BlL 1
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
Haydale
Graphene
Industries Plc
Annual Report
And Accounts
For the year ended
30 June 2020
Creating
Material
Change
Contents
STRATEGIC REPORT
Chairman’s Statement
Strategic Report
GOVERNANCE
Board of Directors
Directors’ Report
Chairman’s 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 2020
Chairman’s Statement
Introduction
I am pleased to present Haydale Graphene Industries Plc’s
(“Haydale”, the “Group” or the “Company”) full year audited
results to 30 June 2020 (“FY20”).
During the year the Group has made significant progress in
moving from a research and development organisation to one
focussed on the delivery of sustainable commercial revenues.
Notwithstanding the impact of Covid-19 on revenue in the latter
part of the year, the Group has made positive strides in driving
profitable sales, developing its operational and technical
capacity and controlling its cost base.
Summary Financials
Commercial revenue for FY20 of £2.95 million (FY19:
£3.47 million) showed a disappointing fall on the prior year. This
reflects the adverse impact of Covid-19 which has restrained
revenues, especially in the US division where demand for our
proprietary Silicon Carbide (‘SiC’) blanks has been significantly
affected by subdued demand for global aviation. Despite the fall
in revenue, Gross Profit increased marginally to £2.06 million
(FY19: £1.90 million). The Gross profit margin of 69.9% (FY19:
54.8%) showed a significant year on year improvement and this
was principally due to reduced sales of lower margin SiC into
the US fracking industry. Other operating income in the year at
£0.76 million (FY19: £0.79 million) is broadly in line with prior
year, although it has benefitted from the support offered by the
US Cares Act during the latter part of the year.
The focus on reducing costs continued in the year with adjusted
Administrative Expenses falling by £0.87 million (12.7%) to
£5.99 million (FY19: £6.86 million) on a like-for-like basis. Over
the last two reporting periods, the Company has reduced its
operating cost base by £1.7 million in total. Non-recurring one
off restructuring costs, principally relating to the closure of the
Taiwan facility during the year, were £0.06 million (FY19:
£0.35 million). Total Trading Admin Expenses are £7.05 million
(FY19: £8.53 million).
Total comprehensive loss for the year was £4.23 million (FY19:
£7.12 million), including the £0.06 million of restructuring costs
(FY19: £2.13 million including an impairment of intangible assets
of £1.79 million) the loss from trading activities was £4.23 million
(FY19: £5.85 million).
Operations
Whilst Covid-19 may have overshadowed the past year it has
certainly not defined it for the Group. The path towards the
goals that were put in place in 2019 has evolved to cope with
the Coronavirus pandemic but the priorities of focussed
investment in our technology, delivery of commercial revenue
and reduction of operating costs remains at the heart of our
strategy.
FOCUSSED INVESTMENT IN R&D
Haydale brings together two state of the art technologies – the
patented HDPlas®
functionalisation process and an
understanding of graphene and other nano materials. The
Company has continued to increase the level of surface
functionalisation that it can achieve and this is leading to a
marked improvement in the enhancements that we can deliver
for our customers. For example, during the year the Group has
invested in the next generation of functionalised inks delivering
reduced resistivity to circa 10 ohms. This development allows for
a cost effective and environmentally friendly replacement of
silver, copper and aluminium etch in certain elements of the
growing radio-frequency identification (‘RFID’) and near field
communication (‘NFC’) sectors.
COMMERCIAL GOALS
The focussed investment in R&D is not an end goal but a means
through which the Group can deliver sustainable revenue
growth. During the year, all of the operating units have made
positive progress in commercialising our technology portfolio
despite the difficult operating environment. In April we signed
a four-year agreement with Uniqe Aviation Inc/Dalian Yi Bang
Science and Technology Co Ltd (“Uniqe”) for the supply of
electrically enhanced masterbatch into the Chinese civilian
aviation and wind turbine sectors. The work that we are doing
in conjunction with Uniqe in aviation should demonstrate that
our electrical masterbatch can offer significant weight savings
and application efficiencies without compromising passenger
safety and should facilitate the wider rollout of this solution to
the global aerospace sector.
GROUP RESTRUCTURING AND COST REDUCTIONS
During the year under review we re-evaluated our operating
footprint and in January 2020 announced the closure of the
Group’s loss-making Taiwan facility and the transfer of its
operations to our ink development hubs in Ammanford and
Bangkok. Subsequently, we concluded a commission agreement
with U-Win, a specialist sales organisation, to sell our portfolio
of technologies into the biomedical sensor, automotive and
other sectors in Taiwan. We have also signed a memorandum
of understanding with a Sino-UK facilitator for business
development in China. Whilst it is early days, management are
encouraged by the progress made by both of these initiatives
and believes the reorganisation will have a positive effect on the
development of our ink technology and the realisation of
commercial revenue in Taiwan and China.
The Group has continued to realign its costs base and during
the year it has reduced its overall headcount whilst continuing
to invest in its global sales presence. The Group has also realised
significant cost savings and, as noted above, like-for-like
administrative costs have reduced by £0.87 million, (12.7%) in the
year and this has been achieved without impacting the
operational effectiveness of the Group.
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STRATEGIC REPORT
Chairman’s Statement continued
IMPACT OF COVID-19
Demand for SiC and the SiC blanks that we manufacture at our
US facility has been severely impacted by the slowdown in the
aviation sector. Whilst this has undoubtedly restrained the
Company’s progress it has also acted as a catalyst for change in
that business unit. The Group has acted decisively to reduce
medium term exposure to the aviation sector by embracing
new markets for its existing products and by adopting
complementary products for new markets and customers. In
April the US division signed an agreement to distribute
CeramycShield™, a product that renews and restores old or
decaying concrete, into the UK water industry. I am pleased to
report that subsequent to the year end the Group shipped its
first order for the product.
Within the wider business we saw an immediate slowdown
when the UK lockdown was introduced in March 2020. The
closure of accredited testing facilities and the furlough of staff
at our customers meant that a number of projects were
postponed or delayed. I am pleased to report that, as the UK
moved out of the first wave, those projects and contracts have
now generally started and are progressing to the revised plans.
Director Changes
In November 2019 Haydale welcomed Mark Chapman as the
Group’s new Chief Financial Officer, who replaced Laura
Redman-Thomas, and in June 2020 Theresa Wallis as a new
independent Non-Executive Director, who replaced Roger
Humm. I would like to take this opportunity to thank Laura and
Roger for their services to the Group, and particularly Roger who
had served as a director before the Company’s AIM IPO in 2014.
Outlook
Whilst the business is well placed to benefit from a recovery in
the aviation industry, given the uncertainty surrounding this
sector the Board believes that it has put in place robust plans
to grow the business whilst reducing reliance on individual
products or sectors. As part of those plans, on 9 September 2020
the Company completed an equity placing raising £2.8 million
(net of expenses) to provide additional working capital to
finance operations. This injection of capital provides a solid
foundation and allows the Company to focus on the delivery of
its strategic goals. I would like to welcome our new shareholders
and to thank our existing shareholders for their continued
support at this time.
The Group has taken advantage of national Covid-19 schemes
and has accessed support from the US Cares Act and the UK
Bounceback loan scheme. At no time during the crisis were any
of the Group’s sites closed and the Company acted and
continues to act in accordance with the relevant guidelines in
the jurisdictions in which it operates. In the UK, vulnerable
employees were allowed to work from home and those
employees who were able to work on site operated in
accordance with the UK and Welsh Governments Covid-19
safety advice. The Company did access the UK Coronavirus Job
Retention Scheme but at the time of this report I am pleased to
say that all of our UK employees have returned to work, albeit
some on a part time basis.
The Board is mindful of the ongoing uncertainty created by
Covid-19 but considers that the long-term outlook remains
positive and believe that Haydale's proprietary technology and
its capacity to functionalise nano and other materials to
significantly enhance the properties of host materials continues
to deliver confidence in the prospects of the Group.
I would like to thank the executive team who have reacted so
positively to the demands of the Covid-19 pandemic and, whilst
challenges remain, 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 during the year.
David Banks
Chairman
29 October 2020
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
Strategic Report
The directors present their Strategic Report for the year-ended
30 June 2020.
Haydale brings together the cutting-edge technology of the
patented HDPlas® process with our engineering expertise to
functionalise graphene and other nanomaterials. Our
technology has the potential to deliver benefits across a
multitude of sectors helping to increase the technical
performance of a wide range of host materials. The Group’s
vision is to be in the forefront of nano advanced materials and
dispersion and to become a world leader in the creation of
material change through understanding the potential of those
materials.
At the core of our product offering is Haydale’s patented HDPlas®
functionalisation process which tailors advance materials to
enhance the quality and performance of our customers’
products, through a cost effective and environmentally friendly
process. We have the engineering expertise to:
•
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create nano-material resins and composites to deliver
enhanced electrical, mechanical (strength) and thermal
performance; and
formulate proprietary nanomaterial-based
inks and
coatings for the print and sensor markets, including
biomedical and piezo resistive inks and sensors and the PATit
anti-counterfeiting eco system.
From our US facility, we manufacture unique, proprietary SiC
fibres and whiskers that strengthen ceramics and produce highly
wear resistant ceramic ‘blanks’ for use in the aerospace industry
and for abrasion resistant coatings. The Company has not
historically functionalised its SiC.
At the year-ended 30 June 2020, the Group has the following
operational activities in its five facilities.
Haydale subsidiary
Haydale Limited
Location
Principal activities
Ammanford, Wales
Haydale Composite Solutions Limited (“HCS”)
Loughborough, England
Haydale Technologies (Korea) Limited (“HTK”)
Seoul, South Korea
Haydale Technologies (Thailand)
Company Limited (“HTT”)
Bangkok, Thailand
Haydale Technologies, Inc. (“HTI”)
and its wholly owned subsidiary
Haydale Ceramic Technologies LLC
Greer, SC, USA
functionalisation
and main
Specialist
manufacturing facility producing inks, resins,
and masterbatches to be used in composites
and polymers for direct sales to customers and
for transfer to other Group sites.
Sales of masterbatch and pre-preg composites,
elastomers and other nanomaterials and the
provision of advanced consulting and test
services to various parties including the EU and
UK national institutions via R&D grants.
Dedicated sales office servicing the fast-
moving Korean and other APAC markets.
Ink development focused on commercial
applications with plasma functionalisation
facilities. Services the APAC region.
Produces and sells SiC microfibres and
whiskers, ceramic blends and ceramic blanks to
the cutting tool and coatings industries
The Group safeguards its business across these sites and the territories in which it operates through the use of patents which protect
its intellectual property. It holds licences where that intellectual property is for operational reasons with a third party. Haydale currently
has a portfolio of patents that are variously recognised in the following territories - US, UK, Europe, China, Japan and Australia. Haydale
works closely with its patent advisors, Mewburn Ellis LLP, and maintains a rolling programme of patent applications. At the year-end
it had two applications for patents pending.
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STRATEGIC REPORT
Strategic Report continued
CONSOLIDATION AND COMMERCIAL FOCUS
The financial year-ended 30 June 2020 has been one of
consolidation in the wake of the major reorganisation and
resetting of commercial priorities which commenced in the
second half of FY19. This consolidation has latterly taken place
against the backdrop of the Covid-19 pandemic which, whilst
restraining revenue, has acted as a further catalyst to deliver on
the strategic priorities that the Company set out in 2019.
The Group needed to transform itself from an organisation with
a focus on research and development with longer term revenue
ambitions to an efficient manufacturing business focussed on
commercialising its portfolio of technology and securing
profitable outcomes.
Under this broad theme, the Directors identified the following
goals that would promote short term benefit whilst creating a
sustainable long-term business model:
•
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Scale up blanks production at the US facility to commercial
levels and ensure that the FY19 investment in the blanks
machinery increased the Group’s revenue and facilitated a
move up the value chain for that operating division;
Focussed R&D Investment on the technology that would
support Haydale’s commercial proposition and show a
pathway to enhancing our core commercial offering;
Priority in identifying and investing resource in grant funded
projects where there is a clear commercial potential
realisable in defined time scales;
Embedding the structures, process and teams set up in FY19
to drive sales and maximise revenue;
Increasing the manufacturing and functionalisation
capability at Ammanford and commencing the process of
planning for the medium-term expansion of production
capacity to meet anticipated volume demands; and
Realigning and reducing the Group’s cost base to ensure
that it supports the operational priorities of the business –
reduction
cost control as a necessity and cost
where prudent.
SCALE UP OF BLANKS PRODUCTION
Revenue at the Group’s US SiC manufacturing facility lagged our
initial expectations in the first half of FY20 as the business was
subject to the issues that were widely reported during 2019 in
the US aerospace and petrochemical sectors. Despite the
on-going sector issues, we did see demand increase in the latter
part of calendar 2019 and early 2020 and strong traction with
customers that had pre-approved the blanks gave us the
confidence to move the facility to a double shift pattern in
February 2020.
From March 2020, Covid-19 had a significant impact on forecast
revenues at this division and we saw a marked slowdown in
demand for SiC and blanks as the global aviation industry was
grounded by the pandemic. Against a backdrop of industry
predictions of a possibility of long-lasting impact on the civil
aviation sector, the Directors took defensive measures to
mitigate the immediate revenue impact and put in place plans
that will lead towards a reduced reliance on the US civilian
aviation sector going forward.
Specifically, the business received a commitment from a long-
standing customer to underpin the SiC whisker volume by
maintaining its short-term order patterns during the current
year despite the general economic uncertainty. Whilst it is likely
that this will result in reduced orders in the year-ending June
2022, this support should offer the business valuable time to
deliver on the initiatives detailed below. In addition, the US
business accessed funds through the US Cares Act which
afforded short term support whilst the impact of the Covid-19
pandemic was assessed. Subsequent to this support ending, the
division had to reluctantly reduce its workforce and, in July 2020,
circa one third of the production team was made redundant at
that facility.
The Directors have also taken steps to address the US division’s
over-reliance on the US civil aviation sector by looking outside of
the US for blanks and other cutting tools customers. The
Company has contracted with an experienced European agent
for the marketing and sale of SiC blanks into parts of the
European market and other contiguous markets. Initial samples
have been provided to a manufacturer and we are awaiting test
results. In the UK specifically, we have established ties with an
engineering tooling supplier for the distribution of SiC blanks
and subsequent to the year-end they have informed us that they
have distributed our blanks to their customers for field trials.
As previously announced, we have been looking to enter the
wider carbide tooling market with cost effective lower grade SiC
blanks that would serve the automotive and other cutting tool
markets. We have been collaborating with an Asian supplier to
develop these blank tools and subsequent to the year-end have
successfully completed initial tests. We are now looking to
commission field trials with tooling customers in the US whilst
simultaneously addressing with our supply partner operational
challenges
in scaling production to required
commercial levels.
involved
The Company has also diversified from the aviation and cutting
tools sector and has looked to take advantage of the enhanced
properties that SiC microfibres can deliver for coatings. In July
2020, Haydale was appointed the exclusive UK distributor to the
UK water infrastructure market for US based Zirconia Inc for
CeramycShield™, a one stop solution that renews and restores
old or partly decaying concrete in-situ in certain applications. This
product is an advanced Ceramic Surface Treatment technology
in a new class of inorganic ceramic polymers, that uses Haydale's
SiC microfibre as part of the reinforcement. Haydale is working
closely with a UK water utility company and other water facility
management companies and is pleased to announce that post
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
year-end it shipped its first order of the product. We believe there
is good potential that this cutting-edge solution could be very
important to the UK water industry as it seeks to meet its
obligations under the new AMP-7 five-year plan which started in
2020 and we are looking to further extend its uses by securing
DW31 (Clean Water) accreditation in the current financial year.
FOCUSSED R&D INVESTMENT: PROGRESS ON PLASMA
FUNCTIONALISATION
The HDPlas® functionalisation process continues to be the
cornerstone of the Group’s offering and good progress has been
made with several new and different treatments enabling more
tuneable and enhanced offerings to meet customers’
requirements. This enables a much greater range of graphene
and other nanomaterial 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,
into polymers or elastomers, or sold as
compounded
masterbatch in many ongoing programmes supported by
technical datasheets that have been verified by accredited third
party testing facilities. We highlight the following step change
improvements in the year which have been achieved at the
Ammanford and Bangkok centres of excellence. These
developments demonstrate the capabilities of Haydale’s unique
offering:
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An increase in the surface oxygen levels from 20% up to
28%, a level which allows Haydale potential access to the
graphene oxide (“GO”) market and indirectly elements of
the electronics sector. Existing GO is typically manufactured
by stripping graphite with hazardous chemicals such as
sulphuric acid and leaves a toxic bi-product whereas
Haydale’s GO production is a clean powder in/powder
out process;
Development of next generation functionalised inks with
resistivity reduced to circa 10 ohms. This lower level
resistivity potentially allows graphene functionalised inks
to replace silver, copper and aluminium etch in certain metal
antenna elements of the growing RFID and NFC sectors and
provides a cost effective and environmentally friendly
application. Existing ‘tags’ are generally single use and as
such are consigned to landfill after use whilst Haydale
functionalised inks are manufactured using a clean process
and there is reduced waste to landfill on disposal;
Further to previous work with the English Institute of Sport,
Haydale has developed inks to surface coat fabrics and other
to create anti-microbial and
garment substrates
anti-bacterial applications. The resulting fabrics are
washable and can be sterilised using UV light without
damaging the core properties of the fabric; and
Further refinement of a range of graphene-enhanced
prepreg materials for lightning-strike protection, utilising
functionalised nanomaterials to improve the electrical
conductivity of aerospace and other resins and polymers.
Developed through the NATEP sponsored GraCELS 2 project,
the materials developed potentially replaces the copper
mesh in various parts of structures including commercial
aircraft which can reduce the unloaded weight of an airliner
cost effectively with clear environmental benefits. These
applications also extend to other markets such as UAVs
(drones), commercial and military aviation, wind generation
and other sectors where risk of damage from lightning
strikes exists.
The core thread running through our continued investment in
R&D is the focus on creating and maintaining technological
advantage where we see a clear commercial pathway. Whilst the
gestation period for some of these developments, such as
lightning strike protection on commercial aircraft, is governed by
the long product life cycle of the end user and high safety
thresholds that need to be validated, other developments such
as the adoption of inks to surface coat fabric can be delivered to
market in a much shorter time horizon. It remains core to our
business model that we invest for the long term whilst taking
advantage of
the numerous short-term commercial
opportunities presented by the commercial adoption of
our technology.
GRANT FUNDED PROJECTS
Collaboration on grant funded projects has continued over the
last twelve months with the emphasis that only projects that
have a clear commercial pathway or add significantly to the
Group’s knowledge bank on applications with commercial
potential in defined time scales will be undertaken. This rigorous
criterion has reduced the number of projects that Haydale has
accepted in the year but this has not diminished the importance
of this work in support of the R&D investment made by Haydale.
In FY20 all grant projects were funded from UK or European
quasi-governmental bodies such as Innovate UK or NATEP.
in the year, Haydale
Amongst other projects awarded
commenced the following:
HiBarFilm – is a novel packaging design based on coatings
for compostable-recyclable high barrier packaging film with
potential applications across food packaging and other
consumer products. Current food contact films require
multi-layer structures to achieve the barrier performance
needed but these structures make them difficult to recycle.
HiBar is looking to replace these multi-layer structures with
a functionalised single layer that could provide the
necessary barrier protection whilst allowing for widespread
recycling of these single use films. The project is in
collaboration with Bangor University, Parkside Flexibles and
Dunbia, the leading meat processor.
Affinity – Analysis of functionalised nanomaterial
interactions with polymers to better understand how
functionalisation imparts specific functional groups to the
nanomaterial surface for improved compatibility with the
host polymer. The project is a collaboration between
Haydale, the National Physical Laboratory and the Science
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STRATEGIC REPORT
Strategic Report continued
and Technology Facilities Council and will be important in
understanding and further enhancing the level and
consistency of our functionalisation process and in allowing
quick and efficient selection of improved chemistries to
optimise the performance of our current portfolio.
•
This structured approach to development is facilitating the
internal learning experience and creating potential products to
fit with the organic growth momentum at the centre of our
strategic drive.
GLOBALISATION OF THE STRATEGIC BUSINESS UNITS
The realignment of the strategic business units and the
establishment of a global sales team in the year ended June 2019
created the opportunity for greater cross-selling of products. As
noted above, subsequent to the year-end we shipped the first
order for CeramycShield™ to a UK water company. The initial
contact with Zirconia Inc was made by our US division whilst the
introduction of the product to the UK water utility was facilitated
by our UK sales and innovation team. They have collaborated
through
initial workshop trials, technical updates and
commercial negotiations to the point where a field asset has
been identified for application and the UK technical team will
attend that trial.
We further strengthened the sales team in this year with the
addition of UK expertise in both the inks and composites sectors.
Despite the challenging environment the enlarged team is
delivering some excellent business wins and we would highlight
the following:
•
•
A four-year exclusive distribution agreement with Uniqe to
market Haydale’s electrically conductive masterbatch in the
Chinese market. The parties will work towards completion
of initial testing, securing the requisite licences and final
certifications from the relevant authorities before the
contract is expected to move to the commercial phase in
early 2021. Subject to successful trials, the agreement
stipulates minimum annual revenue thresholds which
commence at US$300,000 for the calendar year 2021 and
increase annually thereafter.
In March 2020 Haydale announced that its graphene
nanoplatelets were to be incorporated into cosmetic face
sheets manufactured by iCraft, a South Korean company.
The face mask sheets utilise the thermal and electrical
conductivity of graphene to help the skin absorb its
contents through bioelectric currents. Subsequent to the
year- end, a three-year supply contract was agreed for one
metric tonne of functionalised graphene nanoplatelets in
the first year, two metric tonnes in the second year, and
three metric tonnes in the final year. This is an exclusive
agreement for the mask application within the APAC region,
excluding Thailand, and represents the largest contract by
volume that Haydale has signed for functionalised
nanomaterial.
Shortly after the end of the financial year in early July 2020,
the Company announced that it had signed an agreement
with IRPC (a Thailand based subsidiary of PTT Global
Chemical Public Company Limited) to develop a graphene
and functionalised acetylene black conductive inks for RFID,
NFC and related applications. The screen-printing inks are
to be developed as a collaboration between our Ammanford
and Bangkok teams based on initial development work
completed at the UK site.
These wins are supported by a strong pipeline of profitable and
exciting opportunities and a number of these were listed in our
announcement of 9 September 2020. Subsequent to the year-
end, the cross selling of group products has continued with the
commencement of blanks trials with an EMEA cutting tools end
user, sales of SiC whiskers to customers in APAC and the sale of
functionalised inks produced at the Ammanford site for the
manufacture of anti-microbial masks by IRPC. As announced on
15 September 2020, Haydale has signed contracts for the
provision of services to Dowty Propellors which will see the
Company assist Dowty in examining the feasibility of various
material technologies pertinent to Dowty’s future product
development. The projects will involve the incorporation of
graphene, SiC microfibres and other nano scale materials into
applications that may include erosion resistant coatings and
functionalised inks for non-invasive strain sensing.
As noted, inter-site cooperation on technology, new product
development and sales has created exciting and profitable
opportunities for the Group. This collaboration has increased the
need for all units to contribute both technically, operationally and
financially to the Group. Notwithstanding the previous
investment in the Taiwan operation, the Directors could see no
realistic prospect of that business unit moving into profitability
in the medium term. The Board therefore took the decision
during the year to close the Taiwan facility and move production
to the Group’s Bangkok and Ammanford sites. Haydale moved
decisively to fill the gap created by the closure of this facility and
recently signed a distribution agreement with U-Win, a specialist
materials and technology focused sales organisation, who have
a mandate to sell Haydale’s specialist inks and composites into
biomedical sensor, automotive and sports equipment
manufacturers in Taiwan. Management are pleased with the
early progress of this arrangement and the collaboration
between U-Win and the teams at Ammanford and in Bangkok.
Within the wider APAC region, Haydale has established a
memorandum of understanding with a Sino-UK facilitator for
business development purposes in China. Whilst it is still early
days, we are seeing encouraging interest in the region for our
PATit anti-counterfeiting product and, subsequent to the year-
end, we received two orders for SiC microfibres from customers
introduced by this intermediary.
It is perhaps the shift in marketing that concisely sums up how
the Group has embedded the one company ethos to support the
drive to commercialise the technology portfolio. The focus of the
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
marketing team has successfully pivoted to trade marketing to
support product sales and this move was reinforced during the
year when the Haydale website was overhauled and business
units in the US and APAC were incorporated to ensure that we
had one website supporting the global outlook. The website is
not only a window into the Group but an integrated part of the
sales process and has product descriptions and the latest
technical data specifications available for download.
To underpin the One Company philosophy, in January 2020,
Haydale adopted a new EMI share option scheme in the UK to
incentivise and retain existing employees and to help recruit new
members of the team. Subsequent to the year-end, this scheme
was rolled out in the form of a Stock Appreciation Rights plan to
our US division and it remains our intention that this will
eventually cover most of the wider Haydale team.
INCREASING PRODUCTION CAPACITY AT AMMANFORD
Haydale has over the last few years gradually increased its
capacity to functionalise graphene at its Ammanford facility and
in FY18 it successfully introduced an HT200 plasma reactor
which offered seven times the capacity of the smaller HT60
reactors. This investment ahead of the production curve is now
allowing Haydale to meet the demands of its commercial
commitments and in particular will support the manufacturing
requirements of the new iCraft cosmetic face sheet supply
agreement. To support this increased demand, the Group has
approved plans to invest circa £0.05 million in a new gas delivery
and piping system to reduce our production changeover times,
enhance output consistency and to further improve on our
exacting health and safety standards.
Whilst we have a number of options to further increase our
functionalisation capacity utilising our existing reactor
capabilities in the current year, we anticipate the need to invest
in larger capacity reactors in the medium term. Collaboration
with our key OEM on plans to design the next generation of
HDPlas® reactors has continued during the year and no
significant technical challenges are foreseen at this time to the
introduction of larger capacity plasma reactors when they
are required.
REALIGNING AND REDUCING THE GROUP’S COST BASE
During the year, the Directors have continued to realign the cost
base to ensure that the Group focuses resources on achieving its
strategic goals. As the Group has reorganised its operations and
streamlined its reporting lines, it has achieved both a more
efficient and effective operating structure and delivered
significant cost savings. The process that started last year has
continued during the current year and adjusted administrative
expenses have reduced by a further £0.87 million (FY19:
£0.85 million reduction on FY18) in the year and we anticipate
that costs will reduce further as a result of the annualised impact
of reductions made this year and further savings that we
anticipate can be realised in the year-ending June 2021.
The main savings have been achieved in the following areas:
•
•
•
Realignment and reduction in the workforce with the
principal savings being achieved by streamlining reporting
lines. Overall headcount has reduced by circa one third in
the last two years whilst the business has increased its
investment in sales resource and commercial support
functions;
Closure of the loss-making Taiwan facility and relocation of
the production to the Bangkok and Ammanford sites with
minimal loss of revenue or customers; and
Cost reductions across all areas of the business including
reducing travel expenses, professional fees and consulting
costs and making numerous smaller and, in themselves,
non-material adjustments which taken together have
contributed to controlling spend.
The savings secured have been achieved in a timely but not
hurried timeframe and the Company has focussed first on
operational efficiency and then on achieving that in the most
cost-effective manner. This approach has ensured that, despite
the savings achieved, Haydale is now operating in a more flexible,
responsive and productive manner that supports a can-do
culture across the business units.
FUTURE STRATEGIC DIRECTIONS
FY20 was a year of consolidation in the wake of the
reorganisation and resetting of priorities in the second half of
FY19. This consolidation has, from March 2020, been in the
shadow of the Covid-19 pandemic which has depressed demand,
subdued our revenue expectations and obliged the Directors to
revisit the priorities set in 2019.
As detailed above, the direction of travel of the Group has not
altered and
it remains our fundamental priority to
commercialise our exciting cutting-edge technology portfolio.
Within this overarching goal we have had to refine our
operational strategy to ensure that we meet the challenges of
the pandemic. The Directors remain mindful that we are in
uncertain times, and that the longer-term impact of Covid-19
either directly on sectors such as aerospace and indirectly on the
sports and leisure, automotive and other industries may have as
yet unforeseen effects on the Group’s development. However,
the efforts of the Haydale team and the progress made during
the year continue to reinforce the Directors’ belief that, whilst
navigating the challenges ahead will be demanding, it is in the
knowledge that the Company is moving purposely in the
right direction.
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 33 to 70. The
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STRATEGIC REPORT
Strategic Report continued
financial statements of the Company continue to be prepared in
accordance with FRS 101 and are set out on pages 71 to 78.
Statement of Comprehensive Income
In the year under review, the Group's three principal areas of
income were sale of SiC fibres, whiskers and blanks; Specialty
Inks; and graphene enhanced composites. There is a further
category of grant funded income which is included in Other
Operating Income and will be discussed separately.
The Group’s revenue for the year-ended 30 June 2020 of
£2.95 million (FY19: 3.47 million), showed an overall decrease of
£0.52 million on that of the prior year. This reduction reflected a
fall in the Advanced Materials and RPC&I1 business units of £0.45
million and £0.08 million respectively which was only partially
offset by a £0.01 million increase in APAC sales. Other operating
income, which
is principally grant funded projects, at
£0.76 million (FY19: £0.79 million) is broadly in line with prior year,
but has benefitted from the support offered by the US Cares Act
during the latter part of FY20.
Notwithstanding the fall in Revenue, the Group’s Gross Profit,
which excludes Other Operating Income, increased marginally
to £2.06 million (FY19: £1.9 million) delivering a Gross Profit
margin of 70% (FY19: 55%). The increase in margin was principally
due to the reduced level of sales of SiC ceramic blends into the
US fracking industry.
The focus on reducing costs continued in the year and adjusted
Administrative Expenses fell by £0.87 million 12.7% to
£5.99 million (FY19: £6.87 million) on a like for like basis, ignoring
the impact of IFRS 16 on the presentation of the results. The
adoption of IFRS 16 reduced adjusted Administrative Expenses
by £0.63 million to £5.36 million and increased the charge for
Depreciation and Amortisation by the same amount. In line with
the transitional reliefs available, no adjustments have been made
to the prior year figures. Over the last two reporting periods the
Company has reduced its operating cost base by £1.72 million.
Adjusted administrative expenses exclude non-cash items such
as share based payment charges, depreciation and amortisation
as well as one-off restructuring and impairment costs and, as
such, gives visibility of the ongoing cash impact of our operating
cost base. Total administrative expenses for the year were
£7.05 million (FY19: £8.53 million).
The Group continued to direct resource to research and
development with the focus for that investment on products
and process that could develop into sustainable and profitable
revenue streams. R&D spend for the year was £1.42 million (FY19:
£1.84 million2), of which £0.25 million was capitalised (FY19:
£0.27 million). During the year the Group claimed R&D tax credits
of £0.39 million (FY19: £0.44 million) and it is expected that this
claim will be received during the current year.
Total comprehensive loss for the year was £4.23 million (FY19:
£7.12 million), including the £0.06 million of restructuring costs
(FY19: £2.13 million including an impairment of intangible assets
of £1.79 million), the loss from trading activities for FY20 was
£4.23 million (FY19: £5.85 million). There is no impairment of
intangible assets in the year.
The loss per share for the year reduced to £0.01 (FY19: £0.06 loss).
Statement of Financial Position and Cashflows
As at 30 June 2020, net assets amounted to £7.45 million (2019:
£11.25 million), including cash balances of £0.82 million (2019:
£4.69 million). Other current assets increased to £3.32 million at
the year-end (2019: £3.13 million) and this was mainly related to
the increase in inventory of £0.53 million at the US facility during
the year. We anticipate reducing inventory levels over the next
12 – 18 months. Current liabilities reduced to £2.92 million as at
30 June 2020 (2019: £3.12 million) due principally to the reduction
in loan balances.
Tangible Fixed Assets and non current liabilities were impacted
by the adoption of IFRS 16 and the Group recognised a Right of
Use Asset in respect of its leased premises of £1.59 million and a
Right of Use Liability of £1.65 million. These were non cash items
and did not impact the cash outflow in the year. The Company
will amortise these balances over the remaining life of the leases
which varies across the sites.
Net cash outflow from operating activities before working
capital movements for the year reduced to £2.58 million (2019:
£4.59 million), the principal contributing factors being the
adjusted operating loss of £4.02 million (2019: £7.19 million).
Capital expenditure in the year, excluding the IFRS 16
adjustments set out below, of £0.04 million (FY19: £1.2 million)
was significantly less than the prior year when the Group
invested in the US blanks production equipment. The Group
received a R&D tax credit inflow of £0.85 million in FY20 (FY19:
£0.08 million), which included repayments for the R&D claims
made in both FY18 and FY19.
Capital Structure and Funding
As at 30 June 2020, the Company had 340,223,848 ordinary
shares in issue (2019: 317,723,848). In November 2019, the
Company issued 22,500,000 new ordinary shares in connection
with an equity subscription at 2 pence per ordinary share which
raised £0.45 million (before expenses). No options were exercised
into ordinary shares during the year (FY19: none).
The Group repaid borrowings of £0.84 million during the year
under review (FY19: £0.50 million), of which £0.58 million related
to the full repayment of the £0.75 million loan secured from the
Development Bank of Wales in December 2019 and the
remainder related to the Group’s US borrowing facilities which
1 Resins, Polymers, Composites & Inks
2 The method of calculating R&D spend has been changed during the year to align with the calculations submitted to HMRC for the R&D tax credit.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
are secured on the Group’s US based tangible assets. The
Company received £0.05 million under the UK Government’s
Bounceback loan scheme on 2 June 2020. The Group’s $900,000
working capital facility, which is included in Bank Loans, is
secured on the inventory and trade receivables of the US
business and was fully utilised at the year-end (2019: fully
utilised). The net result was that Group’s total borrowings at the
year-end were £1.25 million (2019: £1.96 million), of which £0.05
million was in the UK and the balance held by the Group’s US
subsidiaries. There were no financial covenants extant in respect
of either the Group’s UK or US borrowings.
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.
Post Balance Sheet Event
Subsequent to the year-end and in recognition of the general
uncertainty created by Covid-19, the Company looked to improve
its immediately available liquidity through an issue of new
equity shares. On 9 September 2020, the Company raised
£2.98 million (gross) through the placing and subscription of
85,055,950 new Ordinary Shares at 3.5 pence per share. The funds
raised through the fundraising are being used predominantly as
working capital to finance the operations of the Group.
Key Performance indicators
The Group has historically reported financial metrics such as
revenues, gross profit margin, adjusted operating loss, cash
position and other metrics as its key performance indicators and
these are set out below.
FY20 (£m) FY19 (£m)
Revenue 2.95 3.47
Gross profit margin 70% 55%
Adjusted operating loss3 (3.17) (4.18)
Cash position 0.82 4.69
Borrowings 1.25 1.96
Due to the impact of Covid-19 in the second half of the year some
of the Group’s KPIs were lower than targeted in particular
Revenue.
During the year under review, management has also adopted a
key non-financial performance metric to monitor the revenue
pipeline of the Group and the business units. The sales tracker
monitors the number of accredited leads and assigns a
probability of revenue realisation to those leads.
SECTION 172(1) STATEMENT
The Directors acknowledge their duty under s.172 of the
Companies Act 2006 and consider that they have both
individually and together acted in the way that, in good faith,
would be most likely to promote the success of the Company for
the benefit of its members as a whole, having regard to the
matters set out in s.172.
The Directors have set out the ways in which they look to fulfil
their duties in the year at section 3 of the Chairman’s Corporate
Governance Statement on page 16.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board has ultimate responsibility for risk management
throughout the Group and determines the nature and extent of
risk that the Company is willing to take to achieve its objectives.
The Board considers that the principal risks and uncertainties
facing the Group may be summarised as follows:
Impact of Covid-19
The Covid-19 pandemic has adversely affected Group revenues
during the latter part of the year under review. The Directors
accept that there remains a a varying degree of uncertainty in
all of the countries in which it has facilities and in the markets
in which it operates. The potential impact of Covid-19 on the
future performance and liquidity of the Group has been
considered.
As reported in the Post Balance Sheet Event above, the Group
raised further capital after the year-end and it continues to
monitor its future funding needs to ensure that it remains a
viable operation.
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, well maintained facilities and restricting
activities to only certain qualified individuals. The UK facilities
are ISO 9001 and ISO 14001 accredited.
Covid-19 has added a further health and safety risk during the
current year. The Group has carried out risk assessments at each
of its facilities and continues to monitor these assessments and
the procedures that are in place against the latest national,
regional and state guidance in the jurisdictions in which it
3 Adjusted Operating Loss of £3.17 million is on a like for like basis and includes the £0.63 million of rental costs which in line with IFRS 16 has been included within
depreciation in the consolidated statement of comprehensive income.
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STRATEGIC REPORT
Strategic Report continued
operates. Special attention has been paid to vulnerable workers
and those that are required to shield to protect other members
of their household and the Group has embraced video and other
technology to ensure that it communicates and monitors the
physical and mental wellbeing of colleagues working
from home.
Client Concentration Risk
The Company’s two largest customers accounted for 49% of
revenue in the year (FY19: 50%) and any breakdown in these
relationships could damage the business. Notwithstanding that
the Company has contracts with or long term commitments
from its larger customers it worked hard during challenging
trading conditions to maintain good relations with its key
customers.
The Company is anticipating that as its customer base expands
it will naturally reduce the reliance on any one single customer
although it acknowledges that it will take time to reduce its
reliance on these two key customers to fully mitigate the
current exposure.
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.
Speed of product adoption
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 potentially cessation of product development.
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.
IP portfolio, covering
Intellectual Property Risk
The Group’s success will depend in part on its ability to maintain
adequate protection of
its
its
manufacturing process, additional processes, products and
applications, including in relation to the development of specific
functionalisation of graphene and other types of carbon-based
nanomaterials for use in particular applications. The IP on which
the Group’s business is based is a combination of granted
patents, patent applications and confidential know-how.
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. The Group retains third party
professional experts to assist.
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
and other key executives. 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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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
The Group aims to mitigate this risk by providing well-structured
and competitive reward and benefit packages that ensure our
ability to attract and retain key employees. The EMI scheme
introduced in January 2020 demonstrates the Directors’
commitment to incentivising and rewarding its employees.
The impact of the UK leaving the European Union
The UK entering the transition period with the EU on the
1 January 2020 has not had a material impact on the Group’s
performance in the current reporting period. However, in light of
the uncertain progress on agreeing a future trading
arrangement, as the country exits the transition period on the
31 December 2020 it is likely that the Company will have to
manage some uncertainty in the following areas:
• Materials: any hindrance to 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, The Group is seeking to replace EU grant funds
with additional grant awards from Innovate UK or other UK
national or regional assembly bodies that support inward
investment, innovation and research and development
work.
By order of the Board
David Banks
Chairman
29 October 2020
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GOVERNANCE
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 stockbroking 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 12 March 2019 reverted
to Non-executive Chairman.
Keith Broadbent;
Chief Executive Officer
Prior to joining Haydale, Keith held a number of senior
operational and commercial positions which covered
aerospace, defence, automotive, marine and medical sectors.
His experience includes significant multi-site responsibilities
in both the UK and internationally and he has worked for
Princess Yachts International, Sunseeker, TT Electronics and
most recently Ultra Electronics. Keith has demonstrated a
strong track record in the delivery of budgets, high level
customer service and enhancing shareholder value. Keith
joined Haydale in July 2017 and was appointed the Group’s
Chief Executive Officer in March 2019.
Mark Chapman,
Chief Financial Officer
For the last 19 years, Mark held a number of CFO and COO
roles within international companies operating in the
med-tech, beverages and consumer sectors, where he has
helped deliver strong improvements in business sustainability
and EBITDA growth. Prior to moving into industry, Mark spent
8 years in professional services firms, including 5 years as a
corporate financier with Deloitte. Before embarking on his
career in finance, Mark was a commissioned officer in the
British Army. Mark qualified as a chartered accountant in 1995
and holds a degree in Economics from the University of
Birmingham. Mark joined Haydale as CFO in November 2019.
12
Graham Dudley Eves MA,
Non-Executive Director
Graham Eves joined GKN plc in 1967 where he spent 13 years
operating across multiple overseas jurisdictions including, for
the last 5 years, setting up and running a special operation for
GKN plc’s head office in Switzerland. He returned to the UK
in 1980 to work in venture capital and establish his own
international business consultancy. His main activities
covered advising a range of German, North American and
Japanese automotive component/technology suppliers and
he co-founded and was chairman of an automotive
technology company, Mechadyne (now part of Rheinmetall
Automotiv AG). Graham was a non-executive director of AB
Dynamics plc from flotation until September 2020. He was on
the AIM advisory committee of the London Stock Exchange
(“LSE”) for 6 years and has a Master of Arts degree in Modern
and Medieval Languages from the University of Cambridge.
Theresa Wallis,
Non-Executive Director
Theresa Wallis worked most of her executive career in
financial services, moving into technology commercialisation
in 2001. She was with the LSE for 13 years, where from 1995 to
2001 she was COO of AIM, having managed the market’s
development and launch. From 2001 to end 2006 she was a
principal executive of ANGLE plc, a venture management and
consulting business focusing on the commercialisation of
technology. Since 2001 she has held a number of
non-executive directorships, including LiDCO Group plc where
she was non-executive chairman, Veriton Pharma Ltd and the
Quoted Companies Alliance. Prior to joining the LSE, she
worked for Hambros Bank and then Canadian Imperial Bank
of Commerce in London. Theresa has a degree in Zoology from
the University of Oxford and a Diploma in Company Direction
from the Institute of Directors. Theresa brings a range of
corporate governance, business development, financial and
commercial skills and experience. Theresa joined the Board of
Haydale in June 2020.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
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 2020.
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 Strategic
Report on pages 3 to 11 covers the following matters:
•
•
•
•
Principal Activities;
Review of the Business and Future Developments;
Key Performance Indicators; and
Research and Development.
The directors’ responsibilities in respect of the annual report and the financial statements are included on page 25.
Dividends
The directors do not propose the payment of a dividend (2019: nil).
Directors
The following directors have held office since 1 July 2019 and up to the date of signing the financial statements:
David Banks
Graham Eves
Roger Humm (resigned 10 June 2020)
Theresa Wallis (appointed 10 June 2020)
Keith Broadbent
Laura Redman-Thomas (resigned 22 November 2019)
Mark Chapman (appointed 22 November 2019)
Directors’ Interests in Ordinary Shares
The directors, who held office at 30 June 2020, had the following interests in ordinary shares of the Company at the 30 June 2020
and at the date of this report:
Director
David Banks
Keith Broadbent
Mark Chapman
Graham Eves
Theresa Wallis
Number of
Shares at
30 June
2020
2,241,667
500,000
275,000
–
–
% of
Share
Capital
0.66
0.15
0.08
–
–
Number of
Shares at
29 October
2020
3,098,809
785,714
560,714
142,857
428,571
% of
Share
Capital
0.73
0.18
0.13
0.03
0.10
Directors’ and Officers’ Liability Insurance
Qualifying indemnity insurance cover has been arranged in respect of the personal liabilities which may be incurred by directors and
officers of the Group during the course of their service with the Group. This insurance has been in place during the year and on the
date of this report.
Post Balance Sheet Events
On 9 September 2020, the Company raised £2.98 million (gross) through the placing and subscription of 85,055,950 new Ordinary
Shares at 3.50 pence per share.
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.
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Directors’ Report continued
Going Concern
The Directors have prepared and reviewed detailed financial forecasts of the Group and, in particular, considered the cash flow
requirements for the period from the date of approval of these financial statements to the end of December 2021. These forecasts
sit within the Group’s latest estimate and within the longer term financial plan, both of which have been updated on a regular basis
as our understanding of the potential impact of the Covid-19 pandemic has deepened. The Directors are also mindful of the impact
that the other risks and uncertainties set out on pages 9 to 11 may have on these estimates and in particular the speed of adoption
of new technology during these uncertain times.
As part of this review the Directors have considered several scenarios based on various revenue, cost and funding sensitivities.
Revenue
The underlying methodology has been to split the forecast revenue into two groups. The first group consists of revenue streams
which are underpinned by contracts or some other form of customer guarantee or commitment and therefore have a high certainty
of delivery. The second group consists of all other revenue lines. For this second tranche, in October 2020, we have assessed the
potential value and the likelihood of delivery of each revenue line based on management’s latest information and this has given us
a weighted average unconfirmed revenue estimate by month to December 2021. We have then applied further general sensitivities
to that estimate to assess the margin of error that would need to exist in those estimates before the Group would have a requirement
to raise further funds.
Working Capital Facilities
The Directors have also stress tested the forecasts to assess the likely impact if existing working capital facilities were either not, or
not fully renewed during the period under review. The non-renewal of existing facilities reduces the general sensitivity level on
unconfirmed revenue streams to circa 55% of managements estimates before the forecast shows a cash negative position.
Cost Mitigation
The Directors have not included any assumptions regarding cost savings that might be achievable if the forecast fails to meet the
sensitised estimates. Whilst the Directors do believe that there would be scope for further cost reductions these have not been
factored into their assessment of going concern.
Customer Solvency
As part of this review the Directors have assessed the solvency of key customers and their ability to deliver on their contractual or
other commitments on the basis of publicly available information and included the results of these assessments in our forecasts.
Summary
Therefore, after due consideration of the forecasts prepared and the sensitivities applied, the Group’s current cash resources and its
borrowing facilities 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.
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
Following a tender process Grant Thornton LLP were appointed as auditors to the Group during the year. The comparative results
for FY19 were audited by the Group’s previous auditor, BDO LLP. The auditors 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
29 October 2020
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
Chairman’s Corporate Governance Statement
Overview
As Chair of the Board of Directors of Haydale Graphene Industries Plc (“Haydale”, the “Group” or the “Company”), 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
information flow. We regularly review our governance processes to ensure we are constantly improving. The Board members have
extensive experience of managing AIM companies, including knowledge of the AIM Rules and the Market Abuse Regulations. Haydale
adopts the Quoted Companies Alliance Corporate Governance Code (“QCA Code”) and this report follows its structure and explains
how we have applied it. The principal methods of communicating our application of the QCA Code are this Annual Report and
through our website, at www.haydale.com.
The Board believes that corporate governance is more than just a set of guidelines; we believe that good corporate governance
improves long-term success and performance, whilst reducing or mitigating risks.
During the year the following changes were made to the Board's composition:
•
•
•
•
The resignation of Laura Redman-Thomas as Chief Financial Officer on 28 October 2019, with Laura leaving the Company on 22
November 2019;
The appointment of Mark Chapman as Group Chief Financial Officer on 22 November2019;
The appointment of Theresa Wallis as an independent non-executive Director on 10 June 2020; and
The resignation of Roger Humm as an independent non-executive Director on 10 June 2020.
Below are the Company's explanations of how it has complied with the 10 principles of the QCA Code during the year.
Establish a strategy and business model which promotes long-term value for shareholders
QCA Principles
1.
The Board has concluded that the highest medium and long-term value can be delivered to its shareholders by the adoption of a
single purpose 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, 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 commercial opportunities in the high growth advanced materials industry. Haydale's
business model and strategy, together with the principal risks and uncertainties facing the Group, are set out in the Strategic Report
on pages 3 to 11 of this Annual Report.
The Company intends to deliver shareholder returns initially through capital appreciation and eventually through distributions via
dividends.
Seek to understand and meet shareholder needs and expectations
2.
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders.
The Directors meet shareholders and other investors or potential investors during the year, especially following the announcement
of the Annual and Interim Results. 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 ensure that shareholder enquiries are responded to and take on
board shareholder views.
The Company intends to have close ongoing relationships with its larger private shareholders, institutional shareholders and analysts
and for them to have the opportunity to discuss issues and provide feedback at meetings with the Company. The Company receives
reports from its corporate registrar and from Argus Vickers. In normal years all shareholders are encouraged to attend the Company's
Annual General Meeting (“AGM”) but unless the current Government guidance on non essential gatherings and social distancing is
materially changed before the AGM and the Company is able to comply with that revised guidance then shareholders will,
unfortunately, be unable to attend the next AGM. If there is a resolution passed at a general meeting with a significant number of
votes against, the Board seeks to understand the reason for the result and, where appropriate, takes suitable action.
The whole Board normally attends the AGM although due to current restrictions the minimum required to meet quorate will attend
the next AGM. The AGM is normally regarded as an opportunity to meet, listen and present to shareholders and shareholders are
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GOVERNANCE
Chairman’s Corporate Governance Statement
continued
encouraged to attend and the Board regrets that this will not be possible this year due to the current restrictions, however, we will
provide further information as to how shareholders can submit questions to the Board in the notice to AGM.
The Company's broker and nominated advisor, Arden Partners, is briefed regularly and updates the Board during the year on
shareholders’ expectations.
Take into account wider stakeholder and social responsibilities and their implications for long-term success
3.
The Board is mindful of its statutory duty under s172 of the Companies Act and has worked throughout the year to promote the
success of the Company for the benefit of its members as a whole. In doing so, the Board recognises the Company is reliant upon the
efforts of the employees of the Company and its collaboration partners, suppliers, regulators and other stakeholders whether they
are identified under s172 or not. The Board ensures that there is close oversight and contact with its key resources and relationships
and, whilst this has been more challenging since the introduction of Covid-19 meeting, travel and other restrictions the Company
has used video conferencing and other modes of communication to maintain its efforts in this regard. The following paragraphs set
out how we engage with our stakeholders.
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 Company prepares a detailed budget annually which takes into account the Group's long-term strategy and its available key
resources including staffing, working capital, production capacity and functionalisation capabilities.
In depth analysis and reviews of each business unit’s budgeted business plan 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 the goals, targets
and aspirations of the Company. 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 industry participants, such as customers,
graphene producers, R&D facilities, including universities and academic institutions whilst simultaneously embracing influential
movers within the advanced materials industry who may positively influence perception of the Company. Feedback received from
stakeholders is reviewed, considered, and, if changes are required, actioned appropriately. The Company communicates with its
stakeholders and takes account of their feedback in order to develop products that meet the needs of their customers and that can
be supplied reliably, cost effectively and in line with applicable standards.
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.
Embed effective risk management, considering both opportunities and threats, throughout the organisation
4.
The Board oversees and reviews the Group’s risk management and internal control mechanisms.
The Company has adopted a risk register, which is reviewed regularly by senior management and the Audit Committee. The principal
risks and uncertainties to the business are set out in the Strategic Report in this Annual Report on pages 3 to 11.
The review process involves the review and 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 minimise their likelihood
and/or mitigate their impact. The risk register sets out and categorises these risks, and outlines the controls and any further actions
required.
The Board has established appropriate reporting and control mechanisms. The system of internal control is structured around the
risks set out in the risk register 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.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
Further key features of the Company’s internal control system include the following:
• Monthly management accounts information is prepared and reviewed by the Board, including variances against the annual
budget, latest forecasts and prior year;
There is a schedule of matters reserved for decision by the Board;
A clearly defined organisational structure is in place, with clearly delegated authorities, reporting lines and roles;
Defined levels/limits for authorisation of expenditure and placing of orders and clearly set out authorisation procedures; and
Quality management systems are implemented and regularly audited by an independent third party. The Company is ISO
90001:2015 and ISO 14001:2015 certified.
•
•
•
•
5.
Maintain the board as a well-functioning, balanced team led by the Chair
The Board comprises two executive directors and three non-executive directors as follows:
Executives
•
•
Chief Executive Officer: Keith Broadbent;
Chief Financial Officer: Mark Chapman;
Non-executives
•
•
•
Non-executive Chair: David Banks;
Independent Non-executive: Graham Eves; and
Independent Non-executive: Theresa Wallis.
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 Broadbent and Mr Chapman
are full time. One third of Board are subject to re-election at each AGM.
Board meetings are open and constructive, with every Director participating fully. Senior management are also invited to meetings,
providing the Board with further insights into the Company’s activities and performance.
The full Board has at least eight regular meetings in the year, that are scheduled in advance, and also as and when required. In order
to be efficient, the Directors meet formally and informally both in person by telephone or videoconference, which became the norm
during the Covid-19 lockdown. Board and Committee document authors are made aware of proposed monthly deadlines through
the schedule of meetings. Board papers are prepared by the relevant personnel (for example Chair, CEO, CFO, business unit heads)
and circulated to the Board at least 48 hours before meetings, allowing time for consideration and necessary clarifications before
the meetings. Directors are free to seek any further information they consider necessary.
The Non-executive Directors meet without the presence of the Executive Directors during the year, and also maintain ongoing
communications with Executives between Board meetings.
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GOVERNANCE
Chairman’s Corporate Governance Statement
continued
During the year ended 30 June 2020, the Company held 20 board meetings (FY19: 27), with each member's attendance as follows:
Director
David Banks
Keith Broadbent
Laura Redman-Thomas (resigned 22 November 2019)
Graham Eves
Roger Humm (resigned 9 June 2020)
Mark Chapman (appointed 22 November 2019)
Theresa Wallis (appointed 10 June 2020)
Number of board meetings attended
Scheduled
FY20
Ad hoc Total
FY20 FY20
Total
FY19
11/11
11/11
3/3
10/11
10/10
8/8
1/1
9/9 20/20
8/9 19/20
3/4 6/7
6/9 16/20
4/4 14/14
6/6 14/14
– 1/1
27
24
13
21
22
–
–
Attendance at the Company’s audit, remuneration and nomination committee meetings during FY20 and the prior year were as
follows:
Number of committee meetings attended
Committee member Audit Remuneration Nominations
David Banks
Graham Eves
Roger Humm
(resigned 10 June 2020)
Theresa Wallis
(appointed 10 June 2020)
FY20
FY19
3/3
3/3
1/2
1/1
1/1
1/1
1/1
-/-
FY20
8/8
6/8
8/8
-.-
FY19 FY20
FY19
8/8 3/3
6/8 3/3
8/8 3/3
-/- -/-
3/3
3/3
3/3
-/-
Terms of reference for each of the Board's Committees are published on the Group's website, The Company believes that the
Committees have the necessary skills and knowledge to discharge their duties effectively.
Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
6.
The Company believes that the Directors have an appropriate breadth and depth of skills, knowledge and experience to fulfil their
roles, reflecting a broad range of personal, commercial and professional skills across geographies and relevant sectors and experience
of public markets. Details of the Directors' experience and areas of expertise are outlined on page 12 of this Annual Report and on
the Company’s website.
In addition to their general board responsibilities, Non-executive Directors are encouraged to be involved in site visits and meetings,
in line with their individual areas of expertise.
The Company has employed the services of ONE Advisory Limited to provide assistance to the Company in its Company Secretarial
and MAR compliance needs. Matt Wood, a director of ONE Advisory Limited, is Haydale’s Company Secretary.
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.
In addition the Company is a member of the QCA and as such all the directors have access to briefings issued by the QCA.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
7.
We stated last year that every other year the Board expects to carry out an internal Board and Committee evaluation exercise,
including that of the Chair and individual directors. With further significant board changes having taken place during the past year,
the exercise will be performed in the year ending June 2021, led by the Chair. A Non-executive Director will lead the review of the
performance of the Chair.
The Nomination Committee, comprised entirely of the Non-executive Directors, 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. However as with many small companies, due to financial constraints and limited human resources,
internal opportunities for succession to board director roles are circumscribed.
Promote a corporate culture that is based on ethical values and behaviours
8.
The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and
that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly
impact all aspects of the Company as a whole and the way that employees behave.
Our culture acts as the glue that binds our staff around the world together - tenacious, 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 five sites to be aligned with the Haydale culture is important in improving operations and
ultimately our performance.
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 Board is working to achieve a shared culture across each of our regions of
operation, ensuring more effective communications and cooperation between employees across the Group.
The Company intends to carry out a Group-wide employee engagement survey every other year, to commence during the financial
year to 30 June 2021, that will determine if ethical values and the Company's corporate culture are recognised and respected, and
seek to understand any underlying issues that employees may have.
Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
9.
The Board is committed to, and ultimately responsible for, high standards of corporate governance, and has chosen to adopt the QCA
Corporate Governance Code. We review our corporate governance arrangements regularly and expect to evolve these over time, in
line with the Company's growth. The Board delegates responsibilities to committees and individuals as it sees fit, with the Chair
being responsible for the effectiveness of the Board, and the Executive Directors being accountable for the management of the
Company's business and primary contact with stakeholders.
The Chair 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 CEO is responsible for the day-to-day running of the business: as well as developing
corporate strategy while the Non-Executive Directors are tasked with, for example, constructively challenging the decisions and
recommendations of executive management and satisfying themselves that the systems of business risk management and internal
financial controls are robust.
The Board has adopted appropriate delegations of authority which sets out matters which are reserved to the Board as summarised
below:
•
•
•
•
•
The Group's strategy and vision
Determining management's performance and changes in senior personnel
Board membership
Approval of major capital expenditure
Financial reporting, risk management and internal controls
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GOVERNANCE
Chairman’s Corporate Governance Statement
continued
•
•
•
•
•
•
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 certain duties and, where applicable, authority, to the following three board 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, Theresa Wallis (Chair), Graham Eves and David Banks. For most of the year under review,
Roger Humm was a member and Chair of the Committee, with Ms Wallis taking over this role on 10 June 2020. The CFO and external
auditors normally 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. 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 intend to meet not less than twice in each financial year.
During the year the Committee met twice. At the first meeting in September 2019 it reviewed the feedback from the auditors (BDO)
on the audit for the financial year ended 30 June 2019 and considered the specific representations set out in the draft letter of
representation. Key audit matters were discussed including going concern and impairment of intangible assets. At this meeting the
Committee also considered the risk register and the draft governance statement.
The second meeting of the Committee was held in June 2020 following the appointment of the new Committee chair, Theresa Wallis.
The meeting considered the terms of engagement between the Company and Grant Thornton UK LLP, who would be taking over as
the Company’s financial auditors as well as the audit plan for the Company and its subsidiaries.
The Committee met on 26 October 2020 to consider the report and accounts for the year ended 30 June 2020, including the key
judgements and estimates including revenue recognition, going concern, impairment of intangibles and valuation of the defined
benefit pension scheme set out in notes 1, 10 and 26 to the accounts on pages 37, 52 and 66, as well as the independence of the
auditors and their fees.
Remuneration Committee
The Remuneration Committee has three members, David Banks (Chair), Graham Eves and Theresa Wallis. Roger Humm was a member
of the Committee until 10 June 2020, when Ms Wallis was appointed. The Directors' Remuneration Report is set out on pages 22 to 24
of this Annual Report. The members are all Independent Non-executive Directors. Other members of the Board may attend the
Committee's meetings at the request of the Committee Chair.
The remit of the Committee is primarily to determine and agree with the Board the framework or broad policy for the remuneration
of the Company's Executive Directors and the Senior Management of the Group. The Remuneration Committee reviews the
performance of the Executive Directors and considers 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 as and when required.
The Directors’ Remuneration Report is on pages 22 to 24.
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Nomination Committee
The Nomination Committee has responsibility for evaluating the structure, size and composition of the Board in order to ensure a
suitable balance of experience, knowledge, skills and independence, as well as for recommending to the Board the appointment of
Executive and Non-Executive Directors. The Committees’ Terms of Reference may be found on the Company’s website.
Set out below is an update on the activities of the Committee for the year ended 30 June 2020, in which positive progress was made
and which involved a number of significant changes.
The composition of the Committee changed during the year. Graham Eves took over the chair from David Banks, who remains on
the Committee, and Theresa Wallis replaced Roger Humm.
The Committee met twice during the year and held a number of additional meetings involving the Chief Executive Officer (CEO) as
well as telephone conference calls to discuss two key appointments: the recruitment of a new Chief Financial Officer (CFO); and, the
appointment of a Non-Executive Director to replace Roger Humm, who was retiring from the Board. I am pleased to report that we
have been very fortunate with the two appointments. Mark Chapman as CFO has had a major impact on the Company’s financial
controls and he is supporting the CEO. Theresa Wallis brings considerable AIM company experience and has taken over as chair of
the Audit Committee. Both are enhancing the Company’s corporate governance.
Tasked with succession planning, the Committee feels that it has carried out its role with the above-mentioned appointments and
that the Company now needs a period of stability before evaluating the success of the business and any further Board developments
that might be required.
10.
Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other
relevant stakeholders
As stated in relation to Principle 2, the Board is committed to maintaining effective communication and having constructive dialogue
with its shareholders. We communicate through our Interim and Annual Reports along with Regulatory News Service
announcements. We also use the Company's website for both financial and general news relevant to shareholders.
In addition, the Company engaged Hardman & Co in the year ended 30 June 2020 to publish research on the Company that can be
distributed to both private and institutional existing and potential shareholders.
The Board keeps in mind the proportions of direct, nominee and institutional shareholders, and distributes communications
accordingly.
The latest corporate documents (including Annual Reports and Notices of AGMs) can be found on the Company’s website.
Investors also will have access to the latest information about the Group which is set out on the Company’s website at
www.haydale.com. The Company uses electronic communications with shareholders, where possible, in order to maximise efficiency.
A summary of the work carried out by the Audit and Nomination committees during the year is set out in section 9 above. The
Directors’ Remuneration Report is on pages 22 to 24.
By order of the Board on 29 October 2020
David Banks
Chairman
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GOVERNANCE
Directors’ Remuneration Report
REMUNERATION COMMITTEE
The Company’s remuneration policy is the responsibility of the Remuneration Committee which was first established at the time of
the Company’s admission to trading on AIM. The terms of reference of the Remuneration Committee are outlined below and in the
Chairman’s Corporate Governance Statement on page 20. The members of the Remuneration Committee during the year under
review were Graham Eves (Chairman), David Banks and Roger Humm to 10 June 2020, with Theresa Wallis joining the Committee on
the same day. 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. The requirements of the 2006 Companies Act in respect of the Directors’
Remuneration Report have been applied to this report.
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.
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 2020 is set out on page 24.
The Remuneration Committee terms of reference require it to develop 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.
On 13 January 2020, the Company adopted a new EMI share option scheme (“2020 EMI Scheme”). As part of the adoption of the
2020 EMI Scheme, the Company’s two existing share incentive schemes, the 2014 EMI share option scheme adopted by the Company
in April 2014 ("2014 Option Scheme") and the 2017 LTIP adopted by the Company in December 2017 ("2017 LTIP") were cancelled. All
options granted to Directors under the 2017 LTIP and all EMI options under the EMI element of the 2014 Option Scheme have been
surrendered and the Directors have no options outside of those granted under the 2020 EMI Scheme, as set out below.
2020 EMI Scheme
The 2020 EMI Scheme is designed to directly aligning the interests of the Directors and other employees with those of shareholders,
as set out below.
Under the 2020 EMI Scheme, the Company granted a total of 34,100,000 options (“2020 Options”), of which 19,000,000 were granted
to the Company’s Executive directors and a further 3,500,000 options were granted to directors of subsidiaries of the Company. All
of the 2020 Options granted have an exercise price of 2.25p per Ordinary Share and can only be exercised between the third and
tenth anniversary of Grant ("Exercise Period"). The proportion of the 2020 Options granted that are capable of vesting is dependent
on certain performance conditions being met, with such performance being directly linked to the performance of the Company's
share price from the date of grant to 30 September 2023 as follows:
22
260028 Haydale AR pp12-pp32.qxp 05/11/2020 16:47 Page 23
Haydale Graphene Industries Plc | Annual Report & Accounts 2020
% of Grant subject to the
Performance Condition Performance Condition
30%
30%
40%
For a period of 15 consecutive dealing days, commencing after the date of Grant and ending on or before
the 30 September 2021, the closing price of the Ordinary Shares exceeds 4.0p (four pence) per Ordinary
Share.
For a period of 15 consecutive dealing days, commencing after the date of Grant and ending on or before
the 30 September 2022, the closing price of the Ordinary Shares exceeds 8.0p (eight pence) per Ordinary
Share.
For a period of 15 consecutive dealing days, commencing after the date of Grant and ending on or before
the 30 September 2023, the closing price of the Ordinary Shares exceeds 16.0p (sixteen pence) per
Ordinary Share.
Should the Company's closing mid-market share price not meet the performance conditions specified then the specified percent of
the grant shall lapse. Subsequent to the year end the closing price of the Ordinary Shares remained above 4p (four pence) for a period
of 15 consecutive days and the first performance condition has been met.
DIRECTORS’ INTERESTS IN SHARE OPTIONS
The interests of directors in options over ordinary shares during the year were as follows:
Director
David Banks
Keith Broadbent
Mark Chapman
Graham Eves
Theresa Wallis
Number of
2020
EMI Options
nil
Date of
Grant
First
Exercise
Date
Exercise
Price
Expiry
Date
12,000,000
13 January 2020
13 January 2023
2.25p
12 January 2030
7,000,000
13 January 2020
13 January 2023
2.25p
12 January 2030
nil
nil
No options were exercised by the directors during the year under review. None of the directors had any unapproved options at the
30 June 2020.
The mid-market price of the Company’s ordinary shares at 30 June 2020 was 2.05p (2019: 1.9p). During the year to 30 June 2020, the
mid-market price ranged from 1.0p to 2.1p (2019: 1.8p to 70.6p).
232323
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GOVERNANCE
Directors’ Remuneration Report continued
DIRECTORS’ REMUNERATION
The aggregate remuneration received by directors who served during the years ended 30 June 2020 and 30 June 2019 was as follows:
£’000 Salary/Fee
Bonus
Benefits
Year Ended June 2020
Year Ended June 2019
Total
exc.
pension
Total
inc.
pension
Total
exc.
pension
Total
inc.
pension
Pension
Pension
Executive Directors
R Gibbs4 –
M Wood5 –
L Redman-Thomas6 43
K Broadbent7 170
R Smith8 –
M Chapman9 67
Non-Executive Directors
D Banks10 51
G Eves 28
R Humm11 28
T Wallis12 2
–
–
–
50
–
20
–
–
–
–
–
–
5
12
–
8
–
–
–
–
–
–
48
232
–
95
51
28
28
2
–
–
–
20
–
5
–
–
–
–
–
–
48
252
–
100
51
28
28
2
77
52
74
181
5
–
56
25
25
–
4
3
1
8
–
–
–
–
–
–
389
70
25
484
25
509
495
16
81
55
75
189
5
–
56
25
25
–
511
Bonuses are disclosed in the year for which they have been awarded. Bonuses received in FY19 of £30,000 for Keith Broadbent and
£15,000 for Laura Redman-Thomas are included in Total exc. pension.
By order of the Board
David Banks
Chairman
29 October 2020
4
5
Resigned 20 December 2018
Part time Finance Director resigned 20 December 2018
6 Appointed 21 December 2018 and resigned on 22 November 2019
7 Appointed 5 September 2018, formerly subsidiary director
8 Part-time executive director, resigned 31 January 2019
9 Appointed as CFO on 22 November 2019.
10 Appointed as Independent Executive Chairman on 5 September 2018 until 12 March 2019 when reverted back to non-executive chairman
11 Resigned on 10 June 2020
12 Appointed on 10 June 2020
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
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, relevant, reliable and prudent;
•
•
•
•
State whether they have been prepared in accordance with IFRSs as adopted by the European Union,;
For the Parent Company financial statements, state whether applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the financial statements;
Assess the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern; and
Use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
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 Company’s 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.
By order of the Board
Mark Chapman
Director
29 October 2020
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260028 Haydale AR pp12-pp32.qxp 05/11/2020 16:47 Page 26
FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries plc
Opinion
Our opinion on the financial statements is unmodified
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 2020, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement
of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement, the Parent Company
Balance Sheet, the Company Statement of Changes in Equity and notes to the consolidated financial statements and parent company
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
2020 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.
The impact of macro-economic uncertainties on our audit
Our audit of the financial statements requires us to obtain an understanding of all relevant uncertainties, including those arising as
a consequence of the effects of macro-economic uncertainties such as Covid-19 and Brexit. All audits assess and challenge the
reasonableness of estimates made by the directors and the related disclosures and the appropriateness of the going concern basis
of preparation of the financial statements. All of these depend on assessments of the future economic environment and the group’s
and the parent company’s future prospects and performance.
Covid-19 and Brexit are amongst the most significant economic events currently faced by the UK, and at the date of this report their
effects are subject to unprecedented levels of uncertainty, with the full range of possible outcomes and their impacts unknown. We
applied a standardised firm-wide approach in response to these uncertainties when assessing the group’s and the parent company’s
future prospects and performance. However, no audit should be expected to predict the unknowable factors or all possible future
implications for a group or company associated with these particular events.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are authorised for issue.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
In our evaluation of the directors’ conclusions, we considered the risks associated with the group’s business model, including effects
arising from macro-economic uncertainties such as Covid-19 and Brexit, and analysed how those risks might affect the group's
financial resources or ability to continue operations over the period of at least twelve months from the date when the financial
statements are authorised for issue. In accordance with the above, we have nothing to report in these respects.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor's
report is not a guarantee that the group or parent company will continue in operation.
Overview of our audit approach
•
•
Overall materiality: £225,000, which represents approximately 5% of
the group’s loss before taxation;
Key audit matters for the group were identified as going concern,
revenue may be improperly recognised and valuation of goodwill and
intangible assets. Key audit matters identified for the parent
company were valuation of investments in subsidiaries and
impairment of intercompany receivables; and
• We performed a full scope audit on the financial statements of the
significant group components Haydale Graphene Industries Plc,
Haydale Limited, Haydale Composite Solutions Limited, Haydale
Technologies Incorporated LLC and Haydale Ceramic Technologies
LLC. We performed specified procedures on the financial statements
of Haydale Technologies Thailand Limited. We performed analytical
procedures on the financial information of the remaining group
components.
Key audit matters
Key audit matters are those matters that, in our professional judgement, 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) that we identified. These matters included those that 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.
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Going concern
Our audit work included, but was not restricted to:
As stated in the ‘The impact of macro-economic
uncertainties on our audit’ section of our report,
Covid-19 is amongst the most significant economic
events currently faced by the UK, and at the date of this
report its effects are subject to unprecedented levels of
uncertainty. It has had a particularly significant impact
on the aviation industry, which has historically been a
focus market for the group. This event could adversely
impact the future trading performance of the group
and the parent company and as such increases the
extent of judgement and estimation uncertainty
associated with management’s decision to adopt the
going concern basis of accounting in the preparation of
the financial statements.
•
•
•
Obtaining management’s base case cash flow forecasts covering the
period from 1 October 2020 to 31 December 2021, assessing how these
cash flow forecasts were compiled and corroborating management’s
assessment that they assumption within the forecasts was in relation
to revenue;
Assessing the accuracy of management’s past forecasting by
comparing management’s forecasts for last year to the actual results
for last year and considering the impact on the base case cash flow
forecast;
Assessing the appropriateness of management’s assumptions in
relation to revenue through discussions with key members of the
sales
to supporting
documentation, such as contracts, customer agreements and
customer orders;
team and agreeing expected sales
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FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries plc continued
Key Audit Matter – Group
How the matter was addressed in the audit – Group
As a result of these factors, combined with the
continued losses generated by the group, , we identified
going concern as a significant risk, which was one of the
risks of material
most
misstatement.
significant assessed
Valuation of Goodwill and Intangible Assets
The assessment of impairment of goodwill is carried
out annually. Where there are indicators of impairment
of intangible assets an impairment assessment is
required. Given the continuing losses generated by the
group, and changes to the group’s strategy as
highlighted in the annual report, there are clear
indicators of potential impairment.
The assessment of the carrying value of goodwill and
intangible assets
judgement and any
impairment of the carrying value of such assets could
have a material impact on the group’s financial
statements.
involves
We therefore identified valuation of goodwill and
intangible assets as a significant risk, which was one of
the most significant assessed risks of material
misstatement.
•
•
•
Examining sensitivity analysis carried out by management on the
revenue assumptions in order to assess the levels of uncertainty
inherent in the forecasts and the impact of sensitivities against the
headroom;
Assessing the likelihood and impact of mitigating factors identified
by reference to supporting documentation and discussions with
management; and
Assessing the adequacy of related disclosures within the annual
report.
The group’s accounting policy on going concern is shown in note 1 to the
consolidated financial statements. The Audit Committee identified going
concern as a key judgement in its report on page 20, and the Board has
described the action that it has taken to address this issue on page 14 .
Key observations
We have nothing to report in addition to that stated in the ‘Conclusions
relating to going concern’ section of our report.
Our audit work included, but was not restricted to:
• Meeting with management and key operational personnel to update
our understanding of discounted cash flow models with reference to
current performance;
•
•
•
•
•
Examining, and sensitising, the model underpinning management’s
impairment assessment to identify the key underlying assumptions.
This highlighted long-term revenue growth rates and discount rates
as the key assumptions;
Assessing the long term revenue growth rates for reasonableness by
examining management’s commercialisation strategy, examining
existing customer test feedback and existing orders. We also
compared the long-term revenue growth rates with external market
data, such as third party assessments of the global market;
the discount
Assessing
for
reasonableness by developing an expected range based on our
knowledge of the business, the market and data from comparative
businesses;
rates used by management
Assessing the overall reasonableness of the key assumptions used in
management’s impairment model based on our conclusions from our
work identified above;
Assessing the appropriateness of the accounting and related
disclosures, as set out in note 10.
The group’s accounting policies on goodwill and intangible assets are
shown in note 3 to the consolidated financial statements and related
disclosures are included in note 10.
28
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
Key Audit Matter – Group
How the matter was addressed in the audit – Group
The Audit Committee identified valuation of goodwill and intangible
assets as a key judgement in its report on page 20. The Audit committee
reviewed the assumptions adopted by the management and concluded
that they were fair and reasonable and that no further impairment was
required in the year. The Audit Committee agreed that this should be
continue to be monitored at future Audit Committee meetings.
Key observations
Based on our work, we concluded that the judgement made that no
impairment was required for either goodwill or intangible assets as at 30
June 2020 was reasonable. The impairment review continues to be
sensitive to changes in key assumptions. In particular, failure to achieve
forecast revenue growth rates could give rise to an impairment in the
future.
Key Audit Matter – Parent
How the matter was addressed in the audit – Parent
Valuation of Investments in Subsidiaries
Our audit work included, but was not restricted to:
The assessment of impairment of investments in
subsidiaries is carried out annually, where there are
indicators of impairment. Given the continuing losses
generated by the group, and changes to the group’s
strategy as highlighted in the annual report, there are
clear indicators of potential impairment.
The assessment of the carrying value of investments in
subsidiaries involves judgement and any impairment
of the carrying value of such assets could have a
material impact on the parent company’s financial
statements.
We therefore identified valuation of investments in
subsidiaries as a significant risk, which was one of the
risks of material
most
misstatement.
significant assessed
• Meeting with management and key operational personnel to update
our understanding of discounted cash flow models with reference to
current performance;
•
•
•
•
Examining, and sensitising, the model underpinning management’s
impairment assessment to identify the key underlying assumptions.
This highlighted long-term revenue growth rates and discount rates
as the key assumptions;
Assessing the long term revenue growth rates for reasonableness by
examining management’s commercialisation strategy, examining
existing customer test feedback and existing orders. We also
compared the long-term revenue growth rates with external market
data, such as third party assessments of the global market;
the discount
Assessing
for
reasonableness by developing an expected range based on our
knowledge of the business, the market and data from comparative
businesses;
rates used by management
Assessing the overall reasonableness of the key assumptions used in
management’s impairment model based on our conclusions from our
work identified above.
The parent company’s accounting policies on investments are shown in
note 2 to the company financial statements and related disclosures are
included in note 6.
The Audit Committee identified valuation of investments in subsidiaries
as a key judgement in its report on page 20. The Audit committee reviewed
the assumptions adopted by the management and concluded that they
were fair and reasonable and that no further impairment was required in
the year.
Key observations
Based on our work, we concluded that the judgement made that no
impairment was required for investments at 30 June 2020 was reasonable.
The impairment review continues to be sensitive to changes in key
assumptions. In particular, failure to achieve the forecast growth rates
could give rise to an impairment in the future.
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FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries plc continued
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature,
timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure
Group
Parent company
Financial statements as a whole
loss before
£225,000 which is approximately 5% of the
taxation. This
group’s
benchmark
is considered the most
appropriate because it is a prominent key
driver of the business.
Materiality for the current year is lower
than the
level determined by the
predecessor auditor for the year ended 30
June 2019 due to a reduced loss being
recognised in the current year.
£142,000 which is 2% of the parent company’s
gross assets. This benchmark is considered the
most appropriate because the parent company
is a non-trading holding company.
Materiality for the year ended 30 June 2019 was
not disclosed by the predecessor auditor in the
prior year.
Performance materiality used to
drive the extent of our testing
70% of financial statement materiality,
being £157,500.
70% of financial statement materiality, being
£99,400.
Specific materiality
We determined a lower level of specific
materiality for certain areas such as
Directors’ remuneration and related party
transactions.
We determined a lower level of specific
materiality for certain areas such as Directors’
remuneration and related party transactions.
Communication of misstatements
to the audit committee
£11,250 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£7,100 and misstatements below that threshold
that,
in our view, warrant reporting on
qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
Overall materiality – Group
Overall materiality – Parent company
30
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the Group’s business, its environment and
risk profile and in particular included:
•
•
•
•
•
Evaluating the Group’s internal control environment and documenting our understanding of controls relevant to the audit;
Performing walkthrough testing to evaluate the design and implementation of controls relevant to the Key Audit Matters and
certain other risks in the financial reporting system identified as part of our risk assessment;
Determining the scope of the Group audit based on the relative contribution of revenue, expenses and net assets of each
component to the Group. We performed a full scope audit on the financial statements of Haydale Graphene Industries Plc (the
Parent Company), Haydale Limited, Haydale Composite Solutions Limited, Haydale Technologies Incorporated LLC and Haydale
Ceramic Technologies LLC. We performed specified procedures on revenue balances in the financial statements of Haydale
Technologies Thailand Limited. We performed analytical procedures on the financial information of the remaining four group
components;
The Group sells products and services worldwide predominantly through UK and US trading subsidiaries, which have different
characteristics. 100% of the Group’s revenue, were included in the scope of our full scope and specified audit procedures outlined
above; and
95.7% of the Group’s total assets and 95.6% of the Group’s net assets were included in the scope of our full scope and specified
audit procedures.
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.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report under the Companies Act 2006
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.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
•
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
313131
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FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries plc continued
Responsibilities of directors for the financial statements
As explained more fully in the statement of directors’ responsibilities set out on page 25, 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 at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Mark Bishop FCA (Senior Statutory Auditor)
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Oxford
32
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2020
Note
4
5
6
10
6
8
Year ended
30 June
2020
£’ 000
Year ended
30 June
2019
£’ 000
3,467
(1,567)
––––––––––––––––––––––––––––––
2,947
(885)
2,062
756
1,900
785
(5,357)
(6,865)
––––––––––––––––––––––––––––––
(4,180)
(2,539)
11
(63)
(1,640)
(200)
(350)
(1,118)
––––––––––––––––––––––––––––––
(1,668)
––––––––––––––––––––––––––––––
(1,692)
(7,049)
(8,533)
––––––––––––––––––––––––––––––
(5,848)
(1,784)
––––––––––––––––––––––––––––––
(4,231)
–
(7,049)
(10,317)
––––––––––––––––––––––––––––––
(7,632)
(123)
––––––––––––––––––––––––––––––
(4,231)
(176)
(4,407)
391
(7,755)
570
––––––––––––––––––––––––––––––
(4,016)
(7,185)
82
60
(291)
2
––––––––––––––––––––––––––––––
(7,123)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(4,225)
(4,016)
(7,185)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(7,123)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(4,225)
9
9
(0.06)
(0.06)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(0.01)
(0.01)
REVENUE
Cost of sales
Gross profit
Other operating income
Adjusted Administrative expenses
Adjusted operating loss
Adjusting administrative items:
Share based payment income/(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 37 to 70 form part of these financial statements.
33
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260028 Haydale AR pp33-pp36.qxp 05/11/2020 16:50 Page 34
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
Company Registration No. 07228939
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Current assets
Inventories
Trade receivables
Other receivables
Corporation tax
Cash and bank balances
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Bank loans
Pension Obligation
Other payables
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 losses
TOTAL EQUITY
30 June
2020
£’ 000
30 June
2019
£’ 000
Note
10
10
11
12
13
14
14
20
26
19
20
19
15
16
16
1,453
1,024
5,556
––––––––––––––––––––––––––––––
1,454
1,145
6,407
8,033
––––––––––––––––––––––––––––––
9,006
1,182
637
472
836
4,688
––––––––––––––––––––––––––––––
1,712
886
334
384
823
7,815
––––––––––––––––––––––––––––––
4,139
15,848
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
13,145
388
1,085
–
––––––––––––––––––––––––––––––
304
1,435
1,031
2,770
1,473
1,568
1,347
209
––––––––––––––––––––––––––––––
944
1,906
74
3,124
––––––––––––––––––––––––––––––
2,924
4,597
––––––––––––––––––––––––––––––
5,694
11,251
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
7,451
6,804
27,764
131
(18)
(27,230)
6,354
27,764
828
(100)
(23,595)
––––––––––––––––––––––––––––––
11,251
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
7,451
The financial statements on pages 33 to 70 were approved and authorised for issue by the Board of directors on 29 October 2020
and signed on its behalf by:
David Banks
Chairman
Keith Broadbent
Chief Executive Officer
34
260028 Haydale AR pp33-pp36.qxp 05/11/2020 16:50 Page 35
Haydale Graphene Industries Plc | Annual Report & Accounts 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
Share
capital
£’ 000
Share
premium
£’ 000
Share-based
payment
reserve
£’ 000
Foreign
exchange
reserve
£’ 000
Retained
losses
£’ 000
Total
equity
£’ 000
At 1 July 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
Recognition of share-based payments
Share based payment charges – lapsed and
cancelled options
Issue of ordinary share capital
Transaction costs in respect of share issues
(7,185)
62
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(7,185)
2
–
60
–
–
–
–
–
–
547
27,539
1,298
(100)
(23,866)
5,418
–
–
200
–
–
200
–
6,032
(399)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
5,807
–
(670)
–
–
670
–
(399)
–
225
–
–
–
–
At 30 June 2019
6,354
27,764
828
(100)
(23,595)
11,251
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
Share based payment charges – lapsed options
Issue of ordinary share capital
Transaction costs in respect of share issues
At 30 June 2020
(4,016)
(209)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(4,016)
(291)
–
82
–
–
–
–
–
–
6,354
27,764
828
(18)
(27,902)
7,026
–
–
450
–
(11)
–
450
(14)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
7,451
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(11)
(686)
–
–
–
686
–
(14)
(27,230)
27,764
–
–
–
–
–
–
–
–
6,804
(18)
131
35
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260028 Haydale AR pp33-pp36.qxp 05/11/2020 16:50 Page 36
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2020
Cash flow from operating activities
Loss before taxation
Adjustments for:-
Amortisation of intangible assets
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Share-based payment charge
Pension plan contributions
Finance costs
Pension – net interest expense
Taxation
Operating cash flow before working capital changes
(Increase) in inventories
(Increase)/decrease in trade and other receivables
(Decrease)/increase in payables and deferred income
Cash used in operations
Income tax received
Net cash used in operating activities
Cash flow used in investing activities
Purchase of property, plant and equipment
Purchase of Intangible Assets
Net cash used in investing activities
Cash flow used in financing activities
Finance costs
Finance costs – right of use asset
Payment of lease liability
Proceeds from issue of share capital
New bank loans raised
Repayments of borrowings
Net cash flow from financing activities
Effects of exchange rates changes
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Cash and cash equivalents at end of the financial year
36
Note
10
11
17
26
16
29
29
Year ended
30 June
2020
£’ 000
Year ended
30 June
2019
£’ 000
(4,016)
(7,185)
2,007
895
16
200
(118)
123
42
(570)
––––––––––––––––––––––––––––––
129
1,511
–
(11)
–
176
24
(391)
(4,590)
––––––––––––––––––––––––––––––
(2,578)
(401)
200
13
––––––––––––––––––––––––––––––
(531)
(111)
(104)
(4,778)
––––––––––––––––––––––––––––––
(3,324)
76
––––––––––––––––––––––––––––––
847
(4,702)
––––––––––––––––––––––––––––––
(2,477)
(1,205)
(267)
––––––––––––––––––––––––––––––
(44)
(251)
(1,472)
––––––––––––––––––––––––––––––
(295)
(123)
–
–
5,634
750
(500)
––––––––––––––––––––––––––––––
(94)
(82)
(631)
450
50
(835)
5,761
––––––––––––––––––––––––––––––
(1,142)
9
(404)
5,092
––––––––––––––––––––––––––––––
49
(3,865)
4,688
4,688
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
823
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
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.
Under Section 479A of the Companies Act 2006, exemptions from an audit of the accounts for the financial year ended 30 June 2020
have been taken by Haydale Limited (04790862) and Haydale Composite Solutions Limited (02675462). As required, the Company
guarantees all outstanding liabilities to which the subsidiary companies listed above are subject at the end of the financial year,
until they are satisfied in full and the guarantee is enforceable against the parent undertaking by any person to whom the subsidiary
companies listed above is liable in respect of those liabilities.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
made up to the reporting date. The Company controls an investee if all three of the following elements are present: power over the
investee, exposure to variable returns over the investee, and the ability of the investee to use its power to affect the variable returns.
Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. All
intra-group transactions, balances, income and expenditure are eliminated on consolidation. The consolidated financial statements
have been prepared using the acquisition method of accounting.
Under the acquisition method, the results of the subsidiaries acquired or disposed of are included from the date of acquisition or up
to the date of disposal. At the date of acquisition, the fair values of the subsidiaries’ net assets are determined, and these values are
reflected in the Consolidated Financial Information. The cost of acquisitions is measured at the aggregate of the fair values, at the
date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Haydale Graphene Industries
Group in exchange for control of the acquisition. 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 Directors have prepared and reviewed detailed financial forecasts of the Group and, in particular, considered the cash flow
requirements for the period from the date of approval of these financial statements to the end of December 2021. These forecasts
sit within the Group’s latest estimate and within the longer term financial plan, both of which have been updated on a regular basis
as our understanding of the potential impact of the Covid-19 pandemic has deepened. The Directors are also mindful of the impact
that the other risks and uncertainties set out on pages 9 to 11 of the Strategic Report may have on these estimates and in particular
the speed of adoption of new technology during these uncertain times.
As part of this review the Directors have considered several scenarios based on various revenue, cost and funding sensitivities.
Revenue
The underlying methodology has been to split the forecast revenue into two groups. The first group consists of revenue streams
which are underpinned by contracts or some other form of customer guarantee or commitment and therefore have a high certainty
of delivery. The second group consists of all other revenue lines. For this second tranche, in October 2020, we have assessed the
potential value and the likelihood of delivery of each revenue line based on management’s latest information and this has given us
a weighted average unconfirmed revenue estimate by month to December 2021. We have then applied further general sensitivities
to that estimate to assess the margin of error that would need to exist in those estimates before the Group would have a requirement
to raise further funds.
37
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FINANCIAL STATEMENTS
1. Accounting policies (continued)
Working Capital Facilities
The Directors have also stress tested the forecasts to assess the likely impact if existing working capital facilities were either not, or
not fully renewed during the period under review. The non-renewal of existing facilities reduces the general sensitivity level on
unconfirmed revenue streams to circa 55% of managements estimates before the forecast shows a cash negative position.
Cost Mitigation
The Directors have not included any assumptions regarding cost savings that might be achievable if the forecast fails to meet the
sensitised estimates. Whilst the Directors do believe that there would be scope for further cost reductions these have not been
factored into their assessment of going concern..
Customer Solvency
As part of this review the Directors have assessed the solvency of key customers and their ability to deliver on their contractual or
other commitments on the basis of publicly available information.
Summary
Therefore, after due consideration of the forecasts prepared and the sensitivities applied, the Group’s current cash resources and its
borrowing facilities 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),
2. Changes in accounting policies
IFRS 16 is the only new standard impacting the Group that has been adopted in the annual financial statements during the year,
and which has given rise to changes in the Group accounting policies.
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4 ‘Determining whether an Arrangement contains a
Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27 ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’)
The adoption of this new Standard has resulted in the Group recognising a right-of-use-asset and related lease liability in connection
with all former operating leases except for those identified as low-value or having a remaining lease term of less than 12 months
from the date of initial application.
The new Standard has been applied using the modified retrospective approach, recognising a right of use asset at the date of initial
application for leases previously classified as an operating lease at an amount equal to the lease liability, adjusted by the amount of
any prepaid or accrued lease payment relating to that lease recognised in the statement of financial position immediately before
the date of initial application.
For contracts in place at the date of initial application, the Group has elected to apply the definition of a lease from IAS 17 and IFRIC 4
and has not applied IFRS 16 to arrangements that were previously not identified as lease under IAS 17 and IFRIC 4.
The Group has elected not to include initial direct costs in the measurement of the right-of-use asset for operating leases in existence
at the date of initial application of IFRS 16, being 1 July 2019. At this date, the Group has also elected to measure the right-of-use
assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date
of transition.
Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Group relied on its historic
assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16.
On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and for
leases of low-value assets the Group has applied the optional exemptions to not recognise right-of-use assets but to account for the
lease expense on a straight line basis over the remaining lease term.
On transition to IFRS 16 the incremental borrowing rate applied to lease liabilities recognised under IFRS 16 was based on the average
borrowing rate for each relevant country and was between 4% and 6.25%.
38
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The following is a reconciliation of the financial statements line items from IAS 17 to IFRS 16 at 1 July 2019:
Haydale Graphene Industries Plc | Annual Report & Accounts 2020
Carrying
amount at
30 June 2019
£’000
Remeas-
urement
£’000
IFRS 16 carrying
amount at
1 July 2019
£’000
Property, plant and equipment
Lease liabilities
7,763
(2,207)
–––––––––––––––––––––––––––––––––––––––––––––
2,207
(2,207)
5,556
–
5,556
–––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––
5,556
–
Operating lease commitments at 30 June 2019 as disclosed under IAS 17 in the Group’s
consolidated financial statements
Discounted using the incremental borrowing rate at 1 July 2019
Recognised exemption for leases of low-value assets
Recognition exemption for leases with less than 12 months of lease term at transition
Lease liabilities recognised at 1 July 2019
3. Summary of significant accounting policies
(a) Intangible assets
Research and development expenditure
Research expenditure is recognised as an expense when it is incurred.
£’000
1,244
1,017
(4)
(50)
––––––––––––––
2,207
––––––––––––––
––––––––––––––
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.
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 up to 20 years when the products
or services are ready for sale or use. The maximum 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.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
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. 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
To determine whether to recognise revenue, the Group follows a five step process:
1.
2.
Identifying the contract with a customer
Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5.
Recognising revenue when/as performance obligation(s) are satisfied.
Revenue arises mainly as:
(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. In all instances the transaction price is agreed with the customer prior
to transfer of goods on a stand-alone basis.
(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.
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The group recognises 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. In all cases,
the total transaction price for a contract is allocated amongst the various performance obligations based on their relative
stand-alone prices.
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 once the Group’s right to consideration is unconditional 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.
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.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
(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.
(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 on an accruals basis.
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(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 operating 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 operating 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
Leased assets
As mentioned above, the Group has applied IFRS 16 using the modified retrospective approach and therefore comparative
information has not been restated. This means comparative information is still reported under IAS 17 and IRFIC 4.
Accounting policy applicable from 1st July 2019
For any new contract entered into on or after 1 July 2019, the Group considers whether a contract is, or contains a lease. A lease
is defined as ‘a contract, that conveys the right to use an asset for a period of time in exchange for consideration’. To apply this
definition the Group assesses whether the contract meets all three key criteria which are whether;
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
•
•
•
The contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Group.
The Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout
the period of use, considering its rights within the defined scope of the contract.
The Group has the right to direct the use of the identified asset throughout the period of use. The Group assesses whether
it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.
Measurement and recognition of lease as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-
use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred
by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payment made
in advance of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight line basis from the lease commencement date to the earlier of the
end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for
impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payment unpaid at that
date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental
borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments, variable payments based on
an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably
certain to be exercised.
Subsequent to initial measurement, the liability will be reducing for payment made and increased for interest. It is remeasured
to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if
the right-of-use asset is already reduced to zero.
Measurement and recognition of lease as a lessor
The Group leases out elements of plant and machinery. The Group has classified these leases as operating leases. The Group is
not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor.
The Group has applied IFRS 15 Revenue from Contracts with customers to allocate consideration in the contract to each lease
and non-lease components.
Comparative period
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 benefit from the leased asset are consumed.
(n) Transactions and balances in foreign currencies
Transactions in foreign currencies are converted into the respective functional currencies on initial recognition, using the
exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting
period are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates
that existed when the values were determined. All exchange differences are recognised in profit or loss.
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.
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(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 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 (CGUs) 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 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.
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 is Chief Executive Officer and Chief Financial Officer) 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, Composites & Inks (focussing on the composites market in Europe (known as RPC&I);
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)
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FINANCIAL STATEMENTS
4. Segment analysis (continued)
2020
Resins,
Polymers Advanced
Composites & Inks Materials Asia-Pacific
£’000 £’000 £’000
421
(249)
REVENUE 357 2,169
(517)
Cost of sales (119)
Consolidated
£’000
2,947
(885)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Adjustments,
Central &
Eliminations
£’000
–
–
Gross profit 238 1,652
Other operating income 550 206
(1,687)
Adjusted administrative expenses (1,689)
2,062
756
(5,357)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
–
(1,394)
172
–
(587)
Adjusted operating loss (901)
Administrative expenses
171
(415)
(1,394)
(2,539)
Share based payment expense 6 (8)
Depreciation & amortisation (411)
(868)
Restructuring costs – –
11
(1,640)
(63)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
13
(229)
(63)
–
(132)
–
(405)
(876)
(279)
(132)
(1,692)
Total administrative expenses (2,094)
(7,049)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(2,563)
(1,526)
(866)
OPERATING LOSS (1,306)
Finance costs
(4,231)
(176)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(1,526)
(694)
(705)
LOSS BEFORE TAXATION
Taxation
(4,407)
391
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
LOSS AFTER TAXATION
(4,016)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Additions to non-current assets 40 –
Segment assets 2,486 7,573
(4,173)
Segment liabilities (698)
4
567
(239)
Exceptional Items
Exceptional items
Impairment of goodwill
Impairment of customer relationships
Impairment of development expenditure
–
2,519
(584)
2020
£’000
44
13,145
(5,694)
2019
£’000
634
142
1,008
––––––––––––––––––––––––––––––
–
–
–
1,784
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
–
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During the comparative year, the Group impaired intangible assets by £1.78 million in respect of Haydale Composite Solutions Limited.
2019
Resins,
Polymers Advanced
Composites & Inks Materials Asia-Pacific
£’000 £’000 £’000
407
(195)
REVENUE 441 2,619
(1,128)
Cost of sales (244)
Consolidated
£’000
3,467
(1,567)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Adjustments,
Central &
Eliminations
£’000
–
–
Gross profit 197 1,491
Other operating income 766 –
(2,523)
Adjusted administrative expenses (1,488)
1,900
785
(6,865)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
212
19
(1,003)
–
–
(1,851)
Adjusted operating loss (525)
Administrative expenses
(1,032)
(772)
(1,851)
(4,180)
(14)
Share based payment expense (40)
(339)
Depreciation & Amortisation (366)
Restructuring costs – –
–
Impairment (1,784)
(200)
(1,118)
(350)
(1,784)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(3,452)
(2,190)
(126)
(341)
(350)
–
(20)
(72)
–
–
(353)
(817)
(92)
(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 241 885
Segment assets 2,177 7,765
(2,828)
Segment liabilities (405)
79
613
(216)
–
5,293
(1,148)
1,205
15,848
(4,597)
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
2020
£’000
2019
£’000
328
657
632
3
239
414
1,133
61
––––––––––––––––––––––––––––––
278
378
597
2
345
198
1,113
36
3,467
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2,947
47
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A
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I
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N
A
N
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E
V
O
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T
N
E
M
E
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A
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A
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N
A
N
I
F
I
N
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I
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A
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FINANCIAL STATEMENTS
4. Segment analysis (continued)
During 2020, £1.1 million (37%) (2019: £1.13 million (33%)) of the Group’s revenue depended on a single customer. During
2020 £0.35 million (12%) (2019: £0.58 million (17%)) of the Group’s revenue depended on a second single customer.
Revenue as a proportion of total group turnover for the year within Europe was predominantly to Germany £0.38 million (13%) (2019:
Germany £0.58 million (17%))),.
All amounts shown as other operating income within the Statement of Comprehensive Income are generated within and from the
United Kingdom, EU and the US. These amounts include income earned as part of a number of grant funded projects in the United
Kingdom and EU and a government grant in the US.
Revenue from goods was £2.45 million (83%) of the Group’s revenue (2019: £2.98 million or 86%) and revenue from services was
£0.4 million (14%) (2019: £0.34 million or 10%).
Dis-aggregation of revenues
The split of revenue by type:
Services
Reactor sales
Reactor rental
Goods
2020
2020
£’000
2019
£’000
342
77
69
2,979
––––––––––––––––––––––––––––––
406
–
89
2,452
3,467
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2,947
RPC&I
£’000
AMAT
£’000
APAC
£’000
TOTAL
£’000
Services 104 –
Reactor rental 89 –
Goods 164 2,169
406
89
2,452
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
302
–
119
357 2,169
2,947
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
421
2019
RPC&I
£’000
AMAT
£’000
APAC
£’000
TOTAL
£’000
Services 184 –
Reactor sales – –
Reactor rental 69 –
Goods 188 2,619
342
77
69
2,979
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
158
77
–
172
441 2,619
3,467
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
407
Services and reactor rental revenues are recognised over time, whereas goods and reactor sales are recognised at a point in time.
48
260028 Haydale AR pp37-pp56.qxp 05/11/2020 16:52 Page 49
The group acquired the following non-current assets during the year, split by geographical location as detailed below:
Haydale Graphene Industries Plc | Annual Report & Accounts 2020
Non-current asset additions
By destination
United Kingdom
United States of America
Thailand
Taiwan
2020
£’000
2019
£’000
241
885
14
65
––––––––––––––––––––––––––––––
40
–
4
–
1,205
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
44
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
Federal Support Schemes
There are no unfulfilled conditions attached to the above income.
6. Loss before taxation
Loss before taxation is arrived at after charging:
Impairment of intangibles – Note 10
Amortisation of other intangibles
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
49
2020
£’000
2019
£’000
3,387
4,344
148
1
153
––––––––––––––––––––––––––––––
3,564
5,257
184
1
–
8,033
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
9,006
2020
£’000
2019
£’000
785
–
––––––––––––––––––––––––––––––
550
206
785
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
756
2020
£’000
–
129
63
1,511
–
(9)
2019
£’000
1,785
222
350
867
16
(24)
614
6
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
–
2
T
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G
E
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A
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I
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C
N
A
N
R
E
V
O
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S
T
N
E
M
E
T
A
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L
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C
N
A
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260028 Haydale AR pp37-pp56.qxp 05/11/2020 16:52 Page 50
FINANCIAL STATEMENTS
6. Loss before taxation (continued)
The service fees of the Group’s auditor, Grant Thornton UK LLP and BDO LLP for the comparative period, 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
2020
£’000
67
2019
£’000
27
50
18
7
––––––––––––––––––––––––––––––
–
40
–
102
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
107
All service fees for the current year relate to Grant Thornton UK LLP and service for 2019 relate BDO LLP.
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 (income)/expense
Directors remuneration
Short-term employee benefits and fees
Post-retirement benefits
2020
No.
2019
No.
25
54
––––––––––––––––––––––––––––––
23
40
79
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
63
2020
£’000
2019
£’000
4,140
339
120
42
200
––––––––––––––––––––––––––––––
3,243
287
170
24
(11)
4,841
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
3,713
2020
£’000
2019
£’000
495
16
––––––––––––––––––––––––––––––
484
25
511
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
509
The total amount payable to the highest paid director in respect of emoluments was £252,000 (2019: £189,000), including pension
costs of £20,000 (2019: £8,000).
50
260028 Haydale AR pp37-pp56.qxp 05/11/2020 16:52 Page 51
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
Haydale Graphene Industries Plc | Annual Report & Accounts 2020
2020
£’000
2019
£’000
442
–
––––––––––––––––––––––––––––––
384
7
442
––––––––––––––––––––––––––––––
391
128
–
––––––––––––––––––––––––––––––
–
–
128
––––––––––––––––––––––––––––––
–
570
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
391
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% (2019 – 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 over provision in comparative year
Movement in unrecognised losses carried forward
Movement in unrecognised fixed asset temporary differences
Deferred tax: Origination and reversal of temporary differences
Total tax credit
2020
£’000
2019
£’000
(4,016)
(391)
(7,185)
(570)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(4,407)
(7,755)
1,474
(409)
17
275
43
(44)
–
(681)
(233)
128
––––––––––––––––––––––––––––––
837
(143)
24
259
45
(109)
7
(492)
(37)
–
570
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
391
Changes in tax rates and factors affecting the future tax charge
The main rate of corporation tax for UK companies is currently 19%. In the Spring Budget 2020, the Government announced that
from 1 April 2020 the corporation tax rate would remain at 19% (rather than reducing to 17%, as previously enacted). This new law
was substantively enacted on 17 March 2020.
The Group has tax losses that are available indefinitely for the UK and a maximum of 20 years for the US to be offset against future
taxable profits of the companies approximately amounting to £23.96 million (2019: £21.85 million) and £4.16 million
(2019: £4.53 million) of fixed asset timing differences. No tax losses are expected to expire within the next 15 years. 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.
51
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A
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V
O
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S
T
N
E
M
E
T
A
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S
L
A
C
N
A
N
I
F
I
N
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260028 Haydale AR pp37-pp56.qxp 05/11/2020 16:52 Page 52
FINANCIAL STATEMENTS
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 (£)
2020
£’000
2019
£’000
(4,016)
(7,185)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
331,162,204
115,060,850
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(0.06)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(0.01)
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 2020, there were 34,248,583 (2019: 2,632,199) options and warrants outstanding as detailed in note 17.
All of the above options are potentially dilutive.
10. Intangible assets
Customer
Relationships
£’000
Development
expenditure
£’000
Goodwill
£’000
Total
£’000
Cost
At 1 July 2018
Additions
At 1 July 2019
Additions
FX translation
At 30 June 2020
Accumulated amortisation
At 1 July 2018
Charge for the period
Impairment
At 1 July 2019
Charge for the year
FX translation
At 30 June 2020
Net book value
At 30 June 2020
At 30 June 2019
At 30 June 2018
4,789
267
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,087
–
1,548
267
1,154
–
1,154
–
–
5,056
251
1
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
5,308
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,087
1
–
1,815
250
1
2,066
2,088
1,154
572
222
1,785
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
284
107
1,008
–
–
634
288
115
143
546
87
–
2,579
129
1
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,709
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,399
42
1
634
–
–
1,442
634
633
2,599
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,454
624
521
2,477
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,453
608
416
4,217
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,087
1,264
866
All of the above Development expenditure is currently in use.
52
260028 Haydale AR pp37-pp56.qxp 05/11/2020 16:52 Page 53
Haydale Graphene Industries Plc | Annual Report & Accounts 2020
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). On the 9 September 2016, goodwill of £327,151 arose on
the acquisition of Innophene Co. Ltd (now Haydale Technologies Thailand (“HTT”)). Goodwill arose on the acquisition of HCT
(formerly ACM) on the 13TH October 2016 of £1,102,620.
During the comparative year, the decision was taken to impair the carrying value of intangible assets held by Haydale Composite
Solutions Limited by £634,000.
Customer Relationships
The Customer relationships intangible asset arose on the fair value of assets on the acquisition of EPL Composite Solutions Ltd
(now HCS) 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.
During the comparative year the Customer Relationships in HCS were impaired to nil.
Development costs
Development costs brought forward are made up of three areas. The first 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 relates to capitalised patent costs that were acquired as part of the acquisition of
Innophene Co Ltd. (now HTT) in 2015. The third relates to the development of graphene enhanced epoxy resins within Haydale Limited,
HCS and HTT.
Development expenditure of £251,000 was capitalised during the year in accordance with IAS 38 in connection with the Group’s
expenditure with the development of graphene enhanced products (including inks and epoxy resins), where the Directors believe
that future economic benefit is probable (2019: £267,000). 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 HCS the Development Expenditure relating to enhanced epoxy
resin were impaired to nil during the comparative 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.
Goodwill impairment
Goodwill acquired in a business combination is allocated at acquisition to the CGUs that are expected to benefit from that business
combination. Following the acquisitions of HCS, HCT and HTT, 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, HCS and HTT as separate CGU’s.
53
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N
A
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E
V
O
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T
N
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M
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A
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A
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260028 Haydale AR pp37-pp56.qxp 05/11/2020 16:52 Page 54
FINANCIAL STATEMENTS
10. Intangible assets (continued)
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
Haydale Ceramic Technologies LLC (HCT)
Haydale Technologies (Thailand)
2019
£’000
–
23
1,103
327
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2020
£’000
–
23
1,103
327
2020
%
10%
n/a
12%
10%
2019
%
10%
n/a
12%
10%
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% (2019: 12%), have been used to
discount projected cash flows.
During the comparative year, due to the uncertainty and timing of HCS income, the Directors followed IAS 36 guidance and impaired
the intangible assets relating to the CGU (see above).
The impairment calculations for the current year have been derived from the five year forecasts that have been reviewed by the
Board.
The HCT model assumes that its turnover will grow at 15% in the current financial year, 45% in year two, 50% in year three and below
10% in years four and five and then reducing to 2% in perpetuity. The growth rates used are based on management’s internally
estimated growth forecasts which take into account blank sales and the adoption of the UK products and technology into the
US market.
The HTT model assumes that its turnover will grow at 25% in the current financial year, 10% in year 2 to 5, reducing to 2% into
perpetuity. The growth rates used are based on management’s internally estimated growth forecasts which take into account current
and future product commercialisation.
Following this review, the Directors have determined there is no impairment charge which should be recognised against the
intangible assets of the Group for the year ended 20 June 2020.
Sensitivity to changes in assumptions
Management has completed sensitivity analysis on the impairment model which requires revenue to decrease by £13 million over a
5 year period to result in a material impairment. No reasonable change in the discount rate would cause an impairment.
5454
260028 Haydale AR pp37-pp56.qxp 05/11/2020 16:52 Page 55
Haydale Graphene Industries Plc | Annual Report & Accounts 2020
11. Property, plant and equipment
Assets
Leasehold Plant
and leasehold and
Fixtures Motor under
improvements machinery and fittings vehicles construction
£’000 £’000 £,000
£’000 £’000
Total
£’000
Cost
At 1 July 2018 583 5,941
Additions 48 267
FX translation 4 179
Disposals – –
Transfers – 1,188
7,406
511
1,205
12
203
20
(21)
(21)
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
341
878
–
–
(1,188)
30
–
–
–
–
At 1 July 2019 635 7,575
Transition to IFRS 16 2,207 –
8,793
522
2,207
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
30
–
31
–
2,842 7,575
Additions – 34
FX translation – 126
11,000
522
44
10
138
10
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
11,182
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
30
–
1
31
–
1
7,735
542
32
31
At 30 June 2020 2,842
Accumulated depreciation
At 1 July 2018 240 1,906
Charge for the year 68 732
FX translation 1 24
Disposals – –
2,345
189
867
61
29
5
(4)
(4)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
10
6
(1)
–
–
–
At 1 July 2019 309 2,662
Charge for the year 684 765
FX Translation 1 23
3,237
251
1,511
56
27
4
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,775
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
15
6
(1)
3,450
–
–
–
311
20
–
At 30 June 2020 994
Net book value
At 30 June 2020 1,848
6,407
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,285
231
32
11
At 30 June 2019 326 4,913
5,556
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
271
15
31
At 30 June 2018 343 4,035
5,061
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
322
341
20
Including in the net carrying amount of Property, plant and equipment are right-of-use assets as follows:
Leasehold and leasehold improvements cost
Leasehold and leasehold improvements depreciation
Leasehold and leasehold improvement NBV
30 June 2020
£’000
2,207
(613)
––––––––––––––––
1,594
––––––––––––––––
––––––––––––––––
55
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G
E
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A
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S
I
E
C
N
A
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E
V
O
G
S
T
N
E
M
E
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A
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L
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A
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I
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260028 Haydale AR pp37-pp56.qxp 05/11/2020 16:52 Page 56
FINANCIAL STATEMENTS
12. Inventories
Raw materials
Work in progress
Finished goods
2020
£’000
2019
£’000
116
96
970
––––––––––––––––––––––––––––––
242
125
1,345
1,182
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
1,712
The total value of inventories recognised in cost of sales during the year was £885,471 (2019: £725,986).
Raw materials and finished goods comprise of SiC, blanks, functionalised carbon, chemicals and associated raw materials. Work in
progress comprises recoverable costs on long-term contracts.
13. Trade receivables
Trade receivables
14. Other receivables
Other receivables
Prepayments and accrued income
Grants receivable
Corporation tax
2020
£’000
2019
£’000
637
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
886
2020
£’000
2019
£’000
158
133
181
––––––––––––––––––––––––––––––
137
197
–
472
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
334
2020
£’000
2019
£’000
836
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
384
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
2020
£’000
2019
£’000
178
31
––––––––––––––––––––––––––––––
–
74
209
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
74
Commercial Deferred Income
As at 30 June 2020, deferred income of £30,769 (2019: £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.
5656
260028 Haydale AR pp57-pp70.qxp 05/11/2020 17:00 Page 57
16. Share capital and share premium
At 1 July 2018
Issue of £0.02 ordinary shares
At 30 June 2019
Issue of £0.02 ordinary shares
At 30 June 2020
Haydale Graphene Industries Plc | Annual Report & Accounts 2020
Number of
shares
Total
No.
£’000
27,328,773
28,086
6,032
290,395,075
––––––––––––––––––––––––––––––––––––––––––––––––––
Share
premium
£’000
27,539
225
Share
capital
£’000
547
5,807
6,354
450
34,118
317,723,848
22,500,000
450
––––––––––––––––––––––––––––––––––––––––––––––––––
34,568
340,223,848
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
27,764
–
27,764
6,804
During the year, the Company issued 22,500,000 new ordinary shares of 2p each.
Issue costs amounting to £14,000 have been charged to the profit and loss account during the year (2019: £399,000).
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 unapproved options is equal to the mid-market price of the shares
on the date of grant. The exercise price of the 2020 EMI options granted on 13 January 2020 was 2.25p per Ordinary Share (being a
19.7 % premium to the closing mid–market price of the Company’s Ordinary Shares on 10 January 2020, the last trading day before
the 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
Lapsed
Forfeited
Balance at end of year
Number
of options
No.
2,504,691
34,100,000
(1,591,960)
(831,546)
2019
WAEP
Pence
63.0
–
–
67.0
––––––––––––––––––––––––––––––––––––––––––––––––––
Number
of options
No.
3,242,801
–
–
(738,100)
2020
WAEP
Pence
62.0
2.25
113.0
113.0
34,181,185
62.0
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
2,504,691
23.0
At 30 June 2020, there were options outstanding over 34,181,185 unissued ordinary shares, equivalent to 10% of the issued share
capital as follows:
Unapproved scheme
19 May 2016
14 October 2016
26 June 2017
15 December 2017
Approved EMI scheme
13 January 2020
Number of
shares
Exercise
price
Earliest exercise
date
Latest
exercise date
4,665
6,759
32,984
36,777
171.50p
198.14p
178.50p
125.50p
19 May 2019
14 October 2019
27 June 2020
15 December 2020
19 May 2026
14 October 2026
27 June 2027
15 December 2027
2.25p
13 January 2023
13 January 2030
34,100,000
–––––––––––
34,181,185
–––––––––––
–––––––––––
57
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FINANCIAL STATEMENTS
17. Share-based payment transactions (continued)
The estimated fair value was calculated by applying a Black-Scholes option pricing model.
19 May 2016
14 October 2016
26 June 2017
15 December 2017
13 January 2020
Type of
award
Unapproved
Unapproved
Unapproved
Unapproved
EMI
Number
of shares
4,665
6,759
32,984
36,777
34,100,000
–––––––––
34,181,185
–––––––––
–––––––––
Share
price
at date of
grant
(p)
172
198
179
126
1.88
Fair
value
per
option
(p)
101
113
179
55
0.01
Award
life
(years)
10
10
10
10
10
Risk
free
rate
(%)
0.62
0.50
0.50
0.50
0.50
Expected
volatility
rate Performance
conditions
None
None
None
None
See below
(%)
51
49
34
51
96
Should the Company’s closing mid-market share price reach and remain at or above £0.04 for at least 15 consecutive trading days,
commencing after the grant date and ending on or before 30 September 2021, 30% of share options are capable of exercise.
Should the Company’s closing mid-market share price reach and remain at or above £0.08 for at least 15 consecutive trading days,
commencing after the grant date and ending on or before 30 September 2022, an additional 30% of share options are capable of
exercise.
Should the Company’s closing mid-market share price reach and remain at or above £0.16 for at least 15 consecutive trading days,
commencing after the grant date and ending on or before 30 September 2023, the final 40% of share options are capable of exercise.
The weighted average remaining contractual life of share options outstanding at 30 June 2020 is 9.5 years (2019: 8.1 years). The charge
for the year for share-based payment amounted to £0.1 million (2019: £0.2 million).
Warrants
Balance at beginning of year
Lapsed
Balance at end of year
2020
Weighted
Number of
warrants
2019
Weighted
average
exercise
No. price Pence
193
187
––––––––––––––––––––––––––––––––––––––––––––––––––
average Number of
exercise
warrants
No. price Pence
208
208
107,398
(40,000)
385,719
(278,321)
67,398
208
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
107,398
208
No warrants were issued during the year under review. None of the warrants outstanding at 30 June 2020 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 2020 is 0.72 years (2019: 1.33 years). The charge
for the year for share-based payment amounted to £11,410 (2019: £48,254).
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
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 into
pound sterling.
19. Trade and other payables
Current
Liabilities
2019
£’000
Non-Current
Liabilities
2019
£’000
2020
£’000
2020
£’000
Current Liabilities
Trade payables
Tax and social security
Lease liability
Accruals and other creditors
410
181
617
698
–
–
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––
–
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
473
57
–
817
–
–
1,031
–
1,906
1,031
1,347
A working capital bank facility in the US has been reclassified from Other Creditors to Bank Loans.
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
2019
£’000
1,956
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2020
£’000
1,248
1,568
267
121
––––––––––––––––––––––––––––––
944
265
39
1,956
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
1,248
59
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FINANCIAL STATEMENTS
20.Bank loans (continued)
The Group’s borrowings are denominated in US dollars and Pounds Sterling. The directors consider that there is no material differ-
ence between the fair value and carrying value of the Group’s borrowings.
Average interest rates paid
2019
%
6.1
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2020
%
7.9
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, secured on the fixed assets of HTI and its newly acquired operating
subsidiary, Advanced Composite Materials (now HCT). 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 had an interest at a rate
of 11% per annum and was repayable in 12 equal monthly instalments with the final repayment being paid in March 2020.
In June 2020, as part of the Government Bounce Back Loan scheme, HCS entered into a six year loan agreement with Natwest for
£50,000. The loan has a payment holiday and does not accrue interest during the first 12 month. Following the initial 12 months
interest will be charged at 2.5% p.a. and is repaid in equal instalments over the remaining period.
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
Post-retirement benefits
2019
£’000
495
55
16
––––––––––––––––––––––––––––––
2020
£’000
484
50
25
566
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
559
Other transactions – Group and parent company
During the comparative year £18,519 was paid to ONE Advisory Ltd for financial, administration, compliance and support services, a
company of which Mr M Wood, who served as a director of the Company until 20 December 2018. At 30 June 2019, the balance owed
to ONE Advisory Ltd was £694.
Fees totalling Nil (2019: £49,323) were paid to the ATL Consulting Ltd, a company of which Mr R Smith, who served as a director of the
Company until 31 January 2019, is a director, for business development consultancy. At 30 June 2020, the balance owed to ATL
Consulting Ltd was Nil (2019: Nil).
Fees totalling £6,332 (2019: £14,233) were paid to the AVI Partners, a company based in Jersey of which Mr R Smith who served as a
director of the Company until 31 January 2019 for business development consultancy. At 30 June 2020, the balance owed to AVI
Partners was Nil (2019: £Nil).
Fees totalling £13,500 (2019: Nil) were paid to the Evesco International Business Services of which Mr G Eves who served as a director
of the company during the year for support for the share issue during the year. At 30 June 2020, the balance owed to Evesco
International Business Services was Nil (2019: £Nil).
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
Other transactions - Group
Other related party transactions during the year under review are shown in the table below:
Services Received
PlanarTech
QM Holdings
2020
£’000
2019
£’000
99
443
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
–
468
During the year an amount of £467,741 was paid to QM Holdings in respect of property rent (2019: £443,003). QM Holdings is owned
by Tom Quantrille and Marvin Murrell who are officers of HCT, a wholly owned subsidiary of the Group. The balance outstanding to
QM Holdings at the year-end was £40,163 (2019: £36,697).
During the previous 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 Nil (2019: £99,476). The balance outstanding to PlanarTech at the year-end was Nil (2019: Nil).
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.
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
952
999
––––––––––––––––––––––––––––––––––––––––––––––––––
112
––––––––––––––––––––––––––––––––––––––––––––––––––
111
47
1
949
––––––––––––––––––––––––––––––––––––––––––––––––––
804
145
175
––––––––––––––––––––––––––––––––––––––––––––––––––
175
–
2020
Financial assets
Financial liabilities
2019
Financial assets
Financial liabilities
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FINANCIAL STATEMENTS
22. Financial instruments (continued)
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%
2020 Increase/
(decrease)
£’000
2019 Increase/
(decrease)
£’000
93
(76)
54
(44)
16
(13)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
6
(5)
(ii)
Interest rate risk
The Group’s exposure to interest rate risk arises mainly from interest-bearing financial assets. The Group’s policy is to
obtain the most favourable interest rates available, while ensuring no risk to capital. Any surplus funds will be placed
with licensed financial institutions to generate interest income. The current loan and credit facilities maintain a fixed
rate of interest.
Interest rate risk sensitivity analysis
A 100 basis points strengthening or weakening of the interest rate as at the end of each financial period would have
an immaterial impact on loss after taxation and / or net assets. This assumes that all other variables remain constant.
(ii) Credit risk
The Group’s exposure to credit risk, or the risk of third parties defaulting, arises mainly from trade and other receivables.
The Group manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures
on an ongoing basis. For other financial assets (including cash and bank equivalents), the Group minimises credit risk by
dealing exclusively with high credit rating financial institutions.
The Group establishes an allowance for impairment that represents its 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.
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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
2019
£’000
106
71
119
341
––––––––––––––––––––––––––––––
2020
£’000
28
181
115
562
637
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
886
2020
£’000
834
2019
£’000
604
31
2
––––––––––––––––––––––––––––––
41
11
637
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
886
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 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.
63
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O
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S
T
N
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FINANCIAL STATEMENTS
22. Financial instruments (continued)
Maturity analysis
The ageing analysis of the Group’s non-derivative financial liabilities as at the year-end is as follows:
2020
Trade payables
Secured bank loan
Unsecured bank loan
Lease liability
Total
2019
Trade payables
Secured bank loan
Total
1 to 2 Yrs
£’000
–
255
9
617
Under 1 Yr
£’000
410
943
1
617
Total
£’000
410
1,198
50
1,648
––––––––––––––––––––––––––––––––––––––––––––––––––
3,306
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
2 to 5 Yrs
£’000
–
–
40
414
1,971
454
881
1 to 2 Yrs
£’000
–
267
Under 1 Yr
£’000
473
1,568
Total
£’000
473
1,956
––––––––––––––––––––––––––––––––––––––––––––––––––
2,429
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
2 to 5 Yrs
£’000
–
121
2,041
267
121
(b) Capital risk management
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
Right-of-Use Lease Liability
Accruals and other creditors
Financial Liabilities (at amortised cost)
2020
£’000
2019
£’000
637
158
4,688
––––––––––––––––––––––––––––––
886
334
823
5,483
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2,043
1,956
473
–
817
––––––––––––––––––––––––––––––
1,248
410
1,648
698
3,246
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
4,004
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.
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23. Capital commitments
The Group had the following capital commitments in the respective years:
Authorised by the Directors but not contracted for
2019
£’000
17
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2020
£’000
50
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. 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
Payments recognised as an expense under these leases were as follows:
Operating lease expense
2020
2020
2019
2019
Land and
Plant and
Land and
Plant and
buildings machinery
buildings machinery
£’000
£’000
1
4
3
4
–
–
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
£’000
–
–
–
£’000
624
473
139
8
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
1,236
4
–
2020
2020
2019
2019
Land and
Plant and
Land and
Plant and
buildings machinery
buildings machinery
£’000
£’000
1
6
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
£’000
–
£’000
614
As at 1 July 2020 the Group has applied IFRS 16 using the modified retrospective approach and therefore comparative information
has not been restated. This means comparative information is still reported under IAS 17 and IRFIC 4. The implementation of IFRS 16
has resulted in the leases in relation to Land and Building being recognised under IFRS 16 and not as operational leases.
A significant proportion of the lease arrangements in the comparative year relate to the premises from which HTI and HCT operate
in South Carolina, USA totalling £0.45 million. Other leases pertain to the office and unit contracts for the three UK facilities of in
aggregate £0.16 million. Of the £0.16 million, certain leases are cancellable with three months’ notice.
The facility in Thailand is leased. The cost is £0.01 million.
Within the minimum lease payments for plant and machinery is the cost relating the general office equipment.
65
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FINANCIAL STATEMENTS
26.Defined Benefit Pension Scheme
HCT operated a defined benefit pension scheme. The scheme was closed in November 2006 for any new participants.
Contributions of Nil were made to the scheme during the year ended 30 June 2020 (2019: £118,220). No contributions are expected
to be made during the year ended 30 June 2021.
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
The following table sets forth the pension plan’s funded status as of 30 June:
Accumulated benefit obligation
Projected Benefit obligation
Plan assets at fair value
Funded Status
Accrued Pension Cost
2019
£’000
42
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2020
£’000
24
2019
£’000
(2)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2020
£’000
292
2019
£’000
(3,960)
(3,960)
2,875
––––––––––––––––––––––––––––––
2020
£’000
(4,275)
(4,275)
2,840
(1,085)
––––––––––––––––––––––––––––––
(1,435)
(1,085)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(1,435)
Net amount recognised in the consolidated balance sheet as of 30 June, consisted of the following:
Non-current Liabilities
2019
£’000
(1,085)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2020
£’000
(1,435)
The discount rate is based on the yield curve of government bonds in the applicable region adjusted with a credit spread of one of
the two highest ratings given by a recognized ratings agency. Future cash outflows of the plans are then related with the yield
curve. The average is the discount rate. The weighted average assumptions used to develop the actuarial present value of benefit
obligations and net periodic benefit costs for the pension plan are as follows for the year ended 30 June 2020:
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:
3.00%
3.00%
0.00%
3.00%
Longevity at retirement age (current & future pensioners)
– Males
– Females
2020
22.57 years
25.00 years
2019
23.80 years
25.90 years
Plan Assets
Pension assets are managed by an outside investment manager and are rebalanced periodically. The Company establishes policies
and strategies and regularly monitors performance of the assets, including the selection of investment managers, setting long-term
strategic targets, and monitoring asset allocations. Target allocation ranges are guidelines, not limitations, subject to variation from
time-to-time or as circumstances warrant, and occasionally, the Company may approve allocations above or below a target range.
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The pension plan’s investment strategy with respect to pension assets is to invest the assets in accordance with ERISA and fiduciary
standards. The long-term primary objective for the pension plan assets are to protect the assets from erosion of purchasing power
and to provide a reasonable amount of long-term growth of capital, without undue exposure to risk. Currently, the strategic targets
are 45% for equity securities, 50% for debt securities, and no more than 5% for other categories.
The fair value of the Company’s pension plan assets valued at 30 June 2020, by asset category were as follows:
Description
Cash
Corporate Equities
Fixed Income:
US Government
Municipal
Corporate debt
Mutual Funds
Total
Carrying
Amount
£’000
137
1,554
Assets/
Liabilities
Measured at
Fair Value
£’000
137
1,554
Fair Value Measurements at
30 June 2020 using
Level 1
Inputs
£’000
137
1,554
Level 2
Inputs
£’000
–
–
56
6
988
99
56
6
988
–
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,050
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
56
6
988
99
–
–
–
99
2,840
2,840
1,790
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 2020, were as follows:
Opening Balance
Contributions
Distributions
Earnings
Net realised gain
Administrative expenses
Foreign exchange gain/(loss)
Balance at Year End
2020
£,000
2,875
–
(245)
177
20
(66)
79
2019
£,000
2,710
118
(245)
63
189
(75)
115
––––––––––––––––––––––––––––––––––
2,875
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
2,840
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:
2020
2021
2022
2023
2024
Thereafter
2019
£,000
268
277
274
276
274
1,389
––––––––––––––––––––––––––––––––––
2020
£,000
266
274
272
276
275
1,411
2,758
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
2,774
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G
E
T
A
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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
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S
L
A
C
N
A
N
I
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N
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260028 Haydale AR pp57-pp70.qxp 05/11/2020 17:00 Page 68
FINANCIAL STATEMENTS
26.Defined Benefit Pension Scheme (continued)
The company’s pension plan asset allocations by asset category were as follows as of 30 June 2020:
Asset Category
Cash
Equity Mutual Funds
Fixed Income
Other
Plan Obligations
Benefit Obligation at 01 July 2019
Foreign exchange movement
Interest cost
Actuarial loss
Benefits paid
Benefit Obligation at 30 June 2020
Fair Value of Plan Assets at 01 July 2019
Foreign Exchange movement
Actual Return on plan assets
Interest Income
Employer contributions
Benefits paid
Fair Value of Plan Assets at 30 June 2020
Funded Status at 30 June 2020
4.8%
54.7%
37%
3.5%
2019
£’000
3,830
155
152
68
(245)
––––––––––––––––––––––––––––––––––
2020
£’000
3,960
114
136
310
(245)
3,960
––––––––––––––––––––––––––––––––––
4,275
2,710
115
69
108
118
(245)
––––––––––––––––––––––––––––––––––
2,875
79
19
112
–
(245)
2,875
––––––––––––––––––––––––––––––––––
2,840
(1,085)
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
(1,435)
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
Mortality Rate
Reasonably
Possible Change
(+/- 0.25%)
(+/-1.00%)
Defined Benefit Obligation (£’000)
Decrease
108
(14)
Increase
(103)
13
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 2020, were £24,000 (2019: £58,009).
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
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 2019
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 2020
2020
£’000
–
7
2019
£’000
(125)
128
–
(3)
––––––––––––––––––––––––––––––
–
(7)
–
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
–
Deferred tax assets have been recognised in respect of tax losses and other temporary differences giving rise to deferred tax assets
where the Directors believe it is probable that these assets will be recovered.
Detail of the deferred tax liability, amounts recognised in profit and loss and amounts recognised in other comprehensive income
are as follows:
Employee pension liabilities
Available losses
Business combinations
Net tax assets/(liabilities)
Employee pension liabilities
Available losses
Business combinations
Net tax assets/(liabilities)
(Charged)/
credited
to profit
or loss
2020
£’000
73
(30)
(43)
––––––––––––––––––––––––––––––––––––––––––––––––––
–
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
Liability
2020
£’000
–
–
(937)
Net
2020
£’000
301
636
(937)
Asset
2020
£’000
301
636
–
(937)
937
–
(Charged)/
credited
to profit
or loss
2019
£’000
(16)
328
(184)
Net
2019
£’000
228
666
(894)
Asset
2019
£’000
228
666
–
Liability
2019
£’000
–
–
(894)
––––––––––––––––––––––––––––––––––––––––––––––––––
128
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
(894)
894
–
A deferred tax asset has not been recognised for the following:
Accelerated capital allowances
Unused tax losses
2020
£’000
(63)
3,637
––––––––––––––
3,574
––––––––––––––
––––––––––––––
The unused tax losses can be carried forward indefinitely in the UK and up to a maximum of 20 years in the US.
69
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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
T
A
M
R
O
F
N
I
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E
D
L
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FINANCIAL STATEMENTS
28. Post Balance Sheet Event
On 9 September 2020 the Group successfully raised £2.98 million of new funds before costs via a placing of new ordinary shares
in the Company with existing and new investors.
29. Reconciliation of liability movement as a result of financing activities
Non-current
Loans and
borrowings
£’000
640
88
–
–
–
(16)
Current
loans and
borrowings
£’000
256
35
750
(500)
709
(6)
Total
£’000
896
123
750
(500)
709
(22)
–
–––––––––––––––––––––––––––––––––––––––––––––––
(324)
324
388
14
–
–
1,648
–
9
(107)
1,568
30
50
(835)
559
(559)
24
107
1,956
44
50
(835)
2,207
(559)
33
–
(617)
–
–––––––––––––––––––––––––––––––––––––––––––––––
2,896
–––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––
1,335
1,561
617
At 1st July 2018
Interest accruing in period
New loans in year
Loan repayments in year
Working Capital Facility
Effect of foreign exchange
Loans classified as non-current at 30 June 2018 becoming
current during year.
At 30th June 2019
Interest accruing in period
New loan in year
Loan repayments in year
Lease Liability transition to IFRS 16
Lease Liability repayments in year
Effect of foreign exchange
Loans classified as non-current at 30 June 2019 becoming
current during year.
Lease Liability classified as non-current at 1 July 2019 becoming
current during year
At 30th June 2020
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
PARENT COMPANY BALANCE SHEET
As at 30 June 2020
Company Registration No. 07228939
Fixed assets
Property, plant and equipment
Investments
Current assets
Debtors
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
2020
£’ 000
2019
£’ 000
6
7
8
9
9
14
1,953
––––––––––––––––––––––––––––––
129
1,299
1,967
––––––––––––––––––––––––––––––
1,428
6,800
4,106
––––––––––––––––––––––––––––––
5,297
323
10,906
(970)
––––––––––––––––––––––––––––––
5,620
(584)
9,936
––––––––––––––––––––––––––––––
5,036
11,903
–
––––––––––––––––––––––––––––––
6,464
–
11,903
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
6,464
6,804
27,764
(28,104)
6,354
27,764
(22,215)
––––––––––––––––––––––––––––––
11,903
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
6,464
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 2020 was £5,720,000 (2019: £7,894,000).
The financial statements on pages 71 to 78 were approved and authorised for issue by the Board of Directors on 29 October 2020
and signed on its behalf by: -
David Banks
Chairman
Keith Broadbent
Chief Executive Officer
71
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A
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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
T
A
M
R
O
F
N
I
R
E
D
L
O
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E
R
A
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260028 Haydale AR pp71-imp.qxp 05/11/2020 16:56 Page 72
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
Share
capital
£’ 000
Share
Profit and
Premium loss account
£’ 000
£’ 000
Total
Equity
£’ 000
547
27,539
(1,764)
26,322
–
–
(12,358)
–––––––––––––––––––––––––––––––––––––––––––––––––
13,964
(7,894)
(14,122)
(7,894)
27,539
–
547
–
(12,358)
–
5,807
–
200
6,032
(399)
–––––––––––––––––––––––––––––––––––––––––––––––––
11,903
200
–
(399)
–
225
–
(22,215)
27,764
6,354
–
–
(5,720)
(5,720)
–
–
–
–
450
–
(155)
450
(14)
–––––––––––––––––––––––––––––––––––––––––––––––––
6,464
–––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––
(155)
–
(14)
(28,104)
27,764
6,804
At 1 July 2018
Comprehensive Income for the year
Change in accounting policy – IFRS 9
1 July 2018 as restated
Loss for the year
Contributions by and distributions to owners
Recognition of share-based payments
Issue of ordinary share capital, net of transaction costs
Share issue costs
At 30 June 2019 and 1 July 2019
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 2020
72
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
NOTES TO THE PARENT COMPANY BALANCE SHEET
For the year ended 30 June 2020
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 16 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.
73
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O
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T
N
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M
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A
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L
A
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N
A
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A
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260028 Haydale AR pp71-imp.qxp 05/11/2020 16:56 Page 74
FINANCIAL STATEMENTS
2. Accounting policies (continued)
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.
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.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
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.
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
As mentioned above, the Group has applied IFRS 16 using the modified retrospective approach and therefore comparative information
has not been restated. This means comparative information is still reported under IAS 17 and IRFIC 4.
Accounting policy applicable from 1st July 2019
For any new contract entered into on or after 1 July 2019, the Group considers whether a contract is, or contains a lease. A lease is
defined as ‘a contract, that conveys the right to use an asset for a period of time in exchange for consideration’. To apply this definition
the Group assesses whether the contract meets all three key criteria which are whether;
•
•
•
The contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Group.
The Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the
period of use, considering its rights within the defined scope of the contract.
The Group has the right to direct the use of the identified asset throughout the period of use. The Group assesses whether it
has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.
Measurement and recognition of lease as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use
asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the
Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payment made in advance
of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight line basis from the lease commencement date to the earlier of the end
of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment
when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payment unpaid at that date,
discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments, variable payments based on an
index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably
certain to be exercised.
Subsequent to initial measurement, the liability will be reducing for payment made and increased for interest. It is remeasured to
reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the
right-of-use asset is already reduced to zero.
Measurement and recognition of lease as a lessor
The Group leases out elements of plant and machinery. The group has classified these leases as operating leases. The Group is not
required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor.
75
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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
R
O
F
N
I
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D
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FINANCIAL STATEMENTS
2. Accounting policies (continued)
The Group has applied IFRS 15 Revenue from Contracts with customers to allocate consideration in the contract to each lease and
non-lease components
Comparative period
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 benefit from the leased asset are consumed.
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:
Wages and Salaries
Social Security Costs
Pension Costs
Share based payment (income)/expense
2020
2019
No.
No.
9
12
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
2020
£
715,596
85,876
44,834
(40,190)
2019
£
985,069
105,926
30,671
202,514
––––––––––––––––––––––––––––––––––
1,324,180
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
806,116
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 Group accounts in Note 7 , which
are ascribed as forming part of these financial statements.
6. Fixed asset investments
Investment in
subsidiary
undertakings
£’000
Capital
contribution
£’000
Total
£’000
Cost
At 1 July 2019
Additions
Disposals
At 30 June 2020
1,230
–
(432)
1,953
48
(702)
–––––––––––––––––––––––––––––––––––––––––––––––––––
1,299
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
723
48
(270)
798
501
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).
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Haydale Graphene Industries Plc | Annual Report & Accounts 2020
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)
Country of
incorporation
or registration
England & Wales
England & Wales
England & Wales
England & Wales
South Korea
North America
Thailand
Proportion of
ordinary share
capital held
100%
100%
100%
100%
100%
100%
100%
Nature of
business
R&D, sales and distribution
R&D, sales and distribution
Dormant
Dormant
Sales and distribution
R&D, sales and distribution
R&D, sales and distribution
North America
100%
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)
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
2020
£’ 000
5,164
95
16
22
2019
£’ 000
6,477
275
26
22
––––––––––––––––––––––––––––––
5,297
6,800
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
During the year an impairment provision of £1.42 million was recognised in relation to Inter company balances.
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
2020
£’ 000
–
79
–
84
421
2019
£’ 000
582
41
–
35
312
––––––––––––––––––––––––––––––
584
970
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
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 was repayable in 12 equal monthly instalments which commenced in April 2019 with the final instalment
paid in March 2020.
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260028 Haydale AR pp71-imp.qxp 05/11/2020 16:57 Page 78
FINANCIAL STATEMENTS
9. Share capital and share premium
At 1 July 2019
Issue of £0.02 ordinary shares 6,354
At 30 June 2020
Number of
shares
No.
Share
capital
£’ 000
Share
premium
£’ 000
Total
£’ 000
6,354
450
317,723,848
22,500,000
34,118
450
–––––––––––––––––––––––––––––––––––––––––––––––––––
340,223,848
34,568
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
27,764
–
27,764
6,804
During the year, the Company issued 22,500,000 new ordinary shares of 2p each during November 2019. There were £14,000 issue
costs associated with the new ordinary share issue.
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.
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260028 Haydale AR pp71-imp.qxp 05/11/2020 16:57 Page 79
Haydale Graphene Industries Plc | Annual Report & Accounts 2020
Corporate Directory
Company Number
07228939
Directors
David Doidge Richard Banks
Keith Broadbent
Mark Chapman
Graham Dudley Eves
Theresa Wallis
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
www.haydale.com
info@haydale.com
+44 (0)1269 842946
Grant Thornton UK LLP
Seacourt Tower, Botley, Oxford, OX2 0JJ
Arden Partners
125 Old Broad Street, London, EC2N 1AR
Share Registrars Limited
Suite E, First Floor, 9 Lion and Lamb Yard, Farnham, Surrey, GU9 7LL
Field Fisher LLP
Riverbank House, 2 Swan Lane, London EC4R 3TT
Intellectual Property Solicitors
Mewburn Ellis LLP
33 Gutter Lane, London, EC2V 8AS
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260028 Haydale AR pp71-imp.qxp 05/11/2020 16:57 Page 80
Perivan 260028
BlL 1
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
Haydale
Graphene
Industries Plc
Annual Report
And Accounts
For the year ended
30 June 2020
Creating
Material
Change