Directa Plus Plc
3rd Floor
11-12 St. James’s Square
London
SW1Y 4LB
United Kingdom
www.directa-plus.com
Welcome to the
Graphene age
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Annual Report & Accounts 2018
Directa Plus
Annual Report & Accounts 2018
Directa Plus
Annual Report & Accounts 2018
Directa Plus in 2018
Discover how we are using graphene to help customers’
revolutionize the performance of their products.
Direct Plus is one of the largest producers and suppliers
worldwide of graphene nanoplatelets-based products for use
in consumer and industrial markets.
Our graphene nanoplatelets-based products are natural, chemical-free and
sustainably produced. Our production process is designed to meet large
supply chains' requirements for volume, cost and quality control.
By incorporating Directa Plus’ unique graphene blends, identified by
the G+ brand, our customers can revolutionize the performances
of their own end products in commercial applications such as
textiles, tyres, composite materials and environmental
solutions. We partner with our customers to enable
them to offer the high-performance benefits of
G+ in their own products.
Our company has a unique and patented
technology process and a scalable and portable
manufacturing model. We produce graphene
nanoplatelets-based products at our own
factory near Milan, Italy, and can set up
additional production at customer locations to
reduce transport costs, waste and time-to-
utilization. We are strongly committed to
environmental sustainability and abided by a strong
Code of Ethics in all aspects of our business practice.
Contents
01 Highlights
27 Directors’ remuneration report
02 Target market progress
29 Audit Committee report
03 At a glance
30 Remuneration Committee report
04 Chairman’s statement
31 Independent auditor’s report
06 Our strategy and business model
34 Consolidated statement of comprehensive income
08 Chief Executive Officer’s review
35 Consolidated and company statement of financial position
14 Market review
36 Consolidated statement of changes in equity
16 Chief Financial Officer’s review
36 Company statement of changes in equity
18 Directors’ biographies
20 Directors’ report
37 Consolidated statement of cash flow
38 Notes to the consolidated financial statements
23 Corporate governance report
IBC Directors, secretary and advisers
Directors, secretary and advisers
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
Richard Hickinbotham – Non-Executive Director
Company Secretary
Marco Ferrari
Registration number
04679109
Registered office
3rd Floor
11-12 St James’s Square
London SW1Y 4LB
United Kingdom
Principal place of business
Directa Plus Plc
ComoNExT Science Park
Via Cavour 2
22074 Lomazzo (Co)
Italy
Nominated adviser and broker
Cantor Fitzgerald Europe
One Churchill Place
Canary Wharf
London E14 5RB
United Kingdom
Joint broker
N+1 Singer
1 Bartholomew Lane
London EC2N 2AX
United Kingdom
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
Legal advisers
Fox Williams LLP
10 Finsbury Square
London EC2A 1AF
United Kingdom
Registrar
Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Financial PR adviser
Tavistock
1 Cornhill
London EC3V 3NR
United Kingdom
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Printed sustainably in the UK
by Pureprint, a CarbonNeutral®
company with FSC® chain
of custody and an ISO 14001-
certified environmental
management system recycling
over 99% of all dry waste.
Overview
Strategic Report
Governance
Financial statements
Additional information
Highlights
• We are a leading producer and supplier of branded G+ graphene based
products with strong commercial momentum
• Our production process and products are low cost and chemical free
• We use our G+ graphene to improve existing products, creating
next generation products for our customers with significantly
enhanced properties
• We aim to share in our customers’ growth via upfront licence fees and
royalty payments, rather than merely supplying an additive material
• We target Italian companies with international reach as a bridge to global
markets and collaborations to extend further into the value chain
Directa Plus
Annual Report & Accounts 2018
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Financial highlights
Product and service sales revenue
more than doubled to €2.25m
(2017: €0.95m).
Successful placing to raise €3.8m
in December, with €1.47m received
post period end.
€2.25m
€3.8m
Cash and cash equivalents at year end
of €5.50m (2017: €6.93m), increased
by placing proceeds of €1.47m received
in January 2019.
Total income (including grants)
also more than doubled to
€2.50m (2017: €1.23m).
€5.50m
€2.50m
02
Directa Plus
Annual Report & Accounts 2018
Target market progress
Textiles
• Workwear: new orders received from Alfredo Grassi
• Denim: new products launched with Arvind
• Ski wear: third collection launched with Colmar
• Cycling: launch of Aero Jersey with Oakley
• Luxury: new products to be developed with Loro Piana
Environmental
• Grafysorber® water treatment technology - moved into sales generation with integrated oil
and gas services provider GSP
• Successful conclusion of field trials with OMV Petrom with commercial negotiations underway
• Successful participation in PDO (Oman’s national oil company) Tier 2 Oil Spill Response Exercise
• Collaboration with Ambienthesis to investigate applications in remediation and
reclamation markets
Elastomers
• Strategic agreement signed with Marangoni to enter automotive markets with the cold
re-treading of bus and truck tyres
Composites
• Partnership with Iterchimica to use G+ products as an additive to extend the life and resilience
of asphalts on roads and exclusivity agreement with global luxury accessories producer
Corporate
• Significant new patents filed or granted covering flame retardant properties and elastomeric
formulae for tyres bringing the total number of patents to 18 granted and 23 pending
• CEO and Founder Giulio Cesareo joins the prestigious industry council of the US National
Graphene Association
• New 19% shareholder, California based Nant Capital, controlled by well-known medical,
science and media entrepreneur Patrick Soon-Shiong
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Directa Plus named a National Champion
for Italy in the 2016 European Business
Awards, in the ‘Environmental and
Corporate Sustainability’ category.
Recognising Directa’s innovation,
ethics and success.
Directa Plus's graphene-enhanced
fabrics, jointly developed with Colmar,
were recognised by FabricLink.com as
one of the Top 10 Textiles Innovations
for 2015/2016.
Top 10
Sustainable development award
at Ecomondo 2018 fair, recognised
for the most advanced companies
active in the green economy sector.
Green award
Overview
Strategic Report
Governance
Financial statements
Additional information
At a glance
Directa Plus
Annual Report & Accounts 2018
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Our graphene nanoplatelets-based products are natural, chemical-free
and sustainably produced. Our production process is designed to meet
large supply chains' requirements for volume, cost and quality control.
Our vision is to produce nanoplatelets-based products that are
natural, chemical-free and sustainable.
G+ Technology
Under our G+ brand, we offer a range of graphene nanoplatelets-based products – either
ready-to-use or custom-blended to meet customers' specific technical requirements.
Benefits of our products
• Chemical-free • Certified as non-toxic • High purity • Consistent quality
• Taylor-made particles shape • Abundant, safe and non-toxic raw material
4 target vertical markets
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Environment
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Textiles
Helping mainly Oil & Gas companies tackling
environmental emergencies of pollution.
Printing our nanoplatelets on fabrics, and enhanced
membranes for sports, city, jeans and workwear.
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Elastomers
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Composites
Reducing the rolling resistance, consumption, for all
road transport.
Reducing the weight and improving heat dissipation
for eyewear, brake pads and asphalts.
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Directa Plus
Annual Report & Accounts 2018
Chairman’s statement
Sir Peter Middleton
Chairman
I am pleased to be presenting the results of
a very successful year, which has seen the
Group gain significant commercial momentum
as we advanced our operational and strategic
targets, confirming our position as a leading
producer and supplier of graphene-based
products under our G+ brand. Our full year
revenue of €2.5m reflects this progress –
being more than double that of 2017.
This success has been due to the close working
relationships we strive to maintain with our
customers. A high degree of collaboration
allows us to find and develop the best methods
and applications for the use of G+ graphene
to enhance products in our key industrial
verticals: textiles; environmental improvement;
elastomers; and composites – alongside
customers’ designers and engineers.
Treating sales and product development as
part of the same ongoing process allows us to
gain our customers’ respect as a supplier and
manufacturing partner, which is particularly
important as a young company forging new
commercial relationships. In addition, this
partnership role allows us to establish Directa
Plus higher in the manufacturing value chain –
by moving closer to end users we are able
to better understand consumer demand
and capture a greater share of the profits
“We are creating a next generation of
products with significantly enhanced
properties for our customers. The best
and fastest route to commercial success
and profitability is to use G+ graphene to
improve existing products and processes.”
Overview
Strategic Report
Governance
Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018
05
than would be the case if we were simply
a commodity supplier.
We are creating a next generation of products
with significantly enhanced properties for our
customers, and the progress we have made
in each business vertical is detailed in the
Chief Executive’s Review.
To take a slightly wider view of our
commercialisation strategy – there are a
number of criteria we look for in identifying
the industries in which we want to operate and
companies with whom we want to partner.
In our view the best and fastest route to
commercial success and profitability is to use
G+ graphene to improve existing products
and processes, rather than trying to develop
entirely new categories. With this in mind,
we are seeking to target existing markets
with clear potential for substantial revenues
where products can be improved through
graphene applications.
Similarly, in potential partners we look for
leading international businesses with
significant global footprints who have the
capability to manufacture and deploy products
on a large scale. The potential benefits that this
can bring in terms of revenue are clear, but in
addition, working with some of the world’s
leading manufacturers in one sector gives us
significant additional credibility and exposure
when approaching new potential partners in
other sectors.
We can offer existing and potential partners,
as well as shareholders, firm guarantees
about the quality of our G+ graphene and
our environmental and sustainability
credentials. The Group’s G+ graphene
manufacturing capability uses proprietary
patented technology based on a plasma
super expansion process. Starting
from natural graphite, each step of
our production process – expansion,
exfoliation and drying – creates
graphene-based materials and hybrid
graphene materials ready for a variety
of uses and available in various forms
such as powder, liquid and paste.
This proprietary production process uses
heat, rather than a chemical process, to
process graphite into pristine graphene
nanoplatelets, which enables Directa Plus to
offer a sustainable, non-toxic product, without
unwanted by-products. As the process is low
cost and, crucially, scalable – we do not
foresee any issues in meeting customer
demand for our product.
At a corporate level I would like to welcome
new shareholders from our successful
capital raise in December and thank existing
shareholders for their support in this
fundraise. I would also like to welcome a new
shareholder, Patrick Soon-Shiong, who has
recently bought, including through his
controlled company Nant Capital, a 19%
shareholding in Directa Plus.
Finally, I would like to thank our leadership
team and our employees for their continued
hard work. Directa Plus is enjoying an
extremely exciting period of growth, with
rapid developments in a wide number
of areas, and the passion and energy that
is contributed throughout the business
is invaluable.
On behalf of the Board and myself I am
confident in saying that Directa Plus is
extremely well positioned for another year of
growth and development, and I look forward
to the Group’s future success.
Sir Peter Middleton
Chairman
16 April 2019
A high degree of collaboration allows
us to find and develop the best
methods and applications for the use
of G+ graphene to enhance products.
The G+ graphene manufacturing capability
uses proprietary patented technology based
on a plasma super expansion process.
06
Directa Plus
Annual Report & Accounts 2018
Our strategy
Welcome to the Graphene Age.
G+ Graphene is not just a material. It's a vision. Our vision.
It's the way we are changing everything in the world.
Our vision is for a world that is cleaner and healthier by producing
graphene products that not only are natural and chemical free but
help achieve this and enhance clients own products.
Directa Plus has developed a proprietary scalable, modular
manufacturing process to produce and supply high quality engineered
graphene materials – marketed under its ‘Graphene Plus’ (G+) brand –
which can be used by third parties in a wide variety of industrial and
commercial applications.
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Overview
Strategic Report
Governance
Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018
07
We seek to embed our products
first with Italian (and regional)
companies with large international
footprints to provide reference
customers, before rolling out
globally. The success of this
strategy can be seen in our progress
in the textiles and contaminated
water treatment markets.
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Brand
strength and
endurance
Operational
efficiency
®
Focused
and clear
direction
Flexible
approach
International
development
Financial
stability
+ Integrating our intellectual property into
new products allows our customers to
gain significant competitive advantage.
+ The commercialisation model we
follow is based on capturing for our
shareholders a proportion of customers’
additional revenues and profits.
+ This could be royalty payments, upfront
enabling licence payments, joint-ventures
to get closer to end-users or a combination
of all three.
+ As a company, we are committed to sharing
in the proceeds of customers’ growth from
new products, rather than merely supplying
an essential ingredient.
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Directa Plus
Annual Report & Accounts 2018
Chief Executive Officer’s review
Giulio Cesareo
CEO
Directa Plus saw another year of significant
progress during 2018, improving its position
in key markets and making strides in the
commercialisation strategy through new
products and partnerships, clear vision and
discipline in execution.
The two primary markets we focus on are
textiles and environmental, followed by
elastomers and composites. The majority of
the Directa Plus’ R&D resources are focused
on the two primary markets to develop the
next generation of G+ products to enhance
performance, while in elastomers and
composites, the goal of the Group is to
market the G+ products already engineered
for those markets.
Strategy and Business model
The Group is well placed to take advantage of
market momentum, leveraging on the unique
G+ graphene properties. By incorporating
Directa Plus’ unique graphene blends, identified
by the G+ brand, our customers can
revolutionise the performance, increase the
competitiveness and extend the life cycle of
their own end products.
Integrating our intellectual property into new
products allows our customers to gain
significant competitive advantage and as
outlined in the Chairman’s Statement, as a
Group, we are committed to sharing in the
proceeds of customers’ growth from new
“2018 has seen accelerating commercial traction with agreements and
collaborations signed, and orders received, for products to be delivered
over the next twelve months. We are gaining real, measurable commercial
traction and maintaining our technological and commercial lead over our
competitors, demonstrated by the number of products launched in our
customers' markets and by the number of agreements already signed
which are generating revenue. There is every reason to look forward
with great excitement to the coming year’s activity at Directa Plus
as we move forward on a number of extremely promising fronts.”
Overview
Strategic Report
Governance
Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018 09
products, rather than merely supplying an
essential ingredient. The commercialisation
model we follow is based on capturing for
our shareholders a proportion of these
additional revenues and profits. This could
take the form of royalty payments, upfront
enabling licence payments, joint-ventures
to get closer to end-users, or a combination
of all three.
We seek to embed our products first with
Italian (and regional) companies with large
international footprints proving the business
cases to provide reference customers, before
rolling out globally. The success of this
strategy can be seen in our progress in each
of our key sectors, where we have established
strong commercial advantage through
developing and launching products with
a technological lead:
+ Textiles, based on our G+ Planar
Thermal Circuit technology;
+ Environmental, based on our Grafysorber®
product for treating oil contaminated
water;
+ Elastomers, based on our G+ product
specifically engineered to enhance tyre
performances; and
+ Composite materials, based on our
G+ products specifically engineered to
enhance composite materials, mechanical
performances, and to improve asphalt’s
life cycle.
Expanded partnership
and product lines
Textiles
There are broad market applications for the
integration of G+ graphene products into
textiles across multiple segments, as our Planar
Thermal Circuit® revolutionises temperature
control for natural and synthetic fabrics, and
so for the end consumers of garments. These
benefits are delivered via our G+ printing
paste which can be printed on customers’
fabrics and via our graphene enhanced
membranes which can be laminated on
customers’ fabrics. Moreover, during the
period, a testing phase started with a major
world-wide membrane producer.
Our present subsectors of focus are workwear,
denim, sportswear and luxury goods, where
partners are already finding that G+ products
that are non-toxic, dermatologically tested
and hypoallergenic can significantly augment
their product ranges.
Alfredo Grassi
In July 2018, Alfredo Grassi S.p.A (Grassi),
placed an order with Directa Plus worth €0.70
million which we believe represents one of
the largest amount of textile material to be
treated with graphene nanoplatelets by any
company in the world to date.
This new order followed Grassi’s successful
public tender to provide workwear
incorporating G+ to an Italian government
agency. This is the second such tender to be
won by Grassi, having already supplied
G+-enhanced workwear to an Italian
state-owned company.
Workwear represents a significant target
market for the Group’s G+ technology and
in Italy alone there are approximately
250,000 law enforcement, fire and safety
and military personnel whose clothing
needs to be renewed every three years.
Directa Plus and Grassi continue to work
together to develop and market new
product lines in areas where Grassi is has
a commercial presence.
In October, we received two more orders for
the workwear market with an aggregate value
for Directa Plus of approximately €500,000 of
which €150,000 was delivered in FY18 and
€350,000 is expected to be delivered in this
financial year.
The Board remains excited about the future
opportunities that workwear business could
bring to Directa Plus on a global basis.
Arvind
It has been a pleasure to work closely with
Arvind Limited, India’s leading textile-to-retail-
and-brands conglomerate, since we signed
our first agreement covering textiles in May
2018, and in particular with the CEO of Arvind
Denims, Mr Aamir Akhtar.
Alfredo Grassi S.p.A, placed an order worth
€0.70 million representing one of the
largest amounts of textile material to be
treated with graphene nanoplatelets in the
world to date.
It has been a pleasure to work closely
with Arvind Limited, India’s leading textile-
to-retail-and-brands conglomerate, since
we signed our first agreement covering
textiles in May 2018.
€0.70 million
We received two more orders for the
workwear market with an aggregate value
for of approximately €500,000.
€500,000
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Directa Plus
Annual Report & Accounts 2018
Chief Executive Officer’s review continued
The May agreement set out an exclusive
collaboration, to infuse the high-performance
benefits of our graphene-based products into
Arvind’s denim fabrics. Arvind Denim
produces over 100 million metres of fabrics
and six million pairs of jeans per year, and
supplies a portfolio of brands that are
distinctive and relevant across diverse
consumers, including Cherokee, Excalibur,
Flying Machine, Gant, Levi’s, Nautica, Pierre
Cardin Paris, Tommy Hilfiger, and Wrangler.
Directa Plus’ G+ Planar Thermal Circuit
application can be printed directly onto
denim to significantly increase comfort via
heat dissipation, with additional benefits
including energy harvesting, data
transmission and a reduced odour effect.
Arvind and Directa Plus jointly launched the
world's first graphene enhanced G+ jeans,
shirt and jackets at the Kingpins Show in
Amsterdam in October 2018 – an invitation-
only denim conference and trade show
attended by all the key market players with
the objective of shaping the future of denim.
A further joint presentation entitled
‘Graphene Plus upgraded for Functional
Denim’ was given by both companies at the
Denim Première Vision event in London in
December 2018.
Directa Plus and Arvind believe that the ‘smart
denim’ that will result from the collaboration
will yield some of the most innovative,
widely-used fabrics in the denim market in
the years ahead.
Colmar
Colmar, the high-end sports and activewear
company launched its Winter 2018/19
collection, marking Colmar’s third skiwear
range with Directa Plus. The new collection
has been expanded to consist of 31 garments
incorporating G+, including male and
female ski jackets and, for the first time,
graphene-enhanced ski trousers. It follows
the commercial success of two previous ski
collections, as well as spring/summer garments.
Oakley
July saw the launch of a New Aero Jersey
enhanced with Directa Plus’ G+ graphene –
a first of its kind cycling garment. Designed
by Oakley®, in collaboration with Bioracer,
a designer and manufacturer of innovative,
customised clothing for cycling teams and
individuals, as well as for other sporting
activities. The Aero Jersey incorporates
our G+ planar thermal circuit to distribute
the heat generated by the cyclist’s body and
dissipates it when needed to significantly
improve the comfort of the wearer and
enable riders to use less energy to regulate
their body temperature. We are already
analysing with the Oakley’s innovation
team further potential development
and opportunities.
Environmental remediation
We established a number of key new
relationships in our environmental vertical
this year and demonstrated commercial
viability most clearly by moving beyond
proof of concept and testing into revenue
generation with one of our customers.
Our proprietary Grafysorber® technology
is a commercially-available graphene-
based solution for treating water
contaminated by hydrocarbons and is at
least five times more effective than current
technologies – adsorbing more than
100 times its own weight of oil-based
pollutants. In addition, Grafysorber® is
sustainably produced, non-flammable
and reusable, with the adsorbed
hydrocarbons recoverable.
Ambienthesis
The potential to expand our environmental
remediation processes beyond hydrocarbons
would add a new dimension to the vertical
and greatly expand the industries and
geographies we could service.
To that end we have signed a collaboration
agreement with Ambienthesis S.p.A. a
specialist in the reclamation, environmental
remediation and treatment, recovery and
disposal of hazardous and non-hazardous
waste, listed on the Milan Stock Exchange.
Our proprietary Grafysorber® technology is
a commercially-available graphene-based
solution for treating water contaminated by
hydrocarbons and is at least five times more
effective than current technologies.
Colmar’s new collection has been expanded
to consist of 31 garments incorporating G+,
including male and female ski jackets and,
for the first time, graphene- enhanced
ski trousers.
July saw the launch of a New Aero Jersey
enhanced with Directa Plus’ G+ graphene –
a first of its kind cycling garment. The Aero
Jersey incorporates our G+ planar thermal
circuit to distribute the heat generated by
the cyclist’s body.
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Additional information
Directa Plus
Directa Plus
Annual Report & Accounts 2018
Annual Report & Accounts 2018 11 11
Phase One of the agreement consists of the
testing of products, plants and services, using
the Group’s G+ graphene products for the
remediation of soil and groundwater and
industrial waste waters at Ambienthesis’ plant
in Orbassano, Turin. The testing will start in
the first half of 2019 and will take place using
a mobile treatment plant provided by Directa
Plus, specifically engineered for the project.
The outcome of Phase One will then define
the basis of a potential commercial agreement
between the parties as the second phase of
the process. In line with our strategy, the
collaboration with Ambienthesis allow us to
prove a new business case in the environmental
area that could be replicated and open very
important commercial opportunities.
GSP
GSP is an integrated services provider to the
Oil & Gas industry, with a global presence.
It operates a diversified fleet which includes
mobile offshore drilling rigs, offshore support
vessels, construction vessels, heavy lift
crane barges, ROVs and a Saturation Diving
System. In November we announced the
signing of a €200,000 contract to supply
GSP with a graphene-based Grafysorber®
mobile production unit and a set of G+ oil
adsorption barriers.
The first sale of our Grafysorber® technology
for environmental remediation represents
a significant development for Directa Plus.
We are committed to developing both new
products and processes to capture significant
revenue from the value chain and this contract
is a key indicator of the potential of the vertical.
OMV Petrom
Industrial field testing of Grafysorber® was
successfully completed in April last year at an
oil treatment plant operated by OMV Petrom,
a leading Romanian integrated Oil & Gas company
and one of the largest in Southern Europe.
Elastomers
As demonstrated through our activity on cycle
tyres, the incorporation of G+ is expected
to materially enhance the performance of
retreaded automotive tyres by increasing
grip, durability and fuel efficiency as well as
extending lifespan and addresses a much
larger market. We are strengthening our
business relationship with the main players
in the tyre industry to commercially exploit
the unique properties G+, leveraging on
Directa Plus’ IP.
The purpose of the field tests was to trial the
ability of Directa Plus – Grafysorber®, which
was used in a dedicated treatment facility
on an OMV Petrom site to remove petroleum
hydrocarbons from produced water and
sludges. We are now in the final negotiation
phase with OMV Petrom for a multi-year
commercial agreement for our water
treatment solutions.
PDO
In December we successfully participated in
a Tier 2 Oil Spill Response Exercise undertaken
by Petroleum Development Oman, the
leading exploration and production company
in the Sultanate of Oman.
The Gulf Region is a key area for the further
development of our environmental business
based on the Grafysorber® product, and so
this represents an important opportunity.
Marangoni
A strategic agreement with Marangoni S.p.A.,
signed in April 2018, allows us, thanks to the
unique properties of the G+ based product,
to improve the performance of Marangoni
compounds in truck and bus tyre retreading.
On November 2018 G+ enhanced rings have
been mounted on bus tire and installed on
Milan ATM bus for field test; results of G+
tread durability versus reference are expected
by June 2019. In the meanwhile the
technical teams are working on an industrial
assessment of the project with the goal
to optimize all the relevant aspects of the
G+ re-treading process – production process,
tread design, formulation fine tuning, to
be ready for industrial production by the
end of 2019.
Based in Italy, Marangoni is an international
group with 10 production facilities and 1,300
We announced the signing of a €200,000
contract to supply GSP with a graphene-
based Grafysorber® mobile production
unit and a set of G+ oil adsorption barriers.
€200,000
The incorporation of G+ is expected to
materially enhance the performance
of retreaded automotive tyres by increasing
grip, durability and fuel efficiency as well as
extending lifespan.
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Directa Plus
Annual Report & Accounts 2018
Chief Executive Officer’s review continued
employees worldwide and is the market
leader in the supply of technologies and
materials for the cold retreading of truck and
bus radial tyres.
The value of the exclusivity and the
development agreement, ahead of entering
into an anticipated commercial contract,
amounts to approximately €130,000 in 2018.
Composites
The applications for composite materials are
extremely broad and encompass a huge array
of products providing a clear example of
the benefits we can derive through entering
the market via partnerships with existing
large companies.
At present we are working on two main
partnerships in the composites space – one
with a global luxury accessories provider and
another with Iterchimica S.p.A. one of the
largest Italian companies in the field of
additives for asphalt and paving technologies.
Fashion accessory producer
In April 2018, we entered into a 12-month
exclusivity agreement and nine-month
development agreement with an existing
customer, a global luxury accessories
producer, to produce accessories with
increased mechanical properties derived
from our G+ graphene-based products.
Directa Plus has commenced work with the
client at our Advanced Development Area
facility, which has the added benefit of
reducing the time it will take to bring the
product to market.
Iterchimica
In partnership with Iterchimica we can report
that we have laid the first road surface in the
world with a supermodifier containing
graphene, on a section of Rome’s Strada
Provinciale Ardeatina – a famously busy route.
This real-world application is part of a
commercial test of Ecopave – based on
Directa Plus’s graphene product – Ecopave
has been developed by Directa Plus with
Iterchimica, to provide better roads, that are
more sustainable and with less maintenance
needs, with consequent benefits for public
authorities, citizens and general contractors.
Ecopave materially increases the surface's
physical and mechanical performance by
increasing resilience to deformation and by
decreasing sensitivity to variations in ambient
temperature. Successful laboratory tests
showed that Ecopave can increase fatigue
resistance up to 250 per cent, extending
significantly the service life of the road surface
at a lower life cycle cost than existing tarmacs.
Additionally, once laid, Ecopave can be
100 per cent recycled which can reduce the
extraction of new materials from quarries
and first-use bitumen.
Test results received and disclosed post
period end have proven the unique
properties of Ecopave, exceeding the
expectations. We are very confident on future
market opportunities and conversation are
ongoing with players in UK, USA and Oman.
Intellectual Property
Expanding and protecting our intellectual
property is rightly a central element of our
commercial strategy since the Directa Plus’
foundation. We are at the forefront of the
commercialisation of graphene and at the
year end had 18 patents granted with an
additional two granted post period end and
23 patents pending (plus 1 filed post period)
in respect of our G+ technology covering
process, applications and products.
Significant new patents this year cover
flame retardant compositions of G+ without
the addition of toxic chemicals and G+
elastomeric compositions for tyres.
Post period
Our senior management team has significant
experience of operating in the United States
and our reputation in this important market
continues to grow. This was illustrated by my
joining the influential and prestigious
We entered into a 12-month exclusivity
agreement with a global luxury accessories
producer, to produce accessories with
increased mechanical properties derived
from our G+ graphene-based products.
In partnership with Iterchimica we
have laid the first road surface in the
world with a supermodifier containing
graphene, on a section of Rome's
Strada Provinciale Ardeatina.
Expanding and protecting our intellectual
property is a central element of our
commercial strategy. At the year end we had
18 patents granted and 23 patents pending.
World 1st
18 patents
Overview
Strategic Report
Governance
Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018 13
be able to improve industrial layout to
increase production efficiency, driving
industrial margin.
As a company we always value practice over
theory, recognising that in a fast-evolving
future there will be a higher cost waiting and
planning than doing.
There is every reason to look forward with
great excitement to the coming year’s activity
at Directa Plus as we move forward on a
number of extremely promising fronts.
Guilio Cesareo
Chief Executive Officer
16 April 2019
Industry Council of the US National Graphene
Association in February of 2019. Moreover,
I will take part in the “Graphene on Capitol
Hill” event keynoted by senator Roger Wicker,
chairman of the Senate Commerce
Committee, on May 22nd 2019 in Washington
D.C. Representatives from the Department
of Defense (DOD), Department of Energy
(DOE), National Aeronautics and Space
Administration (NASA), and Economic
Development Administration (EDA), as well
as state legislators, members of the Congress,
and international dignitaries will be in
attendance to discuss invigorating graphene-
focused collaborations between business
and government in the national and
international verticals.
I relish the opportunity to contribute to what
is likely the world’s leading forum on the
development of graphene and its use in an
increasing number of products.
The arrival of Dr. Patrick Soon-Shiong as a
new shareholder is a significant endorsement
for Directa Plus. Going forward we intend
to explore any potential synergy with his
company Nant to penetrate the US market
to support G+ graphene momentum.
Finally, I would also like to note an exclusivity
agreement signed with Loro Piana for the
commercialisation of fabrics and garments
enriched by our G+ technology. Loro Piana
is one of the world’s most renowned fabric
manufacturers and it is a real privilege to be
able to work together. The agreement is on
a worldwide basis with an initial duration of
three years for a minimum value of €800,000.
Outlook
2018 has seen accelerating commercial
traction with agreements and collaborations
signed, and orders received, for products to
be delivered over the next twelve months.
We are gaining real, measurable commercial
traction and maintaining our technological
and commercial lead over our competitors,
demonstrated by the number of products
launched in our customers’ markets and by
the number of agreements already signed
which are generating revenue.
We have increasingly well-established
relationships in all of our key target verticals:
textiles; environmental remediation
industries; elastomers; and composites
verticals, with a number of globally
recognised corporate leaders. Pleasingly, our
commercialisation strategy of adding value
and capturing value in the supply chain is
working well – helping to strengthen our
relationships with our customers.
As result of the continuous improvement
project called “Throughput Project” we will
Exclusivity agreement signed with
Loro Piana, one of the world’s most
renowned fabric manufacturers, for the
worldwide commercialisation of fabrics and
garments enriched by G+ technology.
€800,000
We have increasingly well-established
relationships in all of our key target verticals:
textiles; environmental remediation
industries; elastomers; and composites
verticals, with a number of globally
recognised corporate leaders.
As result of the continuous improvement
project called “Throughput Project”
we will be able to improve industrial
layout to increase production efficiency,
driving industrial margin.
14
Directa Plus
Annual Report & Accounts 2018
Market review
Our graphene nanoplatelets-based products are natural, chemical-free
and sustainably produced. Our production process is designed to meet
large supply chains’ requirements for volume, cost and quality control.
Our vision is to produce nanoplatelets-based products that are natural,
chemical-free and sustainable.
By incorporating Directa Plus’ unique graphene blends, identified by the
G+ brand, our customers can revolutionize the performances of their own
end products in commercial applications such as textiles, tyres, composite
materials and environmental solutions. We partner with our customers
to enable them to offer the high-performance benefits of G+ in their
own products.
Our company has a unique and patented technology process and a scalable
and portable manufacturing model. We produce graphene nanoplatelets-
based products at our own factory near Milan, Italy, and can set up
additional production at customer locations to reduce transport costs,
waste and time-to-utilization.
We are strongly committed to environmental sustainability and abided
by a strong Code of Ethics in all aspects of our business practice.
H
o
w
w
e
d
o
i
t
Directa Plus has received ISO 9001:20015
accreditation for the production and
commercialisation of pristine graphene
nanoplatelets and graphene-based
products of different morphologies.
Directa Plus gets REACH registration from
the Graphite Consortium for exports
between 10 and 100 tonnes and the
chemical-free process for GNPs production.
REACH
Overview
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Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018
15
2
6
e
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p
o
y
e
e
s
l
G+ Technology
Patented, modular process
Under our G+ brand, we offer a range of graphene
nanoplatelets-based products – either ready-to-use
or custom-blended to meet customers’ specific
technical requirements.
Benefits of our products:
+ Chemical-free
+ Certified as non-toxic
+ High purity
+ Consistent quality
+ Taylor-made particles shape
+ Abudant, safe and non-toxic raw material
Our production process uses a unique technique we
call Plasma Super Expansion. Starting from natural
graphite, each step of the process – expansion,
exfoliation and drying – creates graphene
nanoplatelets-based materials ready for a variety
of uses and available in different forms such as
powder, liquid and paste.
Our production process produces a highly consistent
graphene nanoplatelets product – an important
factor for commercial customers – and does not
need any chemical or solvent additives.
Tailor-made for customer needs
Scalable, portable production
When used in consumer and industrial applications,
G+ enables end-products to perform better while
remaining affordable.
We partner with customers to develop bespoke
graphene blends that have just the right morphology
for their particular application. We produce the
precise ingredient to make our customer’s product
stand out from the competition.
Our factory near Milan can produce industrial
quantities of graphene nanoplatelets-based
products each year to supply large supply chains.
In addition, we can set up production directly at
customer locations, thus adding scalable
capacity and reducing transport costs, waste
and time-to-utilization.
Directa Plus is the first company in the
world in its field to have conducted,
and published the results of a series
of toxicology screening tests to
independently certify the non-toxicity
and non-cytotoxicity of its products.
World 1st
16
Directa Plus
Annual Report & Accounts 2018
Chief Financial Officer’s review
Key Performance Indicators
The Board measures the performance of the
Group through a number of important financial
and non-financial KPIs. In a young business with a
number of client verticals, identifying measurable
data that will provide useful insight year-on-year
is not always straightforward but the KPIs below
should help shareholders understand the Group’s
progress. Our financial KPIs show significant
improvement compared to 2017.
The table below summarises the KPIs with further
details contained later in my report:
Financial Review
Total Income increased by 108% to €2.5 million
(2017: €1.2 million).
Revenue from product and service sales grew by
137% to €2.25 million (2017: €0.95 million) with
the increase coming mainly from higher revenue
in our textiles segment to €1.66 million (2017:
€0.77 million).
Other income, which mainly includes grants and
R&D Expenditure Credit (RDEC) received by the
Group, was €0.25 million (2017: €0.28 million).
RDEC is an Italian government incentive scheme
designed to encourage companies to invest in
R&D by providing a tax credit and accounted for
€0.10 million (2017: € 0.08 million).
Income from Government grants was driven
by grants that are directly supporting key
Revenue from product and
service sales €2.25m.
137%+
Marco Ferrari
Chief Financial Officer
“I am pleased to present the results of what
has been another busy and important year
for the Group. We have continued to shape
and improve the finance team, focusing our
activities on accuracy, timing and efficiency
of the internal reporting to support our
commercial and strategic decision making.”
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Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018 17
development activities, namely the GRATA
textiles project and the Eco Pave asphalts
project, as described in the CEO review,
which accounted for €0.06 million (2017:
€ 0.03 million) and €0.07 million (2017: 0.04
million) respectively.
The EBITDA loss for the period was in line
with management expectation and was
slightly higher at €3.24million compared with
a €3.16 million loss for 2017, primarily due to
increased raw materials and consumables
costs, and a change in the inventory that
partially offset the increase of the top line.
Over the period, we remained focused on
improving the value captured within the
textile supply chain and managing
relationships and agreements with clients
and suppliers, to lay the foundations
for improving margins in the next future.
The loss after tax for the year was flat at €3.96
million compared with €3.95 million for 2017.
This reflects both the increase in revenue and
higher expenditure on raw materials, and
changes in inventories and other expenses.
Across the Group we have continued to invest
in new equipment and technology. We
invested €0.12 million (2017: €0.34 million)
related mainly to the purchase of industrial
equipment to improve our manufacturing
process. Moreover, laboratory equipment to
support the development of applications,
particularly in our textile and environmental
markets, were also acquired during the
period. Investment in intangible assets of
€0.21 million (2017: €0.12 million) mainly
related to capitalised development costs and
IP activity.
As at 31 December 2018, inventories totalled
€0.86 million (2017: €1.0 million), ensuring that
Directa Plus can supply key clients in a timely
manner as it receives increasing orders.
In the short term the Group’s priorities
continue to focus on the reduction in cash
consumption and improvement in profitability.
Cash and cash equivalents at 31 December
2018 were €5.5 million (2017: €6.9 million)
with the reduction principally due to:
+ increased cash outflow from operating
activities totalling €3.0 million (2017:
€2.8 million);
+ modest investments in tangible and
intangible assets of €0.3 million (2017:
€0.5 million) for reasons set out above; and
Capital Raise
The capital raise was undertaken between
December 2018 and January 2019 raising the
total gross amount of £3.45 million, with the
Company’s joint brokers Cantor Fitzgerald
Europe and N+1 Singer responsible for
placing the shares. The capital raise consisted
of a placing and an open offer.
The placing of 6,300,000 new Ordinary Shares
issued at price of 50 pence per share raising
gross proceeds of £3.15 million was divided
in two steps:
+ a Firm Placing on 17 December 2018 raising
£2.13 million (gross), through the placing of
4,256,000 ordinary shares with a nominal
value of £0.0025 each, to be reported in
FY18 accounts. Proceeds of capital raise
are reported in Euro and are equal to €2.37
million of gross proceeds and €2.14 million
of net proceeds; and
+ cash in from financing activities equal to
+ a post period end Conditional placing
€2.0 million (2017: expense of €0.3 million)
which includes borrowing repayments,
interest costs and the Firm Placing
undertaken in December 2018 and
concluded in January 2019, of which
the details of which are set out below.
(being subject to shareholder approval at
general meeting) settled on 9 January 2019
raising£1.02 million (€1.14 million) equal
to 2,044,000 ordinary shares with a nominal
value of £0.0025 each with the proceeds
to be shown on the 2019 balance sheet.
Details about Patents granted are covered
in the CEO’s statement.
A description of the principal risks and
uncertainties facing the Group is included
within the Directors’ Report.
KEY PERFORMANCE INDICATORS 2018 2017
Revenue from product and service sales (€’m) 2.25 0.95
Total Income* (€’m) 2.50 1.23
EBITDA** (€’m) (3.24) (3.16)
Loss after tax (€’m) (3.96) (3.95)
Reported basic loss per share (0.09)p (0.09)p
Cash and cash equivalents*** (€’m) 5.50 6.93
margin; and
Total number of patents granted 18 15
+ maintain competitive advantage and
barriers to entry.
* Total Income comprises revenue from product and service sales (€2.25m), and other income including
government grants (€ 0.13m) and RDEC and other income (€0.12)
** EBITDA represents results from operating activities before depreciation and amortisation of €0.67m
(2017: €0.63m). This is a non-GAAP measure. Management decided to use EBITDA to provide a clearer
reflection of operations by stripping out interests, tax, depreciation and amortization.
*** Before receipt of £1.32m (€1.47m) following completion in January 2019 of the Conditional Placing
and Open Offer announced in December 2018
Marco Ferrari
Chief Financial Officer
16 April 2019
The post period Open Offer in early January
2019 in which shareholders were invited to
participate raised an additional £0.30 million
(€0.33 million) that will be shown on the 2019
balance sheet.
The funds will help sustain the Group until we
reach cash flow break-even, and specifically
the Board intends to use the proceeds of the
Placing to:
+ exploit commercial opportunities across
a developing pipeline;
+ build sales and marketing reach;
+ develop the next generation of higher
performing products;
+ improve industrial layout to drive industrial
18
Directa Plus
Annual Report & Accounts 2018
Directors’ biographies
Sir Peter Middleton
Non-Executive Chairman
Relevant strengths
•
Track record and credentials in
financial markets
•
•
Deep financial expertise
Corporate governance and
investors relations
Giulio Cesareo
CEO and Founder
Marco Ferrari
Chief Financial Officer
Relevant strengths
•
Industry knowledge and credentials
Relevant strengths
•
Financial reporting and accounting
•
•
Strategic & Business expertise
Engineering expertise
•
•
Growing businesses and funding
M&A and business planning
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
Accounting, Finance and Control from
Università Commerciale ‘Luigi Bocconi’.
Marco is member of the Corporate
Finance Committee of the ANDAF – Italian
national association of accounting and
finance directors.
Sir Peter Middleton GCB is Chairman of Burford
Capital. 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.
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 business 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 worldwide Advanced Carbon and Graphite
business unit. In his role at Union Carbide,
Giulio managed business units in USA, France
and Italy. Giulio is Advisory Board member
and member of the Industry Council of the
US National Graphene Association. 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 focused 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.
Overview
Strategic Report
Governance
Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018
19
David Gann
Non-Executive Director
Relevant strengths
•
Innovation management
•
•
Business strategy
Engineering expertise
Neil Warner
Non-Executive Director
Richard Hickinbotham
Non-Executive Director
Relevant strengths
•
Financial reporting and accounting
Relevant strengths
•
Deep understanding of AIM markets
•
•
Growing businesses and M&A
Corporate governance
•
Investor relations and financial
communication
•
Growing businesses and funding
Richard Hickinbotham is an experienced City
professional and Head of Equity Research
at N+1 Singer, having served previously as
Head of Equity Research at Cantor Fitzgerald
Europe and Charles Stanley. He has also
held a number of senior positions at Investec,
including Global Head of Research and
Co-Head of UK Investment Banking and as
Head of Pan-European Small and Midcap
Research at S.G. Warburg & Co. (acquired by
UBS). Richard is a non-executive director of
AB Dynamics Plc where he is chairman of the
nomination committee and a member of
the audit and remuneration committees.
Richard holds a BSc. in Mechanical
Engineering from Imperial College and is
a qualified Chartered Accountant.
Neil Warner has strong financial and
managerial experience in multinational
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 Chairman, UK Atomic Energy
Authority. He is Professor of Innovation &
Technology Management, Imperial College
London and was 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 has a PhD in Industrial
Economics and 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 senior
government advisor. His industrial experience
includes serving as Laing O’Rourke plc’s Group
Executive for research and innovation
between 2007 and 2011. He advises executives
and boards on innovation and technology
management, including Citigroup, IBM,
McLaren, NEC and Tata Group.
®
20
Directa Plus
Annual Report & Accounts 2018
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 Group’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 Group’s main country of operation and place of business is Italy
and its registered office address is 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 2018, 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 4 to 17 (The Strategic Report), and in
this Directors’ Report. Post balance sheet events are reported in note 27.
Dividends
The Directors’ current intention is that for the foreseeable future, all
future earnings of the Group 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’ indemnity
The Company has arranged appropriate directors’ and officers’
insurance to indemnify the directors against liability in respect of
proceedings brought by third parties. Such provisions remain in
force at the date of this report.
Directors
The following Directors held office as indicated below for the year
ended 31 December 2018 and up to the date of signing this report:
•
•
•
•
•
•
Giulio Giuseppe Cesareo
Sir Peter Middleton
Marco Ferrari
David Michael Gann
Neil William Warner
Richard Hickinbotham
Directors’ remuneration and interests
The Directors’ Remuneration Report is set out on pages 27 to 28.
It includes details of Directors’ remuneration, interests in the ordinary
shares of the Company and share options.
Corporate governance
The Chairman’s Corporate Governance Statement is set out on pages
23 to 26.
Share capital and substantial shareholdings
Details of the share capital of the Company as at 31 December 2018
are set out in note 18 to the consolidated financial statements.
At 7 February 2019, a total of 51,116,436 ordinary shares were
outstanding. The following Shareholders own 3% or more of the
ordinary shares:
Percentage of
Number of issued ordinary
Shareholder ordinary shares share capital
Nant Capital/ Patrick Soon-Shiong 9,688,440 18.95
Dompè Group 6,926,666 13.55
Unicorn Asset Management 4,800,000 9.39
Dr. Jean Marc Droulers /
Finanziaria Le Perray * 4,093,794 8.01
Galbiga Immobiliare S.r.l.** 3,448,791, 6.75
Ruffer 2,216,500 4.34
Schroders Investment Management 2,000,000 3,91
* Finanziaria Le Perry S.p.A. is a company owned and controlled by Dr. Jean Marc Droulers.
** Galbiga Immobiliare S.r.l. is a company owned and controlled by Giulio Cesareo,
the CEO of Directa Plus.
Risk management
The Group’s financial risk management is discussed in note 22 to the
financial statements. The Directors continually considers how to
identify and mitigate the key business risks. The following list considers
those could have a serious adverse impact on Group’s performance.
The Group’s policies, procedures and practices used to identify,
monitor and control a variety of risks may, in some cases, not be
effective. The Group’s risk management methods rely on a combination
of internally developed technical controls, standard practices,
observation of market behaviour and human supervision.
Overview
Strategic Report
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Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018
21
Risk
Mitigation and management strategy
Likelihood*
Impact (on
the Group)**
Change***
Likely
Limited to
Moderate
↑
Newsflow about Brexit is constantly
monitored as well as the movement of the
EUR-GBP exchange rate. On average more
than 50% of cash and cash equivalent are
held in Euro to be used on Euro denominated
costs and expenses. Cash and cash equivalent
in Sterling are held to be used on Sterling
denominated costs and expenses.
Directa Plus continually monitors the market
and its competition and has resources to
invest in technological development and
product development as appropriate.
Possible
Critical
Possible
Major
The Group monitors scientific papers, news
flow and graphene products brought to the
market as far as reasonably possible and will
take cost-effective legal action if required. The
Group is advised by suitably qualified and
experienced patent agents and meetings with
the patent agents are scheduled regularly.
Risks is mitigated by providing share options
to key employees, building a motivated
management team, together with significant
opportunities for carrier development.
Possible
Major
Risk is mitigated by maintaining good
relationships with the Group’s main
shareholders.
Possible
Major
→
→
→
→
Brexit
Directa Plus holds Sterling bank accounts.
The “hard Brexit” or “no deal” could have a
potential impact on currency risk, triggering
sharp movement on Sterling value with an
effect on Directa Plus’ P&L.
Technological risk
Directa Plus operates in an industry where
competitive advantage has a certain
dependency on the technology adopted.
It is possible that future technological
development or potential substitute
materials may affect the acceptance of,
and the attribution of value to the Group’s
graphene production technology and
Group’s graphene based products.
Intellectual property protection risks
Failure to protect the Group’s IP may result in
another party copying, using or taking
advantage from Group’s proprietary content
and technology without authorisation. There
may not be adequate protection for IP in
every country in which the Group’s products
are or will be made available.
Key employees risks
The Group depends upon the continued
service and performance of the Executive
Officers and key employees. The loss of the
services of any of Executive Officers or other
key employees could have an adverse impact
on the Group’s operations, reputation and
business activities.
Funding risk
The Group’s growth requires access to
funding. It is possible that the Group will
need to raise extra capital in the future to
continue to develop the Group’s business or
to take advantage of future acquisition
opportunities. No assurance can be given
that any such additional financing will be
available or that, if available, it will be
available on terms favourable to the Group
or to the Group’s shareholders.
* Unlikely, Possible, Likely, Certain
** None, Minor, Moderate, Major, Critical
*** Defines the direction on the change in the risk: risk increased (↑), risk decreased (↓), no change (→)
®
22
Directa Plus
Annual Report & Accounts 2018
Directors’ report
continued
Annual General Meeting
The notice for the convening of the AGM 2019 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 Group and Company and of the profit or loss of
the Group for that 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:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether they have been prepared in accordance with IFRSs as
adopted by the European Union, subject to any material departures
disclosed and explained in the financial statements; and
•
•
•
•
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.
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue
in business.
By order of the Board
16 April 2019
Website publication
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.
Overview
Strategic Report
Governance
Financial statements
Additional information
Corporate governance report
Directa Plus
Annual Report & Accounts 2018
23
Chairman’s corporate governance statement
The Board of Directa Plus Plc (the “Company”) fully supports good corporate governance and recognises that it enhances
its decision-making processes by improving the success of the Company and increasing shareholder value over the
medium to long-term. The Quoted Companies Alliance corporate governance code (the “QCA Code”) sets out a minimum
best practice standard for small and mid-sized quoted companies, particularly AIM companies. The Company complies
with the QCA Code and the Directors propose that the Company should continue to do so having regard to the Company’s
size, board structure, stage of development and resources. There have been no significant changes in governance
arrangements during the 2018 financial year.
A review of the Company’s culture, how it is consistent with the company’s objectives, strategy and business model
will be reviewed during the 2019 financial year. Compliance with each of the principles set out in the QCA code is
summarised in this section.
Role of the Chairman
The Board as a whole is responsible for effective corporate governance.
As Chairman of the Board, I have overall responsibility for the
corporate governance arrangements of the Company in addition to
ensuring that corporate governance arrangements are fully adopted
within the Company.
In addition, my role as Chairman is to lead the Board, ensuring its
smooth running and the effective contribution of all Board members.
Strategy and business model
The Company’s business model, strategy and key markets are set out
in the Chief Executive Officer’s review on pages 8 to 13.
Relations with shareholders
The Chief Executive Officer and Chief Financial Officer are responsible
for shareholder liaison and have regular dialogue with institutional
investors in order to develop an understanding of their views.
Meetings with analysts and institutional shareholders of the Company
take place following the interim and annual results announcements as
well as on an ad hoc basis. These presentations are given by the Chief
Executive Officer and the Chief Financial Officer, updating on relevant
matters and in particular, on the progress of the Company in terms of its
operational performance, financial and strategic direction.
The Annual Report and accounts are published on the Company’s
website, www.directa-plus.com, and can be accessed by shareholders
and non-shareholders. Shareholders have the opportunity to meet
members of the Board at the Annual General Meeting of the Company
where Board members will be happy to respond to questions.
The Board believes that its current approach to shareholder
engagement is successful, based on the feedback received and the
Proactive Investor interviews publicly available. In addition, as
Chairman, I remain available to talk to shareholders whenever required.
Stakeholder and social responsibilities
The Board considers its key stakeholder groups to include:
•
•
•
•
workforce – we are a responsible employer, compliant with relevant
human resources legislation and recommended practices, as well as
Health, Safety and Environmental Protection regulations;
customers – deep and wide relationships with our customers are
crucial for the success of our business in developing novel solutions
with our customers and in developing their next generation of products;
suppliers – we aim to develop strong relationships with our suppliers
based on trust, understanding and respect; and
partners – we engage with commercial and scientific partners and
we work with them to develop new applications, building strong and
long-lasting relationships.
The Company obtains feedback from stakeholder groups by way of:
•
•
•
•
informal meetings and consultation with employees’ representatives,
and reports received through the Group’s Whistleblowing policy;
regular meetings with main suppliers and undertaking a formal
assessment at least once a year;
formal survey sent at least once a year to the main customers to
assess our level of service; and
maintaining a social media presence in order to understand the
sentiment of and obtain feedback from the our stakeholders.
The Company has always considered the health and safety of people
and environmental protection as top priorities. We take a proactive
approach to health, safety and environmental protection by monitoring
our production process and products and continuously reviewing our
policies, so they are in line with the latest research on nanomaterials.
Further information about the Company’s approach to sustainability is
set out in the Health, Safety and Environmental Protection section of
the Company’s website.
®
24
Directa Plus
Annual Report & Accounts 2018
Corporate governance report
continued
Risk management
The Directors are responsible for establishing and maintaining the
Company’s system of internal control and reviewing its effectiveness.
Page 21 set out the Company’s approach to risk management and
lists those risks which are considered to have a serious adverse
impact on the Company’s performance.
Page 26 includes additional information about the Company’s
internal control system.
The Board
The primary function of the Board is to provide effective leadership
and direction to enhance the long-term value of the Company to its
shareholders and other stakeholders. The Board has overall
responsibility for reviewing the strategic plans and performance
objectives, financial plans and annual budget, key operational
initiatives, major funding and investment proposals, financial
performance reviews, and corporate governance practices.
The Chief Executive ensures that the Directors’ knowledge is kept up to
date on key issues and developments pertaining to the Group, its
operational environment and to the Directors’ responsibilities as
members of the Board. During the course of the year, Directors received
updates from the Company Secretary and, if required, from external
advisers on a number of corporate governance matters.
The Board keeps under review the skills required to effectively
pursue the Company’s strategy and discharge its duties. The Chief
Financial Officer is also Company Secretary; the Board does not feel
that a full time Company Secretary is currently required but will keep
this under review.
Board performance
The Board continually reflects on its performance to identify potential
areas for improvement. In March 2019, the Board undertook a formal
performance review through a questionnaire distributed to the Board
members. Results, once reviewed, will be timely disclosed on the
corporate website.
Ethical values and behaviours
The Board is committed to ensuring the highest legal and ethical
standards and acknowledges its responsibilities in relation to
corporate governance.
The Board has produced an Ethical Code which aims to ensure that
the Company’s employees conduct themselves respectfully and
honestly in all their dealings with other employees as well as third
parties including clients, suppliers, public institutions, the media,
competitors and legal authorities.
The Board consists of two executive Directors and four non-executive
Directors. The Board considers all the non-executive directors to be
independent.
Governance structure and processes
Delivering growth and long-term shareholder value with effective and
efficient decision-making is of high importance to the Board.
The number of meetings attended by the Board are disclosed on
page 25.
Directors
The Directors continue to remain satisfied that the Board is well
balanced and that the Directors possess the sufficient breadth of skills,
relevant experience, variety of backgrounds and knowledge to ensure
the Board functions appropriately, without being dominated by any
one Director. Details of qualities and capabilities that each director
brings to the Board are added in the director biography section.
The Board acknowledges that there are currently no appointed Female
Directors, however, it will continue to review this moving forwards.
Moreover diversity will be strongly considered in further recruiting
process ensuring the appropriate balance of the Board is developed.
Full biographies of each Director can be found on pages 18 and 19.
There is a clear division of responsibilities between the Chairman, who
is responsible for the effective leadership and smooth running of the
Board, and the Chief Executive Officer who, with the other Executive
Director, is responsible for the running of the Company.
The Company has established an Audit Committee and a Remuneration
Committee. Both committees meet at least twice a year. Details of both
committees and a report of the activities undertaken during the 2018
financial year can be found on pages 29 and 30.
Board
The Board consists of two executive Directors and four non-executive
Directors. The Board considers all the non-executive directors to be
independent. The current members of the Board and their membership
on the Board committees of the Company are as follows:
Overview
Strategic Report
Governance
Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018
25
Board committees as
Board appointments Chairman or member
Non- Non-
Executive executive Independent independent Audit Remuneration
Name of Director director director director director Committee Committee
Sir Peter Middleton 3 3 – –
Giulio Giuseppe Cesareo 3 – –
Marco Ferrari 3 – –
David Michael Gann 3 3 Member Member
Neil William Warner 3 3 Chairman Member
Richard Hickinbotham 3 3 Member Chairman
* Luca Lodi-Rizzini served as a Non-Executive Director until 26 April 2018.
The Board recognises the importance of ensuring the flow of complete,
adequate and timely information on an ongoing basis to enable decisions
to be made on an informed basis and to enable the Board to effectively
discharge their duties and responsibilities. To allow Directors sufficient
time to prepare for the meetings, all Board and board committee papers
are distributed to Directors a week in advance of the meetings, with any
additional material or information provided on request. Directors have
unrestricted access to management and receive briefings from them,
which enable the Directors to keep abreast of the latest developments.
Furthermore, the Company has implemented the appropriate procedures
to support Directors in obtaining independent professional advice at the
expense of the Company as and when required. Directors receive regular
updates in relation to changes in accounting standard and regulation.
while these committees have the authority to examine particular
issues and will report back to the Board with their decisions and/or
recommendations, the ultimate responsibility on all matters lies with
the Board. The functions typically refer to the Nomination Committee
currently remain with the Board.
Time commitments
The Directors devote a sufficient amount of time in order to discharge
their duties to the Company both at and outside of Board Meetings.
In order to ensure continue this commitment the Board meet at least
6 times a year. In addition to the formal Board Meetings the Board will
meet throughout the year as and when required for specific matters.
Committees
The Board has delegated certain functions to its two committees, the
Audit Committee and the Remuneration Committee. These committees
have their own written terms of reference and their actions are
reported to and monitored by the Board. The Board accepts that
The time commitments of the Non-executive Directors are carefully
reviewed by the Board and it is noted that Peter Middleton, David Gann,
Neil Warner and Richard Hickinbotham devote 2 days a month to
the Company. Details of the Directors’ attendance at each of the
scheduled Board and Committee Meetings for the 2018 financial year
are listed below:
Board meetings Audit Committee meetings Remuneration Committee meetings
Name of Director No. held No. attended No. held No. attended No. held No. attended
Sir Peter Middleton 6 6 – – – –
Giulio Cesareo 6 6 – – – –
Marco Ferrari 6 6 – – – –
David Michael Gann 6 4 3 2 1 1
Neil William Warner 6 5 3 3 1 1
Richard Hickinbotham 6 6 3 2 0* 0
* Richard Hickinbotham was appointed as Chairman of the Remuneration Committee on 25th April 2018
®
26
Directa Plus
Annual Report & Accounts 2018
Corporate governance report
continued
Internal control
The Directors are responsible for establishing and maintaining the
Company’s system of internal control and reviewing its effectiveness.
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.
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 2018, the Group had net assets of €8.2m (2017:
€9.9m) and cash and cash equivalent of €5.50m (2017: €6.9m) as set out
in the consolidated statement of financial position. The Directors have
prepared and reviewed forecasts of the Group’s financial performance.
After due consideration of forecast and current cash position, the
Directors believe that the Group 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 Group financial statements.
Sir Peter Middleton
Non-Executive Chairman
16 April 2019
Overview
Strategic Report
Governance
Financial statements
Additional information
Directors’ remuneration report
Directa Plus
Annual Report & Accounts 2018
27
The Company is not required to prepare a Directors’ remuneration
report for each financial year and so the Company makes the following
disclosure 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 QCA 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 Group.
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.
The remuneration of the Directors, in Euros, for the year ended
31 December 2018 was as follows and is audited:
National Total
Insurance Pension emoluments Share based
Salary/Fees Bonus contributions contributions 2018 payment**
2018 €’000 €’000 €’000 €’000 €’000 €’000
Non-Executive Chairman
Sir Peter Middleton 56 – – – 56 17
Executive
Giulio Cesareo 267 98 9 91 466 51
Marco Ferrari 130 27 9 28 193 25
Non-Executive
David Gann 34 – – – 34 10
Neil Warner 34 – – – 34 10
Luca Lodi-Rizzini* 11 – – – 11 –
Richard Hickinbotham 34 – – – 34 9
Total 566 125 18 119 828 122
* Luca Lodi Rizzini retired as a director of 26 April 2018.
** Non monetary cost refers to the share option scheme in place and not exercised yet.
®
28
Directa Plus
Annual Report & Accounts 2018
Directors’ remuneration report
continued
National Total
Insurance Pension emoluments Share based
Salary/Fees Bonus contributions contributions 2017 payment**
2017 €’000 €’000 €’000 €’000 €’000 €’000
Non-Executive Chairman
Sir Peter Middleton 64 – – – 64 17
Executive
Giulio Cesareo 272 98 9 65 444 74
Marco Ferrari 133 27 8 27 195 36
Non-Executive
David Gann 38 – – – 38 10
Neil Warner 38 – – – 38 10
Luca Lodi-Rizzini* 38 – – – 38 10
Richard Hickinbotham 24 – – – 24 6
Elizabeth Robinson 5 – – – 5 –
Total 612 125 17 92 846 163
* Luca Lodi Rizzini retired as a director of 26 April 2018.
** Non monetary cost refers to the share option scheme in place and not exercised yet.
At 7 February 2019 Directors’ interest were the following:
Directors’ interests
Number of Percentage
Number of ordinary shares of issued
Director ordinary shares under option share capital
Sir Peter Middleton 25,000 100,000 0.05
Giulio Cesareo* 3,448,791 545,176 6.75
Marco Ferrari 25,666 265,176 0.05
David Gann 83,379 60,000 0.16
Neil Warner 22,000 60,000 0.04
Richard Hickinbotham 69,000 60,000 0.07
* Giulio Cesareo and his family are the sole beneficiaries of the 3,448,791 ordinary shares held by Galbiga Immobiliare S.r.l.
Overview
Strategic Report
Governance
Financial statements
Additional information
Audit Committee report
Directa Plus
Annual Report & Accounts 2018
29
Membership
The Board has established an Audit Committee with the appropriate
Terms of Reference, which is comprised of Neil Warner (chairman),
David Gann and Richard Hickinbotham. The Committee reports to the
Board in respect of its responsibilities.
Responsibilities
The Committee met three times in 2018 to discuss its ongoing
responsibilities, including such matters as the existing risk
management and internal control systems in place, its financial
reporting obligations and external audit findings.
An outline of the key responsibilities undertaken by the Committee
in the year are set out below:
•
•
•
•
•
•
Review of the Annual and Interim Accounts.
Review of the Auditor’s Report and meeting with the Auditor.
Review of the going concern assumption in line with management’s
cash flow forecasts.
Performance of sensitivity analysis on the assumptions included
within the forecast.
Matching results against management forecasts for the year ended
31st December 2018.
Meeting with management to discuss the Directors’ plans for future
actions in relation to its going concern assessment, taking into
account any relevant events subsequent to the balance sheet date.
Internal controls
The Committee continues to monitor and review the Company’s
financial reporting and internal control procedures. It has been
concluded that a separate internal audit function is not justified at
this time because of the size and scope of the Company’s business
activities. However, as the company continues to grow the need for
this function will be regularly assessed.
External audit
The Board understands the importance of maintaining a relationship
with the external auditors and in order to support this relationship the
external auditor is invited to attend at least one meeting of the Audit
Committee each year.
The Committee maintains the responsibility of making
recommendations to the Board in respect of the appointment,
reappointment and removal of the external auditors. In the
reappointment of the Committee the Board carefully considers their
performance in discharging the audit, the terms of engagement,
and their independence.
Neil Warner
Chairman of the Audit Committee
®
30
Directa Plus
Annual Report & Accounts 2018
Remuneration Committee report
Membership
The Board has established a Remuneration Committee with the
appropriate Terms of Reference, which is comprised of Richard
Hickinbotham (chairman), Neil Warner, and David Gann. The
Committee reports to the Board in respect of its responsibilities.
Responsibilities
The Committee met once in 2018 to discuss its ongoing responsibilities,
including such matters as recommendations to the Board on all
aspects and policies relating to the remuneration of executive directors
and executive officers of the Company.
An outline of the key responsibilities undertaken by the Committee
in the year are set out below:
•
An annual review of remuneration for all Executive Directors
and Senior Managers of the Company.
Richard Hickinbotham
Chairman of the Remuneration Committee
Overview
Strategic Report
Governance
Financial statements
Additional information
Independent auditor’s report
to the members of Directa Plus Plc
Opinion
We have audited the financial statements of Directa Plus Plc (the
‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
31 December 2018 which comprise the consolidated statement of
comprehensive income, the consolidated and company statements of
financial position, the consolidated and the company statements of
changes in equity, the consolidated and the company statements of
cash flows and notes to the financial statements, including a summary
of significant accounting policies.
The financial reporting framework that has been applied in the preparation
of the Group financial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union
and, as regards the Parent Company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the
Group’s and of the Parent Company’s affairs as at 31 December 2018
and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
the Parent Company financial 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 financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report. We are
independent of the Group and the Parent Company in accordance with
the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation
to which the ISAs (UK) require us to report to you where:
•
•
the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is not appropriate; or
the Directors have not disclosed in the financial statements any
identified material uncertainties that may cast significant doubt about
the Group’s or the Parent Company’s ability to continue to adopt the
going concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for issue.
Directa Plus
Annual Report & Accounts 2018
31
Key audit matters
Key audit matters are those matters that, in our professional judgment,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Revenue recognition
The Group earned revenue of €2.3m in the year-ended 31 December
2018. Most of the Group’s sales are made through Directa Plus S.p.A.
and Directa Textile Solutions S.r.l.
Revenue is a significant risk area given the Group’s different revenue
streams, geographic dispersion of sales and product ranges offered.
Moreover, this was the first accounting period in which IFRS 15 was
adopted and the revenue recognition policy was updated to reflect
this. There was a new sales contract relating to the sale of the mobile
processing unit (“MPU”) entered into in the year, which included
bundled sale of goods and services. Since there are multiple
performance obligations relating to this contract, there is a risk that
revenue from this type of contract may not be recognised correctly
with regards to IFRS 15. In addition, there is a risk that disclosures to
the financial statements are not prepared in line with the
requirements of IFRS 15.
Management has included detail regarding their considerations
around revenue recognition and IFRS 15 in note 2 (j).
How our audit addressed the key audit matter
Our audit work on revenue included the following procedures:
•
•
We obtained and read the terms of key sales contracts and
assessed the impact of the contract terms on Management’s
determination of the Group’s revenue recognition policy.
Reviewing the contract relating to the sale of a MPU in the year and
analysed it under the requirements of IFRS 15. Three performance
obligations were identified, being the sale of equipment, a training
course, and a two year warranty. We have reviewed Management’s
assessment of the transaction price of each performance
obligation and agreed this back to supporting documentation
including payroll records and invoices to support maintenance
costs which fall under the two year warranty. We have verified
documents signed by the customer confirming delivery of the
MPU and on site training, which demonstrates the Group has
met performance obligations in the year.
®
32
Directa Plus
Annual Report & Accounts 2018
Independent auditor’s report
continued
•
•
•
Verifying a sample of revenue recognised in the year to supporting
evidence (including sales invoices and delivery documentation)
and the receipt of payments for sales to bank statements, to
confirm that revenue was appropriately recognised.
Performing cut-off procedures on revenue recorded around the
year end by testing a number of pre and post year end
transactions to supporting documentation in order to ensure the
transactions had been recorded in the correct accounting period.
Reviewing the disclosures in the financial statements to ensure
that they were prepared in accordance with the requirements of
the accounting standards, with a particular focus on the IFRS 15
first time adoption disclosures.
Our application of materiality
Group materiality FY2018
Company materiality FY2018
€300k
€225k
Group materiality FY2017
Company materiality FY2017
€300k
€80k
Basis for materiality
Basis for materiality
3% of net assets
(2017: 3% of net assets)
3% of net assets capped
at 75% of Group materiality
(2017: 3% of net assets)
We apply the concept of materiality both in planning and performing
our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable users
that are taken on the basis of the financial statements.
Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take into account of the nature of
identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements
as a whole.
We continue to consider net assets as an appropriate benchmark to
determine materiality. We consider net assets to be the most relevant
consideration as the Group and Parent Company are still in the
development stage and net assets reflects movement in overall
shareholder value. We have applied a percentage of 3% to net assets
in 2018 (2017: 3%) which is consistent with the prior year for the Group.
Parent Company materiality was changed from 1.5% of total assets
to 3% of net assets in order to bring the materiality methodology in
line with Group.
Whilst materiality for the financial statements as a whole was €300k,
each significant component of the Group was audited to a lower level
of materiality, being 75% of Group materiality, which is used to
determine the financial statement areas that are included within the
scope of our audit and the extent of sample sizes used during the audit.
Performance materiality is the application of materiality at the
individual account or balance level set at an amount to reduce to an
appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for the
financial statements as a whole. Performance materiality was set at
75% (2017: 75%) of the above materiality levels on the basis that we
have not identified high volumes or values of misstatements in prior
year audits, and that the Group has few areas requiring significant
judgement or estimates.
We agreed with the audit committee that we would report to the
committee all individual audit differences identified during the course
of our audit in excess of €6k (2017: €15k). We also agreed to report
differences below these thresholds that, in our view, warranted
reporting on qualitative grounds.
An overview of the scope of our audit
Our Group audit scope focused on the Group’s principal operating
entities, Directa Plus Plc and Directa Plus Spa. We have identified both
entities as significant components for the purposes of our financial
statement audit, based on their relative share of total net assets.
We have performed a full scope audit for these components, having
performed substantive procedures over 99% of net assets.
The remaining components of the Group were considered non-
significant and these components were principally subject to analytical
review procedures, together with additional substantive testing over
the risk areas detailed above where applicable to that component.
All audit work (full scope or review work) was conducted by BDO LLP
and another BDO member firm. The audit of Directa Plus S.p.A was
performed in Italy by the component auditors, BDO Italia S.p.A.
As part of our audit strategy members of the Group audit team were
embedded into the Italian audit team and were present onsite in Italy
during the local audit, performing an onsite review and attending
completion meetings with the component auditor and local
management. BDO LLP had full access to all audit working papers
of the significant component audited by BDO Italia S.p.A.
Other information
The Directors are responsible for the other information. The other
information comprises the information included in the annual report
other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Overview
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Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018
33
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in
the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed
by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
In preparing the financial statements, the Directors are responsible for
assessing the Group’s and the Parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
•
•
the information given in the strategic report and the Directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
Misstatements can arise from fraud or error and are considered
material if, individually or in the
the strategic report and the Directors’ report have been prepared in
accordance with applicable legal requirements.
aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
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 identified material misstatements in the strategic
report or the Directors’ report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
•
•
•
•
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
the Parent Company financial statements are not in agreement with
the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are
not made; or
we have not received all the information and explanations we
require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set
out on page 22, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website:
www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
Use of our report
This report is made solely to the Parent 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
Parent 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 Parent Company and the Parent Company’s
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Matt Crane (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
16 April 2019
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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Annual Report & Accounts 2018
Consolidated statement of comprehensive income
for the year ended 31 December 2018
31 Dec 2018 31 Dec 2017
Note € €
Continuing operations
Revenue 3 2,253,293 952,199
Other income 3/4 248,695 281,493
Changes in inventories of finished goods and work in progress 5 (133,382) 390,291
Raw materials and consumables used 6 (1,299,078) (607,338)
Employee benefits expenses 7 (2,112,650) (2,203,558)
Depreciation and amortisation 12/13 (674,919) (633,784)
Other expenses 8 (2,197,670) (1,973,687)
Results from operating activities (3,915,711) (3,794,384)
Finance income 10 4,440 5,501
Finance expenses 10 (45,143) (157,309)
Net finance costs (40,703) (151,808)
Loss before tax (3,956,414) (3,946,192)
Tax expense 11 (414) (1,239)
Loss after tax from continuing operations (3,956,828) (3,947,431)
Loss of the year (3,956,828) (3,947,431)
Other comprehensive income items that will not be reclassified to profit or loss
Defined Benefit Plan re-measurement gains and losses 20 1,219 (4,704)
Other comprehensive (expense)/income for the year (net of tax) 1,219 (4,704)
Total comprehensive (expense)/income for the year (3,955,609) (3,952,135)
Loss attributable to:
Owner of the Parent (3,961,259) (3,948,133)
Non-controlling interests 4,431 702
(3,956,828) (3,947,431)
Total comprehensive (expense)/income attributable to:
Owners of the Company (3,960,040) (3,952,837)
Non-controlling interests 4,431 702
(3,955,609) (3,952,135)
Loss per share
Basic loss per share 23 (0.09) (0.09)
Diluted loss per share 23 (0.09) (0.09)
The notes on pages 38 to 62 form part of these financial statements.
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Additional information
Directa Plus
Annual Report & Accounts 2018
35
Consolidated and company statement of financial position
for the year ended 31 December 2018
Group Company
31 Dec 18 31 Dec 17 31 Dec 18 31 Dec 17
Note € € € €
Assets
Intangible assets 12 1,467,478 1,572,309 – –
Investments 14 – – 16,180,336 14,180,336
Property, plant and equipment 13 1,062,435 1,284,412 – –
Non-current assets 2,529,913 2,856,721 16,180,336 14,180,336
Inventories 5 862,284 995,666 – –
Trade and other receivables 15 2,059,217 1,161,711 158,594 109,240
Cash and cash equivalent 17 5,503,884 6,929,446 3,968,016 4,493,006
Current assets 8,425,385 9,086,823 4,126,610 4,602,246
Total assets 10,955,298 11,943,544 20,306,946 18,782,582
Equity
Share capital 18 154,465 142,628 154,465 142,628
Share premium 18 22,104,240 19,973,996 22,104,240 19,973,996
Retained Earnings 18 (14,044,656) (10,250,225) (2,055,143) (1,380,478)
Equity attributable to owners of Group 8,214,049 9,866,399 20,203,562 18,736,146
Non-controlling interests 27,361 22,930 –
Total equity 8,241,410 9,889,329 20,203,562 18,736,146
Liabilities
Loans and borrowings 19 57,011 211,791 – –
Employee benefits provision 20 335,132 282,031 – –
Non-current liabilities 392,143 493,822 – –
Loans and borrowing 19 226,823 244,780 – –
Trade and other payables 21 2,094,922 1,315,613 103,385 46,436
Current liabilities 2,321,745 1,560,393 103,385 46,436
Total liabilities 2,713,888 2,054,215 103,385 46,436
Total equity and liabilities 10,955,298 11,943,544 20,306,947 18,782,582
The financial statements were approved and authorised for issue by the board and signed on its behalf by:
Neil Warner, Chairman of the Audit Committee
16 April 2019
The notes on pages 38 to 62 form part of these financial statements.
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Annual Report & Accounts 2018
Consolidated statement of changes in equity
for the year ended 31 December 2018
Non-
Share Share Retained controlling Total
capital premium earnings Total interests equity
€ € € € € €
Balance at 31 December 2016 142,628 19,973,996 (6,552,965) 13,563,659 22,228 13,585,887
Total comprehensive (expense)/income for the year – – – – – –
Loss for the year – – (3,948,133) (3,948,133) 702 (3,947,431)
Total other comprehensive (expense)/income – – (4,704) (4,704) – (4,704)
Total comprehensive (expense)/income for the period – – (3,952,837) (3,952,837) 702 (3,952,135)
Share-based payment – – 255,578 255,578 – 255,578
Non-controlling interests on Directa Textiles Solutions – – – – – –
Balance at 31 December 2017 142,628 19,973,996 (10,250,224) 9,866,400 22,930 9,889,329
Total comprehensive (expense)/income for the year
Loss of the year – – (3,961,259) (3,961,259) 4,431 (3,956,828)
Total other comprehensive (expense)/income – – 1,219 1,219 – 1,219
Total comprehensive (expense)/income for the period – – (3,960,040) (3,960,040) 4,431 (3,955,609)
Capital raised 11,837 2,355,548 – 2,367,385 – 2,367,385
Expenditure related to the issuance of shares – (225,304) – (225,304) – (225,304)
Share-based payment – – 165,610 165,610 – 165,610
Balance at 31 December 2018 154,465 22,104,240 (14,044,656) 8,214,049 27,361 8,241,410
Company statement of changes in equity
for the year ended 31 December 2018
Share Share Retained
capital premium earnings Total
€ € € €
Balance at 31 December 2016 142,628 19,973,996 (766,745) 19,349,879
Loss for the year – – (900,374) (900,374)
Share-based payment reserve – – 286,641 286,641
Balance at 31 December 2017 142,628 19,973,996 (1,380,478) 18,736,146
Loss for the year – – (779,197) (779,197)
Capital raised 11,837 2,355,548 – 2,367,385
Expenditure related to the issuance of shares – (225,304) – (225,304)
Share-based payment – – 104,532 104,532
Balance at 31 December 2018 154,465 22,104,240 (2,055,143) 20,203,562
The notes on pages 38 to 62 form part of these financial statements.
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Consolidated statement of cash flow
for the year ended 31 December 2018
Directa Plus
Annual Report & Accounts 2018
37
Group Company
31 Dec 18 31 Dec 17 31 Dec 18 31 Dec 17
Note € € € €
Cash flows from operating activities
Loss for the year before tax (3,956,414) (3,946,191) (779,197) (900,374)
Adjustments for:
Depreciation 13 357,014 347,042 – –
Amortisation of intangible assets 12 317,905 286,742 – –
Share-based payment expense 165,610 255,578 104,532 163,743
Finance income 10 (4,440) (5,501) (3,194) –
Finance expense 10 45,143 157,309 22,610 131,647
Tax expenses – (1,239) – –
(3,075,182) (2,906,260) (655,249) (604,984)
Increase/decrease in:
– inventories 5 133,382 (390,291) – –
– trade and other receivables 15 (897,506) 13,344 (49,354) 203,854
– trade and other payables 21 758,397 442,867 56,949 14,094
– provisions and employee benefits 20 47,175 44,051 – –
Net cash from operating activities (3,033,734) (2,796,291) (647,654) 387,036
Cash flows from investing activities
Interest received 10 4,440 5,501 3,194 –
Investment in intangible assets 12 (207,158) (122,347) – –
Investment in subsidiary – – (2,000,000) (3,000,000)
Loan to associate – – – –
Acquisition of property, plant and equipment 13 (120,456) (340,071) – –
Net cash used in investing activities (323,174) (456,917) (1,996,806) (3,000,000)
Cash flows from financing activities
Proceeds from capital raise 2,367,385 – 2,367,385 –
Expenditure related to the issuance of shares (225,304) – (225,304) –
Interest paid on loans and borrowings 10 (16,329) (20,481) (941) (3,378)
New borrowings 66,607 – – –
Repayment of borrowings 19 (239,344) (236,164) – –
Net cash from/(used in) financing activities 1,953,015 (256,645) 2,141,140 (3,378)
Net increase/(decrease) in cash and cash equivalent (1,403,893) (3,509,853) (503,320) (3,390,414)
Cash and cash equivalent at beginning of the year 6,929,446 10,570,211 4,493,006 8,011,689
Exchange (losses)/gains on cash and cash equivalents (21,669) (130,912) (21,669) (128,269)
Cash and cash equivalent at end of the year 5,503,884 6,929,446 3,968,016 4,493,006
The notes on pages 38 to 62 form part of these financial statements.
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Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
for the year ended 31 December 2018
1. Basis of preparation
The financial information contained in this announcement does not constitute statutory financial statements within the meaning of Section 435
of the Companies Act 2006.
a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRSs) as adopted for use in the European Union and with those parts of Company Act 2006
to companies preparing their financial statements under the adopted IFRS.
The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the preceding year,
unless otherwise stated.
The financial statements have been prepared on a going concern basis as since the Directors believe that the Group has adequate resources to
remain in operation for the foreseeable future.
All notes, except as otherwise indicated, are presented in Euros (“€”).
b) Basis of consolidation
i. Subsidiaries
Where the Company has control over an investee, it is classified 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
affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these
elements of control.
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.
ii. Transaction eliminated on consolidation
The consolidated financial 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.
iii. Non-controlling interest
Non-controlling interest in the net assets of the consolidated subsidiaries are identified 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) Functional and presentation currency
These financial statements are presented in Euro (“€”) 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 Euro (“€”).
d) 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 and liabilities. 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.
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Directa Plus
Annual Report & Accounts 2018
39
1. Basis of preparation continued
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:
i. Carrying value of capitalised development costs
The Group capitalises development costs provided the recognition conditions meet the criteria set out in IAS 38. During the year costs have been
capitalised in relation to projects to enhance and develop the production process and the industrial application for G+ Graphene. The majority of
the capitalised costs relate to internal employee costs and Management are able to separately identify time spent on these projects through the
group’s internal time card management program. Management and the directors continually assess the commercial potential of the technology
and products in development. The costs capitalised in period have resulted in the development of new IP and Management has assessed that
there is sufficient evidence to support that economic benefit will flow.
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.
ii. Valuation and recoverability of Inventory
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 monthly basis. The valuation of Inventory includes key estimates and judgments made by Management including
normal production capacity, 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.
iii. Defined benefit scheme
Provision for benefits upon termination of employment related to amounts accrued by Italian companies for employment retirement.
In determining this provision Management employs actuarial techniques, including the involvement of an external experts. All key estimates
applied have been included in note 20.
iv. Revenues recognition
The revenues recognition in conformity with IFRS 15 requires management to make judgements, estimates and assumptions. Regarding the sale of
equipment in the year the Management have reviewed the contract and analysed it with reference to IFRS 15. Three performance obligations were
identified including the sale of equipment, the provision of training and a two year warranty. The cost of the training was determined based on the
average cost per hour of the employees providing the training while the warranty costs calculation was based on internal calculation and historical
maintenance data. The consideration relating to the warranty has been deferred and will be recognise in line with the performance obligation.
e) New standards adopted for the period
i. IFRS 9 – Financial instruments
IFRS 9 ‘Financial Instruments’ was published in July 2014 and was effective and adopted on 1 January 2018. It is applicable to financial assets and
financial liabilities, and covers the classification, measurement, impairment and de-recognition of financial assets and financial liabilities together
with a new hedge accounting model. The Group’s financial assets comprise trade and other receivables and cash and short-term deposits.
The adoption of IFRS 9 has changed the Group’s accounting for impairment losses for financial assets by replacing IAS 39’s incurred loss approach
with a forward-looking expected credit loss (“ECL”) approach. IFRS 9 requires the Group to recognise an allowance for ECLs for all debt instruments
not held at fair value through profit or loss and contract assets in the scope of IFRS 15.
As all of the Group’s trade receivables and other current receivables which the Group measures at amortised cost are short-term (i.e., less than
12 months) and considering the client’s credit rating and risk management policies in place, the change to a forward-looking ECL approach did
not have a material impact on the amounts recognised in the financial statements. Adoption of IFRS 9 has also not resulted in any restatement
of comparative balances.
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Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
1. Basis of preparation continued
ii. IFRS 15 – Revenues form contract with customers
IFRS 15 is effective for the year beginning 1 January 2018, therefore it has been adopted for the period. IFRS 15 provides a single principles based
five-step model to be applied to all sales contracts, where the key focus is on the transfer of control of goods and services to customers. It replaces
models included in IAS 11 (Construction Contracts) and IAS 18 (Revenue). Management decided to implement new internal procedures and
controls in order to prevent any potential revenue recognition issues arising. Particular attention was given to contracts which bundled both the
sale of goods and on-going services including after sales warranties.. Management has put controls in place to both identify each performance
obligation in the sales contracts, how the consideration is derived and ensuring revenue is only recognised when control is passed. The company
adopted a modified retrospective approach whereby the comparatives are not restated and are presented using the principals set out in IAS 18.
Adopting IFRS 15 did not have an impact on revenue recognised in the current period. Initial application of IFRS 15 did also not have any impact
on brought forward reserves.
New standards and interpretations not yet adopted
iii. IFRS 16 – Leases
IFRS 16 is effective for the year beginning 1 January 2019. IFRS 16 provides a single lessee accounting model, requiring companies to recognise
right of use assets and lease liabilities for all applicable leases. Therefore existing operating leases will be accounted for similarly to finance leases
under the current IAS 17, resulting in the recognition of additional assets within property, plant and equipment in respect of the right of use of the
lease assets, and additional lease liabilities. The operating leases charges currently reflected within operating expenses (and EBITDA) will be
eliminated and instead depreciation and finance charges will be recognised in respect of the lease assets and liabilities. On adoption of IFRS 16, the
adjustments expected is an increase of Asset and Debt of circa €0.56 million.
2. Significant accounting policies
a) Functional and foreign currency
The financial statements of each Group company are measured using the currency of the primary economic environment in which that company
operates (the functional currency). The consolidated financial statements record the results and financial position of each Group company in
Euro, which is the functional currency of the Company and the presentational currency for the consolidated financial statements.
i. Transaction and balances
Transactions in foreign currencies are converted in to the respective functional currencies at initial recognition, using the exchange rates at
the transaction date. Monetary assets and liabilities at the end of the reporting period are translated at the rates ruling at the reporting date.
Non-monetary assets and liabilities are not retranslated. All exchange differences are recognised in profit 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 differences 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.
b) Financial instruments
There are no other categories of financial assets other than those listed below:
i. Trade and other receivables and amounts due from subsidiaries
Trade receivables are recognised and carried at the original invoice amount less any provision for impairment. Other receivables and amounts
due from subsidiaries are recognised and measured at the original invoice amount less any provision for impairment. The Group and Company
apply the expected credit loss model in respect of trade receivables. The Group and Company track changes in credit risk and recognise a loss
allowance based on lifetime ECLs for each customer at each reporting date.
ii. Cash and cash equivalents
Cash and cash equivalents comprise demand deposits with an original maturity up to three months, are readily convertible to a known amount
of cash and are subject to an insignificant risk of change in value.
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Annual Report & Accounts 2018
41
2. Significant accounting policies continued
There are no other categories of financial liabilities other than those listed below:
iii. Trade and other payables
Trade payables are stated at their amortised cost.
iv. Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the asset of the Group after deducting all of its liabilities. Equity instruments issued
by the Company are recorded at the proceeds received net of direct issue costs.
c) Leases
a. 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.
b. 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.
d) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
e) Property, plant and equipment
a. Recognition and measurement
Property, plant and equipment are measured at cost less accumulated depreciation, Government grants received (where applicable) and
accumulated impairment losses.
Costs capitalised include expenditure that are directly attributable to the acquisition of the asset.
When parts of an item of property, plant and equipment have different 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 difference between the net proceeds from disposal
and the carrying amount of the item) are recognised in profit or loss.
b. Subsequent costs
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to
the Group. Ongoing repairs and maintenance are expensed as incurred.
c. 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.
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Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
2. Significant accounting policies continued
The estimated useful lives of significant items of property, plant and equipment are as follows:
•
•
Computer equipment 20% yearly.
Industrial equipment, office equipment and plant and machinery 15% yearly.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted where appropriate.
f) Intangible assets
Intangible assets are measured at cost less accumulated amortisation and Government grants received (where applicable).
Patent 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;
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 benefits; and
expenditure on the project can be measured reliably.
Capitalised development costs are amortised over the period the Group expects to benefit from selling the products developed (Useful
Economic Life). The amortisation expense is included within the cost of sales 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.
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.
a. Amortisation
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.
•
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.
•
Other intangible assets 5 years.
g) Inventories
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.
h) Impairment
At each reporting date, the carrying amounts of the Company’s assets are reviewed to determine whether there is any indication of impairment.
If any such indication exists, then the asset’s recoverable amount is estimated to determine the extent of the impairment, if any. The recoverable
amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the assets. An impairment loss is recognised in operations if the carrying amount of an asset exceeds its recoverable amount. For an
asset that does not generate independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset
belongs. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
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Annual Report & Accounts 2018
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2. Significant accounting policies continued
i) Employee benefits
Defined benefit scheme surpluses and deficits 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 effect of minimum funding requirements agreed with scheme trustees.
Remeasurements of the net defined obligation are recognised directly within equity. The remeasurements include:
•
•
•
Actuarial gains and losses.
Return on plan assets (interest exclusive).
Any asset ceiling effects (interest exclusive).
Service costs are recognised in profit or loss, and include current and past service costs as well as gains and losses on curtailments.
Net interest expense (income) is recognised in profit or loss, and is calculated by applying the discount rate used to measure the defined benefit
obligation (asset) at the beginning of the annual period to the balance of the net defined benefit obligation (asset), considering the effects of
contributions and benefit payments during the period.
Gains or losses arising from changes to scheme benefits or scheme curtailment are recognised immediately in profit or loss.
Settlements of defined benefit schemes are recognised in the period in which the settlement occurs.
For more information please see note 20.
j) Revenues
The majority of the Group’s revenue is derived from a single performance obligation, being the sale of goods with revenue recognised at a point in time
when control of the goods has transferred to the customer. This is generally when the goods are delivered to the customer. However, for export sales,
control might also be transferred when delivered either to the port of departure or port of arrival, depending on the specific terms of the contract with a
customer. There is limited judgement needed in identifying the point control passes: once physical delivery of the products to the agreed location has
occurred, the Group no longer has physical possession, usually will have a present right to payment (as a single payment on delivery) and retains no
control of the goods in question. If other performance obligations are identified Management will deploy the required process to identify the value of
each obligation to allow the recognition in line with IFRS 15. The Group also has revenue from contracts with bundled performance obligations, being
the sale of goods, the provision of training, and a two-year warranty. The cost of the training was determined based on the average cost per hour of
the employees providing the training while the warranty costs calculation was based on internal calculation and historical maintenance data.
The consideration relating to the warranty has been deferred and will be recognise in line with the performance obligation.
k) 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 profit or loss on a systematic basis where the Group has recognised the initial expenses that the grants are
intended to compensate. Where a grant has been received as a contribution for property, plant and equipment, or capitalised development costs,
the income received has been credited against the asset in the statement of financial position.
l) Finance income and finance costs
Finance income comprises interest income on funds invested. Interest income is recognised in the profit or loss, using the effective 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 profit or
loss using the effective interest method.
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Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
2. Significant accounting policies continued
m) Investments in subsidiaries (Company only)
Investments are stated at their cost less any provision for impairment (then refer to h) Impairment).
n) Taxation
Tax expense comprises current and deferred tax. Current and deferred tax is recognised in the 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:
•
•
•
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
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 utilized. 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.
3. Operating segments
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed
by the chief operating decision makers (CEO, CFO, COO and CTO), as defined in IFRS 8, in order to allocate resources to the segments and to
assess its performance.
For management purposes, considering also the materiality the Group is organised into the following segments:
•
•
Textile
Others
For 2018 this breakdown was appropriate for the nature on the underlying businesses. Textile was considered by the Management the strategic
segment able to sustain the growth. Management’s strategic needs are constantly monitored and an update of the segments will be provided
if required. Any further update of the segment analysis will be reflected in this section.
Segment profit/(loss) represents the profit/(loss) earned by each segment, including all the direct costs that are directly correlated with the
segment. Overhead, assets and liabilities not directly attributable to the segment have been allocated using the revenues as main driver.
As the business evolves this is an area that will be assessed on a regular basis and additional segmental reporting will be provided at the
appropriate time. Comparative figures have been calculated in 2018 on the basis that the operating segments existed in the previous financial
despite in 2017 a proper segment analysis was not in place.
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45
3. Operating segments continued
Textile Others Head office Consolidated
2018 € € € €
Revenue 1,664,847 588,446 – 2,253,293
Cost of sales* (1,426,378) (229,203) – (1,655,581)
Gross profit 238,469 359,243 – 597,712
Other income 57,899 71,334 119,462 248,695
Other expenses:
– R&D expense (226,744) (220,940) – (447,684)
– Advisory (187,362) (62,086) (656,597) (906,045)
– Operating expenses (798,009) (305,623) (1,626,254) (2,729,886)
– Depreciation and amortisation (490,609) (187,894) – (678,503)
Operating loss (1,406,357) (345,966) (2,163,388) (3,915,711)
Financial costs – – (40,703) (40,703)
Tax (414) – – (414)
Loss of the year (1,406,771) (345,966) (2,204,091) (3,956,828)
Total assets 7,969,050 2,986,248 – 10,955,298
Total liabilities (2,234,212) (479,676) – (2,713,888)
Textile Others Head office Consolidated
2017 € € € €
Revenue 765,182 187,017 – 952,199
Cost of sales* (391,323) 119,523 – (271,800)
Gross profit 373,859 306,540 – 680,399
Other income 63,158 133,684 84,651 281,493
Other expenses:
– R&D expense (246,236) (209,422) – (455,658)
– Advisory (25,293) (16,733) (617,306) (659,332)
– Operating expense (1,427,294) (552,592) (1,027,616) (3,007,502)
– Depreciation and amortisation (456,893) (176,891) – (633,784)
Operating loss (1,718,698) (515,414) (1,560,272) (3,794,384)
Financial cost – – (151,808) (151,808)
Tax (1,239) – – (1,239)
Loss of the year (1,719,937) (515,414) (1,712,080) (3,947,431)
Total asset 8,641,783 3,301,761 – 11,943,544
Total liabilities (1,600,701) (453,513) – (2,054,215)
* Includes Changes in inventories of finished goods
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Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
3. Operating segments continued
2018 2017
€ €
Sale of products 2,066,876 858,218
Sale of services 186,417 93,981
Government grants 129,232 196,842
Other revenue 119,463 84,651
Total income 2,501,988 1,233,692
Geographical breakdown of revenues are:
2018 2017
€ €
Italy 1,840,139 786,400
Rest of the world 413,154 165,799
Total 2,253,293 952,199
The Group has transacted with two main customers in 2018, which account for more than 10% of Group revenues for sales of products and
services. This largest customer’s revenues amount to €939,752 (42%), whilst the next highest revenue earning customer provided €242,517 (11%).
Other revenues of €119,463 includes R&D Expenditure Credit (RDEC) for €101,267. The RDEC is an Italian incentive scheme (art.3 DL 145/2013)
designed to encourage companies to invest in research and development. The credit can be used to reduce corporation tax or to offset
outstanding payables related to social security.
4. Government grants
Information regarding government grants:
2018 2017
€ €
MAT4BAT – 62,351
Grata 57,899 63,158
Ecopave 71,333 71,333
Total 129,232 196,842
In relation to government grants (Grata and Ecopave), the operational activities refer to FY18 and related to these projects have been completed.
Company has complied with the relevant conditions of the grants.
The key terms of Government grants are:
MAT4BAT Grata Ecopave
Starting date 2013 2017 2016
Ending date 2017 2019 2019
Duration (months) 42 31 36
Total amount 304,700 126,324 214,100
Final report submitted and accepted Yes Project still Project still
on-going on-going
There are no capital commitments built into the ongoing grants. Government grants have been recognised in Other Income.
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47
5. Change in inventories
2018 2017
€ €
Finished products 750,853 877,082
Spare parts 102,400 102,400
Raw material 9,031 16,184
Total 862,284 995,666
As at 31 December 2018 total inventory value is lower than 2017, the movement is mainly driven by the reduction of finished products inventory
due to the increasing sales during the year. Spare parts inventory was required to enhance maintenance efficiency and is composed of a small
number of critical items with a material cost per unit. The spare parts inventory value is maintained steady in 2018.
6. Raw materials and consumables
2018 2017
€ €
Raw material and consumables 170,007 127,052
Textile products 1,129,071 480,286
Total 1,299,078 607,338
Total raw materials and consumables are €1,299,078 (2017: €607,338) of which €1,129,071 (2017: €480,286) refers to textile products.
The movement is mainly driven by the increasing sales in textile segment.
7. Employee benefits expenses
2018 2017
€ €
Wages and salaries 1,557,471 1,585,058
Social security costs 384,998 346,515
Employee benefits 84,779 75,519
Share option expense 165,611 255,578
Other costs 18,346 22,952
Total 2,211,205 2,285,622
Capitalised cost in “Intangible assets” (98,555) (82,064)
Total charged to the Income Statement 2,112,650 2,203,558
The average number of employees (excluding non-executive directors) during the period was as follows:
2018 2017
Sales and administration 8 8
Engineering, R&D and production 17 17
Total 25 25
The total number of employees, employed by the Group on 31 December 2018 was 26 (2017: 24).
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Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
7. Employee benefits expenses continued
The Directors’ emoluments (including non-executive directors) are as follows:
2018 2017
€ €
Wages and salaries 828,311 845,847
Total 828,311 845,847
8. Results from operating activities
Results from operating activities includes:
2018 2017
€ €
Audit of the Group and Company financial statements 41,180 34,927
Audit of the subsidiaries’ financial statements 18,000 18,000
Other non-audit services provided by Group’s auditor 2,292 30,188
Tool manufacturing 282,352 145,597
Operating leases 154,046 210,083
Travel 193,771 153,640
Marketing 172,382 58,072
Tool manufacturing expanses are referred mainly to fabrics printing service and increased to €282,352 (2017: €145,597) for the effect of the increasing
sales in textile sector. Operating leases includes the renting of the Italian production facility (€129,806) and office rent of the Parent company
(€14,341). Marketing expenses increased to 172,382 (2017: 58,072) during the period due to increased marketing activities related to G+ brand.
9. Leases
Operating leases relate to the Group’s Head Office and plant and machinery held on operating leases.
2018 2017
Future minimum lease payments € €
Less than one year 59,083 59,092
Between one and five years – –
More than five years – –
Total 59,083 59,092
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9. Leases continued
Finance lease liabilities are payable as follows:
2018 2017
Future minimum lease payments € €
Less than one year 61,735 61,735
Between one and five years 59,570 121,305
More than five years – –
Total 121,305 183,040
2018 2017
Present value of minimum lease payments € €
Less than one year 59,898 59,898
Between one and five years 54,567 108,369
More than five years – –
Total 114,465 168,267
10. Net finance expenses
Finance expenses include:
2018 2017
€ €
Interest Income (4,440) (5,501)
Interest on loans and other financial costs 8,499 9,715
Interest on financial leasing 7,830 10,766
Interest cost for benefit plan 7,145 5,918
Foreign exchanges losses 21,669 130,910
Total 40,703 151,808
At 31 December 2018 interest on loans and other financial costs amount to €8,499 (2017: €9,715). The slight reduction is a consequence of debt
repayments made in the year. Foreign exchange losses of €21,669 (2017: €130,910) are mainly related to Sterling to Euro movement in the Group’s
Sterling bank account.
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Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
11. Taxation
2018 2017
€ €
Current tax expenses 414 1,239
Deferred tax expenses – –
Total tax expenses 414 1,239
2018 2017
Reconciliation of tax rate € €
Loss before tax (3,956,414) (3,946,191)
Italian statutory tax rate 24% 24%
(949,539) (947,086)
Impact of temporary differences 42,327 38,880
Losses recognised (41,913) (37,641)
Impact of tax rate in foreign jurisdiction 38,960 49,610
Losses not utilized 910,579 897,476
Total tax expenses 414 1,239
Tax losses carried forward have been recognised as a deferred tax asset up to the point that they are recoverable against taxable temporary
differences. All other tax losses are carried forward and not recognised as a deferred tax asset due to the uncertainty regarding generating future
taxable profits. Tax losses carried forward are €20,467,507 (€16,791,913 in 2017).
12. Intangible assets
Development
cost Patents Goodwill Others Total
Cost € € € € €
Balance at 31/12/2016 2,426,042 197,250 22,268 29,408 2,674,968
Additions 82,064 47,394 – 2,393 132,450
Balance at 31/12/2017 2,508,106 244,643 22,268 32,401 2,807,418
Additions 123,305 77,269 – 12,500 213,074
Balance at 31/12/2018 2,631,411 321,912 22,268 44,901 3,020,492
Amortisation
Balance at 31/12/2016 882,901 45,210 – 18,811 948,367
Amortisation 2017 257,101 24,464 – 5,177 286,742
Balance at 31/12/2017 1,140,002 69,674 – 23,988 1,235,109
Amortisation 2018 279,289 32,191 – 6,424 317,905
Balance at 31/12/2018 1,419,291 101,865 – 30,312 1,553,014
Carrying amounts
Balance 31/12/2016 1,543,141 152,040 22,268 9,153 1,726,602
Balance 31/12/2017 1,368,104 174,969 22,268 6,969 1,572,309
Balance 31/12/2018 1,212,120 220,046 22,268 14,489 1,467,478
As disclosed in note 1(d) development costs capitalised in the year are mainly based on time spent by employees who are directly engaged in
the development of the G+ technology.
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13. Property, plant and equipment
Industrial Computer Office Plant &
equipment equipment equipment machinery Total
Cost € € € € €
Balance at 31/12/2016 138,660 33,646 84,171 1,880,994 2,137,471
Additions 21,909 2,218 19,549 304,591 348,267
Balance at 31/12/2017 160,570 35,864 103,720 2,185,585 2,485,739
Additions 11,822 9,573 3,600 110,041 135,036
Balance at 31/12/2018 172,392 45,437 107,320 2,295,626 2,620,775
Depreciation
Balance at 31/12/2016 53,353 21,138 19,018 760,778 854,287
Depreciation 2017 25,615 4,324 14,092 303,008 347,039
Balance at 31/12/2017 78,968 25,462 33,110 1,063,786 1,201,326
Depreciation 2018 26,661 4,857 15,145 310,351 357,014
Balance at 31/12/2018 105,629 30,319 48,255 1,374,137 1,558,340
Carrying amounts
Balance 31/12/2016 85,307 12,508 65,153 1,120,216 1,283,184
Balance 31/12/2017 81,601 10,402 70,610 1,121,799 1,284,412
Balance 31/12/2018 66,763 15,118 59,065 921,489 1,062,435
Assets held under financial leases with a net book value of €146,879 are included in the above table within plant & machinery.
14. Investments in subsidiaries
Details of the Company’s subsidiaries as at 31 December 2018 are as follows:
Shareholding
Subsidiaries Country Principal activity 2018 2017
Directa Plus Spa Italy Producer and supplier of graphene 100% 100%
based materials and related products
Directa Textile Solutions Srl Italy Commercialise textile membranes, 60% 60%
including graphene-based technical and
high-performance membranes
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Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
14. Investments in subsidiaries continued
Subsidiaries Place of Business Registered Office Place of Business
Directa Plus Spa Italy Via Cavour 2, Lomazzo (CO) Italy See registered office
Directa Textile Solutions Srl Italy Via Cavour 2, Lomazzo (CO) Italy See registered office
The Company’s investment as capital contributions in Directa Plus Spa are as follows:
Directa Spa
€
At 31 December 2016 11,057,438
Additions 3,122,898
At 31 December 2017 14,180,336
Additions 2,000,000
At 31 December 2018 16,180,336
15. Trade and other receivables
Group Company
2018 2017 2018 2017
Current € € € €
Account receivables 1,367,425 552,612 – 34,345
Tax receivables 374,673 397,305 30,609 24,219
Other receivables 317,119 211,794 127,985 50,676
Total 2,059,217 1,161,711 158,594 109,240
Group tax receivables are composed of Italian VAT receivables of €241,772, UK VAT receivables of €31,634 and a RDEC Tax Credit receivable of €101,267.
Other receivables are mainly composed of governments grants €151,986 and prepayments €160,298.
As at 31 December 2018 the ageing of account receivables was:
2018 2017
Days overdue € €
0-30 1,263,847 539,015
31-180 97,554 7,878
181-365 + 6,024 5,719
Total 1,367,425 552,612
In 2018, 92% of account receivables have an ageing of 30 days and relate to an order delivered close to the year end. The total trade receivables
write-off for the year was €3,584 (0.3% of the gross account receivables).
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16. Deferred tax liabilities
2018 2017
€ €
Deferred tax liabilities 195,504 237,831
Deferred tax assets – losses (195,504) (237,831)
Total – –
Deferred tax assets have been recognised on losses brought forward to the extent that they can be offset against taxable temporary differences
in line with the requirements of IAS 12.
The deferred tax liabilities arise on the capitalisation of development costs and the accounting for the defined benefit scheme. The deferred tax
liabilities are detailed below:
2018 2017
€ €
Capitalised development costs 191,885 227,076
Other 3,619 10,755
Total 195,504 237,831
Net balance Recognised in Recognised Net balance Deferred tax
1 Jan 2017 profit or loss in OCI 31 Dec 2017 liabilities
€ € € € €
Capitalised development costs 262,266 (35,191) – 227,075 227,075
Other 14,445 (3,689) – 10,756 10,756
Total 276,711 (38,880) – 237,831 237,831
Net balance Recognised in Recognised Net balance Deferred tax
1 Jan 2018 profit or loss in OCI 31 Dec 2018 liabilities
€ € € € €
Capitalised development costs 227,075 (35,190) – 191,885 191,885
Other 10,756 (7,137) – 3,619 3,619
Total 237,831 (42,327) – 195,504 195,504
17. Cash and cash equivalents
Group Company
2018 2017 2018 2017
€ € € €
Cash at bank 5,503,568 6,929,012 3,968,016 4,493,006
Cash in hand 316 434 – –
Total 5,503,884 6,929,446 3,968,016 4,493,006
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Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
18. Equity
2018 2017
€ €
Share Capital 154,465 142,628
Share Premium 22,104,240 19,973,996
Retained earnings (14,044,656) (10,250,225)
Non-controlling interests 27,361 22,930
Balance at 31 December 8,241,410 9,889,329
Number of Share
Share capital ordinary shares capital (€)
At 1 January 2016 503,100 503,100
Share reduction on 25 April 2016* – (439,649)
Share sub-division on 19 May 2016** 19,620,900 –
Share issue on 27 May 2016 – convertible loans*** 7,055,493 23,191
Share issue on 27 May 2016 – IPO*** 17,033,334 55,986
At 31 December 2016 44,212,827 142,628
At 31 December 2017 44,212,827 142,628
Share issue on 17 December 2018 – capital raise**** 4,256,000 11,837
At 31 December 2018 48,468,827 154,465
* On 25 April 2016, the issued ordinary shares were redenominated from EUR to GBP into an aggregate nominal value of £398,908, comprising 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 20,124,000 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.
**** On 17 December 2018, 4,256,000 ordinary shares with a nominal value of £0.0025 each were issued as effect of the Company’s capital raise.
Share premium
Share premium €
At 1 January 2016 3,885,816
Cancellation of share premium account on 25 April 2016 (3,885,816)
Shares issued on 27 May 2016 21,934,648
Expenditure relating to the raising of shares (1,960,652)
At 31 December 2016 19,973,996
At 31 December 2017 19,973,996
Shares issued on 18 December 2018 2,355,548
Expenditure relating to the raising of shares (225,304)
At 31 December 2018 22,104,240
On 25 April 2016, the share premium account of the Company was cancelled and the amount of €3,885,816 was credited to a distributable reserve.
Expenditure of €1,960,652 relating to the raising of shares has been deducted from the share premium.
On 18 December 2018, 4,256,000 ordinary shares with a share premium value of £0.4975 each were issued as effect of the Company’s capital raise
and the amount of €2,355,548 was credit to Share premium reserve.
Expenditure of €225,304 referred to direct cost related to the raising of shares was deducted from the share premium.
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55
18. Equity continued
Share capital
Financial instruments issued by the Directa Plus Group are treated as equity only to the extent that they do not meet the definition of a financial
liability. The Directa Plus Group’s ordinary shares are classified 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.
19. Loans and borrowings
Group Company
2018 2017 2018 2017
Non-current € € € €
Finance leases 57,011 115,132 – –
Loans – 96,659 – –
Total 57,011 211,791 – –
Group Company
2018 2017 2018 2017
Current € € € €
Finance leases 58,122 53,906 – –
Loans 168,701 190,874 – –
Total 226,823 244,780 – –
2018 Current Non-current
€ € € Repayment Interest rate
Intesa San Paolo 50,798 50,798 – 6-months EURIBOR
3M + 2.5%
Finlombarda (Atanor) 45,860 45,860 – 3- months Fixed 0.5%
Intesa San Paolo 66,607 66,607 – 3-months Fixed 3.6%
All of the above loans are unsecured.
®
56
Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
19. Loans and borrowings continued
Cash flows
1 January Accrued Capital Interest Cash inflow from 31 December
2018 interest repayment paid short-term loan 2018
Net debt reconciliation € € € € € €
Borrowings 287,533 8,499 (185,439) (8,499) 66,607 168,701
Lease liabilities 169,038 7,830 (53,905) (7,830) – 115,133
Total 456,571 16,329 (239,344) (16,329) 66,607 283,834
20. Employee benefits provision
2018 2017
€ €
Employee benefits 335,132 282,031
Total 335,132 282,031
Provisions for benefits 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 benefit 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 benefits have been contributing to a pension fund or a
treasury fund held by the Italian administration for post-retirement benefits (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 defined contribution scheme, not subject to actuarial evaluation. Amounts already accrued
before 1 January 2007 continue to be accounted for a defined benefit plan and to be assessed on actuarial assumptions.
The breakdown for 2017 and 2018 is as follows:
€
Amount at 31 December 2016 227,358
Service cost 44,764
Interest cost 5,918
Actuarial gain/losses 4,704
Past service cost –
Benefit paid (714)
Amount at 31 December 2017 282,031
Service cost 52,059
Interest cost 7,145
Actuarial gain/losses (1,219)
Past service cost –
Benefit paid (4,883)
Amount at 31 December 2018 335,132
Overview
Strategic Report
Governance
Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018
57
20. Employee benefits provision continued
Variables analysis
Detailed below are the key variables applied in the valuation of the defined benefit plan liabilities.
2018 2017
Annual rate interest 2.30% 2.30%
Annual rate inflation 1.10% 1.10%
Annual increase TFR 7.41% 7.41%
Tax on revaluation 17.00% 17.00%
Social contribution 0.50% 0.50%
Increase salary male 1.20% 1.20%
Increase salary female 1.15% 1.15%
Rate of turnover male 1.70% 1.70%
Rate of turnover female 1.50% 1.50%
Sensitivity analysis
Detailed below are tables showing the impact of movements on key variables:
Actuarial hypothesis – 2018
Decrease 10% Increase 10%
Variation Variation
Rate DBO € Rate DBO €
Increase salary Male 1.08% (2,868) 1.32% 2,934
Female 1.04% 1.27%
Turnover Male 1.53% (2,088) 1.87% 2,386
Female 1.35% 1.65%
Interest rate 2.07% 10,099 2.53% (9,561)
Inflation rate 0.99% (2,816) 1.21% 2,8561
21. Trade and other payables
Group Company
2018 2017 2018 2017
Non-current € € € €
Trade payables 1,459,732 768,016 15,397 23,403
Employment costs 482,357 397,567 – –
Other payables 152,833 150,030 87,988 23,033
Total 2,094,922 1,315,613 103,385 46,436
®
58
Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
22. Financial instruments
Financial risk management
The Group’s business activities expose the Group to a number of financial risks:
a) Market risk
Market risk arises from the Group’s use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value of
future cash flow of a financial instrument will fluctuate because of changes in interest rates or foreign exchange rates. As at 31 December 2018 the
Group is only exposed to variable interest rate risk on the Intesa San Paolo loan. If the interest rate had increased or decreased by 100 basis points
during the year the reported loss after taxation would not have been materially different to that reported.
b) Capital Risk
The Group’s objectives for managing capital are to safeguard the Group’s ability to continue as going concern, so that it can continue to provide
returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services
commensurately with the level of risk. There were no changes in the Group’s approach to capital management during the year.
c) Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
The Group’s credit risk is primarily attributable to its trade receivables. Every new customer is internally analysed for creditworthiness before the
Group’s standard payment and delivery terms and conditions are offered. Advance payment usually applies for the first order and where a
customer has a low credit rating. The Group’s standard payment terms are 30 to 60 days from date of invoice.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. The Group works with leading banks
and financial institutions, both in UK and in Italy, independently rated with the equivalent of investment grade and above.
d) Exposure to credit risk
2018 2017
Group Note € €
Trade receivables 15 1,367,425 552,6012
Cash and cash equivalent 17 5,503,884 6,929,012
Total 6,871,309 7,481,624
The largest customer within trade receivables account for 45.6% of debtors. Management continually monitor this dependence on the largest
customers and are continuing to develop the commercial pipeline to reduce this dependence, spreading revenues across a variety of customers.
e) Liquidity risk
It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Liquidity risk arises from the Group’s
management of working capital and the finance charges and principal repayments on its debt instruments. The Group manages liquidity risk by
maintaining adequate reserves and banking facilities and by continuously monitoring forecast and actual cash flows. The Board reviews regularly
the cash position to ensure there are sufficient resources for working capital requirements and to meet the Group’s financial commitments.
Carrying amount Up to 1 year 1 -5 years
2018 € € €
Financial liabilities
Trade payables 1,459,732 1,459,732 –
Debts for financial leasing 118,325 61,735 56,590
Loans 168,701 168,701 –
Total 1,746,758 1,690,168 56,590
Overview
Strategic Report
Governance
Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018
59
22. Financial instruments continued
Carrying amount Up to 1 year 1 -5 years
2017 € € €
Financial liabilities
Trade payables 768,016 768,016 –
Debts for financial leasing 180,060 61,735 118,325
Loans 287,533 190,874 96,659
Total 1,235,609 1,020,625 214,984
f) Currency risk
The Group usually raises money issuing shares in pounds, it follows that the Group usually holds sterling bank accounts as result of capital raise.
Sterling bank accounts are mainly used to manage expenses of the Company (such as UK advisors, LSE fees and costs related to the Board) in UK.
The cash held in Sterling continues to be subject to currency risk.
EUR
Cash held in EUR 2,804,659
Cash held in GBP 2,699,225
As at 31 December 2017 if the exchange rate EUR/GBP increase by 10% the impact on P&L would be a loss equal to €0.25 million (if decrease by
10% would be a profit equal to €0.3 million).
23. Earnings per share
Change in Weighted
number of Total number number of
ordinary shares of ordinary shares Days ordinary shares
At 1 January 2015 – 503,100 – 20,124,000
At 30 June 2015 – 503,100 – 20,124,000
At 31 December 2015 – 503,100 – 20,124,000
Existing shares – 503,100 140 7,697,705
Share sub-division on 19 May 2016 19,620,900 20,124,000 8 439,869
Issued on 27 May 2016 24,088,827 44,212,827 218 26,334,416
At 31 December 2016 43,709,727 44,212,827 366 34,471,990
At 31 December 2017 – 44,212,827 365 44,212,827
Existing shares – 44,212,827 351 42,516,993
Issued on 18 December 2018 4,256,000 48,468,827 14 1,859,078
At 31 December 2018 4,256,000 48,468,827 365 44,376,071
®
60
Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
23. Earnings per share
Basic Diluted
2018 2017 2018 2017
Non-current € € € €
Loss for the year (3,956,828) (3,947,431) (3,956,828) (3,947,431)
Weighted average number of ordinary shares
in issue during the year 44,376,071 44,212,827 44,376,071 44,212,827
Fully diluted average number of ordinary shares
during the year 44,376,071 44,212,827 44,376,071 44,212,827
Loss per share (0.09) (0.09) (0.09) (0.09)
24. 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.
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 yet been exercised, leaving a total of
1,639,877 outstanding as at the year end, as cancellation occurred for those employees who left the Group in 2018. 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 office-
holders) of a member of the Group and 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 officer 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
financial 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 financial year of the Company shall not
exceed 150 percent of his annual rate of fees.
Overview
Strategic Report
Governance
Financial statements
Additional information
Directa Plus
Annual Report & Accounts 2018
61
24. Share Schemes continued
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 are based on growth in EBITDA, share price and production capacity
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 reflect 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.
The inputs to the Black-Scholes model were as follows:
31 Dec 2018 31 Dec 2018
Market value Performance
Black Scholes Model shares shares
Share price 75p 75p
Exercise price 75p 0.25p
Expected volatility 70% 70%
Compounded Risk-Free Interest Rate 4.25% 4.25%
Expected life 3 years 3 years
Number of options issued* 540,337 1,099,540
*Number of options issued is an input of the Black-Scholes model and refers to the total outstanding options granted by the Company. This is not representing any
option issued in the period.
Details of the number of share options outstanding are as follows:
Cancelled Exercisable
Outstanding at during the Outstanding at period
start of period Granted period end of period option price Grant date Exercisable date
31 December 2016 – 1,675,609 – 1,675,609
1,099,540 – – 1,099,540 0.25p 12 May 2017 12 May 2020
576,070 60,000 – 636,070 75.00p 12 May 2017 12 May 2020
31 December 2017 1,675,610 60,000 – 1,735,610
– – (95,733) (95,733)
31 December 2018 1,735,610 (95,733) 1,639,877
Cancellation of share options during the period relates to the resignation of two employees and one Non-Executive Director.
®
62
Directa Plus
Annual Report & Accounts 2018
Notes to the consolidated financial statements
continued
25. Related parties
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’.
2018 2017
€ €
Short-term employee benefits and fees 235,646 227,162
Social security costs 64,819 46,498
300,465 273,660
For Directors remuneration please see Director’s Remuneration Report in the Annual Report.
26. Contingent liabilities
The group has the following contingent liabilities relating to bank guarantees on operating lease arrangements and government grants.
2018 2017
€ €
Operating leases 105,640 105,640
Total 105,640 105,640
27. Post balance sheet events
As part of the capital raise that was undertaken in December 2018, a Conditional placing occurred post period, on 9 January 2019, to raise £1.02
million equal to 2,044,000 ordinary shares with a nominal value of £0.0025 each. That will be shown on the 2019 balance sheet. As part of the same
process, the Company undertook an Open Offer in early January 2019 in which shareholders will have been invited to participate. The Open Offer
raised an additional £0.3 million that will be shown on the 2019 balance sheet.
Directa Plus
Annual Report & Accounts 2018
Directa Plus
Annual Report & Accounts 2018
Directa Plus in 2018
Discover how we are using graphene to help customers’
revolutionize the performance of their products.
Direct Plus is one of the largest producers and suppliers
worldwide of graphene nanoplatelets-based products for use
in consumer and industrial markets.
Our graphene nanoplatelets-based products are natural, chemical-free and
sustainably produced. Our production process is designed to meet large
supply chains' requirements for volume, cost and quality control.
By incorporating Directa Plus’ unique graphene blends, identified by
the G+ brand, our customers can revolutionize the performances
of their own end products in commercial applications such as
textiles, tyres, composite materials and environmental
solutions. We partner with our customers to enable
them to offer the high-performance benefits of
G+ in their own products.
Our company has a unique and patented
technology process and a scalable and portable
manufacturing model. We produce graphene
nanoplatelets-based products at our own
factory near Milan, Italy, and can set up
additional production at customer locations to
reduce transport costs, waste and time-to-
utilization. We are strongly committed to
environmental sustainability and abided by a strong
Code of Ethics in all aspects of our business practice.
Contents
01 Highlights
27 Directors’ remuneration report
02 Target market progress
29 Audit Committee report
03 At a glance
30 Remuneration Committee report
04 Chairman’s statement
31 Independent auditor’s report
06 Our strategy and business model
34 Consolidated statement of comprehensive income
08 Chief Executive Officer’s review
35 Consolidated and company statement of financial position
14 Market review
36 Consolidated statement of changes in equity
16 Chief Financial Officer’s review
36 Company statement of changes in equity
18 Directors’ biographies
20 Directors’ report
37 Consolidated statement of cash flow
38 Notes to the consolidated financial statements
23 Corporate governance report
IBC Directors, secretary and advisers
Directors, secretary and advisers
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
Richard Hickinbotham – Non-Executive Director
Company Secretary
Marco Ferrari
Registration number
04679109
Registered office
3rd Floor
11-12 St James’s Square
London SW1Y 4LB
United Kingdom
Principal place of business
Directa Plus Plc
ComoNExT Science Park
Via Cavour 2
22074 Lomazzo (Co)
Italy
Nominated adviser and broker
Cantor Fitzgerald Europe
One Churchill Place
Canary Wharf
London E14 5RB
United Kingdom
Joint broker
N+1 Singer
1 Bartholomew Lane
London EC2N 2AX
United Kingdom
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
Legal advisers
Fox Williams LLP
10 Finsbury Square
London EC2A 1AF
United Kingdom
Registrar
Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Financial PR adviser
Tavistock
1 Cornhill
London EC3V 3NR
United Kingdom
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Printed sustainably in the UK
by Pureprint, a CarbonNeutral®
company with FSC® chain
of custody and an ISO 14001-
certified environmental
management system recycling
over 99% of all dry waste.
Directa Plus Plc
3rd Floor
11-12 St. James’s Square
London
SW1Y 4LB
United Kingdom
www.directa-plus.com
Welcome to the
Graphene age
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Annual Report & Accounts 2018