Haydale
Graphene
Industries Plc
Annual Report
And Accounts
For the year ended
30 June 2019
Creating
Material
Change
www.haydale.com
Haydale Graphene
Industries Plc
Clos Fferws, Parc Hendre,
Capel Hendre, Ammanford,
Carmarthenshire, SA18 3BL
T: +44 (0)1269 842946
F: +44 (0)1269 831062
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 Cash Flow Statement
Notes to the Consolidated Financial Statements
Parent Company Statements
Company Balance Sheet of Haydale Graphene Industries Plc
Company Statement of Changes in Equity
Notes to the Company Financial Statements
SHAREHOLDER INFORMATION
Corporate Directory
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Chairman’s Statement
Introduction
Operations
I am pleased to present Haydale Graphene Industries Plc’s
(“Haydale”, the “Group” or the “Company”) full year audited
results to 30 June 2019 (“FY19”).
The year under review has been a challenging one for Haydale.
At management level, we have recruited a new Executive team
lead by Keith Broadbent, who was promoted from COO to CEO
in March 2019, and Laura Redman-Thomas, who joined as our
CFO in December 2018. At an operational level, we have
streamlined the business and rationalised our cost base, created
a rigorous product and commodity analysis with subsequent
clear focus, both inwardly and outwardly, introducing best
manufacturing procedures and processes, created a Group
sales force and refinanced the business with the fundraising
announced in March 2019.
Summary financials
Total income for FY19 of £4.25 million (FY18: £4.23 million),
comprised commercial revenues of £3.47 million (FY18:
£3.40 million) and grant income of £0.79 million (FY18: £0.83
million).
FY19 has been a year of change and rationalisation, delivering an
annualised cost base reduction of £1.6 million. During the year
there was significant ($1.2 million) investment in the US blanks
(SiC) business, further development of the ink market, the cost
centres in the UK and Thailand were converted to profit centres
and a global sales strategy was introduced.
As a result of these improvements the revenue in the second
half of FY19 was up 12% on the first half of the year and 35%
over the same time period in FY18 driven predominantly by
the US SiC business. The FY19 £0.5 million revenue upside in
the US SiC business and £0.14 million in APAC inks was offset
by the £0.58 million reduction in the UK composites business
where the focus was redirected towards commercial sales and
well-funded, commercially viable grant related projects for
longer-term growth.
The gross profit for the year was broadly in line with the prior
year at £1.9 million (FY18: £2.0 million). Total administrative
expenses for the year were adversely impacted by non-recurring
one-off restructuring costs relating to actions by management
to re-align the Group’s cost base, such that total administrative
expenses for the year including £0.35 million of exceptional items
were £8.53 million (FY18: £8.85 million). Total comprehensive loss
for the year was £7.12 million (FY18: £5.41 million), including the
£2.13 million of restructuring costs and a non-cash, accounting
adjustment for an impairment of intangible assets of
£1.78 million. The loss from trading activities, including one-off
restructuring costs, was £5.85 million (FY18: £6.02 million).
During the year under review we re-evaluated our products and
services in order to align our cost base with our addressable
markets. We are now using tailored advanced materials,
including graphene, boron nitride and silicon carbide micro-fibre
(SiC) to enable our customers to improve the quality and
electrical, thermal and/or mechanical performance of their
products. We have six international operating sites, with two in
the UK and one in each of the USA, Thailand, South Korea
and Taiwan.
In the Far East, our Thailand operation continues to grow
following the successful commissioning of one of our HT60
plasma reactors for one of Thailand’s leading petrochemical
processors as well as our long-term consulting contracts. The
customer intends to add value to certain by-products arising
from their manufacturing process using our functionalisation
capabilities.
Following a product review carried out in the year, we now have
speciality inks and coatings capabilities in both the Far East and
UK, covering the biomedical sensor market where commercial
progress continues. Pleasingly, our inks and coatings expertise
are now supplemented by piezo resistive and heating
applications that are already in commercial applications across
several sectors.
Our USA facility, Haydale Ceramic Technologies (“HCT”),
manufactures a range of our proprietary SiC micro-fibres which
add strength, toughness and anti- scratch properties to existing
materials. Despite taking longer than we had expected to
increase sales, HCT continues to supply against its existing long
term contracts with world-wide businesses that incorporate
HCT’s SiC in the manufacture of their hard-edged cutting tools.
As previously announced, in order to supplement the sale of our
proprietary SiC “powder”, we took the decision in FY18 to add
value to our SiC micro-fibres by investing in our own in-house
manufacturing capabilities at our US site to address a growing
market in selling our own proprietary SiC cutting tools (“blanks”).
The machinery is now commissioned, and we are expecting to
ramp up production in the current financial year after positive
feedback from our customers.
The graphene teams at our Loughborough and Ammanford sites
have been developing customer solutions for resins that
incorporate our functionalised graphene for the pre-preg carbon
fibre market for enhanced electrical, thermal and mechanical
applications following the positive work with NICHE and BAC
Motors. In addition, following successful trials, the teams have
developed a range of graphene enhanced elastomers that were
launched post the period end at the IRC 2019 show at the KIA
Oval earlier in September.
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STRATEGIC REPORT
Chairman’s Statement continued
The new Graphene Engineering Innovation Centre (GEIC) opened
in December 2018 at the University of Manchester, where
Haydale is a Tier 1 Partner. The GEIC has installed one of our HT60
plasma reactors for graphene functionalisation and
is
showcasing it to other partners and customers.
We continue to enhance the functionalisation performance of
our reactors with further upgrades and are working on some
exciting product improvement opportunities for the myriad of
companies now looking at collaborating with the GEIC and its
Tier-1 Graphene partners and with our other customers across
the globe.
Outlook
We enter FY20 with two new graphene-enhanced product lines
in pre-preg and Elastomers and a focussed sales force with the
industry contacts to promote them.
I foresee significant growth opportunities for Haydale with the
new and adapted approach of using our global footprint as one
team, with cross-selling and cross R&D focus, 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. Under the new
executive team the Group has focussed its development
activities on areas where it considers there to be immediate
commercial potential.
The Executives strategic review of the Group’s operations in the
US and UK is largely complete, and the review of the group’s Far
East operations is ongoing.
I would like to thank our new executive team who have worked
tirelessly to address the Group’s challenges in order to put in
place the solid foundations required to deliver on our anticipated
growth. A number of challenges remain to be addressed, and I
am confident in their ability to overcome them. I would also like
to thank the staff, our advisors and my fellow non-executive
directors for their hard work and dedication. I would also like to
thank our shareholders for their continued support.
David Banks
Chairman
14 October 2019
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Strategic Report
The directors present their Strategic Report for the year ended
30 June 2019
Haydale Graphene Industries Plc (“Haydale” or the “Group”) is the
AIM listed group that uses tailored advanced materials, including
graphene, boron nitride and silicon carbide micro-fibre (SiC) to
enable its customers to improve the quality and performance of
their products and thereby creating additional value and market
edge. The Group’s vision is to be in the vanguard of nano
advanced materials and dispersion to become a world leader in
the creation of material change through understanding the
potential of those materials through careful characterisation,
and the incorporation of its bespoke and unique patented
functionalisation process, as appropriate.
The Group’s regulatory approved proprietary graphene-based
and other speciality inks and coatings for the print and
biomedical sensor markets that it has developed continue to
progress commercially and have now been supplemented by
offerings in piezo resistive and heating applications that are in
commercial applications across several sectors. Progress in
enhanced resins for the pre-preg carbon fibre market covering
electrical, thermal and mechanical applications has also moved
into the commercial phase.
In the USA, Haydale manufactures proprietary SiC micro-fibres
and whiskers that strengthen ceramics and hard-edged cutting
tools for fashioning jet engine turbine blades from solid super
alloy billets. This application has now benefitted from substantial
investment and moving up the value chain to produce blanks
which incorporate the fibres and have helped to further
strengthen the relationship with customers. Other applications
including corrosion barriers for oil and gas pipelines and coatings
where high scratch and wear resistant is required is another
application that is addressed.
The Group has operational activities in its six chosen geographies
worldwide. In summary, these are:
Haydale subsidiary
Haydale Limited
Location
Principal activities
Ammanford, Wales
Ex R&D operation now producing inks and
supporting master batch production for direct
sales to customers and other sites in the Group
as a specialist functionalisation centre.
Sale of pre-preg, and consulting services in
advanced composites, elastomers and other
nano materials and including test services. Its
in grants focuses on
R&D
products that could lead to commercial
production.
involvement
Dedicated sales servicing the fast-moving
Korean, Chinese and Japanese markets.
Ex R&D facility now focused on commercial
plasma functionalisation facilities. Services the
APAC region and supporting the Far East sales
teams.
Established in July 2017 as the production
facility and technical centre for sales of
speciality inks, initially into the biomedical
sensor market.
Haydale Ceramic Technologies is HTI’s wholly
owned operating subsidiary which produces
and sells novel SiC micro fibres and whiskers,
as well as ceramic blanks to the cutting tool
industry.
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 Taiwan Ltd (“HTW”)
Kaohsiung, Taiwan
Haydale Technologies, Inc. (“HTI”)
South Carolina, USA
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STRATEGIC REPORT
Strategic Report continued
Background to urgent business restructure and re-alignment
The lead in to FY19 was the trading statement announcement
on 13 June 2018 which explained a delay in expected sales in FY18
and the intention of Ray Gibbs to resign as CEO in order to
concentrate on business development. On 7 September 2018
David Banks stepped up from Non-executive Chairman to be
appointed as Interim Executive Chairman and Keith Broadbent
was appointed to the main board as Chief Operating Officer. On
9 November 2018, the Company announced that the planned
$1.5 million sale and leaseback of the capital tools equipment at
its US facility would not be available and that the Group was
considering alternative sources of finance. At the same time a
£1 million reduction of annualised SG&A costs was announced
as the start of a new direction of business prudence and refocus.
On 21 December 2018, an announcement was made that
additional working capital had been raised through a loan with
the Development Bank of Wales and a new equity subscription,
concurrent with a change to the board of Directors (“Board”)
with Laura Redman-Thomas being appointed as the new CFO
and Matt Wood stepping down from that position, and Ray
Gibbs and Roger Smith also resigning from their Board positions.
The Group released its interim results on 22 February 2019 which
continued to show a challenge on cash and short- term
revenues. A proposed placing, subscription and open offer was
announced on the same day which completed on 12 March 2019,
raising £5.8 million (before costs). Following the General Meeting
held on 12 March 2019, Keith Broadbent was appointed as the
Group’s new CEO and David Banks reverted to Non-executive
Chairman.
Overall the year has been one of major reorganisation and
resetting commercial priorities. In summary, this has meant that
over the last six months:
•
•
•
Board members reduced and new leadership team
installed;
A full review of the Group’s business unit structure to ensure
streamlining and efficiencies with a review of US and UK
largely completed, with the review of the APAC region
ongoing – with c£1.6 million of annual cost savings achieved
to date;
A major change of strategy whereby the focus is securely on
commercial revenue, either project or product related, with
grant income or free of charge R&D only to be used in
applications where an immanent commercial opportunity
was apparent;
•
Core focus established in:
•
•
•
Growing the US business following significant
investment (c$1.5 million) on the blanks (SiC) business;
The redirection of Ammanford from cost centre to
profit centre;
Development of the ink market;
•
•
Composites focus to be maintained but with reduced
resource given the timing of the major commercial
revenues have been and are expected to be longer
than first planned; and
Business unit strategy has been modified into a global
sales strategy – to sell technology across the various
sites and geographies i.e. cross selling.
•
Formation of a cross site / cross commodity sales team
headed by Neil Taylor, VP of HCT in the US (expertise SiC),
and with a UK Sales Director having been recruited post year
end (Composites) and a UK sales engineer part of the team
(Inks).
This reorganisation will continue throughout the new financial
year as we look to opportunities to further rationalise in
conjunction with entering the growth phase.
Globalisation of the Strategic Business Units
As mentioned in previous reports, the setting up of two business
units in 2017 (Resins, Polymers and Composites (“RPC”) and
Advanced Materials (including SiC and inks) (“AMAT”) delivered
some limited success and growth in the business, but did not
facilitate the global approach necessary to leverage the Group’s
geographical and
technological commercial advances.
Consequently, a part of this dual BU structure has been split to
provide a third reporting entity, “APAC”. This has created a more
flexible structure which aligns with commodity or product focus
on one hand insofar as SiC, Inks, Composites and Elastomers
naturally have a site-based expertise, but also encourages Project
Managers and Sales personnel to look to other geographical
areas for potential revenue.
This change to allow greater potential of cross-selling has been
supplemented and re-enforced with the formation of a global
sales team with accountability across the Group; and a new VP
Sales, Neil Taylor, promoted from within the business; and a
new UK Sales Director, Simon Green, recruited externally. Initial
success has been reported previously with commercial activities
on coatings with SiC in progress in the UK, with live commercial
enquiries involving pre-preg composites and graphene offerings
underway in the US. The combination of the Group’s ink
expertise is being pooled and leveraged. This methodology is set
to continue as the template for growth as the one company one
team mantra takes further hold.
Sharing best practice in Operational and other business systems
and practices such as Health and Safety and Quality (ISO9001)
continues to gather force. This, together with more central
reporting structures underway in finance, will assist in cross
group communication and enhanced governance.
Progress on Core Element - Plasma functionalisation
Building on the progress from last year, the HDPlasTM
functionalisation process continues to be the cornerstone of the
Company’s offering. Good progress has been made with several
new and different key treatments enabling much more varied
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
offerings to customers’ requirements. This enables a much
greater range of graphene and other nano material treatments
and facilitates potential improvements in dispersal and
mechanical strength, electrical conductivity, and thermal
conductivity. The loaded matrix can and is being added to
commercial applications such as pre-preg, compounded into
polymers or elastomers, or sold as Masterbatch in many ongoing
programmes.
Key to the investment this year has been the research allowing
ramp up technology to be much better understood and has,
therefore
commercial quantity
increased
facilitated
requirements as and when required.
New applications for the plasma functionalisation process
include projects developing the treatment of materials to re-life
such as Carbon Black and processing larger types of components
to support external surface enhancements, including greater
adherence.
Marketing
The focus on Marketing for graphene profiling that has served
Haydale well in the past has fundamentally shifted to product
marketing for product sales. Alterations to the website in the
year will be further enhanced in the new financial year with an
incorporation of the US and Far East offering onto a single
website and presenting the one global face of Haydale.
SITE SPECIFIC PROGRESS
Loughborough, East Midlands (RPC)
In context of the overall strategic direction, the Loughborough
Site has seen an emphasis on reducing cost overhead, reducing
grant income in preference to commercial paid-for projects
whilst maintaining the progress in relation to the further
development of the main technologies. The focus continues with
the application specific customer solutions which now includes
composites, elastomers, inks and SiC. The incorporation of nano
materials into the bespoke solutions has become a core
competence.
Ammanford, Wales (RPC)
Ammanford’s transition from an R&D cost centre to a commercial
profit centre got underway in the second half of FY19. The focus
has been on ink sales initially and, to that end, we have recruited
an experienced Sales Engineer from that industry. As previously
announced, Haydale, in collaboration with The Welsh Centre for
Printing and Coating (WCPC), has developed and refined a range
of proprietary printing inks utilising functionalised graphene. This
includes the development of advanced ink technology to be
embedded into a range of apparel for elite athletes in training for
the 2020 Olympic and Paralympic Games.
In order to further support this transition and provide a pipeline
going forward, Haydale is a partner in the Smart Expertise
Programmes funded by the Welsh Government which is
designed to speed up the process required to take products from
proof of concept into volume and profitable products. This
involves close collaboration with our Taiwan operations whose
focus is also inks.
As part of the bigger sales team led by Neil Taylor in the US, the
intention is to look to sell the full portfolio of products across all
SBU’s including ink, composites, elastomers and SiC.
Significant progress has been made in many areas of the
functionalisation process, including the ability to increase
treatment levels across several materials. Examples include
treatment to increase hydrophobicity, as well as increase the
ability to treat low bulk density materials such as high grade
FLG’s (few layered graphene) and recovered carbon blacks.
Additionally, Haydale is collaborating with the National Physical
Laboratory for further understanding of the functionalisation
process as part of an Innovate UK grant as the focus continues
on real life products. Key will be the ability to continue to improve
material throughput. Collaboration with our key OEM on plans
to design the next generation of HDPlas™ reactors to provide the
ability to meet commercial volumes in anticipation of the
breakthrough driven by the increasing scope of the core and
patented technology has also been a priority.
Highlights have included the progress from the funding grant
announced in October 2018 with the Niche Vehicle Network, BAC
Mono and Pentaxia as part of the consortia to further develop
pre-preg for tooling and automotive parts, to the showcase of
the BAC Mono “R” at Goodwood Festival of Speed with the
composite parts integral in the vehicle being exhibited
(announced post period in July 2019). This product development
of the tooling and component enhanced pre-preg could well be
a steppingstone for graphene-enhanced composite body panels
and tooling reaching the wider automotive industry soon.
Haydale’s Composites Transition Piece (CTP) was also a product
of previous grant collaboration, and now endorsed by the
National Grid, is another example of product development
targeting commercial revenues. This, together with the
enhanced portfolio and other applications coming through the
same route, bodes well for future revenues and growth.
We continue to have an office in Harwell Business Park, Oxfordshire,
leased from June 2018, to provide a central location for business
development alongside significant potential customers operating
in the aerospace and advanced materials sectors.
Greer, South Carolina (AMAT)
The US operation, Haydale Ceramic Technologies LLC ("HCT”),
continues to deliver the bulk of revenues for the Group and, in
FY19, achieved sales of SiC of £2.7 million (FY18: £2.11 million).
During the year, it developed and extended a previously
announced four-year agreement to supply SiC micro-fibre to a
global group selling tooling and wear-resistant solutions. HCT
renegotiated and extended the term of the agreement. This new
sole supply agreement has a potential sales value of more than
US$3.3 million over a now five-year term, which represented an
increase of US$1.35 million in the order book at the time.
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STRATEGIC REPORT
Strategic Report continued
The commissioning and installation of the equipment invested
in last year at $1.5 million to produce engineered SiC ceramic
blanks for the cutting tool industry has been well received and
qualified with major jet engine and aerospace manufacturers
worldwide and the team are now working towards scaling up
to commercial production quantities. There have been some
initial teething issues with the ramp up, but progress is being
made and the expectation of good revenue growth is still very
much anticipated. The support of customers in this process has
been significant as the teams work together to realise the joint
opportunities.
Efforts to introduce SiC in the powder-coating anti-corrosion
market have continued with revenues also expected to grow
in the current financial year. This application has been the
subject of a paid for commercial contract in the UK and work
is underway between the US and UK sites to develop a
bespoke coating process to further address this market
opportunity.
HCT has a long-term sales order book for delivery of SiC and, as
at 12 September 2019, stood at approximately $3.55 million
($4.22 million, 10 September 2018).
Thailand Bangkok (APAC)
HTT, our high-class facility in the prestigious Thailand Science
Park in Bangkok, has progressed well in the year and is also
moving into more commercial project applications, including
functionalisation projects of some of the by-products of a
large petrochemical processor and entering first stages of
their own bespoke product sales, in particular, PATit. PATit is
Haydale’s software driven anti-counterfeiting device that
“reads” the unique conductive transparent and opaque inks
when printed onto a product label, proving the authenticity
(or otherwise) of the goods. There is currently an agreement
that has been signed with TKS Siampress Management Co.,
Ltd to use the technology in commercial applications on an
exclusive basis in Thailand and one other territory to be
decided by the parties. Furthermore, there is another
customer working with the technology to develop a different
bespoke application.
The site continues additionally to be a technical and sales
support service for our Korean and Taiwan activities.
Korea Seoul (APAC)
Our sales office in Seoul remains a good access route to Chinese
and Japanese markets as we continue to progress in the
commercial sphere. Our sales engineer is now part of the global
sales structure and this will assist revenue growth going
forward. The new PATit sales opportunity described above was
one that originated from this source.
FUTURE STRATEGIC DIRECTIONS
FY19 has been a transitional and challenging year for Haydale
and the much-discussed potential for a commercial focus to
develop a sales team and reduce overheads has been affected.
This will be the fulcrum of business in FY20 and onwards. The
cross selling of products: pre-preg and Inks in the US; Composite
technologies in the APAC regions; and SiC in the UK and Europe,
is a crucial element in this growth direction. The new global sales
team that is now in place has very specific objectives to leverage
this geographical reach and expertise across all the focus
product groups with robust back up of the core and unique
functionalisation process to underpin the drive.
Further improvements in characterisation, dispersion, capital
levels and
equipment modification, material treatment
innovations continue as part of customer paid for process, and
the concurrent development of further know-how with
additional potential IP is, of course, an essential element of this
new intensity, which in turn helps support more business.
Examples of this were evident at the innovations in elastomers
recently announced at the IRC 2019 (International Rubber
Conference) where we launched a range of functionalised
nanomaterials pre-dispersed in process oils for improvements in
mechanical and thermal conductivity of customer’s rubber
products. We also continue to spread this learning, expertise and
best practice throughout the Group to our people.
Central to our future success is also our partnerships which have
continued to be developed over the last twelve months and
where we are looking to expand further. WCPC is part of
Swansea University and is fully committed through the part-
funded Smart Expertise Programme to support the path to
commercialism. The combination of WCPC’s significant expertise
and equipment and Haydale’s newly created commercial focus
assists in expediting products to quality volume to deliver to
customers’ needs.
Taiwan Kaohsiung, (APAC)
HTW continues to provide graphene and other speciality inks in
lower quantities, principally to leading biomedical sensor
printers in the diabetes testing market. We are receiving regular
repeat orders from customers, albeit still in relatively small
quantities and the joint development agreement with STAR RFID.
The previously announced intention to relocate to bigger
premises will be dependent on the sales achieving commercial
volumes and will be reviewed as part of the ongoing strategic
review.
The relationship with University of Manchester’s £60 million
Graphene Engineering Innovation Centre (“GEIC”) is similarly a
major bridge in the commercialisation drive which, from June
2019, has one of our HT60 functionalisation reactors installed
and commissioned. As a Tier One member of the GEIC, Haydale
gains access to the materials knowledge, applications engineers
and both analytical and processing equipment within the GEIC.
This gives Haydale, through the GEIC’s world-renowned
development facilities, a quicker route to market and access to a
greater reach and range of customers.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
We continue to target the less regulated markets, including
sporting goods, which provide potential significant short-term
revenue opportunities for Haydale. An example of which has
been the supply during the year of graphene-enhanced
masterbatch to a customer involved in the hockey and lacrosse
supply industry. However, any significant sales orders are
predicated on the adoption of our products and technologies by
our commercial partners and customers, timing of which is
outside our control. The excellent work we have done over the
last nine months to focus on our core products and expertise, an
example of which is our datasheets on graphene enhanced pre-
pregs and elastomers, has been extremely well received by
industry and our newly created sales team are following up on
these new leads.
Grant Funded Projects
Grant funded projects have continued over the last twelve
months with the new emphasis that only projects that lead to
commercial products in the short to medium term or add
significantly to the Group’s knowledge bank on applications with
commercial potential in defined time scales will be undertaken.
The type of projects involved have included the large
petrochemical customer work detailed above in Thailand but
most focus has been in the UK at our Ammanford and
Loughborough sites. An example of this
includes the
development of graphene enhanced functionalised additives for
use in elastomers. This involves highly loaded nanomaterial
dispersions in process oils to offer enhanced mechanical,
physical, electrical and thermal properties of elastomer
compounds. The technical datasheet and product information
was launched at IRC in September 2019.
In September 2018, Keith Broadbent was promoted to the newly
created role of the Group’s Chief Operating Officer and as a
director of the Company and, following the equity fundraise in
March 2019, became the CEO of the Group, replacing David
Banks who reverted to his previous role as Non-executive
Chairman.
In December 2018, several directors decided to stand down,
including Matt Wood, as part-time Finance Director, who was
replaced by Laura Redman-Thomas as full-time CFO. Ray Gibbs
also stepped down as a director of the Company in December
2018 and Roger Smith, NED, stepped down in January 2019.
Having discussed with our advisers and key shareholders, it is the
Board’s intention over the coming weeks to adopt a new EMI and
Group wide share option scheme in order to incentivise, retain
and recruit our staff. The new scheme will replace the Group’s
existing share option schemes and all options granted under the
previous schemes are expected to be surrendered. Further details
of the new scheme and any grants of options made will be
issued in due course.
Cost Savings
Our focus on cost savings, which started in October 2018 and
continued following the Group’s securing of a loan from the
Development Bank of Wales in December 2018 and through
the equity fund raising that completed in March 2019, has
achieved annualised savings to overheads of approximately
£1.6 million to date. These predominantly relate to Senior
Management salary costs, consultancy costs and travel.
Impairment Review
Other examples include a plan of work to create a graphene
sensor that will be able to detect defects in composite materials
during both the manufacturing process and the normal service
life of a component, to improve the electrical conductivity of
epoxy
functionalised
nanomaterials, and a product readiness project to produce
graphene enhanced composite tooling using thermal pre-preg,
and graphene enhanced components using mechanically
improved pre-preg.
resin structural adhesives using
At the end of FY19, the Board, following extensive discussions
with its advisors including its auditors, took the decision to
impair the carrying value of intangible assets relating to the UK
(RPC) composites business by £1.78 million. This was despite good
pipeline opportunities and takes into consideration the
company’s current share price, its resulting market cap and the
change in the composites business since its acquisition in 2014
from a predominantly grant funded sales business to a product
sales business.
Patents, IP and Licensing
Haydale’s critical IP remains its 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.
The Group currently holds patents in the US, UK, Europe, China,
Japan and Australia.
Further work is also underway on the enhancement of the
electrical pre-preg offering for EMS shielding and lightning strike,
and it is anticipated this will result in another product specified
for FY20.
This structured approach to development is facilitating the
internal learning experiences and potential product to fit with
the organic growth momentum at the centre of our strategic
drive.
Management and Personnel
We have looked to make reductions in overheads this year whilst
at the same time investing in the training of our staff as we
continue to build organisational capability.
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STRATEGIC REPORT
Strategic Report continued
Key Performance Indicators (“KPIs”)
The Group’s KPIs are its financial metrics, being its revenues, gross
profit margin, adjusted operating loss, cash position, total
borrowings and long-term sales order book as follows:
FY19 (£’000) FY18 (£’000)
Revenue 3,467 3,403
Gross profit margin 55% 59%
Adjusted operating loss (4,180) (4,880)
Cash position 4,688 5,092
Borrowings 1,247 896
Long-term sales order book,
inclusive of grants* 3,557 4,674
* unwinding of multi-year contracts in the US of £0.8 million and
timing in UK Composites £0.29 million
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 32 to 67. The
financial statements of the Company continue to be prepared in
accordance with FRS 101 and are set out on pages 68 to 74.
Statement of Comprehensive Income
In the year under review, the Group's three principal areas of
income were: Sale of SiC fibers, whiskers and blanks, Specialty
Inks and graphene enhanced composites. There is a further
category of grant funded turnover which will be discussed
separately.
The Group’s total income for the year ended 30 June 2019 of
£4.25 million (FY18: £4.23 million), comprised commercial
revenues of £3.47 million (FY18: £3.40 million) and grant income
of £0.79 million (FY18: £0.83 million). The increase in revenue from
the US SiC business of £0.50 million and £0.14 million increase
in APAC inks was offset by a £0.58 million reduction in the UK
RPC business, where the focus was redirected towards
commercial sales and well-funded, commercially viable grant
related projects for longer-term growth. Although revenue was
flat year on year, the Group’s second half income increased by
12% compared to the first half of the year and by 35% on the
same period in FY18, predominantly driven by growth in the US.
The Group’s gross profit, which excludes the income from grant
funded projects was £1.90 million (FY18: £2.0 million) delivering
a gross profit margin of 55% (FY18: 59%). The reduction in margin
was primarily due to a different sales mix and a below average
yield from the US operations in the first half of FY19. This was
further impacted by higher than expected graphite costs in the
US, and pricing strategies as the business seeks to expand the
markets for its products.
The Group’s adjusted operating loss before non-cash items, such
as depreciation, amortisation, share based payment charges,
impairments, and one-off restructuring costs was a loss of £4.18
million (FY18: £4.88 million). The loss from trading, including one-
off restructuring costs of £0.35 million was £5.85 million (FY18:
£6.02 million). The Directors consider that adjusted operating
loss is a more useful measure of the Group’s performance and
comparative performance than loss from operations, as it
excludes a non-cash accounting adjustment for the impairment
of intangible assets.
As stated in the Strategic Report, at the year end, the Board,
following extensive discussions with its advisors including its
auditors, took the decision to impair the carrying value of
intangible assets relating to the UK (RPC) composites business
by £1.78 million. This was despite good pipeline opportunities and
takes into consideration the current share price, the resulting
market cap and the change in the composites business since its
acquisition in 2014 from a predominantly grant funded sales
business to a product sales business.
During the year, we invested significantly in the US blanks
business, realigned and refocused resource throughout the
Group, particularly reducing the cost base in the UK composites
business. R&D was redirected towards commercially viable
products expected to deliver future strategic growth. Overall
third-party R&D spend for the year was £0.76 million (FY18:
£1.05 million), of which £0.49 million was expensed during the
year (FY18: £0.88 million), with the balance of £0.22 million being
capitalised, (FY18: £0.18 million).
The Group’s adjusted administrative costs of £6.87 million (FY18:
£7.71 million) exclude non-cash
items of depreciation,
amortisation, share based payment charges as well as one-off
restructuring costs of £0.35 million to facilitate strategic change
and future cost base reductions. Total administrative expenses
for the year were £8.53 million (FY18: £8.85 million).
In the year the cost base was realigned achieving annualised
savings of approximately £1.6 million of which £0.50 million was
realised in the second half of FY19. Overall, the loss before tax for
the year was £7.76 million (FY18: £6.12 million) and included non-
cash items of £3.10 million and one-off costs of £0.35 million.
Non-cash items included impairment of intangible assets,
amortisation, depreciation and share based payment charges.
Total comprehensive loss for the year was £7.12 million (FY18: £5.41
million), including the £1.78 million non-cash charge for the
impairment of intangible assets and one-off restructuring costs
of £0.35 million.
8
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
At the year end, the Group’s contracted order book stood at £3.56
million (FY18: £4.67 million) and, since the year end, additional
long-term orders have been secured resulting in an order book
as at 10 September 2019 of £3.55 million to be delivered over the
coming years.
The loss per share for the year reduced to £0.06 (FY18: £0.21 loss).
Statement of Financial Position and Cashflows
As at 30 June 2019, net assets amounted to £11.25 million (2018:
£12.54 million), including cash balances of £4.69 million (2018:
£5.09 million). Other current assets increased to £3.13 million at
the year-end (2018: £2.56 million), and current liabilities
increased to £3.12 million as at 30 June 2019 (2018: £2.51 million).
Net cash outflow from operating activities, before working
capital movements for the year was £4.59 million (2018:
£4.83 million). The principal contributing factors being the
adjusted operating loss of £4.18 million (2018: £4.88 million) plus
the one-off restructuring costs of £0.35 million. Capital
expenditure of £1.2 million
(FY18: £0.72 million) was
predominantly for the US blanks equipment which utilised a
significant portion of cash during the year.
Capital Structure and Funding
As at 30 June 2019, the Company had 317,723,848 ordinary shares
in issue (2018: 27,328,773). During the year, the Company issued
290,395,075 new ordinary shares in connection with the
Company's placing and offer for subscription which raised
£5.81 million (before expenses) and was completed on 13 March
2019. No options were exercised into ordinary shares during the
year (FY18: no options were exercised).
The Group repaid borrowings of £0.5 million during the year
(FY18: £0.45 million), principally in relation to the Group’s US
borrowing facilities which are secured on the Group’s US based
tangible assets. A new loan was secured on 19TH December 2018
with the Welsh Development Bank for £0.75 million. The net
result left Haydale’s financing costs in line with the previous year
at £0.12 million (FY18: £0.10 million). The Group’s total borrowings
at the year-end were £1.25 million (2018: £0.90 million),
£0.58 million of which was in the UK and the balance 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. Nevertheless the excellent work
undertaken over the last nine months to focus on the Group’s
core products and expertise, an example of which is Haydale’s
datasheets on graphene enhanced pre-pregs and elastomers,
has been extremely well received by industry and the Group’s
newly created sales team are following up on these new leads.
Rapidity of product take up
While the Group makes every effort to establish sensible
timelines for customer engagement and purchasing of Haydale’s
products, there are 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.
9
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STRATEGIC REPORT
Strategic Report continued
The improvement in focus and direction has been a recent
change to ensure commercial product sales are an absolute
priority not withstanding that the timing and adoption of
Haydale’s newly developed product lines remains difficult to
predict.
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. A new share-based
incentive scheme is expected to be adopted by the Group in the
coming weeks.
Intellectual Property Risk
The impact of Brexit
IP portfolio, covering
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.
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
Chairman
14 October 2019
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.
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255921 Haydale AR pp11-pp31.qxp_255921 Haydale AR pp09-pp26 18/11/2019 11:15 Page 11
Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Roger James Humm MBA BSc (Hons) FCA,
Senior Independent Non-Executive Director
Roger is a chartered accountant with over 30 years technology
business experience. He runs his own consultancy business
and is currently CFO at Boxarr Limited and G-Volution Limited,
a trustee director at Oxford Instruments Pension Trustee
Limited and chairs the Investment Committee of the
University of Bristol Enterprise Funds. He has recently held
finance roles with Ixico Plc, Nanosight Limited and Blue Earth
Diagnostics Limited amongst others. Roger is chairman of
Haydale's audit & risk committee and a member of the
remuneration committee.
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
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.
company, Mechadyne
(now
part
Board of Directors
The Haydale board consists of experienced
commercial directors from a range of
industries that include engineering, retail,
finance and accounting, and technology.
Brief biographies of each of the directors are
set out below.
David Doidge Richard Banks,
Non-Executive Chairman
David Banks started in Stock Broking in Birmingham in 1979
with Harris, Allday, Lea and Brooks before moving to London
and becoming an Institutional Salesman at Panmure Gordon
where he was acclaimed in the Automotive, Engineering,
Aerospace and Motor Distributors sectors. He subsequently
became a Corporate Broker advising many companies on their
Corporate Structure, Strategy, Messaging and Presentations.
He also raised the Capital for many of these Companies both
at IPO and in Secondary fund raises. David joined Haydale as
Non-executive Chairman in July 2017 and was appointed as
Interim-executive Chairman on 5 September 2018 and,
following the general meeting on the 12TH March 2019
reverted to Non-executive Chairman.
Keith Broadbent;
Chief Executive 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 before becoming the Group’s Chief Operating Officer on
5TH September 2018. Prior to joining Haydale, Keith held a
number of senior operational and commercial positions
which covered aerospace, automotive, defence, 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. Following the general
meeting on 12TH March 2019, Keith was appointed as the
Group’s Chief Executive Officer.
Laura Redman-Thomas
Chief Financial Officer
Laura is an experienced finance professional, having held a
variety of senior finance roles over the last 19 years, latterly at
Stadium Group Plc where she was the Finance Director of its
Technology Product Division before its sale to TT Electronics
Plc in 2018. Prior to that, Laura spent almost 14 years at De La
Rue, as both Finance Director and Commercial Director of a
number of De La Rue operating companies. Laura holds a
Masters degree in Strategic Business Management and is an
Associate Member of the Chartered Institute of Management
Accountants. Laura joined Haydale as CFO in December 2018.
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GOVERNANCE
Directors’ Report
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 07228939, and
its subsidiaries (together the “Group”) for the year ended 30 June 2019.
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; and
Key Performance Indicators:
Research and development
During the year ended 30 June 2019, the Group invested £0.49 million (2018: £0.88 million) in research and development activities
which were expensed during the year, together with a further £0.27 million (2018: £0.18 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 (2018: nil).
Substantial Shareholdings
As at 30 June 2019, 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
Quilter Plc
Anthony Best
Nicholas Money-Kyrle
David & Monique Newlands
42,451,675
26,254,762
16,236,302
12,950,000
13.36
8.26
5.11
4.08
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 2019, the Company’s
registered shareholders with interests of 3% or more in the Company’s ordinary share capital was as follows:
Name of Shareholder
Rock (Nominees) Limited
Cheviot Capital (Nominees) Ltd
Hargreaves Lansdown (Nominees) Limited
Barclays Direct Investing Nominees Limited
Hargreaves Lansdown (Nominees) Limited
Hargreaves Lansdown (Nominees) Limited
Interactive Investor Services Nominees Limited
Nicholas Money-Kyrle
HSBC Global Custody Nominee (UK) Limited
Number of Ordinary Shares
% of Share Capital
9.07
7.96
5.99
5.17
4.94
4.87
3.42
3.15
3.15
28,817,548
25,300,282
19,038,901
16,424,332
15,680,689
15,477,163
10,868,637
10,000,000
10,000,000
121212
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Directors
The following directors have held office since 1 July 2018 and up to the date of signing the financial statements:
David Banks
Graham Eves
Roger Humm
Laura Redman-Thomas (appointed 20 December 2018)
Roger Smith (resigned 31 January 2019)
Matthew Wood (resigned 21 December 2018)
Keith Broadbent (appointed 5 September 2018)
Raymond Gibbs (resigned 21 December 2018)
Directors’ Interests in Ordinary Shares
The directors, who held office at 30 June 2019, had the following interests in ordinary shares of the Company:
Director
David Banks
Roger Humm1
Laura Redman-Thomas
Keith Broadbent
Number of Shares at 30 June 2019
% of Share Capital
541,667
890,208
375,000
500,000
0.002
0.003
0.001
0.002
1.
Includes 340,208 ordinary shares held by his wife, Wendy Humm.
Between 30 June 2019 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 2019, there has been no changes to the Board of directors of the Company.
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
Chairman
14 October 2019
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GOVERNANCE
Chairman’s Corporate Governance Statement
Overview
As Non-executive 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. In
September 2018, Haydale adopted the Quoted Companies Alliance Corporate Governance (QCA Code) and Haydale updated its
compliance with the QCA Code over the subsequent year. This report updates the Group’s adoption of the QCA Code and explains
how we have applied the guidance and what measures that we intended to implement have been implemented. 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 below.
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 have been made to the Board’s composition since 17 September 2018, the date of adoption by the Group
of the QCA Code, that have an impact on our corporate governance framework are as follows:
•
•
•
•
•
The appointment on 20 December 2018 of Laura Redman-Thomas as full-time Chief Financial Officer, replacing Matt Wood who
had been part-time FD, who stepped down from the Board on the same date, but remains as Company Secretary;
The resignation of Ray Gibbs as a director of the Company on 20 December 2018;
The resignation of Roger Smith as a director of the Company on 31 January 2019;
The appointment of Keith Broadbent as Chief Executive Officer on 12 March 2019 following the Company’s general meeting to
approve the £5.7 million equity fundraising – Keith having been the Group’s COO since 5 September 2018; and
David Banks reverting to the role of Non-executive Chairman on 12 March 2019, having been appointed Interim Executive
Chairman on 5 September 2018.
Where possible, Board changes are discussed with the Company’s major shareholders in advance.
The Company’s Nominations Committee was formed in June 2018, with the following members, which remains the case today. Its
members are: Graham Eves (NED), as Chair, myself (David Banks), and Roger Humm (Senior Independent NED).
At the time of the Group’s adoption of the QCA Code in September 2018, we were in the planning stages of adopting a Group-wide
employee evaluation process, including the Board, and an employee engagement survey. This is now expected to commence in early
2020.
Below are the Company’s explanations of how it complies with the 10 principles of the QCA.
QCA Principles
1.
Establish a strategy and business model which promotes long-term value for shareholders
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 of its 2019 Report and Accounts.
The Company intends to deliver shareholder returns initially through capital appreciation and eventually through distributions via
dividends. Challenges to the execution of the Company’s strategy are set out within the Strategic Report contained in the Company’s
2019 Annual Report and its principal risks are set out within that report.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
2.
Seek to understand and meet shareholder needs and expectations
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 listen to
shareholders’ 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 (www.arden-partners.com), is briefed regularly and updates the Board during
the year on shareholders’ expectations.
In addition, the Company has engaged the services of Hardman & Co (www.hardmanandco.com) to publish research on the Company
that can be distributed to both private and institutional existing and potential shareholders.
3.
Take into account wider stakeholder and social responsibilities and their implications for long-term success
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, commencing in April and signed off by the Board in early July, 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 or sexual orientation.
The Group is in the process of implementing a Company-wide policy to conduct employee engagement surveys, expected to
commence in early 2020, which will seek to understand any issues within the Group’s workforce.
In depth analysis and reviews of each business units’ budgeted business plans are agreed at the start of each financial year, with
contributions from all involved parties which facilitates a two-way communication channel with agreement on goals, targets and
aspirations of the Company and its related parties. This provides each strategic business unit with the opportunity to raise issues
and provide feedback to the Board. These feedback processes help to ensure that the Company can respond to new issues and
opportunities that arise to further the success of the Group.
The Company has close ongoing relationships with a broad range of its stakeholders and provides them with the opportunity to
raise issues and provide feedback to the Company. The Company seeks regular feedback from industries’ participants, such as
customers, graphene producers, R&D facilities, including universities and academic institutions, which broadens communication
and the opportunity for feedback whilst simultaneously embracing influential movers within the advanced materials industry, and
determining Company perception. Feedback received from stakeholders is reviewed, considered and, if changes are required, actioned
appropriately.
The Directors believe that the Group does not have a significant environmental or community impact and will continue to monitor
and will take action if this changes in the future.
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GOVERNANCE
Chairman’s Corporate Governance Statement
continued
4.
Embed effective risk management, considering both opportunities and threats, throughout the organisation
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 has adopted a risk register, which will be reviewed regularly by senior
management and the Audit Committee. The 2019 Annual Report also outlines the key risks to the business, set out within the Strategic
Report, which are added to or amended during the year. 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 every six months.
The review process involves the identification of risks, assessment to determine the relative likelihood of them impacting the business
and the potential severity of the impact and determination of what needs to be done to manage them effectively. Risk management
is integral to the ability of the Group to deliver on its strategic objectives.
The system of internal control is structured around an assessment of the various risks to the business and is designed to address
those risks that the Board considers to be material, to safeguard assets against unauthorised use or disposition and to maintain
proper accounting records which produce reliable financial and management information. The Board has established appropriate
reporting and control mechanisms to ensure the effectiveness of its control systems.
The risk assessment matrix below sets out these risks, categorises said risks, and outlines the controls that are in place. This matrix
is updated as changes arise in the nature of risks or the controls that are implemented to mitigate them. The Audit Committee
reviews the risk matrix and the effectiveness of scenario testing on a regular basis. The following principal risks and controls to
mitigate them have been identified as at the date of this updated Corporate Governance Statement:
Activity Risk
Impact
Mitigating Control
Internal Risk
adoption
Slower
by
customers than expected of
the Group’s newly developed
advanced materials
Lower than expected cash
inflows and consequently
lower revenues and profits
Internal Risk
Contractual Liabilities risk
liability
Uncapped
consequential
(unquantifiable) exist
or
losses
Internal Risk
Inadequate insurance cover
P&L Exposure
A newly formed global sales team with
both regional and product group
expertise has been
established.
The Group regularly reviews the order
book and sales pipeline by Strategic
Business Unit, against clear objectives
and management
accountability.
Considerable customer facing and
operational experience exists at Board
level
The Group delegated authority matrix
ensures senior executives review all
contracts, and any high-risk contracts are
approved at Board level
There is an annual review of insurance
policies and risks. The insurance risk is
also assessed when there is any material
its
change
operations
in the business and
Competition Risk
Dependence
Personnel
on
Key
The loss of services of any
existing key executives could
impact on the
adversely
development,
business,
financial
condition, and
results of operations
The Group provides well-structured and
competitive
reward and benefit
packages that ensure our ability to
attract and retain key employees. A
critical talent pool has been identified
and succession planning is underway
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Activity Risk
Impact
Mitigating Control
Internal Risk
Health and Safety risk
External Risk
Client concentration risk
The Company’s products
could theoretically be a
if an
danger to health
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 through regular
staff training, risk assessments and
restricting activities to only certain
qualified individuals
revenue
The Company’s top two
clients accounted for 48% of
the Group’s
in
FY2018 (FY2017: 63%) and any
these
breakdown
relationships could damage
the business
in
External Risk
delays
Unforeseen
in
forecasting
the
commencement of sales,
possibly due to regulatory
hurdles
Cessation
development
of
product
Financial Risk
Adequate
operational controls
financial and
Error or fraud, leading to a
loss in reputation, business
partners and customers
Government
Regulation
Up to date with government
regulation for nanoparticles
and potential restrictions in
use
IT/Data Risk
Cyber Risk
Fines, penalties, inability to
sell product
The Company has in place long term
contracts with
its key customers.
Furthermore,
significantly
it has
increased the number of its active
customers and its expansion continues
to reduce its exposure to any single large
client
customer
Improved
relationships,
understanding customer requirements,
quarterly
review of development
projects (Technical Readiness Levels) to
ensure commercial feasibility, time to
market and market potential. Monthly
review of key risks and opportunities to
forecast and review longer-term sales
pipeline with key milestones, tasks and
responsibilities identified to close the
sale
The Company has
invested and
continues to invest in its financial
reporting functions to facilitate strong
reporting and management control as it
grows
The Group maintains a vigilant watch on
the market and regulatory changes or
debates in all territories of trade and
manufacture
Loss of data, resulting in a
reduced confidence from our
customers and suppliers.
Fines, penalties
The Company maintains a GDPR policy,
a third party manages the IT security,
regular system backups and disaster
recovery
Financial Risk
Company runs out of funds
prior to full turnaround into
profitability
Closure of business due to
lack of funds to continue in
operation
review of management
Regular
accounts, P&L forecasts and cashflow
forecast. Information provided to the
Board to ensure accurate knowledge
with key sensitivities and various
options available to ensure a going
concern
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GOVERNANCE
Chairman’s Corporate Governance Statement
continued
Activity Risk
Impact
Mitigating Control
Intellectual Property
Risk
Ability to maintain adequate
protection of the Company’s
IP portfolio
Risk that any of the Group’s
patents will not be held valid
if challenged
conducts
The Company
regular
international IP searches as well as
monitoring activities and regulations for
developments in copyright/intellectual
property law and enforcement
External Risk
Brexit
is
Brexit
likely to bring
uncertainty in areas such
imports
exports,
and
regulations and grant income
The Group continues to review imports
and exports from and to Europe, and
monitors
legislation/regulations
accordingly
The Board does not currently deem it necessary for an internal audit function, having 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.
5.
Maintain the board as a well-functioning, balanced team led by the Chair
As from 30 September 2019, the Board comprises two executive directors and three non-executive directors as follows:
Executives
•
•
Chief Executive Officer:
Chief Financial Officer:
Non-executives
•
•
•
Non-executive Chairman:
Senior Independent Non-executive:
Independent Non-executive:
Keith Broadbent; and
Laura Redman-Thomas.
David Banks;
Roger Humm; and
Graham Eves.
Biographical details of the Directors can be found here at www.haydale.com.
All the Non-Executive Directors are expected to dedicate at least 24 days per annum to the Company. Mr Keith Broadbent and
Ms Laura Redman-Thomas are expected to dedicate 227 days per annum to the Company. One third of Board are subject to re-election
at each AGM.
Meetings are open and constructive, with every Director participating fully. Senior management can also be invited to meetings,
providing the Board with a thorough overview of the Company.
The full Board meets at least 8 times in the year according to the schedule of future meetings intended to be 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, CEO, CFO) and circulated to
the Board at least 48 hours before meetings, allowing time for consideration and necessary clarifications before the meetings.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
During the year ended 30 June 2019, the Company held 27 board meetings (FY18: 12), with each member’s attendance as follows:
Number of board meetings attended
Director
David Banks
Keith Broadbent (appointed 5 September 2018)
Laura Redman-Thomas (appointed 20 December 2018)
Graham Eves
Roger Humm
Raymond Gibbs (resigned 20 December 2018)
Matthew Wood (resigned 20 December 2018)
Roger Smith (resigned 31 January 2019)
FY19
27
24
13
21
22
12
14
13
FY18
12
–
–
11
12
12
12
12
Attendance at the Company’s audit, remuneration and nomination committee meetings during FY19 and FY18 were as follows:
Number of committee meetings attended
Committee member
Audit
Remuneration
Nominations
David Banks
Graham Eves
Roger Humm
FY19 FY18 FY19 FY18 FY19
FY18
1 3 8 2 3
1 3 6 2 3
1 4 8 2 3
1
1
1
The Company has Audit, Remuneration and Nominations (from 12 June 2018) Committees. Terms of reference for the each of the
Company’s Committees are published on the Group’s website, see www.haydale.com. The Committees have the necessary skills and
knowledge to discharge their duties effectively.
6.
Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
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 the Company’s website at http://www.haydale-ir.com/content/investors/board. 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.
In addition to their general board responsibilities, Non-executive Directors are encouraged to be involved in specific workshops or
meetings, in line with their individual areas of expertise. The Board shall review annually the appropriateness and opportunity for
continuing professional development whether formal or informal. If required, the Directors are entitled to take independent legal
advice and, if the Board is informed in advance, the cost of the advice will be reimbursed by the Company.
The Company utilises the services of ONE Advisory Limited, company secretarial and corporate governance specialists, to provide
assistance to the Company in its company secretarial and MAR compliance needs. Matt Wood, a former director of the Company
and its Company Secretary, is a director of ONE Advisory Limited.
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GOVERNANCE
Chairman’s Corporate Governance Statement
continued
7.
Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
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 Chairman will usually chair meetings of the non-executive directors, where necessary.
Responses will be received and recorded and circulated in a timely fashion, identifying positive areas and areas for improvement to
ensure that it is functioning at its full potential. The results and recommendations that come out of the appraisals for the Directors
shall identify the key corporate and financial targets that are relevant to each Director and their personal targets in terms of career
development and training. Targets will be addressed during the FY20 financial year and will be used to assess the progress the Board
in future evaluation exercises.
The Nominations Committee comprises the three Non-executive Directors, and regularly reviews the structure, size and composition
required of the Board compared to its current position, makes recommendations to the Board, considers succession planning and
oversees the process to fill Board vacancies. The Nominations Committee also keeps key positions outside the main board and other
personnel considered critical to the business under review; such positions include that of subsidiary directors. Going forward, findings
from the Company’s evaluation exercises will inform the Nominations Committee’s succession planning discussions.
8.
Promote a corporate culture that is based on ethical values and behaviours
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.
Our culture acts as the glue that binds our staff around the world together – relaxed, professional and humble with a focus on doing
the very best we can for each project entrusted to us. Group culture is at the centre of everything we do and to ensure and assist all
of our employees across our six operational/sales sites to be aligned with the Haydale culture is important in improving operations
and ultimately our performance. We are in the process of developing a set of seven guidelines which sets out our culture.
• We communicate openly
• We focus on delivering on our projects
• We empower our people
• We are passionate about making material change
• We will make a difference for our customers
• We have a “can do” attitude
• We learn at every opportunity
A large part of the Company’s activities is centred upon what needs to be an open and respectful dialogue with employees, clients
and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to
successfully achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure
that this flows through all that the Company does. The Directors consider that at present the Company is moving towards its objective
of having an open culture across each of our regions of operation facilitating comprehensive dialogue and feedback and enabling
positive and constructive challenge.
Because the size of the Group’s global workforce has changed considerably over the last few years, the Company intends to carry
out an employee engagement survey every other year, to commence in early 2020, that will determine if ethical values and the
Company’s corporate culture are recognised and respected, and seek to understand any underlying issues with the workforce.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
9.
Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
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 these to evolve 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 primary contact with shareholders, and the Executive Directors being
accountable for the management of the Company’s business.
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 two executive directors, Keith Broadbent (Chief Executive Officer) and Laura Redman-
Thomas (Chief Financial Officer) are responsible for the day-to-day running of the business, 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. The SID is also
available to shareholders, if the Chairman is unavailable, if they have reason for concern that contact through the normal channels
of the Executive Directors has failed to resolve. The SID is responsible for holding annual meetings with the executives and 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 CFO, 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 once during the year ended 30 June 2019 and intends to
meet at least twice in the current financial year.
Remuneration Committee
The Directors’ Remuneration Report and Directors’ Remuneration Policy Report are set out in the 2019 Annual Report. The
Remuneration Committee is made up of the three Non-executive Directors, with Graham Eves as its Chair. The committee’s 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
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GOVERNANCE
Chairman’s Corporate Governance Statement
continued
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 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.
Terms of Reference for each of the Committees can be found here www.haydale.com.
In accordance with the Companies Act 2006, the Board complies with: a duty to act within their powers; a duty to promote the
success of the Company; a duty to exercise independent judgement; a duty to exercise reasonable care, skill and diligence; a duty to
avoid conflicts of interest; a duty not to accept benefits from third parties and a duty to declare any interest in a proposed transaction
or arrangement.
As the Company expands it expects its corporate governance requirements to expand, for example see employee engagement
evaluation/adoption of risk register.
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 regular
transfer reports from its corporate registrar and in-depth quarterly analysis from Argus Vickers. In addition, all shareholders are
encouraged to attend the Company’s Annual General Meeting. All 2018 AGM resolutions were passed comfortably, and the proxy
votes received for each resolution put to the meeting was disclosed by the Company via RNS and on its website. The Board maintains
that, if there is a resolution passed at a GM with 20% votes against, the Company will seek to understand the reason for the result
and, where appropriate, take suitable action.
The latest Corporate Documents (including Annual Reports and Notices of AGMs) can be found here www.haydale.com.
Investors also will have access to current information on the Company though its website, www.haydale.com. The Company uses
electronic communications with shareholders, where possible, in order to maximise efficiency.
Going forwards a summary of work carried out by board committees during the year will be included in the Company’s Annual
Report.
The Company intends to update its Corporate Governance Statement at least every six months or when there is a material change
in the Company’s personnel or its activities.
By order of the Board on 14 October 2019.
David Banks
Chairman
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
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 were
Graham Eves (Chairman) and Roger Humm to 11TH March 2019, with David Banks re-joining the Committee following the general
meeting on 12TH March 2019. 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 2019 is set out on page 25.
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.
Having discussed with our advisers and key shareholders, it is the Board’s intention over the coming weeks to adopt a new EMI and
Group wide share option scheme in order to incentivise, retain and recruit our staff. The new scheme will replace the Group’s existing
share option schemes and all options granted under the previous schemes are expected to be surrendered. Further details of the
new scheme and any grants of options made will be issued in due course.
The Company currently has three equity-based incentive schemes in place.
a)
2013 Share Option Scheme
In May 2013, the Company adopted an EMI share option plan (“2013 Share Option Scheme”). During 2013, the Company granted
options to executive directors and senior management over a total of 121,500 ordinary shares under the 2013 Share Option Scheme.
There were no outstanding options in respect of this scheme at the year-end (2018: nil) and no further grants have been made under
this scheme or are anticipated to be made in the future.
b)
2014 Option Scheme
In April 2014, the Company adopted a new share option scheme pursuant to which it may grant both EMI approved options and
unapproved options (“2014 Option Scheme”). EMI approved options are subject to individual and overall limits. Potential grantees
are employees and officers of the Company and members of the Group.
During the year ended 30 June 2019, no new share options were granted under the 2014 Option Scheme (2018: 99,271 options granted).
During the year ended 30 June 2019, 289,659 share options had lapsed (2018: 408,009) and no share options were exercised (2018: nil).
At 30 June 2019, there were 391,255 unexercised options outstanding (2018: 680,914).
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GOVERNANCE
Directors’ Remuneration Report continued
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. No
further grants are anticipated to be made under this scheme.
c)
Long Term Incentive Plan (“LTIP”)
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.
Grant of LTIP Awards
During FY19 no new LTIP options were awarded and no further grants are anticipated to be made under this scheme. 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 during the comparative year for family reasons, accordingly Mr Rudderham’s LTIP Award lapsed.
** Post year end LTIP awards lapsed
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
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
Director
Date of
Grant
of LTIP
Options
David Banks
15 December 2017
Graham Eves
3 April 2014
Roger Humm
3 April 2014
–
–
–
Number Number of
Number of
EMI Unapproved
Options
Options
First
Exercise
Date
Exercise
Price
Expiry
Date
100,000
100,000
15 December 2020
125.5p 15 December 2027
–
–
16,872
16,872
3 April 2017
3 April 2017
210p
210p
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 2019 was 1.9p (2018: 70p). During the year to 30 June 2019, the
mid-market price ranged from 1.81p to 70.58p (2018: 70p to 186p). The share price was impacted by an issue of 290,395,075 shares
issued during the year. 289,395,075 shares were issued at 2p per share in March 2019.
DIRECTORS’ REMUNERATION
The aggregate remuneration received by directors who served during the years ended 30 June 2019 and 30 June 2018 was as follows:
£’000
Salary/Fee
Benefits
Year ended 30 June 2019
Year ended 30 June 2018
Total
(excl.
Pension)
Total
(incl.
pension)
Total
(excl.
pension)
Total
(incl.
pension)
Pension
Pension
Executive Directors
R Gibbs*
M Wood**
L Redman-Thomas***
K Broadbent****
R Smith*****
Non-Executive Directors
D Banks******
G Eves
R Humm
J Knowles*******
71
47
68
171
5
56
25
25
–
6
5
6
10
–
–
–
–
–
77
52
74
181
5
56
25
25
–
4
3
1
8
–
–
–
–
–
468
27
495
16
81
55
75
189
5
56
25
25
–
511
162
110
–
–
9
49
28
28
12
398
9
6
–
–
–
–
–
–
–
15
171
116
–
–
9
49
28
28
12
413
* Resigned 20 December 2018
** Part time Finance Director resigned 20 December 2018
*** Appointed 21 December 2018
**** Appointed 5 September 2018, formerly subsidiary director
***** Part-time executive director, resigned 31 January 2019
****** Appointed as Independent Executive Chairman on 5 September 2018 until 12 March 2019 when reverted back to non-executive chairman
******* Resigned 13 July 2017
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GOVERNANCE
Directors’ Remuneration Report continued
In addition to the amounts shown above, the share-based payment charge for the period was:
to 30 June
2019
£’000
62
26
26
28
–
–
–
142
to 30 June
2018
£’000
42
14
18
–
5
5
5
89
Raymond Gibbs
David Banks
Matthew Wood
Keith Broadbent
Graham Eves
Roger Humm
Roger Smith
By order of the Board
David Banks
Chairman
14 October 2019
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Statement of Directors’ Responsibilities in
respect of the annual report and the
Financial Statements
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
Company Secretary
14 October 2019
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FINANCIAL STATEMENTS
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 2019 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
2019 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.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you were:
•
•
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the Group’s or the Parent Company’s ability to continue to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue recognition
The Group’s revenue recognition policy is included within the accounting policies on page 39 and the components of revenue are
set out in note 4.
Management exercises judgement in recognising revenue arising from the provision of services where contracts are ongoing at the
year end. Revenues for such contracts are recorded on a percentage completion basis unless the contract outcome cannot be reliably
determined, in which case, revenue is only recognised to the extent that incurred costs are recoverable.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
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 IFRS 15 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 and time recording records.
From the audit procedures performed, we did not identify any instances of revenue recognition not being in accordance with IFRS 15
or the Group’s accounting policies.
Goodwill and intangible asset impairment risk
As detailed in the accounting policies and critical accounting estimates and judgements and key sources of uncertainty, goodwill
and other intangible assets are tested for impairment at least annually through comparing the recoverable amount of the cash-
generating unit (“CGU”), based on a value-in-use calculation, to the CGU carrying value.
Management’s review concluded that, in the absence of contracts to support the forecast revenues, the HCS CGU should be fully
impaired, resulting in an impairment charge of £1.8m. No evidence of impairment was identified by Management in respect of other
CGUs.
The risk that inappropriate conclusions may be reached in respect of goodwill and intangible asset impairment reviews is considered
significant due to the level of judgement involved in the impairment review and the opportunity for management bias within the
impairment model assumptions.
How We Addressed the Key Audit Matter in the Audit
We reviewed impairment reviews prepared by management, specifically reviewing the integrity of management’s value-in-use model
and, with the assistance of our valuation experts, we challenged the key inputs, being forecast growth rates, operating cash flows
and the discount rate.
Our audit procedures for the review of operating cash flows and forecast growth rates included, amongst others, comparing the
forecast to recent financial performance. In addition, we used market data to independently calculate a discount rate for comparison
and also performed our own sensitivity analysis upon the key valuation inputs, most significantly being the forecast revenue growth.
In respect of the HCS CGU, we reviewed the sales pipeline and considered the appropriateness of management’s conclusion based
on the evidence available and agreed the calculated impairment and allocation of the charge with reference to the carrying value of
the assets and liabilities in the CGU.
We considered the discount rate to be within a reasonable range and the impairment of the HCS CGU appropriately applied.
Our application of materiality
Group materiality
30 June 2019
£300,000
Group materiality
30 June 2018
£300,000
Basis for materiality
5% of losses before tax (2018: 5% of losses before tax) as the group is
primarily research and development focussed.
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We
consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of
reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of
testing needed Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account
of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the
financial statements as a whole.
Performance materiality was set at 70 per cent of the above materiality levels.
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FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries Plc continued
Where financial information from components was audited separately, component materiality levels were set for this purpose at
lower levels varying from £30,000 to £150,000 (2018: £42,000 to £125,000).
Our determination of materiality remained consistent year on year. 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 £12,000 (2018: £10,000). 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 98% of the group’s
revenue, 93% of the group’s loss before tax and 96% 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.
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.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
•
•
•
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not
visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 30, 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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website : www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Malcolm Thixton (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Southampton
14 October 2019
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
31
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FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2019
REVENUE
Cost of sales
Gross profit
Other operating income
Adjusted Administrative expenses
Adjusted operating loss
Adjusting administrative items:
Share based payment expense
Restructuring costs
Depreciation and amortisation
Total trading administrative expenses
LOSS FROM TRADING
Impairment
Total 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
Items that will not be reclassified to profit or loss:
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
Total comprehensive loss attributable to:
Owners of the parent
Loss per share attributable to owners of the Parent
Basic (£)
Diluted (£)
The notes from pages 36 to 67 form part of these financial statements.
32
Note
4
5
6
10
6
8
Year ended
30 June
2019
£’ 000
Year ended
30 June
2018
£’ 000
3,403
(1,403)
––––––––––––––––––––––––––––––
3,467
(1,567)
1,900
785
(6,865)
(4,180)
2,000
831
(7,711)
(4,880)
(291)
–
(851)
(1,142)
––––––––––––––––––––––––––––––
(200)
(350)
(1,118)
(1,668)
(8,853)
––––––––––––––––––––––––––––––
(8,533)
(5,848)
(1,784)
(6,022)
–
––––––––––––––––––––––––––––––
(10,317)
(8,853)
––––––––––––––––––––––––––––––
(6,022)
(95)
––––––––––––––––––––––––––––––
(7,632)
(123)
(6,117)
850
––––––––––––––––––––––––––––––
(7,755)
570
(7,185)
(5,267)
60
(47)
(99)
––––––––––––––––––––––––––––––
2
(7,123)
(5,413)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(7,185)
(5,267)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(7,123)
(5,413)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
9
9
(0.06)
(0.06)
(0.21)
(0.21)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
255921 Haydale AR pp32-pp35.qxp 18/11/2019 11:15 Page 33
Haydale Graphene Industries Plc | Annual Report & Accounts 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2019
Company Registration No. 07228939
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade receivables
Other receivables
Corporation tax
Cash and bank balances
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Bank loans
Deferred tax
Pension Obligation
Current liabilities
Bank loans
Trade and other payables
Deferred income
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
30 June
2019
£’ 000
Note
Restated
30 June
2018
£’ 000
10
10
11
27
12
13
14
14
20
27
26
20
19
15
16
16
17
2,087
2,130
5,061
–
––––––––––––––––––––––––––––––
1,453
1,024
5,556
–
9,278
––––––––––––––––––––––––––––––
8,033
781
705
603
473
5,092
––––––––––––––––––––––––––––––
1,182
637
472
836
4,688
7,654
––––––––––––––––––––––––––––––
7,815
15,848
16,932
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
640
125
1,120
––––––––––––––––––––––––––––––
388
–
1,085
1,473
1,885
256
2,172
78
––––––––––––––––––––––––––––––
859
2,056
209
2,506
––––––––––––––––––––––––––––––
3,124
4,391
––––––––––––––––––––––––––––––
4,597
11,251
12,541
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
6,354
27,764
828
(100)
(23,595)
547
27,539
1,298
(160)
(16,683)
––––––––––––––––––––––––––––––
11,251
12,541
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
The financial statements on pages 36 to 67 were approved and authorised for issue by the Board of directors on 14 October 2019
and signed on its behalf by:-
David Banks
Chairman
Keith Broadbent
Chief Executive Officer
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FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2019
Share
capital
£’ 000
Share
premium
£’ 000
Share-based
payment
reserve
£’ 000
Foreign
exchange
reserve
£’ 000
Retained
profits
£’ 000
Total
equity
£’ 000
At 1 July 2017
392
18,936
1,007
(113)
(11,317)
8,905
Comprehensive Loss for the year
Loss for the year
Other comprehensive loss
Total Comprehensive loss
Contributions by and distributions to owners
Recognition of share-based payments
Issue of ordinary share capital
Transaction costs in respect of share issues
–
(5,267)
(146)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(5,267)
(99)
–
(47)
–
–
392
18,936
1,007
(160)
(16,683)
3,492
291
9,278
(520)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
9,123
(520)
291
–
–
–
155
–
–
–
–
–
–
–
At 30 June 2018
547
27,539
1,298
(160)
(16,683)
12,541
Comprehensive Loss for the year
Loss for the year
Other comprehensive loss
Total comprehensive loss
Contributions by and distributions to owners
(7,185)
62
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(7,185)
2
60
–
–
–
547
27,539
1,298
(100)
(23,866)
5,418
Recognition of share-based payments
Share based payment charges – lapsed options
Issue of ordinary share capital
Transaction costs in respect of share issues
At 30 June 2019
–
–
200
–
6,032
(399)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
11,251
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
670
–
(399)
200
(670)
–
(23,595)
27,764
5,807
6,354
(100)
828
225
–
–
34
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2019
Cash flow from operating activities
Loss before taxation
Adjustments for:-
Amortisation of intangible assets
Loss on disposal of intangible assets
Depreciation of property, plant and equipment
Loss/(Profit) on disposal of property, plant and equipment
Share-based payment charge
Pension plan contributions
Finance costs
Pension – net interest expense
Operating cash flow before working capital changes
(Increase)/Decrease in inventories
Decrease in trade and other receivables
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
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 (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Cash and cash equivalents at end of the financial year
35
Note
10
11
16
26
29
29
29
Year ended
30 June
2019
£’ 000
Year ended
30 June
2018
£’ 000
(7,755)
(6,117)
149
75
702
(60)
291
–
95
37
––––––––––––––––––––––––––––––
2,007
–
895
16
200
(118)
123
42
(4,590)
(4,828)
––––––––––––––––––––––––––––––
190
266
159
––––––––––––––––––––––––––––––
(401)
200
13
(4,213)
––––––––––––––––––––––––––––––
(4,778)
269
––––––––––––––––––––––––––––––
76
(4,702)
(3,944)
––––––––––––––––––––––––––––––
(723)
(175)
83
(444)
––––––––––––––––––––––––––––––
(1,205)
(267)
–
–
(1,259)
––––––––––––––––––––––––––––––
(1,472)
(95)
8,757
–
(446)
––––––––––––––––––––––––––––––
(123)
5,634
750
(500)
8,216
––––––––––––––––––––––––––––––
5,761
(12)
3,001
2,091
––––––––––––––––––––––––––––––
9
(404)
5,092
4,688
5,092
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
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FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2019
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 the requirements of the Companies Act 2006.
The Group’s financial statements have been prepared under the historical cost convention.
The consolidated financial statements are presented in sterling amounts.
Amounts are rounded to the nearest thousands, unless otherwise stated.
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
intragroup 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 acquire, 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 2019,
amounts to £4.69 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.
Changes in accounting policies
New standards impacting the Group that have been adopted in the annual financial statements during the year, and which have
given rise to changes in the Group accounting policies are:
•
•
IFRS 9 – Financial Instruments;
IFRS 15 – Revenue from Contract with Customers
The Group adopted IFRS 9 and IFRS 15 with a transition date of 1 July 2018, through considering the cumulative impact at this date in
assessing whether an adjustment to opening reserves was required. However, the application of the standards had no impact on
the current or previous reporting periods.
IFRS 15 (Revenue from Contracts with Customers) – IFRS 15 became effective for annual periods beginning on or after 1 January 2018.
The Group has performed an impact assessment, taking advantage of the practical expedient not to apply IFRS 15 to any contracts
that were completed contracts at that date. Revenues in relation to the delivery of goods continue to be recognised at a point in time
when control is deemed to have passed to the customer (typically on delivery or customer acceptance). In relation to service revenues,
these revenues are recognised over time on the basis that the customer simultaneously receives and consumes the benefit and the
Group has an enforceable right to payment as the service is delivered. Service revenues continue to be recognised over-time using
the input method through assessing costs to date against total estimated costs or hours expended where there are agreed hourly
rates.
36
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
IFRS 9 is effective for annual periods beginning on or after 1 January 2018. The standard introduced a new approach to how financial
assets and liabilities are classified and an expected loss impairment model. As a result of adopting IFRS 9, the Group adopts a
simplified approach using a provision matrix in the determination of lifetime expected credit losses. This approach takes into
consideration both historic credit losses and future factors. However, as there is no history of material bad debt losses and past due
receivables are typically immaterial, impairment losses on such balances are not expected and therefore the application of the
standard had no impact on the current or previous reporting periods.
2. Future accounting developments
New standards and interpretations issued but not yet effective
As at 30 June 2019, 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 16 – Leases (effective for accounting periods commencing on or after 1 January 2019);
The adoption of IFRS 16 will replace IAS 17 and sets out the principles for the recognition, measurement, presentation and disclosure
of leases.
The main effect on the Group is that IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets
and liabilities for almost all leases and will therefore result in an increase of total property, plant and equipment in respect of the
right of use of the lease assets, and an increase in total financial liabilities. The operating lease charges currently reflected within
operating expenses (and EBITDA) will be eliminated and instead depreciation and finance charges will be recognised in respect of
the lease assets and liabilities.
Based on the operating leases in place and qualifying for recognition under IFRS 16 as at 30 June 2019 it is currently estimated that
this would result in the recognition of additional lease assets within property, plant and equipment of approximately £1.2 million
and additional lease liabilities of approximately £1.2 million in total for the Group. It is estimated that a reduction in operating expenses
before depreciation of approximately £0.6 million resulting in an increase in EBITDA. However overall on profit before tax it is
estimated to have a nil impact as depreciation would increase by approximately £0.6 million and finance charges of £0.6 million.
The group plans to adopt the modified retrospective approach and will take advantage of the following practical expedients:
•
•
•
•
a single discount rate has been applied to portfolios of leases with reasonably similar characteristics;
impairment losses on right-of-use assets as at 1 July 2018 have been measured by reference to the amount of any onerous lease
provision recognised on 30 June 2019;
initial direct costs have not been included in the measurement of the right-of-use asset as at the date of initial application; and
for the purposes of measuring the right-of-use asset hindsight has been used. Therefore, it has been measured based on
prevailing estimates at the date of initial application and not retrospectively by making estimates and judgements (such as the
term of leases) based on circumstances on or after the lease commencement date.
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)
its ability to measure reliably the expenditure attributable to the asset under development;
the product or process is technically and commercially feasible;
iii)
its future economic benefits are probable;
iv)
its ability to use or sell the developed asset;
v)
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.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
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.
(b) Impairment of goodwill and other non-financial assets
The carrying value of goodwill, and the cash-generating unit to which it relates, is reviewed at the end of each reporting period for
impairment regardless of whether there is an indication that the asset may be impaired. Other non-financial assets are considered
for indicators of impairment at each reporting date and full impairment reviews carried out if indicators of impairment exist.
Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The recoverable amount of
the assets is the higher of the assets’ fair value less costs to sell and their value-in-use, which is measured by reference to discounted
future cash flow. An impairment loss is recognised in administrative expenses within the Statement of Comprehensive Income
immediately it is identified.
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.
(c) Revenue
(i) Goods
Revenue represents sales to external customers at invoiced amounts less value added tax or local taxes on sales. Revenue
is recognised at the point where control is considered to pass to the customer typically on delivery or customer acceptance,
and all performance obligations have been fulfilled.
There has been no material impact to the recognition of revenue as a result of the changes made under IFRS15. The group
continues to recognise revenue at a point in time when control is considered to have passed to the customer.
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(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.
There has been no material impact to the recognition of revenue as a result of the changes made under IFRS 15. The group
continues to recognise revenue over time based upon the percentage of completion input method, whereby the stage of
completion is determined based on the proportion of contract costs incurred compared to total estimated costs.
At each reporting period, receivables are recognised for revenues yet to be invoiced or settled to the extent that it is highly
probable that there will not be a significant reversal of the amounts accrued in the future.
Where invoices are raised to the client in excess of the value of the consideration recognised as revenue based on the stage
of completion, deferred income balances are recorded that represent unfulfilled performance obligations. These
performance obligations are expected to be fulfilled within a year of the reporting date.
(d) Financial instruments
(i)
Financial assets
Financial assets and financial liabilities are recognised in the Group balance sheet when the Group becomes a party to the
contractual provisions of the instrument. Financial assets are classified as either fair value through profit or loss, fair value
through other comprehensive income, or amortised cost. Classification and subsequent re-measurement depends on the
Group’s business model for managing the financial asset and its cash flow characteristics. The Group has financial assets
in the categories of amortised cost only. The Group does not have financial assets at fair value through other comprehensive
income or fair value through profit or loss. Detailed disclosures are set out in notes 22.
Amortised cost
These assets arise principally from the provision of goods and services to customers (such as loans and trade receivables),
but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual
cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair
value and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process, the probability of the non-payment of trade receivables is assessed. This
probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected
credit loss for the trade receivables. For trade receivables, such provisions are recorded in a separate provision account with
the loss being recognised in the income statement. On confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the associated provision.
Impairment provisions for other receivables are recognised based on a forward-looking expected credit loss model. The
methodology used to determine the amount of the provision is based on whether at each reporting date, there has been
a significant increase in credit risk since initial recognition of the financial asset. For those financial assets where the credit
risk has not increased significantly since initial recognition, twelve month expected credit losses along with gross interest
income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with
the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses
along with interest income on a net basis are recognised.
(ii) Financial liabilities:
Financial liabilities are comprised of trade and other payables, borrowings and other short-term monetary liabilities, which
are recognised at amortised cost.
Trade payables, other payables and other short-term monetary liabilities, are initially recognised at fair value and
subsequently carried at amortised cost using the effective interest method.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in
the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To
the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised
as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
(e) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. The cost of an
item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable
to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by
management.
Depreciation is calculated under the straight-line method to write off the depreciable amount of the assets over their estimated
useful lives. The principal annual rates used for this purpose are:-
Leasehold improvements 10-20% per annum straight line
Plant and machinery 15-33% per annum straight line
Furniture and fittings 20-33% per annum straight line
Motor vehicles 33% per annum straight line
The depreciation method, useful lives and residual values are reviewed, and adjusted if appropriate, at the end of each reporting
period to ensure that the amounts, method and periods of depreciation are consistent with previous estimates and the expected
pattern of consumption of the future economic benefits embodied in the items of the property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when the
cost is incurred and it is probable that the future economic benefits associated with the asset will flow to the Group and the
cost of the asset can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-
to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Cost also comprises the initial
estimate of dismantling and removing the asset and restoring the site on which it is located for which the Group is obligated
to incur when the asset is acquired, if applicable.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
from its use or disposal. The gain or loss on retirement or disposal is determined as the difference between any sales proceeds
and the carrying amounts of the asset and is recognised in the income statement within administrative expenses.
(f)
Income taxes
The charge for taxation is based on the loss for the period and takes into account deferred taxation.
Current tax is measured at amounts expected to be paid using the tax rates and laws that have been enacted by the balance
sheet date. 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.
(g) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, bank balances, deposits with financial institutions and short-term, highly
liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value
and have maturities of 3 months or less from inception.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
(h) Inventories
Inventories are recorded at the lower of cost and net realisable value. Cost represents materials, direct labour, other direct costs
and related production overheads, and is determined on the First-In-First-Out (FIFO) method. Net realisable value is based on
estimated selling price, less further costs expected to be incurred to completion and disposal. Provision is made for slow-moving,
obsolete and defective inventories where appropriate.
The value of inventories used in the fulfilment of commercial or developmental programmes are charged to cost of sales in the
Statement of Comprehensive Income.
(i) Employee benefits
(i)
Short-term benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period in which
the associated services are rendered by employees of the Group.
(ii) Defined contribution plans
The Group’s contributions to defined contribution plans are recognised in profit or loss in the period to which they relate.
Once the contributions have been paid, the Group has no further liability in respect of the defined contribution plans.
(iii) Defined Benefit Pension plans
The Group accounts for its defined benefit pension scheme such that the net pension scheme position is reported on the
balance sheet with actuarial gains and losses being recognised directly in equity through the statement of comprehensive
income. A number of key assumptions have been made in calculating the fair value of the Group’s defined benefit pension
scheme which affect the balance sheet position and the Group’s reserves and income statement. Refer to note 26 of the
notes to the consolidated accounts for a summary of the main assumptions and sensitivities. Actual outcomes may differ
materially from the assumptions used and may result in volatility in the net pension scheme position.
( j) Provisions
Provisions are recognised when the Group has a present or constructive obligation as a result of past events, when it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate
of the amount can be made. Provisions are reviewed at the end of each financial reporting period and adjusted to reflect the
current best estimate. Where the effect of the time value of money is material, the provision is the present value of the estimated
expenditure required to settle the obligation.
(k) Government grants
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.
(l) Share-based payment arrangements
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the
equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based
transactions are set out in note 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.
(m) Leases
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
(n) Transactions and balances in foreign currencies
Transactions in foreign currencies are converted into the respective functional currencies on initial recognition, using the
exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting
period are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates
that existed when the values were determined. All exchange differences are recognised in profit or loss.
Overseas operations which have a functional currency different to the group presentation currency have been translated using
the monthly average exchange rate for consolidation into the statement of comprehensive income. The amounts included in
the Group statement of financial position, have been translated at the exchange rate ruling at the statement date. All resulting
exchange differences are reported in other comprehensive income.
(o) 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 and intangible 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. They 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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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
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 (focussing on the composites market in Europe (known as RPC);
Advanced Materials (focussing on SiC & blank products for tooling) (known as AMAT); and
Asia-Pacific (focusing on Ink sales to the Asian markets) (known as APAC)
The strategic business units RPC & AMAT were created on 1 July 2017, prior to this date management did not distinguish between
different operating segments. The strategic business unit APAC was created on 1 July 2018. Comparative figures have been calculated
on the basis that the operating segments existed in the previous financial year.
2019
Resins,
Polymers & Advanced
Composites Materials
£’000 £’000
REVENUE 441
Cost of sales (244)
Consolidated
£’000
3,467
(1,567)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Asia-Pacific
£’000
2,619
(1,128)
407
(195)
–
–
Adjustments,
Central &
Eliminations
£’000
Gross profit 197
Other income 766
Adjusted administrative expenses (1,488)
1,900
785
(6,865)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
212
19
(1,003)
1,491
–
(2,523)
–
–
(1,851)
Adjusted operating loss (525)
Administrative expenses
(1,032)
(772)
(1,851)
(4,180)
Share based payment expense (40)
Depreciation & amortisation (366)
Restructuring costs –
Impairment (1,784)
(200)
(1,118)
(350)
(1,784)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(126)
(341)
(350)
–
(14)
(339)
–
–
(20)
(72)
–
–
(2,190)
(353)
(92)
(817)
(3,452)
Total administrative expenses (3,678)
(10,317)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(2,668)
(2,876)
(1,095)
OPERATING LOSS (2,715)
Finance costs
(7,632)
(123)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(2,668)
(1,385)
(864)
LOSS BEFORE TAXATION
Taxation
(7,755)
570
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
LOSS AFTER TAXATION
(7,185)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Additions to non-current assets 241
Segment assets 2,177
Segment liabilities (405)
885
8,659
(3,722)
79
613
(216)
Exceptional Items
Exceptional items
Amortisation of goodwill
Amortisation of customer relationships
Amortisation of development expenditure
–
5,293
(1,148)
2019
£’000
1,205
16,742
(5,491)
2018
£’000
–
–
–
––––––––––––––––––––––––––––––
634
142
1,008
1,784
–
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
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FINANCIAL STATEMENTS
4. Segment analysis (continued)
During the year, the Group incurred exceptional amortisation costs in respect of Haydale Composite Solutions Limited. The new
management team has reset expectations for the timing of significant growth in the composites business with resource focused
on good growth targets and high TRL development projects; and have taken the decision to impair intangible assets by £1.78 million
(2018: Nil).
2018
Resins,
Polymers & Advanced
Composites Materials
£’000 £’000
REVENUE 1,018
Cost of sales (566)
Consolidated
£’000
3,403
(1,403)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Asia-Pacific
£’000
2,122
(576)
263
(261)
–
–
Adjustments,
Central &
Eliminations
£’000
Gross profit 452
Other income 757
Administrative expenses
Research & development expenditure (475)
Share based payment expense (58)
Depreciation & Amortisation (109)
Other administrative expenses (1,653)
1,546
–
–
(29)
(230)
(2,623)
2
–
(59)
(14)
(104)
(463)
–
74
(344)
(190)
(408)
(2,094)
2,000
831
(878)
(291)
(851)
(6,833)
(2,295)
(8,853)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(3,036)
(2,882)
(640)
OPERATING LOSS (1,086)
Finance costs
(6,022)
(95)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(2,962)
(1,336)
(638)
LOSS BEFORE TAXATION
Taxation
(6,117)
850
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
LOSS AFTER TAXATION
(5,267)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Additions to non-current assets 338
Segment assets 2,988
Segment liabilities (147)
325
7,176
(4,061)
212
507
(161)
23
6,811
(572)
898
17,482
(4,941)
Geographical information
All revenues of the Group are derived from its principal activity, the sale and distribution of nano-technology and silicon carbide
products or the delivery of research projects into those nano materials. The Group’s revenue from external customers by geographical
location are detailed below.
By destination
United Kingdom
Europe
United States of America
China
Thailand
South Korea
Japan
Rest of the World
2019
£’000
2018
£’000
238
516
532
448
199
93
1,299
78
––––––––––––––––––––––––––––––
328
657
632
3
239
414
1,133
61
3,467
3,403
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
During 2019, £1.13 million or 33% (2018: £1.29 million or 38%) of the Group’s revenue depended on a single customer. During 2019
£0.58 million or 17% (2018: £0.34 million or 10%) of the Group’s revenue depended on a second single customer.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Revenue within Europe was predominantly split between Germany £0.58 million or 17% and Netherlands £0.05 million or 1% (2018:
Germany £0.34 million or 10%, and Ireland £0.17 million or 5%), 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.
Revenue from goods was £2.98 million or 86% (2018: £2.48 million or 73%) and revenue from services was £0.34 million or 10% (2018:
£0.80 million or 24%).
Dis-aggregation of revenues
The split of revenue by type:
Services
Reactor sales
Reactor rental
Goods
2019
2019
£’000
2018
£’000
836
89
–
2,478
––––––––––––––––––––––––––––––
342
77
69
2,979
3,467
3,403
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
RPC
£’000
AMAT
£’000
APAC
£’000
TOTAL
£’000
Services 184
Reactor sales –
Reactor rental 69
Goods 188
342
77
69
2,979
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
–
–
2,619
158
77
–
172
441
3,467
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,619
407
2018
RPC
£’000
AMAT
£’000
APAC
£’000
TOTAL
£’000
Services 682
Reactor sales –
Reactor rental –
Goods 336
836
89
–
2,478
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
–
–
2,122
141
89
–
33
1,018
3,403
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,122
263
Services and rector rental revenues are recognised over time, whereas goods and reactor sales are recognised at a point in time.
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FINANCIAL STATEMENTS
4. Segment analysis (continued)
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
2019
£’000
2018
£’000
360
325
76
2
135
––––––––––––––––––––––––––––––
241
885
14
–
65
1,205
898
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
The carrying value of the group’s non-current assets split by geographical location are detailed below:
By destination
United Kingdom
United States of America
Thailand
South Korea
Taiwan
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
– impairment of intangibles – Note 10
– amortisation of other intangibles
Loss on disposal of intangibles – Note 10
Restructuring costs
Depreciation of property, plant and equipment
Loss/ (profit) on disposal of property, plant and equipment
Foreign Exchange
Operating lease rentals:
– land and buildings
– plant and machinery
46
2019
£’000
2018
£’000
5,378
3,640
142
1
117
––––––––––––––––––––––––––––––
3,387
4,344
148
1
153
8,033
9,278
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2019
£’000
2018
£’000
831
––––––––––––––––––––––––––––––
785
831
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
785
2019
£’000
2018
£’000
493
1,785
222
–
350
867
16
(24)
878
–
149
75
–
675
(9)
(33)
572
6
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
614
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
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 its associates for other services:
– Audit of the company’s subsidiaries
– Taxation related compliance services
– Other non-audit services
7. Employees
The average number of employees during the year, including executive directors, was:
Administration
Research, development and production
Staff costs for all employees, including executive directors, consist of:
Wages and salaries
Social security costs
Defined contribution pension costs
Defined benefit pension costs
Share-based payment expense
2019
£’000
27
2018
£’000
24
45
18
7
––––––––––––––––––––––––––––––
50
18
7
94
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
102
2019
No.
2018
No.
27
49
––––––––––––––––––––––––––––––
25
54
76
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
79
2019
£’000
2018
£’000
3,514
314
172
37
291
––––––––––––––––––––––––––––––
4,140
339
120
42
200
4,841
4,328
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
An analysis of the remuneration of the directors is detailed within the Directors’ Remuneration Report on pages 26 to 29. The total
amount payable to the highest paid director in respect of emoluments was £189,000 (2018: £171,000), including pension costs of
£10,000 (2018: £9,000).
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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
H
E
R
A
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255921 Haydale AR pp36-pp53.qxp_255921 Haydale AR pp31-pp47 18/11/2019 11:13 Page 48
FINANCIAL STATEMENTS
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
2019
£’000
2018
£’000
399
63
––––––––––––––––––––––––––––––
442
–
462
––––––––––––––––––––––––––––––
442
388
–
––––––––––––––––––––––––––––––
128
–
388
––––––––––––––––––––––––––––––
128
850
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
570
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% (2018 – 19%)
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
2019
£’000
2018
£’000
(7,185)
(570)
(5,267)
(850)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(7,755)
(6,117)
1,162
(274)
26
234
36
(15)
63
(747)
(23)
388
–
––––––––––––––––––––––––––––––
1,474
(409)
17
275
43
(44)
–
(681)
(233)
128
–
850
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
570
Changes in tax rates and factors affecting the future tax charge
The main rate of corporation tax for UK companies is currently 19%. The Finance Bill 2016, which was substantively enacted in
September 2016, announced a 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 £21.85 million (2018: £15.78 million) and £4.53 million (2018: £3.84 million) 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 up to the value of the timing difference of fixed assets and therefore no overall deferred tax asset has
been created.
48
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
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 (£)
2019
£’000
(7,185)
Restated
2018
£’000
(5,267)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
115,060,850
24,744,693
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(0.06)
(0.21)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
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
2019, there were 2,632,199 (2018: 3,619,940) options and warrants outstanding as detailed in note 16.
The loss per share for the comparative period was incorrectly calculated as £0.22. The comparative figure has been recalculated and
amended to show the correct loss per share.
10. Intangible assets
Cost
At 1 July 2017
Additions
Additions from acquisitions
At 1 July 2018
Additions
At 30 June 2019
Accumulated amortisation
At 1 July 2017
Charge for the period
Disposals
At 1 July 2018
Charge for the year
Impairment
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
At 30 June 2017
Customer
Relationships
£’000
Development
expenditure
£’000
Goodwill
£’000
Total
£’000
4,696
175
(82)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,428
175
(55)
2,114
–
(27)
1,154
–
–
1,154
–
4,789
267
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
5,056
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,087
–
1,548
267
2,087
1,815
1,154
430
149
(7)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
257
34
(7)
173
115
–
–
–
–
288
115
143
572
222
1,785
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,579
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
284
107
1,008
–
–
634
1,399
634
546
2,477
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,453
608
416
4,217
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,087
1,264
866
4,266
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,114
1,171
981
49
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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
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A
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255921 Haydale AR pp36-pp53.qxp_255921 Haydale AR pp31-pp47 18/11/2019 11:13 Page 50
FINANCIAL STATEMENTS
10. Intangible assets (continued)
Goodwill
Goodwill arose on the acquisition of EPL Composite Solutions Ltd (now Haydale Composite Solutions Limited “HCS”) on 1 November
2014 (£634,000), on the acquisition of Haydale Ltd on 21 May 2010 (£24,000) and of the acquisition of the trade and assets of Intelligent
Nano Technology Ltd (£27,000) on 12 May 2010. On the 9 September 2016, goodwill of £327,151 arose on the acquisition of Innophene
Co. Ltd (now Haydale Technologies Thailand). Goodwill arose on the acquisition of HCT (formerly ACM) on the 13TH October 2016 of
£1,102,620.
In the year, the decision was taken to impair the carrying value of intangible assets held by the UK composites business due to
uncertainties in the timing of significant growth, which is anticipated to be delivered at a slightly slower pace than with the inks
and SiC businesses. This resulted in an impairment of the Goodwill relating to Haydale Composite Solutions Limited of £634,000.
During the comparative 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.
Due to uncertainty relating to the timings of significant growth in Haydale Composite Solution the Customer Relationships relating
to enhanced epoxy resin were impaired to nil during the year
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.
Development expenditure of £267,000 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 (2018: £175,069). Capitalised development expenditure is not amortised until the products or services are ready for sale or
use.
Due to uncertainty relating to the timings of significant growth in Haydale Composite Solution the Development Expenditure relating
to enhanced epoxy resin were impaired to nil during the year.
Amortisation
Capitalised development costs are amortised over the estimated useful life of between 5 and 20 years. The amortisation charge is
recognised in administrative expenses.
The Customer relationships intangible is amortised over the estimated useful life of 10 years. The amortisation charge is recognised
in administrative expenses.
50
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
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)
2018
£’000
634
23
1,103
327
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2019
£’000
–
23
1,103
327
2019
%
10%
n/a
12%
10%
2018
%
10%
n/a
10%
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 12% (2018: 10%), and have been used to
discount projected cash flows.
Despite a good pipeline of opportunities, and following extensive discussions with advisors and auditors, we have decided to impair
the intangible assets of HCS due to the uncertainty of timing of income relating to the CGU.
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 thereafter with a reducing growth rate. The
forecast assumes a 2% 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 apart from the impairment relating to HCS 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 HCT dropped to 15% p.a., assuming all other things being equal, it still would not result in an impairment
within its financial model. No reasonable change in the discount rate would cause an impairment.
51
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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
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I
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A
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255921 Haydale AR pp36-pp53.qxp_255921 Haydale AR pp31-pp47 18/11/2019 11:14 Page 52
FINANCIAL STATEMENTS
11. Property, plant and equipment
Cost
Assets
Leasehold
under
improvements machinery and fittings vehicles construction
£,000
£’000
Plant
and Fixtures Motor
£’000 £’000 £’000
Total
£’000
At 1 July 2017 519
Additions 65
FX translation (1)
Disposals –
Transfers –
6,824
417
723
76
(12)
21
(129)
(3)
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
5,781
217
(31)
(124)
97
74
365
–
–
(97)
33
–
(1)
(2)
–
At 1 July 2018 583
Additions 48
FX translation 4
Disposals –
Transfers –
5,941
267
179
–
1,188
7,406
511
1,205
12
203
20
(21)
(21)
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
8,793
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
341
878
–
–
(1,188)
30
–
–
–
–
7,575
522
30
31
At 30 June 2019 635
Accumulated depreciation
At 1 July 2017 182
Charge for the year 58
FX translation –
Disposals –
1,748
115
676
50
26
27
(105)
(3)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,445
562
(1)
(100)
6
6
–
(2)
–
–
At 1 July 2018 240
Charge for the year 68
FX Translation 1
Disposals –
At 30 June 2019 309
1,906
732
24
–
2,345
189
867
61
29
5
(4)
(4)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
3,237
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
10
6
(1)
–
–
–
–
–
2,662
251
15
–
Net book value
At 30 June 2019 326
5,556
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,913
271
15
31
At 30 June 2018 343
5,061
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,035
322
341
20
At 30 June 2017 337
5,076
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,336
302
74
27
12. Inventories
Raw materials
Work in progress
Finished goods
2019
£’000
2018
£’000
291
30
460
––––––––––––––––––––––––––––––
116
96
970
1,182
781
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
The total value of inventories recognised in cost of sales during the year was £725,986 (2018: £924,091)
Raw materials and finished goods comprise functionalised carbon, chemicals and associated raw materials. Work in progress
comprises recoverable costs on long-term contracts.
52
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
13. Trade receivables
Trade receivables
14. Other receivables
Other receivables
Prepayments and accrued income
Grants receivable
Corporation tax
2019
£’000
2018
£’000
705
––––––––––––––––––––––––––––––
637
705
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
637
2019
£’000
2018
£’000
209
165
229
––––––––––––––––––––––––––––––
158
133
181
603
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
472
2019
£’000
2018
£’000
473
––––––––––––––––––––––––––––––
836
473
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
836
There is nil (2018: nil) within prepayments and accrued income in relation to ongoing consultancy services. This accrued income is
invoiced in milestones as established in the contract and expected to be recovered within 12 months of the balance sheet date.
15. 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
Commercial Deferred Income
2019
£’000
2018
£’000
7
71
––––––––––––––––––––––––––––––
178
31
78
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
209
As at 30 June 2019, deferred income of £30,769 arose in relation to the rental of a reactor, which had been invoiced during the year
for a full year’s rental charge. The charge is being released over the course of the year.
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.
53
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A
N
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E
V
O
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S
T
N
E
M
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A
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L
A
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N
A
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255921 Haydale AR pp54-pp67.qxp_255921 Haydale AR pp48-pp61.qxp 18/11/2019 11:12 Page 54
FINANCIAL STATEMENTS
16. Share capital and share premium
At 1 July 2017
Issue of £0.02 ordinary shares
At 30 June 2018
Issue of £0.02 ordinary shares
At 30 June 2019
Share
capital
£’000
392
155
Share
premium
£’000
18,936
8,603
Number of
shares
No.
19,597,713
7,731,060
Total
£’000
19,328
8,758
––––––––––––––––––––––––––––––––––––––––––––––––––
28,086
27,328,773
290,395,075
6,032
––––––––––––––––––––––––––––––––––––––––––––––––––
34,118
317,723,848
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
27,539
225
547
5,807
27,764
6,354
During the year, the Company issued 290,395,075 new ordinary shares of 2p each as follows:
•
•
In January 2019, 1,250,000 shares were issued; and
In March 2019, 289,145,075 shares were issued in connection with the Company's £5.8 million placing and open offer:
Issue costs amounting to £399,085 have been charged to the profit and loss account during the year (2018: £520,342 was charged to
the share premium account).
17. 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
2019
Weighted
average
exercise
price
Pence
63
–
–
67
2018
Weighted
average
exercise
price
Pence
166
25
–
138
––––––––––––––––––––––––––––––––––––––––––––––––––
63
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
Number
of options
No.
3,242,801
–
–
(738,110)
Number
of options
No.
1,257,717
2,438,576
–
(453,492)
2,504,691
3,242,801
62
At 30 June 2019, there were options outstanding over 2,504,691 un-issued ordinary shares, equivalent to 0.79% 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
18 March 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
135,215
30,000
14,082
3,163
34,587
24,781
51,131
79,186
167,353
21,412
34,052
6,759
35,149
196,416
100,000
1,571,405
–––––––––––
2,504,691
–––––––––––
–––––––––––
210.00p
62.25p
134.50p
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
18 March 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 > 220p
03 April 2024
1 November 2024
18 March 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
54
255921 Haydale AR pp54-pp67.qxp_255921 Haydale AR pp48-pp61.qxp 18/11/2019 11:13 Page 55
The estimated fair value was calculated by applying a Black-Scholes option pricing model.
Haydale Graphene Industries Plc | Annual Report & Accounts 2019
03 April 2014
03 April 2014
1 November 2014
18 March 2015
18 March 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
Type of Number
award of shares
135,215
167,353
30,000
EMI
Unapproved
EMI
14,082
EMI
21,412
Unapproved
3,163
EMI
34,052
Unapproved
34,587
EMI
6,759
Unapproved
24,781
EMI
51,131
EMI
35,149
Unapproved
79,186
EMI
Unapproved
196,416
Unapproved 100,000
15 December 2017
LTIP
1,571,405
–––––––––
2,504,691
–––––––––
–––––––––
Share
price
at date of
grant
(p)
210
210
62
Fair
value
per
option
(p)
94
94
38
Award
life
(years)
10
10
10
135
135
177
172
172
198
198
179
179
126
126
126
126
82
82
111
101
101
113
113
179
179
55
55
47
124
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
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*
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.
The weighted average remaining contractual life of share options outstanding at 30 June 2019 is 8.1 years (2018: 8.8 years). The charge
for the year for share-based payment amounted to £0.2 million (2018: £0.29 million).
Warrants
Balance at beginning of year
Granted
Lapsed
Balance at end of year
55
2019
Weighted
2018
Weighted
average
exercise
No. price Pence
193
Number of
warrants
average Number of
exercise
warrants
No. price Pence
193
––
187
385,719
–
385,719
–
(278,321)
–
––––––––––––––––––––––––––––––––––––––––––––––––––
–
107,398
193
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
385,719
208
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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
H
E
R
A
H
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FINANCIAL STATEMENTS
17. Share-based payment transactions (continued)
No warrants were issued during the year under review. None of the warrants outstanding at 30 June 2019 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 2019 is 1.33 years (2018: 1.14 years). The charge
for the year for share-based payment amounted to £48,254 (2018: £59,052).
18. 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.
19. Trade and other payables
Trade payables
Tax and social security
Accruals and other creditors
20.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
––––––––––––––––––––––––––––––
2019
£’000
473
57
1,526
2,056
2,172
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2019
£’000
1,247
2018
£’000
896
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
256
267
373
––––––––––––––––––––––––––––––
859
267
121
1,247
896
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
The Group’s borrowings are denominated in US dollars and Pounds Sterling. The directors consider that there is no material difference
between the fair value and carrying value of the Group’s borrowings.
Average interest rates paid
2019
%
6.1
2018
%
4
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
56
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
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.
In January 2019, a 15 month loan of £750,000 was taken out with the Development Bank of Wales. The loan is accruing interest at a
rate of 11% per annum and is repayable in 12 equal monthly instalments which commenced in April 2019.
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
––––––––––––––––––––––––––––––
2019
£’000
495
55
142
16
534
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
708
Fees totalling £18,519 (2018: £47,163) were paid to the ONE Advisory Ltd, a company of which Mr M Wood, who served as a director of
the Company during the year until 20 December 2018 for financial, administration, compliance and support services. At 30 June 2019,
the balance owed to ONE Advisory Ltd was £694 (2018: £3,405).
Fees totalling £49,323 (2018: £100,037) were paid to the ATL Consulting Ltd, a company of which Mr R Smith, who served as a director
of the Company during the year until 31 January 2019, is a director, for business development consultancy. At 30 June 2019, the balance
owed to ATL Consulting Ltd was Nil (2018: £9,081).
Fees totalling £14,233 (2018: Nil) were paid to the AVI Partners, a company based in Jersey of which Mr R Smith who served as a director
of the company during the year until 31 January 2019 for business development consultancy. At 30 June 2019, the balance owed to
AVI Partners was £6,164 (2018: £Nil).
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 Nil (2018: £143). The balance owed to ONE Legal Advisory Ltd at the end of the year was Nil (2018: 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
PlanarTech
QM Holdings
2019
£’000
2018
£’000
14
107
416
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
–
99
443
During the previous year 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, there were no services provide by Ms T M Mather during the current year. Ms T M Mather is the
partner of Mr N Finney, who was a director of HCS during the year. As at 30 June 2019, a balance of Nil was due to Ms T M Mather by
HCS (2018: Nil).
57
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A
N
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E
V
O
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S
T
N
E
M
E
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A
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S
L
A
C
N
A
N
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F
I
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I
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A
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FINANCIAL STATEMENTS
21. Related party disclosures (continued)
During the year an amount of £443,003 was paid to QM Holdings in respect of property rent (2018: £416,189). QM Holdings is owned
by Tom Quantrille and Marvin Murrell who are officers of HCT (formerly ACM), a wholly owned subsidiary of the Group. During the
previous year additional payments were made in respect of the deferred consideration due to the vendors of HCT, Tom Quantrille
and Marvin Murrell. Payments to Tom Quantrille in the previous year amounted to £333,333 and £111,111 to Marvin Murrell. There were
no payments made during the current year.
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 £99,476 (2018: £106,765). The balance outstanding to PlanarTech at the year-end was Nil (2018: £10,439).
Services provided
Everpower Sheng Tie (Xiemen) Graphene Technology Co Ltd
Everpower International Holdings Co. Ltd
2019
£’000
2018
£’000
275
52
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
–
–
During the previous 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 previous year.
Everpower are part of the same group as Advanced Waste & Water Technology Environmental Ltd, who at the time the sales were
made owned a 7.17% shareholding in Haydale Graphene Industries Plc. No transactions took place during the year ended 30 June
2019 with either company, with the exception of a bad debt that was written off with Everpower International Holdings Co. Ltd of
£35,000.
The balances outstanding (due to) / from related parties at each year ended 30 June were as follows:-
PlanarTech
Everpower International Holdings Co. Ltd
2019
£’000
–
–
2018
£’000
(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.
58
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
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
2019
Financial assets
Financial liabilities
2018
Financial assets
Financial liabilities
804
949
––––––––––––––––––––––––––––––––––––––––––––––––––
175
––––––––––––––––––––––––––––––––––––––––––––––––––
145
175
–
541
––––––––––––––––––––––––––––––––––––––––––––––––––
498
43
266
––––––––––––––––––––––––––––––––––––––––––––––––––
266
–
Foreign currency sensitivity analysis
The following table details the sensitivity analysis to possible changes in the relative values of foreign currencies to
which the Group is exposed as at the end of the respective financial periods, with all other variables held constant:
Effects on loss after taxation/equity
United States Dollar:
– strengthened by 10%
– weakened by 10%
Euro:
– strengthened by 10%
– weakened by 10%
(ii)
Interest rate risk
2019 Increase/
(decrease)
£’000
2018 Increase/
(decrease)
£’000
54
(44)
26
(21)
5
(4)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
16
(13)
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 expected credit 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 are expected 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.
59
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A
N
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E
V
O
G
S
T
N
E
M
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A
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S
L
A
C
N
A
N
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F
I
N
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255921 Haydale AR pp54-pp67.qxp_255921 Haydale AR pp48-pp61.qxp 18/11/2019 11:13 Page 60
FINANCIAL STATEMENTS
22. Financial instruments (continued)
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
Gross amount
2018
£’000
149
37
124
395
––––––––––––––––––––––––––––––
2019
£’000
106
71
119
341
705
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
637
2019
£’000
604
2018
£’000
470
200
35
––––––––––––––––––––––––––––––
31
2
705
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
637
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. No impairment provision has been recognised in either the
current or prior year.
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 this
also 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 20.
60
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Maturity analysis
The ageing analysis of the Group’s non-derivative financial liabilities as at the year-end is as follows:
Due:
– within one year
– within one to two years
– within two to five years
Gross amount
(b) Capital risk management
2019
£’000
2018
£’000
2,356
267
373
––––––––––––––––––––––––––––––
3,271
267
106
3,644
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 and fair value)
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)
2019
£’000
2018
£’000
705
209
5,092
––––––––––––––––––––––––––––––
637
158
4,688
5,483
6,006
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
896
687
1,412
––––––––––––––––––––––––––––––
1,247
473
1,526
3,246
2,995
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
There is no difference between the fair value and book value for the assets and liabilities.
(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
––––––––––––––––––––––––––––––
2019
£’000
–
17
1,036
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
17
61
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N
A
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O
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FINANCIAL STATEMENTS
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.
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
2019
2019
2018
2018
Land and
Plant and
Plant and
Land and
buildings machinery
buildings machinery
£’000
£’000
4
7
4
8
–
–
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
£’000
624
473
139
£’000
573
976
177
1,236
15
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
1,726
8
Payments recognised as an expense under these operating leases were as follows:
Operating lease expense
2019
2019
Land and
Plant and
buildings machinery
£’000
6
2018
2018
Plant and
Land and
buildings machinery
£’000
6
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
£’000
614
£’000
572
A significant proportion of the lease arrangements relate to the premises from which HTI and HCT operate in South Carolina, USA
totalling £0.70 million (2018: £1.11 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 £0.16 million (2018: £0.22 million). Of the £0.16 million, certain leases are cancellable with
three months’ notice.
During the previous 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 £0.33 million (2018: £0.36 million).
The facility in Thailand is leased and, at the date of these results, will expire in 4 months. The cost is £0.01 million (2018: £0.03 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 £118,220 were made to the scheme during the year ended 30 June 2019. No Contributions are expected to be made
during the year ended 30 June 2020.
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
2019
£’000
42
2018
£’000
37
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2019
£’000
2018
£’000
125
(26)
––––––––––––––––––––––––––––––
(2)
–
99
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(2)
62
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The following table sets forth the pension plan’s funded status as of 30 June:
Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Accumulated benefit obligation
Projected Benefit obligation
Plan assets at fair value
Funded Status
Accrued Pension Cost
2019
£’000
(3,960)
(3,960)
2,875
2018
£’000
(3,830)
(3,380)
2,710
––––––––––––––––––––––––––––––
(1,120)
––––––––––––––––––––––––––––––
(1,085)
(1,085)
(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)
––––––––––––––––––––––––––––––
2019
£’000
–
–
(1,085)
(1,085)
(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 recognised 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 2019:
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:
Longevity at retirement age (current & future pensioners)
– Males
– Females
Plan Assets
3.75%
3.75%
0.00%
3.75%
2019
23.80 years
25.90 years
2018
21.08 years
23.00 years
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.
63
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A
N
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E
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O
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S
T
N
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A
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N
A
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FINANCIAL STATEMENTS
26.Defined Benefit Pension Scheme (continued)
The fair value of the Company’s pension plan assets valued at 30 June 2019, by asset category were as follows:
Description
Cash
Corporate Equities
Fixed Income:
US Government
Municipal
Corporate debt
Mutual Funds
Negotiable CD
Total
Assets/
Liabilities
Carrying Measured at
Fair Value
Amount
£’000
£’000
124
1,455
124
1,455
Fair Value Measurements at
30 June 2019 using
Level 1
Inputs
£’000
124
1,455
Level 2
Inputs
£’000
–
–
Level 3
Inputs
£’000
–
–
183
8
721
207
177
–
–
–
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
–
–
207
177
183
8
721
207
177
183
8
721
–
–
1,963
2,875
2,875
912
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 2019, were as follows:
At 01 July 2018
Contributions
Distributions
Earnings
Net realised gain
Administrative expenses
Foreign exchange gain/(loss)
Balance at 30 June 2019
£’000
2,710
118
(245)
63
189
(75)
115
––––––––––––––––
2,875
––––––––––––––––
––––––––––––––––
Cash Flows
For current financial year, the Company expects contributions to be nil. 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 2019:
Asset Category
Cash
Equity Mutual Funds
Fixed Income
Other
64
£’000
268
277
274
276
274
1,389
––––––––––––––––
2,758
––––––––––––––––
––––––––––––––––
4%
55%
37%
4%
255921 Haydale AR pp54-pp67.qxp_255921 Haydale AR pp48-pp61.qxp 18/11/2019 11:13 Page 65
Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Plan Obligations
Benefit Obligation at 01 July 2018
Foreign exchange movement
Interest cost
Actuarial loss
Benefits paid
Benefit Obligation at 30 June 2019
Fair Value of Plan Assets at 01 July 2018
Foreign Exchange movement
Actual Return on plan assets
Interest Income
Employer contributions
Benefits paid
Fair Value of Plan Assets at 30 June 2019
Funded Status at 30 June 2019
£’000
3,830
155
152
68
(245)
––––––––––––––––
3,960
––––––––––––––––
2,710
115
69
108
118
(245)
––––––––––––––––
2,875
––––––––––––––––
(1,085)
––––––––––––––––
––––––––––––––––
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
Defined Benefit Obligation (£’000)
Decrease
Increase
(+/- 0.25%)
(+/-1.00%)
(+/-1.00%)
(94)
14
14
98
(16)
(14)
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 2019, were £58,009 (2018: £57,725).
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 2018
Recognised in profit and loss:
Tax expense
Recognised in other comprehensive income:
Actuarial gain on defined benefit pension schemes
Movement due to changes in exchange rates
At 30 June 2019
65
2019
£’000
(125)
128
2018
£’000
(555)
388
27
15
––––––––––––––––––––––––––––––
–
(3)
(125)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
–
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
H
E
R
A
H
S
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FINANCIAL STATEMENTS
27. Taxes (continued)
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
reduced the deferred tax liability attributable to the group’s subsidiaries based in South Carolina in the prior year.
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)
credited (Charged)/
credited
to profit
to equity
or loss
2019
2019
£’000
£’000
9
(16)
19
328
(31)
(184)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(3)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Liability
2019
£’000
–
–
(894)
Net
2019
£’000
228
666
(894)
Asset
2019
£’000
228
666
–
(894)
894
128
–
(Charged)/
credited (Charged)/
credited
to profit
to equity
or loss
2018
2018
£’000
£’000
27
(118)
–
(32)
–
538
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Liability
2018
£’000
–
–
(675)
Net
2018
£’000
235
315
(675)
Asset
2018
£’000
235
315
–
27
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(675)
(125)
388
550
A deferred tax asset has not been recognised for the following:
Accelerated capital allowances
Deductible temporary differences
Unused tax losses
2018
£’000
(103)
–
2,426
––––––––––––––––––––––––––––––
2019
£’000
(50)
–
3,182
3,132
2,323
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
The unused tax losses can be carried forward indefinitely.
28. Prior Period Reclassification
The below reclassifications have been made in respect of assets held at 30 June 2018. As there has been no impact on the results
for the year, net assets or reserves, this presentational change is considered to be a reclassification rather than a prior year
adjustment.
The accounts have been restated to reclassify the following transactions:
Revenue grants receivable have been reclassified as other debtors which had been previously recognised as inventories. The
reclassification has no impact on the statement of comprehensive income.
Summary of the prior year accounting impact:
Reduction in inventories
Increase in other debtors
66
£
(228,932)
228,932
255921 Haydale AR pp54-pp67.qxp_255921 Haydale AR pp48-pp61.qxp 18/11/2019 11:13 Page 67
Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Property, plant & equipment (see note 11) has been restated to reclassify some items of Fixtures & Fittings that had been previously
recognised as Plant & Machinery. The reclassification has no impact on the statement of comprehensive income.
Summary of the prior year accounting impact:
Reduction Plant & Machinery
Increase in Fixtures and Fittings
Deferred tax assets and liabilities have been offset as they relate to the same company and tax authority.
Summary of the prior year accounting impact:
Reduction in Non Current Assets – Deferred Tax
Reduction in Non Current Liabilities – Deferred Tax
29. Reconciliation of liability movement as a result of financing activities
£
(17,000)
17,000
£
(550,000)
550,000
Total
£’000
1,270
95
(446)
(23)
Non-current
Loans and
borrowings
£’000
Current
loans and
borrowings
£’000
911
68
–
(16)
359
27
(446)
(7)
–
–––––––––––––––––––––––––––––––––––––––––––––––
(323)
323
640
88
–
–
(16)
256
35
750
(500)
(6)
896
123
750
(500)
(22)
(324)
–
–––––––––––––––––––––––––––––––––––––––––––––––
1,247
–––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––
859
388
324
At 1st July 2017
Interest accruing in period
Loan repayments in year
Effect of foreign exchange
Loans classified as non-current at 30 June 2017 becoming
current during year.
At 30th June 2018
Interest accruing in period
New loan in year
Loan repayments in year
Effect of foreign exchange
Loans classified as non-current at 30 June 2018 becoming
current during year.
At 30th June 2019
67
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P
E
R
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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
H
E
R
A
H
S
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FINANCIAL STATEMENTS
PARENT COMPANY BALANCE SHEET
As at 30 June 2019
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
2019
£’ 000
2018
£’ 000
6
7
7
8
9
9
22
3,610
––––––––––––––––––––––––––––––
14
1,953
3,632
––––––––––––––––––––––––––––––
1,967
6,800
–
4,106
18,102
–
4,874
––––––––––––––––––––––––––––––
10,906
(970)
22,976
(286)
––––––––––––––––––––––––––––––
22,690
––––––––––––––––––––––––––––––
9,936
26,322
–
––––––––––––––––––––––––––––––
11,903
–
11,903
26,322
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
6,354
27,764
(22,215)
547
27,539
(1,764)
––––––––––––––––––––––––––––––
11,903
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 2019 was £7,894,000 (2018: £1,075,000).
The financial statements on pages 81 to 87 were approved and authorised for issue by the Board of directors on 14 October 2019 and
signed on its behalf by: -
David Banks
Chairman
Keith Broadbent
Chief Executive Officer
68
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2019
Share
capital
£’ 000
Share
Premium
£’ 000
Retained
profits
£’ 000
Total
Equity
£’ 000
392
18,936
(980)
18,348
–
–
(1,075)
(1,075)
291
8,758
–––––––––––––––––––––––––––––––––––––––––––––––––
–
8,603
291
–
–
155
26,322
(12,358)
–––––––––––––––––––––––––––––––––––––––––––––––––
(1,764)
(12,358)
27,539
–
547
–
547
27,539
(14,122)
13,964
–
–
(7,894)
(7,894)
–
225
–
–
5,807
–
200
6,032
(399)
–––––––––––––––––––––––––––––––––––––––––––––––––
11,903
–––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––
200
–
(399)
(22,215)
27,764
6,354
At 1 July 2017
Comprehensive Income for the year
Loss for the year
Contributions by and distributions to owners
Recognition of share-based payments
Issue of ordinary share capital, net of transaction costs
At 30 June 2018 and 1 July 2018
Change in accounting policy – IFRS 9
1 July 2018 as restated
Comprehensive Income for the year
Loss for the year
Contributions by and distributions to owners
Recognition of share-based payments
Issue of ordinary share capital
Share issue costs
At 30 June 2019
69
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E
T
A
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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
H
E
R
A
H
S
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FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY BALANCE SHEET
For the year ended 30 June 2019
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; and
Financial Instruments
2. Accounting policies
With the exception of the adoption of IFRS 9 discussed further below, 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.
Financial assets
Impairment of financial assets
The Company assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.
Assets carried at amortised cost
These assets arise principally from the provision of services and advancing of monies to the company’s subsidiaries, but also
incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction
costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment.
The Company’s financial assets measured at amortised cost comprise intercompany receivables, trade and other receivables and
cash and cash equivalents in the consolidated statement of financial position.
70
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Haydale Graphene Industries Plc | Annual Report & Accounts 2019
The intercompany receivables are interest-free loans that are repayable on demand. In applying IFRS 9 to these balances, the company
assesses the ability of the debtor subsidiary to repay the loan on demand at each reporting date. A loan is considered to be in default
where there is evidence that the borrower has insufficient liquid assets to repay the loan on demand. This is assessed with reference
to key liquidity and solvency ratios. Where the borrowing subsidiary has sufficient liquid assets to repay the loan immediately, meaning
the risk of default is very low, the loan is considered to be in Stage 1 of the expected credit loss model, meaning that there is deemed
to have been no significant increase in credit risk. However, should the borrowing subsidiary not have sufficient liquid assets to repay
the loan on demand, the loan is considered to be at Stage 3 of the expected credit loss model and credit impaired. Where a loan is
deemed to be credit impaired, an expected credit loss provision is recognised to the extent that there are insufficient liquid resources
in place.
Cash and cash equivalents includes cash in hand for the purpose of the statement of cash flows - bank overdrafts. Bank overdrafts
are shown within loans and borrowings in current liabilities.
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
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
has been considered under note 10 of the consolidated financial statements.
71
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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
H
E
R
A
H
S
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FINANCIAL STATEMENTS
2. Accounting policies (continued)
Impairment of debtors
The company applies the expected credit loss model under IFRS 9 in assessing the impairment of receivables. As intercompany
receivables are repayable on demand, the debtor is considered to be in default if they would be unable to repay the balance at the
reporting date. In such circumstances, the receivables are impaired to the extent that the debtor company is not considered able to
repay the receivable if it were to be recalled at the balance sheet date.
Changes in accounting policies
New standards impacting the company that have been adopted in the annual financial statements during the year, and which have
given rise to changes in the Group accounting policies are:
•
•
IFRS 9 – Financial Instruments;
IFRS 15 – Revenue from Contract with Customers
The Company adopted IFRS 9 and IFRS 15 through the cumulative adjustment method with a transition date of 1 July 2018. The
transition has not led to a material impact on Revenue recognition for the company.
The adoption of IFRS 9 has led to a review of the intercompany loans under the expected credit loss model. As the intercompany
loans are repayable on demand, the debtor subsidiary companies are considered to be in default at a given reporting date where
they have insufficient resources to repay the loan balance if it were to be recalled. Consequently, to the extent that the loan balances
could not be repaid if recalled at a reporting date, the balances are considered to be credit impaired and an expected credit loss
provision recognised to the extent of the shortfall. The extent of the resultant expected credit loss provision was £12.36 million at
the date of transition of 1 July 2018, reducing reserves and amounts due from group undertakings within debtors by this amount,
and a further provision of £4.50 million in the current financial year, increasing administrative expenses and reducing amounts due
from group undertakings within debtors by this amount . There was no impact on the prior year.
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.
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.
2019 No.
12
11
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
Wages and Salaries
Social Security Costs
Pension Costs
Share based payment expense
2018
£
2019
£
985,069
105,926
30,671
202,514
683,669
80,239
22,391
159,835
––––––––––––––––––––––––––––––––––
946,134
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
1,324,180
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 26 to 29, which are ascribed as forming part of these financial statements.
72
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6. Fixed asset investments
Cost
At 1 July 2018
Additions
Disposals
Impairment
At 30 June 2019
Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Investment in
subsidiary
undertakings
£’000
Capital
contribution
£’000
Total
£’000
2,983
–
–
(1,753)
3,610
96
–
(1,753)
–––––––––––––––––––––––––––––––––––––––––––––––––––
1,953
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
627
96
–
–
1,230
723
The impairment reviews have been carried out on the same basis as those applied to goodwill and intangibles of the Group (see
note 10 in the Group accounts for further detail).
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
Proportion of
ordinary share
capital held
Nature of
business
100%
100%
100%
100%
100%
100%
100%
100%
100%
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
Sales and distribution
R&D, sales and distribution
Haydale Composites Ltd & EPL Composite Limited are exempt from audit in accordance with the Companies Act 2006, as a result of
the them 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
2019
£’ 000
6,477
275
26
22
2018
£’ 000
17,908
115
37
42
––––––––––––––––––––––––––––––
6,800
18,102
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
73
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A
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I
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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
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O
F
N
I
R
E
D
L
O
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FINANCIAL STATEMENTS
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
2019
£’ 000
582
41
–
35
312
2018
£’ 000
–
110
37
29
110
––––––––––––––––––––––––––––––
970
286
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
In January 2019, a 15 month loan of £750,000 was taken out with the Development Bank of Wales. The loan is accruing interest at a
rate of 11% per annum and is repayable in 12 equal monthly instalments which commenced in April 2019.
9. Share capital and share premium
Number of
shares
No.
Share
capital
£’ 000
Share
premium
£’ 000
Total
£’ 000
At 1 July 2018
Issue of £0.02 ordinary shares
At 30 June 2019
547
5,807
28,086
27,328,773
290,395,075
6,032
–––––––––––––––––––––––––––––––––––––––––––––––––––
34,118
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
27,539
225
317,723,848
27,764
6,354
During the year, the Company issued 290,395,075 new ordinary shares of 2p each as follows:
•
•
In January 2019, 1,250,000 shares were issued; and
In March 2019, 289,145,075 shares were issued in connection with the Company’s £5.8 million placing and open offer:
Issue costs amounting to £399,085 have been charged to other comprehensive income during the year (2018: £520,342 was charged
to the share premium account).
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.
74
255921 Haydale AR pp68-imp.qxp_251936 Haydale AR pp62-imp.qxp 18/11/2019 11:23 Page 75
Haydale Graphene Industries Plc | Annual Report & Accounts 2019
Corporate Directory
Company Number
07228939
Directors
David Doidge Richard Banks
Keith Broadbent
Laura Redman-Thomas
Graham Dudley Eves
Roger James Humm
Secretary
Matt Wood
Investor Relations Contact
Head Office and Registered Office
Gemma Smith
Gemma.smith@haydale.com
Clos Fferws, Parc Hendre, Capel Hendre,
Ammanford, Carmarthenshire, Wales, SA18 3BL
Website
E-mail
Telephone
Advisers
Independent Auditor
Nominated Advisor and broker
Registrars
Solicitors
Intellectual Property 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
Mewburn Ellis LLP
33 Gutter Lane, London, EC2V 8AS
75
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255921 Haydale AR pp68-imp.qxp_251936 Haydale AR pp62-imp.qxp 18/11/2019 11:23 Page 76
Perivan 255921
Haydale
Graphene
Industries Plc
Annual Report
And Accounts
For the year ended
30 June 2019
Creating
Material
Change
www.haydale.com
Haydale Graphene
Industries Plc
Clos Fferws, Parc Hendre,
Capel Hendre, Ammanford,
Carmarthenshire, SA18 3BL
T: +44 (0)1269 842946
F: +44 (0)1269 831062