TIDMHAYD
RNS Number : 3249R
Haydale Graphene Industries PLC
26 October 2023
26 October 2023
Haydale Graphene Industries plc
('Haydale', the 'Company', or the 'Group')
Final Results
Haydale (AIM: HAYD), the global advanced materials group, is
pleased to announce its full year results for the year ended 30
June 2023 ("FY23").
Operational Highlights:
US sales continued to progress with growth in the core aerospace
and automotive markets.
-- Established a regionalised manufacturer's representative
network which is already showing signs of generating improved
commercial traction within the North American steel mill, aerospace
and automotive sectors for our finished tooling.
-- As part of the commercial rollout, published full tooling
parts catalogue and now building stock to support growth.
-- We plan to drive further market penetration as additional
distribution agreements are concluded.
-- Added additional internal sales support with plans to
reinforce technical support in Q2 FY24.
Consolidation in the UK of nanomaterial functionalisation
technology offering leading to key partnership arrangements
anticipated to form bedrock of continued commercial progress:
-- continued to optimise and extend the functionality of the
HDPlas(R) HT1400 plasma reactor installed in 2022:
o can functionalise nanomaterials for third parties on an
industrial scale; and
o won an Engineering and Manufacturing Awards in September 2023
in the manufacturing technology innovation class.
-- Signed commercial agreements with industry partners Saint Gobain, Cadent and Petronas:
o all have a commercial requirement that may potentially be met
through the application of our plasma functionalisation process to
their materials or the use of our wider product range; and
o can help take products to market through their market reach
and capability.
-- Working with several other nanomaterial producers and end
customers where our HDPlas(R) process can bring additional value to
their end customers.
-- Secured financial support from the Welsh Government to
continue the development of our key underfloor heating
technology.
-- Re-orientated our Thermal fluid technology to focus on
Graphene by signing an agreement with an industry partner with
expertise and market access.
Financial Highlights
- Revenue at GBP4.30 million (FY22: GBP2.90 million) up by 48.3%
on prior year, driven predominantly by a continued recovery in the
US business.
- Full year impact of the planned FY22 investment in sales,
marketing, quality assurance and production capability saw adjusted
administrative expenses increase by 12.5% to GBP6.26 million (FY22:
GBP5.52 million).
- Adjusted operating loss increased slightly by GBP0.16 million
to GBP3.49 million (FY22: GBP3.33 million).
- GBP5.1 million fundraising completed post period end.
Commenting on the results David Banks, Non-executive Chair of
Haydale, said:
"We have made important progress in our next planned steps as a
business by forging commercial partnerships and collaborations with
leading organisations that the Board believe will ultimately help
lead to commercial success. With the fundamental building blocks in
place and continuing progress in our key markets, the Board remains
confident that the Company will be able to take advantage of the
traction it is now seeing."
For further information:
Haydale Graphene Industries plc
Keith Broadbent, CEO Tel: +44 (0) 1269 842
Patrick Carter, CFO 946
www.haydale.com
Cavendish Capital Markets Limited (Nominated
Adviser & Broker )
Julian Blunt/Edward Whiley, Corporate Finance Tel: +44 (0) 20 7220
Andrew Burdis, ECM 0500
Notes to Editors
Haydale is a global technologies group and service provider that
facilitates the integration of graphene and other nanomaterials
into the next generation of industrial materials and commercial
technologies. With expertise in graphene, other nanomaterials and
Silicon Carbide, Haydale is able to deliver improvements in
electrical, thermal and mechanical properties, Haydale has been
granted patents for its technologies in Europe, USA, Australia,
Japan and China and operates from five sites in the UK, USA and the
Far East. For more information please visit: www.haydale.com or
Twitter: @haydalegraphene
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed
to be, forward looking statements. Forward looking statements are
identi ed by their use of terms and phrases such as "believe",
"could", "should" "envisage", "estimate", "intend", "may", "plan",
"potentially", "will" or the negative of those, variations or
comparable expressions, including references to assumptions. These
forward-looking statements are not based on historical facts but
rather on the Directors' current expectations and assumptions
regarding the Company's future growth, results of operations,
performance, future capital and other expenditures (including the
amount, nature and sources of funding thereof), competitive
advantages, business prospects and opportunities. Such forward
looking statements re ect the Directors' current beliefs and
assumptions and are based on information currently available to the
Directors.
A number of factors could cause actual results to differ
materially from the results discussed in the forward-looking
statements including risks associated with vulnerability to general
economic and business conditions, competition, environmental and
other regulatory changes, actions by governmental authorities, the
availability of capital markets, reliance on key personnel,
uninsured and underinsured losses and other factors, many of which
are beyond the control of the Company. Although any forward looking
statements contained in this announcement are based upon what the
Directors believe to be reasonable assumptions, the Company cannot
assure investors that actual results will be consistent with such
forward looking statements. Accordingly, readers are cautioned not
to place undue reliance on forward looking statements. Subject to
any continuing obligations under applicable law or any relevant AIM
Rule requirements, in providing this information the Company does
not undertake any obligation to publicly update or revise any of
the forward looking statements or to advise of any change in
events, conditions or circumstances on which any such statement is
based.
chair's statement
Introduction
I am pleased to present Haydale Graphene Industries Plc's full
year audited results to 30 June 2023 ("FY23").
The Group continued to make positive progress during the year on
its journey to delivering sustainable commercial revenues. The US
operation in particular saw a strong bounce back in FY23 and, with
its continued progress into the manufacture of SiC cutting tools,
is increasingly well positioned to deliver strong growth moving
forwards. The UK operation has started to see the seeds planted in
FY22 begin to come through in the second half of FY23 and post year
end period as we entered into a number of agreements that we
believe will form the bedrock of strong business partnerships going
forwards to take our offerings to the wider market. We anticipate
the momentum across both the nanomaterial and SiC markets will
continue into the current financial year.
Summary financials
Commercial revenue for FY23 of GBP4.30 million (FY22: GBP2.90
million) was up by 48.3% on prior year. Gross profit margin was
slightly down due to sales mix at 56% (FY22: 60%) resulting in a
gross profit of GBP2.39 million (FY22: GBP1.75 million). Other
operating income for the year of GBP0.38 million (FY22: GBP0.44
million) was in line with last year after adjusting for US Covid
support received in FY22. Adjusted administrative expenses
increased by GBP0.74 million (12.5%) to GBP6.26 million (FY22:
GBP5.52 million) primarily related to the full year impact of FY22
planned investment in resource resulting in an adjusted operating
loss of GBP3.49 million (FY22: GBP3.33 million). Total
administrative expenses were GBP8.93 million (FY22: GBP7.24
million) as a result of the above plus a number of additional
non-trading items, namely increase in share-based payments charges
of GBP0.55 million and an increase in depreciation and impairment
of GBP0.40 million. Loss for the year was GBP6.17 million (FY22:
GBP4.81 million).
Operational Highlights
The Group made good progress towards its longer-term goals in
the year as the Company consolidated its position bringing
increased focus onto its core offerings and laying the foundations
for continuing growth in FY24 and beyond. The priorities of
delivery of commercial revenue, focused investment in our physical
and human capacity and development of our technology remains
central to our strategy.
During the year we continued to optimise and extend the
functionality of the HDPlas(R) HT1400 plasma reactor acquired in
2022 which allows us to manufacture functionalised nanomaterials on
an industrial scale. With that assurance, we have further developed
our collaborations with industry partners who, due to their market
reach or capability, are potentially able to help take our products
to market. We have also concluded commercial project arrangements
with several nanomaterial producers and end customers where our
HDPlas(R) process can bring additional value to their end
customers.
The SiC and ceramic cutting tools produced by our US facility
saw growth in their core aerospace and automotive markets. We
started to roll out a regionalised manufacturer's representative
strategy towards the end of FY23 which is already showing signs of
generating improved commercial traction within the North American
steel mill, aerospace and automotive sectors for our finished
tooling. We anticipate this will increase further during the
current financial year as additional distribution agreements are
concluded.
Staff
I would like to thank our staff for their continued support and
flexibility, as their efforts are key to us achieving our aims. I
would also like to thank the executive management team who continue
to drive the transition towards a sustainable commercial
operation.
Funding
On 3 October 2023, the Company completed an equity funding of
GBP5.1 million (gross) and I would like to welcome our new
shareholders and to thank our existing shareholders for their
continued support.
Outlook
We have made important progress in our next planned steps as a
business by forging commercial partnerships and collaborations with
leading organisations that the Board believe will ultimately help
lead to commercial success. With the fundamental building blocks in
place and continuing progress in our key markets, the Board remains
confident that the Company will be able to take advantage of the
traction it is now seeing.
David Banks
Chair
25 October 2023
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 GBP0.20
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(R) 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(TM), 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.
FINANCIAL REVIEW
In the year under review, the Group's principal areas of income
were sales of specialty inks, fluids and graphene enhanced
composites and associated consultancy services from the UK and APAC
operations and sale of SiC fibres, whiskers, particulate, blanks
and tooling from the US operation. The Group's revenue for the year
ended 30 June 2023 of GBP4.30 million (FY22: GBP2.90 million)
represents a 48% increase compared with the previous year. Revenue
derived from product sales increased by GBP1.33 million during the
year, driven by the US business performance (See Note 3 -
Segmentation Analysis).
The Group's Gross Profit, which excludes Other Operating Income,
was GBP 2.39 million (FY22: GBP1.75 million) delivering a Gross
Profit margin of 56 % (FY22: 60%) which is slightly down due to
sales mix.
Other operating income, which is principally grant funded
projects, was GBP0.38 million (FY22: GBP0.44 million) consistent
with prior year after taking account of GBP0.06 million received in
FY22 from US Covid Government Support packages.
Adjusted administrative expenses increased by GBP0.69 million
(12.5%) to GBP6.26 million (FY22: GBP5.52 million) reflecting the
full year impact of investment decisions taken in FY22 partially
offset by cost savings resulting in an adjusted operating loss of
GBP3.49 million (FY22: GBP3.33 million). Total administrative
expenses for the year were GBP8.93 million (FY22: GBP7.24 million)
which, in addition to the above, reflects additional non-cash
related share-based payment expenses of GBP0.55 million. Also, the
Group took the decision to impair the fixed assets held in the US
and accordingly a non-cash charge of GBP0.53 million is included in
total administrative expenses.
The Loss from Operations was GBP6.16 million (FY22: GBP5.06
million). Finance costs, which include interest payable on the
Group's debt, for the year were GBP0.41 million (FY22: GBP0.19
million).
The Group continued to direct resources to research and
development with the focus for that investment on products and
processes that could develop into sustainable and profitable
revenue streams. R&D spend for the year was GBP1.52 million
(FY22: GBP1.45 million ([1]) ), of which GBP0.42 million was
capitalized (FY22: GBP0.34 million). During the year the Group
claimed R&D tax credits of GBP0.40 million (FY22: GBP0.43
million) and it is expected that this claim will be received during
the current financial year.
Total comprehensive loss for the year, including GBP1.12 million
(FY22: GBP0.41 million) of one off charges relating to impairment
of tangible assets and share-based payment costs, was GBP5.80
million (FY22: GBP4.54 million).
The loss per share for the year was GBP0.01 loss (FY22: GBP0.01
loss).
Statement of Financial Position and Cashflows
As at 30 June 2023, net assets amounted to GBP6.97 million
(2022: GBP7.05 million), including cash balances of GBP1.38 million
(2022: GBP1.19 million). Other current assets marginally decreased
to GBP3.15 million at the year-end (2022: GBP3.26 million) with
modest reductions across most areas offset by an increase in
inventory of GBP0.22 million at the US facility during the year .
Current liabilities reduced slightly to GBP2.01 million (2022:
GBP2.28 million) principally due to a reduction in trade and other
payables.
The Right of Use Asset in respect of its leased premises
decreased to GBP2.20 million (FY22: GBP2.70 million) due to winding
down of the leases agreements. The Lease Liability which is split
between Current and Non-Current Liabilities similarly decreased to
GBP2.44 million (FY22: GBP2.92 million). These movements were
non-cash items and did not impact the cash outflow in the year. The
Company will amortise these balances over the remaining life of the
leases which varies across the sites.
The Group's US Pension Obligations of GBP0.58 million (FY22:
GBP1.36 million) has reduced in the year due to a combination of
positive movements on investments , exchange and discount rate
movements and contributions made.
Net cash outflow from operating activities before working
capital movements for the year increased to GBP3.67 million (FY22:
GBP3.42 million), the principal contributing factors being the Loss
after Taxation of GBP6.17 million (FY22: GBP4.81 million). Cash
used in Operations increased by GBP0.92 million in the year to
GBP4.09 million (FY22: GBP3.17 million). The Group received an
R&D tax credit inflow of GBP0.43 million in the year (FY22:
GBP0.37 million). Net cash used in operating activities increased
to GBP3.66 million (FY22 GBP2.80 million).
Capital expenditure in the year, excluding the IFRS 16
adjustments, was GBP0.20 million (FY22: GBP1.00 million).
Capital Structure and Funding
On 13 September 2022, the Company raised GBP5.51 million (gross)
through the placing, open offer and subscription of 275,516,784 new
Ordinary Shares at 2.00 pence per share. Consequently, at 30 June
2023 the Company had 785,852,475 ordinary shares in issue (2022:
510,335,691). No options were exercised into ordinary shares during
the year (FY22: none).
The Group's total borrowings at the year-end were GBP1.37
million (2022: GBP1.35 million), of which GBP1.21 million was in
the UK and the balance in the Group's US subsidiaries. The UKRI
Innovation loan has a quarterly liquidity covenant until April 2024
with which the Group has been in full compliance through the
reporting period. There are no financial covenants extant in
respect of the UK bounceback loan of GBP0.03 million (FY22: GBP0.04
million) or the Group's US borrowings.
Post Balance Sheet Event
On 3 October 2023, the Company raised GBP5.1 million (gross)
through a placing, retail offer and subscription of 1,012,609,000
new Ordinary Shares at 0.5 pence per share. The funds raised will
be principally used to fund the general working capital needs of
the business. As part of this process, the Company's share capital
was restructured to in effect reduce the nominal value of each
ordinary share from 2.0 pence to 0.1 pence.
Save for 576 shares issued following an exercise of warrants,
all other warrants issued following the fundraise on 13 September
2022 of 138,758,392 lapsed on 14 September 2023 and are no longer
exercisable.
Key Performance Indicators
The Group has historically reported financial metrics of
revenues, gross profit margin, adjusted operating loss, cash
position and other metrics as its key performance indicators and
these are set out below.
FY23 (GBPm) FY22 (GBPm)
------------- -------------
Revenue 4.30 2.90
Gross profit margin 56% 60%
Adjusted operating loss (3.49) (3.33)
Cash position 1.38 1.19
Borrowings 1.37 1.35
During the year under review, management also used a sales
tracker, a non-financial performance metric to monitor the revenue
pipeline of the business. The sales tracker monitors the number of
accredited leads and assigns a probability of revenue realisation
to those leads.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2023
Year ended Year ended
30 June 30 June 2022
Note 2023 GBP'000
GBP'000
REVENUE 3 4,301 2,901
Cost of sales (1,911) (1,156)
------------ ---------------
Gross profit 2,390 1,745
Other operating income 377 442
------------------------------------------------- -------- ------------ ---------------
Adjusted administrative expenses (6,260) (5,520)
------------ ---------------
Adjusted operating loss (3,493) (3,333)
Adjusting administrative items:
Share based payment expense (589) (39)
Depreciation and amortisation (1,552) (1,308)
Impairment (531) (375)
(2,672) (1,722)
------------ ---------------
Total administrative expenses (8,932) (7,242)
------------ ---------------
LOSS FROM OPERATIONS (6,165) (5,055)
Finance costs (407) (187)
LOSS BEFORE TAXATION 4 (6,572) (5,242)
Taxation 407 433
LOSS FOR THE YEAR FROM CONTINUING OPERATIONS (6,165) (4,809)
Other comprehensive income:
Items that may be reclassified to profit
or loss:
Exchange differences on translation of
foreign operations (341) 374
Items that will not be reclassified to
profit or loss:
Remeasurements of defined benefit pension
schemes 702 (109)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
FROM CONTINUING OPERATIONS (5,804) (4,544)
Loss for the year attributable to:
Owners of the parent (6,165) (4,809)
Total comprehensive loss attributable
to:
Owners of the parent (5,804) (4,544)
Loss per share attributable to owners
of the Parent
Basic (GBP) 5 (0.01) (0.01)
Diluted (GBP) 5 (0.01) (0.01)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
Company Registration No. 07228939 Note 30 June 30 June
2023 2022
GBP'000 GBP'000
ASSETS
Non-current assets
Goodwill 1,059 1,131
Intangible assets 1,386 1,312
Property, plant and equipment 5,915 7,579
8,360 10,022
Current assets
Inventories 1,733 1,515
Trade receivables 564 667
Other receivables 446 646
Corporation tax 406 427
Cash and bank balances 1,378 1,186
4,527 4,441
TOTAL ASSETS 12,887 14,463
LIABILITIES
Non-current liabilities
Bank loans 6 (1,363) (1,341)
Pension Obligation (577) (1,356)
Other payables (1,962) (2,440)
(3,902) (5,137)
Current liabilities
Bank loans 6 (11) (11)
Trade and other payables (1,899) (2,199)
Deferred income (103) (68)
(2,013) (2,278)
TOTAL LIABILITIES (5,915) (7,415)
TOTAL NET ASSETS 6,972 7,048
EQUITY
Capital and reserves attributable to
equity holders of the parent
Share capital 15,717 10,207
Share premium account 31,912 31,912
Share-based payment reserve 833 244
Foreign exchange reserve (353) (12)
Retained losses (41,137) (35,303)
TOTAL EQUITY 6,972 7,048
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2023
Share-based
payment Foreign
Share Share reserve Exchange Retained Total Equity
capital premium GBP'000 Reserve losses GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2021 8,505 28,820 250 (386) (30,430) 6,759
Comprehensive loss for
the year
Loss for the year - - - - (4,809) (4,809)
Other comprehensive
income/(loss) - - - 374 (109) 265
----------- ----------- ------------- ------------ ------------ ----------------
8,505 28,820 250 (12) (35,348) 2,215
Contributions by and
distributions to owners
Recognition of
share-based payments - - 39 - - 39
Share based payment
charges - lapsed
options - - (45) - 45 -
Issue of ordinary
share capital 1,702 3,401 - - - 5,103
Transaction costs
in respect of
share issues - (309) - - - (309)
At 30 June 2022 10,207 31,912 244 (12) (35,303) 7,048
Comprehensive loss for
the year
Loss for the year - - - - (6,165) (6,165)
Other comprehensive
income/(loss) - - - (341) 702 361
10,207 31,912 244 (353) (40,766) 1,244
Recognition of
share-based payments - - 589 - - 589
Issue of ordinary
share capital 5,510 - - - - 5,510
Share issue cost - - - - (371) (371)
At 30 June 2023 15,717 31,912 833 (353) (41,137) 6,972
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2023
Year Year
ended ended
30 June 30 June
2023 2022
GBP'000 GBP'000
Cash flow from operating activities
Loss after taxation (6,165) (4,809)
Adjustments for:-
Amortisation and impairment of intangible
assets 335 607
Depreciation and impairment of property,
plant and equipment 1,747 1,076
Profit on disposal of plant and equipment
and F&F - 8
Share-based payment charge 589 39
Finance costs 407 188
Pension: employer contribution (180) (92)
Taxation (407) (433)
Operating cash flow before working
capital changes (3,674) (3,416)
Increase in inventories (218) (187)
Decrease/(increase) in trade and other
receivables 304 (4)
(Decrease)/increase in payables and
deferred income (503) 435
Cash used in operations (4,091) (3,172)
Income tax received 427 371
Net cash used in operating activities (3,664) (2,801)
Cash flow used in investing activities
Purchase of plant and equipment (203) (996)
Purchase of intangible assets (421) (340)
Net cash used in investing activities (624) (1,336)
Cash flow from financing activities
Finance costs (209) (63)
Finance costs - right of use asset (116) (125)
Payment of lease liability (261) (548)
Proceeds from issue of share capital 5,510 5,103
Share capital issues costs (371) (309)
New bank loans raised - 454
Repayments of borrowings (53) (842)
Net cash flow from financing activities 4,500 3,670
Effects of exchange rates changes (20) 9
---------- ----------
Net increase/(decrease) in cash and
cash equivalents 192 (458)
Cash and cash equivalents at beginning
of the financial year 1,186 1,644
Cash and cash equivalents at end of
the financial year 1,378 1,186
Abbreviated notes to the final results statement
1. General information
Haydale Graphene Industries plc is a public limited company
incorporated and domiciled in England and Wales and quoted on the
AIM Market, hence there is no ultimate controlling party.
2. Significant accounting policies
Basis of preparation
The Group consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards,
International Accounting Standards and Interpretations as adopted
by the UK (collectively "IFRSs") and with the requirements of the
Companies Act 2006.
The Group's financial statements have been prepared under the
historical cost convention.
The consolidated financial statements are presented in sterling
amounts.
Amounts are rounded to the nearest thousands, unless otherwise
stated.
The financial information contained in this announcement does
not constitute the Group's statutory accounts for the year ended 30
June 2023 but is derived from those accounts which have been
audited and which will be filed with the Registrar of Companies in
due course.
The auditors' report on the Annual Report and Financial
Statements for the year ended 30 June 2023 was unqualified, did not
draw attention to any matters by way of emphasis and did not
contain a statement under s498(2) or s498(3) of the Companies Act
2006.
Going concern
The Directors have prepared and reviewed detailed financial
forecasts of the Group and, in particular, considered the cash flow
requirements for the period from the date of approval of the 2023
financial statements to the end of June 2025. These forecasts sit
within the Group's latest estimate and within the longer-term
financial plan, both of which have been updated on a regular basis.
The directors are also mindful of the impact that the other risks
and uncertainties set out in the Annual Report may have on these
estimates and in particular the speed of adoption of new
technology.
As part of this review the directors have considered several
scenarios based on various revenue, cost and funding
sensitivities.
Revenue
Various sensitivities have been applied to forecasted revenue
including a stress test scenario which reduces forecasted revenue
by circa 14 per cent in FY24 and 9% in FY25, to the point where the
Group would breach its available cash resources in November 2024.
With respect to this 'stress test' the Group has circa 28 per cent
of that sensitised revenue within forward orders, contractual or
some other form of customer assurance which have a high degree of
certainty.
Cost Mitigation
The directors have included some limited assumptions regarding
cost savings that might be achievable if the forecast fails to meet
the forecasted or sensitised estimates, and these have been phased
in gradually over the 12-month period to October 2024.
Customer Solvency
As part of this review the directors have assessed the solvency
of key customers and their ability to deliver on their contractual
or other commitments on the basis of both publicly available
information and taken account of these assessments in their
forecasts. Future revenue related to certain contractual
commitments have been heavily discounted given the lack of
available data and trading history with the Group.
Summary
Therefore, after due consideration of the forecasts prepared,
the sensitivities applied and the Group's current cash resources
after the equity fund raise in October 2023 and the terms of its
debt facilities, the directors consider that the Company and the
Group have adequate financial resources to continue in operational
existence for the foreseeable future (being a period of at least 12
months from the date of this report), and for this reason the
financial statements have been prepared on the going concern
basis.
Whilst the directors believe that the going concern basis is
appropriate at the date of this report, the Board is mindful that
the net proceeds of the fund raise will be insuf cient to fund the
cash requirements of the Group through to a position where it is
able to fund itself from its own cash ow. The Board continues to
pursue the possibility of securing additional debt facilities to
provide additional liquidity. In the event that such debt
facilities are not available or are unavailable in sufficient
quantum it is very likely that the Group would need to raise
additional equity funding in the future and, whilst the directors
believe that future equity funding would be available, there can be
no guarantee that suf cient funds could be raised at a later date.
Any additional equity nancing may be dilutive to Shareholders.
3. Segment analysis
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the chief operating decision maker (which is
the Chief Executive Officer and Chief Financial Officer) as defined
in IFRS 8, in order to allocate resources to the segment and to
assess its performance.
For management purposes, the Group is organised into the
following reportable regions:
-- UK & Europe (focusing on functionalisation of nano
materials, high performance ink & master batches, elastomers
and the composites market in Europe);
-- North America (focusing on SiC & blank products for tooling); and
-- Asia Pacific (focusing on sales to the Asian markets)
2023 Adjustments,
UK & Europe North America Asia Pacific Central &
GBP'000 GBP'000 GBP'000 Eliminations Consolidated
GBP'000 GBP'000
REVENUE 786 3,190 325 - 4,301
Cost of sales (467) (1,231) (213) - (1,911)
Gross profit 319 1,959 112 - 2,390
Other operating
income 377 - - - 377
---------------------- --------------- ----------------- ---------------- -------------------- ----------------
Adjusted
administrative
expenses (2,270) (1,836) (538) (1,616) (6,260)
--------------- ----------------- ---------------- -------------------- ----------------
Adjusted operating
loss (1,574) 123 (426) (1,616) (3,493)
Administrative
expenses
Share based
payment
expense (34) (43) (1) (511) (589)
Depreciation &
amortisation (681) (693) (48) (130) (1,552)
Impairment - (531) - - (531)
(715) (1,267) (49) (641) (2,672)
--------------------- --------------- ----------------- ---------------- --------------------
Total administrative
expenses (2,985) (3,103) (587) (2,257) (8,932)
OPERATING LOSS (2,289) (1,144) (475) (2,257) (6,165)
--------------- ----------------- ---------------- --------------------
Finance costs (407)
LOSS BEFORE TAXATION (6,572)
Taxation 407
LOSS AFTER TAXATION (6,165)
Additions to
non-current assets 658 - 80 - 738
Segment assets 3,607 6,447 312 2,521 12,887
Segment liabilities (2,391) (3,138) (99) (287) (5,915)
2022 Adjustments,
UK & Europe North America Asia Pacific Central &
GBP'000 GBP'000 GBP'000 Eliminations Consolidated
GBP'000 GBP'000
REVENUE 984 1,673 244 - 2,901
Cost of sales (356) (670) (130) - (1,156)
Gross profit 628 1,003 114 - 1,745
Other operating
income 373 69 - - 442
---------------------- --------------- ----------------- ---------------- -------------------- ----------------
Adjusted
administrative
expenses (1,977) (1,648) (525) (1,370) (5,520)
--------------- ----------------- ---------------- -------------------- ----------------
Adjusted operating
loss (976) (576) (411) (1,370) (3,333)
Administrative
expenses
Share based
payment
expense (20) (4) 23 (38) (39)
Depreciation &
amortisation (474) (629) (74) (131) (1,308)
Impairment - - (23) (352) (375)
(494) (633) (74) (521) (1,722)
--------------------- --------------- ----------------- ---------------- --------------------
Total administrative
expenses (2,471) (2,281) (599) (1,891) (7,242)
OPERATING LOSS (1,470) (1,209) (485) (1,891) (5,055)
--------------- ----------------- ---------------- --------------------
Finance costs (187)
LOSS BEFORE TAXATION (5,242)
Taxation 433
LOSS AFTER TAXATION (4,809)
Additions to
non-current assets 1,533 72 36 - 1,641
Segment assets 4,159 7,225 341 2,738 14,463
Segment liabilities (2,386) (4,486) (114) (429) (7,415)
Geographical information
All revenues of the Group are derived from its principal
activities. The Group's revenue from external customers by
geographical location are detailed below.
2023 2022
GBP'000 GBP'000
By destination
United Kingdom 563 769
Europe 813 685
United States of
America 1,822 1,051
China 180 127
Thailand 61 158
South Korea 145 86
Japan 678 -
Rest of the World 39 25
4,301 2,901
During 2023, GBP0.95 million (22%) (2022: GBP0.73 million (25%))
of the Group's revenue depended on a single customer. During 2023
GBP0.68 million (16%) (2022: GBP0.58 million (20%)) of the Group's
revenue depended on a second single customer.
All amounts shown as other operating income within the Statement
of Comprehensive Income are generated within and from the United
Kingdom, EU and the US. These amounts include income earned as part
of a number of grant funded projects in the United Kingdom and EU
and a government grant in the US.
Dis-aggregation of revenues
The split of revenue by 2023 2022
type: GBP'000 GBP'000
Services 387 306
Reactor rental 124 134
Goods 3,790 2,461
4,301 2,901
North America
2023 UK & Europe GBP'000 Asia Pacific Total
GBP'000 GBP'000 GBP'000
Services 303 - 84 387
Reactor rental 124 - - 124
Goods 359 3,190 241 3,790
786 3,190 325 4,301
2022 North America
UK & Europe GBP'000 Asia Pacific Total
GBP'000 GBP'000 GBP'000
Services 275 - 31 306
Reactor rental 134 - - 134
Goods 575 1,673 213 2,461
984 1,673 244 2,901
Services and reactor rental revenues are recognised over time,
whereas goods and reactor sales are recognised at a point in
time.
The Group acquired non-current assets during the year, split by
geographical location as detailed below:
Non-current asset additions
2023 2022
GBP'000 GBP'000
By destination
United Kingdom 658 1,533
United States of
America - 72
Thailand 80 36
738 1,641
The carrying value of the Group's non-current assets split by
geographical location is detailed below:
2023 2022
GBP'000 GBP'000
By destination
United Kingdom 2,500 2,732
United States of
America 5,781 7,240
Thailand 76 49
South Korea 3 1
8,360 10,022
4. Loss before taxation
Loss before taxation is arrived at after charging:
2023 2022
GBP'000 GBP'000
Amortisation of intangibles 335 232
Impairment of intangibles - 375
Depreciation of property, plant and equipment 1,216 1,076
Impairment of tangibles 531 -
Foreign Exchange 105 58
Operating lease rental: plant and machinery 1 1
The service fees of the Group's auditor, Crowe U.K. LLP are
analysed below:
Fees payable to the Company's auditor
for the audit of the Group's financial
statements 62 56
There are no other fees payable to the Company's auditors and
its associates for other services (2022: GBPNil).
5. Loss per share
The calculations of loss per share are based on the following
losses and number of shares:
2023 2022
GBP'000 GBP'000
Loss after tax attributable
to owners of Haydale Graphene
Industries Plc (6,165) (4,809)
Weighted average number
of shares:
* Basic and Diluted 729,239,439 483,770,289
Loss per share:
Basic (GBP) and Diluted
(GBP) (0.01) (0.01)
The loss attributable to ordinary shareholders and weighted
average number of ordinary shares for the purpose of calculating
the diluted earnings per ordinary share are identical to those used
for basic earnings per share. This is because the exercise of share
options would have the effect of reducing the loss per ordinary
share and is therefore not dilutive under the terms of IAS 33. At
30 June 2023, there were 242,033,392 (2022: 48,685,000) options and
warrants outstanding. All of the options are potentially
dilutive.
6. Bank loans
2023 2022
GBP'000 GBP'000
Bank loans 1,374 1,352
The borrowings are repayable
as follows:-
* within one year 11 11
* in the second year 605 15
* in the third year and above 758 1,326
1,374 1,352
The Group's borrowings are denominated in US dollars and Pounds
Sterling. The directors consider that there is no material
difference between the fair value and carrying value of the Group's
borrowings.
2023 2022
Average interest rates paid 6.85% 6.3%
In October 2016, a five year bank loan of $1,720,000 (equivalent
to approximately GBP1.4 million at the time) was drawn by HTI, the
Company's US holding company, secured on the fixed assets of HTI
and its newly acquired operating subsidiary, HCT. This loan carried
an interest rate of 4% and was repayable in equal instalments. HTI
also had a working capital facility of up to $900,000 which was
secured on a combination of the fixed assets, inventory and trade
receivables of the US business. The rate of interest of this was
fixed at 5.25%. Both the above loans were repaid during the
comparative year.
In June 2020, as part of the Government Bounce Back Loan scheme,
HCS entered into a six year loan agreement with NatWest for
GBP50,000. The loan had a repayment holiday and did not accrue
interest during the first 12 months. Following the initial 12
months, interest has been charged at 2.5% p.a. and the loan and
interest are repayable in equal instalments over the remaining
period.
In March 2021, HCS secured a five year loan of GBP1,100,000 from
Innovate Loans UK Limited. At the year end the Company had fully
drawn down this facility. The loan has a repayment holiday until
March 2024 and is fully repayable by March 2026. Interest will be
charged at 7.4% p.a. for the period of the loan. For the initial 36
months interest will be paid at 3.7% p.a. and for the final 24
months interest with be paid at 10.7% p.a. There are no penalties
for early repayment.
During the prior year, the US operation secured a loan through
the COVID-19 Economic Injury Disaster Loan scheme of $200,000. The
loan is for a period of 30 year with a fixed interest rate of 3.75%
and deferred repayments for the first two years. At the year end
the balance on the loan was GBP164,000.
(1) Based on calculations submitted to HMRC for the R&D tax credit.
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