Haydale
Graphene
Industries Plc
Annual Report
And Accounts
For the year ended
30 June 2021
Creating
Material
Change
Company Registration No:
07228939
www.haydale.com
Haydale Graphene
Industries Plc
Clos Fferws, Parc Hendre,
Capel Hendre, Ammanford,
Carmarthenshire, SA18 3BL
T: +44 (0)1269 842946
F: +44 (0)1269 831062
Contents
STRATEGIC REPORT
Chairs Statement
Strategic Report
GOVERNANCE
Board of Directors
Directors’ Report
Chair’s Corporate Governance Statement
Directors’ Remuneration Report
FINANCIAL STATEMENTS
Independent Auditor’s Report
Consolidated Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes In Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Parent Company Statements
Parent Company Report
SHAREHOLDER INFORMATION
Corporate Directory
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
Chairs 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 2021 (“FY21”).
Despite the headwinds fr om the Covid-19 pandemic during the
year, the Group continued to make positive progress in its
transition from a research and development operation to one
capable of delivering sustainable commercial revenues. Whilst
demand for the proprietary Silicon Carbide (‘SiC’) blanks
manufactured at our US facility has remained subdued, the
Group saw encouraging developments in its core nanomaterial
business and to meet potential demand accelerated the
investment in its operational and technical capacity both during
FY21 and into the current financial year.
Summary financials
Commercial revenue for FY21 of £2.90 million (FY19: £2.95 million)
remained in line with the prior year which was a robust
performance given the subdued market conditions globally.
Gross profit marginally reduced to £1.98 million (FY20: £2.06
million) delivering a gross profit margin of 68.2% (FY20: 70,0%)
broadly in line with prior year. Other operating income for the
year of £0.58 million (FY20: £0.76 million) was lower than the
prior year as the Group’s shift away from grant funded to
commercial projects continues. Included within other operating
income is further support received from the US Cares Act.
The focus on reducing costs continued in the year with adjusted
administrative expenses on a pre IFRS 16 basis falling by £0.70
million (11.7%) to £5.29 million (FY20: £5.99 million). Over the last
three reporting periods, the Group has reduced its operating cost
base by £2.43 million in total on a like for like basis. There were
no non-recurring restructuring costs in the year (FY20: £0.06
million). Total Administrative Expenses were £6.11 million (FY20:
£7.05 million).
Loss for the year was £3.41 million (FY20: £4.02 million)
Operational Highlights
Whilst Covid-19 may have provided the backdrop to the past year
it has certainly not defined it for the Group. By focussing on the
elements within our control, the Group has made solid progress
towards its longer term goals. The priorities of focussed
investment in our technology, delivery of commercial revenue
and control of operating costs remains central to 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 nanomaterials. I was
encouraged to see that the Company’s expertise in Hydrogen
storage has attracted renewed interest in the past 18 months. In
particular, we have collaborated on the functionalised graphene
masterbatch required to produce lightweight low permeability
storage tanks to help unlock the pathway to hydrogen
propulsion. During the year the Company has also seen demand
for the functionalisation of other nanomaterials accelerate and,
in particular, demand for Boron Nitride, where Haydale has been
engaged to functionalise the ‘white graphene’ to improve its
dispersibility into lubricants to increase heat dissipation from
moving parts.
COMMERCIAL DEVELOPMENT
During the year, the Group made progress in commercialising its
core technology portfolio despite the challenging operating
environment. I would highlight the three-year exclusive
agreement with iCraft announced in September 2020 and in
December 2020 we secured our first sale of functionalised nano-
enhanced rubber masterbatch for use in a premium shoe range.
Subsequent to this sale, the Company has been engaged by
several companies in the premium leisure footwear market.
I was also pleased to see the Company broaden its trading
footprint with sales of SiC and blanks to new customers in the
Far East and in Europe. We also extended our distribution
agreement for Ceramycguard™ to 2030 and this range of
products continues to attract significant interest from water
utilities and civil engineering operations both in the UK and the
Middle East. We achieved our first sales in the year and anticipate
revenue will grow in the current year.
COST RESTRAINT
The Group continued to realign its cost base and, during the year,
it reduced its overall headcount whilst continuing to invest in its
global sales presence. The Group also realised other overhead
savings and, as noted above, like-for-like administrative expenses
reduced by £0.70 million, (11.7%) in the year without affecting the
operational capacity of the Group.
IMPACT OF COVID-19
The principal trading impact of Covid-19 has been the slowdown
in the global aviation sector which has reduced demand for SiC
and the SiC blanks that we manufacture at our US facility. The
immediate impact has been mitigated to an extent by the
continued support of our largest customer which offered this
business unit valuable breathing space. During the year the
Group has moved to reduce medium term exposure to the
aviation sector and, as noted above, has entered new markets for
its existing products and by adopting complementary products
such as Ceramycguard™, has accessed new markets and
customers.
Within the wider operation, despite an initial slowdown which
saw a number of projects delayed or postponed, business has
remained robust. I am pleased to report that, as the UK moved
through the second and third waves, whilst not ‘business as
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STRATEGIC REPORT
Chairs Statement continued
normal’, projects and contracts progressed according to revised
plans.
At no time during the year were any of the Group’s sites closed
and the Company acted in accordance with the latest guidance
at each of its locations
Staff
I would like to thank the executive management team who have
maintained the momentum of our transition during these
unprecedented times. In particular, for ensuring that our facilities
continued to operate during the year with minimal interruption
and without compromising on the safety and wellbeing of our
employees. I would also like to thank our staff who have readily
adjusted to rapidly evolving local restrictions and have effectively
embraced new technology and ways of working. Their resilience
and flexibility have allowed the Group to continue to operate
effectively over the past year.
Funding
The Directors believe the business is well placed to benefit from
a recovery in the aviation industry and the wider improvement
in the global economy. During the year we were pleased to be
awarded a £1.10 million loan from Innovate UK and this will allow
the business to expand its functionalisation capacity eight-fold
at our Ammanford facility and support increased investment in
our production, sales and marketing resources. At 30 June 2021
we had drawn down £0.8 million of this facility.
On 20 September 2021, the Company completed an equity
placing raising £5.10 million (gross) and I would like to welcome
our new shareholders and to thank our existing shareholders for
their continued support at this time.
Outlook
The Board is encouraged by the very positive response from
across several different industry sectors to our new products and
technologies, which gives us confidence in our medium to long-
term outlook. However, we are yet to see any sustained recovery
in our Aerospace business and so we continue to be cautious
with respect to short-term revenue. Haydale’s proprietary
technology now has the potential to deliver material change
across many sectors in ways that our customers are increasingly
recognising as
for more
environmentally friendly materials. As a result, Haydale is
expanding the Group’s capacity to functionalise nano and other
materials and continues to invest in product development
critical to our future success.
their search
important
in
David Banks
Chair
14 December 2021
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
Strategic Report
The directors present their Strategic Report for the year-ended
30 June 2021.
PRINCIPAL ACTIVITIES
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
mission is 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. The Directors believe the Company is well placed
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.
Whilst the majority of the Group’s revenues to date have been
generated by our US operation, at the core of our product
offering and underpinning the Group’s future prospects and
value, is Haydale’s patented HDPlas® functionalisation process
which improves the dispersibility of some inert nanomaterials.
Functionalisation allows Haydale to tailor advanced materials to
enhance the properties of our customers’ products. The process
is cost effective and environmentally friendly and our capacity
to produce commercial levels of functionalised nanomaterials
underpins our business model and sets us apart from our direct
competition in this space. Specifically, we have the engineering
expertise to:
•
•
•
functionalise nanomaterials that go into resins and
composites to deliver enhanced electrical, mechanical
(strength) and thermal performance;
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; and
compound functionalised nanomaterials into a range of
elastomers to enable customers to use nanomaterials in
elastomeric products.
Our US facility is projected to be our bridgehead into the
dynamic North American market for our technology. We also
manufacture unique, proprietary silicon carbide (“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.
At the 30 June 2021, the Group has the following operational
activities in its five facilities.
Haydale subsidiary
Haydale Limited
Location
Principal activities
Ammanford, Wales
functionalisation
Specialist
and main
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 and masterbatch development focused on
commercial applications with plasma
functionalisation facilities. Services the APAC
region.
Sales office servicing the North American
market, developing the European and Chinese
markets and manufactures and sells SiC
microfibres and whiskers, ceramic blends and
ceramic blanks to the cutting tool and coatings
industries
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
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STRATEGIC REPORT
Strategic Report continued
The Group safeguards its nanomaterials 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. In the past year the
Company has had four patents granted across three different
patent families including a patent in the US for clothing
incorporating a printed heater incorporating graphene ink, one
application has been allowed and is close to grant and four new
applications have been filed.
REVENUE MODEL
The Group’s revenue model is based on the following strands:
•
•
•
•
•
Sale of plasma reactors with appropriate licencing for use
of the patented HDPlas® functionalisation process;
Sale of functionalised material in powder, masterbatch or
pre-preg format;
Sale of SiC microfibres and whiskers, ceramic blends and
ceramic blanks to the aerospace cutting tool and coatings
industries;
Sale of own brand and third-party products which clearly
align with our product or customer base; and
Consultancy work with respect to testing the potential
enhancements that our product range and engineering
acumen may bring to customer applications.
COMMERCIAL OPERATIONS
The financial year-ended 30 June 2021 (“FY21”) has taken place
against the backdrop of the Covid-19 pandemic which, whilst
restraining revenue, has acted as a catalyst to further deliver on
the strategic priorities that the Company has previously set out.
Notwithstanding the challenges raised by the pandemic in
several of our key markets, the Group has delivered a resilient
performance in the year and, by focussing on elements within
our control, made solid strategic progress towards the Group’s
commercial goals.
The Group continues to transform itself from a research and
development organisation to a manufacturing business
focussed on commercialising its portfolio of technology and
securing profitable outcomes. During the year the Company has
ordered a larger plasma reactor and ancillary equipment that
should deliver a significant increase in our functionalisation
capacity and provide the tools to move production to an
industrial level.
UK & EUROPE
One of the early ramifications of the UK’s response to Covid-19
was the temporary closure of both commercial and academic
research facilities. However, despite the unfamiliar challenges of
collaborating during the UK’s and other territories lockdowns,
we experienced an increased appetite from existing and new
customers to investigate the benefits that our nanomaterial
science can bring to their products, and we saw an acceleration
in both serious enquiries and the commencement of new
commercial projects during the latter part of the year.
The UK division made meaningful progress towards
commercialising its proprietary technology. Functionalised
product sales increased by 30% over the prior year and project
and other consultancy revenues (excluding reactor sales) grew
by 122% on a like for like basis. This increase judged alongside the
sales pipeline gives ground for cautious optimism that, despite
the impact of the pandemic and the knock-on effects as
Government stimulus programmes are unwound, momentum
will be maintained.
Sales & Consultancy Work
In March 2020 Haydale announced that it would be cooperating
with the English Institute of Sport (“EIS”) and the Welsh Centre
for Printing and Coating (“WCPC”) to deliver a range of advanced
wearable technology sport apparel for elite athletes. The initial
plan had been to produce performance garments for a range of
sports in readiness for the Tokyo Olympic Games in 2020. The
project was put on hold with the delay in the Games but, in
combination with the other supply chain partners, Haydale
delivered garments to several Team GB competitors for use at
the rescheduled Games. The garments benefit from temperature
regulated panels, designed using Haydale’s printed
functionalised graphene ink, and the Group is now in discussions
with a potential customer who can access the wider commercial
market.
The four-year agreement with DLYB1, which commenced in April
2020, allows them to market Haydale’s electrically conductive
graphene-enhanced masterbatch in China and Taiwan. The first
year of the contract was reserved for product validation and
whilst these tests have taken longer than scheduled, results
continue to be encouraging and, although some issues persist,
we are hopeful of moving to the commercial phase of the
contract during 2022. Although this is later than anticipated, it
is not unusual for the move from research and development to
wider commercial adoption of cutting-edge technology to take
longer than predicted.
In December 2020 we secured our first sale to Bolflex of our
functionalised nano-enhanced rubber masterbatch for use in its
premium shoe range. The masterbatch is incorporated into the
1 Dalian YiBang Technology Company Limited (‘DLYB’) has been at the forefront of introducing and servicing high-end imported products for 15 years in China, which
included the introduction of copper mesh for the purpose of lightning strike protection in both aerospace and wind energy sectors.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
styrene-butadiene rubber compound used in its soles and results
show improvements against its footwear test standards with
increased tear strength and enhanced abrasion, flex and slip
resistance. Subsequent to this announcement, the Company has
been engaged by several companies in the premium leisure
footwear market and is actively working on feasibility studies to
demonstrate that our functionalised masterbatches offer
performance enhancement and a reduced environmental
footprint. Post year-end Haydale has filed for further patent
protection in this area.
Haydale’s work with Briggs Automotive Company continues
with the use of our graphene enhanced composites for several
of the body panels and for parts of the tooling line. We were
delighted to see that the BAC Mono R won the Track Car of the
Year Award at the prestigious 2021 GQ Car Awards and it is a
privilege to be part of the wider team that is delivering this
exceptional car.
Haydale signed an agreement with Dowty Propellers (“Dowty”)
in September 2020 for the provision of services for the
collaborative development of graphene and nanomaterial
enhanced products for use in Dowty products. The main body of
work completed during the year and, whilst the results were
positive, they did not demonstrate the specific step change in
performance hoped for at this stage. The parties may look at
further projects related to the work performed but these are
unlikely to commence until 2022.
Sale of Plasma Reactors
In April 2021 Haydale partnered with 401 Tech Bridge, Rhode
Island, US, to provide a HT200 Plasma Reactor and advanced
materials support for their innovation ecosystem. The HT200
Plasma Reactor will be utilised in the 401 Tech Bridge Advanced
Materials and Technology Center, managed by the University of
Rhode Island (URI), to support its ambition to accelerate the
commercial adoption of new materials and support local
companies’ efforts in developing next generation products.
This was the first sale of a plasma reactor since the year-ended
June 2019 and was in response to growing interest in the
functionalisation capabilities of our patented HDPlas® reactors.
The Directors appraise each approach on its merits with the
guiding tenet that reactor sales must be demonstrably in the
long-term interests of the Company.
Collaboration Agreement with ProMake Limited (“ProMake”)
ProMake specialises in design, development and manufacturing
of medical innovations and devices. In November 2020 Haydale
signed a memorandum of understanding with ProMake to
formalise the collaboration on, amongst other areas, conductive
and piezo resistive inks and SynerG supertough and conductive
PLA 3D printing filament. Haydale also supported ProMake’s
submissions for Lot 2 and Lot 4 of the Public Health England
(“PHE”) National Microbiology Framework announced in
November 2020. In April 2021 PHE announced that ProMake was
one of the successful bidders for both Lots. In July 2021 the parties
signed a new collaboration agreement for Haydale to be the
exclusive supplier of the graphene and other nanomaterials
required for the effective functioning of ProMake’s BioPod, a
reusable biosensor device, and also set out Haydale’s
responsibility for the manufacturing supply of several elements
of their PreVent testing device, which could also potentially
utilise the anti-bacterial qualities of functionalised graphene as
one of its components.
The Directors are keen to have the opportunity to directly assist
in the fight against Covid-19, but given the uncertainty inherent
in contracts of this nature and scale, the Directors are taking a
prudent approach to their investment of time and resource at
the present time.
ASIA PACIFIC
Our APAC hub in Thailand and sales office in South Korea
continued to make solid progress in the year towards
commercialising Haydale’s proprietary technology. The three-
year exclusive agreement with iCraft2, to supply six tonnes of
functionalised graphene for cosmetic face mask sheets
announced in September 2020 was ahead of schedule at the
year end. Haydale shipped 2.2 tonnes in FY21 against a one tonne
commitment and this may lead to slightly lower volumes in FY22
as the volumes rebalance back to the contractual requirements.
We are also working closely with iCraft to supply functionalised
graphene powder for the manufacture of their graphene nano
platelet enhanced, anti-bacterial, neoprene PPE face masks. As
part of the on-going collaboration between the parties a sole
distributor agreement covering the UK and Europe was
concluded in December 2020 and the first direct-to-consumer
sales of iCraft’s PPE face masks were secured in January 2021
from Haydale’s UK web portal. Whilst sales of PPE face masks
have not met our initial expectations, we believe that
highlighting the positive anti-bacterial and other properties of
graphene within wearable garments will be of value in the
medium term.
Haydale has continued to work with IRPC3 and has been
engaged on several projects during the year, including the
Phase II agreement for the development of transparent
graphene and functionalized acetylene black conductive inks
for RFID, NFC and related applications. Our operation has also
forged new contacts within the Thai industrial landscape and
is actively collaborating with a number of well-known
international operations who have shown interest in the
potential applications of our product range.
2 iCraft, based in South Korea, is a global technology company with interests in security and network solutions as well as the health and beauty sector
3 IRPC Public Company Limited (“IRPC”) is a Thai Public SET-listed Petroleum and Petrochemical company. It is a subsidiary of PTT Group,
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STRATEGIC REPORT
Strategic Report continued
Notwithstanding this progress, APAC revenue in H2 FY21 was
below our expectations. In order to take advantage of the
commercial opportunities available, in May 2021 we appointed
our first Director of Sales in Thailand who came with a strong
background in speciality polymer formulations. We are already
seeing the benefits of the focus and experience that this role
brings to our operations.
NORTH AMERICA
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 in the last quarter of FY20 and during
FY21. The global aviation industry remained grounded by the
pandemic for the majority of this reporting period, but towards
the latter end of the year, we observed some signs of a recovery
in business aviation and domestic flying activity and, whilst the
pace of this recovery and the speed with which it will filter
through the jet engine supply chain is uncertain, we did see a
small increase in sales of our ceramic blanks during H2 FY21.
Historically this division has been dependent on SiC whisker
sales to two long term customers and we have seen very
different outcomes from these customers during the year. The
business received a commitment from its largest customer to
underpin the SiC whisker volume by increasing its short-term
order patterns during FY21 despite the economic uncertainty and
muted demand. The support we have received this year has
ameliorated some of the short-term impact of Covid-19 but will
result in significantly reduced orders in the year-ending June
2022. Importantly this assistance has offered the business unit
valuable breathing space to deliver on the initiatives detailed
below. Unfortunately, we did not receive similar support from
our second largest whisker customer and, towards the latter part
of the year, we regrettably had to seek legal intervention to try
to secure fulfilment of their FY21 revenue obligations of circa
£450,000 and at this time the matter is scheduled for an
arbitration hearing in 2022.
As the impact of the pandemic became clearer, the Directors
took defensive measures to reduce the overhead base at the US
facility and sought assistance from widely available US federal
stimulus programmes. The leaner cost base mitigated some of
the immediate revenue impact of the pandemic, but the
Directors recognised the need to reduce reliance on the US
civilian aviation sector and to widen the unit’s product offering
and expand its geographical footprint. Specifically, the Group
identified the European and the Far Eastern cutting tools market
for sales of both SiC whisker and blanks. We are pleased to report
that these plans had a positive impact on results at this business
unit during FY21 and provides a more robust foundation for this
business to move forward in the current financial year.
European Blanks Sales
In January 2021 we employed an experienced European agent for
the marketing and sale of SiC blanks into parts of the European
market and other contiguous markets. Subsequent to his
employment, we commissioned third party benchmarking tests
at the University of Zwickau to ensure we were able to match or
exceed the quality of finished cutting tools sold by our
competitors in the exacting European market. Positive test results
provided assurance to potential European cutting tool customers
and several are looking to conduct internal trials on our blanks. In
an adjoining market we achieved our first blanks sale outside of
the North American market and, whilst challenges remain we
anticipate this business will expand in the next financial year.
Despite positive initial contacts with a UK engineering tooling
supplier for the distribution of blanks, at this stage we have been
unable to secure any meaningful business in the UK market.
Far Eastern Sales
The Company signed a Memorandum of Understanding (“MoU”)
with a Sino-UK facilitator in FY20 and the early promise shown
by this relationship is now being fulfilled. Further to this MoU, in
January 2021 Haydale announced an Agreement with
Qinhuangdao ENO High-Tech Material Development Co., Ltd
(“ENO”) which allows it to act as a sales representative for
Haydale’s ceramic and silicon carbide products in China (including
Hong Kong) and Taiwan for an initial period of two years ending
December 2022. Under the Agreement, ENO expected to buy a
minimum of $300,000 of product from Haydale within the first
year of the agreement but sales have been slower than
anticipated with the pandemic having a similar impact on
demand as we have seen in our other markets. Haydale has
secured sales to a further four companies in China during the year
and is also actively collaborating on several other projects in China
which would extend our market penetration. We remain
encouraged by the strong interest in our SIC whisker and blanks
offering and, notwithstanding the residual effects of Covid-19,
anticipate revenue growing in this area in the current year.
Product Diversification
The Company has also diversified beyond the aviation and
cutting tools sector and has looked to take advantage of the
enhanced properties that SiC microfibres can deliver for surface
bonding technology applications. In July 2020, Haydale was
appointed the exclusive distributor to the UK water
infrastructure market for US based Zirconia
Inc for
CeramycGuard™4. In April 2021 the Company signed an
amended agreement that extended the term from 31 December
2023 to 31 December 2030 and allowed Haydale full distribution
rights of CeramycGuard™ across all sectors in the UK.
Furthermore, with authorisation, Haydale may now also
distribute to additional territories outside of the US, for all
markets and sectors.
4 Previously CeramycShield™
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
CeramycGuard™ is a one stop solution that can be used in new
concrete applications and also renews and restores old or partly
decaying concrete in-situ in certain applications as well as
preventing water loss. 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 number of UK
water utilities, other water facility management companies and
more general civil engineering contractors who require a solution
to concrete degradation. During the year we secured our first sale
of the product to a UK water utility and in February 2021 Biwater
positively trialled CeramycGuard™ at its wastewater treatment
site in Managua, Nicaragua. 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.We are currently
working to secure DW31 (Clean Water) accreditation in order to
significantly increase the scope of its potential applications.
•
•
Haydale has 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. Our supply
partner is still to overcome the operational challenges involved
in scaling production to required commercial levels. We continue
to work to surmount these issues but at the present time we are
not anticipating any revenue from these lower grade tools.
FOCUSSED R&D INVESTMENT
The HDPlas® functionalisation process continues to be the
cornerstone of the Group’s offering underpinning its future
growth prospects. During the year, good progress has been made
with several new and different treatments enabling more
tuneable and enhanced offerings to meet customers’
requirements. This manipulation 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. During the year
we have seen demand for the functionalisation of other
nanomaterials accelerate and in particular for treated Boron
Nitride. Boron Nitride shares many of the same properties as
graphene and is commonly known as white graphite. When used
as a lubricant additive it provides a low coefficient of friction,
enhanced wear and high thermal conductivity for more efficient
heat dissipation from moving parts to prevent seizure. Haydale
has been engaged to functionalise Boron Nitride to improve its
dispersibility. Amongst other developments, Haydale has:
•
Developed advanced nano enhanced SynerG SuperTough
3D filament, improving the tensile strength by circa 25%, the
strain failure by 45% and the thermal conductivity by a
factor of 3. Haydale also developed SynerG Conductive PLA
3D Printing Filament, with electrical conductivity in the
range of 4.5E+04 to 4.7E+05 Ω.cm as well as a30% increase
in strength and a 3-fold increase in thermal conductivity. We
are anticipate growing sales in the additive printing sector
in FY22.
Developed next generation functionalised inks with
resistivity reduced to under 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; and
Refined next generation functionalised biomedical sensor
inks incorporating improved analyte detection through the
incorporation of compatible functional groups to enhance
the accuracy of diagnosis. The latest iteration has increase
conductivity and electrochemical response and provides a
cost effective and environmentally friendly alternative to
traditional silver based printed biomedical sensor
electrodes, which are also susceptible to tarnishing. The ink
is being tested by a Far Eastern customer and we are also in
discussion with customers in the UK.
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 defined by
long product life cycles and mission critical safety thresholds,
other developments such as creation of advanced additive
printing PLA and the development of biosensor inks can be
delivered to market in a much shorter time horizon. It remains
core to our strategy that we invest for the long term whilst
taking advantage of the numerous short-term commercial
applications presented by our technology.
PATENT DEVELOPMENTS
Haydale safeguards the intellectual property that arises from its
on-going investment in research and development through
patent protection. The Company maintains a rolling programme
of applications for both new inventions and also seeks to
augment and extend existing patents by including later
enhancements. Amongst other filings, the following are of
special note:
Joint Patent with Airbus – During the year the Group has
collaborated with Airbus Operations Limited (“Airbus”) on
the filing of a joint patent for intellectual properties jointly
developed by the parties under the multi-party NATEP-
supported Graphene Composites Evaluated in Lightning
Strike Project (“GraCELS-2”). In August 2021 Airbus filed the
joint patent application. Further to the successful outcome
of GraCELS 2, in October 2019, Haydale launched a range of
graphene enhanced pre-preg material for lightning strike
protection utilising functionalised nanomaterials to
improve the electrical conductivity and reduce the unloaded
weight of an airliner cost effectively and with clear
environmental benefits. Haydale’s capability in this area
•
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STRATEGIC REPORT
Strategic Report continued
underpinned the DLYB agreement in early 2020 and the
technology underlying the latest patent further enhances
the effectiveness and performance of Haydale’ pre-preg
range of materials; and
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.
•
its anti-counterfeit
PATit™ – Haydale has been granted a European Patent for
system which uses
PATit™,
functionalised graphene elements
into
incorporated
printing inks to create unique security and identity code
patterns that are machine readable using capacitive
touchscreen technologies. The code can be verified by using
local or hosted software systems. Whilst the potential
applications for PATit™ in the verification of OEM products
and the fight against counterfeit goods are significant there
are remaining technical and manufacturing challenges to
wider integration in a product’s security eco-system.
GRANT FUNDED PROJECTS
Collaboration on grant funded projects has continued over the
last twelve months with the continued emphasis that only
projects that have a clear commercial pathway or add
significantly to the Group’s knowledge bank on applications are
undertaken. Adopting this yardstick and prioritising commercial
projects, reduced the number of grant funded projects that
Haydale undertook in the year, but this has not diminished the
importance of this work in support of the R&D investment made
by Haydale. Grants received were from either UK or European
quasi-governmental bodies and ‘promoting the green economy’
and ‘cleantech’ were the overarching themes for the funding
awarded in the year. Haydale’s involvement in several of these
projects relates to its long-standing expertise in Hydrogen
storage which has attracted renewed interest in the past 18
months. Amongst other projects awarded in the year, the
following commenced:
•
•
Carbo4power – a European consortium whose main
objective is to develop a new generation of lightweight, high
strength, multifunctional, digitalized multi-materials for
offshore turbine rotor blades that will increase their
operational performance and durability while reducing the
cost of energy production, maintenance, and their
environmental
project
complements previous development work on the NATEP
funded GraCELS projects; and
This multi-year
impact.
(“APC”)
Propulsion
Advance
Automotive
Centre
Transformation Fund – As part of this wide-ranging APC
initiative tasked with exploring the feasibility of low carbon
emission technologies, Haydale will assess the suitability of
its promising lightweight, low-permeability storage tank, to
help unlock the pathway to hydrogen propulsion. The
feasibility study will assess the ability of Haydale’s
functionalised graphene enhanced materials to decrease
manufacturing time and rejection rate, as well as to provide
uplifts to permeability, toughness, and impact resistance.
During the year, amongst others, the Company successfully
completed the Hibar Film and Affinity projects highlighted in last
year’s report and it has been encouraged to apply for further
funds to develop the findings from the Hibar Film project.
INCREASING PRODUCTION CAPACITY AT AMMANFORD
Haydale has consistently increased its capacity to functionalise
graphene ahead of the production curve at its Ammanford
facility. Prior investment permitted Haydale to meet the
demands of its commercial commitments in FY21, especially in
respect of demands placed by the iCraft cosmetic face sheet
supply agreement. During the year the Group increased its
investment at its main production facility and in particular:
•
•
•
Ordered a new HT1400 HDPlas® reactor in May 2021 which
will increase capacity eight-fold allowing the facility to
functionalise over thirty tonnes per annum of graphene
and other nanomaterials based on a single shift pattern.
Whilst we do not foresee any significant technical
challenges to the delivery of larger capacity reactors, we are
not anticipating that the machine will be fully optimised
until 2022.
To support the production scale up, post year end we
ordered, amongst other items, ancillary machinery to
increase our mixing and powder handling capacity; and
invested £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.
We anticipate that this investment which is spread over FY21 and
FY22 will meet our production requirements for the foreseeable
future in the UK and more importantly will allow us to
significantly lower the cost performance ratio that has curtailed
more widespread downstream adoption of graphene to date.
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 its 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 during FY19
continued during FY21 and adjusted like for like administrative
expenses have reduced by a further £0.70 million (FY20: £0.87
million) in the year and by £2.4 million (31.4 %) since FY18.
The main savings have related to the reduction in the workforce
with the principal savings being in the US operation which was
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
severely affected by the Covid-19 pandemic. Notwithstanding
the overall reduction in headcount in the year we have, yet again,
increased investment in sales resource and commercial support
functions in the UK and Thailand. Outside of the workforce,
continuing cost reductions across all areas of the business
including sub-letting underutilised premises, reducing travel
expenses, 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 without doubt in areas such as travel and
subsistence have been artificially reduced by the Covid-19 travel
restrictions imposed by the relevant authorities. Whilst striving
for a leaner cost base, 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. Whilst our focus on cost control
will not diminish, we anticipate in the coming year that
overheads will marginally rise as we seek to meet the operational
challenges of the sales pipeline.
During FY20 and to a lesser extent in FY21, the Company received
limited support from the UK Government through the furlough
scheme and from the US CARES Act via the Employee Retention
Credit programme. The Company has had no UK employees on
either full or part time furlough since October 2020.
FUTURE STRATEGIC DIRECTIONS
Whilst the Covid-19 pandemic has undoubtedly depressed
demand and subdued our revenue expectations for the year, it
has not defined the Group’s performance or slackened the
progress towards our goals. Haydale has 39 verified Technical
Data Sheets available (2018 – Nil) and has executed 38
commercial non-disclosure agreements since the start of the
Covid-19 pandemic. The clear priority remains to commercialise
our cutting-edge technology and the progress we have made
during the year and the opportunities that we are seeing gives
us confidence that we are on a steady path to more widespread
adoption of our technology and the benefits, both performance
and environmental, that it brings.
The Directors remain mindful that downside risks that could
impinge on the general recovery persist, and the Group relies,
amongst other factors, on the pace of recovery of the aerospace
and more generally on the wider economy. However, the solid
progress made in our core business during the year continues to
reinforce the Directors’ belief that, whilst navigating the new
industrial landscape will remain challenging and forward
momentum is unlikely to be smooth, the Company is moving 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 and are set
out on pages 35 to 67 The financial statements of the Company
continue to be prepared in accordance with FRS 101 and are set
out on pages 68 to 74.
Statement of Comprehensive Income
In the year under review, the Group’s principal areas of income
were sale of plasma reactors; SiC fibres, whiskers and blanks;
Specialty Inks; and graphene enhanced composites. The Group’s
revenue for the year-ended 30 June 2021 of £2.90 million (FY20:
2.95 million), showed a small decrease of £0.05 million on that
of the prior year. This reduction mainly reflected a fall in the
North America and Asia Pacific business units which was not
fully offset by gains in the UK business units.
Other operating income, which is principally grant funded
projects, at £0.58 million (FY20: £0.76 million) is below historic
levels which reflects the Company’ move away from Grant
funded to commercial projects. The Group received £0.14 million
(FY20: £0.19 million) from the US Small Business Administration
Paycheck Protection Programme (“PPP”) and this is included in
Other Operation Income.
The Group’s Gross Profit, which excludes Other Operating
Income declined marginally to £1.98 million (FY20: £2.06 million)
delivering a Gross Profit margin of 68% (FY20: 70%).
The focus on reducing costs continued in the year and Adjusted
Administrative Expenses fell by £0.63 million (11.8%) to £4.72
million (FY20: £5.36 million). On a pre IFRS 16 basis the
comparable figures for Adjusted Administrative Expenses would
have been £5.29 million (FY20: £5.99 million). Over the last three
reporting periods the Company has reduced its operating cost
base by £2.43 million. Pre IFRS 16 Adjusted administrative
expenses exclude non-cash items such as share based payment
charges, depreciation and amortisation as well as one-off
restructuring costs but includes operating lease costs and, as
such, gives visibility of the ongoing cash impact of our operating
cost base. Total administrative expenses for the year were £6.11
million (FY20: £7.05 million).
The Loss from Operations was £3.56 million (FY20: £4.23 million).
Finance costs, which include interest payable on the Group’s
debt, for the year were £0.21 million (FY20: £0.18 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 £1.02 million (FY20:
£1.05 million5), of which £0.26 million was capitalized (FY20: £0.25
million). During the year the Group claimed R&D tax credits of
5 Based on calculations submitted to HMRC for the R&D tax credit.
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STRATEGIC REPORT
Strategic Report continued
£0.36 million (FY20: £0.39 million) and it is expected that this
claim will be received during the current year.
Total comprehensive loss for the year was £3.59 million (FY20: £4.23
million). The loss per share for the year was £0.01(FY20: £0.01 loss).
Statement of Financial Position and Cashflows
As at 30 June 2021, net assets amounted to £6.76 million (2020:
£7.45 million), including cash balances of £1.64 million (2020:
£0.82 million). Other current assets reduced to £3.00 million at
the year-end (2020: £3.32 million) and this was mainly related to
the reduction in inventory of £0.39 million at the US facility
during the year. We anticipate inventory levels will continue to
reduce over the next 12 months at the US site. Current liabilities
reduced to £2.78 million as at 30 June 2021 (2020: £2.92 million)
due principally to the reduction in Trade and other payables.
The Right of Use Asset in respect of its leased premises increased
to £2.58 million (FY20: £1.59 million) due to a renewed lease on
our US facility and the Right of Use Liability which is split
between Current and Non-Current Liabilities similarly increased
to £2.74 million (FY20: £1.65 million). These movements 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.
The Group’s US Pension Obligations of £1.03 million (FY20: £1.44
million) reduced in the year due to a combination of exchange
rate gains and positive movements in the plans funding
requirements.
Net cash outflow from operating activities before working
capital movements for the year reduced to £2.04 million (2020:
£2.58 million), the principal contributing factors being the Loss
before Taxation of £3.41 million (2020: £4.02 million). Cash used
in Operations reduced by £1.74 million in the year to £(1.58) million
(FY20: £(3.32)) million. The Group received a R&D tax credit inflow
of £0.39 million in FY21 (FY20: £0.85 million). The prior year figure
included payments for the R&D claims made in both FY18 and
FY19. Net cash used in operating activities reduced to £(1.19)
million (FY20 £(2.48) million).
Capital expenditure in the year, excluding the IFRS 16 adjustments
set out below, was £0.22 million (FY20: £0.04 million).
The Company received £0.80 million of a £1.1 million UKRI
Innovation Loan during the year to support scale up capital
expenditure. The remaining funds are expected to be drawn
down in FY22. The Group’s US working capital facility which was
secured on a combination of the fixed assets, inventory and trade
receivables of the US business was fully utilised at the year-end
(2020: fully utilised). The net result was that the Group’s total
borrowings at the year-end were £1.73 million (2020: £1.25
million), of which £0.85 million was in the UK and the balance in
the Group’s US subsidiaries. The UKRI Innovation loan a quarterly
liquidity covenant applies until April 2024. There are no financial
covenants extant in respect of the UK bounceback loan of £0.05
million (FY20: £0.05 million) or the Group’s US borrowings.
Post Balance Sheet Event
On 20 September 2021, the Company raised £5.10 million (gross)
through the placing, retail offer and subscription of 85,055,893
new Ordinary Shares at 6.00 pence per share. The funds raised
will be used to fund the general working capital needs of the
business, support the scaling up of manufacturing capacity at
the Ammanford site and drive forward product rollout into the
US market.
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.
FY21 (£m) FY20 (£m)
Revenue 2.90 2.95
Gross profit margin 68% 70%
Adjusted operating loss (2.17) (2.54)
Cash position 1.64 0.82
Borrowings 1.73 1.25
During the year under review, management also used a sales
tracker, a key non-financial performance metric to monitor the
revenue pipeline of the business. The sales tracker monitors the
number of accredited leads and assigns a probability of revenue
realisation to those leads.
Capital Structure and Funding
SECTION 172(1) STATEMENT
As at 30 June 2021, the Company had 425,279,798 ordinary shares
in issue (2020: 340,223,848). No options were exercised into
ordinary shares during the year (FY20: none).
The Group repaid borrowings of £0.22 million during the year
under review (FY20: £0.84 million), which almost wholly related
to the Group’s US borrowing facilities which are secured on the
Group’s US based tangible assets.
The Directors acknowledge their duty under s.172 of the
Companies Act 2006 (“s172”) 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 Chair’s Corporate
Governance Statement on page 16.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers that the principal risks and uncertainties
facing the Group may be summarised as follows:
Impact of Covid-19 and General Economic Uncertainty
Despite a robust performance, the Covid-19 pandemic has
adversely affected customer demand and subdued Group
revenues during the year under review. The Directors accept that
there remains a varying degree of economic uncertainty in all of
the countries in which it has facilities and in the markets in
which it operates. The Directors are provided with detailed
projections that model future performance and liquidity of the
Group and funding decisions are based on these forecasts.
Health and Safety
Many of the Group’s products are advanced materials that 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 and the Thailand facility has ISO 9001 accreditation.
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, synthetically produced graphene
and other nanomaterials into customers’ existing products in
order to improve the mechanical, thermal or electrical properties
of these 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 realistic
timelines for customer engagement, testing 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.
Following the realignment in 2019, the focus on commercial
product sales remains an absolute priority, notwithstanding that
the timing and adoption of Haydale’s newly developed product
lines remains difficult to predict.
Intellectual Property Risk
The Group’s success will depend in part on its ability to maintain
adequate protection of its IP portfolio, covering its manufacturing
process, additional processes, products and applications, including
in relation to the development of specific functionalisation of
graphene and other 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.
Internal procedures and controls are in place to capture and
exploit all generated IP as well as to protect, limit and control
disclosure to third parties and partners. 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.
Information and Communications Technology (“ICT”) Risk
The inability to access data for a period of time either due to
systems failures or the unauthorised intervention of malicious
parties may severely impact the Group’s ability to conduct its
day-to-day business, lead to the loss of sensitive information or
result in loss of funds in a ransomware attack.
The Group aims to mitigate these threats by maintaining a third-
party ICT support agreement with a respected contractor,
ensuring industry standard cyber security procedures are
followed, setting out clear
for
communicating potential ICT breaches and by providing
adequate staff training on the cyber security risk that all users
face. In the event that these procedures are inadequate the
Group maintains a business continuity plan with our service
provider that covers longer term denial of access.
internal procedures
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. The Group aims to
mitigate this risk by providing well-structured and competitive
reward and benefit packages that ensure our ability to attract
and retain key employees.
By order of the Board
David Banks
Chair
14 December 2021
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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 Chair
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
Chair in July 2017 and was appointed as Interim-executive Chair
on 5 September 2018 and, following the general meeting on the
12 March 2019, reverted to Non-executive Chair.
David has significant city experience and has advised companies
in the Automotive, Aerospace and Motor Distribution sectors on
their corporate structure, strategy m messaging and presentation.
He has experience of raising capital for growing companies and is
responsible for liaison with our major shareholders.
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.
Keith holds an MBA from Derby University and this, coupled with
his customer contact and manufacturing experience across a
number of different sectors encompassing design, supply chain,
manufacture, commercial and financial elements of business, are
a key skill requirement in the ongoing journey moving Haydale
into a market led commercial scale manufacturing organisation
putting people at the centre of the enterprise strategy.
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.
12
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.
Mark brings experience of working in Board positions in
international multi-currency businesses undergoing periods of
sustained change. He has a strong foundation in accountancy
supplemented by experience in mergers and acquisition,
corporate restructuring and raising equity and debt finance.
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 chair 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.
Graham is a Non-Executive Director of Viritech Limited and iVapps
(UK) Limited, Chair of Zero E Technologies, Inc. and a director of
Zeus Motors, Inc. He has an extensive range of international
business contacts and years of experience of negotiating
technology licence deals. He is particularly interested in the
challenges of growing and structuring small high technology
companies so that they can find their places on the world stage.
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 chair, 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 has a background in business development and
technology commercialisation alongside her experience of working
with AIM and other companies at a similar stage of development.
She brings a range of corporate governance, business development,
financial and commercial experience to the Company.
Theresa joined the Board of Haydale in June 2020.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
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 with company number 07228939, and its subsidiaries (together the
“Group”) for the year ended 30 June 2021.
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.
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) in conformity with
the requirements of the Companies Act 2006 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 in conformity with the requirements of the Companies Act
2006;
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; and
Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the
Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the Group’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Dividends
The directors do not propose the payment of a dividend (2020: nil).
Directors
The following directors have held office since 1 July 2020 and up to the date of signing the financial statements:
David Banks
Keith Broadbent
Mark Chapman
Graham Eves
Theresa Wallis
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GOVERNANCE
Directors’ Report continued
Directors’ Interests in Ordinary Shares
The directors had the following interests in ordinary shares of the Company at the 30 June 2021 and at the date of this report:
Director
David Banks
Keith Broadbent
Mark Chapman
Graham Eves
Theresa Wallis
Number of
Shares at
30 June
2021
3,098,809
785,714
560,714
142,857
428,571
% of
Share
Capital
0.73
0.18
0.13
0.03
0.10
Number of
Shares at
14 December
2021
3,250,000
952,381
750,000
142,857
511,904
% of
Share
Capital
0.64
0.19
0.15
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 Event
On 20 September 2021, the Company raised £5.10 million (gross) through the placing, retail offer and subscription of 85,055,893 new
Ordinary Shares at 6.00 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.
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 2022. 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.
The Directors are also mindful of the impact that the other risks and uncertainties set out on page 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
Various sensitivities have been applied to forecasted revenue including a stress test scenario which reduces forecasted revenue by
circa 72 per cent, to the point where the Group would breach its available cash resources at 31 December 2022. With respect to this
‘stress test’ the Group has a significant proportion of that sensitised revenue within forward orders, contractual or some other form
of customer assurance which have a high degree of certainty.
Cost Mitigation
The Directors have included some low-level assumptions regarding cost savings that might be achievable if the forecast fails to meet
the forecasted or sensitised estimates, and these have been phased in gradually over the 12-month period to 31 December 2022.
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, the sensitivities applied and the Group’s current cash resources after
the fund raise in September 2021 and the terms of its debt facilities, the directors consider that the Company and the Group have
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
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
The auditors, Grant Thornton UK LLP have expressed their willingness to continue in office and a resolution concerning their re-
appointment will be proposed at the annual general meeting.
Statement by the Directors
The Directors consider the annual report and accounts, taken as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s position and performance, business model and strategy.
By order of the Board
David Banks
Chair
14 December 2021
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GOVERNANCE
Chair’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.
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 5 to 12 of this Annual Report. The Directors intend that the strategy will 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 and the Directors ensure that shareholder views are taken into account. Due to the
Covid-19 pandemic, most meetings over the past year with shareholders and brokers took place via videoconference or, when
permitted, by national and regional regulations and guidance, visits to the main production site at Ammanford were organised.
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 the whole Board attends the Company's Annual General
Meeting (“AGM”), which is regarded as an opportunity to meet, listen and present to shareholders, all of whom are normally
encouraged to attend. Whilst shareholders were advised not to attend the 2020 AGM, they were invited to ask questions by email
and submit their votes in advance by proxy. Looking ahead, the Company will continue to monitor and comply with prevailing
guidance when determining if shareholders are able to safely attend the next AGM and hopes that this will be the case. The outcomes
of each of the AGM votes are announced following the meeting. 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 Company's broker and nominated advisor is briefed regularly and keeps the Company appraised of market and regulatory
developments as they affect the Company.
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 the Directors have acted in a way that they considered,
in good faith, to be most likely to promote the success of the Company for the benefit of its stakeholders as a whole, and in doing so,
had regard amongst other matters to the:
•
•
Foreseeable or likely consequences of any decision in the long term;
interests of the Company’s employees at each of its five facilities;
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•
•
•
need to foster the Company’s business relationships with suppliers, customers and others;
impact of the Company’s operations on the community and the environment; and
importance of the Company maintaining a reputation for high standards of business conduct.
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 during the year given
the Covid-19 pandemic and consequent 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 unfamiliar challenges raised by Covid-19 have required the Company to adapt its procedures to comply with national and local
guidance in the jurisdictions in which it operates. Health and safety of our team was prioritised and compliant protocols were
introduced at our sites which all remained operative throughout the year. Where feasible employees moved to homeworking during
the pandemic and for those who were advised to shelter due to personal or household circumstances and, where homeworking was
not practical, appropriate measures, including use of the various Government support schemes, were put in place to reduce the
anxiety caused by any protracted time away from the business. Those working from home were given access to a videoconference
facility and communication with employees was increased to include weekly team calls alongside the normal business related
meetings. The Company is still of a size where the Executive Directors know all of the team and employees were aware that they
were able to contact the senior leadership directly to ask questions on any topic that concerned them.
Notwithstanding the demands imposed by the pandemic, the Group has continued to invest in staff training to ensure that
employees have the skills to meet their responsibilities as part of a modern international operation.
The Company prepares a detailed budget annually which takes into account the Group's 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 via the executive members. 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, as set out above, provides them with the
opportunity to raise issues and provide feedback to the Company. The Company seeks regular feedback from its stakeholders which
include employees, 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. This feedback is generally but not exclusively received through formal performance reviews (employees)
and informal meetings. Feedback received 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 UK is ISO 9001:2015 accredited and the UK and Thailand operations are ISO 14001:2015 accredited. and the Group complies with
relevant health and safety and environmental legislation. Through the employment opportunities it provides it has a beneficial
community effect.
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.
During the year the risk register was regularly reviewed by the senior management working in conjunction with the site managers.
The risk register sets out the assessed risks and the key actions and processes to mitigate those risks and the individual or group
responsible for ensuring that these are performed.
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GOVERNANCE
Chair’s Corporate Governance Statement
continued
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.
During the year particular focus was given to the risks associated with the Covid-19 pandemic and the growing cybersecurity risk
that all organisations face. As set out below the risk register was considered by the Audit Committee at its meeting in May 2021. The
principal risks and uncertainties to the business and steps to mitigate them are set out in the Strategic Report in this Annual Report
on pages 14 to 15.
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.
Further key features of the Company’s internal control system include the following:
•
Close management of the business by the executive directors;
• Monthly management accounts information is prepared and reviewed by the Board, including variances against the annual
budget, latest expectations 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 UK operations are
Company is ISO 9001:2015 and ISO 14001:2015 certified and the Thailand facility is ISO 14001:2015
•
•
•
•
Maintain the board as a well-functioning, balanced team led by the Chair
5.
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. or in this Annual Report on page 12.
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 meet with
the Board, providing further insights into the Company’s activities and performance. The full Board had seven regular meetings in
the year. Regular board meetings are scheduled in advance, but the Board also meets as and when required. In order to be efficient,
the Directors meet formally and informally in person, by telephone or videoconference. This was particularly the case in the last year
due to the Covid 19 restrictions, when all but two of the board meetings took place by videoconference. Board papers are prepared
by the relevant personnel 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.
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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.
During the year ended 30 June 2021, the Company held 21 board meetings (FY20: 20), with each member's attendance as follows:
Director
David Banks
Keith Broadbent
Graham Eves
Mark Chapman
Theresa Wallis
Number of board meetings attended
Scheduled
FY21
Ad hoc Total
FY21 FY21
7/7
7/7
7/7
7/7
7/7
14/14 21/21
14/14 21/21
13/14 20/21
14/14 21/21
14/14 21/21
Total
FY20
20/20
19/20
16/20
14/14
1/1
Attendance at the Company’s audit, remuneration and nomination committee meetings during FY21 and the prior year were as
follows:
Number of committee meetings attended
Committee member Audit Remuneration Nominations
David Banks
Graham Eves
Theresa Wallis
FY21
FY20
4/4
4/4
4/4
3/3
3/3
1/1
FY21
2/2
2/2
2/2
FY20 FY21
FY20
8/8 –
6/8 –
-/- –
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 and the relevant skills each Director brings to the Board
are outlined on pages 16 to 17 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, though this was curtailed for much of the year due to Covid 19 restrictions.
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 and also
access briefing, updates and events offered by other professional advisory firms.
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. Subsequent to the year end the Company commenced its first evaluation exercise
and the results and recommendations of that assessment will be set out in next year’s report. The Chair is leading the evaluation
exercise and a non-executive Director will lead the review of the performance of the Chair.
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GOVERNANCE
Chair’s Corporate Governance Statement
continued
Board succession planning is one of the responsibilities of the Nomination Committee as set out in Principle 9 on page 22. Below
the main Board the CEO seeks board approval for his recommendations on senior management appointments and changes to the
subsidiary boards. During the year a number of appointments were made to the subsidiary Boards in the UK.
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. Underpinning the Haydale culture is the need for team
work and we expect all employees to:
•
Be an active member of the team ensuring that support and cooperation is given to other members to assist them in
achievement of Company objectives.
• Work proactively with colleagues to give a professional and speedy service to clients/customers.
•
•
•
Coordinate activities with other colleagues to ensure the smooth running of the business and excellent customer service.
Participate in the creation of a stable and cohesive team within the Company and assist all staff to maximise their contributions
to the business.
Be adaptable and flexible in respect of work undertaken as and when the needs of the business dictate.
The Company is working towards the goal of a “one team” shared culture that supports an open and respectful dialogue with
employees, clients and other stakeholders, and is underpinned by sound ethical values and behaviours. These values are reinforced
at the regular team and site performance reviews and also at intersite meetings which, amongst other areas, cover sales, marketing,
technical and health and safety matters.
The Company has implemented a quality system based on the rigorous standards of BS EN ISO 9001 and 14001 and adherence to
this Quality System is mandatory throughout the Company. All employees are encouraged to take responsibility for the quality of
their own workmanship and to work with their colleagues towards maintaining our ISO standards.
To ensure we meet the high standards that we set ourselves employees are formally appraised each year and clear personal objectives
are set out within personal development plans. Individual training needs are defined by these reviews and this training is combined
with wider department and group training initiatives.
The Board attaches great importance to the health and safety of its employees and stakeholders who handle or use the Group’s
products. Health and safety is a standing item on the Board’s agenda, with reports reviewed by the board at each scheduled board
meeting. The Company’s Health and Safety policy and the respective site Health and Safety plans are enforced rigorously and this
has never been more important than in the past year in the face of the Covid-19 pandemic.
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 receive adequate time and attention at Board
meetings. He is also the director appointed as the main point of contact for shareholder liaison. 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 appropriate.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
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
Board membership and membership of subsidiary boards
Approval of major capital expenditure
Financial reporting, risk management and internal controls
Contracts, including potential acquisitions or investments in new projects or products
Corporate governance
Approval of annual budgets
Approval of annual and interim reports
Approval of changes in equity or debt funding
Dividend recommendations and policy
The Board delegates 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. 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 plans to meet not less than twice in each financial year.
During the year the Committee met four times. The Committee met twice in October 2020 to consider the draft report and accounts
for the year ended 30 June 2020, including the key judgements and estimates including revenue recognition, going concern, carrying
value of intangible assets, and valuation of the defined benefit pension scheme as well as the independence of the auditors and
their fees. The Committee reviewed the feedback from the auditors (Grant Thornton UK LLP) as set out in their Audit Findings Report
to the Board at the second meeting.
The third meeting of the Committee was held in February 2021 to consider the draft interim results and receive updates on the risk
register and the Group’s internal control mechanisms.
The fourth meeting of the Committee was held in May 2021. The meeting considered the terms of engagement between the
Company and Grant Thornton UK LLP as well as the audit plan for the Group. At this meeting the company also reviewed the risk
register.
Due to the Covid-19 restrictions, the first three meetings of the Committee were held via videoconference. The auditors attended
the October and May meetings by videoconference, with the Committee, CEO and CFO attending in person at the May meeting.
During the October and May meetings, a discussion took place between the Audit Committee and the auditors without management
being present.
Remuneration Committee
The Remuneration Committee has three members, David Banks (Chair), Graham Eves and Theresa Wallis. The members are all non-
executive Directors. Other members of the Board may attend the Committee's meetings at the request of the Committee Chair.
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GOVERNANCE
Chair’s Corporate Governance Statement
continued
The remit of the Committee is primarily to ensure that the executive directors are provided with appropriate remuneration packages.
The 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 Committee met twice during the year.
The Directors’ Remuneration Report is on pages 23 to 24.
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.
The Nomination Committee has three members, Graham Eves (Chair), David Banks and Theresa Wallis. The Committee did not meet
during the year.
As with many small companies, due to financial constraints and limited human resources, internal opportunities for succession to
board director roles are circumscribed. As noted in the 2020 Annual Report and Accounts the Committee made two important
appointments in the year ended June 2020 and, as planned, has promoted a period of stability before looking to further evaluate 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. The Company’s
AGM results are available to view on the Company’s website and all resolutions tabled at the Company’s 2020 AGM passed
comfortably.
The Company 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 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, 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 23 to 24.
By order of the Board on 14 December 2021
David Banks
Chair
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
Directors’ Remuneration Report
REMUNERATION COMMITTEE
The Company’s remuneration policy for executive directors is the responsibility of the Remuneration Committee. The terms of
reference of the Remuneration Committee are outlined below and, in the Chair’s Corporate Governance Statement on pages 21 to
22. The members of the Remuneration Committee during the year under review were Graham Eves (Chair), David Banks and Theresa
Wallis. The provisions of the 2006 Companies Act in respect of the Directors’ Remuneration Report have been applied to this report.
The Remuneration Committee under its terms of reference meets 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 chair of the Board, if a non-executive) is a matter for the Board.
Directors’ remuneration for the year to 30 June 2021 is set out on page 24.
The Remuneration Committee terms of reference require it to determine 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 are designed to support alignment with the long-term interests 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”) and on 8 July 2020 the Company
adopted a Stock Appreciation Rights Plan (“2020 SAR Scheme”) for the Group’s wholly owned US subsidiary, Haydale Technologies
Inc. The 2020 EMI Scheme and the 2020 SAR Scheme are designed to align the interests of the Directors and other employees with
those of shareholders, as set out below.
In the year ended June 2020, under the 2020 EMI Scheme the Company granted a total of 19,000,000 options (“2020 EMI Options”)
to the Company’s executive directors and a further 5,750,000 2020 EMI Options were granted to directors of UK subsidiaries, including
employees who have been appointed as directors of subsidiary companies during the year. In the year ended June 2021, 3,000,000
options (“2020 SAR Options”) were granted to a director of the US subsidiary of the Company. The 2020 EMI Options and the 2020
SAR Options (together 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 Company's
share price from the date of grant to 30 September 2023 as follows:
% 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 8p (eight pence) for a
period of 15 consecutive days and, therefore, the first and second performance condition have been met.
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GOVERNANCE
Directors’ Remuneration Report continued
DIRECTORS’ INTERESTS IN SHARE OPTIONS
The interests of directors of the Company 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.
The mid-market closing price of the Company’s ordinary shares at 30 June 2021 was 8.34p (2020: 2.05p). During the year to 30 June
2021, the mid-market closing price ranged from 2.90p to 8.30p (2020: 1.04p to 2.10p).
DIRECTORS’ REMUNERATION
The aggregate remuneration received by directors who served during the years ended 30 June 2021 and 30 June 2020 was as follows:
£’000 Salary/Fee
Bonus
Benefits
Year Ended June 2021
Year Ended June 2020
Total
exc.
pension
Total
inc.
pension
Total
exc.
pension
Total
inc.
pension
Pension
Pension
Executive Directors
L Redman-Thomas1 –
K Broadbent 191
M Chapman2 104
Non-Executive Directors
D Banks 51
G Eves 28
R Humm3 –
T Wallis4 28
–
50
15
–
–
–
–
–
12
12
–
–
–
–
–
253
131
51
28
–
28
–
24
12
–
–
–
–
–
277
143
51
28
–
28
48
232
95
51
28
28
2
–
20
5
–
–
–
–
48
252
100
51
28
28
2
402
65
24
491
36
527
484
25
509
Bonuses are disclosed in the year for which they have been awarded. Bonuses for FY20 of £50,000 for Keith Broadbent and £20,000
for Mark Chapman are included in Total exc. pension.
By order of the Board
David Banks
Chair
14 December 2021
1
2
3
4
Resigned on 24 November 2019
Appointed on 21 November 2019.
Resigned on 10 June 2020
Appointed on 10 June 2020
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
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 2021, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent
Statement of Financial Position, the Consolidated and Parent Statement of Changes in Equity, the Consolidated Statement of Cash
Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting
framework that has been applied in the preparation of the group financial statements is applicable law and international accounting
standards in conformity with the requirements of the Companies Act 2006. 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
2021 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006;
the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’
section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the group’s and the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we
are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate,
to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However,
future events or conditions may cause the group or the parent company to cease to continue as a going concern.
A description of our evaluation of management’s assessment of the ability to continue to adopt the going concern basis of
accounting, and the key observations arising with respect to that evaluation is included in the Key Audit Matters section of our report.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
The responsibilities of the directors with respect to going concern are described in the ‘Responsibilities of directors for the financial
statements’ section of this report.
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FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries Plc continued
Our approach to the audit
Overview of our audit approach
Overall materiality:
(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)
Group: £190,000, which represents approximately 5% of the group’s loss
before tax.
Parent company: £150,000, which represents approximately 2% of the
parent company’s total assets.
Key audit matters for the group were identified as going concern and
valuation of goodwill. A Key audit matter for the company was identified
as valuation of investments in subsidiaries and impairment of
intercompany receivables.
•
•
•
Going concern (same as previous year);
Valuation of goodwill (same as previous year); and
Valuation of
receivables (same as previous year).
investment
in subsidiaries and
intercompany
Materiality
Key audit
matters
Scoping
Our auditor’s report for the year ended 30 June 2020 included one key
audit matter that has not been reported as a key audit matter in our
current year’s report. This relates to valuation of intangible assets. In the
current year the significant risk of impairment has been pin-pointed to
the valuation of goodwill in the US cash generating unit specifically.
We performed an audit of the financial information of the parent
company and the other significant components using component
materiality (full-scope audit procedures) on Haydale Limited (‘HL’), Haydale
Composite Solutions Limited (‘HCS’) and Haydale Ceramic Technologies
LLC (‘HCT’) and an audit of one or more account balances, classes of
transactions or disclosures (specific-scope audit procedures) of 2 further
components being Haydale Technologies Thailand Limited (‘HTT’) and
Haydale Technologies Incorporated LLC (‘HTI’) to gain sufficient appropriate
audit evidence at the Group level. We performed analytical procedures on
the financial information of the remaining 3 components in the Group
during the year. This approach is the same as the previous year.
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.
Description
Audit reponse
KAM
Disclosures
Key observations/
our results
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
High
Potential
financial
statement
impact
Low
Valuation
of goodwill
Going
concern
V
Valuation of
investment in
subsidiaries an
intercompany
intercompany
receivables
nd
Management
override
of controls
Revenue
recognition –
bill and hold
Reactor sales
Low
Extent of management
High
Key audit matter
Significant risk
Other risk
k
Key Audit Matter – Group
How our scope addressed the matter – Group
Going concern
We identified Going concern as one of the most
significant assessed risks of material misstatement due
to error.
Covid-19 continues to have a negative impact on parts
of the business and given the early-stage development
of its graphene-based products, it continues to be loss-
making.
Note, this is considered a risk at both a group and a
company level with the work performed being the
same for both.
In responding to the key audit matter, we performed the following audit
procedures:
•
•
•
•
•
•
•
Obtained management’s Base Case and Breakpoint models with the
relevant going concern period assessed as being to the end of
December 2022;
Assessed the appropriateness of management’s assumptions in
relation to revenue through agreeing expected sales to supporting
documentation such as signed contracts or purchase orders;
Examined the 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;
Confirmed the terms and conditions of any loan covenants;
Assessed the likelihood and impact of mitigating factors identified by
reference to supporting documentation and discussions with
management;
Compared post year-end performance against forecasts; and
Assessed the adequacy of related disclosures within the annual report.
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FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries Plc continued
Key Audit Matter – Group
How our scope addressed the matter – Group
Relevant disclosures in the Annual Report and Accounts
2021
•
Financial statements: Note 1, Going Concern;
•
Directors’ Report: page 13.
Valuation of goodwill
We identified valuation of goodwill in relation to
Haydale Ceramic Technologies LLC (‘HCT’) as one of the
most
risks of material
misstatement due to error.
significant assessed
HCT specialises in silicon carbide products rather than
graphene or other nano-materials and hence has a
different customer base to other parts of the group with
different opportunities/challenges. This more mature
part of the business remains exposed to the ongoing
impact of Covid-19 and continuing losses have been
recognised in HCT, and hence the valuation of goodwill
is deemed a significant risk. HCT is considered to be a
single cash-generating unit (‘CGU’).
Within the HCT CGU there is goodwill of £1.0m and
other assets of £6.1m giving rise to a carrying value of
£7.1m for the HCT CGU as a whole.
Our results
Management’s Breakpoint model identified that revenue would need to
fall by 72% compared to that recognised in the year ended 2021 for there
to be a going concern issue. Such a severe scenario is not considered
plausible by management based on post year-end performance and
expected future revenues.
Based on our audit work, we are satisfied that the assumptions made in
management's assessment of the use of the going concern assumption
in preparation of financial statements were appropriate. We consider that
the group's disclosure to be in accordance with IAS 1.
In responding to the key audit matter, we performed the following audit
procedures:
•
•
•
•
•
•
Spoke with management and key operational personnel to update
our understanding of HCT’s performance;
Examined and sensitised management’s value in use model
underpinning their impairment assessment, identifying the key
assumptions;
Examined management’s model and considered the accounting
policy to ensure compliance with IAS 36 ‘Impairment’;
Assessed revenue growth rates in years 1 to 5 along with the long-
term revenue growth rate and challenged the feasibility of meeting
those forecasts, which included examining the existing customer
base, existing orders and external market data, such as third party
assessments of the global market;
Assessed the discount rate used by management with the assistance
of one of our valuation experts; and
Asked management to prepare a Breakpoint model so that they could
identify the changes in circumstances and/or assumptions that
would result in an impairment and whether those changes were
plausible; and
•
Assessed the adequacy of related disclosures within the annual report.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
Key Audit Matter – Group
How our scope addressed the matter – Group
Relevant disclosures in the Annual Report and Accounts
2022
•
Financial statements: Note 1 n) Critical accounting
estimates and judgements; Note 10, Intangible
Assets.
Our results
Management’s key assumption is that HCT will return to pre-Covid-19
levels of revenue (being FY 2019) by 2023. Our assessment and challenge
of revenue growth concluded that this was a reasonable assumption but
given the sensitivity to forecast growth rates, one that required additional
disclosure in line with IAS 36.
Key Audit Matter – Parent company
How our scope addressed the matter– Parent company
Valuation of
intercompany receivables
investment
in subsidiaries and
In responding to the key audit matter, we performed the following audit
procedures:
We identified valuation of investment in subsidiaries
and intercompany receivables as one of the most
significant assessed risks of material misstatement due
to error given the identified risks in relation to Going
Concern and Impairment of goodwill.
Investments in subsidiaries amount to £1.5m of which
£720k relates to HL, £413k relates to HTI and £278k
relates to HTT, with other smaller balances noted.
Intercompany receivables amount to £6.2m of which
£3.9m relates to HTI, £1.2m relates to HL and £670k
relates to HCT, with smaller balances noted.
•
•
•
•
•
•
In relation to investments our work we examined and sensitised
management’s model underpinning their impairment assessment,
identifying the key assumptions;
Examined management’s model and considered the accounting
policy to ensure compliance with IAS 36 ‘Impairment’;
Assessed revenue growth rates in years 1 to 5 along with the long-
term revenue growth rate and challenging on the feasibility of
meeting those forecasts which included examining the existing
customer base, existing orders and external market data, such as third
party assessments of the global market;
Assessed the discount rate used by management with the assistance
of one of our valuation experts;
Considered alternative sources of evidence in relation to fair value less
costs of disposal by considering the Group’s market capitalisation and
that of other similar listed entities;
In relation to intercompany receivables the key balances relate to a
£3.9m receivable from Haydale Technologies Incorporated LLC, the
parent company of HCT and a £670k receivable from HCT, and hence
our work performed to address the Group risk of valuation of Goodwill
informed our conclusions when considering the requirements of
IFRS 9 ‘Financial Instruments’; and
•
Assessed the adequacy of related disclosures within the annual report.
Relevant disclosures in the Annual Report and Accounts
2021
•
Financial statements: Note 2, Accounting policies,
Note 6 Fixed asset investments, Note 7 debtors.
Our results
Based on our work we concluded that management's judgement that no
impairment was required as at 30 June 2021 was reasonable.
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FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries Plc continued
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified
misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the
auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Parent company
Materiality for financial statements
as a whole
We define materiality as the magnitude of misstatement in the financial statements that,
individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of these financial statements. We use materiality in determining the
nature, timing and extent of our audit work.
Materiality threshold
£190,000, which is approximately 5% of
loss before tax.
£150,000, which is 2% of total assets.
Significant judgements made by
auditor in determining materiality
Performance materiality used to
drive the extent of our testing
Performance materiality threshold
Significant judgements made by
auditor in determining performance
materiality
We have used loss before tax as our
materiality benchmark. This is consistent
with the prior year. This benchmark is
considered the most appropriate because
this is a key measure used by the Directors
to report to investors on the financial
performance of the Group.
We have used total assets as our materiality
benchmark. This is consistent with the prior year.
This benchmark
is considered the most
appropriate because its principal activity is that
of a holding company (with the largest financial
statement line items being investments and
intercompany balances).
Materiality for the current year is lower
than the level that we determined for the
year ended 30 June 2020 to reflect the
lower loss before tax.
Materiality for the current year is higher than
the level that we determined for the year ended
to reflect an increase in total assets.
We set performance materiality at an amount less than materiality for the financial
statements as a whole to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality for the financial
statements as a whole.
£140,000, which
statement materiality.
is 75% of financial
£110,000, which is 75% of financial statement
materiality.
In determining performance materiality, along
with those significant judgements made at
group level, we considered the requirement that
the parent company performance materiality
should be incrementally below the group’s
performance materiality.
The determination of performance
materiality
involves the exercise of
professional judgement. In determining
performance materiality, we made the
following significant judgments:
• Our risk assessment – based on the
results of our
risk assessment
procedures, we considered the group's
overall control environment to be
effective;
• Our experience with auditing the
financial statement of the group in
previous years – based on the
identification of few misstatements
and management's attitude
to
correcting misstatements identified;
and
30
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
Materiality measure
Group
Parent company
• The number of components within
the group and the extent of audit
procedures planned and performed at
these components.
Specific materiality
We determine specific materiality for one or more particular classes of transactions, account
balances or disclosures for which misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Specific materiality
We determined a lower level of specific
materiality for the following areas:
We determined a lower level of specific
materiality for the following areas:
• Related party transactions, including
Directors remuneration and related
disclosures.
• Related party transactions,
remuneration and
including
related
Directors
disclosures.
Communication of misstatements
to the audit committee
Threshold for communication
We determine a threshold for reporting unadjusted differences to the audit committee.
£9,500 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£7,500 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
Loss before
tax
£3,697k
PM
£140k, 75%
FSM
£190k, 5%
Total assets
£7,427k
PM
£110k, 75%
FSM
£150k, 5%
TFPUM
£50k, 25%
TFPUM
£40k, 25%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements.
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in particular
matters related to:
Understanding the group, its components, and their environments, including group-wide controls
•
•
The engagement team obtained an understanding of the group and its environment, including group-wide controls, and
assessed the risks of material misstatement at the group level; and
The engagement team obtained an understanding of the effect of the group organisational structure on the scope of the audit,
identifying that the group financial reporting system is centralised and that there is a use of management experts where
required.
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FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries Plc continued
Identifying significant components
•
•
Significant components were identified through assessing their relative share of key financial metrics including total revenue,
total expenses, absolute loss before taxation, total assets and total liabilities.
Other components were selected where we determined there to be a specific risk profile in those components and were included
in the scope of our group reporting work in order to provide sufficient coverage over the group’s results. For these components,
an audit of one or more account balances or class of transactions (specific scope procedures) was performed.
•
All other components of the group were selected as ‘neither significant nor material’ and analytical procedures performed.
Performance of our audit
•
The majority of the year-end audit was conducted remotely due to Covid-19 restrictions and social distancing requirements.
This was supported through the use of software collaboration platforms for the secure and timely delivery of requested
audit evidence.
•
Despite restrictions, we were still able to physically attend and observe the year end inventory count in the US and UK.
Type of work to be performed on financial information of parent and other components (including how it addressed the key
audit matters)
•
•
•
Performance of full-scope audits of the financial information of Haydale Graphene Industries Plc, Haydale Limited, Haydale
Composite Solutions Limited and Haydale Ceramic Solutions.
Specific-scope audit procedures were performed for Haydale Technologies Thailand Limited and Haydale Technologies
Incorporated LLC.
Analytical procedures were performed for all other components using group materiality.
Audit approach
Full-scope audit
Specific-scope audit
Analytical procedures
Other information
No. of
components
% coverage % coverage
total assets revenue
% coverage
LBT
4
2
3
97 89
– 5
3 6
93
6
1
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.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
Matter 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.
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement, 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.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the inherent
limitations of an audit, there is an unavoidable risk that material misstatements in the financial statements may not be detected,
even though the audit is properly planned and performed in accordance with ISAs (UK).
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with
laws and regulations, our procedures included the following:
• We enquired of management, the finance team and the Board of Directors about the Group’s and Company’s policies and
procedures relating to the identification, evaluation and compliance with laws and regulations and the detection and response
to the risks of fraud and the establishment of internal controls to mitigate risks related to fraud or non-compliance with laws
and regulations;
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and Company. We
determined that the most significant frameworks that are directly relevant to specific assertions in the financial statements
are those related financial reporting and taxation laws, being international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union, international accounting standards in conformity with the
requirements of the Companies Act 2006, Financial Reporting Standard 101 (for the Company), and the Companies Act 2006. In
addition, we concluded that health and safety laws and regulations may have an effect on the determination of the amounts
and disclosures in the financial statements;
• We enquired of management and the Board of Directors whether they were aware of any instances of non-compliance with
laws and regulations and whether they had any knowledge of actual, suspected or alleged fraud;
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FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries Plc continued
• We assessed the susceptibility of the Group’s and Company’s financial statements to material misstatement including how fraud
might occur and the risk of management override of controls. Audit procedures performed by the engagement team included:
–
–
Team communications in respect of potential non-compliance with laws and regulations and fraud which included the
evaluation of the risk of management override of controls, principally in relation to the potential bias when considering
going concern and the impairment of goodwill and investments;
Enquiring of management, the finance team and the Board about the risks of fraud at the Group and Company and the
controls implemented to address those risks. Assessing the design and implementation of controls relevant to the audit
that management has in place to prevent and detect fraud, including updating our understanding of the internal controls
over journal entries, including those related to the posting of non-standard entries used to record non-recurring, unusual
transactions or other non-routine adjustments;
– Making specific inquiries of each member of the finance team to ascertain whether they had been subject to undue
pressure or had been asked to make any unusual postings or modifications to reports used in financial reporting;
–
–
Identifying and testing journal entries selected based on risk profiling;
Running specific keyword searches (including to related parties and of those previously connected to related entities) over
the journal entry population to identify descriptions that could indicate fraudulent activity or management override of
controls. In addition, journal entries by user were evaluated to identify types of entries posted that were not in line with
expectations of their role. Unusual entries noted from these searches were agreed to supporting documentation to verify
the validity of the posting;
–
Planning specific procedures responding to the risk of fraudulent recognition of revenue;
– We also assessed the disclosures within the annual report including principal risks;
–
–
Challenging assumptions and judgements made by management in its significant accounting estimates (as referenced
in the Key Audit Matters section above); and
Identifying and testing related party transactions.
•
•
•
In assessing the potential risks of material misstatement, we obtained an understanding of the Group’s and Company’s
operations, including the nature of income sources and of its objectives and strategies in order to understand the classes of
transactions, account balances, expected financial statement disclosures and business risks that may result in risks of material
misstatement;
These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or
error. However, detecting irregularities that result from fraud is inherently more difficult than detecting those that result from
error, as those irregularities that result from fraud may involve collusion, deliberate concealment, forgery or intentional
misrepresentations; and
Assessment of the appropriateness of the collective competence and capabilities of the engagement team included
consideration of the engagement team’s understanding of, and practical experience with, audit engagements of a similar nature
and complexity.
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.
Christopher Smith
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Oxford
14 December 2021
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2021
Note
4
5
6
6
8
Year ended
30 June
2021
£’ 000
Year ended
30 June
2020
£’ 000
2,947
(885)
––––––––––––––––––––––––––––––
2,903
(924)
1,979
575
2,062
756
(4,724)
(5,357)
––––––––––––––––––––––––––––––
(2,170)
(2,539)
11
(63)
(1,640)
––––––––––––––––––––––––––––––
(119)
–
(1,271)
(1,390)
(1,692)
––––––––––––––––––––––––––––––
(7,049)
––––––––––––––––––––––––––––––
(6,114)
(3,560)
(4,231)
––––––––––––––––––––––––––––––
(7,049)
––––––––––––––––––––––––––––––
(6,114)
(3,560)
(211)
(4,231)
(176)
––––––––––––––––––––––––––––––
(4,407)
391
––––––––––––––––––––––––––––––
(3,771)
363
(3,408)
(4,016)
(368)
82
208
(291)
––––––––––––––––––––––––––––––
(4,225)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(3,568)
(3,408)
(4,016)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(3,568)
(4,225)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
9
9
(0.01)
(0.01)
(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 OPERATIONS
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 39 to 67 form part of these financial statements.
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262133 Haydale AR pp35-pp38.qxp 14/12/2021 16:32 Page 36
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2021
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
2021
£’ 000
30 June
2010
£’ 000
Note
10
10
11
12
13
14
14
20
26
19
20
19
15
16
16
1,454
1,145
6,407
––––––––––––––––––––––––––––––
1,341
1,174
6,622
9,006
––––––––––––––––––––––––––––––
9,137
1,712
886
334
384
823
––––––––––––––––––––––––––––––
1,328
715
595
364
1,644
4,646
4,139
––––––––––––––––––––––––––––––
13,783
13,145
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
304
1,435
1,031
––––––––––––––––––––––––––––––
844
1,026
2,370
2,770
––––––––––––––––––––––––––––––
4,240
944
1,906
74
––––––––––––––––––––––––––––––
885
1,719
180
2,924
––––––––––––––––––––––––––––––
2,784
5,694
––––––––––––––––––––––––––––––
7,024
6,759
7,451
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
8,505
28,820
250
(386)
(30,430)
6,804
27,764
131
(18)
(27,230)
––––––––––––––––––––––––––––––
6,759
7,451
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
The financial statements on pages 35 to 67 were approved and authorised for issue by the Board of directors on 14 December 2021
and signed on its behalf by:
David Banks
Chair
Keith Broadbent
Chief Executive Officer
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2021
At 1 July 2019
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
Comprehensive Loss for the year
Loss for the year
Other comprehensive loss
Total comprehensive loss
Contributions by and distributions to owners
Recognition of share-based payments
Issue of ordinary share capital
Transaction costs in respect of share issues
At 30 June 2021
Share
capital
£’ 000
Share
premium
£’ 000
Share-based
payment
reserve
£’ 000
Foreign
exchange
reserve
£’ 000
Retained
losses
£’ 000
Total
equity
£’ 000
6,354
27,764
828
(100)
(23,595)
11,251
(4,016)
(209)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(4,016)
(291)
–
82
–
–
–
–
–
–
6,354
27,764
828
(18)
(27,902)
7,026
(11)
–
450
(14)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(11)
(686)
–
–
–
686
–
(14)
–
–
450
–
–
–
–
–
–
–
–
–
6,804
27,764
131
(18)
(27,230)
7,451
(3,408)
(160)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(3,408)
208
–
(368)
–
–
–
–
–
–
6,804
27,764
131
(386)
(30,430)
3,883
–
1,701
–
–
1,276
(220)
119
2,977
(220)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
6,759
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
119
–
–
(30,430)
28,820
8,505
(386)
–
–
–
–
–
–
250
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262133 Haydale AR pp35-pp38.qxp 14/12/2021 16:32 Page 38
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2021
Cash flow from operating activities
Loss before taxation
Adjustments for:–
Amortisation of intangible assets
Depreciation of property, plant and equipment
Profit on disposal of plant and equipment and F&F
Share-based payment charge
Finance costs
Pension – net interest expense
Taxation
Operating cash flow before working capital changes
Decrease/(increase) in inventories
(Increase) in trade and other receivables
Increase/(decrease) 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 plant and equipment
Capitalised 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
Share capital issues costs allocated against share premium
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
38
Note
10
11
17
26
16
16
29
29
Year ended
30 June
2021
£’ 000
Year ended
30 June
2020
£’ 000
(3,408)
(4,016)
129
1,511
–
(11)
176
24
(391)
––––––––––––––––––––––––––––––
176
1,096
78
119
211
47
(363)
(2,044)
(2,578)
––––––––––––––––––––––––––––––
(531)
(111)
(104)
––––––––––––––––––––––––––––––
384
(90)
174
(3,324)
––––––––––––––––––––––––––––––
(1,576)
847
––––––––––––––––––––––––––––––
383
(2,477)
––––––––––––––––––––––––––––––
(1,193)
(44)
(251)
––––––––––––––––––––––––––––––
(220)
(260)
(295)
––––––––––––––––––––––––––––––
(480)
(94)
(82)
(631)
450
–
50
(835)
––––––––––––––––––––––––––––––
(95)
(116)
(591)
2,977
(220)
800
(219)
(1,142)
––––––––––––––––––––––––––––––
2,536
49
(3,865)
4,688
––––––––––––––––––––––––––––––
(42)
821
823
1,644
823
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2021
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”) 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.
As part of this assessment the Directors have considered several scenarios based on various revenue, cost and funding sensitivities.
Revenue
Various sensitivities have been applied to forecasted revenue including a stress test scenario which reduces forecasted revenue by
circa 72 per cent to the point where the Group would breach its available cash resources at the 31 December 2022. With respect to
this ‘stress test’ the Group has a significant proportion of that sensitised revenue within forward orders, contractual or some other
form of customer assurance which have a high degree of certainty.
Cost Mitigation
The Directors have included some low-level assumptions regarding cost savings that might be achievable if the forecast fails to meet
the forecasted or sensitised estimates and these have been phased in gradually over the 12-month period to 31 December 2022.
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.
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FINANCIAL STATEMENTS
1. Accounting policies (continued)
Summary
Therefore, after due consideration of the forecasts prepared, the sensitivities applied and the Group’s current cash resources after
the fund raise in September 2021 and the terms of its debt 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.
2. Changes in accounting policies
There are no change of accounting policies during the year.
Intangible assets
3. Summary of significant accounting policies
a)
Research and development expenditure
Research expenditure is recognised as an expense when it is incurred.
Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as
intangible assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure
is capitalised if, and only if an entity within the Group can demonstrate all of the following:–
i)
ii)
its ability to measure reliably the expenditure attributable to the asset under development;
the product or process is technically and commercially feasible;
iii)
its future economic benefits are probable;
iv)
its ability to use or sell the developed asset;
v)
the availability of adequate technical, financial and other resources to complete the asset under development; and
vi)
its intention to use or sell the developed asset.
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 UK 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 ten years.
Goodwill
Business combinations 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.
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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 represents 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.
Impairment of goodwill and other non-financial assets
b)
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)
ii)
Goods (including Reactor sales)
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.
Services
Engineering design and research revenue is recognised on the percentage of completion method unless the outcome of
the contract cannot be reliably determined, in which case contract revenue is only recognised to the extent of contract costs
incurred that are recoverable. Foreseeable losses, if any, are provided for in full as and when it can be reasonably ascertained
that the contract will result in a loss.
The 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.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
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 note 22.
ii) 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.
iii) 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.
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
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
US Plant and machinery Time in use
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 Statement of Comprehensive Income 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 tax credits are recognised in income tax within the Statement of Comprehensive Income, in the period in which they relate.
g) Cash and cash equivalents
h)
i)
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.
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.
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.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
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 17 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, 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
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.
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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.
n) Transactions and balances in foreign currencies
Transactions in foreign currencies are converted into the respective functional currencies on initial recognition, using the
exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting
period are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates
that existed when the values were determined. All exchange differences are recognised in profit or loss.
Overseas operations which have a functional currency different to the group presentation currency have been translated using
the monthly average exchange rate for consolidation into the statement of comprehensive income. The amounts included in
the group statement of financial position, have been translated at the exchange rate ruling at the statement date. All resulting
exchange differences are reported in other comprehensive income.
o) Critical accounting estimates and judgements
The preparation of financial information in conformity with IFRSs requires the use of certain critical accounting estimates. It
also requires the directors of the 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 (estimate)
In determining the pension valuation movement and the defined benefit obligation of the Group’s 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 (judgement)
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 reviewed by the Board.
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.
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies (continued)
Useful economic lives of tangible and intangible assets (judgement)
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.
p) Alternative Performance Measures
Disclosure has been adjusted in the Statement of Comprehensive Income. Adjusted Administrative expenses have excluded
Share based payment charges and depreciation as these are non-cash items. We believe removing these balances better reflects
the performance of the Group and provides more meaningful information to the user of the Financial Statements.
4. Segment analysis
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker (which is the 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 regions:
•
•
•
UK & Europe (focussing on functionalisation of nano materials, high performance ink & master batches and the composites
market in Europe;
North America (focussing on SiC & blank products for tooling); and
Asia Pacific (focusing on Ink sales to the Asian markets)
2021
UK & North
Europe America Asia Pacific
£’000 £’000 £’000
Adjustments,
Central &
Eliminations
£’000
Consolidated
£’000
REVENUE 923
Cost of sales (311)
2,903
(924)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,679
(379)
301
(234)
–
–
Gross profit 612
1,300
Other operating income 427 148
(1,328)
Adjusted administrative expenses (1,725)
Adjusted operating loss (686)
120
Administrative expenses
67
–
(404)
(337)
–
–
(1,267)
(1,267)
1,979
575
(4,724)
(2,170)
Share based payment expense (38)
Depreciation & amortisation (376)
(119)
(1,271)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(30)
(679)
(48)
(149)
(3)
(67)
(414)
(709)
(70)
(197)
(1,390)
Total administrative expenses (2,139)
(6,114)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(1,464)
(2,037)
(474)
OPERATING LOSS (1,100)
Finance costs
LOSS BEFORE TAXATION
Taxation
LOSS AFTER TAXATION
(589)
(407)
(1,464)
(3,560)
(211)
–––––––––––––––
(3,771)
363
–––––––––––––––
(3,408)
–––––––––––––––
–––––––––––––––
Additions to non-current assets 473 1,667
Segment assets 3,473 7,398
(4,697)
Segment liabilities (1,727)
17
404
(194)
–
2,508
(406)
2,157
13,783
(7,024)
46
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
2020
UK & North
Europe America Asia Pacific
£’000 £’000 £’000
Adjustments,
Central &
Eliminations
£’000
Consolidated
£’000
REVENUE 357
Cost of sales (119)
2,947
(885)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,169
(517)
421
(249)
–
–
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)
(868)
Depreciation & Amortisation (411)
Restructuring costs – –
11
(1,640)
(63)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
13
(229)
(63)
–
(132)
–
(405)
(876)
(279)
(132)
(1,692)
(2,094)
(7,049)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(2,563)
(1,526)
(866)
OPERATING LOSS (1,306)
Finance costs
LOSS BEFORE TAXATION
Taxation
LOSS AFTER TAXATION
(705)
(694)
(1,526)
(4,231)
(176)
–––––––––––––––
(4,407)
391
–––––––––––––––
(4,016)
–––––––––––––––
–––––––––––––––
Additions to non-current assets 291 –
Segment assets 2,486 7,573
(4,173)
Segment liabilities (698)
4
567
(239)
–
2,519
(584)
295
13,145
(5,694)
Geographical information
All revenues of the Group are derived from its principal activities as set out on page 5. 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
2021
£’000
2020
£’000
278
378
597
2
345
198
1,113
36
––––––––––––––––––––––––––––––
370
104
739
135
136
165
1,207
47
2,903
2,947
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
During 2021, £1.2 million (42%) (2020: £1.1 million (37%)) of the Group’s revenue depended on a single customer. During 2021 £0.41
million (14%) (2020: £0.35 million (12%)) of the Group’s revenue depended on a second single customer.
47
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G
E
T
A
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S
I
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C
N
A
N
R
E
V
O
G
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F
I
N
O
I
T
A
M
R
O
F
N
I
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E
D
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262133 Haydale AR pp39-pp55.qxp 14/12/2021 16:37 Page 48
FINANCIAL STATEMENTS
4. Segment analysis (continued)
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 (including Reactor sales) was £2.43 million (84%) of the Group’s revenue (2020: £2.45 million or 83%) and revenue
from services was £0.34 million (12%) (2020: £0.40 million or 14%).
Dis-aggregation of revenues
The split of revenue by type:
Services
Reactor sales (Goods)
Reactor rental
Goods
2021
2021
£’000
2020
£’000
406
–
89
2,452
––––––––––––––––––––––––––––––
338
403
134
2,028
2,903
2,947
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
UK &
Europe
£’000
North
America
£’000
Asia
Pacific
£’000
TOTAL
£’000
Services 231 –
Reactor sales (Goods) 403 –
Reactor rental 134 –
Goods 155 1,679
338
403
134
2,028
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,903
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
107
–
–
194
1,679
301
923
2020
UK &
Europe
£’000
North
America
£’000
Asia
Pacific
£’000
TOTAL
£’000
Services 104 –
Reactor rental 89 –
Goods 164 2,169
406
89
2,452
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
302
–
119
357
2,947
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,169
421
Services and reactor rental revenues are recognised over time, whereas goods and reactor sales are recognised at a point in time.
The group acquired the following non-current assets during the year, split by geographical location as detailed below:
Non-current asset additions
By destination
United Kingdom
United States of America
Thailand
2021
£’000
2020
£’000
291
–
4
––––––––––––––––––––––––––––––
473
1,667
17
2,157
295
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
48
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
The carrying value of the group’s non-current assets split by geographical location are detailed below:
2021
£’000
2020
£’000
By destination
United Kingdom
United States of America
Thailand
South Korea
5. Other Operating Income
Grant Income
Federal Support Schemes
3,271
5,749
116
3,564
5,257
184
1
––––––––––––––––––––––––––––––
1
9,137
9,006
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2021
£’000
2020
£’000
427
550
206
––––––––––––––––––––––––––––––
148
There are no unfulfilled conditions attached to the above income.
6. Loss before taxation
Loss before taxation is arrived at after charging:
Amortisation of other intangibles
Restructuring costs
Depreciation of property, plant and equipment
Foreign Exchange
Operating lease rental : plant and machinery
The service fees of the Group’s auditor, Grant Thornton UK LLP, 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:
Taxation related compliance services
756
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
575
2021
£’000
2020
£’000
176
–
1,096
(44)
1
129
63
1,511
(9)
2
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2021
£’000
72
2020
£’000
67
40
––––––––––––––––––––––––––––––
12
107
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
84
49
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G
E
T
A
R
T
S
I
E
C
N
A
N
R
E
V
O
G
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F
I
N
O
I
T
A
M
R
O
F
N
I
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D
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262133 Haydale AR pp39-pp55.qxp 14/12/2021 16:38 Page 50
FINANCIAL STATEMENTS
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
2021
£’000
2020
£’000
23
40
––––––––––––––––––––––––––––––
22
32
63
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
54
2021
£’000
2020
£’000
3,243
287
170
24
(11)
––––––––––––––––––––––––––––––
2,509
271
172
47
119
3,118
3,713
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2021
£’000
2020
£’000
484
25
––––––––––––––––––––––––––––––
491
36
509
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
527
The total amount payable to the highest paid director in respect of emoluments was £253,000 (2020: £232,000), excluding pension
costs of £24,000 (2020: £20,000). Further details on Directors Remuneration can be found in the Director Remuneration Report on
page 24.
8.
Income tax
Current tax credit
Total income tax credits:
– for the financial year
– under provision in the previous financial year
Total Current Tax
2021
£’000
2020
£’000
384
7
––––––––––––––––––––––––––––––
363
–
391
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
363
50
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
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% (2020 – 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
Total tax credit
Changes in tax rates and factors affecting the future tax charge
The main rate of corporation tax for UK companies is currently 19%.
2021
£’000
2020
£’000
(3,408)
(363)
(4,016)
(391)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(3,771)
717
216
(4,407)
837
(143)
24
259
45
(109)
7
(492)
(37)
––––––––––––––––––––––––––––––
(2)
340
49
(446)
–
(494)
(17)
391
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
363
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 £23.68 million (2020: £23.96 million) including £4.12 million (2020:
£4.16 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.
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 (£)
2021
£’000
2020
£’000
(3,408)
(4,016)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
408,967,698
331,162,204
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(0.01)
(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 2021, there were 39,734,928 (2020: 34,248,583) options and warrants outstanding as detailed in note 17. All of the options are
potentially dilutive.
Post year end 85,055,893 of new Ordinary Shares were issued on 20th September 2021, these Ordinary Shares are dilutive. 1,000,000
warrants were also issued on 2nd August 2021 and are potentially dilutive.
51
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E
T
A
R
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S
I
E
C
N
A
N
R
E
V
O
G
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F
I
N
O
I
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A
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262133 Haydale AR pp39-pp55.qxp 14/12/2021 16:38 Page 52
FINANCIAL STATEMENTS
10. Intangible assets
Cost
At 1 July 2019
Additions
FX translation
At 1 July 2020
Additions
FX translation
At 30 June 2021
Accumulated amortisation
At 1 July 2019
Charge for the period
FX translation
At 1 July 2020
Charge for the year
FX translation
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
At 30 June 2019
Customer
Relationships
£’000
Development
expenditure
£’000
Goodwill
£’000
Total
£’000
5,056
251
1
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,087
1
–
1,815
250
1
1,154
–
–
1,154
–
(133)
5,308
260
(253)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
5,315
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,066
260
(7)
2,088
–
(113)
2,319
1,975
1,021
2,579
129
1
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,399
42
1
634
–
–
546
87
–
633
87
(83)
2,709
176
(85)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,800
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,442
89
(2)
634
–
–
1,529
634
637
2,515
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,341
790
384
2,599
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,454
624
521
2,477
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,453
608
416
All of the above Development expenditure is currently in use.
Goodwill
Goodwill arose 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.
Customer Relationships
The Customer relationships intangible asset arose on the fair value of assets on the acquisition of HCT (formerly ACM) on the 13
October 2016 amounting to £868,676.
Development costs
Development costs brought forward are made up of three areas. 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 nano enhanced products within Haydale Limited, HCS
and HTT.
Development expenditure of £260,000 was capitalised during the year in accordance with IAS 38 in connection with the Group’s
expenditure with the development of nano enhanced products (including inks, epoxy resins, rubbers and composites), where the
Directors believe that future economic benefit is probable (2020: £251,000). Capitalised development expenditure is not amortised
until the products or services are ready for sale or use.
Amortisation
Capitalised development costs are amortised over the estimated useful life of between 5 and 20 years. The amortisation charge is
recognised in administrative expenses.
52
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
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.
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:
2021
%
2020
%
2021
£’000
2020
£’000
Haydale & HCS
HCT
HTT
23
1,103
327
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
10%
12%
10%
10%
12%
10%
23
975
341
The Group tests goodwill at least annually for impairment or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined from value-in-use calculations. The key assumptions for the value-in-use are
those regarding the discount rates, the growth rates and expected changes to cash flows during the period for which management
have detailed plans. The Directors estimate discount rates using pre-tax rates that reflect current market assessments of the time
value of money and the risks specific to the CGUs.
Pre-tax discount rates, derived from the Group’s post-tax weighted average cost of capital of 10% to12% (2020: 10% to 12%), have
been used to discount projected cash flows.
The impairment calculations for the current year have been derived from the five year forecasts (the “Forecasts”) that have been
approved by the Board.
The HCT model assumes that its turnover is in in line with the Forecasts and then reduces to 2% growth in perpetuity. The growth
rates used are based on management’s internally estimated growth forecasts which are predicated on a recovery in the aerospace
industry during FY22 and FY23. This anticipated rebound would lead to a recovery in the whisker sales and allow for growth in the
blank sales at this facility such that by June 2023 the CGU had at least recovered to its pre pandemic trading position. As noted in the
Chairs Report on page 4 we are yet to see any sustained recovery in our Aerospace business and, given this, we will continue to review
the carrying value of Goodwill in this CGU in the event that the expected bounce back does not occur in the timeframes anticipated.
As part of the impairment sensitivity analysis, a break point discounted cashflow was prepared based on revenue increasing by 75%
over the two year period ending June 2023 to coincide with the recovery in aerospace at which point it would have returned to pre
pandemic trading levels and increasing by 2% per annum thereafter. Margins were forecast to be at historic levels for the year ended
June 2023 and to maintain that level thereafter. The carrying value of the HCT CGU is £7.1m which consists of Goodwill, Customer
Relations, PPE and Right of Use Assets.
The HTT model assumes that its turnover is in line with the Forecasts and then reduces to 2% growth into perpetuity. The growth
rates used are based on management’s internally estimated growth forecasts which take into account current and future product
commercialisation. As part of the impairment sensitivity analysis, management reduced the anticipated turnover and gross profit
levels by 25%, which still resulted in no requirement to impair.
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 30 June 2021.
53
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G
E
T
A
R
T
S
I
E
C
N
A
N
R
E
V
O
G
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F
I
N
O
I
T
A
M
R
O
F
N
I
R
E
D
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262133 Haydale AR pp39-pp55.qxp 14/12/2021 16:38 Page 54
FINANCIAL STATEMENTS
11. Property, plant and equipment
Assets
Leasehold Plant
Fixtures Motor under
and leasehold and
improvements machinery and fittings vehicles construction
£’000 £’000 £,000
£’000 £’000
Total
£’000
Cost
At 1 July 2019 635 7,575
Transition to IFRS 16 2,207 –
Additions – 34
FX translation – 126
8,793
522
2,207
–
44
10
138
10
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
30
–
–
1
31
–
–
1
At 1 July 2020 2,842 7,735
542
31
32
11,182
Additions 1,677 198
FX translation (207)
(514)
(225)
Disposals (108)
Transfer – 29
1,897
22
(779)
(53)
(344)
(11)
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
11,956
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
(3)
–
(29)
–
(2)
–
–
7,223
500
29
–
At 30 June 2021 4,204
Accumulated depreciation
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
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
15
6
(1)
–
–
At 1 July 2020 994 3,450
Charge for the year 598 444
FX Translation (122)
(118)
(226)
Disposals (32)
311
4,775
48
1,096
(32)
(271)
(266)
(8)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
5,334
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
20
6
1
–
–
–
–
–
3,550
319
27
–
At 30 June 2021 1,438
Net book value
At 30 June 2021 2,766
6,622
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
3,673
181
–
2
At 30 June 2020 1,848 4,285
6,407
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
231
32
11
At 30 June 2019 326 4,913
5,556
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
271
15
31
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
12. Inventories
Raw materials
Work in progress
Finished goods
54
30 June
2021
£’000
3,576
(993)
30 June
2020
£’000
2,207
(613)
––––––––––––––––––––––––––––––
2,583
1,594
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2020
£’000
242
125
1,345
––––––––––––––––––––––––––––––
2021
£’000
167
261
900
1,328
1,712
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
262133 Haydale AR pp39-pp55.qxp 14/12/2021 16:38 Page 55
Haydale Graphene Industries Plc | Annual Report & Accounts 2021
The total value of inventories recognised in cost of sales during the year was £915,580 (2020: £885,471). 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
Lease Asset
Corporation tax
2021
£’000
2020
£’000
886
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
715
2021
£’000
2020
£’000
137
197
–
––––––––––––––––––––––––––––––
299
227
69
334
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
595
2021
£’000
2020
£’000
384
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
364
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. All income will be recognised within one year.
Commercial Deferred Income
2021
£’000
2020
£’000
74
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
180
As at 30 June 2021, deferred income of £30,769 (2020: £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. The remaining deferred income
relates to grant income which will be recognised in the profit and loss within a year.
16. Share capital and share premium
At 1 July 2019
Issue of £0.02 ordinary shares
At 30 June 2020
Issue of £0.02 ordinary shares
At 30 June 2021
Number of
shares
No.
Share
capital
£’000
Share
premium
£’000
Total
£’000
34,118
450
––––––––––––––––––––––––––––––––––––––––––––––––––––
317,723,848
22,500,000
27,764
–
6,354
450
6,804
1,701
340,223,848
85,055,950
34,568
2,757
––––––––––––––––––––––––––––––––––––––––––––––––––––
37,325
––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––
27,764
1,056
425,279,798
28,820
8,505
On the 9th September 2020, the Company issued 85,055,950 new ordinary shares of 2p each.
Issue costs amounting to £220,000 have been charged to the share premium account during the year (2020: £14,000 charged to
the profit and loss).
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FINANCIAL STATEMENTS
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 Group. 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
2021
WAEP
Pence
23.00
Number
of options
No.
34,181,185
7,100,000
(1,500,000)
(46,257)
Number
of options
No.
2,504,691
2.25 34,100,000
2.25
(1,591,960)
154.70
(831,546)
2020
WAEP
Pence
62.00
2.25
113.00
113.00
––––––––––––––––––––––––––––––––––––––––––––––––––
39,734,928
23.00
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
34,181,185
2.39
At 30 June 2021, there were options outstanding over 39,734,928 un-issued ordinary shares, equivalent to 9% of the issued share
capital as follows:
Unapproved scheme
19 May 2016
14 October 2016
26 June 2017
15 December 2017
8 July 2020
Approved EMI scheme
13 January 2020
Number of
shares
Exercise
price
Earliest exercise
date
Latest
exercise date
171.50p
198.14p
178.50p
125.50p
2.25p
19 May 2019
14 October 2019
27 June 2020
15 December 2020
8 July 2023
19 May 2026
14 October 2026
27 June 2027
15 December 2027
8 July 2030
2.25p
13 January 2023
13 January 2030
4,665
6,759
7,495
16,009
7,000,000
32,700,000
–––––––––––
39,734,928
–––––––––––
–––––––––––
The estimated fair value was calculated by applying a Monte Carlo option pricing model.
19 May 2016
14 October 2016
26 June 2017
15 December 2017
8 July 2020
13 January 2020
Type of
award
Unapproved
Unapproved
Unapproved
Unapproved
Unapproved
EMI
Number
of shares
4,665
6,759
7,495
16,009
7,000,000
32,700,000
–––––––––––
39,734,928
–––––––––––
–––––––––––
Share
price
at date of
grant
(p)
172.00
198.00
179.00
126.00
3.65
1.88
Fair
value
per
option
(p)
101.00
113.00
179.00
55.00
0.63
1.56
Award
life
(years)
10
10
10
10
10
10
Risk
free
rate
(%)
0.62
0.50
0.50
0.50
0.50
0.50
Expected
volatility
rate Performance
conditions
None
None
None
None
See below
See below
(%)
51
49
34
51
80.5
80.5
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.
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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 2021 is 8.5 years (2020: 9.5 years). The charge
for the year for share-based payment amounted to £0.12 million (2020: £(0.01) million).
Warrants
Balance at beginning of year
Lapsed
Balance at end of year
2021
Weighted
Number of
warrants
2020
Weighted
average
exercise
No. price Pence
208.00
208.00
––––––––––––––––––––––––––––––––––––––––––––––––––
average Number of
exercise
warrants
No. price Pence
208.00
–
107,398
(40,000)
67,398
–
67,398
208.00
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
67,398
208.00
None of the warrants outstanding at 30 June 2021 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 2021 is 0.04 years (2020: 0.72 years). The charge
for the year for share-based payment amounted to £7,258 (2020: £11,410).
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, less
any costs associated with the issuance of the shares, 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
2020
£’000
Non-Current
Liabilities
2020
£’000
2021
£’000
2021
£’000
Current Liabilities
Trade payables
Tax and social security
Lease liability
Accruals and other creditors
57
–
–
1,031
–
––––––––––––––––––––––––––––––––––––––––––––––––––
410
181
617
698
–
–
2,370
–
677
101
365
576
1,719
1,031
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
1,906
2,370
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FINANCIAL STATEMENTS
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
2021
£’000
1,729
2020
£’000
1,248
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
944
265
39
––––––––––––––––––––––––––––––
885
9
835
1,729
1,248
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
The Group’s borrowings are denominated in US dollars and Pounds Sterling. The directors consider that there is no material difference
between the fair value and carrying value of the Group’s borrowings.
Average interest rates paid
2021
3.2%
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 HTI, the
Company’s US holding company, secured on the fixed assets of HTI and its newly acquired operating subsidiary, HCT. This loan carries
an interest rate of 4% and is repayable in equal instalments. HTI also had a working capital facility of up to $900,000 which was
secured on a combination of the fixed assets, inventory and trade receivables of the US business and this was fully utilised at the
year end (FY20: Fully Utilised). The rate of interest of this was fixed at 5.25%.
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 repayment 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.
In March 2021, HCS secured a five year loan of £1,100,000 from Innovate Loans UK Limited. At the year end the Company had drawn
down £800,000 of this facility. It is anticipated that the full amount will be drawn by 31 March 2022. The loan has a repayment holiday
until March 2024 and is fully repayable by March 2026. For the initial 36 months interest will be charged at 3.7% p.a. and for the final
24 months interest with be charged at 10.7%. There are no penalties for early repayment.
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 Directors of the Company 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
2020
£’000
484
50
25
––––––––––––––––––––––––––––––
2021
£’000
491
65
36
559
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
592
Other transactions – Group and parent company
Fees totalling £15,856 (2020: £13,500) were paid to the Evesco International Business for support during the fund raise. Mr G Eves
served as a director of the company during the year and is a director of Evesco International Business Services. At 30 June 2021, the
balance owed to Evesco International Business Services was £Nil (2020: £Nil).
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Other transactions – Group
Other related party transactions during the year under review are shown in the table below:
Services Received
QM Holdings
2021
£’000
2020
£’000
468
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
402
During the year an amount of £401,870 was paid to QM Holdings in respect of property rent (2020: £468,000). QM Holdings is owned
by Thomas Quantrille and Marvin Murrell who are officers of HCT. The balance outstanding to QM Holdings at the year-end was
£28,971 (2020: £40,163).
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
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
2021
Financial assets
Financial liabilities
2020
Financial assets
Financial liabilities
287
339
––––––––––––––––––––––––––––––––––––––––––––––––––
374
––––––––––––––––––––––––––––––––––––––––––––––––––
370
52
4
999
––––––––––––––––––––––––––––––––––––––––––––––––––
952
47
112
––––––––––––––––––––––––––––––––––––––––––––––––––
111
1
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%
59
2021 Increase/
(decrease)
£’000
2020 Increase/
(decrease)
£’000
31
(26)
93
(76)
6
(5)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(45)
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FINANCIAL STATEMENTS
22. Financial instruments (countinued)
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.
b) 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.
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
2021
£’000
9
9
360
337
2020
£’000
28
181
115
562
––––––––––––––––––––––––––––––
886
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
715
2021
£’000
677
2020
£’000
834
41
11
––––––––––––––––––––––––––––––
38
–
886
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
715
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.
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Collective impairment allowances, are determined based on estimated irrecoverable amount from the sale of goods and services,
determined by reference to past default experience. Impairment provision is not material and therefore has not 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.
Maturity analysis
The ageing analysis of the Group’s non-derivative financial liabilities as at the year-end is as follows:
2021
Trade payables
Secured bank loan
Unsecured bank loan
Lease liability
Total
2020
Trade payables
Secured bank loan
Unsecured bank loan
Lease liability
Total
1 to 2 Yrs
£’000
–
–
9
359
Under 1 Yr
£’000
677
876
9
365
Total
£’000
677
1,679
50
2,735
––––––––––––––––––––––––––––––––––––––––––––––––––
5,141
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
3+ Yrs
£’000
–
803
32
2,011
2,846
1,927
368
Under 1 Yr
£’000
410
943
1
617
Total
£’000
410
1,198
50
1,648
––––––––––––––––––––––––––––––––––––––––––––––––––
1 to 2 Yrs
£’000
–
255
9
617
3+ Yrs
£’000
–
–
40
414
3,306
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
1,971
454
881
c) 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 issue new shares or sell assets to reduce debt.
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FINANCIAL STATEMENTS
22. Financial instruments (countinued)
d) 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
Lease Liability
Financial Liabilities (at amortised cost)
2021
£’000
2020
£’000
886
137
823
––––––––––––––––––––––––––––––
715
368
1,644
2,727
1,846
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
1,248
410
1,648
––––––––––––––––––––––––––––––
1,729
677
2,735
5,141
3,306
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
There is no difference between the fair value and book value for the assets and liabilities.
e) Fair value of financial instruments
The Group has no financial assets or liabilities carried at fair values at the end of each reporting date.
23. Capital commitments
The Group had the following capital commitments in the respective years:
Authorised by the directors but not contracted for
2021
£’000
317
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
Aggregate amounts payable
Payments recognised as an expense under these leases were as follows:
Operating lease expense
2021
2021
2020
2020
Land and
Plant and
Land and
Plant and
buildings machinery
buildings machinery
£’000
£’000
1
1
2
3
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
£’000
–
–
£’000
–
–
3
4
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
–
–
2021
2021
Land and
Plant and
buildings machinery
£’000
2020
2020
Land and
Plant and
buildings machinery
£’000
1
1
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
£’000
–
£’000
–
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.
Within the minimum lease payments for plant and machinery is the cost relating the general office equipment.
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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 2021 (2020: Nil).
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
2021
£’000
47
2020
£’000
24
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2021
£’000
2020
£’000
292
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
208
2021
£’000
(3,834)
(3,834)
2,808
2020
£’000
(4,275)
(4,275)
2,840
––––––––––––––––––––––––––––––
(1,026)
(1,435)
––––––––––––––––––––––––––––––
(1,026)
(1,435)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
Net amount recognised in the consolidated balance sheet as of 30 June, consisted of the following:
Non-current Liabilities
2021
£’000
(1,026)
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 2021:
Discount rate for periodic benefit costs
Discount rate for benefit obligations
Rate of increase in compensation levels
Investment return rate
Mortality Assumptions are as follows:
Longevity at retirement age (current & future pensioners)
– Males
– Females
Plan Assets
2.75%
2.75%
3.50%
3.00%
2021
20.4 years
22.3 years
2020
22.6 years
25.0 years
Pension assets are managed by an outside investment manager and are rebalanced periodically. The Company establishes policies
and strategies and regularly monitors performance of the assets, including the selection of investment managers, setting long-term
strategic targets, and monitoring asset allocations. Target allocation ranges are guidelines, not limitations, subject to variation from
time-to-time or as circumstances warrant, and occasionally, the Company may approve allocations above or below a target range.
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E
T
A
R
T
S
I
E
C
N
A
N
R
E
V
O
G
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F
I
N
O
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A
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FINANCIAL STATEMENTS
26.Defined Benefit Pension Scheme (continued)
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 2021, by asset category were as follows:
Description
Cash
Corporate Equities
Fixed Income:
US Government
Municipal
Corporate debt
Mutual Funds
Total
Carrying
Amount
£’000
141
1,596
Assets/
Liabilities
Measured at
Fair Value
£’000
141
1,596
Fair Value Measurements at
30 June 2021 using
Level 1
Inputs
£’000
Level 2
Inputs
£’000
–
–
141
1,596
14
1
942
114
14
1
942
–
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
957
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
14
1
942
114
–
–
–
114
2,808
2,808
1,851
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 2021, were as follows:
Opening Balance
Contributions
Distributions
Earnings
Net realised gain
Administrative expenses
Foreign exchange gain/(loss)
Balance at Year End
Cash Flows
2020
£,000
2,875
–
(245)
177
20
(66)
79
––––––––––––––––––––––––––––––––––
2021
£,000
2,840
–
(217)
111
449
(64)
(311)
2,840
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
2,808
The Company expects benefits paid for the next five fiscal years and the five years thereafter as follows:
2022
2023
2024
2025
2026
Thereafter
2021
£,000
247
245
250
249
249
1,270
2020
£,000
266
274
272
276
275
1,411
––––––––––––––––––––––––––––––––––
2,774
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
2,510
The company’s pension plan asset allocations by asset category were as follows as of 30 June 2021:
Asset Category
Cash
Equity Mutual Funds
Fixed Income
Other
5%
57%
34%
4%
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Plan Obligations
Benefit Obligation at 01 July
Foreign exchange movement
Interest cost
Actuarial loss
Benefits paid
Benefit Obligation at 30 June
Fair Value of Plan Assets at 01 July
Foreign Exchange movement
Actual Return on plan assets
Interest Income
Employer contributions
Benefits paid
Fair Value of Plan Assets at 30 June
Funded Status at 30 June
Haydale Graphene Industries Plc | Annual Report & Accounts 2021
2020
£,000
3,960
114
136
310
(245)
––––––––––––––––––––––––––––––––––
2021
£,000
4,275
(452)
109
120
(218)
4,275
––––––––––––––––––––––––––––––––––
3,834
2,840
(311)
449
47
–
(217)
2,875
79
19
112
–
(245)
––––––––––––––––––––––––––––––––––
2,840
––––––––––––––––––––––––––––––––––
2,808
(1,435)
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
(1,026)
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
Defined Benefit Obligation (£’000)
Decrease
Increase
(+/- 0.25%)
(+/-1.00%)
(91)
12
95
(12)
HCT 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 2021, were £47,000 (2020: £24,000).
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
Recognised in profit and loss:
Tax expense
Recognised in other comprehensive income:
Movement due to changes in exchange rates
At 30 June
2021
£’000
–
–
2020
£’000
–
7
(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.
65
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A
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262133 Haydale AR pp56-pp67.qxp 14/12/2021 16:51 Page 66
FINANCIAL STATEMENTS
27. Taxes (continued)
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
Fixed assets
Net tax assets/(liabilities)
Employee pension liabilities
Available losses
Business combinations
Net tax assets/(liabilities)
(Charged)/
credited
to profit
or loss
2021
£’000
(86)
(142)
228
––––––––––––––––––––––––––––––––––––––––––––––––––
–
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
Liability
2021
£’000
–
–
(709)
Net
2021
£’000
215
494
(709)
Asset
2021
£’000
215
494
–
(709)
709
–
(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
–
A deferred tax asset has not been recognised for the following:
Accelerated capital allowances
Unused tax losses
2021
£’000
(49)
23,677
––––––––––––––
23,628
––––––––––––––
––––––––––––––
The unused tax losses can be carried forward indefinitely in the UK and up to a maximum of 20 years in the US.
28. Post Balance Sheet Event
On 20 September 2021 the Group successfully raised £5.10 million (gross) of new funds before costs via a placing, retail offer and
subscription of new ordinary shares in the Company.
66
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29.Reconciliation of liability movement as a result of financing activities
Haydale Graphene Industries Plc | Annual Report & Accounts 2021
Non-current
Loans and
borrowings
£’000
Current
loans and
borrowings
£’000
388
14
–
–
1,648
–
9
(107)
1,568
30
50
(835)
559
(559)
24
107
Total
£’000
1,956
44
50
(835)
2,207
(559)
33
–
–
–––––––––––––––––––––––––––––––––––––––––––––––
(617)
617
1,335
3
800
–
1,647
–
(263)
1,561
2,896
15
–
(219)
–
(561)
(117)
263
18
800
(219)
1,647
(561)
(117)
–
(308)
–
–––––––––––––––––––––––––––––––––––––––––––––––
4,464
–––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––
1,250
3,214
308
At 1st July 2019
Interest accruing in period
New loans in year
Loan repayments in year
Lease Liability transaction 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.
Loans classified as non-current at 30 June 2019 becoming
current during year.
At 30th June 2020
Interest accruing in period
New loan in year
Loan repayments in year
Lease Liability addition
Lease Liability repayments in year
Effect of foreign exchange
Loans classified as non-current at 30 June 2020 becoming current during year.
Lease Liability classified as non-current at 1 July 2020 becoming
current during year
At 30th June 2021
67
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A
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E
V
O
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T
N
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M
E
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262133 Haydale AR pp68-imp.qxp 14/12/2021 16:54 Page 68
FINANCIAL STATEMENTS
PARENT COMPANY BALANCE SHEET
As at 30 June 2021
Company Registration No. 07228939
PARENT COMPANY REPORT
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
2021
£’ 000
2020
£’ 000
6
7
8
9
9
129
1,299
––––––––––––––––––––––––––––––
27
1,497
1,428
––––––––––––––––––––––––––––––
1,524
5,297
323
––––––––––––––––––––––––––––––
6,393
283
5,620
––––––––––––––––––––––––––––––
6,676
(584)
––––––––––––––––––––––––––––––
(408)
5,036
––––––––––––––––––––––––––––––
6,268
6,464
–
––––––––––––––––––––––––––––––
7,792
–
7,792
6,464
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
8,505
28,820
(29,533)
6,804
27,764
(28,104)
––––––––––––––––––––––––––––––
7,792
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 2021 was £1,533,000 (2020: £5,720,000).
The financial statements on pages 68 to 74 were approved and authorised for issue by the Board of directors on 14 December 2021
and signed on its behalf by:
David Banks
Chair
Keith Broadbent
Chief Executive Officer
68
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2021
Share
capital
£’ 000
Share
Profit and
Premium loss account
£’ 000
£’ 000
Total
Equity
£’ 000
6,354
27,764
(22,215)
11,903
–
–
(5,720)
(5,720)
–
450
–
(155)
450
(14)
–––––––––––––––––––––––––––––––––––––––––––––––––
6,464
(155)
–
(14)
(28,104)
27,764
6,804
–
–
–
–
–
(1,533)
(1,533)
–
1,701
–
–
1,276
(220)
104
2,977
(220)
–––––––––––––––––––––––––––––––––––––––––––––––––
7,792
–––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––
104
–
–
(29,533)
28,820
8,505
At 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, net of transaction costs
Share issue costs
At 30 June 2020 and 1 July 2020
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 2021
69
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262133 Haydale AR pp68-imp.qxp 14/12/2021 16:54 Page 70
FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY BALANCE SHEET
For the year ended 30 June 2021
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 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 undertakings where the company has control are stated at cost less any provision for impairment.
Financial assets
Impairment of financial assets
•
The Company assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.
Assets carried at amortised cost
These assets arise principally from the provision of services and advancing of monies to the company’s subsidiaries, but also
incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction
costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment.
The Company’s financial assets measured at amortised cost comprise intercompany receivables, trade and other receivables and
cash and cash equivalents in the consolidated statement of financial position.
70
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Haydale Graphene Industries Plc | Annual Report & Accounts 2021
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 based on a ‘repay over time’ approach applying a
discounted cashflow analysis.
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. 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.
Foreign Currency
Foreign currency transactions are translated at the rates ruling when they occurred. Foreign currency monetary assets and liabilities
are translated at the rate of exchange ruling at the balance sheet date. Any differences are taken to the profit and loss account.
Critical accounting judgements and estimation uncertainty
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent
liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of the assets or liabilities affected in future periods.
The key sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements
include estimation, where applicable, for items relating to revenue recognition and impairment of receivables.
Impairment of Investments
The company considers the impairment of investments on an annual basis. An estimate of the values of investments is calculated
on a discounted cash flow basis. Our value in use calculations require estimates in relation to uncertain items, including
management’s expectations of future revenue growth, operating costs, profit margins, operating cashflows and the discount
rate applied.
71
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262133 Haydale AR pp68-imp.qxp 14/12/2021 16:54 Page 72
FINANCIAL STATEMENTS
2. Accounting policies (continued)
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. Where a loan is deemed to be credit impaired, an expected
credit loss provision is recognised based on a ‘repay over time’ approach applying a discounted cashflow analysis.
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
2021
No.
No.
9
9
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
2021
£’ 000
642
79
53
48
2020
£’ 000
716
86
44
(40)
––––––––––––––––––––––––––––––
822
806
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
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
Cost
At 1 July 2020
Additions
At 30 June 2021
Investment
£’000
1,299
198
–––––––––––––
1,497
–––––––––––––
–––––––––––––
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 2021
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
Country of
incorporation
or registration
England & Wales
England & Wales
England & Wales
England & Wales
South Korea
North America
Thailand
North America
Proportion of
ordinary share
capital held
Nature of
business
100%
100%
100%
100%
100%
100%
100%
100%
R&D, sales and distribution
R&D, sales and distribution
Dormant
Dormant
Sales and distribution
R&D, sales and distribution
R&D, sales and distribution
Sales and distribution
Haydale Composites Ltd & EPL Composite Limited are exempt from audit in accordance with the Companies Act 2006, as a result of
them remaining dormant throughout the current and previous financial years.
Haydale Technologies Korea Co., Ltd is exempt from audit.
Subsidiary
Registered office
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
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
7. Debtors
Amounts owed by group companies
Corporation tax
Other debtors
Prepayments and accrued income
2021
£’ 000
6,217
76
91
9
2020
£’ 000
5,164
95
16
22
––––––––––––––––––––––––––––––
6,393
5,297
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
During the year an impairment provision of £nil (2020: £1.42 million) was recognised in relation to Intercompany balances.
Loans to subsidiary organisations are denominated in their local currency in line with IAS21, for consolidation purposes these loans
are classified as part of the net investment in the subsidiary and foreign exchange movements on these balances are recorded
through the Other Comprehensive Income.
Amounts owed by group companies are in foreign currencies, predominately USD and Thai Baht a 10% movement in the exchange
rate would result in a gain of £1.14m or a loss of £0.93m.
8. Creditors: amounts falling due within one year
Trade creditors
Other creditors including tax and social security
Accruals and deferred income
73
2021
£’ 000
19
46
343
2020
£’ 000
79
84
421
––––––––––––––––––––––––––––––
408
584
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––––––––––––––––––––––––––––––
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
E
C
N
A
N
R
E
V
O
G
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F
I
N
O
I
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A
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O
F
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E
D
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262133 Haydale AR pp68-imp.qxp 14/12/2021 16:54 Page 74
FINANCIAL STATEMENTS
9. Share capital and share premium
At 1 July 2020
Issue of £0.02 ordinary shares
At 30 June 2021
Number of
shares
No.
Share
capital
£’ 000
Share
premium
£’ 000
Total
£’ 000
6,804
1,701
340,223,848
85,055,950
34,568
2,757
–––––––––––––––––––––––––––––––––––––––––––––––––––
425,279,798
37,325
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
27,764
1,056
28,820
8,505
During the year, the Company issued 85,055,950 new ordinary shares of 2p each during September 2020. There were £220,000 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.
74
262133 Haydale AR pp68-imp.qxp 14/12/2021 16:55 Page 75
Haydale Graphene Industries Plc | Annual Report & Accounts 2021
Corporate Directory
Company Number
Directors
Secretary
Investor Relations
Head Office and Registered Office
Website
E-mail
Telephone
Advisers
Independent Auditor
Nominated Advisor and broker
Registrars
Solicitors
07228939
David Doidge Richard Banks
Keith Broadbent
Mark Chapman
Graham Dudley Eves
Theresa Anne Wallis
Matt Wood
investor.relations@haydale.com
Clos Fferws, Parc Hendre, Capel Hendre,
Ammanford, Carmarthenshire, Wales, SA18 3BL
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
75
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A
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A
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A
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A
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262133 Haydale AR pp68-imp.qxp 14/12/2021 16:55 Page 76
Perivan 262133
Haydale
Graphene
Industries Plc
Annual Report
And Accounts
For the year ended
30 June 2021
Creating
Material
Change
Company Registration No:
07228939
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