Final Results

RNS Number : 5760T

Versarien PLC

21 July 2015

 

Press Release

21 July 2015

Versarien plc

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

Final Results

Versarien Plc (AIM:VRS), the advanced engineering materials group, today announces its final results for the year ended 31 March 2015.

Highlights

·	Group revenues up 69% to £4.98 million (2014: £2.95 million)
·	Net assets up 180% to £7.3 million (2014: £2.6 million)
·	Cash at 31 March 2015 of £3.5 million (2014: £0.2 million)
·	*LBITDA of £277,000 (2014: £232,000)
·	Loss before tax £866,000 (2014: £653,000)
·	Total Carbide sales of £4.6m (2014: £2.9 million - 9 months)
·	Total Carbide EBITDAE  rose to £1.12m (2014: £0.47m - 9 months)
·	Acquisition of 2-D Tech Limited which has achieved a breakthrough in the cost effective manufacture of high quality graphene
·	First product range launch for Versarien Technologies VCu copper foam
·	First Distribution deal for Versarien Technologies VCu Copper foam
·	Acquisition of heat sink manufacturing business out of administration for a total consideration of £191,000

* LBITDA excludes exceptional items and share based payment charges.

Commenting on the final results, Neill Ricketts, Chief Executive Officer of Versarien, said: "We are clearly delivering on our stated strategy to identify, acquire, develop and commercialise disruptive intellectual property in advanced materials with the milestone of the first distribution agreement for Versarien technologies copper foam product.  We have acquired 2-D Tech Limited, which has achieved a significant breakthrough in the cost effective manufacture of high quality graphene and have secured important relationships to accelerate the commercialisation of this business including a partnership agreement with the National Graphene Centre at the University of Manchester, the recognised home of graphene.  We are also pleased to have delivered £1.12 million EBITDAE from Total Carbide in our first full year since admission to AIM demonstrating our ability to run and optimise our established companies and therefore believe Versarien has an exciting future as we continue to look for further opportunities to grow the business both organically and by acquisition."

For further information:

Versarien Plc Neill Ricketts, Chief Executive Officer Chris Leigh, Chief Financial Officer	Tel: [phone] www.versarien.com
Panmure Gordon (Nominated Adviser and Broker) Russell Cook / James Greenwood	Tel: [phone]
IFC Advisory (Financial PR and IR) Tim Metcalfe / Graham Herring / Heather Armstrong	Tel [phone]

 

Chairman's Statement

In this, our first full year of trading since being admitted to AIM, I am pleased to be able to report real progress in the Group's performance.  Versarien comprises an exciting combination of advance materials with high growth potential with underpinning, profitable manufacturing. I believe this set of results demonstrates Versarien has the expertise in place to take new materials and scale up efficient manufacturing for commercial applications. All of this is in accordance with our stated strategy, details of which are given in the Strategic Report.

We have completed two acquisitions in the period and the Group is now organised into three business segments: Thermal Products which develops and manufactures porous copper and aluminium heat sinks, Hard wear Products which manufactures tungsten carbide hard wear parts and Graphene Products which is developing graphene nano-platelets via an exfoliation process.

We are pleased to report sales of £4.98 million, up 69% from the previous year. Net assets increased 180% to £7.3 million with cash at the year-end of £3.5 million.

Thermal Products

We have broadened our product offering following the acquisition of the assets of Custom Systems to include aluminium heat sinks; revenue was up £351,000 as a result. A new range of air cooled heat sinks was launched and our routes to market grew through the establishment of distributors in Europe and the US.

Hard wear Products

Hard wear Products reported sales of £4.6m and operating profit of £884,000 during a period of relatively high oil prices. As the oil price has declined the market for our products has weakened.  We have mitigated this by diversifying our customer base to include new territories and sectors. The division continues to perform well given the current economic environment and we continue to look for ways to enhance performance further.

Graphene Products

Following the acquisition of 2-D Tech in May, we have focused on developing the process licensed through the University of Ulster and part funded by the University of Manchester (UoM).  We continue to collaborate with both of these leading research institutions. Sales and other income from the division were £153,000 in the post-acquisition period. Since the year end we have announced a breakthrough in the scalable manufacture of graphene platelets using a patented exfoliation process.  And we have also announced an agreement to repay the funding previously provided by UoM in return for a 60% share in the patent rights and the lesser of 98.4% of sales revenues and 90% of profits arising from the graphene IP.

Summary

We made considerable progress in the last year and this has continued into the new financial year with a number key strategic achievements.

As announced on the 13 July 2015, Versarien and Haydale Graphene Industries plc signed a memorandum of understanding to collaborate on and accelerate the development of their respective graphene projects. This is the latest in a number of strategic alliances formed by Versarien, others including agreements with the National Graphene Institute and the Graphene Engineering Innovation Centre at the University of Manchester.

The UK is one of the leading territories for the development of graphene solutions. Through collaborations, such as that which we announced recently with Haydale, the UK market is well positioned to become the global leader in graphene technology development. Our attendance at the United Kingdom Graphene Exhibit at Nano Korea earlier this month, along with a number of other UK based companies, illustrates the high level of development and co-operation in this space.

As a result, the Board is confident in Versarien's position to capitalise on the opportunities presented in its key markets, while minimising risk by pursuing multiple projects and developing a range of innovative materials into commercially viable products.  We look forward with optimism to the coming year.

I would like to thank the staff and the Board for their hard work during the year. This coming year will be important for Versarien as it seeks to commercialise the technologies it has been developing since flotation in June 2013.

Ian Balchin

Non-executive Chairman
 

Chief Executive's Statement and Strategic Report

Business Overview

Thermal products consists of the porous copper foam product and the metal heat sink business acquired during the year. We have recently announced the launch of a range of air cooled heat sink products using VersarienCu™.This range is designed for use in passive cooling applications where space is at a premium and performance is crucial. Applications include power integrated circuits, high temperature components and transistors, set top boxes, AP routers, cable modems and broadband, optical Networks and LED TV and flat panel displays.  Since our financial year end, we have signed a global distribution agreement with Mouser Inc and a number of European distributors to sell this technology thus accelerating our routes to market. We also continue to work with a small number of potential OEM customers on specific projects.

In order to expand our thermal product offering, in February 2015 we acquired certain  assets and business of Custom Systems Limited, a manufacturer of all manner of extruded aluminum products and heat sinks for the electronics and computing industries as well as for large machinery and generators.

Graphene Products currently consists of 2D-Tech Limited, which we acquired in May last year from the University of Manchester. This purchase gave us a low-cost entry into graphene technology from the home of graphene and mainly consisted of some shared intellectual property with the Universities of Manchester and Ulster for graphene production using an exfoliation process, know how to produce graphene using chemical vapour deposition and a number of networking opportunities.

On the 11 June 2015, we announced that 2-DTech made a major advance in graphene platelet production to accelerate potential commercial applications for graphene and graphene products.  2-DTech has developed its own proprietary graphene production technique founded upon the shared IP process from Universities of Ulster and Manchester which offers numerous advantages over the conventional graphene manufacturing solutions currently on the market.

2-DTech is currently working with a number of clients, from industries as diverse as military, medical and consumer products, requiring access to high quality, cost effective graphene and is expecting to form a number of further partnerships to commercialise this technology in a timely fashion in the near future.

Hard wear Products currently consists of Total Carbide Limited and our associate, DV Composite Tooling Limited. Total Carbide was acquired at the time of flotation and supplies tungsten carbide parts mainly to the oil and gas industry.  Despite the drop in the oil price and subsequent set-backs in that sector, it has performed exceptionally well.  DV Composite Tooling is a start-up venture with Dimar Limited, an Israeli company supplying tungsten carbide tools to the woodworking industry. DV will develop and market a new range of hard wear tooling for the composites industry.

Business model

Versarien seeks to capitalise on innovative IP, transforming it into commercially viable products that can tackle the technological challenges faced by modern manufacturers. This requires a number of steps:

·     a continual deal flow, either by establishing new licence arrangements with research institutions or by identifying embryonic companies in early stages of development whose intellectual property fits with our definition of advanced materials technology;

·     applying the management team's experience to developing and commercialising the advanced materials technology;

·     providing the plant and equipment to get into production either via its existing production facilities or by funding new facilities; and

·     providing working capital facilities either from existing reserves, its public listing or via banking facilities.

Markets and trends

There are a number of companies that provide support and finance to businesses seeking to commercialise intellectual property or provide finance to spin-out companies from universities or research institutions, but they tend to cover many sectors.  Versarien concentrates on only those opportunities that are in the advanced materials and high value manufacturing sectors and that outperform conventional materials with superior combinations of functional properties, such as toughness, hardness, durability, elasticity, strength or conductivity.

Versarien Technologies operates in the global market for thermal management technology which is expected to reach $11 billion by the year 2016 and its potential applications include aerospace, defense, automotive, data communications, renewable energy, power distribution, transportation and motorsport.  2-DTech operates in the graphene development market, the total demand for which is anticipated to be circa 400 tonnes by 2017. Forecasts suggest the market for graphene products in 2018 will be US$195 million growing to US$1.3 billion by 2023. Total Carbide operates in the hard wear parts market principally for use in oil and gas exploration.

Strategy

·     To identify and acquire disruptive intellectual property in advanced materials and enter into joint development agreements with potential customers or take to market through distribution channels

·     To establish development agreements with world-class organisations

·     To commence commercial production  

·     To maximise cash generation from our mature business to help support technology development

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:

	2015 £'000	2014 £'000
Revenue	4,982	2,953
Gross margin percentage	38%	36%
Loss before interest, tax, depreciation, amortisation, exceptional costs  and share based charges	(277)	(232)
Cash generated from mature businesses after capital investment	483	119
Cash utilised by technology businesses after capital investment	(1,747)	(589)
Cash raised/utilised by parent (including cash acquired and net of loans to technology businesses)	4,580	653
Net Cash raised by the Group	3,316	183
Technology products/processes in development	31	26

Outlook

We continue to look for opportunities to grow the business both organically and by acquisition whilst keeping costs and cash under control. Research and development is a fundamental part of our business and the Board's strategy is to ensure that we now commercialise the sums invested. I would like to thank all of our hard working employees for their dedication in our fast-moving businesses and we look forward to the future with much optimism.

Neill Ricketts

Chief Executive Officer
 

Chief Financial Officer's Review

The share placing in the early part of the financial year raised £5.25 million net of expenses and allowed the Group to continue to accelerate the production of copper foam and acquire 2-D Tech, a graphene development business.

Group Results

Versarien's revenue for the year ended 31 March 2015 was £4,982,000 (£2014: £2,953,000) with operating losses before exceptional costs, depreciation/amortisation and share based payment charges of £277,000 (2014: £232,000).

Exceptional costs were £307,000 (2014; £197,000) including £76,000 of acquisition and potential acquisition costs (2014: £147,000), £69,000 of initial start-up costs for the associate DV Composite Tooling (2014: £ Nil) and £162,000 of restructuring costs (2014: £50,000).  The restructuring costs in the current year relate to the anticipated relocation of Total Carbide following the expected termination of its factory lease in 2016 (2014: £Nil).

The loss before tax for the year was £866,000 (2014: 653,000).

Group net assets at 31 March 2015 were £7.3 million (2014: £2.6million) following the placing. Cash at the year-end was £3.5 million (2014: £0.2 million) with £0.6m of headroom on its invoice finance facilities (2014: £0.5million).

Cash outflow from operating activities was £1.1 million (2014:£0.7 million) including working capital increases of £0.5 million (2014: £0.3 million). The Group invested £0.2 million, net of cash, in acquisitions (2014: £1.2 million), £0.3 million (2014: £nil) in capitalised development costs and £0.3 million (2014:£Nil) in plant and machinery.  The Group raised £5.3 million net of costs in placing and shares issued from existing options (2014: £2.1 million) and repaid £0.2 million of borrowings (2014: £0.1 million borrowed).

Thermal Products

Revenue for the year for Versarien Technologies was £355,000 (2014: £4,000) including contribution from the heat-sink business acquired in February 2015, details of which are in note 6. Operating losses before exceptional items were £688,000 (2014: £526,000). The business capitalised £250,000 on development costs.

Hard wear Products

It is very pleasing to report that Total Carbide has had an exceptional year achieving sales of £4,594,000 (2014: £2,949,000 (9 months)) and returned an operating profit before exceptional costs of £958,000 (2014: £332,000 (9 months)) representing a 21% return on sales. During the year the costing system was reviewed which result in an uplift of £85,000 to the stock valuation. The business generated £882,000 in cash from its operations, invested £221,000 in new plant and equipment and repaid loans of £178,000.

DV Composite Tooling is a start -up venture with Dimar Limited, an Israeli company supplying tungsten carbide tools to the woodworking industry. DV is developing and marketing a new range of hard wear tooling for the composites industry. It has been recognised as an associated company as Versarien holds 49.9% of the issued share capital. It is at pre-revenue stage and its share of un-recognised losses for the period since incorporation were £8,000 with £69,000 incurred as exceptional start-up costs.

Graphene Products

As described more fully in note 6, eighty five percent of the issued share capital of 2D-Tech was acquired for a total consideration of £740,000 in May 2014.  Its revenue for the post-acquisition period was £33,000 and it received £120,000 of grant income. Its operating loss for the period was £240,000.

Bank facilities and going concern

At 31 March 2015 the Group had cash balances totalling £3.5 million and available invoice discounting facilities of £0.6 million.  Since the year-end it has negotiated further asset funding facilities of up to £1.2 million to finance plant and machinery additions that may be required to scale up production facilities.

The Board has prepared forecasts and projections for a period of not less than twelve months from the approval of this annual report and assessed the key risks and uncertainties. In the event that trading performance falls below these forecasts it has a number of options available to it to manage cash outflow.  Consequently, at the time of approving the financial statements, the Board has concluded that the Group has adequate resources to continue in operation for the foreseeable future and has therefore continued to adopt the going concern basis.

Chris Leigh

Chief Financial Officer
 

Group statement of comprehensive Income

Year ended 31 March 2015

	Notes	2015 £'000	2014 £'000
Continuing operations
Revenue	2	4,982	2,953
Cost of sales		(3,089)	(1,881)
Gross profit		1,893	1,072
Other operating income		126	98
Operating expenses (including exceptional items)		(2,883)	(1,811)
Loss from operations before exceptional items		(557)	(444)
Exceptional items	3	(307)	(197)
Loss from operations		(864)	(641)
Finance charge		(2)	(12)
Loss before income tax		(866)	(653)
Income tax		-	-
Loss for the year		(866)	(653)
Loss attributable to:
-Owners of the parent company		(830)	(653)
- Non-controlling interest		(36)	-
		(866)	(653)
Loss per share attributable to the equity holders of the Company:
Basic and diluted loss per share	5	(0.80)p	(0.85)p

There were no comprehensive gains or losses in the year other than those included in the Comprehensive Income Statement.

 

Group statement of financial position

As at 31 March 2015

	Notes	2015 £'000	2014 £'000
Assets
Non-current assets
Intangible assets	6	1,502	586
Property, plant and equipment	7	1,423	1,091
Deferred taxation		65	65
		2,990	1,742
Current assets
Inventory		1,109	765
Trade and other receivables		1,272	955
Cash and cash equivalents		3,531	215
		5,912	1,935
Total assets		8,902	3,677
Equity
Called up share capital	8	1,055	831
Share premium account	8	7,150	1,853
Merger reserve		1,017	1,017
Share-based payment reserve		94	35
Retained earnings		(1,967)	(1,137)
Equity attributable to owners of the parent company		7,349	2,599
Non-controlling interest		(22)	-
Total equity		7,327	2,599
Liabilities
Non-current liabilities
Trade and other payables		181	115
Provisions		203	200
Long-term borrowings		13	34
		397	349
Current liabilities
Trade and other payables		855	549
Provisions		300	-
Invoice discounting advances		-	156
Current portion of long-term borrowings		23	24
		1,178	729
Total liabilities		1,575	1,078
Total equity and liabilities		8,902	3,677

Group statement of changes in equity

Year ended 31 March 2015

	Share  capital £'000	Share premium account £'000	Merger reserve £'000	Share-based payment  reserve £'000	Retained earnings £'000	Non-controlling Interest £'000	Total equity £'000
At 1 April 2013 (unaudited)	529	-	53	-	(484)	-	98
Issue of shares	302	2,434	964	-	-	-	3,700
Cost of share issue	-	(581)	-	-	-	-	(581)
Loss for the year	-	-	-	-	(653)	-	(653)
Share-based payments	-	-	-	35	-	-	35
At 31 March 2014	831	1,853	1,017	35	(1,137)	-	2,599
Issue of shares	224	5,550	-	-	-	-	5,774
Cost of share issue	-	(253)	-	-	-	-	(253)
Non controlling interest on acquisition	-	-	-	-	-	14	14
Loss for the year	-	-	-	-	(830)	(36)	(866)
Share-based payments	-	-	-	59	-	--	59
At 31 March 2015	1,055	7,150	1,017	94	(1,967)	(22)	7,327

Included within the merger reserve is £53,000 in respect of the merger with Versarien Technologies Limited and £964,000 in respect of the acquisition of Total Carbide Limited.

Statement of Group cash flows

Year ended 31 March 2015

	Notes	Group 2015 £'000	Group 2014 £'000
Cash flows from operating activities
Cash used in operations	9	(1,119)	(715)
Interest (paid)/received		(2)	(12)
Net cash used in operating activities		(1,121)	(727)
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired)		(154)	(1,175)
Purchase of intangible assets		(277)	(18)
Purchase of property, plant and equipment		(255)	(33)
Net cash used in investing activities		(686)	(1,226)
Cash flows from financing activities
Share issue		5,553	2,650
Flotation/share issue costs		(252)	(581)
Repayment of finance leases		(22)	(89)
Invoice discounting loan (repayment)/proceeds		(156)	156
Net cash generated from financing activities		5,123	2,136
Increase in cash and cash equivalents		3,316	183
Cash and cash equivalents at beginning of year		215	32
Cash and cash equivalents at end of year		3,531	215

 

Notes

1. Basis of preparation

The consolidated financial statements consolidate those 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 periods ended 31 March 2015 or 31 March 2014.  The financial information for the year ended 31 March 2015 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.

Both the consolidated financial statements and the Company financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("IFRSs").

2.  Segmental reporting

The Directors regard the Group's reportable segments of business to be the development and manufacture of Thermal Products  ("Thermal Products"), manufacturing of tungsten carbide ("Hard Wear Products"), the development and manufacture of graphene  ("Graphene Products") and holding company activities ("Central Activities"). The business has no significant geographical aspect. Costs are allocated to the appropriate segment as they arise with central overheads apportioned on the basis of time spent by central staff on subsidiary affairs.  This segmentation is consistent with internal reports to the chief operating decision maker for use in assessing business performance and allocating Group resources. The chief operating decision maker is the Chief Executive of the Group and the activity of each segment is explained in the Chief Executive's Statement and Strategic Report

The segment analysis for the period ended 31 March 2015 is as follows:

	Central £'000	Graphene Products £'000	Thermal Products £'000	Hard Wear Products £'000	Intra group adjustments £'000	Total £'000
Revenue from services	-	33	355	4,594	-	4,982
Gross (loss)/profit	-	(3)	60	1,841	(5)	1,893
Other operating income	-	120	6	-	-	126
Operating expenses	(768)	(357)	(773)	(957)	(28)	(2,883)
(Loss)/profit from operations	(768)	(240)	(707)	884	(33)	(864)
Finance income/(charge)	11	-	(10)	(3)	-	(2)
(Loss)/profit before tax	(757)	(240)	(717)	881	(33)	(866)
Total assets	8,064	228	1,150	3,688	(4,228)	8,902
Total liabilities	(347)	(375)	(1,782)	(679)	1,608	(1,575)
Net assets/net (liabilities)	7,717	(147)	(632)	3,009	(2,620)	7,327
Capital expenditure	4	2	27	222	-	255
Depreciation/amortisation	0	10	29	157	25	221

The segment analysis for the period ended 31 March 2014 is as follows:

	Central £'000	Graphene Products £'000	Thermal Products £'000	Hard Wear Products £'000	Intra group adjustments £'000	Total £'000
Revenue from services	-	-	4	2,949	-	2,953
Gross (loss)/profit	-	-	(25)	1,097	-	1,072
Other operating income	30	-	68	-	-	98
Operating expenses	(389)	-	(619)	(784)	(19)	(1,811)
(Loss)/profit from operations	(359)	-	(576)	313	(19)	(641)
Finance charge	-	-	(10)	(2)	-	(12)
(Loss)/profit before tax	(359)	-	(586)	311	(19)	(653)
Total assets	3,438	-	258	2,953	(2,972)	3,677
Total liabilities	(114)	-	(173)	(864)	73	(1,078)
Net assets/net (liabilities)	3,324	-	85	2,089	(2,899)	2,599
Capital expenditure	1	-	29	21	-	51
Depreciation/amortisation	-	-	34	140	20	194

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
	2015 £'000	2014 £'000		2015 £'000	2014 £'000
United Kingdom	3,454	2,378		2,990	1,742
Rest of Europe	818	515		-	-
North America	11	3		-	-
Other	699	57		-	-
	4,982	2,953		2,990	1,742

3.  Exceptional items

	2015 £'000	2014 £'000
Restructuring costs	162	50
Acquisition costs	76	147
Associate start up costs	69	-
	307	197

Exceptional costs include £76,000 of acquisition and potential acquisition costs (2014: £147,000), £69,000 of initial start-up costs for the joint venture DV Composite Tooling (2014: £ Nil) and £162,000 of restructuring costs (2014: £50,000).  The restructuring costs in the current year relate to the impending relocation of Total Carbide following the expected termination of its factory lease in 2016 (2014: £Nil).

4.  Dividends

As stated in the 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 2015 and 31 March 2014 is based on the losses attributable to the shareholders of Versarien plc Group divided by the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings 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 21 March 2015 there were 5,956,000 (2014: 3,943,000) potential ordinary shares which have been disregarded in the calculation of diluted earnings 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 2015	(830)	103,583	(0.80)
Year ended 31 March 2014	(653)	77,118	(0.85)

6.  Intangible assets

	Goodwill £'000	Other intangibles £'000	Total £'000
Cost
At 1 April 2013 (unaudited)	-	165	165
Acquisition of Total Carbide Limited	354	123	477
Additions	-	18	18
At 1 April 2014	354	306	660
Acquisitions	659	28	687
Additions	-	277	277
At 31 March 2015	1,013	611	1,624
Accumulated amortisation and impairment
At 1 April 2013 (unaudited)	-	32	32
Amortisation charge	-	42	42
At 1 April 2014	-	74	74
Amortisation charge	-	48	48
At 31 March 2015	-	122	122
Carrying value
At 31 March 2015	1,013	489	1,502
At 31 March 2014	354	232	586

 

Impairment

Goodwill arising on consolidation represents the excess of the fair value of the consideration for an acquisition over the fair value of the Group's share of the net assets of the acquired subsidiary at the date of acquisition and is reviewed annually for impairment.

Goodwill acquired in a business combination is allocated, at acquisition, to the business segments ("cash generating units") detailed in note 2 "Segmental Reporting" as follows:

	Opening £'000	Additions £'000	Closing £'000
Hard wear products	354	-	354
Graphene products	-	659	659
Thermal products	-	-	-
	354	659	1,013

The recoverable amount of all cash generating units has been determined based on value in use calculations using pre-tax cash flow projections based on financial projections approved by management covering a five-year period. The key assumptions to which the value-in-use calculation is most sensitive are those regarding the discount rates, growth rates and expected changes to selling prices and costs during the period.  The rate used to discount forecast cash flow is 12%, which was deemed to be the Group's weighted average cost of capital.   Growth rates for mature products is assumed to be 2% and for embryonic technology products is 75%.

Other intangible assets

	31 March 2015 £'000	31 March 2014 £'000
Customer relationships/order books	108	103
Development costs	346	67
Licence	35	62
Total	489	232

The fair value of customer relationships acquired as part of business combinations based on the estimated cash flows from major customers over a five-year period and assumes attrition of 20% per annum and a discount factor of 19.6%. It is amortised on a straight-line basis over two to five years.

On 1 May 2014 the Company completed the acquisition of 85% of the issued share capital of 2D-Tech Limited for a consideration of £740,000 comprising cash of £220,000, 846,153 Ordinary shares at a price of 26 pence per share and a commitment to fund vendor projects at a maximum cost of £300,000.  The purchase of 2D Tech provided the Group with a low cost entry into graphene development. Goodwill arising from the transaction represents the opportunity to participate on the graphene market. Revenues and results of 2D Tech are disclosed in the segmental analysis at note 2 under "Graphene Products".  Had 2D Tech been acquired at the start of the accounting period the revenue for the business would have increased by £26,000 and losses for the year by £7,000.

On 2 February 2015 Versarien Technologies acquired out of administration parts of the business of Custom Systems Limited for an initial cash consideration of £206,000 revised to £191,000 to expand the company's thermal product offering including extruded aluminum products and heat sinks for the electronics and computing industries as well as for large machinery and generators. Included with the results for the year are revenues of £332,000 and profits of £38,000. As the business was purchased out of Administration results for the period from 1 April 2014 to the date of acquisition are not available to disclose the results of the combined entity had it been purchased at the start of the financial year.
 

The provisional fair value of the assets and liabilities acquired were as follows:

	2D -Tech £'000	Custom Systems £'000	Total
Non-current assets
Intangible assets	-	28	28
Property, plant and equipment	126	127	253
	126	155	281
Current assets
Inventories	10	36	46
Trade and other receivables	42	-	42
Cash and cash equivalents	257	-	257
	309	36	345
Total assets	435	191	626
Current liabilities
Trade and other payables	(78)	-	(78)
Accruals and deferred income	(262)	-	(262)
Total liabilities	(340)	-	(340)
Net assets acquired	95	191	286
Non-controlling interest	(14)	-	(14)
Goodwill	659	-	659
Consideration	740	191	931
Consideration satisfied by:
Shares issued	220	-	220
Cash	220	191	411
Deferred consideration	300	-	300
	740	191	931

7.         Property, plant and equipment

Group	Plant and equipment £'000	Leasehold improvements £'000	Total £'000
Cost
At 1 April 2013 (unaudited)	66	13	79
On acquisition of Total Carbide Limited	5,389	-	5,389
Additions	33	-	33
At 1 April 2014	5,488	13	5,501
Acquisitions	290	-	290
Additions	255	-	255
Disposals	(29)	(13)	(42)
At 31 March 2015	6,004	-	6,004
Accumulated depreciation
At 1 April 2014 (unaudited)	3	7	10
On acquisition of Total Carbide Limited	4,248	-	4,248
Charge for the year	146	6	152
At 1 April 2014	4,397	13	4,410
Acquisitions	37	-	37
Charge for the year	173	-	173
Disposals	(26)	(13)	(39)
At 31 March 2015	4,581	-	4,581
Net book value
At 31 March 2015	1,423	-	1,423
At 31 March 2014	1,091	-	1,091

Plant and equipment includes the following amounts where the Group is a lessee under finance leases and hire purchase contracts:

	Group 2015 £'000	Group 2014 £'000
Cost	122	122
Accumulated depreciation	(38)	(30)
Net book value	84	92

8.  Called up share capital and share premium

	Number of shares '000	Ordinary shares £'000	Share premium £'000	Total £'000
At 1 April 2013 (unaudited)	52,872	529	-	529
Issue of shares at 12.25 pence per share	30,204	302	2,434	2,736
Expenses of share issue	-	-	(581)	(581)
At 1 April 2014	83,076	831	1,853	2,684
Issue of shares at 12.25 pence per share	445	4	50	54
Issue of shares at 26 pence per share	22,000	220	5,500	5,720
Expenses of share issue	-	-	(253)	(253)
At 31 March 2015	105,521	1,055	7,150	8,205

In connection with the acquisition of 2DTech Limited, the Company raised £5,500,000 (before expenses) through the placing of 21,153,847 new Ordinary Shares at 26 pence per share and issued 846,153 new Ordinary Shares at 26p as part of the consideration. During the year options to acquire 445,000 Ordinary Shares at 12.25 pence per share were exercised.

9.  Cash flows from operating activities

	2015 £'000	2014 £'000
Loss before tax	(866)	(653)
Adjustments for:
Share-based payments	59	35
Depreciation	173	152
Amortisation	48	42
Disposal of non-current assets	3	-
Finance cost	2	12
Increase in trade and other receivables	(275)	(131)
Increase in inventories	(298)	(61)
(Decrease)/increase in trade and other payables	35	(111)
Cash flows from operating activities	(1,119)	(715)

10.  Post balance sheet events

2DTech Limited has signed an agreement with the University of Manchester and the University of Ulster to vary the terms of the agreement existing at the time of the acquisition of 2DTech relating to the production of graphene using exfoliation methods. Under the terms of the variation 2D Tech has undertaken to pay £140,000 to the University of Manchester in equal quarterly instalments over a period of 2 years in return for them forgoing patent and income sharing rights arising from graphene production. Under a revised agreement with the University of Ulster, 2D Tech is now entitled to 60% of the patent rights and the lesser of 98.4% of sales revenues and 90% of profits arising from graphene production.

11.  Report and accounts

Copies of the 2015 Annual Report and Accounts will be posted to shareholders in early August. Further copies may be obtained by contacting the Company Secretary at the registered office. In addition, the 2015 Annual Report and Accounts will be available to download from the investor relations section on the Company's website www.versarien.com.

- Ends -

 

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