Annual Report and Accounts
for the year ended 31 December 2016
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Directa Plus plc
ComoNExT Science Park
Via Cavour 2, 22074 Lomazzo (Co)
Italy
www.directa-plus.com
LEVERAGING THE QUALITIES OF A NEW
RANGE OF GRAPHENE-BASED MATERIALS
FOR CONSUMER, ENVIRONMENTAL AND
INDUSTRIAL APPLICATIONS
ELASTOMERS
TEXTILES
COMPOSITE
MATERIALS
ENVIRONMENT
3D PRINTING
FILAMENTS
RUBBER
TECHNICAL
ITEMS
Contents
Directors, Secretary & Advisers
Financial & Operational Summary
Chairman’s Statement
Strategic Report - Chief Executive Officer’s Review
Strategic Report - Chief Financial Officer’s Review
Textiles Market
Environmental Market
Throughput Project & Manufacturing
Directors’ Biographies
Directors’ Report
Corporate Governance Report
Directors’ Remuneration Report
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
04
05
08
09
13
14
16
17
18
20
23
25
28
29
Consolidated & Company Statement of Financial Position 30
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated & Company Statement of Cash Flows
Notes to the Consolidated Financial Statements
31
32
33
34
3
Annual Report & Accounts 2016
Directors, Secretary & Advisers
Directors, Secretary & Advisers
The Board of
Directors
Sir Peter Middleton
Non-Executive Chairman
Giulio Cesareo
CEO and Founder
Marco Ferrari
Chief Financial Officer
David Gann
Non-Executive Director
Neil Warner
Non-Executive Director
Luca Lodi-Rizzini
Non-Executive Director
Elizabeth Robinson
Non-Executive Director
(resignation effective 12 May 2017)
Richard Hickinbotham
Non-Executive Director
(appointment effective
12 May 2017)
Company Secretary
Marco Ferrari
Registration Number
04679109
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
Legal Advisers
As to English Law
Fox Williams LLP
10 Finsbury Square
London EC2A 1AF
United Kingdom
As to Italian Law
Bird & Bird LLP
Via Borgogna 8
20122 Milan
Italy
Registrar
Capita Registrars Ltd
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Financial PR Adviser
Luther Pendragon Ltd
48 Gracechurch Street
London EC3V 0EJ
United Kingdom
Registered Office
3rd Floor
11-12 St James’s Square
London SW1Y 4LB
United Kingdom
Principle Place
of Business
Directa Plus plc
ComoNExT Science Park
Via Cavour 2
22074 Lomazzo (Co)
Italy
Nominated Advisor
and Broker
Cantor Fitzgerald Europe
One Churchill Place
Canary Wharf
London E14 5RB
United Kingdom
Adviser to the
Company
Hamilton Venture Capital Ltd
5th Floor
50 Curzon Street
London W1J 7UW
United Kingdom
4
Annual Report & Accounts 2016
Financial & Operational Summary
Financial & Operational Summary
Key Performance Indicators
Revenue from product sales (ex MDU) (€’m)
Group revenues (€’m)
Adjusted loss after tax**(€’m)
Production (tonnes delivered)
Number of active customers
Total number of patents granted
Financial Summary
2016
0.74
0.74
4.11
3.1
16
14
2015
0.39
1.39
1.73
1.3
7
12
■ Revenue from graphene sales increased by 89% to €0.74 million (2015 revenues excluding MDU
– Mobile Decontamination Units: €0.39 million) (2015 revenues including MDU: €1.39 million)
■ EBITDA* loss for the year increased to €3.7 million (2015: €2.7 million)
■ Adjusted EBITDA loss** for the year increased to €2.4 million (2015: €0.8 million)
■ Loss after tax for the year increased to €6.4 million (2015: €4.4 million)
■ Adjusted loss after tax*** for the year increased to €4.1 million (2015: €1.7 million loss)
■ Admitted to AIM on 27 May 2016, successfully raising £12.8 million (approximately €16.8 million)
gross at 75 pence per share
■ Non-cash cost of the embedded derivative associated with convertible loan was €1.04 million
(2015: €0.71 million)
■ Cash and cash equivalents at 31 December 2016 were €10.6 million (2015: €2.0 million)
* EBITDA represent results from operating activities before depreciation and amortisation of €0.57m
** Adjusted EBITDA loss stated before IPO costs (€0.43m); exceptional write down (€0.84m) of receivables from a customer and related increase in inventory
value (€0.15m); and share options costs (€0.15m). 2015 adjusted EBITDA loss stated before the provision of €1.93m against the Group’s D+ technology
*** 2016 adjusted loss after tax stated before non-recurring IPO costs (€0.43m); the non-cash cost of the embedded derivative associated with a convertible
loan (€1.04m); exceptional write down (€0.84m) of receivables from a customer and related increase of inventory value (€0.15m); and share options costs
(€0.15m). 2015 adjusted loss after tax stated before the provision of €1.93m against the Group’s D+ technology and the non-cash cost of the embedded
derivative associated with a convertible loan (€0.71m)
5
Annual Report & Accounts 2016
Financial & Operational Summary
Financial & Operational Summary (continued)
Operational Highlights
■ Delivered 3.1 tonnes of Graphene Plus (G+) materials (2015: 1.3 tonnes)
■ Throughput Project has successfully improved production process delivering increased
efficiency and expanding the Group’s graphene product range
■ Two further patents granted during 2016 covering the liquid exfoliation phase and the entire
G+ process
■ Two further patents filed in respect of Grafysorber® and elastomer applications
■ Total portfolio of 14 patents granted with a further 18 pending
■ Over 16 active customers (2015: 7 active customers), 8 of which are global players
■ Extended product portfolio from 6 to 10 to better satisfy customer needs and to address
new markets
Commercialisation Progress
Textiles
■ Launched Directa Textile Solutions, through the acquisition of Osmotek Srl, to enhance the
route-to-market for the Group’s textile applications
■ Colmar successfully launched first G+ enhanced clothing collection
Environmental
■ Sold, in aggregate, first kilometre of Grafysorber® booms to a growing number of recurring
customers
Composites
■ Progressed two-year Joint Development Agreement (“JDA”) signed in 2015 with leading
spectacles company, completing the industrialisation of a fine-tuned G+ enhanced polymer
■ Commercial launch of Grafylon®3D, a graphene-enhanced filament for 3D printing, developed
in collaboration with FILOALFA
Elastomers
■ Several victories achieved in various competitions by cyclists using the new G+ collection
of Vittoria tyres, including a gold medal at the 2016 Summer Olympics
6
Annual Report & Accounts 2016
Financial & Operational Summary
Post year-end Highlights
Textiles
■ Colmar launched an expanded collection of 16 G+ enhanced sports garments (2015: 4)
■ Two JDAs signed with global textile producers and a third under discussion for high
performance fabrics incorporating G+ material for sportswear and leisurewear
Environmental
■ Discussions progressing regarding substantial opportunities to use Grafysorber® to clean
contaminated water produced from oilfields in the Middle East
■ Advanced discussion for rental or sale of Mobile Decontamination Units in Eastern Europe,
Middle East and North Africa
■ Agreement signed with IIT (Istituto Italiano di Tecnologia), a major Italian research centre, to
develop the second generation of Grafysorber® for water treatment applications
Composites
■ Expect to receive first industrial order for G+ material for brake pads in Q2 2017
■ Major spectacles company launched the first spectacles collection enhanced by G+
Elastomers
■ JDA under negotiation with leading global footwear company to provide sustainable solution
for high performance soles
■ Parker, a leading company in rubber-based applications, is continuing to test G+ material in a
wider range of applications
■ Expecting a reduction in volume into the bicycle tyre segment in 2017, as the market adjusts to
on-going levels of demand across Vittoria’s product range
Outlook
■ Deepening engagement with existing and potential customers to provide more
comprehensive solutions will mean timeframe to adoption will be up to 12 months longer
than previously anticipated. As a result, and together with the now expected slowdown
in volumes in 2017 into the tyre segment and the time required to conclude the ongoing
discussions on rental or sales of MDUs, the Group now expects a significant reduction in
anticipated revenues for 2017
7
Annual Report & Accounts 2016
Strategic Report
Chairman’s Statement
Sir Peter Middleton
Chairman, 27 April 2017
directly in the supply chains
of large companies
■ Flexible process with at least
two different types of equipment
in each production phase
■ On-going broadening of the customer
base and securing JDAs for further
penetration into key target markets
■ To maintain Directa Plus’ leading
market position by being able to
fine tune particles’ morphology to
meet customers’ application needs
The progress we have achieved in
2016 in implementing our strategy
are discussed in the Chief Executive’s
Review. The Board believes that a
clear and focused strategy, together
with a highly motivated and talented
management team, patented
technology and products, and strong
financial discipline, means Directa
Plus is well positioned to realise
sustainable, long-term growth.
Leading position
amongst companies
commercialising
graphene and graphene-
based products
Directa Plus has developed a proprietary
scalable manufacturing process to
produce and supply high quality
engineered graphene-based products
which can be used by third parties in a
wide variety of industrial and commercial
applications. We look to partner with
customers to support them in fully
capturing the high-performance benefits
of G+ graphene. Our graphene is already
incorporated into several commercial
applications in the smart textiles,
environmental, composite materials and
elastomers sectors. We plan to capture
the growth opportunities from these
existing applications as well as delivering
against our pipeline of other prospects.
Our manufacturing facility in Italy is
capable of producing up to 30 tonnes per
annum of non-toxic pristine graphene
nanoplatelets – the most of any company
in Europe, if not worldwide. We believe
that this manufacturing capability and
proven production process provides
Directa Plus with an opportunity to
become a leading player in the on-going
and expanding commercialisation of
graphene and associated nanomaterials.
Finally, I would like to thank our
customers, partners and shareholders
for their continued support. Above all,
I would like to thank our employees
for their hard work and enthusiasm,
which has enabled the business to
achieve significant progress during 2016.
We are deepening our relationships
with existing and potential customers
and working with them to provide
more comprehensive solutions to
incorporate our graphene into their
products. This work being performed
means the timeframe to adoption
will be up to 12 months longer than
previously anticipated and, with the
reduced volumes into the tyre segment
together with the time required to
conclude the ongoing discussions
on rental or sales of MDUs, we now
expect a significant reduction in
anticipated revenues for 2017. However,
notwithstanding this disappointment,
there is momentum building within
the Group that puts Directa Plus
on a solid footing for the future.
I am proud to be presenting our
maiden annual results following
our listing in May 2016. It has been
a momentous year for Directa Plus,
one where we not only completed
our IPO but also built upon the solid
foundations set in the previous year.
In the relatively short period since
becoming a public company, we
have continued to implement our
strategy outlined at the time of our
IPO and, whilst we have encountered
some delay in the sale of Mobile
Decontamination Units, we are pleased
with the significant progress that the
business has made. We now have over
16 active customers in 2016 (7 active
customers in 2015) and revenues from
the sale of graphene grew by 89%
(excluding MDUs) in 2016 over 2015.
Commercialisation
Strategy
In 2016, our priority was to move
towards the commercialisation of our
graphene-based products. During the
year, the Board focused on setting out
the Company’s strategy for growth,
involving detailed examination of
each of our primary target markets.
The key elements of our commercial
strategy are as follows:
■■ Position the business high in the value
chain providing visibility to our G+ brand
■■ Low cost, modular, highly scalable,
high-yield process able to produce
revenues at each phase of production
■ A chemical-free process using only
physics that results in our G+ materials
being non-toxic and non-cytotoxic
■ Production of several grades of
material designed for different
applications able to be utilised
8
Annual Report & Accounts 2016
Strategic Report
Chief Executive Officer’s Review
Giulio Cesareo
Chief Executive Officer and Founder, 27 April 2017
This was a significant year for
Directa Plus with the successful IPO
in May 2016 and the progress we
made in the period. We gained new
customers whilst existing customers
whom we have been working with
closely over the past year launched
products with G+ inside them that
were well received by the market.
I am particularly pleased to report
that the investment in our Throughput
Project has delivered a substantial
improvement in efficiency and increased
our graphene product range. We
achieved our objective of listing on AIM,
raising £12.8 million that now enables
us to capitalise on an exciting pipeline
of commercial opportunities. We are
working closely with existing and
potential partners and making good
progress with several global businesses.
Commercial progress
During 2016 we made good
commercial progress across our end
applications with more customers
launching further products into the
market and entering strategic JDAs.
The exceptional performance of our
G+ materials has been confirmed in
extensive test programmes and our
engagement with these customers
has continued to deepen as they
have sought our support in adjusting
their production processes. We are
now providing more comprehensive
solutions to meet our customers’ needs
and, accordingly, we are increasingly
confident in the outlook for the Group,
albeit we now believe the timeframe
for adoption will be up to 12 months
longer than previously anticipated.
Textile
Directa Textile Solutions
Towards the end of the year we
achieved a significant milestone with
the launch of Directa Textile Solutions
(DTS), enabling Directa Plus to move
further up the textile value chain and
positioning us closer to commercial
brands. Our wholly-owned subsidiary,
Directa Plus S.p.A., acquired a 60%
interest in the issued share capital of
Osmotek Srl (“Osmotek”), a company
involved in the commercialisation and
distribution of textile membranes,
for a total consideration of €60,000.
I am really pleased that we have
secured this position at a very
attractive cost to the business.
DTS is able to market a complete
range of graphene-based technical
and high-performance membranes.
These functional and multi-functional
products are designed to enhance
different textile applications, leveraging
the thermal, electrical conductivities and
bacteriostatic properties of G+ materials.
As a result, we are now providing
membranes incorporating G+ materials
as a hi-tech solution for several
global manufacturing firms. We are
capturing value from this acquisition
through enhanced sales of G+ material
and through greater access to new
markets such as technical, home-
textiles and other opportunities.
The orders booked for Q1 2017
are already ahead of our initial
investment in Osmotek and we are
pleased with the progress already
being made from this acquisition.
Colmar
In January 2016 Colmar, the high-end
sportswear company, launched its first
Capsule collection, made up of four
garments, incorporating our G+ materials
and commenced selling the clothing
online and in selected stores. The French
national ski team have had successes at
several competitions wearing the racing
ski suits developed within this collection.
Post year end, Colmar launched a
second collection of 16 garments
incorporating G+ materials. We are
delighted that one of the new jackets,
the Technologic G+, was selected as
a Gold Winner in the ‘Ski’ category
at ISPO Munich, an international
multi-segment exhibition for sports
businesses, which, each year, honors
exceptional sporting goods.
We also signed two JDAs with global
textile producers and a third one
is currently under discussion. Our
customers greatly value G+ materials
for their non-toxicity and this is a proven
and major competitive advantage for us.
Eurojersey
In 2016 we also entered into a
collaboration with Eurojersey S.p.A.,
part of the Carvico group, a producer
of high quality warp-knit technical
fabrics marketed under its Sensitive®
brand, to produce a new range of highly
performant technical fabrics targeting
the sportswear, leisure and underwear
sectors. Post period end, Eurojersey
unveiled a number of prototype textiles,
which we are now jointly developing
into product samples that will be
marketed to the customers of both
companies. Significant Eurojersey
customers include Lululemon,
Victoria’s Secret, Rapha and GAP.
9
Annual Report & Accounts 2016
Strategic Report
Chief Executive Officer’s Review (continued)
Grant award
Post period end, we were awarded
a grant by the European Regional
Development Fund via the Lombardy
regional government in respect of
a €1 million project focusing on the
development of G+ membranes to
enhance the thermal and electrical
performance of membranes for
fashion applications. The project is a
collaboration between Directa Plus,
the Politecnico of Milan University and
two other companies, with Directa
Plus as project leader. We expect to
invest €308k and receive a grant of
€126k following the completion of the
project in December 2018. The grant is
aligned with our textile development
strategy, and targeted to reduce
costs and expand the range of high-
performance G+ textile products.
Environmental
Grafysorber® is a sustainable product,
produced by Directa Plus, that enables
the recovery and recycling of adsorbed
oils. Grafysorber® also has significant
and proven advantages compared with
the most commonly used traditional
materials, such as polypropylene. It is
recyclable, non-flammable, and does
not contain any toxic substances and
is primarily used to soak up oil spills.
It is usually produced and deployed
at the site of the spill via our Mobile
Decontamination Unit (MDU). This
ability to produce the Grafysorber®
on site and in the right quantity
renders it a highly cost-effective
solution compared with conventional
solutions. We are now exploring the
potential of Grafysorber® to remove
pollutants other than hydrocarbons in
applications that also include soil and
air treatment. In particular, we are in
detailed conversations around the use
of Grafysorber® to clean contaminated
water produced from oilfields in the
Middle East, a market opportunity that
could prove very exciting for us. During
the year, we sold, in aggregate, our first
kilometre of Grafysorber® booms and
we are currently engaged in commercial
discussions in Romania, Italy and Oman
on the potential rental or sales of MDUs.
for oil and gas processes, which is
active in the Middle East region. We
continue to progress discussions in
the region on the advantages of our
MDUs and our objective is to move
into the decontamination of the
produced water used in enhanced oil
recovery. We consider this potentially
represents a substantial market
opportunity and we are encouraged
that Grafysorber® remains a
unique solution to the problem.
Romania
OIL DEPOL group, a leading
Romanian decontamination company,
purchased several hundred kilograms
of Grafysorber® during the year to
conduct a series of industrial tests on
water that had been contaminated by
oil. Following successful test results,
OIL DEPOL and Demeco, another
Romanian water treatment company,
are now using Grafysorber® and
there are ongoing negotiations with
them, respectively, for the purchase
or renting of an MDU. In addition,
Setcar, a customer, has designed and
developed an industrial unit to utilise
loose Grafysorber®, which has been
successfully deployed in Romania.
Post year end, we entered discussions
with OMV Petrom to establish
Grafysorber® as the preferred solution
for their upstream decontamination
and oil recovery activities.
Oman
During the year we delivered
Grafysorber® materials to our local
partner, Blue Planet Engineering &
Technical Services LLC, an Omani
company providing technical and
scientific services and products
Italy
Testing activity with ENI, one of the
largest oil and gas companies in the
world, was successfully completed
in October 2016 and we are now in
a good position to capitalise on this
work. In July 2017 we will officially
present the test results in conjunction
with ENI at the 6th International
Conference on Environmental
Chemistry and Engineering in Rome.
Post year end, we entered advanced
negotiations to deliver products for
decontamination activities to be
performed in Nigeria and at some
other contaminated sites. There
are also several on-going tests for
environmental decontamination
and industrial applications in Italy.
Composite Materials
We made progress under a two-
year JDA, signed during the year,
with a global luxury accessories
producer, to develop an entire
generation of graphene-enhanced
spectacles. The first product was
commercially available Q1 2017.
During the year, we launched Grafylon
10
Chief Executive Officer’s Review (continued)
Annual Report & Accounts 2016
Strategic Report
3D, a new graphene-enhanced filament
for 3D printing. It was developed and
commercialised in collaboration with
FILOALFA, a company specialised
in producing filaments used in 3D
printing. This is the first 3D printing
product to contain our G+ material and
the product is now available through a
wide range of distribution channels.
We also proceeded with a JDA
signed in 2015 with one of the leading
manufacturers of brake pads to conduct
a joint R&D project. The collaboration
is progressing well and we expect to
generate revenue under this JDA in
2017. As part of the development work,
we created new hybrid G+ materials
that are now ready to enter different
areas of applications and we are very
excited by the market potential.
Elastomers
Vittoria conducted an intensive
marketing campaign to promote
the new G+ tyres collection (ITS -
Intelligent Tire System) targeting
on and off road and e-bike markets.
There were several victories in
various competitions by cyclists using
these tyres, including a gold medal
at the Olympics in August 2016.
This resulted in a significant increase
in revenues in 2016, but unfortunately
we now expect a reduction in volume
in 2017 as the market adjusts to
on-going levels of demand across
the Vittoria product range.
We are currently in advanced
negotiations with a leading global
footwear company to conclude a
JDA. G+ materials can provide thermal
conductivity, greater durability and less
deformation and we are excited by the
potential of this market opportunity.
Expanded product
portfolio
In order to better satisfy customer needs
and address new markets, we continue
to develop our product portfolio to
expand the potential applications of
G+ technology. During the year, we
focused on providing the most suitable
G+ material for the different applications,
in order to accelerate G+ adoption in
commercial products – developing
new products and enhancing existing
ones. We extended our product
portfolio from six to 10 products, which
enables the business to engage more
quickly with customers and potential
customers and to win the commercial
opportunity and in a reduced timeframe.
Throughput Project
During 2016, we started the Throughput
Project with the objective of improving
our proprietary G+ manufacturing
process, and we are pleased to
report that we have achieved material
improvements in production efficiency,
exceeding our initial expectation, and
an expansion of our graphene product
range. There is the potential for further
enhancements of these developments
and we look forward to benefitting from
these improvements in the future.
IP Protection and Certification process
A key focus of Directa Plus is the
protection of our intellectual property.
Two further patents were granted
during 2016: one covering the liquid
exfoliation phase and the other
covering the entire G+ production
process. A further two patents have
been filed, in respect of Grafysorber®
and elastomer applications. We
now have a portfolio of 14 patents
granted with a further 18 pending.
In addition to ISO 9001:2015 certification,
we received ISO 14001:2015 certification
following an assessment of our
environmental management system. This
certification confirms that the business is
operating to the highest level of Health,
Safety and Environmental Protection.
During the year we also conducted an
intense toxicological analysis of our
products, in particular of Grafysorber®
and Pure G+, and received independent
certification that they are non-toxic
and non-cytotoxic. This is an important
competitive advantage particularly
for sales into the textile industry.
Production footprint
The Throughput Project has generated
further production efficiency at our plant
in Italy and thereby provides sufficient
flexibility to meet forecast demand.
Whilst the Board had planned to
establish a manufacturing presence in
Thailand to access the Far East markets,
with the evolution of other advancing
commercial opportunities with a
number of leading global companies
in different geographical locations, the
Board has taken a prudent decision
to delay that capital expenditure. The
Board continues to assess where
to locate our first plant outside Italy,
monitoring in particular, potential sites
in Asia, the Middle East and the USA.
11
Annual Report & Accounts 2016
Strategic Report
Chief Executive Officer’s Review (continued)
Outlook
2016 was a year of intense and focused
learning resulting in improved internal
capability and much deeper market
knowledge. Directa Plus has begun
2017 with increased engagement with
existing, new and potential customers
and continues to attract interest from
companies worldwide. Specifically,
we expect the textiles segment to
feature prominently this year. Colmar
has launched its second collection of
G+ clothing and we are in advanced
discussions with some of the world’s
largest clothing and footwear brands to
incorporate our G+ materials into their
new ranges of products. We anticipate
working with these new customers this
year to test and produce new enhanced
products; however, revenues generated
from these are now expected to be up to
12 months later than previously expected
with the ramp up being delivered when
the new products are launched into
the mass market in 2018 and beyond.
We also anticipate the environmental
segment to be active during the year
as we see increased interest from
Europe, the Middle East and the
USA for our Grafysorber® product.
With a longer-than-expected timeframe
to adoption together with the now
expected slowdown in volumes in
2017 into the tyre segment and the
time required to conclude the ongoing
discussions on rental or sales of MDUs,
it is disappointing to report that we
now expect a significant reduction in
anticipated revenues for 2017. However,
in light of the significant opportunities
and the building momentum within the
business, the Board feels confident that
we are well positioned to capture growth
within our target markets and continues
to look to the future with optimism.
Below: The maiden Board of Directors of Directa Plus plc
12
Annual Report & Accounts 2016
Strategic Report
Chief Financial Officer’s Review
Marco Ferrari
Chief Financial Officer, 27 April 2017
Key Performance
Indicators
The Board considers that there are
a number of important financial and
non-financial KPIs. Performance against
these KPIs is in-line with the Board’s
expectation and the detail regarding
this performance has been summarised
in my report. We have provided a
summarised table of the KPIs below:
In 2016, revenues were €0.74 million
(2015: €1.39 million) with the decline
being primarily a result of lower
revenues due to the absence of sales
of Mobile Decontamination Units
(MDU) compared with revenues of €1.0
million in 2015. Revenues, excluding
MDUs, increased by 89% year-on-
year to €0.74 million (2015: €0.39
million) as more customers adopted
our G+ graphene-based solutions.
Revenue from product
sales (ex MDU) (€’m)
Group revenues (€’m)
Adjusted loss
after tax (€’m)
Production (tonnes
delivered)
Number of active
customers
2016
2015
0.74
0.74
0.39
1.39
4.11
1.73
3.1
1.3
16
7
Financial Review
On 27 May 2016, Directa Plus plc was
admitted to AIM, raising approximately
£12.8 million (€16.8 million), primarily
to increase production capacity,
and to sustain as well as expedite
the development of our commercial
pipeline. The net amount, post IPO-
related expenses, was approximately
£11.0 million (€14.4 million).
Prior to the IPO, we had been funded
principally through the issue of
convertible loan notes bearing interest
at 8%. Holders of approximately 86% of
these loan notes, with a value of €5.1
million (including accrued interest),
elected to convert their holdings at the
IPO into the Group’s equity. Holders
of remaining 14% (€0.8 million) were
repaid out of the IPO proceeds.
Other income (which includes grants
received by the Group) was €0.08
million (2015: €0.32 million). Whilst
grants are important, we are primarily
focused on commercial and applications
development, rather than applying
for grants that are inconsistent with
the business’ principal strategies.
An investment in tangible and intangible
assets of €0.5 million (2015: €0.8 million)
was incurred during the year, mainly
relating to the development of products
and production processes, IP activity
and the purchase of new equipment. We
built a large Application Development
Area, enabling us to work more closely
with customers and produce the most
suitable G+ materials for them, thereby
reducing the time it takes them to launch
their end-user products in the market.
During the year, we invested €0.06
million for a 60% shareholding in Directa
Textile Solutions (formerly known as
Osmotek Srl), fulfilling an important
objective of the business to establish
itself higher in the value chain. The
€0.06 million was used to fund DTS’
working capital requirements.
The EBITDA loss for the year increased
to €3.7 million compared with €2.7
million for 2015. Adjusted EBIDTA is €2.4
million stated before IPO costs (€0.43m);
exceptional write down (€0.84m) of
receivables from a customer and related
increase in inventory value (€0.15m);
and share options costs (€0.15m).
The loss for the year was €6.4 million
compared with €4.4 million loss for 2015,
with the decline primarily due to the
expenses associated with the IPO that
were charged to the income statement
(€0.43 million), the non-cash cost of
the embedded derivative associated
with the convertible loan notes (€1.04
million) as described in note 19, the net
effect of the write-down of receivables
(€0.69 million) in respect of two MDUs
sold in 2015 (announced on 2 December
2016) and the share options cost of
€0.15 million (2015: nil). Excluding
these exceptional items, the adjusted
loss for the year was €4.1 million.
Immediately after the IPO and before
the Brexit referendum, we converted
£7.5 million of the IPO proceeds to
€9.5 million (based on an average
exchange rate of £1: €1.26) as the costs
of the Italian subsidiary are in Euros.
The remaining amount in Sterling,
of approximately £3.5 million, has
been retained for the management of
expenses in the UK. Finance expenses
include €0.9 million due to the effect of
the subsequent movement of Sterling
against Euro on the Sterling deposits.
Cash and cash equivalents at 31
December 2016 were €10.6 million
(30 June 2016: €13.1 million) with the
reduction primarily due to IPO expenses
settled after 30 of June, investments
and operational expenditure.
13
Annual Report & Accounts 2016
Strategic Report
Textile Market
Developed planar thermal
pattern – delivering a unique
solution to every customer
First-mover advantage
with end products on sale
which incorporates G+
Textile Brands
End User
G+
Textile
Auxiliaries
Producer
Directa Plus
Non-toxic and non-cytotoxic
Understand and control
the value chain through
Directa Textile Solutions
Consultancy to
Auxiliaries Producer
Printing mills
Advantages in
the Textiles
Market
Consultancy
on G+ Printing
Already in development
phase with new customers
Directa Plus
Directa Plus
Textile membranes
Apparels/Technical textile
Graphene
Producer
Directa Plus
Textile
Auxiliaries
Producer
Membranes
Producer
Distribution/Commercial
Directa Textile Solutions
Textile Brands
/Converters
End User
Directa Textile Solutions
■ Directa Textile Solutions is key to downstream integration
Directa Textile Solutions
■ Directa Textile Solutions is key to downstream integration strategy
■ Two revenue streams: from the sale of membranes and sale of G+
strategy
■ Two revenue streams: from the sale of membranes and sale
to the membrane producer
of G+ to the membrane producer
■ Better able to communicate directly with major brands and
provide a product that meets their exact needs
provide a product that meets their exact needs
■ Better able to communicate directly with major brands and
■ Partnership with a leading producer of textile membranes,
Novaresin, allows generation of more value and margin by
controlling the process from development to sale
■ Partnership with a leading producer of textile membranes,
Novaresin, allows generation
of more value and margin by controlling the process from
development to sale
14
Annual Report & Accounts 2016
Strategic Report
Textile Market (continued)
Printed textiles
Brand new approach along the value chain in order to sell a certified planar thermal circuit, being proactive in solving
client’s issues.
G+
Directa Plus
Textile
Auxiliaries
Producer
Printing mills
Textile Brands
End User
Consultancy to
Auxiliaries Producer
Consultancy
on G+ Printing
Directa Plus
Directa Plus
PLANAR THERMAL CIRCUIT
Apparels/Technical textile
Graphene
Producer
INSULATION
Directa Plus
Textile
Auxiliaries
Producer
LINING
Membranes
Producer
■ Traditionally, textile development has focused on
through-plane properties of fabric that regulate
Textile Brands
the relationship between the human body and the
/Converters
environment e.g. textile breathability or impermeability
Distribution/Commercial
Directa Textile Solutions
End User
OUTER
LAYER
R
E
T
U
O
E
R
U
T
A
R
E
P
M
E
T
Y
D
O
B
E
R
U
T
A
R
E
P
M
E
T
■ Now, thanks to bidimensional and planar nature
of graphene, the in-plane properties can optimise
fabric performance due to the interaction
between the fabric and the human body
Directa Textile Solutions
■ Directa Textile Solutions is key to downstream integration strategy
■ Two revenue streams: from the sale of membranes and sale of G+
■ The planar thermal circuit created by G+ distributes
heat generated by the body to prevent the creation
of hot-spots and dissipates it when needed
HOT SPOT
to the membrane producer
■ Better able to communicate directly with major brands and
■ It is possible to adjust the body temperature
provide a product that meets their exact needs
■ Partnership with a leading producer of textile membranes,
Novaresin, allows generation of more value and margin by
controlling the process from development to sale
without using an external source of energy, such
as batteries, and without affecting the fabric’s other
features such as breathability and impermeability
15
Annual Report & Accounts 2016
Strategic Report
Environmental Market
Directa Plus’ Environmental Solution
Grafysorber
and MDU
Directa Plus
Oil Company &
Decontamination
Company
Oil Spill Remediation
/Produced Water
Treatment
Equipment* to use
Grafysorber
Directa Plus
*Currently under development
Grafysorber®
Grafysorber® produced in an MDU
on site
Grafysorber® supplied in pillow
barriers
Former Italian PM Matteo Renzi
receiving briefing on Grafysorber ® at
Directa HQ (April 2017)
Proven advantages compared with
most commonly used traditional
materials such as polypropylene
Solutions for two key applications
– treating oil spills and produced
water (in oil & gas)
Environmental
Market
Oil adsorption capacity
of Grafysorber® in
pillows/barriers is at
least five-times higher
than polypropylene
16
Present Production
Capacity
Future Production
Capacity
Capex
Required
3D Materials
30 tonnes
+250%
105 tonnes
€270,000
2D Materials
12 tonnes
+516%
74 tonnes
€435,000
Present Production
Capacity
Future Production
Capacity*
Capex
Required
3D Materials
30 tonnes
+250%
105 tonnes
€270,000
Annual Report & Accounts 2016
2D Materials
12 tonnes
+516%
Throughput Project & Manufacturing
74 tonnes
Strategic Report
€435,000
Present Production
Capacity
Future Production
Capacity*
3D Materials
30 tonnes
+250%
105 tonnes
2D Materials
12 tonnes
+516%
74 tonnes
*Increase in production capacity
will be driven by market demand
Low energy use and
near zero waste
Low energy use and
near zero waste
Independently
certified as non-toxic
and non-cytotoxic
Independently
certified as non-toxic
and non-cytotoxic
No chemicals are
used in production
No chemicals are
used in production
Directa Plus’
Strengths
Directa Plus’
Strengths
Consistency of
end product
Consistency of
end product
Chemical-free and sustainable
IP protected: 14 granted and 18 pending patents in core G+ technology
ISO 9001:2015 and ISO 14001:2015 accredited
Chemical-free and sustainable
IP protected: 14 granted and 18 pending patents in core G+ technology
ISO 9001:2015 and ISO 14001:2015 accredited
Production methodology
proven to deliver consistent
quality, pristine GNPs
Production methodology
proven to deliver consistent
quality, pristine GNPs
A continuous efficient
production process with high
yield and minimal waste
A continuous efficient
production process with high
yield and minimal waste
Low production costs and
no chemicals and solvents
Low production costs and
no chemicals and solvents
Manufacturing
Capability
Manufacturing
Capability
A low cost of capital investment
and a modular design facilitates
ease of scale up
A low cost of capital investment
and a modular design facilitates
ease of scale up
Key features of production
facility and production process
Key features of production
facility and production process
Built a large Application Development Area
at headquarters in Italy
■ Enables Directa Plus to work closely with its customers to produce the most suitable
G+ materials for them and reduce the time it takes for the customers to launch their
end-user products
17
Annual Report & Accounts 2016
Corporate Governance
Directors’ Biographies
Sir Peter Middleton
Non-Executive Chairman
Giulio Cesareo
CEO and Founder
Marco Ferrari
Chief Financial Officer
Prior to joining Directa Plus, Marco was
a financial advisor at EY, involved in
several M&A transactions, with a focus
on energy, renewable energy and oil
& gas industries. Other experience
includes Deutsche Bank, Deloitte and
Dezan Shira & Associates in China.
Marco holds a degree in Business
Administration and Master of Science
in Administration Finance and Control
from Università Commerciale ‘Luigi
Bocconi’.
Giulio Cesareo is one of the founders of
Directa Plus. He began his professional
career in 1982 in Italy working for Falck
and Techint. From 1986 to 2004, he
worked in the carbon and graphite field
for Union Carbide, UCAR and Graftech,
reaching the positions of the President
and CEO of the Italian company and
Vice President and General Manager
of the Advanced Carbon and Graphite
business unit. In his role at Union
Carbide, Giulio managed business units
in USA, France and Italy.
Giulio Cesareo was awarded a degree
in Mechanical Engineering from the
Polytechnic University of Milan, an MBA
and an Executive MBA from Bocconi
University of Milan and attended
Strategic and Financial Management
Programs at Stanford University
(USA). He serves as a board member
of Fondazione Quarta, a non-profit
organisation focussed on scientific
research in areas of social activity and
was also Board Member of: Centro di
cultura scientifica “Alessandro Volta”,
an organisation aimed at promoting
the practical applications of a scientific
culture.
Sir Peter Middleton GCB is Chairman of
Burford Capital, the Resort Group and
Hamilton Ventures. He was Chairman
of Marsh Ltd between 2005 and 2013,
UK Chairman of Marsh & McLennan
Companies between 2007 and 2014
and Chairman of Mercer Ltd between
2009 and 2014. He was also previously
Chairman of Camelot Group plc and
Chairman of the Centre for Effective
Dispute Resolution. He was a Director,
Chairman and Deputy Chairman of
United Utilities from 1994-2007, a Board
member of OJSC Mobile Telesystems
from 2005-2007 and a board member
of Bass plc from 1992-2001 and General
Accident (later CGU) from 1992-1995.
Sir Peter spent nearly 30 years at HM
Treasury, working closely with nine
Chancellors, and was Permanent
Secretary from 1983 to 1991. Sir Peter
became Group Chairman of Barclays
Bank plc in April 1999 and retired in
August 2004. He joined Barclays in
1991 as Group Deputy Chairman and
Executive Chairman of BZW, became
Chairman of Barclays Capital following
the reorganisation of BZW in October
1997 and was Group Chief Executive
from November 1998 until October
1999. He was also President of the
British Bankers Association from 2004-
2006 and a member of the National
Institute for Economic Research from
1996-2007.
18
Annual Report & Accounts 2016
Corporate Governance
Directors’ Biographies (continued)
David Gann
Non-Executive Director
Neil Warner
Non-Executive Director
Luca Lodi-Rizzini
Non-Executive Director
Neil Warner has strong financial and
managerial experience in multi-
national businesses. He is the senior
independent director and chairman of
the audit committee at Trifast plc and
he is also a non-executive director of
Vectura Group plc where he is chairman
of the audit committee. Formerly he
served as non-executive chairman of
Enteq Upstream plc and as Finance
Director at Chloride Group plc, a
position he held for 14 years until its
acquisition by Emerson Electric. Prior
to this, Neil spent six years at Exel plc
(formerly Ocean Group plc and now
part of DHL following its acquisition
by Deutsche Post in December
2005) where he held a number of
senior posts in financial planning,
treasury and control. He has also held
senior positions in Balfour Beatty plc
(formerly BICC Group plc), Alcoa and
PricewaterhouseCoopers and was
non-executive director of Dechra
Pharmaceuticals plc where he was the
senior independent director and Chair of
the Audit Committee.
David Gann CBE CEng FICE FCGI is
a renowned expert on technological
innovation and an accomplished
business and academic leader. He
is Imperial College London’s Vice-
President (Innovation) and member
of the College’s Executive Board.
He has deep experience mentoring
start-ups, supporting fast growth
technology businesses and developing
long-term strategic partnerships with
multinational technology corporations.
He is Professor of Innovation and
Technology Management with a
PhD in Industrial Economics. He is a
Chartered Civil Engineer, a Fellow of
the Institution of Civil Engineers, an
Honorary Fellow of the Royal College
of Art and Fellow, City & Guilds Institute.
He was appointed Commander of the
Order of the British Empire (CBE) in
the 2010 Queen’s Birthday Honours for
services to engineering, and received
the 2014 Tjalling C. Koopmans Asset
Award for extraordinary contributions
to the economic sciences. David is
a member of the London Enterprise
Panel and Chairman of the Smart
London Board. His industrial
experience includes serving as Laing
O’Rourke plc’s Group Executive for
research and innovation between
2007-2011. He advises executives and
boards on innovation and technology
management, including Citigroup, IBM,
Huawei, McLaren and Tata Group.
Luca Lodi-Rizzini is a Managing
Director at Credit Suisse, one of
leading global investment banks. Luca
is currently the Head of Institutional
Equity Derivatives Sales for Europe.
Having joined Credit Suisse in 2004,
Luca was previously a Senior Equities
Portfolio Manager at Eurizon Capital.
Richard Hickinbotham
Non-Executive Director
(effective 12 May 2017)
Richard Hickinbotham is an experienced
City professional having served as
Head of Equity Research at Cantor
Fitzgerald Europe and Charles Stanley.
Prior to this, he held a number of
senior positions at Investec, including
Global Head of Research and Co-
Head of Investment Banking. He has
also served as Head of Pan-European
Small and Midcap Research at S.G.
Warburg & Co. (acquired by UBS).
Richard holds a BSc. in Mechanical
Engineering from Imperial College, and
is a qualified Chartered Accountant.
19
with the Company, on 23 May 2016 (with effect
from 28 April 2016), to act as an Executive Director
of the AIM-listed entity – having previously been
employed by the Directa Plus S.p.A subsidiary
since 13 October 2014.
*** Elizabeth Robinson will resign as a director as
of 12 May 2017.
Directors’ Remuneration
and Interests
The Directors’ Remuneration Report is
set out on pages 25 to 26. It includes
details of Directors’ remuneration,
interests in the ordinary shares of the
Company and share options.
Corporate Governance
The Board’s Corporate Governance
Statement is set out on pages 23 to 24.
Annual Report & Accounts 2016
Corporate Governance
Directors’ Report
Principal Activities
Directa Plus is a technological company
pursuing the development of innovative
manufacturing processes to produce
and supply high quality engineered
graphene-based products which can be
used by third parties in a wide variety of
industrial and commercial applications.
The Company’s strategy is to partner
with potential customers at an early
stage and work with them to develop
tailor-made graphene forms that have
the desired morphology for each
potential customer’s specific applications
to enable them to capitalise on the high-
performance benefits of graphene.
The Company’s main country of
operation and place of business is Italy
and its registered office address is 3rd
Floor, 11-12 St. James’s Square, London,
SW1Y 4LB, UK.
Business and Strategic
Review
The information that fulfils the
requirements of the strategic report and
business review, including details of the
results for the year ended 31 December
2016, principal risks and uncertainties,
research and development, KPIs and the
outlook for future years, are set out in the
Chairman’s Statement, Chief Executive
Officer’s Review and Chief Financial
Officer’s Review on pages 8 to 13 (The
Strategic Report), and in this Directors’
Report. There are no post balance sheet
events to report.
Admission to AIM
Directa Plus plc was admitted to
trading on AIM, a market operated by
the London Stock Exchange plc, on
27 May 2016, at which time 17,033,334
new ordinary shares were placed to
raise gross proceeds of £12.8 million
(approximately €16.8 million).
Further information relating to
movements in share capital is set out
in Note 19 to the consolidated financial
statements on pages 51 to 52.
Dividends
The Directors’ current intention is that
for the foreseeable future, all future
earnings of the Company will be
reinvested in the business in order to
fund the ongoing growth strategy. In the
future, if it is commercially prudent to do
so, the Board may consider the payment
of a dividend.
Directors
The following Directors held office as
indicated below for the year ended 31
December 2016 and up to the date of
signing this report:
Giulio Giuseppe Cesareo*
Sir Peter Middleton
Giuseppe Monti
Luca Lodi-Rizzini
Elizabeth Marie Robinson***
Marco Ferrari**
David Michael Gann
Neil William Warner
■ Marco Ferrari was appointed as
a director on 28 April 2016.
■ David Michael Gann was appointed
as a director on 28 April 2016.
■ Neil William Warner was appointed
as a director on 28 April 2016.
■ Giuseppe Monti retired as a
director on 23 May 2016.
* Giulio Cesareo signed a letter of appointment
with the Company, on 23 May 2016, to act as
an Executive Director of the AIM-listed entity –
having previously been employed by the Directa
Plus S.p.A subsidiary since 23 November 2005.
** Marco Ferrari signed a letter of appointment
20
Annual Report & Accounts 2016
Corporate Governance
Directors’ Report (continued)
Share Capital
and Substantial
Shareholdings
Details of the share capital of the
Company as at 31 December 2016 are
set out in Note 19 to the consolidated
financial statements. At 27 April 2017, a
total of 44,212,827 ordinary shares were
outstanding. The following Shareholders
own 3% or more of the ordinary shares:
Shareholder
Number of
ordinary
shares
Percentage
of Issued
Ordinary
Share
Capital
Quadrivio
Capital SGR*
5,845,208
Dompe Group
5,126,666
13.22
11.60
Unicorn Asset
Management
Galbiga
Immobiliare S.r.l.**
Finanziaria Le
Perray S.p.A.
William
David Cate
Robert Angelo
Mercuri
4,000,000
9.05
3,056,480
6.91
2,254,754
5.10
1,885,480
4.26
Paul Calarco
1,885,480
1,885,480
4.26
4.26
Jean-Marc
Droulers
1,699,040
3.84
* Elizabeth Robinson, a Non-Executive Director of
the Company (as at 27 April 2017), is an Investment
Director of Quadrivio Capital SGR and therefore
is deemed to be beneficially interested in the
5,845,208 ordinary shares held by funds managed
by Quadrivio Capital SGR
** Giulio Cesareo, CEO of the Company and an
Executive Director, and his family are the sole
beneficiaries of the 3,056,480 ordinary shares held
by Galbiga Immobiliare S.r.l.
Research and
Development
The Company conducts research and
development of products and processes
of the G+ family. The development
of new ready-to-use products and
fine-tuned process ensures economic
benefits for the Company going forward.
New products allow the Company to
enter into new markets, reducing the
time-to-market, and new processes
allow material improvement in
production capacity and cost efficiency.
Development expenditure on the
research phase of internal projects
is recognised in the consolidated
statement of comprehensive income as
incurred. Costs of research undertaken
are mainly related to employee costs.
Risk Management
The Company’s financial risk
management is discussed in Note 24 to
the financial statements. The Directors
regularly assess the Company’s key
commercial risks, which are considered
to be:
■ the dependence on the market’s
acceptance of, and attribution
of value to, the plasma super
expansion technology and graphene
based materials produced;
■ the Company’s ability to enter into
arrangements with third parties
in respect of the development,
production and commercialisation of
products based on the Company’s
graphene technology as well
as its negotiation of appropriate
terms for supply agreements;
■ competition from organisations that
have greater capital resources and/
or which have a product offering
competitive to that of the Company,
to the detriment of the Company;
■ technological advances in existing
materials or in potential substitute
materials occurring at a faster rate
than the advances of graphene,
which may impede the commercial
progress of graphene; and
■ the continuing ability to establish,
protect and enforce Directa Plus’
proprietary intellectual property
rights (including but not limited
to patents, know-how and trade
secrets), covering production
process, products and applications.
The Company’s policies, procedures and
practices used to identify, monitor and
control a variety of risks may, in some
cases, not be effective. The Company’s
risk management methods rely on a
combination of internally developed
technical controls, standard practices,
observation of market behavior and
human supervision.
Diversification of targets markets,
applications and clients help to
mitigate the risk of market acceptance
of graphene products, avoiding
undue dependence on a single
customer’s product or application being
commercially successful.
Company patents may be challenged
at any time and any unsuccessful
defence may cause the Company to
lose protection for its process and
products and subsequently affect further
development and sales. The Company
is advised by suitably qualified and
experienced patent agents. Meetings
with the patent agents are scheduled
on a regular basis to review both
21
Annual Report & Accounts 2016
Corporate Governance
Directors’ Report (continued)
patents portfolio and IP strategy. Internal
controls are in place to avoid disclosure
of patentable material and to protect
existing patents.
There can be no assurance that
competitors will not succeed in
developing products that are more
effective or economic than any
developed by the Company. In any
case the Company is constantly
monitoring news flow and new products
on the market to try to have a clear
comprehension of the competitive
environment.
Annual General Meeting
The notice for the convening of the
AGM 2017 together with the proposed
resolutions will be contained in a Notice
of AGM sent to all shareholders and
available via the Company’s website.
Statement of Directors’
Responsibilities
The Directors are responsible for
preparing the annual report and the
financial statements in accordance
with applicable law and regulations.
Company law requires the Directors
to prepare financial statements for
each financial year. Under that law
the Directors have elected to prepare
Company financial statements in
accordance with International Financial
Reporting Standards (“IFRSs”) as adopted
by the European Union.
Under Company law the Directors must
not approve the financial statements
unless they are satisfied that they give
a true and fair view of the state of affairs
of the Company and of the profit or
loss of the Company for the period. The
Directors are also required to prepare
financial statements in accordance with
the rules of the London Stock Exchange
for companies trading securities on
the AIM. In preparing these financial
statements, the Directors are required to:
■ present fairly the financial position,
financial performance and
cashflows of the Company;
■ select suitable accounting
policies in accordance with IAS 8
Accounting Policies, Changes in
Accounting Estimates and Errors
and then apply them consistently;
■ make judgements and estimates
that are reasonable and prudent;
■ state whether applicable IFRSs have
been followed, subject to any material
departures disclosed and explained
in the financial statements; and
■ prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Company and
enable them to ensure that the financial
statements comply with the Companies
Act 2006.
They are also responsible for
safeguarding the assets of the Company
and hence for taking reasonable steps
for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for
ensuring the annual report and the
financial statements are made available
on the corporate website. Financial
statements are published on the
Company’s website in accordance
with legislation in the United Kingdom
governing the preparation and
dissemination of financial statements,
which may vary from legislation in
other jurisdictions. The Directors are
responsible for the maintenance and
integrity of the corporate and financial
information included on the Company’s
website.
Auditors
Each of the persons who is a Director at
the date of approval of this annual report
confirms that:
■ so far as the Director is aware,
there is no relevant audit
information of which the Company’s
auditors are unaware; and
■ the Director has taken all the steps that
he ought to have taken as a Director
in order to make himself aware of
any relevant audit information and to
establish that the Company’s auditors
are aware of that information.
This confirmation is given and should
be interpreted in accordance with
the provisions of Section 418 of the
Companies Act 2006.
BDO LLP have expressed their
willingness to continue in office as
auditors and a resolution to reappoint
them will be proposed at the
forthcoming Annual General Meeting.
By order of the Board
27 April 2017
22
Annual Report & Accounts 2016
Corporate Governance
Corporate Governance Report
The Board fully supports the underlying
principles of corporate governance
contained in the UK Corporate
Governance Code, notwithstanding
that, as its securities are not listed on
the Official List, it is not required to
comply with such recommendations.
It has sought to comply with the
provisions of the Corporate Governance
Code, insofar as is practicable and
appropriate for a public company of
its size and nature, and recognises its
overall responsibility for the Company’s
systems of internal control and for
monitoring their effectiveness.
The Board and
Committees
Board
The Board is responsible for formulating,
reviewing and approving the Company’s
strategy, budget and major items of
capital expenditure. The Board consists
of five Non-Executive Directors with
relevant experience to complement the
two Executive Directors and to provide
an independent view to the Executive
Directors. The Non-Executive Directors
for the year ended 31 December 2016
and up to the date of approval of signing
of this report are Sir Peter Middleton
(Chairman), Prof. David Gann, Neil
Warner, Luca Lodi-Rizzini and Elizabeth
Robinson. The Executive Directors are
Giulio Cesareo (Chief Executive Officer)
and Marco Ferrari (Chief Financial Officer).
The Board met on nine occasions during
the period subsequent to the Company’s
admission to AIM on 27 May 2016 and
the financial year end on 31 December
2016. Directors’ attendance was as
follows:
Directors
Sir Peter Middleton
Giulio Giuseppe
Cesareo
Marco Ferrari
David Michael Gann
Neil William Warner
Luca Lodi-Rizzini
Elizabeth Marie
Robinson
Giuseppe Monti
(retired as a director
on 23 May 2016)
Number of
Meetings
Attended
9
9
9
8
8
7
7
0
Audit committee
The Audit Committee is comprised
of Neil Warner, Luca Lodi-Rizzini and
David Gann, and is chaired by Neil
Warner. The Audit Committee, amongst
other duties, determines and examines
matters relating to the financial affairs
of the Company including the terms of
engagement of the Company’s auditors
and, in consultation with the auditors,
the scope of the audit. It receives and
reviews reports from management and
the Company’s auditors relating to the
half yearly and annual accounts and
the accounting and the internal control
systems in use throughout the Company
and its subsidiary undertakings.
Remuneration committee
The Remuneration Committee is
comprised of Neil Warner, Luca
Lodi-Rizzini and David Gann, and
is chaired by Luca Lodi-Rizzini. The
Remuneration Committee reviews and
makes recommendations in respect
of the Directors’ remuneration and
benefits packages and that of senior
employees, including share options
and the terms of their appointment.
The Remuneration Committee also
makes recommendations to the Board
concerning the allocation of share
options to employees under the Share
Scheme.
Relations with
shareholders
Meetings with the analysts and
institutional shareholders of the
Company following the interim and
annual results announcements and
on an as-needed basis are attended
by the Executive Directors to update
the shareholders on the progress of
the Company in terms of its business,
financial performance and strategic
direction. The Annual Report and
accounts is published on the Company’s
website, www.directa-plus.com, and
can be accessed by shareholders.
Shareholders will also have the
opportunity to meet members of the
Board at the Annual General Meeting of
the Company where the Board members
will be happy to respond to questions.
Internal control
The Directors are responsible for
establishing and maintaining the
Company’s system of internal control
and reviewing its effectiveness.
23
Annual Report & Accounts 2016
Corporate Governance
Corporate Governance
Corporate Governance Report (continued)
The Company has adopted a share
dealing code for the Directors and
certain applicable employees, which
is appropriate for a company whose
shares are admitted to trading on AIM
(particularly relating to dealing during
close periods in accordance with Rule 21
of the AIM Rules for Companies) and the
Company takes all reasonable steps to
ensure compliance by the Directors and
any relevant employees.
Going concern
As at 31 December 2016, the Company
had net assets of €13.6m (2015: net
liabilities of €1.9m) as set out in the
consolidated statement of financial
position. The Directors have prepared
and reviewed forecasts of the Company’s
financial performance. As a result of this
review, the Directors believe that the
Company has sufficient resources and
working capital to meet their present and
foreseeable obligations for a period of
at least twelve months from approval of
these financial statements. Accordingly,
they continue to adopt the going concern
basis in preparing the Company financial
statements.
The system of internal control is designed
to manage, rather than eliminate, the risk
of failure to achieve business objectives
and can only provide reasonable but
not absolute assurance against material
misstatement or loss.
The main features of the internal control
system are as follows:
■ Close management of the business
by the Executive Directors. There
are clearly delineated approval
limits throughout the Company
and a well-defined organisational
structure. Controls are monitored
at the appropriate level;
■ monthly management accounts are
prepared and reviewed by the Board,
including reviewing variances against
prior months and against budgets;
■ clear segregation of duties within
the Company’s finance function
help ensure the Company’s assets
are safeguarded and that proper
financial records are maintained; and
■ a list of matters is reserved for
the approval of the Board.
Marco Ferrari is the Company Secretary
(as well as the Chief Financial Officer)
and is responsible for ensuring that
the Company’s registers and filings are
properly maintained and up to date. At
this stage of its development, the Board
does not feel it is necessary for the
Company to have a full time or external
company secretary. This will be kept
under review.
24
24
Annual Report & Accounts 2016
Corporate Governance
Directors’ Remuneration Report
As the Company is AIM listed, the
Directors are not required, under
Section 420(1) of the Companies
Act 2006, to prepare a Directors’
remuneration report for each financial
year and so the Company makes the
following disclosures voluntarily.
The Remuneration Committee is
responsible for recommending
the remuneration and other terms
of employment for the Executive
Directors of Directa Plus plc.
In determining remuneration for
the year, the committee has given
consideration to the requirements of
the UK Corporate Governance Code.
Remuneration policy
The objective of the remuneration
policy is to attract, retain and motivate
high calibre executives to deliver
outstanding shareholder returns and at
the same time maintain an appropriate
compensation balance with the
other employees of the Company.
Directors’ remuneration
The normal remuneration arrangements
for Executive Directors consists of
base salary, performance bonuses and
other benefits as determined by the
Board. Each of the Executive Directors
has a service agreement that can be
terminated at any time by either party
giving notice, the length of such notice
period being determined pursuant
to the applicable National Collective
Bargaining Agreement (NCBA),
governed by Italian law, depending
upon accrued length of service.
Non-Executive Directors are
remunerated solely in the form of
Director fees determined by the Board
and are not entitled to pensions,
annual bonuses or employee
benefits. Each of the Non-Executive
Directors’ appointment may be
terminated by either party giving
three months’ prior written notice.
Directors are not involved in specific
discussions on their own remuneration.
Directors’ remuneration
The remuneration of the Directors, in Euros, for the year ended 31 December 2016 was as follows and is audited:
Salary €’000
Fees €’000
Benefits €’000
Bonus €’000
National
Insurance
contributions
€’000
Pension
contributions
€’000
Total
emoluments
2016
€’000
Non-Executive Chairman
Sir Peter Middleton
Executive
Giulio Cesareo
Marco Ferrari
Non-Executive
David Gann*
Neil Warner*
Luca Lodi-Rizzini
Elizabeth Robinson
Giuseppe Monti**
-
270
112
-
-
-
-
-
61
-
-
26
26
33
15
4
Total
382
165
-
-
-
-
-
-
-
-
0
-
46
8
-
-
-
-
-
-
9
5
-
-
-
-
-
-
77
27
-
-
-
-
-
54
14
104
* The amounts reflect partial year payments since the Non-Executive Director’s appointment in April 2016.
** Giuseppe Monti retired as a director on 23 May 2016.
61
402
152
26
26
33
15
4
719
25
Annual Report & Accounts 2016
Corporate Governance
Directors’ Remuneration Report (continued)
As of 27 April 2017:
Director
Number of ordinary shares
Number of ordinary shares
under option***
Percentage of issued share capital
Sir Peter Middleton
Giulio Cesareo*
Marco Ferrari
David Gann
Neil Warner
Luca Lodi-Rizzini
20,000
3,056,480
6,666
20,000
20,000
6,667
Elizabeth Robinson**
5,845,208
100,000
545,176
265,176
60,000
60,000
60,000
Nil
0.05
6.91
0.02
0.05
0.05
0.02
13.22
* Giulio Cesareo and his family are the sole beneficiaries of the 3,056,480 ordinary shares held by Galbiga Immobiliare S.r.l.
** Elizabeth Robinson is an investment Director of Quadrivio Capital SGR and therefore is deemed to be beneficially interested in the 5,845,208 ordinary shares
held by funds managed by Quadrivio Capital SGR.
*** Of the share option charge in the year, €98,126 relates to options issued to the Directors.
26
Consolidated
Financial
Statements
2016
Annual Report & Accounts 2016
27
Annual Report & Accounts 2016
Annual Report & Accounts 2016
Consequat Duis autem vel eum iruire dolor in endrerit voluptat
Independent Auditor’s Report
for the year ended ?? ?????? 2016
to the members of Directa Plus plc
We have audited the fi nancial statements of Directa Plus Plc for the year ended 31 December 2016 which comprises the
consolidated statement of comprehensive income, the consolidated and Company statement of fi nancial position, the consolidated
and Company statements of changes in equity, the consolidated and Company statement of cash fl ows, and the related notes.
The fi nancial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards the parent company fi nancial statements, as applied in
accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the
opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the fi nancial
statements and for being satisfi ed that they give a true and fair view. Our responsibility is to audit and express an opinion on the
fi nancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.
Scope of the audit of the fi nancial statements
A description of the scope of an audit of fi nancial statements is provided on the FRC’s website at www.frc.org.uk/auditscopeukprivate.
Opinion on fi nancial statements
In our opinion:
l
the fi nancial statements give a true and fair view of the state of the Group’s and the parent Company’s aff airs as at 31 December
2016 and of the Group’s loss for the year then ended;
l the group fi nancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
l
the parent company fi nancial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
the fi nancial statements have been prepared in accordance with the requirements of the Companies Act 2006.
l
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
l
the information given in the strategic report and directors’ report for the fi nancial year for which the fi nancial statements are
prepared is consistent with the fi nancial statements; and
the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
l
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course
of the audit, we have not identifi ed material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our
opinion:
l
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
l the parent company fi nancial statements are not in agreement with the accounting records and returns; or
l certain disclosures of directors’ remuneration specifi ed by law are not made; or
l we have not received all the information and explanations we require for our audit.
Matt Crane (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
27 April 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
28
Directa Plus_Financial Statements.indd 28
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Independent Auditor’s Report
to the members of Directa Plus plc
Annual Report & Accounts 2016
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2016
CONTINUING OPERATIONS
Revenue
Other income
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Employee benefits expenses
Depreciation and amortisation
Other expenses
Results from operating activities
Fair value movement on embedded derivative
Finance income
Finance expenses
Net finance costs
Loss before tax
Tax expense
Loss after tax
Loss from continuing operations
Loss of the year
Note
31 Dec 2016
€
31 Dec 2015
€
3
3
5
6
11/12
7
21
9
9
738,028
79,733
450,843
(169,643)
(1,784,094)
(572,402)
(2,981,032)
1,392,232
315,977
(1,832,246)
(342,209)
(895,769)
(492,140)
(1,379,124)
(4,238,567)
(3,233,279)
(1,039,473)
4,230
(1,151,135)
(706,525)
7,032
(434,708)
(2,186,378)
(1,134,201)
(6,424,945)
(4,367,480)
10
–
–
(6,424,945)
(4,367,480)
(6,424,945)
(4,367,480)
(6,424,945)
(4,367,480)
150
150
8,563
8,563
Other Comprehensive income items that will not be reclassified to profit or loss
Defined Benefit Plan re-measurement gains and losses
22
Other comprehensive income for the year (net of tax)
Total comprehensive income for the year
(6,424,795)
(4,358,917)
Loss attributable to
Owner of the Parent
Non-controlling interests
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
(6,422,019)
(2,926)
(4,367,480)
–
(6,424,945)
(4,367,480)
(6,421,869)
(2,926)
(4,358,917)
–
(6,424,795)
(4,358,917)
Loss per share
Basic loss per share (cents)
Diluted loss per share (cents)
25
25
(0.19)
(0.19)
(0.22)
(0.22)
29
Directa Plus_Financial Statements.indd 29
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Euismod tincidunt ut laroeet dolore magna for the year ended ?? ?????? 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Annual Report & Accounts 2016
Consolidated and Company Statement of Financial Position
Consequat Duis autem vel eum iruire dolor in endrerit voluptat
for the year ended 31 December 2016
for the year ended ?? ?????? 2016
Group
Company
Note
31 Dec 16
€
31 Dec 15
€
31 Dec 16
€
31 Dec 15
€
Assets
Intangible assets
Investments
Property, plant and equipment
Non-current assets
Inventories
Trade and other receivables
Prepayments
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Retained Earnings
11
14
12
17
15
18
19
19
19
1,726,602
–
1,283,184
1,819,115
–
1,224,336
–
11,057,438
–
–
7,057,438
1,903
3,009,786
3,043,451
11,057,438
7,059,341
606,065
1,092,892
77,446
10,570,211
112,903
1,305,214
35,659
2,031,650
–
262,693
50,401
8,011,689
–
30,353
4,041
319,339
12,346,641
3,485,426
8,324,783
353,733
15,356,400
6,528,877
19,382,221
7,413,074
Equity attributable to owners of Group
Non-controlling interests
13,563,659
22,228
(1,892,401)
–
19,349,879
–
142,628
19,973,996
(6,552,965)
503,100
3,885,816
(6,281,317)
142,628
19,973,996
(766,745)
503,100
3,885,816
(3,636,996)
751,920
–
Total equity
19
13,585,887
(1,892,401)
19,349,879
751,920
Liabilities
Loans and borrowings
Employee benefi ts provision
Non-current liabilities
Loans and borrowing
Embedded derivative
Trade and other payables
Current liabilities
Total liabilities
20
22
20
21
23
454,600
227,358
688,821
170,952
681,958
859,773
238,134
–
850,421
6,082,915
706,525
772,065
–
–
–
–
–
–
–
–
32,342
5,813,847
706,525
140,782
1,088,555
7,561,505
32,342
6,661,154
1,770,513
8,421,278
32,342
6,661,154
Total equity and liabilities
15,356,400
6,528,877
19,382,221
7,413,074
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006, and has not presented
its own statement of comprehensive income in these fi nancial statements. The Company loss after tax for the year was €3,279,968
(2015: loss €1,582,965).
The fi nancial statements were approved and authorised for issue by the board and were signed on its behalf by:
Neil Warner
Chairman of the Audit Committee
Date: 27 April 2017
The notes on pages 34 to 62 form part of these fi nancial statements
30
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Annual Report & Accounts 2016
Annual Report & Accounts 2016
Consolidated Statement of Changes in Equity
Euismod tincidunt ut laroeet dolore magna
for the year ended 31 December 2016
for the year ended ?? ?????? 2016
Share
capital
€
Share
premium
€
Retained
Earnings
€
Non-
controlling
interests
€
Total
€
Total
equity
€
Balance at 31 December 2014
503,100
3,885,816
(1,922,400)
2,466,516
-
2,466,516
Total comprehensive income for the year
Loss
Total other comprehensive income
Total comprehensive income for the year
–
–
–
–
–
–
–
–
–
(4,367,480)
8,563
(4,358,917)
–
(4,367,480)
8,563
(4,358,917)
Balance at 31 December 2015
503,100
3,885,816
(6,281,317)
(1,892,401)
Total comprehensive income for the
period
Loss of the year
Total other comprehensive income
Total comprehensive income for the
period
Transactions with owners
Share reduction
Cancellation of share premium account
Initial Public Offering
Expenditure relating to the issuance of
shares
Share-based payment reserve
Non-Controlling Interests in Directa
Textiles Solutions acquisition
Convertible loan (embedded derivative)
–
–
–
–
–
–
–
(6,422,019)
150
–
(6,422,019)
150
–
–
(439,649)
–
55,986
–
–
–
(3,885,816)
16,739,965
(6,421,869)
–
439,649
3,885,816
–
(6,421,869)
–
–
–
16,795,951
–
–
(1,960,652)
–
–
154,068
(1,960,652)
154,068
–
–
(1,960,652)
154,068
–
23,191
–
5,194,683
–
1,670,686
–
6,888,560
25,154
–
25,154
6,888,560
–
–
–
–
–
–
(2,926)
–
(2,926)
–
–
–
–
–
(4,367,480)
8,563
(4,358,917)
(1,892,401)
–
(6,424,945)
150
(6,424,795)
–
–
–
16,795,951
Balance at 31 December 2016
142,628
19,973,996
(6,552,965)
13,563,659
22,228
13,585,887
The notes on pages 34 to 62 form part of these financial statements
Directa Plus_Financial Statements.indd 31
31
31
11/05/2017 08:16
Annual Report & Accounts 2016
Company Statement of Changes in Equity
for the year ended 31 December 2016
for the year ended ?? ?????? 2016
Share
Capital
€
Share
premium
€
Retained
earnings
€
Total
equity
€
Balance at 31 December 2014
503,100
3,885,816
(2,054,031)
2,334,885
Loss for the year
–
–
(1,582,965)
(1,582,965)
Balance at 31 December 2015
503,100
3,885,816
(3,636,996)
751,920
Loss for the year
Share reduction
Cancellation of share premium account
Initial Public Off ering
Expenditure relating to the issuance of shares
Share-based payment reserve
Convertible loan (embedded derivative)
–
(439,649)
55,986
–
–
23,191
–
–
(3,885,816)
16,739,965
(1,960,652)
–
5,194,683
(3,279,968)
439,649
3,885,816
–
–
154,068
1,670,686
(3,279,968)
–
–
16,795,951
(1,960,652)
154,068
6,888,560
Balance at 31 December 2016
142,628
19,973,996
(766,745)
19,349,879
The notes on pages 34 to 62 form part of these fi nancial statements
32
Directa Plus_Financial Statements.indd 32
11/05/2017 08:16
Annual Report & Accounts 2016
Consolidated and Company Statement of Cash Flows
for the year ended 31 December 2016
Cash flows from operating activities
Loss for the year
Adj for:
Depreciation
Amortisation of intangible assets
Bad debt expense
Fair value movement on derivative
Share-based option payment cost
IPO Costs
Finance income
Finance expense
Increase/Decrease in:
- inventories
- trade and other receivables, prepayments
- trade and other payables
- provisions
Net cash from operating activities
Cash flows from investing activities
Interest received
Investment in intangible assets
Investment in subsidiary
Loan to associate
Consideration paid for acquisition of subsidiary
net of cash acquired
Acquisition of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from IPO
Interest paid
Drawdown of financial debt
Repayment of borrowings
Note
Group
2016
€
2015
€
Company
2016
€
2015
€
(6,424,945)
(4,367,480)
(3,279,970)
(1,582,965)
317,258
267,105
909,763
1,039,473
154,068
427,903
(4,230)
1,151,136
(2,162,469)
(450,843)
(654,509)
(8,101)
56,406
238,646
253,494
1,902,129
706,525
-
-
(7,032)
434,708
(839,010)
(38,691)
(764,012)
255,805
31,169
763
-
70,903
1,039,473
154,068
427,903
-
1,117,709
(469,151)
-
(349,603)
(108,440)
-
763
-
-
706,525
-
-
-
403,177
(472,500)
-
(2,374)
125,767
-
(3,219,516)
(1,354,739)
(927,194)
(349,107)
4,230
(168,716)
–
(50,939)
(58,718)
(377,246)
–
(573,866)
–
–
–
(221,059)
–
–
(4,000,000)
(50,939)
–
–
(3,250,000)
(22,825)
–
–
–
–
(651,389)
(794,925)
(4,050,939)
(3,272,825)
14,408,156
(52,195)
–
(989,696)
–
–
(106,110)
2,851,121
(134,082)
–
14,408,156
(37,519)
–
(811,817)
–
–
(81,610)
2,825,443
–
12
11
17
15
23
9
11
13
10
20
20
Net cash from (used in) financing activities
13,366,265
2,610,929
13,558,820
2,743,833
Net increase (decrease) in cash and cash equivalent
Cash and cash equivalent at 1 January
Foreign exchange on cash
9,495,360
2,031,650
(956,799)
461,265
1,570,385
8,580,687
319,339
(878,099)
1,197,438
–
(888,337)
–
Cash and cash equivalent at 31 December
10,570,211
2,031,650
8,011,689
319,339
The notes on pages 34 to 62 form part of these financial statements
Directa Plus_Financial Statements.indd 33
33
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Euismod tincidunt ut laroeet dolore magna for the year ended ?? ?????? 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
for the year ended 31 December 2016
1. Basis of preparation
(a) Statement of compliance
The consolidated fi nancial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as
issued by the International Accounting Standards Board and as adopted by the European Union.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated fi nancial
statements. The accounting policies have been consistently applied by all companies of the Group.
All notes, except as otherwise indicated, are presented in Euros (“€”).
(b) Basis of Consolidation
Subsidiaries
Subsidiaries are those enterprises controlled by the Group. Control exists where the Group has the power, directly or indirectly, to
govern the fi nancial and operating policies of an enterprise so as to obtain benefi ts from its activities.
The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling
interests in proportion to their relative ownership interests.
Where the Company has control over an investee, it is classifi ed as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the
investor to use its power to aff ect those variable returns. Control is reassessed whenever facts and circumstances indicate that there
may be a change in any of these elements of control.
Associates
Where the Group has the power to participate in (but not control) the fi nancial and operating policy decisions of another entity, it is
classifi ed as an associate. Associates are initially recognised in the consolidated statement of fi nancial position at cost. Subsequently
associates are accounted for using the equity method, where the Group’s share of post-acquisition profi ts and losses and other
comprehensive income is recognised in the consolidated statement of profi t and loss and other comprehensive income (except for
losses in excess of the Group’s investment in the associate unless there is an obligation to make good those losses).
Profi ts and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated
investors’ interests in the associate. The investor’s share in the associate’s profi ts and losses resulting from these transactions is
eliminated against the carrying value of the associate.
Any premium paid for an associate above the fair value of the Group’s share of the identifi able assets, liabilities and contingent
liabilities acquired is capitalised and included in the carrying amount of the associate. Where there is objective evidence that the
investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as
other non-fi nancial assets.
Transactions eliminated on consolidation
The consolidated fi nancial statements present the results of the Company and its subsidiaries (“the Group”) as if they formed a single
entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
Non-controlling interest
Non-controlling interest in the net assets of the consolidated subsidiaries are identifi ed separately from the Group’s equity. Non-
controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling
shareholder’s share changes in equity since the date of the combination. The non-controlling interest’s share of losses, where
applicable, are attributed to the non-controlling interests irrespective of whether the non-controlling shareholders have a binding
obligation and are able to make an additional investment to cover the losses.
(c) Basis of measurement
The fi nancial statements have been prepared on the historical cost basis unless otherwise stated.
34
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11/05/2017 08:16
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
1. Basis of preparation (continued)
(d) Functional and presentation currency
These financial statements are presented in Euros (”€”) and is considered by the Directors to be the most appropriate presentation
currency to assist the users of the financial statements. The functional currency of the Company and operating subsidiary is Euros
(“€”).
(e) Use of estimates and judgements
The preparation of the financial statements in conformity with IFRS, as adopted by the EU, requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements
about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised if the revision affects only that period, or in the period of revision and future periods if the
revision affects both current and future periods.
Critical estimates and assumptions that have the most significant effect on the amounts recognised in the financial statements and/
or have a significant risk of resulting in a material adjustment within the next financial year are as follows:
Carrying value of capitalised development costs
The Group capitalises development costs provided the conditions meet the criteria set out in IAS 38. The Directors are required
to continually assess the commercial potential of the product in development and its useful life following launch. Impairment of
the capitalised development cost depends of the sales potential and market readiness. Management has noted no indicators of
impairment in the period.
Intangible assets are amortised over their expected or known useful lives on a straight-line basis beginning from the point they
are available for use. The estimated useful life is the lower of the legal duration (term of patents- usually 20 years) and the useful
economic life. The estimated useful lives of intangible assets are regularly reviewed. Management currently estimates based on
the development program the estimated useful life for intangible assets is currently 10 years. The useful economic life is based on
management’s estimate of the time period over which the assets will generate future cash flows.
Valuation of embedded derivative
The embedded derivative relates to the conversion option contained in the convertible loan note issue by the Company. The
option breaks the fixed for fixed conversion under IAS 19 and has therefore been fair valued as an embedded derivative. The
probability of the IPO successfully completing was a key variable contained in the fair valuation and it was been carefully assessed
and judged by Management and the Directors. For the year ended 31 December 2016 the IPO successfully completed and the
embedded derivative was valued including a 100% chance of success. On conversion of the loan the embedded derivative has been
appropriately extinguished.
Valuation and recoverability of inventory – Note 17
Inventories are stated at the lower of cost or net realisable value. The cost of inventories comprises of net prices paid for materials
purchased, production labour cost and factory overhead. Net realisable value represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing, selling and distribution. Inventory provisions are recognised for slow-moving,
obsolete or unsalable inventory and are reviewed on a six months basis. This methodology is affected by forecast and judgment of
Management about market demand and selling opportunities. If actual demand or usage were to be lower than estimated, inventory
provisions for excess or obsolete inventory may be required, which could have a material adverse effect on our business, financial
condition and results of operations. Management has noted no provision in slow moving or obsolete stock at 31 December 2016.
Directa Plus_Financial Statements.indd 35
35
11/05/2017 08:16
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
1. Basis of preparation (continued)
Defi ned benefi t scheme – Note 22
Provision for benefi ts upon termination of employment related to a provision accrued by Italian companies for employment retirement
is determined using actuarial techniques, involving external experts. All key estimates applied have been included in note 19.
Share Based Payments – Note 26
The cost of employee services received (compensation expenses) in exchange for awards of equity instruments are recognised
based upon the grant date fair value of stock options. The grant date fair value of stock options is estimated using a Black-Scholes
option valuation model. This Black-Scholes option valuation model requires the use of assumptions, including expected stock price
volatility and the estimated life of each award. The risk-free interest rate used in the model is determined, based on a government
bond with a life equal to the expected life of the equity-settled share-based payments. Probability to match the performance level
set for performance share options is also a key variable to defi ne the fair value.
New standards and interpretations not yet adopted
Standards, Amendments to published Standards and Interpretations issued but not yet eff ective
Certain standards, amendments to published standards and interpretations have been issued that are mandatory for accounting
periods beginning on or after 1 January 2015 or later periods, but which the Group has not early adopted.
–
IFRS 9 Financial instruments (eff ective 1 January 2018)
–
IFRS 15 Revenue from contracts with customers (eff ective 1 January 2018)
–
IFRS 16 Leases (eff ective 1 January 2019)
Amendments:
– Amendments to IAS 12: Recognition of deferred tax assets for unrealised losses (eff ective 1 January 2017)
Management is currently evaluating the impact of IFRS 9, 15 and 16 on the consolidated fi nancial statements. Given the nature of
the business conducted in 2016 Management does not currently see any material impact from these standards, however as new
sales contracts are signed Management is continually re-evaluating the impact of IFRS 15. All other standard updates have been
deemed to have no material impact.
2. Signifi cant accounting policies
(a) Functional and Foreign currency
The individual fi nancial statements of each entity of the Group are presented by the currency of the primary economic environment
in which the entity operates, which is the functional currency. The functional currency of the Company is Euros.
The consolidated fi nancial statements are presented in Euros, which is the Group’s presentation currency.
(i)
Transaction and balances
Transactions in foreign currencies are converted in to the respective functional currencies in initial recognition, using the exchange
rates approximating to those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting period are
translated at the rates ruling as of that date. Non-monetary assets and liabilities are not retranslated. All exchange diff erences are
recognised in profi t or loss. On consolidation, the results of overseas operations not in Euro are translated at the rates approximating
to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at
the reporting date. Exchange diff erences arising on translating the opening net assets at closing rate and the results of overseas
operations at actual rate are recognised in other comprehensive income.
36
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2. Significant accounting policies (continued)
(b) Financial instruments
(i)
Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are originated. All other financial assets are recognised
initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights
to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial
asset are transferred. Any interest in such transferred financial assets that is created or retained by the Company is recognised as a
separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when the Group
has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability
simultaneously.
The Group’s non-derivative financial assets comprise loans and receivables.
(c) Loans and receivables
Loans and receivables are financial assets with fixed or determinable payment terms that are not quoted in an active market. The
Group’s loans and receivables comprise of trade and other receivables and loan receivable, which are recognised initially at fair
value plus any directly attributable transaction costs and subsequently measured at amortised cost using the effective interest rate
method less provisions for impairment.
(d) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less, that are
subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term
commitments.
(i)
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other
financial liabilities are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual
provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Other financial liabilities
comprise trade and other payables.
(e) Leases
Finance leases
At inception of an arrangement, the Group determines whether the arrangement is or contains a lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the
outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate
of interest on the remaining balance of the liability.
Operating leases
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
Directa Plus_Financial Statements.indd 37
37
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Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016 Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
2. Signifi cant accounting policies (continued)
(f) Share capital
Ordinary shares
Ordinary shares are classifi ed as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as
a deduction from equity, net of any tax eff ects. All costs that are directly attributable to raising new equity have been recognised
against share premium. All costs that are attributed to both the IPO and raising new equity have been apportioned to share premium
and the profi t or loss based on the ratio of old to new shares issued. Any costs which cannot be attributed to either the IPO or issued
new equity have been expensed.
(g) Property, plant and equipment
(i)
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset.
When parts of an item of property, plant and equipment have diff erent useful lives, they are accounted for as separate items (major
components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the diff erence between the net proceeds
from disposal and the carrying amount of the item) is recognised in profi t or loss.
(ii)
Subsequent costs
Subsequent expenditure is capitalised only when it is probable that the future economic benefi ts associated with the expenditure
will fl ow to the Group. Ongoing repairs and maintenance are expensed as incurred.
(iii) Depreciation
Items of property, plant and equipment are depreciated on a straight-line basis in the statement of comprehensive income over the
estimated useful lives of each component.
Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of
internally constructed assets, from the date that the asset is completed and ready for use.
The estimated useful lives of signifi cant items of property, plant and equipment are as follows:
l Computer equipment over 5 years
l
Industrial equipment, offi ce equipment and installations 15% yearly
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
(h)
Intangible assets
Intangible assets are measured at cost less accumulated amortisation and Government grants received.
Rights acquired and development expenditure are recognised at cost.
Expenditure on internally developed products is capitalised if it can be demonstrated that:
– it is technically feasible to develop the product for it to be sold
– adequate resources are available to complete the development
– there is an intention to complete and sell the product
– the Group is able to sell the product
– sale of the product will generate future economic benefi ts, and
– expenditure on the project can be measured reliably.
38
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2. Significant accounting policies (continued)
Capitalised development costs are amortised over the periods the Group expects to benefit from selling the products developed.
The amortisation expense is included within the cost of sales line in the consolidated statement of comprehensive income.
Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are
recognised in the consolidated statement of comprehensive income as incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses.
In accordance with IAS 38, the cost has been capitalised, in the category ‘Development Costs’ within Intangible Assets; based on
time of employees directly engaged in the development of the G+ technology.
For 2015 50% of the cost of 9 employees and 50% of the cost of the CEO Mr. Cesareo has been capitalised.
For 2016 on average 33% of the cost of 4 employees has been capitalised and no cost of the CEO has been capitalised.
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated
amortisation and accumulated impairment losses.
Amortisation
(i)
Intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, from the date that they are
available for use.
l Software 3 years
l
Patents and research and development costs concerning G+ technology, are amortised over the lower of the legal duration
of the patent (typically 20 years) and the economic useful life. These are currently amortised over 10 years
l Other intangible assets 5 years
i)
(i)
Impairment
Non-derivative financial assets
A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there
is objective evidence that it is impaired. A financial assets is impaired if there is objective evidence of impairment as a result of one
or more events that occurred after the initial recognition of the asset, and that event(s) had an impact on the estimated future cash
flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to
the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse
changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of
an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value
below its cost is objective evidence of impairment.
(ii) Non-financial assets
The carrying amounts of the Group’s non-financial assets, are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised
if the carrying amount of an asset or Cash Generating Unit (‘CGU’) exceeds its recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell.
Directa Plus_Financial Statements.indd 39
39
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Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
2. Signifi cant accounting policies (continued)
(j) Employee benefi ts
Defi ned benefi t scheme surpluses and defi cits are measured at:
– The fair value of plan assets at the reporting date; less
– Plan liabilities calculated using the projected unit credit method discounted to its present value using yields available on high
quality corporate bonds that have maturity dates approximating to the terms of the liabilities; plus
– Unrecognised past service costs; less
– The eff ect of minimum funding requirements agreed with scheme trustees.
Remeasurements of the net defi ned obligation are recognised directly within equity. The remeasurements include:
– Actuarial gains and losses
– Return on plan assets (interest exclusive)
– Any asset ceiling eff ects (interest exclusive).
Service costs are recognised in profi t or loss, and include current and past service costs as well as gains and losses on curtailments.
Net interest expense (income) is recognised in profi t or loss, and is calculated by applying the discount rate used to measure the
defi ned benefi t obligation (asset) at the beginning of the annual period to the balance of the net defi ned benefi t obligation (asset),
considering the eff ects of contributions and benefi t payments during the period.
Gains or losses arising from changes to scheme benefi ts or scheme curtailment are recognised immediately in profi t or loss.
Settlements of defi ned benefi t schemes are recognised in the period in which the settlement occurs.
For more information please see note 22.
(k) Revenue
Revenue from the sale of goods is recognised in the statement of comprehensive income when the signifi cant risks and rewards of
ownership have been transferred to the buyer, upon delivery of item. Revenue is recognised net of the related sales taxes.
(l) Government grants
Government grants are recognised when there is reasonable assurance that the entity will comply with the relevant conditions and
the grant will be received. Grants are recognised in profi t or loss on a systematic basis as the entity recognises as expenses the costs
that the grants are intended to compensate. Where a grant has been received as a contribution for property, plant and equipment,
the income received has been credited against the asset in the statement of fi nancial position.
(m) Finance income and fi nance costs
Finance income comprises interest income on funds invested. Interest income is recognised in profi t or loss, using the eff ective
interest method. Finance costs comprise interest expense on borrowings.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in
profi t or loss using the eff ective interest method.
40
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11/05/2017 08:16
2. Significant accounting policies (continued)
(n) Taxation
Tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or loss except to the extent that it
relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for:
l
l
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable
that they will not reverse in the foreseeable future; and
l taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
A deferred tax asset is recognised for deductible temporary differences to the extent that it is probable that future taxable profits
will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.
(o) Convertible Loan Notes
The proceeds received on issue of the Group’s convertible loans are allocated into their liability and equity components. The amount
initially attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable
on a similar debt instrument that does not include an option to convert. Subsequently, the debt component is accounted for as a
financial liability measured at amortised cost until extinguished on conversion or maturity of the bond. The Group’s convertible loan
notes do not contain an equity component.
Derivatives embedded in host debt contracts, such as convertible loan notes, are accounted for as separate derivatives and
recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host
contracts are not held for trading or designated at fair value though profit or loss. These embedded derivatives are measured at fair
value with changes in fair value recognised in profit or loss.
Directa Plus_Financial Statements.indd 41
41
11/05/2017 08:16
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
3. Operating segments
The Group considers that it operates in one main business area, being the manufacture and sale of graphene products. This
business area currently forms the basis of the Group’s operating segments. The Group’s CEO (the chief operating decision maker)
reviews internal management reports on a periodical basis.
Other operations relate to the Group’s administrative functions conducted at its head offi ce and by its holding company.
Directa Plus UK
(Head Offi ce)
€’000
Directa Plus Spa
€’000
Operating Segments
2016
Revenue
Other revenue
Depreciation and amortisation
Other expenses
Results from operating activities
Fair value movement on embedded derivative
Finance Income
Financial expenses
Loss of the year
Operating Segments
2015
Revenue
Other revenue
Depreciation and amortisation
Other expenses
Results from operating activities
Fair value movement on embedded derivative
Finance Income
Financial expenses
Loss of the year
–
–
–
(1,123)
(1,123)
(1,039)
–
(1,118)
(3,280)
–
–
–
(473)
(473)
(707)
–
(404)
(1,584)
Total
€’000
738
80
(572)
(2,981)
(4,239)
(1,039)
4
(1,152)
(6,425)
1,392
316
(492)
(4,636)
(3,232)
(707)
7
(435)
(4,367)
2015
€
1,392,232
287,070
28,907
738
80
(572)
(1,858)
(3,116)
–
4
(34)
(3,145)
1,392
316
(492)
(4,163)
(2,759)
-
7
(31)
(2,783)
2016
€
738,028
77,012
2,721
Information regarding the results of each reportable segment is included below.
Sale of products
Government grants
Other revenue
Total income
817,761
1,708,209
There is one client in 2016 which accounts for more than 10% of revenues for sales of products or services, the client revenues
amount to €455,000 (62%).
There were two main clients in 2015 which account for more than 10% of revenues for sales of products or services: the fi rst client
revenues amount to €1,001,730 (72%), while the second client amount to €270,000 (19%).
42
Directa Plus_Financial Statements.indd 42
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3. Operating segments (continued)
Geographical breakdown of revenues are:
Italy
Rest of the world
Revenue
4. Government Grants
Information regarding government grants:
Genius
MAT4BAT
Brevetti Plus
Voucher 2014 C
Voucher 2014 F
Total
The key terms of Government grants are:
Starting date
Ending date
Duration
Total amount
Final report submitted and accepted
2016
€’000
216
522
738
2016
€
-
77,012
-
-
-
2015
€’000
1,170
222
1,392
2015
€
107,338
77,012
67,200
24,000
11,520
77,012
287,070
Mat4Bat
September 2013
February 2017
42
304,700
Project still on-going
Project closing is on
February 2017
There are no capital commitments built into the ongoing grants.
5. Raw materials and consumables used
The amount of €169,643 (2015: €342,209) refers to materials for production and consumption by laboratory. In 2015 the figure is
higher because it included €214,482 relating to the manufacture of MDU (Mobile Decontamination Unit) which did not occur in 2016.
Directa Plus_Financial Statements.indd 43
43
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Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
6. Employee benefi ts expenses
Wages and salaries
Social security costs
Employee benefi ts
Other costs
Total Gross
Capitalised cost in “Intangible assets”
2016
€
1,304,362
305,287
85,461
188,729
1,883,839
(99,745)
2015
€
1,024,882
252,723
50,465
37,261
1,365,331
(469,562)
Total
1,784,094
895,769
As of 31 December 2016 Staff costs are higher than 31 December 2015 due to the implementation of the new Board of Directors for
the Company and because in 2015 a larger amount of staff costs were capitalised, €469,562 compared with €99,745 for 2016.
As of 31 December 2016 Other Costs are higher than 31 December 2015 due to €154,068 of share options expenses not included in
2015. €98,126 of the share option charge relates to options issued to the Directors.
The average number of employees during the period was:
Management
Administration Staff
Staff
Total
The Directors’ emoluments are the following:
Wages and salaries
Total
See the remuneration report on pages 25 to 26 for further details.
During 2016 the number of directors increased from 5 to 7.
2016
€
7
10
5
22
2016
€
2015
€
6
10
3
19
2015
€
718,710
495,355
718,710
495,355
44
Directa Plus_Financial Statements.indd 44
11/05/2017 08:16
7. Results from operating activities
Results from operating activities includes:
Audit of the Group and Company financial statements
Audit of the subsidiaries’ financial statements
Other non-audit services provided by Group’s auditor
Operating leases
Travel and marketing
Bad debt expense
Impairment provision for D+
8. Leases
Operating leases relate to the Group’s plant and machinery held on leases.
Future minimum lease payments
Less than one year
Between one and five years
More than five years
Total
Finance lease liabilities are payable as follows:
Future minimum lease payments
Less than one year
Between one and five years
More than five years
Total
Present value of minimum lease payments
Less than one year
Between one and five years
More than five years
2016
€
32,112
18,000
264,184
143,951
217,647
909,763
–
2016
€
63,000
–
–
2015
€
–
10,000
–
124,528
185,143
–
1,902,129
2015
€
108,000
54,000
–
63,000
162,000
2016
€
61,735
183,039
–
244,774
2016
€
59,898
168,117
–
2015
€
88,499
223,298
–
311,797
2015
€
91,949
220,008
–
Total
228,015
311,957
Directa Plus_Financial Statements.indd 45
45
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Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
9. Finance income and fi nance expenses
Finance income includes:
Interest income on cash balances held
Total
Finance expenses include:
Interest on loans and other fi nancial costs
Interest on fi nancial leasing
Interest cost for benefi t plan
Foreign exchanges losses
Total
10. Taxation
Current tax expenses
Deferred tax expenses
Total tax expenses
Reconciliation of tax rate
Loss before tax
Italian statutory tax rate
Impact of temporary diff erences
Losses recognised
Losses not utilised
Total tax expenses
2016
€
4,230
4,230
2016
€
197,169
14,576
4,614
934,777
2015
€
7,032
7,032
2015
€
423,370
4,120
4,619
2,599
1,151,136
434,708
2016
€
–
–
–
2016
€
2015
€
–
–
–
2015
€
(6,424,945)
24%
(1,541,987)
74,534
(74,534)
1,541,987
(4,367,480)
27.5%
(1,201,057)
87,300
(87,300)
1,201,057
–
–
Tax losses carried forward have been recognised as a deferred tax asset up to the point that they are recoverable against taxable
temporary diff erences. All other tax losses are carried forward and not recognised as a deferred tax asset due to the uncertainty
regarding future taxable profi ts. Tax losses carried forward are €13,483,787 (€7,864,956 in 2015).
46
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11. Intangible assets
Cost
Development
costs
Patents
Software
Goodwill
Others
Total
Balance at 31/12/2014
Additions
Reclassification from inventory
Balance at 31/12/2015
Additions
Disposal
1,856,735
469,562
-
2,326,297
99,745
-
42,189
54,899
31,191
128,279
68,971
-
Balance at 31/12/2016
2,426,042
197,250
Amortisation
Balance at 31/12/2014
Amortisation 2015
Balance at 31/12/2015
Amortisation 2016
Reclassification
407,667
232,630
640,297
242,604
12,657
12,828
25,485
19,725
1,445
-
-
1,445
-
-
1,445
1,406
39
1,445
–
Balance at 31/12/2016
882,901
45,210
1,445
-
-
-
0
22,268
-
38,102
18,214
-
56,316
(28,353)
1,938,471
542,675
31,191
2,512,337
190,984
(28,353)
22,268
27,963
2,674,968
-
-
-
-
0
17,998
7,997
25,995
4,776
(11,961)
18,810
20,104
30,321
9,153
439,728
253,494
693,222
267,105
(11,961)
948,366
1,498,743
1,819,115
1,726,602
Carrying amounts
Balance 31/12/2014
Balance 31/12/2015
Balance 31/12/2016
1,449,068
1,686,000
1,543,141
29,532
102,794
152,040
39
-
-
-
-
22,268
Development costs are generated internally and relate to the capitalisation of personnel costs dedicated to the development of
products and processes of the G+ family. In order to reliably define the capitalisation of the expenditures related to the development
phase of the industrial process, the Company has duly reported the time-sheets of all the employees identifying daily the hours
spent on the job. The development of the new ready to use products and fine-tuned process ensures economic benefits for the
Company going forward. New products allow to enter into new markets, reducing the time-to-market and new process allow
material improvement in production capacity and cost efficiency.
Others intangible asset are mainly due to the website costs.
Directa Plus_Financial Statements.indd 47
47
11/05/2017 08:16
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
12. Property, plant and equipment
Industrial
equipment
€
Computer
equipment
€
Offi ce
equipment
€
Installations
€
Under
construction
€
Total
€
Cost
Balance at 31/12/2014
Additions
Balance at 31/12/2015
Additions
Disposals
45,478
2,001
47,479
91,181
–
Balance at 31/12/2016
138,660
Depreciation
Balance at 31/12/2014
Depreciation 2015
Balance at 31/12/2015
Depreciation 2016
Disposals
Balance at 31/12/2016
Carrying amounts
Balance 31/12/2014
Balance 31/12/2015
Balance 31/12/2016
17,393
6,972
24,365
28,988
–
53,353
28,085
23,114
85,307
23,031
6,074
29,105
4,841
(300)
33,646
12,488
4,203
16,691
4,747
(300)
21,138
10,543
12,414
12,508
17,874
38,085
55,959
35,839
(7,627)
84,171
9,648
5,156
14,804
10,700
(6,486)
19,018
8,226
41,155
65,153
1,194,281
443,099
1,637,380
186,747
(1,773)
– 1,280,664
489,259
–
– 1,769,923
377,248
(9,700)
58,640
-
1,822,354
58,640 2,137,471
267,413
222,315
489,728
272,823
(1,773)
760,778
–
–
–
–
–
–
306,942
238,646
545,588
317,258
(8,559)
854,287
926,868
1,147,652
1,061,576
–
–
58,640
973,722
1,224,335
1,283,184
Assets held under fi nancial leases with a net book value of €300,200 are included in the above table within installations.
13. Acquisitions
On 11 November 2016 Directa Plus S.p.A. has acquired a 60% interest in the issued share capital of Osmotek Srl, a company involved
in the commercialisation and distribution of textile membranes, for a total consideration of €60,000 to be invested in the business as
working capital.
Directa Plus S.p.A has assumed responsibility for the operations of Osmotek, which has been renamed Directa Textile Solutions Srl
(“DTS”). The Directors of the Company believe that the Acquisition will enhance the route-to-market for its textile applications.
The identifi able assets acquired and liabilities acquired are as follows:
Cash and cash equivalents
Trade and other receivables
Inventories
Trade and other payables
Total identifi able net assets/liabilities
Consideration paid
Share of net assets at 60%
Goodwill
61,282
45,742
42,319
(86,457)
62,886
60,000
(37,732)
22,268
Pro-forma consolidated revenues and loss as if the acquisition of Osmotek had occurred on January 1, 2016 are described below:
Revenues
Loss of the year*
895,443
(6,431,910)
*The contribution to the Group losses for the full year would have been €14,430.
48
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14. Investments in subsidiaries
Details of the Company’s subsidiaries as at 31 December 2016 are as follows:
Subsidiaries
Country
Principal activity
Directa Plus Spa
Italy
Producer and supplier of graphene materials
Directa Textile Solutions Srl
Italy
Directa Plus Asia
Hong Kong
commercialise textile membranes, including graphene-
based technical and high-performance membranes
marketing, distribution and trading of graphene-based
products.
Shareholding
2016
100%
60%
2015
100%
0%
49%
49%
Subsidiaries
Directa Plus Spa
Directa Textile Solutions Srl
Directa Plus Asia
Place of Business
Registered Office
Place of Business
Italy
Italy
Taiwan
Via Cavour 2, Lomazzo (CO) Italy
See registered office
Via Cavour 2, Lomazzo (CO) Italy
See registered office
38-44 D’Aguilar Street, Central,
Hong Kong
372, Linsen North Rd, Taipei, TW
The Company’s investment in Directa Plus Spa is as follows:
At 31 December 2014
Additions
At 31 December 2015
Additions
At 31 December 2016
Directa Spa
3,162,346
3,895,092
7,057,438
4,000,000
11,057,438
15. Trade and other receivables
Current
Account receivables
VAT receivables
Other receivables
Total
Group
Company
2016
€
356,075
696,075
40,742
2015
€
1,166,387
44,770
94,057
2016
€
–
262,693
–
1,092,892
1,305,214
262,693
2015
€
–
7,527
22,826
30,353
The VAT receivables position for 2016 can be split into €262,693 relating to IPO costs, €248,582 relating to operational costs in
Directa Plus Spa and €184,800 reclaimable VAT previously paid.
Directa Plus_Financial Statements.indd 49
49
11/05/2017 08:16
Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
15. Trade and other receivables (continued)
As at 31 December 2016 Ageing of account receivables was:
Days overdue
0-30
31-180
181-365 +
Total
2016
€
340,216
14,622
1,237
2015
€
1,152,628
8,861
4,898
356,075
1,166,387
96% of account receivables in FY16 have ageing within 30 days. In the year €909,763 was written-off in relation to the 2 MDUs
(€840,000) and to the loan provided to Directa Plus Asia (€69,763).
16. Deferred tax liabilities
Deferred tax liabilities
Deferred tax assets – losses
Total
2016
€
276,711
(276,711)
-
2015
€
353,600
(353,600)
-
Deferred tax assets have been recognised on losses brought forward to the extent that they can be off set against taxable temporary
diff erences in line with the requirements of IAS 12.
The deferred tax liabilities arise on the capitalisation of development costs and the accounting for the defi ned benefi t scheme. The
deferred tax liabilities are detailed as follows:
Capitalised development costs
Other
Total
2016
€
262,266
14,445
276,711
2015
€
341,362
12,238
353,600
Net balance
1 Jan 2015
€
Recognised in
profi t or loss
€
Recognised
in OCI
€
Net balance
31 Dec 2015
€
Deferred tax
liabilities
€
Capitalised development costs
Other
Total
254,007
9,939
263,946
87,356
(56)
87,300
-
2,355
2,355
341,362
12,238
353,600
341,362
12,238
353,600
Net balance
1 Jan 2016
€
Recognised in
profi t or loss
€
Recognised
in OCI
€
Net balance
31 Dec 2016
€
Deferred tax
liabilities
€
341,362
12,238
353,600
(79,096)
4,562
(74,534)
-
(2,355)
(2,322)
262,266
14,445
276,711
262,266
14,445
276,711
Capitalised development costs
Other
Total
50
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17. Inventories (Consolidated only)
Finished products (Graphene)
Raw material
Total
2016
€
595,796
10,269
606,065
2015
€
101,337
11,566
112,903
As at 31 December 2016 inventories are higher than last year due to two Mobile Decontamination Units (amounted €75,000 each)
shown in finished products.
18. Cash and cash equivalent
Bank balances
Cash
Total
19. Equity
Share Capital
Share Premium
Retained earnings
Non-controlling interests
Balance at 31 December
Share Capital
At 1 January 2015
At 31 December 2015
Share reduction on 25 April 2016*
Share sub-division on 19 May 2016**
Share issue on 27 May 2016 – convertible loans***
Share issue on 27 May 2016 – IPO***
At 31 December 2016
Group
Company
2016
€
2015
€
2016
€
10,570,000
211
2,030,881
769
8,011,689
-
2015
€
319,339
-
10,570,211
2,031,650
8,011,689
319,339
2016
€
142,628
19,973,996
(6,552,965)
22,228
2015
€
503,100
3,885,816
(6,281,317)
-
13,585,887
(1,892,401)
Number of
ordinary shares
Share
Capital (€)
503,100
503,100
-
19,620,900
7,055,493
17,033,334
44,212,827
503,100
503,100
(439,649)
-
23,191
55,986
142,628
*
On 25 April 2016, the issued ordinary shares were redenominated from EUR to GBP into an aggregate nominal value of £398,908, comprising of 503,100
ordinary shares of £0.7929 each, at the spot rate of exchange of 0.7929. The aggregate nominal value of the issued ordinary shares was then reduced to
£50,310 comprising 503,100 ordinary shares of £0.10 each.
** On 19 May 2016, each ordinary share of £0.10 in the issued share capital of the Company was sub-divided into 40 ordinary shares resulting in 20,124,0000
shares of £0.0025 each.
*** On 27 May 2016, 24,088,827 ordinary shares with a nominal value of £0.0025 each were issued at the Company’s initial public offering. Of the 24,088,827 new
ordinary shares, 7,055,493 shares were issued through the exercise of convertible loan notes. The remaining 17,033,334 shares were issued to institutional and
other investors.
Directa Plus_Financial Statements.indd 51
51
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Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
19. Equity (continued)
Share Premium
At 31 December 2015
Cancellation of share premium account on 25 April 2016
Shares issued on 27 May 2016
Expenditure relating to the raising of shares
At 31 December 2016
Share premium
3,885,816
(3,885,816)
21,934,648
(1,960,652)
19,973,996
On 25 April 2016, the share premium account of the Company was cancelled and the amount of the 3,885,816 was credited to a
distributable reserve.
The eff ect on equity of the 17,033,334 shares issued at the initial public off ering in GBP and reported in EUR is summarised below.
Expenditure of €1,960,652 relating to the raising of shares has been deducted from the share premium.
Share capital
Financial instruments issued by the Directa Plus Group are treated as equity only to the extent that they meet the defi nition of a
fi nancial liability. The Directa Plus Group’s ordinary shares are classifi ed as equity instruments.
Share premium
To the extent that the Company’s ordinary shares are issued for a consideration greater than the nominal value of those shares (in
the case of the Company, £0.0025 per share), the excess is deemed Share Premium. Costs directly associated with the issuing of
those shares are deducted from the share premium account, subject to local statutory guidelines.
Legal reserve
The legal reserve relates to Directa Plus S.P.A and forms part of retained earnings. In Italy it is mandatory to create a legal reserve for
5% of net profi t. There was a net profi t of €11,312 in 2009 creating a legal reserve of €566.
20. Loans and borrowings
Non-current
Group
Company
2016
€
169,043
285,557
2015
€
220,008
468,813
454,600
688,821
2016
€
–
–
–
2015
€
–
–
–
Group
Company
2016
€
187,164
50,970
–
2015
€
93,710
91,949
5,897,256
238,134
6,082,915
2016
€
–
–
–
–
2015
€
–
–
5,813,847
5,813,847
Debts for fi nancial leasing
Loan
Total
Current
Debts to other lenders
Debts for fi nancial leasing
Loan
Total
52
Directa Plus_Financial Statements.indd 52
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Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
20. Loans and borrowings (continued)
Intesa San Paolo
Atanor
2016
240,646
228,161
Current
92,327
90,923
Non current
Repayment
Interest rate
148,319
137,238
6-months
EURIBOR 3M + 2.5%
3- months
Fixed 0.5%
Intesa San Paolo interest rates have been renegotiated after the IPO, from 5.2% to 2.5%.
There are no securities related with above loans.
The Group received two shareholder loans totalling Euro 185,185 in prior periods. They were interest free and switched into the
convertible loans in 2015.
Included in loans at 31 December 2015 are 39 convertible loans with drawdowns totalling €5,529,041. The convertible loans were
repayable on or before 31/12/2016 and bear interest at 8%. Accrued interest is payable on each anniversary of the agreements or if
earlier, when the Loans are payable in full.
The proceeds received on issue of the Group’s convertible loans are allocated into their liability and equity components. The amount
initially attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable
on a similar debt instrument that does not include an option to convert. Subsequently, the debt component is accounted for as a
financial liability measured at amortised cost until extinguished on conversion or maturity of the bond. The Group’s convertible loan
notes do not contain an equity component.
Derivatives embedded in host debt contracts, such as convertible loan notes, are accounted for as separate derivatives and
recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host
contracts are not held for trading or designated at fair value though profit or loss.
21. Embedded derivative
Embedded derivative
Total
2016
€
–
–
2015
€
706,525
706,525
The embedded derivative relates to the conversion option contained in the convertible loan notes disclosed in note 19. The loan
note holders had an option to convert at a 25% discount to the IPO listing price. This breaks the fixed for fixed conversion under IAS
39 and has therefore been fair valued as an embedded derivative. The key variable contained in the fair valuation is the probability
that the IPO will occur and the conversion option becomes exercisable. This is deemed to be a key judgement applied by
Management and is described below.
As at 31 December 2015 Management reassessed the fair value of the embedded derivative. The factors that were considered are
as follows:
–
A decision to undertake an AIM listing had been agreed but the Company was only at the start of the process in appointing
advisors and initiating listing activity;
– No marketing activity had commenced;
– Average success rates for companies listing on the AIM market and the wider current IPO activity;
– Macro-economic factors which would impact upon any IPO success.
As at 27 May 2016, after the successful IPO the embedded derivative was updated to reflect a 100% chance of success and the
embedded derivative extinguished on the issue of shares.
Directa Plus_Financial Statements.indd 53
53
11/05/2017 08:16
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
21. Embedded derivative (continued)
86% of convertible loan note holders opted for conversion, with convertible loan value extinguished on the issue of shares, and 14%
opted for cash repayment of their convertible loan value.
When extinguishing the convertible loan and embedded derivative liabilities, the Company recognised a gain of €1,943,333. The
86% gain of €1,670,687, relating to holders opting to convert has been taken to retained earnings to match against the previous
fair value movements. The gain of €272,646 relating to the 14% opting for cash repayment has been realised in the consolidated
statement of comprehensive income for the period under fair value movement on embedded derivative.
Convertible Loan Notes
Embedded
derivative
liability
€
Loan notes
€
Share
capital
€
Share
premium
€
Retained
earnings
€
Income
statement
€
At 31 December 2015
5,809,842
706,525
Interest up until date of conversion
Interest settled in period up to
conversion
Fair value movement
Balance prior to conversion
Conversion to shares
Loan settled in cash
Gain on extinguishment relating to
cash settled
182,072
(10,115)
5,981,799
(5,142,563)
(839,236)
1,312,119
2,018,644
(1,745,998)
(272,646)
23,191
5,194,683
1,670,687
(1,312,119)
272,646
At 31 December 2016
-
-
23,191
5,194,683
1,670,687
(1,039,473)
22. Employee benefi ts provision
Employee benefi ts
Total
2016
€
227,358
227,358
2015
€
170,952
170,952
Provisions for benefi ts upon termination of employment primarily related to provisions accrued by Italian companies for employee
retirement, determined using actuarial techniques and regulated by Article 2120 of the Italian Civil code. The benefi t is paid upon
retirement as a lump sum, the amount of which corresponds to the total of the provisions accrued during the employees’ service
period based on payroll costs as revalued until retirement. Following the changes in the law regime, from January 1 2007 accruing
benefi ts have been contributing to a pension fund or a treasury fund held by the Italian administration for post-retirement benefi ts
(INPS). For companies with less than 50 employees it will be possible to continue this scheme as in previous years. Therefore,
contributions of future TFR provisions to pension funds or the INPS treasury fund determines that these amounts will be treated in
accordance to a defi ned contribution scheme, not subject to actuarial evaluation. Amounts already accrued before 1 January 2007
continue to be accounted for a defi ned benefi ts to be assessed on actuarial assumptions.
54
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22. Employee benefits provision (continued)
The breakdown for 2015 and 2016 is as follows:
Amount at 31 December 2014
Service cost
Interest cost
Actuarial gain/losses
Past service cost
Benefit paid
Amount at 31 December 2015
Service cost
Interest cost
Actuarial gain/losses
Past service cost
Benefit paid
Amount at 31 December 2016
145,991
32,092
4,619
(8,563)
-
(3,187)
170,952
52,286
4,614
(150)
-
(344)
227,358
Variables analysis
Detailed below are the key variables applied in the valuation of the defined benefit plan liabilities.
Annual rate interest
Annual rate inflation
Annual increase TFR
Tax on revaluation
Social contribution
Increase salary male
Increase salary female
Rate of turnover male
Rate of turnover female
Sensitivity analysis
2016
2.30%
1.10%
7.41%
17.00%
0.50%
1.20%
1.15%
1.70%
1.50%
2015
3.00%
1.30%
7.41%
17.00%
0.50%
1.50%
1.40%
1.70%
1.50%
Detailed below are tables showing the impact of movements on key variables:
Actuarial hypothesis – 2015
Male
Female
Male
Female
Increase salary
Turnover
Interest rate
Inflation rate
Decrease 10%
Increase 10%
Rate
1.35%
1.26%
1.53%
1.35%
2.70%
1.17%
Variation
DBO
(1,599)
(1,475)
6,135
(1,613)
Rate
1.65%
1.54%
1.87%
1.65%
3.30%
1.43%
Variation
DBO
1,645
1,434
(5,749)
1,640
Directa Plus_Financial Statements.indd 55
55
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Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
22. Employee benefi ts provision (continued)
Decrease 10%
Increase 10%
Actuarial hypothesis – 2016
Male
Female
Male
Female
Increase salary
Turnover
Interest rate
Infl ation rate
Rate
1.08%
1.04%
1.53%
1.35%
2.07%
0.99%
Variation
DBO
(1,914)
(1,649)
6,857
(1,916)
Rate
1.32%
1.27%
1.87%
1.65%
2.53%
1.21%
Variation
DBO
1,959
1,602
(6.499)
1,943
23. Trade and Other payables
Trade payables
Employment costs
Other payables
Deferred income for public grant
Total
24. Financial instruments
Financial risk management
Group
Company
2016
€
529,468
203,278
117,675
-
2015
€
345,713
223,909
157,852
44,643
2016
€
910
-
31,432
-
2015
€
29,600
91,135
20,047
-
850,421
772,117
32,342
140,782
The Company has exposure to the following risks from its operations:
Capital Risk
The Company manages its capital to ensure to be able to continue as going concerns while maximising the return to shareholders.
The Company considers that the current capital structure will provide suffi cient fl exibility to ensure that appropriate investment can
be made, if required, to implement and achieve a long-term growth strategy.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in fi nancial loss to the Group. The
Group has adopted a policy of only dealing with creditworthy counterparties and obtaining suffi cient collateral where appropriate, as
a means of mitigating the risk of fi nancial loss from defaults. The Group only transacts with entities that are rated the equivalent of
investment grade and above.
Trade receivables consist of a small number of customers, spread across diverse industries and geographical areas. Ongoing credit
evaluation is performed on the fi nancial condition of accounts receivable.
The Group’s standard credit terms are 30 to 60 days from date of invoice. Invoices greater than 60 days old are assessed as overdue.
Exposure to credit risk
The carrying amount of fi nancial assets represents the maximum credit exposure. The maximum exposure to credit risk at the
reporting date was as follows.
56
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24. Financial instruments (continued)
Group
Trade and other receivables
Cash and cash equivalent
Total
Note
13
18
2016
€
2015
€
1,092,892
10,570,211
1,305,214
2,031,650
11,663,103
3,336,864
All trade and other receivables are considered recoverable.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are
settled by delivering cash or another financial asset.
The management review its facilities regularly to ensure it has adequate funds for operations and expansion plans.
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and
undiscounted.
2016
Financial liabilities
Trade payables
Debts for financial leasing
Debts to other lenders
Embedded derivative
Loans
Total
2015
Financial liabilities
Trade payables
Debts for financial leasing
Loans
Total
Market risk
Contractual cash flows
Carrying amount
€
Up to 1 year
€
1-5 years
€
345,715
311,957
93,710
706,525
6,366,069
7,823,976
345,715
106,528
93,710
706,525
6,357,350
7,609,828
Contractual cash flows
Carrying amount
€
Up to 1 year
€
529,468
220,007
472,727
1,222,202
529,468
61,735
199,565
767,602
–
224,773
–
–
489,134
713,907
1-5 years
€
–
180,059
293,476
473,535
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Group’s income or the value of its of financial instruments.
The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the return.
As at 31 December 2016 the Group is only exposed to variable interest rate risk on the Intesa San Paolo loan. If the interest rate has
increased or decreased by 100 basis points during the year the impact on the profit or loss would have been +/- €2,406.
Directa Plus_Financial Statements.indd 57
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Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
24. Financial instruments (continued)
Currency risk
The Group is exposed to currency risk. Immediately after Admission and before the Brexit referendum, £7.5 million of the IPO
proceeds was converted to €9.5 million (based on an average exchange rate of £1: €1.26) as the costs of the Italian subsidiary are in
Euros. The remaining amount of approximately £3.5 million is to manage expenses of the Company (such as UK advisors, LSE fees
and costs related to the Board) in the UK.
Cash held in EUR
Cash held in GBP
Cash held in USD
EUR
7,066,131
3,503,345
734
As at 31 December 2016 if the exchange rate EUR/GBP increase by 10% the impact on P&L would be a loss equal to €0.32 million (if
decrease by 10% would be a profi t equal to €0.39 million).
Fair values
The following table shows the carrying amounts and fair values of fi nancial assets and fi nancial liabilities carried at fair value,
including their levels in the fair value hierarchy.
Carrying amount
Fair value
Loans and
receivables
€
Other
fi nancial
liabilities
€
Total
€
Level 1
€
Level 2
€
Level 3
€
–
-
706,525
706,525
706,525
706,525
–
–
706,525
706,525
–
–
31 Dec 2015
Financial liabilities not measured
at fair value
Embedded derivative
Total
Measurement of fair values: valuation techniques and signifi cant unobservable inputs – refer to note 18 for details regarding the fair
value of the embedded derivative. The embedded derivative was released on conversion of the loan in 2016.
Capital management
The Group’s objective when managing capital is to safeguard its accumulated capital in order to provide an adequate return to
shareholders by maintaining a suffi cient level of funds, in order to support continued operations.
25. Earnings per share
The earnings per share calculations for 31 December 2016 are infl uenced by the large change in the number of ordinary shares
during the period. This is due to the share sub-division which occurred on 19 May 2016, dividing each share into 40 new shares and
increasing the number of shares by 19,620,900, and the Initial Public Off ering on 27 May 2016, which resulted in 24,088,827 new
shares. The earnings per share have been calculated using the weighted average of ordinary shares. In order for the calculations of
basic and diluted earnings per share for all periods presented to be comparable, the weighted number of ordinary shares has been
adjusted retrospectively to refl ect the sub-division. The Company was loss making for all periods presented. Therefore the dilutive
eff ect of share options has not been taken account of in the calculation of diluted earnings per share, since this would decrease the
loss per share for each of the period reported.
58
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25. Earnings per share (continued)
At 1 January 2015
At 30 June 2015
At 31 December 2015
Existing shares
Share sub-division on 19 May 2016
Issued on 27 May 2016
At 31 December 2016
Change in number
of ordinary shares
Total number of
ordinary shares
-
-
-
19,620,900
24,088,827
43,709,727
503,100
503,100
503,100
503,100
20,124,000
44,212,827
44,212,827
Days
-
-
-
140
8
218
366
Weighted number of
ordinary shares
20,124,000
20,124,000
20,124,000
7,697,705
439,869
26,334,416
34,471,990
Loss for the year
Weighted average number of ordinary shares in issue
Basic
Diluted
2016
2015
2016
2015
(6,422,019)
(4,367,480)
(6,422,019)
(4,367,480)
during the year
34,471,990
20,124,000
34,471,990
20,124,000
Fully diluted average number of ordinary shares during
the year
Loss per share
Adjusted EPS
Losses of the year
Non recurring IPO costs
Fair value movement on embedded derivative
Write down of Receivables
Inventory Adjustment
Share option cost
Inventory write off
34,471,990
20,124,000
34,471,990
20,124,000
(0.19)
(0.22)
(0.19)
(0.22)
Basic
Diluted
2016
2015
2016
2015
(6,422,019)
427,144
1,039,473
840,000
(150,000)
154,068
–
(4,367,480)
–
706,525
–
–
1,933,319
(6,422,019)
427,144
1,039,473
840,000
(150,000)
154,068
–
(4,367,480)
–
706,525
–
–
1,933,319
Adjusted Losses
(4,111,334)
(1,727,636)
(4,111,334)
(1,727,636)
Average number of ordinary share
34,471,990
20,124,000
34,471,990
20,124,000
Adjusted LPS
(0.12)
(0.09)
(0.12)
(0.09)
26. Share Schemes
The Company established the Employees’ Share Scheme for employees and executive directors and the NED Share Scheme for
the Chairman and non-executive directors on 19 May 2016. The Employees’ Share Scheme is administered by the Remuneration
Committee. The NED Share Scheme is administered by the Executive Directors.
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Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
26. Share Schemes (continued)
The Directors are entitled to grant awards over up to 10 per cent of the Company’s issued share capital from time to time. Awards
over a total of 1,675,609 Ordinary Shares were granted on or around the date of Admission, 27 May 2016. No awards have as yet
been exercised, leaving a total of 1,675,609 outstanding as at the year end. The main terms of the Share Schemes are set out below:
Eligibility
All persons who at the date on which an award is granted under the Employees’ Share Scheme are employees (or employees who
are also offi ce-holders) of a member of the Group are eligible to participate. The Board may also grant market value share options to
non-executive directors under the NED Share Scheme. The Remuneration Committee decides to whom awards are granted under
the Employees’ Share Scheme, the number of Ordinary Shares subject to an award, the exercise date(s) (subject to the below) and
the performance conditions (if any) which must be achieved in order for the award to be exercisable.
Types of Award
Awards granted under the Employees’ Share Scheme can take the form of performance shares and/or market value share options.
“Performance shares” are share options with an exercise price equal to the nominal value of a share, while “market value share
options” are share options with an exercise price equal to the market value of a share at the date of grant. The right to exercise
the award is generally dependent upon the participant remaining an offi cer or employee throughout the performance period
and, except in the case of market value share options granted to the Chairman or non-executive directors, the satisfaction of
performance conditions. This is subject to the good leaver provisions described below. Awards granted under the Share Schemes
will not be pensionable.
Individual Limits
The value of Ordinary Shares over which an employee or executive director may be granted awards under the Employees’ Share
Scheme in any fi nancial year of the Company shall not exceed 200 per cent of his basic rate of salary at the date of grant. The value
of Ordinary Shares over which a non-executive director may be granted market value share options under the NED Share Scheme in
any fi nancial year of the Company shall not exceed 150 percent of his annual rate of fees.
Performance Targets
The Remuneration Committee will impose objective targets which will determine the extent to which awards will vest. Targets for
awards to be granted to executive directors and senior employees on or prior to Admission will be based on growth in EBITDA, share
price and production targets in line with the Company’s forecasts prior to Admission.
The Remuneration Committee may modify or amend the performance targets if changes to the Company or its business mean
that the targets are no longer relevant or appropriate. However, any new or amended conditions will not be materially any more or
less challenging than the original conditions were expected to be at the time they were imposed. The vesting of market value share
options granted to non-executive directors will not be subject to performance conditions.
Variation of share capital
Awards granted under the Share Schemes may be adjusted to refl ect variations in the Company’s share capital.
Vesting of awards
Awards will vest on the third anniversary of the date of grant to the extent that the performance targets have been met. Vested
awards may generally be exercised between the third and tenth anniversaries from the date of grant.
60
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26. Share Schemes (continued)
The inputs to the Black-Scholes model were as follows:
Black Scholes Model
27 May 2016
27 May 2015
Share price
Exercise price
Expected volatility
Compounded Risk-Free Interest Rate
Expected life
Number of options issued
75p
75p
70%
4.25%
3 years
576,069
75p
0.25p
70%
4.25%
3 years
1,099,540
Details of the number of share options outstanding are as follows:
Outstanding
at start of
period
Outstanding
at end of
period
Exercisable
period option
price
Granted
Grant date
Exercisable
date
31 December 2015
31 December 2016
27. Related parties
–
–
–
–
–
–
1,099,540
576,069
1,099,540
576,069
0.25p
75.00p
27 May 2016
27 May 2016
27 May 2019
27 May 2019
1,675,609
1,675,609
The below figures represent remuneration of key management personnel for Directa Plus Spa, who are part of the Executive
Management Team but not part of the Board of Directa Plus PLC. The remuneration is set out below in aggregate for each of the
categories specified in IAS 24 ‘Related Party Disclosures’.
Short-term employee benefits and fees
Social security costs
For Directors remuneration please see Director’s Remuneration Report.
Related party transactions
The following are deemed as related party transactions:
2016
€
176,708
8,179
184,887
2015
€
80,000
6,138
86,138
During the years under review, Sir Peter Middleton, a director of the Company, acted as Chairman of Hamilton Venture Capital Ltd,
a company which provided advisory services and office rental to Directa Plus PLC. During the year ended 30 December 2016, the
Company was invoiced €569,993 for advisory services (2015: €286,212) and €12,767 for office rental (2015: nil). Sir P Middleton
received no remuneration for this role and had no part in the provision of advice.
During the year ended 31 December 2016, the Company was invoiced €3,792 (2015: €12,315) from its subsidiary for services provided
by Director Giulio Cesareo.
During the year ended 31 December 2016, the Company made interest free loan payments to Directa Plus Asia Limited of €48,563.
As at 31 December 2016 the loan balance was reviewed and an impairment of €69,763 made, reducing the carrying value to nil
(2015: €22,825).
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Notes to the Consolidated Financial Statements (continued) for the year ended 31 December 2016Annual Report & Accounts 2016
Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2016
27. Related parties (continued)
As at 31 December 2016 the intercompany loan balance with Directa Plus S.P.A is nil (2015: €641,092).
Giuseppe Lazzaroni acted as chairman of the Italian Company (resigned 30 September 2016) and received €7,500 remuneration
(2015: €10,000).
During the year ended 31 December 2016, the Company sold equipment and other services for €651 (2015: nil) to Galbiga
Immobiliare Srl, a company under the control of Giulio Cesareo.
The following are deemed as related party transactions as the parties are shareholders and loan note holders. The loans were
settled in cash or shares on 27 May 2016 as part of the IPO, see note 21 for further details.
Shareholder
Date of loan
Principal
Interest in
2015
Interest repaid
in 2015
Loan
outstanding
31 December
2015
Interest in
2016
Loan
outstanding
31 December
2016
Finanziaria Le Perray
08/10/2014
500,000
40,650
–
547,046
Giuseppe Lazzaroni
08/10/2014
225,000
17,968
17,605
229,192
Finanziaria Le Perray
31/12/2014
525,219
42,018
Como Ventures
07/04/2015
100,000
5,896
Quadrivio Capital
02/04/2015
500,000
30,027
Quadrivio Capital
05/02/2015
166,667
12,055
Como Ventures
05/02/2015
18,518
1,340
–
–
–
–
–
567,237
105,896
530,027
178,722
19,858
17,421
7,299
18,400
3,409
17,058
5,737
637
–
–
–
–
–
–
–
28. Contingent Liabilities
The group has the following contingent liabilities relating to bank guarantees on operating lease arrangements and government
grants.
Operating leases
Total
29. Post Balance Sheet events
There have been no events after the reporting date that require disclosure after the reporting period.
2016
€
20,000
20,000
2015
€
20,000
20,000
62
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Annual Report and Accounts
for the year ended 31 December 2016
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Directa Plus plc
ComoNExT Science Park
Via Cavour 2, 22074 Lomazzo (Co)
Italy
www.directa-plus.com