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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Pv Crystalox Solar Plc | LSE:PVCS | London | Ordinary Share | GB00BJ0CHQ31 | ORD 3.0206P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 33.10 | 30.20 | 36.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMPVCS
RNS Number : 5145T
PV Crystalox Solar PLC
21 March 2019
PV Crystalox Solar PLC
("PV Crystalox", the "Company" or the "Group")
Preliminary Results for the year ended 31 December 2018
PV Crystalox Solar a long established supplier to the global PV industry now also providing slicing services for high technology ceramics and optics industries in Germany is pleased to announce its preliminary results for the year to 31 December 2018.
Highlights
-- EUR28.8m received from customer in settlement of ICC arbitration award -- Closure of UK operations completed following production shutdown in 2017 -- Multicrystalline wafer production operations terminated in Germany
-- Focusing on transformation of business by applying our wire sawing expertise to cutting of non-silicon materials
-- GBP38.5m capital return proposed (equivalent to 24 pence per share) for shareholders
Overview of results
l Revenues EUR6.3m (2017: EUR26.4m)
l EBT of EUR1.6m (2017: EUR12.0m)
l Net cash generated from/(used in) operating activities EUR27.7m (2017: EUR(1.2)m)
l Net cash EUR54.0m (2017: EUR26.9m)
l Inventories EUR0.1m (2017: EUR3.9m)
Iain Dorrity, Chief Executive Officer commented
"Following the capital return the Board will consider the options available to maximise any value from the listing of Group's shares on the Official List. Consideration will also be given to the possible cancellation of the listing. It should be noted that whilst the majority of the cash resources are available for immediate return to shareholders, any further possible cash return will be strongly dependent on developments in the German business and the decisions taken on the Group's listing."
John Sleeman, Chairman, commented
"After an extensive review of the strategic options for the future of the Group, the Board has concluded that returning a large proportion of available cash, as part of an orderly resolution of the Group's affairs, would be in the best interest of shareholders rather than the pursuit of acquisitions. The Board intends to return GBP38.5 million (EUR42.8 million at year end exchange rate) equivalent to 24 pence per ordinary share to shareholders."
Enquiries:
PV Crystalox Solar PLC Iain Dorrity, Chief Executive Officer +44 (0) 1235 437160 Matthew Wethey, Chief Financial Officer and Group Secretary
About PV Crystalox
PV Crystalox Solar a long established supplier to the global PV industry now also providing slicing services for the high technology ceramics and optics industries in Germany.
Chairman's introduction
Dear Shareholder
As a result of the dire PV industry environment which has persisted since 2011, the Group had been operating in cash conservation mode to protect shareholder value whilst preserving the Group's core production capabilities. The Board subsequently made the decision to significantly reduce those capabilities: initially in July 2017 when the decision was made to close the Group's production facilities in the United Kingdom; then in H1 2018 the Group terminated multicrystalline silicon wafer production in Germany and restructured that operation. On 30 November the Group received the final payment of EUR14.3m due under the agreement with its customer in settlement of all claims and obligations relating to the wafer supply contract and arbitration award (the "Agreement"). Under the Agreement the customer has now made total payments of EUR28.8m, including the initial payment of EUR14.5m received in May 2018, and waived its right to demand delivery of the outstanding wafers. The Group recognised EUR20.5 million in relation to the arbitration award as other income in the 2017 results and has recognised the remaining EUR8.2m in the results for the year ended 31 December 2018.
Total revenues of EUR6.3 million were 76% lower than in the prior year and after recognizing EUR8.2 million of other income in relation to the Agreement we achieved a profit before tax of EUR1.6 million. Year end net cash of EUR54.0 million was EUR27.1 million higher than at the beginning of the year, mostly as a result of the settlement from the Agreement.
The restructuring of our German production operations has resulted in a significant reduction in our staff numbers there. Of the 90 staff employed when the closure was announced 70 left during 2018 and the remaining 20 employees are now focusing on research and development activities and non-silicon wafering whilst retaining limited silicon wafering capabilities. Our employees have been vital to the Group's ability to pursue the cash conservation strategy since 2011 and I would like to thank all of them for their commitment and contribution during these challenging times.
Following an extensive review of the strategic options for the future of the Group, the Board has concluded that returning a large proportion of available cash, as part of an orderly resolution of the Group's affairs, would be in the best interest of shareholders rather than the pursuit of acquisitions. The Board intends to return GBP38.5 million (EUR42.8 million at year end exchange rate) equivalent to 24 pence per ordinary share to shareholders (the 'Capital Return'). All shareholders, on the register at the time, will participate in the Capital Return, which will be implemented through a reduction of the capital reserves and will be accompanied by a share consolidation to maintain broad comparability of the share price before and after the return. The Board will be recommending that the shareholders approve the necessary measures at a General Meeting which is expected to be held in May in order to achieve a cash return before the end of the Q2 2019. Further information will be provided in a circular to shareholders.
John Sleeman
Chairman
20 March 2019
OPERATIONAL AND FINANCIAL REVIEW
Operational review of 2018
The difficult PV market environment has persisted since 2011 when the industry was first impacted by Chinese manufacturing overcapacity which led to a collapse in pricing across the value chain. During the intervening years the Group progressively restructured and pursued cost reduction programmes while attempting to maintain key operational capabilities in the expectation that the pricing environment might become more rational.
Despite claims of unfair trade practices and anti-dumping investigations in Europe and the USA, Chinese players in the PV industry became increasingly dominant and pricing continued to decline. After concluding that there was no realistic prospect of an improvement in market conditions or any relaxation in pricing pressure, the Group announced the permanent shutdown of all United Kingdom production operations in August 2017 which resulted in mass redundancies with the majority of United Kingdom employees leaving by the end of September 2017. In the subsequent months activities focused on clearing the production facilities and returning the four leased buildings to the landlord. The programme was concluded in May 2018 when the final long term lease was surrendered. Only one employee now remains dealing with administrative activities as well as any residual trading.
The Group's exit from PV manufacturing was finally completed with the termination of multicrystalline silicon wafer production in Germany during H1 2018 in accord with the announcement in the 2017 Annual Report. While it had been hoped that a buyer could be found who would be willing to develop the operation, the deteriorating PV market conditions made this impossible. Instead major restructuring was necessary which following discussion with the workers council regrettably led to extensive job losses in May 2018. Following restructuring, there are currently around 20 employees and the operational capabilities are being downsized accordingly. The lease on the production facilities has been terminated and advanced discussions with the landlord are underway with the aim of vacating one of the two production buildings at the end of 2019 and consolidating operations into the other building. Some silicon wafering capabilities are being retained and limited contract wafering is periodically carried out for a PV customer in Germany. The funded PV related research and development activities which provided income in excess of EUR0.5m in 2018 are continuing.
The primary focus is now on the transformation of the business by applying our wire sawing expertise to the cutting and slicing of a variety of materials other than silicon and establishing relationships with new customers in Germany. Successful trials have been carried out in the cutting of glass, quartz, alumina and piezo-ceramics and some of these customer relationships have already been consolidated into regular contracting business during 2018. The customer base is expected to develop further during 2019 as companies complete their internal evaluations of the cutting trials and recognise the economic benefits of the improved yields delivered by wire sawing.
Group wafer shipments during 2018 totalled 47MW (146MW: 2017) with the much reduced volume reflecting the termination of production during H1. Only around 3MW of wafer inventory remained at the end of the year and this was finally sold during February 2019.
Wafer supply contracts
On 8 November 2017 the Group announced that it had received notification of the final award rendered by the International Court of Arbitration of the International Chamber of Commerce in the claim filed by the Group in March 2015 and arising from an outstanding long-term wafer supply contract with one of the world's leading PV companies. The award required the customer, who had failed to purchase wafers in line with its contractual obligations, to pay the amount of around EUR36.5m including interest to the Group as at May 2018. The obligation to pay was not conditioned upon the Group's delivery of 22.9m wafers, outstanding under the contract, although the customer's right to seek such delivery was not precluded by the award. On 17 August 2018 the Group announced that it had concluded an agreement with the customer in settlement of all claims and obligations under the wafer supply contract and arbitration award. Under the agreement the customer committed to make total payments of EUR28.8m and waive its right to demand delivery of the outstanding wafers. An initial payment of EUR14.5m was made on 8 May 2018 and the final outstanding payment of EUR14.3m was received on 30 November 2018.
A final payment was received in resolution of the Group's other outstanding wafer supply contract, where the customer had entered insolvency and shipments stopped in 2012. Claims had been registered with the administrator and an interim settlement of EUR0.96m was received during H1 2016. A further payment of around EUR0.56m was recognised in the 2017 financial statements and received in April 2018. No further payments are expected unless the administrator is successful in a claim against the management board whose members are covered by a D&O insurance policy.
Financial Review
The financial results are driven largely by the settlement agreement relating to the arbitration award and the termination of multicrystalline silicon wafer production in Germany in H1 2018. These two factors led to significant cash inflows, a significant reduction in the scale of operations and employee numbers and a release in working capital.
In 2018 Group revenues decreased by 76% to EUR6.3 million (2017: EUR26.4 million). This decrease was due to the significantly lower wafer sales volumes following the shutdown of multicrystalline silicon wafer production in H1 2018 and the absence of any polysilicon trading.
During 2018 the Group recognised other income of EUR9.6 million, which was EUR14.2 million lower than in 2017. Additional income in relation to the settlement agreement was EUR8.2 million whereas the Group recognised EUR20.5 million in 2017.
Personnel expenses of EUR4.6 million (2016: EUR8.2 million) were 45% lower than those in 2017 due to lower employee numbers. Termination payments in relation to the closure of United Kingdom production operations were paid in 2017 and similar payments were made as a result of the restructuring in Germany in 2018.
Other expenses at EUR2.0 million were EUR2.7 million lower than in 2017 mainly due to lower land and building operating lease charges following the surrender of leases in the United Kingdom during 2017.
The Group's annual depreciation and impairment charge was EUR0.7 million in 2018 which was the same as the charge in 2017. This level of charge included impairment charges of EUR0.6 million in 2018 and EUR0.5 million in 2017 which were recognised following a review of the recoverable value of certain assets. It should be noted that the Group's remaining plant and equipment, was largely written down between 2011 and 2013.
There was a currency gain in 2018 of EUR0.3 million whereas the gain in 2017 was negligible.
Overall the Group generated a profit before taxes of EUR1.6 million (2017: profit of EUR12.0 million). The EUR10.4 million decrease compared to 2017 reflected the decrease in other income of EUR14.2 million and a EUR2.7 million reduction in gross margin. Offsetting this were reductions in personnel expenses of EUR3.5 million and other expenses of EUR2.7 million.
The Group's cash position at the year end of EUR54.0 million was EUR27.1 million higher than the net position of EUR26.9 million at the start of the year. This was due to net cash inflows of EUR27.7 million from operating activities partially offset by EUR0.7 million of foreign exchange rate changes on cash.
Going concern
The Group's directors are required to make an assessment as to whether it is appropriate to prepare the financial statements on a going concern basis by considering the Group's ability and intention to continue in business.
The Group have been operating a cash conservation strategy to maximise cash held and to enable the Group to manage its operations whilst market conditions remain difficult. A description of the market conditions and the Group's plans are included in the Strategic Report.
On 31 December 2018 there was a net cash balance of EUR54.0 million. As part of its normal business practice, the Group regularly prepares both annual and longer-term plans which are based on the directors' expectations concerning key assumptions. The directors, after careful consideration and after making appropriate enquiries, are of the opinion that the levels of net cash outflows remain low such that Group has sufficient cash to continue in operational existence for at least twelve months from the date of approval of the financial statements, in March 2020.
The Group intends to return around GBP38.5m to shareholders in Q2 2019. The Group intends to continue operations at PV Crystalox Solar Silicon GmbH, in Germany which involve the cutting of silicon and non-silicon materials together with a continued focus on funded research and development activities
As a result of this assessment the directors have concluded that the Group has the ability and the intention to continue in business. It should be noted that the Group and PV Crystalox Solar Silicon GmbH financial statements have been prepared on a going concern basis whereas those for Crystalox Limited were prepared on a basis other than going concern following the announcement on 13 July 2017 that Group intended to cease United Kingdom manufacturing operations in H2 2017.
Outlook
The Board has conducted an extensive review of the strategic options for the future of the Group and has concluded that returning a large proportion of available cash, as part of an orderly resolution of the Group's affairs, would be in the best interest of shareholders rather than the pursuit of acquisitions. In parallel we will aim to complete the transformation of the manufacturing operation in Germany. A sale to a third party or a transfer of the business to the existing management team would be given consideration if an offer was made.
Following the cash return, the Board will consider the options available to maximise any value from the listing of Group's shares on the Official List. Consideration will also be given to the possible cancellation of the listing. It should be noted that whilst the majority of the cash resources are available for immediate return to shareholders. Any further possible cash return will be strongly dependent on developments in the German business and the decisions taken on the Group's listing.
Iain Dorrity
Chief Executive Officer
20 March 2019
Consolidated statement of comprehensive income
For the year ended 31 December 2018
Hot Features
Premium
2018 2017
Notes EUR'000 EUR'000
--------------------------------------------------------- ----- -------- --------
Revenues 2 6,308 26,364
Cost of materials and services 3 (7,378) (24,681)
Personnel expenses 4 (4,567) (8,231)
Depreciation and impairment of property, plant and
equipment and amortisation of intangible assets (655) (667)
Other income 5 9,556 23,800
Other expenses 6 (2,025) (4,656)
Currency gains 324 33
--------------------------------------------------------- ----- -------- --------
Profit before interest and taxes ("EBIT") 1,563 11,962
Finance income 7 64 65
Finance cost 7 - (25)
--------------------------------------------------------- ----- -------- --------
Profit before taxes ("EBT") 1,627 12,002
Income taxes 8 (264) (1,084)
--------------------------------------------------------- ----- -------- --------
Profit for the year attributable to owners of the parent 1,363 10,918
--------------------------------------------------------- ----- -------- --------
Other comprehensive (loss)/income
Items that may be reclassified subsequently to profit
or loss:
Currency translation adjustment (537) (1,204)
Actuarial (loss) / gains on defined benefit pension
scheme 9 (126) 295
--------------------------------------------------------- ----- -------- --------
Total comprehensive income
Attributable to owners of the parent 700 10,009
--------------------------------------------------------- ----- -------- --------
Basic and diluted profit per share in Euro cents:
From profit for the year - basic 10 0.9 6.9
From profit for the year - diluted 10 0.9 6.8
--------------------------------------------------------- ----- -------- --------
The accompanying notes form an integral part of these financial statements.
Consolidated balance sheet
As at 31 December 2018
2018 2017
Notes EUR'000 EUR'000
---------------------------------- ----- -------- --------
Intangible assets 11 - 6
Property, plant and equipment 12 51 651
Other non-current assets 13 - 429
---------------------------------- ----- -------- --------
Total non-current assets 51 1,086
---------------------------------- ----- -------- --------
Cash and cash equivalents 14 53,964 26,881
Trade accounts receivable 15 40 1,548
Inventories 16 125 3,914
Assets held for sale 17 - 390
Prepaid expenses and other assets 18 537 22,430
---------------------------------- ----- -------- --------
Total current assets 54,666 55,163
---------------------------------- ----- -------- --------
Total assets 54,717 56,249
---------------------------------- ----- -------- --------
Trade accounts payable 19 99 1,037
Accrued expenses 20 911 806
Provisions 21 - 1,385
Current tax liabilities 22 1,348 -
Deferred tax liabilities 23 - 1,084
Other current liabilities 24 21 167
---------------------------------- ----- -------- --------
Total current liabilities 2,379 4,479
---------------------------------- ----- -------- --------
Share capital 25 12,332 12,332
Share premium 50,511 50,511
Other reserves 25,096 25,096
Shares held by the EBT (372) (372)
Share-based payment reserve 162 294
Reverse acquisition reserve (3,601) (3,601)
Accumulated losses (7,194) (8,431)
Currency translation reserve (24,596) (24,059)
---------------------------------- ----- -------- --------
Total equity 52,338 51,770
---------------------------------- ----- -------- --------
Total liabilities and equity 54,717 56,249
---------------------------------- ----- -------- --------
The accompanying notes form an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 20 March 2019 and signed on its behalf by:
Iain Dorrity Company number Chief Executive Officer 06019466
Consolidated statement of changes in equity
For the year ended 31 December 2018
Shares Share-
held based Reverse Currency
Share Share Other by the payment acquisition Accumulated translation Total
capital premium reserves EBT reserve reserve losses reserve equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
As at 1 January
2017 12,332 50,511 25,096 (372) 260 (3,601) (19,644) (22,855) 41,727
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Share-based
payment
credit - - - - 34 - - - 34
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Transactions
with owners - - - - 34 - - - 34
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Profit for the
year - - - - - - 10,918 - 10,918
Currency
translation
adjustment - - - - - - - (1,204) (1,204)
Actuarial gains - - - - - - 295 - 295
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Total
comprehensive
income - - - - - - 11,213 (1,204) 10,009
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
As at 31
December 2017 12,332 50,511 25,096 (372) 294 (3,601) (8,431) (24,059) 51,770
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
As at 1 January
2018 12,332 50,511 25,096 (372) 294 (3,601) (8,431) (24,059) 51,770
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Share-based
payment
credit - - - - (132) - - - (132)
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Transactions
with owners - - - - (132) - - - (132)
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Profit for the
year - - - - - - 1,363 - 1,363
Currency
translation
adjustment - - - - - - - (537) (537)
Actuarial loss - - - - - - (126) - (126)
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Total
comprehensive
income - - - - - - 1,237 (537) 700
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
As at 31
December 2018 12,332 50,511 25,096 (372) 162 (3,601) (7,194) (24,596) 52,338
---------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Consolidated cash flow statement
For the year ended 31 December 2018
2018 2017
EUR'000 EUR'000
------------------------------------------------------------------ -------- --------
Profit before taxes 1,627 12,002
Adjustments for:
Net interest income (64) (40)
Depreciation, impairment and amortisation 655 667
Inventory writedown 591 -
(Charge)/credit for retirement benefit obligation and share-based
payments (132) 48
Change in provisions (1,385) 1,385
Gain from the disposal of property, plant and equipment and
intangibles (27) (254)
(Gains)/losses in foreign currency exchange 145 14
Change in deferred grants and subsidies - -
------------------------------------------------------------------ -------- --------
1,410 13,822
Changes in working capital
Decrease in inventories 3,197 7,148
Decrease in accounts receivables 1,000 755
Decrease in accounts payables and deferred income (329) (1,534)
Decrease/(increase) in other assets 22,549 (21,591)
(Decrease)/Increase in other liabilities (147) 112
------------------------------------------------------------------ -------- --------
27,680 (1,288)
Income taxes received - 1
Interest received 64 40
------------------------------------------------------------------ -------- --------
Net cash generated from/(used in) operating activities 27,744 (1,247)
------------------------------------------------------------------ -------- --------
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 29 431
Payments to acquire property, plant and equipment and intangibles (12) (133)
------------------------------------------------------------------ -------- -------- Net cash generated from/(used in) investing activities 17 298 ------------------------------------------------------------------ -------- -------- Cash flow from financing activities Interest paid - - ------------------------------------------------------------------ -------- -------- Net cash used in financing activities - - ------------------------------------------------------------------ -------- -------- Cash generated from/(used in) operations 27,761 (949) Effects of foreign exchange rate changes on cash and cash equivalents (678) (997) ------------------------------------------------------------------ -------- -------- Cash and cash equivalents at the beginning of the year 26,881 28,827 ------------------------------------------------------------------ -------- -------- Cash and cash equivalents at the end of the year 53,964 26,881 ------------------------------------------------------------------ -------- --------
The accompanying notes form an integral part of these financial statements.
Notes to the consolidated financial statements
For the year ended 31 December 2018
1. Group accounting policies
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The financial information has also been prepared under the historical cost convention except that it has been modified to include certain financial assets and liabilities (including derivatives) at their fair value through profit and loss. These policies have been consistently applied to all years presented unless otherwise stated.
PV Crystalox Solar PLC is incorporated and domiciled in the United Kingdom.
The address of the registered office is 11B(ii) Park House, Milton Park, Abingdon, OX14 4RS.
The financial statements for the year ended 31 December 2018 were approved by the Board of Directors on [--] March 2019.
Functional and presentational currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The functional currency of the parent company is Sterling. The financial information has been presented in Euros, which is the Group's presentational currency. The Euro has been selected as the Group's presentational currency as this is the currency used in its significant contracts. The financial statements are presented in round thousands.
Foreign currency translation
Transactions in foreign currencies are translated into the functional currency of the respective entity at the foreign exchange rate ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the date the fair value was determined. Exchange gains and losses on monetary items are charged to the Statement of Comprehensive Income.
The assets and liabilities of foreign operations are translated to Euros at foreign exchange rates ruling at the balance sheet date. The income and expenses of foreign operations are translated into Euros at the average foreign exchange rates of the year that the transactions occurred in. In the Consolidated Financial Statements exchange rate differences arising on consolidation of the net investments in subsidiaries are recognised in other comprehensive income under "Currency translation adjustment".
Non-going concern entities
Subsidiary accounts for Crystalox Limited are no longer prepared on a going concern basis and include an estimate of all related costs either committed to or incurred in the period. Where the Company continues to trade any losses incurred in so doing are booked in the same period as revenue derived and therefore no accrual is made for these. The preparation of these accounts differs from that of going concern in that:
-- non-current assets/liabilities become current; -- assets are written down to a recoverable amount; and -- provision for wind-down costs is charged to the income statement.
Use of estimates and judgements - overview
The preparation of financial statements in conformity with adopted IFRS requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income, expenses and contingent assets and liabilities. Estimates and assumptions mainly relate to the useful life of non-current assets, the discounted cash flows used in impairment testing, taxes, share-based payments and inventory valuations. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. Actual values may vary from the estimates. The estimates and the assumptions are under continuous review with particular attention paid to the life of material plant.
Critical accounting and valuation policies and methods are those that are both most important to the depiction of the Group's financial position, results of operations and cash flows and that require the application of subjective and complex judgements, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent years. The critical accounting policies that the Group discloses will not necessarily result in material changes to our financial statements in any given year but rather contain a potential for material change. The main accounting and valuation policies used by the Group are outlined in the following notes. While not all of the significant accounting policies require subjective or complex judgements, the Group considers that the following accounting policies should be considered critical accounting policies.
Use of estimates - deferred taxes
To compute provisions for taxes, judgements have to be applied.
There is a risk that an intra-group compensation payment could be challenged by tax authorities under transfer pricing rules resulting in a higher tax liability. The Group believe this likelihood is remote and have not recognised a provision.
Other estimates involve assessing the probability that deferred tax assets resulting from deductible temporary differences and tax losses can be utilised to offset taxable income in the future.
Due to the lack of certainty around future profits, all deferred tax assets continue to be unrecognised in the year's balance sheet.
Use of estimates - inventory valuation
Given the decline in market prices for silicon wafers to below the Group's cost of production, the carrying amount of inventory is recorded at net realisable value.
Net realisable value has been determined as estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Basis of consolidation
The Group financial statements consolidate those of the Group and its subsidiary undertakings drawn up to 31 December 2018. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.
The results of any subsidiary sold or acquired are included in the Consolidated Statement of Comprehensive Income up to, or from, the date control passes.
Consolidation is conducted by eliminating the investment in the subsidiary with the parent's share of the net equity of the subsidiary.
On acquisition of a subsidiary, all of the subsidiary's separately identifiable assets and liabilities existing at the date of acquisition are recorded at their fair value reflecting their condition at that date. Goodwill arises where the fair value of the consideration given for a business exceeds the fair value of such net assets. So far no acquisitions have taken place since inception of the Group.
Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. All intra-group transactions, balances, income and expenses are eliminated upon consolidation.
Going concern
The Group's directors are required to make an assessment as to whether it is appropriate to prepare the financial statements on a going concern basis by considering the Group's ability and intention to continue in business.
The Group have been operating a cash conservation strategy to maximise cash held and to enable the Group to manage its operations whilst market conditions remain difficult. A description of the market conditions and the Group's plans are included in the Strategic Report.
On 31 December 2018 there was a net cash balance of EUR54.0 million. As part of its normal business practice, the Group regularly prepares both annual and longer-term plans which are based on the directors' expectations concerning key assumptions. The directors, after careful consideration and after making appropriate enquiries, are of the opinion that the levels of net cash outflows remain low such that Group has sufficient cash to continue in operational existence for at least twelve months from the date of approval of the financial statements, in March 2020.
The Group intends to return around GBP38.5m to shareholders in Q2 2019. The Group intends to continue operations at PV Crystalox Solar Silicon GmbH, in Germany which involve the cutting of silicon and non-silicon materials together with a continued focus on research and development activities. A sale to a third party or a transfer of the business to the existing management team remains under consideration.
As a result of this assessment the directors have concluded that the Group has the ability and the intention to continue in business. It should be noted that whilst the Group and PV Crystalox Solar Silicon GmbH have been prepared on a going concern basis the operations at Crystalox Limited have not following the announcement on 13 July 2017 that Group intended to cease United Kingdom manufacturing operations in H2 2017.
Effects of new accounting pronouncements
Accounting standards, IFRICs and other guidance in effect or applied for the first time in 2018
-- IFRS 9 'Financial instruments' -- IFRS 14, 'Regulatory Deferral Accounts' -- IFRS 15, 'Revenue from Contracts with Customers'
IFRS 9 'Financial instruments' and IFRS 15 'Revenue from contracts with customers' are new accounting standards that are effective for the year ended 31 December 2018. As explained, IFRS 9 and IFRS 15 were adopted without restating comparative information. The new accounting policies are set out in note 1.
a) IFRS 9 'Financial instruments'
IFRS 9 replaces the provisions of IAS39 that relate to the recognition, classification and measurement of financial assets and financial liabilities de-recognition of financial instruments, impairment of financial assets and hedge accounting.
The company has two types of financial assets subject to IFRS 9's new credit loss model:
-- Trade receivables from sale of inventory; and -- Amounts owed by group undertakings.
While cash is also subject to impairment movements of IFRS 9, the identified impairment loss is not material.
The Group applies the IFRS simplified approach to measuring expected credit losses which uses a lifetime expected allowance for all trade receivables Trade receivables outstanding as at 31 December 2017 were held with recurring customers with low credit risk. Amounts owed by group undertakings are repayable on demand with low credit risk. Accordingly the restatement amount on transition was immaterial.
a) IFRS 15 'Revenue from contracts with customers'
IFRS 15 replaces IAS 18. The core principal of the guidance is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. The new guidance establishes a five-step model to achieve that core principle. Based on completion of the assessment, the Company has determined that there is not a material difference between the recognition under IAS 18 and IFRS 15. Therefore, no adjustment is recorded to the opening balance sheet 31 December, 2017.
The above have not made a material difference to the financial statements.
In issue, but not yet effective
-- IFRS 16 'Leases'
-- Amendments to IFRS 2, 'Share-based Payments', on clarifying how to account for certain types of share-based payment transactions
The Group does not believe that any of these will have a material impact on the Group's financial positions, results of operations or cash flows, but will complete a full exercise assessing their impact during 2019.
Intangible assets
Intangible assets are stated at cost net of accumulated amortisation. The Group's policy is to write off the difference between the cost of intangible assets and their estimated realisable value systematically over their estimated useful life. Amortisation of intangible assets is recorded under "Depreciation and impairment of property, plant and equipment and amortisation of intangible assets" in the Consolidated Statement of Comprehensive Income.
Acquired computer software licences and patents are capitalised on the basis of the costs incurred to purchase and bring into use the software.
The capitalised costs are written down using the straight-line method over the expected economic life of the patents and licences (five years) or the software under development (three to five years).
Internally generated intangible assets - research and development expenditure
Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding is recognised in the Consolidated Statement of Comprehensive Income.
Property, plant and equipment
Property, plant and equipment is stated at acquisition or construction cost, net of depreciation and provision for impairment. No depreciation is charged during the period of construction. The cost of own work capitalised is comprised of direct costs of material and manufacturing and directly attributable costs of manufacturing overheads. All allowable costs up until the point at which the asset is physically able to operate as intended by management are capitalised. The capitalised costs are written down using the straight-line method.
The Group's policy is to write off the difference between the cost of property, plant and equipment and its residual value systematically over its estimated useful life. Reviews of the estimated remaining lives and residual values of individual productive assets are made annually, taking commercial and technological obsolescence as well as normal wear and tear into account.
The total useful lives range from five to ten years for plant and machinery and up to 15 years for other furniture and equipment. Property, plant and equipment are reviewed for impairment at each balance sheet date or upon indication that the carrying value may not be recoverable.
The gain or loss arising on disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the Consolidated Statement of Comprehensive Income.
Impairment
The carrying amount of the Group's non-financial assets is subject to impairment testing upon indication of impairment.
If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs of disposal and value in use based on an internal discounted cash flow evaluation. The asset is subsequently reviewed for possible reversal of the impairment at each reporting date.
Leased assets
Leases are categorised as per the requirements of IAS 17. Where risks and rewards are transferred to the lessee, the lease is classified as a finance lease. All other leases are classed as operating leases.
Rentals under operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the lease term. Lease incentives are spread over the total period of the lease.
The obligations from operating lease contracts are disclosed among financial obligations.
For the reporting year, no assets were recorded under finance leases.
Other income
Income other than that from sale of silicon products is recognised at the point of entitlement to receipt and shown as other income.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Financial instruments are recorded initially at fair value net of transaction costs. Subsequent measurement depends on the designation of the instrument, as follows:
Amortised cost
-- short-term borrowing, overdrafts and long-term loans are held at amortised cost; and
-- accounts payable which are not interest bearing are recognised initially at fair value and thereafter at amortised cost under the effective interest method.
Loans and receivables
-- Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are recognised initially at the amount of consideration that is unconditional. The group holds the trade receivables with the objective of collecting the contractual cash flows, and so it measures them subsequently at amortised cost using the effective interest method. Details about the group's impairment policies are provided in note 15.
-- non-interest bearing accounts receivable are initially recorded at fair value and subsequently valued at amortised cost, less provisions for impairment. Any change in their value through impairment or reversal of impairment is recognised in profit or loss net of any advance payment held by the Group where a right of offset exists; and
-- cash and cash equivalents comprise cash balances and call deposits with maturities of less than three months together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Interest and other income resulting from financial assets are recognised in profit or loss on the accruals basis, using the effective interest method.
Inventories
Inventories are stated at the lower of cost or net realisable value.
Acquisition costs for raw materials are usually determined by the weighted average method.
For finished goods and work in progress, cost of production includes directly attributable costs for material and manufacturing and an attributable proportion of manufacturing overhead expenses (including depreciation) based on normal levels of activity. Selling expenses and other overhead expenses are excluded. Interest is expensed as incurred and therefore not included. Net realisable value is determined as estimated selling price for silicon wafers or polysilicon less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Contingent liabilities
Provisions are made for contingent liabilities where there is an obligation at the balance sheet date, an adverse outcome is probable and associated costs can be estimated reliably. Where no obligation is present at the balance sheet date no provision is made, although, where material, the contingent liability will be disclosed in a note.
Current and deferred taxes
Current tax is the tax currently payable based on taxable profit for the year, including any under or over provisions from prior years.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.
Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Consolidated Statement of Comprehensive Income, except where they relate to items that are charged or credited directly to equity, in which case the related deferred tax is also charged or credited directly to equity.
Public grants and subsidies
As the German wafering operation is located in a region designated for economic development, the Group received both investment subsidies and investment grants. Government grants and subsidies relating to capital expenditure were credited to the "Deferred grants and subsidies" account and released to the Consolidated Statement of Comprehensive Income by equal annual instalments over the expected useful lives of the relevant assets under "Other income".
Government grants of a revenue nature, mainly for research and development purposes, were credited to the Consolidated Statement of Comprehensive Income in the same year as the related expenditure.
All required conditions of these grants have been met and it is the Group's intention that they will continue to be met.
Provisions
Provisions are formed where a third party obligation exists, which will lead to a probable future outflow of resources and where this outflow can be reliably estimated. Provisions are measured at the best estimate of the expenditure required to settle the obligation, discounted to present value. The resulting charge upon the discounting being unwound is recorded as a finance cost.
Future expected wind-down costs for Group companies no longer classed as going concern are included within provisions.
Accruals
Accruals are recognised when an obligation to meet an outflow of economic benefit in the future arises at the balance sheet date.
Accruals are initially recognised at fair value and subsequently at amortised cost using the effective interest method.
Revenue recognition
Revenue is recognised in according with the requirements of IFRS 15 'Revenue from Contracts with Customers'. The Company recognises revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is delivered in a five-step model framework:
1. Identify the contract(s) with the customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognise revenue when (or as) the entity satisfy a performance obligation.
Revenue is recognised when control of the products have been transferred to the customer. Control is considered to have transferred once products have been received by the customer unless shipping terms dictate any different. Revenues exclude intra-group sales and value added taxes and represent net invoice value less estimated rebates, returns and settlement discounts. The net invoice value is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied.
Finance income and costs
Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, dividend income and gains and financial income and costs relating to the defined benefit pension scheme.
Interest income is recognised in the Consolidated Statement of Comprehensive Income as it accrues, using the effective interest method.
Defined contribution pension plan
For defined contribution plans, the Group pays contributions to pension insurance plans on a contractual basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are incurred.
Defined benefit pension plan
For defined benefit plans, the Group previously made contributions to pension insurance plans in Germany which covered the estimated liability for the two German members. These amounts have historically been shown netted off due to the fact that the gross balances were not deemed to be material to the financial statements. During 2017 the liability was reduced due to the death of the spouse of one of the employees and in 2018 the pension obligation was eliminated following the transfer of the obligation to an insurance company. The plans are reviewed annually by an actuary and any actuarial gains or losses are recorded in the Consolidated Statement of Comprehensive Income.
Employee Benefit Trust
All assets and liabilities of the Employee Benefit Trust ("EBT") have been consolidated in these financial statements as the Group has de facto control over the trust's net assets as the parent of its sponsoring company.
Share-based payments
The Group has applied the requirements of IFRS 2, 'Share-based Payments'. The Group issues equity-settled share-based payments to certain employees. These are measured at their fair value at the date of the grant using an appropriate option pricing model and are expensed over the vesting year, based on the Group's estimate of the number of shares that will eventually vest. Grants of shares made during 2008 and 2007 are not subject to performance criteria and were valued at the date of the grant at market value. During 2011 awards were granted under the Performance Share Plan to employees. The share options granted are subject to performance criteria required for the option to vest and are considered in the method of measuring fair value. Fair value is assessed using the Black-Scholes method.
Charges made to the Consolidated Statement of Comprehensive Income in respect of share-based payments are credited to the share-based payment reserve.
Shareholders' equity
Shareholders' equity is comprised of the following balances:
-- share capital is comprised of 160,278,975 ordinary shares of 5.2 pence each;
-- share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of share issue;
-- other reserves arising from the issue and redemption of B shares in 2013;
-- investment in own shares is the Group's shares held by the EBT that are held in trust for the benefit of employees;
-- share-based payment reserve is the amount charged to the Consolidated Statement of Comprehensive Income in respect of shares already granted or options outstanding relative to the vesting date or option exercise date;
-- the reverse acquisition reserve is the difference between the value of the assets acquired and the consideration paid by way of a share for share exchange on 5 January 2007;
-- accumulated losses is the cumulative loss retained by the Group; and
-- currency translation reserve represents the differences arising from the currency translation of the net assets in subsidiaries.
2. Segment reporting
The chief operating decision-maker, who is responsible for allocating resources and assessing performance, has been identified as the Group Board. The Group is organised around the production and supply of wafers from silicon and non-silicon materials. Accordingly, the Board reviews the performance of the Group as a whole and there is only one operating segment. Disclosure of reportable segments under IFRS 8 is therefore not made.
Geographical information 2018
Rest Rest
United of of
Taiwan Canada Germany Kingdom Europe world Group
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------------------------- -------- -------- -------- -------- -------- -------- --------
Revenues
By entity's country of domicile - - 350 5,958** - - 6,308
By country from which derived 5,958 - 274 - - 77 6,308
--------------------------------- -------- -------- -------- -------- -------- -------- --------
Non-current assets*
By entity's country of domicile - - 51 - - - 51
--------------------------------- -------- -------- -------- -------- -------- -------- --------
* Excludes financial instruments, deferred tax assets and post-employment benefit assets.
One customer in Taiwan accounted for more than 10% of Group revenue, with sales to this customer of EUR5,958 (figures in EUR'000).
Geographical information 2017
Rest Rest
United of of
Taiwan Canada Germany Kingdom Europe world Group
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------------- -------- -------- -------- -------- -------- -------- --------
Revenues
By entity's country of
domicile - - 3,418 22,946** - - 26,364
By country from which
derived 16,966 1,993 312 - 816 6,277 26,364
------------------------ -------- -------- -------- -------- -------- -------- --------
Non-current assets*
By entity's country of
domicile - - 1,086 - - - 1,086
------------------------ -------- -------- -------- -------- -------- -------- --------
* Excludes financial instruments, deferred tax assets and post-employment benefit assets.
** Includes sales of surplus polysilicon feedstock.
One customer in Taiwan accounted for more than 10% of Group revenue, with sales to this customer of EUR16,720 (figures in EUR'000).
3. Cost of materials and services
The cost of materials is attributable to the consumption of silicon, ingots, wafers, chemicals and other consumables as well as the purchase of merchandise.
2018 2017
EUR'000 EUR'000
---------------------------------------------------------- -------- --------
Cost of raw materials, supplies and purchased merchandise 3,904 20,681
Change in unfinished and finished goods 2,939 1,699
Purchased services 535 2,301
---------------------------------------------------------- -------- --------
Cost of materials and services 7,378 24,681
---------------------------------------------------------- -------- --------
4. Personnel expenses
2018 2017
EUR'000 EUR'000
------------------------------------------ -------- --------
Staff costs for the Group during the year
Wages and salaries 3,952 7,000
Social security costs 517 843
Other pension costs 56 356
Employee share schemes 42 32
Total 4,567 8,231
------------------------------------------ -------- --------
Employees
The Group employed a monthly average of 64 employees during the year ended 31 December 2018 (2017: 126).
2018 2017
Number Number
--------------- ------- -------
Germany 60 89
United Kingdom 4 37
--------------- ------- -------
64 126
--------------- ------- -------
2018 2017
Number Number
--------------- ------- -------
Production 28 76
Administration 36 50
--------------- ------- -------
64 126
--------------- ------- -------
The Group employed 24 employees at 31 December 2018 (31 December 2017: 98).
The remuneration of the Board of Directors, including appropriations to pension accruals, is shown in the Directors' Remuneration Report.
5. Other income
2018 2017
EUR'000 EUR'000
----------------------------------------------------------- -------- --------
Customer compensations 8,161 21,811
Gain on disposals of assets held for sale/ property, plant
and equipment 369 256
Sale of uncapitalised assets 339 408
Research and development grants 382 520
Miscellaneous 305 805
----------------------------------------------------------- -------- --------
9,556 23,800
----------------------------------------------------------- -------- --------
Customer compensations relate to realisation of payments received in respect of unfulfilled customer purchase obligations and includes EUR8.2 million (2017:EUR20.5 million) in relation to the arbitration award/settlement agreement.
6. Other expenses
2018 2017
EUR'000 EUR'000
----------------------------------------------- -------- --------
Land and building operating lease charges 424 2,018
Repairs and maintenance 47 99
Selling expenses - 1
Technical consulting, research and development 68 38
Legal costs 530 1,144
Other professional services 517 182
Insurance premiums 99 167
Travel and advertising expenses 44 61
Bad debts - 7
Staff related costs 29 82
Other 267 857
----------------------------------------------- -------- --------
2,025 4,656
----------------------------------------------- -------- --------
Amounts payable to the Group's auditors
2018 2017
EUR'000 EUR'000
------------------------------------------------------------------ -------- --------
Fees payable to the Company's auditors and their associates
for the audit of the parent company
and consolidated financial statements 83 76
Fees payable to the Company's auditors and their associates
for other services:
- The audit of the Company's subsidiaries pursuant to legislation 45 53
- Other assurance services 4 9
------------------------------------------------------------------ -------- --------
132 138
------------------------------------------------------------------ -------- --------
7. Finance income and costs
Finance income and costs are derived/incurred on financial assets/liabilities and recognised under the effective interest method.
2018 2017
EUR'000 EUR'000
------------------------------ -------- --------
Finance income 64 65
------------------------------ -------- --------
Finance expense:
Expense of pension commitment - (25)
------------------------------ -------- --------
Finance expense - (25)
------------------------------ -------- --------
8. Income taxes
2018 2017
EUR'000 EUR'000
------------------------------------- -------- --------
Current tax:
Current tax on profit for the year (140) -
Adjustment in respect of prior years 404 -
------------------------------------- -------- --------
Total current tax 264 -
------------------------------------- -------- --------
Deferred tax (note 23):
Total deferred tax - 1,084
------------------------------------- -------- --------
Total tax charge/(credit) 264 1,084
------------------------------------- -------- --------
The total tax rate for the German companies is 32.275% (2017: 32.275%). The effective total tax rate in the United Kingdom was 19.0% (2017: 19.25%). These rates are based on the legal regulations applicable or adopted at the balance sheet date.
The rate of corporation tax in the United Kingdom will fall to 17% in 2020. The German rate will be unchanged in 2019. The impact of these changes is not expected to be material.
The tax on the Group's results before tax differs from the theoretical amount that would arise using the effective UK tax rate applicable to the losses of the consolidated entities as follows:
2018 2017
EUR'000 EUR'000
--------------------------------------------------------- -------- --------
Profit before tax 1,627 12,002
--------------------------------------------------------- -------- --------
Expected income tax charge at United Kingdom tax rate of
19.00% (2017: 19.25%) 309 2,310
Adjustments for foreign tax rates - 1,249
Income not subject to tax - (141)
Unrecognised adjustments to deferred tax (395) (2,481)
Adjustment in respect of prior years 264 -
Utilisation of tax losses and other deductions - -
Expenses not deductible for tax 86 147
--------------------------------------------------------- -------- --------
Total tax (credit) / charge 264 1,084
--------------------------------------------------------- -------- --------
9. Actuarial gains on defined benefit scheme
Actuarial losses represent the net of movements in the defined benefit obligation and the asset value of the Group's defined benefit pension scheme.
Following the transfer of the last remaining pension obligation to an insurance company there was loss of EUR126k being a EUR791k release of benefit obligation and EUR917k decrease in value of the plan assets. In 2017 following the death of one beneficiary in the year there was a gain of EUR295k being a EUR759k release of benefit obligation and EUR464k decrease in the value of the plan assets.
10. Earnings per share
Net earnings per share is computed by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
Diluted net earnings per share is computed by dividing the net profit for the year by the weighted average number of ordinary shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including share options.
2018 2017
---------------------------------------- ----------- -----------
Basic shares (average) 158,305,912 158,307,027
Basic earnings per share (Euro cents) 0.9 6.9
Diluted shares (average) 159,250,047 160,051,162
Diluted earnings per share (Euro cents) 0.9 6.8
---------------------------------------- ----------- -----------
Basic shares and diluted shares for this calculation can be reconciled to the number of issued shares (see note 25) as follows:
2018 2017
------------------------------------------------------------ ----------- -----------
Shares in issue (see note 25) 160,278,975 160,278,975
Weighted average number of EBT shares held (1,973,063) (1,971,948)
------------------------------------------------------------ ----------- -----------
Weighted average number of shares for basic EPS calculation 158,305,912 158,307,027
Dilutive share options 944,135 1,744,135
------------------------------------------------------------ ----------- -----------
Weighted average number of shares for fully diluted
EPS calculation 159,250,047 160,051,162
------------------------------------------------------------ ----------- -----------
11. Intangible assets
Intangible assets relate to software licences.
Total
EUR'000
------------------------- --------
Cost
At 1 January 2018 824
Disposals (23)
At 31 December 2018 801
------------------------- --------
Accumulated amortisation
At 1 January 2018 818
Charge for the year 4
Impairment 2
Disposals (23)
At 31 December 2018 801
------------------------- --------
Net book amount
At 31 December 2018 -
------------------------- --------
At 31 December 2017 6
------------------------- --------
Total
EUR'000
----------------------------------------- --------
Cost
At 1 January 2017 863
Additions 5
Reclassification to assets held for sale (23)
Disposals (20)
Net effect of foreign currency movements (1)
----------------------------------------- --------
At 31 December 2017 824
----------------------------------------- --------
Accumulated amortisation
At 1 January 2017 856
Charge for the year 6
Reclassification to assets held for sale (23)
Disposals (19)
Net effect of foreign currency movements (2)
----------------------------------------- --------
At 31 December 2017 818
----------------------------------------- --------
Net book amount
At 31 December 2017 6
----------------------------------------- --------
At 31 December 2016 7
----------------------------------------- --------
12. Property, plant and equipment ("PPE")
Other
Plant furniture
and and
machinery equipment Total
EUR'000 EUR'000 EUR'000
--------------------------------- ---------- ---------- --------
Cost
At 1 January 2018 25,270 2,890 28,160
Additions 6 47 53
Disposals (4,853) (132) (4,985)
At 31 December 2018 20,423 2,805 23,228
--------------------------------- ---------- ---------- --------
Accumulated depreciation
At 1 January 2018 24,802 2,707 27,509
Depreciation charge for the year 43 29 72
Impairment charge for the year 400 179 579
On disposals (4,853) (130) (4,983)
At 31 December 2018 20,392 2,785 23,177
--------------------------------- ---------- ---------- --------
Net book amount
At 31 December 2018 31 20 51
--------------------------------- ---------- ---------- --------
At 31 December 2017 468 183 651
--------------------------------- ---------- ---------- --------
Other
Plant furniture
and and
machinery equipment Total
EUR'000 EUR'000 EUR'000
----------------------------------------- ---------- ---------- --------
Cost
At 1 January 2017 66,336 4,260 70,596
Additions 3 136 139
Reclassification to assets held for sale (23,293) (237) (23,530)
Disposals (16,228) (1,213) (17,441)
Net effect of foreign currency movements (1,548) (56) (1,604)
----------------------------------------- ---------- ---------- --------
At 31 December 2017 25,270 2,890 28,160
----------------------------------------- ---------- ---------- --------
Accumulated depreciation
At 1 January 2017 64,711 4,105 68,816
Depreciation charge for the year 108 40 148
Impairment charge for the year 502 11 513
Reclassification to assets held for sale (22,949) (191) (23,140)
On disposals (16,062) (1,202) (17,264)
Net effect of foreign currency movements (1,508) (56) (1,564)
----------------------------------------- ---------- ---------- --------
At 31 December 2017 24,802 2,707 27,509
----------------------------------------- ---------- ---------- --------
Net book amount
At 31 December 2017 468 183 651
----------------------------------------- ---------- ---------- --------
At 31 December 2016 1,625 155 1,780
----------------------------------------- ---------- ---------- --------
13. Other non-current assets
As at 31 December
------------------------- -------------------
2018 2017
EUR'000 EUR'000
------------------------- --------- --------
Other non-current assets - 429
------------------------- --------- --------
- 429
------------------------- --------- --------
The Group has historically paid in to an insurance policy for two German employees that served to match the liabilities that arose under a legacy pension scheme. These amounts have historically been shown netted off due to the fact that the gross balances were not deemed to be material to the financial statements. During 2017 the liability was reduced due to the death of the spouse of one of the employees.
In December the Group concluded an agreement with the insurance company such that the insurance asset was sold and the contingent pension liability was transferred to the insurance company.
14. Cash and cash equivalents
All short-term deposits are interest bearing at the various rates applicable in the business locations of the Group.
As at 31 December
------------------------- -------------------
2018 2017
EUR'000 EUR'000
------------------------- -------- ---------
Cash at bank and in hand 53,964 26,881
53,964 26,881
------------------------- -------- ---------
15. Trade accounts receivable
As at 31 December
--------------- -------------------
2018 2017
EUR'000 EUR'000
--------------- -------- ---------
Germany 40 30
United Kingdom - 1,518
--------------- -------- ---------
40 1,548
--------------- -------- ---------
All receivables have short-term maturity. During the year receivables of EURnil were written off (2017: EUR7k).
All amounts outstanding as at 31 December 2018 and due at date of signing had been received, consequently there is no provision for doubtful debts (2017: EURnil).
None of the unimpaired trade receivables are past due at the reporting date.
These amounts, together with the customer compensations detailed in note 5, represent the Group's maximum exposure to credit risk at the year end.
16. Inventories
Inventories include finished goods as well as production supplies. The change in inventories is included in the Consolidated Statement of Comprehensive Income in the line "Cost of materials".
As at 31 December
------------------ -------------------
2018 2017
EUR'000 EUR'000
------------------ -------- ---------
Finished products 53 2,598
Raw materials 72 1,316
------------------ -------- ---------
125 3,914
------------------ -------- ---------
EUR591k of inventory writedowns are included in cost of materials in 2018 (2017: EURnil).
17. Assets held for sale
As at 31 December
------------------------- -------------------
2018 2017
EUR'000 EUR'000
------------------------- -------- ---------
At 1 January 390 -
Sold (390) -
Cost transferred - 23,530
Depreciation transferred - (23,140)
------------------------- -------- ---------
At 31 December - 390
------------------------- -------- ---------
The brought forward assets held for sale had an estimated fair value of EUR586k.
18. Prepaid expenses and other assets
As at 31 December
----------------------- -------------------
2018 2017
EUR'000 EUR'000
----------------------- -------- ---------
VAT 36 611
Prepaid expenses 59 551
Energy tax claims 26 113
Customer compensations - 21,077
Other current assets 416 78
----------------------- -------- ---------
537 22,430
----------------------- -------- ---------
Customer compensations relate to realisation of payments received in respect of unfulfilled customer purchase obligations and, for the prior year, includes EUR20.5 million in relation to arbitration award/settlement agreement.
Other current assets include EUR0.3 million in relation to the sale of the insurance asset. The payment for this was received in January 2019.
19. Trade accounts payable
As at 31 December
--------------- -------------------
2018 2017
EUR'000 EUR'000
--------------- -------- ---------
United Kingdom 18 32
Germany 81 1,005
--------------- -------- ---------
99 1,037
--------------- -------- ---------
20. Accrued expenses
As at 31 December
------------------------------- -------------------
2018 2017
EUR'000 EUR'000
------------------------------- -------- ---------
Rents and ancillary rent costs 129 437
Salary related costs 183 130
Other accrued expenses 599 239
------------------------------- -------- ---------
911 806
------------------------------- -------- ---------
21. Provisions
Building Staff
lease costs
related related Total
EUR'000 EUR'000 EUR'000
----------------------------------------------- -------- -------- --------
Provisions brought forward at 1 January 2018 520 865 1,385
Additional provision 182 1,324 1,506
----------------------------------------------- -------- -------- --------
Utilised (702) (2,189) (2,891)
----------------------------------------------- -------- -------- --------
Provisions carried forward at 31 December 2018 - - -
----------------------------------------------- -------- -------- --------
All brought forward provisions are short term and relate to the winding down of operations in the UK. The additional provision relates to the restructuring of German operations. All provisions were utilised in 2018.
22. Current taxes liabilities
As at 31 December
--------------- -------------------
2018 2017
EUR'000 EUR'000
--------------- -------- ---------
United Kingdom 405 -
Germany 943 -
--------------- -------- ---------
1,348 -
--------------- -------- ---------
Current tax liabilities comprises corporation and other non-tax liabilities, calculated or estimated by the Group companies, as well as corresponding taxes abroad due to local tax laws, including probable amounts arising on completed or current tax audits.
23. Deferred tax liabilities
Deferred tax assets arising as a result of losses are recognised where, based on the Group's budget, they are expected to be realised in the foreseeable future.
As at 31 December 2018 there were unrecognised potential deferred tax assets in respect of losses of EUR43.8 million (2017: EUR44.5 million).
Deferred tax liabilities
As at 31 December
--------------- -------------------
2018 2017
EUR'000 EUR'000
--------------- -------- ---------
United Kingdom - -
Germany - 1,084
--------------- -------- ---------
- 1,084
--------------- -------- ---------
Deferred tax liabilities, calculated or estimated by the Group companies, comprise taxes payable due to local tax laws, including probable amounts arising on completed or current tax audits. Movement in the year is shown below.
2018 2017
EUR'000 EUR'000
---------------------------- -------- ---------
As at 1 January 1,084 -
Charged to income statement (1,084) 1,084
---------------------------- -------- ---------
As at 31 December - 1,084
---------------------------- -------- ---------
24. Other liabilities
As at 31 December
-------------------- -------------------
2018 2017
EUR'000 EUR'000
-------------------- -------- ---------
Payroll liabilities 21 35
Other liabilities - 132
-------------------- -------- ---------
21 167
-------------------- -------- ---------
As at 31 December
----------- -------------------
2018 2017
EUR'000 EUR'000
----------- -------- ---------
Short term 21 167
Long term - -
----------- -------- ---------
21 167
----------- -------- ---------
25. Share capital
2018 2017
EUR'000 EUR'000
------------------------------------------------------- -------- --------
Allotted, called up and fully paid
160,278,975 (2017: 160,278,975) ordinary shares of 5.2
pence each 12,332 12,332
------------------------------------------------------- -------- --------
Summary of rights of share capital
The ordinary shares are entitled to receipt of dividends. On winding up, their rights are restricted to a repayment of the amount paid up to their share in any surplus assets arising. The ordinary shares have full voting rights.
Shares held by the EBT
At 31 December 2018, 1,973,063 ordinary shares of 5.2 pence were held by the EBT (2017: 1,973,063). The market value of these shares was EUR0.550 million (2017: EUR0.461 million). Additionally, the cash balance held by the EBT on 31 December 2018 was EUR0.595 million (2017: EUR0.603 million).
26 Share-based payment plans
The Group established the PV Crystalox Solar PLC EBT on 18 January 2007, which has acquired, and may in the future acquire, the Company's ordinary shares for the benefit of the Group's employees.
During the year the Group had three share incentive plans in operation which are satisfied by grants from the EBT.
PV Crystalox Solar PLC Executive Directors' Deferred Share Plan ("EDDSP")
At the AGM on 28 May 2009 a bonus plan (with deferred share element) for executive directors was approved by the Company's shareholders in the context of bringing the arrangements more in line with market practice and aligning executive directors' pay more closely with the interests of the Company's shareholders. Half of each bonus was to be payable in cash and the other half deferred and payable in shares under the EDDSP, which vests three years after the award date. Awards of deferred shares under the EDDSP are to be satisfied on vesting by the transfer of shares from the existing PV Crystalox Solar PLC Employee Benefit Trust.
On 31 March 2017 awards over 544,135 shares were made to Iain Dorrity, as detailed in the Directors' Remuneration Report. No awards were made during 2018.
Market Value Option ("MVO")
An MVO is an option with an exercise price per share equal to the market value of a share on the date of grant. The vesting period of each award is three years from the date of grant and the award must be exercised no later than ten years following the date of grant.
On 24 November 2008 an MVO over 200,000 ordinary shares was granted to a senior employee and this option was exercisable from 24 November 2011 at GBP1.00 per share subject to agreed performance criteria. This option was forfeited when the employee left the Group in May 2018.
On 26 March 2009 an MVO over 200,000 ordinary shares was granted to a senior employee and this option is exercisable from 26 March 2012 at 76.0 pence per share subject to agreed performance criteria, and on 25 September 2009 MVO awards over 1,200,000 ordinary shares were granted to key senior employees and these options are exercisable from 25 September 2012 at 76.9 pence per share subject to agreed performance criteria.
One of the employees to whom an award over 200,000 ordinary shares was issued on 25 September 2009 left the Group after the closure of PV Crystalox Solar KK during 2016 and the award was forfeited. Two employees to whom awards over 400,000 ordinary shares were issued on 25 September 2009 left the Group after being made redundant from Crystalox Limited during in April and May 2018 and the awards were forfeited. One of the employees to whom an award over 200,000 ordinary shares was issued on 25 September 2009 left the Group top pursue other career opportunities during October 2018 and the award was forfeited.
Awards over 800,000 shares were forfeited in 2018 (2017: nil). There are two remaining awards: one over 200,000 shares expires on 26 March 2019 at an exercise price of 76.0 pence per share; the other over 200,000 shares expires on 25 September 2009 at an exercise price of 76.9 pence per share.
PV Crystalox Solar PLC Share Incentive Plan ("SIP")
The SIP is an employee share scheme approved by HM Revenue and Customs in accordance with the provisions of Schedule 8 to the Finance Act 2000. On 26 February 2008 awards were granted to United Kingdom employees of 500 shares each over a total of 37,000 ordinary shares of 2 pence. These 37,000 ordinary shares of 2 pence each were transferred from the EBT into the SIP. The shares in the SIP were subject to the share consolidation so that each holding of 500 ordinary shares of 2 pence became a holding of 192 shares of 5.2 pence following the 5 for 13 share consolidation in 2013.
During 2017 awards over 3,455 shares vested due to employees leaving the Group as good leavers due to redundancy and/or where the employees had held the award for more than five years and were able to withdraw the shares from the SIP without incurring a tax personal liability. The balance of 1,153 shares which had previously been within the SIP as a result of leavers forfeiting their shares was transferred to the EBT. At the end of 2017 the Group closed the SIP.
The Group recognised a total credit before tax of EUR132,000 (2017: EUR34,000) related to equity-settled share-based payment transactions during the year.
The number of share options and weighted average exercise price ("WAEP") for each of the schemes is set out as follows:
MVO WAEP
EDDSP* MVO price SIP*
Number Number Pence Number
---------------------------------------- ------- --------- -------- -------
Share grants and options outstanding
at 1 January 2017 - 1,200,000 79.7 4,608
Share grants and options granted during
the year 544,135 - - -
Share grants and options forfeited
during the year - - - (1,153)
Share grants vested during the year - - - (3,455)
Options exercised during the year - - - -
---------------------------------------- ------- --------- -------- -------
Share grants and options outstanding
at 31 December 2017 544,135 1,200,000 79.7 -
------------------------------------------ ------- --------- -------- -------
Exercisable at 31 December 2017 - 1,200,000 79.7 -
------------------------------------------ ------- --------- -------- -------
Share grants and options granted during - - - -
the year
Share grants and options forfeited
during the year - (800,000) - -
Share grants vested during the year - - - -
Options exercised during the year - - - -
---------------------------------------- ------- --------- -------- -------
Share grants and options outstanding
at 31 December 2018 544,135 400,000 79.7 -
------------------------------------------ ------- --------- -------- -------
Exercisable at 31 December 2018 - 400,000 79.7 -
------------------------------------------ ------- --------- -------- -------
* The weighted average exercise price for the PSP, SABP, PSA and SIP options is GBPnil.
27. Risk management
The main risks arising from the Group's financial instruments are credit risk, exchange rate fluctuation risks, interest rate risk and liquidity risk. The Board reviews and determines policies for managing each of these risks and they are, as such, summarised below. These policies have been consistently applied throughout the period.
Credit risk
Credit risk arises from cash and cash equivalents, as well as credit exposure to customers including outstanding receivables. The main credit risk arises from accounts receivable. All trade receivables are of a short-term nature, with maximum payment terms of 60 days, although the majority of customers currently have payment terms of 45 days. In order to manage credit risk, local management defines limits for customers based on a combination of payment history and customer reputation. Credit limits are reviewed by local management on a regular basis. Where appropriate, the Group requests payment or part payment in advance of shipment, which generally covers the cost of the goods. Different forms of retention of title are used for security depending on local restrictions prevalent on the respective markets. The maximum credit risk to the Group is the total of trade accounts receivable details of which can be seen in note 15.
Cash is not considered to be a high credit risk due to all funds being immediately available, consideration being given to the institution in which it is deposited and the setting of counterparty limits. All institutions used have a minimum Moody's credit rating of A3.
Exchange rate fluctuation risks
Significant cash funds are denominated in currencies other than the presentational currency of the Group. Excess cash funds not needed for local sourcing are exposed to exchange rate and associated interest fluctuation risks, particularly so in the United Kingdom. The exchange rate risk is based on assets held in currencies other than Euros.
The following exchange rates were used to translate individual companies' financial information into the Group's presentational currency:
Average Year-end
rate rate
--------------- ------- --------
Euro:US Dollar 1.1809 1.1444
Sterling:Euro 1.1302 1.1126
--------------- ------- --------
During 2018 the net gain on foreign currency adjustments was EUR0.3 million (2017: gain of EURnil).
In addition to the above, upon translation of net assets in the consolidation, there was a negative impact in 2018 of EUR1.0 million (2017: negative impact of EUR1.2 million) recording as a currency translation adjustment which is shown in the Consolidated Statement of Comprehensive Income as "other comprehensive income".
Interest rate risk
The Group has limited exposure to interest rate fluctuation risks, since the Group does not have any borrowings.
Sensitivity analysis of the accruals and loans outstanding at the year end has not been disclosed as these are all current and paid in line with standard payment terms.
The Group had a cash balance at the end of 2018 of EUR54.0 million (2017: EUR26.9 million) and places these cash funds on deposit with various quality banks subject to a counterparty limit of EUR15 million. Accordingly, there is an interest rate risk in respect of interest receivable which amounted to EUR0.1 million in the year (2017: EUR0.1 million). The Group is cash positive and current interest rates are low. The risk of interest rates falling is considered small and in any case would have a small impact on the Group's income statement and cash flows. Group management considers that in the medium term it is more likely that interest rates might rise. The impact of interest rate rises would positively impact the Group's profits and cash flow.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
On 31 December 2018 the Group had a net cash balance of EUR54.0 million (2017: EUR26.9 million) and this together with cash flow projections from the cash conservation plan indicate, assuming the projections are broadly correct, that the Group will have adequate cash reserves until at least twelve months beyond the signing of the accounts.
Financial assets and liabilities
Fair value of financial instruments
There is no significant difference between the book values and fair values of the financial assets and liabilities of the Group and the latter are reviewed on a regular basis to ensure that no such exposure arises or, if it does, to enable the Group to take action to mitigate or eliminate any such potential loss. The carrying value of financial assets and liabilities is summarised in the table below:
2018 2017
EUR'000 EUR'000
--------------------------------------------- -------- --------
Financial assets measured at amortised cost:
Cash and cash equivalents 53,964 26,881
Accounts receivable 40 1,548
Prepaid expenses and other assets 537 22,820
--------------------------------------------- -------- --------
54,541 51,249
--------------------------------------------- -------- --------
Financial assets measured at amortised cost:
Accounts payable trade (99) (1,037)
Accrued expenses (911) (806)
Provisions - (1,385)
--------------------------------------------- -------- --------
Total tax charge/(credit) (1,010) (3,228)
--------------------------------------------- -------- --------
Capital management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns to shareholders and other stakeholders and to maintain an optimal capital structure that strikes the appropriate balance between risk and the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group defines capital as all elements of equity.
The Group's capital (plus its cash and cash equivalents) is set out in the following table. The Group is not subject to any externally imposed capital requirements.
2018 2017
EUR'000 EUR'000
---------------------------------------- -------- --------
Cash and cash equivalents (see note 14) 53,964 26,881
Total net cash 53,964 26,881
---------------------------------------- -------- --------
Total equity 52,338 51,770
---------------------------------------- -------- --------
The Group is net cash positive and therefore does not have any gearing. Accordingly, the leverage ratio has no meaning and has not been calculated.
28. Calculation of fair value
There are no publicly traded financial instruments (e.g. publicly traded derivatives and securities held for trading and available-for-sale securities) nor any other financial instruments held at fair value.
29. Contingent liabilities
The Group did not assume any contingent liabilities for third parties. No material litigation or risks from violation of third parties' rights or laws are pending at the time of approval of these financial statements.
30. Other financial obligations
Lease agreements (operating leases)
The leases primarily relate to rented buildings and have terms of no more than five years. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
As at 31 December
----------------------- -------------------
2018 2017
EUR'000 EUR'000
----------------------- --------- --------
Less than one year 392 555
Two to five years - 919
Longer than five years - -
----------------------- --------- --------
392 1,474
----------------------- --------- --------
The above represent the contractual obligation at balance sheet date.
There were no significant purchase commitments at the year end.
31. Related party disclosures
Related parties as defined by IAS 24 comprise the senior executives of the Group, including their close family members, and also companies that these persons could have a material influence on as related parties as well as other Group companies. During the reporting year, none of the shareholders had control over or a material influence in the parent company.
Transactions between the Company and its subsidiaries have been eliminated on consolidation.
The remuneration of the directors, who are the key management personnel of the Group, is set out in the audited part of the Directors' Remuneration Report.
32. Dividends and return of cash
No dividends were paid in 2018 (2017: EURnil).
33. Post-balance sheet events
There are no significant post-balance sheet events.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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