Haydale
Graphene
Industries Plc
Annual Report
And Accounts
For the year ended
30 June 2017
Creating
Material
Change
www.haydale.com
Haydale Graphene
Industries Plc
Clos Fferws, Parc Hendre,
Capel Hendre, Ammanford,
Carmarthenshire, SA18 3BL
T: +44 (0)1269 842946
F: +44 (0)1269 831062
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Contents
StRAteGIC RePoRt
Chairman’s Statement
Chief executive’s Review
Strategic Report
GoveRnAnCe
Board of Directors
Directors’ Report
Corporate Governance Statement
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
FInAnCIAL StAteMentS
Independent Auditor’s Report
Consolidated Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in equity
Consolidated Cash Flow Statement
notes to the Consolidated Financial Statements
Parent Company Statements
Company Balance Sheet of Haydale Graphene Industries Plc
Company Statement of Changes in equity
notes to the Company Financial Statements
SHAReHoLDeR InFoRMAtIon
Corporate Directory
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Industry leader
applying graphene
and other advanced
materials to enhance
performance
Haydale
Creating
material
change
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
Chairman’s Statement
David Banks
Chairman
My task is to grow the
business into a
significant global
advanced materials
group
The year under review
was a very busy one,
with two strategic
acquisitions, one in
the USA and one in
Thailand
I am delighted to present the Company’s
full year results to 30 June 2017 as your
new Chairman, having taken over from
John Knowles, who retired in July of this
year. The Group thanks John for his major
contribution to the Company, which he
joined prior to the IPO in April 2014. My
task is to build on his foundations and to
move the business on from our early
commercial wins to taking the current
products we have developed, and
together with the new ones in the
pipeline, grow the business into being a
significant global advanced materials
group.
Haydale has been working for over
18 months on developing products in the
Far East, a market which we see as ready
adopters of graphene, and our other
advanced materials, and a market that
offers significant potential growth. I am
therefore encouraged to see our strategic
focus in the Far East is starting to pay off,
with a dozen sales orders received across
our three sites in the Far East since the
beginning of August, where we have been
particularly active
in supplying our
tailored graphene-based inks for screen
printing sensors for the self-monitoring
blood glucose (“SMBG”) market. Whilst
initially modest, it is the beginning of
long-term repeat orders that we are
looking to secure in this rapidly growing
£11.54 billion market (US$15 billion).
Furthermore, as previously announced, a
number of our graphene-based inks that
have received FDA regulatory approval to
test in the SMBG sector where we believe
the applications can be aimed at the US
market. The longevity of these products is
the crucial factor in our investment into
this sector which, once established, are
expected to deliver regular recurring sales
orders to the Group.
In addition, Haydale’s graphene has been
designed into a new product range for a
leading Far East cookware manufacturer
who sell almost 400,000 units per
month. We are in the final stages of
independent testing of the product range
which, if successful, is expected to be
the new year. The
launched
in
functionalised
graphene material
into the product was
incorporated
processed by our new Thai facility and has
been shown to enhance the thermal
response in a range of pots and pans.
Once launched, our expectation is that
the manufacturer will extend the
graphene coating across a wider range of
its cookware products. It is our firm
intention to then seek other cookware
manufacturers
in other geographic
territories to adopt this new product
offering.
On the corporate front, the year under
review was a very busy one, with two
strategic acquisitions completed, one in
the USA and one in Thailand. We now
believe that we have a global presence in
the world markets serving customers
wanting our performance enhancing
advanced materials to improve their own
products. Post year end, we began
operating out of Taiwan to meet demand
for biomedical screen-printed sensors for
the SMBG market. It is early stages but
the customer engagements are looking
very encouraging. We are now operating
from six sites globally (two in the UK and
one in each of the US, Thailand, South
Korea and Taiwan), the sales from which
are managed through two newly
established strategic business units
which began operating in July 2017
dealing with (i) resins, polymers and
composites; and (ii) advanced materials,
including functional inks, coatings and
silicon carbide (SiC). Going forward, we
will concentrate on growing our sales
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STRATEGIC REPORT
Chairman’s Statement continued
order book, which at the year end stood at £5.40 million and was
increased post year end to approximately £6.00 million,
bolstered by the new $4.48 (£3.45) million three-year-contract
announced in early September with one of our existing SiC
customers, Tateho Chemical Industry Co., Limited.
We now believe that we have a
global presence in the world
markets serving customers
wanting our performance
enhancing advanced materials
As part of Haydale’s sales strategy we will continue to look to
engage in focussed partnerships, collaborations, and other
commercial arrangements with “best in class” companies across
the globe in our chosen strategic market of composites, ceramics
and functional inks/coatings, in order to introduce our products
using these advanced materials.
I would like to thank the staff, our advisors and my fellow Board
members for their hard work and dedication in positioning the
Group for the next stage of its growth. I would also like to thank
our shareholders for their continued support.
David Banks
Chairman
10 October 2017
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
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Haydale’s
advanced
materials have
led to weight
savings on the
BAC Mono
Haydale’s formulated conductive inks are
being used in biomedical sensor test strips
Haydale’s materials have helped overcome
lightning strike on aircraft
3
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STRATEGIC REPORT
Chief Executive’s Review
Haydale Limited
Ammanford, Wales
2
Main R&D operation which also sources,
handles, functionalises and processes
nanomaterials.
3
2
1
Haydale Technologies,
Inc. (“HTI”)
South Carolina, USA
HTI owns ACM which manufactures and sells
SiC whiskers and fibres and is the Group’s US
Centre of Excellence.
1
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
3
Haydale Composite Solutions
Limited (“HCS”)
Loughborough, England
Composites design, R&D and testing
specialist, covering the full product
development lifecycle.
5
4
4
Haydale Technologies (Thailand)
Company Limited (“HTT”)
Bangkok, Thailand
Provides a low cost R&D Centre of
Excellence, servicing the APAC region
and supporting HTK’s and HTW’s sales
team.
55
Haydale Technologies,
(Taiwan) Co Ltd (“HTW”)
Kaohsiung, South Taiwan
6
Formulates, produces and sells bespoke smart
conductive inks used in diagnostic biomedical
sensors and other products
6
5
Haydale Technologies
(Korea) Limited (“HTK”)
Seoul, South Korea
Dedicated sales servicing the fast moving
Korean, Chinese and Japanese markets.
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STRATEGIC REPORT
STRATEGIC REPORT
Chief Executive’s Review continued
Financial Highlights
Total income, comprising revenue of
£3.00 million (2016: £1.17 million) and
grant income of £0.90 million (2016:
£0.75 million), for the year ended 30 June
2017 increased more than 100 per cent.
year on year to £3.91 million (2016: £1.92
million), being generated from a mixture
of silicon carbide sales (81⁄2
month’s
contribution from ACM, acquired in mid-
October 2016), advanced composite
consulting contracts, reactor sales and
grant income. The EBITDA (adjusted for
share-based payment charges and
profit/loss on disposal of property, plant
and equipment) was a loss of £4.35
million (2016: £3.36 million). We continued
to invest in increasing our know-how,
knowledge and understanding of mixing
and dispersion techniques alongside our
industry leading collaboration partners as
we expensed £0.91 million of R&D spend
during the year (2016: £0.51 million) and
capitalised
(2016:
£0.43 million). We ended the year with
cash of £2.10 million (2016: £2.86 million).
£0.24 million
in
Strategy
This year has seen the continued
implementation of our strategy to
promote Haydale as a pre-eminent
solutions
the
provider
commercialisation of graphene and other
advanced materials. We have increased
Group income in this year by more than
100 per cent. to £3.91 million and are
operational across 6 sites in the US, UK
and the Far East. Critically, in our drive to
grow sales further, we now have market
ready products, principally in silicon
carbide micro fibres (“SiC”) from our US
operation and screen printable graphene
and speciality inks from our Far East
businesses. Since we acquired the SiC
business in October 2016, we have
successfully secured additional long term
orders of US$2.6 (£2.0 million) million
from a new customer as announced in
April this year, and recently a new contract
from our key SiC customer, Tateho
Chemical Company Co., Limited, worth
$4.48 million (£3.45 million) over three
years that extended the previous order
value by $1.40 million (£1.08 million).
These contracts, together with others
66
Ray Gibbs
Chief Executive Officer
4000
3500
3000
2500
2000
1500
1000
500
0
Group income (£’000)
3,905
1,923
1,475
FY2015
FY2016
FY2017
Total income increased
more than 100% year
on year
16000
14000
12000
10000
8000
6000
4000
2000
0
Gross Assets (£’000)
15,001
7,703
6,148
FY2015
FY2016
FY2017
Investment in
knowledge, know-how,
products and building
our global presence
has led to an almost
doubling of gross
assets
across the Group, take the Group’s total
order book to £6.00 million today, which
will be delivered over the next three and
a half years.
As previously announced, Haydale has
experienced unforeseen delays with our
commercial
collaboration partners,
Flowtite Technology AS (owned Amiantit
Company) and Huntsman Advanced
Materials, albeit we remain confident of
future revenues from both of these next
generation product developments. In
particular, the results from extensive
testing with Flowtite on their glass
reinforced plastic (“GRP”) pipes produced
in April this year incorporating our GNP
material to improve impact resistance
have been very encouraging and Flowtite
has requested a repeat trial, set for early
2018, to corroborate these positive
findings. During the course of our work
with Huntsman, we have gained critical
know-how and understanding of
dispersion, mixing and processing of
advanced nanomaterials which has
assisted us in a number of related areas
and
our
commercial offering. Our ability to use
advanced materials in a way that does
not affect the downstream production
process of customers has been a
significant factor in gaining customer
acceptance of our product offering. A key
example here is Haydale’s involvement in
the recently announced Airbus aileron
where our technology was independently
verified to achieve over a 600 per cent.
increase in electrical conductivity capable
of defeating lightning strike impact on
aircraft. Although a longer-term revenue
opportunity, our work in this area, in
collaboration with GKN and Cobham, has
generated a product
capable of
immediate sales in the pre-impregnated
carbon fibre composite field and opens
up a range of near-term opportunities
such as electro-magnetic shielding,
leading-edge de-icing and anti-static
applications.
significantly
improved
Haydale’s business model utilises the
expertise of best in class industrial
partners to process significant volumes of
graphene under licence. The carrier
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
material (e.g. resin, polymer or ink systems) which is impregnated
with a concentrated tailored advanced material (such as
graphene) is known as a masterbatch. We previously reported
our important agreement with the Advanced Metallurgical
Group N.V. (“AMG”) culminating in the commissioning at its
Hauzenburg site in Germany of two of our plasma reactors in
November 2016. AMG’s facility being established will be able to
satisfy the requirements of our customers and
joint
development partners for graphene loaded masterbatch,
principally in the thermoset composite market where volumes
can be substantial. As part of our agreement with AMG, we now
have access to their world-wide sales force to promote our other
products, principally our functional inks. Ensuring we have
strategically located, dedicated processing centres, close to
customer bases with a secure, sustainable, consistent, quality
material supply is at the heart of our commercialisation strategy.
Acquisitions
We continue to pursue a strategy to consider suitable
acquisitions if they provide Haydale access to sales of
complementary products in our primary target markets. In the
year under review we have been particularly active and have
acquired operations in the USA and Thailand, both key
geographies that we consider prime markets for our products
and technical skills.
In the USA, our SiC operation acquired in October 2016 is
performing to plan and growing its order book. Having
established its sales growth potential, in May 2017, we acquired
the minority 13.5 per cent. of our US holding company subsidiary,
Haydale Technologies Inc (“HTI”), that the Group did not
previously own for approximately US$0.5 million (£0.41 million),
satisfied out of internal cash resources.
Haydale has ambitious plans for
growth in the Far East following
intensive customer evaluations,
especially in South Korea, and our
new facilities in Taiwan and
Thailand
In Thailand, shortly after the acquisition in September 2016, we
built out a high-class facility to house our patented plasma
reactor technology and establish a graphene R&D centre in the
prestigious Thailand Science Park capable of servicing our Far
East sales effort. This facility officially was opened on 29 March
2017 by HRH Princess Maha Chakri Sirindhorn. Since then our
Thai facility has supplied the functionalised graphene for our
push into bio medical sensors and cookware and has secured its
own funded research projects with leading Thai petrochemical
processor, IRPC, and the Thailand Ministry of Energy. We have
expectations that these projects will lead to follow on product
sales in region. Further details of the two acquisitions are dealt
with in the Strategic Report.
A major part of our sales expansion will be in China, one of the
largest markets in the world for advanced composites
applications. In February 2017, we secured a strategic financial
partner in Everpower Holdings (a New York financial investment
family office with direct access to China), to assist us in opening
up this high growth market for us. We are encouraged by their
commercial approach and business drive which we expect to
translate into revenues to Haydale in the current financial year.
Strategic Business Units
From 1 July 2017, we created two strategic business units (SBU’s)
within the Group to focus on and deliver our anticipated sales
growth:
1.
2.
Resins, Polymers and Composites; and
Advanced Materials (including SiC and inks)
Both SBU’s have dedicated management teams with a focus on
delivering sales growth and, in turn, operating profits. Each unit
has a Managing Director, with Trevor Rudderham heading up
Advanced Materials and Keith Broadbent running the Resins,
Polymers and Composites SBU. Keith, who is based in the UK,
joined Haydale in July 2017 having worked at Ultra Electronics
and was previously head of production at luxury boat builders
Sunseeker and Princess. Trevor, who is based in the US, has been
with the Group since mid-2016 shortly before our acquisition of
ACM in the Autumn of 2016.
From 1 July 2017, we created two
strategic business units within the
Group to focus on sales
The SBU teams are challenged with growing sales of our SiC and
inks products and on the conversion of our extensive research
and product development in areas such as pre-preg composites
into a sales pipeline and commercial revenues of graphene
enhanced products. Haydale has ambitious plans for growth in
the Far East following intensive customer evaluations, especially
in Korea, and our new facilities in Taiwan and Thailand.
In North America, we have successfully relaunched and
rebranded ACM, and our strategy is to take advantage of a
fragmented and largely untapped graphene and advanced
materials market. This operation has quality technical and now
commercial management to deliver ambitious growth plans. In
addition, we will seek to establish our plasma reactors in the USA
to enhance the full technical delivery of our materials and
products to a large market.
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STRATEGIC REPORT
STRATEGIC REPORT
Chief Executive’s Review continued
Haydale’s patented functionalisation process
Outlook
The group has income visibility from its long-term grant awards,
the ongoing advanced composite consulting services from the
highly skilled team at Loughborough, and SiC sales orders from
the US which, in aggregate, provided the Group with a record
order book of £5.4 million at the year-end, that has since grown
to approximately approx. £6.0 million as at the date of
this report.
We see the rapidly growing self-diagnostic biomedical sensor
market for diabetes monitoring as a major part of the inks sales
in the current financial year through our newly opened Taiwan
operation. The long-term repeatability of this market should add
to our increasing sales visibility and provide a pathway for us to
progress our other speciality functional ink products under
development. We expect to enter into long-term supply
agreements with the print houses with which we have had our
conductive graphene-based ink product accepted and designed
into the future sale of test strips for the SMBG market.
Haydale has evolved from an R&D focused business to a
commercial entity with a real geographic presence. This past year,
having grown total income by more than 100 per cent., and with
the recent overseas investments and management actions
highlighted in this statement and in the Strategic Report, we are
expecting significant increases in product sales in the current
financial year, which will build the foundations for Haydale to
achieve our near and long-term growth objectives.
Ray Gibbs
Chief Executive Officer
10 October 2017
Supply Chain (cid:1)
The right material with
the right level of
functionalisation is
essential for the
specific application or
product(cid:1)
(cid:1)
We supply the most
appropriate feedstock.
Our process is
independently
verified(cid:2)by the(cid:2)National
Physical Laboratory(cid:1)
Material(cid:1)
Graphene and many other nano particles do not
mix naturally with other materials. All materials
o(cid:3)er di(cid:3)ering qualities to the host material (cid:1)
AM(cid:1)
Advanced Materials(cid:1)
Chemistry(cid:1)
To ensure graphene’s superior properties can be blended
into our customers’ products, compatible chemical groups
are added to the material’s surface to enable e(cid:3)ective
dispersion of the graphene (‘functionalised’)(cid:1)
Outputs (cid:1)
U
n
i
t
s
(cid:1)
B
u
s
i
n
e
s
s
S
t
r
a
t
e
g
i
c
Level(cid:1)
Our patented HDPLAS® low temperature plasma process
o(cid:3)ers the most e(cid:3)ective method of achieving this
nanomaterial functionalisation and harnesses the true
potential of graphene(cid:1)
RPC(cid:1)
Resins, Polymers, Composites(cid:1)
8
(cid:2)
(cid:2)
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
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Industries such as healthcare and manufacture of
jet engines use Haydale’s advanced materials
Haydale’s advanced materials have been incorporated into drones
Sporting goods is a key target sector for Haydale’s advanced materials
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STRATEGIC REPORT
Strategic Report
The directors present their Strategic Report for the year ended
30 June 2017.
PRINCIPAL ACTIVITIES
Haydale Graphene Industries Plc (“HGI”, “Haydale” or the “Group”)
is the AIM listed group that uses tailored advanced materials,
including graphene and silicon carbide (SiC), to enhance the
quality and performance of its customers’ products. In the USA,
Haydale manufactures proprietary silicon carbide fibres and
whiskers that strengthen ceramics and enable highly scratch and
wear resistant coatings. Applications for SiC include scratch
resistant cookware, corrosion barriers for oil and gas pipelines
and cutting tools that fashion, for example, jet engine turbine
blades from solid billets. The Group has developed regulatory
approved proprietary graphene-based inks and coatings for the
print and biomedical sensor markets, as well as enhanced resins
for the pre-preg carbon fibre market. The Group has operational
activities in its six chosen geographies worldwide. In summary,
these are:
Haydale subsidiary
Haydale Limited
Location
Principal activities
Ammanford, Wales
Haydale Composite Solutions Limited (“HCS”)
Loughborough, England
Haydale Technologies (Korea) Limited (“HTK”)
Seoul, South Korea
Haydale Technologies (Thailand) Company
Limited (“HTT”)
Bangkok, Thailand
Haydale Technologies, Inc. (“HTI”)
South Carolina, USA
Haydale Technologies Taiwan Ltd (“HTW”)
Kaohsiung, Taiwan
resins,
R&D operation, supporting
polymers and composites strategic business
unit
the
Advanced composites design, R&D and testing
full product
covering
specialist,
development lifecycle
the
Dedicated sales servicing the fast-moving
Korean, Chinese and Japanese markets
Provides
low-cost and high-value R&D,
servicing the APAC region and supporting the
Far East sales teams. Acquired in September
2016
ACM
is HTI’s wholly owned operating
subsidiary acquired in October 2016 which
produces and sells novel silicon carbide micro
fibres and whiskers
Newly established
in July 2017 as the
production facility and technical centre for
sales of bio medical regulatory approved screen
printing and other speciality inks
During the year the Group made two acquisitions, in Thailand
and in the USA, and secured a strategic investor as part of a desire
for geographic coverage and product diversification in the key
overseas markets of the USA and Far East, details of which are
set out below.
USA
In October 2016, we completed the strategic acquisition of ACMC
Holding, Inc., and its wholly owned trading subsidiary, Advanced
Composites Materials, LLC. (together “ACM”), a profitable, high
quality USA based silicon carbide micro-fibre producer. We
acquired the share capital of ACM for of $1.6 million (£1.31 million)
and we assumed debts held by ACM of approximately
$3.6 million (£2.96 million). $1.00 million (£0.82 million) of the
consideration was settled via the issue of 415,618 new ordinary
shares in Haydale and there remains approximately £0.46 million
of consideration which is expected to be settled by the end of
December 2017. There is also an agreed earn out formula that
runs to mid-2020 that provides for further payments of up to
$1.80 million (£1.39 million) to the vendors of ACM, based upon
ACM achieving certain sales targets that are expected to be
self-funded.
The acquisition of ACM was financed out of existing resources,
new-long term banking facilities secured in the US and an
oversubscribed placing and open offer that raised £2.59 million
before expenses. We spent a considerable amount of time
evaluating the North American market before deciding to
acquire ACM and we concluded that the business offered us a
strategic foothold in a substantial geographic territory offering
significant growth potential and synergistic products, whilst also
allowing for substantial cross-selling opportunities within the
Group. In advance of its purchase, we recruited Trevor Rudderham
as CEO of Haydale Technologies Inc (“HTI”), our US subsidiary that
acquired ACM, to run the Group’s North American operations. In
May 2017, we acquired the minority 13.5 per cent. interest in HTI
10
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
that the Group didn’t previously own for $0.51 million
(£0.41 million), paid out of existing cash resources.
We are pleased with ACM’s performance under the Group’s
ownership and we have subsequently invested heavily in sales
and marketing activities. Pleasingly, in March 2017 we secured a
four-year sales contract to supply our SiC micro fibre to a new
customer for tooling and wear resistant applications, principally
in the manufacture of hard edged cutting tools used in the
production of land based turbines and jet engine fan blades. The
contract, worth $2.60 million (£2.0 million) over its four-year
term, is expected to deliver approximately $0.65 million (£0.50
million) of annual revenues. Post year end, we secured a new
replacement long-term contract for the supply of our SiC
whiskers to our major Japanese customer, Tateho Chemical
Industries Co., Limited (“Tateho”). This contract, worth
$4.58 million (£3.52 million) over its three-year term, replaces the
existing contract with Tateho which had less than two years to
run and increased the Group’s order book and income visibility
by a further $1.40 million (£1.08 million).
ACM has predominately long-term
contracts, some at highly attractive
margins, providing us with
excellent future revenue visibility.
The USA is a significant market for us which we estimate
accounts for around 40 per cent. of the world’s demand for our
advanced materials and further investment into the region is
likely to continue, particularly with regards to our patented
plasma treatment process of advanced materials, such as
graphene. HTI is reviewing a number of initiatives to add revenue
and new products to its SiC portfolio. This will involve adding
processes and equipment into the available space at our South
Carolina facility. If successful, these new products are not
expected to add any significant cost to direct labour or
overheads.
Far East
Having opened a sales office in Seoul, South Korea in 2015, and
established a collaboration in Taiwan for our inks in early 2016,
we found that the pace of enquiries for functional materials and
ink products challenging to our UK operations. It became
apparent that we needed a local facility to service our Far East
customers who constantly required rapid turnaround and ink
reformulation services. In September 2016, we completed the
acquisition of Bangkok-based Innophene Co. Ltd for £0.31 million,
consideration for which was settled through the issue of 176,952
new ordinary shares in Haydale, representing approximately 1 per
cent. of the Company’s then issued share capital.
Innophene was subsequently renamed Haydale Technologies
(Thailand) Limited, (“HTT”) and now has a portfolio of ink
products that we are starting to commercialise. These include a
software driven anti-counterfeiting device that “reads” our
unique ink when printed onto a product label, proving the
authenticity (or otherwise) of the goods. We are exploring areas
of interest from governments and producers seeking to protect
brands and reduce the growing incidence of counterfeit goods.
The specialist ink uses materials from our collaboration partner,
Talga Resources, and has been developed over the last nine
months.
HTT has quickly established itself as a technical and sales
support service for our Korean and Taiwan activities. The first step
was to set up a high-class facility in the prestigious Thailand
Science Park in Bangkok to house one of our patented plasma
HT60 reactors and establish the first graphene R&D centre in
Thailand. This was achieved when HRH Princess Maha Chakri
Sirindhorn officially opened the facility on 29 March 2017. Since
then the operation has secured funded research projects with
leading Thai petrochemical processor, IRPC, for functionalisation
of some of its by-products, and the Thailand Ministry of Energy
on graphene enabled super capacitors. All trial and product sales
requiring functionalised graphene in the region have been
processed and shipped from our Thai facility.
As further evidence of our focus on the Far East market, in
February 2017, we announced that we had secured a £3.3 million
strategic investment from USA-based, Everpower International
Holdings Co ltd (“Everpower”), to be made through one of its
Chinese subsidiaries. The investment was concluded in April 2017
and resulted in Everpower owning 9.9 per cent. of the Group and
an agreement to exploit Haydale’s current and future products
in China. Everpower has purchased $0.20 million (£0.15 million)
worth of products from us for delivery in the new year and we
are currently working together to industrialise a number of our
products, including our SiC, conductive inks and the advanced
thermoset composite designs created by the Group.
sources, handles,
The EU
In the UK, we have two operational facilities in Ammanford and
Loughborough. Ammanford is primarily a R&D operation which
functionalises and processes
also
nanomaterials using a suite of prototyping and analytical
equipment, as well as its own patented plasma reactors.
Ammanford is responsible for installing, commissioning and
maintaining the plasma reactors used internally and for third
parties. The aim is to provide the Group with sustainable
commercially available graphene and other nanomaterials for
both internal product development and third-party customers.
In Loughborough, we are focussed on producing applications
engineering solutions in traditional thermoset composites and
have been delivering masterbatch for the Huntsman research
project where we have added graphene into Huntsman’s high-
end epoxy resin where their focus has now been to enhance the
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STRATEGIC REPORT
Strategic Report continued
thermal conductivity (heat dissipation) of composite carbon fibre
pre-preg. A second major research project was undertaken with
leading water and sewerage pipe manufacturer, Flowtite, which
incorporated graphene into Flowtite’s next generation pipes with
the aim of increasing their impact resistance and improving the
pipe’s impermeability. Our work with Huntsman and Flowtite
has been mainly funded by the Group and, although there have
been some delays in their commercial progress, we remain
confident of significant revenue opportunities in the future.
Although it is too early to be definitive as tests are ongoing, we
have seen encouraging results in key metrics such as fracture
toughness (impact resistance) in the glass reinforced plastic
(“GRP”) pipes.
using
products
In May 2016, we entered into a collaboration agreement with
Graphit Kropfmuhl GmbH ("GK"), part of AMG Advanced
Metallurgical Group N.V. ("AMG"), to develop new valued-added
HDPlas®
nanomaterial
functionalisation process. As part of the agreement, we supplied
an HT60 R&D reactor and a larger capacity HT200 reactor to GK’s
purpose built facility in Germany. Commissioning of the reactors
was completed in November 2016. It is expected that this facility
will produce, under licence from Haydale, the graphene-based
masterbatch expected to be purchased by the likes of Flowtite,
once commercial quantities begin to be required.
Haydale’s
Strategic Business Units
On 1 July 2017, the Group, which consisted of eight worldwide
limited liability operating entities, undertook an internal
reorganisation and created two Strategic Business Units (“SBU”)
in order to streamline its operations and instill a focus on sales
and profits. The intention is to ensure that the Group is best
positioned to realise its potential as a profitable commercial
entity having evolved from being an R&D oriented business.
One SBU is focused on Resins, Polymers, and Composites (“RPC”)
and will concentrate on marketing and selling the newly
developed graphene infused carbon fibre pre-impregnated
materials (pre-preg). The second SBU is focused on selling our
Advanced Materials (“AMAT”), including our silicon carbide (“SiC”)
whiskers and fibres and our newly developed functional inks and
pastes initially targeting the US$15Bn (£11.54Bn) self-monitoring
blood glucose device market.
Each SBU has its own managing director with full profit and loss
responsibility and a principal focus on driving product delivery
and sales. Supporting each managing director will be dedicated
sales teams with technical support. Trevor Rudderham, our USA
CEO, is heading up the AMAT SBU and has a dedicated sales team
in the USA and Far East. Keith Broadbent has been appointed as
the MD of the RPC SBU, which incorporates both of our UK
facilities. Keith joined us July 2017 after many years at an
operational director level with related businesses such as
prestigious boat manufacturers, Sunseeker International and
Princess Yachts. Going forward, the Group intends reporting the
trading results of each SBU.
12
OPERATING REVIEW
The Group’s key objective now is to accelerate the transition of
the business from an R&D focussed operation into a sales and
marketing organisation. We now have the strategic business
units in place with quality management and the supply chain
and collaboration partners with sales reach to commence
commercial sales of products. One of the fundamental items of
this strategy is to have a sustainable supply chain (with a second
back-up source) secured for anticipated demand and multiple
sites that answer the customers’ requirements for a disaster
recovery plan.
Funded and Private Venture projects
During the year under review, the Group has been busy
progressing R&D programmes with important commercial
partners where development of a commercially viable end
products is a pre-requisite of securing each projects’ funding.
Examples of such projects include:
•
Graphene composites evaluated in lightning strike:
This Innovate UK project was designed to develop electrically
conductive adhesives for aerospace applications and we were
able to deliver independently verified increases in electrical
conductivity on a carbon fibre Airbus Aileron. We are now
investigating other ways of imparting lightning protection
and electrical conductivity for electromagnetic interference
(EMI) shielding and anti-static composite structures. The
adhesives developed during the project are expected to have
applications in other sectors, including large offshore wind
turbines and marine, as well as applications in the oil and gas
industry for static electricity dissipation in pipelines.
•
Graphene additives on carbon/carbon composite materials.
In conjunction with Meggitt Aircraft Braking Systems, a
division of Meggitt plc, we are investigating the potential of
graphene additives and SiC to develop carbon/carbon
composites for friction and thermal management
applications for a range of global end users, including
aerospace, space and power generation.
•
Hydrogen storage pressure vessels
We are designing and developing a thermoplastic composite
vessel and pipe for hydrogen storage and transfer
applications at pressures of up to 700 bar. Such products will
be fully recyclable, impact resistant and durable. The sectors
targeted for these products include automotive and energy.
•
De-icing
We have successfully demonstrated the feasibility of
forming multi-functional graphene-based surfaces capable
of Joule heating for de-icing applications with additional
functionality of ice sensing to form a 'smart surface'.
Applications include de-icing for drones and other leading-
edge structures such as wind turbine blades.
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
with the FDA approved ink formulations that have been
developed in the Far East. We are in the process of documenting
our knowledge and know-how IP, including ink recipes and
masterbatching techniques.
In the USA, ACM has filed a patent for the production of its silicon
carbide micro-fibre but our preference is to keep secret the
production process of the even smaller “SiC whisker” material.
Key Performance Indicators (“KPIs”)
The Board consider there are a number of important KPIs which
are non-financial, such as: the nature and size of development
projects; the speed of response to inbound enquiries; product
performance improvements of the host material once enhanced
with our functionalised materials vs the control; the ability to
convert non-disclosure agreements and letters of intent for
collaborations to development project discussions and binding
commercial contracts. Performance against these non-financial
KPIs is in line with the Board’s expectations for the year under
review.
The important financial KPIs are the income, cash position, the
operating cash flows and the adjusted EBITDA (adjusted for
share-based payment charges and profit/loss on disposal of
property, plant and equipment). of the Group. Going forward, in
addition, as revenues increase, an important KPI is the quantum
of the order book and we have commenced reporting on this
metric in the current year. The visibility on future sales gives some
comfort on likely income streams, although predicting unit
volumes of sales by a third party of their next generation product
which incorporates our advanced material sometimes in new
territories is not easy to do accurately. That said, the focus on
functional inks in the Far East and the future potential for our
FDA approved inks for the disposable self-diagnostic blood
glucose sensor market is expected to provide us with repeatable
monthly sales visibility, especially as the print houses to whom
we supply will want long-term agreements. For the year ended
30 June 2017, the Group’s income of £3.91 million was in line with
management’s expectation with cash and deposit balances
amounting to £2.10 million at 30 June 2017 (2016: £2.06 million)
is also in line with budgets. The net cash outflow from operating
activities for the year ended 30 June 2017 of £4.29 million (2016:
£3.36 million loss) which was also in line with the budgeted
cashflows for the year. The Group’s adjusted EBITDA for the year
ended 30 June 2017 amounted to £4.20 million (2016:
£3.29 million).
Operations and technical
Crucially, during the year under review we have invested in
reducing the processing time of our advanced materials and
hence increased our capacity. This has been successfully done for
certain materials and consequently we now have an established
processing and treatment facilities in the UK, Germany and
Thailand capable of treating (known as “doping”) tonnes of
nanomaterials per year into an intermediate product to the
customers’ specification. The processing capacity depends on a
range of factors, in particular the nature of the nanomaterial
being processed and the graphene loading required. Our granted
patent on processing nanomaterials with plasma offers not only
the opportunity to exploit the graphene market but other non-
carbon based 2D materials. We are aware that the Centre of
Process and Innovation (“CPI”) in the UK, who purchased one of
our HT60 reactors last year, has successfully functionalised Boron
Nitride, an insulating 2D material known as the “white graphite”
with their HT60. During the year, the importance of mixing,
processing and dispersing nanomaterials has become an area of
equal importance to graphene for the future growth of Haydale.
During the year, the plasma patent was also granted in Japan
and has been allowed for grant in the USA.
The Group’s key objective now is to
accelerate the transition of the
business from an R&D focussed
operation into a sales and
marketing organisation.
In the year under review, the Group’s headcount increased
significantly from 46 to 70 at the year end as we delivered on
internally and externally funded projects and begin to build up
a sales force capable of capitalising on our existing and future
products. We acknowledge that we have some way to go to
perfect the sales cycle and we are still in need of more sales
specialists, particularly in the pre-preg sector where we think
there is considerable opportunity, especially in China. We lease
all or our facilities and some, such as our facilities in
Loughborough, are at or nearing capacity where we will be
carefully evaluating their growth requirements during the
current financial year. ACM in the US has substantial spare space
in its 70,000 sq. ft. factory and offices and we have plans to utilise
the space in the foreseeable future.
Patents, IP and Licensing
Our patents are process patents in key selected strategic
territories where, as a blocking prior art tool, they are very useful.
We are aware of one patent application where the examiner has
thrown out their claims citing Haydale’s patents as prior art. Our
critical IP however, is our processing, mixing and dispersion
knowledge and know-how derived from the many months work
we have carried out in conjunction with Huntsman, together
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STRATEGIC REPORT
Strategic Report continued
FINANCIAL REVIEW
Financial
The Financial Review should be read in
conjunction with
the consolidated
financial statements of the Group and
the notes thereto. The consolidated
financial statements are presented under
International
Reporting
Standards as adopted by the European
Union and are set out on pages 32 to 64.
The financial statements of the Company
continue to be prepared in accordance
with International Financial Reporting
Standards and are set out on pages 65
to 70.
Statement of Comprehensive Income
In the year under review, the Group's
three principal areas of income were: (i)
advanced
consulting
composite
engineering services; (ii) sale of silicon
carbide whiskers and fibres; and (iii) long-
term grant funded projects.
the
team
year, our
During
in
Loughborough built on the work of the
previous financial year, specifically in
improving the thermal, electrical and
mechanical performance of certain
thermoset epoxy resins in conjunction
with collaboration partners, Huntsman
and Flowtite. Significant investment was
made to ensure that the Group retained
all of the key IP, knowledge and know-
how surrounding the development of
these higher performing resins. This work
has been crucial in the team being able to
develop three new pre-preg carbon fibre
products which are just now becoming
available and able to demonstrate their
performance improvements. As well as
developing products for the longer term
significant sales opportunity, the team at
Loughborough has been delivering on
long-term
consulting
composite
contracts, recording revenues of £0.62
million in the year under review (2016:
£0.54 million).
The team at Ammanford continues to
deliver incremental improvements in
reducing processing cycle times and
increase load capacities in both plasma
reactor models, the HT60 and HT200. In
the year, revenues of £0.25 million were
recorded
the
commissioning of the two plasma
in connection with
14
reactors sold to GK in the previous
financial year.
The team at ACM delivered revenues of
£2.05 million since it was acquired in mid-
October 2016, in line with expectations.
ACM has predominately
long-term
contracts with its customers, some of
which are at highly attractive gross
margins, providing us with excellent
future revenue visibility.
Revenues from the Far East totaled £0.09
million, principally derived from R&D
services provided by our Thailand
operation acquired in September 2016.
£0.92 million of new grant funded
projects were secured during the year,
building upon awards obtained in prior
years meaning that we recorded grant
income of £0.90 million in the year under
review (2016: £0.75 million). Grant funded
projects are extremely important to the
Group in that they are typically longer
term (12-24 months) contributors to our
fixed overhead base. They allow us work
alongside world renowned businesses in
their particular field of expertise and they
are expected to lead to the development
of a commercial product at the end of
each project.
The Group's total income for the year
more than doubled year on year to £3.91
million (2016: £1.92 million). Pleasingly, at
the year end, the Group’s contracted order
book stood at £5.40 million and since the
year end, additional long term orders
have been secured resulting in a current
order book of £6.0 million to be delivered
over the next 3.5 years.
Overall R&D spend for the year increased
to £1.15 million (2016: £0.94 million), of
which £0.9 million was expensed during
the year (2016: £0.51 million), with the
balance of £0.24 million being capitalized,
(2016: £0.43 million). This internal funded
development expenditure is expected to
lead to sales of new products in future
financial years. The Group’s other
administrative costs for the year totaled
£8.14 million
(2016: £5.09 million)
including almost a full year of costs from
Innophene, acquired in September 2016,
Matt Wood
Finance Director
Total income for
the year more
than doubled to
£3.9 million
1200
1000
800
600
400
200
0
R&D Spend (£’000)
1,150
940
559
FY2015
FY2016
FY2017
At the year end the
Group’s order book
stood at £5.4 million,
which has since
grown to £6.0 million
70
60
50
40
30
20
10
0
Average no employees
69
40
26
FY2015
FY2016
FY2017
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
and ACM, acquired in October 2016. Overall, the loss from
operations for the year was £5.34 million (2016: £4.01 million loss),
and included non-cash items of £1.14 million (2016: £0.76 million).
The loss per share for the year increased marginally £0.28 (2016:
£0.26 loss).
Statement of Financial Position and Cashflows
As at 30 June 2017, net assets amounted to £8.91 million (2016:
£6.60 million), including cash balances of £2.10 million (2016:
£2.86 million). Other current assets increased to £2.89 million at
the year end (2016: £1.44 million), and current liabilities increased
to £2.98 million as at 30 June 2017 (2016: £1.00 million). Current
liabilities include £0.47 million of consideration payable for the
acquisition of ACM which is expected to be settled in the current
financial year. Net cash outflow from operating activities for the
year was £4.29 million (2016: £3.28 million), the principal
contributing factor being the loss from operations activities of
£5.34 million (2016: £4.01 million). Expenditure on capital
equipment again utilised a significant portion of cash during the
year at £0.42 million (2016: £0.47 million). Additionally, in May
2017, the Company acquired the 13.5 per cent. minority interest
in HTI, its US subsidiary, that it did not already own for
£0.41 million.
Capital Structure and Funding
As at 30 June 2017, the Company had 19,597,713 ordinary shares
in issue (2016: 15,236,946). During the year, the Company issued
4,360,767 new ordinary shares, 176,952 of which were for the
acquisition of Innophene in September 2016, 2,035,305 of which
were issued in connection with the Company's acquisition of
ACM in October 2016 (1,619,687 in relation to the £2.6 million
oversubscribed placing and open offer and 415,618 issued as
consideration to the vendors of ACM). A further 2,109,010
ordinary shares were issued in connection with the £3.6 million
strategic subscription, of which £3.3m was subscribed for by
Everpower, which completed in April 2017 and the balance of
39,500 shares were issued in respect of option exercises.
The Group’s objectives when managing capital are to safeguard
the Group’s ability to continue as a going concern in order to
provide return to equity holders of the Company and benefits to
other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital. The Group manages this objective
through tight control of its cash resources to meet its forecast
future cash requirements.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers that the principal risks and uncertainties
facing the Group may be summarised as follows:
Health and Safety
Many of the Group’s products of advanced materials are nano in
size and, although there is little actual evidence of any health
risks associated with the handling of the Group’s products, there
is a theoretical risk that the Group’s products could be a danger
to health if an individual is exposed to and/or inhales/ingests
some of the Group’s products. The Group takes health and safety
very seriously and manages the potential health and safety risk
by regular staff training and restricting activities to only certain
qualified individuals.
Acceptance of the Group’s Products
The success of the Group will depend on the market’s acceptance
of, and attribution of value to, advanced materials technology
developed by the Group based on converting principally raw,
mined graphite and other synthetically produced graphenes into
high quality functionalised GNPs, using a dry and low energy
process, without using wet chemicals or acids.
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STRATEGIC REPORT
Strategic Report continued
The Group aims to mitigate this risk by providing well-structured
and competitive reward and benefit packages that ensure our
ability to attract and retain key employees.
By order of the Board
Ray Gibbs
Chief Executive Officer
10 October 2017
Notwithstanding the technical merits of the processes
developed by the Group, and the extensive market and product
research carried out by management to assess the likelihood of
acceptance of the Group’s products, there can be no guarantee
that its targeted customer base for the processes will ultimately
purchase the Group’s products.
Intellectual Property Risk
IP portfolio, covering
The Group’s success will depend in part on its ability to maintain
its
its
adequate protection of
manufacturing process, additional processes, products and
applications, including in relation to the development of specific
functionalisation of graphene and other types of carbon-based
nanomaterials for use in particular applications. The IP on which
the Group’s business is based is a combination of granted
patents, patent applications and confidential know-how.
The Group aims to mitigate any risk that any of the Group’s
patents will not be held valid if challenged, or that third parties
will claim rights in, or ownership of, the patents and other
proprietary rights held by the Group through general vigilance,
regular international IP searches as well as monitoring activities
and regulations for developments in copyright/intellectual
property law and enforcement.
Growth Risk
Expansion of the business of the Group may place additional
demands on the Group’s management administrative and
technological resources and marketing capabilities, and may
require additional capital expenditure. The Group monitors the
additional demands on resources on a regular basis and
strengthens resources as necessary. If the Group is unable to
manage any such expansion effectively, then this may adversely
impact the business, development, financial condition, results of
operations, prospects, profits, cash flow and reputation of the
Group.
Competition Risk
include
The Group’s current and potential competitors
companies and academic institutions, many of whom have
significantly greater financial resources than the Group and
management regularly reviews the competitive landscape.
There can be no assurance that competitors will not succeed in
developing products that are more effective or economic than
any developed by the Group or which would render the Group’s
products non-competitive or obsolete.
Dependence on Key Personnel
The Group’s business, development and prospects are dependent
upon the continued services and performance of its Directors.
The experience of the Group’s personnel helps provide the Group
with a competitive advantage. The Directors believe that the loss
of services of any existing key executives, for any reason, or failure
to attract and retain necessary additional personnel, could
adversely impact on the business, development, financial
condition, results of operations and prospects of the Group.
16
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
Board of Directors
1
2
3
The Haydale board consists of experienced commercial directors from a range of industries
that include engineering, retail, finance and accounting, high technology and the petro-
chemical industries. Brief biographies of each of the directors are set out below.
1. David Doidge Richard Banks,
Non-executive Chairman
David Banks started in Stock Broking in Birmingham in 1979 with Harris, Allday, Lea and Brooks before moving to London and becoming
an Institutional Salesman at Panmure Gordon where he was acclaimed in the Automotive, Engineering, Aerospace and Motor
Distributors sectors. He subsequently became a Corporate Broker advising many companies on their Corporate Structure, Strategy,
Messaging and Presentations. He also raised the Capital for many of these Companies both at IPO and in Secondary fund raises.
2. Raymond (Ray) John Gibbs BA (Hons) FCA,
Chief Executive Officer
Ray Gibbs is a Chartered Accountant, and former Deloitte audit and corporate finance partner for 9 years. He has spent the last
21 years in industry as CFO or commercial director of high technology and fast-moving consumer goods businesses both in the quoted
and private arenas with sales ranging from £0.5 million to £500 million. He was a former CFO of Chemring Group Plc. Ray is a Board
Member of the USA based National Graphene Association and is the UK Chairman of the UK and China Joint Working Group on
Graphene Standardisation, organised by the BSI Group. Ray was part of the original Haydale Graphene Industries’ management team
that acquired Haydale Limited in 2010, becoming CEO in 2013, and leading the Group through its AIM IPO in 2014.
3. Matthew (Matt) Graham Wood BA (Hons) FCA,
Finance Director and Company Secretary
Matt Wood is a Chartered Accountant and experienced finance director and corporate finance professional with a background in
advising quoted growth companies. A former nomad, since 2006, Matt has worked as a finance and non-executive director with a
variety of companies and joined Haydale in early 2014 before its AIM IPO. Matt is also Managing Director and founder of ONE Advisory
Group Ltd, a City-based corporate advisory firm. Matt holds a first-class degree in Economics.
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GOVERNANCE
Board of Directors continued
Board of Directors
4. Roger Anthony Smith BSc (Hons),
Executive Director
Roger Smith graduated with a degree in physics and has worked in the global oil and gas sector for the past 30 years. He has set up
and invested in businesses in Europe, Middle East and North America. Roger has started up, managed and subsequently sold
2 successful consulting businesses and in doing so has worked with venture capital and private equity houses. He has also held the
post of commercial director with Bureau Veritas and Senior Vice President with Petrofac Plc. Roger was part of the original Haydale
Graphene Industries’ management team that acquired Haydale Limited in 2010.
5. Graham Dudley Eves MA,
Non-Executive Director
Graham Eves joined GKN plc in 1967 where he spent 13 years operating across multiple overseas jurisdictions including, for the last
5 years, setting up and running a special operation for GKN plc’s head office in Switzerland. He returned to the UK in 1980 to work in
venture capital and establish his own international business consultancy. His main activities covered advising a range of German,
North American and Japanese automotive component/technology suppliers and he co-founded and was chairman of an automotive
technology company, Mechadyne (now part of KolbenschmidtPierburg AG). Graham is a non-executive director of AB Dynamics plc.
He was on the AIM advisory committee of the London Stock Exchange for 6 years and has a Master of Arts degree in Modern and
Medieval Languages from the University of Cambridge.
6. Roger James Humm MBA BSc (Hons) FCA,
Non-Executive Director
Roger Humm is an experienced Commercial and Finance Director with extensive knowledge of high-growth technology companies.
He held corporate, financial and senior management roles with Oxford Instruments plc both in the UK and USA, including
responsibility for corporate development, intellectual property and establishing a corporate venturing portfolio. More recently he has
worked with a number of public and private com-panies including Ixico plc, NanoSight Limited and Blue Earth Diagnostics Limited.
He currently acts as Finance Director at G-Volution Limited and OMass Technologies Limited, and is a Trustee Director of the Oxford
Instruments pension scheme. Roger gained his BSc in microbiology and virology from Warwick University before qualifying as a
chartered accountant with Grant Thornton. He has an MBA from the University of Bath.
4
5
6
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
Directors’ Report
The directors present their report and the audited financial statements for Haydale Graphene Industries Plc (the “Company”), a public
company incorporated and registered in England and Wales under the Companies Act 2016 with company number 7228939, and its
subsidiaries (together the “Group”) for the year ended 30 June 2017.
There are a number of items required to be included in the Directors’ Report which are covered elsewhere in the annual report. Details
of directors’ remuneration and share options are given in the Directors’ Remuneration Report, details of the use of financial
instruments and financial risk management objectives and policies are given in note 21 of the financial statements and the following
are covered in the Strategic Report:
•
•
•
•
Principal Activities
Review of the Business and Future Developments
Key Performance Indicators
Principal Risks and Uncertainties
Research and development
During the year ended 30 June 2017, the Group invested £0.95 million (2016: £0.51 million) in research and development activities
which were expensed during the year, together with a further £0.24 million (2016: £0.43 million) of development expenditure which
has been capitalised. A review of this expenditure is included in the Strategic Report.
Dividends
The directors do not propose the payment of a dividend.
Substantial Shareholdings
As at 30 June 2017, the Company had been advised of the following shareholders, other than the directors, with interests of 3% or
more in its ordinary share capital:
Name of Shareholder
Number of Ordinary Shares
% of Share Capital
Everpower International Holdings Co. Ltd
Octopus Investments Nominees Ltd
Canaccord Genuity
Directors
1,958,451
1,369,619
1,197,756
9.99
6.99
6.11
The following directors have held office since 1 July 2016 and up to the date of signing the financial statements:
David Banks (Appointed 13 July 2017)
Anthony Belisario (resigned 15 December 2016)
Graham Eves
Raymond Gibbs
Roger Humm
Directors’ Interests in Ordinary Shares
John Knowles (retired 13 July 2017)
Roger Smith
Matthew Wood
Dr Christopher Spacie (resigned 31 July 2016)
The directors, who held office at 30 June 2017, had the following interests in ordinary shares of the Company:
Director
Ray Gibbs
Roger Smith
John Knowles
Roger Humm1
Matthew Wood
1.
Includes 28,459 ordinary shares held by his wife, Wendy Humm.
Number of Shares at 30 June 2017
% of Share Capital
2.48
1.47
0.79
0.18
0.05
486,353
288,455
155,464
34,709
9,821
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GOVERNANCE
Directors’ Report continued
Between 30 June 2017 and the date of this report there has been no change in the beneficial interests of directors in shares or share
options as disclosed in this report.
Directors’ and Officers’ Liability Insurance
Qualifying indemnity insurance cover has been arranged in respect of the personal liabilities which may be incurred by directors and
officers of the Group during the course of their service with the Group. This insurance has been in place during the year and on the
date of this report.
Post Balance Sheet Events
On 9 August 2017, the group announced the launch of its Taiwan operations, Haydale Technologies (Taiwan) Co., Ltd., (‘HTW’), which
will operate as a dedicated producer and sales outlet of graphene-based conductive inks and pastes, including other functional and
specialty inks and pastes. HTW is located in Kaohsiung, Southern Taiwan.
The Group today intends to raise at least £6.0 million of new funds before costs via a placing of new ordinary shares in the Company
with existing and new investors.
Foreign Currency, Interest Rate, Credit and Liquidity Risk
The directors do not consider any of these potential risks to pose a significant risk to the Group or its operations over the coming
year. See note 21, Financial Instruments, for further details.
Disclosure of information to auditors
All of the current directors have taken all the steps that they ought to have taken to make themselves aware of any information
needed by the Company’s auditors for the purposes of their audit and to establish that the auditors are aware of that information.
The directors are not aware of any relevant audit information of which the auditors are unaware.
Independent auditors
The auditors, BDO LLP have expressed their willingness to continue in office and a resolution concerning their re-appointment will
be proposed at the annual general meeting.
Statement by the Directors
The Directors consider the annual report and accounts, taken as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s position and performance, business model and strategy.
By order of the Board
Ray Gibbs
Chief Executive Officer
10 October 2017
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
Corporate Governance Statement
The Board is accountable to the Company’s shareholders for good corporate governance and it is the objective of the Board to attain
a good standard of corporate governance by taking into account the requirements of the Corporate Governance Code for Small and
Mid-Size Quoted Companies 2013 published by the QCA to the extent that they consider it appropriate having regard to the Company’s
size, board structure, stage of development and resources.
Board
The Board retains full and effective control of the Group. The role of the Board, inter alia, is to provide entrepreneurial leadership of
the Company within a framework of prudent and effective controls which enable risks to be managed and assessed, set the
Company’s strategic aims and ensure that the necessary financial and human resources are in place for the Company to meet its
objectives and set the Company’s values and standards. The directors are responsible for formulating, reviewing and approving the
Company’s strategy, budget and major items of capital expenditure. The board includes directors from a range of industries including
the engineering, retail, accounting and finance, banking, high technology and the petro-chemical industries.
At the date of this report, the Board consists of three executive directors,and three non-executive directors including the non-executive
Chairman. Brief details about the directors are given on pages 17 and 18.
The roles of Chairman and Chief Executive are clearly divided. The Chairman is responsible for overseeing the running of the Board,
ensuring that no individual or group dominates the Board’s decision making and ensuring that the Non-Executive Directors are
properly briefed. The Chief Executive Officer has responsibility for implementing the strategy of the Board and managing the day-
to-day business activities of the Group. The non-executive directors bring relevant experience from different backgrounds and receive
a fixed fee for their services and reimbursement of reasonable expenses incurred in attending meetings. Of the non-executive
directors, David Banks and Roger Humm are considered by the Board to be independent.
The Company holds regular board meetings. Prior to each board meeting, directors are sent an agenda and Board papers as
appropriate for matters to be discussed. Additional information is provided when requested by the Board or individual directors.
Corporate Governance issues are discussed at these board meetings. All directors have access to independent professional advice, if
required.
During the year ended 30 June 2017, the Company held 11 board meetings, with each member’s attendance as follows:
Director
John Knowles
Anthony Belisario (resigned 13 December 2016)
Raymond Gibbs
Dr Christopher Spacie (resigned 31 July 2016)
Matthew Wood
Graham Eves
Roger Humm
Roger Smith
Board Committees
Number of Meetings Attended
11
5
11
1
11
10
10
10
The directors have established an Audit Committee and a Remuneration Committee with formally delegated roles, terms of reference
and responsibilities. Each of these committees meet as and when appropriate and at least twice a year. All committee members hold
non-executive roles with the Company.
The Audit Committee comprises Roger Humm, Graham Eves and David Banks, with Roger Humm as Chairman. John Knowles was a
member of the audit committee during the year ended 30 June 2017, but has since retired He was replaced by David Banks. The Audit
Committee is responsible for, inter alia, determining and examining matters relating to the financial affairs of the Company including
the terms of engagement of the Company’s auditors and, in consultation with the auditors, the scope of the audit. It receives and
reviews reports from management and the Company’s auditors relating to the half yearly and annual accounts and the accounting
and the internal control systems in use throughout the group. The Board does not consider it necessary at present to have an internal
audit function. The audit committee monitors the scope, results and cost effectiveness of the audit. It has unrestricted access to the
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GOVERNANCE
Corporate Governance Statement continued
Group’s auditors. In certain circumstances, it is permitted by the Board for the auditors to supply non-audit services (in the provision
of tax advice, or non-specific projects where they can add value). The audit committee has approved and monitored the application
of this policy in order to safeguard auditor objectivity and independence.
The Remuneration Committee comprises Graham Eves, Roger Humm and David Banks, with Graham Eves as Chairman. Tony Belisario
was the chairman of the remuneration committee during the year ended 30 June 2017, until he stepped down in December 2016
and Roger Smith was also a member until he stepped down on 20 June 2017. The Remuneration Committee is responsible for
reviewing and making recommendations in respect of directors’ remuneration and benefits packages, including share options and
the terms of appointment. The remuneration committee will also make recommendations to the board concerning the allocation
of share options to employees under the Company’s share option schemes.
Attendance at the Company’s audit and remuneration committee meetings during the year was as follows:
Committee member
John Knowles
Graham Eves
Roger Humm
Tony Belisario
Roger Smith
Number of audit committee
meetings attended
Number of remuneration
committee meetings attended
2
2
2
–
–
–
2
–
1
2
The board does not currently consider a nominations committee to be necessary and the board as a whole are responsible for board
and senior management nominations, but this will be kept under review.
Shareholder Engagement
Shareholders have the opportunity to meet members of the Board at the annual general meeting where the Board members are
happy to respond to questions. The Board also responds to written queries made by shareholders during the course of the year and
may also meet with major shareholders, if so requested.
Directors are required to attend the Annual General Meeting of the Company unless unable to do so for personal reasons or due to
pressing commercial commitments. Shareholders are given the opportunity to vote on each separate issue. Proxy voting results are
announced at the relevant shareholder meeting. As well the annual general meeting, the Company regularly communicates with
shareholders via regular news releases, updates to the Company’s website and via social media.
Internal Control
The directors are responsible for establishing and maintaining the Group’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 Group
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 Group’s finance function help ensure the Group’s assets are safeguarded and that proper
financial records are maintained; and
A list of matters is reserved for the approval of the board.
Matt Wood is the Company Secretary (as well as the FD) and is responsible for ensuring that the Company’s registers and filings are
properly maintained and up to date. Mr Wood is a qualified chartered accountant and is qualified to hold the role of Company
Secretary. At this stage of its development, the Board does not feel it is necessary for the Company to have a full time or external
company secretary. This will be kept under review.
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
The Company has adopted a share dealing code for the Directors and certain 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) and the Company will take all reasonable steps to ensure compliance by the Directors and any relevant employees.
Market Abuse Regime
Following the introduction of the Market Abuse Regime on 3 July 2016 (“MAR”), the Company has adopted and implemented the
following new/updated policies in order to comply with MAR:
•
Share dealing policy;
• Market Soundings policy;
•
•
Inside Information and delayed disclosure policy; and
New Registers and records for the following:
o
o
Insider List (permanent);
Insider List (specific matters);
o Market Soundings – Recipients Record;
o
o
o
o
No Soundings List;
Delayed Disclosure Record;
Share Dealing Code Record; and
PDMR and PCA list.
The Company’s directors and directors of its subsidiaries have been deemed to be PDMRs and also to be permanently inside in respect
of information on the Group. Mr Wood, company secretary, is primarily responsible for ensuring that the Group and its directors and
employees are compliant with MAR.
By order of the Board
David Banks
Chairman
10 October 2017
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GOVERNANCE
Directors’ Remuneration Report
REMUNERATION COMMITTEE
The Company’s remuneration policy is the responsibility of the Remuneration Committee which was established at the time of
Admission. The terms of reference of the Remuneration Committee are outlined below and in the Corporate Governance Statement
on page 22. The members of the Remuneration Committee are Graham Eves (Chairman), Roger Humm and David Banks. There is no
requirement for the Company to prepare a Directors’ Remuneration Report under the AIM Rules, however the Directors have included
this report voluntarily. Furthermore, the requirements of the 2006 Companies Act in respect of the Directors’ Remuneration Report
have only been applied to the extent necessary as there is no requirement to prepare a Directors’ Remuneration Report under the
Companies Act.
The Remuneration Committee is required to meet at least twice per year and is responsible for considering executive remuneration.
Executives may be invited to attend to assist the Remuneration Committee but no director or manager of the Company may be
involved in any decisions as to their own remuneration.
The terms of reference of the Committee do not encompass decisions to employ or dismiss Executives. The Committee does not
have responsibilities for nominations to the Board.
Under the terms of reference of the Remuneration Committee, the remuneration of the Company's non-executive directors (including
the chairman of the Board if a non-executive) is a matter for the chairman of the Board (if executive) and the Company's executive
directors.
Directors’ remuneration for the year to 30 June 2017 is set out on page 26.
The Remuneration Committee terms of reference require it to establish remuneration policy on the basis of various outcomes
including developing remuneration packages needed to attract, retain and motivate executives of the quality required (but to avoid
paying more than is necessary for this purpose) and to ensure that performance-related elements of remuneration form a significant
proportion of the total remuneration package of executives and that such elements be designed to align executives’ interests with
those of shareholders and to give such executives incentives to perform at the highest levels.
Equity Based Incentive Schemes
The Remuneration Committee believes that equity-based incentive schemes provide a strong incentive for retaining and attracting
high calibre individuals.
The Company currently has two equity-based incentive schemes in place.
a)
2013 Share Option Scheme
In May 2013, the Company adopted an EMI share option plan (“2013 Share Option Scheme”). During 2013, the Company granted
options to executive directors and senior management over a total of 121,500 ordinary shares under the 2013 Share Option Scheme.
No further grants have been made under this scheme or are anticipated to be made in the future. The exercise price under the 2013
Option Scheme is 92.592p per ordinary share. There are no performance conditions attached to the exercise of these options although
in the ordinary course (and subject to some exceptions), grantees will be required to remain employed in the Group at the date of
exercise. As at the year end, 80,000 of these options had been exercised, with 41,500 options remaining to be exercised or will lapse
on the earlier of 12 months after death of the grantee, leaving employment with the Group in certain circumstances and on the tenth
anniversary of grant.
b)
2014 Option Scheme
In April 2014, the Company adopted a new share option scheme pursuant to which it may grant both EMI approved options and
unapproved options (“2014 Option Scheme”). EMI approved options are subject to individual and overall limits. Potential grantees
are employees and officers of the Company and members of the Group.
During the year ended 30 June 2017, a total of 215,581 share options were granted under the 2014 Option Scheme (2016: 190,627
options granted) as follows:
•
•
78,254 options on 14 October 2016 at an exercise price of 198.1p
137,327 options on 26 June 2017 at an exercise price of 178.5p
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
During the year ended 30 June 2017, no share options had lapsed (2016: 2,825) and 39,500 (2016: 40,500) share options were exercised
at 92.59p. At 30 June 2017, there were 1,634,856 unexercised options outstanding.
The 2014 Share Option Scheme sets a limit of 10% of the issued share capital at the time of grant that can be used by the Company
for share options. Options granted under this scheme may typically be exercised between the third and tenth anniversaries of grant
provided the option holder remains an employee of a member of the Group. In certain circumstances, options may be exercised
outside this window, for example in the event of death of the option holder or a change of control of the Company. Options can be
granted under the scheme within 42 days of release of the annual and interim results and at other times in exceptional circumstances
by resolution of the Board. No further options may be issued after the tenth anniversary of the date of adoption of the scheme. It is
intended that options shall not be granted with an exercise price lower than the prevailing market value of an ordinary share at the
time of grant. There are no individual or company performance targets to be met in order to be able to exercise the options.
DIRECTORS’ INTERESTS IN SHARE OPTIONS
The interests of directors in share options over ordinary shares during the year were as follows:
2013 Share Option Scheme
Director
Date
of Grant
Number of
Options
First
Exercise Date
Exercise
Price
Latest
Expiry Date
Dr Christopher Spacie*
30 Sept 2013
40,500
30 Sept 2016
92.5926p
30 Sept 2023
* Dr Spacie resigned as a director on 31 July 2016
2014 Share Option Scheme
Date of
Grant
Number
of EMI
Options
Number of
Unapproved
Options
First
Exercise
Date
Exercise
Price
Expiry
Date
Director
Raymond Gibbs
Dr Christopher
Spacie*
Matthew Wood
3 April 2014
18 March 2015
19 May 2016
3 April 2014
18 March 2015
19 May 2016
3 April 2014
18 March 2015
19 May 2016
John Knowles
3 April 2014
Antony Belisario
3 April 2014
Graham Eves
3 April 2014
Roger Humm
3 April 2014
Roger Smith
3 April 2014
101,190
–
–
75,923
11,895
15,393
–
–
–
–
–
–
–
–
39,408
14,275
20,991
3 April 2017
18 March 2018
19 May 2019
–
–
–
3 April 2017
18 March 2018
19 May 2019
32,337
7,137
8,396
3 April 2017
18 March 2018
19 May 2019
28,120
3 April 2017
16,872
3 April 2017
16,872
3 April 2017
16,872
3 April 2017
16,872
3 April 2017
210p
134.5p
171.5p
210p
134.5p
171.5p
210p
134.5p
171.5p
210p
210p
210p
210p
210p
3 April 2024
18 March 2025
19 May 2026
3 April 2024
18 March 2025
19 May 2026
3 April 2024
18 March 2025
19 May 2026
3 April 2024
3 April 2024
3 April 2024
3 April 2024
3 April 2024
No options were exercised by the directors during the year under review. Dr Spacie exercised 20,000 options under the 2013 Share
Option Scheme in March 2017, having resigned as a director on 31 July 2016.
The mid-market price of the Company’s ordinary shares at 30 June 2017 was 175.5p (2016: 161p). During the year to 30 June 2017, the
mid-market price ranged from 148.5p to 206p (2016: 107p to 188p).
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GOVERNANCE
Directors’ Remuneration Report continued
DIRECTORS’ REMUNERATION
The aggregate remuneration received by directors who served during the years ended 30 June 2017 and 30 June 2016 was as follows:
£’000
Salary/Fee
Benefits
Year ended 30 June 2017
Year ended 30 June 2016
Total
(excl.
Pension)
Total
(incl.
pension)
Total
(excl.
pension)
Total
(incl.
pension)
Pension
Pension
Executive Directors
R. Gibbs
C. Spacie*
M. Wood
Non-Executive Directors
J. Knowles
A. Belisario **
G. Eves
R. Humm
R. Smith
* resigned on 31 July 2016
** resigned on 13 December 2016
150
9
83
41
14
28
28
28
12
1
6
–
–
–
–
–
162
10
89
41
14
28
28
28
9
1
5
–
–
–
–
–
171
11
94
41
14
28
28
28
170
113
65
41
27
27
27
27
11
8
3
–
–
–
–
–
181
121
68
41
27
27
27
27
381
19
400
15
415
497
22
519
In addition to the amounts shown above, the share-based payment charge for the period was:
to 30 June
2017
£’000
to 30 June
2016
£’000
43
7
15
9
5
5
5
5
94
47
43
16
12
7
7
7
7
146
Raymond Gibbs
Dr Christopher Spacie
Matthew Wood
John Knowles
Anthony Belisario
Graham Eves
Roger Humm
Roger Smith
By order of the Board
Graham Eves
Chairman of the Remuneration Committee
10 October 2017
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
Statement of Directors’ Responsibilities
The directors are responsible for preparing the strategic report, 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 the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union and the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law). 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 for 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 market.
In preparing these financial statements, the directors are required to:
•
Select suitable accounting policies and then apply them consistently;
• Make judgements and accounting 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
Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue
in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the financial statements comply with the requirements of 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.
Website Publication
The directors are responsible for ensuring that the annual report and financial statements are made available on a website. Financial
statements are published on the Group’s website, www.haydale.com, in accordance with the AIM Rules for Companies published by
the London Stock Exchange and legislation in the United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group’s website is the
responsibility of the directors. The directors’ responsibility also extends to the ongoing integrity of the financial statements contained
therein.
Going Concern
The directors have prepared and reviewed financial forecasts. After due consideration of these forecasts, current cash resources and
the net proceeds of the fundraising to be agreed today and scheduled to be received by the Company on or around 26 October 2017,
the directors consider that the Company and the Group have adequate financial resources to continue in operational existence for
the foreseeable future (being a period of at least 12 months from the date of this report), and for this reason the financial statements
have been prepared on the going concern basis.
By order of the Board
Matt Wood
Finance Director and Company Secretary
10 October 2017
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247114 Haydale AR pp17-pp31 15/11/2017 21:51 Page 28
GOVERNANCE
Independent Auditor’s Report to the members
of Haydale Graphene Industries Plc
Opinion
We have audited the financial statements of Haydale Graphene Industries PLC (the ‘parent company’) and its subsidiaries (the ‘group’)
for the year ended 30 June 2017 which comprise the Consolidated Statement of Comprehensive Income, Consolidated Statement of
Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows, Parent Company’s Balance
Sheet and Parent Company Statement of Changes in Equity 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. The financial reporting framework that has
been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted
Accounting Practice).
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 30 June
2017 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 United Kingdom Generally Accepted
Accounting Practice; 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 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.
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’s revenue recognition policy is included within the accounting policies on page 39 and the components of revenue are set
out in note 4.
Management exercises judgement in recognising revenue arising from the provision of services where contracts are ongoing at the
year end. Revenues for such contracts are recorded on a percentage completion basis unless the contract outcome cannot be reliably
determined, in which case, revenue is only recognised to the extent that incurred costs are recoverable.
28
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
In view of the judgements involved we considered that these matters gave rise to a significant risk of misstatement in the financial
statements.
How We Addressed the Key Audit Matter in the Audit
We have assessed whether revenue recognition is in accordance with IAS 18 and the Group’s accounting policies and, in respect of
service contracts ongoing at the year end, we reviewed the basis of estimation for accrued and deferred income. This involved a
review of the terms of a sample of underlying contracts and an assessment of the stage of completion with reference to evidence
such as costs incurred, time recording records and budgets.
Our application of materiality
Group materiality
30 June 2017
£400,000
Group materiality
30 June 2016
£320,000
Basis for materiality
8% of losses before tax (2016: 8% of losses before tax) as the group is
primarily research and development focussed
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. In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of
testing needed Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take 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.
Performance materiality was set at 70 per cent of the above materiality levels.
Where financial information from components was audited separately, component materiality levels were set for this purpose at
lower levels varying from £25,000 to £200,000.
Our determination of materiality increased from 2016 with the increased losses experienced by the group. We consider losses before
tax to be one of the principal considerations for members of the company in assessing the financial performance of the group.
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 £16,000 (2016: £9,600). We also agreed to report differences below these thresholds that, in our view,
warranted reporting on qualitative grounds.
There were no misstatements identified during the course of our audit that were individually, or in aggregate, considered to be
material in terms of their absolute monetary value or on qualitative grounds.
An overview of the scope of our audit
Our group audit scope focussed on the group’s principal operating locations being Ammanford, Loughborough and South Carolina,
each of which were subject to a full scope audit. Together with the parent company and its group consolidation, which was also
subject to a full scope audit, these locations represent the principal business units of the group and account for 97% of the group’s
revenue, 94% of the group’s loss before tax and 98% of the group’s total assets. The remaining components of the group were
considered non-significant and these components were principally subject to analytical review procedures.
Whilst materiality for the financial statements as a whole was £400,000, each component of the group was audited to a lower level
of materiality.
Audits of the components were performed at a materiality level calculated by reference to a proportion of group materiality
appropriate to the relative scale of the business concerned. These audits were all performed by BDO LLP with the exception of the
South Carolina operations.
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247114 Haydale AR pp17-pp31 15/11/2017 21:52 Page 30
GOVERNANCE
Independent Auditor’s Report to the members
of Haydale Graphene Industries Plc continued
The Group audit team was actively involved in directing the audit strategy of the component auditor in South Carolina and a key
member of the Group audit team visited local management and the auditors of the operations in South Carolina during the audit
fieldwork. The Group audit team reviewed in detail the findings of work performed and considered the impact of these upon the
Group audit opinion.
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.
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:
•
•
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
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
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, 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 27, 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.
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.
30
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
Auditor’s responsibilities for the audit of the financial statements
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
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.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Malcolm Thixton (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Arcadia House
Maritime Walk – Ocean Village
Southampton SO14 3TL
UNITED KINGDOM
10 October 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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247114 Haydale AR pp32-pp35 15/11/2017 21:52 Page 32
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2017
REVENUE
Cost of sales
Gross profit
Other income
Administrative expenses
Research and development expenditure
Share based payment expense
Other administrative expenses
LOSS FROM OPERATIONS
Finance costs
LOSS BEFORE TAXATION
Taxation
LOSS FOR THE YEAR FROM CONTINUING OPERATIONS
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Remeasurements of defined benefit pension schemes
TOTAL COMPREHENSIVE LOSS FOR THE YEAR FROM CONTINUING OPERATIONS
Loss for the year attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive loss attributable to:
Owners of the parent
Non-controlling interest
Loss per share attributable to owners of the Parent
Basic (£)
Diluted (£)
The notes from pages 36 to 64 form part of these financial statements.
Year ended
30 June
2017
£’ 000
Year ended
30 June
2016
£’ 000
1,169
(899)
––––––––––––––––––––––––––––––
3,004
(894)
Note
4
2,110
901
(908)
(351)
(7,090)
270
754
(514)
(326)
(4,193)
(8,349)
(5,033)
––––––––––––––––––––––––––––––
(4,009)
(14)
––––––––––––––––––––––––––––––
(5,338)
(297)
(4,023)
386
––––––––––––––––––––––––––––––
(5,635)
883
(4,752)
(3,637)
5
7
(44)
–
––––––––––––––––––––––––––––––
(74)
(36)
(4,862)
(3,681)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(4,862)
–
(3,598)
(39)
––––––––––––––––––––––––––––––
(4,862)
(3,637)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(4,862)
–
(3,637)
(44)
––––––––––––––––––––––––––––––
(4,862)
(3,681)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
8
8
(0.28)
(0.28)
(0.26)
(0.26)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
32
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
Company Registration No. 07228939
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade receivables
Other receivables
Corporation tax
Cash and bank balances
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Bank loans
Deferred tax
Pension Obligation
Current liabilities
Bank loans
Trade and other payables
Deferred income
Corporation tax
TOTAL LIABILITIES
TOTAL NET ASSETS
EQUITY
Capital and reserves attributable to equity holders of the parent
Share capital
Share premium account
Share-based payment reserve
Foreign exchange reserve
Retained earnings
Non-Controlling Interest
TOTAL EQUITY
30 June
2017
£’ 000
30 June
2016
£’ 000
Note
9
9
10
27
11
12
13
27
18
27
26
18
17
19
27
14
14
15
685
1,141
1,576
–
––––––––––––––––––––––––––––––
2,115
2,152
5,074
679
10,020
3,402
––––––––––––––––––––––––––––––
398
49
613
379
2,862
––––––––––––––––––––––––––––––
1,212
798
535
345
2,091
4,301
––––––––––––––––––––––––––––––
4,981
15,001
7,703
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
104
–
–
––––––––––––––––––––––––––––––
911
1,234
969
3,114
104
166
656
176
–
––––––––––––––––––––––––––––––
359
2,305
253
65
998
––––––––––––––––––––––––––––––
2,982
1,102
––––––––––––––––––––––––––––––
6,096
8,905
6,601
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
392
18,936
1,007
(113)
(11,317)
–
305
11,840
656
(39)
(6,117)
(44)
––––––––––––––––––––––––––––––
8,905
6,601
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
LIABILITIES
The financial statements on pages 32 to 64 were approved and authorised for issue by the Board of directors on 10 October 2017
and signed on its behalf by:-
Ray Gibbs
Chief Executive Officer
Matt Wood
Finance Director
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247114 Haydale AR pp32-pp35 15/11/2017 21:52 Page 34
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2017
Share
capital
£’ 000
Share
premium
£’ 000
Share-based
payment
reserve
£’ 000
Foreign
exchange
reserve
£’ 000
Retained
profits
£’ 000
Total
attributable
to equity
holders of
parent
£’ 000
Non-
controlling
interest
£’ 000
Total
equity
£’ 000
At 1 July 2015
229
6,254
329
–
(2,519)
4,293
–
4,293
Total comprehensive loss
for the year
Recognition of share-based
payments
Issue of ordinary share
–
–
–
–
–
327
(39)
(3,598)
(3,637)
(44)
(3,681)
–
–
327
–
327
capital
At 30 June 2016
Comprehensive loss
for the year
Other Comprehensive
(loss)/Income
Retirement Benefit
Obligations
Total Comprehensive loss
for the year
Recognition of share-based
payments
Issue of ordinary share
capital
Repurchase of NCI
At 30 June 2017
76
5,662
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
5,662
5,586
–
–
–
–
305
11,840
656
(39)
(6,116)
6,646
(44)
6,601
–
–
–
–
–
–
–
(4,752)
(4,752)
(74)
–
(74)
–
–
(4,752)
(74)
(36)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(36)
(36)
–
–
–
–
–
–
351
(74)
(4,788)
(4,862)
–
–
351
–
–
(4,862)
351
87
–
7,096
–
7,183
(369)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
8,905
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
7,183
(413)
–
(413)
18,936
(11,317)
–
44
8,905
1,007
(113)
392
–
–
–
–
–
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
Note
9
10
15
25
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2017
Cash flow from operating activities
Loss before taxation
Adjustments for:-
Amortisation of intangible assets
Capitalised loan costs written off
Depreciation of property, plant and equipment
Impairment on available for sale asset
Reduction in deferred consideration
(Profit)/Loss on disposal of property, plant and equipment
Share-based payment charge
Finance costs
Operating cash flow before working capital changes
Increase in inventories
Increase in trade and other receivables
Decrease in payables and deferred income
Cash used in operations
Income tax received
Net cash flow from operating activities
Cash flow used in investing activities
Purchase of property, plant and equipment
Purchase of Intangible Assets
Proceeds from disposal of property, plant and equipment
Acquisition of subsidiary net of cash acquired
Settlement of deferred consideration
Purchase of non-controlling shareholding
Net cash flow in investing activities
Cash flow used in financing activities
Finance costs
Proceeds from issue of share capital (net of share issue costs)
New bank loans raised
Repayments of borrowings
Net cash flow from financing activities
Effects of exchange rates changes
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Cash and cash equivalents at end of the financial year
35
Year ended
30 June
2017
£’ 000
Year ended
30 June
2016
£’ 000
(5,635)
(4,023)
63
–
370
117
(117)
(107)
327
14
––––––––––––––––––––––––––––––
157
77
560
–
–
–
351
297
(3,356)
––––––––––––––––––––––––––––––
(4,193)
(115)
(128)
187
––––––––––––––––––––––––––––––
(12)
(596)
260
(56)
––––––––––––––––––––––––––––––
(348)
128
––––––––––––––––––––––––––––––
412
(3,284)
––––––––––––––––––––––––––––––
(4,129)
(415)
(245)
–
4
(470)
(429)
207
–
(350)
–
––––––––––––––––––––––––––––––
(413)
(1,069)
(1,042)
––––––––––––––––––––––––––––––
(14)
5,359
–
(162)
––––––––––––––––––––––––––––––
(297)
6,058
1,408
(2,817)
5,183
––––––––––––––––––––––––––––––
4,352
(44)
813
2,049
––––––––––––––––––––––––––––––
75
(771)
2,862
2,091
2,862
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
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247114 Haydale AR pp36-pp64 15/11/2017 21:53 Page 36
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2017
1. Accounting policies
Basis of preparation
The Group consolidated financial statements have been prepared in accordance with International Financial Reporting Standards,
International Accounting Standards and Interpretations (collectively “IFRSs”) as adopted by the European Union (‘Adopted IFRSs’) and
with those parts of the Companies Act 2006 applicable to companies preparing their financial statements under adopted IFRS.
The Group’s financial statements have been prepared under the historical cost convention and in accordance with IFRS.
The consolidated financial statements are presented in sterling amounts.
Amounts are rounded to the nearest thousands, unless otherwise stated.
The individual financial statements of Haydale Graphene Industries Plc are shown on pages 65 to 70.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
made up to the reporting date. The Company controls an investee if all three of the following elements are present: power over the
investee, exposure to variable returns over the investee, and the ability of the investee to use its power to affect the variable returns.
Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. All
intra-group transactions, balances, income and expenditure are eliminated on consolidation. The consolidated financial statements
have been prepared using the acquisition method of accounting.
Under the acquisition method, the results of the subsidiaries acquired or disposed of are included from the date of acquisition or up
to the date of disposal. At the date of acquisition, the fair values of the subsidiaries’ net assets are determined and these values are
reflected in the Consolidated Financial Information. The cost of acquisitions is measured at the aggregate of the fair values, at the
date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Haydale Graphene Industries
Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. Any excess of the
purchase consideration of the business combination over the fair value of the identifiable assets and liabilities acquired is recognised
as goodwill. Goodwill, if any, is not amortised, but reviewed for impairment at least annually. If the consideration is less than the fair
value of assets and liabilities acquired, the difference is recognised directly in the statement of comprehensive income. Acquisition-
related costs are expensed as incurred.
Going concern
The Group consolidated financial statements are prepared on a going concern basis which the Directors believe continues to be
appropriate. The Group meets its day-to-day working capital requirements through existing cash resources which at 30 June 2017,
amounts to £2.091 million. The Directors have prepared cash flow projections for the period ending no less than 12 months from the
date of their approval of these financial statements. On the basis of those projections, which take into account the net proceeds of
the fundraising approved today and scheduled to be received by the Company on or around 26 October 2017 and current cash
resources, the Directors believe that the Group will be able to continue to trade for the foreseeable future.
2. Future accounting developments
The following amendments to standards and IFRIC interpretation have been adopted and are effective for the current year:
•
•
•
•
•
•
•
•
•
•
IFRS 2
IFRS 3
IFRS 7
Share-based payment – Annual Improvements to IFRSs 2010-2012 Cycle
Business Combinations
Financial Instruments: Disclosures (Annual Improvements to IFRSs 2012-2014 Cycle – Servicing contracts and
applicability of offsetting amendments in condensed interim financial statements)
IFRS 8
Operating segments (Amendments – aggregation of segments, reconciliation of segment assets)
IFRS 10
Consolidated Financial Statements (Amendments – Investment Entities, Sale or Contribution of Assets)
IAS 1
IAS 16
IAS 27
IAS 32
IAS 34
Presentation of financial statements (Amendments resulting from the disclosures initiative)
Property, Plant and Equipment (Amendments – Acceptable Methods of Depreciation)
Consolidated and Separate Financial Statements (Amended to provide an additional measurement option for
investments in separate entity financial statements)
Financial Instruments: Presentation (Amendments – Offsetting)
Interim Financial Reporting (Amendments resulting from September 2014 Annual Improvements to IFRS)
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
•
•
IAS 36
IAS 38
Impairment of Assets (Amendments – Recoverable Amount Disclosures)
Intangible Assets (Amendments to clarify acceptable methods of amortisation)
The adoption of these pronouncements has not impacted the classification or measurement of the Group’s assets and liabilities.
The new standards and interpretations adopted did not have an effect on the previous reported results or any significant impact on
the accounting policies.
New standards and interpretations not applied
IASB and IFRIC have issued the following relevant standards and interpretations with an effective date for periods commencing after
1 January 2016:
Title
Implementation
Anticipated effect on the Group
IFRS 15 – Revenue from Contracts with Customers
1 January 2018
IFRS 9 – Financial instruments (The standard includes requirements
for recognition and measurement, impairment, derecognition and
general hedge accounting.)
1 January 2018
IFRS 16 – Leases (yet to be endorsed by the EU)
1 January 2019
The directors are in the process
of assessing the impact of the
new standard, which could have
a material impact
The directors are in the process of
assessing the impact of the new
standard, which could have a
material impact
The directors are in the process of
assessing the impact of the new
standard, which are expected
to have a material impact
3. Summary of significant accounting policies
(a) Critical accounting estimates and judgements
The preparation of financial information in conformity with IFRSs requires the use of certain critical accounting estimates. It
also requires the directors of the Haydale Graphene Industries Plc Group (the “Group”) to exercise their judgement in the process
of applying the accounting policies which are detailed below. These judgements are continually evaluated by the directors and
management and are based on historical experience and other factors, including expectations of future events that are believed
to be reasonable under the circumstances.
The key estimates and underlying assumptions concerning the future and other key sources of estimation uncertainty at the
statement of financial position date, that have a significant risk of causing material adjustment to the carrying amounts of
assets and liabilities within the next financial period are reviewed on an ongoing basis. Revision to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future periods.
Share-based payment
The critical accounting estimates, assumptions and judgements underpinning the valuation of share options are disclosed in
note 15.
Defined Benefit Pension Scheme
In determining the pension cost and the defined benefit obligation of the groups pension scheme, a number of assumptions
are used in order to produce a valuation. The assumptions include an appropriate discount rate, the levels of salary increases,
price inflations and mortality rates. Further details are included in note 26.
Impairment of non-financial assets
The carrying value of goodwill, and the cash-generating unit to which it relates, is reviewed at the end of each reporting period
for impairment regardless of whether there is an indication that the asset may be impaired. Other non-financial assets are
considered for indicators of impairment at each reporting date and full impairment reviews carried out if indicators of
impairment exist. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The
recoverable amount of the assets is the higher of the assets’ fair value less costs to sell and their value-in-use, which is measured
by reference to discounted future cash flow. An impairment loss is recognised in administrative expenses within the Statement
of Comprehensive Income immediately it is identified. Goodwill is tested for impairment annually regardless of whether there
are any indicators.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
In respect of assets other than goodwill, and when there is a change in the estimates used to determine the recoverable amount,
a subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is
recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and
depreciation) had no impairment loss been recognised. The reversal is recognised in profit or loss immediately.
Acquired Business Combinations
Consideration has been made in the measurements of the assets and liabilities acquired. Key judgements and assumptions
have been made in respect of the fair value of intangible assets and goodwill figures. The acquisitions provide access to customer
databases and future earnings which have been calculated based on estimated values of the present value of future cash flows.
The valuation of acquired plant and machinery at market value has been another significant estimate.
(b) Intangible assets
Research and development expenditure
Research expenditure is recognised as an expense when it is incurred.
Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as
intangible assets to the extent that such expenditure is expected to generate future economic benefits. Development
expenditure is capitalised if, and only if an entity within the Group can demonstrate all of the following:
i)
ii)
iii)
iv)
v)
vi)
its ability to measure reliably the expenditure attributable to the asset under development;
the product or process is technically and commercially feasible;
its future economic benefits are probable;
its ability to use or sell the developed asset;
the availability of adequate technical, financial and other resources to complete the asset under development; and
its intention to use or sell the developed asset.
Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any.
Development expenditure initially recognised as an expense will not be restated as an asset in a subsequent period.
Historic capitalised development expenditure is amortised on a straight-line basis over a period of 20 years when the products
or services are ready for sale or use. The 20 years amortisation period is based on European Patents being 20 years from the date
of filing of the application, under Article 60 of the European Patent Convention, and, although the Group now has patents
granted in other jurisdictions, the Directors believe that 20 years is appropriate. New projects will be reviewed on completion, to
determine the useful economic life. In the event that it is no longer probable that the expected future economic benefits will be
recovered, the development expenditure is written down to its recoverable amount. Amortisation is included within
administrative expenses.
Acquired intangible assets
An intangible resource acquired with a subsidiary undertaking is recognised as an intangible asset if it is separable from the
acquired business or arises from contractual or legal rights, is expected to generate future economic benefits and its fair value
can be measured reliably. Acquired intangible assets (excluding development expenditure which is in line with the above policy),
including customer relationships, are amortised through the Consolidated Statement of Comprehensive Income on a straight-
line basis over their estimated economic lives of between three and ten years.
Goodwill
Business combination are accounted for by applying the purchase method. The cost of a business combination is a fair value of
the consideration given, liabilities incurred or assumed and of equity instrument issued plus the cost directly attributable to
business combination. Where control is achieved in stages the cost is a consideration at the date of each transaction.
Contingent consideration is initially recognised at estimated amount where the consideration is probable and can be measured
reliably. Where (i) the contingent consideration is not considered probable or cannot be reliably measured but subsequently
becomes probable or (ii) contingent consideration previously measured is adjusted, the amounts are recognised as an adjustment
to the cost of the business combination if the remeasurement occurs within a year of the transaction and relates to information
that was available at the point of acquisition. Otherwise, any remeasurements of contingent consideration is reflected in the
statement of comprehensive income. Transaction fees associated with the business combination are capitalised as part of the
investment.
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
On acquisition of a business, fair values are attributed to the identifiable assets, liabilities and contingent liabilities unless the
fair value cannot be measured reliably, in which case the value is incorporated in goodwill. Where the fair value of contingent
liabilities cannot be reliably measured they are disclosed on the same basis as other contingent liabilities.
Goodwill recognised represent the excess of the fair value and directly attributable costs of the purchase consideration over the
fair value to the Group’s interest in the identifiable net assets, liabilities and contingent liabilities acquired.
Goodwill is allocated to cash generating units and reviewed for impairment at least annually. Impairment losses recognised in
previous periods for an asset other than goodwill are reversed if there has been a change in estimates used to assess the asset’s
recoverable amount. The carrying amount of an asset shall not be increased above the amount that would have been determined
had no loss been recognised in prior periods. Impairment losses recognised in relation to goodwill are not reversed.
(c) Revenue and interest income
(i) Goods
Revenue represents sales to external customers at invoiced amounts less value added tax or local taxes on sales. Revenue
is recognised generally on delivery, or customer acceptance where customer acknowledges the transfer of risk and reward
of ownership and are liable for insuring the goods.
(ii) Services
Engineering design and research revenue is recognised on the percentage of completion method unless the outcome of
the contract cannot be reliably determined, in which case contract revenue is only recognised to the extent of contract costs
incurred that are recoverable. Foreseeable losses, if any, are provided for in full as and when it can be reasonably ascertained
that the contract will result in a loss.
The stage of completion is determined based on the proportion of contract costs incurred compared to total estimated
contract costs.
(iii)
Interest income
Interest income is recognised as finance income on an accruals basis using the effective interest rate method.
(d) Financial instruments
Financial instruments are recognised in the statements of financial position when the Group has become a party to the
contractual provisions of the instruments.
Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement.
Interest, dividends, gains and losses relating to a financial instrument classified as a liability are reported as an expense or income.
Distributions to holders of financial instruments classified as equity are charged directly to equity.
Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net
basis or to realise the asset and settle the liability simultaneously.
A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through
profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument.
The accounting policy for financial instruments recognised in the statements of financial position are disclosed in the individual
policy statement associated with each item.
Financial assets are derecognised when the contractual rights to receive cash flows from the financial assets have expired or
have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
(i)
Financial assets
The group currently only holds financial assets classed as loans and receivables.
•
Loans and receivables
Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active
market are classified as loans and receivables financial assets. Loans and receivables financial assets are measured at
amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying
the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
(ii) Financial liabilities
All financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently
measured at amortised cost using the effective interest method other than those categorised as fair value through profit
or loss.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
(e) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. The cost of an
item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable
to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by
management.
Depreciation is calculated under the straight-line method to write off the depreciable amount of the assets over their estimated
useful lives. The principal annual rates used for this purpose are:
Leasehold improvements
10-20% per annum straight line
Plant and machinery
15-33% per annum straight line
Furniture and fittings
20-33% per annum straight line
Motor vehicles
33% per annum straight line
The depreciation method, useful lives and residual values are reviewed, and adjusted if appropriate, at the end of each reporting
period to ensure that the amounts, method and periods of depreciation are consistent with previous estimates and the expected
pattern of consumption of the future economic benefits embodied in the items of the property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when the
cost is incurred and it is probable that the future economic benefits associated with the asset will flow to the Group and the
cost of the asset can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-
to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Cost also comprises the initial
estimate of dismantling and removing the asset and restoring the site on which it is located for which the Group is obligated
to incur when the asset is acquired, if applicable.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
from its use or disposal. The gain or loss on retirement or disposal is determined as the difference between any sales proceeds
and the carrying amounts of the asset and is recognised in the income statement within “other income/(expenses)”.
(f)
Income taxes
The charge for taxation is based on the loss for the period and takes into account deferred taxation.
Current tax is measured at amounts expected to be paid using the tax rates and laws that have been enacted by the balance
sheet date. Substantively enacted rate has been used for deferred tax balances, which are recognised in respect of all timing
differences that have been originated but not reversed by the reporting date, except that the recognition of deferred tax assets
is limited to the extent that the Company anticipates making sufficient taxable profits in the future to absorb the reversal of
the underlying timing differences.
The Group receives research and development tax credits for the work it performs in the field of nano-technology. Using the
SME and large company schemes, these credits generate cash reimbursement in exchange for the sacrifice of applicable losses,
such receipts are recognised in income tax within the Statement of Comprehensive Income.
(g) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, bank balances, deposits with financial institutions and short-term, highly
liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value
and have maturities of 3 months or less from inception.
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
(h) Inventories
Inventories are recorded at the lower of cost and net realisable value. Cost represents materials, direct labour, other direct costs
and related production overheads, and is determined on the First-In-First-Out (FIFO) method. Net realisable value is based on
estimated selling price, less further costs expected to be incurred to completion and disposal. Provision is made for slow-moving,
obsolete and defective inventories where appropriate.
The value of inventories used in the fulfilment of commercial or developmental programmes are charged to the Statement of
Comprehensive Income.
(i) Employee benefits
(i)
Short-term benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period in which
the associated services are rendered by employees of the Group.
(ii) Defined contribution plans
The Group’s contributions to defined contribution plans are recognised in profit or loss in the period to which they relate.
Once the contributions have been paid, the Group has no further liability in respect of the defined contribution plans.
(iii) Defined Benefit Pension plans
The group has acquired a non-contributory defined benefit pension plan through the acquisition of ACM. The pension
obligations are identified by the calculations performed by an actuary.
( j) Provisions
Provisions are recognised when the Group has a present or constructive obligation as a result of past events, when it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate
of the amount can be made. Provisions are reviewed at the end of each financial reporting period and adjusted to reflect the
current best estimate. Where the effect of the time value of money is material, the provision is the present value of the estimated
expenditure required to settle the obligation.
(k) Government grants
Government grants are not recognised until there is a reasonable assurance that the Group will comply with the conditions
attaching to them and that the grants will be received. Government grants are treated as deferred income and released to the
income statement on the achievement of the relevant performance criteria. When grant income is received for capital
expenditure, it is held as deferred income on the balance sheet and released on a straight line basis over the useful economic
life of the asset to which it relates. All income relating to government grants is included as ‘other income’ within the Statement
of Comprehensive Income.
(l) Share-based payment arrangements
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the
equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based
transactions are set out in note 15 to the Consolidated Financial Statements.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over
the vesting period, based on the Group’s estimate of the number of equity instruments that will eventually vest, with a
corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that
the cumulative expense reflects the revised estimate, with a corresponding adjustment to other reserves.
(m) Leases
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
(n) Transactions and balances in foreign currencies
Transactions in foreign currencies are converted into the respective functional currencies on initial recognition, using the
exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting
period are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates
that existed when the values were determined. All exchange differences are recognised in profit or loss.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
Overseas operations which have a functional currency different to the group presentation currency have been translated using
the monthly average exchange rate for consolidation in to the statement of comprehensive income. The amounts included in
the group statement of financial position, have been translated at the exchange rate ruling at the statement date. All resulting
exchange differences are reported in other comprehensive income.
(o) Non-controlling interest
The total comprehensive income of non-wholly owned subsidiary is attributed to owners of the parent and to the non-controlling
interest in proportion to their relative ownership interests.
4. Segment analysis
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker (which takes the form of the board of directors of Haydale Graphene Industries Plc)
as defined in IFRS 8, in order to allocate resources to the segment and to assess its performance.
The directors of the Group consider the principal activity of the Group to be the sale and distribution of specialist research and
development materials in the field of nano-technology, and therefore consider this currently to be the sole operating and reportable
segment. Overseas sales relate to the fulfilment of sales generated outside the UK but actioned within the UK. Since the acquisition
of ACM, the sale of silicon carbide based materials have been included within the provision of goods category.
Geographical information
All revenues of the Group are derived from its principal activity, the sale and distribution of nano-technology and silicon carbide
products or the delivery of research projects into those nano materials. The Group’s revenue from external customers by geographical
location are detailed below.
By destination
United Kingdom
Europe
North America
Rest of the World
2017
£’ 000
2016
£’ 000
397
743
3
26
––––––––––––––––––––––––––––––
265
952
131
1,656
3,004
1,169
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
During 2017, 51% (2016: 35%) of the Group’s revenue depended on a single customer. During 2017, 12% (2016: 27%) of the Group’s
revenue depended on a second single customer.
Revenue within Europe was predominantly split between Germany (19%) and Ireland (10%) (2016: Germany 57%, and Ireland 41%).
All amounts shown as other income within the Statement of Comprehensive Income are generated within and from the United
Kingdom. These amounts include income earned as part of a number of grant funded projects and a government grant which is
being released over a period of 5 years. The residual amount is reflected in deferred income.
Revenue from goods was £2,087,777 or 70% (2016: £626,000 or 54%) and revenue from services was £691,274 or 23% (2016: £543,000
or 46%).
Services
Reactors
Goods
2017
£’ 000
691
225
2,088
2016
£’ 000
543
591
35
––––––––––––––––––––––––––––––
3,004
1,169
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
From 1 July 2017, the Group changed its internal reporting system to set up two profit-centric strategic business units (“SBUs”) known
as “RPC” and “AMAT”. For the current financial year and beyond, the Group intends to report sales and profits under these two SBUs.
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5. Loss before taxation
Loss before taxation is arrived at after charging:
Research and development:
– current period’s expenditure
– amortisation of capitalised expenditure
– amortisation of other intangibles
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Foreign Exchange
Inventories recognised as an expense
Operating lease rentals:
– land and buildings
– plant and machinery
The fees of the Group’s auditor, BDO LLP, for services provided are analysed below:
Fees payable to the Company’s auditor for the audit of the Group’s financial statements
Fees payable to the Company’s auditor for other services:
– Taxation related compliance services
– Other non-audit services
6. Employees
The average number of employees during the year, including executive directors, was:
Administration
Research, development and production
Staff costs for all employees, including executive directors, consist of:
Wages and salaries
Social security costs
Pension costs
Share based payment expense
Haydale Graphene Industries plc | Annual Report & Accounts 2017
2017
£’ 000
2016
£’ 000
908
77
157
560
–
(20)
252
480
34
29
370
(107)
(118)
–
98
23
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
447
7
2017
£’ 000
49
2016
£’ 000
42
14
5
––––––––––––––––––––––––––––––
14
–
61
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
63
2016
No.
11
29
––––––––––––––––––––––––––––––
2017
No.
26
43
40
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
69
2017
£’ 000
2,989
391
142
321
2016
£’ 000
1,995
185
100
326
––––––––––––––––––––––––––––––
3,843
2,606
––––––––––––––––––––––––––––––
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An analysis of the remuneration of the directors is detailed within the Directors’ Remuneration Report on pages 24 to 26. The total
amount payable to the highest paid director in respect of emoluments was £171,000 (2016: £181,000), including pension costs of
£9,000 (2016: £11,000).
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FINANCIAL STATEMENTS
7.
Income tax
Current tax credit
Total income tax credits:
– for the financial year
– under provision in the previous financial year
Total Current Tax
Deferred tax credit
Original and reversal of temporary differences
Recognition of previously unrecognised deferred tax assets
2017
£’ 000
2016
£’ 000
318
68
––––––––––––––––––––––––––––––
280
33
386
––––––––––––––––––––––––––––––
313
–
–
––––––––––––––––––––––––––––––
204
366
–
––––––––––––––––––––––––––––––
570
386
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
883
The reason for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United
Kingdom applied to the losses for the year are as follows:
Loss for the year
Income tax credit
Loss before income taxes
Tax using the Group’s domestic tax rates of 19.75% (2016 – 20%)
Expenses not deductible for tax purposes
Different tax rates applied in overseas jurisdictions
R&D enhancement
Surrender for R&D tax credit
Unrecognised deferred tax assets
Adjustment for under/(over) provision in previous periods
Recognition of previously unrecognised deferred tax assets
Total tax credit
2017
£’ 000
(4,752)
(883)
2016
£’ 000
(3,637)
(386)
––––––––––––––––––––––––––––––
(5,635)
(4,023)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
805
(158)
–
331
(201)
(459)
68
–
––––––––––––––––––––––––––––––
1,113
(251)
53
285
(94)
(622)
33
336
386
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
883
Changes in tax rates and factors affecting the future tax charge
The main rate of corporation tax for UK companies reduced from 20% to 19% from 1 April 2017. The Finance Bill 2016, which was
substantively enacted in September 2016, announced a further reduction to the main rate of corporation tax. The rate will reduce to
17% from 1 April 2020.
The Group has tax losses that are available indefinitely for offset against future taxable profits of the companies approximately
amounting to £12,629,000 (2016: £8,228,000) and £4,946,000 (2016: £1,030,000) of fixed asset timing differences. The group currently
expects to be able to utilise its US tax losses in the foreseeable future and a deferred tax asset has been recognised in respect of
these tax losses accordingly.
The main tax rate of corporation tax for UK companies reduced from 20% to 19% from 1 April 2017. The Finance Bill 2016, which was
substantially enacted on 6 September 2016, announced a further reduction to the main rate of corporation tax. The rate will reduce
to 17% from 1 April 2020. Deferred tax will therefore be calculated at a rate of 17%.
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
8. Loss per share
The calculations of loss per share are based on the following losses and number of shares:
Loss after tax attributable to owners of Haydale Graphene Industries Plc
Weighted average number of shares:
– Basic and Diluted
Loss per share:
Basic (£) and Diluted (£)
2017
£’ 000
(4,862)
2016
£’ 000
(3,598)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
17,232,137
13,713,757
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(0.28)
(0.26)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the
diluted earnings per ordinary share are identical to those used for basic earnings per share. This is because the exercise of share
options would have the effect of reducing the loss per ordinary share and is therefore not dilutive under the terms of IAS 33. At 30
June 2017, there were 1,634,856 (2016: 1,458,775) options and warrants outstanding as detailed in note 15.
9.
Intangible assets
Cost
At 1 July 2015
Additions
At 1 July 2016
Additions
Additions from acquisitions
At 30 June 2017
Accumulated amortisation
At 1 July 2015
Charge for the period
At 1 July 2016
Charge for the year
At 30 June 2017
Net book value
At 30 June 2017
At 30 June 2016
At 30 June 2015
Customer
relationships
£’ 000
Development
expenditure
£’ 000
Goodwill
£’ 000
Total
£’ 000
1,670
429
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
700
429
685
–
285
–
285
–
869
2,099
244
2,353
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,696
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
685
–
1,429
1,129
244
55
1,428
2,114
1,154
210
63
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
181
34
29
29
–
–
58
115
273
157
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
430
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
215
42
257
173
–
–
–
4,266
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,114
1,171
981
1,826
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
685
914
227
1,460
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
685
256
519
Goodwill
Goodwill arose on the acquisition of EPL Composite Solutions Ltd (now Haydale Composite Solutions Limited “HCS”) on 1 November
2014 (£634,000), on the acquisition of Haydale Ltd on 21 May 2010 (£24,000) and of the acquisition of the trade and assets of Intelligent
Nano Technology Ltd (£27,000) on 12 May 2010. On the 9 September 2016, goodwill of £327,151 arose on the acquisition of Innophene
Co. Ltd (now Haydale Technologies Thailand). Goodwill arose on the acquisition of ACM on the 13th October 2016 of £1,102,620.
45
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N
A
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FINANCIAL STATEMENTS
Intangible assets (continued)
9.
Customer Relationships
The customer relationships intangible asset arose on the fair value of assets on the acquisition of EPL Composite Solutions Ltd (now
Haydale Composite Solutions Limited) on 1 November 2014. Additions to the assets were brought in through the acquisition of ACM
on the 13 October 2016 amounting to £868,676.
Development costs
Development costs brought forward arose on the fair value of assets on the acquisition of Haydale Ltd on 21 May 2010 for development
of nano-technology projects, where it is anticipated that the costs will be recovered through future commercial activity. During the
year the group acquired £54,831 due to the acquisition of Innophene.
Development expenditure of £245,369 was capitalised during the year in accordance with IAS 38 in connection with the Group’s
expenditure with the development of graphene enhanced epoxy resins, where the Directors believe that future economic benefit is
probable. Capitalised development expenditure is not amortised until the products or services are ready for sale or use.
Amortisation
Capitalised development costs are amortised over the estimated useful life of 20 years. The amortisation charge is recognised in
administrative expenses.
The customer relationships intangible is amortised over the estimated useful life of 10 years with the exception of the amount
pertaining to the acquisition of ACM which is being amortised over 5 years. The amortisation charge is recognised in administrative
expenses.
Goodwill impairment
Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (“CGUs”) that are expected to
benefit from that business combination. Following the acquisitions of HCS, ACM and Haydale Technologies (Thailand), the Group is
operating a number of different CGUs and therefore HCS and ACM goodwill has been considered against the future forecast trading
outcomes of ACM and HCS as separate CGU’s. The remaining goodwill in the Group prior to the acquisitions is immaterial and has
not been tested for impairment. The goodwill arising from the acquisition of Haydale Technologies (Thailand) is also immaterial and
has not been tested for impairment. An analysis of the pre-tax discount rates used and the goodwill balance as at the year end by
principal CGU’s is shown below:
Haydale Composite Solutions
Haydale Graphene Industries
ACM
Haydale Technologies (Thailand)
2017
%
11%
n/a
11%
n/a
2016
£’ 000
634
51
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
2017
£’ 000
634
51
1,103
327
2016
%
15%
n/a
–
–
The Group tests goodwill at least annually for impairment or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined from value-in-use calculations. The key assumptions for the value-in-use are
those regarding the discount rates, the growth rates and expected changes to cash flows during the period for which management
have detailed plans. The Directors estimate discount rates using pre-tax rates that reflect current market assessments of the time
value of money and the risks specific to the CGUs.
Pre-tax discount rates, derived from the Group’s post-tax weighted average cost of capital of 11% (2016: 15%), and have been used to
discount projected cash flows.
The calculations for HCS have been derived from the Board’s approved forecast figures for the next year. The HCS forecasts assume
that its turnover will grow in the current financial year and then by a further 33% per annum from the end of the current financial
year across the course of the remaining four-years of the forecast and by 3% per annum beyond five years. The growth rates used are
based on management’s internally estimated growth forecasts for the market, together with the expected market share of HCS
within those markets. The Group applies sensitivities to the projections to determine whether there is sufficient head-room in positive
cash flows to support the carrying value of the underlying assets of the CGUs.
46
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
The calculations for ACM have been derived from the Board’s approved forecast figures for the next year.
The ACM forecasts assume that its turnover will grow in the current financial year and then by a further 5% per annum from the
end of the current financial year across the course of the remaining four-year forecasts and by 3% per annum beyond five years. The
growth rates used are based on management’s internally estimated growth forecasts for the market, together with the expected
market share of ACM within those markets.
Following this review, the Directors have determined that there is no impairment charge which should be recognised against the
intangible assets of the Group, nor has any such impairment been required to be recognised in any of the periods covered by this
report.
Sensitivity to changes in assumptions
If the revenue growth in HCS dropped below 30% p.a. that would result in an impairment within its financial model although, in this
scenario, the Board would take mitigating action to try to prevent such an impairment.
10. Property, plant and equipment
Leasehold
improvements machinery
£’ 000
£’ 000
Plant and Fixtures and
fittings
£’ 000
Motor
vehicles
£’ 000
Total
£’ 000
Cost
At 1 July 2015
Additions
Disposals
At 1 July 2016
Additions
Additions from acquisitions
FX on additions from acquisitions
At 30 June 2017
Accumulated depreciation
At 1 July 2015
Charge for the year
At 1 July 2015
Charge for the year
At 30 June 2017
Net book value
At 30 June 2017
At 30 June 2016
At 30 June 2015
2,182
469
(99)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,830
273
(99)
259
188
–
91
8
–
2
–
–
447
17
11
(1)
2,004
364
3,544
(210)
2,552
415
3,870
(227)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
6,610
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
99
34
283
(16)
2
–
32
–
5,702
400
474
34
606
370
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
486
323
63
28
55
19
2
–
91
47
976
560
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,536
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
809
467
74
41
1,276
138
2
5
115
7
5,074
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,426
285
336
27
1,576
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,195
356
25
–
1,576
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,344
196
36
–
Included within plant and machinery are assets under construction totalling £50,609 (2016: £15,000). Included within fixtures and
fittings are assets under construction totalling £22,615 (2016: £0).
47
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FINANCIAL STATEMENTS
11. Inventories
Raw materials
Work in progress
Finished goods
2017
£’ 000
274
296
642
2016
£’ 000
72
300
26
––––––––––––––––––––––––––––––
398
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
1,212
Raw materials and finished goods comprise functionalised carbon, chemicals and associated raw materials. Work in progress
comprises recoverable costs on long-term contracts.
12. Trade receivables
Trade receivables
13. Other receivables
Other receivables
Prepayments and accrued income
14. Share capital and share premium
At 1 July 2015
Issue of £0.02 ordinary shares
At 30 June 2016
Issue of £0.02 ordinary shares
At 30 June 2017
2017
£’ 000
798
2016
£’ 000
49
––––––––––––––––––––––––––––––
49
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
798
2017
£’ 000
127
408
2016
£’ 000
411
202
––––––––––––––––––––––––––––––
613
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
535
Number
of shares
No.
11,446,446
3,790,500
Total
£’ 000
6,483
5,662
––––––––––––––––––––––––––––––––––––––––––––––––––
Share
premium
£’ 000
6,254
5,586
Share
capital
£’ 000
229
76
305
87
15,236,946
4,360,767
12,145
7,183
––––––––––––––––––––––––––––––––––––––––––––––––––
19,328
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
11,840
7,096
19,597,713
18,936
392
During the year, the Company issued 4,360,767 new ordinary shares of 2p each as follows:
•
•
•
•
•
In September 2016, 176,952 £0.02 ordinary shares were issued following the acquisition of Innophene Co Ltd;
In October 2016, 1,619,687 shares were issued in connection with the Company’s £2.59 million placing and open offer;
In December 2016, 415,618 shares were issued following the acquisition of ACMC Holding;
In April 2017 the Company received a strategic investment of £3.6 million (£3.3 million of which was from a subsidiary of Everpower
Holdings) resulting in the issue of 2,109,010 shares; and
39,500 ordinary shares were issued were in respect of the exercise of options.
Issue costs amounting to £157,360 (2016: £376,372) have been charged to the share premium account in the year.
48
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
15. Share-based payment transactions
Options
The Company operates both an approved EMI share option scheme and an unapproved share option scheme for the benefit of
employees and directors of the Company. The exercise price of the options is equal to the mid-market price of the shares on the date
of grant. The options vest either one year or three years from the date of grant. The options are accounted for as equity settled share
based payment transactions. The following table which illustrates the number and weighted average exercise prices (WAEP) of, and
movements in, share options during the year:
Balance at beginning of year
Granted
Exercised
Lapsed
Balance at end of year
2016
Weighted
average
exercise
price
Pence
154
172
93
135
––––––––––––––––––––––––––––––––––––––––––––––––––
2017
Weighted
average
exercise
price
Pence
159
187
93
–
Number
of options
No.
1,081,636
215,581
(39,500)
–
Number
of options
No.
934,334
190,627
(40,500)
(2,825)
1,257,717
159
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
1,081,636
166
At 30 June 2017, there were options outstanding over 1,257,717 un-issued ordinary shares, equivalent to 6.4% of the issued share capital
as follows:
Number of
shares
Exercise
price
Earliest exercise
date
Performance
criteria
Latest
exercise date
Approved EMI scheme
23 May 2013
30 September 2013
03 April 2014
1 November 2014
7 November 2014
18 March 2015
25 June 2015
3 November 2015
19 May 2016
14 October 2016
26 June 2017
Unapproved schemes
03 April 2014
18 March 2015
19 May 2016
14 October 2016
26 June 2017
21,000
20,500
329,241
130,000
60,000
54,565
47,438
13,782
147,458
52,084
133,344
167,353
21,412
29,387
26,170
3,983
–––––––––––
1,257,717
–––––––––––
–––––––––––
93.00p
93.00p
210.00p
62.25p
61.50p
134.50p
121.00p
177.00p
171.50p
198.14p
178.5p
210.00p
134.50p
171.50p
198.14p
178.5p
23 May 2014
30 September 2016
03 April 2017
1 November 2017
7 November 2017
18 March 2018
25 June 2018
3 November 2018
19 May 2019
14 October 2019
27 June 2020
03 April 2017
18 March 2018
19 May 2019
14 October 2019
27 June 2020
–
23 May 2023
– 30 September 2023
03 April 2024
–
1 November 2024
Share price > 160p
7 November 2024
Share price > 160p
18 March 2025
–
25 June 2025
–
3 November 2025
–
19 May 2026
–
14 October 2026
–
27 June 2027
–
–
–
–
–
–
03 April 2024
18 March 2025
19 May 2026
14 October 2026
27 June 2027
The exercise prices for options granted prior to 03 April 2014 have been adjusted to reflect the 80-for-1 bonus issue made on that
date.
The estimated fair value was calculated by applying a Black-Scholes option pricing model.
49
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247114 Haydale AR pp36-pp64 15/11/2017 21:54 Page 50
FINANCIAL STATEMENTS
15. Share-based payment transactions (continued)
Share
price
at date of
grant
(p)
93
93
210
210
62
Type of Number
award of shares
21,000
20,500
329,241
167,353
130,000
23 May 2013
30 September 2013
03 April 2014
03 April 2014
1 November 2014
EMI
EMI
EMI
Unapproved
EMI
Fair
value
per
option
(p)
53
54
94
94
38
Award
life
(years)
10
10
10
10
10
7 November 2014
EMI
60,000
18 March 2015
18 March 2015
25 June 2015
3 November 2015
19 May 2016
19 May 2016
14 October 2016
14 October 2016
26 June 2017
26 June 2017
EMI
Unapproved
EMI
EMI
Unapproved
EMI
Unapproved
EMI
EMI
Unapproved
54,565
21,412
47,438
13,782
29,387
147,458
52,084
26,170
133,334
3,983
–––––––––
1,257,717
–––––––––
–––––––––
62
135
135
121
177
172
172
198
198
179
179
38
82
82
74
111
101
101
113
113
179
179
10
10
10
10
10
10
10
10
10
10
10
Risk
free
rate
(%)
1.75
1.75
1.75
1.75
1.75
1.75
1.75
1.75
1.75
1.75
0.62
0.62
0.50
0.50
0.50
0.50
Expected
volatility
rate Performance
conditions
(%)
None
30
None
30
None
30
30
None
50 Share price >
160p*
50 Share price >
160p*
None
None
None
None
None
None
None
None
None
None
50
50
50
52
51
51
49
49
34
34
*Share price >160p. These performance conditions are for share options issued to Employees only; there are no performance conditions
for share options issued to Directors.
538,094 Options were exercisable as at 30 June 2017 (2016: 78,178).
The model inputs for share options granted in the year were:
Share prices at grant date
Exercise prices
Expected volatility
Risk free rate
Contractual life
14 October
2016
172p
172p
48.5%
0.50%
10 years
27 June
2017
179p
179p
33.92%
0.50%
10 years
•
•
•
No dividends are anticipated in the life of model, consistent with the Directors’ view that the Group’s model is to generate value
through capital growth rather than the payment of dividends;
Risk-free interest rate of 0.5 per cent., equating to the prevailing UK Gilts rate, was used for the most recent option grants, which
most closely matches the expected term of the grant; and
The volatility has been adjusted to reflect market based performance criteria where appropriate.
The weighted average remaining contractual life of share options outstanding at 30 June 2017 is 7.8 years (2016: 8.3 years). The charge
for the year for share-based payment amounted to £292,720 (2016: £268,796).
50
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Warrants
Balance at beginning of year
Granted
Lapsed
Balance at end of year
Haydale Graphene Industries plc | Annual Report & Accounts 2017
2017
Weighted
Number of
warrants
2016
Weighted
average
exercise
No. price Pence
183
225
160
––––––––––––––––––––––––––––––––––––––––––––––––––
average Number of
exercise
warrants
No. price Pence
187
–
–
397,321
58,818
(79,000)
377,139
–
–
377,139
187
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
377,139
187
No warrants were issued during the year under review. None of the warrants outstanding at 30 June 2017 are to employees or have
performance conditions attached. The same pricing model was used for calculating the cost of warrants to the Group as was used
for calculating the cost of the options to the Group.
The weighted average remaining contractual life of warrants outstanding at 30 June 2017 is 2.14 years (2016: 3.14 years). The charge
for the year for share-based payment amounted to £58,610 (2016: £57,530).
16. Reserves
Share capital
The share capital represents the nominal value of the equity shares in issue.
Share premium account
The share premium account represents the amount received on the issue of ordinary shares in excess of their nominal value and is
non-distributable.
Share-based payment reserve
The share-based payment reserve comprises the cumulative expense representing the extent to which the vesting period of share
options has passed and management’s best estimate of the achievement or otherwise of non-market conditions and the number
of equity instruments that will ultimately vest.
Retained earnings
The retained profits and losses reserves comprise the cumulative effect of all other net gains, losses and transactions with owners
(e.g. dividends) not recognised elsewhere.
Foreign Exchange
The foreign exchange reserve comprises of translation differences arising from the translation of the overseas subsidiary results.
Revaluing those subsidiaries from their functional currency in to the group presentation currency.
17. Trade and other payables
Trade payables
Tax and social security
Accruals and other creditors
2017
£’ 000
380
80
1,845
2016
£’ 000
260
67
329
––––––––––––––––––––––––––––––
2,305
656
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
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247114 Haydale AR pp36-pp64 15/11/2017 21:54 Page 52
FINANCIAL STATEMENTS
18. Bank loans
Bank loans
The borrowings are repayable as follows:
– within one year
– in the second year
– in the third to fifth years inclusive
2017
£’ 000
1,270
2016
£’ 000
270
166
104
–
––––––––––––––––––––––––––––––
359
261
650
1,270
270
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
The Group’s borrowings are denominated in pounds sterling and US dollars. The directors consider that there is no material difference
between the fair value and carrying value of the Group’s borrowings.
Average interest rates paid
2016
%
2
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2017
%
4
In December 2014 a three year bank loan of £500,000 was drawn by the Company and securitised by cash deposits. The loan accrues
interest at 1.5% above the Bank of England base rate and is repayable in equal monthly instalments until February 2018.
In October 2016, a five year bank loan of $1,720,000 (equivalent to approximately £1.4 million at the time) was drawn by Haydale
Technologies Inc (“HTI”), the Company’s US holding company subsidiary, secured on the fixed assets of HTI and its newly acquired
operating subsidiary, Advanced Composite Materials. This loan carries an interest rate of 4% and is repayable in equal instalments. In
addition to this HTI has secured a working capital line of credit with a rate fixed at 5.25% on the remaining balance.
19. Deferred income
Deferred income is recognised for both capital and revenue grants from governments and other funding parties, and released as
income in accordance with the relevant conditions of the grant concerned.
Grants
Commercial Deferred Income
2017
£’ 000
13
240
2016
£’ 000
19
157
––––––––––––––––––––––––––––––
176
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
253
Commercial Deferred Income
As at 30 June 2017, deferred income £240,104 arose in relation to a sale where a cash receipt was received in advance for work to be
carried out over the next six months.
20.Related party disclosures
Balances and transactions between Haydale Graphene Industries Plc and its subsidiaries are eliminated on consolidation and are
not disclosed in this note. Balances and transactions between the Group and other related parties are disclosed below.
Remuneration of directors and key management personnel
The remuneration of the senior Executive Management Committee members, who are the key management personnel of the Group,
is set out below in aggregate for each of the categories specified in IAS 24 ‘Related Party Disclosures’.
Short-term employee benefits and fees
Social security costs
Share-based payments
Post-retirement benefits
52
2017
£’ 000
400
46
122
15
2016
£’ 000
497
52
146
22
––––––––––––––––––––––––––––––
717
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
583
247114 Haydale AR pp36-pp64 15/11/2017 21:54 Page 53
Haydale Graphene Industries plc | Annual Report & Accounts 2017
During the year ended 30 June 2017, Mr G Eves, a director of the Company, earned fees through his company, Evesco International
Business, totalling £11,293 (2016: £24,000) for corporate finance consultancy. At 30 June 2017, the balance owed to Evesco International
Business was £0 (2016: £5,000).
Fees totalling £35,333 (2016: £59,000) were paid to the ONE Advisory Ltd, a company of which Mr M Wood, a director of the Company,
is a director, during the year ended 30 June 2017 for financial, administration, compliance and support services. At 30 June 2017, the
balance owed to ONE Advisory Ltd was £3,551 (2016: £2,000).
Fees totalling £64,427 (2016: £0) were paid to the ATL Consulting Ltd, a company of which Mr R Smith, a director of the Company, is
a director, during the year ended 30 June 2017 for business development consultancy. At 30 June 2017, the balance owed to ATL
Consulting Ltd was £11,387 (2016: £0).
During the year under review, legal services were provided to the Group by ONE Legal Advisory Ltd, a company of which Mr M Wood
is a director amounting to £5,856 (2016: £14,000). The balance owed to ONE Legal Advisory Ltd at the end of the year was £0 (2016:
£600).
Other transactions
Other related party transactions during the year under review are shown in the table below:
Services Received
T M Mather – admin support
Arago Technology Limited
Thermocomp Limited
Tracey Enterprises Limited
PlanarTech
Services Provided
Aqualiner Limited
Frangible Safety Posts Limited
Services received
2017
£’ 000
2016
£’ 000
7
21
–
4
110
–
20
15
45
–
30
16
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
72
6
During the year under review, Haydale Composite Solutions Ltd (“HCS”), a wholly owned subsidiary of the Company, purchased
technical consultancy from Arago Technology Limited (“Arago”), a company in which HCS owns 117,263 preference shares. During
2016, the investment in Argao was impaired in full. The net total amount of services purchased during the year was £21,277
(2016: £19,708). There were no balances outstanding due to Arago at 30 June 2017.
An amount of £7,079 was invoiced by Ms T M Mather to HCS during the year ended 30 June 2017 for the provision of administrative
support. Ms T M Mather is the partner of Mr N Finney, a director of HCS. As at 30 June 2017, a balance of £3,023 was due to Ms T M
Mather by HCS.
Accountancy and administration services were provided by Tracey Enterprises Ltd (“Tracey”) to HCS during the year ended 30 June
2017 amounting to £3,555 (2016: £44,636). Mr R Tracey, a director of Tracey, was the company secretary of HCS during the year under
review. There were no amounts outstanding due to Tracey at 30 June 2017.
During the year an amount of £328,887 was paid to QM Holdings in respect of property rent. QM Holding is owned by Tom Quantrille
and Marvin Murrell who are officers of ACM, a wholly owned subsidiary of the group. Additional payments were made in the year in
respect of the deferred consideration due to the vendors of ACM, Tom Quantrille and Marvin Murrell. Payments to Tom Quantrille
made in the year amounted to £16,281 and £5,427 to Marvin Murrell. There were no amounts outstanding at the year end.
Services provided
In the year ended 30 June 2017, HCS provided services to Frangible Safety Posts Limited (“FSP”), a company of which Mr G S Boyce, a
director of HCS, was a director. The amounts for the year under review were £6,186 (2016: £16,245). There were no amounts outstanding
at the year end.
HCS made sales to Aqualiner Ltd (“Aqualiner”) during the year ended 30 June 2017, a company in which Mr N Weatherby and Mr G S
Boyce, both directors of HCS, are directors. The net sales for the year ended 30 June 2017 were £72,429 (2016: £30,178). Amounts
outstanding including VAT at the year end was £66,534
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FINANCIAL STATEMENTS
20.Related party disclosures (continued)
During the year, Haydale Limited procured business development services from PlanarTech, a company of which P Frantz, a director
of Haydale Technologies Thailand Ltd, a subsidiary of the Company, is a director. The value of services provided by PlanarTech in the
year was £110,356.
The balances outstanding (due to)/from related parties at each year ended 30 June were as follows:
Aqualiner Limited
Thermocomp Limited
T M Mather
PlanarTech
2017
£’ 000
67
(2)
(3)
(18)
2016
£’ 000
5
(2)
–
–
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
21. Financial instruments
The Group’s activities are exposed to a variety of market risk (including foreign currency risk and interest rate risk), credit risk and
liquidity risk. The Group’s overall financial risk management policy focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group’s financial performance.
(a) Financial risk management policies
The Group’s policies in respect of the major areas of treasury activity are as follows:
(i) Market risk
(i)
Foreign currency risk
The Group is exposed to foreign currency risk on transactions and balances that are denominated in currencies other
than Pounds Sterling. The currencies giving rise to this risk are primarily the United States Dollar and the Euro. Foreign
currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level. The
Group maintains the ability to provide a natural hedge wherever possible by matching the cash inflows (revenue
stream) and cash outflows used for purposes such as operational expenditure in the respective currencies.
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the end of each
reporting period were as follows:
United States
Dollar
£’ 000
Euro
£’ 000
Total
£’ 000
658
746
––––––––––––––––––––––––––––––––––––––––––––––––––
131
––––––––––––––––––––––––––––––––––––––––––––––––––
127
88
4
801
––––––––––––––––––––––––––––––––––––––––––––––––––
688
113
–
––––––––––––––––––––––––––––––––––––––––––––––––––
–
–
2017
Financial assets
Financial liabilities
2016
Financial assets
Financial liabilities
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
Foreign currency sensitivity analysis
The following table details the sensitivity analysis to possible changes in the relative values of foreign currencies to
which the Group is exposed as at the end of the respective financial periods, with all other variables held constant:
Effects on loss after taxation/equity
United States Dollar:
– strengthened by 10%
– weakened by 10%
Euro:
– strengthened by 10%
– weakened by 10%
(ii)
Interest rate risk
2017 Increase/
(decrease)
£’ 000
2016 Increase/
(decrease)
£’ 000
58
(50)
(1)
1
76
(62)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
9
(8)
The Group’s exposure to interest rate risk arises mainly from interest-bearing financial assets. The Group’s policy is to
obtain the most favourable interest rates available, while ensuring no risk to capital. Any surplus funds will be placed
with licensed financial institutions to generate interest income. The current loan and credit facilities maintain a fixed
rate of interest.
Interest rate risk sensitivity analysis
A 100 basis points strengthening or weakening of the interest rate as at the end of each financial period would have
an immaterial impact on loss after taxation and/or equity. This assumes that all other variables remain constant.
(ii) Credit risk
The Group’s exposure to credit risk, or the risk of third parties defaulting, arises mainly from trade and other receivables.
The Group manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures
on an ongoing basis. For other financial assets (including cash and bank equivalents), the Group minimises credit risk by
dealing exclusively with high credit rating financial institutions.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of the trade
and other receivables as appropriate. The main components of this allowance are a specific loss component that relates to
individually significant exposures, and a collective loss component established for groups of similar assets in respect of
losses that have been incurred but not yet identified. Impairment is estimated by management based on prior experience,
current market and third party intelligence while considering the current economic environment.
Credit risk concentration profile
To date, modest sales have meant that the credit risk profile of the Group has tended to focus on a handful of customers
only. As such, no meaningful analysis can be drawn from the customer profile of the receivables outstanding at each period
end under review.
Exposure to credit risk
As the Group does not hold any collateral, the maximum exposure to credit risk is represented by the carrying amount of
the financial assets at the end of each financial period.
The exposure of credit risk for trade receivables by geographical region as at the year end is as follows:
United Kingdom
Europe
North America
Rest of the world
55
2017
£’ 000
132
16
265
385
2016
£’ 000
45
–
–
4
––––––––––––––––––––––––––––––
49
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
798
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FINANCIAL STATEMENTS
21. Financial instruments (continued)
Maturity analysis
The ageing analysis of the Group’s trade receivables as at the year end is as follows:
Not past due
Past due:
– less than 3 months
– between 3 and 6 months
– more than 6 months
Gross amount
2017
£’ 000
699
2016
£’ 000
20
6
–
17
––––––––––––––––––––––––––––––
99
–
–
49
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
798
At the end of each financial period, trade receivables that are individually impaired were those in significant financial
difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancement.
Collective impairment allowances, are determined based on estimated irrecoverable amount from the sale of goods and
services, determined by reference to past default experience.
Trade receivables that are past due but not impaired
The Haydale Graphene Industries Group believes that no impairment allowance is necessary in respect of these trade
receivables. They are substantially companies with good collection track record and no recent history of default, further on
from this , this applies to any trade receivables held at year end which are not past due.
(iii) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group exposure
to liquidity risk arises primarily from mismatches of the maturity of financial assets and liabilities.
The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by management to ensure
as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.
All of the financial liabilities of the Group are due within one year, with the exception of certain long term bank loans – see
note 18.
Maturity analysis
The ageing analysis of the Group’s non-derivative financial liabilities as at the year end is as follows:
Due:
– within one year
– within one to two years
– within two to five years
Gross amount
(b) Capital risk management
2017
£’ 000
2016
£’ 000
822
104
–
––––––––––––––––––––––––––––––
2,591
261
650
3,502
926
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
The Group defines capital as the total equity of the Group. The Group’s objectives when managing capital are to safeguard the
Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure,
Haydale Graphene Industries PLC may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue
new shares or sell assets to reduce debt. Haydale Graphene Industries PLC ensures that the distributions to shareholders do not
exceed working capital requirements.
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
(c) Classification of financial instruments
Financial assets
Trade receivables
Other receivables
Cash and bank balances
Financial liabilities
Bank loans
Trade payables
Accruals and other creditors
Financial Liabilities (at amortised cost)
Provision for contingent consideration (fair value through profit and loss)
Total Financial Liabilities
2017
£’ 000
2016
£’ 000
49
411
2,864
––––––––––––––––––––––––––––––
798
222
2,091
3,324
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
3,111
270
260
329
––––––––––––––––––––––––––––––
1,270
380
1,845
859
–
––––––––––––––––––––––––––––––
2,895
–
2,895
859
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(d) Fair value of financial instruments
All financial assets and liabilities approximate their fair values due to the relatively short-term nature of the financial instruments.
The Group has no financial assets or liabilities carried at fair values at the end of each reporting date, with the exception of the
contingent consideration.
22. Capital commitments
The Group had the following capital commitments in the respective years:
Contracted but not provided for
2017
£’ 000
39
2016
£’ 000
22
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
23. Ultimate controlling party
The Directors do not consider any one shareholder, individually or acting in consort with others, to have ultimate control of the Group.
24.Operating lease arrangements
The amounts of minimum lease payments under non-cancellable operating leases are as follows:
2017
2017
Land and
Plant and
buildings machinery
£’ 000
£’ 000
2016
2016
Plant and
Land and
buildings machinery
£’ 000
£’ 000
547
1,423
7
1
3
–
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
40
–
1,970
1
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
40
10
Operating leases which expire:
– within one year
– within two to five years
Aggregate amounts payable
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FINANCIAL STATEMENTS
24.Operating lease arrangements (continued)
Payments recognised as an expense under these operating leases were as follows:
Operating lease expense
2017
2017
2016
2016
Plant and
Land and
Plant and
Land and
buildings machinery
buildings machinery
£’ 000
£’ 000
7
23
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
£’ 000
447
£’ 000
98
Significant lease arrangements have been established during the year for the lease of the premises from which ACM and HTI operate
in South Carolina, USA totalling £1.56 million (2016: nil). The lease expires on 31 December 2020. Other leases pertain to the office and
unit contracts for the two UK facilities of in aggregate £0.3 million (2016: £0.04 million). Of the £0.3 million, certain leases are
cancellable with three months’ notice and others have break clauses 18 months after the date of these accounts.
The facility in Thailand is leased and, at the date of these results, will expire in 12 months. The cost is £0.09 million (2016: nil),
Within the minimum lease payments for plant and machinery is the cost relating the general office equipment.
25. Acquisitions
In September 2016, the Company agreed to acquire the entire issued voting share capital of Innophene Co Ltd (renamed Haydale
Technologies (Thailand) Co Ltd (“HTT”) for a maximum consideration of £311,665, settled through the issue of 176,972 new ordinary
shares in Haydale to the vendors. It was acquired as an R&D and production facility for the Group’s Far East operations.
The fair values of Innophene Co Ltd as at 9 September 2016 were as follows:
ASSETS
Intangible assets
Property, plant and equipment
Other receivables
Trade receivables
Cash and bank balances
TOTAL ASSETS
LIABILITIES
Trade and other payables
TOTAL LIABILITIES
NET LIABILITIES ACQUIRED
Consideration
Consideration (176,792 new ordinary shares in the Company)
Goodwill on acquisition
Effects within consolidated statement of cashflows
£’ 000
55
4
63
9
1
––––––––––––––––
132
––––––––––––––––
147
––––––––––––––––
147
––––––––––––––––
(15)
––––––––––––––––
––––––––––––––––
312
––––––––––––––––
312
––––––––––––––––
––––––––––––––––
327
1
Since the acquisition date to 30 June 2017, HTT contributed £0.07 million to the Group’s total income and generated a loss of
£0.28 million.
58
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
In October 2016, the Company acquired the entire issued voting share capital of ACMC Holding, Inc (“ACM”) for £1.31 million together
with the repayment of borrowings of ACM of approximately £2.86 million. It was acquired to become the Group’s US base from
which it could expand its operations into the US market.
The fair values of ACMC Holdings as at 13 October 2016 were as follows:
ASSETS
Intangible assets
Property, plant and equipment
Inventories
Other receivables
Trade receivables
Cash and bank balances
TOTAL ASSETS
LIABILITIES
Trade and other payables
Pension Obligation
Deferred tax
TOTAL LIABILITIES
NET ASSETS ACQUIRED
Consideration
Consideration – 415,618 ordinary shares in Haydale ($1.0 million)
Deferred cash of $600,000
Goodwill on acquisition
Effect within consolidated statement of cashflows:
Less: cash and bank balances acquired
£’ 000
869
3,867
802
67
1
3
––––––––––––––––
5,609
––––––––––––––––
3,068
1,117
1,217
––––––––––––––––
5,402
––––––––––––––––
207
––––––––––––––––
––––––––––––––––
819
491
––––––––––––––––
1,310
––––––––––––––––
––––––––––––––––
1,103
––––––––––––––––
––––––––––––––––
(3)
––––––––––––––––
(3)
––––––––––––––––
––––––––––––––––
Since the acquisition date to 30 June 2017, ACM contributed £2.05 million to the Group’s total income and generated a profit of
£0.27 million. The terms of the acquisition include an agreed earn out formula that runs to mid-2020 that provides for payments of
conditional consideration of up to $1.8 million to the vendors of ACM, based upon ACM achieving certain sales targets that are
expected to be self-funded (“Earn Out”). The Earn Out amount does not form part of the consideration for the acquisition of ACM as
the Earn Out is conditional upon the former owners remaining within the employment of ACM up to the point that any Earn Out is
due. No amounts of contingent consideration have been recognised in the accounts during the year under review.
59
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FINANCIAL STATEMENTS
26.Defined Benefit Pension Scheme
ACM operated a defined benefit pension scheme, which is now closed for any new participants. The net periodic benefit cost is
determined at the beginning of the year based on applicable assumptions at that time.
No contributions are expected to be made to the year ended 30 June 2018, the next payment of approximately £41,000 is expected
to be paid in December 2018.
Included in the loss before tax since acquisition to the year ended 30 June 2017:
Interest payable
Included in other comprehensive income since acquisition to the year ended 30 June 2017:
Actuarial Movement
Deferred Tax
The following table sets forth the pension plan’s funded status as of 30 June 2017:
Accumulated benefit obligation
Projected Benefit obligation
Plan assets at fair value
Funded Status
Accrued Pension Cost
Net amount recognised in the consolidated balance sheet as of 30 June 2017, consisted of the following:
Non current Assets
Current Liabilities
Non current liabilities
£’ 000
156
––––––––––––––––
––––––––––––––––
£’ 000
57
(21)
––––––––––––––––
36
––––––––––––––––
––––––––––––––––
£’ 000
(3,939)
(3,939)
2,970
––––––––––––––––
(969)
––––––––––––––––
(969)
––––––––––––––––
––––––––––––––––
£’ 000
2,970
(351)
(3,558)
––––––––––––––––
(969)
––––––––––––––––
––––––––––––––––
The discount rate is based on the yield curve of government bonds in the applicable region adjusted with a credit spread of one of
the two highest ratings given by a recognized ratings agency. Future cash outflows of the plans are then related with the yield curve.
The average is the discount rate. The weighted average assumptions used to develop the actuarial present value of benefit obligations
and net periodic benefit costs for the pension plan are as follows for the year ended 30 June 2017:
Discount rate for periodic benefit costs
Discount rate for benefit obligations
Rate of increase in compensation levels
Investment return rate
Mortality Assumptions are as follows:
4.00%
4.00%
0.00%
8.00%
Pre-Retirement valuation assumptions – Investment Earnings
Retirement valuation assumptions- Investment Earnings
IRC417 (e) (3) Interest Assumption
IRC417 (e) (3) Pre-retirement mortality
IRC417 (e) (3) Retirement mortality
2015 430(h)(3)(A)-Optional Combined
2015 430(h)(3)(A)-Optional Combined
Funding yield curve segmented rates
2015 417(e)(3) – Applicable Mortality Table
2015 417(e)(3) – Applicable Mortality Table
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Plan Assets
Pension assets are managed by an outside investment manager and are rebalanced periodically. The Company establishes policies
and strategies and regularly monitors performance of the assets, including the selection of investment managers, setting long-term
strategic targets, and monitoring asset allocations. Target allocation ranges are guidelines, not limitations, subject to variation from
time-to-time or as circumstances warrant, and occasionally, the Company may approve allocations above or below a target range.
The pension plan’s investment strategy with respect to pension assets is to invest the assets in accordance with ERISA and fiduciary
standards. The long-term primary objective for the pension plan assets are to protect the assets from erosion of purchasing power
and to provide a reasonable amount of long-term growth of capital, without undue exposure to risk. Currently, the strategic targets
are 45% for equity securities, 50% for debt securities, and no more than 5% for other categories.
The fair value of the Company’s pension plan assets which were acquired on 13 October through acquisition, valued at 30 June 2017,
by asset category were as follows:
Description
Cash
Corporate Equities
Fixed Income:
US Government
Municipal
Corporate debt
Mutual Funds
Negotiable CD
Total
Assets/
Liabilities
Carrying Measured at
Fair Value (£)
246,884
1,565,441
Amount (£)
246,884
1,565,441
Fair Value Measurements at
30 June 2017 using
Level 1
Inputs (£)
246,884
1,565,441
Level 2
Inputs (£)
–
–
Level 3
Inputs (£)
–
–
270,629
12,334
393,965
423,256
57,636
270,629
12,334
393,965
423,256
57,636
–
–
–
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
270,629
12,334
393,965
–
–
–
–
–
423,256
57,636
2,970,145
2,970,145
2,293,217
676,928
All corporate equities are quoted securities.
The changes in the fair value of the Company’s pension plan assets for the year ending 30 June 2017, were as follows:
On acquisition
Contributions
Distributions
Earnings
Net realised gain
Other income
Administrative expenses
Ending balance
£
2,913,631
124,412
(167,991)
49,625
11,424
103,912
(64,867)
––––––––––––––––
2,970,146
––––––––––––––––
––––––––––––––––
Cash Flows
For current financial year, the Company expects contributions to be approximately £40,784. The Company expects benefits paid for
the next five fiscal years and the five years thereafter as follows:
2018
2019
2020
2021
2022
Thereafter
£
259,404
261,961
254,728
251,831
247,459
1,169,304
––––––––––––––––
2,444,687
––––––––––––––––
––––––––––––––––
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FINANCIAL STATEMENTS
26.Defined Benefit Pension Scheme (continued)
The company’s pension plan asset allocations by asset category were as follows as of 30 June 2017:
Asset Category
Cash
Equities
Fixed Income
Plan Obligations
Benefit Obligation at acquisition
Foreign Exchange on translation
Interest Cost
Actuarial loss
Benefits paid
Benefit Obligation at acquisition
Fair Value of Plan Assets at acquisition
Foreign Exchange on translation
Actual Return on plan assets
Employer Contributions
Benefits paid
Fair Value of Plan Assets at the end of the year
Funded Status at the end of the year
Defined benefit obligation – sensitivity analysis.
8%
53%
39%
£’ 000
4,217
(254)
156
(12)
(168)
––––––––––––––––
3,939
––––––––––––––––
3,100
(186)
100
124
(168)
––––––––––––––––
2,970
––––––––––––––––
969
––––––––––––––––
––––––––––––––––
The impact to the value of the defined benefit obligation of a reasonably possible change to one actuarial assumption, holding all
other assumption constant, is presented in the table below:
Actuarial Assumption
Discount Rate
Reasonably
Possible Change
(+/- 0.25%)
Defined Benefit Obligation (£’000)
Decrease
97
Increase
(94)
The Company also has a retirement savings plan under Section 401(k) of the Internal Revenue Code which provides for voluntary
participation. All employees who have completed one hour of service are eligible to participate in this plan beginning the first pay
period of the month following the date an hour of service is first performed. Participants may contribute on a pre-tax basis from 1%
to 60%, in 1% increments, of their annual base salary. Company contributions under the plan are required to be equal to 100% of that
portion of participant contributions which do not exceed 6% of the participant’s annual base compensation rate. Participants are
immediately vested in their voluntary contributions plus actual earnings and Company contributions. The Company contributions
for the year ended 30 June 2017, were £29,245.
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27. Taxes
Deferred tax is calculated in full on temporary differences under the liability method. Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and
tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The movement on the deferred tax account is as shown below:
At 1 July
Tax credit recognised in profit and loss
Arising on business combinations
Movement due to changes in tax rates
At 30 June
2017
£’ 000
–
570
2016
£’ 000
–
–
––––––––––––––––––––––––––––––
–
–
–
––––––––––––––––––––––––––––––
570
(1,217)
92
–
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(555)
Deferred tax assets have been recognised in respect of tax losses and other temporary differences giving rise to deferred tax assets
where the directors believe it is probable that these assets will be recovered.
Detail of the deferred tax liability, amounts recognised in profit and loss and amounts recognised in other comprehensive income
are as follows:
(Charged)/
Employee pension liabilities
Available losses
Business combinations
Net tax assets/(liabilities)
Employee pension liabilities
Available losses
Business combinations
Net tax assets/(liabilities)
Asset
2017
£’ 000
329
350
–
credited (Charged)/
credited
to profit
to equity
or loss
2017
2017
£’ 000
£’ 000
–
329
–
350
–
(109)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Liability
2017
£’ 000
–
–
(1,234)
Net
2017
£’ 000
329
350
(1,234)
(1,234)
(555)
679
570
(Charged)/
credited (Charged)/
credited
to profit
to equity
or loss
2016
2016
£’ 000
£’ 000
–
–
–
–
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Liability
2016
£’ 000
–
–
–
Net
2016
£’ 000
–
–
–
Asset
2016
£’ 000
–
–
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
–
–
–
A deferred tax asset has not been recognised for the following:
Accelerated capital allowances
Deductible temporary differences
Unused tax losses
The unused tax losses can be carried forward indefinitely.
63
2017
£’ 000
(224)
–
1,972
2016
£’ 000
(206)
8
1,646
––––––––––––––––––––––––––––––
1,748
1,448
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
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247114 Haydale AR pp36-pp64 15/11/2017 21:54 Page 64
FINANCIAL STATEMENTS
28. Post Balance Sheet Events
From 1 July 2017, the Group changed its internal reporting system to set up two profit-centric strategic business units (“SBUs”) known
as “RPC” and “AMAT”. For the current financial year and beyond, the Group intends to report sales and profits under these two SBUs.
On 9 August 2017, the Group announced the launch of its Taiwan operations, Haydale Technologies (Taiwan) Co Ltd (“HTW”). HTW is
located in Kaoshing, South Taiwan. HTW will operate as a producer and sales outlet of graphene-based and other conductive inks
and pastes.
The Group today intends to raise at least £6.0 million of new funds before costs via a placing of new ordinary shares in the Company
with existing and new investors.
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
PARENT COMPANY BALANCE SHEET
As at 30 June 2017
Company Registration No. 07228939
Fixed assets
Investments
Current assets
Debtors
– within one year
– after more than one year
Cash at bank and in hand
Creditors: amounts falling due within one year
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
Creditors: amounts falling due after more than one year
NET ASSETS
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
SHAREHOLDER’S FUNDS
Note
2017
£’ 000
2016
£’ 000
5
6
6
7
8
9
9
2,197
––––––––––––––––––––––––––––––
3,076
2,197
––––––––––––––––––––––––––––––
3,076
14,329
–
1,675
9,172
–
1,983
––––––––––––––––––––––––––––––
16,004
(732)
11,155
(768)
––––––––––––––––––––––––––––––
10,387
––––––––––––––––––––––––––––––
15,272
18,348
–
12,584
(104)
––––––––––––––––––––––––––––––
18,348
12,480
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
392
18,936
(980)
305
11,840
335
––––––––––––––––––––––––––––––
18,348
12,480
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
As permitted by section 408 of the Companies Act 2006, the Company’s profit and loss account has not been included in these
financial statements. The loss of the Company for the year ended 30 June 2017 was £1,666,959 (2016: £1,269,326).
The financial statements on pages 65 to 70 were approved and authorised for issue by the Board of directors on 10 October 2017 and
signed on its behalf by:
Ray Gibbs
Chief Executive Officer
Matt Wood
Finance Director
65
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247114 Haydale AR pp65-imp 15/11/2017 21:54 Page 66
FINANCIAL STATEMENTS
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
As at 30 June 2017
Share
capital
£’ 000
Share
Premium
£’ 000
Retained
profits
£’ 000
Total
Equity
£’ 000
7,761
(1,269)
326
5,662
–––––––––––––––––––––––––––––––––––––––––––––––––
1,278
(1,269)
326
–
6,254
–
–
5,586
229
–
–
76
305
–
–
87
11,840
–
–
7,096
12,480
(1,666)
351
7,183
–––––––––––––––––––––––––––––––––––––––––––––––––
18,348
–––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––
335
(1,666)
351
–
18,936
(980)
392
At 1 July 2015
Loss for the year
Recognition of share-based payments
Issue of ordinary share capital
At 30 June 2015 and 1 July 2016
Loss for the year
Recognition of share-based payments
Issue of ordinary share capital
At 30 June 2017
66
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
NOTES TO THE PARENT COMPANY BALANCE SHEET
For the year ended 30 June 2017
1. Basis of preparation
The parent company financial statements of Haydale Graphene Industries Plc, a public company incorporated and registered in
England and Wales under the Companies Act 2016 with company number 7228939 which is limited by shares, have been prepared
in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework. The principal accounting policies adopted in
the preparation of the financial statements are set out below. The policies have been consistently applied to the years presented,
unless otherwise stated.
The financial statements have been prepared on a historical cost basis. The presentation currency used is sterling and amounts have
been presented in round (“£000’s”).
Disclosure exemptions adopted
In preparing these financial statements the company has taken advantage of all disclosure exemptions conferred by FRS101. Therefore
these financial statements do not include:
•
•
•
•
•
•
certain comparative information as otherwise required by EU endorsed IFRS;
certain disclosures regarding the company’s capital;
a statement of cash flows;
the effect of future accounting standards not yet adopted;
the disclosure of the remuneration of key management personnel; and
disclosure of related party transactions with other wholly owned members of the group headed by Haydale Graphene Industries
Plc.
In addition, all in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent disclosures are
included in the consolidated financial statements of Haydale Graphene Industries Plc. These financial statements do not include
certain disclosures in respect of:
•
•
•
•
Share based payments;
Business combinations;
Financial Instruments (other than certain disclosures required as a result of recording financial instruments at fair value); and
Fair value measurement (other than certain disclosures required as a result of recording financial instruments at fair value).
2. Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material to the
company’s financial statements:
Investment in subsidiary undertakings
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.
Investments in subsidiary understandings where the company has control are stated at cost less any provision for impairment.
Share-based payments
When the company grants options over equity instruments directly to the employees of a subsidiary undertaking, the effect of the
share-based payment is capitalised as part of the investment in the subsidiary as a capital contribution, with a corresponding increase
in equity.
Depreciation
Depreciation is provided to write off cost, less estimated residual values, of all tangible fixed assets, evenly over their expected useful
lives. It is calculated at the following rates:
Furniture and fittings
33% per annum straight line
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247114 Haydale AR pp65-imp 15/11/2017 21:54 Page 68
FINANCIAL STATEMENTS
2. Accounting policies (continued)
Impairment
The need for any fixed asset impairment write-down is assessed by comparison of the carrying value of the asset against the higher
of realisable value and value in use.
Taxation
The charge for taxation is based on the loss for the period and takes into account taxation deferred.
Current tax is measured at amounts expected to be paid using the tax rates and laws that have been enacted by the balance sheet
date. Substantively enacted rate has been used for deferred tax balances, which are recognised in respect of all timing differences
that have been originated but not reversed by the reporting date, except that the recognition of deferred tax assets is limited to the
extent that the Company anticipates making sufficient taxable profits in the future to absorb the reversal of the underlying timing
differences.
Foreign Currency
Foreign currency transactions are translated at the rates ruling when they occurred. Foreign currency monetary assets and liabilities
are translated at the rate of exchange ruling at the balance sheet date. Any differences are taken to the profit and loss account.
3. Loss attributable to members of the Parent Company
It’s permitted by section 408 of the Companies Act 2006; the company’s profit and loss account has not been included in these
financial statements. The loss dealt with in the financial statements of the parent company for the year ended 30 June 2017 was
£1,666,959 (2016: £1,269,326).
4. Directors’ remuneration
The only employees of the Company are the directors. In respect of directors’ remuneration, the disclosures required by Schedule 5
to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 are included in the detailed
disclosures in the audited section of the Directors’ Remuneration Report on pages 24 to 26, which are ascribed as forming part of
these financial statements.
5. Fixed asset investments
Investment
in subsidiary
undertakings
£’ 000
Capital
contribution
£’ 000
Total
£’ 000
Cost
At 1 July 2016
Additions
At 30 June 2017
1,904
676
2,197
879
–––––––––––––––––––––––––––––––––––––––––––––––––
3,076
–––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––
293
203
2,580
496
The undertakings in which the company’s interest at the period end is 20% or more are as follows:
Name of subsidiary company
Haydale Ltd
Haydale Composite Solutions Limited
Nano Hex (Sales) Ltd
Haydale Resins Ltd
Haydale Composites Ltd
Nano Hex Ltd
Intelligent Nano Technology Ltd
Haydale Technologies Korea Co., Ltd
Haydale Technologies Incorporated
Haydale Technologies Thailand Ltd
ACMC Holdings
Proportion of
ordinary share
capital held
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Nature of
business
R&D, sales and distribution
R&D, sales and distribution
Sales and distribution
Dormant
Dormant
Dormant
Dormant
Sales and distribution
R&D, sales and distribution
R&D, sales and distribution
Sales and distribution
Country of
incorporation
or registration
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
South Korea
North America
Thailand
North America
68
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
Subsidary
Haydale Ltd
Nano Hex (Sales) Ltd
Haydale Resins Ltd
Haydale Composites Ltd
Nano Hex Ltd
Intelligent Nano Technology Ltd
Haydale Composite Solutions Limited
Haydale Technologies Korea Co., Ltd
Haydale Technologies Thailand Ltd
Haydale Technologies Incorporated
ACMC Holdings
Registered office
Clos Fferws, Parc Hendre, Capel Hendre, Ammanford, Carmarthenshire, SA18 3BL
Clos Fferws, Parc Hendre, Capel Hendre, Ammanford, Carmarthenshire, SA18 3BL
Clos Fferws, Parc Hendre, Capel Hendre, Ammanford, Carmarthenshire, SA18 3BL
Clos Fferws, Parc Hendre, Capel Hendre, Ammanford, Carmarthenshire, SA18 3BL
Clos Fferws, Parc Hendre, Capel Hendre, Ammanford, Carmarthenshire, SA18 3BL
Clos Fferws, Parc Hendre, Capel Hendre, Ammanford, Carmarthenshire, SA18 3BL
Unit 10 Charnwood Business Park, North Road, Loughborough, Leicestershire, LE11 1QJ
16F, Gangnam Bldg. 396, Seocho-daero, Seocho-gu, Seoul 137-857, South Korea
Room 510 – 515, Tower D, 5th Floor, Thailand Science Park Phahon Yothin Road, Luang
District, Pathum Thani Province, 12120, Thailand
1446 South Buncombe Road, Greer, South Carolina. 29651, USA
1446 South Buncombe Road, Greer, South Carolina. 29651, USA
6. Debtors
Amounts owed by group companies
Corporation tax
Other debtors
Prepayments and accrued income
7. Creditors: amounts falling due within one year
Bank loan
Trade creditors
Other creditors including tax and social security
Accruals and deferred income
2017
£’ 000
13,984
190
116
39
2016
£’ 000
8,873
153
107
39
––––––––––––––––––––––––––––––
14,329
9,172
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2017
£’ 000
108
64
477
83
2016
£’ 000
166
48
17
177
––––––––––––––––––––––––––––––
768
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
732
The bank loan is securitised by an equal balance held on deposit and accrues interest at 1.5% above the Bank of England base rate.
8. Creditors: amounts falling due after more than one year
Bank loan
2017
£’ 000
–
2016
£’ 000
104
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
The bank loan is securitised by an equal balance held on deposit and accrues interest at 1.5% above the Bank of England base rate.
9. Share capital and share premium
Number of
shares
No.
Share
capital
£’ 000
Share
premium
£’ 000
Total
£’ 000
At 1 July 2016
Issue of £0.02 ordinary shares
Share Issue Costs
At 30 June 2017
69
15,236,946
4,360,767
–
12,145
305
7,340
87
(157)
–
–––––––––––––––––––––––––––––––––––––––––––––––––––
19,328
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
11,840
7,253
(157)
19,597,713
18,936
392
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247114 Haydale AR pp65-imp 15/11/2017 21:54 Page 70
FINANCIAL STATEMENTS
9. Share capital and share premium (continued)
During the year, the Company issued 4,360,767 new ordinary shares of 2p each as follows:
•
•
•
•
•
In September 2016, 176,952 £0.02 ordinary shares were issued following the acquisition of Innophene Co Ltd;
In October 2016, 1,619,687 shares were issued in connection with the Company’s £2.59 million placing and open offer;
In December 2016, 415,618 shares were issued following the acquisition of ACMC Holding;
In April 2017 the Company received a strategic investment of £3.6 million (of which £3.3 million was from a subsidiary of Everpower
Holdings) resulting in the issue of 2,109,010 shares; and
39,500 ordinary shares were issued were in respect of the exercise of options.
Issue costs amounting to £157,360 (2016: £376,372) have been charged to the share premium account in the year.
10. Ultimate controlling party
The Directors do not consider any one shareholder, individually or acting in consort with others, to have ultimate control of the
Company
11. Related party transactions
The Company is exempt from disclosing transactions with wholly owned subsidiaries within the Group. Other related party
transactions are included within those given in note 20 of the consolidated financial statements.
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Haydale Graphene Industries plc | Annual Report & Accounts 2017
Corporate Directory
Company Number
7228939
Directors
Secretary
Investor Relations Contact
David Doidge Richard Banks
Raymond John Gibbs
Matthew Graham Wood
Roger Anthony Smith
Graham Dudley Eves
Roger James Humm
Matt Wood
Trevor Phillips
trevor.phillips@haydale.com
Head Office and Registered Office
Clos Fferws, Parc Hendre, Capel Hendre,
Ammanford, Carmarthenshire, Wales, SA18 3BL
Website
E-mail
Telephone
Advisers
Independent Auditor
Nominated Advisor
Broker
Financial Public Relations
Registrars
Solicitors
www.haydale.com
info@haydale.com
+44 (0)1269 842946
BDO LLP
Arcadia House, Maritime Walk, Ocean Village, Southampton, SO14 3TL
Cairn Financial Advisers LLP
Cheyne House, Crown Court, 62-63 Cheapside, London, EC2V 6AX
Arden Partners
125 Old Broad Street, London, EC2N 1AR
Buchanan Communications Limited
107 Cheapside, London, EC4V 6DN
Share Registrars Limited
The Courtyard, 17 West Street, Farnham, Surrey, GU9 7DR
Field Fisher LLP
Riverbank House, 2 Swan Lane, London EC4R 3TT
Intellectual Property Solicitors
Mewburn Ellis LLP
33 Gutter Lane, London, EC2V 8AS
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247114 Haydale AR pp65-imp 15/11/2017 21:54 Page 72
Perivan Financial Print 247114
Haydale
Graphene
Industries Plc
Annual Report
And Accounts
For the year ended
30 June 2017
Creating
Material
Change
www.haydale.com
Haydale Graphene
Industries Plc
Clos Fferws, Parc Hendre,
Capel Hendre, Ammanford,
Carmarthenshire, SA18 3BL
T: +44 (0)1269 842946
F: +44 (0)1269 831062
247114 Haydale AR Graphene cover.indd 1-3
15/11/2017 22:06