Applied Graphene Materials PLC Final Results (4068E)

TIDMAGM

RNS Number : 4068E

Applied Graphene Materials PLC

18 October 2018

18 October 2018

Applied Graphene Materials plc

("Applied Graphene Materials", "the Group" or "the Company")

Full year results for the year ended 31 July 2018

Applied Graphene Materials, the producer of specialty graphene materials, is pleased to announce its full year results for the year ended 31 July 2018.

Operational and commercial highlights

-- James Briggs Limited (JBL), a leading independent coatings business, launching a range of graphene enhanced primer products, delivering significantly improved barrier protection

-- Following the successful completion of real world trials carried out over a one year period, national truck company Brit Tipp using AGM graphene for its barrier properties in vehicle coatings

-- Tier one automotive supplier Magna carrying out further investigations into utilising AGM graphene following launch of Fenyr supercar, using graphene enhanced components

-- Customer completes testing of Genable(R) 4400 and is now looking to launch a product targeted at the electronics sector

-- Airbus Defence and Space (Airbus) working to finalise materials qualification ahead of a product launch

   --      Genable(R) dispersion range launched for coatings systems and being well received 

Financial overview

   --      Total income                        GBP0.2 million (2017: GBP0.3 million) 

-- EBITDA* Loss of GBP4.0 million (2017: loss of GBP4.1 million)

-- PBTA** Loss of GBP4.2 million (2017: loss of GBP4.3 million)

   --      Loss before tax                    Loss of GBP4.5 million (2017: loss of GBP4.3 million) 
   --      Cash at bank                        GBP10.4 million (2017: GBP4.7 million) 
   --      Diluted EPS                          Loss of 8.2 pence per share (2017: loss of 13.8 pence) 
   --      Adjusted diluted EPS          Loss of 7.5 pence per share (2017: loss of 13.8 pence) 

* EBITDA comprises loss before interest, tax, exceptional costs, depreciation and amortisation.

** PBTA comprises loss before tax, exceptional costs and amortisation.

Adrian Potts, Chief Executive Officer, commented:

"The business has continued to make considerable progress during the year, particularly in the coatings sector where we are starting to see some real commercial momentum.

Having invested significantly in developing our understanding as to how best to exploit the benefits that graphene has to offer, we are now beginning to see this investment come to fruition, with the focus very much on converting the 120 plus commercial engagements into long term supply agreements, many of which we are unable to disclose due to confidentiality agreements.

The announcement by JBL that they are launching a graphene enhanced product in the near future represents the successful completion of their testing programme. Although the launch is likely to be slightly later than originally anticipated this represents an important milestone for the business. The launch of our Genable(R) product range combined with our test results earlier in the year has been well received across the coatings sector and this has enabled us to accelerate a number of programmes. Nowhere is this more evident than the work we have done with Britt Tipp, who having completed their in-house testing regime, are now utilising AGM's graphene in coatings for their vehicles in order to provide additional barrier properties.

Our joint composites development programme with Magna is beginning to produce some very encouraging results in a number of potential applications and I remain confident that over the coming twelve months we will be able to report an ever increasing number of customers, who having completed their testing programme are looking to enter into commercial supply agreements."

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Applied Graphene Materials' results presentation, with audio commentary, is expected to be made available on its website at http://www.appliedgraphenematerials.com in due course.

For further information, please contact:

Applied Graphene Materials [phone]

Adrian Potts, Chief Executive Officer

Gareth Jones, Chief Financial Officer

N+1 Singer [phone]

Richard Lindley / James White

Hudson Sandler [phone]

Charlie Jack / Emily Dillon

Notes to Editors

Applied Graphene Materials works in partnership with its customers using its knowledge and expertise to provide bespoke graphene dispersions and formats to deliver enhancements and benefits for a wide range of applications. The Group's strategy is to target commercial applications in three core markets: coatings, composites and functional materials.

The Group has developed proprietary bottom-up processes which are capable of producing high purity graphene nanoplatelets using a continuous process. The manufacturing process is based on sustainable, readily available raw materials and therefore does not rely on the supply of graphite, unlike a number of other graphene production techniques. Applied Graphene Materials owns the intellectual property and know-how behind this process.

Applied Graphene Materials was founded by Professor Karl Coleman in 2010 with its operations and processes based on technology that he initially developed at Durham University. The Group was admitted to AIM in November 2013, raising GBP11 million, and is based at the Wilton Site on Teesside. In January 2016 the Group raised GBP8.5m to support its ongoing activities and in October 2017 the Group raised a further GBP9.8m.

Business review

Overview

The financial year has seen significant developments in a number of areas within the business. Whilst these achievements are not always visible from the outside, they have proven to be critical steps in our evolution as a business and create a platform to enable the exploitation of the benefits graphene has to offer. It is only by ensuring we have the necessary building blocks in place that we will ultimately provide the base from which to develop further a successful technology-led organisation.

Jon Mabbitt stepped down as CEO at the end of July after five years of service, working to establish these solid foundations. He had been with the business from its very early days and took it to the point of commercial inflection. On 9 October 2018 it was announced that David Blain would be joining the business as Chief Financial Officer to succeed Gareth Jones. It is now incumbent on me and the rest of the team to take the Company to the next level, leveraging off that platform, and the significant ongoing development work, to generate real-top line growth that will in time lead to financial independence.

As a Company I believe we remain well positioned to support the anticipated growth in graphene product demand. AGM has remained singularly focused on being the industry-leading formatted graphene material supplier. Whilst it may be tempting to stray downstream and develop semi-finished graphene containing products we know that in the long run this would be counter-productive and eventually the real gains will come from being a high value-added specialty chemical business.

During the year we have strengthened our performance data in our core markets of coatings and composites, which have served to attract yet more interest from new potential customers and added to the appetite from existing customer engagements. The 120 plus active customer engagements we hold are starting to bear fruit as the evaluation phases come to completion and they move forward into product integration and toward mainstream production.

February 2018 saw the first extended operation on the new production plant for A-GNP35, AGM's process for making high surface area graphene nanoplatelets. This capital investment will enable sufficient raw material to be made for the expected demand over the coming years, and has given us confidence that we can easily expand the capacity in a cost-effective, modular fashion, as demand increases. The two grades of AGM graphene nanoplatelet, A-GNP10 and A-GNP35, differ in their chemical composition and physical shape, and have been designed to deliver different specific bulk performance gains when added into host materials at low loadings.

At the JEC exhibition in Paris in March 2018 we displayed our patented Structural Ink(R) printing technology. This attracted a lot of interest from both end users (aerospace manufacturers, motor sport racing teams, and sports goods producers) as well as the composite material supply chain (prepreggers, kit-cutting machine companies and resin producers). We have subsequently designed and acquired a larger capacity printing capability that we have started to promote to the industry, both via a turn-key technology package and by a toll-coating service. This exciting process is a synergistic enabler for the addition of graphene in automated manufacturing of composite materials and could equally be applied to other markets as a platform technology.

Commercial progress

We remain focused on our three core markets of coatings, composites and functional materials, where we are actively engaged with more than 120 customers. Each sector contains a variety of customers from the small niche, very active players to global manufacturers, covering a diversified range of applications. They are all linked by the belief that by incorporating graphene into their product they can significantly enhance their product offerings and hence achieve a competitive advantage. As a business we share that belief and are working with each partner to support and provide technical input as required, to enable them to realise the potential we believe our product has to offer.

Coatings sector

The majority of engagements within this sector are focused around the exceptional barrier performance gains that small additions of graphene can offer. This can relate to acting as a moisture diffusion barrier to significantly enhance anti-corrosive protection, particularly in harsh environments such as oil and gas and marine environments. The launch of the Genable(R) product range in May 2018 has proved to be a catalyst in many ways. Genable(R) has enabled us to offer the coatings market a standardised platform range of products that can readily be incorporated and can operate in a host of coatings applications, including the most hostile of conditions.

In what is traditionally a conservative industry the introduction of a robust data-backed innovative product has generated significant excitement and interest, with both manufacturers and end users alike. There are currently numerous work streams ongoing, testing and developing potential applications, often supported directly by our technical teams. This collaborative approach is the same that we adopted when working with JBL. In May 2018, after an extensive testing programme, JBL announced that its first graphene products were coming to fruition. Work is currently underway to finalise the launch and ramp-up programmes to enable us to meet the increased demand in the current financial year.

AGM continues to work with HMG Paints in the development and commercialisation of graphene containing anti-corrosion coatings. Following initial formulation, a development programme was undertaken working with an innovative commercial vehicle company, Brit Tipp. Subsequently this extended to field testing through a number of commercial tipper truck contracts. These "real world" trials have progressed very well and Brit Tipp is currently bidding on several larger contracts based on customer feedback around this enhanced coating system. In parallel, HMG and AGM have continued to expand their understanding of how to further optimise graphene performance and their combined focus is now on bringing a new product to the broader market within the first half of 2019.

Elsewhere in the coatings sector the business has circa 74 ongoing engagements across many industries, with the industrial and automotive sectors comprising around 40% of the opportunities. These range in size from small independent niche players through to multi-national organisations.

In order to further support the application of graphene based coatings into the widest range of coatings opportunities, we are evolving our products to enable customers to address the most extreme corrosion and barrier challenges with an AGM graphene solution.

Composites sector

The global composites market is estimated to be worth in excess of EUR70 billion per annum, of which over 50% relates to component parts. Customers within this sector are very often targeting improved mechanical performance of a product, whilst also reducing weight, by the inclusion of graphene. Manufacturers of sporting goods and products tend to be at the forefront of innovation, where incremental technological gains make for commercial advantage. Currently 11% of our composite engagements relate to this sector, and include the likes of Century rods. Whilst the majority of these sports related opportunities tend to be with niche players, the ability and willingness of this sector to incorporate new products rapidly into their range means that they represent some of our most advanced projects in terms of commercialisation. Other early adopters are expected to be in the high performance motorsport industry.

Large opportunities for composites lie within the aerospace and automotive industries, which combined account for 55% of our composite engagements. In many cases there is a critical safety element, fundamental to the success of these projects, and as such the testing regimes tend to be more extensive and therefore take longer. In keeping with many of our engagements the nature of the arrangements very often restricts what can be disclosed as our partners look to develop product in a discreet fashion. An exception to this is our engagement with Magna Exteriors, a division of the Magna Group, a $39 billion revenue, tier 1 automotive supplier. In March this year it launched the Fenyr supercar at the Geneva Motor Show incorporating AGM graphene into the tailgate of the vehicle. Following on from this, Magna is now investigating ways in which it can utilise AGM graphene within its product range, and a number of projects are currently underway.

Our patented technology Structural Ink(R), which enables us to selectively deposit graphene onto composite materials in a targeted fashion via innovative printing techniques, continues to generate significant levels of interest amongst potential customers. The technology was first publically demonstrated at JEC in Paris in March this year and as a direct result of this a number of interested parties have commenced testing the product, with a view to incorporating it into their offering. The Structural Ink(R) programme will not only enable us to add graphene to customers' product, but in cases where demand is larger there is the potential to offer a turn-key solution, providing customers with the capability to directly oversee the application process. Such an approach is of particular interest to the automotive and aviation industries, where volumes are greater and where automated manufacturing is widespread. Our focus is on this automated integration as a means of gaining traction with graphene in this sector. The positive feedback following the launch of Structural Ink(R) has encouraged the business to accelerate the investment programme and in June 2018 an additional GBP74,000 investment was made to install increased printing capacity. The new printer is operational, and has already begun supplying evaluation materials to interested parties.

Functional materials

We continue to work closely with Airbus, with a view to concluding the product qualification of the second thermal paste adhesive material for space use during 2018. Following on from this, Airbus is planning to carry out application-specific space flight qualifications of the product concluding later in the year. It is Airbus' intention to specify this product immediately thereafter onto its next-generation satellite platform, with first flight application and initial production sales now anticipated in early 2019. We are proud to have partnered with Airbus on this initiative, and to be able to see the fruition of many months of effort.

Elsewhere, a customer recently completed an in-depth assessment of the Genable(R) 4400 product range. Feedback from the programme indicates that the product exhibits outstanding thermal conductivity for heat sink applications, and it is in the process of looking to launch a product into the electronics sector.

Following on from an extensive development programme involving AGM and specialist oil company Puraglobe, the German business launched its Graphenics(R) product range to a number of target customers earlier in the year for evaluation. The product range is targeted at innovative lubricant technology businesses for applications as broad as gear oil, metal working and driveline fluids. By incorporating graphene into existing products the aim is to offer finished lubricant manufacturers with product providing greater protection against friction and wear, which ultimately will extend the lifecycle of parts and reduce the downtime of equipment.

A number of development programmes are ongoing at this time as Puraglobe's customers look to evaluate the benefits. Initial feedback remains positive and the expectation remains that during the course of the forthcoming financial year the business will generate revenues from this specific application.

Technological and manufacturing capabilities

We have continued to invest in our technical capabilities throughout the year and are resolute in our commitment to furthering our understanding of graphene's potential within our core markets. We believe it is only by remaining at the technological forefront of this emerging industry that this will provide us with the ability with which to succeed.

In March 2018, the USA patent office approved our patent application for our unique manufacturing process. Our technical teams have continued to push the boundaries when working with graphene, filing three further patent applications during the year, in relation to the dispersing of graphene to enable ease of use. This work led directly to the launch of the Genable(R) range of products in May 2018. The Genable(R) family is a data backed standard range of dispersions, primarily targeted at the coatings sector that provides formulating chemists with a known set of criteria from which to base their calculations. Initial feedback from customers has been extremely positive and enabled us to engage with partners which up until that point had stated that they did not wish to explore the potential benefits graphene has to offer.

Outlook

The business remains well positioned for significant growth, with a clearly defined strategy and strong leadership along with a well-developed and ever maturing opportunity pipeline. The overall quantum and level of engagement continue to increase as we move into the commercialisation phase of development. The adoption of our graphene by JBL, Brit Tipp, Airbus and Puraglobe are key milestones for us and provide growing evidence that customers are beginning to recognise the significant benefits graphene can offer. Although both JBL and Airbus are now reaching the point of commercial inflection the completion of the testing regime required to meet customer expectations has taken longer than originally expected, and consequently the ramp-up in sales is likely to be later than previously anticipated.

As a business we are absolutely focused on continuing to commercialise our offering and increasing the rate of market adoption and penetration during the coming year and beyond.

The increasing commercialisation is in no small part down to the relationships we have developed, which then allow us to work alongside customers, providing critical technical input on how best to incorporate the graphene. Working with any nanomaterial is a highly technical challenge and success can only be achieved by recruiting and retaining people with real talent. Continuing to develop our knowledge base and relationships will enable us to capitalise on the benefits graphene has to offer in a multitude of applications. The well-established foundations are beginning to materialise into real commercial opportunities, and the expectation remains that the business will see revenues building, which will ultimately lead to a profitable business.

Adrian Potts

Chief Executive Officer

17 October 2018

Financial review

Revenue

Revenue for the year was GBP77,000 (2017: GBP97,000) arising from the supply of production orders and evaluation quantities of graphene to commercial partners.

Other income

Other income, which comprises grant income and RDEC revenue, was GBP126,000 (2017: GBP168,000). Grants received generally relate to funding for the development of new graphene applications or the creation of new jobs.

Loss on ordinary activities before interest, tax, exceptional costs, depreciation and amortisation (EBITDA)

EBITDA for the Group reduced from a loss of GBP4,059,000 in 2017 to a loss of GBP3,984,000 for the year ended 31 July 2018. The loss incurred reflects the ongoing costs of working with commercial partners and the significant efforts undertaken to support those customers.

Exceptional costs

Exceptional costs recognised in the year were GBP307,000 (2017: GBPnil). These costs principally relate to fees paid in relation to the issue of new shares in the current year (GBP185,000) and the disposal of licence fees and patents costs relating to a technology no longer being developed following the introduction of the A-GNP35 production facility (GBP122,000).

Net finance income

Net finance income for the year was GBP57,000 (2017: GBP33,000). The Group has benefited from interest earned on money raised from the placing that took place in the year.

Loss on ordinary activities before tax, exceptional costs and amortisation (PBTA)

PBTA for the year reduced from a loss of GBP4,277,000 in 2017 to a loss of GBP4,238,000 for the year ended 31 July 2018. The losses within the year continue to reflect ongoing costs of working with commercial partners and the significant efforts undertaken to support those customers.

Loss on ordinary activities before tax

A loss on ordinary activities before tax of GBP4,545,000 (2017: loss of GBP4,277,000) was recognised. This includes exceptional costs of GBP307,000 mainly connected to payments made in relation to the issue of new shares.

Tax

The Group has not recognised any tax assets in respect of trading losses arising in the current financial year or accumulated losses in previous financial years. The tax credit recognised in the current financial year is in relation to the receipt of R&D tax credits for 2017 and an estimate of R&D tax credits due for 2018. The credit recognised in the prior financial year was in relation to the receipt of R&D tax credits for 2015 and 2016.

Earnings per share

Diluted earnings per share was a loss of 8.2 pence per share (2017: loss of 13.8 pence per share). Adjusted diluted earnings per share (before exceptional costs) was a loss of 7.5 pence per share (2017: loss of 13.8 pence per share).

Dividend

No dividend has been proposed for the year ended 31 July 2018 (2017: GBPnil).

Cash flow

Net cash used in operations was GBP4,005,000 (2017: GBP3,962,000). During the year, net working capital utilised increased by GBP12,000 (2017: increase of GBP95,000).

Capital expenditure of GBP257,000 (2017: GBP684,000) has been incurred in the year mainly relating to the development of the production process and related production assets. Net proceeds arising from the issue of shares totalled GBP9,375,000 (2017: GBP407,000).

Balance sheet

Net assets have increased to GBP12,121,000 (2017: GBP6,068,000), principally reflecting the cash generated from the issue of shares offset by the trading loss for the year.

Cash at bank at 31 July 2018 was GBP10,443,000 (2017: GBP4,708,000). The proceeds from the issue of shares have been placed on deposit with a small number of financial institutions for time periods ranging between instant access and up to 95 days in maturity.

Accounting policies

The Group's consolidated financial information has been prepared in accordance with International Financial Reporting Standards as adopted in the EU. The accounting policies used in the consolidated financial information are consistent with those set out in the audited financial statements.

Going concern

After making enquiries and producing cash flow forecasts, the Directors have reasonable expectations, as at the date of approving the financial statements, that the Company and the Group will have adequate resources to fund the activities of the Company and the Group for at least twelve months from the date of the approval of the financial statements. Although the business continued to make losses throughout the year to July 2018, these losses primarily relate to the development of the production process and production assets. The increased level of commercial engagements provides the Directors with reasonable expectations that the Group continues to demonstrate meaningful progress. Therefore, the financial statements have been prepared on a going concern basis.

Principal risks and uncertainties

Risk management forms an integral part of the business planning and review cycle.

As a business we strive to achieve the right balance between risk and reward. The Board reviews and updates risks within the business on a regular basis. Having identified a potential risk each risk is assessed individually both in terms of likelihood of occurrence and for the potential financial impact on the business. A further assessment is then made to ensure that the exposure to any risk is mitigated wherever feasible.

The Directors believe the following risks to be the most significant for potential investors. However, the risks listed do not necessarily comprise all of those associated with an investment in the Group and are not set out in any particular order or priority. Additional risks and uncertainties not currently known to the Directors, or which the Directors currently deem not to be significant, may also have an adverse effect on the Group and the information set out below does not purport to be an exhaustive summary of the risks affecting the Group. In particular, the Group's performance may be affected by changes in market or economic conditions and in legal, regulatory and tax requirements.

Broadly, risks are categorised into seven types: strategic and planning; financial and IT; operational and quality; technical; safety, health and environment (SHE) and regulatory; commercial and reputation; and people. Significant risks facing the Group are listed below.

-- Consistency of product - as the business begins to supply graphene in ever larger quantities it is essential that the quality of the product is maintained. Working with nanomaterials is extremely technical and if products are not produced to a consistently high quality there is a risk that the products will not deliver the potential benefits and customers may look for alternative suppliers. As the business looks to gear up its manufacturing capabilities to meet demand, it is essential that even at higher volumes the quality of material is maintained. In addition to working under strict operating procedures the business has implemented a series of quality control measures to ensure there is no drop off in product quality. Operating and quality procedures are continually reviewed and where appropriate improved, in order to ensure the highest quality is maintained at all times.

-- Intellectual property - the Group's business is based on a combination of patents granted, patent applications and know-how. The Group's success will depend in part on its ability to maintain adequate protection of its intellectual property and know-how. There is no certainty that patent applications will be granted, such applications and know-how will be a source of competitive advantage to the Group, or that others have not developed similar or better applications or know-how. Significant costs may be incurred in asserting intellectual property rights and there is no certainty that intellectual property could not become known in a manner (for example, cyber-attack) which provided the Group with no recourse. The Group takes protection of its intellectual property very seriously, with information restricted on a need to know basis. Confidentiality clauses are used extensively throughout the business in a variety of forms, and key files and documents are maintained separately in a secure manner.

-- Financial, operational and management information systems - the efficient operation and management of the Group depends on the proper operation and performance of financial, operational and management information systems. Any failure in such systems via a cyber-attack may result in a loss of control and adversely impact the Group's ability to operate effectively. The business takes a multi-faceted approach to ensuring its systems are able to support the business. This ranges from a series of back-up procedures, training and physical and virtual defence mechanisms. Regular reviews are undertaken to assess what additional precautions if any are required.

-- Safety, health and environment - the Group's operations are subject to numerous safety, health and environmental and regulatory requirements, both in the UK and overseas, which are likely to become more complicated, stringent and onerous as the Group grows or as time passes. Failure to comply in any way with SHE or regulatory requirements could result in the Group being unable to manufacture or supply graphene, incurring significant costs and liabilities, or being subject to claims and lawsuits, which could adversely affect its operations and financial condition. Graphene is also a relatively new material with a limited number of studies having been undertaken into its effects on biological systems. If evidence emerges that graphene has a deleterious effect then this may adversely impact the Group's business and financial position. The Group undertakes regular training programmes to ensure best operating practices are maintained. This is assessed through an extensive audit programme along with health and safety meetings, which are held on a monthly basis. Employees who work with the product in its raw form operate under strict operating procedures with designated protective clothing at all times. In addition, they are required to undertake regular health checks.

-- Key personnel - the Group has in place an experienced and motivated senior management team and is beginning to build strength in depth. If the Group is unable to retain and attract suitably skilled and qualified people, then the Group's performance and prospects may be adversely impacted. The loss of one or more key personnel could have an adverse impact on the Group's operations, reputation, relationships and future prospects. In order to both attract and retain individuals with the necessary skills and motivation, the Group has a range of incentives and support processes in place. In addition to a comprehensive financial package of both short and long term incentives, individuals receive regular updates in an open and transparent manner, both on an individual and team basis. Training and development programmes are tailored to meet the needs and aspirations of the individual.

-- Acceptance of the Group's products - early stage of operations and acceptance of graphene. The Group is at an early stage of development and the success of the Group will depend on the acceptance and attribution of value to graphene produced by the business. Timescales to the successful development of applications for graphene are significantly determined by the product development cycle of customers. There can be no guarantee that either acceptance of graphene or attribution of value will be forthcoming. The business remains focused on its core markets and applications where it believes graphene can offer real benefits as a high-end additive. In addition to continuing to invest in and develop in-house expertise, the technical teams look to maintain close working relationships with customers, to provide technical support and thereby reduce the time to market.

Cautionary statement

The Business and Financial reviews have been prepared for the shareholders of the Company, as a body, and no other persons. Their purpose is to assist shareholders of the Company to assess the strategies adopted by the Group and the potential for those strategies to succeed and for no other purpose. The Business and Financial reviews, contain forward-looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated. No assurances can be given that the forward-looking statements in the Business and Financial reviews will be realised. The forward-looking statements reflect the knowledge and information available at the date of preparation.

Gareth Jones

Chief Financial Officer

17 October 2018

Consolidated income statement and statement of comprehensive income

for the year ended 31 July 2018.

 
                                                         2018     2017 
                                                Note  GBP'000  GBP'000 
----------------------------------------------  ----  -------  ------- 
Revenue                                            5       77       97 
Other income                                              126      168 
----------------------------------------------  ----  -------  ------- 
                                                          203      265 
Cost of sales                                           (250)    (385) 
----------------------------------------------  ----  -------  ------- 
Gross loss                                               (47)    (120) 
Operating expenses                                    (4,555)  (4,190) 
----------------------------------------------  ----  -------  ------- 
EBITDA                                                (3,984)  (4,059) 
Exceptional costs                                       (307)        - 
Depreciation of property, plant and equipment           (311)    (251) 
----------------------------------------------  ----  -------  ------- 
Operating loss                                        (4,602)  (4,310) 
Finance income                                             57       33 
----------------------------------------------  ----  -------  ------- 
PBTA                                                  (4,238)  (4,277) 
Exceptional costs                                       (307)        - 
----------------------------------------------  ----  -------  ------- 
Loss before tax                                    5  (4,545)  (4,277) 
Tax credit                                         3    1,046    1,234 
----------------------------------------------  ----  -------  ------- 
Loss for the year attributable to equity 
 shareholders                                         (3,499)  (3,043) 
Other comprehensive income                                  -        - 
----------------------------------------------  ----  -------  ------- 
Total comprehensive expense                           (3,499)  (3,043) 
----------------------------------------------  ----  -------  ------- 
Earnings per share (pence per share) 
Basic                                              6    (8.2)   (13.8) 
Diluted                                            6    (8.2)   (13.8) 
----------------------------------------------  ----  -------  ------- 
 

EBITDA comprises loss before interest, tax, exceptional costs, depreciation and amortisation

PBTA comprises loss before tax, exceptional costs and amortisation

Consolidated statement of changes in shareholders' equity

as at 31 July 2018

 
                               Called 
                                   up     Share 
                                share   premium   Merger  Accumulated    Total 
                              capital   account  reserve       losses   equity 
                              GBP'000   GBP'000  GBP'000      GBP'000  GBP'000 
----------------------------  -------  --------  -------  -----------  ------- 
As at 1 August 2016               437    18,243    1,231     (11,399)    8,512 
Loss for the year and total 
 comprehensive expense              -         -        -      (3,043)  (3,043) 
IFRS 2 share based payments         -         -        -          192      192 
Issue of shares (net)               9       398        -            -      407 
----------------------------  -------  --------  -------  -----------  ------- 
As at 31 July 2017                446    18,641    1,231     (14,250)    6,068 
Loss for the year and total 
 comprehensive expense              -         -        -      (3,499)  (3,499) 
IFRS 2 share based payments         -         -        -          177      177 
Issue of shares (net)             543     8,832        -            -    9,375 
----------------------------  -------  --------  -------  -----------  ------- 
As at 31 July 2018                989    27,473    1,231     (17,572)   12,121 
----------------------------  -------  --------  -------  -----------  ------- 
 

Consolidated statement of financial position

as at 31 July 2018

 
                                          2018      2017 
                                Note   GBP'000   GBP'000 
------------------------------  ----  --------  -------- 
Assets 
Non-current assets 
Intangible assets                           78       138 
Property, plant and equipment            1,881     1,936 
------------------------------  ----  --------  -------- 
                                         1,959     2,074 
------------------------------  ----  --------  -------- 
Current assets 
Inventories                                 56        45 
Trade and other receivables                612       151 
Cash                                    10,443     4,708 
------------------------------  ----  --------  -------- 
                                        11,111     4,904 
------------------------------  ----  --------  -------- 
Total assets                            13,070     6,978 
Liabilities 
Current liabilities 
Trade and other payables                 (949)     (910) 

------------------------------  ----  --------  -------- 
Total liabilities                        (949)     (910) 
------------------------------  ----  --------  -------- 
Net current assets                      10,162     3,994 
------------------------------  ----  --------  -------- 
Net assets                              12,121     6,068 
------------------------------  ----  --------  -------- 
Equity 
Called up share capital            8       989       446 
Share premium account                   27,473    18,641 
Merger reserve                           1,231     1,231 
Accumulated losses                    (17,572)  (14,250) 
------------------------------  ----  --------  -------- 
Total equity                            12,121     6,068 
------------------------------  ----  --------  -------- 
 

Consolidated cash flow statement

for the year ended 31 July 2018

 
                                                        2018     2017 
                                               Note  GBP'000  GBP'000 
---------------------------------------------  ----  -------  ------- 
Operating activities 
Net cash used in operations                       7  (4,005)  (3,962) 
Finance income                                            53       52 
R&D tax credit received                           3      631    1,234 
---------------------------------------------  ----  -------  ------- 
Net cash used in operating activities                (3,321)  (2,676) 
---------------------------------------------  ----  -------  ------- 
Investing activities 
Purchase of intangible assets                           (62)     (41) 
Purchase of property, plant and equipment              (257)    (684) 
---------------------------------------------  ----  -------  ------- 
Net cash used in investing activities                  (319)    (725) 
---------------------------------------------  ----  -------  ------- 
Financing activities 
Net proceeds from issue of Ordinary shares             9,375      407 
---------------------------------------------  ----  -------  ------- 
Net cash generated from financing activities           9,375      407 
---------------------------------------------  ----  -------  ------- 
Net increase/(decrease) in net cash and 
 cash deposits                                         5,735  (2,994) 
Net cash and cash deposits at 31 July 2017             4,708    7,702 
---------------------------------------------  ----  -------  ------- 
Net cash and cash deposits at 31 July 2018            10,443    4,708 
---------------------------------------------  ----  -------  ------- 
 
Net cash and cash deposits include: 
---------------------------------------------  ----  -------  ------- 
Cash (maturity less than 95 days)                     10,443    4,708 
---------------------------------------------  ----  -------  ------- 
Net cash and cash deposits at 31 July 2018            10,443    4,708 
---------------------------------------------  ----  -------  ------- 
 

Notes to the annual financial results

for the year ended 31 July 2018

1 General information

The principal activity of Applied Graphene Materials plc is the manufacture, dispersion and development of applications for graphene. The Group operates principally in the United Kingdom.

The Company is incorporated and domiciled in the United Kingdom and its registered number is 8708426. The address of the registered office is The Wilton Centre, Redcar, Cleveland, TS10 4RF. The Company was incorporated on 27 September 2013.

The consolidated financial information was approved for issue on 17 October 2018.

2 Basis of accounting

The consolidated financial information for the year ended 31 July 2018 has been presented under the historical cost accounting convention, as modified by financial assets and liabilities at fair value through the income statement and share based payments at fair value, and in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRS IC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial information has been prepared on a going concern basis.

The consolidated financial information included in this announcement has been extracted from the audited financial statements of the Group for the year ended 31 July 2018. The content of this announcement has been agreed with the Company's auditors. This announcement of financial results does not constitute the Group's financial statements. The Group's 2018 Annual report and financial statements, on which the Company's auditors, RSM UK Audit LLP, have given an unqualified opinion in accordance with the Companies Act 2006, are to be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The accounting policies used in the consolidated financial information are consistent with those set out in the audited financial statements. If any new IFRS standards or interpretations are issued then these may impact on the financial statements of the Group in future years. The Group will continue to review its accounting policies in the light of emerging industry consensus on the practical application of IFRS.

The preparation of consolidated financial information in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amounts, events or actions, actual events ultimately may differ from those estimates.

The consolidated financial information does not include all financial risk management information and disclosures required in the annual financial statements.

3 Taxation

The Group has not recognised any tax assets in respect of trading losses arising in either the current financial year or accumulated losses in previous financial years. The tax credits recognised arise from the receipt of R&D tax credits.

4 Dividends

No dividend has been proposed for the year ended 31 July 2018 (2017: GBPnil).

5 Segmental analysis

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources and in assessing performance. The Group's Chief Executive Officer has been identified as the CODM. Revenue and profits arising from that operating segment are the same as presented on the face of the consolidated income statement and statement of comprehensive income.

The Group currently has one operating segment, as reported revenue for the year is not considered to be of sufficient magnitude to warrant identifying different operating segments. As the business evolves this is an area that will be assessed on a regular basis and additional segmental reporting will be provided at the appropriate time.

6 Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to Ordinary shareholders by the weighted average number of shares in issue during each year. The weighted average number of shares in issue during the year used in the calculation of basic earnings per share was as follows:

 
                                                          2018     2017 
                                                       million  million 
-----------------------------------------------------  -------  ------- 
Weighted average number of shares for basic earnings 
 per share                                                42.7     22.1 
-----------------------------------------------------  -------  ------- 
 

Diluted earnings per share is the basic earnings per share adjusted for the effect of the conversion into fully paid shares of the weighted average number of share options outstanding during the year. The weighted average number of shares in issue during the year used in the calculation of diluted earnings per share was as follows:

 
                                                            2018     2017 
                                                         million  million 
-------------------------------------------------------  -------  ------- 
Weighted average number of shares for diluted earnings 
 per share                                                  43.6     23.0 
-------------------------------------------------------  -------  ------- 
 

Adjusted earnings per share has been calculated so as to exclude the effect of exceptional costs including related tax charges and credits. Adjusted earnings used in the calculation of basic and diluted earnings per share reconciles to basic earnings as follows:

 
                                                   2018     2017 
                                                GBP'000  GBP'000 
----------------------------------------------  -------  ------- 
Basic earnings                                  (3,499)  (3,043) 
Exceptional costs                                   307        - 
----------------------------------------------  -------  ------- 
Adjusted earnings                               (3,192)  (3,043) 
----------------------------------------------  -------  ------- 
Earnings per share (pence per share) 
Basic                                             (8.2)   (13.8) 
Diluted                                           (8.2)   (13.8) 
----------------------------------------------  -------  ------- 
Adjusted earnings per share (pence per share) 
Basic                                             (7.5)   (13.8) 
Diluted                                           (7.5)   (13.8) 
----------------------------------------------  -------  ------- 
 

The Group was loss making for the years ended 31 July 2018 and 31 July 2017. Therefore, the dilutive effect of share options has not been taken account of in the calculation of diluted earnings per share or adjusted diluted earnings per share, since this would decrease the loss per share for each of the years reported.

7 Notes to the cash flow statement

 
                                                           2018     2017 
                                                        GBP'000  GBP'000 
------------------------------------------------------  -------  ------- 
Continuing operations 
Loss for the year attributable to equity shareholders   (3,499)  (3,043) 
R&D tax credit                                          (1,046)  (1,234) 
Finance income                                             (57)     (33) 
Depreciation of property, plant and equipment               311      251 
Exceptional costs                                           307        - 
------------------------------------------------------  -------  ------- 
EBITDA                                                  (3,984)  (4,059) 
Depreciation of property, plant and equipment             (311)    (251) 
Exceptional costs                                         (307)        - 
------------------------------------------------------  -------  ------- 
Operating loss                                          (4,602)  (4,310) 
Depreciation of property, plant and equipment               311      251 
Disposal of intangible assets                               121        - 
IFRS 2 share based payments                                 177      192 
Increase in inventories                                    (10)      (7) 
(Increase)/decrease in receivables                         (96)       39 
Increase/(decrease) in payables                              94    (127) 
------------------------------------------------------  -------  ------- 
Net cash used in operations                             (4,005)  (3,962) 
------------------------------------------------------  -------  ------- 
 

8 Share capital

 
                                                         Number 
                                                             of    Total 
                                                       Ordinary 
                                                         shares  GBP'000 
---------------------------------------------------  ----------  ------- 
Allotted, called up and fully paid 
At 1 August 2017 - Ordinary shares of 2 pence each   22,290,763      446 
Issued on 31 October 2017                            27,138,617      543 
At 31 July 2018 - Ordinary shares of 2 pence each    49,429,380      989 
---------------------------------------------------  ----------  ------- 
 

On 31 October 2017, 27,138,617 Ordinary shares of 2 pence each were issued at a price of GBP0.36 per share to institutional and other investors.

9 Related party transactions

Transactions between Applied Graphene Materials plc and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Transactions with shareholders

The following purchases with shareholders and companies controlled by former Directors of the Group were recorded, excluding VAT, during the year:

 
                                                        2018     2017 
                                                     GBP'000  GBP'000 
---------------------------------------------------  -------  ------- 
Durham University (shareholder) 
Staff secondment, consultancy and other fees             (4)       57 
Top Technology Limited (controlled by shareholder) 
Non-Executive Director fees                               15       16 
IP2IPO (shareholder) 
Non-Executive Director expenses                            1        - 
 
 

The following balances were owed by the Group at the end of the year in respect of the transactions set out above:

 
                            2018     2017 
                         GBP'000  GBP'000 
-----------------------  -------  ------- 
Durham University             10       64 
Top Technology Limited         5        9 
 

Remuneration of key management personnel

The remuneration of the Directors and the key management personnel of the Group is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures:

 
                                                      2018     2017 
                                                   GBP'000  GBP'000 
-------------------------------------------------  -------  ------- 
Short term employee benefits (excluding bonuses)       705      643 
Bonuses                                                100        - 
National insurance contributions                        82       81 
Pension contributions                                   48       39 
Payments to third parties                               15       15 
IFRS 2 share based payments                             84      146 
                                                     1,034      924 
-------------------------------------------------  -------  ------- 
 

Remuneration of key management includes remuneration paid by subsidiary undertakings in the current and prior financial years.

10 Seasonality

The Group experiences no material variations in performance arising due to seasonality.

11 Availability of Annual Report

It is anticipated that the Annual Report will be sent to all shareholders on 9 November 2018. Electronic copies of the report will also be available on Applied Graphene Materials' website at www.appliedgraphenematerials.com.

12 Annual General Meeting

The 2018 Annual General Meeting is to be held at The Farndale Room, The Wilton Centre, Redcar, Cleveland, TS10 4RF on 18 December 2018 at 11.00am.

13 Post balance sheet events

On 1 September 2018, the Group entered into a two year lease agreement to rent the premises currently occupied by the business. Total rent payable per annum under the terms of the agreement are GBP148,000 with indexation applied on the anniversary of the commencement date.

On 1 August 2018 Dr Adrian Potts was appointed Chief Executive Officer of the Group having previously been employed as Vice President, Business Development, North America.

On 9 October 2018 it was announced that David Blain would be joining the business as Chief Financial Officer to succeed Gareth Jones.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

END

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(END) Dow Jones Newswires

October 18, 2018 02:01 ET (06:01 GMT)