The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
Haydale (AIM: HAYD), the global advanced materials group, is pleased to announce its full year results for the year ended 30 June 2017.
Post Period End Highlights:
Commenting on the results Ray Gibbs, CEO of Haydale, said:
"This has been a year of considerable developments at Haydale as the Group has moved from being R&D focused to a commercial entity with focus on repeatable revenues of our advanced materials in both Graphenes and our specialist Silicon Carbide micro fibre product. We are at the inflexion point in our evolution having built a global presence serving locally the key markets of the Far East and USA. We have grown total income by 100% and with the recent overseas investments and emphasis on increasing sales, we look at the current financial year with much optimism having built the foundations for the Group to achieve its long term strategic objectives."
I am delighted to present the Company's full year results to 30 June 2017 as your new Chairman, having taken over from John Knowles, who retired in July of this year. The Group thanks John for his major contribution to the Company, which he joined prior to the IPO in April 2014. My task is to build on his foundations and to move the business on from our early commercial wins to taking the current products we have developed, and together with the new ones in the pipeline, grow the business into being a significant global advanced materials group.
Haydale has been working for over 18 months on developing products in the Far East, a market which we see as ready adopters of graphene, and our other advanced materials, and a market that offers significant potential growth. I am therefore encouraged to see our strategic focus in the Far East is starting to pay off, with a dozen sales orders received across our three sites in the Far East since the beginning of August, where we have been particularly active in supplying our tailored graphene-based inks for screen printing sensors for the self-monitoring blood glucose ("SMBG") market. Whilst initially modest, it is the beginning of long-term repeat orders that we are looking to secure in this rapidly growing £11.54 billion market (US$15 billion). Furthermore, as previously announced, a number of our graphene-based inks have received FDA regulatory approval to test in the SMBG sector where we believe the applications can be aimed at the US market. The longevity of these products is the crucial factor in our investment into this sector which, once established, are expected to deliver regular recurring sales orders to the Group.
In addition, Haydale's graphene has been designed into a new product range for a leading Far East cookware manufacturer who sell almost 400,000 units per month. We are in the final stages of independent testing of the product range which, if successful, is expected to be launched in the new year. The functionalised graphene material incorporated into the product was processed by our new Thai facility and has been shown to enhance the thermal response in a range of pots and pans. Once launched, our expectation is that the manufacturer will extend the graphene coating across a wider range of its cookware products. It is our firm intention to then seek other cookware manufacturers in other geographic territories to adopt this new product offering.
On the corporate front, the year under review was a very busy one, with two strategic acquisitions completed, one in the USA and one in Thailand. We now believe that we have a global presence in the world markets serving customers wanting our performance enhancing advanced materials to improve their own products. Post year end, we began operating out of Taiwan to meet demand for biomedical screen-printed sensors for the SMBG market. It is early stages but the customer engagements are looking very encouraging. We are now operating from six sites globally (two in the UK and one in each of the US, Thailand, South Korea and Taiwan), the sales from which are managed through two newly established strategic business units which began operating in July 2017 dealing with (i) resins, polymers and composites; and (ii) advanced materials, including functional inks, coatings and silicon carbide (SiC). Going forward, we will concentrate on growing our sales order book, which at the year end stood at £5.40 million and was increased post year end to approximately £6.00 million, bolstered by the new US$4.48 (£3.45) million three-year-contract announced in early September with one of our existing SiC customers, Tateho Chemical Industry Co., Limited.
As part of Haydale's sales strategy we will continue to look to engage in focussed partnerships, collaborations, and other commercial arrangements with "best in class" companies across the globe in our chosen strategic market of composites, ceramics and functional inks/coatings, in order to introduce our products using these advanced materials.
I would like to thank the staff, our advisors and my fellow Board members for their hard work and dedication in positioning the Group for the next stage of its growth. I would also like to thank our shareholders for their continued support.
10 October 2017
Total income for the year ended 30 June 2017 increased more than 100 per cent. year on year to £3.91 million (2016: £1.92 million), being generated from a mixture of silicon carbide sales (8½ month's contribution from ACM, acquired in mid-October 2016), advanced composite consulting contracts, reactor sales and grant income. The EBITDA (adjusted for share-based payment charges and profit/loss on disposal of property, plant and equipment) was a loss of £4.35 million (2016: £3.36 million). We continued to invest in increasing our know-how, knowledge and understanding of mixing and dispersion techniques alongside our industry leading collaboration partners as we expensed £0.91 million of R&D spend during the year (2016: £0.51 million) and capitalised £0.24 million (2016: £0.43 million). We ended the year with cash of £2.10 million (2016: £2.86 million).
This year has seen the continued implementation of our strategy to promote Haydale as a pre-eminent solutions provider in the commercialisation of graphene and other advanced materials. We have increased Group income in this year by more than 100 per cent. to £3.91 million and are operational across six sites in the US, UK and the Far East. Critically, in our drive to grow sales further, we now have market ready products, principally in silicon carbide micro fibres ("SiC") from our US operation and screen printable graphene and speciality inks from our Far East businesses. Since we acquired the SiC business in October 2016, we have successfully secured additional long term orders of US$2.6 (£2.0 million) million from a new customer as announced in April this year, and recently a new contract from our key SiC customer, Tateho Chemical Company Co., Limited, worth US$4.48 million (£3.45 million) over three years that extended the previous order value by US$1.40 million (£1.08 million). These contracts, together with others across the Group, take the Group's total order book to £6.00 million today, which will be delivered over the next three and a half years.
As previously announced, Haydale has experienced unforeseen delays with our commercial collaboration partners, Flowtite Technology AS (owned Amiantit Company) and Huntsman Advanced Materials, albeit we remain confident of future revenues from both of these next generation product developments. In particular, the results from extensive testing with Flowtite on their glass reinforced plastic ("GRP") pipes produced in April this year incorporating our GNP material to improve impact resistance have been very encouraging and Flowtite has requested a repeat trial, set for early 2018, to corroborate these positive findings. During the course of our work with Huntsman, we have gained critical know-how and understanding of dispersion, mixing and processing of advanced nanomaterials which has assisted us in a number of related areas and significantly improved our commercial offering. Our ability to use advanced materials in way that does not affect the downstream production process of customers has been a significant factor in gaining customer acceptance of our product offering. A key example here is Haydale's involvement in the recently announced Airbus aileron where our technology was independently verified to achieve over a 600 per cent. increase in electrical conductivity capable of defeating lightning strike impact on aircraft. Although a longer-term revenue opportunity, our work in this area, in collaboration with GKN and Cobham, has generated a product capable of immediate sales in the pre-impregnated carbon fibre composite field and opens up a range of near-term opportunities such as electro-magnetic shielding, leading-edge de-icing and anti-static applications.
Haydale's business model utilises the expertise of best in class industrial partners to process significant volumes of graphene under licence. The carrier material (e.g. resin, polymer or ink systems) which is impregnated with a concentrated tailored advanced material (such as graphene) is known as a masterbatch. We previously reported our important agreement with the Advanced Metallurgical Group N.V. ("AMG") culminating in the commissioning at its Hauzenburg site in Germany of two of our plasma reactors in November 2016. AMG's facility being established will be able to satisfy the requirements of our customers and joint development partners for graphene loaded masterbatch, principally in the thermoset composite market where volumes can be substantial. As part of our agreement with AMG, we now have access to their world-wide sales force to promote our other products, principally our functional inks. Ensuring we have strategically located, dedicated processing centres, close to customer bases with a secure, sustainable, consistent, quality material supply is at the heart of our commercialisation strategy.
We continue to pursue a strategy to consider suitable acquisitions if they provide Haydale access to sales of complementary products in our primary target markets. In the year under review we have been particularly active and have acquired operations in the USA and Thailand, both key geographies that we consider prime markets for our products and technical skills.
In the USA, our SiC operation acquired in October 2016 is performing to plan and growing its order book. Having established its sales growth potential, in May 2017, we acquired the minority 13.5 per cent. of our US holding company subsidiary, Haydale Technologies Inc ("HTI"), that the Group did not previously own for approximately US$0.5 million (£0.41 million), satisfied out of internal cash resources.
In Thailand, shortly after the acquisition in September 2016, we built out a high-class facility to house our patented plasma reactor technology and establish a graphene R&D centre in the prestigious Thailand Science Park capable of servicing our Far East sales effort. This facility officially was opened on 29 March 2017 by HRH Princess Maha Chakri Sirindhorn. Since then our Thai facility has supplied the functionalised graphene for our push into bio medical sensors and cookware and has secured its own funded research projects with leading Thai petrochemical processor, IRPC, and the Thailand Ministry of Energy. We have expectations that these projects will lead to follow on product sales in region. Further details of the two acquisitions are dealt with in the Strategic Report.
A major part of our sales expansion will be in China, one of the largest markets in the world for advanced composites applications. In February 2017, we secured a strategic financial partner in Everpower Holdings (a New York financial investment family office with direct access to China), to assist us in opening up this high growth market for us. We are encouraged by their commercial approach and business drive which we expect to translate into revenues to Haydale in the current financial year.
Strategic Business Units
From 1 July 2017, we created two strategic business units (SBU's) within the Group to focus on and deliver our anticipated sales growth:
Both SBU's have dedicated management teams with a focus on delivering sales growth and, in turn, operating profits. Each unit has a Managing Director, with Trevor Rudderham heading up Advanced Materials and Keith Broadbent running the Resins, Polymers and Composites SBU. Keith, who is based in the UK, joined Haydale in July 2017 having worked at Ultra Electronics and was previously head of production at luxury boat builders Sunseeker and Princess. Trevor, who is based in the US, has been with the Group since mid-2016 shortly before our acquisition of ACM in the Autumn of 2016.
The SBU teams are challenged with growing sales of our SiC and inks products and on the conversion of our extensive research and product development in areas such as pre-preg composites into a sales pipeline and commercial revenues of graphene enhanced products. Haydale has ambitious plans for growth in the Far East following intensive customer evaluations, especially in Korea, and our new facilities in Taiwan and Thailand.
In North America, we have successfully relaunched and rebranded ACM, and our strategy is to take advantage of a fragmented and largely untapped graphene and advanced materials market. This operation has quality technical and now commercial management to deliver ambitious growth plans. In addition, we will seek to establish our plasma reactors in the USA to enhance the full technical delivery of our materials and products to a large market.
The Group has income visibility from its long-term grant awards, the ongoing advanced composite consulting services from the highly skilled team at Loughborough, and SiC sales orders from the US which, in aggregate, provided the Group with a record order book of £5.4 million at the year-end, that has since grown to approximately approx. £6.0 million as at the date of this report.
We see the rapidly growing self-diagnostic biomedical sensor market for diabetes monitoring as a major part of the inks sales in the current financial year through our newly opened Taiwan operation. The long-term repeatability of this market should add to our increasing sales visibility and provide a pathway for us to progress our other speciality functional ink products under development. We expect to enter into long-term supply agreements with the print houses with which we have had our conductive graphene-based ink product accepted and designed into the future sale of test strips for the SMBG market.
Haydale has evolved from an R&D focused business to a commercial entity with a real geographic presence. This past year, having grown total income by more than 100 per cent., and with the recent overseas investments and management actions highlighted in this statement and in the Strategic Report, we are expecting significant increases in product sales in the current financial year, which will build the foundations for Haydale to achieve our near and long-term growth objectives.
Chief Executive Officer
10 October 2017
The directors present their Strategic Report for the year ended 30 June 2017.
Haydale Graphene Industries Plc ("HGI", "Haydale" or the "Group") is the AIM listed group that uses tailored advanced materials, including graphene and silicon carbide (SiC), to enhance the quality and performance of its customers' products. In the USA, Haydale manufactures proprietary silicon carbide fibres and whiskers that strengthen ceramics and enable highly scratch and wear resistant coatings. Applications for SiC include scratch resistant cookware, corrosion barriers for oil and gas pipelines and cutting tools that fashion, for example, jet engine turbine blades from solid billets. The Group has developed regulatory approved proprietary graphene-based inks and coatings for the print and biomedical sensor markets, as well as enhanced resins for the pre-preg carbon fibre market. The Group has operational activities in its six chosen geographies worldwide. In summary, these are:
|Haydale subsidiary||Location||Principal activities|
|Haydale Limited||Ammanford, Wales||R&D operation, supporting the resins, polymers and composites strategic business unit|
|Haydale Composite Solutions Limited ("HCS")||Loughborough, England||Advanced composites design, R&D and testing specialist, covering the full product development lifecycle|
|Haydale Technologies (Korea) Limited ("HTK")||Seoul, South Korea||Dedicated sales servicing the fast-moving Korean, Chinese and Japanese markets|
|Haydale Technologies (Thailand) Company Limited ("HTT")||Bangkok, Thailand||Provides low-cost and high-value R&D, servicing the APAC region and supporting the Far East sales teams. Acquired in September 2016|
|Haydale Technologies, Inc. ("HTI")||South Carolina, USA||ACM is HTI's wholly owned operating subsidiary acquired in October 2016 which produces and sells novel silicon carbide micro fibres and whiskers|
|Haydale Technologies Taiwan Ltd ("HTW")||Kaohsiung, Taiwan||Newly established in July 2017 as the production facility and technical centre for sales of bio medical regulatory approved screen printing and other speciality inks|
During the year the Group made two acquisitions, in Thailand and in the USA, and secured a strategic investor as part of a desire for geographic coverage and product diversification in the key overseas markets of the USA and Far East, details of which are set out below.
In October 2016, we completed the strategic acquisition of ACMC Holding, Inc., and its wholly owned trading subsidiary, Advanced Composites Materials, LLC. (together "ACM"), a profitable, high quality USA based silicon carbide micro-fibre producer. We acquired the share capital of ACM for of US$1.6 million (£1.31 million) and we assumed debts held by ACM of approximately US$3.61 million (£2.96 million). US$1.00 million (£0.82 million) of the consideration was settled via the issue of 415,618 new ordinary shares in Haydale and there remains approximately £0.46 million of consideration which is expected to be settled by the end of December 2017. There is also an agreed earn out formula that runs to mid-2020 that provides for further payments of up to US$1.80 million (£1.39 million) to the vendors of ACM, based upon ACM achieving certain sales targets that are expected to be self-funded.
The acquisition of ACM was financed out of existing resources, new-long term banking facilities secured in the US and an oversubscribed placing and open offer that raised £2.59 million before expenses. We spent a considerable amount of time evaluating the North American market before deciding to acquire ACM and we concluded that the business offered us a strategic foothold in a substantial geographic territory offering significant growth potential and synergistic products, whilst also allowing for substantial cross-selling opportunities within the Group. In advance of its purchase, we recruited Trevor Rudderham as CEO of Haydale Technologies Inc ("HTI"), our US subsidiary that acquired ACM, to run the Group's North American operations. In May 2017, we acquired the minority 13.5 per cent. interest in HTI that the Group didn't previously own for US$0.51 million (£0.41 million), paid out of existing cash resources.
We are pleased with ACM's performance under the Group's ownership and we have subsequently invested heavily in sales and marketing activities. Pleasingly, in March 2017 we secured a four-year sales contract to supply our SiC micro fibre to a new customer for tooling and wear resistant applications, principally in the manufacture of hard edged cutting tools used in the production of land based turbines and jet engine fan blades. The contract, worth US$2.60 million (£2.0 million) over its four-year term, is expected to deliver approximately US$0.65 million (£0.50 million) of annual revenues. Post year end, we secured a new replacement long-term contract for the supply of our SiC whiskers to our major Japanese customer, Tateho Chemical Industries Co., Limited ("Tateho"). This contract, worth US$4.58 million (£3.52 million) over its three-year term, replaces the existing contract with Tateho which had less than two years to run and increased the Group's order book and income visibility by a further US$1.40 million (£1.08 million). The USA is a significant market for us which we estimate accounts for around 40 per cent. of the world's demand for our advanced materials and further investment into the region is likely to continue, particularly with regards to our patented plasma treatment process of advanced materials, such as graphene. HTI is reviewing a number of initiatives to add revenue and new products to its SiC portfolio. This will involve adding processes and equipment into the available space at our South Carolina facility. If successful, these new products are not expected to add any significant cost to direct labour or overheads.
Having opened a sales office in Seoul, South Korea in 2015, and established a collaboration in Taiwan for our inks in early 2016, we found that the pace of enquiries for functional materials and ink products challenging to our UK operations. It became apparent that we needed a local facility to service our Far East customers who constantly required rapid turnaround and ink reformulation services. In September 2016, we completed the acquisition of Bangkok-based Innophene Co. Ltd for £0.31 million, consideration for which was settled through the issue of 176,952 new ordinary shares in Haydale, representing approximately 1 per cent. of the Company's then issued share capital.
Innophene was subsequently renamed Haydale Technologies (Thailand) Limited, ("HTT") and now has a portfolio of ink products that we are starting to commercialise. These include a software driven anti-counterfeiting device that "reads" our unique ink when printed onto a product label, proving the authenticity (or otherwise) of the goods. We are exploring areas of interest from governments and producers seeking to protect brands and reduce the growing incidence of counterfeit goods. The specialist ink uses materials from our collaboration partner, Talga Resources, and has been developed over the last nine months.
HTT has quickly established itself as a technical and sales support service for our Korean and Taiwan activities. The first step was to set up a high-class facility in the prestigious Thailand Science Park in Bangkok to house one of our patented plasma HT60 reactors and establish the first graphene R&D centre in Thailand. This was achieved when HRH Princess Maha Chakri Sirindhorn officially opened the facility on 29 March 2017. Since then the operation has secured funded research projects with leading Thai petrochemical processor, IRPC, for functionalisation of some of its by-products, and the Thailand Ministry of Energy on graphene enabled super capacitors. All trial and product sales requiring functionalised graphene in the region have been processed and shipped from our Thai facility.
As further evidence of our focus on the Far East market, in February 2017, we announced that we had secured a £3.3 million strategic investment from USA-based, Everpower International Holdings Co ltd ("Everpower"), to be made through one of its Chinese subsidiaries. The investment was concluded in April 2017 and resulted in Everpower owning 9.9 per cent. of the Group and an agreement to exploit Haydale's current and future products in China. Everpower has purchased $0.20 million (£0.15 million) worth of products from us for delivery in the new year and we are currently working together to industrialise a number of our products, including our SiC, conductive inks and the advanced thermoset composite designs created by the Group.
In the UK, we have two operational facilities in Ammanford and Loughborough. Ammanford is primarily a R&D operation which also sources, handles, functionalises and processes nanomaterials using a suite of prototyping and analytical equipment, as well as its own patented plasma reactors. Ammanford is responsible for installing, commissioning and maintaining the plasma reactors used internally and for third parties. The aim is to provide the Group with sustainable commercially available graphene and other nanomaterials for both internal product development and third-party customers.
In Loughborough, we are focused on producing applications engineering solutions in traditional thermoset composites and have been delivering masterbatch for the Huntsman research project where we have added graphene into Huntsman's high-end epoxy resin where their focus has now been to enhance the thermal conductivity (heat dissipation) of composite carbon fibre pre-preg. A second major research project was undertaken with leading water and sewerage pipe manufacturer, Flowtite, which incorporated graphene into Flowtite's next generation pipes with the aim of increasing their impact resistance and improving the pipe's impermeability. Our work with Huntsman and Flowtite has been mainly funded by the Group and, although there have been some delays in their commercial progress, we remain confident of significant revenue opportunities in the future. Although it is too early to be definitive as tests are ongoing, we have seen encouraging results in key metrics such as fracture toughness (impact resistance) in the glass reinforced plastic ("GRP") pipes.
In May 2016, we entered into a collaboration agreement with Graphit Kropfmuhl GmbH ("GK"), part of AMG Advanced Metallurgical Group N.V. ("AMG"), to develop new valued-added nanomaterial products using Haydale's HDPlas® functionalisation process. As part of the agreement, we supplied an HT60 R&D reactor and a larger capacity HT200 reactor to GK's purpose built facility in Germany. Commissioning of the reactors was completed in November 2016. It is expected that this facility will produce, under licence from Haydale, the graphene-based masterbatch expected to be purchased by likes of Flowtite, once commercial quantities begin to be required.
Strategic Business Units
On 1 July 2017, the Group, which consisted of eight worldwide limited liability operating entities, undertook an internal reorganisation and created two Strategic Business Units ("SBU") in order to streamline its operations and instil a focus on sales and profits. The intention is to ensure that the Group is best positioned to realise its potential as a profitable commercial entity having evolved from being an R&D oriented business.
One SBU is focused on Resins, Polymers, and Composites ("RPC") and will concentrate on marketing and selling the newly developed graphene infused carbon fibre pre-impregnated materials (pre-preg). The second SBU is focused on selling our Advanced Materials ("AMAT"), including our silicon carbide ("SiC") whiskers and fibres and our newly developed functional inks and pastes initially targeting the US$15 billion (£11.54 billion) self-monitoring blood glucose device market.
Each SBU has its own managing director with full profit and loss responsibility and a principal focus on driving product delivery and sales. Supporting each managing director will be dedicated sales teams with technical support. Trevor Rudderham, our USA CEO, is heading up the AMAT SBU and has a dedicated sales team in the USA and Far East. Keith Broadbent has been appointed as the MD of the RPC SBU, which incorporates both of our UK facilities. Keith joined us July 2017 after many years at an operational director level with related businesses such as prestigious boat manufacturers, Sunseeker International and Princess Yachts. Going forward, the Group intends to reporting the trading results of each SBU.
The Group's key objective now is to accelerate the transition of the business from an R&D focused operation into a sales and marketing organisation. We now have the strategic business units in place with quality management and the supply chain and collaboration partners with sales reach to commence commercial sales of products. One of the fundamental items of this strategy is to have a sustainable supply chain (with a second back-up source) secured for anticipated demand and multiple sites that answer the customers' requirements for a disaster recovery plan.
Funded and Private Venture projects
During the year under review, the Group has been busy progressing R&D programmes with important commercial partners where development of a commercially viable end products is a pre-requisite of securing each projects' funding. Examples of such projects include:
Operations and technical
Crucially, during the year under review we have invested in reducing the processing time of our advanced materials and hence increased our capacity. This has been successfully done for certain materials and consequently we now have an established processing and treatment facilities in the UK, Germany and Thailand capable of treating (known as "doping") tonnes of nanomaterials per year into an intermediate product to the customers' specification. The processing capacity depends on a range of factors, in particular the nature of the nanomaterial being processed and the graphene loading required. Our granted patent on processing nanomaterials with plasma offers not only the opportunity to exploit the graphene market but other non-carbon based 2D materials. We are aware that the Centre of Process and Innovation ("CPI") in the UK, who purchased one of our HT60 reactors last year, has successfully functionalised Boron Nitride, an insulating 2D material known as the "white graphite" with their HT60. During the year, the importance of mixing, processing and dispersing nanomaterials has become an area of equal importance to graphene for the future growth of Haydale. During the year, the plasma patent was also granted in Japan and has been allowed for grant in the USA.
In the year under review, the Group's headcount increased significantly from 46 to 70 at the year end as we delivered on internally and externally funded projects and begin to build up a sales force capable of capitalising on our existing and future products. We acknowledge that we have some way to go perfect the sales cycle and we are still in need of more sales specialists, particularly in the pre-preg sector where we think there is considerable opportunity, especially in China. We lease all or our facilities and some, such as our facilities in Loughborough, are at or nearing capacity where we will be carefully evaluating their growth requirements during the current financial year. ACM in the US has substantial spare space in its 70,000 sq. ft. factory and offices and we have plans to utilise the space in the foreseeable future.
Patents, IP and Licensing
Our patents are process patents in key selected strategic territories where, as a blocking prior art tool, they are very useful. We are aware of one patent application where the examiner has thrown out their claims citing Haydale's patents as prior art. Our critical IP however, is our processing, mixing and dispersion knowledge and know-how derived from the many months work we have carried out in conjunction with Huntsman, together with the FDA approved ink formulations that have been developed in the Far East. We are in the process of documenting our knowledge and know-how IP, including ink recipes and masterbatching techniques.
In the USA, ACM has filed a patent for the production of its silicon carbide micro-fibre but our preference is to keep secret the production process of the even smaller "SiC whisker" material.
Key Performance Indicators ("KPIs")
The Board consider there are a number of important KPIs which are non-financial, such as: the nature and size of development projects; the speed of response to inbound enquiries; product performance improvements of the host material once enhanced with our functionalised materials vs the control; the ability to convert non-disclosure agreements and letters of intent for collaborations to development project discussions and binding commercial contracts. Performance against these non-financial KPIs is in line with the Board's expectations for the year under review.
The important financial KPIs are the income, cash position, the operating cash flows and the adjusted EBITDA (adjusted for share-based payment charges and profit/loss on disposal of property, plant and equipment). of the Group. Going forward, in addition, as revenues increase, an important KPI is the quantum of the order book and we have commenced reporting on this metric in the current year. The visibility on future sales gives some comfort on likely income streams, although predicting unit volumes of sales by a third party of their next generation product which incorporates our advanced material sometimes in new territories is not easy to do accurately. That said, the focus on functional inks in the Far East and the future potential for our FDA approved inks for the disposable self-diagnostic blood glucose sensor market is expected to provide us with repeatable monthly sales visibility, especially as the print houses to whom we supply will want long-term agreements. For the year ended 30 June 2017, the Group's income of £3.91 million was in line with management's expectation with cash and deposit balances amounting to £2.10 million at 30 June 2017 (2016: £2.06 million) is also in line with budgets. The net cash outflow from operating activities for the year ended 30 June 2017 of £4.29 million (2016: £3.36 million loss) which was also in line with the budgeted cashflows for the year. The Group's adjusted EBITDA for the year ended 30 June 2017 amounted to £4.20 million (2016: £3.29 million).
Statement of Comprehensive Income
In the year under review, the Group's three principal areas of income were: (i) advanced composite consulting engineering services; (ii) sale of silicon carbide whiskers and fibres; and (iii) long-term grant funded projects.
During the year, our team in Loughborough built on the work of the previous financial year, specifically in improving the thermal, electrical and mechanical performance of certain thermoset epoxy resins in conjunction with collaboration partners, Huntsman and Flowtite. Significant investment was made to ensure that the Group retained all of the key IP, knowledge and know-how surrounding the development of these higher performing resins. This work has been crucial in the team being able to develop three new pre-preg carbon fibre products which are just now becoming available to be demonstrate their performance improvements. As well as developing products for the longer term significant sales opportunity, the team at Loughborough has been delivering on long-term composite consulting contracts, recording revenues of £0.62 million in the year under review (2016: £0.54 million).
The team at Ammanford continues to deliver incremental improvements in reducing processing cycle times and increase load capacities in both plasma reactor models, the HT60 and HT200. In the year, revenues of £0.25 million were recorded in connection with the commissioning of the two plasma reactors sold to GK in the previous financial year.
The team at ACM delivered revenues of £2.05 million since it was acquired in mid-October 2016, in line with expectations. ACM has predominately long-term contracts with its customers, some of which are at highly attractive gross margins, providing us with excellent future revenue visibility.
Revenues from the Far East totaled £0.09 million, principally derived from R&D services provided by our Thailand operation acquired in September 2016.
£0.92 million of new grant funded projects were secured during the year, building upon awards obtained in prior years meaning that we recorded grant income of £0.90 million in the year under review (2016: £0.75 million). Grant funded projects are extremely important to the Group in that they are typically longer term (12-24 months) contributors to our fixed overhead base. They allow us work alongside world renowned businesses in their particular field of expertise and they are expected to lead to the development of a commercial product at the end of each project.
The Group's total income for the year more than doubled year on year to £3.91 million (2016: £1.92 million). Pleasingly, at the year end, the Group's contracted order book stood at £5.40 million and since the year end, additional long term orders have been secured resulting in a current order book of £6.0 million to be delivered over the next 3.5 years.
Overall R&D spend for the year increased to £1.15 million (2016: £0.94 million), of which £0.9 million was expensed during the year (2016: £0.51 million), with the balance of £0.24 million being capitalized, (2016: £0.43 million). This internal funded development expenditure is expected to lead to sales of new products in future financial years. The Group's other administrative costs for the year totaled £8.14 million (2016: £5.09 million) including almost a full year of costs from Innophene, acquired in September 2016, and ACM, acquired in October 2016. Overall, the loss from operations for the year was £5.34 million (2016: £4.01 million loss), and included non-cash items of £1.14 million (2016: £0.76 million). The loss per share for the year increased marginally £0.28 (2016: £0.26 loss).
Statement of Financial Position and Cashflows
As at 30 June 2017, net assets amounted to £8.91 million (2016: £6.60 million), including cash balances of £2.10 million (2016: £2.86 million). Other current assets increased to £2.89 million at the year end (2016: £1.44 million), and current liabilities increased to £2.98 million as at 30 June 2017 (2016: £1.00 million). Current liabilities include £0.47 million of consideration payable for the acquisition of ACM which is expected to be settled in the current financial year. Net cash outflow from operating activities for the year was £4.29 million (2016: £3.28 million), the principal contributing factor being the loss from operations activities of £5.34 million (2016: £4.01 million). Expenditure on capital equipment again utilised a significant portion of cash during the year at £0.42 million (2016: £0.47 million). Additionally, in May 2017, the Company acquired the 13.5 per cent. minority interest in HTI, its US subsidiary, that it did not already own for £0.41 million.
Capital Structure and Funding
As at 30 June 2017, the Company had 19,597,713 ordinary shares in issue (2016: 15,236,946). During the year, the Company issued 4,360,767 new ordinary shares, 176,952 of which were for the acquisition of Innophene in September 2016, 2,035,305 of which were issued in connection with the Company's acquisition of ACM in October 2016 (1,619,687 in relation to the £2.6 million oversubscribed placing and open offer and 415,618 issued as consideration to the vendors of ACM). A further 2,109,010 ordinary shares were issued in connection with the £3.6 million strategic subscription, of which £3.3 million was subscribed for by Everpower, which completed in April 2017 and the balance of 39,500 shares were issued in respect of option exercises.
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide return to equity holders of the Company and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Group manages this objective through tight control of its cash resources to meet its forecast future cash requirements.
|Cost of sales||(894)||(899)|
|Research and development expenditure||(908)||(514)|
|Share based payment expense||(351)||(326)|
|Other administrative expenses||(7,090)||(4,193)|
|LOSS FROM OPERATIONS||(5,338)||(4,009)|
|LOSS BEFORE TAXATION||7||(5,635)||(4,023)|
|LOSS FOR THE YEAR FROM CONTINUING OPERATIONS||(4,752)||(3,637)|
|Other comprehensive income:|
|Items that may be reclassified to profit or loss:|
|Exchange differences on translation of foreign operations||(74)||(44)|
|Remeasurements of defined benefit pension schemes||(36)||-|
|TOTAL COMPREHENSIVE LOSS FOR THE YEAR FROM CONTINUING OPERATIONS||(4,862)||(3,681)|
|Loss for the year attributable to:|
|Owners of the parent||(4,862)||(3,598)|
|Total comprehensive loss attributable to:|
|Owners of the parent||(4,862)||(3,637)|
|Loss per share attributable to owners of the Parent|
|Company Registration No. 07228939||Note||30 June
|Property, plant and equipment||11||5,074||1,576|
|Deferred tax asset||679||-|
|Cash and bank balances||2,091||2,862|
|Trade and other payables||14||2,305||656|
|TOTAL NET ASSETS||8,905||6,601|
|Capital and reserves attributable to equity holders of the parent|
|Share premium account||13||18,936||11,840|
|Share-based payment reserve||1,007||656|
|Foreign exchange reserve||(113)||(39)|
|At 1 July 2015||229||6,254||329||-||(2,519)||4,293||-||4,293|
|Total comprehensive loss for the year||-||-||-||(39)||(3,598)||(3,637)||(44)||(3,681)|
|Recognition of share- based payments||-||-||327||-||-||327||-||327|
|Issue of ordinary share capital||76||5,586||-||-||-||5,662||-||5,662|
|At 30 June 2016||305||11,840||656||(39)||(6,116)||6,646||(44)||6,601|
|Comprehensive loss for the year||-||-||-||-||(4,752)||(4,752)||-||(4,752)|
|Other Comprehensive (loss)/Income||-||-||-||(74)||-||(74)||-||(74)|
|Retirement Benefit Obligations||(36)||(36)||-||(36)|
|Total Comprehensive loss for the year||-||-||-||(74)||(4,788)||(4,862)||-||(4,862)|
|Recognition of share- based payments||-||-||351||-||-||351||-||351|
|Issue of ordinary share capital||87||7,096||-||-||-||7,183||-||7,183|
|Repurchase of NCI||-||-||-||-||(413)||(413)||44||(369)|
|At 30 June 2017||392||18,936||1,007||(113)||(11,317)||8,905||-||8,905|
|Cash flow from operating activities|
|Loss before taxation||(5,635)||(4,023)|
|Amortisation of intangible assets||10||157||63|
|Capitalised loan costs written off||77||-|
|Depreciation of property, plant and equipment||11||560||370|
|Impairment on available for sale asset||-||117|
|Reduction in deferred consideration||-||(117)|
|(Profit)/Loss on disposal of property, plant and equipment||-||(107)|
|Share-based payment charge||351||327|
|Operating cash flow before working capital changes||(4,193)||(3,356)|
|Increase in inventories||(12)||(115)|
|Increase in trade and other receivables||(596)||(128)|
|Decrease in payables and deferred income||260||187|
|Cash used in operations||(348)||(56)|
|Income tax received||412||128|
|Net cash flow from operating activities||(4,129)||(3,284)|
|Cash flow used in investing activities|
|Purchase of property, plant and equipment||(415)||(470)|
|Purchase of Intangible Assets||(245)||(429)|
|Proceeds from disposal of property, plant and equipment||-||207|
|Acquisition of subsidiary net of cash acquired||17||4||-|
|Settlement of deferred consideration||-||(350)|
|Purchase of non-controlling shareholding||(413)||-|
|Net cash flow in investing activities||(1,069)||(1,042)|
|Cash flow used in financing activities|
|Proceeds from issue of share capital (net of share issue costs)||6,058||5,359|
|New bank loans raised||1,408||-|
|Repayments of borrowings||(2,817)||(162)|
|Net cash flow from financing activities||4,352||5,183|
|Effects of exchange rates changes||(75)||(44)|
|Net (decrease) / increase in cash and cash equivalents||(771)||813|
|Cash and cash equivalents at beginning of the financial year||2,862||2,049|
|Cash and cash equivalents at end of the financial year||2,091||2,862|
The full results including the notes to the financial statements are available in the PDF Download.
Page last updated: 10 October 2017