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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 18.70 | 18.40 | 19.00 | 18.70 | 18.70 | 18.70 | 11,004 | 08:00:00 |
| 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 2023 to Apr 2024
TIDMDCTA
RNS Number : 8614Y
Directa Plus PLC
10 May 2023
10 May 2023
Directa Plus plc
("Directa Plus", the "Group" or the "Company")
Final Results
Strong performance delivers revenue ahead of market expectations
and solid growth across the Group
Directa Plus (AIM: DCTA), a leading producer and supplier of graphene nanoplatelets based products for use in consumer and industrial markets, announces its full year results for the year ended 31 December 2022.
Financial highlights
-- Product sales and service revenue increased by 26% to EUR10.86m (2021: EUR8.62m), slightly above consensus market expectations
-- Total income (including grants) increased by 19.4% to EUR11.28m (2021: EUR9.45m) -- Adjusted LBITDA * increased to EUR3.15m (2021: EUR2.49m) -- Loss before tax increased to EUR5.33m (2021: EUR3.38m) -- Reported (basic) Loss per share was EUR0.07 (2021: EUR0.06) -- Cash and cash equivalents at year end of EUR5.73m (2021: EUR11.13m) -- Total patents granted at year end of 80 (2021: 72)
* Adjusted LBITDA represents loss from operating activities before tax, interest, depreciation and amortization, adjusted by one-off income, inventory write-offs, non-recurring legal expenses and onerous contract provision (please refer to the CFO statement for further details) .
Target market progress
Environmental Remediation ( 75% of revenue (2021: 76%))
-- Installed two production units to increase production capacity and benefits derived from lower unit production costs.
-- Commercial Agreement with UK based REDA Energy to distribute Grafysorber(R) oil response products in agreed territories in Northern Europe.
-- Authorisation from the US Federal Environment Protection Agency (EPA) for Grafysorber(R) technology to be used on any oil contamination on US territory.
-- Established pipeline of active tenders and high value opportunities.
Textiles ( 23 % of revenue (2021: 21%))
-- First exclusive supply agreement in Latin America with CIA Miguel Caballero SAS in Colombia.
-- Contract extension with Alfredo Grassi S.p.A. to broaden the collaboration for the workwear markets in Italy and France .
-- Supply agreement with Officine di Cartigliano in Italy to improve equipment performance and address antistatic issues.
-- Continued to partner with a global chemicals and materials group on an exclusive basis to develop specific products for the global air filtration markets.
-- Post period end granted an Italian patent for G+ graphene technology for air filtration applications.
Others
-- New major contract in the composites vertical covering the resurface of a total of 250 km section of the A4 Torino-Milano motorway section with Gipave, a sustainable asphalt solution containing G+ graphene.
-- New exclusive agreement with Pigmentsolution GmbH to support the development and distribution of Directa Plus's new patented Graphene Plus (G+) paints product, Grafyshield G+, initially in Germany, Austria, Switzerland, and Poland.
-- Continued investment in next generation manufacturing equipment to materially reduce direct production costs and to mitigate inflationary cost pressures.
Commenting on the results, Giulio Cesareo, Founder & CEO, said: "I am incredibly proud of the successes achieved by our dedicated team this year against a challenging economic backdrop. We have secured several contract wins and invested in our technology to position the business to serve a range of customers globally as the awareness of the capabilities of graphene continues to grow.
"In the current climate, businesses across all sectors are turning to more sustainable methods and our G+ technology has the ability to sit right at the heart of many of these sectors globally. The prospects for Directa Plus are increasingly positive and we have entered FY23 in a robust position. Our focus now is on developing our core verticals which are able to generate significant product demand and higher recurring revenue from customers. With an expanding network of customers and partners, a record order book alongside a strong balance sheet, I am confident in the Group's ability to deliver on its growth ambitions for the year ahead."
Enquiries:
Directa Plus plc +39 02 36714458 Giulio Cesareo, CEO Giorgio Bonfanti, CFO Cenkos Securities plc (Nominated Adviser and Joint Broker) +44 131 220 6939 Neil McDonald Adam Rae Singer Capital Markets Securities Limited (Joint Broker) +44 20 7496 3069 Rick Thompson Phil Davies Alma PR (Financial PR Adviser) +44 20 3405 0205 Justine James directaplus@almapr.co.uk Hannah Campbell
Notes to Editors
Directa Plus (www.directa-plus.com) is one of the largest producers and suppliers of graphene-based products for use in consumer and industrial markets. The Company's graphene manufacturing capability uses proprietary patented technology based on a plasma super expansion process. Starting from natural graphite, each step of Directa Plus' production process - expansion, exfoliation and drying - creates graphene-based materials and hybrid graphene materials ready for a variety of uses and available in various forms such as powder, liquid and paste.
This proprietary production process uses a physical process, rather than a chemical process, to process graphite into pristine graphene nanoplatelets, which enables Directa Plus to offer a sustainable, non-toxic product, without unwanted by-products.
Directa Plus' products are made of hybrid graphene materials and graphene nano-platelets. The products (marketed as G+(R)) have multiple applications due to its properties. These G+(R) products can be categorised into various families, with different products being suitable for specific practical applications.
Directa Plus was established in 2005 and is based in Lomazzo (Como, Italy) and has been listed on the AIM market of the London Stock Exchange since May 2016. Directa Plus holds the Green Economy Mark from London Stock Exchange which recognises companies that contribute to the global green economy.
For further information please visit http://www.directa-plus.com/
Chairman's statement
I am pleased to provide my first report as Chairman of Directa Plus covering a year of strong operational and strategic progress. The Group delivered revenue growth of 26% from products and services to EUR10.86m and LBITDA increased to EUR3.61m . These results were achieved in a context challenged by inflationary cost pressures and supply chain disruption that impacted customer scheduling.
During the year the Group secured a number of important new business wins, further strengthening our position within the expanding graphene market and demonstrating our increasing commercial traction. We continue to see growing interest in the ability of graphene to transform the performance of our customers' products and to support a more sustainable future. The Group has maintained its focus on developing and delivering market leading products and services within our two principal business verticals: Environmental Remediation and Textiles. We remain focused on prioritising those verticals where we have already established strong momentum and where there is high potential in terms of commercialisation and financial returns. I am confident therefore in the Group's ability to continue delivering for all its stakeholders.
Delivering on our strategy
A robust and sustainable strategy remains at the core of the Group's activities and is focused around four key pillars: a unique, low-cost graphene production process; the manufacture of pristine graphene nanoplatelets free of chemical pollutants and tailored to customers' needs; a reduced time to market for new products, benefiting from considerable accumulated knowhow and strong IP; and market reach leveraged through carefully assessed partnerships. Our strategy and financial results are covered in more detail in the Chief Executive Officer's statement.
The market for graphene-based products is broad and developing rapidly and expected to be worth EUR0.5bn p.a. by 2026, a compound annual growth of 36%. Directa Plus is very well positioned to capitalise on this growth through its unique platform technology that supplies G+ graphene material into many applications and products, created in close collaboration with our partners and customers. Whilst the Group is focused on developing its core vertical markets, there is also the opportunity to expand into new markets as and when appropriate for the business, as graphene continues to revolutionise new and existing products and materials.
Focused on customer needs
With strong foundations laid over the last few years we are encouraged by the accelerated levels of interest in the Group's offering and we continue to gain wider recognition for our proven, innovative products.
We have partnered with a number of new organisations in the year to offer the high-performance benefits of our G+ graphene and we are confident in our commercial prospects. We have established new, long-standing and deepening partnerships with leading industrial companies across a range of sectors, including a global chemicals and materials group, Alcantara and REDA Energy that provide opportunities for growth as we leverage on their established expertise and international reach.
The Group has also secured a number of notable new customers and contracts during the year across all key verticals and markets, including MC Armor in South America and Alfredo Grassi SpA in Italy in the textiles sector, Reda Energy in the UK environmental sector and a major Gipave asphalt contract. Notably, we also signed a new exclusive agreement with Pigmentsolution, a European distributor of speciality chemicals and ingredients, to support the development and distribution of the Group's new patented Grafyshield G+ product that enhances the anti-corrosion and flame-retardant properties of paint systems. These wins throughout the year demonstrate the increasing appetite for our products and our competitive advantage as we continue to build on our leading position in the graphene market.
Board changes
I became interim Chairman following the Annual General Meeting in June 2022 at which Sir Peter Middleton stepped down as Chairman and today I am delighted to accept the Board's invitation to be Chairman.
During the year we were pleased to welcome two new Non-Executive Directors to the Board: General Wesley Clark, in October, and Sarah Cope, in November. Among many accreditations, General Clark is a businessman with experience across a variety of sectors and his experience and contacts will enable us to gain faster access to the most significant high-potential graphene opportunities in the United States. He has in-depth knowledge of the US innovation eco-system, not only in the defence sector but also in oil and gas and new energy, including batteries and renewables. Sarah has over twenty years of financial and capital market experience and has previously advised AIM listed companies in the Oil and Gas sector. Her knowledge will help us in our next phase of development as we address global decontamination markets with Grafysorber(R).
We entered 2023 with a high calibre Board with a diverse range of strengths and experience that Directa Plus can benefit from.
Summary and outlook
The Group made significant progress in 2022 and is well positioned to serve a growing customer base globally. I would particularly like to take this opportunity to thank our dedicated team who have continued to work hard to strengthen our position within the graphene market.
The new business wins in the year, alongside the grant of important new patents, demonstrates the breadth and depth of our graphene technology that can be used across a wide range of growth markets. As the awareness of the capabilities of graphene continues to build, it is clear that large supply chains are now increasingly considering incorporating graphene into their product portfolios to enhance performance and to provide more sustainable solutions.
Whilst we remain cognisant of inflationary pressures, I am confident in our ability to continue to mitigate these throughout our current financial year. We entered 2023 in a robust position, with an expanding network of customers and partners, a record order book and a supportive market backdrop. The Board is confident in the Group's ability to take advantage of the substantial opportunities that lie ahead.
Richard Hickinbotham
Chairman
9 May 2023
Chief Executive Officer's Review
2022 was a year of solid operational performance fuelled by new contract wins and increasing traction in the graphene market. We delivered strong top line growth and maintained focus on developing and delivering market leading products and services in our two core business verticals: Environmental Remediation and Textiles.
As one of the largest producers and suppliers of graphene-based products, we have built Directa Plus with a clear strategy based on our four key pillars:
1. A unique graphene production process with strong IP - we have designed and patented an in-house process, that is simple, scalable and sustainable, utilising physics without the need for over complicated and pollutive chemistry;
2. Pristine G+ graphene - we produce graphene nanoplatelets with tunable xyz dimensions tailored to the needs of each vertical and customer;
3. Time to market - we have continued to build considerable product and process knowhow since our first product launch in 2015 and we now have 43 products on the market;
4. Partnerships - we aim to work with leading industrial partners with large international footprints that provide significant growth opportunities: These partners are important reference customers that support the roll out of graphene enhance products and services globally.
The strong foundation of our key pillars enabled us to achieve our target to scale production capacity to 100t p.a. in the year and to deliver double digit revenue of with a 63% CAGR over the past 5 years.
Our mission remains to deliver the best quality graphene at the best possible price in the most sustainable way, whilst supporting the industrialisation of existing and new vertical applications. The Group continued to enhance products in other areas based on its patented technology, where it has identified significant potential commercial opportunities, including paints, composites, concrete, polymers and Lithium-Sulphur batteries.
By delivering on our core strategy we achieved another year of strong growth with revenue ahead 26% on the previous year at EUR10.86m, slightly above market expectations due to a solid trading performance in December 2022, and LBITDA and LBT in line with expectations.
During the year we experienced revised timelines on some orders due to the re-profiling of certain projects, as a result of the uncertain macroeconomic backdrop. We have nevertheless achieved continued growth across the business' key vertical markets and geographies.
Like many businesses in the year, the Group was impacted by higher energy and raw material costs, which affected our direct production costs, and general cost increases on outsourced services. We worked to mitigate these potential impacts by increasing the price of our own products and also implementing a cost reduction plan including investment in new milling equipment that reduced direct production costs. These measures allowed the Group to progressively improve margins over the second half of the year and to position the business to withstand future headwinds by taking full advantage of the technology platform we have developed.
The development of graphene technology and its applications is accelerating across a range of industries due to its exceptional properties, including electrical and thermal conductivity, antibacterial and antivirus efficacy. Directa Plus is well positioned to capitalise on this opportunity using our patented process for the production of pristine, chemical free, graphene nanoplatelets, tailored to new and existing partners' and customers' requirements. We expect to build a substantial business by positioning Directa Plus in the verticals where technology capabilities, at attractive costs, meet with market opportunities and growing customer acceptance.
The Company entered 2023 in a solid position, building on momentum from the end of the prior year. With an expanding network of customers and partners, a record order book and a supportive market backdrop, we are confident in the Group's ability to take advantage of the huge opportunity that is ahead.
Strategy
We are building a highly scalable business by targeting new and existing products and markets that can be significantly improved with the addition of our graphene-based products. We work closely with our partner network, benefitting from their knowledge of different markets, strong reputation and commercial channels to identify the right opportunities that will deliver commercialisation and financial return.
We continuously monitor potential markets where we believe that for a relatively small investment, we can develop products that can generate high commercial traction and which have a fast time to market, such as paints and filtration.
Sustainability is at the heart of our operations and acts as a powerful differentiator from our competitors. We have amassed 43 certifications over the years, all reporting the absence of negative impacts on biological systems.
We consider the health and safety of all stakeholders and environmental protection as top priorities, and we have implemented a proactive approach by continuously monitoring our production process and products.
During the year, we delivered strong top line growth and maintained focus on developing and delivering market leading products and services in our two core business verticals - Environmental Remediation and Textiles. The Company continued to deliver enhancements, based on its patented technology, to products in other areas where Directa Plus has identified significant potential commercial opportunities, including paints, composites, concrete, polymers, and Lithium-Sulphur batteries.
Environmental remediation (75% of annual revenue)
Environmental remediation activities are principally carried out through Setcar, a subsidiary company based in Romania. Significant progress was achieved in this key vertical in 2022 with another year of strong growth with revenues ahead 24% and Grafysorber technology rapidly gaining traction in a number of new markets. Grafysorber(R) is a truly ground-breaking technology that is the only commercially available hybrid graphene-based solution for treating water contaminated by hydrocarbons. Grafysorber has many advantages over traditional products and can work on a wide range of hydrocarbon and several other organic pollutants. It absorbs 100 times its weight, it is safe for the operators and the environment, and it is light and easy to handle.
We have continued to invest to further improve performance and to broaden the range of potential applications, in addition to our existing water treatment products and services.
In the first half of the year we installed our first production unit for Grafysorber(R) materials in Romania. In response to growing demand, the Group has subsequently installed a second Grafysorber(R) production unit into Romania to further increase production capacity.
In April 2022 the Group received authorisation from the US Federal Environment Protection Agency (EPA) for Grafysorber(R) technology to be used on any oil contamination on US territory, providing the business with an entrance into the very large US oil decontamination market. The Group is also looking to further expand product and service sales into Asia over the longer term.
In the UK, the Company signed a Commercial Agreement with UK based REDA Energy in July 2022, a leading chemical manufacturer and supplier to the oil and gas industry, to distribute Grafysorber(R) oil response products in agreed territories in Northern Europe. The Commercial Agreement follows the successful testing of Directa Plus's products by REDA customers in the North Sea. Directa Plus has been able to further improve its oil spill response products, enhancing their ease of use and performance. The Group delivered REDA's first product order in June 2022 and it is now also exploring wider opportunities for the application of the Group's water decontamination technology.
The Group keeps working on a number of large and small contracts providing waste treatment and decontamination services, both locally and internationally.
Directa Plus still awaits the final decision on the award of a significant contract in Romania for the Group's Environmental Remediation services and the Directors continue to believe that the Group is well positioned to secure the tender.
Textiles (23% of annual revenue)
Directa Plus continued to gain strong commercial momentum in the Textiles vertical during the year with revenue growth of 33%. There is significant interest in incorporating technology into wearables which will further expand the broad spread of applications for G+ (R) graphene that is now incorporated into fabrics through four different technologies:
-- G+(R) PLANAR THERMAL CIRCUIT(R): a functional print that can be applied to any type of fabrics, creating a circuit.
-- G+(R) MEMBRANES: G+(R) is incorporated into the polyurethane membrane that can be laminated self-standing or combined with a PTFE membrane directly to a fabric.
-- G+(R) DYEING: The fabric is immersed in a water-based bath containing G+(R) yielding a completely antimicrobial fabric.
-- G+(R) COATINGS: a special coating process, based on water, able to obtain high-performance polyurethane, enhanced with G+(R).
Workwear
A key highlight includes the signing of an extension agreement with Alfredo Grassi S.p.A, a European workwear manufacturer, to broaden the existing collaboration to include our Planar Thermal Circuit(R) (PTC(R)) for the workwear markets in Italy and France. This will enable the development of new products for Grassi which will increase comfort for the wearer - a key differentiator as temperatures increase around the world. We have been working with Grassi for over five years and this extension agreement demonstrates the reliability of our technology and ability to deliver consistently for our customers. It will enable us to further develop our understanding of market trends and drivers affecting demand for workwear products.
Military
We secured our first exclusive supply agreement for printed graphene textile Planar Thermal Circuit(R) (PTC(R)) in Latin America with a Columbian based manufacturer of ballistic protection clothing, CIA Miguel Caballero SAS. Directa Plus will provide a total of 77,500 linear metres of PTC(R) printed material over a four year period, commencing from October 2022, for a total contract value of over EUR1 million. This agreement further demonstrates the applicability of our technology to a wide range of materials.
Luxury
We continue to work with a major luxury Italian brand, which has been a customer since 2019, generating important volumes and relying on our technology to promote its technical fabrics collections.
Automotive
In April 2022, the Company signed a Letter of Intent (LOI) with a leading global supplier of automotive interiors to Tier 1 manufacturers. The supplier intends to develop a suite of new products for the automotive industry based on the antimicrobial properties (antibacterial and antiviral), thermal comfort and electrical conductivity properties of G+(R) enhanced fabrics.
The LOI has a 12-month term and sees Directa Plus and the supplier agree to combine resources, competence and expertise to develop G+(R) enhanced fabrics into a suite of ready to use products for the automotive industry. If both parties are satisfied with the results achieved after the 12 months, the partners shall undertake to negotiate a Supply Agreement between the two companies. Directa Plus is already working with the supplier to produce prototypes for a number of global Tier 1 car manufacturers.
Air filters
In March 2023, the Company was granted an Italian patent for its G+(R) graphene technology for air-filtering applications and the development of an industrial-tested G+ product for the expanding air filtration market. This significant award is in partnership with an Italian-based global chemicals and materials company. The companies have been working together since December 2021 on an exclusive basis to develop specific products for the global air and water filtration markets.
Textiles for consumer electronics
Directa Plus continues to collaborate with the soft goods division of a major international developer and manufacturer of consumer electronics and related services. The agreement covers the potential application of G+(R) as a protective covering for consumer devices, exploiting its antiviral-antibacterial properties as well as its thermal and electrical conductivity. The partnership has delivered exceptional results to date with the collaboration continuing to demonstrate the potential for significant volumes in the coming years.
Other textiles applications
We secured a supply agreement with Officine di Cartigliano, an Italian based leader in the production of tanning equipment for the textile industry for its G+(R) technology, worth EUR150,000 over one year on a take or pay basis. Officine di Cartigliano will be using a formulation of the Company's G+(R) based textile finishing application to improve the performance of its equipment, particularly to address antistatic issues.
The Group is also exploring the sportswear industry to exploit the G+ heat dispersion and antimicrobial properties to understand the potential of this vast market.
Additional potential high return verticals
Composites
The asphalt applications of the Group's G+ graphene technology have great potential and the product developed with Iterchimica provides exceptional results in terms of increased durability and reduced carbon footprint. Market interest for the product is growing internationally and is gaining significant commercial traction.
In March 2022, Oxfordshire County Council conducted its second trial of a patented asphalt concrete modifier developed by Iterchimica and enhanced by our Graphene Plus product. This follows an initial pilot trial in Oxfordshire in 2019. The new trial will see two identical stretches of Marsh Lane in Oxford, which carries around 10,000 vehicles a day along a key city route, resurfaced with different materials. Half of a 700-metre stretch of the road will be laid with GiPave(R), while the rest will be resurfaced using conventional asphalt, so that the two surfaces can be compared.
In the second half of the year we secured a new major contract for the A4 Torino-Milano motorway section, managed by the ASTM Group to provide a sustainable, resilient and safe asphalt made with G+(R) graphene and specially selected recycled hard plastics (e.g., toys, fruit crates, litter bins). The asphalt will re-use 70% of milled material from the existing pavement, thus reducing the use of new natural aggregates to only 30%. The works will involve both directions for a total of 250 km.
GiPave(R) was developed by Iterchimica with the support of Directa Plus and resulted from a three-year research programme with a patent filed in 2017. The product uses waste plastics that would not normally be recycled and the asphalt containing GiPave(R) can itself be entirely recycled - promoting the 'circular economy,' which reduces waste and the need for new materials.
Paints
Another area showing considerable early potential is within the graphene-based paints vertical. We have developed a graphene-based paint solution which provides enhanced anti-flame and anti-corrosion properties compared to normal paints. We have hired a team of experienced people in the field and initiated positive discussions with major international players in Europe and Asia to accelerate commercialisation and we are excited about the potential of this technology.
In the second half of the year we signed a new exclusive agreement with Pigmentsolution GmbH, a European distributor of speciality chemicals and ingredients, to support the development and distribution of Directa Plus's new patented Graphene Plus (G+) product, Grafyshield G+, initially in Germany, Austria, Switzerland and Poland, with the potential for further expansion in Europe. The initial 12 month contract will enable us to assess these important markets and measure the potential for further territorial expansion in the longer-term. It is a significant win for the Group as it demonstrates the appetite for and competitive advantage of our Grafyshield G+ product.
The global anticorrosion coating market is estimated to be valued at 41.20 USD billion by 2027, and the global flame-retardant coating market is estimated to be 4.83 USD billion.
Lithium-Sulphur Batteries
Lithium-Sulphur is a next generation battery chemistry offering advantages over Lithium-Ion as it has a superior energy density, significant cost advantages and a superior safety profile. We have continued to support our partner NexTech in the development of this technology, in which G+(R) will play a key role in terms of technical properties and the supply of the product at the scale necessary to satisfy the needs of the market. In the first half of the year, we agreed the removal of exclusivity originally agreed in the contract, and this allows Directa Plus to collaborate with other players in the industry.
We remain focused on supporting the development of such a potentially disruptive technology and we have already targeted another Lithium-Sulphur battery producer to accelerate the technology's commercialisation.
Others
We have maintained our investment in potential additional high return opportunities that could generate significant value for the Group in the upcoming years. The Group is currently looking with great interest at G+ applications in the concrete and polymers industries.
Intellectual Property
As at March 2023, the Group's patent portfolio comprised 81 patents granted and 37 pending, grouped into 22 families. This has increased from 72 patents granted and 27 pending, grouped into 19 families in March 2022.
New patents during the year include:
-- an Italian patent covering the use of the Company's G+(R) applied to textile substrates for high bacterial filtration efficiency media for filtration applications;
-- a grant of a US patent titled "Golf ball comprising graphene". The patent will enable Directa Plus to license its technology in the key US market; and
-- a patent from the United States Patent and Trademark Office for the grant of a patent covering the Company's G+(R) embedded polyurethane membrane, developed explicitly for the textile industry, together with its production method and its applications.
We aim to create value from our wide IP portfolio. Discussions on potential licensing contracts are ongoing with potential for further patent applications and awards in 2023.
Environmental, Social and Governance policies
Environmental, Social and Governance considerations are an important part of what drives Directa Plus' business.
Environment
Graphene Plus is a unique product, produced in a unique and sustainable way; G+(R) products are obtained through a proprietary patented process based on the physical transformation of natural graphite: (i) water-based process, (ii) no chemistry, (iii) high purity, (iv) zero discharge of hazardous chemicals.
In our production process we consider raw materials supply chains, energy consumption, water and wastewater, atmospheric emissions, the production of waste and any effect on biodiversity. We are constantly assessing our production processes, working with recognised environmental organisations to ensure the safety and sustainability of our products. Our method of producing G+(R) always uses low energy consumption and low waste generation, making the entire process environmentally friendly.
With regards to our commercialisation strategy, it is our mandate to only work with environmentally responsible industrial partners, and to seek to improve products in existing markets. This means that we can help produce and sell better quality products than are currently available, with better performance and longer life for end-users.
Environmental remediation is a key division at the heart of this and we have been ISO 14001 certified since 2016.
In December 2021 Directa Plus received the Green Economy Mark from the London Stock Exchange, with over 75% of revenue contributions derived from the Environmental Remediation division.
Social
The Board considers one of its key stakeholder groups to include its workforce and makes efforts to support our employees where possible. We are a responsible employer and carefully consider all aspects of employee rights, equal opportunities, health and safety at work and training and education. We also have a remuneration policy intended to attract, retain and motivate high calibre executives to deliver outstanding shareholder returns and at the same time maintain an appropriate compensation balance with the other employees of the Group.
With respect to our local community, Directa Plus is well-known and deeply rooted in the Milan area. We promote our regional economy by identifying local suppliers, with whom it is possible to structure lasting partnerships. We believe it is essential to actively contribute to initiatives that can have a positive impact on the social fabric of the area.
Governance
The Board fully supports good corporate governance and recognises that it enhances its decision-making processes by improving the success of the Company and increasing shareholder value over the medium to long-term.
The Company complies with the Quoted Companies Alliance corporate governance code (the "QCA Code") and the Directors propose that the Company should continue to do so having regard to the Company's size, board structure, stage of development and resources.
ESG Rating
Directa Plus has embarked on the development of a full ESG Strategy and has engaged Integrum, an independent ESG ratings agency. With the objective to gather initial data upon which the Company can enhance its ESG reporting and practices for transparency for all stakeholders.
Integrum assessed and scored the company against robust frameworks including the SASB framework, Minerva Analytics and the Cambridge Impact Framework (latter against the UN Sustainability Goals).
Measures including managing greenhouse gas emissions and waste consumption were assessed as well as the company's policy on incorporating ESG concerns into Directa Plus' products and services and managing risk from government regulations and policy proposals that address social factors affecting the industry.
The Company was then ranked relative to specific sub-sector peers and an overall score, and rating was applied. The Company was given a 'B' rating.
Outlook
This year we secured a number of high-level wins in our core verticals, Environmental Remediation and Textiles. We also invested in our technology and expanded our customer and partner networks to position the business to be able to successfully serve a range of customers globally as awareness of the capabilities of graphene continues to grow.
The Company has entered the new financial year in a solid position, building on the momentum established in 2022. With an expanding network of customers and partners, a record order book and a supportive market backdrop, we are confident in the Group's ability to take advantage of the huge opportunity that is ahead.
As we build scale we expect to drive further production efficiencies and are excited about potential opportunities to expand our capacity with new installations in new geographic locations.
In parallel, we aim to create value from our wide IP portfolio. We are discussing potential licensing contracts that could accelerate the spread of our technology worldwide and generate positive cashflows for the Group.
While aware of the ongoing macroeconomic pressures, we have a dedicated and experienced team and supportive market tailwinds. The Board is confident in delivering results for 2023 in line with current expectations.
Giulio Cesareo
Chief Executive Officer
9 May 2023
Chief Financial Officer's Review
2022 was an important year of growth, in which the Group delivered a 26% increase in product and service revenue underpinned by strong traction in Environmental Remediation and Textiles. Noting the challenging and adverse market conditions, Directa Plus has efficiently managed its financial resources, mitigated the main risks and is working hard to improve its business growth and to recover margin.
Key Performance Indicators
The Board measures the performance of the Group through a number of important financial and non-financial KPIs. In a young business with a number of different vertical markets, identifying measurable data that will provide useful insight year-on-year is not always straightforward but the KPIs below aim to help shareholders understand the Group's progress.
Summary of financial KPIs with further details contained later in this report:
-- Product sales and service revenue increased by 26% to EUR10.86m (2021: EUR8.62m), above market expectations
-- Total income (including grants) increased by 19.4% to EUR11.28m (2021: EUR9.45m) -- Adjusted LBITDA* increased to EUR3.15m (2021: EUR2.49m) -- Loss before tax increased to EUR5.33m (2021: EUR3.38m) -- Reported (basic) Loss per share was EUR0.07 (2021: EUR0.06) -- Cash and cash equivalents at year end of EUR5.73m (2021: EUR11.13m)
* Adjusted EBITDA loss represents results from operating activities before tax, interest, depreciation and amortisation, adjusted by one-off income, inventory write-offs, non-recurring legal expenses and onerous contract provision (details below).
Financial review
In 2022, the Group delivered another year of significant growth. Revenue from products and services increased by 26% to EUR10.86 million (2021: EUR8.62 million), and total income by 19.4% to EUR11.28 million (2021: EUR9.45 million).
The increase in revenue was driven by our two main verticals. Environmental Remediation services gained further traction with revenue growth of 24% to EUR8.14 million, supported by new and expanded contracts delivered by our subsidiary Setcar, leveraging on our technology and promoting G+ in the oil & gas industry globally. Textiles grew by 33%, with sales of EUR2.46 million due to the contribution of recurring and new contracts.
During the year, global markets were challenged by adverse macro-economic and geopolitical conditions. The war in Ukraine, together with post-pandemic supply chain issues, led to double digit inflation trends and created unprecedented market conditions. In the first half of the year, the Group was impacted by cost increases, from significant energy cost rises to increases in the cost of subcontracted services and general expenses. Management has sought to mitigate these cost pressures through price increases for the Group's products and investment to significantly reduce direct production costs. Our investment in next generation milling equipment in particular has built on Directa's throughput cost reduction project that was successfully begun six years ago. These actions, focused on margin recovery, are expected to have a material positive effect that will be increasingly evident during the new financial year.
Alternative performance measures
This report includes both statutory and adjusted financial measures, the latter of which the Directors believe better reflect the underlying performance of the Group by excluding certain items that if included could distort a reader's understanding of the results.
The table below shows a reconciliation of statutory and adjusted measures for LBITDA and Loss before taxation.
EUR million FY22 FY21 Result from operating activities (5.02) (3.53) (+) Depreciation and amortisation 1.40 1.54 LBITDA (3.61) (1.99) (-) One-off income 0.00 (0.50) (+) Inventory write-off 0.11 0.00 (+) Legal costs 0.16 0.00 (+) Onerous contracts provision 0.19 0.00 Adjusted LBITDA (3.15) (2.49) EUR million FY22 FY21 Loss before tax (5.33) (3.38) (-) One-off income 0.00 (0.50) (+) Inventory write-off 0.11 0.00 (+) Legal costs 0.16 0.00 (+) Onerous contracts provision 0.19 0.00 (+/-) FX gain/loss 0.20 (0.22) Adjusted Loss before tax (4.67) (4.11)
Adjustments refer to:
-- one-off other income of EUR0.5 million reported in the 2021 accounts from the release of an undue obligation to the former shareholders of Setcar;
-- inventory write-off of EUR0.11 million in 2022, attributable to obsolete Co-Masks which are now experiencing a low market demand following the end of the Covid-19 pandemic;
-- legal costs of EUR0.16 million linked to the protection of Directa Plus' IP portfolio and disbursements relating to a lawsuit that dates back to 2017;
-- provision of EUR0.19 million for the total expected loss in 2023 on the conclusion of an onerous long-term contract where recovery is deemed uncertain under IFRS15. The Group is currently in discussion with the customer to seek an acceptable resolution;
-- Non-cash exchange rate effects, especially on the conversion of GBP cash balances to Euro.
In December 2021, the Group completed a fundraise with gross proceeds of GBP7 million, by way of a placing and subscription to accelerate additional investment in development of both our primary and secondary vertical markets. As of December 2022, the Group had EUR5.73 million of cash and cash equivalents. The forecasts prepared by the Directors show that the Group has sufficient liquidity in place to support the plan and strategy for the future developments of the business over the next 18 months. However, the Directors also modelled some downside scenarios, based on contract losses or delays and margin reductions, that could adversely impact the Group and require it to search for additional funds before December 2024, and could represent a material uncertainty over going concern. Nevertheless, the Board has a reasonable expectation that the Group has adequate resources in place to maintain investment and operations in line with its strategic business plan, and they have concluded it is appropriate to adopt the going concern basis of accounting in the preparation of the financial statements.
Whilst the war in Ukraine, inflation, and increased Central Bank interest rates pose on-going challenges, we are monitoring these external factors and continue to react to mitigate any potential further risk. In the short term, the Group's priorities continue to be focused on the reduction of cash consumption and improving profitability as we develop our core verticals to deliver for our shareholders, partners and customers.
Giorgio Bonfanti
Chief Financial Officer
9th May 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Hot Features
Premium
In Euro Note 31-Dec-22 31-Dec-21
------------------------------------------------------------------- ------ -------------- ------------------
Continuing operations
Revenue 3 10,856,144 8,615,098
Other income 3/4 424,926 831,405
Changes in inventories of finished goods and work in progress (191,510) 12,960
Raw materials and consumables used 6 (5,856,661) (3,634,311)
Employee benefits expenses 7 (4,424,087) (4,296,955)
Depreciation and amortisation 11/12 (1,403,933) (1,543,567)
Other expenses 8 (4,421,177) (3,516,424)
Results from operating activities (5,016,298) (3,531,794)
------------------------------------------------------------------- ------ -------------- ------------------
Finance income 9 5,904 221,622
Finance expenses 9 (317,804) (74,681)
------------------------------------------------------------------- ------
Net finance costs (311,900) 146,941
------------------------------------------------------------------- ------ -------------- ------------------
Loss before tax (5,328,198) (3,384,853)
------------------------------------------------------------------- ------ -------------- ------------------
Tax (expense)/income 10 53,197 (44,620)
Loss after tax from continuing operations (5,275,001) (3,429,473)
------------------------------------------------------------------- ------ -------------- ------------------
Loss of the year (5,275,001) (3,429,473)
------------------------------------------------------------------- ------ -------------- ------------------
Other Comprehensive income items that will not be reclassified to
profit or loss
Defined Benefit Plan re-measurement gains and losses 20 (6,790) (6,457)
Other comprehensive expense for the year (no tax impact) (6,790) (6,457)
------------------------------------------------------------------- ------ -------------- ------------------
Total comprehensive expense for the year (5,281,791) (3,435,930)
------------------------------------------------------------------- ------ -------------- ------------------
Loss attributable to
Owner of the Parent (4,822,044) (3,652,364)
Non-controlling interests (452,957) 222,891
(5,275,001) (3,429,473)
Total comprehensive expense attributable to:
Owners of the Company (4,828,834) (3,658,821)
Non-controlling interests (452,957) 222,891
(5,281,791) (3,435,930)
------------------------------------------------------------------- ------ -------------- ------------------
Loss per share
Basic loss per share 24 (0.07) (0.06)
Diluted loss per share 24 (0.07) (0.06)
------------------------------------------------------------------- ------ -------------- ------------------
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
Group Company
------------------------------ ----- ----------------------------- --------------------------
In Euro Note 31-Dec-22 31-Dec-21 31-Dec-22 31-Dec-21
------------------------------ ----- ------------- -------------- ------------ ------------
Assets
Intangible assets 11 1,664,666 1,792,277 - -
Investments 13 - - 30,260,336 25,680,336
Property, plant and
equipment 12 3,861,151 3,982,966 - -
Other receivables 14 69,720 185,623 - -
------------
Non-current assets 5,595,537 5,960,866 30,260,336 25,680,336
------------------------------ ----- ------------- -------------- ------------ ------------
Inventories 5 1,121,912 1,370,875 - -
Trade and other receivables 14 4,115,846 3,305,493 114,884 205,291
Cash and cash equivalent 16 5,727,768 11,130,468 3,787,989 9,430,364
------------
Current assets 10,965,526 15,806,836 3,902,873 9,635,655
------------------------------ ----- ------------- -------------- ------------ ------------
Total assets 16,561,063 21,767,702 34,163,209 35,315,991
------------------------------ ----- ------------- -------------- ------------ ------------
Equity
Share capital 17 205,469 205,393 205,469 205,393
Share premium 17 39,181,789 39,159,027 39,181,789 39,159,027
Foreign Currency Translation
Reserve 17 (39,161) (23,109) - -
Retained Earnings 17 (30,069,844) (25,352,139) (5,346,322) (4,220,247)
------------------------------ ----- ------------- -------------- ------------ ------------
Equity attributable
to owners of Group 9,278,253 13,989,172 34,040,936 35,144,173
------------------------------ ----- ------------- -------------- ------------ ------------
Non-controlling interests 17 1,546,887 2,041,938 - -
------------------------------ ----- ------------
Total equity 10,825,140 16,031,110 34,040,936 35,144,173
------------------------------ ----- ------------- -------------- ------------ ------------
Liabilities
Loans and borrowings 18 1,378,141 2,403,881 - -
Lease liabilities 19 395,260 463,047 - -
Employee benefits provision 20 554,444 500,535 - -
Other payables 21 64,366 64,357 - -
Deferred tax liabilities 15 33,095 89,497 - -
------------
Non-current liabilities 2,425,306 3,521,317 - -
------------------------------ ----- ------------- -------------- ------------ ------------
Loans and borrowings 18 767,677 65,840 - -
Lease liabilities 19 239,068 217,537 - -
Trade and other payables 21 2,112,875 1,911,898 122,273 171,818
Provision 22 190,997 20,000 - -
Current liabilities 3,310,617 2,215,275 122,273 171,818
------------------------------ ----- ------------- -------------- ------------ ------------
Total liabilities 5,735,923 5,736,592 122,273 171,818
------------------------------ ----- ------------- -------------- ------------ ------------
Total equity and liabilities 16,561,063 21,767,702 34,163,209 35,315,991
------------------------------ ----- ------------- -------------- ------------ ------------
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 EUR1,200,138 (2021: EUR709,825).
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
================================= =========== ============ ============= ============ ================ ============
In Euro Share Share Foreign Retained Total Non-controlling Total
Capital premium curreny earnings interests equity
translation
reserve
------------------ ------------- ----------- ------------ ------------- ------------ ---------------- ------------
Balance at 31
December 2020 190,996 31,395,612 (7,015) (21,824,229) 9,755,364 906,885 10,662,249
------------------ ------------- ----------- ------------ ------------- ------------ ---------------- ------------
Total
comprehensive
(expense)/income
for the year
Loss of the year - - - (3,652,364) (3,652,364) 222,891 (3,429,473)
Total other
comprehensive
(expense)/income - - - (6,457) (6,457) - (6,457)
Total
comprehensive
(expense)/income
for the period - - - (3,658,821) (3,658,821) 222,891 (3,435,930)
Capital raised 14,397 8,306,293 .- - 8,320,690 - 8,320,690
Expenditure
related to the
issuance of
shares - (542,878) - - (542,878) - (542,878)
Translation
reserve (16,094) - (16,094) - (16,094)
Share-based
payment - - - 130,910 130,910 - 130,910
Increase in share
capital of
Setcar - - - - - 912,162 912,162
------------------ ------------- ----------- ------------ ------------- ------------ ---------------- ------------
Balance at 31
December 2021 205,393 39,159,027 (23,109) (25,352,139) 13,989,172 2,041,938 16,031,110
------------------ ------------- ----------- ------------ ------------- ------------ ---------------- ------------
Total
comprehensive
(expense)/income
for the year
Loss of the year - - - (4,822,044) (4,822,044) (452,957) (5,275,001)
Total other
comprehensive
(expense)/income - - - (6,790) (6,790) - (6,790)
Total
comprehensive
(expense)/income
for the period - - - (4,828,834) (4,828,834) (452,957) (5,281,791)
Capital raised
and exercise of
share option 76 22,762 . 22,838 - 22,838
Expenditure
related to the
issuance of
shares - - - - - - -
Translation
reserve - - (16,052) - (16,052) - (16,052)
Share-based
payment - - - 111,130 111,130 - 111,130
Increase in share
capital of
Setcar - - - - - (42,094) (42,094)
------------------ ------------- ----------- ------------ ------------- ------------ ---------------- ------------
Balance at 31
December 2022 205,469 39,181,789 (39,161) (30,069,844) 9,278,253 1,546,887 10,825,140
------------------ ------------- ----------- ------------ ------------- ------------ ---------------- ------------
COMPANY STATEMENT OF CHANGES IN EQUITY
Share Share Retained Total
In Euro Capital premium Earnings equity
----------------------------- -------- ----------- ------------ ------------
Balance at 31 December 2020 190,996 31,395,612 (3,573,130) 28,013,478
----------------------------- -------- ----------- ------------ ------------
Loss for the year - - (709,825) (709,825)
Capital raised 14,397 8,306,293 - 8,320,690
Expenditure related to the
issuance of shares - (542,878) - (542,878)
Share-based payment - - 62,708 62,708
----------------------------- -------- ----------- ------------ ------------
Balance at 31 December 2021 205,393 39,159,027 (4,220,247) 35,144,173
----------------------------- -------- ----------- ------------ ------------
Loss for the year - - (1,200,138) (1,200,138)
Capital raised and exercise
of share option 76 22,762 - 22,838
Expenditure related to the - - - -
issuance of shares
Share-based payment - - 74,063 74,063
----------------------------- -------- ----------- ------------ ------------
Balance at 31 December 2022 205,469 39,181,789 (5,346,322) 34,040,936
----------------------------- -------- ----------- ------------ ------------
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
Group Company
In Euro Note Note 2022 2021 2022 2021
Cash flows from operating activities
Loss for the year before tax (5,328,198) (3,384,853) (1,200,138) (709,825)
Adjustments for:
Depreciation 12 861,127 994,021 - -
Amortisation of intangible assets 11 542,806 549,547 - -
Disposal loss on tangible assets 20,508
Share-based payment expense 7 111,130 130,910 74,063 62,708
Finance income 9 (5,904) (221,622) 207,776 (211,056)
Finance expense 303,044 56,524 2,042 988
Interest of lease liabilities 9 14,760 18,157 - -
Other provision 21 190,997 - - -
(3,289,730) (1,857,316) (916,257) (857,185)
(Increase)/Decrease in:
- inventories 248,963 5,072 - -
- trade and other receivables 14 (694,450) (493,008) 90,407 (39,029)
- trade and other payables 120,918 (1,207,601) (49,545) 55,073
- provisions and employee benefits 28,819 37,457 - -
Net cash from operating activities (3,585,480) (3,515,396) (875,395) (841,141)
------------------------------------------------- ------ ------------ ------------ ------------ ------------
Cash flows from investing activities
Interest received 9 5,904 1,616 - -
Investment in intangible assets (415,195) (299,056) - -
Investment in subsidiary 13 - - (4,580,000) (2,000,000)
Contingent consideration 21 - (572,268) - -
Acquisition of property, plant and equipment (759,821) (767,719) - -
------------------------------------------------- ------ ------------ ------------ ------------ ------------
Net cash used in investing activities (1,169,112) (1,637,427) (4,580,000) (2,000,000)
Cash flows from financing activities
Proceeds from Capital raise and exercise of
share options 17 22,838 8,320,690 22,838 8,320,690
Expenditure related to the issuance of shares 17 - (542,878) - (542,878)
Interest paid 9 (97,456) (45,426) (2,042) (988)
New borrowings 18 988,938 1,511,719 - -
Repayment of borrowings 18 (1,312,840) (81,666) - -
Repayment of lease liabilities (223,197) (179,646) - -
New lease liabilities 191,700 - - -
Net cash from (used in) financing activities (430,017) 8,982,793 20,796 7,776,824
------------------------------------------------- ------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalent (5,184,609) 3,829,970 (5,434,599) 4,935,683
Cash and cash equivalent at beginning of the
year 11,130,468 7,080,492 9,430,364 4,283,625
------------------------------------------------- ------ ------------ ------------ ------------ ------------
Exchange (losses)/gains on cash and cash
equivalents (218,091) 220,006 (207,776) 211,056
------ ------------ ------------ ------------ ------------
Cash and cash equivalent at end of the year 5,727,768 11,130,468 3,787,989 9,430,364
------------------------------------------------- ------ ------------ ------------ ------------ ------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 31 DECEMBER 2022
1. Basis of preparation a) Statement of compliance
These consolidated and parent Company financial statements have been prepared in accordance with UK-adopted International Accounting Standards (IFRSs). The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the preceding year, unless otherwise stated.
All notes, except as otherwise indicated, are presented in Euros ("EUR").
I. Going Concern
As of 31 December 2022, the Group (including the Company) had net assets of EUR10.83m (2021: EUR16.03m) and cash and cash equivalent of EUR5.73m (2021: EUR11.13m).
The Directors are aware that there is an ongoing need to monitor closely the cash flow requirements of the Company and Group, particularly in light of the recent developments in the markets due to the COVID-19 pandemic, the war in Ukraine and inflation trends, which have had a significant impact on global economies and could affect the business. In this regard, the Group prepares annual budgets and forecasts in order to ensure that there is sufficient liquidity to meet liabilities and commitments as they fall due. The Directors regularly review updates to the scenario planning such that the Board can put in place appropriate mitigating actions that are within their control.
The Directors prepared a cash flow forecast for the period 2023-2024 to ensure that there is sufficient liquidity in place to support the plan and strategy for the future development of the business. This forecast showed that the Group will have sufficient financial headroom for the entire forecast period.
The Directors also modelled reasonably plausible downside scenarios. These include scenarios which reflect the loss of major contracts, reduction in margin and delays contracts being executed. Each of these scenarios could adversely impact the Group. Management also modelled the impact of mitigating factors within their control, including delaying capital expenditure and additional reductions in costs in order to maintain sufficient liquidity. Under these reasonably plausible downsides, the Group would utilise its cash resources before December 2024 and require additional funding. While the Group successfully raised GBP7m in 2021 that was fully subscribed by existing and new investors, there is no certainty that the Group will be able to raise further funds through the issue of equity in the future. As a consequence, this represents a material uncertainty that may cast significant doubt on the Group and Parent Company's ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.
Based on the analysis above, the Directors have a reasonable expectation that the Group has adequate resources to support the Group's activities for the foreseeable future and have concluded it is appropriate to adopt the going concern basis of accounting in the preparation of the financial statements. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.
b) Basis of consolidation I. Business combination
The Group accounts for business combination using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair value of the assets acquired, liabilities incurred or assumed, and equity instruments issued. Costs attributable to the business combination are expensed as incurred.
The acquiree's identifiable assets and liabilities which meet the recognition conditions are recognised at the fair values at the acquisition date.
Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date that arises from past events and its fair value can be measured reliably.
Any difference arising between the fair value and the tax base of the acquiree's assets and liabilities that give rise to a taxable or deductible difference results in the recognition of a deferred tax liability or asset.
Non-controlling interest arising from a business combination is measured at their share of the fair value of the assets and liabilities of the acquiree.
Goodwill is not amortised, but it is tested on an annual basis for impairment.
II. 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.
III. Transactions 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.
IV. 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 of the Italian operating subsidiaries is Euro ("EUR"). The functional currency of the Romanian subsidiary is Romanian Leu.
d) Use of estimates and judgements
The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances and 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 judgements 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.
e) Estimates I. Valuation of share based payments
The estimation related to share-based payment expenses includes the selection of an appropriate valuation option pricing model, consideration as to the inputs necessary for the valuation model chosen, and the estimation of the number of awards that will ultimately vest. Inputs subject to estimation relate to the future volatility of the share price which has been estimated based on the historical observed volatility from trading in the Company's shares, over a historical period of time between the date of the grant and the date of exercise. Management has used a Monte-Carlo model to calculate the fair value of the awards which include market based performance conditions. Further disclosure of inputs relevant to the calculations is set out in note 24 to the financial statements.
II. Carrying value of goodwill
The carrying value of goodwill, and the cash generating units (CGUs) to which it relates, is assessed annually for impairment through comparing the recoverable amount to the CGU's carrying value. The value in use calculations require estimates in relation to uncertain items, including management's expectations of future revenue growth, operating costs, profit margins, operating cashflows and the discount rate applied. Future cash flows used in the value in use calculations are based on our latest two-year financial plans. Expectations about future growth reflect expectations of growth in the markets applicable to the group. The future cashflows are discounted using a pre-tax discount rate that reflects current market assessments of the time value of money. The discount rate used is adjusted for the specific risk to the group, including the countries to which cash flows will be generated. Further disclosure of evaluations is set out in note 11 to the financial statements.
III. Valuation 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.
IV. Investments
Judgement is required over the recoverability of any amounts invested into subsidiary companies, management estimates the expected future cash flows that might be generated by the underlying operations and the potential value of the assets owned and managed by these subsidiaries. As each of the subsidiaries are owned (directly or indirectly) by the Company the creditworthiness of the subsidiary is the same as the creditworthiness of the Company. Further details are set out in note 13.
V. Revenue recognition and long-term contract accrued income
The determination of anticipated costs for completing a contract is based on estimates that can be affected by a variety of factors such as potential variances in scheduling and cost of materials along with the availability and cost of qualified labour and subcontractors, productivity, and possible claims from subcontractors.
The determination of anticipated revenues includes the contractually agreed revenue and may also involve estimates of future revenues from claims and unapproved variations, if such additional revenues can be reliably estimated and it is considered probable that they will be recovered.
A variation results from a change to the scope of the work to be performed compared to the original contract signed. An example of such contract variation could be a change in the project specification, whereby costs related to such variation might be incurred prior to the client's formal contract amendment signature. A claim represents an amount expected to be collected from the client or a third party as reimbursement for costs incurred that are not part of the original contract.
A modification is only then accounted for as a separate contract if the goods and services are distinct in that the customer can benefit from the good or service on its own. In both cases, management's judgments are required in determining the probability that additional revenue will be recovered from these variations and in determining the measurement of the amount to be recovered. As risks and uncertainties are different for each project, the sources of variations between anticipated costs and actual costs incurred will also vary for each project. The long-term nature of certain arrangements usually results in significant estimates related to scheduling and prices. The determination of estimates is based on internal policies as well as historical experience. Furthermore, management regularly reviews underlying estimates of project profitability.
VI. Onerous contract provision
The determination of the minimum unavoidable loss to complete a contract is based on estimates that could be affected by a variety of factors including cost of materials, cost of labour, productivity and variations. Management reviews all contracts on a regular basis to identify indications that a contract may be onerous. Where sufficient evidence exists that a contract will be onerous Management provide for the total anticipated loss on the contract immediately
2. Significant accounting policies a) Functional 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 into 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
There are no other categories of financial assets other than those listed below:
I. Trade and other receivables and amounts due from subsidiaries
Trade and other receivables and amounts due from subsidiaries are recognised and carried at the original invoice amount less any provision for impairment.
The Group recognises a loss allowance for expected credit losses ("ECL") on financial assets that are measured at amortised cost which comprise mainly of trade receivables. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.
The Group always recognises lifetime ECL on trade receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.
II. Cash and cash equivalents
Cash and cash equivalents comprise demand deposits with an original maturity of up to 3 months which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.
There are no other categories of financial liabilities other than those listed below:
III. Trade and other payables
Trade payables are stated at their amortised cost.
IV. Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. At initial recognition, financial liabilities are measured at their fair value, minus transaction costs that are directly attributable, and are subsequently measured at amortised cost.
An equity instrument is any contract that evidences a residual interest in the asset of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.
V. Leases
On commencement of a contract which gives the Group the right to use assets for a period of time in exchange for consideration, the Group recognises a right-of-use asset and a lease liability. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payment made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payment unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group's incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments, variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reducing for payment made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.
c) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are netted off against share premium.
d) 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:
-- IT equipment from 3 to 5 years -- Industrial equipment, office equipment and plant and machinery from 5 to 10 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted where appropriate.
e) Intangible assets
Intangible assets are measured at cost less accumulated amortisation and Government grants received (where applicable). The carrying value of intangible assets is reviewed annually for impairment.
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. The estimated useful lives of significant intangible assets are as follows:
-- Patents concerning G+ (R) technology generate significant value to the Group over a period of 20 years, in line with the legal duration of the patent and their useful lives. However, given the risk of technical obsolescence, such costs are amortised over a period of 10 years.
-- Brand: 5 years -- Development costs concerning personnel capitalized: 5 years -- Others: 5 years f) 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.
g) Goodwill
Goodwill represents the excess of the cost of a business combination over the Group's interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired.
Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, remeasured subsequently through profit or loss.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.
h) Impairment
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (CGUs). The Group's CGUs generally align with each subsidiary. The recoverable amount is then estimated. The recoverable amount of an asset or a CGU is the greater of its net present value and its fair value less costs to sell.
Net present value is generally computed as the present value of the future cash flows, discounted to present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
An impairment loss is recognised if the carrying amount of an asset or a CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to reduce the carrying amounts of the other assets in the unit on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortisation, if no impairment loss had been recognised.
i) 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.
j) Revenues
The Group operates diverse businesses and accordingly applies different methods for revenue recognition, based on the principles set out in IFRS 15.
The revenue and profits recognised in any reporting period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer. In determining the amount of revenue and profits to record, and associated balance sheet items, management is required to review performance obligations within individual contracts. This may involve some judgemental areas.
Revenue is recognised either when the performance obligation in the contract has been performed (so 'point in time' recognition) or 'over time' as control of the performance obligation is transferred to the customer.
For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group's performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer.
-- Revenues from sale of graphene-based products are typically recognised at a point in time when goods are delivered to the customer as with this, the customer gains the right of control over the goods. However, for export sales, control might also be transferred when delivered either to the port of departure or port of arrival, depending on the specific terms of the contract with a customer.
-- Revenues from services relates mainly to environmental services provided by Setcar which are recognised:
o at a point in time basis when contracts include an obligation to process waste once the process occurred according with the contract in place.
o at the point in time when the waste is delivered to our platform with no further performance obligations.
o over time in accordance with agreed project milestones being delivered.
Fixed price long-term service agreements are recognised over time according to the stage of completion reached in the contract by measuring the proportion of costs incurred for work performed relative to the total estimated costs.
The Group excludes the measure of progress of any goods or services for which the entity has not transferred control to a customer, such as costs which are excluded from the progress measurement including those costs related to inefficiencies or unproductive time.
Contract costs are recognised in the income statement when incurred. When it is probable that the total contract costs will exceed total contract revenue, the expected loss is recognised immediately. As per IAS 37 an onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. In line with the principles of IAS 37 the loss will be recognised if there is a present obligation, payment is probable and the amount can be estimated reliably. The amount recognised will be the best estimate of the expenditure required to settle the present obligation at the balance sheet date.
k) 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.
l) 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.
m) Investments in subsidiaries (Company only)
Investments are stated at their cost less any provision for impairment (for details refer to note h).
n) 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.
Adoption of new and revised standards
a) New standards, interpretations and amendments effective from 1 January 2022
The following amendments are effective for the period beginning 1 January 2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37); -- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
These amendments to various IFRS standards are mandatorily effective for reporting periods beginning on or after 1 January 2022. See the applicable notes for further details on how the amendments affected the Group.
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
IAS 37 defines an onerous contract as a contract in which the unavoidable costs (costs that the Group has committed to pursuant to the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it.
The amendments to IAS 37.68A clarify, that the costs relating directly to the contract consist of both:
-- The incremental costs of fulfilling that contract- e.g. direct labour and material; and
-- An allocation of other costs that relate directly to fulfilling contracts: e.g. Allocation of depreciation charge on property, plant and equipment used in fulfilling the contract.
The Group, prior to the application of the amendments, did not have any onerous contracts.
As a result of the amendments, certain other directly related costs have now been included by the Group in determining the costs of fulfilling the contracts. The Group has therefore recognised an additional onerous contract provision as at 1 January 2022.
In accordance with the transitional provisions, the Group applies the amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application) and has not restated its comparative information.
New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning 1 January 2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2); Definition of Accounting Estimates (Amendments to IAS 8); and
-- Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).
The following amendments are effective for the period beginning 1 January 2024:
-- IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback)
-- IAS 1 Presentation of Financial Statements (Amendment - Classification of Liabilities as Current or Non-current)
-- IAS 1 Presentation of Financial Statements (Amendment - Non-current Liabilities with Covenants)
The Group is currently assessing the impact of these new accounting standards and amendments. The Group does not believe that the amendments to IAS 1 will have a significant impact on the classification of its liabilities, as the conversion feature in its convertible debt instruments is classified as an equity instrument and therefore, does not affect the classification of its convertible debt as a non-current liability.
The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the group.
3. Operating segments
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision makers (CEO, CFO, COO and CTO), as defined in IFRS 8, in order to allocate resources to the segments and to assess its performance.
For management purposes, also considering the materiality the Group is organized into the following segments:
- Textile - Environmental - Others
Textile and Environmental were considered by Management the most advanced strategic segments in terms of commercial readiness. Management's strategic needs are constantly monitored and an update of the segments will be provided if required. Any further update of the segment analysis will be reflected in this section.
Segment profit/(loss) represents the profit/(loss) earned by each segment, including all the direct costs that are directly correlated with the segment. Overhead, assets and liabilities not directly attributable to a specific segment have been allocated as Head Office.
As the business evolves this is an area that will be assessed on a regular basis and additional segmental reporting will be provided at the appropriate time.
2022
-In euro Textile Environmental Others Head office Consolidated Revenue 2,460,398 8,136,050 259,696 - 10,856,144 Cost of Sales* (1,677,952) (5,281,884) (157,619) - (7,117,456) ----------------------------- ------------ -------------- ---------- ------------ ------------------------ Gross Profit 782,446 2,854,165 102,077 - 3,738,688 ----------------------------- ------------ -------------- ---------- ------------ ------------------------ Other income 161,271 113,865 23,415 126,375 424,926 Other expenses: ----------------------------- ------------ -------------- ---------- ------------ ------------------------ R&D expense (186,587) (420) (76,988) - (263,995) Advisory (94,784) (421,042) (45,000) (1,055,002) (1,615,828) Operating expenses (411,727) (3,057,472) (90,439) (2,336,519) (5,896,157) Depreciation & amortisation (329,964) (1,038,337) (35,632) - (1,403,933) Operating Loss (79,345) (1,549,240) (122,568) (3,265,145) (5,016,298) ----------------------------- ------------ -------------- ---------- ------------ ------------------------ Net financial costs - - - (311,900) (311,900) Tax - 53,197 - - 53,197 ----------------------------- ------------ -------------- ---------- ------------ ------------------------ Loss of the year (79,345) (1,496,042) (122,568) (3,577,046) (5,275,001) ----------------------------- ------------ -------------- ---------- ------------ ------------------------ Total assets 4,582,368 11,164,786 813,909 - 16,561,063 ------------------- ---------- ----------- -------- ----------- Total liabilities 1,849,107 3,633,655 253,161 - 5,735,923 ------------------- ---------- ----------- -------- -----------
2021
- In euro Textile Environmental Others Head office Consolidated Revenue 1,843,506 6,560,771 210,821 - 8,615,098 Cost of Sales* (1,002,845) (3,030,602) (107,310) - (4,140,757) ----------------------------- ------------ -------------- ---------- ------------ ------------- Gross Profit 840,661 3,530,169 103,511 - 4,474,341 ----------------------------- ------------ -------------- ---------- ------------ ------------- Other income 174,484 607,049 - 49,872 831,405 Other expenses: ----------------------------- ------------ -------------- ---------- ------------ ------------- R&D expense (317,422) (45,450) (25,966) - (388,838) Advisory (50,004) (481,992) - (887,722) (1,419,718) Operating expenses (536,615) (2,519,008) (135,782) (2,294,012) (5,485,417) Depreciation & amortisation (331,492) (1,177,445) (34,630) - (1,543,567) Operating Loss (220,388) (86,677) (92,867) (3,131,862) (3,531,794) ----------------------------- ------------ -------------- ---------- ------------ ------------- Net financial costs - - - 146,941 146,941 Tax - (44,620) - - (44,620) ----------------------------- ------------ -------------- ---------- ------------ ------------- Loss of the year (220,388) (131,297) (92,867) (2,984,921) (3,429,473) ----------------------------- ------------ -------------- ---------- ------------ ------------- Total assets 5,642,443 15,086,933 1,038,326 - 21,767,702
------------------- ---------- ----------- ---------- ----------- Total liabilities 1,746,301 3,739,745 250,546 - 5,736,592 ------------------- ---------- ----------- ---------- -----------
* Includes Changes in inventories of finished goods.
2022 2021
EUR EUR
----------- ----------
Sale of products 3,171,133 2,898,224
Sale of services 7,685,011 5,716,874
Government grants 171,135 166,112
Other 253,791 665,293
----------- ----------
Total income 11,281,070 9,446,503
Geographical breakdown of revenues is:
2022 2021
EUR EUR
----------- ----------
Italy 2,663,918 1,755,329
Romania 8,096,804 6,563,839
Rest of the world 95,422 295,930
----------- ----------
Total 10,856,144 8,615,098
The group has transacted with 3 main customers in 2022, which accounted for more than 10% of Group revenues for sales of products and services. This largest customer accounted for 13% of revenues (EUR1,382,080), the second largest to 11% (EUR1,143,446), whilst the third for 9% (EUR954,663). Other Income of EUR424,926 mainly include Government Grants for EUR171,135 and R&D Expenditure Credit (RDEC) for EUR80,000. The RDEC is an Italian incentive scheme (art.3 DL 145/2013) designed to encourage companies to invest in research and development. 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:
2022 2021
EUR EUR
-------- --------
Innodriver - 25,000
Inno4covid - 99,889
Green.Tex 11,299 30,616
Techfast 136,421 10,607
Filiere 23,415 -
Total 171,135 166,112
In 2022 Directa Plus concluded the activities related to the Green.Tex and Techfast projects.
Moreover, in October 2022 the Company was awarded with the inclusion in the Filiere project, fostered by Regione Lombardia for funding part of Directa Plus's activities in the paints vertical over 12 months. For this project the Company budgeted an overall value of approximately EUR270,000, financed at 50%.
The key terms of government grants are:
Green.Tex Tech fast Filiere
------------------------ ---------- ---------- ---------
Starting date 2020 2021 2022
Ending date 2022 2022 2023
Duration (months) 21 12 12
-------------------------- ---------- ---------- ---------
Total amount 96,192 147,028 135,930
-------------------------- ---------- ---------- ---------
Final report submitted Yes Yes on-going
There are no capital commitments built into the ongoing grants. Government grants have been recognised within other income.
5. Inventory
2022 2021
EUR EUR
---------- ----------
Finished products 917,280 1,141,372
Spare parts 93,292 76,663
Raw material 111,340 93,798
Working in progress - 59,042
Total 1,121,912 1,370,875
As of 31 December 2022, the total inventory value decreased compared to 2021. This effect was partially driven by a c. EUR112,000 write-off of the Co-Masks value still in stock, as the gradual Covid-19 pandemic de-escalation has slowed down the sales of Directa Plus's face masks. However, the Company is exploring any opportunity to exploiting its R&D developments on the Co-Mask project to a number of new applications, such as the air filtering industry.
The finished products mainly referred to Directa Plus SpA. 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.
6. Raw materials and consumables
2022 2021
EUR EUR
---------- ----------
Raw material & consumables 4,796,333 2,711,528
Textile products 1,060,328 922,783
---------- ----------
Total 5,856,661 3,634,311
The increase in raw material & consumable costs was mainly driven by the business growth and the cost increases experienced over the year due to inflation on the markets.
7. Employee benefits expenses
2022 2021
EUR EUR
---------- ----------
Wages and salaries 3,578,948 3,525,876
Social security costs 573,778 559,856
Employee benefits 144,277 111,964
Share option expense 111,130 130,910
Other costs 146,116 103,877
---------- ----------
Total 4,554,249 4,432,483
Capitalised cost in "Intangible assets" (130,162) (135,528)
---------- ----------
Total charged to the Income Statement 4,424,087 4,296,955
The average number of employees (excluding non-executive directors) during the period was as follows:
2022 2021
----- -----
Sales and Administration 32 30
Engineering, R&D and production 159 165
----- -----
Total 191 195
The total average number of employees of the Group as at 31 December 2022 was 191 (2021: 195), of which 162 were employed by Setcar.
The Directors' emoluments (including non-executive directors) are as follows:
2022 2021
EUR EUR
-------- --------
Wages and salaries 768,055 773,683
Total 768,055 773,683
The aggregate emoluments (wages, salaries and social contributions) of the highest paid Director totalled EUR406k (2021: EUR527k).
Share-base payment expenses were EUR111,130, of which EUR74,063 accounted for in the Parent Company accounts as directly attributable to the Executive Directors.
8. Other expenses:
Other expenses include:
2022 2021
EUR EUR
---------- ----------
Audit of the Group and Company financial statements 108,525 81,991
Audit of the subsidiaries' financial statements 37,735 36,230
Other non-audit services provided by Group's auditor 7,780 5,978
Tool manufacturing 504,411 296,965
Analyses & tests 224,451 377,028
Travel 145,045 69,659
Technical consultancies 316,966 277,117
Shipping and logistic expenses 446,894 260,014
Insurance 186,145 165,347
Marketing 15,718 32,989
Legal, tax and administrative consultancies 1,286,662 1,252,410
------------------------------------------------------ ---------- ----------
The inflation trends on the global markets in the year in some cases materially affected the Group's cost base. Major effects were experienced in transportation costs (Travel, Shipping and Logistic expenses) and outsourced and professional services (Audit, Legal, tax and administrative consultancies).
Other costs, such as the Tool Manufacturing expenses (EUR504,411), increased in line with the Group business growth.
Analyses & tests expenses (EUR224,451) and technical consultancies (EUR316,966) refer to R&D activities outsourced to external labs and universities.
9. Net Finance expenses
Finance expenses include:
2022 2021
EUR EUR
--------- ----------
Interest Income (5,904) (1,616)
Interest on loans and other financial costs 82,696 45,426
Interest on lease liabilities 14,760 18,157
Interest cost for benefit plan 18,309 11,098
Foreign exchanges losses/(gains) 202,039 (220,006)
--------- ----------
Total 311,900 (146,941)
Foreign exchange losses of EUR202,039 (2021: EUR220,006 gains) includes EUR207,776 of Sterling to Euro movement in the Group's Sterling bank accounts.
10. Taxation
2022 2021
EUR EUR
-------- ---------
Current tax expense (1,581) (1,727)
Deferred tax expense/ (recovery) 54,778 (42,893)
Total Tax income/(expenses) 53,197 (44,620)
Reconciliation of tax rate
2022 2021
EUR EUR
------------ ------------
Loss before tax (5,328,198) (3,384,853)
Italian statutory tax rate 24% 24%
(1,278,768) (812,365)
Impact of temporary differences 93,175 4,431
Losses recognised (39,978) (49,052)
Impact of tax rate in foreign jurisdiction (60,007) (35,491)
Losses not utilised 1,338,775 847,857
------------ ------------
Total Tax (expenses)/income 53,197 (44,620)
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 EUR35,720,602 (EUR31,494,057 in 2021).
11. Intangible assets
Cost Development Patents Goodwill Other Brands Total
cost
EUR EUR EUR EUR EUR EUR
----------------------- ------------ -------- --------- -------- -------- ----------
Balance at 31/12/2020 3,144,804 545,740 298,348 285,105 377,017 4,651,014
----------------------- ------------ -------- --------- -------- -------- ----------
Additions 135,527 172,307 - (1,063) - 306,771
Currency translation
diff. (184) - (4,391) (3,059) (5,996) (13,630)
----------------------- ------------ -------- --------- -------- -------- ----------
Balance at 31/12/2021 3,280,147 718,047 293,957 280,983 371,021 4,944,154
----------------------- ------------ -------- --------- -------- -------- ----------
Additions 130,162 274,740 - 9,974 - 414,876
Currency translation
diff. 2 - 38 25 52 117
----------------------- ------------ -------- --------- -------- -------- ----------
Balance at 31/12/2022 3,410,311 992,787 293,995 290,982 371,073 5,359,146
----------------------- ------------ -------- --------- -------- -------- ----------
Amortisation
----------------------- ---------- -------- -------- -------- ----------
Balance at 31/12/2020 2,089,541 363,596 - 72,807 82,301 2,608,245
----------------------- ---------- -------- -------- -------- ----------
Amortisation
2021 389,299 71,829 - 13,797 74,621 549,547
Currency translation
diff. (271) - - (3,313) (2,330) (5,914)
----------------------- ---------- -------- -------- -------- ----------
Balance at 31/12/2021 2,478,569 435,425 - 83,291 154,592 3,151,877
----------------------- ---------- -------- -------- -------- ----------
Amortisation
2022 371,719 81,670 - 14,964 74,454 542,806
Currency translation
diff. 2 - - 25 (230) (203)
----------------------- ---------- -------- -------- -------- ----------
Balance at 31/12/2022 2,850,290 517,094 - 98,280 228,816 3,694,480
----------------------- ---------- -------- -------- -------- ----------
Carrying
amounts
---------------- ------- ---------------- ------ -------- --------- -------------------
Balance
at 31/12/2020 1,055,262 182,145 298,348 212,297 294,715 2,042,767
---------------- --------------- -------- ----------- ---------- ----------- ----------
Balance
at 31/12/2021 801,578 282,623 293,957 197,692 216,428 1,792,277
---------------- --------------- -------- ----------- ---------- ----------- ----------
Balance
at 31/12/2022 560,021 475,693 293,995 192,702 142,256 1,664,666
---------------- --------------- -------- ----------- ---------- ----------- ----------
As disclosed in note 1(d) development costs capitalised in the year are mainly based on time spent by employees who are directly engaged in the development of the G+ (R) technology.
Management carried out an impairment test on goodwill accounted following the acquisition of Setcar S.A. in 2019.
The CGU is represented by Setcar itself, whose carrying amount as of 31 December 2022 was estimated equal to EUR5.4m.
The impairment review of the CGU is based on an assessment of the CGU's value in use ("VIU"). In calculating VIU, the estimated future cash flows are discounted to their present value using a pre-tax discount rate of 11.9% that reflects current market assessments of the time value of money and the risks specific to the asset/CGU and a perpetual annual growth rate of 2.3% on a terminal EBIT of EUR5.4 million.
Based on such assumptions, the recoverable amount was estimated equal to EUR33.7m. In addition, a sensitivity analysis was performed, assuming a +/- 0.5% variation in the discount rate and a +/- 0.5% variation in the perpetuity growth rate. This led to a recoverable amount estimated in the range of EUR31m and EUR36m.
As a conclusion, the verifications have shown that the book values can be fully recovered and no goodwill impairment is required as of 31 December 2022.
12. Property, plant and equipment
Industrial Computer Office Plant Land ROU Under Total
Equipment Equipment Equipment & Assets Const.
Machinery
Cost EUR EUR EUR EUR EUR EUR EUR EUR
------------- ------------ ------------ ------------ ------------ ---------- ---------- --------- ------------
Balance
31/12/2020 1,267,415 74,521 172,627 4,297,207 597,138 779,128 2,445 7,190,481
------------- ------------ ------------ ------------ ------------ ---------- ---------- --------- ------------
Additions 392,141 10,095 13,934 416,922 - - - 833,092
Disposals (6,435) - (3,143) (31,124) - - - (40,703)
Currency
trans.
diff. (32,070) - (2,228) (50,895) (9,498) - (38) (94,728)
------------- ------------ ------------ ------------ ------------ ---------- ---------- --------- ------------
Balance
at
31/12/2021 1,621,051 84,616 181,189 4,632,110 587,640 779,128 2,407 7,888,141
------------- ------------ ------------ ------------ ------------ ---------- ---------- --------- ------------
Additions 430,272 2,477 8,737 317,042 - - - 758,528
Disposals (39,333) - (48,935) (206,642) - - - (294,910)
Currency
trans.
diff. (261) - 160 786 83 - (45) 723
------------- ------------ ------------ ------------ ------------ ---------- ---------- --------- ------------
Balance
at
31/12/2022 2,011,729 87,093 141,151 4,743,296 587,723 779,128 2,362 8,352,481
------------- ------------ ------------ ------------ ------------ ---------- ---------- --------- ------------
Depreciation EUR EUR EUR EUR EUR EUR EUR EUR
---------------- ------------ --------- ---------- ------------ ------ ---------- ------ ------------
Balance
31/12/2020 556,309 43,807 100,663 2,123,314 - 157,120 - 2,981,213
---------------- ------------ --------- ---------- ------------ ------ ---------- ------ ------------
Depreciation
2021 287,741 9,312 49,791 544,774 - 102,402 - 994,021
Currency
trans. diff. (21,983) - (4,986) (43,089) - - - (70,059)
---------------- ------------ --------- ---------- ------------ ------ ---------- ------ ------------
Balance
at 31/12/2021 822,067 53,119 145,468 2,624,999 - 259,522 - 3,905,175
---------------- ------------ --------- ---------- ------------ ------ ---------- ------ ------------
Depreciation
2022 267,411 10,211 38,873 442,228 - 102,402 - 861,127
Disposal
2022 (23,926) (1,591) (47,378) (201,507) - - - (274,402)
Currency
trans. diff. (637) - 120 (52) - - - (569)
---------------- ------------ --------- ---------- ------------ ------ ---------- ------ ------------
Balance
at 31/12/2022 1,064,915 61,740 137,082 2,865,669 - 361,924 - 4,491,330
---------------- ------------ --------- ---------- ------------ ------ ---------- ------ ------------
Carrying amounts
------------------------------------------------------------------------------------------------------------- Balance 31/12/2020 711,106 30,714 71,965 2,173,892 597,138 622,008 2,445 4,209.268 ------------- ---------- --------- --------- ------------ ---------- ---------- -------- ------------ Balance 31/12/2021 798,985 31,496 35,722 2,007,110 587,640 519,606 2,407 3,982,966 ------------- ---------- --------- --------- ------------ ---------- ---------- -------- ------------ Balance 31/12/2022 946,814 25,353 4,068 1,877,628 587,723 417,204 2,362 3,861,151 ------------- ---------- --------- --------- ------------ ---------- ---------- -------- ------------
Asset held under financial leases with a net book value of EUR400,634 are included in the above table within Plant & Machinery.
13. Investments in subsidiaries
Details of the Company's subsidiaries as at 31 December 2022 are as follows:
Shareholding
Subsidiaries Country Principal activity 2022 2021
---------------------------------- --------- ------------------------------------------------------ ------- ------
Producer and supplier of graphene-based materials and
Directa Plus S.p.a. Italy related products 100% 100%
---------------------------------- --------- ------------------------------------------------------ ------- ------
Commercialise textile membranes, including
graphene-based technical and high-performance
Directa Textile Solutions S.r.l. Italy membranes 73.5% 73.5%
---------------------------------- --------- ------------------------------------------------------ ------- ------
Waste management and decontamination services
Setcar S.A. Romania business 51 % 52%
---------------------------------- --------- ------------------------------------------------------ ------- ------
Subsidiaries Place of Business Registered Office and place
of business
-------------------------- ------------------ ----------------------------
Directa Plus S.p.a. Italy Via Cavour 2, Lomazzo (CO)
Italy
-------------------------- ------------------ ----------------------------
Directa Textile Solutions Italy Via Cavour 2, Lomazzo (CO)
S.r.l. Italy
-------------------------- ------------------ ----------------------------
Setcar S.A. Romania Str. Gradinii Publice 6,
Braila Romania
-------------------------- ------------------ ----------------------------
The Company's investment as capital contributions in Directa Plus Spa are as follows:
Directa Spa
At 31 December 2020 23,680,336
------------
Additions 2,000,000
At 31 December 2021 25,680,336
------------
Additions 4,580,000
------------
At 31 December 2022 30,260,336
------------
14. Trade and other receivables
Current Group Company
2022 2021 2022 2021
EUR EUR EUR EUR
---------- ---------- -------- --------
Account receivables 2,964,480 2,339,369 - -
Tax receivables 687,670 465,953 24,230 49,539
Other receivables 463,696 500,171 90,654 155,752
---------- ---------- -------- --------
Total 4,115,846 3,305,493 114,884 205,291
Non-current Group Company
2022 2021 2022 2021
EUR EUR EUR EUR
------- -------- ----- -----
Other receivables 69,720 185,623 - -
------- -------- ----- -----
Total 69,720 185,623 - -
Group account receivables of EUR2,964,480 are mainly composed by six major clients, covering 60% of the total amount.
Group Tax Receivables are composed of Italian VAT receivables of EUR348,109, UK VAT receivables of EUR24,230, Romanian VAT receivables of EUR89,898, RDEC Tax Credit receivables of EUR124,562 and other Italian Tax receivables of EUR100,872.
Other receivables are mainly composed of governments grants for EUR266,630 and prepayments for EUR185,551.
Non-current other receivables of EUR69,720 refer to specific projects where the collection of a certain amount, although due, is postponed to the end of the project itself.
As at 31 December 2022 the ageing of account receivables was:
Days overdue 2022 2021
EUR EUR
------------------------- ------------
0-60 2,841,939 1,771,113
61-180 69,607 251,458
181-365 13,465 101,450
365 + 39,469 215,348
------------------------- ------------
Total 2,964,480 2,339,369
The Group recognises a loss allowance for expected credit losses on trade receivables. As at 31 December 2022 the Group recognised provision for EUR15,181 mainly referred to Setcar's overdue debts.
15. Deferred tax liabilities
2022 2021
EUR EUR
--------- ---------
Deferred tax liabilities 98,694 174,158
Deferred tax (assets) (65,599) (84,661)
--------- ---------
Total 33,095 89,497
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 from the capitalisation of development costs and defined benefit scheme are detailed below:
2022 2021
EUR EUR
---------- --------------
Deferred tax liabilities Cost Capitalized 48,269 86,313
Deferred tax liabilities Other (9,788) (1,652)
Deferred tax liabilities arising from acquisition 33,095 89,497
Deferred tax assets - losses exc. Setcar (38,481) (84,661)
---------- --------------
Total 33,095 89,497
16. Cash and cash equivalents
Group Company
2022 2021 2022 2021
EUR EUR EUR EUR
---------- ----------- ------------- ----------
Cash at bank 5,721,538 11,126,683 3,787,989 9,430,364
of which restricted - 40,000 - -
cash
Cash in hand 6,230 3,785 - -
---------- ----------- ------------- ----------
Total 5,727,768 11,130,468 3,787,989 9,430,364
In 2021 the Company holds EUR40,000 of restricted cash as a guarantee for a performance bond provided by a bank for a major contract in the Environmental vertical.
17. Equity
2022 2021
EUR EUR
------------- -------------
Share Capital 205,469 205,393
Share Premium 39,181,789 39,159,027
Foreign currency translation reserve (39,161) (23,109)
Retained earnings (30,069,844) (25,352,139)
Non-controlling interests 1,546,887 2,041,938
------------- -------------
Balance at 31 December 10,825,140 16,031,110
Share Capital
Number Share capital
of ordinary shares (EUR)
At 31 December 2020 61,174,587 190,996
-------------------------------------- -------------------- --------------
Share issue on 14 January * 190,872 535
Share issue on 29 December - capital
raise ** 1,670,518 4,962
Share issue on 30 December - capital
raise ** 2,996,149 8,900
At 31 December 2021 66,032,126 205,393
-------------------------------------- -------------------- --------------
Share issue on 28 February *** 25,523 76
-------------------------------------- -------------------- --------------
At 31 December 2022 66,057,649 205,469
* On 14 January 2021, 190,872 ordinary shares with a nominal value of GBP0.0025 each were issued as effect of the exercise of options of ordinary shares for Directors and Senior Managers.
** On 29 and 30 December 2021, 4,666,667 ordinary shares with a nominal value of GBP0.0025 each were issued as effect of the Company's capital raise.
*** On 28 February 2022, 25,523 ordinary shares with a nominal value of GBP0.0025 each were issued as effect of the exercise of option of ordinary shares for a Directa Plus SpA employee.
Share Premium
Share
In euro premium
At 31 December 2020 31,395,612
------------------------------------------------ ------------------
Shares issued 8,306,293
Expenditure relating to the raising of shares (542,878)
------------------------------------------------ --------------------
At 31 December 2021 39,159,027
------------------------------------------------ ------------------
Shares issued 22,762
------------------------------------------------ ------------------
Expenditure relating to the raising of shares -
----------------------------------------------- ------------------
At 31 December 2022 39,181,789
------------------------------------------------ ------------------
On 28 February 2022, 25,523 ordinary shares were issued as effect of the exercise of option of ordinary shares for a Directa Plus SpA employee, at a price of GBP0.75 each. The Company accounted for EUR22,762 of gross share premium reserve.
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.
Foreign currency translation reserve
Exchange differences resulting from the consolidation process of Setcar are recognised in the translation reserve for an amount of EUR 39,161.
Non- controlling interest
Non-controlling interest refers to the minority shareholders of the company who own less than 50% of the overall share capital.
As of 31 December 2022, non-controlling interest is composed by 49% of Setcar S.A. and 26.46% of Directa Textile Solutions Srl.
18. Loans and borrowings
Group Company
2022 2021 2022 2021
EUR EUR EUR EUR
---------- ---------- ----- -----
Non-current loans and
borrowings 1,378,141 2,403,881 - -
Current loans and borrowings 767,677 65,840 - -
---------- ---------- ----- -----
Total 2,145,818 2,469,721 - -
In euro 2022 Current Non-current Repayment Interest rate
-------- -------- ------------ ----------- -------------------------
Variable 4.7% ROBOR
Bank of Transilvania 407,908 407,908 - 36-monthts 3M + 2,5%/year
-------- -------- ------------ ----------- -------------------------
Bank of Transilvania Variable 4.11%
IMM INV 436,817 113,933 322,884 60-monthts ROBOR 3M +2.11%/year+2%
-------- -------- ------------ ----------- -------------------------
1.5%/year + EURIBOR
Intesa San Paolo 281,607 74,043 207,564 72-monthts 3M
-------- -------- ------------ ----------- -------------------------
1.5%/year + EURIBOR
Intesa San Paolo 21,924 6,194 15,730 72-monthts 3M
-------- -------- ------------ ----------- -------------------------
1.5%/year + EURIBOR
Intesa San Paolo 500,000 61,248 438,752 72-monthts 3M
-------- -------- ------------ ----------- -------------------------
1.5%/year + EURIBOR
Banca Popolare di Sondrio 491,970 98,759 393,211 72-monthts 3M
-------- -------- ------------ ----------- -------------------------
Reconciliation of liabilities arising from financing activities
Cash flows Non-cash flows
-------------------------------------- -------------------------------------------
1 January Capital Liabilities Accrued Loan conversion 31 December
22 repayments acquired interests into equity 22
EUR EUR EUR EUR EUR EUR
---------- ------------ ------------ ----------- ---------------- ------------
Borrowings 2,469,721 (1,296,210) 988,938 - (16,630) 2,145,818
---------- ------------ ------------ ----------- ---------------- ------------
Total 2,469,721 (1,296,210) 988,938 - (16,630) 2,145,818
Net debt reconciliation
2022 2021
EUR EUR
------------ -------------
Loans and borrowings 2,145,818 2,469,721
Lease liabilities 634,328 680,584
Less: cash and cash equivalent (5,727,768) (11,130,468)
------------ -------------
Net Debt (2,947,622) (7,980,163)
Total equity 10,825,140 16,031,110
------------ -------------
Debt to capital ratio (%) (27,23%) (49,78%)
19. Leases liabilities
The following table details the movement in the Group's lease obligations for the period ended 31 December 2022:
2022 2021
EUR EUR
-------- --------
Non-current lease liabilities 395,260 463,047
Current lease liabilities 239,068 217,537
-------- --------
Total 634,328 680,584
20. Employee benefits provision
2022 2021
EUR EUR
-------- -------------
Employee benefits 554,444 500,535
-------- -------------
Total 554,444 500,535
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 2021 and 2022 is as follows:
EUR
Amount at 31 December 2020 444,483 ----------------------- --------- Service cost 47,536 Interest cost 11,098 Actuarial gain/losses 6,457 Benefit paid (9,039) ----------------------- --------- Amount at 31 December 2021 500,535 ----------------------- --------- Service cost 76,108 Interest cost 18,309 Actuarial gain/losses 6,790 Benefit paid (47,298) ----------------------- --------- Amount at 31 December 2022 554,444 ----------------------- ---------
Variables analysis
Detailed below are the key variables applied in the valuation of the defined benefit plan liabilities.
2022 2021
------------------------- ------- ------
Annual rate interest 3.3% 2.30%
------------------------- ------- ------
Annual rate inflation 2.10% 1.10%
------------------------- ------- ------
Annual increase TFR 7.41% 7.41%
------------------------- ------- ------
Tax on revaluation 17.00% 17.00%
------------------------- ------- ------
Social contribution 0.5% 0.50%
------------------------- ------- ------
Increase salary male 2.2% 1.20%
------------------------- ------- ------
Increase salary female 2.10% 1.15%
------------------------- ------- ------
Rate of turnover male 2.00% 1.70%
------------------------- ------- ------
Rate of turnover female 1.80% 1.50%
------------------------- ------- ------
Sensitivity analysis
Detailed below are tables showing the impact of movements on key variables:
Actuarial hypothesis - 2022 Decrease 10% Increase 10%
Variation Variation
Rate DBO EUR Rate DBO EUR
------------------------ -------- -------- ---------- ------ ----------------
Increase salary Male 1.98% (5,302) 2.42% 5,844
------------------------ ---------- ----------------
Female 1.89% 2.31%
--------------------------------- -------- ---------- ------ ----------------
Turnover Male 1.80% (4,968) 2.20% 5,153
Female 1.62% 1.98%
Interest rate 2.97% 18,239 3.36% (16,643)
---------------------------------- -------- ---------- ------ ----------------
Inflation rate 1.89% (7,979) 2.31% 8,555
21 . Trade and Other payables
Non-current Group Company
2022 2021 2022 2021
EUR EUR EUR EUR
------- ------- ----- -----
Other payables 64,366 64,357 - -
------- ------- ----- -----
Total 64,366 64,357 - -
Current Group Company
2022 2021 2022 2021
EUR EUR EUR EUR
---------- ---------- -------- --------
Trade payables 1,088,849 946,694 28,915 93,332
Employment costs 264,627 520,380 - -
Other payables 759,399 444,824 93,358 78,486
Total 2,112,875 1,911,898 122,273 171,818
22 . Provision
Current Group Company
2022 2021 2022 2021
EUR EUR EUR EUR
-------- ------- ----- -----
Provision 190,997 20,000 - -
-------- ------- ----- -----
Total 190,997 20,000 - -
In compliance with IAS 37, the Group accounted for a provision relating to the expected loss on an onerous contract in Guatemala, where the recovery of excess costs is deemed uncertain under IFRS15. The Group is currently in discussion with the customer to seek an acceptable resolution.
23. Financial instruments
Financial risk management
The Group's business activities expose the Group to the following 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 2022 the Group is exposed to variable interest rate risk for a short term revolving loan and for the loans issued by Directa Plus SpA under the Italian Government Covid-19 Recovery Plan. Those loans, being 90% guaranteed by the Italian Government, bear a low interest rate (1.5% + EURIBOR) and, if the interest rate had increased or decreased by 200 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's credit risk is primarily attributable to its trade receivables that the Company consider defaulted if any instalment is unpaid more than sixty (60) days past its original due date or where there is evidence that identifies the debtor's state of insolvency.
The Group's cash and cash equivalents and restricted cash are held with major financial institutions. The Group monitors credit risk by reviewing the credit quality of the financial institutions that hold the cash and cash equivalents and restricted cash.
The Group's trade receivables consist of receivables for revenue mainly in Italy and Romania. Management believes that the Group's exposure to credit risk is manageable and currently the Group's standard payment terms are 30 to 60 days from date of invoice are largely met from the clients. At the end of the period, 95% of account receivables have an ageing less of 60 days and refers to orders delivered close to the year end. As at 31 December 2022 the Group recognised a cumulated bad debt provision for EUR15,181.
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 the exposure to credit risk is approved and monitored on an ongoing basis individually for all significant customers. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position. The Group does not require collateral in respect of financial assets.
d) Exposure to credit risk
Group Note 2022 2021
EUR EUR
---------- -----------
Trade receivables 14 2,964,480 2,339,369
Cash and cash equivalent 16 5,727,768 11,130,468
---------- -----------
Total 8,692,248 13,469,837
The largest customer within trade receivables accounts for 23% of debtors. Management continually monitors this dependence on the largest customers and are continuing to develop the commercial pipeline to reduce this dependence, spreading revenues across a variety of customers.
e) Liquidity risk
It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. The Group manages liquidity risk by maintaining adequate reserves and banking facilities and by continuously monitoring forecast and actual cash flows. 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.
2022 Carrying amount Up to 1 year 1 -5 years
Financial liabilities EUR EUR EUR
---------------- ------------- -----------
Trade payables 1,088,849 1,088,849 -
Lease liabilities 634,328 239,068 395,260
Loans 2,145,818 2,469,721 760,206
---------------- ------------- -----------
Total 3,868,995 3,797,638 1,155,466
2021 Carrying amount Up to 1 year 1 -5 years
Financial liabilities EUR EUR EUR
---------------- ------------- -----------
Trade payables 946,694 946,694 -
Lease liabilities 680,584 217,537 463,047
Loans 2,469,721 65,840 2,403,881
---------------- ------------- -----------
Total 4,096,999 1,230,071 2,866,928
f) Currency risk
The Group usually raises money issuing shares in pounds, it follows that the Group usually holds sterling bank accounts as result of capital raise. Sterling bank accounts are mainly 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 GBP 3,225,304
As of January 2022, in light of the favourable exchange rates and to reduce the exposure to liquidity risk, Directors decided to translate GBP 4.5 million into EUR, which supported the operating activities of Directa Plus over the year. As at 1(st) March 2023 the total cash held in GBP is equal to GBP2.8 million. If the exchange rate EUR/GBP increase by 10% the impact on P&L would be a loss equal to EUR0.3 million (if decrease by 10% would be a profit equal to EUR0.3 million).
The Group holds accounts also in other currency (such as USD and RON) but just for business purposes and for not material amount.
24. Earnings per share
Total number Days Weighted number
Change in number of ordinary of ordinary
of ordinary shares shares shares
----------------------- -------------------- ------------- ----- ----------------
At 31 December 2021 4,857,539 66,032,126 365 61,380,599
----------------------- -------------------- ------------- ----- ----------------
Existing shares - 66,032,126 58 10,492,776
Issued on 28 February
2022 25,523 66,057,649 307 55,560,817
At 31 December 2022 25,523 66,057,649 365 66,053,593
----------------------- -------------------- ------------- ----- ----------------
Basic Diluted
2022 2021 2022 2021
EUR EUR EUR EUR
Loss attributable to the owners of the Parent (4,822,044) (3,652,364) (4,822,044) (3,652,364)
Weighted average number of ordinary shares in issue
during the year 66,053,593 61,380,599 - -
Fully diluted average number of ordinary shares
during the year - - 67,189,085 61,649,085
Loss per share (0.07) (0.06) (0.07) (0.06)
------------ ------------ ------------ ------------
The effect of anti-dilutive potential ordinary shares is ignored in calculating the diluted loss per share.
25. Share Schemes
The 2020 Employees' Share Scheme is administered by the Remuneration Committee.
The Directors are entitled to grant awards over up to 10 per cent of the Company's issued share capital from time to time.
Under the 2020 Employees' Share Scheme, in November 2020 1,801,000 options over Ordinary Shares were granted to key employees and additional 150,000 options were granted to an Executive Director in June 2021 under the same Scheme. As of 31 December 2022, the total number of outstanding Ordinary Shares awards is 567,000.
At the date of this report, an additional 539,080 share options had vested in 2020 under the 2016 Employees' and NED Share Schemes that have not yet been exercised.
The main terms of the 2020 Employee's 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 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 conditions which must be achieved in order for the award to be exercisable.
Types of Award
Awards granted under the Employees' Share Scheme have the form of market value share options. "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. This is subject to the good leaver provisions. 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.
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
Outstanding awards will vest over three years in equal one third tranches on each anniversary of the grant date to the extent that the market-based performance targets have been met. Vested awards may generally be exercised between the third and tenth anniversaries from the date of grant. 75% of vested shares can be exercised after the third anniversary, while the remaining 25% from the fourth.
The inputs to the Monte-Carlo simulation were as follows:
Monte-Carlo simulation
------------------------- ------------------------------------ ---------------------- ----------
Market value Market value
shares (1st granting shares (2nd granting
Nov20) Jun21)
------------------------------- -------------- ------------------------ ------------------------
Share price 60p 127p
Exercise price 66p 118.20p
Expected volatility 54% 61%
Compounded Risk-Free Interest
Rate 0.10% 0.16%
Expected life 6 years 6 years
Number of options issued* 1,801,000 150,000
---------------------------------------- ----- ------------------------ ------------------------
*Number of options issued is an input of the Monte-Carlo simulation and refers to the total options granted by the Company in November 2020 and June 2021. This is not representing any option issued in the period.
Details of the number of share options outstanding are as follows:
2020 2021 2022
---------------------- ---------- --------------- ------------
Outstanding at start
of period 60,000 1,801,000 1,175,333
Granted during the
period 1,801,000 150,000 -
Cancelled during the
period - (263,000) (123,333)
Expired during the - - -
period
Vested during the
period (60,000) (512,667) (485,000)
Outstanding at end
of period 1,801,000 1,175,333 567,000
Exercisable period
option price 66p 66p-118p 66p-118p
Grant date 12 Nov 20 12 Nov 20 - 15 12 Nov 20 -
Jun 21 15 Jun 21
Exercisable date 12 Nov 23 12 Nov 23 - 15 12 Nov 23 -
Jun 23 15 Jun 23
---------------------- ---------- --------------- ------------
Cancelation of share options during the period relates to the resignation of employees. Share options expired over the period refer to those performance share options that did not meet the performance criteria on the third anniversary of their granting. Vested share options are Market share options that met the criteria on each anniversary.
26. Related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Remuneration of key management personnel
The below figures represent remuneration of key management personnel for the Group, 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'.
2022 2021
EUR EUR
-------- --------
Short-term employee benefits and fees 227,159 407,451
Social security costs 74,423 102,469
-------- --------
301,582 509,920
The decrease in the 2022 remuneration is mainly explained by the variable remuneration and the layoff of an executive manager.
Other transaction Group
Other related party transactions during the year under review are shown in the table below:
2022 2021
EUR EUR
------ -------
Sale of products 6,625 19,395
------ -------
Products are sold on normal commercial terms and conditions.
27. Contingent Liabilities and Commitments
The group has the following contingent liabilities relating to bank guarantees on operating lease arrangements and government grants.
2022 2021
EUR EUR
------- --------
Bank guarantees 38,435 163,340
------- --------
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END
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