TIDMAGM
RNS Number : 9115U
Applied Graphene Materials PLC
03 April 2019
3 April 2019
Applied Graphene Materials plc
("Applied Graphene Materials", "the Group" or "the Company")
Interim results for the six months ended 31 January 2019
Applied Graphene Materials, the producer of specialty graphene
materials, is pleased to announce its interim results for the six
months ended 31 January 2019.
Highlights
Operational:
-- Finalising the terms of the Hycote product launch by James Briggs Limited (JBL)
-- Scale-up trials continuing with Applied Nano Systems (ANS)
for a graphene-loaded coating system
-- New anti-corrosion data developed, widely presented and
exhibited to ensure AGM remains a leader in innovation in coatings
and maximises opportunities to establish new commercial
collaborations. Positive feedback received from the sector
-- NATEP collaborative development programme focusing on
enhancement of fire-retardant materials in aircraft and mass
transit markets has seen positive progress in performance testing
and manufacturability trials
-- Structural Ink trials producing useful performance gains in composites
-- Airbus Space and Defence (Airbus) qualification nearing
completion and is close to first order commitment
-- Increase in presence as global graphene community member -
signed a Memorandum of Understanding and developed links with the
National Graphene Institute and the Graphene Engineering Innovation
Centre and joined The Graphene Council and the Industry Council of
The National Graphene Association
Strategic:
-- New Executive team in place focused on accelerating commercial momentum
-- Extensive strategic review of the business completed and commercial strategy refined
-- Pragmatic review of revenue pipeline against likelihood of success
-- Focus on converting our 120 active engagements towards meaningful revenues
-- Seeking to appoint distributors to increase channels to market for standard products
-- Greater presence in the graphene market as a key influencer
Financial:
Loss of GBP2.2 million (2018: loss
-- EBITDA* of GBP2.0 million)
Loss of GBP2.4 million (2018: loss
-- Loss before tax of GBP2.3 million)
-- Cash at bank GBP8.2 million (2018: GBP12.0 million)
Loss of 4.4 pence per share (2018:
-- Basic and diluted EPS loss of 6.4 pence).
* EBITDA comprises loss on ordinary activities before interest,
tax, exceptional costs, depreciation and amortisation.
Adrian Potts, Chief Executive Officer, commented:
"We continue to make positive progress with providing robust
technology solutions for our key focus market of coatings
technology. Whilst the pace of such progress is not always as rapid
as we would like, this is reflective of the intensity, breadth and
depth of engagement with multiple customers and the length of time
it often takes to formulate a solution and then test it. This can
often last six months or more in the case of an iterative effort.
We are determined to provide robust, repeatable graphene-based
technical solutions in conjunction with our customers as a key
means of securing long term business opportunities and creating
line-of-sight to revenue.
Our strategy and expected milestones in the next 12 months
include:
- Significant sales development as a result of existing pipeline
engagements transitioning to repeat customers;
- Launch of customer products containing AGM graphene dispersion
solutions, principally in the coatings sector;
- Airbus completion of satellite builds with AGM thermal adhesives on board;
- Maturing pipeline customers completing their iterative
testing, product reviews and launching products;
- Technology development efforts bringing forth platform
solutions for customer engagement in the broader coatings space -
both for ever-harsher conditions and in more environmentally
friendly water-based coatings systems; and
- Increasing routes to market through distribution agreements for standard products.
I am pleased with the progress achieved over the last six
months, albeit that the timing of certain revenues is behind our
previous expectations and look forward to the future with
confidence as we focus on increasing the momentum in the
business."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Applied Graphene Materials' results presentation, with audio
commentary, is expected to be made available on its website at
http://www.appliedgraphenematerials.com in due course.
For further information, please contact:
Applied Graphene Materials
Adrian Potts, Chief Executive Officer
David Blain, Chief Financial Officer +44 (0) 1642 438 214
N+1 Singer
Richard Lindley / Justin McKeegan
/ Mia Gardner +44 (0) 207 496 3000
Hudson Sandler
Charlie Jack / Emily Dillon +44 (0) 207 796 4133
Notes to Editors
Applied Graphene Materials works in partnership with its
customers using its knowledge and expertise to provide bespoke
graphene dispersions and formats to deliver enhancements and
benefits for a wide range of applications. The Group's strategy is
to target commercial applications in three core markets: coatings,
composites and functional materials.
The Group has developed proprietary bottom-up processes which
are capable of producing high purity graphene nanoplatelets using a
continuous process. The manufacturing process is based on
sustainable, readily available raw materials and therefore does not
rely on the supply of graphite, unlike a number of other graphene
production techniques. Applied Graphene Materials owns the
intellectual property and know-how behind this process.
Applied Graphene Materials was founded by Professor Karl Coleman
in 2010 with its operations and processes based on technology that
he initially developed at Durham University. The Group was admitted
to AIM in November 2013, raising GBP11 million, and is based at the
Wilton Site on Teesside. In January 2016 the Group raised GBP8.5m
to support its ongoing activities and in October 2017 the Group
raised a further GBP9.8m.
Business review
with Adrian Potts
Overview
I have now completed my first six months as CEO of AGM and I am
pleased with the overall progress we have made during this period.
David Blain joined AGM as CFO in mid-October 2018 and he has proved
to be a valuable addition to the team. I split my time between the
USA and UK allowing a deeper level of engagement with customers in
both regions, with a strong focus on helping progress our
collaborations towards commercial relationships. This is often an
in-depth process and requires significant time to secure the best
solution possible with the integration of graphene dispersions into
customer formulations.
We have undertaken an extensive review of the business and its
strategy and have a clear vision for the future of AGM. We are
focused on accelerating the commercial momentum in the
business.
There are now a growing number of graphene manufacturers around
the world, each producing a product with a slightly different range
of characteristics reflecting their specific manufacturing
processes. AGM's graphene is particularly suited to our key target
market, coatings technology, because of its particular set of
physical properties which can impart barrier, anti-corrosion,
conductivity and mechanical performance. We are focused on
delivering revenue in this market as we engage and collaborate with
customers and continue to generate increasingly compelling data
proving our products' ability to improve the performance of their
primary coatings and the life of the coated article.
We have now developed a range of graphene products with
different specifications suited for coatings applications and are
extending this range further to suit developing coatings chemistry
solutions. We also remain focused on the composites market, where
we have developed meaningful collaborations with industry players
and continue to extend our offer. Our commercial engagements
involve rigorous, extensive and lengthy testing by our partners as
well as our own testing in house, and we are seeing promising
results.
It is very challenging to effectively transfer the properties of
graphene into a host material ensuring a high quality of dispersion
to enable the desired enhancements - but it is something we are
delivering on a repeatable basis:
-- resistance to diffusion (in a barrier system);
-- resistance to corrosion (in a paint);
-- enhanced strength (in a plastic or composite); or
-- conductive qualities (in an adhesive or ink).
We have achieved an industry-leading position through a focus on
developing our dispersion and application IP, and engaging closely
with customers to ensure our dispersions truly work well in their
resin systems, supported by data from our ongoing in house testing.
This gives us a significant edge in the quality and depth of our
technical engagement, in that we are able to clearly guide
customers through the process of graphene integration into their
process methodology - effectively making disruptive technology
accessible. Customers can be wary of introducing new materials into
their production lines and this results in extensive work
programmes to check the performance of our graphene products and
also means that customers can be in the development pipeline for
considerable lengths of time. We believe that a number of testing
programmes are nearing completion, with further commercial sales
agreements expected in the near future, with a total of seven
collaborations in the final commercial engagement stage of
development.
We have worked with many companies over the last three to four
years and the current pipeline of active customer programmes stands
at over 120, following an in-depth review regarding opportunity for
success. This extensive and wide-ranging work has led to AGM
becoming a leader in the field of graphene-containing barrier
coatings. This area is now our main focus of activity although we
will not lose sight of our other areas of expertise and will
continue to develop the collaborations we have in the composites
and functional fluids industries. Our main focus is on converting
our existing engagements into commercial supply agreements.
Alignment to this purpose throughout our commercial, technical,
manufacturing and quality groups gives us confidence that our
substantial pipeline can deliver future revenue, although in some
cases results may be slow given the nature of the testing.
In support of the coatings industry and to broaden the impact of
our messaging to the industry, we have purposely presented at
prestigious technical conferences including the European Coatings
Show and Corrosion 2019 by the National Association of Corrosion
Engineers in the USA. We will also present to the American Coatings
Association Technical Conference and Aluminium 2000 World Congress
in April. Presenting our solutions for both multi-layer coatings
fully representative of real applications, as well as specific
solutions for anti-corrosion primers using Genable(R) products, has
been well received with positive feedback and further encouraging
new customer engagement. It is this rigorous development and
presentation of relevant data that creates the new opportunities to
support future growth.
As part of our detailed review of the business during the
period, we also assessed our routes to market. The introduction of
the Genable(R) product range (standard dispersions to cater for the
needs of the paints, coatings, composites and thermal pastes
industries) in 2018 has now allowed us to decide to approach
distributors to expand our channels to market and we are already in
discussion with various potential distributors.
We are keen to ensure our investors and customers are kept
updated about the positive progress we are making. We will use a
broader range of platforms to do this including greater use of RNS
Reach, trade press releases and social media to communicate more
non-regulatory news items.
Commercial progress
Pipeline update overview
The number of programmes in the pipeline at 31 January 2019 and
the movements since 31 July 2018 are as follows:
At 31 January
2019 Stage of development
Agreement Initial Repeat testing Final product Final commercial Total
on scope testing for consistency trials engagement
of sampling and and review formulation
and engagement interpretation of results and
Approval time of results specification
---------------- ----------------- ----------------- ----------------- ------
Short 11 8 5 4 4 32
Medium 18 25 13 2 3 61
Long 7 12 1 - - 20
Technology
scouting
or time frame
unclear
currently 6 1 1 - - 8
42 46 20 6 7 121
================ ================ ================= ================= ================= ======
Change since
31 July 2018
Short 6 (5) (5) 2 - (2)
Medium 1 (1) 3 (3) 1 1
Long (2) (3) (2) - - (7)
Technology
scouting
or time frame
unclear
currently 4 1 1 - - 6
9 (8) (3) (1) 1 (2)
================ ================ ================= ================= ================= ======
We have reviewed the overall pipeline of ongoing customer
engagements, including an in-depth review of opportunity for
success. Inevitably, these are at varying levels of technical
maturity as we test our products in customer systems which have
different levels of complexity. It is encouraging to see general
progress across these engagements although, as noted above, the
process of tailoring an application to ensure it achieves the
desired performance gain as a cost-effective solution is an
intensive process involving our Tech team as well as commercial
engagement.
Coatings sector
With our primary focus on coatings technology as the key
opportunity to deliver revenue and where we have invested heavily
in technical resources and generation of supporting data, the
pipeline for coatings opportunities can be represented thus:-
At 31 January
2019 Stage of development
Agreement Initial Repeat testing Final product Final commercial
on scope testing for consistency trials engagement
of sampling and and review formulation
and engagement interpretation of results and
Approval time of results specification Total
---------------- ----------------- ----------------- ----------------- ------
Short 9 5 3 1 2 20
Medium 16 21 9 1 1 48
Long 7 10 1 - - 18
Technology
scouting
or time frame
unclear
currently 4 1 - - 5
36 36 14 2 3 91
================ ================ ================= ================= ================= ======
James Briggs Ltd (JBL)
We continue to finalise the terms of the Hycote product launch
by JBL. As part of its range reformulation and upgrade to suit
latest vehicle colours, the graphene-containing primer is expected
to be launched in H2 FY19. This is a little behind previous
guidance, which will have an impact on near term revenues from this
project, although the longer term volume proposition remains
strong. As recently noted by Jim Miller, JBL's Commercial Director,
the two year development collaboration between JBL and AGM has
resulted in JBL's first products coming to fruition for the
automotive market. Initial feedback from the market has been very
positive, with customers keen to see innovative products with
genuine substantive performance improvements, which these products
deliver through utilisation of AGM's graphene dispersion
technology. Further sales potential is also expected beyond the
Hycote launch, with uptake in the retail sector.
HMG
HMG is the UK's largest independent paint manufacturer. Initial
performance testing and product release to HMG's customer Brit-Tipp
resulted in excellent performance feedback regarding corrosion
performance in their light commercial vehicles. Seeking a broader
and deeper understanding of the performance possibilities for
graphene in its coatings, HMG has elected to continue testing. AGM
is engaged in a technical evaluation in HMG's commercial vehicle
primer systems and this is expected to deliver a yet more robust
technology solution for future product offerings towards the end of
2019.
Jonathan Falder from HMG Paints Ltd in Manchester said: "We have
been pleased with initial performance results in our commercial
vehicle applications. Since that time, we have been impressed with
the potential for the use of graphene in anti-corrosion coating
applications for Industrial and commercial vehicle business and
have committed to a deeper programme with AGM to determine the
extent of performance gains we can achieve with this technology. We
continue to be excited by the prospects and are pleased to have AGM
as our partner in this important product development project".
Positive engagements continue with a number of other customers
for steel anti-corrosion applications, the majority of which are
covered by NDA arrangements. Our recent technology sharing
programme at Coatings conferences has yielded a positive number of
new engagements.
We also continue to make significant strides forward in coatings
technology in the aerospace sector at ten undisclosed accounts.
Corrosion control of aluminium substrates is a highly complex
matter requiring high performance and safe solutions, given the
end-use is often the aerospace sector. The integration of graphene
into aluminium primer coatings is yielding positive performance
results with a number of these customers leading to next stages of
the adoption testing process becoming apparent. In support of this
industry sub-sector, we will also present our own Genable(R)
solutions for aluminium corrosion in April 2019.
Applied Nano Systems (ANS) A development effort with ANS has led
to a graphene-loaded aerosol spray product. In this application,
the product offers clear advantages to the end user as a
low-slip/low-friction coating. As a water-based solution, this
product also represents a milestone in environmentally friendly
coatings solutions. Scale-up trials are continuing with this
customer. ANS, a Swedish company specialising in surface treatment
methods for tribological applications, has started to deploy AGM
graphene in their polymer-bonded coating systems. ANS Tricolit(R)
GO is one of the first high-performance direct-to-metal water-based
graphene-fortified coating systems on the market. This product also
represents a milestone in environmentally friendly coatings
solutions. ANS is also engaged in a development programme on the
use of functionalised graphene as reactive cross-linker. Scale up
trials are continuing.
AGM's Genable(R) range of dispersions is a key enabler for ease
of integration of graphene into a host material - be it a paint
formulation, a resin system or other polymer types. With a
standardised range of dispersions, customers can confidently
procure a repeatable product for batch to batch consistency. We
also of course continue to produce custom dispersions to order to
suit customer needs and to support the best opportunity for success
in a customer's product. With an in-depth appreciation of both
dispersion chemistry and application awareness for how to add
graphene to the end formulation, we are well placed to see success
in the markets we are operating in.
Composites sector
Fire retardant resins / Composites Evolution
Under a NATEP collaborative development programme focused on the
mechanical properties enhancement of fire-retardant materials for
interiors in aircraft and mass transit markets, we have seen
positive progress in both performance testing and all-important
manufacturability trials using prepreg methods. Anticipation is
high that this graphene-enhanced solution will result in a
deliverable practical solution for this important market.
Magna
Following very positive early engagement with Magna, including
the demonstration of a tailgate fortified with AGM's graphene at
the JEC conference and a growing confidence in the potential for
success in its composite materials, coatings for composites and
polymers technology, changes within Magna have slowed down the pace
of further testing with it.
Structural Ink(R) Our graphene printing technology, which
creates the possibility to selectively deposit graphene materials
in a composite structure to maximise performance, whilst minimising
weight, continues to produce outstanding gains in a key parameter -
fracture toughness.
We continue to pursue a broad performance uplift in a range of
materials and are engaged with customer testing of printed carbon
fibre prepreg materials which are cured and tested in specific
ways.
Further to this promising progress, we are reviewing scope to
develop our printing platform to cover other market applications
and potential with the technology. An example would be in the area
of conductive inks to enable delivery of specific properties -
either thermal or electrical enhancements to a broader range of
materials through the specific placement of graphene materials
where they are needed.
Functional materials
Airbus
The qualification for our thermal paste adhesive, Genable(R)
4400, with Airbus Space and Defence is approaching completion and
we have line of sight to first order commitment, which when
fulfilled will put our product onto satellite platforms. Clearly,
the approval process for such an application involves rigorous and
lengthy testing to prove such an innovative new technology. The key
application benefits with this material are found in a combination
of high thermal conductivity, low density and good adhesion
properties. Expected timeline to completion of work at the customer
will put first orders in H2 FY19/H1 2020.
Genable(R) 4400 We are also seeing interest in the product
outside of Airbus and are pleased to note the near term launch with
an undisclosed customer of this product under its own branding -
now intended for April 2019. It is pleasing to see a wider uptake
with this product technology.
Technical and manufacturing capabilities
Alignment throughout the organisation
As we focus on the delivery of coatings technology, a key
enabler is the transition from "development" to "standard" to "full
production" dispersed materials. An active programme is in place to
achieve this milestone across the breadth of the Genable(R) product
range. Such activity enables a high level of production readiness.
The technical and manufacturing arms of our business are fully
focused on this objective in support of delivering commercial
revenue.
Latest technology developments Application technology
development is key to leadership in this emerging innovative
technology space. Having invested heavily in the development of the
Genable(R) stable dispersions range using our graphene and the
generation of supporting data for the mid-range anti-corrosion
market, we continue to focus on pushing the boundaries yet further
whilst maximising engagement in this sub-sector. The objective is
to create ease-of-use solutions to these technology opportunities
such that the adoption of graphene is less of a challenge.
The launch of a truly environmentally friendly alternative to
zinc-based additives for anti-corrosion primers represents a major
achievement. Reflecting this, the Company secured a nomination as a
finalist in the Materials Performance Corrosion Innovation Awards
2019 which acknowledges the leaders advancing understanding and
development of global corrosion technology. It is run in parallel
with NACE International where we recently presented our latest
work.
Further development effort has been focused in three areas:
- Meeting the needs of the harsher "C4 and C5" anti-corrosion
markets with novel graphene-based solutions.
This work is focused on real paint systems and uses a graphene
"tie-coat" to control diffusion through the integral coating and
extend the onset of corrosion. Applications for such technology
represent significant volumes of paint. AGM is proud to have
presented this technology at the prestigious European Coatings
Conference in March 2019. We also presented our unique solutions at
Corrosion 2019 in March, and will shortly present them at The
American Coatings Association Technology conference and Aluminium
2000 World Congress (both in April 2019)
- Solutions for yet more harsh "CX" anti-corrosion environments.
This will involve significant additional testing as we seek to
access this market sector. Based on current outstanding performance
trends from current testing we are confident that graphene has a
central part to play in future coatings solutions for harsh
environments.
- Developing solutions for environmentally friendly water-based
paints and coatings for barrier performance enhancement.
Significant challenges exist in this technology area related to the
incorporation of graphene nanomaterials into water-based emulsions.
In achieving a solution to this formulating challenge, the route to
market is potentially faster, based on less onerous testing
regimes.
Progress on patents
We continue to add value through our IP portfolio, principally
in coatings and dispersions applications.
Taking a leading position
In seeking to engage on a broader footprint and to be in a more
prominent leadership role in the graphene space given our unique
and maturing technology platform, we are pleased to have signed a
Memorandum of Understanding with the Graphene Engineering
Innovation Centre (GEIC) at the University of Manchester. This is
expected to significantly strengthen ties with the National
Graphene Institute (NGI) and the University and further develop
graphene technology in the UK. We are pleased to have the
opportunity to work much more closely with these centres of
excellence.
We have accepted an invitation to join the Industry Council of
The National Graphene Association in the USA in order to be at the
centre of development of international standards and overcoming
challenges of mass-scale adoption of graphene in different
industrial segments such as composites and coatings. We will be
presenting at the NGA's Graphene Summit in May 2019 in Washington
DC, and will have the opportunity to input to policy and
environmental standards development for this new technology. We
have also joined The Graphene Council and anticipate the
opportunity to present webinars such as graphene solutions for
anti-corrosion coatings to an ever widening audience, as well as
benefitting from the broader networking opportunity within these
organisations.
Regulatory
An area of significant focus, which again requires positive
leadership in a new materials industry, is the development of
regulatory control standards. We are lead partner in the EU REACH
consortium on graphene and are well advanced in accreditation in
Asia. TSCA registration is also being pursued as part of a broader
platform of approval on a global basis. We are further engaged with
the UK HSE on development of understanding of nanotechnology in the
workplace.
Local community
We value our local community and we have agreed to become an
ambassador for Redcar and Cleveland to promote it as a great place
to live and do business.
Outlook
We continue to make positive progress in robust technology
solutions for our key focus market of coatings technology. Whilst
the pace of such progress is not always as rapid as we would like,
this is reflective of the intensity, breadth and depth of
engagement with multiple customers and the length of time it can
take to formulate a solution and then test it, often for six months
or more in the case of an iterative process.
Our strategy and expected milestones in the next twelve months
are:
- significant sales development as a result of existing pipeline
engagements transitioning to repeat customers;
- launch of customer products containing AGM graphene dispersion solutions;
- Airbus completion of satellite builds with AGM thermal adhesives on board;
- maturing pipeline customers completing their reviews and launching products;
- technology development efforts bringing forth platform
solutions for customer engagement; and
- Increasing routes to market through distribution agreements for standard products.
I am pleased with the progress achieved over the last six
months, albeit that the timing of certain revenues is behind our
previous expectations and look forward to the future with
confidence as we focus on increasing the momentum in the
business.
Adrian Potts
Chief Executive Officer
3 April 2019
Financial review
with David Blain
Revenue
Revenue for the period was GBP26,000 (2018: GBP54,000) arising
from the supply of production orders of graphene and evaluation
quantities of graphene to commercial partners.
Other income
Other income, which comprises grant income, was GBP23,000 (2018:
GBP30,000). Grants received related to funding for the development
of new graphene applications, with a small amount for the creation
of new jobs or the purchase of assets.
Cost of sales
Cost of sales has increased as a result of increased rent,
labour and materials used in preparing the plant for commercial
production.
Loss on ordinary activities before tax
A loss on ordinary activities before tax of GBP2,374,000 (2018:
loss of GBP2,291,000) was recognised. The prior year loss includes
exceptional costs of GBP205,000 mainly connected to fees paid in
relation to the issue of new shares.
Loss on ordinary activities before interest, tax, exceptional
costs, depreciation and amortisation (EBITDA)
EBITDA for the Group increased from a loss of GBP1,952,000 in
2018 to a loss of GBP2,233,000 for the period ended 31 January
2019. The losses incurred in the period relate to the day to day
costs of the business and include the ongoing costs associated with
the technical input provided to our commercial partners as they
look to evaluate and incorporate graphene into their product
lines.
Exceptional costs
Exceptional costs recognised in the period were GBPnil (2018:
GBP205,000). The prior year costs principally relate to fees paid
in relation to the issue of new shares in that period.
Net finance income
Net finance income for the period was GBP34,000 (2018:
GBP20,000).
Loss on ordinary activities before tax, exceptional costs and
amortisation (PBTA)
PBTA for the period increased from a loss of GBP2,086,000 in
2018 to a loss of GBP2,374,000 for the period ended 31 January
2019.
Tax
R&D tax credits for the current year are accrued on a
monthly basis resulting in a credit of GBP200,000 for the period.
In previous years the credit was recognised in full at the year
end. The tax credit recognised in respect of the previous financial
year arises from R&D tax credits.
Earnings per share
Basic earnings per share was a loss of 4.4 pence per share
(2018: loss of 6.4 pence per share). Adjusted basic earnings per
share (before exceptional costs) was a loss of 4.4 pence per share
(2018: loss of 5.8 pence per share).
Dividend
No dividend has been proposed for the period ended 31 January
2019 (2018: GBPnil).
Cash flow
Net cash used in operations was GBP2,173,000 (2018:
GBP1,998,000).
Capital expenditure of GBP57,000 (2018: GBP132,000) has been
incurred in the period mainly relating to the development of the
production process and related production assets. Net proceeds
arising from the issue of shares totalled GBPnil (2018:
GBP9,369,000).
Balance sheet
Net assets have reduced to GBP10,087,000 (2018: GBP13,284,000),
principally reflecting the trading loss for the period.
Cash at bank at 31 January 2019 was GBP8,246,000 (2018:
GBP11,961,000). Monies are on deposit with a small number of
financial institutions for time periods ranging between instant
access and up to 95 days in maturity.
Accounting policies
The Group's consolidated financial information has been prepared
in accordance with International Financial Reporting Standards as
adopted in the EU. The Group's significant accounting policies,
which are consistent with those set out in the audited financial
statements for the year ended 31 July 2018, have been applied
consistently throughout the period. For this period, we have
calculated the share based payment charge using the Monte Carlo
method rather than the Black-Scholes model which has been used in
prior years. This is to reflect that the option awards are subject
to market based vesting conditions and therefore the Monte Carlo
method is more accurate.
Principal risks and uncertainties
Risk management forms an integral part of the business planning
and review cycle. The principal risks and uncertainties remain
unchanged from those set out on pages 22 to 25 of the Annual Report
for year ended 31 July 2018.
Forecasting timing and quantum of revenues at this stage of
development continues to be a key difficulty faced by the Company
as this is heavily dependent upon the product development cycle of
our customers and, therefore, is not under our control.
Cautionary statement
The Business and Financial reviews have been prepared for the
shareholders of the Company, as a body, and no other persons. Their
purpose is to assist shareholders of the Company in assessing the
strategies adopted by the Group and the potential for those
strategies to succeed, and for no other purpose. The Business and
Financial reviews contain forward-looking statements that are
subject to risk factors associated with, amongst other things, the
economic and business circumstances occurring from time to time in
the sectors and markets in which the Group operates. It is believed
that the expectations reflected in these statements are reasonable
but they may be affected by a wide range of variables which could
cause actual results to differ materially from those currently
anticipated. No assurances can be given that the forward-looking
statements in the Business and Financial reviews will be realised.
The forward-looking statements reflect the knowledge and
information available at the date of preparation.
David Blain
Chief Financial Officer
3 April 2019
Consolidated income statement and statement of comprehensive
income
for the six months ended 31 January 2019
Unaudited Unaudited Audited
6 months 6 months
to to year ended
31 January 31 January 31 July
2019 2018 2018
Note GBP'000 GBP'000 GBP'000
------------------------------------------- ---- ---------- ---------- ----------
Revenue 5 26 54 77
Other income 23 30 126
------------------------------------------- ---- ---------- ---------- ----------
49 84 203
Cost of sales (231) (120) (250)
------------------------------------------- ---- ---------- ---------- ----------
Gross loss (182) (36) (47)
Operating expenses (2,226) (2,275) (4,555)
------------------------------------------- ---- ---------- ---------- ----------
EBITDA (2,233) (1,952) (3,984)
Exceptional costs - (205) (307)
Depreciation of tangible fixed assets (175) (154) (311)
------------------------------------------- ---- ---------- ---------- ----------
Operating loss (2,408) (2,311) (4,602)
Net finance income 34 20 57
------------------------------------------- ---- ---------- ---------- ----------
PBTA (2,374) (2,086) (4,238)
Exceptional costs - (205) (307)
------------------------------------------- ---- ---------- ---------- ----------
Loss on ordinary activities before tax 5 (2,374) (2,291) (4,545)
Tax on loss on ordinary activities 3 200 - 1,046
------------------------------------------- ---- ---------- ---------- ----------
Loss for the period attributable to equity
shareholders (2,174) (2,291) (3,499)
Other comprehensive income - - -
------------------------------------------- ---- ---------- ---------- ----------
Total comprehensive loss (2,174) (2,291) (3,499)
------------------------------------------- ---- ---------- ---------- ----------
Earnings per share (pence per share)
Basic 6 (4.4) (6.4) (8.2)
Diluted 6 (4.4) (6.4) (8.2)
------------------------------------------- ---- ---------- ---------- ----------
EBITDA comprises loss on ordinary activities before interest,
tax, exceptional costs, depreciation and amortisation.
PBTA comprises loss on ordinary activities before tax,
exceptional costs and amortisation.
Consolidated statement of changes in shareholders' equity
for the six months ended 31 January 2019
Share Share Merger Retained Unaudited
capital premium reserve earnings total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------- ------- ------- -------- ---------
As at 31 July 2017 446 18,641 1,231 (14,250) 6,068
Comprehensive loss - - - (2,291) (2,291)
IFRS 2 share based payments - - - 138 138
Issue of shares (net) 543 8,826 - - 9,369
---------------------------- ------- ------- ------- -------- ---------
As at 31 January 2018 989 27,467 1,231 (16,403) 13,284
Comprehensive loss - - - (1,208) (1,208)
IFRS 2 share based payments - - - 39 39
Issue of shares (net) - 6 - - 6
---------------------------- ------- ------- ------- -------- ---------
As at 31 July 2018 989 27,473 1,231 (17,572) 12,121
Comprehensive loss - - - (2,174) (2,174)
IFRS 2 share based payments - - - 140 140
Issue of shares (net) - - - - -
---------------------------- ------- ------- ------- -------- ---------
As at 31 January 2019 989 27,473 1,231 (19,606) 10,087
---------------------------- ------- ------- ------- -------- ---------
Consolidated balance sheet
as at 31 January 2019
Unaudited Unaudited Audited
31 January 31 January 31 July
2019 2018 2018
Note GBP'000 GBP'000 GBP'000
------------------------------ ---- ---------- ---------- --------
Assets
Non-current assets
Intangible assets 90 139 78
Property, plant and equipment 1,763 1,913 1,881
------------------------------ ---- ---------- ---------- --------
1,853 2,052 1,959
------------------------------ ---- ---------- ---------- --------
Current assets
Inventories 52 38 56
Trade and other receivables 743 168 612
Cash 8,246 11,961 10,443
------------------------------ ---- ---------- ---------- --------
9,041 12,167 11,111
------------------------------ ---- ---------- ---------- --------
Liabilities
Current liabilities
Trade and other payables (807) (935) (949)
------------------------------ ---- ---------- ---------- --------
(807) (935) (949)
------------------------------ ---- ---------- ---------- --------
Net assets 10,087 13,284 12,121
------------------------------ ---- ---------- ---------- --------
Shareholders' equity
Called up share capital 8 989 989 989
Share premium account 27,473 27,467 27,473
Merger reserve 1,231 1,231 1,231
Retained earnings (19,606) (16,403) (17,572)
------------------------------ ---- ---------- ---------- --------
Equity shareholders' funds 10,087 13,284 12,121
------------------------------ ---- ---------- ---------- --------
Consolidated cash flow statement
for the six months ended 31 January 2019
Unaudited Unaudited Audited
6 months 6 months
to to year ended
31 January 31 January 31 July
2019 2018 2018
Note GBP'000 GBP'000 GBP'000
--------------------------------------------- ---- ---------- ---------- ----------
Operating activities
Net cash used in operations 7 (2,173) (1,998) (4,005)
Net finance income 45 15 53
Tax received - - 631
--------------------------------------------- ---- ---------- ---------- ----------
Net cash used in operating activities (2,128) (1,983) (3,321)
--------------------------------------------- ---- ---------- ---------- ----------
Investing activities
Purchase of intangible assets (12) (1) (62)
Purchase of property, plant and equipment (57) (132) (257)
--------------------------------------------- ---- ---------- ---------- ----------
Net cash used in investing activities (69) (133) (319)
--------------------------------------------- ---- ---------- ---------- ----------
Financing activities
Net proceeds from issue of Ordinary shares - 9,369 9,375
--------------------------------------------- ---- ---------- ---------- ----------
Net cash generated from financing activities - 9,369 9,375
--------------------------------------------- ---- ---------- ---------- ----------
Net (decrease)/increase in net cash and cash
deposits (2,197) 7,253 5,735
Net cash and cash deposits at 31 July 2018 10,443 4,708 4,708
--------------------------------------------- ---- ---------- ---------- ----------
Net cash and cash deposits at 31 January
2019 8,246 11,961 10,443
--------------------------------------------- ---- ---------- ---------- ----------
Net cash and cash deposits include:
---------------------------------------------- ----- ------ ------
Cash (maturity less than 95 days) 8,246 11,961 10,443
---------------------------------------------- ----- ------ ------
Net cash and cash deposits at 31 January 2019 8,246 11,961 10,443
---------------------------------------------- ----- ------ ------
Notes to the Interim Report
for the six months ended 31 January 2019
1 General information
The principal activity of Applied Graphene Materials plc is the
manufacture, dispersion and development of applications for
graphene. The Group operates principally in the United Kingdom.
The Company is incorporated and domiciled in the United Kingdom
and its registered number is 8708426. The address of the registered
office is The Wilton Centre, Redcar, Cleveland TS10 4RF. The
Company was incorporated on 27 September 2013.
The interim financial information was approved for issue on 3
April 2019.
2 Basis of accounting
The consolidated interim financial information for the period
ended 31 January 2019 has been presented under the historical cost
accounting convention, as modified by financial assets and
liabilities at fair value through the income statement and share
based payments at fair value, and in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union, IFRIC interpretations and those parts of the Companies Act
2006 applicable to companies reporting under IFRS. The consolidated
interim financial information has been prepared on a going concern
basis.
The accounting policies used in the consolidated interim
financial information are consistent with those set out in the
audited financial statements for the year ended 31 July 2018, other
than the method of calculation of the share based payment charge.
For this period, we have calculated the share based payment charge
using the Monte Carlo method rather than the Black-Scholes model
which has been used in prior years. This is to reflect that the
option awards are subject to market based vesting conditions and
therefore the Monte Carlo method is more accurate.
The Group has adopted IFRS 15 "Revenue from Customer Contracts"
and IFRS 9 "Financial Instruments" in preparing this Interim Report
and will also apply these standards in preparing the financial
statements for the year ending 31 July 2019. Neither standard has a
material impact on the Group's financial statements.
Further IFR standards or interpretations may be issued that
could apply to the Group's financial statements for the year ending
July 2019. If any such amendments, new standards or interpretations
are issued, then these may require the consolidated financial
information provided in this report to be changed. The Group will
continue to review its accounting policies in light of emerging
industry consensus on the practical application of IFRS.
The preparation of financial information in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, events or
actions, actual events ultimately may differ from those
estimates.
The consolidated interim financial information does not include
all financial risk management information and disclosures required
in the annual financial statements.
The consolidated interim financial information for the six
months ended 31 January 2019 and for the six months ended 31
January 2018 contained within the Interim Report does not
constitute statutory financial statements within the meaning of
Section 434 of the Companies Act 2006 and is unaudited. The
comparative figures for the year ended 31 July 2018 have been
extracted from the audited financial statements, on which the
Company's auditors have given an unqualified opinion.
3 Taxation
The Group has not recognised any tax assets in respect of
trading losses arising in either the current financial year or
accumulated losses in previous financial years. Research and
development tax credits for the period up to January 2019 have been
accrued after having taken into account the anticipated level of
research and development work carried out in the period. The tax
credit recognised in respect of the previous financial year arises
from the receipt of R&D tax credits for the year up to July
2017 and an accrual for the year up to July 2018 taking into
account the level of research and development work carried out
during the year.
4 Dividends
No dividend has been proposed for the period ended 31 January
2019 (2018: GBPnil).
5 Segmental analysis
The Group currently has one operating segment. Operating
segments are defined as components of an enterprise about which
separate financial information is available that is evaluated
regularly by the Chief Operating Decision Maker (CODM) in deciding
how to allocate resources and in assessing performance. The Group's
Chief Executive Officer has been identified as the CODM. Revenue
and profits arising from that operating segment are the same as
presented on the face of the consolidated income statement and
statement of comprehensive income.
6 Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of shares in issue during each period. The weighted average
number of shares in issue during the period used in the calculation
of basic earnings per share was as follows:
Unaudited Unaudited Audited
6 months 6 months
to to year ended
31 January 31 January 31 July
2019 2018 2018
'm 'm 'm
----------------------------------------------------- ---------- ---------- ----------
Weighted average number of shares for basic earnings
per share 49.4 36.0 42.7
----------------------------------------------------- ---------- ---------- ----------
Adjusted earnings per share has been calculated so as to exclude
the effect of exceptional costs including related tax charges and
credits. Adjusted earnings used in the calculation of basic
earnings per share reconciles to basic earnings as follows:
Unaudited Unaudited Audited
6 months 6 months
to to year ended
31 January 31 January 31 July
2019 2018 2018
GBP'000 GBP'000 GBP'000
---------------------------------------------- ---------- ---------- ----------
Basic earnings (2,274) (2,291) (3,499)
Exceptional costs - 205 307
---------------------------------------------- ---------- ---------- ----------
Adjusted earnings (2,274) (2,086) (3,192)
---------------------------------------------- ---------- ---------- ----------
Earnings per share (pence per share)
Basic (4.4) (6.4) (8.2)
---------------------------------------------- ---------- ---------- ----------
Adjusted earnings per share (pence per share)
Basic (4.4) (5.8) (7.5)
---------------------------------------------- ---------- ---------- ----------
The Group was loss making for the periods ended 31 January 2019
and 31 January 2018 and also for the year ended 31 July 2018.
Diluted loss per share has not been presented above as the effect
of share options issued is anti-dilutive.
7 Notes to the cash flow statement
Unaudited Unaudited Audited
6 months 6 months
to to year ended
31 January 31 January 31 July
2019 2018 2018
GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ---------- ---------- ----------
Loss for the period attributable to equity shareholders (2,174) (2,291) (3,499)
Tax on loss (200) - (1,046)
Net finance income (34) (20) (57)
Depreciation of property, plant and equipment 175 154 311
Exceptional costs - 205 307
-------------------------------------------------------- ---------- ---------- ----------
EBITDA (2,233) (1,952) (3,984)
Depreciation of property, plant and equipment (175) (154) (311)
Exceptional costs - (205) (307)
-------------------------------------------------------- ---------- ---------- ----------
Operating loss (2,408) (2,311) (4,602)
Depreciation of tangible fixed assets 175 154 311
Disposal of intangible assets - - 121
IFRS 2 share based payments charge 140 138 177
(Increase)/decrease in net working capital (80) 21 (12)
-------------------------------------------------------- ---------- ---------- ----------
Net cash used within operations (2,173) (1,998) (4,005)
-------------------------------------------------------- ---------- ---------- ----------
8 Share capital
Unaudited Unaudited
number
of total
Ordinary
shares GBP'000
--------------------------------------------------- ---------- ---------
Allotted, called up and fully paid
At 31 July 2017 Ordinary shares of 2 pence each 22,290,763 446
Issued on 31 October 2017 27,138,617 543
--------------------------------------------------- ---------- ---------
At 31 July 2018 Ordinary shares of 2 pence each 49,429,380 989
At 31 January 2019 Ordinary shares of 2 pence each 49,429,380 989
--------------------------------------------------- ---------- ---------
On 31 October 2017, 27,138,617 Ordinary shares of 2 pence each
were issued at a price of GBP0.36 per share to institutional and
other investors.
9 Related party transactions
Transactions between Applied Graphene Materials plc and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
Transactions with shareholders
The following transactions with shareholders of the Group were
recorded, excluding VAT, during the period:
Unaudited Unaudited Audited
6 months 6 months
to to year ended
31 January 31 January 31 July
2019 2018 2018
GBP'000 GBP'000 GBP'000
--------------------------------------------------- ---------- ---------- ----------
University of Durham (shareholder)
Staff secondment, consultancy and other fees 17 20 (4)
--------------------------------------------------- ---------- ---------- ----------
Top Technology Limited (controlled by shareholder)
Non-Executive fees and expenses 8 8 15
Corporate finance fees - 20 -
--------------------------------------------------- ---------- ---------- ----------
IP2IPO (shareholder)
Non-Executive Director expenses - - 1
--------------------------------------------------- ---------- ---------- ----------
Remuneration of key management personnel
The remuneration of the Directors and the key management
personnel of the Group is set out below in aggregate for each of
the categories specified in IAS 24 Related Party Disclosures:
Unaudited Unaudited Audited
6 months 6 months
to to year ended
31 January 31 January 31 July
2019 2018 2018
GBP'000 GBP'000 GBP'000
------------------------------------------------- ---------- ---------- ----------
Short term employee benefits (excluding bonuses) 357 338 705
Payments to third parties 8 8 15
IFRS 2 share based payments charge 140 138 84
------------------------------------------------- ---------- ---------- ----------
505 484 804
------------------------------------------------- ---------- ---------- ----------
10 Seasonality
The Group experiences no material variations in performance
arising due to seasonality.
11 Availability of Interim Report
It is anticipated that the Interim Report will be sent to all
shareholders on 10 April 2019. Electronic copies of the report will
also be available on Applied Graphene Materials' website at
www.appliedgraphenematerials.com.
Glossary of terms
Term Meaning
Anti-corrosion A type of coating made with neutral or slightly alkaline
pigments and a water resisting vehicle for use as a
primer on steel and other metals to prevent or inhibit
corrosion
--------------------------------------------------------------
Barrier system A method of preventing corrosion by using barrier materials
within the coating that restrict the movement of water
and other chemicals towards the metal surface
--------------------------------------------------------------
Coat/coating When used as a verb, "coat" means to cover or apply;
as a noun, the word signifies the amount of finishing
material applied to a surface during one or more applications
without a drying period between applications
--------------------------------------------------------------
Composites A material made up of resin and reinforcement
--------------------------------------------------------------
Conductive inks An ink that results in a printed object which conducts
electricity
--------------------------------------------------------------
Conductivity - electrical The degree to which a specified material conducts electricity,
calculated as the ratio of the current density in the
material to the electric field which causes the flow
of current
--------------------------------------------------------------
Conductivity - thermal The rate at which heat passes through a specified material,
expressed as the amount of heat that flows per unit
time through a unit area with a temperature gradient
of one degree per unit distance
--------------------------------------------------------------
Dispersion A mixture in which very small pieces of one substance
are scattered within another substance
--------------------------------------------------------------
Elasticity The property of a film that allows it to stretch or
otherwise change size or shape and return to its original
condition without breaking or rupturing
--------------------------------------------------------------
Fracture toughness Resistance to cracks, crazing or delamination resulting
from physical damage
--------------------------------------------------------------
Functional fluids Sustainable base oil products - enhanced with graphene
nanoplatelets - offer exceptional performance, and
friction and wear protection, especially for lubricants
and machining fluids used in automotive and industrial
applications
--------------------------------------------------------------
Mechanical Strength, hardness, toughness, elasticity, plasticity,
brittleness, ductility and malleability are mechanical
properties used as measurements of how materials behave
under a load
--------------------------------------------------------------
NATEP National Aerospace Technology Programme
--------------------------------------------------------------
Polymer A long-chain molecule, consisting of many repeat units
--------------------------------------------------------------
Prepreg A factory-made combination of reactive resins and reinforcing
fibres, plus other necessary additive chemicals, ready
to be moulded
--------------------------------------------------------------
Primer A substance used as a preparatory coat on wood, metal
or canvas, especially to prevent the absorption of
subsequent layers of paint or the development of rust
--------------------------------------------------------------
Resin system A polymer with indefinite and often high molecular
weight and a softening or melting range that exhibits
a tendency to flow when subjected to stress
--------------------------------------------------------------
Substrate A material which provides the surface on which something
is deposited or inscribed
--------------------------------------------------------------
Thermal paste adhesive A thermally conductive paste applied to mating surfaces
to bond them together by surface attachment in order
to transfer heat across the materials
--------------------------------------------------------------
Tie coat Paint specifically formulated for situations and conditions
to provide a transition from a primer or undercoat
to a finish coat. Tie coats are used to seal the surface
of a zinc-rich primer, to bond generically different
types of coatings, or to improve the adhesion of a
succeeding coating
--------------------------------------------------------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UURKRKKASRAR
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