable to the development phase of a new customised chemical
manufacturing process or development of a new iodine project are recognised as
intangible assets provided they meet the following recognition requirements:
§ completion of the intangible asset is technically feasible so it will be
available for use or sale;
§ the Group intends to complete the intangible asset and use or sell it;
§ the Group has the ability to use or sell the intangible asset;
§ the intangible asset will generate probable future economic benefits;
§ there are adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset; and
§ the expenditure attributable to the intangible asset during its development
can be measured reliably.
Among other things, this requires that there is a market for the output from
the intangible asset or for the intangible asset itself, or, if it is to be
used internally, the asset will be used in generating such benefits.
Development costs not meeting these criteria for capitalisation are expensed
as incurred. In 2021, all research and development expenditures were expensed
as incurred.
f) Going concern
The Group considers that it is now well placed financially in light of recent
reductions in debt, generation of profits and sustained upwards trends in
iodine pricing. On that basis the Group has prepared forecasts and projections
that indicate there are adequate resources to continue in operational
existence for the foreseeable future. However, the Group recognises that there
can be no certainty where these predictions are concerned. After due
consideration of the foregoing, the Directors consider it appropriate to
continue to adopt the going concern basis in preparing the financial
statements.
g) Basis of consolidation and investments in subsidiary undertakings
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries made up to 31 December 2021. Subsidiaries are
entities over which the Group has the power to control the financial and
operating policies so as to obtain benefits from their activities. The Group
obtains and exercises control through voting rights. The acquisition method of
accounting is used to account for the purchase of subsidiaries by the Group.
On acquisition, the subsidiary's assets and liabilities are recorded at fair
value, reflecting their condition at the date of acquisition.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date control commences until the date control
ceases.
Intra-Group balances and any unrealised gains and losses or income and
expenses arising from intra-Group transactions are eliminated in preparing the
consolidated financial statements, unless the losses provide an indication of
impairment of the assets transferred.
Amounts reported in the financial statements of the subsidiaries are adjusted
where necessary to ensure consistency with the accounting policies adopted by
the Group.
Investments in subsidiary undertakings are stated in the parent company
balance sheet at cost less provision for any impairment losses.
h) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The
acquisition method involves the recognition of the acquiree's identifiable
assets and liabilities, including contingent liabilities, regardless of
whether they were recorded in the financial statements prior to acquisition.
On initial recognition, the assets and liabilities of the acquired subsidiary
are included in the consolidated balance sheet at their fair values, which are
also used as the basis for subsequent measurement in accordance with the
Group's accounting policies. Acquisition costs are expensed as incurred.
Goodwill represents the excess of the fair value of consideration payable in a
business combination over the fair value of the Group's share of the
identifiable net assets of the acquiree at the date of acquisition. Any excess
of identifiable net assets over the fair value of consideration is recognised
in profit or loss immediately after acquisition.
As described in Note 1m) below, goodwill is tested for impairment at least
annually.
i) Foreign currency
The vast majority of the Group's business is denominated in U.S. Dollars,
which is the functional currency of the main operating subsidiaries. U.S.
Dollars is the presentational currency for the Group financial statements.
Transactions denominated in foreign currencies are translated at the rates of
exchange ruling at the date of the transaction. Monetary assets and
liabilities in foreign currencies are translated at the rates of exchange
ruling at the balance sheet date. Non-monetary items that are measured at
historical cost in a foreign currency are translated at the exchange rate at
the date of transaction. Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange rates at the date the
fair value was determined.
Any exchange differences arising on the settlement of monetary items or on
translating monetary items at rates different from those at which they were
initially recorded are recognised in profit and loss in the period in which
they arise. Exchange differences on non-monetary items are recognised in other
comprehensive income to the extent that they relate to a gain or loss on that
non-monetary item taken to the statement of changes in equity, otherwise such
gains and losses are recognised in profit and loss.
The results and financial position of foreign operations (none of which has
the currency of a hyperinflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
• assets and liabilities for each balance sheet presented are translated at
the closing rate at the date of that balance sheet;
• income and expenses for each statement of profit or loss and statement of
comprehensive income are translated at average exchange rates (unless this 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 recognised in other comprehensive
income.
On disposal of a foreign operation for which the presentational and functional
currencies were different in previous periods, the cumulative translation
differences are transferred to profit and loss as part of the gain or loss on
disposal. The US Dollar/Pounds Sterling exchange rate averaged 1.2334 in 2022
(2021 1.3756), and at 31 December 2022 was 1.209 (2021: 1.351).
j) Intangible assets
Undeveloped leasehold costs
Undeveloped leasehold costs relate to the costs of acquiring brine leases in
respect of the surface and mineral rights of landowners in areas of interest
outside of those currently connected to the Group's operating plants.
These costs are capitalised as exploration and evaluation assets and are
carried at historical cost less any impairment losses recognised. If areas
leased provide brine to operating plants, the related costs are transferred to
the relevant plants and amortized over the lives of those plants.
Other intangible assets
Other identifiable intangible assets arose from the acquisition of H&S
Chemical in 2009. These assets were valued by an external, independent
valuation firm. Based on the type of asset, the useful life of each asset was
estimated. The value of each identifiable intangible asset is amortised evenly
over its useful life. The following useful lives are applied:
§ WET® patent: 15 years
§ Customer relationships: 10 years
§ Patent portfolio: 8 years
§ EPA registrations: 2 years
Goodwill
Goodwill represents the excess of the fair value of consideration in a
business combination over the fair value of the Group's share of the
identifiable net assets acquired. Goodwill is carried at cost less accumulated
impairment losses.
k) Property, plant and equipment
Property, plant and equipment are stated at historical cost, net of
depreciation and any provision for impairment. Cost includes purchase price
and costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner intended
by management, such as costs relating to construction, site preparation,
installation and testing.
Costs relating to assets put into service at a later date are accumulated as
construction in progress, and depreciation only commences once such assets are
put into use.
Depreciation is provided at rates calculated to write off the depreciable
amount of each asset on a straight line basis over its expected useful life,
as follows:
§ Buildings: 2.5 percent per annum
§ Office lease: term of the lease (38 months)
§ Equipment and machinery:
o IOSorb plants - 5 percent per annum
o Other plant and equipment - 5 to 7 years
o Vehicles and office equipment - 20 percent per annum
o Computer equipment - 33 percent per
annum
Reviews of the estimated remaining lives and residual values of individual
assets are made at least semi-annually, and adjustments are made where
appropriate. Construction in progress is also reviewed for impairment.
Freehold land is not depreciated.
l) Financial instruments
Financial liabilities
Trade and other payables
Trade and other payables are initially recognised at fair value and
subsequently measured at amortised cost using the effective interest rate
method.
Loan notes
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities.
Interest-bearing loans are recorded initially at their fair value, net of
direct transaction costs. Such instruments are subsequently carried at their
amortised cost and finance charges, including premiums payable on settlement,
redemption or conversion, are recognised in profit or loss over the term of
the instrument using the effective rate of interest.
Financial assets
Cash and cash equivalents represent short term, highly liquid investments with
an original maturity of fewer than three months that are readily convertible
to known amounts of cash and which are subject to an insignificant risk of
changes in value. At the end of 2022 and 2021, all cash amounts were in 100
percent liquid accounts.
The Group uses the 'simplified method of expected credit losses'. Trade
receivables are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest rate method, less provision for
expected credit losses. Expected credit losses are based on the Group's
historical credit losses experienced, then adjusted for current and forward
looking information on factors affecting the Group's customers.
m) Impairment
Whenever events or changes in circumstances indicate that the carrying value
of an asset may not be recoverable, that asset is reviewed for impairment. An
asset's carrying value is written down to its estimated recoverable amount
(being the higher of the fair value less costs to sell and value in use) if
that is less than the asset's carrying amount.
Goodwill is allocated to those cash-generating units that are expected to
benefit from synergies of the related business combinations and represent the
lowest level within the Group at which management monitors goodwill.
Cash-generating units to which goodwill has been allocated are tested for
impairment at least annually. An impairment loss is recognised for the amount
by which the asset's or cash generating unit's carrying amount exceeds its
recoverable amount, which is the higher of fair value less costs to sell and
value in use. To determine the value in use, management estimates expected
future cash flows from each cash-generating unit and determines a suitable
discount rate in order to calculate the present value of those cash flows. The
data used for impairment testing procedures are directly linked to the Group's
latest approved budget, adjusted as necessary to exclude the effects of future
reorganisations and asset enhancements. Discount factors are determined
individually for each cash-generating unit and reflect their respective risk
profiles as assessed by management.
Impairment losses for cash-generating units reduce first the carrying amount
of any goodwill allocated to that cash-generating unit. Any remaining
impairment loss is charged pro rata to the other assets in the cash-generating
unit. With the exception of goodwill, all assets are subsequently reassessed
for indications that an impairment loss previously recognised may no longer
exist. An impairment charge is reversed if the cash-generating unit's
recoverable amount exceeds its carrying amount.
The Group assesses on a forward-looking basis the expected credit losses
associated with its debt instruments carried at amortised cost. The impairment
methodology applied depends on whether there has been a significant increase
in credit risk.
For trade receivables, the Group applies the simplified approach permitted by
IFRS 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables. Intercompany loans due to the parent company
from its subsidiaries are tested for impairment as part of the overall
investment in those subsidiaries, by reference to the present values of
estimated future cash flows of the subsidiaries, as further described in Note
2c.
n) Equity
Equity comprises the following:
§ "Share capital" represents the nominal value of equity shares.
§ "Share premium" represents the excess over nominal value of the fair value
of consideration received for equity shares, net of expenses for the share
issue.
§ "Share-based payment reserve" represents the cumulative fair value of
options and warrants issued by the Company and recognised in profit and loss.
§ "Retained losses" represents accumulated losses.
§ "Foreign currency reserve" represents the cumulative differences arising
from translation of foreign operations.
o) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
includes all expenses directly attributable to the manufacturing process as
well as suitable portions of related production overheads, based on normal
operating capacity. Costs of ordinarily interchangeable items are assigned
using the first in, first out cost formula. Cost excludes unrealised gains
arising from intra-Group transactions. Net realisable value is the estimated
selling price in the ordinary course of business less any applicable selling
expenses. When inventory is sold the cost is included in Cost of Sales on the
Statement of Comprehensive Income.
p) Taxation
Tax expense recognised in profit or loss is the tax currently payable based on
taxable profit for the year and deferred tax not recognised directly in
equity.
Deferred income taxes are calculated using the balance sheet liability method.
Deferred tax is generally provided on the difference between the carrying
amounts of assets and liabilities and their tax bases. However, deferred tax
is not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries is not provided
if reversal of these temporary differences can be controlled by the Group and
it is probable that reversal will not occur in the foreseeable future. In
addition, tax losses available to be carried forward, as well as other income
tax credits to the Group, are assessed for recognition as deferred tax assets
according to the likelihood of their recoverability in the foreseeable future.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against
future taxable income. Current and deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the
balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in profit or loss, except where they relate to items that are
charged or credited directly to equity in which case the related deferred tax
is also charged or credited directly to equity.
q) Leases
The Group assesses whether a contract is, or contains, a lease, at inception
of the contract. The Group recognises a right-of-use asset and a lease
liability on the balance sheet at the lease commencement date. The
right-of-use asset is initially measured at cost. This comprises the initial
amount of the lease liability adjusted for any lease payments made at or
before the commencement date and an estimate of any costs to restore the
underlying asset to the site on which it is located, less any lease incentives
received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the earlier of the end of the useful life
of the right-of-use-asset or the end of the lease term. Amounts relating to
such assets are disclosed separately in note 12. In addition, the Group assess
the right-of-use asset for impairment when such indicators exist.
At the commencement date, the lease liability is initially measured at the
present value of the lease payments discounted using the Group's incremental
borrowing rate at the date of transition as the interest rate implicit in the
lease could not be readily determined. Interest is charged at the same
discount rate used to calculate the present value of the lease.
The lease liability is re-measured if the Group changes its assessment of
whether it will exercise a purchase, extension or termination option. When the
lease liability is re-measured in this way, a corresponding adjustment is made
to the carrying amount for the right-of-use asset, or is recorded in profit or
loss if the carrying amount of the right-of-use asset has been reduced to
zero.
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases that have a lease term of 12 months or less
and leases of low value operating value. These are charged to profit and loss
on a straight-line basis over the period of the lease. At 31 December 2021 the
Group had one lease, for office space.
r) Share-based payments
The cost of equity settled transactions is measured at fair value at the grant
date as measured by use of the Black Scholes model. If vesting periods or
other vesting conditions apply, the expense is allocated over the vesting
period, based on the best available estimate of the number of share options
expected to vest. Non-market vesting conditions are included in assumptions
about the number of options that are expected to become exercisable. Estimates
are subsequently revised if there is any indication that the number of share
options expected to vest differs from previous estimates. Any cumulative
adjustment prior to vesting is recognised in the current period. No adjustment
is made to any expense recognised in prior periods if share options ultimately
exercised are different to those estimated on vesting.
Charges made to profit or loss, in respect to share-based payments, are
credited to the share-based payment reserve.
s) Segment reporting (Note 3)
In identifying its operating segments, management follows the Group's service
lines, which represent the main products provided by the Group and are based
on the information presented to the chief operating decision maker, which is
the Board.
2. Significant judgements and estimates
Judgements and estimates are regularly evaluated based on historical
experience, current circumstances and expectations of future events.
The critical estimates made in the preparation of the financial statements are
set out below. The resulting accounting estimate may not equal the related
actual result, and management must also make judgements about current
circumstances and expectations of future events. Significant judgements made
by management include:
a. Intangible and tangible assets are tested for impairment where there
is an indication that they may be impaired. In accordance with IAS 36 -
Impairment of Assets, an intangible or tangible asset is considered impaired
when its carrying amount exceeds its recoverable amount on an individual cash
generating unit basis. The recoverable amounts of relevant cash generating
units are based on value in use calculations using management's best estimate
of future business performance. For this purpose management regards all the
iodine production plants as a single cash generating unit given their mutual
dependence on centralised management, financial, maintenance and sales and
marketing functions. In carrying out impairment testing, management makes a
number of significant estimates in relation to the assumptions incorporated
into their calculations. These will include factors such as growth rates and
discount rates. Cash flow projections over the next five years were used and a
discount rate of 10.83% was applied. Details and carrying values of intangible
assets, goodwill and property, plant and equipment are provided in notes 10,
11 and 12.
b. Management reviews the useful lives of depreciable and amortisable
assets at each reporting date. The carrying amounts are analysed in notes 10
and 12. Management's estimate of the useful lives of plant and equipment as
detailed in note 1k are common life expectancies for the industry. In
particular, the expected useful life attributed to each IOsorb® plant is 20
years. Changes in the expected level of usage or other technological
developments could impact the life and residual value of these assets.
c. Management applies the accounting polices set out in Note 1o)
Inventories to determine the carrying value of raw materials, work in progress
and finished goods (Note 13). Based on historical experience and current
market intelligence, judgements are made as regards net realisable value,
which may include but are not limited to obsolescence, usage in alternative
formulations, production needs, market demand, costs to complete production,
condition, regulatory requirements and limitations, and allocations of
production overheads to the cost of work in progress and finished goods. Based
on these assessments no requirement for provisions against the carrying value
of inventories was identified.
d. The carrying amount of the parent company's investment in its
subsidiaries of $37.3m (2021: $38.0M) has been evaluated for impairment. The
investment amounts include debts due from subsidiaries of $20.1m (2021
$20.8m). For this purpose the two operating subsidiaries have been treated as
one unit, given the vertical integration of the Group's operating activities.
The carrying amount of the parent company's investment of $37.3m (2021:
$38.0M) compares to carrying amounts of the subsidiaries' net assets,
excluding loans from the parent company, of $38.0m (2021: $29.9m). An
assessment has been made of the present values of the future cash flows
related to the operating activities of the subsidiaries to determine whether
any impairment losses should be recognised. The assessment took into account
cash flow projections of the subsidiaries over the next five years, and
applied a discount rate of 10.83%. The Group has concluded that no impairment
provision is required.
e. In accordance with IAS12 and in light of the Group's recent much
improved profitability, and therefore its likely utilisation of its
accumulated US Federal tax losses in the foreseeable future, a deferred tax
asset reflecting the value of those losses at a tax rate of 21% was set up in
the balance sheet as of 31 December 2021 and credited to tax in the profit and
loss account. This asset is being amortised to the profit and loss account in
line with reductions in tax payable resulting from utilisation of the losses.
Management considers this treatment continues to be appropriate in light of
the Group's ongoing profitability. The deferred tax asset balance at 31
December 2022 was $1.9m (see Notes 8 and 25).
3. Segment reporting
a. Business segments - The Group's operations comprise the exploration
and production of iodine with complete vertical integration into its specialty
chemical halogen derivatives business, and are therefore considered to fall
within one business segment.
31 December 31 December
2022 2021
$ $
Assets
Halogen Derivatives and Iodine 52,706 44,445
Total $52,706 $44,445
Liabilities
Halogen Derivatives and Iodine 14,734 14,484
Total $14,734 $14,484
3. Segment reporting (continued)
b. Geographical segments - The Group reports by geographical segment. The
Group's activities are related to exploration for, and development of, iodine
in certain areas of the USA and the manufacturing of specialty chemicals in
the USA with support provided by the UK office. In presenting information on
the basis of geographical segments, segment assets and the cost of acquiring
them are based on the geographical location of the assets.
31 December 31 December
2022 2021
$'000 $'000
Assets
UK 96 166
USA 52,610 44,279
Total $52,706 $44,445
Liabilities
UK 153 137
USA 14,581 14,347
Total $14,734 $14,484
Revenue
North America 19,822 19,858
Asia 17,960 15,851
South America 3,588 3,148
Europe 783 156
Other 45 26
Total $42,198 $39,039
c. Significant customers - in 2022 Iofina Chemical had six customers in
excess of 5% of sales (2021 five customers). 2022 percentages were 11%, 8%,
7%, 7%, 6%, 6% (2021 percentages were 10%, 9%, 7%, 7%, 6%).
4. Profit before taxation
Profit before taxation is stated after charging:
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Depreciation expense 1,643 1,551
Amortisation expense 180 180
Other:
Annual audit fees for audit of parent company and consolidated financial 65 82
statements
Fees payable to the company's auditor for other services - 8
4. Profit before taxation (continued)
Cost of sales - analysis by nature
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Raw materials 12,872 14,912
Freight 657 782
Sales commission 378 359
Labour, manufacturing overhead and royalties 12,462 12,254
$26,369 $28,307
Administrative expenses - analysis by nature
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Remuneration and benefits 2,955 2,582
Share-based payments 146 120
Office expenses 254 257
Professional services 655 554
Travel 169 75
Rent (34) (19)
Other 216 220
$4,361 $3,789
Research and development expenses recognised during the period were $237k
(2021: $241k), and are included in administrative expenses above.
5. Staff numbers and costs
The average number of Group employees, including executive directors, and
their costs were:
Year ended Year ended
31 December 31 December
2022 2021
Number Number
Production 80 81
Administrative 14 14
Sales 1 1
Total staff 95 96
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Wages and salaries 7,245 6,454
Social security costs 1,120 1,057
$8,365 $7,511
5. Staff numbers and costs (continued)
Of the total staff costs above, $5,600k (2021: $5,120k) is included within
cost of sales and $2,765k (2021: $2,391k) is included within administrative
expenses.
Payments to executive directors and senior officers of subsidiaries
(considered to be key management personnel) for their services during the year
were as follows:
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Wages and salaries 1,116 941
Social security costs 85 108
Total key management cost $1,201 $1,049
Included within wages and salaries above is $309k (2021: $295k) in respect of
the highest paid director. No options were exercised by a director in 2022
(2021 Nil).
6. Finance expense
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Term loan interest 310 345
Revolving loan facility interest - 27
IFRS16 lease interest 16 (4)
Total finance expense $326 $368
7. Finance income
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Interest income 13 17
$13 $17
8. Taxation
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Current tax 31 -
Deferred tax (Note 25) 2,134 (4,066)
$2,165 $(4,066)
Tax reconciliation:
Profit on ordinary activities before tax 10,030 5,120
Tax at UK income tax rate of 19% (2021: 19%) 1,905 973
Effects of:
Temporary differences (149) (110)
Permanent differences 10 (32)
UK losses not recognised 165 162
Difference in tax rates US/UK 203 105
Tax charge not recognised - (1,097)
Losses carried forward recognised as deferred tax asset - (4,066)
Current tax paid 31 -
Total tax charge/(credit) $2,165 $(4,066)
As previously disclosed, the Group has accumulated US Federal tax losses that
are expected to be deductible from future US Federal taxable profits subject
to agreement with the relevant tax authorities. As of 31 December 2022 these
losses are estimated to be approximately $9.2 million (2021: $19.4 million).
To the extent US Federal tax losses are not utilised to offset current income
taxes they will begin to expire in 2035.
In accordance with IAS 12 and in light of the Group's recent much improved
profitability, and therefore its likely utilisation of its accumulated US
Federal tax losses in the foreseeable future, a deferred tax asset of $4.1m
reflecting the value of those losses at a tax rate of 21% was set up in the
balance sheet as of December 2021 and credited to tax in the consolidated
statement of income. This asset is being adjusted to the consolidated
statement of income in line with reductions in tax payable resulting from
utilisation of the losses.
9. Earnings per share
The calculation of earnings per ordinary share is based on the profit after
tax attributable to shareholders of $7,865k (2021 profit $9,186k) and the
weighted average number of ordinary shares outstanding of 191,858,408 (2021:
191,858,408). After including the weighted average effect of dilutive share
options of 4,186,203 (2021: 1,232,450) the diluted weighted average number of
ordinary shares outstanding was 196,044,611 (2021 193,090,858).
10. Intangible assets (Group)
Details of intangible assets are set out below:
Intangible assets WET® patent Customer relationships Patent portfolio EPA registrations Total
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2021 2,700 661 187 271 3,819
At 31 December 2021 & 2022 $2,700 $661 $187 $271 $3,819
Accumulated amortization
At 1 January 2021 2,057 661 212 271 3,176
Charge for the year 180 - - - 180
At 31 December 2021 2,237 661 187 271 3,356
Charge for the year 180 - - - 180
At 31 December 2022 $2,417 $661 $187 $271 $3,536
Carrying amounts
At 31 December 2020 $643 - - - $643
At 31 December 2021 $463 - - - $463
At 31 December 2022 $283 - - - $283
Intangible assets were acquired in the acquisition of H&S Chemical in
2009.
WET® Patent
The WET® Patent technology employs two different iodine extraction methods
depending on brine chemistry for optimal efficiency. We utilised a with and
without analysis, a variation of the discounted cash-flow method, to estimate
the fair value of a WET® Patent at date of acquisition. The methodology
compared the cash flow generating capacity of Iofina Chemical assuming it was
operating without the benefit of the WET® Patent to the projected cash flow
with the benefit of the patent. The contractual life of the patent is in
excess of 20 years; however, the useful life of the patent was estimated at 15
years based on the following:
§ Management's expectation for the expected viability of the technology
§ Management's expectations regarding the timing of significant substitute
technology
§ The lack of comparable substitute technologies as of the valuation date
§ The remaining amortization period is 1.5 years
11. Goodwill (Group)
Carrying amounts $'000
At 31 December 2020, 31 December 2021 and 31 December 2022 $3,087
Goodwill arose on the acquisition of H&S Chemical in 2009 and is wholly
allocated to the Iofina Chemical cash generating unit of the Group. Goodwill
impairment testing is conducted annually, based on projected cash flow to be
generated.
The Chemical business has been in operation for 36 years, and much of its
products and customer base are long established. For impairment testing, a
long term growth rate of 1.00% per annum was applied to budgeted cash flows
and a discount rate of 10.83% per annum was used. On this basis the net
present value of cash flow exceeded the goodwill amount of $3,087k.
Sensitivity analysis
Projections based on the above assumptions show headroom of $7.9m between the
value in use of the business net of other assets of $34.3m and the carrying
value of $26.4m, comprising goodwill of $3.1m, other intangible assets of
$0.3m, and net business trading assets of $23.0m. In order for the value in
use to equal the carrying value it would be necessary for the discount rate to
rise to 14.0% or the long term growth rate to be 4.25% negative or projected
EBITDA to be lower by 20.4%. Based on the results of this impairment testing
management are satisfied that a reasonably possible change in assumptions
would not lead to an impairment.
12. Property, plant and equipment (Group)
Exploration
and Evaluation
Assets
Montana Freehold Land Buildings Equipment and Machinery Construction in Progress Total
Atlantis
Field
Right of use
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2021 236 209 1,730 355 25,064 636 28,230
Transfers (236) - 276 - 1,124 (1,164) -
Additions - - 38 415 168 1,279 1,900
Disposals - - - (18) (80) - (98)
At 31 December 2021 - $209 $2,044 $752 $26,276 $751 $30,032
Transfers - - (37) - 103 (113) (46)
Additions - - 18 - 230 2,885 3,133
At 31 December 2022 - $209 $2,025 $752 $26,610 $3,524 $33,119
Accumulated depreciation
At 1 January 2021 - - 492 205 8,751 - 9,448
Charges for the year - - 57 96 1,398 - 1,551
Disposals - - - - (80) - (80)
At 31 December 2021 - - $549 $301 $10,069 - $10,919
Charges for the year - - 61 104 1,479 - 1,644
At 31 December 2022 - - $610 $405 $11,548 - $12,563
Carrying amounts
At 31 December 2020 $236 $209 $1,238 $150 $16,313 $636 $18,782
At 31 December 2021 - $209 $1,495 $451 $16,207 $751 $19,113
At 31 December 2022 - $209 $1,415 $346 $15,062 $3,524 $20,557
Right-of-use assets
Right-of-use assets relate to the Group's lease on office premises in Denver,
Colorado. During 2021 the expiry date of the lease was extended from April
2022 to April 2026, and an amount of $415k was capitalised as an addition in
respect of future rentals, in accordance with IFRS 16. Liabilities for future
payments are shown in Note 19.
Release of plant acquisition accrual
An accrual balance of $0.45m relating to the acquisition of #IO2 plant is no
longer considered to be required, and has therefore been transferred to
income. No claims have been made and the period of validity for such claims
has expired.
13. Inventories
Group 31 December 31 December
2022 2021
$'000 $'000
Raw materials 7,231 4,487
Work in progress 2,895 1,753
Finished goods 58 56
$10,184 $6,296
At year end, there were no provisions against the carrying value of
inventories (2021: nil). During the year, the cost of inventories recognised
as expense and included in 'cost of sales' amounted to $25,334k (2021:
$27,165k).
14. Financial instruments
The Board of directors determines, as required, the degree to which it is
appropriate to use financial instruments to mitigate risks. The main risks for
which such instruments may be appropriate are interest rate risk, foreign
currency risk, credit risk, investment risk, liquidity risk and commodity
risk. The Group's principal financial asset is cash, which is invested with
major banks. The Group has a term loan and no other borrowings currently drawn
(see Note 20).
Financial assets and liabilities
Group Loans and receivables at amortised cost Financial liabilities at amortised cost Total
Investment and swap liability at fair value
2022 $'000 $'000 $'000 $'000
Cash and cash equivalents 5,927 5,927
Trade receivables 9,950 9,950
Interest rate swap asset 249 249
$16,126
Trade payables 2,510 2,510
Accrued liabilities 5,028 5,028
Lease liabilities 410 410
Term loan 6,785 6,785
$14,733
2021
Cash and cash equivalents 5,262 5,262
Trade receivables 5,653 5,653
$10,915
Trade payables 1,521 1,521
Accrued liabilities 4,281 4,281
Lease liabilities 468 468
Term loan 8,214 8,214
$14,484
14. Financial instruments (continued)
Company Loans and receivables at amortised cost Financial liabilities at amortised cost Total
2022 $'000 $'000 $'000
Cash and cash equivalents 94 94
Other receivables 2 2
Due from subsidiaries 20,112 20,112
$20,208
Accruals 153 153
$153
2021
Cash and cash equivalents 163 163
Other receivables 3 3
Due from subsidiaries 20,792 20,792
$20,958
Accruals 137 137
$137
The interest rate swap liability at fair value is valued on the basis of Level
2 inputs as defined in IFRS 13.
Interest rate risk
Surplus funds are held within the Group's checking and savings accounts. The
benefit of fixing rates for the longer term is kept under review, having
regard to forecast cash requirements and the levels of return available. Given
the short term nature of Iofina's surplus funds, the Group has limited
interest rate risk. As of 31 December 2022, all surplus funds were invested in
checking and savings accounts that had no terms and were 100% liquid. Bank
facilities have variable interest rate terms and therefore there is an
exposure to increases in interest rates. This is mitigated by the use of an
interest rate swap to fix the rate on the majority of the term loan. Also the
interest on the revolving credit facility (if drawn) is reduced by
arrangements to sweep surplus funds into that account.
Foreign currency risk
The Group has potential transactional currency exposure in respect of items
denominated in foreign currencies relating to the Group's administration in
the UK. The balance of cash held in foreign currency was $94k (GBP £78k) as
of year-end, and provides a hedge against GBP denominated UK expenses.
Sales transactions are denominated in US Dollars, which is the operating
currency. Other impacts of foreign currency risk are not deemed material to
these financial statements.
Credit risk
The maximum exposure is reflected by the carrying amount of financial assets.
Because the counterparties to Iofina's holdings of cash and cash equivalents
are prime financial institutions, Iofina
14. Financial instruments (continued)
does not expect any counterparty to fail to meet its obligations.
Additionally, the Group is exposed to marginal credit risk in the form of
receivables for product sales. Credit risk in this regard is mitigated through
long-term customer payment history, insurance of certain foreign
receivables, extensive credit analysis of large purchasers, use of letters of
credit, and the requirement for partial or total payment prior to shipment for
some customers.
Investment risk
There is a risk that short term investments may not realise their carrying
value.
Liquidity risk
The Group raises funds as required on the basis of forecast expenditure and
cash inflows over the next 12 months. When necessary, the scope and rate of
activity are adjusted to take account of the funds available. There is a risk
that the Group may not be able to raise sufficient funds to repay loans at
their maturity.
The following table sets out the contractual maturities (representing
undiscounted contractual cash flows) of financial liabilities:
Group Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 6 years
At 31 December 2022: $'000 $'000 $'000 $'000
Trade payables 2,510 - - -
Accrued liabilities 2,059 2,969 - -
Lease liabilities 19 82 260 49
Term loan 357 1,071 1,429 3,929
$4,944 $4,122 $1,689 $3,978
Group Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 6 years
At 31 December 2021: $'000 $'000 $'000 $'000
Trade payables 1,521 - - -
Accrued liabilities 1,476 2,804 - -
Lease liabilities 2 56 102 309
Term loan 357 1,071 1,429 5,357
$3,356 $3,931 $1,531 $5,666
Commodity risk
The Group is exposed to movements in the price of raw iodine. Sales of iodine
based products were
$31,422k (2021: $30,473k). The effects of changes in the price of iodine on
2022 revenue and profits are set out in the Financial Review on pages 7 to 9.
Iodine is produced internally and is the most significant cost component for
iodine based products.
15. Trade and other receivables
Group
31 December 31 December
2022 2021
$'000 $'000
Trade receivables 9,950 5,653
Prepayments and other receivables 537 505
$10,487 $6,158
Company
31 December 31 December
2022 2021
$'000 $'000
Prepayments and other receivables 2 3
$2 $3
All receivables and prepayments are short term in nature. The carrying values
are considered a reasonable approximation of fair value. There are no expected
credit losses.
The Group and the Company have not received a pledge of any assets as
collateral for any receivable or asset.
17. Cash and cash equivalents
Group
31 December 31 December
2022 2021
$'000 $'000
Cash in US Dollar accounts 5,833 5,099
Cash in GB Pound Sterling accounts 94 163
$5,927 $5,262
Company
31 December 31 December
2022 2021
$'000 $'000
Cash in GB Pound Sterling accounts 94 163
$94 $163
18. Trade and other payables
Group 31 December 31 December
2022 2021
$'000 $'000
Trade payables 2,510 1,521
Accrued expenses and deferred income 5,028 4,281
$7,538 $5,802
Company
31 December 31 December
2022 2021
$'000 $'000
Accrued expenses 153 137
$153 $137
All trade and other payables are considered short term. The carrying values
are considered to be a reasonable approximation of fair value.
Except as regards the bank facilities described in Note 20, the Group and
Company have not pledged any assets as collateral for any liabilities or
contingent liabilities.
19. Lease liabilities
31 December 31 December
2022 2021
$'000 $'000
Lease liabilities - current 101 58
Lease liabilities - non-current 309 410
$410 $468
Movements: 2022 2021
$'000 $'000
Opening balance 468 186
Payments (74) (110)
Lease extension liabilities - 405
Interest accrued 16 (4)
Adjustments - (9)
$410 $468
Lease liabilities relate to the Group's lease on office premises in Denver,
Colorado, which was extended during 2021 to run till 30 April 2026.
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 Group's incremental borrowing rate on commencement of the
lease or the extension period. Lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
by lease payments made.
20. Term loans and Revolving loan facility
Term loan Revolving loan facility
$'000 $'000
At 1 January 2021 $9,643 $2,718
Term loan instalment repayments (1,429) -
Revolving loan facility net payments - (2,718)
At 31 December 2021 $8,214 -
Term loan instalment repayments (1,429) -
At 31 December 2022 $6,785 -
Due within one year $1,429 -
Due after one year $5,357 -
The above bank facilities, with First Financial Bank of Ohio, are fully
secured by fixed and floating charge and the principal terms are:
Term loan
a) The term loan balance of $6.8m (2021 $8.2m) relates to a $10.0m loan drawn
down in September 2020 and repayable in full by equal monthly instalments over
the seven years to 30 September 2027. The interest rate on $7 million of the
loan has been fixed to maturity by a swap contract at 3.99%, and the interest
rate on the balance is variable monthly at 2.50% above the one month Secured
Overnight Financing Rate ("SOFR"), subject to a minimum SOFR rate of 1.00%.
Repayment of all or part of the loan may be made at any time without penalty.
Revolving loan facility
b) The revolving loan facility is for $6.0m over the period to September
2024, and may be drawn and repaid in variable amounts at the Group's
discretion. Amounts that may be drawn are subject to a borrowing base of
sufficient eligible discounted monthly values of receivables and inventory,
and compliance on a quarterly basis with trailing 12 months financial covenant
ratios of 1) a maximum multiple of 2.5 total debt to EBITDA, and 2) a minimum
multiple of 1.2 EBITDA net of capital expenditure to the total of principal
and interest payments on the total debt. The interest rate is variable monthly
at 2.4% above SOFR, subject to a minimum SOFR rate of 1.00%.
Additional facilities
c) There are further facilities for capital projects totalling $4.36m that are
available but have not yet been drawn.
Swap contract
d) The derivative asset resulting from the swap contract described above as at
31 December 2022 has been revalued by reference to market expectations for
future SOFR rates, and an amount of $249k has been credited to comprehensive
income (2021 $69k) and included in the balance sheet. During the year the swap
contract generated a net reduction of interest otherwise payable of $23k.
21. Net debt
Net debt excludes lease liabilities totalling $410k (2021 $468k) and is made
up as follows:
2022 2021
$'000 $'000
Term loan (6,785) (8,214)
Cash and cash equivalents 5,927 5,262
Net debt at 31 December $(858) $(2,952)
23. Share capital
31 December 31 December
2022 2021
Authorised:
Ordinary shares of £0.01 each - number of shares 1,000,000,000 1,000,000,000
- nominal value £10,000,000 £10,000,000
Allotted, called up and fully paid:
Ordinary shares of £0.01 each - number of shares 191,858,408 191,858,408
- nominal value £1,918,584 £1,918,584
There was no change in share capital or share premium in 2022.
24. Share based payments
On 9 March 2022 options over 1,196,700 ordinary shares of the Company,
representing 0.62% of the Company's issued share capital at that date, were
granted to directors and key management personnel. The options are exercisable
at the closing share price on 9 March 2022 of 17.6p per share, with 50%
vesting after one year on 9 March 2023 and 50% vesting after two years on 9
March 2024. The options expire ten years from the date of grant.
The above options were valued using the Black Scholes model and the exercise
price of 17.6p, an expected term of 5.75 years, historical volatility of
74.88% and a risk free rate of 1.9%. The resulting valuation of $179,658 is
being amortised over the vesting periods, and $109,591 has been charged as an
expense in respect of the period from 9 March 2022 to 31 December 2022.
No options lapsed or were forfeited or exercised during the year. In 2021 a
total of 1,378,250 options either lapsed or were forfeited. There were
5,000,400 total options outstanding at 31 December 2022, representing 2.61% of
shares in issue.
24. Share based payments (continued)
Options granted to directors and key employees and outstanding at 31 December
2022 are as follows:
Date of Grant Number of Options Vesting Share Price Exercise Price Exercise Price 2022 Exercise Price 2021
Date
£ £ $ $
13 June 2018 880,000 13 June 2019 0.162 0.162 0.20 0.22
13 June 2018 880,000 13 June 2020 0.162 0.162 0.20 0.22
25 July 2019 451,000 25 July 2020 0.213 0.213 0.26 0.29
25 July 2019 451,000 25 July 2021 0.213 0.213 0.26 0.29
16 December 2020 570,850 16 December 21 0.125 0.125 0.15 0.17
16 December 2020 570,850 16 December 22 0.125 0.125 0.15 0.17
9 March 2022 598,350 9 March 2023 0.176 0.176 0.21 -
9 March 2022 598,350 9 March 2024 0.176 0.176 0.21 -
Weighted average 5,000,400 £0.17 £0.17 $0.20 $0.22
The weighted average contractual life of options outstanding at 31 December
2022 was 7.1 years (2021 7.5 years).
Exercise prices shown in USD are based on the US Dollar/Pounds Sterling
exchange rate at 31 December 2022 of 1.21 (2021 1.351). Options outstanding at
31 December 2022 expire the earlier of ten years from grant date or 90 days
after the termination of service to the Company.
2022 Number of Options Weighted average exercise price 2021 Number of Options Weighted average exercise price
£ $ £ $
Options outstanding
At 1 January 3,803,700 £0.16 $0.22 5,181,950 £0.19 $0.26
Granted 1,196,700 £0.18 $0.21 - - -
Lapsed - - - (985,000) £0.30 $0.41
Forfeited - - - (393,250) £0.16 $0.22
At 31 December 5,000,400 £0.17 $0.20 3,803,700 £0.16 $0.22
Options exercisable
At 1 January 3,232,850 £0.21 $0.28 3,457,250 £0.21 $0.28
Lapsed - £0.30 $0.41 (985,000) £0.30 $0.41
Forfeited - £0.17 $0.23 (261,250) £0.17 $0.23
Vested 570,850 £0.16 $0.22 1,021,850 £0.16 $0.22
At 31 December 3,803,700 £0.17 $0.23 3,232,850 £0.17 $0.23
24. Share based payments (continued)
Movements in the Share-based payment reserve were as follows:
31 December 31 December
2022 2021
$'000 $'000
Balance 1 January 2,007 2,136
Share-based payment charge 146 120
Lapsed and forfeited options - (249)
Balance 31 December $2,153 $2,007
25. Deferred tax
2022 2021
$'000 $'000
At 1 January 4,066 -
Prior years US Federal tax losses available for offset against - 4,066
future US Federal taxable profits (see note 8)
Prior years tax losses utilized against US Federal tax liability (2,134) -
(see Note 8)
At 31 December $1,932 $4,066
26. Related party transactions
Transactions between group companies were as follows:
2022 2021
$'000 $'000
Iofina Resources to/(from) Iofina Chemical:
Crystallised iodine sales 22,115 16,059
Expenses recharged (net) (200) (903)
Iofina Plc to/(from) Iofina Resources:
Management fee 50 50
Funding payments (750) (1,000)
Expenses recharged (7) (2)
Iofina Plc to/(from) Iofina Chemical:
Management fee 50 50
Expenses recharged (22) (19)
In both 2021 and 2022 all iodine produced by Iofina Resources was sold to
Iofina Chemical.
Additional related party transactions with directors, who are considered to be
key management personnel, are set out in the Corporate Governance Statement on
page 27. Option grants as described in note 24 are to employees and Directors.
26. Related party transactions (continued)
The Company has entered into a number of unsecured related party transactions
with its subsidiary undertakings. The most significant transactions carried
out between the Company and its subsidiary undertakings are financing.
27. Capital management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern, to provide returns for shareholders
and to maintain an optimal capital structure to reduce the cost of capital.
The Group defines capital as being share capital plus reserves as shown in the
balance sheet. The Directors continue to monitor the level of capital as
compared to the Group's commitments and adjust the level of capital as is
determined to be necessary by issuing new shares. Iofina plc is not subject to
any externally imposed capital requirements. The Directors consider the
capital of the Group to be the total equity attributable to the equity holders
of the parent of $38.0 million as at 31 December 2022 (2021: $30.0
million).
28. Subsidiary undertakings
Investment in subsidiaries
Investment in
subsidiaries
$'000
Company
Balance at 31 December 2020, 2021 and 2022 $17,199
Due from subsidiaries
2022 2021
$'000 $'000
Company
At 1 January 20,792 21,712
Management fees 100 100
Funding from subsidiaries (750) (1,000)
Expenses recharged to Plc (30) (20)
At 31 December $20,112 $20,792
The Group's debt arrangements are on a joint and several basis with all Group
companies excluding dormant subsidiaries. The principal beneficiary of these
arrangements is Iofina Resources, Inc., and therefore the debt is accounted
for in that company and in the consolidated balance sheet, and does not appear
in the balance sheet of Iofina Plc.
Company Country of incorporation and operation Principal activity Interest in ordinary shares and voting rights
Iofina, Inc. United States/CO Holding company 100%
Iofina Resources, Inc. United States/CO Iodine production 100%
Iofina Chemical, Inc. United States/DE Specialty chemical 100%
IofinaEX, Inc. United States/KY Dormant 100%
Iofina Resources, LLC United States/CO Dormant 100%
Iofina Resources, LLC United States/TX Dormant 100%
28. Subsidiary undertakings (continued)
Iofina, Inc. was established in February 2006 and is a wholly owned subsidiary
of Iofina plc. Iofina, Inc. owns the whole of the issued share capital of
Iofina Resources, Inc., Iofina Chemical, Inc. and IofinaEX, Inc. Other
entities are subsidiaries of Iofina Resources, Inc., the iodine production
company.
The registered offices of the above companies are as follows:
Company Registered office
Iofina, Inc. 8480 East Orchard Road, Greenwood Village CO 80111, USA
Iofina Resources, Inc. 8480 East Orchard Road, Greenwood Village CO 80111, USA
Iofina Chemical, Inc. 306 W. Main Street, Frankfort, KY 40601, USA
IofinaEX, Inc. 212 N 2nd St., Suite 100, Richmond, KY 40475
Iofina Resources, LLC (CO) 8480 East Orchard Road, Greenwood Village CO 80111, USA
Iofina Resources, LLC (TX) 815 Brazos Street, Austin TX 78701, USA
29. Capital commitments
At 31 December 2022 the Group had capital commitments amounting to
approximately $2m in respect of completion of construction of #IO9 plant.
30. Post balance sheet events
There were no post balance sheet events.
31. Contingent liabilities
The Group considers that a contingent liability exists in respect of overdue
interest on amounts that may be due in relation to certain iodine related
property rights. The theoretical exposure is estimated at approximately $300k,
but past experience suggests that amounts actually paid will be a relatively
small proportion of that amount.
32. Ultimate controlling party
There is no ultimate controlling party of the Group.
Iofina and the environment
Iofina promotes, wherever possible, environmental sustainability in its
working practices and seeks to minimise, mitigate, or remedy any harmful
effects from the Group's operations on the environment at each of its
operational sites. To continue that effort through all aspects of business,
this report has been produced to minimise its effect on the environment by
using thinner paper, fewer pages, smaller type set, and non‐colour printing
as much as possible. As part of this effort Iofina is trying to move attention
to its online annual reports available at www.iofina.com. By being a better
steward of the environment, Iofina saves valuable shareholder funds instead of
producing glossy magazine pages throughout the whole document.
This page does not form part of the statutory financial statements.
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