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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Directa Plus Plc | LSE:DCTA | London | Ordinary Share | GB00BSM98843 | ORD 0.25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.50 | -2.60% | 18.70 | 18.40 | 19.00 | 19.20 | 18.70 | 19.20 | 10,034 | 15:14:42 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Carbon And Graphite Products | 11.28M | -4.82M | -0.0730 | -2.56 | 12.35M |
From Apr 2019 to Apr 2024
TIDMDCTA
RNS Number : 1584M
Directa Plus PLC
26 April 2018
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
26 April 2018
Directa Plus plc
("Directa Plus" or the "Company" or the "Group")
Final Results
Directa Plus plc (AIM: DCTA), a leading producer and supplier of graphene-based products for use in consumer and industrial markets, is pleased to announce its final results for the year ended 31 December 2017.
Increased commercial traction
-- Significant year as Directa Plus becomes the leading graphene producer with the highest number of commercially-available graphene-enhanced products
-- Increased sales momentum with Total Income (revenues plus other income, including Government Grants) increasing by over 50% to EUR1.23 million (2016: EUR0.82 million)
-- More than doubled the number of active customers to 35 from 16 in the previous year -- Produced c. 3 tonnes of G+ materials and sold c. 15,000 metres of G+ printed fabric
-- Key customers expected to launch further clothing and environmental solutions as well as asphalt additives incorporating G+ graphene in 2018
-- Established a clear commercial lead in textiles:
o The Group believes its contract with Alfredo Grassi represents the largest amount of textile material to be treated with graphene nanoplatelets by any company to date
o Colmar launched an expanded collection of 16 garments incorporating G+ in 2017 and a new winter collection of 31 garments in 2018
-- Only company with a unique, disruptive and commercially-available graphene-based solution for the highly-effective treatment of produced water in the oil & gas industry:
o Two leading Romanian integrated oil & gas companies, OMV Petrom and GSP SA, signed agreements for field testing Grafysorber(R) product
o Post year-end, the Group signed an agreement with Sartec Srl (part of Saras Group) to jointly develop a continuous commercial-scale Grafysorber(R) -based industrial system for treating oil-contaminated produced water in the oil & gas industry
Established at least an 18-24 month lead over competitors
-- Industry-leading production and capacity enabling Directa Plus to produce consistent, certified production at high tonnages and at a price that can satisfy the requirements of large supply chains
-- Fully operational Advanced Development Area ("ADA") on-site that enables customers to significantly reduce their time-to-market and to certify production
-- Only chemical-free, graphene-based products selling into the textile market that are independently certified as non-irritating and hypoallergenic
-- Now able to offer complete textile package, from supply of G+ to graphene-treated fabric and consultancy services - capturing all of the value chain
-- Grafysorber(R) is at least five times more effective than the technologies presently used for water decontamination, adsorbing more than 100 times its own weight of oily pollutant, proven through extensive testing
Key Performance Indicators and financial summary
Hot Features
Premium
2017 2016
Revenue from product and service
sales (EUR'm) 0.95 0.74
Total Income* (EUR'm) 1.23 0.82
EBITDA** (EUR'm) (3.16) (3.67)
Adjusted loss after tax*** (EUR'm) (3.95) (4.26)
Cash and cash equivalents (EUR'm) 6.93 10.57
Number of active customers 35 16
Total number of patents granted 15 14
* Total Income comprises revenue from product and service sales (EUR0.95m), and other income including government grants (EUR 0.28m)
** EBITDA represent results from operating activities before depreciation and amortisation of EUR0.63m (2016: EUR0.57m)
***There are no adjustments related to 2017 losses. 2016 adjusted loss after tax stated before non-recurring IPO costs (EUR0.43m); the non-cash cost of the embedded derivative associated with a convertible loan (EUR1.04m); exceptional write down (EUR0.84m) of receivables from a customer and related increase of inventory value (EUR0.15m).
Giulio Cesareo, Chief Executive Officer of Directa Plus, said: "We are pleased to report a return to revenue growth, driven by increased sales of our graphene-based products, particularly in the textiles market where we sold 15,000 metres of Graphene Plus printed fabric. Our focus in 2017 was to concentrate on near-term opportunities in the textiles and environmental markets and we made significant progress in this. We ended the year with 35 active customers, and we believe that we have established at least an 18 - 24 month clear lead over our competitors based on our proprietary chemical-free manufacturing process and significant customer engagement.
"We are excited about Directa Plus' commercial prospects in the coming year. While the textile and environmental markets are expected to continue to be the main contributors to revenue, we expect to experience strong growth in activity within our other two target markets of composite materials and elastomers. As a result, we anticipate increased revenue generation from our active clients and with more customers preparing to launch products incorporating G+, the business is well-placed to deliver significant year-on-year growth in 2018 in line with market expectations."
Enquiries
Directa Plus plc -------------------------------------- ---------------- Giulio Cesareo, CEO Marco Ferrari, CFO +39 02 36714458 -------------------------------------- ---------------- Cantor Fitzgerald Europe (Nominated Adviser and Broker) -------------------------------------- ---------------- Marc Milmo, David Foreman (Corporate Finance) +44 20 7894 Alex Pollen (Sales) 7000 -------------------------------------- ---------------- Luther Pendragon (Financial PR) -------------------------------------- ---------------- Harry Chathli, Claire Norbury, +44 20 7618 Alexis Gore 9100 -------------------------------------- ----------------
About Directa Plus
Directa Plus is one of the largest producers and suppliers of graphene-based products for use in consumer and industrial markets worldwide. By incorporating Directa Plus' unique graphene blends, identified by the G+ brand, its customers can enhance the performance of their end products without significantly increasing their cost. Directa Plus graphene-based products are natural, chemical-free, sustainably produced and tailored to specific customer requirements for commercial applications such as smart textiles, tyres, composite materials and environmental solutions.
Established in 2005, the Company has a patented technology process and a portfolio of product and application patents. It produces its graphene-based products at its own factory in Lomazzo, Italy, with a scalable and exportable manufacturing model enabling the set-up of additional production at customer locations to reduce transport costs, waste and time-to-utilisation. Directa Plus partners with customers to enable them to offer the high-performance benefits of graphene in their own products.
Chairman's Statement
I am proud to be presenting the results for our first full year on AIM, following our listing in May 2016. It has been a transformational year for Directa Plus, one during which we established ourselves as the leading company with the highest number of graphene-enhanced end products for purchase by our customers than any other graphene producer. The results reflect the benefit of the commercialisation strategy put into place by the Board and our excellent management team.
Overall, we are pleased with the significant commercial progress the business has made. The progress we have achieved in 2017 in implementing our strategy is discussed in the Chief Executive's Review.
Our G+ graphene is already incorporated into several commercial applications in the smart textiles, environmental, composite materials and elastomers markets. However, in 2017, the Group increased its focus on fulfilling near-term opportunities in the smart textiles and environmental markets, delivering solid growth in the business. We now have 35 active customers, more than double the number of the previous year. These active customers are defined as those who have moved beyond the "sampling" stage and into their product commercialisation phase.
Total Income increased by over 50% to EUR1.23 million compared to EUR0.82 million last year, with revenue from the sale of graphene-based products and services increasing by 29% to EUR0.95 million. We believe that Directa Plus has a clear lead over its competitors and we plan to capture the growth opportunities from our existing commercial engagements as well as delivering against a significant pipeline of other prospects.
Established at least an 18-24 month clear lead over competitors
The Board considers that the Group has now established a clear lead of at least 18 to 24 months over our competitors in the various industry markets in which we operate. Most importantly, Directa Plus is able to produce consistent, certified production at high tonnages and at a price that can satisfy the requirements of large supply chains. We are not aware of any other company that can match our industry-leading capacity of 30 tonnes per annum of pristine, chemical-free graphene-based material. In addition, our on-site Advanced Development Area ("ADA") has enabled our customers both to reduce their time-to-market and to certify production. It is for these vital reasons, our customers tell us, that they have elected to work with Directa Plus.
In our key vertical markets, Directa Plus is the only company that has graphene-based products selling into the textile industry that are independently certified as non-irritating and hypoallergenic. An additional advantage is that our process to produce our graphene-based products is chemical-free using only physics that results in our G+ materials being non-toxic and non-cytotoxic. This year we also successfully expanded to a full service textile offer: from the supply of G+ materials to the ready-to-use graphene-enhanced fabric and value-added consultancy services, we can cater to whatever our clients require. This is why global household brands have chosen to launch clothing and accessories that are enhanced by our products. In the environmental vertical, our proprietary product Grafysorber(R) is proving to be at least five times more effective than the technologies presently used for water decontamination. Grafysorber(R) can adsorb more than 100 times its own weight of oily pollutant and provides a step-change in performance. This is not only a significant advantage over incumbent technologies, but also over any potential competitor.
Directa Plus is able to produce differing grades of G+ material that can be specifically designed for different customer products and applications, which can then be utilised directly in the supply chains of large companies, without altering established production processes, thereby reducing the time-to-market. We have a proven, low cost, modular, highly scalable, high-yield process that is able to produce revenues at each phase of production. The Board believes its clear and focused strategy, together with a highly motivated and talented management team, patented technology and products, and strong financial discipline, results in Directa Plus being strongly positioned to realise sustainable, long-term growth.
Finally, I would like to thank our customers, partners and shareholders for their continued support. I would like to thank Luca Lodi-Rizzini, who resigned from the Board of Directors, with effect of 26 April 2018, for personal reasons. His expertise and experience have been a great support to Directa Plus during the IPO process and beyond, and we wish him all the best for the future. Above all, I would like to thank our employees for their hard work and enthusiasm, which has enabled the business to achieve significant progress during 2017. We are deepening our relationships with existing and potential customers and working with them to provide more comprehensive solutions to incorporate our G+ graphene into their products. There is momentum building within the Group that puts Directa Plus on a very solid footing for the future.
Sir Peter Middleton
Chairman
Chief Executive Officer's Review
Positioned for strong growth
We are pleased to report that Directa Plus made excellent commercial and operational progress during 2017 that has reinforced the Group's leading position in the market sectors in which it operates. We believe that we have laid the foundations for a strong increase in revenue in 2018 and beyond. During the year, Total Income grew by over 50% to EUR1.23 million due to our increased focus on nearer-term revenue opportunities, in particular in two of our key markets: textiles and environmental.
As Sir Peter Middleton discussed in his Chairman's statement, the Board believes that the Group has now established a clear commercial lead over our competitors. Directa Plus has no hurdles to overcome in terms of our proprietary technology, production capability and capacity or our advantageous cost structure, and we are able to deliver product to meet the exacting requirements of all customers. We have a unique proposition - with a sustainable, chemical-free product offering - and a rich pipeline of projects. Our products and processes are protected by a portfolio of patents, which now stands at 18 granted and 19 pending. Consequently, we believe Directa Plus has at least an 18 to 24 month lead over any other company in the markets we serve.
During the year, the Group's strategy was to focus on markets that had the most opportunity to deliver higher sales in the short to medium term. We were successful in applying our cost structure, key resources, customer relations and commercial channels to achieve this goal.
Significant orders were placed by our customers and our G+ graphene has been delivered to a much larger number of clients, with many moving from the proof-of-concept stage through to the commercial phase and launched products into the market. I am delighted to report that we ended 2017 with 35 active clients compared with 16 clients in the previous year. Hence, the growth in revenue from products and services increased by 29% to EUR0.95 million. The Group expects to generate increased revenues from these active clients in 2018 as well as helping other clients commence their commercialisation programmes.
Most importantly, we have established a clear commercial positioning that is focused purely on graphene and, thanks to the strength of our G+ products, we do not need to pursue material blends or revenue from non-graphene-related activities.
It is testament to our position within the industry that the National Graphene Association, the main organisation and body in the US advocating and promoting the commercialisation of graphene and addressing critical issues such as standards and policy development, has added Directa Plus as a new Corporate Partner and I am pleased to have joined the organisation's Advisory Board.
Focused on key markets
As part of our strategy, Directa Plus is focused on the key industry markets where it has an established competitive advantage and where it feels that it can achieve most success in the short to medium term. The two primary markets are textiles and environmental, followed by composite materials and elastomers. During 2017, the Group made significant commercial progress across these four markets.
Textile
Directa Plus is uniquely positioned in the textiles market as it is the only graphene-based product commercially available that is independently certified as non-toxic and hypoallergenic as well as being sustainably produced. As a result, customers can leverage the performance enhancements provided by incorporating our G+, such as thermal regulation, heat dissipation, data transmission and no odour effect, while being assured that the product is safe for human skin and the environment.
In 2017, sales into the textiles market increased to EUR0.77 million compared with EUR0.08 million in 2016 as we sold approximately 15,000 metres of G+ printed fabric as more customers launched more end-products into the market enhanced with the Group's G+.
Alfredo Grassi
The Group entered into a Joint Development Agreement ("JDA") with Alfredo Grassi S.p.A. ("Grassi"), a leading manufacturer of customised protective clothing, workwear and uniforms for private and public organisations globally. This followed detailed testing of Directa Plus' graphene by Grassi to assess the potential benefits that could be delivered by incorporating the Group's graphene planar thermal circuit into their workwear products. This successfully progressed into a EUR0.6 million contract to supply G+ materials to create graphene-enhanced employee clothing for an Italian state-owned company. The Board believes this order represents the largest amount of textile material to be treated with graphene nanoplatelets by any company to date. It is also testament to the strength of our offer as we have met the more-specialised requirements of the workwear sector. Grassi has a leading market position in the provision of workwear and customised uniforms across a range of sector verticals. In Italy alone, there are approximately 300,000 law enforcement, fire and safety and military personnel being dressed top to toe with Grassi clothing that has to be renewed every three years. As a result, we are very excited about the opportunities that this relationship with Grassi could yield for the Group.
Colmar
Colmar, the high-end sportswear company, launched a collection of 16 garments incorporating G+ materials during 2017 and, post period end, launched its third G+ winter collection consisting of 31 garments. This included, for the first time, graphene ski trousers for men and women.
Other projects
In addition to Grassi, the Group signed a JDA with a leading global product design and sport performance brand and with a global leader in branded lifestyle apparel, footwear and accessories. These companies greatly value G+ materials for their non-toxicity and this is a proven and major competitive advantage for Directa Plus.
Directa Plus was awarded a grant by the European Regional Development Fund via the Lombardy regional government in respect of a EUR1 million research project into Graphene for Advanced Textiles and Fashion ("GRATA"), namely, the development of G+ membranes to enhance the thermal and electrical performance of membranes for fashion applications. The project is a collaboration between Directa Plus, the Politecnico of Milan University and two other companies, with Directa Plus as project leader. Directa Plus is investing EUR310k and will receive a grant of EUR126k following the completion of the project in December 2018. The grant is aligned with the Group's textile development strategy, and targeted to reduce costs and expand the range of high performance G+ textile products.
Certifications
During the year, the Group achieved independent certifications that G+ textiles are non-irritating and safe for human skin, including a hypoallergenic and dermatologically tested certification confirming that G+ textiles do not cause allergic reaction and irritations in human skin. The Group's production process is chemical-free and these certifications are key for the widespread adoption of G+ materials in the textiles industry and represent an additional source of competitive advantage.
In addition, post period end, the U.S. Patent and Trademark Office issued notification that it had granted the Group a patent covering the product and application of its 'flame retardant composition comprising graphene nanoplatelets', which was subsequently also granted by the Chinese Patent Office. The ability of G+ to confer flame retardancy on an object without the use of toxic chemicals is another key differentiator for Directa Plus, particularly in respect of the textiles market where manufacturers generally achieve flame retardancy through the addition of toxic chemicals to an object or the use of a chemical after-treatment. This is especially relevant for workwear, such as for emergency services and manufacturing, and sportswear, such as motorsports.
Environmental
The Group's G+ product for the environmental industry, Grafysorber(R) , has a unique oil adsorption capacity that has been substantiated through extensive testing and commercial trials over the last three years in Italy, Romania and Nigeria - and is the only commercially-available graphene-based solution for treating produced water in the oil & gas industry. Data collected demonstrates Grafysorber(R) to be at least five times more effective than the technologies presently used for water decontamination, adsorbing more than 100 times its own weight of oily pollutant. It has also received public endorsement from leading companies such as Eni, one of the world's largest oil & gas companies, which presented test results at the 6(th) International Conference on Environmental Chemistry and Engineering in Rome.
Romania
The Group signed agreements with two leading Romanian integrated oil & gas companies for field testing Grafysorber(R) for treating oil-contaminated water. OMV Petrom completed the field test at an oil treatment plant, with better-than-expected results in the continuous decontamination of produced water. Separately, GSP SA is due to commence field tests during H1 2018. The Board is confident that these field tests will lead to Grafysorber(R) being established by OMV Petrom and GSP SA as the preferred solution for their upstream decontamination and oil recovery activities.
Italy
In collaboration with Eni, Directa Plus delivered products incorporating Grafysorber(R) for decontamination activities in the oil and gas sector in Nigeria. This followed the successful testing last year of Grafysorber(R) by Eni.
Post period end, as announced on 21 March 2018, the Group achieved a significant milestone with the signing of a commercial agreement with Sartec Srl (part of Saras Group, one of the largest refineries in Europe), to jointly develop a continuous commercial-scale industrial system using the Group's Grafysorber(R) product, for treating oil-contaminated produced water in the oil & gas industry. Sartec will commence building the system in Q2 2018, which will be capable of treating up to 500 cubic metres per day of produced water and is expected to be completed by the end of the year. In conjunction with this, both parties will work together to generate industrial-scale demand by leveraging the global footprint of the Sartec sales force and commercial opportunities activated by Directa Plus.
This agreement with Sartec follows a successful joint research proof-of-concept phase conducted over the last eight months. The ongoing tests continue to demonstrate Grafysorber(R) 's ability to outperform existing technologies in treating oil-contaminated produced water. As such, this represents another significant endorsement by an established company within the oil, energy and environment sector.
Middle East
Directa Plus continued to progress discussions in the Middle East in respect of using Grafysorber(R) for the decontamination of produced water from enhanced oil recovery. The Group is enlarging its upstream and downstream commercial network in the region as it potentially represents a substantial market opportunity with Grafysorber(R) being a unique solution to the problem.
Grafysorber(R) development
During the first half of the year, the Group signed an agreement with the IIT (Istituto Italiano di Tecnologia), a major and well-respected Italian research centre with more than 1,200 researchers and scientists, to develop the second generation of Grafysorber(R) for water treatment applications. The three-year agreement has two primary work streams. First, to develop a treatment for the external fabric of Grafysorber(R) booms to increase the penetration of oil and prohibit the adsorption of water, thereby maximising the oil absorption capability of the Grafysorber(R) . The second objective is to enable the Grafysorber(R) to form a porous 3D structure based on a polymeric network that "glues" the individual grains together. Both of these improvements will increase the adsorption capability of Grafysorber(R) and the ease with which it can be used.
Composite Materials
In the composite materials market, the Group's G+ products can be incorporated into a variety of materials to enhance their existing properties or to confer new ones. These properties range from mechanical reinforcement to electrical/thermal conductivity to barrier and tribological properties.
In particular, we are working to produce a graphene-enhanced asphalt additive, Eco Pave, which is aligned with our development strategy for Grafysorber(R) : after being used to treat an oil spill or for decontamination of produced water, the exhausted material could be utilised in asphalt to increase its mechanical and thermal properties. During the year, the Group was awarded a grant from the European Regional Development Fund in respect of a project focusing on the development of innovative asphalts and bitumen based on G+. Directa Plus will provide the graphene-based products, and will work in collaboration with partners to develop Eco Pave. As part of this project, we signed an agreement with Iterchimica S.r.l., an established producer and distributor of specialised additives for asphalt, and received an order during the year from Iterchimica for graphene to be used in a pilot test of Eco Pave in 2018.
In other composite activities, the Group is working with a leading manufacturer of brake pads, which placed an order during the year for two different grades of G+ for testing, which is now complete. This followed the completion in H2 2016 of a joint R&D project conducted under a JDA signed in 2015.
Also during the year, a global luxury accessories producer launched its first collection of spectacles enhanced by G+. The new spectacles range was developed under a two-year JDA signed in 2015 and the Group continues to conduct development work with this customer.
Elastomers
In the elastomers market, the Group's G+ represents a disruptive technology that can be incorporated into end-products, in particular tyres and rubber hoses, to enhance their technical performance with properties such as puncture resistance and strength. Specifically for tyres, G+ simultaneously reduces rolling resistance and increases grip, resulting in a tyre that is faster in motion and safer as well as enabling a reduction in fuel consumption. In this sector, the route-to-market is potentially longer than adoption in other markets, but the Board believes that it represents a significant opportunity in the medium- to long-term.
During the year, the Group received orders for over 250 kilos of G+ from Vittoria for incorporation into its range of graphene-enhanced bicycle tyres and wheels. Vittoria is one of the Group's longest-established partners and the performance of cyclists using the G+ tyres continues to be strong with victories in various competitions.
Post period, and as announced on 23 April 2018, the Group entered into a strategic collaboration agreement with Marangoni S.p.A., a global leader in the tyre retreading industry and in the development of associated technologies and machinery, to develop a bespoke version of our G+ to improve the performance of Marangoni compounds in truck and bus tyre retreading. This is an important milestone for Directa Plus as the Group is leveraging the significant experience gained in the bike tyre industry to transition into the automotive markets, which we believe is a key target market for future growth. The Group's engagement in the automotive tyre industry was further supported, also post period, with the Ufficio Brevetti e Marchi (Italian Patent and Trademark Office) granting the Group a patent for the product and application of its new graphene-based solution for enhancing the performance of tyres.
Advancements in Production and R&D
We maintained investment in our Continuous Improvement Project to enable a substantial increase in production capacity and efficiency. In particular, the continuous development of the production process was focused on the expansion and exfoliation phases to enable new potential sales from the products of these phases. We are now able to produce 30 tonnes per annum of pristine, chemical-free graphene-based material and have a proven process to easily scale our production capacity to match the higher tonnages that we expect will eventually be needed by our customers.
We also sustained our R&D efforts, which is crucial in the fast-evolving market in which we operate. We consistently seek to innovate across our markets, but a key development is the progress we have made in improving the physical functionalisation of graphene, which enhances its properties. We are excited about the potential of this development, particularly for our activity in the composite materials market.
Outlook
The Board are excited about the Group's commercial prospects for the coming year. The Group has built strongly on the foundations that were established in 2016 and, as a result of the commercial progress made in 2017, we have entered 2018 with increased confidence of securing further significant orders.
In the textiles market, the Group continues to add new customers as well as having current customers launch larger numbers of graphene-enhanced products into the market. In the environmental market, the contract signed with Sartec to develop a continuous commercial-scale industrial system is receiving increased attention by key prospects and we expect the first commercial agreement to be signed during this year.
While the textile and environmental markets are expected to continue to be the main contributors to revenue, the Group expects to experience a strong increase in activity within its other two targeted markets of composite materials and elastomers. The Group anticipates that some customers will launch pilot programmes and others will move from proof-of-concept phase and launch products into the market.
As a result, the Group anticipates increased revenue generation from its active clients and with more customers preparing to launch products incorporating G+, the business is well-placed to deliver significant year-on-year growth in 2018 and beyond.
With the Group set to maintain its position and competitive lead, it anticipates entering into strategic commercial arrangements with some of the world's largest companies in its four key verticals, thereby laying the groundwork for future growth. The opportunities for G+ remain substantial and the Board continues to look to the future with optimism.
Giulio Cesareo
Chief Executive Officer
Chief Financial Officer's Review
Key Performance Indicators
The Board measures the performance of the Group through a number of important financial and non-financial KPIs. This was a strong year for Directa Plus as we improved on our KPIs, in line with the Board's expectation.
Financial Review
Revenue from product and service sales grew by 29% to EUR0.95 million, with the increase primarily due to sales into the textiles market, while Total Income increased by 51% to EUR1.23 million (2016: EUR0.82 million).
Other income, which mainly includes grants and R&D Expenditure Credit (RDEC) received by the Group, was EUR0.28 million (2016: EUR0.08 million), resulting in Total Income for 2017 of EUR1.23 million (2016: EUR0.82 million). Government grants value increased to EUR0.20 million (2016: EUR0.08 million). The increase was driven by grants that are directly supporting key development activities of the Group, namely the GRATA textiles project and the Eco Pave asphalts project, as described in the CEO review, which accounted for EUR0.06 million and EUR0.07 million respectively (2016: nil). Research and Development Expenditure Credit accounted for EUR0.08 million (2016: nil). RDEC is an Italian government incentive scheme designed to encourage companies to invest in R&D by providing a tax credit.
Additions in tangible assets of EUR0.35 million (2016: EUR0.38 million) mainly related to the purchase of industrial equipment to improve our manufacturing process and laboratory equipment to support the development of applications, particularly in our textile and environmental markets. Investment in intangible assets of EUR0.13 million (2016: EUR0.19 million) mainly related to development costs and IP activity.
The loss after tax for the year was significantly reduced to EUR3.95 million compared with EUR6.42 million for 2016. The reduction was primarily due to the increased income generated in 2017, a EUR1.0 million decrease in finance expenses and the absence of expenses incurred in 2016 relating to the fair value adjustment of the embedded derivative associated with the convertible loan notes at IPO (EUR1.0 million). The EBITDA loss for the period was reduced to EUR3.16 million compared with EUR3.67 million loss for 2016, primarily due to increased income and lower bad debt expenses, which was partly offset by an increase in raw material and consumables expenses and employee benefits expenses. The increase in raw materials and consumables primarily related to the growth and development of our textile market.
On an adjusted basis, loss after tax for 2017 was EUR3.95 million (2016: EUR4.26 million loss) as per the table below:
Adjusted loss after 2017 2016 tax (EURm) ========================= ======================= ============================= Losses of the period (3.95) (6.42) ========================= ======================= ============================= Non recurring IPO costs - 0.43 ========================= ======================= ============================= Fair value movement of embedded derivative - 1.04 ========================= ======================= ============================= Exceptional write-down of receivables - 0.84 ========================= ======================= ============================= Inventory adjustment - (0.15) ========================= ======================= ============================= Share based payment - - expenses costs ========================= ======================= ============================= Adjusted losses after tax (3.95) (4.26) ========================= ======================= =============================
As at 31 December 2017, inventories totaled EUR1.0 million (2016: EUR0.6 million), mainly due to EUR0.3m higher finished product inventory to ensure Directa Plus can supply to key clients in a timely manner as it receives increasing orders.
Cash and cash equivalents at 31 December 2017 were EUR6.9 million (2016: EUR10.6 million) with the reduction principally due to:
-- reduced cash outflow from operating activities totaling EUR2.8 million (2016: EUR3.2 million);
-- modest investments in tangible and intangible assets of EUR0.5 million (2016: EUR0.7 million) for reasons set out above; and
-- financing activities equal to EUR0.3 million (2016: increase of EUR13.4 million mainly due to proceeds from the IPO).
-- Exchange losses on cash and cash equivalent equal to EUR0.1 million (2016: EUR1 million) does not represent a cash outflow and is mainly due to the effect of movement of Sterling against Euro on Sterling deposits.
Marco Ferrari
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
In euro Note 31 Dec 2017 31 Dec 2016 --------------------------------------------------------------------------- ------ ------------ ------------ Continuing operations Revenue 3 952,199 738,028 Other income 3/4 281,493 79,733 Changes in inventories of finished goods and work in progress 5 390,291 450,843 Raw materials and consumables used 6 (607,338) (169,643) Employee benefits expenses 7 (2,203,558) (1,784,094) Depreciation and amortisation 12/13 (633,784) (572,402) Other expenses 8 (1,973,687) (2,981,032) Results from operating activities (3,794,384) (4,238,567) --------------------------------------------------------------------------- ------ ------------ ------------ Fair value movement on embedded derivative - (1,039,473) Net Finance expenses 10 (151,808) (1,146,905) --------------------------------------------------------------------------- ------ Net finance costs (151,808) (2,186,378) --------------------------------------------------------------------------- ------ ------------ ------------ Loss before tax (3,946,192) (6,424,945) --------------------------------------------------------------------------- ------ ------------ ------------ Tax expense 11 (1,239) - Loss after tax from continuing operations (3,947,431) (6,424,945) --------------------------------------------------------------------------- ------ ------------ ------------ Loss of the year (3,947,431) (6,424,945) --------------------------------------------------------------------------- ------ ------------ ------------ Other Comprehensive income items that will not be reclassified to profit or loss Defined Benefit Plan re-measurement gains and losses 20 (4,704) 150 Other comprehensive (expense)/income for the year (net of tax) (4,704) 150 --------------------------------------------------------------------------- ------ ------------ ------------ Total comprehensive (expense)/income for the year (3,952,135) (6,424,795) --------------------------------------------------------------------------- ------ ------------ ------------ Loss attributable to Owner of the Parent (3,948,133) (6,422,019)
Non-controlling interests 702 (2,926)
--------------------------------------------------------------------------- ------ ------------ ------------
(3,947,431) (6,424,945)
Total comprehensive (expense)/income attributable to:
Owners of the Company (3,952,837) (6,421,869)
Non-controlling interests 702 (2,926)
--------------------------------------------------------------------------- ------ ------------ ------------
(3,952,135) (6,424,795)
--------------------------------------------------------------------------- ------ ------------ ------------
Loss per share
Basic loss per share 23 (0,09) (0.19)
Diluted loss per share 23 (0.09) (0.19)
--------------------------------------------------------------------------- ------ ------------ ------------
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
Group Company
------------------------------ ----- --------------------------- -------------------------
In euro Note 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16
------------------------------ ----- ------------- ------------ ------------ -----------
Assets
Intangible assets 12 1,572,309 1,726,602 - -
Investments 14 - - 14,180,336 11,057,438
Property, plant and
equipment 13 1,284,412 1,283,184 - -
-----------
Non-current assets 2,856,721 3,009,786 14,180,336 11,057,438
------------------------------ ----- ------------- ------------ ------------ -----------
Inventories 5 995,666 606,065 - -
Trade and other receivables 15 1,161,711 1,170,338 109,240 313,094
Cash and cash equivalent 17 6,929,446 10,570,211 4,493,006 8,011,689
-----------
Current assets 9,086,823 12,346,614 4,602,246 8,324,783
------------------------------ ----- ------------- ------------ ------------ -----------
Total assets 11,943,544 15,356,400 18,782,52 19,382,221
------------------------------ ----- ------------- ------------ ------------ -----------
Equity
Share capital 18 142,628 142,628 142,628 142,628
Share premium 18 19,973,996 19,973,996 19,973,996 19,973,996
Retained Earnings 18 (10,250,225) (6,552,965) (1,380,478) (766,745)
------------------------------ ----- ------------- ------------ ------------ -----------
Equity attributable
to owners of Group 9,866,399 13,563,659 18,736,146 19,349,879
------------------------------ ----- ------------- ------------ ------------ -----------
Non-controlling interests 22,930 22,228 - -
------------------------------ ----- -----------
Total equity 9,889,329 13,585,887 18,736,146 19,349,879
------------------------------ ----- ------------- ------------ ------------ -----------
Liabilities
Loans and borrowings 19 211,791 454,600 - -
Employee benefits
provision 20 282,031 227,358 - -
-----------
Non-current liabilities 493,822 681,958 - -
------------------------------ ----- ------------- ------------ ------------ -----------
Loans and borrowing 19 244,780 238,134 - -
Trade and other payables 21 1,315,613 850,421 46,436 32,342
Current liabilities 1,560,393 1,088,555 46,436 32,342
------------------------------ ----- ------------- ------------ ------------ -----------
Total liabilities 2,054,215 1,770,513 46,436 32,342
------------------------------ ----- ------------- ------------ ------------ -----------
Total equity and liabilities 11,943,544 15,356,400 18,782,582 19,382,221
------------------------------ ----- ------------- ------------ ------------ -----------
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own statement of comprehensive income in these financial statements. The Company loss after tax for the year was EUR900,374.
The accompanying notes form part of these financial statement
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
==================================== ============ ================== ============ ================ ==============
Share Share Retained Earnings Total Non-controlling Total
In euro capital premium interests equity
------------------------ ---------- ------------ ------------------ ------------ ---------------- --------------
Balance at 31 December
2015 503,100 3,885,816 (6,281,317) (1,892,401) - (1,892,401)
Total comprehensive
(expense)/income for
the period - - - - - -
Loss of the year - - (6,422,019) (6,422,019) (2,926) (6,424,945)
Total other
comprehensive
(expense)/income - - 150 150 - 150
Total comprehensive
(expense)/income for
the period - - (6,421,869) (6,421,869) (2,926) (6,424,795)
Transactions with
owners - - - - - -
Share reduction (439,649) - 439,649 - - -
Cancellation of share
premium account - (3,885,816) 3,885,816 - - -
Initial Public Offering 55,986 16,739,965 - 16,795,951 - 16,795,951
Expenditure relating to
the issuance of shares - (1,960,652) - (1,960,652) - (1,960,652)
Share-based payment - - 154,068 154,068 - 154,068
Non-Controlling
Interests on Directa
Textiles Solutions - - - - 25,154 25,154
Convertible loan
(embedded derivative) 23,191 5,194,683 1,670,686 6,888,560 - 6,888,560
------------------------ ---------- ------------ ------------------ ------------ ---------------- --------------
Balance at 31 December
2016 142,628 19,973,996 (6,552,965) 13,563,659 22,228 13,585,887
------------------------ ---------- ------------ ------------------ ------------ ---------------- --------------
Total comprehensive
(expense)/income for
the year - - - - - -
Loss of the year - - (3,948,133) (3,948,133) 702 (3,947,431)
Total other
comprehensive
(expense)/income - - (4,704) (4,704) - (4,704)
Total comprehensive
(expense)/income for
the period - - (3,952,837) (3,952,837) 702 (3,952,135)
Transaction with owners - - - - - -
Share-based payment - - 255,578 255,578 - 255,578
Non-controlling
interests on Directa
Textiles Solutions - - - - - -
------------------------ ---------- ------------ ------------------ ------------ ---------------- --------------
Balance at 31 December
2017 142,628 19,973,996 (10,250,225) 9,866,399 22,930 9,889,329
------------------------ ---------- ------------ ------------------ ------------ ---------------- --------------
COMPANY STATEMENT OF CHANGES IN EQUITY
Share Share Retained Total
In euro Capital premium earnings equity
---------------------------- ---------- ------------ ------------ ------------
Balance at 31 December
2015 503,100 3,885,816 (3,636,996) 751,920
---------------------------- ---------- ------------ ------------ ------------
Loss for the year - - (3,279,968) (3,279,968)
Share reduction (439,649) - 439,649 -
Cancellation of share
premium account (3,885,816) 3,885,816 -
Initial Public Offering 55,986 16,739,965 - 16,795,951
Expenditure relating
to the issuance of
shares - (1,960,652) - (1,960,652)
Share-based payment
reserve - - 154,068 154,068
Convertible loan (embedded
derivative) 23,191 5,194,683 1,670,686 6,888,560
---------------------------- ---------- ------------ ------------ ------------
Balance at 31 December
2016 142,628 19,973,996 (766,745) 19,349,879
---------------------------- ---------- ------------ ------------ ------------
Loss for the year - - (900,374) (900,374)
Share-based payment
reserve - - 286,641 286,641
Balance at 31 December
2017 142,628 19,973,996 (1,380,478) 18,736,146
---------------------------- ---------- ------------ ------------ ------------
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
Group Company
In euro Note Note 2017 2016 2017 2016
------------------------------------------------ ----- ------------ ------------ ------------ ------------
Cash flows from operating activities
Loss for the year before tax (3,946,191) (6,424,945) (900,374) (3,279,970)
Adjustments for:
Depreciation 13 347,042 317,258 - 763
Amortisation of intangible assets 12 286,742 267,105 - -
Bad debt expense 15 16,738 909,763 - 70,903
Fair value movement on derivative - 1,039,473 - 1,039,473
Share-based payment expense 255,578 154,068 163,743 154,068
IPO Costs - 427,903 - 427,903
Finance income 10 (5,501) (4,230) - -
Finance expense 10 157,309 1,151,136 131,647 1,117,709
Tax expenses (1,239)
----- ------------ ------------ ------------ ------------
(2,889,523) (2,162,469) (604,984) (469,151)
Increase/Decrease in:
- inventories 5 (390,291) (450,843) - -
- trade and other receivables 15 (3,394) (654,509) 203,854 (349,603)
- trade and other payables 21 442,867 (8,101) 14,094 (108,440)
- provisions and employee benefits 20 44,051 56,406 - -
Net cash from operating activities (2,796,291) (3,219,516) 387,036 (927,194)
------------------------------------------------ ----- ------------ ------------ ------------ ------------
Cash flows from investing activities
Interest received 10 5,501 4,230 - -
Investment in intangible assets 12 (122,347) (168,716) - -
Investment in subsidiary - - (3,000,000) (4,000,000)
Loan to associate - (50,939) - (50,939)
Consideration paid for acquisition of
subsidiary net of cash acquired - (58,718) - -
Acquisition of property, plant and equipment 13 (340,071) (377,246) - -
------------------------------------------------ ----- ------------ ------------ ------------ ------------
Net cash used in investing activities (456,917) (651,389) (3,000,000) (4,050,939)
Cash flows from financing activities
-
Proceeds from IPO - 14,408,156 - 14,408,156
Interest paid on loans and borrowings 10 (20,481) (52,195) (3,378) (37,519)
Repayment of borrowings 19 (236,164) (989,696) - (811,817)
Net cash from (used in) financing activities (256,645) 13,366,265 (3,378) 13,558,820
------------------------------------------------ ----- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalent (3,509,853) 9,495,360 (3,390,414) 8,580,687
Cash and cash equivalent at beginning of the
year 10,570,211 2,031,650 8,011,689 319,339
------------------------------------------------ ----- ------------ ------------ ------------ ------------
Exchange (losses)/gains on cash and cash
equivalents (130,912) (956,799) (128,269) (888,337)
----- ------------ ------------ ------------ ------------
Cash and cash equivalent at end of the year 6,929,446 10,570,211 4,493,006 8,011,689
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 31 DECEMBER 2017
1. Basis of preparation a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) as adopted for use in the European Union and with those parts of Company Act 2006 to companies preparing their financial statements under the adopted IFRS.
The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the preceding year, unless otherwise stated.
The financial statements have been prepared on a going concern basis as since the Directors believe that the Group has adequate resources to remain in operation for the foreseeable future.
All notes, except as otherwise indicated, are presented in Euros ("EUR") and all values are rounded to the nearest thousand (EUR'000) except where otherwise stated.
b) Basis of consolidation I. Subsidiaries
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.
The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests
II. Transaction eliminated on consolidation
The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.
III. Non-controlling interest
Non-controlling interest in the net assets of the consolidated subsidiaries are identified separately from the Group's equity. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholder's share changes in equity since the date of the combination. The non-controlling interest's share of losses, where applicable, are attributed to the non-controlling interests irrespective of whether the non-controlling shareholders have a binding obligation and are able to make an additional investment to cover the losses.
c) Functional and presentation currency
These financial statements are presented in Euro ("EUR") and is considered by the Directors to be the most appropriate presentation currency to assist the users of the financial statements. The functional currency of the Company and operating subsidiary is Euro ("EUR").
d) Use of estimates and judgements
The preparation of the financial statements in conformity with IFRS, as adopted by the EU, requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period.
Critical estimates and assumptions that have the most significant effect on the amounts recognised in the financial statements and/or have a significant risk of resulting in a material adjustment within the next financial year are as follows
I. Carrying value of capitalised development costs
The Group capitalises development costs provided the recognition conditions meet the criteria set out in IAS 38.
During the year costs have been capitalised in relation to projects to enhance and develop the production process for G+ Graphene. The majority of the capitalised costs relate to internal employee costs and Management are able to separately identify time spent on these projects through the Group's internal time card management program. Management and the directors continually assess the commercial potential of the technology and products in development. The costs capitalised in period have resulted in the development of new IP and Management has assessed that there is sufficient evidence to support that economic benefit will flow.
Intangible assets are amortised over their expected or known useful lives on a straight-line basis beginning from the point they are available for use. The estimated useful life is the lower of the legal duration (term of patents - usually 20 years) and the useful economic life. The estimated useful lives of intangible assets are regularly reviewed. Management currently estimates based on the development program the estimated useful life for intangible assets is currently 10 years. The useful economic life is based on management's estimate of the time period over which the assets will generate future cash flows.
II. Valuation and recoverability of Inventory
Inventories are stated at the lower of cost or net realisable value. The cost of inventories comprises of net prices paid for materials purchased, production labour cost and factory overhead. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Inventory provisions are recognised for slow-moving, obsolete or unsalable inventory and are reviewed on a six monthly basis. The valuation of Inventory includes key estimates and judgments made by Management including normal production capacity, market demand and selling opportunities. If actual demand or usage were to be lower than estimated, inventory provisions for excess or obsolete inventory may be required.
III. Defined benefit scheme
Provision for benefits upon termination of employment related to amounts accrued by Italian companies for employment retirement. In determining this provision Management employs actuarial techniques, including the involvement of an external experts. All key estimates applied have been included in note 20.
IV. Share based payments
The cost of employee services received (compensation expenses) in exchange for awards of equity instruments are recognised based upon the fair value of stock options at the grant date. Management uses a Black-Scholes option valuation model to value the stock options at grant date. This Black-Scholes option valuation model requires the use of assumptions, including expected stock price volatility and the estimated life of each award. The risk-free interest rate used in the model is determined, based on a government bond with a term equal to the expected life of the equity-settled share-based payments. Stock options with market based vesting conditions also includes key judgements regarding the probability of performance conditions being met.
e) New standards and interpretations not yet adopted I. IFRS 15 - Revenues form contract with customers
IFRS 15 is effective for the year beginning 1 January 2018 and provides a single principles based five-step model to be applied to all sales contracts, where the key focus is on the transfer of control of goods and services to customers. It replaces models included in IAS 11 (Construction Contracts) and IAS 18 (Revenue).
Management has undertaken proper analysis of how IFRS 15 should be implemented and which the impact could be. Management decided to implement new commercial Terms and Conditions during the FY17 in order to better meet IFRS 15 requirements. The Group plans to adopt IFRS 15 in FY18 and based on the current and historic sales contracts in place do not expect any material impact from implementing this new standard. As Management consider there will be no impact, the company will adopt a modified retrospective approach whereby the comparatives are not restated and are presented using existing IAS 18.
II. IFRS 16 - Leases
IFRS 16 is effective for the year beginning 1 January 2019. IFRS 16 provides a single lessee accounting model, requiring lesses to recognise right of use assets and lease liabilities for all applicable leases. Therefore existing operating leases will be accounted for similarly to finance leases under the current IAS 17, resulting in the recognition of additional assets within property, plant and equipment in respect of the right of use of the lease assets, and additional lease liabilities. The operating leases charges currently reflected within operating expenses (and EBITDA) will be eliminated and instead depreciation and finance charges will be recognised in respect of the lease assets and liabilities. The full impact of IFRS 16 is currently under review, including understanding the practical application of the principles of the standard. Is it therefore not practical to provide a reasonable estimate of the effect until this review is complete, nevertheless, as preliminary comment, due to the low level of existing leases, Management don't expect any material impact.
III. IFRS 9 - Financial Instruments
IFRS 9 "Financial Instruments" will supersede IAS 39 "Financial Instruments - Recognition and Measurement" and is effective for annual periods beginning on or after 1 January 2018. IFRS 9 includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting.
Management assessed the impact of the new standard and IFRS 9 is expected not to have material effect on the Group's accounting.
2. Significant accounting policy a) Functional and foreign currency
The financial statements of each Group company are measured using the currency of the primary economic environment in which that company operates (the functional currency). The consolidated financial statements record the results and financial position of each Group company in Euro, which is the functional currency of the Company and the presentational currency for the consolidated financial statements.
I. Transaction and balances
Transactions in foreign currencies are converted in to the respective functional currencies at initial recognition, using the exchange rates at the transaction date. Monetary assets and liabilities at the end of the reporting period are translated at the rates ruling at the reporting date. Non-monetary assets and liabilities are not retranslated. All exchange differences are recognised in profit or loss. On consolidation, the results of overseas operations not in Euro are translated at the rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at closing rate and the results of overseas operations at actual rate are recognised in other comprehensive income.
b) Financial instruments I. Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are originated. All other financial assets are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. Subsequent to initial recognition financial liabilities are measured at amortised cost.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.
Financial assets and liabilities are offset, and the net amount presented in the statement of financial position when the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group's non-derivative financial assets comprise loans and receivables.
c) Loans and receivables
Loans and receivables are financial assets with fixed or determinable payment terms that are not quoted in an active market. The Group's loans and receivables comprise trade and other receivables and loan receivables, which are recognised initially at fair value plus any directly attributable transaction costs and subsequently measured at amortised cost using the effective interest rate method less provisions for impairment.
d) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less, that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.
I. Non-derivative financial liabilities
The Group initially recognises all financial liabilities on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Other financial liabilities comprise trade and other payables.
e) Leases I. Finance leases
At inception of an arrangement, the Group determines whether the arrangement is or contains a lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
II. Operating leases
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
f) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
g) Property, plant and equipment I. Recognition and measurement
Property, plant and equipment are measured at cost less accumulated depreciation, Government grants received (where applicable) and accumulated impairment losses.
Costs capitalised include expenditure that are directly attributable to the acquisition of the asset.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) are recognised in profit or loss.
II. Subsequent costs
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred.
III. Depreciation
Items of property, plant and equipment are depreciated on a straight-line basis in the statement of comprehensive income over the estimated useful lives of each component.
Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.
The estimated useful lives of significant items of property, plant and equipment are as follows:
-- Computer equipment over 5 years -- Industrial equipment, office equipment and plant and machinery 15% yearly
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted where appropriate.
h) Intangible assets
Intangible assets are measured at cost less accumulated amortisation and Government grants received (where applicable).
Patent rights acquired and development expenditure are recognised at cost.
Expenditure on internally developed products is capitalised if it can be demonstrated that:
- it is technically feasible to develop the product
- adequate resources are available to complete the development
- there is an intention to complete and sell the product
- the Group is able to sell the product
- sale of the product will generate future economic benefits, and
- expenditure on the project can be measured reliably.
Capitalised development costs are amortised over the period the Group expects to benefit from selling the products developed (Useful Economic Life). The amortisation expense is included within the cost of sales in the consolidated statement of comprehensive income.
Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the consolidated statement of comprehensive income as incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses.
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.
I. Amortisation
Intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, from the date that they are available for use.
-- Patents and research and development costs concerning G+ technology, are amortised over the lower of the legal duration of the patent (typically 20 years) and the economic useful life. These are currently amortised over 10 years.
-- Other intangible assets 5 years i) Inventories
Inventories are stated at the lower of cost or net realisable value. The cost of inventories comprises of net prices paid for materials purchased, production labour cost and factory overhead. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Inventory provisions are recognised for slow-moving, obsolete or unsalable inventory and are reviewed on a six months basis.
j) Impairment I. Non-derivative financial assets
A financial asset not classified at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
II. Non-financial assets
The carrying amounts of the Group's non-financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or Cash Generating Unit ('CGU') exceeds its recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell.
k) Employee benefits
Defined benefit scheme surpluses and deficits are measured at:
- The fair value of plan assets at the reporting date; less
- Plan liabilities calculated using the projected unit credit method discounted to its present value using yields available on high quality corporate bonds that have maturity dates approximating to the terms of the liabilities; plus
- Unrecognised past service costs; less
- The effect of minimum funding requirements agreed with scheme trustees.
Remeasurements of the net defined obligation are recognised directly within equity. The remeasurements include:
- Actuarial gains and losses
- Return on plan assets (interest exclusive)
- Any asset ceiling effects (interest exclusive).
Service costs are recognised in profit or loss, and include current and past service costs as well as gains and losses on curtailments.
Net interest expense (income) is recognised in profit or loss, and is calculated by applying the discount rate used to measure the defined benefit obligation (asset) at the beginning of the annual period to the balance of the net defined benefit obligation (asset), considering the effects of contributions and benefit payments during the period.
Gains or losses arising from changes to scheme benefits or scheme curtailment are recognised immediately in profit or loss.
Settlements of defined benefit schemes are recognised in the period in which the settlement occurs.
For more information please see note 20.
l) Revenues
Revenue represents sales to external customers invoiced at amounts less value added tax or local taxes on sales. Revenue from products sale is recognised on delivery, or customer acceptance where customer acknowledges the transfer of risk and control. Revenue from services contracts is recognised based on the contractual agreement, once the service is provided and confirmation of service completion provided is being formally received.
m) Government grants
Government grants are recognised when there is reasonable assurance that the entity will comply with the relevant conditions and the grant will be received. Grants are recognised in profit or loss on a systematic basis where the Group has recognised the initial expenses that the grants are intended to compensate. Where a grant has been received as a contribution for property, plant and equipment, or capitalised development costs, the income received has been credited against the asset in the statement of financial position.
n) Finance income and finance costs
Finance income comprises interest income on funds invested. Interest income is recognised in the profit or loss, using the effective interest method. Finance costs comprise interest expense on borrowings.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.
o) Investments in subsidiaries (Company only)
Investments are stated at their cost less any provision for impairment (then refer to j) Impairment).
p) Taxation
Tax expense comprises current and deferred tax. Current and deferred tax is recognised in the profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
-- temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and
-- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
A deferred tax asset is recognised for deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
3. Operating segments
Operating segments are currently disclosed in a manner consistent with the internal management reporting system and financial reporting provided to the chief operating decision makers (CEO, CFO, COO and CTO). A change in the internal reporting system is under discussion and would drive the disaggregation of the operating segments in line with the strategic business units that offer the different products and services.
Information regarding the results of each reportable segment is included below.
Operating Segments
2017
UK Operations ITA
EUR Operations Total
EUR EUR
---------------- ------------------------- --------------
Revenue 49,620 902,579 952,199
Other revenue 2,052 279,441 281,493
Depreciation - (633,784) (633,784)
Other expenses (1,000,127) (3,394,165) (4,394,292)
-------------------------- ---------------- ------------------------- --------------
Results from operating
activities (948,454) (2,845,929) (3,794,384)
Fair value movement on
embedded derivative -
Net Financial expenses (131,647) (20,162) (151,808)
-------------------------- ---------------- ------------------------- --------------
Loss before tax (1,080,101) (2,866,091) (3,946,192)
Operating Segments
2016
UK ITA
Operations Operations Total
EUR EUR EUR
---------------------------------------- -------------------------- ---------------
Revenue - 738,028 738,028
Other revenue - 79,733 79,733
Depreciation - (572,402) (572,402)
Other expenses (1,122,788) (3,361,138) (4,483,926)
--------------------------- ---------------------------------------- -------------------------- ---------------
Results from operating
activities (1,122,788) (3,115,779) (4,238,567)
Fair value movement on
embedded derivative (1,039,473) - (1,039,473)
Net Financial expenses (1,117,709) (29,197) (1,146,905)
--------------------------- ---------------------------------------- -------------------------- ---------------
Loss of the year (3,279,970) (3,144,976) (6,424,945)
2017 2016
EUR EUR
---------- --------
Sale of products 858,218 692,384
Sale of services 93,981 45,644
Government grants 196,842 77,012
Other revenue 84,651 2,721
---------- --------
Total Income 1,233,692 817,761
---------- --------
Geographical breakdown of revenues are:
2017 2016
EUR' EUR'
------------------------------------------- --------------------------------
Italy 786,400 215,924
USA 60,100 16,953
Rest of the world 105,699 505,151
------------------------------------------- --------------------------------
Total 952,199 738,028
The Group has transacted with one main customer in 2017, which accounts for more than 10% of Group revenues for sales of products and services: this customer's revenues amount to EUR303,664 (32%), whilst the next highest revenue earning customer provided EUR81,669 (9%).
Revenues from UK operations amount to approximately EUR46,620 (2016: EUR0) and this arose from one major customer in USA.
Other revenues of EUR82,306 substantially relate to R&D Expenditure Credit (RDEC). The RDEC is an Italian incentive scheme (art.3 DL 145/2013) designed to encourage companies to invest in. The credit can be used to reduce corporation tax or to offset outstanding payables related to social security.
4. Government Grants
Information regarding government grants:
2017 2016
EUR EUR
-------- -------
MAT4BAT 62,351 77,012
Grata 63,158 -
Ecopave 71,333
-
Total 196,842 77,012
In relation to government grants (Grata and Ecopave), the completion of the operational activities related to these projects and the submission of final documents have been completed. Therefore the conditions of the grants have been fulfilled.
The key terms of Government grants are:
MAT4BAT Grata Ecopave
Starting date 2013 2017 2016
Ending date 2017 2018 2019
Duration (months) 42 24 36
Total amount 304,700 126,324 214,100
Final report submitted and accepted Yes Project still on-going Project still on-going
There are no capital commitments built into the ongoing grants. Government grants have been recognised in Other Income.
5. Change in Inventory & Inventory
2017 2016
EUR EUR
-------- --------
Finished products 877,082 566,196
Spare Parts 102,400 29,600
Raw material 16,184 10,269
--------
Total 995,666 606,065
As at 31 December 2017 inventories are higher than 2016 due to the introduction of spare parts inventory and an increase in Finished products. Spare parts inventory was required to enhance maintenance efficiency and is composed of a small number of critical items with a material cost per unit. Finished products inventory increased to ensure timely supply to key clients in the growing target market. Two Mobile Production Unit are included in Finished products with a total value of EUR150,000.
6. Raw materials and consumables
2017 2016
EUR EUR
-------- --------
Raw material & consumables 127,052 149,048
Textile products 480,286 20,595
Total 607,338 169,643
-------- --------
EUR607,338 (2016: EUR169,643) refers to materials for production and consumables. The cost increase is due to the expansion of Directa Textile Solutions following the acquisition in 2016.
7. Employee benefits expenses
2017 2016
EUR EUR
---------- ---------------------------------
Wages and salaries 1,585,058 1,304,362
Social security costs 346,515 305,287
Employee benefits 75,519 85,461
Share option expense 255,578 154,068
Other costs 22,952 34,660
---------- ---------------------------------
Total 2,285,622 1,883,839
Capitalised cost in "Intangible assets" (82,064) (99,745)
---------- ---------------------------------
Total charged to the Income Statement 2,203,558 1,784,094
The average number of employees (excluding non-executive directors) during the period were:
2017 2016
Sales and Administration 8 7
Engineering, R&D and production 17 15
----- -----
Total 25 22
The Directors' emoluments (including non-executive directors) are as follows:
2017 2016
EUR EUR
-------- --------
Wages and salaries 845,847 718,710
-------- --------
Total 845,847 718,710
A detailed analysis of the remuneration of the directors will be detailed within the Directors' Remuneration Report on of the Annual Report.
8. Results from operating activities:
Results from operating activities includes:
2017 2016
EUR EUR
------------------ ---------
Audit of the Group and Company financial statements 34,927 32,112
Audit of the subsidiaries' financial statements 18,000 18,000
Other non-audit services provided by Group's auditor 30,188 264,184
Operating leases 210,083 143,951
Travel and marketing 211,712 217,647
Bad debt expense 16,738 909,763
Other non-audit services refers to services for advising the Company on the entitlement to recover input tax in the UK. Other non-audit services are lower than 2016 due to services received in 2016 in relation to the company's IPO.
Operating leases includes rent of the facility (EUR140,382), machinery and equipment (EUR69,702). The bad debt expense in 2016 is significantly higher than 2017 as it includes the exceptional costs relating to the two MPUs sold in 2015 and subsequently returned to the Group in 2016.
9. Leases
Operating leases relate to the Group's plant and machinery held on leases.
Future minimum lease payments 2017 2016
EUR EUR
------- -------
Less than one year 59,092 63,000
Between one and five years - -
More than five years - -
Total 59,092 63,000
Finance lease liabilities are payable as follows:
Future minimum lease payments 2017 2016
EUR EUR
-------- --------
Less than one year 61,735 61,735
Between one and five years 121,305 183,039
More than five years - -
Total 183,040 244,774
2017 2016
Present value of minimum lease payments EUR EUR
-------- --------
Less than one year 59,898 59,898
Between one and five years 108,369 168,117
More than five years - -
Total 168,267 228,015
10. Net Finance expenses
Finance expenses include:
2017 2016
EUR EUR
-------- ----------
Interest Income (5,501) (4,230)
Interest on loans and other financial costs 9,715 197,168
Interest on financial leasing 10,766 14,576
Interest cost for benefit plan 5,918 4,614
Foreign exchanges losses 130,910 934,777
-------- ----------
Total 151,808 1,146,905
At 31 December 2017 interest on loans and other financial costs amount to EUR9,715 (2016: EUR197,168). The sharp reduction is consequence of the convertible debt repayment that occurred in 2016. Foreign exchange losses of EUR130,910 (2016: 934,777k) are mainly related to Sterling movement in the Group's Sterling bank account.
11. Taxation
2017 2016
EUR EUR
------ -----
Current tax expenses 1,239 -
Deferred tax expenses - -
------ -----
Total tax expenses 1,239 -
Reconciliation of tax rate
2017 2016
EUR EUR
------------ ------------
Loss before tax (3,946,191) (6,424,945)
Italian statutory tax rate 24% 24%
(947,086) (1,541,987)
Impact of temporary differences 38,880 74,534
Losses recognised (37,641) (74,534)
Losses not utilised 947,086 1,541,987
Total tax expenses 1,239 -
Tax losses carried forward have been recognised as a deferred tax asset up to the point that they are recoverable against taxable temporary differences. All other tax losses are carried forward and not recognised as a deferred tax asset due to the uncertainty regarding generating future taxable profits. Tax losses carried forward are EUR16,790,913 (EUR 13,483,787 in 2016)
12. Intangible assets
Development
Cost Cost Patents Goodwill Others Total
EUR EUR EUR EUR EUR
Balance at
31/12/2015 2,326,297 128,279 - 57,761 2,512,337
Additions 99,745 68,970 22,268 - 190,983
Reduction - - - (28,353) (28,353)
Balance at
31/12/2016 2,426,042 197,250 22,268 29,408 2,674,968
Additions 82,064 47,394 - 2,393 132,450
Balance at
31/12/2017 2,508,106 244,643 22,268 32,401 2,807,418
Amortisation
Balance at
31/12/2015 640,297 25,485 - 25,995 693,222
Amortisation
2016 242,604 19,725 - 4,776 267,105
Reclassification - - - (11,960) (11,960)
---------------------- ---------------- ------------------- ---------------- ------------------
Balance at
31/12/2016 882,901 45,210 - 18,811 948,367
Amortisation
2017 257,101 24,464 - 5,177 286,742 Balance at 31/12/2017 1,140,002 69,674 - 23,988 1,235,109 Carrying amounts Balance 31/12/2015 1,686,000 102,794 - 30,321 1,819,115 Balance 31/12/2016 1,543,141 152,040 22,268 9,153 1,726,602 Balance 31/12/2017 1,368,104 174,969 22,268 6,969 1,572,309
As disclosed in note 1(d) development costs capitalised in the year are based on time spent by employees who are directly engaged in the development of the G+ technology.
During 2017 an average of 23% of the cost of 5 employees has been capitalised.
During 2016 an average of 33% of the cost of 4 employees has been capitalised.
The Goodwill relates to the acquisition of Directa Textile Solutions (formerly Osmotek Srl) on 11 November 2016.
13. Property, plant and equipment
Industrial Computer Office Plant &
Cost Equipment Equipment Equipment Machinery Total
EUR EUR EUR EUR EUR
Balance at 31/12/2015 47,479 29,105 55,959 1,637,380 1,769,923
Additions 91,181 4,841 35,839 245,383 377,246
Disposals - (300) (7,627) (1,773) (9,700)
--------------------- ---------------- -------------- ----------------- ----------------
Balance at 31/12/2016 138,660 33,646 84,171 1,880,994 2,137,471
Additions 21,909 2,218 19,549 304,591 348,267
Balance at 31/12/2017 160,570 35,864 103,720 2,185,585 2,485,739
Depreciation
Balance at 31/12/2015 24,365 16,691 14,804 489,728 545,588
Depreciation 2016 28,988 4,747 10,700 272,823 317,258
Disposals - (300) (6,486) (1,773) (8,559)
--------------------- ---------------- -------------- ----------------- ----------------
Balance at 31/12/2016 53,353 21,138 19,018 760,778 854,287
Depreciation 2017 25,615 4,324 14,092 303,008 347,042
--------------------- ---------------- -------------- ----------------- ----------------
Balance at 31/12/2017 78,968 25,462 33,110 1,063,786 1,201,327
Carrying amounts
Balance 31/12/2015 23,114 12,414 41,155 1,147,652 1,224,335
Balance 31/12/2016 85,307 12,508 65,153 1,120,216 1,283,184
Balance 31/12/2017 81,601 10,402 70,610 1,121,799 1,284,412
Asset held under financial leases with a net book value of EUR 223,550 are included in the above table within Plant & Machinery.
14. Investments in subsidiaries
Details of the Company's subsidiaries as at 31 December 2017 are as follows:
Shareholding
Subsidiaries Country Principal activity 2017 2016
Directa Plus Spa Italy Producer and supplier of graphene materials 100% 100%
Commercialise textile membranes, including
Directa Textile Solutions Srl Italy graphene-based technical and high-performance membranes 60% 60%
Subsidiaries Place of Registered Office Place of
Business Business
Directa Plus Italy Via Cavour 2, See registered
Spa Lomazzo (CO) Italy office
Directa Textile Italy Via Cavour 2, See registered
Solutions Srl Lomazzo (CO) Italy office
The Company's investment as capital contributions in Directa Plus Spa are as follows:
Directa Spa
At 31 December 2015 7,057,438
------------
Additions 4,000,000
------------
At 31 December 2016 11,057,438
------------
Additions 3,122,898
------------
At 31 December 2017 14,180,336
------------
15. Trade and other receivables
Current
Group Company
2017 2016 2017 2016
EUR EUR EUR EUR
---------- ---------- -------- --------
Account receivables 552,612 356,075 34,345 -
Tax Receivables 397,305 696,075 24,219 262,693
Other receivables 211,794 118,188 50,676 50,401
---------- ----------
Total 1,161,711 1,170,338 109,240 313,094
Tax Receivables are composed of Italian VAT EUR290,790, UK VAT EUR24,219 and a RDEC Tax Credit receivable (EUR82,306).
At 31 December 2017 VAT receivables are lower than last year due to the reimbursement of UK VAT which was received in 2017.
Other receivables are composed of governments grants EUR152,324 and prepayments EUR54,930.
As at 31 December 2017 the ageing of account receivables was:
Days overdue 2017 2016
EUR EUR
-------- --------
0-30 539,015 340,216
31-180 7,878 14,622
181-365 + 5,719 1,237
-------- --------
Total 552,612 356,075
-------- --------
In 2017, 98% of account receivables have an ageing within 30 days and relate to an order delivered close to the year end. The total trade receivables write-off for the year was EUR16,047 (2.8% of the gross trade receivables). The Group's policy is to write off 50% of trade receivables overdue between 121 and 365 and 100% write off for balances overdue for more than 365 days.
16. Deferred tax liabilities
2017 2016
EUR EUR
---------- ----------
Deferred tax liabilities 237,831 276,711
Deferred tax assets - losses (237,831) (276,711)
---------- ----------
Total - -
Deferred tax assets have been recognised on losses brought forward to the extent that they can be offset against taxable temporary differences in line with the requirements of IAS 12.
The deferred tax liabilities arise on the capitalisation of development costs and the accounting for the defined benefit scheme. The deferred tax liabilities are detailed below:
2017 2016
EUR EUR
----------------- ----------------
Capitalised
development
costs 227,076 262,266
Other 10,755 14,445
Total 237,831 276,711
Net balance 01 Recognised in Recognised in Net balance 31 Deferred tax
Jan 2016 profit or loss OCI Dec 2016 liabilities
Capitalised
development
costs 341,362 (79,096) - 262,266 262,266
Other 12,238 4,562 (2,355) 14,445 14,445
Total 353,600 (74,534) (2,355) 276,711 276,711
---------------- ---------------- ----------------- ---------------- ----------------
Net balance 01 Recognised in Recognised in Net balance 31 Deferred tax
Jan 2017 profit or loss OCI Dec 2017 liabilities
---------------- ---------------- ----------------- ---------------- ----------------
Capitalised
development 262,266 (35,191) - 227,075 227,075
costs
Other 14,445 (3,689) - 10,756 10,756
Total 276,711 38,880 - 237,831 237,831
17. Cash and cash equivalents
Group Company
2017 2016 2017 2016
EUR EUR EUR EUR
---------- ------------- ---------- ----------
Cash at bank 6,929,012 10,570,000 4,493,006 8,011,689
Cash in hand 434 211 - -
----------
Total 6,929,446 10,570,211 4,493,006 8,011,689
18. Equity
2017 2016
EUR EUR
------------- ------------
Share Capital 142,628 142,628
Share Premium 19,973,996 19,973,996
Retained earnings (10,250,225) (6,552,965)
Non-controlling interests 22,930 22,228
------------- ------------
Balance at 31 December 9,889,329 13,585,887
Share Capital
Number of
ordinary Share
Capital
shares (EUR)
At 1 January 2016 503,100 503,100
Share reduction on 25 April
2016* - (439,649)
Share sub-division on 19
May 2016** 19,620,900 -
Share issue on 27 May 2016
- convertible loans*** 7,055,493 23,191
Share issue on 27 May 2016
- IPO*** 17,033,334 55,986
At 31 December 2016 44,212,827 142,628
----------------------------- ----------- ----------
At 31 December 2017 44,212,827 142,628
*On 25 April 2016, the issued ordinary shares were redenominated from EUR to GBP into an aggregate nominal value of GBP398,908, comprising 503,100 ordinary shares of GBP0.7929 each, at the spot rate of exchange of 0.7929. The aggregate nominal value of the issued ordinary shares was then reduced to GBP50,310 comprising 503,100 ordinary shares of GBP0.10 each.
**On 19 May 2016, each ordinary share of GBP0.10 in the issued share capital of the Company was sub-divided into 40 ordinary shares resulting in 20,124,000 shares of GBP0.0025 each.
*** On 27 May 2016, 24,088,827 ordinary shares with a nominal value of GBP0.0025 each were issued at the Company's initial public offering. Of the 24,088,827 new ordinary shares, 7,055,493 shares were issued through the exercise of convertible loan notes. The remaining 17,033,334 shares were issued to institutional and other investors.
Share Premium
Share
In euro premium
EUR
At 01 January 2016 3,885,816
Cancellation of share premium account
on 25 April 2016 (3,885,816)
Shares issued on 27 May 2016 21,934,648
Expenditure relating to the raising
of shares (1,960,652)
At 31 December 2016 19,973,996
---------------------------------------- ------------
At 31 December 2017 19,973,996
On 25 April 2016, the share premium account of the Company was cancelled and the amount of EUR3,885,816 was credited to a distributable reserve.
Expenditure of EUR1,960,652 relating to the raising of shares has been deducted from the share premium.
Share capital
Financial instruments issued by the Directa Plus Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Directa Plus Group's ordinary shares are classified as equity instruments.
Share premium
To the extent that the company's ordinary shares are issued for a consideration greater than the nominal value of those shares (in the case of the company, GBP0.0025 per share), the excess is deemed Share Premium. Costs directly associated with the issuing of those shares are deducted from the share premium account, subject to local statutory guidelines.
19. Loans and borrowings
Non-current
Group Company
2017 2016 2017 2016
EUR EUR EUR EUR
-------- -------- ------- ----------------------
Finance leases 115,132 169,043 - -
Loans 96,659 285,557 - -
-------- -------- ------- ----------------------
Total 211,791 454,600 - -
Current
Group Company
2017 2016 2017 2016
EUR EUR EUR EUR
-------- -------- ------- ------------------
Finance leases 53,906 187,164 - -
Loans 190,874 50,970 - -
-------- -------- ------- ------------------
Total 244,780 238,134 - -
Repayment Interest rate
2017 Current Non current
EUR EUR EUR
Intesa EURIBOR 3M
San Paolo 148,319 97,520 50,798 6-months + 2.5%
------------- -------- ---------- -------------- ---------- --------------
Finlombarda
(Atanor) 137,238 91,378 45,860 3- months Fixed 0.5%
------------- -------- ---------- -------------- ---------- --------------
All of the above loans are unsecured.
Net Debt Reconciliation
Cash flows
-----------------------------------------------------
01 January Accrued Interest Capital Repayment Interest Paid
2017 31 January 2017
EUR EUR EUR EUR EUR
----------- ----------------- ------------------ -------------- ----------------
Borrowings 472,727 9,715 (185,194) (9,715) 287,523
Lease liabilities 220,007 10,766 (50,969) (10,766) 169,038
----------- ----------------- ------------------ -------------- ----------------
Total 692,734 20,481 (236,163) (20,481) 456,571
----------------- ------------------ --------------
20. Employee benefits provision
2017 2016
EUR EUR
-------- --------
Employee benefits 282,031 227,358
--------
Total 282,031 227,358
Provisions for benefits upon termination of employment primarily related to provisions accrued by Italian companies for employee retirement, determined using actuarial techniques and regulated by Article 2120 of the Italian Civil code. The benefit is paid upon retirement as a lump sum, the amount of which corresponds to the total of the provisions accrued during the employees' service period based on payroll costs as revalued until retirement. Following the changes in the law regime, from January 1 2007 accruing benefits have been contributing to a pension fund or a treasury fund held by the Italian administration for post-retirement benefits (INPS). For companies with less than 50 employees it will be possible to continue this scheme as in previous years. Therefore, contributions of future TFR provisions to pension funds or the INPS treasury fund determines that these amounts will be treated in accordance to a defined contribution scheme, not subject to actuarial evaluation. Amounts already accrued before 1 January 2007 continue to be accounted for a defined benefit plan and to be assessed on actuarial assumptions.
The breakdown for 2016 and 2017 is as follows:
EUR
Amount at 31 December 2015 170,952 ----------------------- ------------------------- Service cost 52,286 Interest cost 4,614 Actuarial gain/losses (150) Past service cost - Benefit paid (344) ----------------------- ------------------------- Amount at 31 December 2016 227,358 ----------------------- ------------------------- Service cost 44,764 Interest cost 5,918 Actuarial gain/losses 4,704 Past service cost - Benefit paid (714) ----------------------- ------------------------- Amount at 31 December 2017 282,031 ----------------------- -------------------------
Variables analysis
Detailed below are the key variables applied in the valuation of the defined benefit plan liabilities.
2017 2016
------------------------- ------- ------
Annual rate interest 2.30% 2.30%
------------------------- ------- ------
Annual rate inflation 1.10% 1.10%
------------------------- ------- ------
Annual increase TFR 7.41% 7.41%
------------------------- ------- ------
Tax on revaluation 17.00% 17.00%
------------------------- ------- ------
Social contribution 0.50% 0.50%
------------------------- ------- ------
Increase salary male 1.20% 1.20%
------------------------- ------- ------
Increase salary female 1.15% 1.15%
------------------------- ------- ------
Rate of turnover male 1.70% 1.70%
------------------------- ------- ------
Rate of turnover female 1.50% 1.50%
Sensitivity analysis
Detailed below are tables showing the impact of movements on key variables:
Actuarial hypothesis - Decrease
2017 10% Increase 10%
Variation Variation
Rate DBO EUR Rate DBO EUR
------------------- -------- --------- ------------- ------ ----------------
Increase salary Male 1.08% (2,439) 1.32% 2,496
Female 1.04% 1.27%
Turnover Male 1.53% (2,088) 1.87% 2,028
Female 1.35% 1.65%
Interest rate 2.07% 8,561 2.53% (8,107)
Inflation rate 0.99% (2,386) 1.21% 2,421
21. Trade and Other payables
Group Company
2017 2016 2017 2016
EUR EUR EUR EUR
----------------- -------- ------- -------
Trade payables 768,016 529,468 23,403 910
Employment costs 397,567 203,278 - -
Other payables 150,030 117,675 23,033 31,432
Total 1,315,613 850,421 46,436 32,342
-----------------
22. Financial instruments
Financial risk management
The Group's business activities expose the Group to a number of financial risks:
a) Market risk
Market risk arises from the Group's use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value of future cash flow of a financial instrument will fluctuate because of changes in interest rates or foreign exchange rates. As at 31 December 2017 the Group is only exposed to variable interest rate risk on the Intesa San Paolo loan. If the interest rate had increased or decreased by 100 basis points during the year the reported loss after taxation would not have been materially different to that reported.
b) Capital Risk
The Group's objectives for managing capital are to safeguard the Group's ability to continue as going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. There were no changes in the Group's approach to capital management during the year.
c) Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk from credit sales. Every new customer is internally analysed for creditworthiness before the Group's standard payment and delivery terms and conditions are offered. Advance payment usually applies for the first order and where a customer has a low credit rating. The Group's standard payment terms are 30 to 60 days from date of invoice.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. The Group works with leading banks and financial institutions, both in UK and in Italy, independently rated with the equivalent of investment grade and above.
The Group's policy is to write off 50% of trade receivables overdue between 121 and 365 and 100% write off for balances overdue for more than 365 days.
d) Exposure to credit risk
Group
Note 2017 2016
EUR EUR
------------------- -----------
Trade and other receivables 15 764,406 396,817
Cash and cash equivalent 17 6,929,012 10,570,211
-------------------
Total 7,693,418 10,967,028
e) Liquidity risk
Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group seeks to manage liquidity risk to ensure sufficient liquidity is available to meet the requirements of the business. The Board reviews regularly the cash position to ensure there are sufficient resources for working capital requirements and to meet the Group's financial commitments.
2017 Carrying amount Up to 1 year 1 -5 years
EUR EUR EUR
---------------- ------------- -----------
Financial liabilities
Trade payables 768,016 768,016
Debts for financial
leasing 180,060 61,735 118,325
Loans 287,533 190,874 96,659
Total 1,243,528 1,020,625 214,984
---------------- ------------- -----------
2016 Carrying amount Up to 1 year 1 -5 years
EUR EUR EUR
---------------- ------------- -----------
Financial liabilities
Trade payables 529,468 529,468 -
Debts for financial
leasing 220,007 61,735 180,059
Loans 472,727 199,565 293,476
Total 1,222,202 767,602 473,535
---------------- ------------- -----------
f) Currency risk
The Group is exposed to currency risk. Immediately after the Admission in May 2016 and before the Brexit referendum, GBP7.5 million of the IPO proceeds was converted to EUR9.5 million (based on an average exchange rate of GBP1:EUR1.26) as the costs of the Italian subsidiary are in Euros. The remaining amount of approximately GBP3.5 million was used to manage expenses of the Company (such as UK advisors, LSE fees and costs related to the Board) in UK. The cash held in Sterling continues to be subject to currency risk.
EUR
Cash held in
EUR 4,526,843
Cash held in
GBP 2,402,603
As at 31 December 2017 if the exchange rate EUR/GBP increase by 10% the impact on P&L would be a loss equal to EUR0.22 million (if decrease by 10% would be a profit equal to EUR0.27 million).
23. Earnings per share
Change
in Total Weighted
number number number
of of of
ordinary ordinary ordinary
shares shares Days shares
-------------------------- ----------- ----------- ----- -----------
At 1 January 2015 - 503,100 - 20,124,000
-------------------------- ----------- ----------- ----- -----------
At 30 June 2015 - 503,100 - 20,124,000
-------------------------- ----------- ----------- ----- -----------
At 31 December 2015 - 503,100 - 20,124,000
-------------------------- ----------- ----------- ----- -----------
Existing shares 503,100 140 7,697,705
Share sub-division on 19
May 2016 19,620,900 20,124,000 8 439,869
Issued on 27 May 2016 24,088,827 44,212,827 218 26,334,416
At 31 December 2016 43,709,727 44,212,827 366 34,471,990
-------------------------- ----------- ----------- ----- -----------
At 31 December 2017 44,212,827 365 44,212,827
-------------------------- ----------- ----------- ----- -----------
Basic Diluted
2017 2016 2017 2016
EUR EUR EUR EUR
Loss for the year (3,947,431) (6,424,945) (3,947,431) (6,424,945)
Weighted average number of ordinary shares in issue during
the year 44,212,827 34,471,990 44,212,827 34,471,990
Fully diluted average number of ordinary shares during the
year 44,212,827 34,471,990 44,212,827 34,471,990
Loss per share (0,09) (0.19) (0,09) (0.19)
------------ ------------ ------------ ------------
Adjusted EPS
Basic Diluted
EUR
---------------------------------------- ----------------------------------------
2017 2016 2017 2016
Losses of the year (3,947,431) (6,424,945) (3,947,431) (6,424,945)
Non recurring IPO costs - 427,144 - 427,144
Fair value movement on embedded
derivative - 1,039,473 - 1,039,473
Write down of Receivables - 840,000 - 840,000
Inventory Adjustment - (150,000) - (150,000)
Share option cost - - - -
Adjusted Losses (3,947,431) (4,268,328) (3,647,431) (4,268,328)
---------------------------------- ------------ -------------------------- ------------ --------------------------
Average number of ordinary share 44,212,827 34,471,990 44,212,827 34,471,990
---------------------------------- ------------ -------------------------- ------------ --------------------------
Adjusted LPS (0.09) (0.12) (0.09) (0.12)
---------------------------------- ------------ -------------------------- ------------ --------------------------
24. Share Schemes
The Company established the Employees' Share Scheme for employees and executive directors and the NED Share Scheme for the Chairman and non-executive directors on 19 May 2016. The Employees' Share Scheme is administered by the Remuneration Committee. The NED Share Scheme is administered by the Executive Directors.
The Directors are entitled to grant awards over up to 10 per cent of the Company's issued share capital from time to time. Awards over a total of 1,675,609 Ordinary Shares were granted on or around the date of Admission (27 May 2016). No awards have yet been exercised, leaving a total of 1,735,609 outstanding as at the year end. The main terms of the Share Schemes are set out below:
Eligibility
All persons who at the date on which an award is granted under the Employees' Share Scheme are employees (or employees who are also office-holders) of a member of the Group and are eligible to participate. The Board may also grant market value share options to non-executive directors under the NED Share Scheme. The Remuneration Committee decides to whom awards are granted under the Employees' Share Scheme, the number of Ordinary Shares subject to an award, the exercise date(s) (subject to the below) and the performance conditions (if any) which must be achieved in order for the award to be exercisable.
Types of Award
Awards granted under the Employees' Share Scheme can take the form of performance shares and/or market value share options. "Performance shares" are share options with an exercise price equal to the nominal value of a share, while "Market value share options" are share options with an exercise price equal to the market value of a share at the date of grant. The right to exercise the award is generally dependent upon the participant remaining an officer or employee throughout the performance period and, except in the case of market value share options granted to the Chairman or non-executive directors, the satisfaction of performance conditions. This is subject to the good leaver provisions described below. Awards granted under the Share Schemes will not be pensionable.
Individual Limits
The value of Ordinary Shares over which an employee or executive director may be granted awards under the Employees' Share Scheme in any financial year of the Company shall not exceed 200 per cent of his basic rate of salary at the date of grant. The value of Ordinary Shares over which a non-executive director may be granted market value share options under the NED Share Scheme in any financial year of the Company shall not exceed 150 percent of his annual rate of fees.
Performance Targets
The Remuneration Committee will impose objective targets which will determine the extent to which awards will vest. Targets for awards to be granted to executive directors and senior employees on or prior to Admission are based on growth in EBITDA, share price and production capacity targets in line with the Company's forecasts prior to Admission.
The Remuneration Committee may modify or amend the performance targets if changes to the Company or its business mean that the targets are no longer relevant or appropriate. However, any new or amended conditions will not be materially any more or less challenging than the original conditions were expected to be at the time they were imposed. The vesting of market value share options granted to non-executive directors will not be subject to performance conditions.
Variation of share capital
Awards granted under the Share Schemes may be adjusted to reflect variations in the Company's share capital.
Vesting of awards
Awards will vest on the third anniversary of the date of grant to the extent that the performance targets have been met. Vested awards may generally be exercised between the third and tenth anniversaries from the date of grant.
The inputs to the Black-Scholes model were as follows:
31 Dec 2017 31 Dec 2017
Market value Performance
Black Scholes Model shares shares
------------------------------- -------------- -------------
Share price 75p 75p
Exercise price 75p 0.25p
Expected volatility 70% 70%
Compounded Risk-Free Interest
Rate 4.25% 4.25%
Expected life 3 years 3 years
Number of options issued 636,069 1,099,540
------------------------------- -------------- -------------
Details of the number of share options outstanding are as follows:
Outstanding at Granted Outstanding at Exercisable Grant date Exercisable
start of period end of period period date
option price
31 December - - -
2015
---------------- ------------------ ------------------ ------------- ------------ --------------
- 1,099,540 1,099,540 0.25p 27 May 2016 27 May 2019
- 576,069 576,069 75.00p 27 May 2016 27 May 2019
31 December
2016 - 1,675,609 1,675,609
---------------- ------------------ ------------------ ------------- ------------ --------------
1,099,540 - 1,099,540 0.25p
576,069 60,000 636,069 75.00p 12 May 2017 12 May 2020
---------------- ------------------ ------------------ ------------- ------------ --------------
31 December
2017 1,675,609 60,000 1,735,609
---------------- ------------------ ------------------ ------------- ------------ --------------
25. Related parties
The below figures represent remuneration of key management personnel for Directa Plus Spa, who are part of the Executive Management Team but not part of the Board of Directa Plus PLC. The remuneration is set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures'.
2017 2016
EUR EUR
-------- -----------------
Short-term employee benefits and fees 227,162 176,708
Social security costs 46,498 45,758
-------- -----------------
273,660 222,466
For Directors remuneration please see Director's Remuneration Report of the Annual Report.
26. Contingent Liabilities
The Group has the following contingent liabilities relating to bank guarantees on operating lease arrangements and government grants.
2017 2016
EUR EUR
-------- -------
Operating leases 105,640 20,000
Total 105,640 20,000
27. Post Balance Sheet events
There have been no events after the reporting date that require disclosure after the reporting period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAALSAANPEAF
(END) Dow Jones Newswires
April 26, 2018 02:01 ET (06:01 GMT)
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