Haydale
Graphene
Industries Plc
Annual Report
And Accounts
For the year ended
30 June 2018
Creating
Material
Change
Contents
STRATEGIC REPORT
Chairman’s Statement
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 Statement of Cash Flows
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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Haydale Graphene Industries plc | Annual Report & Accounts 2018
Chairman’s Statement
Introduction
I am pleased to present the Haydale Graphene Industries Plc’s
(“Haydale”, the “Group” or the “Company”) full year audited
results to 30 June 2018 (“FY18”).
The year under review has been a busy one for Haydale, building
on the foundations of the previous year, integrating, investing in
and growing the revenues of the two acquisitions made in the
prior year, launching a specialist graphene ink operation facility
in Taiwan and opening new markets for our advanced graphene
and nanomaterials products. At the beginning of the year we
split the Group’s customer facing operations into two sales
generating strategic business units (SBU) which has proved to
be a beneficial stepping stone in our operational development,
increasing our revenues across both SBUs from those generated
in the prior year ended 30 June 2017 (“FY17”).
Summary financials
Total income for FY18 of £4.23 million (FY17: £3.91 million),
comprised commercial revenues of £3.40 million (FY17: £3.00
million) and grant income of £0.83 million (FY17: £0.90 million).
We continued to invest in increasing our know-how, knowledge
and understanding of mixing and dispersion techniques
alongside our industry-leading collaboration partners; being the
bedrock for successful commercial sales.
As a leader in the graphene industry, an important KPI for
Haydale is the amount of income that we generate from the sale
of our graphene-related products and services. In FY18, I’m
pleased that this figure remained in excess of £1.0 million for the
second successive year, but more importantly it was made up
from sales to more than 50 different customers across our
countries of operation, almost double that of the prior year. We
expect to be able to build further on this figure in the coming
years.
Operations
During the year under review we set up a graphene and specialty
ink manufacturing facility in Taiwan, targeting the $15 billion
biomedical screen-printed sensors for the self-monitoring blood
glucose market. This now takes our international operating sites
to six, with two in the UK and one in each of the USA, Thailand,
South Korea and Taiwan. Our Thailand operation is going from
strength to strength and expects to build further on its
improving sales in the current financial year ending 30 June 2019
(“FY19”). In particular, following successful functionalisation
trials, we are delighted to have secured the sale of one of our
HT60 plasma reactors to one of Thailand’s leading Petro-
chemical processors (final commissioning is due in Q1 of FY19),
as well as long-term consulting contracts. The customer intends
to add value to certain bi-products arising from their
manufacturing process using our functionalisation capabilities.
Our USA facility, which was successfully rebranded to Haydale
Ceramic Technologies (“HCT”) during the year, manufactures a
range of our proprietary silicon carbide micro-fibres (“SiC”) which
1
add strength, toughness and anti-scratch properties to existing
materials. Despite taking longer than we had expected, HCT has
now signed a number of long-term supply contracts with world-
wide businesses that incorporate HCT’s SiC in the manufacture
of their hard-edged cutting tools and, as of 10 September 2018,
had a long-term order book of approximately £4.15 million
($5.46 million) for delivery over the coming years, providing
excellent revenue visibility. HCT has been developing new
markets for its products and has successfully integrated its SiC
into a major US-based paint and coatings customer where sales
commenced in October 2017 and were approximately £0.22
million in FY18. Pleasingly, sales volumes in current financial year
to this customer are continuing at higher monthly rates than
in FY18.
Our South Korean sales office has secured SiC orders of
approximately £0.09 million from industrial giant, Taegu Tec Ltd,
based in South Korea. that we expect to increase in FY19. We have
received positive feedback from a major oil conglomerate on the
benefits of our SiC as a structural enhancer of their catalysts, a
crucial part in the petrochemical refining process. We have high
hopes of developing this new market opportunity in FY19 as our
product offers a real benefit to an industry-wide problem.
Rather than just sell SiC “powder”, we took the decision in FY18
to add value to our SiC micro fibres by investing in our own in-
house US manufacturing capabilities to address a growing
market in selling our proprietary SiC cutting tools (“blanks”). We
generated maiden sales of approximately £0.1 million in FY18,
initially through selling third-party contract manufactured SiC
blanks, but encountered supply chain issues from our European
contractors which led to us deciding to accelerate our
investment in our own capabilities. Our in-house manufacturing
equipment is expected to be commissioned by the end of this
calendar year with sales of product coming through in H2
of FY19.
During the year, we delivered phase 1 of a project to build a novel
Automotive panel production line for Everpower in China. The
sales value for phase 1 was approximately £0.28 million and
phase 2 is expected to commence in Q3 of FY19, where the target
application is initially focussed on internal car panels for the
burgeoning Chinese auto industry.
The graphene teams in Loughborough and Ammanford have
been working tirelessly during the year to enhance a number of
customers’ products through the appropriate functionalisation,
mixing and dispersion of the correct commercially available
graphene into their existing products. An excellent example of
this was the strong commercial progress they have made over
the last year with a global composite materials group to enhance
mechanical properties for selected lines within their product
range. The global customer paid approximately £0.11 million to
Haydale in FY18 as we delivered various formulations of graphene
enhanced masterbatches for trials.
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STRATEGIC REPORT
Chairman’s Statement continued
Overall progress for the Group this year has been solid, albeit we
are disappointed that we did not achieve the revenue growth
we had anticipated and we have previously updated the market
on the reasons for this. We now believe that we have made the
necessary changes to address those issues.
There are significant growth opportunities with the new and
adapted approach of using our global footprint as one team,
with cross-selling and cross R&D focus, and a re-orientation to
organic growth and cost monitoring. Business development
surrounding the major advances we have seen in the core skills
on inks, functionalisation and dispersion of graphene, in
conjunction with the new market segment of SiC, sets Haydale
up for the next phase of evolution and scale up.
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
Interim Executive Chairman
17 September 2018
In collaboration with GKN, Cobham and BAE Systems, we have
successfully increased the electrical conductivity of an aircraft
aileron by 600% to defeat lighting strike and potentially reduce
the need for heavy “parasitic copper” in a composite built aircraft.
Whilst we acknowledge that material revenues from the
commercial aircraft market will be longer term, its application in
the fast-growing drone market is potentially considerable. We
were delighted to be involved with the University of Central
Lancaster, to develop the world’s first graphene skinned plane
which was unveiled at the Farnborough Airshow in July 2018.
Management
As recently announced, Keith Broadbent, who has been with
Haydale for just over a year as Managing Director of the Resins,
Polymers and Composites business unit, has now stepped up
and joined the Board of Directors as Chief Operating Officer. Keith
brings extensive operational experience in driving sales and will
have overall responsibility for delivery of the Group’s budgets.
This allows Ray Gibbs, formerly CEO and now President, Business
Development, to concentrate on global sales opportunities and
focus on our key markets of ceramics, composites, conductive
inks and elastomers.
I have also taken on the role of Interim Executive Chairman
during this important phase of the Group’s development. All
businesses face challenges as they grow and develop and we
have not been immune to a number of these challenges,
specifically around sales order delays caused by the actions
outside of our control by multi-national corporates. However, we
now believe that we have in place an improved management
structure capable of minimising these types of issues in the
future.
Outlook
We enter FY19 with cautious optimism. The recently announced
five-year SiC contract extension with an existing cutting tool
customer has provided even more sales visibility for our US
operation and our steadily increasing graphene ink sales to
several print houses for the bio-medical sensor market is an
encouraging start to the financial year.
We are delighted to be a Tier-1 partner to the new Graphene
Engineering Innovation Centre (GEIC) at the University of
Manchester, where we will install and showcase one of our HT60
plasma reactors. The enhanced functionalisation now being
generated from upgrades we have made to the reactor makes
for exciting product improvement opportunities for the myriad
of companies now looking at collaborating with the GEIC and its
Tier-1 Graphene partners. The facility officially opens in December
2018.
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
Strategic Report
The directors present their Strategic Report for the year ended
30 June 2018.
PRINCIPAL ACTIVITIES
Haydale Graphene Industries Plc (“Haydale” or the “Group”) is the
AIM listed group that uses tailored advanced materials, including
graphene and silicon carbide micro-fibre (SiC). The Group’s vision
is to use its knowledge of advanced materials and dispersion to
become one of the World’s foremost creators of material change,
enabling its customers to improve the performance of their
products.
The Group has developed regulatory approved proprietary
graphene-based and other speciality inks and coatings for the
print and biomedical sensor markets, as well as enhanced resins
for the pre-preg carbon fibre market. In the USA, Haydale
manufactures proprietary SiC micro-fibres and whiskers that
strengthen ceramics and enable highly scratch and wear
resistant coatings. Applications for SiC include corrosion barriers
for oil and gas pipelines and hard-edged cutting tools for
fashioning jet engine turbine blades from solid super alloy billets.
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, developing ink production capability
the
Principally consulting on advanced composites
and elastomers design, R&D and testing
specialist,
full product
covering
development lifecycle
the
Dedicated sales servicing the fast-moving
Korean, Chinese and Japanese markets
Provides low-cost, high-value R&D and plasma
functionalisation facilities, servicing the APAC
region and supporting the Far East sales teams.
Haydale Ceramic Technologies (formerly ACM)
is HTI’s wholly owned operating subsidiary
which produces and sells novel SiC micro fibres
and whiskers
Established in July 2017 as the production
facility and technical centre for sales of
speciality inks initially into the biomedical
sensor market
Evolution of Strategic Business Units
From 1 July 2017, we created two strategic business units (SBU’s)
within the Group, each with their own dedicated management
teams to focus on and deliver our anticipated sales growth:
1.
2.
Resins, Polymers and Composites (“RPC”); and
Advanced Materials (including SiC and inks) (“AMAT”)
The RPC SBU increased its commercial revenues in the year to
£1.02 million from £0.87 million in FY17, whilst AMAT’s revenue
increased to £2.39 million from £2.13 million in the prior year.
RPC’s revenues include those generated by the three UK entities,
whereas the revenue from AMAT is derived from the Group’s
operations in the US and the Far East.
The setting up of two business units, as detailed in last year’s
strategic report, has delivered some success and ensured growth
in all areas of the global business, albeit it did not deliver on our
expected sales targets for the year. Accordingly, the dynamic
nature of the growth requirement has necessitated an evolution
in this approach, and consequently performance reporting for
FY19 will see the three regional areas of: (1) USA; (2) UK (and
Europe); and (3) Far East being brought together as a team under
the newly created position of Group’s Chief Operating Officer,
with Keith Broadbent, the UK’s MD for Resins, Polymers &
Composites, having recently been promoted into the role, and
becoming an executive director of Haydale Graphene Industries
Plc.
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STRATEGIC REPORT
Strategic Report continued
This change is designed to facilitate greater cross-selling and
accountability across the Group, and success has already been
seen with commercial activities on coatings with SiC now in
progress in the UK, and graphene initiatives being targeted with
major players in the US. The combination of our ink expertise in
the UK with that in our Taiwan facility is also bearing fruit, not
just on the technology side, but also sharing best operational
practice on Health and Safety, Quality (ISO9001) and Production
techniques. The Group’s US MD, Trevor Rudderham, has very
recently decided to step away from the business for family
reasons and, whilst his contribution to Group’s growth has been
appreciated, his decision will allow the Group’s transition from
SBU focus to global focus. This position will not be replaced.
Plasma functionalisation and enhanced performance
During the year we have successfully completed several key
research and development projects to enhance Haydale’s
capabilities and product offerings through the HDPlasTM
process. We have made significant investments into capital
equipment and our team’s knowledge base to enhance our
HT60 plasma reactors’ performance and yield increased
functionalisation levels to improve the concentration of bonded
functional groups. Improving our product offering to compete
in the advanced materials markets has been critical. Our ability
to now offer enhanced functionalisation, including amines,
means we can tailor functionalisation levels to further improve
the dispersion characteristics of nanomaterials in wide ranging
matrices. This has resulted in some significant graphene-related
sales contracts being secured and delivered in the year under
review.
The UK
In the UK, where RPC is principally situated, we have two
operational
facilities: Ammanford, South Wales; and
Loughborough, East Midlands. We also opened a Group Head
Office in Harwell Business Park, Oxfordshire in June 2018, to
provide a central location for business development alongside
significant potential customers operating in the aerospace and
advanced materials sectors.
Ammanford is primarily a R&D operation which also sources,
handles, functionalises and processes nanomaterials using a
suite of prototyping and analytical equipment, as well as its own
patented plasma reactors (HT60s and HT200s). Ammanford is
responsible for installing, commissioning and maintaining the
plasma reactors used internally and by 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 addition, we have
recently recruited a dedicated technical sales person with a track
record in growing conductive inks.
In Loughborough, we are focussed on producing applications
engineering solutions in composite and elastomer materials to
enhance their mechanical properties (strength and stiffness),
electrically conductive properties, and their thermally conductive
properties.
The USA
Our US operation delivered the bulk of AMAT’s revenues for FY18,
with sales of SiC at £2.11 million (FY17: £2.05 million). We
rebranded the operation from Advanced Composite Materials
(“ACM”) to Haydale Ceramic Technologies (“HCT”) during the
year, having acquired ACM in the autumn of 2016. The SiC
comparative sales figure for FY17 represents the sales generated
in the period from acquisition to 30 June 2017, which is the same
as that generated in the full 12 months to 30 June 2017. During
the year, we began an investment programme to instal a new
product line in HCT to add value to its proprietary SiC micro fibres
by incorporating them with aluminium oxide to enable us to
manufacture our own cutting tool blanks. Revenues from this
new product line are expected to start in the second half of FY19.
We also successfully opened up new markets for our SiC in the
powder-coating anti-corrosion market where we generated
maiden sales of approximately £0.22 million in FY18 and which
have continued into the current year. Although sales in this
market are at a lower gross profit margin than sales into the
cutting tools market, the market size is potentially significantly
larger. We also received encouraging feedback from a major oil
conglomerate that has tested our SiC as a structural enhancer
of catalysts which are a crucial part in the petrochemical refining
process.
HCT has a long-term sales order book for delivery of SiC which
was added to post year end with a new five-year supply contract
extension and, as at 10 September 2018, stood at approximately
£4.15 million ($5.46 million).
The Far East
We now have three operational sites in the Far East: a sales office
in Seoul, South Korea (HTK); an R&D and consulting facility in
Bangkok, Thailand (HTT); and an
ink formulation and
manufacturing facility in Kaohsiung, Taiwan (HTW).
HTT has quickly established itself as a technical and sales
support service for our Korean and Taiwan activities. In FY18, HTT
generated revenues of £0.23 million, up from £0.07 million in the
prior year from a mixture of commercially funded contract
research projects and the sale of an HT60 reactor to leading Thai
petrochemical processor, IRPC, for functionalisation of some of
its bi-products. Our high-class facility in the prestigious Thailand
Science Park in Bangkok houses two of our patented plasma
HT60 graphene functionalisation reactors, with one being
owned by IRPC. The commissioning of IRPC’s reactor straddled
the end of the financial year so some revenues associated with
its sale will fall into FY19.
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
Other developing graphene-related opportunities include PATit,
Haydale’s software driven anti-counterfeiting device that “reads”
our unique conductive transparent and opaque inks when
printed onto a product label, proving the authenticity (or
otherwise) of the goods. The specialist ink uses graphite block
from our collaboration partner, Talga Resources. To date, we have
signed a LOI with one of Thailand’s leading security printers.
HTW was established in July 2017 and commenced providing
graphene and other speciality inks samples principally to leading
biomedical sensor printers in the diabetes testing market. The
time that customers take to evaluate our graphene inks has
proven to take longer than we originally anticipated yet,
pleasingly, we are now receiving regular repeat orders from
customers, albeit still in relatively small quantities. Once our
existing facility is operating at maximum capacity and our
commercial revenues are fully established, our intention is to
relocate production to a larger 10,000sq ft unit.
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.
The improvements in our analysis, testing and characterisation
expertise, both in-house and in collaboration with external
partners in academia and industry, have increased the pace at
which customer solutions can be obtained as well as giving
potential for additional IP owned products. We have invested
heavily
in our UK teams’ understanding of dispersion
technologies, developing our knowledge of dispersibility of Nano
materials into a wide range of polymer systems. This has
included equipment and personnel, and the sharing of best
practice throughout our company turning Haydale into a
learning organisation.
Haydale has been working with its key OEM, to plan and design
the next generation of HDPlas™ reactors , which will provide the
ability to meet commercial volumes in anticipation of the
breakthrough driven by the increasing scope of the core and
patented technology.
Following the sale of a HT60 reactor to the Centre for Process
Innovation (CPI) in 2015, CPI continues to assist Haydale to be at
the forefront of graphene enhanced development in a range of
applications. Working closely with Haydale’s technical team
through grant funded projects, Haydale and CPI, have developed
filter technology for oil/water separation, desalination and
industrial waste water, evaluation of which will continue during
the current financial year.
At the end of June 2018, we were pleased to have been selected
as one of the core Tier-1 partners of the University of
Manchester’s recently completed £60 million Graphene
Engineering Innovation Centre (GEIC) where one of our patented
HT60 plasma reactors is to be housed. This will help further
functionalisation and applications knowledge across a range of
graphene and other 2D materials where correct chemical
bonding is a key part ensuring graphene disperses uniformly
within its host material.
In the UK, our work on inks over the past year has been focused
on the commercialisation of our patented pressure sensor and
screen printable inks. Over the next 12 months, Haydale will
continue to focus on bringing innovative and novel printed
solutions to the market and has invested in it sales team to
realise this potential. Other ink applications include wearables,
focussed around a contract with The English Institute of Sport,
as announced today.
Non-regulated markets, such as sporting goods, provide
potentially significant short-term revenue opportunities for
Haydale. An example of which has been supply during the year
of graphene-enhanced carbon fibre pre-preg to a high
specification bespoke UK bicycle manufacturer, which has met
with some success.
Progress on two other longer-term projects continues, albeit
slower than originally anticipated. Testing by Flowtite A/S of
graphene-enhanced resins for their glass reinforced pipe
systems took longer than anticipated and, whilst it showed
certain improvements, there remains the need for further
testing. Importantly, progress has been made but the
incorporation of lab-based improvements into a full-blown
production process is the key challenge, with functionalisation
and dispersion in harmony with the manufacturing process still
requiring further work. The Haydale and Flowtite teams are
regrouping next month to determine next steps.
Results from the work carried out with Huntsman has
subsequently significantly benefited other trials carried out with
specific applications for component pre-preg in less regulated
markets such as sports goods (cycles) and low volume
automotive components. We continue to work on improvements
in incorporating Haydale’s graphene dispersions into Huntsman
specific high value, specialist applications.
Grant Funded Projects
During the year under review, the Group has been busy
progressing R&D programmes with important commercial
partners where development of commercially viable end
products is a pre-requisite of securing each projects’ funding.
Income from such projects totalled £0.83 million for the year
under review (FY17: £0.91 million) and, as at 10 September 2018,
the Group had secured grant funded projects worth
approximately £0.86 million for delivery over the coming years.
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STRATEGIC REPORT
Strategic Report continued
Management and Personnel
We have continued to invest in our people across the Group
during the year, which now employs 79 people across five
countries (FY17: 70).
In July 2017, David Banks replaced John Knowles as non-executive
Chairman and, since the year end, has become the Group’s
Interim Executive Chairman. We further strengthened other key
management with the recruitment in July 2017 of Keith
Broadbent as MD of the RPC SBU. Keith has successfully
demonstrated his operational and commercial capabilities
during the past year such that, post year end, Keith has been
promoted to the newly created role of the Group’s Chief
Operating Officer and as a director of the Company.
In June 2018, Ray Gibbs, who has served as the Company’s Chief
Executive Officer since 2013, informed the Board of his intention
to step down as CEO in order to concentrate on the Group’s
business development activities. Ray was appointed to his new
role as President, Business Development in early September 2018.
Patents, IP and Licensing
Our patents are process patents in key selected strategic territories
where their use is as a blocking prior art tool. We are aware of one
patent application by a third party where the examiner threw 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 work we have carried out in
conjunction with Huntsman, together 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.
The Group currently holds patents in the US, UK, Europe, China,
Japan and Australia.
Key Performance Indicators (“KPIs”)
The Group’s KPIs are its financial metrics are its revenues,
graphene related income, gross profit margin, grant income,
adjusted EBITDA, cash position, total borrowings and long-term
sales order book as follows:
FINANCIAL REVIEW
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 Financial Reporting Standards as adopted
by the European Union and are set out on pages 27 to 61. The
financial statements of the Company continue to be prepared in
accordance with FRS 101 and are set out on pages 62 to 68.
Statement of Comprehensive Income
In the year under review, the Group’s three principal areas of
income were: (i) graphene-enhanced and advanced composite
consulting services; (ii) sale of silicon carbide whiskers and fibres;
and (iii) long-term graphene-related grant funded projects.
The Group’s total income for the year ended 30 June 2018 of £4.23
million (FY17: £3.91 million), comprised commercial revenues of
£3.40 million (FY17: £3.00 million) and grant income of £0.83
million (FY17: £0.90 million). Although the Group has made
significant progress during the year, the 8 per cent. increase in
income year-on-year was
than management’s
expectations. The Group’s income suffered in the second half of
FY18 from a combination of specific customers requesting to
defer shipment of product into the current financial year and
longer than anticipated lead times by customers to reach
commercial volumes.
lower
The Group’s gross profit, which excludes the income from grant
funded projects was £2.0 million (FY17: £2.1 million) delivering a
gross profit margin of 59% (FY17: 70%). The reduction in margin
was primarily due to a different sales mix from the Group’s US
operations as it looks to expand the markets for its products. The
Group’s adjusted EBITDA (adjusted for share-based payment
charges, profit/loss on disposal of property, plant and equipment
and profit/loss on disposal of intangible assets) was a loss of
£4.89 million (FY17: £4.19 million). The Directors consider that
adjusted EBITDA is a more useful measure of the Group’s
performance and comparative performance than EBITDA
because it is a closer measure to operating cashflow and it
reduces the effects of one-off transactions and other non-cash
items.
FY18 (£’000) FY17 (£’000)
Revenue 3,403 3,004
Gross profit margin 59% 70%
Income from graphene related
products and services 1,070 1,020
Adjusted EBITDA (4,892) (4,193)
Cash position 5,092 2,091
Borrowings 896 1,270
Long-term sales order book* 4,674 5,400
* The figure increased to £5.19 million as at 10 September 2018
At the year end, the Group’s contracted order book stood at £4.67
million (FY17: £5.40 million) and, since the year end, additional
long term orders have been secured resulting in an order book
as at 10 September 2018 of £5.19 million to be delivered over the
coming years.
Total administrative costs increased approximately 6 per cent. In
the year to £8.85 million (FY17: £8.35 million). During the year, we
continued to invest in increasing our know-how, knowledge and
understanding of mixing and dispersion techniques alongside
our industry leading collaboration partners. Overall R&D spend
for the year was £1.05 million (FY17: £1.15 million), of which £0.88
million was expensed during the year (FY17: £0.91 million), with
the balance of £0.18 million being capitalised, (FY17: £0.24
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
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
£7.68 million (FY17: £7.09 million), the increase reflecting the
investment in our Far East operations during the year, specifically
in Taiwan. Overall, the loss from before tax for the year was £6.12
million (FY17: £5.64 million loss), and included non-cash items of
£1.17 million (FY17: £1.14 million). The loss per share for the year
reduced marginally to £0.22 (FY17: £0.28 loss).
Statement of Financial Position and Cashflows
As at 30 June 2018, net assets amounted to £12.54 million (2017:
£8.91 million), including cash balances of £5.09 million (2017:
£2.10 million). Other current assets decreased to £2.56 million at
the year end (2017: £2.89 million), and current liabilities reduced
to £2.51 million as at 30 June 2018 (2017: £2.89 million). Deferred
consideration of £0.47 million was settled during the year, being
amounts due to the vendors following the acquisition of ACM
in 2016. Net cash outflow from operating activities, before
working capital movements for the year was £4.86 million (2017:
£4.19 million), the principal contributing factor being the loss
from operations activities of £6.02 million (2017: £5.34 million).
Expenditure on capital equipment again utilised a significant
portion of cash during the year at £0.72 million (FY17: £0.42
million).
Capital Structure and Funding
As at 30 June 2018, the Company had 27,328,773 ordinary shares
in issue (2017: 19,597,713). During the year, the Company issued
7,731,060 new ordinary shares, in connection with the Company’s
placing and offer for subscription which raised £9.28 million
(before expenses) and was completed on 30 October 2017. No
options were exercised into ordinary shares during the year (FY17:
39,500).
The Group repaid borrowings of £0.47 million during the year
(FY17: £2.82 million), principally in relation to the Group’s US
borrowing facilities which are secured on the Group’s US based
tangible assets. This in turn reduced Haydale’s financing costs in
the year to £0.1 million from £0.3 million in the prior year. The
Group’s total borrowings at the year end were £0.90 million
(2017: £1.27 million), all of which were held by the Group’s US
subsidiaries.
Haydale’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 successfully
mixing and dispersing raw, mined graphite and other
synthetically produced graphenes into customers’ existing
products in order to improve the mechanical, thermal or
electrical properties of the customers’ existing products.
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.
Rapidity of product take up
While the Group makes every effort to establish sensible
timelines for customer engagement and purchasing of Haydale
products, there is often unforeseen delays (by both parties) in
forecasting the commencement of sales. There may be
regulatory hurdles to overcome and end customer risk aversion
in accepting a new nanomaterial enhanced product.
Additionally, a change of senior management or a corporate
event such as a merger can cause revisions in customer
requirements and often cessation of product development.
IP portfolio, covering
Intellectual Property Risk
The Group’s success will depend in part on its ability to maintain
adequate protection of
its
its
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.
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STRATEGIC REPORT
Strategic Report continued
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
The Group’s current and potential competitors
include
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.
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.
The impact of Brexit
The UK vote to leave the EU (Brexit) has not had a direct material
impact on the Group’s performance in the current reporting
period. However, Brexit is likely to bring uncertainty in the
following areas:
• Materials: the ability of the Group to import graphene and
export its products, together with fluctuations in the value
of Sterling may, have an impact on the Group’s operations.
•
•
Regulations: the Group is subject to the relevant regulations,
including materials handling, within the jurisdictions that
it operates, which include the EU. Any material adverse
changes to the requirement for UK based business to adopt
additional regulations as a result of Brexit may have a
detrimental effect on the Group’s operations.
Grant income: the Group has previously benefitted from EU
grant funds, specifically the Horizon 2020 Research and
Innovation programme. However, the Group has, in the last
18 months, offset the loss of access to Horizon 2020, with
additional grant awards from Innovate UK.
The Group will respond to the challenges that Brexit brings once
negotiations are at an advanced stage.
By order of the Board
David Banks
Interim Executive Chairman
17 September 2018
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
Board of Directors
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,
Interim-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. David joined Haydale as
Non-executive Chairman in July 2017 and was appointed as
Interim-Executive Chairman on 5 September 2018
2. Keith Broadbent;
Chief Operating Officer
Keith joined Haydale in July 2017 as head of its Resins, Polymers
and Composites Strategic Business Unit (RPC SBU) and as
Managing Director of Haydale Composites Solutions Ltd. Prior
to joining Haydale, Keith held a number of senior operational
and commercial positions which covered aerospace,
automotive, defence, automotive, marine and medical sectors.
His experience includes significant multi-site responsibilities
in both the UK and internationally. The companies he has
worked for include Princess Yachts International, Sunseeker, TT
Electronics and most recently at Ultra Electronics. Keith has
demonstrated a strong track record in the delivery of budgets,
high level customer service and enhancing shareholder value.
Keith was appointed as the Group’s Chief Operating Officer on
5 September 2018.
3. Raymond (Ray) John Gibbs BA (Hons) FCA,
President, Business Development
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, was its CEO between 2013 and 2018, and was appointed as
President, Business Development on 5 September 2018.
9
4. 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 for almost 20 years. A
former nomad, since 2006, Matt has worked as a finance and
non-executive director of AIM companies since 2006 and joined
Haydale in early 2014 before its AIM IPO. Matt brings a wealth of
experience of Plc financial reporting, corporate governance and
general board advisory. Matt is an approved person by the
Financial Conduct Authority and holds a first-class degree in
Economics.
5. Roger Anthony Smith BSc (Hons),
Executive Director
Roger Smith has over 30 years of experience in building and
developing technology-based businesses having graduated with
a degree in Physics. Roger has managed and, as their Managing
Director, led two start up businesses to profitable multi-million
pound revenue postions with successful exits. Roger has served
as Commercial Director with Bureau Veritas SA, a French
industrial services business, and most recently as Senior Vice
President of Petrofac, a global oilfield services group. Roger was
one of the original Haydale Graphene Industries' management
team that acquired Haydale Ltd in 2010 and acted as one of its
non-excective director until July 2017. From July 2017 Roger has
been using his background in business development and
account management to assist Haydale to accelerate its
graphene sales. Roger is Non Executive Chairman of SRJ
Technologies Ltd and a Non Executive Director of
Inductosense Ltd.
6. Roger James Humm MBA BSc (Hons) FCA,
Senior Independent Non-Executive Director
Roger Humm is an experienced Commercial and Finance
Director with extensive knowledge of high-growth technology
companies. He brings experience of financial reporting,
corporate governance, internal control and risk management
from multiple board roles in both public and private companies.
He currently acts as Chief Financial Officer at Boxarr Limited and
G-Volution Limited, is a Trustee Director of the Oxford
Instruments pension scheme and chairs the Investment
Committee of the University of Bristol Enterprise Funds. In these
roles he provides general support to management teams to
ensure effective performance and good communication with all
stakeholders. Roger has previously held corporate, financial and
senior management roles with Oxford Instruments plc both in
the UK and USA, including responsibility for corporate
development,
intellectual property management and
establishing a corporate venturing portfolio. 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.
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GOVERNANCE
Board of Directors continued
Board of Directors
7. 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.
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
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 2018.
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 22 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 2018, the Group invested £0.88 million (2017: £0.91 million) in research and development activities
which were expensed during the year, together with a further £0.18 million (2017: £0.24 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 (2017: nil).
Substantial Shareholdings
As at 30 June 2018, the Company had been advised by the following shareholders, other than the directors, that they held interests
of 3% or more in the Company’s ordinary share capital:
Name of Shareholder
Number of Ordinary Shares
% of Share Capital
Advanced Waste & Water Technology Environmental Ltd*
Credit Suisse Group AG
Legal & General Group Plc
1,958,451
1,427,735
1,050,000
7.17
5.22
3.84
* shares transferred from Everpower International Holdings Co. Ltd, part of the same group.
In addition to those shareholders set out in the table above who had informed the Company of their holding of Ordinary Shares, as
they are required to due pursuant to the Companies Act and under the AIM Rules for Companies, as at 30 June 2018, the Company’s
registered shareholders with interests of 3% or more in the Company’s ordinary share capital was as follows:
Name of Shareholder
Number of Ordinary Shares
% of Share Capital
Lynchwood Nominees Limited
Advanced Waste & Water Technology Environmental Ltd
Credit Suisse Group AG
Cheviot Capital (Nominees) Ltd
HSBC Global Custody Nominee (UK) Limited
Hargreaves Lansdown (Nominees) Limited
J M Finn Nominees Limited
2,128,584
1,958,451
1,427,735
1,221,519
1,050,000
1,009,749
948,170
7.79
7.17
5.22
4.47
3.84
3.69
3.47
Directors
The following directors have held office since 1 July 2017 and up to the date of signing the financial statements:
David Banks (Appointed 13 July 2017)
Graham Eves
Raymond Gibbs
Roger Humm
Roger Smith
Matthew Wood
John Knowles (retired 13 July 2017)
Keith Broadbent (Appointed 5 September 2018)
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GOVERNANCE
Directors’ Report continued
Directors’ Interests in Ordinary Shares
The directors, who held office at 30 June 2018, had the following interests in ordinary shares of the Company:
Director
Ray Gibbs
Roger Smith
David Banks
Roger Humm1
Matthew Wood
Number of Shares at 30 June 2018
% of Share Capital
494,686
288,455
41,667
48,776
18,154
1.81
1.06
0.15
0.18
0.07
1.
Includes 42,526 ordinary shares held by his wife, Wendy Humm.
Between 30 June 2018 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
Since 30 June 2018, there has been the following changes to the Board of directors of the Company:
•
•
•
•
The appointment of David Banks as Interim Executive Chairman in September 2018;
The appointment of Keith Broadbent as the Group’s Chief Operating Officer and a member of the Board in September 2018;
The appointment of Roger Humm as Senior Independent Non-executive Director in September 2018; and
The appointment of Ray Gibbs as President, Business Development, in September 2018, having previously held the position of
the Group’s Chief Executive Officer.
From 1 July 2018, the Group changed its internal reporting system to set up a third profit-centric strategic business units (“SBUs”)
known as “RPC”, “AMAT” & “APAC”. For the current financial year and beyond, the Group intends to report sales and profits under these
three SBUs.
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 22, 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
David Banks
Interim Executive Chairman
17 September 2018
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
Corporate Governance Statement
Overview
As Chairman of the Board of Directors of Haydale Graphene Industries Plc (Haydale or the Company/Group as the context requires),
it is my responsibility to ensure that Haydale has both sound corporate governance and an effective Board. This is achieved by
maintaining a corporate governance framework that includes regular meetings of the board and its committees, with informative,
relevant and timely management information flow. We have introduced effective Board evaluation practices and will carry out a
regular review of our governance processes to ensure we are constantly improving. The Board members have extensive experience
of managing AIM Companies, including detailed knowledge of the AIM Rules and the Market Abuse Regulations. Haydale has decided
to adopt the Quoted Companies Alliance Corporate Governance (QCA Code) and this statement follows the structure of these
guidelines and summarises how we have applied the guidance. The Board considers that the Group complies with the QCA Code in
all respects. A full overview of the Company’s compliance with the QCA Code is provided on the Company’s website at
www.haydale.com.
The Board believes that corporate governance is more than just a set of guidelines; rather it is a framework which underpins the
core values for running the business in which we all believe, including a commitment to open and transparent communications
with stakeholders. We believe that good corporate governance improves long-term success and performance, whilst reducing or
mitigating risks. Changes that have been made to the Board’s composition that have had an impact on our corporate governance
framework in the year ended 30 June 2018 and since the year end, include:
•
•
•
•
•
The appointment in July 2017 of David Banks as non-executive Chairman, replacing the retiring John Knowles;
The appointment of Keith Broadbent as the Group’s Chief Operating Officer and a member of the Board in September 2018;
The appointment of David Banks as Interim Executive Chairman in September 2018;
The appointment of Roger Humm as Senior Independent Non-executive Director in September 2018; and
The appointment of Ray Gibbs as President, Business Development, in September 2018, having previously held the position of
the Group’s Chief Executive Officer.
Board changes are discussed with the Company’s major shareholders in advance, where possible. In June 2018, the Board formed a
Nominations Committee, the whole Board having previously carried out that function. The members of the Nominations Committee
are myself, as Chair, Graham Eves and Roger Humm. Following my appointment as Interim Executive Chair in September 2018, I
stepped down as a member of the Company’s Remuneration Committee.
As part of our adoption of the QCA Code, we are in the planning stages of adopting a Group-wide employee evaluation process,
including the Board, and an employee engagement survey, to commence in January 2019.
The Company summarises how it complies with the 10 principles of the QCA below. A full explanation can be found on the Company’s
website at www.haydale.com.
Establish a strategy and business model which promotes long-term value for shareholders
QCA Principles
1.
The Board has concluded that the highest medium and long-term value can be delivered to its shareholders by the adoption of a
single strategy for the Company; To use our knowledge of advanced materials and dispersion to be one of the World’s foremost
creators of material change, enabling our customers to improve the performance of their products. To achieve this vision the Company
aims to grow organically and, if necessary, by acquisition to extend the Group’s client base and geographical penetration, and use its
existing expertise and global reach to generate synergies in the high growth advanced materials industry. Haydale’s business model
is set out with the Strategic Report on pages 3-8 of this report and accounts.
The Company intends to deliver shareholder returns initially through capital appreciation and eventually through distributions via
dividends.
Seek to understand and meet shareholder needs and expectations
2.
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders by providing
effective communications through our Interim and Annual Reports along with Regulatory News Service announcements. We also
use the Company’s website, www.haydale.com for both financial and general news relevant to shareholders.
The Directors meet shareholders and other investors or potential investors at regular intervals during the year, especially during the
Annual and Interim Results cycles. The Company also hosts broker and analyst meetings. David Banks is the Director appointed as
the main point of contact for shareholder liaison. The Directors respond to all shareholder requests for meetings, and take on board
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Corporate Governance Statement continued
shareholder views. Roger Humm, the Senior Independent Non-executive Director (“SID”), will carry out shareholder liaison if the
Chairman is not available or as an alternative.
The Board keeps in mind the proportions of direct, nominee and institutional shareholders, and distributes communications
accordingly. The whole Board attends the AGM. The AGM is regarded as an opportunity to meet, listen and present to shareholders
and shareholders are encouraged to attend. In addition, the Company seeks feedback from key stakeholders, taking action where
appropriate.
The Company’s broker and NOMAD, Arden Partners, is briefed regularly and updates the Board during the year on shareholder
expectations.
Take into account wider stakeholder and social responsibilities and their implications for long-term success
3.
The Board recognises that the long-term success of the Company is reliant upon the efforts of the employees of the Company and
its collaboration partners, suppliers, regulators and other stakeholders. The Board has put in place a range of processes and systems
to ensure that there is close oversight and contact with its key resources and relationships. The Company prepares a detailed budget
annually which takes into account the Group’s long term strategy and its available key resources including staffing, working capital,
production capacity and functionalisation capabilities.
Everyone within the Group is a valued member of the team, and our aim is to help every individual achieve their full potential. We
offer equal opportunities regardless of race, gender, gender identity or reassignment, age, disability, religion of sexual orientation.
The Group is in the process of implementing a Company-wide policy to conduct employee engagement surveys, which will seek to
understand any issues within the workforce which will be in place within the coming months.
Embed effective risk management, considering both opportunities and threats, throughout the organisation
4.
The Board recognises the need for an effective and well-defined risk management process, and whilst it oversees and regularly
reviews the current risk management and internal control mechanisms, has delegated this responsibility primarily to the Audit
Committee and senior management. The Company is in the process of adopting a risk register, which will be reviewed regularly by
senior management and the Audit Committee. This report and accounts outlines the key risks to the business, see pages 7-8. The
status of the key risks to the Company will be shared regularly with the Board, and the Board intends to thoroughly review the
Company’s risk register to the Company on an annual basis.
The Board does not currently deem it necessary for an internal audit function, having put in place experienced financial controllers
in each of its key operational entities and jurisdictions. The Company went through an extensive Group audit tender process in the
spring of 2018, which provided insight into areas where the Group could improve its financial reporting framework. Consequently,
the Board believes that it now has in place effective governance and risk management processes, however, it will continue to monitor
closely and regularly, assessing its effectiveness and will implement any changes that it deems appropriate.
Maintain the board as a well-functioning, balanced team led by the Chair
5.
The Board comprises five executive directors and two non-executive directors as follows:
Executives
•
•
•
•
•
Interim Executive Chairman:
Chief Operating Officer:
Finance Director:
President, Business Development:
Executive Director:
Non-executives
•
•
Senior Independent Non-executive:
Independent Non-executive:
David Banks;
Keith Broadbent;
Matt Wood;
Ray Gibbs; and
Roger Smith.
Roger Humm; and
Graham Eves.
Biographical details of the Directors can be found on pages 9 to 10 of this report and on the Company’s website at www.haydale.com.
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
The full Board meets 8 times in the year according to the schedule of future meetings agreed at the beginning of each year, and also
as and when required. In order to be efficient, the Directors meet formally and informally both in person and by telephone. Board
and Committee document authors are made aware of proposed monthly deadlines through the schedule of meetings agreed at
the beginning of the year. Board papers are prepared by the relevant personal (Chair, COO, FD, Business Development) and circulated
to the Board at least 48 hours before meetings, allowing time for consideration and necessary clarifications before the meetings.
During the year ended 30 June 2018, the Company held 12 board meetings (FY2017: 11), with each member’s attendance as follows:
Director
David Banks (appointed July 2017)
Raymond Gibbs
Matthew Wood
Graham Eves
Roger Humm
Roger Smith
John Knowles (retired July 2017)
Anthony Belisario (retired December 2016)
Dr Christopher Spacie (resigned July 2016)
Number of board meetings attended
FY2018
FY2017
12
12
12
11
12
12
–
–
–
–
11
11
10
10
10
11
5
1
Attendance at the Company’s audit, remuneration and nomination committee meetings during the year ended 30 June 2018 was
as follows:
Number of committee meetings attended
Committee member
Audit
Remuneration
Nomination
David Banks
Graham Eves
Roger Humm
3
3
4
2
2
2
1
1
1
Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
6.
The Non-executive Directors have both a breadth and depth of skills and experience to fulfil their roles. The Company believes that
the current balance of skills in the Board as a whole, reflects a very broad range of personal, commercial and professional skills across
geographies and industries and the Board has experience of public markets. Details of the Directors’ experience and areas of expertise
are outlined on pages 9-10 of this report and accounts. The Non-executive Directors meet without the presence of the Executive
Directors during the year, and also maintain ongoing communications with Executives between formal Board meetings.
Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
7.
Every other year the Board expects to carry out an internal Board and Committee evaluation exercise, including that of the Chairman.
The exercise will be led by Roger Humm, the SID. The areas of evaluation covered include Board structure and knowledge, operating
effectiveness, operating efficiency, quality of information and ongoing professional development. Individual reviews of Non-executive
Director performance will also be carried out by the SID, and the Chairman will undertake a review of the performance of the SID.
The SID will also chair meetings of the non-executive directors, where necessary.
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GOVERNANCE
Corporate Governance Statement continued
Promote a corporate culture that is based on ethical values and behaviours
8.
The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and
that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly
impact all aspects of the Company as a whole and the way that employees behave. The corporate governance arrangements that the
Board has adopted are designed to ensure that the Company delivers long-term value to its shareholders, and that shareholders have
the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board.
Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
9.
The Board is committed to, and ultimately responsible for, high standards of corporate governance, and has chosen to adopt the QCA
Corporate Governance Code. We review our corporate governance arrangements regularly and expect to evolve these over time, in
line with the Company’s growth. The Board delegates responsibilities to Committees and individuals as it sees fit, with the Chairman
being responsible for the effectiveness of the Board, and the Executive Directors being accountable for the management of the
Company’s business and primary contact with shareholders.
The Chairman is responsible for the leadership of the Board and ensuring its effectiveness in all aspects of its role. He is also responsible
for creating the right Board dynamic and for ensuring that all important matters, in particular strategic decisions, receive adequate
time and attention at Board meetings. The Executive Directors are responsible for the day-to-day running of the business: Keith
Broadbent (Operations), Matt Wood (Finance), Ray Gibbs (Business Development) and Roger Smith (Business Development); as well
as developing corporate strategy while the Non-Executive Directors are tasked with constructively challenging the decisions of
executive management and satisfying themselves that the systems of business risk management and internal financial controls
are robust.
The role of the SID is to serve as a sounding board for the Chairman and act as an intermediary for other Directors. They are also
available to shareholders if they have reason for concern that contact through the normal channels of the Executive Directors has
failed to resolve. They are responsible for holding annual meetings with non-executives, without the Chairman present, to appraise
the Chairman’s performance.
The Board has adopted appropriate delegations of authority which sets out matters which are reserved to the Board as set out below:
•
•
•
•
•
•
•
•
•
•
The Group’s strategy and vision
Determining management’s performance and changes in senior personnel
Approval of major capital expenditure
Financial reporting, risk management and internal controls
Contracts, including potential acquisitions or investments in new projects or products
Corporate governance
Approval of annual budgets
Approval of annual and interim reports
Approval of changes in equity or debt funding
Dividend recommendations and policy
The Board delegates authority to three Committees to assist in meeting its business objectives whilst ensuring a sound system of
internal control and risk management. The Committees meet independently of Board meetings.
Audit Committee
The Audit Committee has three members, Roger Humm (Chair), Graham Eves and David Banks. The FD, Group FC and external auditors
attend meetings by invitation. The Audit Committee is responsible for assisting the Board in fulfilling its financial and risk
responsibilities. The Audit Committee oversees the financial reporting, risk management and internal control procedures. The Audit
Committee advises the Board on the appointment and removal of the external auditor and discusses the nature, scope and results
of the audit with the auditors. The Audit Committee reviews the extent of non-audit services provided by the auditors and reviews
with them their independence and objectivity. The Audit Committee met four times during the year. The Audit Committee shall
meet not less than three times in each financial year.
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
Remuneration Committee
The Directors’ Remuneration Report is set out on pages 18-21 of this Report and Accounts. As from 5 September 2018, the Remuneration
Committee has two members, Graham Eves (Chair) and Roger Humm, with David Banks stepping down on 4 September 2018,
following his appointment as Interim Executive Director. The members are all Independent Non-Executive Directors. Other members
of the Board may attend the Committee’s meetings at the request of the Committee Chairman.
The remit of the Committee is primarily to determine and agree with the Board the framework or broad policy for the remuneration
of the Company’s Executive Directors and the Senior Management of the Group. The Remuneration Committee reviews the
performance of the Executive Directors and makes recommendations to the Board on matters relating to their terms of employment
and remuneration, including short term bonus and long-term incentives. The Remuneration Committee also considers the granting
of share options pursuant to the Company’s share option schemes. The Remuneration Committee shall meet not less than twice a
year and will meet on other occasions and as and when required.
Nominations Committee
The Nominations Committee was created in June 2018 and currently has three members, Graham Eves (Chair), Roger Humm and
David Banks. The Nominations Committee reviews the structure, size and composition required of the Board compared to its current
position and make recommendations to the Board, considers succession planning and nominates candidates to fill Board vacancies.
The Nominations Committee shall meet at least once per year, and otherwise as necessary to consider proposals for Board
appointments and other matters.
10.
Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other
relevant stakeholders
The Board is committed to maintaining effective communication and having constructive dialogue with its shareholders. The
Company intends to have close ongoing relationships with its private shareholders. Institutional shareholders and analysts and for
them to have the opportunity to discuss issues and provide feedback at meetings with the Company. The Company receives reports
from its corporate registrar and from Argus Vickers. In addition, all shareholders are encouraged to attend the Company’s Annual
General Meeting. All 2017 AGM resolutions were passed comfortably. The Board maintains that, if there is a resolution passed at a
General Meeting with 20% votes against, the Company will seek to understand the reason for the result and, where appropriate,
take suitable action.
By order of the Board
David Banks
Interim Executive Chairman
17 September 2018
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GOVERNANCE
Directors’ Remuneration Report
REMUNERATION COMMITTEE
The Company’s remuneration policy is the responsibility of the Remuneration Committee which was first established at the time of
the Company’s admission to trading on AIM. The terms of reference of the Remuneration Committee are outlined below and in the
Corporate Governance Statement on page 17. The members of the Remuneration Committee during the year under review and up
until 4 September 2018 were Graham Eves (Chairman), David Banks and Roger Humm. As from 5 September 2018, its members are
Graham Eves (Chairman) and Roger Humm, with David Banks having stepped off the committee following his appointment as
Interim Executive Chairman. 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, responsibility for which is with the recently formed Nomination Committee.
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 2018 is set out on page 21.
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 three equity-based incentive schemes in place.
2013 Share Option Scheme
a)
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.
There were no outstanding options in respect of this scheme at the year end and no further grants have been made under this
scheme or are anticipated to be made in the future.
2014 Option Scheme
b)
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 2018, a total of 99,271 share options were granted under the 2014 Option Scheme (2017: 215,581 options
granted) as follows:
•
99,271 options on 15 December 2017 at an exercise price of 125.50p
During the year ended 30 June 2018, 408,009 share options had lapsed (2017: nil) and no share options were exercised (2017: 39,500).
At 30 June 2018, there were 619,360 unexercised options outstanding (2017: 928,098).
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
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.
Long Term Incentive Plan (“LTIP”)
c)
In December 2017, the Company adopted the LTIP to incentivise the Group’s key management (“Key Management”) to deliver long-
term value creation for shareholders, to ensure alignment with shareholders’ interests and to attract and retain high-quality
individuals.
Awards under the LTIP are structured as nominal cost options (£0.02) with a three-year vesting period and a seven-year life after
vesting (“Exercise Period”). A single conditional grant of a maximum number of LTIP Awards (“Award”) can be made to the relevant
member of the Key Management (“Award Holder”) at the outset. The performance conditions that dictate the proportion, if any, of
the Award that is capable of exercise by the Award Holder during the Exercise Period, are based upon the Company’s sustainable
share price performance during the period commencing on the first day of the 13th month following the date of grant and ending
on the last day of the 120th month following the date of grant (“Performance Period”).
Share price performance criteria
The LTIP has been structured to ensure that value is created for shareholders before any value is delivered to the Key Management.
Accordingly, should the Company’s closing mid-market share price not reach and remain at, or above, £2.20 for at least 15 consecutive
trading days during the Performance Period (“Minimum Target”), then none of the Awards vest or is exercisable and the Awards will
lapse in full.
Should the Company’s closing mid-market share price reach and remain at or above £4.20 for at least 15 consecutive trading days
during the Performance Period (“Maximum Target”), then 100% of the Awards vest and are exercisable. Between the Minimum
Target and the Maximum Target, the % of the Awards that vest shall be pro-rata on a straight-line basis. The Awards may lapse in
the event of cessation of employment save for certain circumstances, including inter alia, redundancy or retirement in which case,
at the Company’s sole discretion and subject to performance criteria being met, the Exercise Period may be accelerated.
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GOVERNANCE
Directors’ Remuneration Report continued
Grant of LTIP Awards
On 15 December 2017, grants of LTIP Awards were made to the following members of the Key Management:
Name
and role
Ray Gibbs
Trevor Rudderham*
Keith Broadbent
Matt Wood
Number of
LTIP Awards
granted
(“Award”)
Earliest
exercise
date
Latest
exercise
date
Minimum
share price
target before
any Awards vest
Maximum
share price
target for 100%
of Awards to vest
819,863
14/12/20
14/12/27
409,932
14/12/20
14/12/27
409,932
14/12/20
14/12/27
341,610
14/12/20
14/12/27
£2.20
£2.20
£2.20
£2.20
£4.20
£4.20
£4.20
£4.20
* Trevor Rudderham left the Group post year end for family reasons, accordingly Mr Rudderham’s LTIP Award has lapsed.
DIRECTORS’ INTERESTS IN SHARE OPTIONS
The interests of directors in share options over ordinary shares during the year were as follows:
2014 Share Option Scheme
Number Number of
Number of
EMI Unapproved
Options
Options
First
Exercise
Date
Exercise
Price
Expiry
Date
Director
Date of
Grant
of LTIP
Options
Raymond Gibbs
3 April 2014
18 March 2015
19 May 2016
–
–
–
15 December 2017
819,863
Matthew Wood
3 April 2014
18 March 2015
19 May 2016
15 December 2017
341,610
101,190
39,408
3 April 2017
210p
3 April 2024
–
–
–
–
–
–
–
14,275
20,991
18 March 2018
134.5p
18 March 2025
19 May 2019
171.5p
19 May 2026
–
15 December 2020
2p 15 December 2027
32,337
7,137
8,396
3 April 2017
210p
3 April 2024
18 March 2018
134.5p
18 March 2025
19 May 2019
171.5p
19 May 2026
–
15 December 2020
2p 15 December 2027
David Banks
15 December 2017
–
100,000
100,000
15 December 2020
125.5p 15 December 2027
Graham Eves
3 April 2014
Roger Humm
3 April 2014
Roger Smith
3 April 2014
–
–
–
16,872
16,872
16,872
3 April 2017
3 April 2017
3 April 2017
210p
210p
210p
3 April 2024
3 April 2024
3 April 2024
No options were exercised by the directors during the year under review.
The mid-market price of the Company’s ordinary shares at 30 June 2018 was 70p (2017: 175.50p). During the year to 30 June 2018, the
mid-market price ranged from 70p to 186p (2017: 148.50p to 206p).
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
DIRECTORS’ REMUNERATION
The aggregate remuneration received by directors who served during the years ended 30 June 2018 and 30 June 2017 was as follows:
£’000
Salary/Fee
Benefits
Year ended 30 June 2018
Year ended 30 June 2017
Total
(excl.
Pension)
Total
(incl.
pension)
Total
(excl.
pension)
Total
(incl.
pension)
Pension
Pension
Executive Directors
R. Gibbs
C. Spacie*
M. Wood
R. Smith**
Non-Executive Directors
A. Belisario ***
J. Knowles****
D Banks*****
G. Eves
R. Humm
* resigned on 31 July 2016
** Part-time executive
*** resigned on 13 December 2016
**** resigned on 13 July 2017
150
–
98
9
–
12
49
28
28
374
12
–
12
–
–
–
–
–
–
162
–
110
9
–
12
49
28
28
24
398
9
–
6
–
–
–
–
–
–
15
171
–
116
9
–
12
49
28
28
413
162
10
89
28
14
41
–
28
28
9
1
5
–
–
–
–
–
–
171
11
94
28
14
41
-
28
28
400
15
415
***** appointed on 13 July 2017. Mr Banks was appointed as Independent Executive Chairman on 5 September 2018
In addition to the amounts shown above, the share-based payment charge for the period was:
to 30 June
2018
£’000
42
14
18
9
5
5
5
5
103
to 30 June
2017
£’000
43
7
15
9
5
5
5
5
94
Raymond Gibbs
David Banks
Matthew Wood
John Knowles
Anthony Belisario
Graham Eves
Roger Humm
Roger Smith
By order of the Board
Graham Eves
Chairman of the Remuneration Committee
17 September 2018
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GOVERNANCE
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 detailed financial forecasts. After due consideration of these forecasts, the Group’s current
cash resources, borrowing facilities and the directors’ belief that the Group will have access to additional equity or debt funding in
the future, 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
17 September 2018
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
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 2018 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
2018 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with 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 and the parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
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 32 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.
In view of the judgements involved and estimation that could be susceptible to management bias, we considered that these matters
gave rise to a significant risk of misstatement in the financial statements and therefore a key audit matter.
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 considered the basis of estimation for accrued and deferred income. This was performed
by gaining an understanding of the terms of a sample of underlying contracts and ensuring that the revenue, accrued and deferred
income were recognised appropriately by testing management’s assessment of the stage of completion with reference to evidence
such as costs incurred, time recording records and budgets.
23
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FINANCIAL STATEMENTS
Independent Auditor’s Report to the members
of Haydale Graphene Industries Plc continued
Our application of materiality
Group materiality
30 June 2018
£300,000
Group materiality
30 June 2017
£400,000
Basis for materiality
5% of losses before tax (2017: 8% of losses before tax). This
determination is based on our view that the loss before tax is a key
financial measure for the group and its members in assessing financial
performance 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 £42,000 to £125,000 (2017: £25,000 to £200,000).
Our determination of materiality decreased from 2017 due to a lower percentage being applied to the benchmark on the basis of
our risk assessment and assessment of the group’s control environment. 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 £10,000 (2016: £16,000). 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 91% of the group’s
revenue, 90% of the group’s loss before tax and 97% 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 £300,000, 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 audited by BDO US.
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.
24
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
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, as set out on page 22, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists.
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.
25
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251936 Haydale AR pp09-pp26.qxp 27/11/2018 18:38 Page 26
FINANCIAL STATEMENTS
Independent Auditor’s Report to the members
of Haydale Graphene Industries Plc continued
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.
Use of our report
This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the parent company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the parent company and the parent company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Malcolm Thixton (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Southampton
17 September 2018
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
26
251936 Haydale AR pp27-pp30.qxp 27/11/2018 18:38 Page 27
Haydale Graphene Industries plc | Annual Report & Accounts 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2018
Year ended
30 June
2018
£’ 000
Year ended
30 June
2017
£’ 000
Note
4
5
6
8
REVENUE
Cost of sales
Gross profit
Other operating 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
3,403
(1,403)
3,004
(894)
––––––––––––––––––––––––––––––
2,110
901
2,000
831
(878)
(291)
(7,684)
(908)
(351)
(7,090)
(8,853)
(6,022)
(95)
(8,349)
––––––––––––––––––––––––––––––
(5,338)
(297)
––––––––––––––––––––––––––––––
(5,635)
883
––––––––––––––––––––––––––––––
(4,752)
(6,117)
850
(5,267)
(47)
(99)
(74)
(36)
––––––––––––––––––––––––––––––
(4,862)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(5,413)
(5,413)
–
(4,862)
–
––––––––––––––––––––––––––––––
(4,862)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(5,413)
(5,413)
–
(4,862)
–
––––––––––––––––––––––––––––––
(4,862)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(5,413)
Loss per share attributable to owners of the Parent
Basic (£)
Diluted (£)
The notes from pages 31 to 61 form part of these financial statements.
9
9
(0.28)
(0.28)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(0.22)
(0.22)
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251936 Haydale AR pp27-pp30.qxp 27/11/2018 18:38 Page 28
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2018
Company Registration No. 07228939
30 June
2018
£’ 000
30 June
2017
£’ 000
Note
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
TOTAL EQUITY
10
10
11
27
12
13
14
14
19
27
26
19
18
20
18
15
15
16
2,087
2,130
5,061
550
2,115
2,152
5,074
679
––––––––––––––––––––––––––––––
10,020
––––––––––––––––––––––––––––––
9,828
1,022
705
362
473
5,092
1,212
798
535
345
2,091
––––––––––––––––––––––––––––––
4,981
––––––––––––––––––––––––––––––
15,001
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
17,482
7,654
640
675
1,120
911
1,234
969
––––––––––––––––––––––––––––––
3,114
2,435
256
2,172
78
–
359
2,305
253
65
––––––––––––––––––––––––––––––
2,982
––––––––––––––––––––––––––––––
6,096
––––––––––––––––––––––––––––––
8,905
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
12,541
2,506
4,941
547
27,539
1,298
(160)
(16,683)
392
18,936
1,007
(113)
(11,317)
––––––––––––––––––––––––––––––
8,905
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
12,541
The financial statements on pages 27 to 61 were approved and authorised for issue by the Board of directors on 17 September 2018
and signed on its behalf by:-
David Banks
Interim Executive Chairman
Matt Wood
Finance Director
28
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2018
Share
capital
£’ 000
Share
premium
£’ 000
Share-based
payment
reserve
£’ 000
Foreign
exchange
reserve
£’ 000
At 1 July 2016
305
11,840
656
Total comprehensive loss for the year
Recognition of share-based payments
Issue of ordinary share capital
Repurchase of NCI
Transaction costs in respect of share
issues
At 30 June 2017
Total Comprehensive loss for the year
Recognition of share-based payments
Issue of ordinary share capital
Transaction costs in respect of share
issues
At 30 June 2018
Retained
profits
£’ 000
Other
reserves
£’ 000
Total
equity
£’ 000
(6,117)
(44)
6,601
(4,787)
–
–
(413)
–
–
–
44
(4,861)
351
7,340
(369)
(39)
(74)
–
–
–
–
–
87
–
–
–
7,253
–
–
351
–
–
–
(157)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
8,905
18,936
(11,317)
1,007
(157)
(113)
392
–
–
–
–
–
–
–
155
–
–
9,123
–
291
–
(47)
–
–
(5,366)
–
–
–
–
–
(5,413)
291
9,278
–
(520)
(520)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
12,541
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(16,683)
27,539
1,298
(160)
547
–
–
–
–
–
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10
11
16
251936 Haydale AR pp27-pp30.qxp 27/11/2018 18:38 Page 30
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2018
Cash flow from operating activities
Loss before taxation
Adjustments for:-
Amortisation of intangible assets
(Profit)/Loss on disposal of intangible assets
Capitalised loan costs written off
Depreciation of property, plant and equipment
(Profit)/Loss on disposal of property, plant and equipment
Share-based payment charge
Finance costs
Pension – net interest expense
Operating cash flow before working capital changes
Decrease/(Increase) in inventories
Decrease/(Increase) in trade and other receivables
(Decrease)/Increase in payables and deferred income
Cash used in operations
Income tax received
Net cash used in 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 – deferred consideration
Purchase of non-controlling shareholding
Net cash used 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 increase/(decrease) 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
30
Year ended
30 June
2018
£’ 000
Year ended
30 June
2017
£’ 000
(6,117)
(5,635)
149
75
–
675
(60)
291
95
37
157
–
77
560
–
351
297
–
––––––––––––––––––––––––––––––
(4,193)
––––––––––––––––––––––––––––––
(12)
(596)
260
––––––––––––––––––––––––––––––
(4,541)
––––––––––––––––––––––––––––––
412
––––––––––––––––––––––––––––––
(4,129)
––––––––––––––––––––––––––––––
190
266
159
(4,240)
(4,855)
(3,971)
269
(723)
(175)
83
(444)
–
(415)
(245)
–
4
(413)
––––––––––––––––––––––––––––––
(1,069)
––––––––––––––––––––––––––––––
(1,259)
8,216
(95)
8,757
–
(446)
(297)
6,058
1,408
(2,817)
––––––––––––––––––––––––––––––
4,352
––––––––––––––––––––––––––––––
75
(771)
2,862
––––––––––––––––––––––––––––––
2,091
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
15
3,001
2,091
5,092
251936 Haydale AR pp31-pp47.qxp 27/11/2018 18:37 Page 31
Haydale Graphene Industries plc | Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
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 62 to 68.
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 2018,
amounts to £5.092 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, 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
New standards and interpretations issued but not yet effective
As at 30 June 2018, the following new or amended standards and interpretations, which have not been applied in these financial
statements, have been issued by the International Accounting Standards Board (IASB) but are yet to become effective.
•
•
•
•
IFRS 9 – Financial Instruments (effective for accounting periods commencing on or after 1 January 2018);
IFRS 15 – Revenue from Contracts with Customers (effective for accounting periods commencing on or after 1 January 2018);
IFRS 16 – Leases (effective for accounting periods commencing on or after 1 January 2019); and
Amendments resulting from Annual Improvements to IFRS 2014-2016 Cycle (effective for accounting periods commencing on
or after 1 January 2018).
IFRS 9 - Financial Instruments replaces IAS 39. The standard is effective for the Group’s first IFRS financial statements for the period
beginning on 1 July 2018 and will impact the classification and measurement of financial instruments and will require certain
additional disclosures. Whilst an assessment of the new standard is ongoing, the changes to recognition and measurement of
financial instruments and changes to hedge accounting rules are not currently considered likely to have any major impact on the
Group’s current accounting treatment or hedging activities due to the simple nature of our financial instruments.
31
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FINANCIAL STATEMENTS
2. Future accounting developments (continued)
The standard also requires entities to use an expected credit loss model for impairment of financial assets instead of an incurred
credit loss model. This could be expected to impact the way the Group provides for bad and doubtful receivables. However, the current
expectation is that it is unlikely to have a material impact on the overall level of provisions due to historical low levels of bad or
doubtful receivables, together with the credit worthiness of our customers and procedures and processes carried out before billing.
There is no expectation for restatement of any 2018 comparatives within the 2019 Financial Statements.
IFRS 15 - Revenue from Contracts with Customers (effective for the Group’s first IFRS financial statements for the period beginning
on 1 July 2018) replaces IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’ and related interpretations. The standard introduces a single,
five-step revenue recognition model that is based upon the principle that revenue is recognised at the point that control of goods or
services is transferred to the customer. The standard also updates revenue disclosure requirements.
The Directors have specifically considered the adoption of IFRS 15 on the revenue recognition of the Group’s three main revenue
streams, which are explained below.
Goods
The Directors do not anticipate that the changes made under IFRS 15 will have any material impact to the way in which sale of goods
will be recognised within the Group’s financial statements. Under IFRS 15, the Group will continue to recognise revenue when the
risks and rewards of ownership are passed to the customer.
The Group currently have some contracts in place with customers to provide goods over a number of years. There are, occasionally,
variations or amendments to these shipments of goods under these contracts. The Directors have considered the contract
modification criteria with IFRS 15 and will ensure these are applied for any contract modifications that may take place. At present,
the Directors do not anticipate that there will be any restatement of any 2018 comparatives within the 2019 financial statements.
Services
The Directors do not anticipate that the changes made under IFRS 15 will have a material impact to the way in which revenue from
services will be recognised. The Group will continue to adopt the approach of recognising revenue based upon the percentage of
completion method, whereby the stage of completion is determined based on the proportion of contract costs incurred compared
to total estimated contract costs.
Reactor Sales
The recognition of reactor sales has been considered by the Directors. The recognition of revenue has historically been recognised
over time on a percentage of completion basis. Under IFRS 15, it is anticipated that the revenue will continue to be recognised over
time, as opposed to a point in time, given that the performance obligations of the delivery and commissioning of the reactors are
linked. As a result, the recognition of revenue will continue to be recognised on a percentage completion basis, as in prior years. The
Directors do no anticipate that there will be any restatement of any 2018 comparatives within the 2019 financial statements.
IFRS 16 - Leases (effective for the Group’s first IFRS financial statements for the period beginning on 1 July 2019) will require all of the
Group’s leases to be recognised on the balance sheet. The new standard brings most leases on-balance sheet for lessees under a
single model, eliminating the distinction between operating and finance leases. IFRS 16 supersedes IAS 17 ‘Leases and related
interpretations’ and its adoption requires the Group to set out the principles for the recognition, measurement, presentation and
disclosure of leases. The Group has a number of operating lease arrangements which we have considered below.
The main effect on the Group is that IFRS 16 introduces a single lessee accounting model and requires lessees to recognise assets
and liabilities for almost all leases and will therefore result in an increase of total property, plant and equipment and total financial
debt of approximately £1.6 million.
All things being equal, under the new standard, trading operating profit and reported EBITDA would increase by approximately £1.4
million due to the replacement of the operating lease expense with amortisation of lease assets. This would partially be offset by an
interest charge resulting in an insignificant impact on net profit. The Group is currently assessing the precise impact of the standard.
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3. Summary of significant accounting policies
(a) 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)
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
vi)
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.
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.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
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.
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.
(b) 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 for 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.
(c) 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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(d) 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 administrative expenses.
(e) 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. The 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.
(f) 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.
(g) 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 cost of sales in the
Statement of Comprehensive Income.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
(h) 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 acquired a non-contributory defined benefit pension plan through the acquisition of HCT (formerly ACM). The
pension obligations are identified by the calculations performed by an actuary.
(i) 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.
( j) Government grants
Revenue grants are accounted for under the accruals model, with grants being recognised within other income on a systematic
basis over the period in which the group recognised the related costs for which the grant is intended to compensate. Grants
received in advance of the income being recognised in the Statement of Comprehensive Income are included in grant creditors.
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.
(k) 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 16 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.
(l) 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.
(m) 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.
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.
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(n) 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.
Defined Benefit Pension Scheme
In determining the pension valuation movement and the defined benefit obligation of the groups pension scheme, a number
of assumptions are used in order to produce a valuation, which is sensitive to changes in the assumptions. These assumptions
include an appropriate discount rate, the levels of salary increases, price inflations and mortality rates. Further details are included
in note 26, including sensitivity analysis.
Impairment of non-financial assets
The carrying value of goodwill, and the cash generating units to which it relates, is assessed annually for impairment through
comparing the recoverable amount to the CGU’s carrying value. The value in use calculations require estimates in relation to
uncertain items, including management’s expectations of future revenue growth, operating costs, profit margins, operating
cashflows and the discount rate applied.
Future cash flows used in the value in use calculations are based on our latest Board approved five-year financial plans.
Expectations about future growth reflect expectations of growth in the markets applicable to the group. The future cashflows
are discounted using a pre-tax discount rate that reflects current market assessments of the time value of money. The discount
rate used is adjusted for the specific risk to the group, including the countries to which cash flows will be generated.
Further details are included in note 10, including sensitivity analysis.
Useful economic lives of tangible assets
The annual depreciation charge for tangible assets is sensitive to change in the estimated useful economic lives and residual
values of the assets. The useful economic lives and residual values are re-assessed annually. Thay are amended where necessary
to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical
condition of the assets. See note 11 for the carrying amounts of the property plant and equipment, and the depreciation
accounting policy for the useful economic lives for each class of assets.
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FINANCIAL STATEMENTS
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.
For management purposes, the Group is organised into the following reportable segments:
•
•
Resins, Polymers and Composites (known as RPC) ; and
Advanced Materials (including SiC and Inks) (known as AMAT)
These strategic business units were created on 1 July 2017, prior to this date management did not distinguish between different
operating segments. Comparative figures have been calculated on the basis that the operating segments existed in the previous
financial year.
2018
REVENUE
Cost of sales
Gross profit
Other income
Administrative expenses
Resins,
Polymers &
Composites
£’000
1,018
(566)
Advanced
Materials
£’000
2,385
(837)
Consolidated
£’000
3,403
(1,403)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,000
831
1,548
–
452
757
–
74
Adjustments,
Central &
Eliminations
£’000
–
–
Research and development expenditure
Share based payment expense
Depreciation & Amortisation
Other administrative expenses
(475)
(58)
(104)
(1,658)
(59)
(43)
(334)
(3,086)
(344)
(190)
(408)
(2,094)
(878)
(291)
(846)
(6,838)
OPERATING LOSS
Finance costs
LOSS BEFORE TAXATION
Taxation
LOSS AFTER TAXATION
Additions to non-current assets
Segment assets
Segment liabilities
(1,974)
(3,522)
(2,295)
(1,086)
(3,036)
(8,853)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(6,022)
(95)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(6,117)
850
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(5,267)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(2,962)
338
2,988
(147)
537
7,683
(4,222)
23
6,811
(572)
898
17,482
(4,941)
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
2017
REVENUE
Cost of sales
Gross profit
Other income
Administrative expenses
Research and development expenditure
Share based payment expense
Depreciation & Amortisation
Other administrative expenses
OPERATING LOSS
Finance costs
LOSS BEFORE TAXATION
Taxation
LOSS AFTER TAXATION
Additions to non-current assets
Segment Assets
Segment Liabilities
Resins,
Polymers &
Composites
£’000
870
(639)
Advanced
Materials
£’000
2,134
(255)
Consolidated
£’000
3,004
(894)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,110
901
1,879
–
231
660
–
241
Adjustments,
Central &
Eliminations
£’000
–
–
(58)
(28)
(61)
(1,368)
(161)
(7)
(205)
(2,294)
(689)
(316)
(451)
(2,711)
(908)
(351)
(717)
(6,373)
(788)
(624)
(1,515)
(4,167)
(2,667)
(8,349)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(5,338)
(297)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(5,635)
883
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(4,752)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(3,926)
527
3,092
(275)
132
7,386
(4,085)
–
4,523
(1,736)
659
15,001
(6,096)
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.
2018
£’000
2017
£’000
By destination
United Kingdom
Europe
United States of America
China
Thailand
South Korea
Japan
Rest of the World
238
516
532
448
199
93
1,299
78
265
952
131
11
73
14
1,545
13
––––––––––––––––––––––––––––––
3,004
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
3,403
During 2018, 38% (2017: 51%) of the Group’s revenue depended on a single customer. During 2018, 10% (2017: 12%) of the Group’s
revenue depended on a second single customer.
Revenue within Europe was predominantly split between Germany (6%) and Ireland (5%) (2017: Germany 19%, and Ireland 10%), as
a proportion of total group turnover for the year.
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.
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FINANCIAL STATEMENTS
4. Segment analysis (continued)
Revenue from goods was £2.48 million or 73% (2017: £2.09 million or 70%) and revenue from services was £0.80 million or 24%
(2017: £0.69 million or 23%).
The split of revenue by type was as follows:
2018
£’000
2017
£’000
Services
Reactors
Goods
Services
Reactors
Goods
836
89
2,478
691
225
2,088
––––––––––––––––––––––––––––––
3,004
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
3,403
RPC
£’000
AMAT
£’000
TOTAL
£’000
809
–
209
836
89
2,478
––––––––––––––––––––––––––––––––––––––––––––––––––
3,403
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
27
89
2,269
2,385
1,018
The group acquired the following non-current assets during the year, split by geographical location as detailed below:
Non-current asset additions
By destination
United Kingdom
United States of America
Thailand
South Korea
Taiwan
2018
£’000
2017
£’000
360
325
76
2
135
528
31
100
–
–
––––––––––––––––––––––––––––––
659
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
898
The carrying value of the group’s non-current assets split by geographical location are detailed below:
2018
£’000
2017
£’000
By destination
United Kingdom
United States of America
Thailand
South Korea
Taiwan
40
5,378
3,640
142
1
117
5,691
3,552
98
–
–
––––––––––––––––––––––––––––––
9,341
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
9,278
251936 Haydale AR pp31-pp47.qxp 27/11/2018 18:37 Page 41
5. Other Operating Income
Grant Income
6. 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
Loss on disposal of intangibles – Note 10
Depreciation of property, plant and equipment
Profit on disposal of property, plant and equipment
Foreign Exchange
Operating lease rentals:
– land and buildings
– plant and machinery
Haydale Graphene Industries plc | Annual Report & Accounts 2018
2018
£’000
2017
£’000
831
901
––––––––––––––––––––––––––––––
901
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
831
2018
£’000
2017
£’000
878
–
149
75
675
(9)
(33)
908
77
157
–
560
–
(20)
447
7
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
572
6
2018
£’000
24
2017
£’000
30
45
18
7
19
14
–
––––––––––––––––––––––––––––––
63
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
94
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 and it’s associates for other services:
– Audit of the company’s subsidiaries
– Taxation related compliance services
– Other non-audit services
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FINANCIAL STATEMENTS
7. Employees
The average number of employees during the year, including executive directors, was:
2018
No.
2017
No.
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
27
49
26
43
––––––––––––––––––––––––––––––
69
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
76
2018
£’000
2017
£’000
3,514
314
172
291
2,989
391
142
321
––––––––––––––––––––––––––––––
3,843
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
4,291
An analysis of the remuneration of the directors is detailed within the Directors’ Remuneration Report on pages 18 to 21. The total
amount payable to the highest paid director in respect of emoluments was £171,000 (2017: £171,000), including pension costs of
£9,000 (2017: £9,000).
2018
£’000
2017
£’000
399
63
280
33
––––––––––––––––––––––––––––––
313
––––––––––––––––––––––––––––––
462
388
–
204
366
––––––––––––––––––––––––––––––
570
––––––––––––––––––––––––––––––
883
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
850
388
8.
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
Origination and reversal of temporary differences
Recognition of previously unrecognised deferred tax assets
42
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
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% (2017 – 19.75%)
Expenses not deductible for tax purposes
Different tax rates applied in overseas jurisdictions
R&D enhancement
R&D costs capitalised
Surrender for R&D tax credit
Adjustment for under/(over) provision in previous periods
Movement in unrecognised losses carried forward
Movement in unrecognised fixed asset temporary differences
Deferred tax: Origination and reversal of temporary differences
Recognition of previously unrecognised deferred tax assets
Total tax credit
2018
£’000
2017
£’000
(4,752)
(883)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(5,267)
(850)
(6,117)
1,162
(274)
26
234
36
(15)
63
(747)
(23)
388
–
(5,635)
1,113
(251)
53
285
–
(94)
33
–
–
(622)
366
––––––––––––––––––––––––––––––
883
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
850
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 main rate of corporate tax in the U.S reduced from 34% to 21% effective from 1 January 2018 as part of the U.S tax reforms. This
has reduced the deferred tax liability attributable to the group’s subsidiaries based in South Carolina.
The Group has tax losses that are available indefinitely for offset against future taxable profits of the companies approximately
amounting to £15,780,000 (2017: £12,629,000) and £3,843,000 (2017: £4,946,000) 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.
9. 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 (£)
2018
£’000
2017
£’000
(4,862)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(5,413)
24,744,693
17,232,137
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(0.28)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(0.22)
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
2018, there were 3,619,940 (2017: 1,634,856) options and warrants outstanding as detailed in note 16.
43
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A
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251936 Haydale AR pp31-pp47.qxp 27/11/2018 18:38 Page 44
FINANCIAL STATEMENTS
10. Intangible assets
Cost
At 1 July 2016
Additions
Additions from acquisitions
At 1 July 2017
Additions
Disposals
At 30 June 2018
Accumulated amortisation
At 1 July 2016
Charge for the period
At 1 July 2017
Charge for the year
Disposals
At 30 June 2018
Net book value
At 30 June 2018
At 30 June 2017
At 30 June 2016
Customer
Relationships
£’000
Development
expenditure
£’000
Goodwill
£’000
Total
£’000
285
–
869
1,129
244
55
685
–
1,429
2,099
244
2,353
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,696
175
(82)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,789
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,428
175
(55)
2,114
–
(27)
1,154
–
2,087
1,548
1,154
–
–
58
115
215
42
273
157
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
430
149
(7)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
572
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
257
34
(7)
173
115
–
–
–
–
288
284
–
4,217
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,087
1,264
866
4,266
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,114
1,171
981
1,826
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
685
914
227
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 acquistion of HCT (formerly ACM) on the 13th October 2016 of
£1,102,620.
During the year Intelligent Nano Technology Limited was dissolved resulting in the disposal of £27,000 of goodwill.
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 HCT
(formerly ACM) on the 13 October 2016 amounting to £868,676.
Development costs
Development costs brought forward are made up of three areas. One of which relates to 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. The second of which relates to capitalised patent costs of Innophene that were acquired a part
of the acquisition of Innophene in the previous financial year. And lastly, the development of graphene enhanced epoxy resins within
Haydale Limited.
The group acquired £54,831 due to the acquisition of Innophene during the previous year. This was disposed of in the current financial
year as the costs related to a patent that was previously capitalised, however the contract was terminated during the current year
resulting in a loss on disposal of £47,379.
Development expenditure of £175,069 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 (2017: £245,369). Capitalised development expenditure is not amortised until the products or services are ready for sale or use.
44
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
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 HCT (formerly 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, HCT (formerly 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 HCT 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
Haydale Ceramic Technologies LLC (HCT)
Haydale Technologies (Thailand)
2017
£’000
634
51
1,103
327
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2018
£’000
634
23
1,103
327
2018
%
10%
n/a
10%
n/a
2017
%
11%
n/a
11%
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 10% (2017: 11%), 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 at 30% in the current financial year, the following year and thereafter with the growth rate tapering off
6% year on year. The forecast assumes a 3% per annum growth 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.
The calculations for HCT have been derived from the Board’s approved forecast figures for the next year. The HCT forecasts assume
that its turnover will grow at 30% in the current financial year, the following year and therafter with the growth rate tapering off
7.5% year on year. The forecast assumes a 3% per annum growth 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 HCT 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 and HCT dropped below 20% p.a., assuming all other things being equal, 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, included reducing the cost base in line with the reduced revenues.
45
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251936 Haydale AR pp31-pp47.qxp 27/11/2018 18:38 Page 46
FINANCIAL STATEMENTS
11. Property, plant and equipment
Assets
Leasehold
under
improvements machinery and fittings vehicles construction
£,000
£’000
Plant
and Fixtures Motor
£’000 £’000 £’000
Total
£’000
Cost
At 1 July 2016 492
Additions 17
Additions from acquisitions 11
FX on additions from acqn’s (1)
Transfers –
At 1 July 2017 519
Additions 65
FX translation (1)
Disposals –
Transfers –
At 30 June 2018 583
2
–
32
–
–
15
74
–
–
(15)
2,171
290
3,544
(210)
15
2,777
97
415
34
3,870
283
(227)
(16)
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
6,835
398
723
76
(11)
21
(129)
(3)
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
7,418
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
5,810
217
(30)
(124)
98
74
365
–
–
(98)
34
–
(1)
(2)
–
5,971
492
341
31
Accumulated depreciation
At 1 July 2016 136
Charge for the year 47
At 1 July 2017 183
Charge for the year 57
FX Translation –
Disposals –
At 30 June 2018 240
2
5
–
–
991
467
1,201
72
560
41
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,761
113
675
50
26
27
(105)
(3)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,357
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,458
562
(1)
(100)
7
6
–
(2)
–
–
–
–
1,919
187
11
–
Net book value
At 30 June 2018 343
5,061
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,052
305
341
20
At 30 June 2017 336
5,074
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,352
285
74
27
At 30 June 2016 356
1,576
25
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,180
15
–
12. Inventories
Raw materials
Work in progress
Finished goods
2018
£’000
2017
£’000
291
271
460
274
296
642
––––––––––––––––––––––––––––––
1,212
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
1,022
The total value of inventories recognised in cost of sales during during the year was £924,091 (2017: £252,394)
Raw materials and finished goods comprise functionalised carbon, chemicals and associated raw materials. Work in progress
comprises recoverable costs on long-term contracts.
46
251936 Haydale AR pp31-pp47.qxp 27/11/2018 18:38 Page 47
13. Trade receivables
Trade receivables
14. Other receivables
Other receivables
Prepayments and accrued income
Corporation tax
15. Share capital and share premium
At 1 July 2016
Issue of £0.02 ordinary shares
At 30 June 2017
Issue of £0.02 ordinary shares
At 30 June 2018
Haydale Graphene Industries plc | Annual Report & Accounts 2018
2018
£’000
2017
£’000
705
798
––––––––––––––––––––––––––––––
798
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
705
2018
£’000
2017
£’000
209
153
127
408
––––––––––––––––––––––––––––––
535
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
362
2018
£’000
2017
£’000
473
345
––––––––––––––––––––––––––––––
345
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
473
Share
capital
£’000
305
87
Share
premium
£’000
11,840
7,096
Number of
shares
No.
15,236,946
4,360,767
Total
£’000
12,145
7,183
––––––––––––––––––––––––––––––––––––––––––––––––––
19,328
8,758
––––––––––––––––––––––––––––––––––––––––––––––––––
28,086
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
19,597,713
7,731,060
18,936
8,603
27,328,773
392
155
27,539
547
During the year, the Company issued 7,731,060 new ordinary shares of 2p each as follows:
•
In October 2017, 7,731,060 shares were issued in connection with the Company's £9.3 million placing and open offer;
Issue costs amounting to £520,342 (2017: £157,360) have been charged to the share premium account in the year.
47
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251936 Haydale AR pp48-pp61.qxp 27/11/2018 18:37 Page 48
FINANCIAL STATEMENTS
16. 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
2018
Weighted
average
exercise
price
Pence
166
25
–
138
2017
Weighted
average
exercise
price
Pence
159
187
93
–
––––––––––––––––––––––––––––––––––––––––––––––––––
166
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
Number
of options
No.
1,257,717
2,438,576
–
(453,492)
Number
of options
No.
1,081,636
215,581
(39,500)
–
3,242,801
1,257,717
44
At 30 June 2018, there were options outstanding over 3,242,801 un-issued ordinary shares, equivalent to 11.87% of the issued share
capital as follows:
Number of
shares
Exercise
price
Earliest exercise
date
Performance
criteria
Latest
exercise date
Approved EMI scheme
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
15 December 2017
Unapproved schemes
03 April 2014
18 March 2015
19 May 2016
14 October 2016
26 June 2017
15 December 2017
15 December 2017
Long Term Incentive Plan
15 December 2017
192,860
30,000
60,000
17,115
17,438
10,619
61,835
42,782
87,440
99,271
167,353
21,412
34,052
26,170
35,149
257,968
100,000
1,981,337
–––––––––––
3,242,801
–––––––––––
–––––––––––
210.00p
62.25p
61.50p
134.50p
121.00p
177.00p
171.50p
198.14p
178.50p
125.50p
210.00p
134.50p
171.50p
198.14p
178.50p
125.50p
125.50p
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
15 December 2020
03 April 2017
18 March 2018
19 May 2019
14 October 2019
27 June 2020
15 December 2020
15 December 2020
–
Share price > 160p
Share price > 160p
–
–
–
–
–
–
–
–
–
–
–
–
–
Share price > 220p
03 April 2024
1 November 2024
7 November 2024
18 March 2025
25 June 2025
3 November 2025
19 May 2026
14 October 2026
27 June 2027
15 December 2027
03 April 2024
18 March 2025
19 May 2026
14 October 2026
27 June 2027
15 December 2027
15 December 2027
0.02p
15 December 2020
Share price > 220p**
15 December 2027
The estimated fair value was calculated by applying a Black-Scholes option pricing model.
48
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
Share
price
at date of
grant
(p)
210
210
62
Fair
value
per
option
(p)
94
94
38
Award
life
(years)
10
10
10
Type of Number
award of shares
192,860
167,353
30,000
EMI
Unapproved
EMI
03 April 2014
03 April 2014
1 November 2014
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
15 December 2017
15 December 2017
15 December 2017
17,115
EMI
21,412
Unapproved
17,438
EMI
10,619
EMI
34,052
Unapproved
61,835
EMI
42,782
Unapproved
26,170
EMI
87,440
EMI
35,149
Unapproved
99,271
EMI
Unapproved
257,968
Unapproved 100,000
15 December 2017
LTIP
1,981,337
–––––––––
3,242,801
–––––––––
–––––––––
62
135
135
121
177
172
172
198
198
179
179
126
126
126
126
38
82
82
74
111
101
101
113
113
179
179
55
55
47
124
10
10
10
10
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
0.62
0.62
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
Expected
volatility
rate Performance
conditions
(%)
None
30
30
None
50 Share price >
160p*
50 Share price >
160p*
None
50
None
50
None
50
None
52
None
51
None
51
None
49
None
49
None
34
None
34
None
51
51
None
51 Share price >
220p
51 Share price >
220p**
*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.
**The LTIP has been structured to ensure that value is created for shareholders before any value is delivered to the Key Management.
Accordingly, should the Company’s closing mid-market share price not reach and remain at, or above, £2.20 for at least 15 consecutive
trading days during the Performance Period (“Minimum Target”), then none of the Awards vest or is exercisable and the Awards will
lapse in full.
Should the Company’s closing mid-market share price reach and remain at or above £4.20 for at least 15 consecutive trading days
during the Performance Period (“Maximum Target”), then 100% of the Awards vest and are exercisable. Between the Minimum
Target and the Maximum Target, the % of the Awards that vest shall be pro-rata on a straight-line basis. The Awards may lapse in
the event of cessation of employment save for certain circumstances, including inter alia, redundancy or retirement in which case,
at the Company’s sole discretion and subject to performance criteria being met, the Exercise Period may be accelerated.
Grant of LTIP Awards
On 15 December 2017, grants of LTIP Awards were made to the following members of the Key Management:
Name and role
Ray Gibbs
Trevor Rudderham
Keith Broadbent
Matt Wood
Number of
LTIP Awards
granted
(“Award”)
819,863
409,932
409,932
341,610
Earliest
exercise date
14/12/20
14/12/20
14/12/20
14/12/20
Latest
exercise date
14/12/27
14/12/27
14/12/27
14/12/27
Minimum share
price target
before any
Awards vest
£2.20
£2.20
£2.20
£2.20
Maximum share
price target for
100% of
Awards to vest
£4.20
£4.20
£4.20
£4.20
506,078 Options were exercisable as at 30 June 2018 (2017: 538,094).
49
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R
C
G
E
T
A
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S
I
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C
N
A
N
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E
V
O
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S
T
N
E
M
E
T
A
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S
L
A
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N
A
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FINANCIAL STATEMENTS
16. Share-based payment transactions (continued)
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
EMI & Unapproved
15 December
2017
125.50p
125.50p
51.11%
0.50%
10 years
LTIP
15 December
2017
125.50p
2.00p
51.11%
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 2018 is 8.8 years (2017: 7.8 years). The charge
for the year for share-based payment amounted to £232,094 (2017: £292,721).
Warrants
Balance at beginning of year
Granted
Lapsed
Balance at end of year
2018
Weighted
Number of
warrants
2017
Weighted
average
exercise
No. price Pence
187
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––
187
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
average Number of
exercise
warrants
No. price Pence
187
–
–
377,139
–
–
377,139
–
–
377,139
377,139
187
No warrants were issued during the year under review. None of the warrants outstanding at 30 June 2018 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 2018 is 1.14 years (2017: 2.14 years). The charge
for the year for share-based payment amounted to £59,052 (2017: £58,610).
17. 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 into the group presentation currency.
50
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
18. Trade and other payables
Trade payables
Tax and social security
Accruals and other creditors
Corporation tax
19. Bank loans
Bank loans
The borrowings are repayable as follows:
– within one year
– in the second year
– in the third to fifth years inclusive
2018
£’ 000
687
73
1,412
2017
£’ 000
380
80
1,845
––––––––––––––––––––––––––––––
2,305
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2,172
2018
£’ 000
–
2017
£’ 000
65
––––––––––––––––––––––––––––––
65
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
–
2018
£’ 000
896
2017
£’ 000
1,270
256
267
373
359
261
650
––––––––––––––––––––––––––––––
1,270
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
896
The Group’s borrowings are denominated in 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
2017
%
4
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2018
%
4
In December 2014 a three year bank loan of £500,000 was drawn by the Company and securitised by cash deposits. The loan accrued
interest at 1.5% above the Bank of England base rate and was repayable in equal monthly instalments. The loan was fully repaid in
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.
20.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
2018
£’ 000
7
71
2017
£’ 000
13
240
––––––––––––––––––––––––––––––
253
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
78
Commercial Deferred Income
As at 30 June 2018, deferred income of £71,041 arose in relation to the sale of a reactor, which had been invoiced at the year end,
however the full revenue could not be recognised until the reactor has been commissioned.
As at 30 June 2017, deferred income of £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.
51
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A
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FINANCIAL STATEMENTS
21. 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
2018
£’ 000
398
47
74
15
2017
£’ 000
400
46
122
15
––––––––––––––––––––––––––––––
583
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
534
During the year ended 30 June 2018, Mr G Eves, a director of the Company, earned fees through his company, Evesco International
Business, totalling Nil (2017: £11,293) for corporate finance consultancy. At 30 June 2018, the balance owed to Evesco International
Business was Nil. (2017: Nil).
Fees totalling £47,163 (2017: £35,333) 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 2018 for financial, administration, compliance and support services. At 30 June 2018, the
balance owed to ONE Advisory Ltd was £3,405 (2017: £3,551).
Fees totalling £100,037 (2017: £64,427) 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 2018 for business development consultancy. At 30 June 2018, the balance owed to ATL
Consulting Ltd was £9,081 (2017: £11,387).
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 £143 (2017: £5,856). The balance owed to ONE Legal Advisory Ltd at the end of the year was Nil (2017: Nil).
Other transactions
Other related party transactions during the year under review are shown in the table below:
Services Received
T M Mather – admin support
Tracey Enterprises Limited
PlanarTech
QM Holdings
2018
£’ 000
2017
£’ 000
7
4
110
329
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
14
–
107
416
An amount of £13,885 was invoiced by Ms T M Mather to HCS during the year ended 30 June 2018 for the provision of administrative
support (2017: £7,079). Ms T M Mather is the partner of Mr N Finney, a director of HCS. As at 30 June 2018, a balance of Nil was due to
Ms T M Mather by HCS (2017:£3,023).
Accountancy and administration services were provided by Tracey Enterprises Ltd (“Tracey”) to HCS during the year ended 30 June
2018 amounting to Nil (2017: £3,555). 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 2018 (2017: Nil).
During the year an amount of £416,189 was paid to QM Holdings in respect of property rent (2017: £328,887). QM Holdings is owned
by Tom Quantrille and Marvin Murrell who are officers of HCT (formerly 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 HCT, Tom Quantrille and Marvin
Murrell. Payments to Tom Quantrille made in the year amounted to £333,333 (2017: £16,281) and £111,111 (2017: £5,427) to Marvin Murrell.
There were no amounts outstanding at the year end.
52
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
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 £106,765 (2017: £110,356). The balance outstanding to PlanarTech at the year end was £10,439 (2017: £18,169).
Services provided
Frangible Safety Posts Limited
Aqualiner Limited
Everpower Sheng Tie (Xiemen) Graphene Technology Co Ltd
Everpower International Holdings Co. Ltd
2018
£’ 000
2017
£’ 000
6
72
–
–
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
1
10
275
52
In the year ended 30 June 2018, 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 £776 (2017: £6,186). There were no amounts outstanding
at the year end (2017: Nil).
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 2018 were £9,908 (2017: £72,429). The
balance outstanding at the year end was Nil (2017: £66,534).
During the year, Haydale Graphene Industries Plc made sales to Everpower Sheng Tie (Xiemen) Graphene Technology Co. Ltd for
£275,000. Haydale Limited made sales to Everpower International Holdings Co. Ltd of £51,744 during the year. Everpower are part of
the same group as Advanced Waste & Water Technology Environmental Ltd, who own a 7.17% shareholding in Haydale Graphene
Industries Plc.
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
Everpower International Holdings Co. Ltd
2017
£’ 000
67
(2)
(3)
(18)
–
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2018
£’ 000
–
(2)
–
(10)
35
22. 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.
53
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251936 Haydale AR pp48-pp61.qxp 27/11/2018 18:37 Page 54
FINANCIAL STATEMENTS
22. Financial instruments (continued)
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
2018
Financial assets
Financial liabilities
2017
Financial assets
Financial liabilities
498
541
––––––––––––––––––––––––––––––––––––––––––––––––––
266
––––––––––––––––––––––––––––––––––––––––––––––––––
266
43
–
658
746
––––––––––––––––––––––––––––––––––––––––––––––––––
131
––––––––––––––––––––––––––––––––––––––––––––––––––
127
88
4
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%
2018 Increase/
(decrease)
£’ 000
2017 Increase/
(decrease)
£’ 000
26
(21)
58
(50)
9
(8)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
5
(4)
(ii)
Interest rate risk
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 net assets. 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.
54
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
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
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
2018
£’ 000
149
37
124
395
2017
£’ 000
132
16
265
385
––––––––––––––––––––––––––––––
798
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
705
2018
£’ 000
470
2017
£’ 000
699
200
35
–
99
–
–
––––––––––––––––––––––––––––––
798
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
705
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 19.
55
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251936 Haydale AR pp48-pp61.qxp 27/11/2018 18:37 Page 56
FINANCIAL STATEMENTS
22. Financial instruments (continued)
Maturity analysis
The ageing analysis of the Group’s non-derivative financial liabilities as at the year end is as follows:
2018
£’ 000
2017
£’ 000
Due:
– within one year
– within one to two years
– within two to five years
Gross amount
(b) Capital risk management
2,356
267
373
2,591
261
650
––––––––––––––––––––––––––––––
3,502
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2,996
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.
(c) Classification of financial instruments (at amortised cost)
2018
£’ 000
2017
£’ 000
Financial assets
Trade receivables
Other receivables
Cash and bank balances
Financial Assets (at amortised cost)
Financial liabilities
Bank loans
Trade payables
Accruals and other creditors
Financial Liabilities (at amortised cost)
705
209
5,092
798
222
2,091
––––––––––––––––––––––––––––––
3,111
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
6,006
896
687
1,412
1,270
380
1,845
––––––––––––––––––––––––––––––
2,895
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2,995
(d) Fair value of financial instruments
The Group has no financial assets or liabilities carried at fair values at the end of each reporting date.
23. Capital commitments
The Group had the following capital commitments in the respective years:
Contracted but not provided for
Authorised by the directors but not contracted for
2018
£’ 000
999
37
2017
£’ 000
39
–
––––––––––––––––––––––––––––––
39
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
1,036
24.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.
56
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25. Operating lease arrangements
The amounts of minimum lease payments under non-cancellable operating leases are as follows:
– within one year
– within two to five years
– later than 5 years
Aggregate amounts payable
2018
2018
2017
2017
Plant and
Land and
Plant and
Land and
buildings machinery
buildings machinery
£’ 000
£’ 000
7
7
8
3
–
–
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
£’ 000
573
976
177
£’ 000
547
1,423
–
10
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
1,970
1,726
15
Payments recognised as an expense under these operating leases were as follows:
Operating lease expense
2018
2018
Plant and
Land and
buildings machinery
£’ 000
6
2017
2017
Plant and
Land and
buildings machinery
£’ 000
7
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
£’ 000
572
£’ 000
447
A significant proportion of the lease arrangements relate to the premises from which HTI and HCT operate in South Carolina, USA
totalling £1.11 million (2017: £1.56 million). The lease expires on 31 December 2020. Other leases pertain to the office and unit contracts
for the two UK facilities of in aggregate £0.1 million (2017: £0.22 million). Of the £0.22 million, certain leases are cancellable with three
months’ notice and others have break clauses 10 months after the date of these accounts.
During the current year a new lease agreement has been entered into, in respect of offices at Harwell, Oxfordshire. The lease expires
in March 2028. The estimated committed costs are £0.36 million (2017: nil).
The facility in Thailand is leased and, at the date of these results, will expire in 16 months. The cost is £0.03 million (2017: £0.09 million).
Within the minimum lease payments for plant and machinery is the cost relating the general office equipment.
26.Defined Benefit Pension Scheme
HCT (formerly ACM) operated a defined benefit pension scheme, The scheme was closed in November 2006 for any new participants.
The net periodic benefit cost is determined at the beginning of the year based on applicable assumptions at that time.
Contributions of approximately £110,000 are expected to be made during the year ended 30 June 2019. This payment is expected to
be made in September 2018.
Included in the loss before tax during the year:
Net Interest Expense
Included in other comprehensive income during the year:
Actuarial loss / (gain) from demographic assumptions
Deferred Tax
57
2017
£’000
156
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2018
£’000
37
2018
£’000
125
(26)
2017
£,000
57
(21)
––––––––––––––––––––––––––––––
36
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
99
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I
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A
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A
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FINANCIAL STATEMENTS
26.Defined Benefit Pension Scheme (continued)
The following table sets forth the pension plan’s funded status as of 30 June:
Accumulated benefit obligation
Projected Benefit obligation
Plan assets at fair value
Funded Status
Accrued Pension Cost
2018
£‘000
(3,830)
(3,830)
2,710
2017
£,000
(3,939)
(3,939)
2,970
––––––––––––––––––––––––––––––
(969)
––––––––––––––––––––––––––––––
(969)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(1,120)
(1,120)
Net amount recognised in the consolidated balance sheet as of 30 June, consisted of the following:
Non current Assets
Current Liabilities
Non current liabilities
2018
£’000
–
–
(1,120)
2017
£,000
–
–
(969)
––––––––––––––––––––––––––––––
(969)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(1,120)
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 2018:
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%
4.00%
Longevity at retirement age (current & future pensioners)
– Males
– Females
2018
21.08 years
23.00 years
2017
19.98 years
21.71 years
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.
58
251936 Haydale AR pp48-pp61.qxp 27/11/2018 18:37 Page 59
The fair value of the Company’s pension plan assets valued at 30 June 2018, by asset category were as follows:
Haydale Graphene Industries plc | Annual Report & Accounts 2018
Description
Cash
Corporate Equities
Fixed Income:
US Government
Municipal
Corporate debt
Mutual Funds
Negotiable CD
Total
Assets/
Liabilities
Carrying Measured at
Fair Value
Amount
£’000
£’000
147
147
1,212
1,212
Fair Value Measurements at
30 June 2018 using
Level 1
Inputs
£’000
147
1,212
Level 2
Inputs
£’000
–
–
Level 3
Inputs
£’000
–
–
144
10
694
334
169
–
–
–
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
144
10
694
–
–
144
10
694
334
169
–
–
–
334
169
1,862
2,710
2,710
848
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 2018, were as follows:
At 01 July 2017
Contributions
Distributions
Earnings
Net realised gain
Administrative expenses
Foreign exchange gain/(loss)
Balance at 30 June 2018
£’000
2,970
–
(262)
65
57
(73)
(47)
––––––––––––––––
2,710
––––––––––––––––
––––––––––––––––
Cash Flows
For current financial year, the Company expects contributions to be approximately £110,000. The Company expects benefits paid for
the next five fiscal years and the five years thereafter as follows:
2019
2020
2021
2022
2023
Thereafter
The company’s pension plan asset allocations by asset category were as follows as of 30 June 2018:
Asset Category
Cash
Equities
Fixed Income
Mutual funds
59
£’000
243
242
237
232
226
1,080
––––––––––––––––
2,260
––––––––––––––––
––––––––––––––––
5%
45%
38%
12%
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
E
C
N
A
N
R
E
V
O
G
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F
I
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
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251936 Haydale AR pp48-pp61.qxp 27/11/2018 18:37 Page 60
FINANCIAL STATEMENTS
26.Defined Benefit Pension Scheme (continued)
Plan Obligations
Benefit Obligation at 01 July 2017
Foreign exchange movement
Interest Cost
Actuarial loss
Benefits paid
Benefit Obligation at 30 June 2018
Fair Value of Plan Assets at 01 July 2017
Foreign Exchange movement
Actual Return on plan assets
Interest Income
Employer contributions
Benefits paid
Fair Value of Plan Assets at 30 June 2018
Funded Status at 30 June 2018
£’ 000
3,939
(59)
147
65
(262)
––––––––––––––––
3,830
––––––––––––––––
2,970
(46)
(61)
109
–
(262)
––––––––––––––––
2,710
––––––––––––––––
(1,120)
––––––––––––––––
––––––––––––––––
Defined benefit obligation – sensitivity analysis.
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
Inflation Rate
Mortality Rate
Reasonably
Possible Change
(+/- 0.25%)
(+/-1.00%)
(+/-1.00%)
Defined Benefit Obligation (£’000)
Decrease
94
(16)
(39)
Increase
(91)
14
39
HCT (formerly ACM) also has a defined contribution 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 2018, were £57,725 (2017: £29,245).
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 2017
Recognised in profit and loss:
Tax expense
Recognised in other comprehensive income:
Actuarial gain on defined benefit pension schemes
Arising on business combinations
Movement due to changes in exchange rates
At 30 June 2018
60
2018
£’ 000
(555)
388
2017
£’ 000
–
570
27
–
15
(1,217)
92
––––––––––––––––––––––––––––––
(555)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(125)
251936 Haydale AR pp48-pp61.qxp 27/11/2018 18:37 Page 61
Haydale Graphene Industries plc | Annual Report & Accounts 2018
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.
The main rate of corporate tax in the U.S reduced from 34% to 21% effective from 1 January 2018 as part of the U.S tax reforms. This
has reduced the deferred tax liability attributable to the group’s subsidiaries based in South Carolina.
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)
A deferred tax asset has not been recognised for the following:
Accelerated capital allowances
Deductible temporary differences
Unused tax losses
credited (Charged)/
credited
to profit
to equity
or loss
2018
2018
£’ 000
£’ 000
27
(118)
–
(32)
–
538
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
27
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Liability
2018
£’ 000
–
–
(675)
Net
2018
£’ 000
235
315
(675)
Asset
2018
£’ 000
235
315
–
(675)
(125)
388
550
(Charged)/
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)
Asset
2017
£’ 000
329
350
–
(1,234)
(555)
679
570
2018
£’ 000
(103)
–
2,426
2017
£’ 000
(224)
–
1,972
––––––––––––––––––––––––––––––
1,748
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2,323
The unused tax losses can be carried forward indefinitely.
28. Post Balance Sheet Events
From 1 July 2018, the Group changed its internal reporting system to set up a third profit-centric strategic business units (“SBUs”)
known as “RPC”, “AMAT” & “APAC”. For the current financial year and beyond, the Group intends to report sales and profits under
these three SBUs.
Since 30 June 2018, there has been the following changes to the Board of directors of the Company:
•
•
•
•
The appointment of David Banks as Interim Executive Chairman in September 2018;
The appointment of Keith Broadbent as the Group’s Chief Operating Officer and a member of the Board in September 2018;
The appointment of Roger Humm as Senior Independent Non-executive Director in September 2018; and
The appointment of Ray Gibbs as President, Business Development, in September 2018, having previously held the position of
the Group’s Chief Executive Officer.
61
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T
A
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S
I
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C
N
A
N
R
E
V
O
G
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F
I
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
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E
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251936 Haydale AR pp62-imp.qxp 27/11/2018 18:37 Page 62
FINANCIAL STATEMENTS
PARENT COMPANY BALANCE SHEET
As at 30 June 2018
Company Registration No. 07228939
Fixed assets
Property, plant and equipment
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
2018
£’ 000
2017
£’ 000
6
7
7
8
9
9
22
3,610
–
3,076
––––––––––––––––––––––––––––––
3,076
––––––––––––––––––––––––––––––
3,632
22,976
(286)
18,102
–
4,874
14,329
–
1,675
––––––––––––––––––––––––––––––
16,004
(732)
––––––––––––––––––––––––––––––
15,272
––––––––––––––––––––––––––––––
18,348
–
––––––––––––––––––––––––––––––
18,348
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
26,322
–
22,690
26,322
547
27,539
(1,764)
392
18,936
(980)
––––––––––––––––––––––––––––––
18,348
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
26,322
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 2018 was £1,074,669 (2017: £1,666,959).
The financial statements on pages 62 to 68 were approved and authorised for issue by the Board of directors on 17 September 2018
and signed on its behalf by:-
David Banks
Interim Executive Chairman
Matt Wood
Finance Director
62
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
Share
capital
£’ 000
Share
Premium
£’ 000
Retained
profits
£’ 000
Total
Equity
£’ 000
305
–
–
87
11,840
–
–
7,096
335
(1,666)
351
–
12,480
(1,666)
351
7,183
–––––––––––––––––––––––––––––––––––––––––––––––––
18,348
(1,075)
291
8,758
–––––––––––––––––––––––––––––––––––––––––––––––––
26,322
–––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––
18,936
–
–
8,603
(980)
(1,075)
291
–
392
–
–
155
(1,764)
27,539
547
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2018
At 1 July 2016
Loss for the year
Recognition of share-based payments
Issue of ordinary share capital, net of transaction costs
At 30 June 2017 and 1 July 2017
Loss for the year
Recognition of share-based payments
Issue of ordinary share capital, net of transaction costs
At 30 June 2018
63
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A
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E
V
O
G
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F
I
N
O
I
T
A
M
R
O
F
N
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D
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251936 Haydale AR pp62-imp.qxp 27/11/2018 18:37 Page 64
FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY BALANCE SHEET
For the year ended 30 June 2018
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 07228939 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
Computer equipment
33% per annum straight line
33% per annum straight line
64
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
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.
Critical accounting judgements and estimation uncertainty
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent
liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of the assets or liabilities affected in future periods.
The key sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements
include estimation, where applicable, for items relating to revenue recognition and impairment of receivables.
Impairment of Investments
The company considers the impairment of investments on an annual basis. An estimate of the values of investments is calculated
on a discounted cash flow basis. Our value in use calculations require estimates in relation to uncertain items, including
management’s expectations of future revenue growth, operating costs, profit margins, operating cashflows and the discount rate
applied.
Future cash flows used in the value in use calculations are based on our latest Board approved five-year financial plans. Expectations
about future growth reflect expectations of growth in the markets applicable to the group. The future cashflows are discounted
using a pre-tax discount rate that reflects current market assessments of the time value of money. The impairment of investments
have been considered under note 10 of the consolidated financial statements.
Impairment of debtors
The company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other
debtors, management considers factors including the current credit rating of the debtor, the ageing profile of the debtor and historical
experience.
For intercompany debtors, the company considers the forecast results of the subsidiary to which the intercompany balance relates,
in order to determine its recoverability. The impairment of intercompany debtors have been considered under note 10 of the
consolidated financial statements.
3. Audit Fees
The audit fees of the parent company have been disclosed within note 6 of the consolidated financial statements, which form part
of these financial statements.
65
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N
A
N
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E
V
O
G
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F
I
N
O
I
T
A
M
R
O
F
N
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D
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251936 Haydale AR pp62-imp.qxp 27/11/2018 18:37 Page 66
FINANCIAL STATEMENTS
4. Employees
The average number of employees during the year, including executive directors, was:
Administration
Staff costs for all employees, including executive directors, consist of:
2018 No.
2017 No.
––––––––––––––––––––––––––––––––––
11
7
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
Wages and Salaries
Social Security Costs
Pension Costs
Share based payment expense
2017
2018
£
£
––––––––––––––––––––––––––––––––––
385,703
46,268
14,053
147,990
––––––––––––––––––––––––––––––––––
594,014
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
683,669
80,239
22,391
159,835
946,134
5. Directors’ remuneration
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 18 to 21, which are ascribed as forming part of these financial statements.
6. Fixed asset investments
Investment in
subsidiary
undertakings
£’000
Capital
contribution
£’000
Total
£’000
Cost
At 1 July 2017
Additions
Disposals
At 30 June 2018
2,580
432
(29)
3,076
563
(29)
–––––––––––––––––––––––––––––––––––––––––––––––––––
3,610
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
496
131
–
2,983
627
On 14 July 2017, the group setup a new wholly owned subsidiary, Haydale Technologies (Taiwan) Co Ltd (HTW), based in Kaoshing,
South Taiwan. The group acquired the entire share capital for £25,251 on incorporation. HTW issued further shares of £99,057 and
£307,984 on 14 September 2017 & 01 December 2017 respectively, taking the group’s investment in HTW to £432,292. This represents
Haydale Graphene Industries’ 100% ownership of 1,750,000 shares of 10 TWD each in HTW. The composition of the consideration
was cash.
Since the incorporation of HTW to 30 June 2018, HTW has contributed £0.02 million to the Group’s total income and generated a
loss of £0.21 million.
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
Haydale Composites Ltd
EPL Composites Limited
Haydale Technologies Korea Co., Ltd
Haydale Technologies Incorporated LLC
Haydale Technologies Thailand Ltd
Haydale Ceramic Technologies LLC
(Formerly ACMC Holdings LLC)
Haydale Technologies (Taiwan) Co Ltd
Country of
incorporation
or registration
England & Wales
England & Wales
England & Wales
England & Wales
South Korea
North America
Thailand
North America
Taiwan
66
Proportion of
ordinary share
capital held
100%
100%
100%
100%
100%
100%
100%
Nature of
business
R&D, sales and distribution
R&D, sales and distribution
Dormant
Dormant
Sales and distribution
R&D, sales and distribution
R&D, sales and distribution
100%
100%
Sales and distribution
R&D, sales and distribution
251936 Haydale AR pp62-imp.qxp 27/11/2018 18:37 Page 67
Haydale Graphene Industries plc | Annual Report & Accounts 2018
Haydale Composites Ltd & EPL Composite Limited are exempt from audit in accordance with the Companies Act 2006, as a result of
the companies remaining dormant throughout the current and previous financial years.
Haydale Technologies Korea Co., Ltd and Haydale Technologies (Taiwan) Co Ltd are exempt from audit.
Subsidiary
Haydale Ltd
Haydale Composites Ltd
EPL Composites Ltd
Haydale Composite Solutions Limited
Haydale Technologies Korea Co., Ltd
Haydale Technologies Thailand Ltd
Haydale Technologies Incorporated LLC
Haydale Ceramic Technologies LLC
(Formerly ACMC Holdings LLC)
Haydale Technologies (Taiwan) Co Ltd
7. Debtors
Amounts owed by group companies
Corporation tax
Other debtors
Prepayments and accrued income
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
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
10 Fl., No 251 Minghua Road, Gushan District Kaohsiung City 804, Taiwan
2018
£’ 000
17,908
115
37
42
2017
£’ 000
13,984
190
116
39
––––––––––––––––––––––––––––––
14,329
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
18,102
8. Creditors: amounts falling due within one year
Bank loan
Trade creditors
Amounts owed to group companies
Other creditors including tax and social security
Accruals and deferred income
2018
£’ 000
–
110
37
29
110
2017
£’ 000
108
64
–
477
83
––––––––––––––––––––––––––––––
732
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
286
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.
The loan was fully repaid in February 2018.
9. Share capital and share premium
Number of
shares
No.
19,597,713
7,731,060
–
Share
capital
£’ 000
Share
premium
£’ 000
392
155
–
18,936
9,123
(520)
Total
£’ 000
19,328
9,278
(520)
–––––––––––––––––––––––––––––––––––––––––––––––––––
28,086
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
27,328,773
27,539
547
At 1 July 2017
Issue of £0.02 ordinary shares
Share Issue Costs
At 30 June 2018
67
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T
N
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T
A
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S
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A
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N
A
N
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N
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251936 Haydale AR pp62-imp.qxp 27/11/2018 18:37 Page 68
FINANCIAL STATEMENTS
9. Share capital and share premium (continued)
During the year, the Company issued 7,731,060 new ordinary shares of 2p each as follows:
•
In October 2017, 7,731,060 shares were issued in connection with the Company's £9.3 million placing and open offer;
Issue costs amounting to £520,342 (2017: £157,360) 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 21 of the consolidated financial statements.
68
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Haydale Graphene Industries plc | Annual Report & Accounts 2018
Corporate Directory
Company Number
07228939
Directors
David Doidge Richard Banks
Keith Broadbent
Raymond John Gibbs
Matthew Graham Wood
Roger Anthony Smith
Graham Dudley Eves
Roger James Humm
Secretary
Matt Wood
Investor Relations Contact
Gemma Smith
Gemma.smith@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 and broker
Registrars
Solicitors
www.haydale.com
info@haydale.com
+44 (0)1269 842946
BDO LLP
Arcadia House, Maritime Walk, Ocean Village, Southampton, SO14 3TL
Arden Partners
125 Old Broad Street, London, EC2N 1AR
Share Registrars Limited
Suite E, First Floor, 9 Lion and Lamb Yard, Farnham, Surrey, GU9 7LL
Field Fisher LLP
Riverbank House, 2 Swan Lane, London EC4R 3TT
Intellectual Property Solicitors
Mewburn Ellis LLP
33 Gutter Lane, London, EC2V 8AS
69
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251936 Haydale AR pp62-imp.qxp 27/11/2018 18:37 Page 70
Perivan Financial Print 251936
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