Final Results

RNS Number : 1584M
Directa Plus PLC
26 April 2018
 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

 

26 April 2018

 

Directa Plus plc

("Directa Plus" or the "Company" or the "Group")

 

Final Results

 

Directa Plus plc (AIM: DCTA), a leading producer and supplier of graphene-based products for use in consumer and industrial markets, is pleased to announce its final results for the year ended 31 December 2017.

 

Increased commercial traction

·   Significant year as Directa Plus becomes the leading graphene producer with the highest number of commercially-available graphene-enhanced products

·   Increased sales momentum with Total Income (revenues plus other income, including Government Grants) increasing by over 50% to €1.23 million (2016: €0.82 million)

·   More than doubled the number of active customers to 35 from 16 in the previous year

·   Produced c. 3 tonnes of G+ materials and sold c. 15,000 metres of G+ printed fabric

·   Key customers expected to launch further clothing and environmental solutions as well as asphalt additives incorporating G+ graphene in 2018

·   Established a clear commercial lead in textiles:

o  The Group believes its contract with Alfredo Grassi represents the largest amount of textile material to be treated with graphene nanoplatelets by any company to date

o  Colmar launched an expanded collection of 16 garments incorporating G+ in 2017 and a new winter collection of 31 garments in 2018

·   Only company with a unique, disruptive and commercially-available graphene-based solution for the highly-effective treatment of produced water in the oil & gas industry:

o  Two leading Romanian integrated oil & gas companies, OMV Petrom and GSP SA, signed agreements for field testing Grafysorber® product

o  Post year-end, the Group signed an agreement with Sartec Srl (part of Saras Group) to jointly develop a continuous commercial-scale Grafysorber®-based industrial system for treating oil-contaminated produced water in the oil & gas industry

 

Established at least an 18-24 month lead over competitors

·   Industry-leading production and capacity enabling Directa Plus to produce consistent, certified production at high tonnages and at a price that can satisfy the requirements of large supply chains

·   Fully operational Advanced Development Area ("ADA") on-site that enables customers to significantly reduce their time-to-market and to certify production

·   Only chemical-free, graphene-based products selling into the textile market that are independently certified as non-irritating and hypoallergenic

·   Now able to offer complete textile package, from supply of G+ to graphene-treated fabric and consultancy services - capturing all of the value chain

·   Grafysorber® is at least five times more effective than the technologies presently used for water decontamination, adsorbing more than 100 times its own weight of oily pollutant, proven through extensive testing

 

 

 

 

Key Performance Indicators and financial summary

 

2017

2016

Revenue from product and service sales (€'m)

0.95

0.74

Total Income* (€'m)

1.23

0.82

EBITDA** (€'m)

(3.16)

(3.67)

Adjusted loss after tax*** (€'m)

(3.95)

(4.26)

Cash and cash equivalents (€'m)

6.93

10.57

Number of active customers

35

16

Total number of patents granted

            15

14

 

* Total Income comprises revenue from product and service sales (€0.95m), and other income including government grants (€ 0.28m)

** EBITDA represent results from operating activities before depreciation and amortisation of €0.63m (2016: €0.57m)

***There are no adjustments related to 2017 losses. 2016 adjusted loss after tax stated before non-recurring IPO costs (€0.43m); the non-cash cost of the embedded derivative associated with a convertible loan (€1.04m); exceptional write down (€0.84m) of receivables from a customer and related increase of inventory value (€0.15m).

 

 

Giulio Cesareo, Chief Executive Officer of Directa Plus, said: "We are pleased to report a return to revenue growth, driven by increased sales of our graphene-based products, particularly in the textiles market where we sold 15,000 metres of Graphene Plus printed fabric. Our focus in 2017 was to concentrate on near-term opportunities in the textiles and environmental markets and we made significant progress in this. We ended the year with 35 active customers, and we believe that we have established at least an 18 - 24 month clear lead over our competitors based on our proprietary chemical-free manufacturing process and significant customer engagement. 

 

"We are excited about Directa Plus' commercial prospects in the coming year. While the textile and environmental markets are expected to continue to be the main contributors to revenue, we expect to experience strong growth in activity within our other two target markets of composite materials and elastomers. As a result, we anticipate increased revenue generation from our active clients and with more customers preparing to launch products incorporating G+, the business is well-placed to deliver significant year-on-year growth in 2018 in line with market expectations."

 

 

Enquiries

 

Directa Plus plc


Giulio Cesareo, CEO

Marco Ferrari, CFO

+39 02 36714458



Cantor Fitzgerald Europe (Nominated Adviser and Broker)


Marc Milmo, David Foreman (Corporate Finance)

Alex Pollen (Sales)

+44 20 7894 7000



Luther Pendragon (Financial PR)


Harry Chathli, Claire Norbury, Alexis Gore

+44 20 7618 9100

 

 

About Directa Plus

 

Directa Plus is one of the largest producers and suppliers of graphene-based products for use in consumer and industrial markets worldwide. By incorporating Directa Plus' unique graphene blends, identified by the G+ brand, its customers can enhance the performance of their end products without significantly increasing their cost. Directa Plus graphene-based products are natural, chemical-free, sustainably produced and tailored to specific customer requirements for commercial applications such as smart textiles, tyres, composite materials and environmental solutions. 

 

Established in 2005, the Company has a patented technology process and a portfolio of product and application patents. It produces its graphene-based products at its own factory in Lomazzo, Italy, with a scalable and exportable manufacturing model enabling the set-up of additional production at customer locations to reduce transport costs, waste and time-to-utilisation. Directa Plus partners with customers to enable them to offer the high-performance benefits of graphene in their own products.

 

 

Chairman's Statement 

 

I am proud to be presenting the results for our first full year on AIM, following our listing in May 2016. It has been a transformational year for Directa Plus, one during which we established ourselves as the leading company with the highest number of graphene-enhanced end products for purchase by our customers than any other graphene producer. The results reflect the benefit of the commercialisation strategy put into place by the Board and our excellent management team.

 

Overall, we are pleased with the significant commercial progress the business has made. The progress we have achieved in 2017 in implementing our strategy is discussed in the Chief Executive's Review.

 

Our G+ graphene is already incorporated into several commercial applications in the smart textiles, environmental, composite materials and elastomers markets. However, in 2017, the Group increased its focus on fulfilling near-term opportunities in the smart textiles and environmental markets, delivering solid growth in the business. We now have 35 active customers, more than double the number of the previous year. These active customers are defined as those who have moved beyond the "sampling" stage and into their product commercialisation phase.

 

Total Income increased by over 50% to €1.23 million compared to €0.82 million last year, with revenue from the sale of graphene-based products and services increasing by 29% to €0.95 million. We believe that Directa Plus has a clear lead over its competitors and we plan to capture the growth opportunities from our existing commercial engagements as well as delivering against a significant pipeline of other prospects.

 

Established at least an 18-24 month clear lead over competitors

 

The Board considers that the Group has now established a clear lead of at least 18 to 24 months over our competitors in the various industry markets in which we operate. Most importantly, Directa Plus is able to produce consistent, certified production at high tonnages and at a price that can satisfy the requirements of large supply chains. We are not aware of any other company that can match our industry-leading capacity of 30 tonnes per annum of pristine, chemical-free graphene-based material. In addition, our on-site Advanced Development Area ("ADA") has enabled our customers both to reduce their time-to-market and to certify production. It is for these vital reasons, our customers tell us, that they have elected to work with Directa Plus.

 

In our key vertical markets, Directa Plus is the only company that has graphene-based products selling into the textile industry that are independently certified as non-irritating and hypoallergenic. An additional advantage is that our process to produce our graphene-based products is chemical-free using only physics that results in our G+ materials being non-toxic and non-cytotoxic. This year we also successfully expanded to a full service textile offer: from the supply of G+ materials to the ready-to-use graphene-enhanced fabric and value-added consultancy services, we can cater to whatever our clients require. This is why global household brands have chosen to launch clothing and accessories that are enhanced by our products. In the environmental vertical, our proprietary product Grafysorber® is proving to be at least five times more effective than the technologies presently used for water decontamination. Grafysorber® can adsorb more than 100 times its own weight of oily pollutant and provides a step-change in performance. This is not only a significant advantage over incumbent technologies, but also over any potential competitor. 

 

Directa Plus is able to produce differing grades of G+ material that can be specifically designed for different customer products and applications, which can then be utilised directly in the supply chains of large companies, without altering established production processes, thereby reducing the time-to-market. We have a proven, low cost, modular, highly scalable, high-yield process that is able to produce revenues at each phase of production. The Board believes its clear and focused strategy, together with a highly motivated and talented management team, patented technology and products, and strong financial discipline, results in Directa Plus being strongly positioned to realise sustainable, long-term growth.

 

Finally, I would like to thank our customers, partners and shareholders for their continued support. I would like to thank Luca Lodi-Rizzini, who resigned from the Board of Directors, with effect of 26 April 2018, for personal reasons. His expertise and experience have been a great support to Directa Plus during the IPO process and beyond, and we wish him all the best for the future. Above all, I would like to thank our employees for their hard work and enthusiasm, which has enabled the business to achieve significant progress during 2017. We are deepening our relationships with existing and potential customers and working with them to provide more comprehensive solutions to incorporate our G+ graphene into their products. There is momentum building within the Group that puts Directa Plus on a very solid footing for the future.

 

Sir Peter Middleton

Chairman

 

 

 

 

Chief Executive Officer's Review

 

Positioned for strong growth

 

We are pleased to report that Directa Plus made excellent commercial and operational progress during 2017 that has reinforced the Group's leading position in the market sectors in which it operates. We believe that we have laid the foundations for a strong increase in revenue in 2018 and beyond. During the year, Total Income grew by over 50% to €1.23 million due to our increased focus on nearer-term revenue opportunities, in particular in two of our key markets: textiles and environmental.

 

As Sir Peter Middleton discussed in his Chairman's statement, the Board believes that the Group has now established a clear commercial lead over our competitors. Directa Plus has no hurdles to overcome in terms of our proprietary technology, production capability and capacity or our advantageous cost structure, and we are able to deliver product to meet the exacting requirements of all customers. We have a unique proposition - with a sustainable, chemical-free product offering - and a rich pipeline of projects. Our products and processes are protected by a portfolio of patents, which now stands at 18 granted and 19 pending. Consequently, we believe Directa Plus has at least an 18 to 24 month lead over any other company in the markets we serve.

 

During the year, the Group's strategy was to focus on markets that had the most opportunity to deliver higher sales in the short to medium term. We were successful in applying our cost structure, key resources, customer relations and commercial channels to achieve this goal. 

 

Significant orders were placed by our customers and our G+ graphene has been delivered to a much larger number of clients, with many moving from the proof-of-concept stage through to the commercial phase and launched products into the market. I am delighted to report that we ended 2017 with 35 active clients compared with 16 clients in the previous year. Hence, the growth in revenue from products and services increased by 29% to €0.95 million. The Group expects to generate increased revenues from these active clients in 2018 as well as helping other clients commence their commercialisation programmes.

 

Most importantly, we have established a clear commercial positioning that is focused purely on graphene and, thanks to the strength of our G+ products, we do not need to pursue material blends or revenue from non-graphene-related activities.

 

It is testament to our position within the industry that the National Graphene Association, the main organisation and body in the US advocating and promoting the commercialisation of graphene and addressing critical issues such as standards and policy development, has added Directa Plus as a new Corporate Partner and I am pleased to have joined the organisation's Advisory Board.   

 

Focused on key markets

 

As part of our strategy, Directa Plus is focused on the key industry markets where it has an established competitive advantage and where it feels that it can achieve most success in the short to medium term. The two primary markets are textiles and environmental, followed by composite materials and elastomers. During 2017, the Group made significant commercial progress across these four markets.

 

Textile

 

Directa Plus is uniquely positioned in the textiles market as it is the only graphene-based product commercially available that is independently certified as non-toxic and hypoallergenic as well as being sustainably produced. As a result, customers can leverage the performance enhancements provided by incorporating our G+, such as thermal regulation, heat dissipation, data transmission and no odour effect, while being assured that the product is safe for human skin and the environment. 

 

In 2017, sales into the textiles market increased to €0.77 million compared with €0.08 million in 2016 as we sold approximately 15,000 metres of G+ printed fabric as more customers launched more end-products into the market enhanced with the Group's G+.

 

Alfredo Grassi

The Group entered into a Joint Development Agreement ("JDA") with Alfredo Grassi S.p.A. ("Grassi"), a leading manufacturer of customised protective clothing, workwear and uniforms for private and public organisations globally. This followed detailed testing of Directa Plus' graphene by Grassi to assess the potential benefits that could be delivered by incorporating the Group's graphene planar thermal circuit into their workwear products. This successfully progressed into a €0.6 million contract to supply G+ materials to create graphene-enhanced employee clothing for an Italian state-owned company. The Board believes this order represents the largest amount of textile material to be treated with graphene nanoplatelets by any company to date. It is also testament to the strength of our offer as we have met the more-specialised requirements of the workwear sector. Grassi has a leading market position in the provision of workwear and customised uniforms across a range of sector verticals. In Italy alone, there are approximately 300,000 law enforcement, fire and safety and military personnel being dressed top to toe with Grassi clothing that has to be renewed every three years. As a result, we are very excited about the opportunities that this relationship with Grassi could yield for the Group.

 

Colmar

Colmar, the high-end sportswear company, launched a collection of 16 garments incorporating G+ materials during 2017 and, post period end, launched its third G+ winter collection consisting of 31 garments. This included, for the first time, graphene ski trousers for men and women.

 

Other projects

In addition to Grassi, the Group signed a JDA with a leading global product design and sport performance brand and with a global leader in branded lifestyle apparel, footwear and accessories. These companies greatly value G+ materials for their non-toxicity and this is a proven and major competitive advantage for Directa Plus.

 

Directa Plus was awarded a grant by the European Regional Development Fund via the Lombardy regional government in respect of a €1 million research project into Graphene for Advanced Textiles and Fashion ("GRATA"), namely, the development of G+ membranes to enhance the thermal and electrical performance of membranes for fashion applications. The project is a collaboration between Directa Plus, the Politecnico of Milan University and two other companies, with Directa Plus as project leader. Directa Plus is investing €310k and will receive a grant of €126k following the completion of the project in December 2018. The grant is aligned with the Group's textile development strategy, and targeted to reduce costs and expand the range of high performance G+ textile products.

 

Certifications

During the year, the Group achieved independent certifications that G+ textiles are non-irritating and safe for human skin, including a hypoallergenic and dermatologically tested certification confirming that G+ textiles do not cause allergic reaction and irritations in human skin. The Group's production process is chemical-free and these certifications are key for the widespread adoption of G+ materials in the textiles industry and represent an additional source of competitive advantage.

 

In addition, post period end, the U.S. Patent and Trademark Office issued notification that it had granted the Group a patent covering the product and application of its 'flame retardant composition comprising graphene nanoplatelets', which was subsequently also granted by the Chinese Patent Office. The ability of G+ to confer flame retardancy on an object without the use of toxic chemicals is another key differentiator for Directa Plus, particularly in respect of the textiles market where manufacturers generally achieve flame retardancy through the addition of toxic chemicals to an object or the use of a chemical after-treatment. This is especially relevant for workwear, such as for emergency services and manufacturing, and sportswear, such as motorsports. 

 

Environmental

 

The Group's G+ product for the environmental industry, Grafysorber®, has a unique oil adsorption capacity that has been substantiated through extensive testing and commercial trials over the last three years in Italy, Romania and Nigeria - and is the only commercially-available graphene-based solution for treating produced water in the oil & gas industry.  Data collected demonstrates Grafysorber® to be at least five times more effective than the technologies presently used for water decontamination, adsorbing more than 100 times its own weight of oily pollutant. It has also received public endorsement from leading companies such as Eni, one of the world's largest oil & gas companies, which presented test results at the 6th International Conference on Environmental Chemistry and Engineering in Rome.

 

Romania

The Group signed agreements with two leading Romanian integrated oil & gas companies for field testing Grafysorber® for treating oil-contaminated water. OMV Petrom completed the field test at an oil treatment plant, with better-than-expected results in the continuous decontamination of produced water. Separately, GSP SA is due to commence field tests during H1 2018.  The Board is confident that these field tests will lead to Grafysorber® being established by OMV Petrom and GSP SA as the preferred solution for their upstream decontamination and oil recovery activities.

 

Italy

In collaboration with Eni, Directa Plus delivered products incorporating Grafysorber® for decontamination activities in the oil and gas sector in Nigeria. This followed the successful testing last year of Grafysorber® by Eni.

 

Post period end, as announced on 21 March 2018, the Group achieved a significant milestone with the signing of a commercial agreement with Sartec Srl (part of Saras Group, one of the largest refineries in Europe), to jointly develop a continuous commercial-scale industrial system using the Group's Grafysorber® product, for treating oil-contaminated produced water in the oil & gas industry. Sartec will commence building the system in Q2 2018, which will be capable of treating up to 500 cubic metres per day of produced water and is expected to be completed by the end of the year. In conjunction with this, both parties will work together to generate industrial-scale demand by leveraging the global footprint of the Sartec sales force and commercial opportunities activated by Directa Plus.

 

This agreement with Sartec follows a successful joint research proof-of-concept phase conducted over the last eight months. The ongoing tests continue to demonstrate Grafysorber®'s ability to outperform existing technologies in treating oil-contaminated produced water. As such, this represents another significant endorsement by an established company within the oil, energy and environment sector. 

 

Middle East

Directa Plus continued to progress discussions in the Middle East in respect of using Grafysorber® for the decontamination of produced water from enhanced oil recovery. The Group is enlarging its upstream and downstream commercial network in the region as it potentially represents a substantial market opportunity with Grafysorber® being a unique solution to the problem.

 

Grafysorber® development

During the first half of the year, the Group signed an agreement with the IIT (Istituto Italiano di Tecnologia), a major and well-respected Italian research centre with more than 1,200 researchers and scientists, to develop the second generation of Grafysorber® for water treatment applications. The three-year agreement has two primary work streams. First, to develop a treatment for the external fabric of Grafysorber® booms to increase the penetration of oil and prohibit the adsorption of water, thereby maximising the oil absorption capability of the Grafysorber®. The second objective is to enable the Grafysorber® to form a porous 3D structure based on a polymeric network that "glues" the individual grains together. Both of these improvements will increase the adsorption capability of Grafysorber® and the ease with which it can be used.

 

Composite Materials

 

In the composite materials market, the Group's G+ products can be incorporated into a variety of materials to enhance their existing properties or to confer new ones. These properties range from mechanical reinforcement to electrical/thermal conductivity to barrier and tribological properties.

 

In particular, we are working to produce a graphene-enhanced asphalt additive, Eco Pave, which is aligned with our development strategy for Grafysorber®: after being used to treat an oil spill or for decontamination of produced water, the exhausted material could be utilised in asphalt to increase its mechanical and thermal properties. During the year, the Group was awarded a grant from the European Regional Development Fund in respect of a project focusing on the development of innovative asphalts and bitumen based on G+. Directa Plus will provide the graphene-based products, and will work in collaboration with partners to develop Eco Pave. As part of this project, we signed an agreement with Iterchimica S.r.l., an established producer and distributor of specialised additives for asphalt, and received an order during the year from Iterchimica for graphene to be used in a pilot test of Eco Pave in 2018.

 

In other composite activities, the Group is working with a leading manufacturer of brake pads, which placed an order during the year for two different grades of G+ for testing, which is now complete. This followed the completion in H2 2016 of a joint R&D project conducted under a JDA signed in 2015.

 

Also during the year, a global luxury accessories producer launched its first collection of spectacles enhanced by G+. The new spectacles range was developed under a two-year JDA signed in 2015 and the Group continues to conduct development work with this customer.

 

Elastomers

 

In the elastomers market, the Group's G+ represents a disruptive technology that can be incorporated into end-products, in particular tyres and rubber hoses, to enhance their technical performance with properties such as puncture resistance and strength. Specifically for tyres, G+ simultaneously reduces rolling resistance and increases grip, resulting in a tyre that is faster in motion and safer as well as enabling a reduction in fuel consumption. In this sector, the route-to-market is potentially longer than adoption in other markets, but the Board believes that it represents a significant opportunity in the medium- to long-term.

 

During the year, the Group received orders for over 250 kilos of G+ from Vittoria for incorporation into its range of graphene-enhanced bicycle tyres and wheels. Vittoria is one of the Group's longest-established partners and the performance of cyclists using the G+ tyres continues to be strong with victories in various competitions.

 

Post period, and as announced on 23 April 2018, the Group entered into a strategic collaboration agreement with Marangoni S.p.A., a global leader in the tyre retreading industry and in the development of associated technologies and machinery, to develop a bespoke version of our G+ to improve the performance of Marangoni compounds in truck and bus tyre retreading. This is an important milestone for Directa Plus as the Group is leveraging the significant experience gained in the bike tyre industry to transition into the automotive markets, which we believe is a key target market for future growth. The Group's engagement in the automotive tyre industry was further supported, also post period, with the Ufficio Brevetti e Marchi (Italian Patent and Trademark Office) granting the Group a patent for the product and application of its new graphene-based solution for enhancing the performance of tyres.

 

 

Advancements in Production and R&D

 

We maintained investment in our Continuous Improvement Project to enable a substantial increase in production capacity and efficiency. In particular, the continuous development of the production process was focused on the expansion and exfoliation phases to enable new potential sales from the products of these phases. We are now able to produce 30 tonnes per annum of pristine, chemical-free graphene-based material and have a proven process to easily scale our production capacity to match the higher tonnages that we expect will eventually be needed by our customers.

 

We also sustained our R&D efforts, which is crucial in the fast-evolving market in which we operate. We consistently seek to innovate across our markets, but a key development is the progress we have made in improving the physical functionalisation of graphene, which enhances its properties. We are excited about the potential of this development, particularly for our activity in the composite materials market.

 

Outlook

 

The Board are excited about the Group's commercial prospects for the coming year. The Group has built strongly on the foundations that were established in 2016 and, as a result of the commercial progress made in 2017, we have entered 2018 with increased confidence of securing further significant orders.

 

In the textiles market, the Group continues to add new customers as well as having current customers launch larger numbers of graphene-enhanced products into the market. In the environmental market, the contract signed with Sartec to develop a continuous commercial-scale industrial system is receiving increased attention by key prospects and we expect the first commercial agreement to be signed during this year.

 

While the textile and environmental markets are expected to continue to be the main contributors to revenue, the Group expects to experience a strong increase in activity within its other two targeted markets of composite materials and elastomers. The Group anticipates that some customers will launch pilot programmes and others will move from proof-of-concept phase and launch products into the market.

 

As a result, the Group anticipates increased revenue generation from its active clients and with more customers preparing to launch products incorporating G+, the business is well-placed to deliver significant year-on-year growth in 2018 and beyond.

 

With the Group set to maintain its position and competitive lead, it anticipates entering into strategic commercial arrangements with some of the world's largest companies in its four key verticals, thereby laying the groundwork for future growth. The opportunities for G+ remain substantial and the Board continues to look to the future with optimism.

 

Giulio Cesareo

Chief Executive Officer

 

 

 

Chief Financial Officer's Review

 

Key Performance Indicators

 

The Board measures the performance of the Group through a number of important financial and non-financial KPIs. This was a strong year for Directa Plus as we improved on our KPIs, in line with the Board's expectation.

 

Financial Review

 

Revenue from product and service sales grew by 29% to €0.95 million, with the increase primarily due to sales into the textiles market, while Total Income increased by 51% to €1.23 million (2016: €0.82 million).

 

Other income, which mainly includes grants and R&D Expenditure Credit (RDEC) received by the Group, was €0.28 million (2016: €0.08 million), resulting in Total Income for 2017 of €1.23 million (2016: €0.82 million). Government grants value increased to €0.20 million (2016: €0.08 million). The increase was driven by grants that are directly supporting key development activities of the Group, namely the GRATA textiles project and the Eco Pave asphalts project, as described in the CEO review, which accounted for €0.06 million and €0.07 million respectively (2016: nil). Research and Development Expenditure Credit accounted for €0.08 million (2016: nil). RDEC is an Italian government incentive scheme designed to encourage companies to invest in R&D by providing a tax credit.

 

Additions in tangible assets of €0.35 million (2016: €0.38 million) mainly related to the purchase of industrial equipment to improve our manufacturing process and laboratory equipment to support the development of applications, particularly in our textile and environmental markets. Investment in intangible assets of €0.13 million (2016: €0.19 million) mainly related to development costs and IP activity. 

 

The loss after tax for the year was significantly reduced to €3.95 million compared with €6.42 million for 2016. The reduction was primarily due to the increased income generated in 2017, a €1.0 million decrease in finance expenses and the absence of expenses incurred in 2016 relating to the fair value adjustment of the embedded derivative associated with the convertible loan notes at IPO (€1.0 million). The EBITDA loss for the period was reduced to €3.16 million compared with €3.67 million loss for 2016, primarily due to increased income and lower bad debt expenses, which was partly offset by an increase in raw material and consumables expenses and employee benefits expenses. The increase in raw materials and consumables primarily related to the growth and development of our textile market.

 

On an adjusted basis, loss after tax for 2017 was €3.95 million (2016: €4.26 million loss) as per the table below:

 

  Adjusted loss after tax (€m)

2017

2016

Losses of the period

                 (3.95)

                     (6.42)

Non recurring IPO costs

-                                

                         0.43

Fair value movement of embedded derivative

-

                      1.04

Exceptional write-down of receivables

-

0.84

Inventory adjustment

-

(0.15)

Share based payment expenses costs

                     -

- 

Adjusted losses after tax

                 (3.95)

                     (4.26)

 

As at 31 December 2017, inventories totaled €1.0 million (2016: €0.6 million), mainly due to €0.3m higher finished product inventory to ensure Directa Plus can supply to key clients in a timely manner as it receives increasing orders.

 

Cash and cash equivalents at 31 December 2017 were €6.9 million (2016: €10.6 million) with the reduction principally due to:

·     reduced cash outflow from operating activities totaling €2.8 million (2016: €3.2 million);

·     modest investments in tangible and intangible assets of €0.5 million (2016: €0.7 million) for reasons set out above; and

·     financing activities equal to €0.3 million (2016: increase of €13.4 million mainly due to proceeds from the IPO).

·     Exchange losses on cash and cash equivalent equal to €0.1 million (2016: €1 million) does not represent a cash outflow and is mainly due to the effect of movement of Sterling against Euro on Sterling deposits.

 

Marco Ferrari

Chief Financial Officer

 

 


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


In euro

Note


31 Dec 2017

31 Dec 2016



Continuing operations







Revenue

3


952,199

738,028



Other income

   3/4


281,493

79,733



Changes in inventories of finished goods and work in progress

5


390,291

450,843



Raw materials and consumables used

6


(607,338)

(169,643)



Employee benefits expenses

7


(2,203,558)

(1,784,094)



Depreciation and amortisation

12/13


(633,784)

(572,402)



Other expenses

8


(1,973,687)

(2,981,032)



Results from operating activities



(3,794,384)

(4,238,567)










Fair value movement on embedded derivative



-

(1,039,473)



Net Finance expenses

10


(151,808)

(1,146,905)



Net finance costs



(151,808)

(2,186,378)










Loss before tax



(3,946,192)

(6,424,945)



Tax expense

11


(1,239)

-



Loss after tax from continuing operations



(3,947,431)

(6,424,945)

















Loss of the year



(3,947,431)

(6,424,945)


 

 


Other Comprehensive income items that will not be reclassified to profit or loss







Defined Benefit Plan re-measurement gains and losses

20


(4,704)

150



Other comprehensive (expense)/income for the year (net of tax)



(4,704)

150



Total comprehensive (expense)/income for the year



(3,952,135)

(6,424,795)



Loss attributable to







Owner of the Parent



(3,948,133)

(6,422,019)



Non-controlling interests



702

(2,926)






(3,947,431)

(6,424,945)






 

Total comprehensive (expense)/income attributable to:







Owners of the Company



(3,952,837)

(6,421,869)



Non-controlling interests



702

(2,926)






(3,952,135)

(6,424,795)



Loss per share







Basic loss per share

23


(0,09)

(0.19)



Diluted loss per share

23


(0.09)

(0.19)


 

 

CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION



Group

Company



In euro

Note

31-Dec-17

31-Dec-16

31-Dec-17

31-Dec-16



Assets








Intangible assets

12

1,572,309

1,726,602

-

-



Investments

14

-

-

14,180,336

11,057,438



Property, plant and equipment

13

1,284,412

1,283,184

-

-



Non-current assets


2,856,721

3,009,786

14,180,336

11,057,438



Inventories

5

995,666

606,065

-

-



Trade and other receivables

15

1,161,711

1,170,338

109,240

313,094



Cash and cash equivalent

17

6,929,446

10,570,211

4,493,006

8,011,689



Current assets


9,086,823

12,346,614

4,602,246

8,324,783



Total assets


11,943,544

15,356,400

18,782,52

19,382,221











Equity








Share capital

18

142,628

142,628

142,628

142,628



Share premium

18

19,973,996

19,973,996

19,973,996

19,973,996



Retained Earnings

18

(10,250,225)

(6,552,965)

(1,380,478)

(766,745)



Equity attributable to owners of Group


9,866,399

13,563,659

18,736,146

19,349,879



Non-controlling interests


22,930

22,228

-

-



Total equity


9,889,329

13,585,887

18,736,146

19,349,879











Liabilities








Loans and borrowings

19

211,791

454,600

-

-



Employee benefits provision

20

282,031

227,358

-

-



Non-current liabilities


493,822

681,958

-

-



Loans and borrowing

19

244,780

238,134

-

-



Trade and other payables

21

1,315,613

850,421

46,436

32,342



Current liabilities


1,560,393

1,088,555

46,436

32,342



Total liabilities


2,054,215

1,770,513

46,436

32,342



Total equity and liabilities


11,943,544

15,356,400

18,782,582

19,382,221











The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own statement of comprehensive income in these financial statements. The Company loss after tax for the year was €900,374.

 

The accompanying notes form part of these financial statement


 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY














Share

Share

Retained Earnings

Total

Non-controlling

Total

In euro

capital

premium



interests

equity

Balance at 31 December 2015

503,100

3,885,816

(6,281,317)

(1,892,401)

-

(1,892,401)

Total comprehensive (expense)/income for the period

-

-

-

-

-

-

Loss of the year

-

-

(6,422,019)

(6,422,019)

(2,926)

(6,424,945)

Total other comprehensive (expense)/income

-

-

150

150

-

150

Total comprehensive (expense)/income for the period

-

-

(6,421,869)

(6,421,869)

(2,926)

(6,424,795)

Transactions with owners

-

-

-

-

-

-

Share reduction

(439,649)

-

439,649

-

-

-

Cancellation of share premium account

-

(3,885,816)

3,885,816

-

-

-

Initial Public Offering

55,986

16,739,965

-

16,795,951

-

16,795,951

Expenditure relating to the issuance of shares

-

(1,960,652)

-

(1,960,652)

-

(1,960,652)

Share-based payment

-

-

154,068

154,068

-

154,068

Non-Controlling Interests on Directa Textiles Solutions

-

-

-

-

25,154

25,154

Convertible loan (embedded derivative)

23,191

5,194,683

1,670,686

6,888,560

-

6,888,560

Balance at 31 December 2016

142,628

19,973,996

(6,552,965)

13,563,659

22,228

13,585,887

Total comprehensive (expense)/income for the year

-

-

-

-

-

-

Loss of the year

-

-

(3,948,133)

(3,948,133)

702

 

 (3,947,431)

Total other comprehensive (expense)/income

-

-

(4,704)

(4,704)

-

(4,704)

Total comprehensive (expense)/income for the period

-

-

(3,952,837)

(3,952,837)

702

(3,952,135)

Transaction with owners

-

-

-

-

-

-

Share-based payment

-

-

255,578

255,578

-

255,578

Non-controlling interests on Directa Textiles Solutions

-

-

-

-

-

-

Balance at 31 December 2017

142,628

19,973,996

   (10,250,225)

9,866,399

22,930

9,889,329


 

COMPANY STATEMENT OF CHANGES IN EQUITY









Share

Share

Retained

Total



In euro

Capital

premium

earnings

equity



Balance at 31 December 2015

503,100

3,885,816

(3,636,996)

751,920



Loss for the year

-

-

(3,279,968)

(3,279,968)



Share reduction

(439,649)

-

439,649

-



Cancellation of share premium account


(3,885,816)

3,885,816

-



Initial Public Offering

55,986

16,739,965

-

16,795,951



Expenditure relating to the issuance of shares

-

(1,960,652)

-

(1,960,652)



Share-based payment reserve

-

-

154,068

154,068



Convertible loan (embedded derivative)

23,191

5,194,683

1,670,686

6,888,560



Balance at 31 December 2016

142,628

19,973,996

(766,745)

19,349,879



Loss for the year

-

-

(900,374)

(900,374)



Share-based payment reserve

-

-

286,641

286,641



Balance at 31 December 2017

142,628

19,973,996

(1,380,478)

18,736,146









 

 

 

 

 

 


CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS




Group

Company



In euro                                                           Note

Note

2017

2016

2017

2016











Cash flows from operating activities








Loss for the year before tax


(3,946,191)

(6,424,945)

(900,374)

(3,279,970)



Adjustments  for:








Depreciation                                                  

13

347,042

317,258

-

763



Amortisation of intangible assets                        

12

286,742

267,105

-

-



Bad debt expense                                              

15

16,738

909,763

-

70,903



Fair value movement on derivative


-

1,039,473

-

1,039,473



Share-based payment expense       


255,578

154,068

163,743

154,068



IPO Costs


-

427,903

-

427,903



Finance income                                            

10

(5,501)

(4,230)

-

-



Finance expense                                           

10

157,309

1,151,136

131,647

1,117,709



Tax expenses


(1,239)








(2,889,523)

(2,162,469)

(604,984)

(469,151)



Increase/Decrease in:








- inventories                                                    

5

(390,291)

(450,843)

-

-



- trade and other receivables                         

15

(3,394)

(654,509)

203,854

(349,603)



- trade and other payables                               

21

442,867

(8,101)

14,094

(108,440)



- provisions and employee benefits             

20

44,051

56,406

-

-



Net cash from operating activities


(2,796,291)

(3,219,516)

387,036

(927,194)











Cash flows from investing activities








Interest received                                              

10

5,501

4,230

-

- 



Investment in intangible assets                       

12

(122,347)

(168,716)

-

-



Investment in subsidiary


-

-

(3,000,000)

(4,000,000)



Loan to associate 


-

(50,939)

-

(50,939)



Consideration paid for acquisition of subsidiary net of cash acquired


-

(58,718)

-

-



Acquisition of property, plant and equipment    

13

(340,071)

(377,246)

-

-



Net cash used in investing activities


(456,917)

(651,389)

(3,000,000)

(4,050,939)











Cash flows from financing activities













-



Proceeds from IPO


-

14,408,156

-

14,408,156



Interest paid on loans and borrowings                                                      

10

(20,481)

(52,195)

(3,378)

(37,519)



Repayment of borrowings                                  

19

(236,164)

(989,696)

-

(811,817)



Net cash from (used in) financing activities


(256,645)

13,366,265

(3,378)

13,558,820



Net increase (decrease) in cash and cash equivalent


(3,509,853)

9,495,360

(3,390,414)

8,580,687



Cash and cash equivalent at beginning of the year


10,570,211

2,031,650

8,011,689

319,339



Exchange (losses)/gains on cash and cash equivalents


(130,912)

(956,799)

(128,269)

(888,337)



Cash and cash equivalent at end of the year


6,929,446

10,570,211

4,493,006

8,011,689


 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017

1.     Basis of preparation

 

a)     Statement of compliance

 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) as adopted for use in the European Union and with those parts of Company Act 2006 to companies preparing their financial statements under the adopted IFRS.

 

The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the preceding year, unless otherwise stated.

 

The financial statements have been prepared on a going concern basis as since the Directors believe that the Group has adequate resources to remain in operation for the foreseeable future.

 

All notes, except as otherwise indicated, are presented in Euros ("€") and all values are rounded to the nearest thousand (€'000) except where otherwise stated.

 

b)     Basis of consolidation

 

I.      Subsidiaries

 

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

 

The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests

 

II.    Transaction eliminated on consolidation

 

The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

 

III.   Non-controlling interest

 

Non-controlling interest in the net assets of the consolidated subsidiaries are identified separately from the Group's equity. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholder's share changes in equity since the date of the combination. The non-controlling interest's share of losses, where applicable, are attributed to the non-controlling interests irrespective of whether the non-controlling shareholders have a binding obligation and are able to make an additional investment to cover the losses. 

 

c)     Functional and presentation currency

 

These financial statements are presented in Euro ("€") and is considered by the Directors to be the most appropriate presentation currency to assist the users of the financial statements. The functional currency of the Company and operating subsidiary is Euro ("€").

 

d)     Use of estimates and judgements

 

The preparation of the financial statements in conformity with IFRS, as adopted by the EU, requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period.

 

Critical estimates and assumptions that have the most significant effect on the amounts recognised in the financial statements and/or have a significant risk of resulting in a material adjustment within the next financial year are as follows

 

I.      Carrying value of capitalised development costs

 

The Group capitalises development costs provided the recognition conditions meet the criteria set out in IAS 38.   During the year costs have been capitalised in relation to projects to enhance and develop the production process for G+ Graphene.  The majority of the capitalised costs relate to internal employee costs and Management are able to separately identify time spent on these projects through the Group's internal time card management program.  Management and the directors continually assess the commercial potential of the technology and products in development.  The costs capitalised in period have resulted in the development of new IP and Management has assessed that there is sufficient evidence to support that economic benefit will flow.

 

Intangible assets are amortised over their expected or known useful lives on a straight-line basis beginning from the point they are available for use. The estimated useful life is the lower of the legal duration (term of patents - usually 20 years) and the useful economic life.  The estimated useful lives of intangible assets are regularly reviewed. Management currently estimates based on the development program the estimated useful life for intangible assets is currently 10 years.  The useful economic life is based on management's estimate of the time period over which the assets will generate future cash flows. 

 

II.    Valuation and recoverability of Inventory

 

Inventories are stated at the lower of cost or net realisable value. The cost of inventories comprises of net prices paid for materials purchased, production labour cost and factory overhead. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Inventory provisions are recognised for slow-moving, obsolete or unsalable inventory and are reviewed on a six monthly basis. The valuation of Inventory includes key estimates and judgments made by Management including normal production capacity, market demand and selling opportunities. If actual demand or usage were to be lower than estimated, inventory provisions for excess or obsolete inventory may be required.

 

III.   Defined benefit scheme

 

Provision for benefits upon termination of employment related to amounts accrued by Italian companies for employment retirement. In determining this provision Management employs actuarial techniques, including the involvement of an external experts. All key estimates applied have been included in note 20.

 

IV.   Share based payments

 

The cost of employee services received (compensation expenses) in exchange for awards of equity instruments are recognised based upon the fair value of stock options at the grant date. Management uses a Black-Scholes option valuation model to value the stock options at grant date. This Black-Scholes option valuation model requires the use of assumptions, including expected stock price volatility and the estimated life of each award. The risk-free interest rate used in the model is determined, based on a government bond with a term equal to the expected life of the equity-settled share-based payments. Stock options with market based vesting conditions also includes key judgements regarding the probability of performance conditions being met.

 

e)     New standards and interpretations not yet adopted

 

I.      IFRS 15 - Revenues form contract with customers

 

IFRS 15 is effective for the year beginning 1 January 2018 and provides a single principles based five-step model to be applied to all sales contracts, where the key focus is on the transfer of control of goods and services to customers. It replaces models included in IAS 11 (Construction Contracts) and IAS 18 (Revenue).

 

Management has undertaken proper analysis of how IFRS 15 should be implemented and which the impact could be. Management decided to implement new commercial Terms and Conditions during the FY17 in order to better meet IFRS 15 requirements. The Group plans to adopt IFRS 15 in FY18 and based on the current and historic sales contracts in place do not expect any material impact from implementing this new standard. As Management consider there will be no impact, the company will adopt a modified retrospective approach whereby the comparatives are not restated and are presented using existing IAS 18.

 

II.    IFRS 16 - Leases

 

IFRS 16 is effective for the year beginning 1 January 2019. IFRS 16 provides a single lessee accounting model, requiring lesses to recognise right of use assets and lease liabilities for all applicable leases. Therefore existing operating leases will be accounted for similarly to finance leases under the current IAS 17, resulting in the recognition of additional assets within property, plant and equipment in respect of the right of use of the lease assets, and additional lease liabilities. The operating leases charges currently reflected within operating expenses (and EBITDA) will be eliminated and instead depreciation and finance charges will be recognised in respect of the lease assets and liabilities. The full impact of IFRS 16 is currently under review, including understanding the practical application of the principles of the standard. Is it therefore not practical to provide a reasonable estimate of the effect until this review is complete, nevertheless, as preliminary comment, due to the low level of existing leases, Management don't expect any material impact.

 

III.   IFRS 9 - Financial Instruments

 

IFRS 9 "Financial Instruments" will supersede IAS 39 "Financial Instruments - Recognition and Measurement" and is effective for annual periods beginning on or after 1 January 2018. IFRS 9 includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting.

 

Management assessed the impact of the new standard and IFRS 9 is expected not to have material effect on the Group's accounting.

 

2.     Significant accounting policy

 

a)     Functional and foreign currency

 

The financial statements of each Group company are measured using the currency of the primary economic environment in which that company operates (the functional currency). The consolidated financial statements record the results and financial position of each Group company in Euro, which is the functional currency of the Company and the presentational currency for the consolidated financial statements.

 

I.      Transaction and balances

 

Transactions in foreign currencies are converted in to the respective functional currencies at initial recognition, using the exchange rates at the transaction date. Monetary assets and liabilities at the end of the reporting period are translated at the rates ruling at the reporting date. Non-monetary assets and liabilities are not retranslated. All exchange differences are recognised in profit or loss. On consolidation, the results of overseas operations not in Euro are translated at the rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at closing rate and the results of overseas operations at actual rate are recognised in other comprehensive income.

 

b)     Financial instruments

 

I.      Non-derivative financial assets

 

The Group initially recognises loans and receivables on the date that they are originated. All other financial assets are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. Subsequent to initial recognition financial liabilities are measured at amortised cost.

 

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

 

Financial assets and liabilities are offset, and the net amount presented in the statement of financial position when the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

 

The Group's non-derivative financial assets comprise loans and receivables.

 

 

 

 

c)     Loans and receivables

 

Loans and receivables are financial assets with fixed or determinable payment terms that are not quoted in an active market. The Group's loans and receivables comprise trade and other receivables and loan receivables, which are recognised initially at fair value plus any directly attributable transaction costs and subsequently measured at amortised cost using the effective interest rate method less provisions for impairment.

 

d)     Cash and cash equivalents

 

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less, that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.

 

I.      Non-derivative financial liabilities

 

The Group initially recognises all financial liabilities on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

 

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

 

Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Other financial liabilities comprise trade and other payables.

 

e)     Leases

 

I.      Finance leases

 

At inception of an arrangement, the Group determines whether the arrangement is or contains a lease.

 

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

 

II.    Operating leases

 

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

 

f)     Share capital

 

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

g)    Property, plant and equipment

 

I.      Recognition and measurement

 

Property, plant and equipment are measured at cost less accumulated depreciation, Government grants received (where applicable) and accumulated impairment losses.

 

Costs capitalised include expenditure that are directly attributable to the acquisition of the asset.

 

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

 

Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) are recognised in profit or loss.

 

II.    Subsequent costs

 

Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred.

 

III.   Depreciation

 

Items of property, plant and equipment are depreciated on a straight-line basis in the statement of comprehensive income over the estimated useful lives of each component.

 

Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.

 

The estimated useful lives of significant items of property, plant and equipment are as follows:

 

·      Computer equipment over 5 years

·      Industrial equipment, office equipment and plant and machinery 15% yearly

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted where appropriate.

 

h)    Intangible assets

 

Intangible assets are measured at cost less accumulated amortisation and Government grants received (where applicable).

 

Patent rights acquired and development expenditure are recognised at cost.

 

Expenditure on internally developed products is capitalised if it can be demonstrated that:

 

- it is technically feasible to develop the product

- adequate resources are available to complete the development

- there is an intention to complete and sell the product

- the Group is able to sell the product

- sale of the product will generate future economic benefits, and

- expenditure on the project can be measured reliably.

 

Capitalised development costs are amortised over the period the Group expects to benefit from selling the products developed (Useful Economic Life). The amortisation expense is included within the cost of sales in the consolidated statement of comprehensive income.

 

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the consolidated statement of comprehensive income as incurred.

 

Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses.

 

Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.

 

I.      Amortisation

 

Intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, from the date that they are available for use.

 

·      Patents and research and development costs concerning G+ technology, are amortised over the lower of the legal duration of the patent (typically 20 years) and the economic useful life.  These are currently amortised over 10 years.

·      Other intangible assets 5 years

 

i)     Inventories

 

Inventories are stated at the lower of cost or net realisable value. The cost of inventories comprises of net prices paid for materials purchased, production labour cost and factory overhead. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Inventory provisions are recognised for slow-moving, obsolete or unsalable inventory and are reviewed on a six months basis.

 

 

 

j)     Impairment

 

I.      Non-derivative financial assets

 

A financial asset not classified at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably.

 

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

 

II.    Non-financial assets

 

The carrying amounts of the Group's non-financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or Cash Generating Unit ('CGU') exceeds its recoverable amount.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell.

 

k)    Employee benefits

 

Defined benefit scheme surpluses and deficits are measured at:

 

- The fair value of plan assets at the reporting date; less

- Plan liabilities calculated using the projected unit credit method discounted to its present value using yields available on high quality corporate bonds that have maturity dates approximating to the terms of the liabilities; plus

- Unrecognised past service costs; less

- The effect of minimum funding requirements agreed with scheme trustees.

 

Remeasurements of the net defined obligation are recognised directly within equity. The remeasurements include:

 

- Actuarial gains and losses

- Return on plan assets (interest exclusive)

- Any asset ceiling effects (interest exclusive).

 

Service costs are recognised in profit or loss, and include current and past service costs as well as gains and losses on curtailments.

 

Net interest expense (income) is recognised in profit or loss, and is calculated by applying the discount rate used to measure the defined benefit obligation (asset) at the beginning of the annual period to the balance of the net defined benefit obligation (asset), considering the effects of contributions and benefit payments during the period.

 

Gains or losses arising from changes to scheme benefits or scheme curtailment are recognised immediately in profit or loss.

 

Settlements of defined benefit schemes are recognised in the period in which the settlement occurs.

 

For more information please see note 20.

 

l)     Revenues

 

Revenue represents sales to external customers invoiced at amounts less value added tax or local taxes on sales. Revenue from products sale is recognised on delivery, or customer acceptance where customer acknowledges the transfer of risk and control. Revenue from services contracts is recognised based on the contractual agreement, once the service is provided and confirmation of service completion provided is being formally received.

 

 

 

m)   Government grants

 

Government grants are recognised when there is reasonable assurance that the entity will comply with the relevant conditions and the grant will be received. Grants are recognised in profit or loss on a systematic basis where the Group has recognised the initial expenses that the grants are intended to compensate. Where a grant has been received as a contribution for property, plant and equipment, or capitalised development costs, the income received has been credited against the asset in the statement of financial position.

 

n)    Finance income and finance costs

 

Finance income comprises interest income on funds invested. Interest income is recognised in the profit or loss, using the effective interest method. Finance costs comprise interest expense on borrowings.

 

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

 

o)     Investments in subsidiaries (Company only)

 

Investments are stated at their cost less any provision for impairment (then refer to j) Impairment).

 

p)     Taxation

 

Tax expense comprises current and deferred tax. Current and deferred tax is recognised in the profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

 

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

 

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

 

Deferred tax is not recognised for:

 

·      temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

·      temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and

·      taxable temporary differences arising on the initial recognition of goodwill.

 

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

 

A deferred tax asset is recognised for deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

 

3.     Operating segments

 

Operating segments are currently disclosed in a manner consistent with the internal management reporting system and financial reporting provided to the chief operating decision makers (CEO, CFO, COO and CTO). A change in the internal reporting system is under discussion and would drive the disaggregation of the operating segments in line with the strategic business units that offer the different products and services.

 

Information regarding the results of each reportable segment is included below.

 

 

 

 

 

 

 

Operating Segments

 







2017







 

UK Operations

€

 

ITA

Operations

€



 

 

Total

€

 

Revenue

49,620

 

902,579



952,199

Other revenue

2,052

                  279,441



281,493

Depreciation

-

(633,784)



(633,784)

Other expenses

(1,000,127)

(3,394,165)



(4,394,292)

Results from operating activities

(948,454)

(2,845,929)



(3,794,384)

 

Fair value movement on embedded derivative

-





Net Financial expenses

(131,647)

(20,162)



(151,808)

Loss before tax

(1,080,101)

(2,866,091)



(3,946,192)

 

 

Operating Segments






 2016







 

UK

Operations

€

 

ITA

Operations

€


        

 

Total

€


Revenue

                              -  

738,028                            


738,028


Other revenue

-

79,733


79,733


Depreciation

-

(572,402)


(572,402)


Other expenses

(1,122,788)

(3,361,138)


(4,483,926)


Results from operating activities

                             (1,122,788)

(3,115,779)                           


(4,238,567)


 

Fair value movement on embedded derivative

                         (1,039,473)

                         -


 

                         (1,039,473)


Net Financial expenses

                         (1,117,709)

(29,197)                          


(1,146,905)


Loss of the year

                         (3,279,970)

(3,144,976)                        


(6,424,945)


 

 


2017

2016



€

€

Sale of products


858,218

692,384

Sale of services


93,981

45,644

Government grants


196,842

77,012

Other revenue


84,651

2,721

Total Income


1,233,692

817,761

 

 

Geographical breakdown of revenues are:

 

2017

2016


€'

€'

Italy

786,400

215,924

USA

60,100

16,953

Rest of the world

105,699

505,151

Total

                                    952,199

                         738,028

 

The Group has transacted with one main customer in 2017, which accounts for more than 10% of Group revenues for sales of products and services: this customer's revenues amount to €303,664 (32%), whilst the next highest revenue earning customer provided €81,669 (9%).

 

Revenues from UK operations amount to approximately €46,620 (2016: €0) and this arose from one major customer in USA.

 

Other revenues of €82,306 substantially relate to R&D Expenditure Credit (RDEC). The RDEC is an Italian incentive scheme (art.3 DL 145/2013) designed to encourage companies to invest in. The credit can be used to reduce corporation tax or to offset outstanding payables related to social security.

 

4. Government Grants

 

Information regarding government grants:

 


2017

€

2016

€

MAT4BAT


62,351

77,012

Grata

Ecopave


63,158

71,333

-

-

Total


196,842

77,012

 

In relation to government grants (Grata and Ecopave), the completion of the operational activities related to these projects and the submission of final documents have been completed. Therefore the conditions of the grants have been fulfilled.

 

The key terms of Government grants are:


MAT4BAT

Grata

Ecopave

Starting date


2013

2017

2016

Ending date


2017

2018

2019

Duration (months)


42

24

36

Total amount


304,700

126,324

214,100

Final report submitted and accepted


Yes

Project still  on-going

Project still  on-going

There are no capital commitments built into the ongoing grants. Government grants have been recognised in Other Income.

 

 

 

5. Change in Inventory & Inventory

 


2017

€

2016

€

Finished products


877,082

566,196

Spare Parts


102,400

29,600

Raw material


16,184

10,269

Total


995,666

606,065

 

As at 31 December 2017 inventories are higher than 2016 due to the introduction of spare parts inventory and an increase in Finished products. Spare parts inventory was required to enhance maintenance efficiency and is composed of a small number of critical items with a material cost per unit. Finished products inventory increased to ensure timely supply to key clients in the growing target market. Two Mobile Production Unit are included in Finished products with a total value of €150,000.

 

6. Raw materials and consumables

 

 

2017

2016


€

€

Raw material & consumables

127,052

149,048

Textile products

480,286

20,595

Total

607,338

169,643

 

€607,338 (2016: €169,643) refers to materials for production and consumables. The cost increase is due to the expansion of Directa Textile Solutions following the acquisition in 2016.

 

7. Employee benefits expenses

 

2017

2016


€

€




Wages and salaries

1,585,058

                        1,304,362

Social security costs

346,515

305,287

Employee benefits

75,519

85,461

Share option expense

255,578

154,068

Other costs

22,952

34,660

Total

2,285,622

 1,883,839

Capitalised cost in "Intangible assets"

(82,064)

(99,745)

Total charged to the Income Statement

2,203,558

1,784,094

 

 

 

 

 

 

The average number of employees (excluding non-executive directors) during the period were:

 





2017

2016

Sales and Administration





8

7

Engineering, R&D and production





17

15

Total





25

22

 

The Directors' emoluments (including non-executive directors) are as follows:


2017

€

2016

€

Wages and salaries 


845,847

718,710

Total


845,847

718,710

 

A detailed analysis of the remuneration of the directors will be detailed within the Directors' Remuneration Report on of the Annual Report.

 

 

8. Results from operating activities: 

 

Results from operating activities includes:

 




2017

€

2016

€

 

 

Audit of the Group and Company financial statements

34,927

 32,112

Audit of the subsidiaries' financial statements

18,000

 18,000

Other non-audit services provided by Group's auditor

30,188

264,184

Operating leases

210,083

143,951

Travel and marketing

           211,712

 217,647

Bad debt expense

16,738

909,763




Other non-audit services refers to services for advising the Company on the entitlement to recover input tax in the UK. Other non-audit services are lower than 2016 due to services received in 2016 in relation to the company's IPO.

 

Operating leases includes rent of the facility (€140,382), machinery and equipment (€69,702). The bad debt expense in 2016 is significantly higher than 2017 as it includes the exceptional costs relating to the two MPUs sold in 2015 and subsequently returned to the Group in 2016.  

 

 

9. Leases

 

Operating leases relate to the Group's plant and machinery held on leases.

 

 

Future minimum lease payments


2017

€

2016

€

Less than one year


59,092

63,000

Between one and five years


-

-

More than five years


-

-

Total


59,092

63,000

 

 

Finance lease liabilities are payable as follows:

 

Future minimum lease payments


2017

€

2016

€

Less than one year


61,735

61,735

Between one and five years


121,305

183,039

More than five years


-

-

Total


183,040

244,774

 

Present value of minimum lease payments

 


 

 

 

 

2017

€

 

 

 

 

2016

€

Less than one year


59,898

59,898

Between one and five years


108,369

168,117

More than five years


-

-

Total


168,267

228,015

 

10. Net Finance expenses

 

Finance expenses include:

 


2017

€

2016

€

Interest Income


(5,501)

(4,230)

Interest on loans and other financial costs


9,715

197,168

Interest on financial leasing


10,766

14,576

Interest cost for benefit plan


5,918

4,614

Foreign exchanges losses


130,910

934,777

Total


151,808

1,146,905

 

 

At 31 December 2017 interest on loans and other financial costs amount to €9,715 (2016: €197,168). The sharp reduction is consequence of the convertible debt repayment that occurred in 2016. Foreign exchange losses of €130,910 (2016: 934,777k) are mainly related to Sterling movement in the Group's Sterling bank account.

 

 

 

11. Taxation


2017

€

2016

€

Current tax expenses


1,239

-

Deferred tax expenses


-

-

Total tax expenses


1,239

-

 

 

Reconciliation of tax rate


2017

€

2016

€

Loss before tax


(3,946,191)

(6,424,945)

Italian statutory tax rate


24%

24%



(947,086)

(1,541,987)

Impact of temporary differences


38,880

74,534

Losses recognised


(37,641)

(74,534)

Losses not utilised


947,086

1,541,987

Total tax expenses


1,239

-

 

Tax losses carried forward have been recognised as a deferred tax asset up to the point that they are recoverable against taxable temporary differences.  All other tax losses are carried forward and not recognised as a deferred tax asset due to the uncertainty regarding generating future taxable profits. Tax losses carried forward are €16,790,913 (€ 13,483,787 in 2016)

 

 

12. Intangible assets

 

Development





Cost

Cost

Patents

Goodwill

Others

Total


€

€

€

€

€

 

Balance at 31/12/2015

       

2,326,297

     

128,279

 

-

 

57,761

 

2,512,337

 

Additions

              

99,745

        

68,970

          

22,268

 

- 

      

 190,983

 

Reduction

           

          -  

     

          -  

                 

-  

    

(28,353)

        

(28,353)

Balance at 31/12/2016

      2,426,042

    197,250

     22,268

29,408

     2,674,968

Additions

            82,064

      47,394

- 

     2,393

        132,450

Balance at 31/12/2017

       2,508,106

    244,643

     22,268

   32,401

     2,807,418













Amortisation






Balance at 31/12/2015

640,297

25,485

-

25,995

693,222

Amortisation 2016

          242,604

      19,725

-

     4,776

        267,105

Reclassification

- 

- 

-

      

(11,960)

 

        (11,960)

Balance at 31/12/2016

         882,901

     45,210

               -  

18,811

   948,367

Amortisation 2017

          257,101

     24,464

-

    5,177

        286,742

 

Balance at 31/12/2017

     

1,140,002

    

69,674

                 

-  

  

23,988

 

1,235,109







 

Carrying amounts












Balance 31/12/2015

1,686,000

102,794

-

30,321

1,819,115

 

Balance 31/12/2016

         

1,543,141

       

152,040

        

22,268

       

 9,153

    

1,726,602

 

Balance 31/12/2017

         

1,368,104

       

174,969

          

22,268

        

6,969

   

 1,572,309

 

As disclosed in note 1(d) development costs capitalised in the year are based on time spent by employees who are directly engaged in the development of the G+ technology.

 

During 2017 an average of 23% of the cost of 5 employees has been capitalised.

 

During 2016 an average of 33% of the cost of 4 employees has been capitalised.

 

The Goodwill relates to the acquisition of Directa Textile Solutions (formerly Osmotek Srl) on 11 November 2016.

 

 

13. Property, plant and equipment

 

Industrial

Computer

Office

Plant & 


Cost

Equipment

Equipment

Equipment

Machinery

Total


€

€

€

€

€







Balance at 31/12/2015

47,479

29,105

55,959

1,637,380

1,769,923

Additions

91,181

4,841

35,839

245,383

       377,246

Disposals

-

          (300)

       (7,627)

       (1,773)

        (9,700)

Balance at 31/12/2016

138,660

33,646

84,171

1,880,994

2,137,471

Additions

 21,909

    2,218

 19,549

         304,591

    348,267

Balance at 31/12/2017

160,570

35,864

103,720

2,185,585

2,485,739













Depreciation






Balance at 31/12/2015

24,365

       16,691

14,804

489,728

545,588

Depreciation 2016

       28,988

         4,747

      10,700

     272,823

       317,258

Disposals

- 

          (300)

(6,486)

       (1,773)

        (8,559)

Balance at 31/12/2016

          53,353

         21,138

     

19,018

        

760,778

       

854,287

 

Depreciation 2017

               25,615

           4,324

     

14,092

    

 303,008

       

347,042

Balance at 31/12/2017

       78,968

       25,462

      33,110

     1,063,786

    1,201,327







 

Carrying amounts








Balance 31/12/2015

       23,114

      12,414

      41,155

  1,147,652

1,224,335

Balance 31/12/2016

     85,307

      12,508

      65,153

  1,120,216

1,283,184

Balance 31/12/2017

       81,601

      10,402

  70,610

 1,121,799

1,284,412

 

 

Asset held under financial leases with a net book value of € 223,550 are included in the above table within Plant & Machinery.

 

 

14. Investments in subsidiaries

 

Details of the Company's subsidiaries as at 31 December 2017 are as follows:

 



Shareholding

Subsidiaries

Country

Principal activity

2017

2016

Directa Plus Spa

Italy

Producer and supplier of graphene materials

100%

100%

Directa Textile Solutions Srl

Italy

Commercialise textile membranes, including graphene-based technical and high-performance membranes

60%

60%






 

 

Subsidiaries

Place of Business

Registered Office

Place of Business

Directa Plus Spa

Italy

Via Cavour 2, Lomazzo (CO) Italy

See registered office

Directa Textile Solutions Srl

Italy

Via Cavour 2, Lomazzo (CO) Italy

See registered office





 

The Company's investment as capital contributions in Directa Plus Spa are as follows:

Directa Spa

At 31 December 2015

7,057,438

Additions

4,000,000

At 31 December 2016

11,057,438

Additions

3,122,898

At 31 December 2017

14,180,336

 

15. Trade and other receivables

Current


Group

Company


2017

2016

2017

2016


€

€

€

€

Account receivables

552,612

356,075

34,345

-

Tax Receivables

397,305

696,075

24,219

262,693

Other receivables

211,794

118,188

50,676

50,401

Total

1,161,711

1,170,338

109,240

313,094

 

Tax Receivables are composed of Italian VAT €290,790, UK VAT €24,219 and a RDEC Tax Credit receivable (€82,306).

 

At 31 December 2017 VAT receivables are lower than last year due to the reimbursement of UK VAT which was received in 2017.

 

Other receivables are composed of governments grants €152,324 and prepayments €54,930.  

 

As at 31 December 2017 the ageing of account receivables was:



 Days overdue

2017

2016


€

€

 0-30

539,015

340,216

 31-180

7,878

14,622

 181-365 +

5,719

1,237

 Total

552,612

356,075

 

In 2017, 98% of account receivables have an ageing within 30 days and relate to an order delivered close to the year end. The total trade receivables write-off for the year was €16,047 (2.8% of the gross trade receivables). The Group's policy is to write off 50% of trade receivables overdue between 121 and 365 and 100% write off for balances overdue for more than 365 days.

 

16. Deferred tax liabilities


2017

2016



€

€

Deferred tax liabilities


237,831

276,711

Deferred tax assets - losses


(237,831)

(276,711)

Total


-

-

 

Deferred tax assets have been recognised on losses brought forward to the extent that they can be offset against taxable temporary differences in line with the requirements of IAS 12.

 

The deferred tax liabilities arise on the capitalisation of development costs and the accounting for the defined benefit scheme. The deferred tax liabilities are detailed below:

 



2017

2016

 




€

€

 

Capitalised development costs



227,076

262,266

 

Other



10,755

14,445

 

Total



237,831

276,711

 






 






 


Net balance 01 Jan 2016

Recognised in profit or loss

Recognised in OCI

Net balance 31 Dec 2016

Deferred tax liabilities

Capitalised development costs

341,362

(79,096)

-

262,266

262,266

Other

12,238

4,562

(2,355)

14,445

14,445

Total

353,600

(74,534)

(2,355)

276,711

276,711







 

 

 

 

Net balance 01 Jan 2017

 

Recognised in profit or loss

 

Recognised in OCI

 

Net balance 31 Dec 2017

 

Deferred tax liabilities

Capitalised development costs

Other

262,266

 

14,445

(35,191)

 

(3,689)

-

 

-

227,075

 

10,756

227,075

 

10,756

Total

276,711

38,880

-

237,831

237,831







17. Cash and cash equivalents


Group

Company



2017

2016

2017

2016



€

€

€

€

Cash at bank


6,929,012

   10,570,000

4,493,006

8,011,689

Cash in hand


434

211

-

-

Total

 


6,929,446

10,570,211

4,493,006

8,011,689

18. Equity

 


2017

2016



€

€

Share Capital


142,628

142,628

Share Premium


19,973,996

19,973,996

Retained earnings


(10,250,225)

(6,552,965)

Non-controlling interests


22,930

22,228

Balance at 31 December


9,889,329

13,585,887

 

Share Capital

Number of



ordinary

Share


shares

Capital (€)

At 1 January 2016

503,100

Share reduction on 25 April 2016*

(439,649)

Share sub-division on 19 May 2016**

-

Share issue on 27 May 2016 - convertible loans***

23,191

Share issue on 27 May 2016 - IPO***

55,986

At 31 December 2016

44,212,827

142,628

At 31 December 2017

44,212,827

142,628

 

*On 25 April 2016, the issued ordinary shares were redenominated from EUR to GBP into an aggregate nominal value of £398,908, comprising 503,100 ordinary shares of £0.7929 each, at the spot rate of exchange of 0.7929. The aggregate nominal value of the issued ordinary shares was then reduced to £50,310 comprising 503,100 ordinary shares of £0.10 each.

**On 19 May 2016, each ordinary share of £0.10 in the issued share capital of the Company was sub-divided into 40 ordinary shares resulting in 20,124,000 shares of £0.0025 each.

*** On 27 May 2016, 24,088,827 ordinary shares with a nominal value of £0.0025 each were issued at the Company's initial public offering. Of the 24,088,827 new ordinary shares, 7,055,493 shares were issued through the exercise of convertible loan notes.  The remaining 17,033,334 shares were issued to institutional and other investors.

 


Share Premium








Share



In euro


premium





€








At 01 January 2016


3,885,816



Cancellation of share premium account on 25 April 2016


(3,885,816)



Shares issued on 27 May 2016


21,934,648



Expenditure relating to the raising of shares


(1,960,652)



At 31 December 2016


19,973,996



At 31 December 2017


19,973,996


 

On 25 April 2016, the share premium account of the Company was cancelled and the amount of €3,885,816 was credited to a distributable reserve.

 

Expenditure of €1,960,652 relating to the raising of shares has been deducted from the share premium.

 

Share capital

 

Financial instruments issued by the Directa Plus Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Directa Plus Group's ordinary shares are classified as equity instruments.

 

Share premium

 

To the extent that the company's ordinary shares are issued for a consideration greater than the nominal value of those shares (in the case of the company, £0.0025 per share), the excess is deemed Share Premium. Costs directly associated with the issuing of those shares are deducted from the share premium account, subject to local statutory guidelines.

 

19. Loans and borrowings

 

Non-current

 


Group

Company



2017

2016

2017

2016



€

€

€

€

Finance leases


115,132

169,043

-    

          -

Loans


96,659

285,557

-    

-

Total


211,791

454,600

-    

-

 

Current



Group

Company



2017

2016

2017

2016



€

€

€

€

Finance leases


53,906

187,164

-    

      -

Loans


190,874

50,970

-    

-

Total


244,780

238,134

-    

-

 

 

 

2017

€

 

Current

€

 

Non current

€

Repayment

Interest rate

Intesa San Paolo

148,319

97,520

50,798

6-months

EURIBOR 3M + 2.5%

Finlombarda (Atanor)

137,238

91,378

45,860

3- months

Fixed 0.5%

 

All of the above loans are unsecured.

 

Net Debt Reconciliation

 

01 January                            2017

Cash flows

 

31 January 2017


Accrued Interest

Capital Repayment

Interest Paid

€

€

€

€

€

Borrowings

472,727

9,715

(185,194)

(9,715)

     287,523

Lease liabilities

220,007

10,766

(50,969)

(10,766)

169,038

Total

692,734

20,481

(236,163)

(20,481)

456,571

 

20. Employee benefits provision


2017

2016



€

€

Employee benefits


282,031

227,358

Total


282,031

227,358


Provisions for benefits upon termination of employment primarily related to provisions accrued by Italian companies for employee retirement, determined using actuarial techniques and regulated by Article 2120 of the Italian Civil code.  The benefit is paid upon retirement as a lump sum, the amount of which corresponds to the total of the provisions accrued during the employees' service period based on payroll costs as revalued until retirement.  Following the changes in the law regime, from January 1 2007 accruing benefits have been contributing to a pension fund or a treasury fund held by the Italian administration for post-retirement benefits (INPS).  For companies with less than 50 employees it will be possible to continue this scheme as in previous years.  Therefore, contributions of future TFR provisions to pension funds or the INPS treasury fund determines that these amounts will be treated in accordance to a defined contribution scheme, not subject to actuarial evaluation. Amounts already accrued before 1 January 2007 continue to be accounted for a defined benefit plan and to be assessed on actuarial assumptions.

 

 

The breakdown for 2016 and 2017 is as follows:

€

Amount at 31 December 2015

170,952

Service cost

                  52,286

Interest cost

                    4,614

Actuarial gain/losses

                  (150)

Past service cost

-

Benefit paid

(344)

Amount at 31 December 2016

                227,358

Service cost

                  44,764

Interest cost

                    5,918

Actuarial gain/losses

                  4,704

Past service cost

-

Benefit paid

(714)

Amount at 31 December 2017

             282,031

 

Variables analysis

Detailed below are the key variables applied in the valuation of the defined benefit plan liabilities. 

 

2017

2016

Annual rate interest

2.30%

2.30%

Annual rate inflation

1.10%

1.10%

Annual increase TFR

7.41%

7.41%

Tax on revaluation

17.00%

17.00%

Social contribution

0.50%

0.50%

Increase salary male

1.20%

1.20%

Increase salary female

1.15%

1.15%

Rate of turnover male

1.70%

1.70%

Rate of turnover female

1.50%

1.50%

 

 

Sensitivity analysis

Detailed below are tables showing the impact of movements on key variables:

 

 

Actuarial hypothesis - 2017

              Decrease 10%

Increase 10%




Variation


Variation



Rate

DBO €

Rate

DBO €

Increase salary

Male

1.08%

(2,439)

1.32%

2,496

Female

1.04%

1.27%







Turnover

Male

1.53%

(2,088)

1.87%

           2,028

Female

1.35%

1.65%







Interest rate


2.07%

    8,561

2.53%

        (8,107)

Inflation rate


0.99%

   (2,386)

1.21%

           2,421

 

 

21. Trade and Other payables

Group

Company


2017

€

2016

€

2017

€

2016

€

Trade payables

768,016

529,468

23,403

910

Employment costs

397,567

203,278

-

-

Other payables

          150,030

117,675

23,033

31,432

Total

1,315,613

850,421

46,436

32,342






 

22. Financial instruments

 

Financial risk management

 

The Group's business activities expose the Group to a number of financial risks:

 

a)     Market risk

Market risk arises from the Group's use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value of future cash flow of a financial instrument will fluctuate because of changes in interest rates or foreign exchange rates. As at 31 December 2017 the Group is only exposed to variable interest rate risk on the Intesa San Paolo loan. If the interest rate had increased or decreased by 100 basis points during the year the reported loss after taxation would not have been materially different to that reported.

 

b)     Capital Risk

The Group's objectives for managing capital are to safeguard the Group's ability to continue as going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. There were no changes in the Group's approach to capital management during the year.

 

 

c)     Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk from credit sales. Every new customer is internally analysed for creditworthiness before the Group's standard payment and delivery terms and conditions are offered. Advance payment usually applies for the first order and where a customer has a low credit rating. The Group's standard payment terms are 30 to 60 days from date of invoice.

 

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. The Group works with leading banks and financial institutions, both in UK and in Italy, independently rated with the equivalent of investment grade and above.

 

The Group's policy is to write off 50% of trade receivables overdue between 121 and 365 and 100% write off for balances overdue for more than 365 days.

 

d)     Exposure to credit risk

  Group


Note


2017

€

2016

€

Trade and other receivables

15


764,406

396,817

Cash and cash equivalent

17


6,929,012

10,570,211

Total



          7,693,418

 

10,967,028

 

e)     Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group seeks to manage liquidity risk to ensure sufficient liquidity is available to meet the requirements of the business. The Board reviews regularly the cash position to ensure there are sufficient resources for working capital requirements and to meet the Group's financial commitments.

 

2017

Carrying amount

€

Up to 1 year

€

1 -5 years

€

Financial liabilities




Trade payables

768,016

768,016


Debts for financial leasing

180,060

61,735

118,325

Loans

287,533

190,874

96,659

Total

1,243,528

1,020,625

214,984

 

 



2016

Carrying amount

€

Up to 1 year

€

1 -5 years

€


Financial liabilities





Trade payables

529,468

529,468

-


Debts for financial leasing

220,007

61,735

180,059


Loans

472,727

199,565

293,476


Total

1,222,202

767,602

473,535



 

 

 

 

f)     Currency risk

 

The Group is exposed to currency risk. Immediately after the Admission in May 2016 and before the Brexit referendum, £7.5 million of the IPO proceeds was converted to €9.5 million (based on an average exchange rate of £1:€1.26) as the costs of the Italian subsidiary are in Euros. The remaining amount of approximately £3.5 million was used to manage expenses of the Company (such as UK advisors, LSE fees and costs related to the Board) in UK. The cash held in Sterling continues to be subject to currency risk.

                                              EUR

Cash held in EUR    

4,526,843

Cash held in GBP 

2,402,603



As at 31 December 2017 if the exchange rate EUR/GBP increase by 10% the impact on P&L would be a loss equal to €0.22 million (if decrease by 10% would be a profit equal to €0.27 million).

 

23. Earnings per share

 


Change in

Total


Weighted




number of

number of


number of




ordinary

ordinary


ordinary




shares

shares

Days

shares



At 1 January 2015

-

503,100

-

20,124,000



At 30 June 2015

-

503,100

-

20,124,000



At 31 December 2015

-

503,100

-

20,124,000



Existing shares


503,100

140

7,697,705



Share sub-division on 19 May 2016

19,620,900

20,124,000

8

439,869



Issued on 27 May 2016

24,088,827

44,212,827

218

26,334,416



At 31 December 2016

43,709,727

44,212,827

366

34,471,990



At 31 December 2017


44,212,827

365

44,212,827


 


Basic

Diluted



2017

€

2016

€

2017

€

2016

€







Loss for the year


(3,947,431)                     

(6,424,945)

(3,947,431)                     

(6,424,945)

Weighted average number of ordinary shares in issue during the year


44,212,827

34,471,990

44,212,827

34,471,990

Fully diluted average number of ordinary shares during the year

                   

44,212,827

34,471,990

44,212,827

34,471,990

Loss per share


(0,09)

(0.19)

(0,09)

(0.19)

 

Adjusted EPS

 

€

 

 

Basic

Diluted


2017

2016

2017

2016






Losses of the year

(3,947,431)

       (6,424,945)

(3,947,431)

       (6,424,945)

Non recurring IPO costs

-

           427,144

-

           427,144

Fair value movement on embedded derivative

-

        1,039,473

-

        1,039,473

Write down of Receivables

-

           840,000

-

           840,000

Inventory Adjustment

-

(150,000)

-

(150,000)

Share option cost

-

               -

-

           -

Adjusted Losses

(3,947,431)

       (4,268,328)

(3,647,431)

       (4,268,328)

Average number of ordinary share

44,212,827

      34,471,990

44,212,827

      34,471,990

Adjusted LPS

(0.09)

                    (0.12)

(0.09)

                    (0.12)

 

24. Share Schemes

 

The Company established the Employees' Share Scheme for employees and executive directors and the NED Share Scheme for the Chairman and non-executive directors on 19 May 2016. The Employees' Share Scheme is administered by the Remuneration Committee. The NED Share Scheme is administered by the Executive Directors.

 

The Directors are entitled to grant awards over up to 10 per cent of the Company's issued share capital from time to time. Awards over a total of 1,675,609 Ordinary Shares were granted on or around the date of Admission (27 May 2016). No awards have yet been exercised, leaving a total of 1,735,609 outstanding as at the year end. The main terms of the Share Schemes are set out below:

 

Eligibility

 

All persons who at the date on which an award is granted under the Employees' Share Scheme are employees (or employees who are also office-holders) of a member of the Group and are eligible to participate. The Board may also grant market value share options to non-executive directors under the NED Share Scheme. The Remuneration Committee decides to whom awards are granted under the Employees' Share Scheme, the number of Ordinary Shares subject to an award, the exercise date(s) (subject to the below) and the performance conditions (if any) which must be achieved in order for the award to be exercisable.

 

Types of Award

 

Awards granted under the Employees' Share Scheme can take the form of performance shares and/or market value share options. "Performance shares" are share options with an exercise price equal to the nominal value of a share, while "Market value share options" are share options with an exercise price equal to the market value of a share at the date of grant. The right to exercise the award is generally dependent upon the participant remaining an officer or employee throughout the performance period and, except in the case of market value share options granted to the Chairman or non-executive directors, the satisfaction of performance conditions. This is subject to the good leaver provisions described below. Awards granted under the Share Schemes will not be pensionable.

 

Individual Limits

 

The value of Ordinary Shares over which an employee or executive director may be granted awards under the Employees' Share Scheme in any financial year of the Company shall not exceed 200 per cent of his basic rate of salary at the date of grant. The value of Ordinary Shares over which a non-executive director may be granted market value share options under the NED Share Scheme in any financial year of the Company shall not exceed 150 percent of his annual rate of fees.

 

Performance Targets

 

The Remuneration Committee will impose objective targets which will determine the extent to which awards will vest. Targets for awards to be granted to executive directors and senior employees on or prior to Admission are based on growth in EBITDA, share price and production capacity targets in line with the Company's forecasts prior to Admission.

 

The Remuneration Committee may modify or amend the performance targets if changes to the Company or its business mean that the targets are no longer relevant or appropriate. However, any new or amended conditions will not be materially any more or less challenging than the original conditions were expected to be at the time they were imposed. The vesting of market value share options granted to non-executive directors will not be subject to performance conditions.

 

Variation of share capital

 

Awards granted under the Share Schemes may be adjusted to reflect variations in the Company's share capital.

 

Vesting of awards

 

Awards will vest on the third anniversary of the date of grant to the extent that the performance targets have been met. Vested awards may generally be exercised between the third and tenth anniversaries from the date of grant.

 

The inputs to the Black-Scholes model were as follows:

Black Scholes Model

31 Dec 2017 Market value shares

31 Dec 2017 Performance shares

Share price

75p

75p

Exercise price

75p

0.25p

Expected volatility

70%

70%

Compounded Risk-Free Interest Rate

4.25%

4.25%

Expected life

3 years

3 years

Number of options issued

636,069

  1,099,540

 

Details of the number of share options outstanding are as follows:

 

Outstanding at start of period

Granted

Outstanding at end of period

Exercisable period option price

Grant date

Exercisable date

31 December 2015

               -  

                 -  

                 -  





               -  

      1,099,540

      1,099,540

0.25p

27 May 2016

27 May 2019


               -  

576,069

576,069

75.00p

27 May 2016

27 May 2019

31 December 2016

               -  

      1,675,609

      1,675,609





1,099,540

-

1,099,540

0.25p




576,069

60,000

636,069

75.00p

12 May 2017

12 May 2020

31 December 2017

1,675,609

60,000

1,735,609




 

25. Related parties

 

The below figures represent remuneration of key management personnel for Directa Plus Spa, who are part of the Executive Management Team but not part of the Board of Directa Plus PLC. The remuneration is set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures'.

 

2017

2016


€

€

Short-term employee benefits and fees

227,162

         176,708

Social security costs

46,498

           45,758


273,660

         222,466

 

For Directors remuneration please see Director's Remuneration Report of the Annual Report.

 

26. Contingent Liabilities

 

The Group has the following contingent liabilities relating to bank guarantees on operating lease arrangements and government grants.


2017

€

2016

€

Operating leases


105,640

20,000

Total


105,640

20,000

 

27. Post Balance Sheet events

 

There have been no events after the reporting date that require disclosure after the reporting period.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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