Latest Results

STRATEGIC REPORT

FY23 has seen the Group's US operations continue its progress as demand returns for SiC powders and tooling in the aerospace and automotive industries. This has driven the overall FY23 revenue growth of the Group and looks set to help support the Group moving forwards with the expansion into the manufacture and sale of SiC tooling through a network of regional manufacturer representatives recently engaged across the USA.  The UK based nanomaterial business has made significant steps in commercialising its portfolio of technology, especially in terms of business collaborations with significant industry players in key markets, having previously installed sufficient capacity to be able to process commercial levels of plasma functionalised nanomaterials for those partners and other third parties.  These collaborations are expected to form a solid base to the expected progress in the current financial year.  

Nanomaterials

The UK operations made significant progress over the year in progressing commercialisation of its proprietary technology which resulted in a number of key agreements being signed with industry partners in the last quarter of FY23 and first quarter of FY24. We anticipate these may lead to significant volume sales as those products and relationships mature over the next few years.  Whilst progress on commercial arrangements has been strong, it is taking longer than expected for this to translate into revenue and, primarily due to one large functionalised product sale (goods) in FY22 not being repeated in FY23, total sales reduced by £0.20 million on prior year. Other consultancy revenues (services) grew by 11% on a like-for-like basis. 

Patented Plasma Functionalisation Technology

At the core of all our product offerings and underpinning the Group's future nanomaterial prospects, is Haydale's patented HDPlas^® plasma functionalisation process which improves the dispersibility of many nanomaterials by changing their surface chemistry using a highly tunable, repeatable process.  Plasma functionalisation allows Haydale to tailor advanced materials to enhance the properties of its customers' products to achieve pre-agreed mechanical or conductive performance criteria. The process is cost effective and environmentally friendly and our capacity to produce industrial levels of functionalised nanomaterials underpins the business model.  Specifically, we have the expertise to:

• functionalise nanomaterials that are blended with resins, composites and fluids to deliver enhanced electrical, mechanical (strength) and thermal performance;
• formulate proprietary nanomaterial-based inks and coatings for the print and sensor markets, including biomedical, RFID and piezo resistive inks and sensors; and
• compound functionalised nanomaterials into a range of elastomers to enable customers to use nanomaterials in elastomeric products.

The Group safeguards its nanomaterials business across its sites and the territories in which it operates through the use of patents and trade secret protocols which protect its intellectual property.  It holds licences where that intellectual property is for operational reasons with a third party.  Haydale currently has a portfolio of patents that are variously recognised in the following territories - US, UK, Europe, China, Japan and Australia.  Haydale works closely with its patent advisors, Mewburn Ellis LLP, and maintains a rolling programme of patent applications. 

Plasma Functionalised Powder Sales

We have secured a number of commercial contracts during the year with manufacturers of graphene to plasma functionalise their graphene powders to their requirements and are in discussions with many others who recognise the difference plasma functionalisation can make. 

Of particular note, we have entered into contracts with a number of major industrial customers who manufacture their own nanomaterials. For Saint Gobain, who manufacture boron nitride, we are working with their end customers to hone the final surface chemistry to match their desired outcomes.  Our ability to reliably adjust the surface chemistry has more recently led to our securing a major collaboration with Petronas to help them take their own graphene product, refined from a byproduct of their main petrochemical business, and functionalise it so it can potentially be recycled into other applications.  We anticipate that all of these initiatives may lead to significant volumes needing to be plasma functionalised over the coming years, either directly by Haydale, or indirectly through the leasing of plasma reactors on a volume based royalty model.

Plasma Functionalised Products Sales:

Heating

Haydale has been working in the energy and heating sectors for a number of years.   Geopolitical events and the UK Government's net zero strategy, have brought an increased urgency for solutions in this space. 

Over the past few years, the Company has developed a number of off-the-shelf flexible heater graphene-based functional inks that can be printed onto a wide variety of surfaces.  Based on those inks we are developing a range of low power heating products, potentially the most exciting of which is an energy efficient, cost-effective and easy to install underfloor heating system that could be used to supplement or replace domestic heating systems. The technology could be rolled out underneath the floor covering (e.g. carpet or tiles) and potentially run off a battery. With support from the Welsh Government, working prototypes have been created and are currently being tested in laboratory conditions to finalise the design before further optimisation and seeking a CE mark.  We are now looking at various partnership options to take these to market.

We are also undertaking a number of paid projects for Cadent focused on helping energy suppliers meet their obligations to their vulnerable customers where they are under a legal requirement to be able to guarantee hot water and heating in situations where the power or gas go down.  The initial project referred to last year involves a portable, battery powered water heater, a prototype of which is currently undergoing testing.  We have also recently started work on a low power, portable over-the-radiator heating device which is also looking promising.  Other potential applications of the same low power heating technology are currently in early-stage testing with partners.

In FY22 we announced we were working with a company that had acquired a patent for a boron nitride based thermal fluid. This has not progressed as we had hoped and is unlikely to lead to further revenues.  We have however developed our own graphene based thermal fluid (patent pending) which early trials suggest performs with similarly positive thermal results and have now partnered with a specialist heating fluid engineering firm to finesse the formulation to work with the necessary additives so it meets applicable industry standards and can ultimately be deployed into their customer base.

Sensors

Following on from the work historically undertaken in the biomedical ink sector, we have a range of off-the-shelf functional inks appropriate for use in biomedical and other sensor applications that can potentially detect a wide range of medical conditions.  These inks have a high sensitivity and are therefore able to replace lower grade carbon inks and potentially metallic based inks in existing sensor products.  Our work with a leader in the glucose monitoring and diabetes management sector is moving forwards following positive results against their existing inks and, having successfully passed an audit of the quality controls around production at our Ammanford site, we are now working with them on further tests.  In the interim, we are separately working with a major European sensor manufacturer on an application to detect chlorine in water which we understand has a potentially lower barrier to entry, market wise. 

Elastomers

Our collaboration with Vittoria Spa, a leading premium cycle tyre manufacturer, has progressed and, having proved the benefits that plasma functionalised graphene can bring to tyres (namely: grip, rolling resistance, puncture resistance and durability), we are shipping tonnage materials.  We are also working with Vittoria on further enhancements for the next generation of tyres and anticipate the existing graphene enhancements to start trickling out to the wider market in due course.

Composites

In the second half of FY23, we released a graphene enhanced prepreg tooling material, following two years of trialling with Prodrive Composites Ltd, which is designed to deliver cost effective composite tooling with extended tooling life. This, and related products which were released during the year, are now seeing interest from the market which we hope will build through the current year.

Focused research and development

We continue to work on customer-paid and grant-funded projects to develop plasma functionalised nanomaterial solutions where there is a clear problem statement and we believe there to be a volume demand at the end of the process for any product created.  We are selective and require a clear business case to proceed.  By being able to deliver a number of selective projects that have resulted in a requirement for plasma functionalised material for third party applications or intellectual property that vests in Haydale, we have been able to build our underlying customer base.  Key projects include the development of material that might be appropriate for type IV and V hydrogen storage tanks with Viritech for use in hydrogen powered vehicles and anti-counterfeiting technology using our PATit plasma functionalised graphene based conductive inks.

Asia Pacific

The performance of both the Thailand and Korea operations were at the lower end of expectation and, whilst we have been able to leverage our presence in these countries to secure several major clients for the Group as a whole including Petronas and Vittoria sourced by the Thailand office, it has been agreed that both entities are to be scaled back to a sales front office for the foreseeable future.  This has been a progressive process which we will continue to monitor carefully. The Korea office concluded a beneficial commercial settlement with iCraft to terminate the agreement after they decided to focus on their core activities.

Silicon Carbide powders and tooling

Following prior year investment in the US and our move up the value chain into the manufacture of cutting tools, we have seen our silicon carbide and tooling business achieve significant growth in FY23.  Although the raw SiC powder market is limited in scope (historically dependent on a small number of key customers) we continue to have additional sales in that area. 

The SiC cutting tools is, by itself, a $900m market.  Having previously invested in the necessary plant to manufacture our own SiC tooling and signed finishing service supply agreements to ensure we can meet capacity demands, towards the end of FY23 we released our first cutting tools catalogue and appointed four additional regional manufacturer representatives who act to introduce our product directly to end users on a commission only basis and thereby cost effectively extend our sales reach.  The initial feedback we are receiving is very positive and we understand our tooling is exceeding the largest competitor in terms of durability and performance in a number of applications.  This is starting to lead to a potential sizeable demand for product being reported by the manufacturer representatives which we anticipate will feed through into orders in the US hence we are taking steps to ensure inventory is available to support.  We have recently secured an agreement with a distributor for the UK and Eire and are in discussions for similar arrangements in Asia. In addition, we have started acting as a seller of complementary non-SiC tooling in a number of areas and are also looking to develop further partnerships in this space through FY24.

Other products

There has been limited progress on CeramycGuard™, a one stop solution to significantly extend the surface life of concrete assets, for which Haydale holds the distribution rights for the UK market. Whilst accreditation with the Drinking Water Inspectorate ("DWI") has not been progressed due to the DWI not having the necessary capability at this time, we still believe that there remains a key market in the wider, non-drinking water market.

Production Capacity

Haydale invested in production capacity for its plasma functionalisation process and ink production in FY22 and now has sufficient capacity to meet its forecasts for the next few years.  Should additional capacity be required, Haydale has a scaling plan to affordably and materially increase its own internal capacity on relatively short timescales or, depending on client volumes, arrange for a machine to be leased to a client and charge a volume-based royalty.

Likewise, there is also more than sufficient capacity for the manufacture of SiC powder and tooling in the US to meet the business plan for the next few years. 

Overheads

The Directors continued to invest in the human capital across the wider business in FY23, strengthening the teams across UK and US operations and across the spectrum of sales, marketing, human resources, quality control and production. Whilst there will be further strategic hires required at the right time to manage the anticipated growth, there is not expected to be a need for any step change to deliver the business plan.

At the same time, the Group has also taken selective measures to reduce costs around the organisation.  The scope of these is being extended as more focus is brought into the areas likely to lead to profit on a short-term basis.

FUTURE STRATEGIC DIRECTION

As noted above, the US operations have potential for strong growth in the short term through the manufacture and sale of specialised SiC tooling and complementary products. Having historically made the necessary capital investments, the focus is now on building the manufacturing representative network across the US and elsewhere to get the tooling into key end user sites.

Whilst Haydale has world leading technology for the functionalisation of nanomaterials, the focus for the UK is on building the business partnerships that will get its plasma functionalised nanomaterial solutions into the market and the organic growth that this will bring through repeat revenues at scale. This is concurrent to developing our own strategic products based on our existing solutions, such as underfloor heating, and we anticipate these, together with third party plasma functionalisation services, will form the basis of our future growth over the coming years in the UK.

The Directors remain mindful of the scaling challenges in both the US and UK that need to be managed for the Company to deliver the growth it expects to deliver as its early-stage industry partner relationships develop.