Haydale
Graphene
Industries Plc
Annual Report
And Accounts
For the year ended
30 June 2022
Creating
Material
Change
Company Registration No:
07228939
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 2022
Staff
I would like to thank the executive management team who
continue to drive the difficult transition from an R&D focused
organisation to a sustainable commercial operation. I would also
like to thank our staff for their continued resilience and flexibility,
and it is through their endeavours that we have been able to
make the progress that we have in the year.
Funding
On 12 September 2022, the Company completed an equity
placing and open offer raising £5.51 million (gross) and I would
like to welcome our new shareholders and to thank our existing
shareholders for their continued support, especially so against
the backdrop of a more turbulent economic landscape.
Outlook
During the year we made significant investments in both our
functionalisation capacity and in the wider team that allows us
to deliver sustainable revenues for the Company. With the
fundamental building blocks in place, the Board remains
confident that the Company will be able to take advantage of
the commercial traction it is seeing.
David Banks
Chair
5 October 2022
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 2022 (“FY22”).
The Group continued to make positive progress during the year
on its journey to delivering sustainable commercial revenues.
During H2 FY22 we saw positive sales development, especially
within the UK operations, and we anticipate that this
momentum will continue into the current financial year.
Summary financials
Commercial revenue for FY22 of £2.90 million (FY21: £2.90 million)
remained in line with the prior year which was a robust
performance given the exceptional support that we received
from our largest customer in FY21. Gross profit marginally
reduced to £1.75 million (FY21: £1.98 million) delivering a gross
profit margin of 60.0% (FY21: 68.2%) broadly in line with prior
year. Other operating income for the year of £0.44 million (FY21:
£0.58 million) was lower than the prior year but this reflected
the £0.14 million federal support received by our US subsidiary
in FY21. Adjusted administrative expenses increased by £0.80
million (16.9%) to £5.52 million (FY21: £4.72 million). Total
Administrative Expenses were £7.24 million (FY21: £6.11 million).
Loss for the year was £4.81 million (FY22: £3.41 million).
Operational Highlights
The Group made good progress towards its longer-term goals in
the year. The priorities of delivery of commercial revenue,
focussed investment in our physical and human capacity and
development of our technology remains central to our strategy.
During the year we successfully commissioned the new HD-
Plas® HT1400 plasma reactor which allows us to manufacture
functionalised nanomaterials on an industrial scale. In tandem
with bringing that capacity on stream we continued to invest in
our technical development and submitted a patent for the use
of liquid doping technology which will allow us to extend the
scope of the enhancements we can bring to products such as
our conductive inks. We looked to further strengthen our teams
across all Group sites and invested in sales, marketing, quality
and production resource to ensure that we are in a position to
scale up our operations safely and effectively.
The principal trading impact on the Group of Covid-19 since early
2020 has been the slowdown in the global aviation sector which
has reduced demand for the SiC and the ceramic cutting tools
produced by our US facility. In H2 FY22 we saw demand for these
products begin to recover, and our finished tools are gaining
commercial traction within the North American aerospace and
automotive sectors.
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STRATEGIC REPORT
Strategic Report
The directors present their Strategic Report for the year ended
30 June 2022.
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 major benefits across a
multitude of sectors helping to increase the technical
performance of a wide range of host materials. The Group’s
vision is ‘to be a world leader in the revolutionary development of
plasma functionalisation of advanced performance-enhancing
materials and nanomaterials across all industry sectors, providing
cutting-edge technological solutions to improve people’s life
experience’. Operationally we look to use our extensive
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 a significant but reducing level 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
is Haydale’s patented HDPlas®
prospects and value,
functionalisation process which improves the dispersibility of
many 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 industrial levels of
functionalised nanomaterials underpins our business model.
Specifically, we have the engineering expertise to:
•
•
•
functionalise nanomaterials that are blended with resins,
composites and fluids to deliver enhanced electrical,
mechanical (strength) and thermal performance;
formulate proprietary nanomaterial-based
inks and
coatings for the print and sensor markets, including
biomedical, RFID and piezo resistive inks and sensors; and
compound functionalised nanomaterials into a range of
elastomers to enable customers to use nanomaterials in
elastomeric products.
At our North American site we also manufacture proprietary
silicon carbide (“SiC”) fibres and whiskers that strengthen
ceramics and produce highly wear resistant ceramic ‘blanks’ for
use in the aerospace and automotive industries and for abrasion
resistant coatings.
At the 30 June 2022, the Group has the following operational
activities in its five facilities.
Haydale subsidiary
Haydale Limited
Location
Principal activities
Ammanford, Wales
functionalisation
and main
Specialist
manufacturing facility producing inks, resins,
fluids 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 South Korean and other APAC markets.
Ink and masterbatch development focused on
commercial applications with plasma
functionalisation facilities. Assists the UK in
servicing the APAC region.
Large installed SiC manufacturing facility with
sales office serving the North American Market
and developing the European and East Asian
markets.
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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The Group safeguards its nanomaterials business across these
sites and the territories in which it operates through the use of
patents and trade secret protocols 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. During
the year Haydale applied for eight new patents in its own right
and one joint patent with Airbus Operations Limited. The patents
submitted cover our HDPlas® capability with developments such
as liquid dosing, barrel temperature control and the use of a step
transformer extending both the range and control of the
enhancements that our customers are seeking.
REVENUE MODEL
The Group’s revenue model is based on the following strands:
•
•
•
•
•
Sale of functionalised material in powder, masterbatch, fluid
or pre-preg format;
Sale of SiC microfibres and whiskers, ceramic blends and
ceramic blanks to the aerospace and automotive cutting
tool sector and the coatings industries;
Sale of own brand and third-party products, such as
CeramycGuard™, which clearly align with our product or
customer base;
Sale of plasma reactors with appropriate licencing for use
of the patented HDPlas® functionalisation process; and
Consultancy services with respect to testing the potential
enhancements that our product range and engineering
acumen may bring to customer applications.
COMMERCIAL OVERVIEW
The financial year ended 30 June 2022 (“FY22”) has seen the
Group deliver a resilient performance in the year against a
turbulent economic backdrop and the directors are pleased to
report that the commercial progress accelerated in the second
half of the year within the core graphene and other nano particle
operations in the UK. Revenue has been impacted by the slower
than anticipated recovery from the pandemic at the Group’s US
operation and this has weighed on the overall financial
performance in the Year.
The Group continues to transform itself from a research and
development organisation into a manufacturing business
focussed on commercialising its portfolio of technology and
securing profitable outcomes. In the latter part of the year the
Company successfully commissioned a larger plasma reactor
that, when fully optimised, will deliver a significant increase in
our functionalisation capacity and provide the means to move
production to an industrial level.
UK & EUROPE
The UK division made robust progress towards commercialising
its proprietary technology in the year. Total sales (excluding
reactor sales of £0.40 million in the prior year) increased by
£0.46 million (89%) on FY21. Functionalised product sales (goods)
increased by 270% over the prior year and project and other
consultancy revenues (services) grew by 19% on a like for like
basis.
Product Sales & Consultancy Services
Haydale has been working in the energy, heating and power
storage sectors for a number of years. Geopolitical events and
closer to home severe weather incidents, when set against the
backdrop of the UK Government’s net zero carbon strategy, have
brought an increased urgency to this work. In January 2022 the
Company signed an exclusive supply agreement to manufacture
a thermal fluid (“Hi-Therm®”) for High Tech Systems Limited.
Haydale is using its patented plasma functionalisation
technology to enhance the thermal conductivity and dispersion
of boron nitride in ionised water. Controlled environment tests
that maintain a constant heating temperature have shown that
the thermodynamic properties of Hi-Therm® deliver up to a 30
per cent energy saving compared with energy required to heat
untreated water. Initial sales of Hi-Therm® have been ahead of
contractual volumes and whilst the product is still in a
development stage, we anticipate that it will represent a
significant step forward in the commercialisation of thermally
efficient nanomaterials in the energy sector.
Haydale has also been working with Cadent and the Energy
Innovation Centre to develop graphene ink-based heaters to
generate low power hot water in off-grid situations where
customers are left without the means to economically heat
water for an extended period of time. The most recent example
was Storm Arwen which brought widespread disruption to the
UK and resulted in over one million customers losing power.
Approximately 40,000 customers were without supply for more
than three days and nearly 4,000 customers were off supply for
over a week. The aim of this commercial 15 month project with
Cadent is to develop an operational Graphene ink-based heater
prototype that would provide cost effective and timely relief in
these situations.
The graphene inks used in this solution are flexible enough to
be printed onto multiple substrates such as metals, plastics,
fabrics, and glass. The Company is working to develop this
technology into underfloor heating which may be able to offer
an energy efficient, cost-effective and easy to install system that
can be used to supplement domestic heating systems. Whilst
still at an early stage, the prototypes are demonstrating
considerable promise as part of an array of solutions that may
improve the energy efficiency and reduce the CO2 impact of
heating commercial and domestic buildings. In addition to this
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STRATEGIC REPORT
Strategic Report continued
application, we are also working with a caravan and motorhome
customer with a variation of this heating ink.
Biomedical Inks
We continue to develop our biomedical sensor inks and, in
particular, our work during the year with a leader in the glucose
monitoring and diabetes management sector on the refining of
a bespoke ink has been productive. Haydale’s patented plasma
functionalisation process allows for the introduction of new
chemical substances to the surface of advance materials
enabling biomedical inks to have an improved catalytic and
electro chemical response. Our tests show that the additions
enhance the downstream accuracy of response to analytes and
the speed of result. We have collaborated closely with this
customer to ensure that the quality control at our Ammanford
site meets the stringent requirements for medical products and
we are also looking to commence internal tests to validate the
shelf life and longer-term efficacy of the product.
Whilst at a less advanced commercial stage, we have worked
with a number of other business and academic parties to explore
the wider potential for our sensor inks in the field of medical
diagnostics. Of particular note in this area is our work with the
Wales Kidney Research Unit at Cardiff University to develop a
urinary electrochemical microRNA sensor for rapid detection of
problems with newly transplanted kidneys. The sensor can
potentially accelerate issue detection without the need for an
invasive biopsy and potentially opens up a wider and exciting
opportunity for the monitoring or detection of other diseases.
Haydale was pleased to have directly input into the work of one
of the award winners at the Kidney Research UK MedTech
Competition earlier this year.
Elastomers and Other Developments
In December 2020 we secured our first sale of our functionalised
nano-enhanced rubber masterbatch for use in shoes and the
Company continues to progress a number of projects within the
leisure footwear and industrial workwear market. Whilst these
projects have taken longer than anticipated to move out of the
feasibility stage, the work done in this area has been utilised in
our collaboration with Vittoria Spa, the leading premium cycle
tyre manufacturer, and allowed us to move with speed to prove
performance enhancements for functionalised rubber in cycle
tyres. We were able to demonstrate substantial improvements
in the grip, rolling resistance, puncture resistance and durability
of their premium tyres and, in July 2022 we announced that we
had received our first order for one tonne of functionalised
graphene nanomaterial. Haydale will use its new HT1400 plasma
reactor in order to meet Vittoria’s production requirements.
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
initial stages of the contract were reserved for product validation
and although our product has met the initial requirements,
further modification and development has been requested by
DLYB. Whilst the Company is continuing to develop this product
line for use with DLYB and other customers, it is focussing on
those products that can deliver commercial returns more rapidly
and, as such, at this stage we do not anticipate this contract
moving to the commercial phase in the foreseeable future.
Haydale formed part of a dedicated supply chain to deliver a
range of advanced wearable technology to British athletes, at
the Tokyo games in August 2021. The garments benefited from
temperature regulated panels and were designed using
Haydale’s printed functionalised graphene ink. The Company
remains in discussion with a customer who can access the wider
market but our focus remains on other graphene ink products
that demonstrate a closer commercial potential.
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. This was the
first sale of a plasma reactor since the year-ended June 2019. As
noted in the prior year report, each approach is appraised on its
merits with the guiding tenet that reactor sales must be
demonstrably in the long-term interests of the Company. To this
end, the Company has not made any reactor sales in the year
under review.
Collaboration with ProMake Limited
On-going cooperation with ProMake (renamed Atomi Limited
post year end) continues to progress positively in a number of
directions including the previously noted SynerG 3D printing
filament, biomedical inks and more recently on developing
cleaner, smarter concrete formulations. The Public Health
England National Microbiology Framework has not progressed
at this time, although work is still underway in this arena it has
been impacted by changing UK government priorities.
NORTH AMERICA
Revenue at our US SiC and blanks manufacturing facility
continued to be adversely affected by the lingering impact of the
Covid 19 pandemic for much of the year. Reported increases in
civilian aviation traffic took time to filter down the aerospace
supply chain and it was not until the last quarter of FY22 that we
started to see some rebound in demand for our blank tools.
During the year we have looked to drive revenue by expanding
our product offering to include certain geometries of finished
cutting tools. We have contracted with a third-party company
who are taking our blanks and completing the final cut, grind
and tool preparation to enable Haydale to sell a finished tool. By
taking control of end user sales, we have created a direct dialogue
1 Dalian YiBang Technology Company Limited (‘DLYB’)
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with a number of important aviation customers, and it has also
allowed us to extend our sector coverage into the automotive
market where we have achieved finished tool sales post year end.
We have seen sales of finished tools in both areas post year end
and anticipate that, as general demand grows, this will be a key
driver for growth within this business unit. We are following a
dual distribution strategy to maximise our coverage with a
combination of direct to customer sales and indirect sales
through well represented distributors and consolidators. During
the year we made an agreement with a large US carbide tool
distributor to sell our tools in a number of states on the west
coast of the country and we are currently in discussions to give
non-exclusive rights to distribute our growing range of tools to
selected midwest industrial states.
East Asian Sales
In January 2021 Haydale announced an agreement with
Qinhuangdao ENO High-Tech Material Development Co., Ltd
(“ENO”) which allowed it to act as a non-exclusive sales
representative for Haydale’s ceramic and silicon carbide products
in China (including Hong Kong) and Taiwan (the “Territory”) for
an initial period of two years ending December 2022. Despite the
continuing lock downs and other restrictions that are impacting
manufacturers and impeding new business development we
have seen sales progress in the year although not to the extent
anticipated.
During the year Haydale signed a sales representation
agreement with Hainan Hongshida Information Technology Co.,
Ltd., (“Hongshida”). The agreement is for an initial period of two
years and allows Hongshida to act as a non-exclusive sales
representative for Haydale’s ceramic and silicon carbide products
in the Territory. First year sales to February 2023 were agreed to
be limited and, as expected, we did not receive any orders from
Hongshida during the year. Outside of these contracts, Haydale
is actively collaborating with a number of other parties that may
extend our market penetration in East Asia and may also offer
some reciprocal product that will expand our offering in the
North American market. We remain of the view that the
potential for this business unit’s products in East Asia is
significant and, whilst results have been less than we would have
hoped for to date, we continue to believe that the prognosis is
positive.
European Blanks Sales
We continue to make progress with potential European
customers and, whilst we remain optimistic that we will secure
further sales within this territory, we have recognised that this
will take longer than expected and we have therefore adjusted
our cost base with our European Sales Manager moving onto a
commission basis during H2 FY22.
Product Diversification
As previously noted, the Company has also diversified beyond its
traditional product range and agreed exclusive distribution
arrangements for the UK market for CeramycGuard™, 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. Earlier this
year, CeramycGuard™ won the ‘Materials Application of the Year’
category at the prestigious British Engineering Excellence
Awards and was recognised for its ability to significantly extend
the surface life of concrete assets and its potential to reduce the
anthropogenic impact of cement usage.
Haydale continues to work 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. Post year end the Group employed a sales
manager to specifically drive sales of CeramycGuard™, and this
has led to some early positive results. Whilst there is a substantial
wider market for this product, we believe that Drinking Water
Inspectorate 31 (Clean Water) accreditation is important to
securing sales of this product within the water industry and,
despite delays outside of our control, we are working towards
results by the end of 2022.
Historic Sales
Historically this division has been dependent on SiC whisker
sales to two long term customers and, as previously noted, we
saw very different responses to the pandemic from these
customers. The business received a commitment from its largest
customer to underpin the SiC whisker volume by increasing its
short-term order patterns during FY21. This was on the
understanding that this would likely see a significant reduction
in sales through FY22 and FY23. As expected, during the year we
have not made any sales to this customer, but we anticipate that
sales will resume in FY23 when their inventory levels are brought
into balance. We were pleased to reach a settlement with our
second largest historical whisker customer over the contractual
dispute which adversely impacted revenue in the prior year. The
settlement with the US group, which sells silicon carbide tools
and wear resistant solutions, secures revenue in both FY22 and
FY23 at which point the five-year contract dated September 2018
will come to an end. In FY22 this customer accounted for £0.58
million/20.1% of total group revenue and we expect a similar
level of revenue in FY23.
ASIA PACIFIC
Our operation in Thailand was instrumental in securing the first
orders from Vittoria for functionalised graphene powder for use
in cycle tyres. As announced in July, Vittoria and Haydale have
agreed to investigate the possibility of producing functionalised
graphene in Thailand and a Letter of Intent was signed post year
end between Haydale and Vittoria’s co-owned Thai nanotech
subsidiary, Graphene Creations Limited, that will allow the
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STRATEGIC REPORT
Strategic Report continued
parties to assess the merits of combining Haydale’s technical
expertise with Graphene Creations’ market access. This
assessment is on-going but should reach a conclusion during
the current year. Outside of this, Haydale. is actively collaborating
with a number of well-known international operations who have
shown interest in the potential applications of our product range
and the team continues to search for opportunities for the
commercialisation of graphene and other nanomaterials into
various industries.
Our sales office in South Korea did not meet our expectations
this year. The three-year exclusive agreement with iCraft has
delivered on the contractual requirement of three tonnes by the
end of year two but, subsequent to the year end, we have been
informed that it is reviewing its on-going involvement in the
nanomaterial sector. We are maintaining a proactive dialogue
with iCraft to ensure that it understands its contractual
obligations with respect to the final year of the contract. Outside
of iCraft, we have started working with a number of new
customers and we hope to be able to leverage these
opportunities in the current year to improve the financial
performance of this sales office.
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 dispersion and mechanical strength,
electrical conductivity and thermal conductivity. Amongst other
developments, Haydale has:
•
•
Developed liquid doping technology that allows for
graphene to be dosed with microscopic levels of metals
which allows us to markedly enhance the conductivity and
resistivity of our next generation functionalised inks This
lower level resistivity potentially allows our 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 friendlier application.
Existing ‘tags’ are generally single use and as such are
consigned to landfill after use. Haydale functionalised inks
are manufactured using a clean process and there is
reduced waste to landfill on disposal. Subsequent to the
year end this work has directly led to a collaboration with a
leading supplier of digital identification solutions who is
investing in the RFID of the future; and
Haydale was awarded funding to develop hydrogen fuel
storage tanks by the Advanced Propulsion Centre in 2020
and this work directly led to the signing of a memorandum
of understanding with Viritech Limited in September 2021.
Haydale has subsequently worked on two projects to deliver
advanced hydrogen powertrain solutions
the
automotive, aerospace, marine and distributed power
industries and we continue to provide consulting
engineering support services, including type IV and V
pressure vessel design and material science analysis.
for
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 is defined by
long product life cycles, we are focussing on areas such as our
biosensor inks and other functionalised inks which can be
delivered to market in a 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.
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. Whilst we give priority to commercial projects, this
does not diminish the importance of grant funded 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 a number of fields and amongst other
projects awarded in the year, the following commenced:
HiBar Film 2 – the project aims to develop the next
generation of high barrier films for food packaging using
HDPlas® plasma functionalisation through the redesign of
multilayer films into 100% recyclable and compostable
mono-material solutions for the food industry. Key project
deliverables are intended to reduce the environmental
impact of packaging plastics and offer more sustainable
barrier solutions to combat food waste. We are already
seeing commercial spin offs from this work with the South
Korean customer, NeoEnpla; and
Anti-Counterfeiting technology – Haydale was awarded a
SMARTCymru grant, part-funded by the European Regional
Development Fund, to further develop PATit, its anti-
counterfeiting technology that uses graphene-enhanced,
high-performance conductive inks and proprietary software
codes for brand and security protection that is non-copiable
and does not require expensive printing processes or
electronic chips (NFC/RFID). PATit aims to provide a mass
market anti-counterfeiting technology that addresses the
current market need for secure low-cost anti-counterfeiting
technologies.
•
•
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
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.
During the year the Company successfully completed the
European Space Agency (“ESA”) demisable fuel storage project
and Haydale was encouraged to apply for further ESA funds to
develop proof of concept with phase 2 funds being approved at
the end of the financial year. Haydale was awarded funding to
develop hydrogen fuel storage tanks by the Advanced Propulsion
Centre in FY21 and this work has led to commercial projects for
the development of type IV and type V hydrogen storage tanks
in FY22 with partners such as Viritech Ltd.
INCREASING PRODUCTION CAPACITY AT AMMANFORD
Haydale has consistently increased its capacity to functionalise
graphene ahead of the production curve at its Ammanford
facility. In May 2021 we ordered a new HT1400 HDPlas® reactor
which has the potential to increase our capacity to functionalise
nanomaterial up to 90 tonnes per annum depending on factors
such as the bulk density of the material and the specific
enhancement required. The new reactor was delivered on site in
March this year and has been successfully commissioned.
Various plasma treatments and nanomaterials are currently
being optimised through the reactor and this process will
continue through FY23. In addition to the new reactor, Haydale
invested to:
•
•
support the production scale-up and ordered ancillary
machinery to increase our powder handling capacity; and
leased a further unit at the Ammanford site and invested in
ink handling facilities that will allow the business to meet
the stringent quality assurance standards required for the
production of bio medical and other functionalised inks.
As noted previously, we believe that the significant capital
expenditure which commenced in FY21 and completed through
FY22 will allow us to meet our production requirements for the
foreseeable future in the UK but we will, where appropriate, look
to make further smaller ‘add on’ investments as production
volumes demand in order to lower our cost performance ratio
further.
INVESTING IN THE GROUP’S HUMAN CAPITAL
Alongside the investment in physical capacity during the year,
the Directors have invested in the human capital across the
wider business and have strengthened the teams across all
Group sites and across the spectrum of sales, marketing, human
resources, quality control and production. Whilst the Group has
in the three years to June 2021 secured substantial savings in its
administrative costs, some of which were specifically linked to
the uncertainty surrounding the length and impact of the Covid-
19 pandemic, the Directors saw the need this year to put in place
the building blocks that will underpin the Group’s growth plans.
To that end, administrative costs have increased during the year
and the annualised impact of this investment should see that
trend continue into the next financial year. The cost savings
achieved over that three year period were secured in a timely
manner and likewise the Directors remain prudent when they
are increasing the operational cost base of the business in what
have become more turbulent and changeable economic times.
FUTURE STRATEGIC DIRECTIONS
The clear priorities remain 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 can bring.
The Directors remain mindful that the economic backdrop
remains uncertain and that risks that could impinge on our
operations persist. 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 29 to 62. The financial statements of the Company
continue to be prepared in accordance with FRS 101 and are set
out on pages 63 to 69.
Statement of Comprehensive Income
In the year under review, the Group’s principal areas of income
were sales of specialty inks, fluids and graphene enhanced
composites and associated consultancy services from the UK
and APAC operations and sale of SiC fibres, whiskers, particulate
and blanks from the US operation. The Group’s revenue for the
year ended 30 June 2022 of £2.90 million (FY21: 2.90 million) was
consistent with the previous year. Revenue derived from product
sales increased by £0.43 million during the year but this was
offset by the reduction to reactor sales of £0.40 million (See
Note 4 – Segmentation Analysis).
Other operating income, which is principally grant funded
projects, was £0.44 million (FY21: £0.58 million). The Group
received £0.06 million (FY21: £0.14 million) from US Covid
Government Support packages and this is included in Other
Operation Income. Excluding US Government support other
operating income was comparable with the prior year.
The Group’s Gross Profit, which excludes Other Operating
Income declined marginally to £1.75 million (FY21: £1.98 million)
delivering a Gross Profit margin of 60% (FY21: 68%).
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STRATEGIC REPORT
Strategic Report continued
Adjusted Administrative Expenses increased by £0.80 million
(17.0%) to £5.52 million (FY21: £4.72 million). Total administrative
expenses for the year were £7.24 million (FY21: £6.11 million).
During the year the Group took the decision to impair the
residual intangible assets relating to its 2015 acquisition of
Innophene Co Ltd (now Haydale Technologies Thailand Limited)
and the non-cash charge of £0.38 million is included in total
administrative expenses.
Net cash outflow from operating activities before working
capital movements for the year increased to £3.42 million (FY21:
£2.04 million), the principal contributing factors being the Loss
before Taxation of £4.81 million (FY21: £3.41 million). Cash used in
Operations increased by £1.59 million in the year to £3.17 million
(FY21: £1.58 million). The Group received a R&D tax credit inflow
of £0.37 million in the year (FY21: £0.39 million). Net cash used in
operating activities increased to £2.80 million (FY21 £1.19 million).
The Loss from Operations was £5.06 million (FY21: £3.56 million).
Finance costs, which include interest payable on the Group’s
debt, for the year were £0.19 million (FY21: £0.21 million).
Capital expenditure in the year, excluding the IFRS 16
adjustments, was £1.00 million (FY21: £0.22 million).
Capital Structure and Funding
As at 30 June 2022, the Company had 510,335,691 ordinary shares
in issue (2021: 425,279,798). No options were exercised into
ordinary shares during the year (FY21: none).
The Group repaid borrowings of £0.84 million during the year
under review (FY21: £0.22 million), which almost wholly related
to the Group’s commercial US borrowing facilities which have
now been fully repaid.
The Company received the remaining £0.30 million of a £1.1
million UKRI Innovation Loan during the year to support scale up
capital expenditure in the UK. The US operation secured a loan
through the COVID-19 Economic Injury Disaster Loan scheme of
$0.20 million (£0.14 million). The net result was that the Group’s
total borrowings at the year-end were £1.35 million (2021: £1.73
million), of which £1.18 million was in the UK and the balance in
the Group’s US subsidiaries. The UKRI Innovation loan has a
quarterly liquidity covenant until April 2024. There are no
financial covenants extant in respect of the UK bounceback loan
of £0.04 million (FY21: £0.05 million) or the Group’s US
borrowings.
Post Balance Sheet Event
On 12 September 2022, the Company raised £5.51 million (gross)
through the placing, open offer and subscription of 275,516,784
new Ordinary Shares at 2.00 pence per share. The funds raised
will be principally used to fund the general working capital needs
of the business. Following the close of the Open Offer, the
Company issued a total of 138,758,392 Warrants to the
subscribers of New Ordinary Shares. These warrants are
exercisable at a value of 2.00 pence per share in the period to 12
September 2023.
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 £1.45 million (FY21:
£1.02 million2), of which £0.34 million was capitalized (FY21: £0.26
million). During the year the Group claimed R&D tax credits of
£0.43 million (FY21: £0.36 million) and it is expected that this
claim will be received during the current financial year.
Total comprehensive loss for the year, including the £0.38 million
non-cash charge for the impairment of intangible assets, was
£4.54 million (FY21: £3.57 million).
The loss per share for the year was £0.01 (FY21: £0.01 loss).
Statement of Financial Position and Cashflows
As at 30 June 2022, net assets amounted to £7.05 million (2021:
£6.76 million), including cash balances of £1.19 million (2021: £1.64
million). Other current assets increased to £3.26 million at the
year-end (2021: £3.00 million) and this was mainly related to the
increase in inventory of £0.11 million at the US facility during the
year. Current liabilities reduced to £2.28 million as at 30 June 2022
(2021: £2.78 million) due principally to the reduction in Bank
Loans repayable within 12 months.
The Right of Use Asset in respect of its leased premises increased
to £2.70 million (FY21: £2.58 million) due to renewed leases in the
UK. The Right of Use Liability which is split between Current and
Non-Current Liabilities similarly increased to £2.92 million (FY21:
£2.74 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 £1.36 million (FY21: £1.03
million) has increased in the year due to a combination of
negative movements on investments and exchange rate
movements.
2 Based on calculations submitted to HMRC for the R&D tax credit.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
Key Performance indicators
The Group has historically reported financial metrics of revenues,
gross profit margin, adjusted operating loss, cash position and
other metrics as its key performance indicators and these are set
out below.
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.
A detailed health and safety report is provided to the Board each
month and is a standing agenda at scheduled Board meetings.
FY22 (£m) FY21 (£m)
Revenue 2.90 2.90
Gross profit margin 60% 68%
Adjusted operating loss (3.33) (2.17)
Cash position 1.19 1.64
Borrowings 1.35 1.73
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.
During the year under review, management also used a sales
tracker, a 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.
SECTION 172(1) STATEMENT
The Directors acknowledge their duty under s.172 of the
Companies Act 2006 (“s.172”) 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 15.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers that the principal risks and uncertainties
facing the Group may be summarised as follows:
General Economic Uncertainty
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
Notwithstanding the technical merits of the processes
developed by the Group, and the 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.
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.
IP portfolio, covering
Intellectual Property Risk
The Group’s success will depend in part on its ability to maintain
adequate protection of
its
its
manufacturing process, additional processes, products and
applications, including in relation to the development of specific
functionalisation of graphene and other 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
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STRATEGIC REPORT
Strategic Report continued
enforcement. The Group retains third party professional experts
to advise on all matters relating to IP.
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
for
followed, setting out clear
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 allow us to attract and retain
key employees.
By order of the Board
David Banks
Chair
5 October 2022
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
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 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
Mark has held a number of CFO and COO roles within
international companies operating in the med-tech, beverages
and consumer sectors, where he has helped deliver strong
improvements in business sustainability and EBITDA growth.
Prior to moving into industry, Mark spent 8 years in professional
services firms, including 5 years as a corporate financier with
Deloitte. Before embarking on his career in finance, Mark was a
commissioned officer in the British Army. Mark qualified as a
11
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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GOVERNANCE
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 2022.
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 2 to 10 covers the following matters:
•
•
•
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 as adopted by the UK (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 (2021: nil).
Directors
The following directors have held office since 1 July 2021 and up to the date of signing the financial statements:
David Banks
Keith Broadbent
Mark Chapman
Graham Eves
Theresa Wallis
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
Directors’ Interests in Ordinary Shares
The directors had the following interests in ordinary shares of the Company at the 30 June 2022 and at the date of this report:
Director
David Banks
Keith Broadbent
Mark Chapman
Graham Eves
Theresa Wallis
Number of
Shares at
30 June
2022
3,250,000
952,381
750,000
142,857
511,904
% of
Share
Capital
0.64
0.19
0.15
0.03
0.10
Number of
Shares at
5 October
2022
5,000,000
1,952,381
750,000
142,857
1,011,904
% of
Share
Capital
0.64
0.25
0.10
0.02
0.13
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 12 September 2022, the Company raised £5.51 million (gross) through the placing, open offer and subscription of 275,516,784 new
Ordinary Shares at 2.00 pence per share. Following the close of the Open Offer, the Company issued a total of 138,758,392 Warrants
to the subscribers of New Ordinary Shares. These warrants are exercisable at a value of 2.00 pence per share in the period to 12
September 2023.
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 October 2023. 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 pages 9 to 10 may have on these
estimates and in particular the speed of adoption of new technology.
As part of this review the Directors have considered scenarios based on 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 25 per cent, to the point where the Group would breach its available cash resources in December 2023. With respect to this
‘stress test’ the Group has greater than 30 per cent of the 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 limited 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 October 2023.
Customer Solvency and Contractual Commitments
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 have taken account of these assessments in our forecasts.
Future revenue related to certain contractual commitments haves been heavily discounted given the lack of available data and
trading history with the Group.
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Directors’ Report 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 2022 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.
Disclosure of information to auditors
All of the current directors have taken all the steps that they ought to have taken to make themselves aware of any information
needed by the Company’s auditors for the purposes of their audit and to establish that the auditors are aware of that information.
The directors are not aware of any relevant audit information of which the auditors are unaware.
Independent auditors
Following a tender process, Crowe U.K. LLP were appointed as auditors to the Group during the year. The comparative results for FY21
were audited by the Group’s previous auditor, Grant Thornton UK LLP. The auditors have expressed their willingness to continue in
office and a resolution concerning their reappointment 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
5 October 2022
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
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. 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.
Below are the Company’s explanations of how it has complied with the 10 principles of the QCA Code during the year.
QCA Principles
1. Establish a strategy and business model which promotes long-term value for shareholders
The Board believes the highest medium and long-term value can be delivered to its shareholders by the adoption of the following
vision statement for the Company: To be a world leader in the revolutionary development of plasma functionalisation of advanced
performance-enhancing materials and nanomaterials across all industry sectors, providing cutting-edge technological solutions to
improve people’s life experience. 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. The Group’s business model, together with the principal risks and
uncertainties facing the Group, are set out in the Strategic Report on pages 2 to 10 of this Annual Report. The Directors intend that
the strategy will deliver shareholder returns initially through capital appreciation and eventually through distributions via dividends.
The Group’s values underpin its approach to growth and are addressed in paragraph 8.
2. Seek to understand and meet shareholder needs and expectations
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders.
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. The website provides contact details for
investor relations enquiries and David Banks is the Director appointed as the main point of contact for shareholder liaison.
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 to facilitate these relationships. When possible, 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. The Company held its 2021 AGM at its Loughborough facility, and, after a question
and answer session, all attendees were offered a guided tour of that facility. The Company also understood that whilst prevailing
guidance allowed the AGM to go ahead, it was aware that some members would not want to attend in person and so provision was
made for questions to be asked by email as well as submit their votes in advance by proxy. 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 appointed finnCap as its new broker and nominated advisor is January 2022 and both the new and outgoing broker
regularly briefed and kept the Company appraised of market and regulatory developments as they affect the Company and feedback
from shareholders and potential investors.
3. Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board is mindful of its statutory duty under s.172 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;
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.
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Chair’s Corporate Governance Statement
continued
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 s.172 or not. The Board ensures that there is
close oversight and contact with its key resources and relationships and where face to face meetings have been difficult to arrange,
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 on-going but much reduced 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 remains a priority, and compliant
protocols were maintained at our sites. Where feasible employees had moved to homeworking during the pandemic and those who
continue to work from home or have adopted a hybrid solution have access to a videoconference facility. The Company is still of a
size where the Executive Directors know all of the team and employees are aware that they are able to contact the senior leadership
directly to ask questions on any topic that concerns them.
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 with specific focus on health and safety related training at the Ammanford site as it prepares for
higher material throughput.
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 inform the
development of each business unit’s budget and taken together these form the basis of the Company’s annual budget, which is
submitted to the Board before the start of each financial year. Subsequently, the ongoing review of performance against the budget
facilitates an on-going dialogue on the goals, targets and aspirations of the Company and of each of the business units. This two-
way communication 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 on-going 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 meetings held in the ordinary course of business with other stakeholders such as customers, suppliers and partners.
Feedback received is reviewed, considered and, any changes required, are 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.
4. Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board oversees and reviews the Group’s risk management and internal control mechanisms.
During the year the risk register was reviewed by the executive directors in conjunction with other senior 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.
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 growing cybersecurity risk that all organisations face.
As set out below the risk register was considered by the Audit Committee at its meeting in June 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 9 to 10.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
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
ISO 9001:2015 and ISO 14001:2015 certified and the Thailand facility is ISO 14001:2015
•
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5. Maintain the board as a well-functioning, balanced team led by the Chair
The Board comprises two executive directors and three non-executive directors as follows:
Executives
•
Chief Executive Officer: Keith Broadbent;
•
Chief Financial Officer: Mark Chapman;
Non-executives
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Non-executive Chair: David Banks;
•
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Non-executive: Graham Eves; and
Non-executive: Theresa Wallis.
Biographical details of the Directors can be found here at www.haydale.com or in this Annual Report on page 11.
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 20 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 videoconference or telephone. Board papers are prepared by the relevant
personnel and usually circulated to the Board at least 48 hours before meetings, allowing time for consideration and necessary
clarifications before the meetings. Directors are free to seek any further information they consider necessary.
The Non-executive Directors meet without the presence of the Executive Directors during the year, and also maintain ongoing
communications with Executives between Board meetings.
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Chair’s Corporate Governance Statement
continued
During the year ended 30 June 2022, the Company held 20 board meetings (FY21: 21), with each member’s attendance as follows:
Director
David Banks
Keith Broadbent
Graham Eves
Mark Chapman
Theresa Wallis
Number of board meetings attended
Scheduled
FY22
Ad hoc Total
FY22 FY22
7/7
7/7
7/7
7/7
7/7
13/13 20/20
13/13 20/20
12/13 19/20
12/13 19/20
12/13 19/20
Total
FY21
21/21
21/21
20/21
21/21
21/21
Attendance at the Company’s audit, remuneration and nomination committee meetings during FY22 and the prior year were as
follows:
Number of committee meetings attended
Committee member Audit Remuneration Nominations
David Banks
Graham Eves
Theresa Wallis
FY22
5/5
5/5
5/5
FY21
4/4
4/4
4/4
FY22
3/3
3/3
3/3
FY21 FY22
FY21
2/2 –
2/2 –
2/2 –
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–
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.
6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
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 page 11 of this Annual Report and on the Company’s website.
In addition to their general board responsibilities, Non-executive Directors are encouraged to be involved in site visits and meetings,
in line with their individual areas of expertise.
The Company has employed the services of ONE Advisory Limited to provide Company Secretarial and MAR compliance services.
Matt Wood, a director of ONE Advisory Limited, is Haydale’s Company Secretary.
If required, the Directors are entitled to take independent professional advice at the Company’s expense in accordance with the
relevant Board agreed procedure.
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 briefings, updates and events offered by other professional advisory firms.
Following the Company’s equity fundraising completed in September 2022, the Board announced its intention to appoint an
additional non-executive director to the Board in due course and, as at the date of this annual report, this process remains ongoing.
7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
The Chair performs a continuous assessment of the individual and collective performance of the Board in an informal and collegiate
way through dialogue and meetings. The Chair is also leading a more formal evaluation exercise through a structured questionnaire.
At the year end, the Non-Executive Directors had completed the questionnaire and it is anticipated the formal process will be
concluded in the current financial year.
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Board succession planning is one of the responsibilities of the Nomination Committee as set out with regard to Principle 9 on page 19.
Below the main Board, the CEO seeks board approval for his recommendations on senior management appointments and changes
to the subsidiary boards.
8. Promote a corporate culture that is based on ethical values and behaviours
The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and
that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly
impact all aspects of the Company as a whole and the way that employees behave.
Our culture acts as the glue that binds our staff around the world together. Underpinning the Haydale culture is the need for
teamwork 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 inter-site meetings which, amongst other areas, cover sales, marketing,
technical and health and safety matters.
The Company completed its first employee survey during the year and all employees were invited to complete a confidential online
questionnaire which covered amongst other matters job satisfaction, culture and engagement. The results of the survey together
with actions for improvement in areas where the results demonstrated room for improvement were presented to the Board.
The Company also introduced an internal newsletter which is prepared by an editorial team from across the Group. ‘Material Matters’
is published quarterly and provides an informative update on developments across our facilities including key business developments,
a profile of new members of the team and a focus on a selected facility.
In April 2022 the Company hosted a strategy and team building event for the leadership team from across all of the Group sites. The
gathering took place in Wales and was the first time, due to the pandemic, that many of the new members of the team had met in
person. The event consolidated the work on Mission and Value statements that had taken place by videoconference earlier and
allowed time for the attendees to further discuss the corporate culture of the Company. The non-executive Directors joined those
attending at a team building session on the final day of the event.
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 normally 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.
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
The Board is committed to, and ultimately responsible for, high standards of corporate governance, and has chosen to adopt the QCA
Corporate Governance Code. We review our corporate governance arrangements regularly and expect to evolve these over time, in
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Chair’s Corporate Governance Statement
continued
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.
The Board has adopted appropriate delegations of authority which sets out matters which are reserved to the Board as summarised
below:
•
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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, CEO 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 financial reporting, risk management and internal control, 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 three times in each financial year.
During the year the Committee met five times. The Committee met in November 2021 to consider the draft report and accounts for
the year ended 30 June 2021, 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 draft Audit Status Update to
the Board at the first meeting. The Committee met in December 2021 to further review certain aspects of the audit work performed
and to review the draft annual report and financial statements, which it subsequently recommended to the Board for approval.
The third meeting of the Committee was held in February 2022 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 March 2022 to review the audit tenders submitted by various parties and to meet,
by videoconference, Crowe UK LLP.
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The fifth meeting of the Committee was held in June 2022. The meeting considered the terms of engagement between the Company
and Crowe UK LLP who would be taking over as the Company’s financial auditors, as well as the audit plan for the Group. At this
meeting the Company also reviewed the Group’s risk register.
The Group’s previous auditors attended the November 2021 meeting, and the new auditors attended the June 2022 meeting. During
these 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.
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 scheme. The Remuneration Committee plans to meet at least 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 22 to 23.
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, during the year, as planned, has continued to promote a period of stability before
looking to evaluate 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 2021 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 22 to 23 .
By order of the Board on 5 October 2022
David Banks
Chair
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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 page 21. The
members of the Remuneration Committee during the year under review were David Banks (Chair), Graham Eves and Theresa Wallis.
The provisions of the 2006 Companies Act in respect of the Directors’ Remuneration Report have been applied to this report.
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 2022 is set out on page 23.
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 (“EMI Scheme”) and on 8 July 2020 the Company adopted
a Stock Appreciation Rights Plan (“SAR Scheme”) for the Group’s wholly owned US subsidiary, Haydale Technologies Inc. The EMI
Scheme and the SAR Scheme are designed to align the interests of the Directors and other employees with those of shareholders,
as set out below.
On 20 January 2022, under the EMI Scheme, the Company granted a total of 1,900,000 options (“EMI Options”) to the Company’s
executive directors and a further 1,500,000 EMI Options were granted to directors of UK subsidiaries. The EMI Options granted in
January 2022 have an exercise price of 6.25p and their vesting is subject to, amongst other conditions, certain performance criteria
linked to the share price of the Company being met in the period to September 2025.
At the 30 June 2022, the Company had granted a total of 20,900,000 EMI Options to the Company’s executive directors and 6,500,000
EMI Options and 3,000,000 options under the SAR Scheme (“SAR Options”) to the directors of subsidiaries of the Company. The EMI
Options and the SAR Options (together the “Options”) granted since January 2020 have an exercise price of between 2.25p to 6.25p
per Ordinary Share and can only be exercised between the third and tenth anniversary of Grant (“Exercise Period”). Full details of the
principal conditions and performance requirements of the grants made can be found on the Company’s website at www.haydale.com.
The proportion of the Options granted that are capable of vesting are dependent on certain performance conditions being met, with
such performance being directly linked to the Company’s share price. Should the Company’s closing mid-market share price not
meet the performance conditions set then a specified percent of the grant shall lapse. At the year ended 30 June 2022, 11,400,00
Options granted to the executive directors of the Company and 3,000,000 EMI Options granted to the directors of subsidiaries of
the Company have met the performance thresholds specified and become exercisable as from 13 January 2023. At the year ended 30
June 2022, 1,800,000 SAR Options granted to a director of a subsidiary of the Company have met the performance thresholds specified
and become exercisable as from 8 July 2023.
The Remuneration Committee and the Board as a whole are expected to grant equity-based incentives during the current financial
year to continue to attract, incentivise and retain its employees.
22
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
DIRECTORS’ INTERESTS IN SHARE OPTIONS
The interests of directors of the Company in options over ordinary shares during the year were as follows:
Director
Keith Broadbent
Number of
2020
EMI Options
Date of
Grant
First
Exercise
Date
Exercise
Price
Expiry
Date
12,000,000
13 January 2020
13 January 2023
2.25p
12 January 2030
1,200,000
20 January 2022
20 January 2025
6.25p
19 January 2032
Mark Chapman
7,000,000
13 January 2020
13 January 2023
2.25p
12 January 2030
700,000
20 January 2022
20 January 2025
6.25p
19 January 2032
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 2022 was 5.20p (2021: 8.34p). During the year to 30 June
2022, the mid-market closing price ranged from 3.81p to 9.40p (2021: 2.90p to 8.34p).
DIRECTORS’ CONTRACTS
The executive directors have service contracts with the period of notice being six months. The non-executive directors have a letter
of engagement which provides for a one month notice period.
DIRECTORS’ REMUNERATION
The aggregate remuneration received by directors who served during the years ended 30 June 2022 and 30 June 2021 was as follows:
£’000 Salary/Fee
Bonus
Benefits
Year Ended June 2022
Year Ended June 2021
Total
exc.
pension
Total
inc.
pension
Total
exc.
pension
Total
inc.
pension
Pension
Pension
Executive Directors
K Broadbent 211
M Chapman 115
Non-Executive Directors
D Banks 51
G Eves 28
T Wallis 28
433
50
15
–
–
–
65
12
12
–
–
–
24
273
142
51
28
28
522
24
12
–
–
–
36
297
154
51
28
28
558
253
131
51
28
28
491
24
12
–
–
–
36
277
143
51
28
28
527
Bonuses are disclosed in the year for which they have been awarded. Bonuses for FY21 of £50,000 for Keith Broadbent and £15,000
for Mark Chapman are included in Total exc. pension.
By order of the Board
David Banks
Chair
5 October 2022
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FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries Plc
Opinion
We have audited the financial statements of Haydale Graphene Industries plc (the “Parent Company”) and its subsidiaries (the
“Group”) for the year ended 30 June 2022, which comprise:
•
•
•
•
•
the Group income statement and statement of comprehensive income for the year ended 30 June 2022;
the Group and parent company statements of financial position as at 30 June 2022;
the Group statement of cash flows for the year then ended;
the Group and parent company statements of changes in equity for the year then ended; and
the notes to the financial statements, including significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and
UK adopted International Accounting Standards. 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
2022 and of the Group’s loss for the period then ended;
the Group financial statements have been properly prepared in accordance with UK adopted International Accounting Standards;
the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard, 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
In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s ability to continue
to adopt the going concern basis of accounting included obtaining details of the cash raised post year end, evidence of the sales
pipeline, and understanding the directors’ assessment of potential measures that could be taken to conserve cash should this be
required.
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 entity’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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
24
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
Overview of our audit approach
MATERIALITY
In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be
expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus
our testing and to evaluate the impact of misstatements identified.
Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be £240,000
based on 5% of the Group loss before tax. The material set for the Parent Company was £170,000.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial
statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk
and our evaluation of the specific risk of each audit area having regard to the internal control environment. The performance
materiality for the Group financial statements was set at £168,000 and for the Parent Company £119,000.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party transactions and
directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of £12,000. Errors below that threshold would also
be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds.
Overview of the scope of our audit
Full scope audit were performed for Haydale Graphene Industries Plc, Haydale Limited, Haydale Composite Solutions Limited and
Haydale Ceramic Technologies LLC. Agreed upon procedures were performed for Haydale Technologies Thailand Limited and Haydale
Technologies Incorporated LLC. The other group entities were subject to analytical review procedures.
% coverage % coverage
Scope Revenue Net Assets
% coverage
Loss
before tax
Full scope
Agreed upon procedures
Analytical review
92 98 97
5 1 2
3 1 1
All audit work was performed by the same team at Crowe U.K. LLP.
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 which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
252525
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264369 Haydale AR pp24-pp28 new.qxp 12/10/2022 16:09 Page 26
FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries Plc continued
This is not a complete list of all risks identified by our audit.
Key Audit Matter
How the scope of our audit addressed the key audit matter
Valuation of goodwill in respect of Haydale Ceramic
Technologies LLC (see note 10)
We considered the risk that the goodwill in relation to
Haydale Ceramic Technologies LLC was impaired given
the losses incurred in the cash generating unit in the
year.
Revenue recognition (note 4)
We considered the risk that revenue was misstated
through including sales that do not meet the revenue
recognition criteria
Parent company investments (parent company note 6)
During the year and impairment charge of £259,000
was recognised. We considered the risk that there were
further impairments that should be recognised.
We obtained the directors’ impairment assessment and performed the
following procedures:
•
•
•
•
Used a valuation specialist to develop our own estimate of the
discount rate;
Discussion with management to understand the budgets and growth
plans for the business;
Obtaining the sales pipeline and evidence of orders received post year
end to support the revenue assumption for the coming financial year;
and
Reviewing the completeness of disclosure including that given in
relation to the sensitivity analysis.
We performed the following procedures:
•
•
•
Testing a sample of revenue items during the year to cash receipt;
Testing the cut off of revenue by agreeing a sample of items around
the year end to support evidence; and
Discussing one specific contract with management and following up
on post year end developments to support the revenue recognised.
We considered the directors’ assessment of the impairment of
investments alongside our consideration of the carrying value of the
associated goodwill. Our procedures included:
•
•
•
Used a valuation specialist to develop our own estimate of the
discount rate;
Discussion with management to understand the budgets and growth
plans for the business; and
Obtaining the sales pipeline and evidence of orders received post year
end to support the revenue assumption for the coming financial year.
Other information
The directors are responsible for the other information contained within the annual report. 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.
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 this gives rise to a material
misstatement in the financial statements themselves. 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.
26
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our 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 directors’ report and strategic report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the group and the parent company and their environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters where 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 the directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 12, 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 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.
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. The extent to which
our procedures are capable of detecting irregularities, including fraud is detailed below:
•
Understanding the principal legal and regulatory frameworks relevant to the Group, these included the requirements of the
Companies Act 2006, laws relating to taxation and health and safety;
• Making enquiries of management, and other personnel, regarding their knowledge of any actual, suspected or alleged fraud;
•
•
•
Performing substantive audit procedures in areas of significant audit risk, including revenue recognition;
Performed specific testing on journal transaction with a focus on those journals which, in our opinion, displayed higher risk
characteristics; and
Considering accounting estimates, both individually and in aggregate, and reporting to the Audit Committee our view of the
judgements made by management.
272727
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FINANCIAL STATEMENTS
Independent auditor’s report to the members
of Haydale Graphene Industries Plc continued
further description of our
A
responsibilities
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
is available on
the Financial Reporting Council’s website at:
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.
Matthew Stallabrass
(Senior Statutory Auditor)
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
5 October 2022
28
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2022
Note
4
5
6
8
Year ended
30 June
2022
£’ 000
Year ended
30 June
2021
£’ 000
2,901
(1,156)
2,903
(924)
––––––––––––––––––––––––––––––
1,979
575
1,745
442
(5,520)
(4,724)
––––––––––––––––––––––––––––––
(2,170)
(3,333)
(39)
(1,308)
(375)
(119)
(1,271)
–
––––––––––––––––––––––––––––––
(1,390)
––––––––––––––––––––––––––––––
(6,114)
––––––––––––––––––––––––––––––
(3,560)
––––––––––––––––––––––––––––––
(5,055)
(7,242)
(1,722)
(7,242)
(5,055)
(187)
(6,114)
––––––––––––––––––––––––––––––
(3,560)
(211)
––––––––––––––––––––––––––––––
(3,771)
363
––––––––––––––––––––––––––––––
(3,408)
(5,242)
433
(4,809)
374
(368)
(109)
208
––––––––––––––––––––––––––––––
(3,568)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(4,544)
(4,809)
(3,408)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(4,544)
(3,568)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
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 expense
Depreciation and amortisation
Impairment
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 33 to 62 form part of these financial statements.
29
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264369 Haydale AR pp29-pp32.qxp 12/10/2022 16:09 Page 30
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
Company Registration No. 07228939
30 June
2022
£’ 000
30 June
2021
£’ 000
Note
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
10
10
11
12
13
14
14
20
26
19
20
19
15
16
16
1,131
1,312
7,579
1,341
1,174
6,622
––––––––––––––––––––––––––––––
9,137
––––––––––––––––––––––––––––––
10,022
1,515
667
646
427
1,186
1,328
715
595
364
1,644
––––––––––––––––––––––––––––––
4,646
––––––––––––––––––––––––––––––
13,783
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
14,463
4,441
1,341
1,356
2,440
844
1,026
2,370
––––––––––––––––––––––––––––––
4,240
––––––––––––––––––––––––––––––
5,137
11
2,199
68
885
1,719
180
––––––––––––––––––––––––––––––
2,784
––––––––––––––––––––––––––––––
7,024
––––––––––––––––––––––––––––––
6,759
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
7,048
2,278
7,415
10,207
31,912
244
(12)
(35,303)
8,505
28,820
250
(386)
(30,430)
––––––––––––––––––––––––––––––
6,759
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
7,048
The financial statements on pages 29 to 62 were approved and authorised for issue by the Board of directors on 5 October 2022 and
signed on its behalf by:
David Banks
Chair
Keith Broadbent
Chief Executive Officer
30
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2022
At 1 July 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
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 2022
Share
capital
£’ 000
Share
premium
£’ 000
Share-based
payment
reserve
£’ 000
Foreign
exchange
reserve
£’ 000
Retained
losses
£’ 000
Total
equity
£’ 000
6,804
27,764
131
(18)
(27,230)
7,451
–
–
(3,408)
(160)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
3,883
(3,408)
208
–
(368)
(30,430)
27,764
6,804
(386)
–
–
–
–
131
–
1,701
–
119
2,977
(220)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
6,759
–
1,276
(220)
119
–
–
(30,430)
28,820
8,505
(386)
–
–
–
–
–
–
250
–
–
(4,809)
265
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,215
(4,809)
(109)
–
374
(35,348)
28,820
8,505
250
(12)
–
–
–
–
–
–
1,702
–
–
–
3,401
(309)
39
–
5,103
(309)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
7,048
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
39
(45)
–
–
–
45
–
–
(35,303)
10,207
–
–
–
–
31,912
244
(12)
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FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2022
Cash flow from operating activities
Loss after taxation
Adjustments for:
Amortisation and impairment 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 – (employer contribution)/net interest expense
Taxation
Operating cash flow before working capital changes
(Increase)/decrease in inventories
(Increase) in trade and other receivables
Increase in payables and deferred income
Cash used in operations
Income tax received
Net cash used in operating activities
Cash flow used in investing activities
Purchase of plant and equipment
Purchase of Intangible Assets
Net cash used in investing activities
Cash flow used in financing activities
Finance costs
Finance costs – right of use asset
Payment of lease liability
Proceeds from issue of share capital
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)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Cash and cash equivalents at end of the financial year
32
Note
10
11
17
26
16
16
29
29
Year ended
30 June
2022
£’ 000
Year ended
30 June
2021
£’ 000
(4,809)
(3,408)
(3,416)
607
1,076
8
39
188
(92)
(433)
176
1,096
78
119
211
47
(363)
––––––––––––––––––––––––––––––
(2,044)
––––––––––––––––––––––––––––––
384
(90)
174
––––––––––––––––––––––––––––––
(1,576)
––––––––––––––––––––––––––––––
383
––––––––––––––––––––––––––––––
(1,193)
––––––––––––––––––––––––––––––
(187)
(4)
435
(2,801)
(3,172)
371
(996)
(340)
(220)
(260)
––––––––––––––––––––––––––––––
(480)
––––––––––––––––––––––––––––––
(1,336)
(63)
(125)
(548)
5,103
(309)
454
(842)
(95)
(116)
(591)
2,977
(220)
800
(219)
––––––––––––––––––––––––––––––
2,536
––––––––––––––––––––––––––––––
(42)
821
823
––––––––––––––––––––––––––––––
1,644
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
9
(458)
1,644
3,670
1,186
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2022
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 as adopted by the UK (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 2022
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 from 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 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 October 2023. 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 pages 9 to 10 may have on these
estimates and in particular the speed of adoption of new technology.
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 25 per cent, to the point where the Group would breach its available cash resources at in December 2023. With respect to this
‘stress test’ the Group has greater than 30 per cent 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 limited 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 October 2023.
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 both publicly available information and taken account of these assessments in our forecasts.
Future revenue related to certain contractual commitments have been heavily discounted given the lack of available data and trading
history with the Group.
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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 2022 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 2022
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
Cash and cash equivalents comprise cash in hand, bank balances, deposits with financial institutions and short-term, highly
liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value
and have maturities of 3 months or less from inception.
h)
i)
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 reduced for payment made and increased for interest. It is remeasured
to reflect any reassessment or modification, or if there are changes in substance to the 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 longer term projections 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.
39
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A
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E
V
O
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S
T
N
E
M
E
T
A
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S
L
A
C
N
A
N
I
F
I
N
O
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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, impairment 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, elastomers and the
composites market in Europe);
North America (focussing on SiC & blank products for tooling); and
Asia Pacific (focusing on sales to the Asian markets)
2022
UK & North
Europe America
£’000 £’000
1,673
(670)
REVENUE 984
Cost of sales (356)
Adjustments,
Central &
Eliminations
£’000
–
–
Asia Pacific
£’000
244
(130)
Consolidated
£’000
2,901
(1,156)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,745
442
(5,520)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(3,333)
1,003
69
(1,648)
–
–
(1,370)
114
–
(525)
(1,370)
(576)
(411)
Gross profit 628
Other operating income 373
Adjusted administrative expenses (1,977)
Adjusted operating loss (976)
Administrative expenses
Share based payment expense (20)
Depreciation & amortisation (474)
Impairment –
(39)
(1,308)
(375)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(1,722)
(4)
(629)
–
(38)
(131)
(352)
23
(74)
(23)
(633)
(521)
(74)
(494)
Total administrative expenses (2,471)
OPERATING LOSS (1,470)
Finance costs
LOSS BEFORE TAXATION
Taxation
LOSS AFTER TAXATION
(599)
(1,891)
(2,281)
(1,209)
(7,242)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(5,055)
(187)
–––––––––––––––
(5,242)
433
–––––––––––––––
(4,809)
–––––––––––––––
–––––––––––––––
(1,891)
(485)
Additions to non-current assets 1,533
Segment assets 4,159
Segment liabilities (2,386)
72
7,225
(4,486)
36
341
(114)
–
2,738
(429)
1,641
14,463
(7,415)
40
264369 Haydale AR pp33-pp49.qxp 12/10/2022 16:10 Page 41
2021
Haydale Graphene Industries Plc | Annual Report & Accounts 2022
UK & North
Europe America
£’000 £’000
1,679
(379)
REVENUE 923
Cost of sales (311)
Adjustments,
Central &
Eliminations
£’000
–
–
Asia Pacific
£’000
301
(234)
Consolidated
£’000
2,903
(924)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,979
575
(4,724)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(2,170)
–
–
(1,267)
1,300
148
(1,328)
67
–
(404)
(1,267)
(337)
120
Gross profit 612
Other operating income 427
Adjusted administrative expenses (1,725)
Adjusted operating loss (686)
Administrative expenses
Share based payment expense (38)
Depreciation & Amortisation (376)
(119)
(1,271)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(1,390)
(30)
(679)
(48)
(149)
(3)
(67)
(709)
(197)
(70)
(414)
Total administrative expenses (2,139)
OPERATING LOSS (1,100)
Finance costs
LOSS BEFORE TAXATION
Taxation
LOSS AFTER TAXATION
(474)
(589)
(2,037)
(1,464)
(6,114)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(3,560)
(211)
–––––––––––––––
(3,771)
363
–––––––––––––––
(3,408)
–––––––––––––––
–––––––––––––––
(1,464)
(407)
Additions to non-current assets 473
Segment assets 3,473
Segment liabilities (1,727)
1,667
7,398
(4,697)
17
404
(194)
–
2,508
(406)
2,157
13,783
(7,024)
Geographical information
All revenues of the Group are derived from its principal activities as set out on page 2. The Group’s revenue from external customers
by geographical location are detailed below.
2022
£’000
2021
£’000
By destination
United Kingdom
Europe
United States of America
China
Thailand
South Korea
Japan
Rest of the World
769
685
1,051
127
158
86
–
25
370
104
739
135
136
165
1,207
47
––––––––––––––––––––––––––––––
2,903
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2,901
During 2022, £0.73 million (25%) (2021: £1.2 million (42%)) of the Group’s revenue depended on a single customer. During 2022 £0.58
million (20%) (2021: £0.41 million (14%)) of the Group’s revenue depended on a second single customer.
41
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I
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N
A
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V
O
G
S
T
N
E
M
E
T
A
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S
L
A
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N
A
N
I
F
I
N
O
I
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A
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264369 Haydale AR pp33-pp49.qxp 12/10/2022 16:10 Page 42
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 was £2.46 million (85%) of the Group’s revenue (2021: £2.43 million or 84% (including Reactor sales)) and revenue
from services was £0.31 million (11%) (2021: £0.34 million or 12%).
Dis-aggregation of revenues
The split of revenue by type:
Services
Reactor sales (Goods)
Reactor rental
Goods
2022
2022
£’000
2021
£’000
306
–
134
2,461
338
403
134
2,028
––––––––––––––––––––––––––––––
2,903
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2,901
UK &
Europe
£’000
North
America
£’000
Asia
Pacific
£’000
TOTAL
£’000
Services 275
Reactor rental 134
Goods 575
984
–
–
1,673
306
134
2,461
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,901
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
31
–
213
1,673
244
2021
UK &
Europe
£’000
North
America
£’000
Asia
Pacific
£’000
TOTAL
£’000
Services 231
Reactor sales (Goods) 403
Reactor rental 134
Goods 155
923
–
–
–
1,679
338
403
134
2,028
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,903
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
107
–
–
194
1,679
301
Services and reactor rental revenues are recognised over time, whereas goods and reactor sales are recognised at a point in time.
The group acquired 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
42
2022
£’000
2021
£’000
1,533
72
36
473
1,667
17
––––––––––––––––––––––––––––––
2,157
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
1,641
264369 Haydale AR pp33-pp49.qxp 12/10/2022 16:10 Page 43
The carrying value of the group’s non-current assets split by geographical location is detailed below:
Haydale Graphene Industries Plc | Annual Report & Accounts 2022
2022
£’000
2021
£’000
By destination
United Kingdom
United States of America
Thailand
South Korea
5. Other Operating Income
Grant Income
Federal Support Schemes
There are no unfulfilled conditions attached to the above income.
6. Loss before taxation
Loss before taxation is arrived at after charging:
Amortisation of intangibles
Impairment of intangibles
Depreciation of property, plant and equipment
Foreign Exchange
Operating lease rental : plant and machinery
2,732
7,240
49
1
3,271
5,749
116
1
––––––––––––––––––––––––––––––
9,137
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
10,022
2022
£’000
2021
£’000
373
69
427
148
––––––––––––––––––––––––––––––
575
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
442
2022
£’000
2021
£’000
176
–
1,096
(44)
1
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
232
375
1,076
58
1
The service fees of the Group’s auditor, Crowe U.K. LLP (2021 – Grant Thornton UK LLP), are analysed below:
2022
£’000
56
2021
£’000
72
–
12
––––––––––––––––––––––––––––––
84
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
56
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
43
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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
I
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A
M
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O
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N
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D
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264369 Haydale AR pp33-pp49.qxp 12/10/2022 16:10 Page 44
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 expense
Directors’ remuneration
Short-term employee benefits and fees
Post-retirement benefits
2022
No.
2021
No.
26
34
22
32
––––––––––––––––––––––––––––––
54
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
60
2022
£’000
2021
£’000
2,958
269
193
8
39
2,509
271
172
47
119
––––––––––––––––––––––––––––––
3,118
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
3,467
2022
£’000
2021
£’000
522
36
491
36
––––––––––––––––––––––––––––––
527
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
558
The total amount payable to the highest paid director in respect of emoluments was £273,000 (2021: £253,000), excluding pension
costs of £24,000 (2021: £24,000). Further details on Directors Remuneration can be found in the Directors’ Remuneration Report on
page 23.
2022
£’000
2021
£’000
427
6
363
–
––––––––––––––––––––––––––––––
363
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
433
8.
Income tax
Current tax credit
Total income tax credits:
– for the financial year
– under provision in the previous financial year
Total Current Tax
44
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
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
Income not taxable
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
Amounts not recognised
Non Qualifying assets
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%.
2022
£’000
2021
£’000
(4,809)
(433)
(3,408)
(363)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(5,242)
(3,771)
996
(906)
1,017
(53)
396
717
(215)
458
(2)
340
(519)
10
(515)
26
(19)
(446)
–
(472)
(8)
(9)
––––––––––––––––––––––––––––––
363
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
433
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 £24.994 million (2021: £23.68 million) including £4.12 million (2021:
£4.12 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 (£)
2022
£’000
2021
£’000
(4,809)
(3,408)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
483,770,289
408,967,698
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(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 2022, there were 48,710,000 (2021: 39,734,928) options and warrants outstanding as detailed in note 17. All of the options are
potentially dilutive.
Post year end 275,516,784 of new Ordinary Shares were issued on 13 September 2022, these Ordinary Shares are dilutive. There were
also 138,758,392 Warrants issued on 13 September 2022 and these Warrants are potentially dilutive.
45
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I
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C
N
A
N
R
E
V
O
G
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F
I
N
O
I
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FINANCIAL STATEMENTS
10. Intangible assets
Cost
At 1 July 2020
Additions
FX translation
At 1 July 2021
Additions
FX translation
At 30 June 2022
Accumulated amortisation
At 1 July 2020
Charge for the period
FX translation
At 1 July 2021
Charge for the year
Impairment
FX translation
At 30 June 2022
Net book value
At 30 June 2022
At 30 June 2021
At 30 June 2020
Customer
Relationships
£’000
Development
expenditure
£’000
Goodwill
£’000
Total
£’000
1,154
–
(133)
2,088
–
(113)
2,066
260
(7)
5,308
260
(253)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
5,315
340
281
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
5,936
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,319
340
2
1,975
–
142
1,021
–
137
2,661
1,158
2,117
634
–
–
633
87
(83)
1,442
89
(2)
2,709
176
(85)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2,800
232
375
86
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
3,493
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,529
145
23
1
634
–
352
–
637
87
–
85
1,698
809
986
2,443
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,131
963
349
2,515
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,341
790
384
2,599
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,454
624
521
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 Ltd (“HTT”)). Goodwill arose on the acquisition of ACM
(now Haydale Composite Technology LLC (“HCT”) on 13 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 on 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,
Haydale Composite Solutions Limited (“HCS”) and HTT.
Development expenditure of £340,000 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, elastomers and composites), where the
Directors believe that future economic benefit is probable (2021: £260,000). Capitalised development expenditure is not amortised
until the products or services are ready for sale or use.
46
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
Amortisation
Capitalised development costs are amortised over the estimated useful life of between 5 and 20 years. The amortisation charge is
recognised in administrative expenses.
The Customer relationships intangible is amortised over the estimated useful life of 10 years. The amortisation charge is recognised
in administrative expenses.
Goodwill impairment
Goodwill acquired in a business combination is allocated at acquisition to the CGUs that are expected to benefit from that business
combination. Following the acquisitions of Haydale, HCT and HTT, the Group is operating a number of different CGUs and therefore
Haydale and ACM goodwill has been considered against the future forecast trading outcomes of HCT, Haydale 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:
2022
%
2021
%
2022
£’000
2021
£’000
Haydale
HCT
HTT
24
975
341
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
24
1,107
–
10%
12%
10%
10%
12%
10%
The Group tests goodwill at least annually for impairment or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined from value-in-use calculations. The key assumptions for the value-in-use are
those regarding the discount rates, the growth rates and expected changes to cash flows during the period for which management
have detailed plans. Discount rates are estimated 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 (“WACC) of 12% (FY21: 12%)% , have been
used to discount projected cash flows.
The impairment calculations for the current year have been derived from the longer term forecasts (the “Forecasts”) that have been
approved by the Board.
The HCT model assumes that its turnover is 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 FY23 and beyond. This anticipated rebound would lead to a recovery in the whisker sales and allow for growth in blank and
finished tool sales at this facility such that by June 2023 the CGU had at least recovered to its pre pandemic trading position. Further
information on this trading unit is given in the strategic report on page 2 under the subheading ‘North America’.
As part of the impairment sensitivity analysis we reviewed several performance assumptions which involved either reducing forecast
revenue or increasing the WACC to a point where the carrying value of the assets were equal to the HCT discounted cashflows. Of
these scenarios 1) using the Groups WACC of 12%, revenue was equal to FY23 budgeted revenue with revenues increasing by 20%
over the two year period ending June 2025 and increasing by 2% per annum thereafter: and 2) increased the WACC to 14% and keeping
all other factors constant increased the revenue growth in the two year period ending June 25 from 20% to 30%. In both sensitivities
margins were maintained at historic levels. The carrying value of the HCT CGU is £7.5 million which consists of Goodwill, Customer
Relations, PPE and Right of Use Assets.
Due to uncertainty over the timings of the recovery in revenue at HTT the Directors have impaired the intangible assets of HTT in
the year.
Following this review, the Directors have determined that apart from the impairment in relation to HTT there is no impairment
charge which should be recognised against the intangible assets of the Group.
47
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A
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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
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264369 Haydale AR pp33-pp49.qxp 12/10/2022 16:10 Page 48
FINANCIAL STATEMENTS
11. Property, plant and equipment
Assets
Leasehold
and leasehold
under
improvements machinery and fittings vehicles construction
£,000
£’000
Plant
and Fixtures Motor
£’000 £’000 £’000
Total
£’000
Cost
At 1 July 2020 2,842
Additions 1,677
Disposals (108)
Transfer –
FX translation (207)
At 1 July 2021 4,204
Additions 422
FX translation 429
Disposals (125)
Transfer –
At 30 June 2022 4,930
11,182
542
1,897
22
(344)
(11)
–
–
(779)
(53)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
11,956
7,735
198
(225)
29
(514)
(29)
(3)
32
–
7,223
31
–
500
(2)
29
–
851
592
(15)
–
1,301
28
1,063
38
(140)
–
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
14,180
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–
4
–
–
–
–
–
–
8,651
566
33
–
Accumulated depreciation
At 1 July 2020 994
Charge for the year 598
Disposal (32)
FX translation (122)
At 1 July 2021 1,438
Charge for the year 559
FX Translation 124
Disposals (125)
At 30 June 2022 1,996
–
–
20
6
–
1
3,450
444
(226)
(118)
4,775
311
1,096
48
(266)
(8)
(271)
(32)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
5,334
319
1,076
47
324
22
(133)
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
6,601
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
3,550
468
174
(8)
27
2
4
–
–
–
–
–
4,184
388
33
–
Net book value
At 30 June 2022 2,934
7,579
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,467
178
–
–
At 30 June 2021 2,766
6,622
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
3,673
181
–
2
At 30 June 2020 1,848
6,407
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
4,285
231
32
11
Including in the net carrying amount of Property, plant and machinery 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
48
30 June
2022
£’000
4,182
(1,486)
30 June
2021
£’000
3,576
(993)
––––––––––––––––––––––––––––––
2,583
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2,696
2022
£’000
2021
£’000
286
554
675
167
261
900
––––––––––––––––––––––––––––––
1,328
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
1,515
264369 Haydale AR pp33-pp49.qxp 12/10/2022 16:10 Page 49
Haydale Graphene Industries Plc | Annual Report & Accounts 2022
The total value of inventories recognised in cost of sales during the year was £1,028,486 (2021: £915,580). 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
2022
£’000
2021
£’000
715
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
667
2022
£’000
2021
£’000
236
364
46
299
227
69
––––––––––––––––––––––––––––––
595
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
646
2022
£’000
2021
£’000
364
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
427
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
2022
£’000
2021
£’000
180
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
68
As at 30 June 2022, deferred income of £52,055 (2021: £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 2020
Issue of £0.02 ordinary shares
At 30 June 2021
Issue of £0.02 ordinary shares
At 30 June 2022
Share
capital
£’000
6,804
1,701
Share
premium
£’000
27,764
1,056
Number of
shares
No.
340,223,848
85,055,950
Total
£’000
34,568
2,757
––––––––––––––––––––––––––––––––––––––––––––––––––––
37,325
4,794
––––––––––––––––––––––––––––––––––––––––––––––––––––
42,119
––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––
425,279,798
85,055,893
28,820
3,092
8,505
1,702
510,335,691
10,207
31,912
On 20 September 2021, the Company issued 85,055,893 new ordinary shares of 2p each.
Issue costs amounting to £309,000 have been charged to the share premium account during the year (2021: £220,000).
49
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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 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 three years from the date of grant.
The exercise price of the 2022 EMI options granted on 20 January 2022 was 6.25p per Ordinary Share (being a 12.6 % premium to the
closing mid–market price of the Company’s Ordinary Shares on 20 January 2022). The options vest three years from the date of grant.
The options are accounted for as equity settled share based payment transactions.
The following table which illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options
during the year:
Balance at beginning of year
Granted
Lapsed
Forfeited
Balance at end of year
Number
of options
No.
39,734,928
11,835,000
(3,872,768)
(12,160)
Number
2022
of options
WAEP
No.
Pence
34,181,185
2.39
7,100,000
6.25
3.10 (1,500,000)
(46,257)
2021
WAEP
Pence
23.00
2.25
2.25
154.70
––––––––––––––––––––––––––––––––––––––––––––––––––
2.39
47,685,000
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
39,734,928
175.81
2.25
At 30 June 2022, there were options outstanding over 47,710,000 un-issued ordinary shares, equivalent to 9% of the issued share
capital as follows:
Unapproved scheme
8 July 2020
20 January 2022
Approved EMI scheme
13 January 2020
20 January 2022
Number of
shares
Exercise
price
Earliest exercise
date
Latest
exercise date
2.25p
6.25p
2.25p
6.25p
8 July 2023
19 January 2025
8 July 2030
19 January 2032
13 January 2023
19 January 2025
13 January 2030
19 January 2032
5,000,000
4,750,000
30,850,000
7,085,000
–––––––––––
47,685,000
–––––––––––
–––––––––––
The estimated fair value was calculated by applying a Black-Scholes option pricing model.
Type of
award
Number
of shares
8 July 2020
13 January 2020
20 January 2022
20 January 2022
Unapproved
EMI
Unapproved
EMI
5,000,000
30,850,000
4,750,000
7,085,000
–––––––––––
47,685,000
–––––––––––
–––––––––––
Share
price
at date of
grant
(p)
3.65
1.88
5.50
5.50
Fair
value
per
option
(p)
0.63
1.56
1.13
1.13
Award
life
(years)
10
10
10
10
Risk
free
rate
(%)
0.50
0.50
0.50
0.50
Expected
volatility
rate Performance
conditions
(%)
80.5
80.5
63.6
63.6
See below
See below
See below
See below
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
January & July 2020 Performance Conditions
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 vesting.
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
vesting.
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 vesting.
January 2022 Performance Conditions
Should the Company’s closing mid-market share price reach and remain at or above £0.10 for at least 15 consecutive trading days,
commencing after the grant date and ending on or before 30 September 2023, 30% of share options are capable of exercise.
Should the Company’s closing mid-market share price reach and remain at or above £0.15 for at least 15 consecutive trading days,
commencing after the grant date and ending on or before 30 September 2024, an additional 30% of share options are capable of
exercise.
Should the Company’s closing mid-market share price reach and remain at or above £0.20 for at least 15 consecutive trading days,
commencing after the grant date and ending on or before 30 September 2025, the final 40% of share options are capable of exercise.
The weighted average remaining contractual life of share options outstanding at 30 June 2022 is 8 years (2021: 8.5 years). The charge
for the year for share-based payment amounted to £0.03 million (2021: £0.12 million).
Warrants
Balance at beginning of year
Lapsed
Granted
Balance at end of year
2022
Weighted
Number of
warrants
2021
Weighted
average
exercise
No. price Pence
208.00
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––
208.00
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
average Number of
warrants
exercise
No. price Pence
208.00
208.00
8.00
67,398
(67,398)
1,000,000
67,398
–
–
1,000,000
67,398
8.00
None of the warrants outstanding at 30 June 2022 are to employees. Warrants granted during the year have a share price performance
condition of £0.16 for 15 consecutive working days on or before 30th September 2023 (The opening warrants did not have performance
conditions). 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 2022 is 1.25 years (2021: 0.04 years). The charge
for the year for warrant payment amounted to £8,881 (2021: £7,258).
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FINANCIAL STATEMENTS
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 Losses
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 the translation differences arising from the translation of the overseas subsidiary results
into pound sterling.
19. Trade and other payables
Trade payables
Tax and social security
Lease liability
Accruals and other creditors
20.Bank loans
Bank loans
The borrowings are repayable as follows:-
– within one year
–
–
in the second year
in the third year and above
Current
Liabilities
2021
£’000
677
101
365
576
Non-Current
Liabilities
2021
£’000
–
–
2,370
–
––––––––––––––––––––––––––––––––––––––––––––––––––
2,370
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
2022
£’000
–
–
2,440
–
2022
£’000
1,178
57
480
484
2,440
2,199
1,719
2022
£’000
1,352
2021
£’000
1,729
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
11
15
1,326
885
9
835
––––––––––––––––––––––––––––––
1,729
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
1,352
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%
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2022
6.3%
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 carried
an interest rate of 4% and was 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. The rate of interest of this was fixed
at 5.25%. Both the above loans were repaid during the year.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
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 had a repayment holiday and did not accrue interest during the first 12 months. Following the initial 12 months,
interest has been charged at 2.5% p.a. and the loan and interest are repayable 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 fully
drawn down this facility. The loan has a repayment holiday until March 2024 and is fully repayable by March 2026. Interest will be
charged at 7.4% p.a. for the period of the loan. For the initial 36 months interest will be paid at 3.7% p.a. and for the final 24 months
interest with be paid at 10.7% p.a. There are no penalties for early repayment.
During the year, the US operation secured a loan through the COVID-19 Economic Injury Disaster Loan scheme of $200,000. The loan
is for a period of 30 year with a fixed interest rate of 3.75% and deferred repayments for the first two years. At the year end the balance
on the loan was £164,000.
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
2022
£’000
522
61
37
2021
£’000
491
65
36
––––––––––––––––––––––––––––––
592
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
620
Other transactions – Group and parent company
Fees totalling £12,352 (2021: £15,856) were paid to Evesco International Business for support during the September 2021 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
2022, the balance owed to Evesco International Business Services was £Nil (2021: £Nil).
Other transactions – Group
Other related party transactions during the year under review are shown in the table below:
Services Received
QM Holdings
2022
£’000
2021
£’000
402
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
175
QM Holdings is owned by Thomas Quantrille and Marvin Murrell who are officers of HCT. QM Holdings owned the HCT facilities and
leased these to the Company. QM Holdings sold the property during the year and following the sale the rental is no longer deemed
a related party transaction. During the year an amount of £174,914 was paid to QM Holdings in respect of property rent (2021:
£401,870). The balance outstanding to QM Holdings at the year-end was £Nil (2021: £28,971).
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264369 Haydale AR pp50-pp62 new.qxp 12/10/2022 16:12 Page 54
FINANCIAL STATEMENTS
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
2022
Financial assets
Financial liabilities
2021
Financial assets
Financial liabilities
5
216
––––––––––––––––––––––––––––––––––––––––––––––––––
117
––––––––––––––––––––––––––––––––––––––––––––––––––
211
44
73
287
339
––––––––––––––––––––––––––––––––––––––––––––––––––
374
––––––––––––––––––––––––––––––––––––––––––––––––––
370
52
4
Foreign currency sensitivity analysis
The following table details the sensitivity analysis to possible changes in the relative values of foreign currencies to which
the Group is exposed as at the end of the respective financial periods, with all other variables held constant:
Effects on loss after taxation/equity
United States Dollar:
– strengthened by 10%
– weakened by 10%
Euro:
– strengthened by 10%
– weakened by 10%
2022 Increase/
(decrease)
£’000
2021 Increase/
(decrease)
£’000
(4)
4
31
(26)
(45)
29
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
14
(12)
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 minimal risk to capital. Any surplus funds will be placed with
licensed financial institutions to generate interest income.
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.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
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
– more than 6 months
Gross amount
2022
£’000
298
29
280
60
2021
£’000
9
9
360
337
––––––––––––––––––––––––––––––
715
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
667
2022
£’000
604
2021
£’000
677
29
14
20
38
–
–
––––––––––––––––––––––––––––––
715
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
667
At the end of each financial period, trade receivables that are individually impaired were those in significant financial difficulties
and have defaulted on payments. These receivables are not secured by any collateral or credit enhancement.
Collective impairment allowances, are determined based on estimated irrecoverable amount from the sale of goods and services,
determined by reference to past default experience. 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 Board believes that no further impairment allowance is necessary in respect of these trade receivables.
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FINANCIAL STATEMENTS
22. Financial instruments (continued)
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:
2022
Trade payables
Secured bank loan
Unsecured bank loan
Lease liability
Total
2021
Trade payables
Secured bank loan
Unsecured bank loan
Lease liability
Total
1 to 2 Yrs
£’000
–
–
15
461
Under 1 Yr
£’000
1,178
–
11
480
Total
£’000
1,178
1,141
211
2,920
––––––––––––––––––––––––––––––––––––––––––––––––––
5,450
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
3+ Yrs
£’000
–
1,141
185
1,979
1,669
3,305
476
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
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.
d) Classification of financial instruments (at amortised cost and fair value)
2022
£’000
2021
£’000
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)
667
282
1,186
715
368
1,644
––––––––––––––––––––––––––––––
2,727
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2,135
1,352
1,178
2,920
1,729
677
2,735
––––––––––––––––––––––––––––––
5,141
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
5,450
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.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
23. Capital commitments
The Group had the following capital commitments in the respective years:
Authorised by the directors for
2022
£’000
52
2021
£’000
317
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
2022
2022
Plant and
Land and
Land and
Plant and
buildings machinery
buildings machinery
£’000
£’000
1
1
2
2
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
£’000
–
–
£’000
–
–
3
3
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
–
–
2022
2022
Plant and
Land and
buildings machinery
£’000
£’000
2021
2021
Plant and
Land and
buildings machinery
£’000
£’000
1
1
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
–
–
Within the minimum lease payments for plant and machinery is the cost relating to general office equipment.
26.Defined Benefit Pension Scheme
HCT operated a defined benefit pension scheme. The scheme was closed in November 2006 for any new participants and frozen in
February 2009 for all participants.
Contributions of £92,000 were made to the scheme during the year ended 30 June 2022 (2021: 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
2022
£’000
9
2021
£’000
47
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
2022
£’000
113
2021
£’000
(208)
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FINANCIAL STATEMENTS
26.Defined Benefit Pension Scheme (continued)
The following table sets forth the pension plan’s funded status as of 30 June:
Accumulated benefit obligation
Projected Benefit obligation
Plan assets at fair value
Funded Status
Accrued Pension Cost
2022
£’000
(4,076)
(4,076)
2,720
2021
£’000
(3,834)
(3,834)
2,808
––––––––––––––––––––––––––––––
(1,026)
––––––––––––––––––––––––––––––
(1,026)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(1,356)
(1,356)
Net amount recognised in the Consolidated Statement of Financial Position as of 30 June, consisted of the following:
Non-current Liabilities
2022
£’000
2021
£’000
––––––––––––––––––––––––––––––
(1,026)
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
(1,356)
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 2022:
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
3.25%
3.25%
3.50%
3.00%
2022
20.5 years
22.4 years
2021
20.4 years
22.3 years
Plan Assets
Pension assets are managed by an outside investment manager and are rebalanced periodically. The Company establishes policies
and strategies and regularly monitors performance of the assets, including the selection of investment managers, setting long-term
strategic targets, and monitoring asset allocations. Target allocation ranges are guidelines, not limitations, subject to variation from
time-to-time or as circumstances warrant, and occasionally, the Company may approve allocations above or below a target range.
The pension plan’s investment strategy with respect to pension assets is to invest the assets in accordance with ERISA and fiduciary
standards. The long-term primary objective for the pension plan assets are to protect the assets from erosion of purchasing power
and to provide a reasonable amount of long-term growth of capital, without undue exposure to risk. Currently, the strategic targets
are 45% for equity securities, 50% for debt securities, and no more than 5% for other categories.
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The fair value of the Company’s pension plan assets valued at 30 June 2022, by asset category were as follows:
Haydale Graphene Industries Plc | Annual Report & Accounts 2022
Description
Cash
Corporate Equities
Fixed Income:
US Government
Corporate debt
Mutual Funds
Total
Carrying
Amount
£’000
160
1,450
Assets/
Liabilities
Measured at
Fair Value
£’000
160
1,450
Fair Value Measurements at
30 June 2022 using
Level 1
Inputs
£’000
160
1,450
Level 2
Inputs
£’000
–
–
14
1,003
93
14
1,003
–
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1,017
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
14
1,003
93
–
–
93
2,720
2,720
1,703
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 2022, were as follows:
Opening Balance
Contributions
Distributions
Earnings
Net realised (loss)/gain
Foreign exchange gain/(loss)
Balance at Year End
2022
£,000
2,808
92
(269)
–
(271)
360
2021
£,000
2,840
–
(217)
47
449
(311)
––––––––––––––––––––––––––––––––––
2,808
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
2,720
Cash Flows
The Company expects benefits paid for the next five fiscal years and the five years thereafter as follows:
2022
2023
2024
2025
2026
Thereafter
2022
£,000
280
279
284
283
283
1,442
2021
£,000
247
245
250
249
249
1,270
––––––––––––––––––––––––––––––––––
2,510
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
2,850
The company’s pension plan asset allocations by asset category were as follows as of 30 June 2022:
Asset Category
Cash
Equity Mutual Funds
Fixed Income
Other
6%
53%
38%
3%
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FINANCIAL STATEMENTS
26.Defined Benefit Pension Scheme (continued)
Plan Obligations
Benefit Obligation at 01 July
Foreign exchange movement
Interest cost
Actuarial gain/(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
4,076
2022
£,000
3,834
518
106
(113)
(269)
2021
£,000
4,275
(452)
109
120
(218)
––––––––––––––––––––––––––––––––––
3,834
––––––––––––––––––––––––––––––––––
2,840
(311)
449
47
–
(217)
––––––––––––––––––––––––––––––––––
2,808
––––––––––––––––––––––––––––––––––
(1,026)
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
2,808
360
(271)
–
92
(269)
(1,356)
2,720
Defined benefit obligation – sensitivity analysis.
The impact to the value of the defined benefit obligation of a reasonably possible change to one actuarial assumption, holding all
other assumption constant, is presented in the table below:
Actuarial Assumption
Discount Rate
Mortality Rate
Reasonably
Possible Change
(+/- 0.25%)
(+/-1.00%)
Defined Benefit Obligation (£’000)
Decrease
115
(15)
Increase
(110)
15
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 2022, were £92,000 (2021: £47,000).
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
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.
There was no movement on the deferred tax account in the year and the balance at the year end is £Nil (2021 – £nil).
Detail of the deferred tax liability, amounts recognised in profit and loss and amounts recognised in other comprehensive income
are as follows:
Employee pension liabilities
Available losses
Business combination
Net tax assets/(liabilities)
Employee pension liabilities
Available losses
Business combinations
Net tax assets/(liabilities)
(Charged)/
credited
to profit
or loss
2022
£’000
70
21
(91)
––––––––––––––––––––––––––––––––––––––––––––––––––
–
––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––
Liability
2022
£’000
–
–
(800)
Net
2022
£’000
285
515
(800)
Asset
2022
£’000
285
515
–
(800)
800
–
(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
–
A deferred tax asset has not been recognised for the following:
Accelerated capital allowances
Unused tax losses
2022
£’000
(49)
24,994
––––––––––––––
24,945
––––––––––––––
––––––––––––––
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 13 September 2022, the Company raised £5.51 million (gross) through the placing, open offer and subscription of 275,516,784 new
Ordinary Shares at 2.00 pence per share. The funds raised will be used to fund the general working capital needs of the business.
Following the close of the Open Offer, the Company will issue a total of 138,758,392 Warrants to the subscribers of New Ordinary
Shares. These warrants are exercisable at a value of 2.00 pence per share in the period to 12 September 2023.
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FINANCIAL STATEMENTS
29.Reconciliation of liability movement as a result of financing activities
Non-current
Loans and
borrowings
£’000
1,335
3
800
–
1,647
–
–
(263)
Current
loans and
borrowings
£’000
1,561
15
–
(219)
–
(561)
(117)
263
Total
£’000
2,896
18
800
(219)
1,647
(561)
(117)
–
308
(308)
–
–––––––––––––––––––––––––––––––––––––––––––––––
4,464
124
454
(842)
260
(548)
360
–
1,250
16
–
(842)
–
(548)
12
(43)
3,214
108
454
–
260
–
348
43
(646)
–
–––––––––––––––––––––––––––––––––––––––––––––––
4,272
–––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––
3,781
646
491
At 1st July 2020
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 2020 becoming current during year.
Lease Liability classified as non-current at 30 June 2020 becoming
current during year.
At 30th June 2021
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 2021 becoming current during year.
Lease Liability classified as non-current at 1 July 2021 becoming
current during year
At 30th June 2022
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PARENT COMPANY BALANCE SHEET
As at 30 June 2022
Company Registration No. 07228939
PARENT COMPANY REPORT
Fixed assets
Property, plant and equipment
Investments
Current assets
Debtors – within one year
Debtors – after more than one year
Cash at bank and in hand
Creditors: amounts falling due within one year
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
Creditors: amounts falling due after more than one year
NET ASSETS
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
SHAREHOLDER’S FUNDS
Haydale Graphene Industries Plc | Annual Report & Accounts 2022
Note
2022
£’ 000
2021
£’ 000
6
7
7
8
9
9
17
1,238
27
1,497
––––––––––––––––––––––––––––––
1,524
––––––––––––––––––––––––––––––
1,255
(429)
8,070
278
7,097
695
176
6,217
283
––––––––––––––––––––––––––––––
6,676
––––––––––––––––––––––––––––––
(408)
––––––––––––––––––––––––––––––
6,268
––––––––––––––––––––––––––––––
7,792
–
––––––––––––––––––––––––––––––
7,792
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
8,896
–
8,896
7,641
10,207
31,912
(33,223)
8,505
28,820
(29,533)
––––––––––––––––––––––––––––––
7,792
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
8,896
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 2022 was £3,728,000 (2021: £1,533,000).
The financial statements on pages 65 to 69 were approved and authorised for issue by the Board of directors on 5 October 2022 and
signed on its behalf by:
David Banks
Chair
Keith Broadbent
Chief Executive Officer
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A
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A
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N
A
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FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2022
Share
capital
£’ 000
Share
Profit and
Premium loss account
£’ 000
£’ 000
Total
Equity
£’ 000
6,804
27,764
(28,104)
6,464
–
–
(1,533)
(1,533)
–
1,701
–
104
2,977
(220)
–––––––––––––––––––––––––––––––––––––––––––––––––
7,792
–
1,276
(220)
104
–
–
(29,533)
28,820
8,505
–
–
(3,728)
(3,728)
–
1,702
–
–
3,401
(309)
38
5,103
(309)
–––––––––––––––––––––––––––––––––––––––––––––––––
8,896
–––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––
38
–
–
(33,223)
10,207
31,912
At 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, net of transaction costs
Share issue costs
At 30 June 2021 and 1 July 2021
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 2022
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
NOTES TO THE PARENT COMPANY BALANCE SHEET
For the year ended 30 June 2022
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.
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FINANCIAL STATEMENTS
2. Accounting policies (continued)
The Company’s financial assets measured at amortised cost comprise intercompany receivables, trade and other receivables and
cash and cash equivalents in the consolidated statement of financial position.
The intercompany receivables are interest-free loans that are repayable on demand. In applying IFRS 9 to these balances, the company
assesses the ability of the debtor subsidiary to repay the loan on demand at each reporting date. A loan is considered to be in default
where there is evidence that the borrower has insufficient liquid assets to repay the loan on demand. This is assessed with reference
to key liquidity and solvency ratios. Where the borrowing subsidiary has sufficient liquid assets to repay the loan immediately, meaning
the risk of default is very low, the loan is considered to be in Stage 1 of the expected credit loss model, meaning that there is deemed
to have been no significant increase in credit risk. However, should the borrowing subsidiary not have sufficient liquid assets to repay
the loan on demand, the loan is considered to be at Stage 3 of the expected credit loss model and credit impaired. Where a loan is
deemed to be credit impaired, an expected credit loss provision is recognised 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.
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Haydale Graphene Industries Plc | Annual Report & Accounts 2022
Future cash flows used in the value in use calculations are based on our latest Board approved longer term projections. 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
2021
No.
9
––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––
2022
No.
10
2022
£’ 000
723
91
62
38
2021
£’ 000
642
79
53
48
––––––––––––––––––––––––––––––
822
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
914
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 2021
Impairment provision
At 30 June 2022
Investment
£’000
1,497
(259)
–––––––––––––
1,238
–––––––––––––
–––––––––––––
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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FINANCIAL STATEMENTS
6. Fixed asset investments (continued)
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
100%
100%
100%
100%
100%
100%
100%
100%
Nature of
business
R&D, sales and distribution
R&D, sales and distribution
Dormant
Dormant
Sales and distribution
Holding Company
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 also exempt
from audit.
Subsidiary
Haydale Ltd
Haydale Composites Ltd
EPL Composites Ltd
Haydale Composite Solutions Limited
Haydale Technologies Korea Co., Ltd
Haydale Technologies Thailand Ltd
Haydale Technologies Incorporated LLC
Haydale Ceramic Technologies LLC
Registered office
Clos Fferws, Parc Hendre, Capel Hendre, Ammanford, Carmarthenshire, SA18 3BL
Clos Fferws, Parc Hendre, Capel Hendre, Ammanford, Carmarthenshire, SA18 3BL
Clos Fferws, Parc Hendre, Capel Hendre, Ammanford, Carmarthenshire, SA18 3BL
Unit 10 Charnwood Business Park, North Road, Loughborough, Leicestershire, LE11 1QJ
16F, Gangnam Bldg. 396, Seocho-daero, Seocho-gu, Seoul 137-857, South Korea
Room 510 – 515, Tower D, 5th Floor, Thailand Science Park Phahon Yothin Road,
Luang District, Pathum Thani Province, 12120, Thailand
1446 South Buncombe Road, Greer, South Carolina. 29651, USA
1446 South Buncombe Road, Greer, South Carolina. 29651, USA
7. Debtors
2022 2022
£’ 000 £’ 000
< 1 yr > 1 yr
Amounts owed by group companies – 7,097
Corporation tax 76 –
Other debtors 188 –
Prepayments and accrued income 14 –
2021
£’ 000
> 1 yr
6,217
–
–
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
6,217
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2021
£’ 000
< 1 yr
–
76
91
9
278 7,097
176
During the year an impairment provision of £909,000 (2021: Nil) was recognised in relation to Haydale Technologies Thailand Limited
and Haydale Technologies Korea Co Ltd 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, predominantly in USD. A 1% movement in the exchange rate would
result in a gain of £0.07m or a loss of £0.07m.
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8. Creditors: amounts falling due within one year
Haydale Graphene Industries Plc | Annual Report & Accounts 2022
Trade creditors
Other creditors including tax and social security
Accruals and deferred income
9. Share capital and share premium
At 1 July 2021
Issue of £0.02 ordinary shares
At 30 June 2022
2022
£’ 000
152
89
188
2021
£’ 000
19
46
343
––––––––––––––––––––––––––––––
408
––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––
429
Number of
shares
No.
Share
capital
£’ 000
Share
premium
£’ 000
Total
£’ 000
8,505
1,702
425,279,798
85,055,893
37,325
4,794
–––––––––––––––––––––––––––––––––––––––––––––––––––
42,119
510,335,691
–––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––––––––––––––––––
28,820
3,092
10,207
31,912
The Company issued 85,055,893 new ordinary shares of 2p each in September 2021. There were £309,000 issue costs associated with
the new ordinary share issue.
10. Ultimate controlling party
The Directors do not consider any one shareholder, individually or acting in consort with others, to have ultimate control of
the Company.
11. Related party transactions
The Company is exempt from disclosing transactions with wholly owned subsidiaries within the Group. Other related party
transactions are included within those given in note 21 of the consolidated financial statements.
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264369 Haydale AR pp63-imp.qxp 12/10/2022 16:17 Page 70
SHAREHOLDER INFORMATION
Corporate Directory
Company Number
07228939
Directors
Secretary
Investor Relations
David Doidge Richard Banks
Keith Broadbent
Mark Chapman
Graham Dudley Eves
Theresa Anne Wallis
Matt Wood
investor.relations@haydale.com
Head Office and Registered Office
Clos Fferws, Parc Hendre, Capel Hendre,
Ammanford, Carmarthenshire, Wales, SA18 3BL
Website
E-mail
Telephone
Advisers
Independent Auditor
Nominated Advisor and broker
Registrars
Solicitors
www.haydale.com
info@haydale.com
+44 (0)1269 842946
Crowe U.K. LLP
55 Ludgate Hill, London, EC4M 7JW
finnCap
One Bartholomew Close, London, EC1A 7BL
Share Registrars Limited
3 The Millennium Centre, Crosby Way, Farnham, Surrey, GU9 7XX
Field Fisher LLP
Riverbank House, 2 Swan Lane, London EC4R 3TT
Intellectual Property Solicitors
Mewburn Ellis LLP
33 Gutter Lane, London, EC2V 8AS
70
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Perivan 264369
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