Preliminary Results

RNS Number : 7139V

Versarien PLC

11 August 2020

 

11 August 2020

Versarien Plc

("Versarien" or the "Company" or the "Group")

Preliminary Results for the year ended 31 March 2020

Versarien Plc (AIM:VRS), the advanced engineering materials group, is pleased to announce its unaudited results for the year ended 31 March 2020.

Operational highlights

· Commercial Partnership Agreement with the Company's textile sector collaboration partner, MAS Innovation (Private) Limited, to develop new garments utilising Versarien's graphene ink materials

· Awarded €350,000 grant to participate in the Graphene Flagship project, led by Airbus  to develop graphene based thermo-electric ice protection systems to prevent icing on aircraft surfaces

· Partnership with Rolls Royce and the University of Manchester's Graphene Engineering Innovation Centre ("GEIC") using chemical vapour deposition ("CVD") in wiring for next generation aerospace engine systems

· Grant of £104,000 from the Advanced Propulsion Centre for the development of  low-carbon technologies to significantly reduce vehicle emissions

Financial highlights

· Group revenues of £8.3million (2019: £9.1 million)

· Adjusted LBITDA* of £0.6 million (2019: £1.1 million)**

· Loss before tax of £4.7 million (2019: £2.8 million) after share based payments charge in the year of £1.2 million (2019: £0.7 million)

· Cash at 31 March 2020 of £1.7 million (2019: £4.3 million)

· Successful fundraising of £6 million gross in March 2020 re-invested into the 24-month sharing agreement with Lanstead Capital Investors LP ("Lanstead"),a US headquartered institutional investor, with a currently assessed fair value of £7 million

· Net assets of £15.7 million (2019: £13.3 million)

* Adjusted LBITDA (Loss before interest, tax, depreciation and amortisation) excludes exceptional items and share based payment charges ** IFRS 16,leases, was adopted on 1 April 2019 using the modified retrospective approach and comparatives are therefore not restated under this method.  The impact of this adoption has resulted in  a reduction in LBITDA of £0.7 million in 2020

Post Period highlights

· Product development agreement signed with J&P Coats Limited, part of Coats Group plc, to incorporate graphene nano-platelets and graphene inks into consumer textiles

· £5 million Innovate UK loan awarded in June 2020, with security arrangements completed, for scale up and product development related to the GSCALE collaborations

· Graphene Enhanced Protective Face Masks launched with first orders received for 120,000 masks.

Commenting, Neill Ricketts, Chief Executive Officer of Versarien, said:  

"Recent times have been dominated by the challenges that the Covid-19 pandemic have presented on a global basis.  However, I am pleased to report Versarien has continued to operate throughout and achieved much during lockdown.

"I am particularly grateful for the support of the UK Government both in its provision of a £5 million loan via Innovate UK to allow us the opportunity to scale up and to expand the reach of our graphene operations.

"Our global expansion plans have changed direction slightly as we have decided that progressing into the Chinese market, whilst significant commercially, must be done on the basis that we are confident that our IP is protected. We have exciting opportunities elsewhere, and the change of emphasis in China is not precluding commercial deals being done; the supply of graphene in masks manufactured in China being the first example utilising our graphene technology.

"Monetisation of our technologies is now the focus of the Company's attention, although we will continue our stated strategy of acquiring additional IP should suitable opportunities arise.  With a strengthened balance sheet following the Lanstead placing and the Innovate UK loan, coupled with a particular focus on those collaborative projects that are expected to deliver commercially in the near term we are very well positioned to execute this strategy.

"I would like to take this opportunity to thank our continually supportive investor base and our employees for their hard work as we look forward to the future with continued optimism and confidence."

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

For further information please contact:

Versarien Neill Ricketts, CEO Chris Leigh, CFO	[phone]
SP Angel Corporate Finance (Nominated Adviser and Joint Broker) Ewan Leggat, Soltan Tagiev	[phone]
Berenberg (Joint Broker) Mark Whitmore, Simon Cardron	[phone]
Yellow Jersey (Investor Relations)  Charles Goodwin Georgia Colkin Henry Wilkinson [e-mail]	[phone]

Notes to Editors:

About Versarien

Versarien Plc (AIM:VRS), is an advanced engineering materials group. Leveraging proprietary technology, the Group creates innovative engineering solutions for its clients in a diverse range of industries. Versarien has eight subsidiaries operating under two divisions:

Graphene and Plastics

2-DTech Limited, which specialises in the supply, characterisation and early stage development of graphene products.  www.2-dtech.com  

Cambridge Graphene Ltd, supplies novel inks based on graphene and related materials, using patented processes to develop graphene materials technology.

www.cambridgegraphene.com  

Gnanomat S.L. (" GNA "), based in the Parque Cientifico Madrid, Spain, is a company capable of utilising Versarien's graphene products in an environmentally friendly, scalable production process for energy storage devices that offer high power density, fast recharging and long lifetime for use in electrical vehicles and portable electronics products. www.gnanomat.com

AAC Cyroma Limited, which specialises in the supply of vacuum-formed and injection- moulded products to the automotive, construction, utilities and retail industry sectors. Using Versarien's existing graphene manufacturing capabilities, AAC will have the ability to produce graphene-enhanced plastic products.   www.aaccyroma.co.uk    

Versarien Graphene Inc ("VGI") based in Texas, United States of America, is the distribution arm for the UK's graphene development technologies.

Beijing Versarien Technology Company Limited ("BVT") is the wholly owned Chinese foreign entity that will form the base for expansion activities in China.
 

Hard Wear and Metallic Products

Versarien Technologies Limited has developed an additive process for creating advanced micro-porous metals targeting the thermal management industry and supplies extruded aluminium.  www.versarien-technologies.co.uk  

Total Carbide Limited, a leading manufacturer in sintered tungsten carbide for applications in arduous environments.  www.totalcarbide.com  

Chairman's Statement

I am delighted to provide my first statement as Non-executive Chairman of Versarien. In the short time since my appointment in June 2020 much has happened at the Company.

We have completed the rigorous process required to achieve the award of a £5 million Innovate UK loan,  have redirected our strategy with regard to China and have strengthened our senior management with the appointment of Matt Walker.

Our focus is now very much on the monetisation of the graphene technologies in our portfolio, although we will continue to fill any product gaps as opportunities arise to do so. An update on the collaborations that we continue to work on is provided in the Chief Executive Officer's Report.

Having exercised the backstop arrangement for our joint venture in China, our intention is to use Beijing Versarien Technology Limited ("BVT") as the vehicle for channelling sales enquiries back to the UK for the supply of graphene and/or application products into China. Additionally, we are also looking at how products that utilise our graphene can be imported. It is particularly pleasing to see this in the graphene enhanced mask launch recently announced.

The Board of BVT has been appointed and consists of Neill Ricketts, Matt Walker and Bruno Jin, who will also act as General Manager. Bruno, who has worked with Versarien since 2018, has a Bachelor of Engineering degree from Nanjing University and studied at Cambridge University having been awarded a scholarship by the Cambridge Overseas Trust.

The appointment of Matt Walker, following his two year secondment from the UK Department for International Trade, brings with it strategic direction for the Company's global expansion plans, which it should be noted are focussed far wider than China and the US. Matt, together with our representative, Rachel Kim, have been working tirelessly on a number of opportunities in South Korea. Matt is also currently looking at opportunities in India, Japan and Singapore.

I am particularly pleased with the support that the UK Government has provided to the Company,  most significantly via Innovate UK with the provision of a £5 million loan, their first of such magnitude.  It is specifically for a project named G SCALE, (an acronym for Graphene-Seat, Concrete, Arch, Leisure, Elastomer), covering a number of Versarien's existing collaborations, which is designed to enable Versarien to significantly increase its manufacture of quality assured graphene.

Prior to my appointment, the Company completed a £6 million fund raise and sharing agreement with Lanstead, a US headquartered institutional investor who is now our largest shareholder. Having spoken directly with Lanstead's principal, I am pleased to report that he is very supportive of the Company and its strategic direction. The Versarien team is looking at how it can best advance in the US where early adoption is proving challenging for all market participants.

I would like to thank all the staff and the executive directors for their hard work during the year. The coming year will be important for Versarien as it seeks to monetise its graphene technologies and that will be the focus of the Board's attention.

James Stewart CBE

Non-executive Chairman

Chief Executive Officer's Review and Strategic Report

As stated above, this year has been particularly challenging with the Covid-19 pandemic taking full force and effect towards the end of our financial year. As has been reported previously, we are now concentrating on the major collaboration opportunities and these are allied to the £5 million Innovate UK loan ("the Loan") awarded to us at the end of June 2020.  The Loan particularly acknowledges the work we are undertaking, the advancements made and the strategic importance of our 2D materials technology to the UK. The Loan will help Versarien step up its graphene production capacity so that we can expedite the commercial adoption of products utilising graphene enhanced materials.

As we stated would be the case in our announcement on 25 February 2020 the Company intends to use its interim and full year results announcements to provide updates on the status of the Company's various collaborations and will not make announcements between these unless a disclosure obligation arises. I am therefore pleased to provide an update on our current commercial collaborations as well as a summary of specific funding.

In order to ensure the appropriate focus of the Company's resources and to ensure that the monetisation of our technologies is now the primary focus of the Company's attention we have segmented our various collaborative projects.  Our primary focus is on those projects that are related to the GSCALE project, whilst still continuing to progress others that are likely to provide medium term returns.

Funded projects

Funder	Project	Amount	Duration
Innovate UK	GSCALE	£5,000,000	24 months
Graphene Flagship	Aircraft surface de-icing	€350,000	36 months
Advanced Propulsion Centre	Low carbon technologies	£104,000	18 months

GSCALE collaborations:

Start date	Description	Current status
May-20	Coats Group Plc	The agreement will see the parties work on four specific projects, which will focus on two different manufacturing processes that use Versarien graphene nano-platelets and graphene inks in different consumer textile applications in the Apparel and Footwear sectors. The agreement follows new research and testing on yarn extrusion featuring the Company's graphene materials at the Warwick Manufacturing Group and subsequent discussions with an existing collaborative partner of the Company.
Mar-19	Initial order from US company for 12kg of HP-GNP incorporated into polymer masterbatch for down-hole drilling components	Testing on scale up is underway at the customer test facility in Europe and the next milestone is a live drilling test but is subject to ongoing restrictions re Covid-19.
Mar-19	Further collaboration with Chinese Aerospace Company	The parties continue to progress through the work plan created with samples sent for further testing.
Dec-18	MOU China Railway	The project, which involves GEIC and other civil engineering parties, continues to progress well. The testing features trials with various grades of construction materials for different construction applications and are undergoing further analysis.
Dec-18	Collaboration with Chinese Aerospace Company	This longer-term project, which is focused on several materials for different parts continues at an R&D level. Progress dependent upon test results.
Aug-18	Construction materials collaboration with AECOM	Following the launch of the AECOM CNCT Arch at Network Rail facility in Bristol, the product has been subject to further tests, with positive test data reported to date.  Discussions underway regarding project delivery/commercialisation.
Aug-18	Sporting goods collaboration	New Polygrene blend being formulated for trial at customer factory. In addition, the companies are collaborating on other shoe development and garments. Programme to resume following lifting of Covid-19 restrictions.
Jan-18	Agreement with global apparel manufacturer, MAS Innovation (Private) Limited	The parties continue to work together on projects with brand partners for sportswear and non-sports wear as well as pre-production trials on base layer garments for own branding. Further projects underway on PPE garments with different material blends that could provide further unique benefits.

Priority projects :

Start date	Description	Current status
Apr-20	Rolls Royce/ GEIC	The aim of the collaboration is to reduce the weight of electrical components, improve electrical performance of 2D materials and increase resistance to corrosion of components in future engine systems. It also involves the development of new reel to reel CVD capabilities applicable to other sectors
Mar-18	Collaboration with world-leading aerospace group	This longer-term project features work on specific parts and continues with WMG and other parties.
Feb-18	Medical technology collaboration at Addenbrooke's hospital	Following the return to work of the global partner, the parties are now discussing further supplementary funded projects.
Feb-18	Agreement with shoemaker, Vivobarefoot	Further project work, including textiles and leathers has now commenced, following delays due to Covid-19.
Dec-17	Agreement with global chemical major	Project ongoing and awaiting further test results.
Nov-17	Collaboration with global consumer goods company	Following commercial discussions to evaluate cost-benefit value. The customer has agreed to funded testing at its R&D centre based in the UK. The funding forms part of a new joint development agreement agreed between the parties.

Ongoing Projects (non-priority):

Start date	Description	Current status
Feb-20	Oxford Advanced Surfaces	Collaboration to work on graphene enhanced surfaces for adhesion and increase in electrical conductivity using Versarien 2D materials.
Oct-19	Refractory Materials Collaboration	Materials have been supplied and tests carried out, the results of which have been assessed and further tests are being carried out.
Jun-18	Commercial agreement with MediaDevil	New product development has focused on the requirements of private label partners and further trials of different eco-friendly material are on-going. In addition, Media Devil are working with the company on other audio project will a well know household brand.
May-18	Consumer goods collaboration for polymer structures in plastics	The project was put on hold by the customer due to production demands during Covid-19 with resumption anticipated later in the year.
Mar-18	Collaboration with Team Ineos for cycling equipment	We are working on material prototypes with other partners which we expect to trial later in 2020.

Gnanomat

Gnanomat has continued to make progress with its objective of incorporating graphene into energy storage devices.

Recently, some of these nanomaterials have demonstrated not only their suitability to be integrated into the electrodes of such devices, but also have demonstrated a significant improvement over current market standards in tests in industrial prototypes. Gnanomat believes it has now developed its nanomaterials to a level that provides approximately three times the energy capacity of current market reference products and is continuing with further developments.

These findings have opened the door to prospective customers that are now partnering with Gnanomat. At present it is working with companies in the US, Japan and South Korea, among others, to commercialise its products.

In addition, some of the Gnanomat materials have shown significant benefits in other energy storage applications, such as supercapacitors and metal/air batteries.

As a result of the advances achieved and its extensive knowledge base and manufacturing potential, Gnanomat is able to participate in a number of different European funding programmes. These include the Spanish Ministry of Science and Innovation which has granted a €116,000 project to the Company as well as others where application is progressing.

Versarien Graphene Inc

With the Covid-19 pandemic significantly impacting the US, contacting and conducting business with customers in the US has been challenging in recent times. Therefore, the current strategy is to concentrate on larger corporations, which have a further forward vision.

A number of NDA's have been signed and technical conference calls between prospective customers and the UK development staff held.  In addition, trials are ongoing on a project to add graphene for coatings applications.  A tyre manufacturer has also expressed its recent wish to move forward with testing despite being at the epicentre of the pandemic.

Gaining traction in the US market is proving challenging, which appears to be in common with many other US graphene companies and these challenges are expected to continue until the worst of the pandemic has abated in the region.

AAC Cyroma

The past 12 months has seen AAC Cyroma focussing on internal efficiency improvements and new business sales in very challenging market conditions. Improved planning techniques, factory process layout changes and scrap reduction activities has resulted in a reduction in direct labour and raw material costs.

A targeted sales strategy has seen new customers placing regular schedules orders, for both injection moulded and vacuum formed work, replacing some lower margin accounts. These include the manufacture and supply of hospital bed and cot mattress panels, injection moulded soil sample core boxes, paint masks, electric vehicle component parts, packaging trays and protective visors for smart PPE.

Graphene enhanced injection moulded products, ranging from packaging trays, construction products and consumer goods, have been successfully moulded using AAC Cyroma's injection moulding technology utilising a variety of different polymer grades. These products are being tested in conjunction with our partners for live applications and AAC Cyroma continues to work with new partners looking at opportunities whereby graphene-enhanced products can offer product differentiation and structural improvements.

Hard Wear and Metallic Products

Over the past few years Total Carbide has sought to move away from its dependency on the oil and gas sector which it had done reasonably successfully. However, with low oil prices that part of the business which still remains has been badly affected and accelerated the need for the business to diversify.

For example, after two years of tests and development work with an award winning, Norwegian high- tech company, Total Carbide has succeeded in securing orders for the manufacture of parts which reduce the inflow of water or gas in oil wells. It is expected that this will account for approaching up to 10% of future revenues.

Breakthrough technology designed to cut the weight of rockets is being carried out at Westcott and Total Carbide has been working on technology to transform the throat nozzles, which provide the right amount of thrust to propel rockets and satellites.

Currently its throat nozzles are made from heavy tungsten alloys to provide sufficient strength and heat and wear resistance. The addition of Hexotene into a heat resistant ceramic will be used to provide a more lightweight solution. The project is part-funded by the Space Research and Innovation Network for Technology (SPRINT) programme which will help with testing of the new material.

Versarien Technologies' restructuring at the start of the financial year saw it reduce its less profitable business in order to create space at the Cheltenham site to support the graphene scale up that is now made possible by the award of the Innovate UK loan.

Key performance indicators

As a Group that consists of mature products supporting the development of early stage technology products, we concentrate on the following financial metrics:

	2020 £'000	2019 £'000
Group revenue	8,281	9,140
Gross margin percentage	24%	27%
Loss before interest, tax, depreciation, amortisation, exceptional costs and share based charges	(646)	(1,134)
Cash used by Graphene and Plastic Products	(2,685)	(1,305)
Cash used/generated by Hard Wear and Metallic Products	608	(266)
Cash raised/(utilised) by parent (before loans to/from subsidiaries)	(558)	3,567
Net Cash raised and generated/(used) by the Group	(2,635)	1,996

Current trading and outlook

The current financial year has seen a slow start for the mature businesses with some staff furloughed, some working from home and some working at our factory locations. With the lifting of restrictions, we are beginning to see some indication of our markets recovering, but continue to monitor costs carefully.

The future for the technology businesses looks exciting with the new product launch of the graphene enhanced masks, final testing of Gnanomat products by prospective customers and  opportunities for expansion abroad.

The opportunity afforded to us by the Innovate UK loan to scale up our processes will be a main focus for the business going forward as we seek to monetise the opportunities we have.

We remain confident of the future benefits that graphene can bring to society and our shareholders.

Neill Ricketts

Chief Executive Officer

Financial Review

Versarien's revenue for the year ended 31 March 2020 was £8.3 million (2019: £9.1 million) with operating losses before exceptional costs, depreciation, amortisation and share based payment charges of £0.6 million (2019: £1.1 million).

Exceptional costs were £1.6 million (2019: £0.4 million) which arose mainly through impairment of goodwill in AAC Cyroma Limited and Total Carbide Limited totalling £0.9m, principally as a result of the Covid 19 related recovery scenarios (2019: £Nil) and China expansion costs of £0.5m (2019: £0.3m).  The loss before tax for the year was £4.7 million (2019: £2.8 million), after share based payment charges of £1.2 million (2019: £0.7 million).

Prior to the year end the Company entered into a 6 million subscription agreement with Lanstead, together with a related sharing agreement (the "Sharing Agreement"). 15,000,000 new ordinary shares of 1 pence each were issued at a price of 40 pence per share raising gross proceeds of £6 million.

The £6 million gross proceeds of the subscription were pledged by the Company pursuant to the Sharing Agreement with Lanstead. The Sharing Agreement entitles the Company to receive back those proceeds on a pro rata monthly basis over a period of 24 months, subject to adjustment upwards or downwards each month depending on the Company's share price at the time by reference to an average benchmark price of 53.33p.

In accordance with IFRS 13, the sharing agreement has been valued as at 31 March 2020 using the Monte Carlo (or multiple probability simulation) pricing model which has resulted in a valuation of £6,987,000.  Consequently, and in accordance with IFRS 13, a gain of £987,000 has been accounted for as other gains in the Group Statement of Comprehensive Income.

The key assumptions in the valuation model, based on a 20-day average price for each month of the 24 months of the Lanstead sharing agreement were:

· Observed return volatility over 5 years of 76%

· Annual drift factor 21.2%

· 50,000  simulated observations

· Average share price over the 24 months generated from the model of £0.62

One strand of our strategy is to look for global expansion opportunities and our initial target had been China where, as noted above, we have spent £0.5 million including legal fees and secondment fees from the UK Government. Whilst the strategy for China expansion has changed due to a number of factors we have nevertheless made progress as evidenced by the product launch of graphene enhanced face masks accompanied by  first orders  of 120,000 in volume.  Adjusted LBITDA for the graphene businesses was £1.9 million (pre IFRS 16 £2.1 million) (2019: £1.1 million).

Our plastics business, AAC Cyroma has returned revenues of £3.8 million (2019: £4.7 million) and EBITDA of £0.4 million (pre IFRS 16 £0.2 million) (2019: £0.2 million).

Our mature Hard Wear and Metallic businesses have provided stability to support the development of the emerging businesses, with Total Carbide returning revenues of £3.4 million (2019: £3.2million) and EBITDA of £0.6 million (pre IFRS 16 £0.4 million) (2019: £0.5 million) and Versarien Technologies similarly returning revenues of £0.9 million (2019: £1.2 million) and adjusted LBITDA of £nil million (pre IFRS 16 £0.1 million) (2019 £0.1 million).

Group net assets at 31 March 2020 were £15.7 million (2019: £13.3 million) at the year end the Group had cash of £1.7m (2019: £4.3 million), with £1.2 million (2019: £0.6 million) drawn under the invoice finance facilities. As at period end the Company had £0.3 million of headroom in its invoice finance facilities (2019: £0.6 million).  Together with the Lanstead sharing agreement and the Innovate UK loan, the Directors consider this sufficient for our current activities over the coming twelve months having made certain assumptions, further details of which are detailed below.

Cash outflow from operating activities was £1.5 million (2019: £1.7 million). The Group invested £nil in acquisitions (2019: £0.7 million), £0.4 million (2019: £0.4 million) in capitalised development costs, and £0.3 million (2019: £0.5 million) in plant and machinery. 

Going concern

The financial statements, which are not yet audited, have been prepared on a going concern basis, which the Directors believe to be appropriate for the following reasons:

· The Group meets its day-to-day working capital requirements through careful cash management and the use of its invoice discounting facilities;

· As at 31 March 2020, the Group had cash balances totalling £1.7 million with £0.3million of headroom on its invoice discounting facilities;

· The Group was awarded a £5 million loan by Innovate UK to fund certain of its activities;

· The Group receives monthly settlements from its sharing agreement with Lanstead, the quantum of which is dependent upon share price;

The Directors have prepared detailed projections of expected future cash flows for a period of twelve months from the date of issue of this preliminary statement.  These show that the Group is expected to have sufficient cash available to meet its obligations as they fall due for the foreseeable future (at least twelve months).

These projections contain certain assumptions about the sales performance as a result of the Covid 19 pandemic. There is therefore a risk that trading performance could be below expectations.  The projections also contain certain assumptions with regards to the share price and the funds that will flow under the sharing agreement with Lanstead and there is also a risk that the share price could be below expectations.  Both of these scenarios could lead to a requirement to take mitigating action

Such actions could include raising more cash via an equity placing (there is a track record of successful placings) or, in the absence of a funding round, cost reduction in the Group. The Directors' have prepared sensitised projections for these scenarios which indicate that sufficient cash reserves  would exist for the foreseeable future(at least twelve months) without any additional fundraising.

Other factors that have been taken into account in the Directors' assessment of going concern include:

· The expectation that the placing authority for up to 15% of the existing share capital without pre-emption rights will be renewed at the Annual General Meeting;

· The continuation and adequacy of bank facilities and

· That there are a number of mitigating actions the Group could implement, such as reducing the funds spent on development of its technologies and overheads to concentrate on GSCALE opportunities.

After due consideration, the Directors have concluded that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future (at least twelve months). For this reason, they continue to adopt the going concern basis in preparing the consolidated financial statements.

Chris Leigh

Chief Financial Officer

Group statement of comprehensive Income (unaudited)

Year ended 31 March 2020

	Notes	2020 £'000	2019 £'000
Continuing operations
Revenue	2	8,281	9,140
Cost of sales		(6,334)	(6,706)
Gross profit		1,947	2,434
Other operating income		5	148
Other gains		987	-
Operating expenses (including exceptional items)		(7,487)	(5,345)
Loss from operations before exceptional items		(2,941)	(2,343)
Exceptional items	3	(1,607)	(420)
Loss from operations		(4,548)	(2,763)
Finance costs		(160)	(69)
Finance income		5	3
Loss before income tax		(4,703)	(2,829)
Income tax		49	117
Loss for the year		(4,654)	(2,712)
Loss attributable to:
- Owners of the parent company		(4,148)	(2,473)
- Non-controlling interest		(506)	(239)
		(4,654)	(2,712)
Loss per share attributable to the equity holders of the Company:
Basic and diluted loss per share	5	(2.69)p	(1.64)p

There is no other comprehensive income for the year.

The gain in the year relates to the fair value assessment of the Lanstead sharing agreement at the balance sheet date.

Group statement of financial position (unaudited)

As at 31 March 2020

	Notes	2020 £'000	2019 £'000
Assets
Non-current assets
Intangible assets	6	4,720	5,318
Property, plant and equipment	7	4,316	3,170
Deferred taxation		25	25
Trade and other receivables		4,295	-
		13,356	8,513
Current assets
Inventory		2,252	2,253
Trade and other receivables		4,817	2,141
Current tax		157	106
Cash and cash equivalents		1,657	4,292
		8,883	8,792
Total assets		22,239	17,305
Equity
Called up share capital	8	1,697	1,536
Share premium account	8	25,497	19,776
Merger reserve		1,256	1,256
Share-based payment reserve		2,056	899
Retained losses		(13,846)	(9,698)
Equity attributable to owners of the parent company		16,660	13,769
Non-controlling interest		(999)	(493)
Total equity		15,661	13,276
Liabilities
Non-current liabilities
Trade and other payables		1,192	328
Deferred tax		67	69
Long-term borrowings		516	708
		1,775	1,105
Current liabilities
Trade and other payables		2,928	1,528
Provisions		97	174
Current tax		290	257
Invoice discounting advances		1,156	603
Current portion of long-term borrowings		332	362
		4,803	2,924
Total liabilities		6,578	4,029
Total equity and liabilities		22,239	17,305

Group statement of changes in equity (unaudited)

Year ended 31 March 2020

	Share  capital £'000	Share premium account £'000	Merger reserve £'000	Share-based payment  reserve £'000	Accumulated losses £'000	Non-controlling Interest £'000	Total equity £'000
At 1 April 2018	1,486	12,529	1,256	187	(7,225)	(254)	7,979
Issue of shares	50	7,247	-	-	-	-	7,297
Loss for the year	-	-	-	-	(2,473)	(239)	(2,712)
Share-based payments	-	-	-	712	-	-	712
At 31 March 2019	1,536	19,776	1,256	899	(9,698)	(493)	13,276
Issue of shares	161	5,721	-	-	-	-	5,882
Loss for the year	-	-	-	-	(4,148)	(506)	(4,654)
Share-based payments	-	-	-	1,157	-	-	1,157
At 31 March 2020	1,697	25,497	1,256	2,056	(13,846)	(999)	15,661

Statement of Group cash flows (unaudited)

Year ended 31 March 2020

	Notes	2020 £'000	2019 £'000
Cash flows from operating activities
Cash used in operations	9	(1,487)	(1,737)
Interest paid		(155)	(66)
Net cash used in operating activities		(1,642)	(1,803)
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired)		-	(673)
Purchase of intangible assets		(351)	(434)
Purchase of property, plant and equipment		(286)	(541)
Net cash used in investing activities		(637)	(1,648)
Cash flows from financing activities
Share issue (net of funds deferred per sharing agreement)*		123	5,155
Share issue costs		(241)	(200)
Finance leases (net of repayments)		-	156
Principal payment of leases under IFRS 16		(791)	-
Invoice discounting loan proceeds/(repayments)		553	(514)
Net cash generated from financing activities		(356)	4,597
Increase/(decrease) in cash and cash equivalents		(2,635)	1,146
Cash acquired on acquisition		-	850
Cash and cash equivalents at beginning of year		4,292	2,296
Cash and cash equivalents at end of year		1,657	4,292

* As disclosed further in the Financial Review, during the year 15,000,000 shares were issued for cash raising gross proceeds of £6 million which were pledged via a sharing agreement entitling the Company to receive back those proceeds over a period of 24 months.

 

Notes to the Financial Statements (unaudited)

1. Basis of preparation

The consolidated financial statements consolidate the results of the Company and its subsidiaries (together referred to as the "Group").

The financial information included in this preliminary announcement does not constitute statutory accounts of the Group for the years ended 31 March 2020 or 31 March 2019.  The financial information for the year ended 31 March 2019 is derived from statutory accounts upon which the auditors have reported. Their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The auditors work on the statutory accounts of the Group for the year ended 31 March 2020 is not yet complete.

Both the consolidated financial statements and the Company financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS").

On 1 April 2019, IFRS 16 was adopted using the modified retrospective approach therefore not restating the comparatives.

2.  Segmental reporting

At 31 March 2020 the Group was organised into two business segments. Central costs are reported separately.

Information reported to the Group's Chief Executive Officer for the purposes of resource allocation and assessment of performance is focused on the two principal business segments of Graphene and Plastic Products and Hard Wear and Metallic Products and, accordingly, the Group's reportable segments under IFRS 8 are based on these activities.

Segment profit/(loss) represents the profit/(loss) earned by each segment, including a share of central administration costs, which are allocated on the basis of actual use or pro rata to sales. This is the measure reported to the Chief Executive Officer for the purposes of resource allocation and assessment of segment performance.

The segment analysis for the period ended 31 March 2020 is as follows:

	Central £'000	Graphene and Plastic Products £'000	Hard Wear and Metallic  Products £'000	Intra-group adjustments £'000	Total £'000
Revenue	-	3,942	4,342	(3)	8,281
Gross profit	-	727	1,220	-	1,947
Other operating income	-	-	5	-	5
Other gains	987	-	-	-	987
Operating expenses	(2,032)	(3,449)	(1,126)	(4)	(6,611)
Impairment of Goodwill	-	(522)	(354)	-	(876)
(Loss) from operations	(1,045)	(3,244)	(255)	(4)	(4,548)
Finance charge	(1)	(97)	(57)	-	(155)
(Loss) before tax	(1,046)	(3,341)	(312)	(4)	(4,703)
Total assets	21,917	6,906	5,509	(12,093)	22,239
Total liabilities	(1,523)	(11,090)	(4,753)	10,788	(6,578)
Net assets/(liabilities)	20,394	(4,184)	756	(1,305)	15,661
Capital expenditure	34	324	279	-	637
Depreciation/amortisation	23	628	458	29	1,138

The segment analysis for the period ended 31 March 2019 is as follows:

	Central £'000	Graphene and Plastic Products £'000	Hard Wear And Metallic Products £'000	Intra-group adjustments £'000	Total £'000
Revenue	-	4,729	4,416	(5)	9,140
Gross profit	-	1,064	1,370	-	2,434
Other operating income	-	144	4	-	148
Operating expenses	(1,978)	(2,582)	(1,274)	489	(5,345)
(Loss) from operations	(1,978)	(1,374)	100	489	(2,763)
Finance income/(charge)	3	(43)	(26)	-	(66)
(Loss)/profit before tax	(1,975)	(1,417)	74	489	(2,829)
Total assets	15,510	5,536	4,780	(8,521)	17,305
Total liabilities	(1,109)	(6,963)	(4,068)	8,111	(4,029)
Net assets/(liabilities)	14,401	(1,427)	712	(410)	13,276
Capital expenditure	166	775	34	-	975
Depreciation/amortisation and impairment	13	245	207	32	497

Geographical information

The Group's revenue from external customers and information about its segment assets by geographical location are detailed below:

	Revenue from external customers			Non-current assets
	2020 £'000	2019 £'000		2020 £'000	2019 £'000
United Kingdom	6,920	7,577		11,040	6,203
Rest of Europe	831	1,065		2,316	2,310
North America	273	306		-	-
Other	257	192		-	-
	8,281	9,140		13,356	8,513

3.  Exceptional items

	2020 £'000	2019 £'000
Relocation and restructuring costs	139	59
Costs relating to expansion in China	531	271
Costs relating to setting up of the US subsidiary	-	28
Acquisition costs	32	29
Impairment of goodwill relating to subsidiaries (see note 6)	876	-
Other	29	33
	1,607	420

4.  Dividends

As stated in the Company's AIM Admission Document, the Board will not be declaring or proposing any dividends until such time as the commercialisation of its product portfolio has generated sufficient distributable reserves from which to do so.

5.  Loss per ordinary share

The calculation of the basic loss per share for the period ended 31 March 2020 and 31 March 2019 is based on the losses attributable to the shareholders of Versarien Plc divided by the weighted average number of shares in issue during the year. The calculation of diluted loss per share is based on the basic loss per share adjusted to allow for the issue of shares on the assumed conversion of all dilutive options. However, in accordance with IAS 33 "Earnings Per Share" potential ordinary shares are only considered dilutive when their conversion would decrease the profit per share or increase the loss per share.  As at 31 March 2020 there were 14,677,130 (2019: 14,985,100) potential ordinary shares which have been disregarded in the calculation of diluted loss per share as they were considered non-dilutive at that date.

	Loss attributable to shareholders £'000	Weighted average number of shares £'000	Basic loss per share pence
Year ended 31 March 2020	(4,148)	153,956	(2.69)
Year ended 31 March 2019	(2,473)	151,129	(1.64)

6.  Intangible assets

	Goodwill £'000	Other intangibles £'000	Total £'000
Cost
At 1 April 2018	2,167	1,543	3,710
Additions	-	434	434
Disposals	-	(21)	(21)
Acquisitions	2,264	20	2,284
At 1 April 2019	4,431	1,976	6,407
Additions	-	351	351
At 31 March 2020	4,431	2,327	6,758
Accumulated amortisation and impairment
At 1 April 2018	-	1,032	1,032
Disposals	-	(13)	(13)
Amortisation charge	-	70	70
At 1 April 2019	-	1,089	1,089
Amortisation charge	-	73	73
Impairment	876	-	876
At 31 March 2020	876	1,162	2,038
Carrying value
At 31 March 2020	3,555	1,165	4,720
At 31 March 2019	4,431	887	5,318

The impairment of Goodwill in 2020 relates to AAC Cyroma Limited and Total Carbide Ltd as per exceptional items, note 3.

Other intangible assets

	31 March 2020 £'000	31 March 2019 £'000
Customer relationships/order books	54	81
Development costs	901	600
Licence	28	48
Intellectual property	182	158
Total	1,165	887

7.  Property, plant and equipment

Group	ROU asset	Plant and equipment £'000	Leasehold improvements £'000	Total £'000
Cost
At 1 April 2018	-	9,247	518	9,765
Additions	-	541	-	541
Acquisitions	-	76	-	76
Disposals	-	(2)	-	(2)
At 1 April 2019	-	9,862	518	10,380
Adjustment on transition to IFRS 16	6,377	(4,453)	-	1,924
Additions	160	127	-	287
Disposals	-	(132)	-	(132)
At 31 March 2020	6,537	5,404	518	12,459
Accumulated depreciation
At 1 April 2018	-	6,735	50	6,785
Charge for the year	-	393	34	427
Disposals	-	(2)	-	(2)
At 1 April 2019	-	7,126	84	7,210
Adjustment on transition to IFRS 16	2,567	(2,567)	-	-
Charge for the year	820	218	27	1,065
Disposals	-	(132)	-	(132)
At 31 March 2020	3,387	4,645	111	8,143
Net book value
At 31 March 2020	3,150	759	407	4,316
At 31 March 2019	-	2,736	434	3,170

Under IFRS16 the Right of Use assets for the Group are as follows:

	Group 2020 £'000
	Plant & equipment	Buildings	Total
Cost	4,613	1,924	6,537
Accumulated depreciation	(2,788)	(599)	(3,387)
Net book value	1,825	1,325	3,150

In prior year leases under HP were classified as plant and equipment, however, under IFRS16 they have now been classified as ROU asset with other leases.

8.  Called up share capital and share premium

	Number of shares '000	Ordinary shares £'000	Share premium £'000	Total £'000
At 1 April 2018	148,665	1,486	12,529	14,015
Issue of shares	4,959	50	7,247	7,297
At 31 March 2019	153,624	1,536	19,776	21,312
Issue of shares	16,058	161	5,721	5,882
At 31 March 2020	169,682	1,697	25,497	27,194

9.  Cash used in operations

	2020 £'000	2019 £'000
Loss before tax	(4,703)	(2,829)
Adjustments for:
Share-based payments	1,157	712
Depreciation	1,065	427
Amortisation	73	70
Impairment of Goodwill	876	-
Disposal of non-current assets	-	8
R&D tax credit repayment	49	117
Gain on FV movement of share agreement	(987)	-
Finance cost	155	66
Decrease/(increase) in trade and other receivables	(35)	424
Decrease/(increase) in inventories	1	(292)
Decrease in trade and other payables	862	(440)
Cash flows from operating activities	(1,487)	(1,737)

10.  Report and accounts

Copies of the 2020 Annual Report and Accounts will be posted to shareholders in due course once they are finalised and approved. Further copies may be obtained by contacting the Company Secretary at the registered office. In addition, the 2020 Annual Report and Accounts will be available, when published, to download from the investor relations section on the Company's website  www.versarien.com .

- Ends -

 

END

 

 

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