The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (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.
Haydale (AIM: HAYD), the global advanced materials group, announces its unaudited interim results for the six months ended 31 December 2017 (the 'Period' or 'H1FY18').
Post Period End Highlights
Commenting on the interim results, Ray Gibbs, CEO of Haydale, said: "In the Period we have successfully commenced commercialisation following the global expansion we achieved last year. We now have an engineering-based advanced materials business operating in the three principal world markets of the US, EU and APAC. Our transition from technically focused research and development to a sales-led operation is gathering momentum, but it is not without its challenges. It requires focus and dedication, with the right people in place and our introduction of dedicated SBUs has been enormously helpful in achieving that focus. I am delighted then to report a 67% increase in total income for this half year and a 85% increase in commercial revenues demonstrating the effect of our focus on sales.
Looking forward, and following our successful fundraising, we have invested in our Taiwanese operation with a newly established, initially temporary, ink production facility. The Taiwanese team have been incredibly busy formulating ink samples to potential customers' specifications who want to improve the performance of their printed sensors, principally in the US$15 billion self-monitoring blood glucose market. We are hopeful of securing several meaningful orders and supply agreements from this key strategic market and plan to move to a 10,000 sq. ft. facility by the end of this financial year.
With the building blocks now in place, the next six to twelve months should be an exciting time for the Group, which we believe now has the customer engagement, geographic reach, engineering solutions capability and product know how to create material change in the Group's future revenues."
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identiﬁed by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reﬂect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.
A number of factors could cause actual results to differ materially from the results discussed in the forward looking statements including risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes, actions by governmental authorities, the availability of capital markets, reliance on key personnel, uninsured and underinsured losses and other factors, many of which are beyond the control of the Company. Although any forward looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with such forward looking statements. Accordingly, readers are cautioned not to place undue reliance on forward looking statements. Subject to any continuing obligations under applicable law or any relevant AIM Rule requirements, in providing this information the Company does not undertake any obligation to publicly update or revise any of the forward looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based.
I am delighted to present Haydale's unaudited interim results to 31 December 2017. Following on from our strategic acquisitions in 2016, the Group is now focused on sales growth through product commercialisation. In July 2017, we established two sales oriented strategic business units ('SBUs'): Advanced Materials ('AMAT') and Resins Polymers and Composites ('RPC') to concentrate sales effort and target customers who typically operate internationally across a variety of sectors. Haydale now has routes to geographic markets with a range of novel speciality performance enhancing nanomaterials and products to add to its product portfolio and graphene expertise. Crucially, the Group now has the capabilities to combine its graphene and other nanomaterials and produce hybrid 'masterbatches' as we see this as the optimal way to significantly improve end-product performance without crucially changing downstream customer processing and overcome industry's reluctance to handle powders.
The progress made in the establishment of the SBUs with dedicated teams has made an immediate impact with like-for-like income growth in the Period of approximately £0.5 million in each SBU.
Haydale now has over 70 staff operating from six sites in three geographic regions, where 11 Haydale patented plasma functionalisation reactors are now deployed. With demand increasing for our engineered solutions and masterbatch products, we plan to expand our reactor numbers once known customer requirements are finalised. We are now seeing demonstrable dispersion and performance benefits from adding appropriate chemical groups on the surface and ends of nano particles.
In the US, the Group's recently launched hard-edged cutting tool product has already opened new customers and achieved almost £0.1 million of sales in the year to date from a standing start, offering promising prospects for future growth. Our sales team in the Far East is making good inroads into customers requiring graphene and functional conductive inks, mainly from our Thailand operation and our newly established, and initially temporary, Taiwanese facility. The team in Taiwan has been incredibly busy formulating ink samples to potential customers' specifications, who want to improve the performance of their printed sensors, principally in the US$15 billion self-monitoring blood glucose market. We are hopeful of securing several meaningful orders and supply agreements from this key strategic market.
Advanced Materials SBU ('AMAT')
The AMAT SBU delivered a 45 per cent. increase in sales of its proprietary Silicon Carbide micro-fibres ('SiC') in the Period to £1.14 million, as compared to the same period in 2016. This significant uplift was aided by targeted investment in sales and marketing activities in the US. Our operation in South Carolina has been rebranded as Haydale Ceramic Technologies ('HCT') and, on a like-for-like basis, doubled its number of customer engagements (i.e. customers who have sampled HCT's products right through to long term contracted customers) for the Period, including generating sales in new territories, such as South Korea.
In the last year, HCT has invested in product development to open up new markets and has had an encouraging start to sales of its newly developed hard-edged cutting blanks, used for fashioning products such as aircraft engine and land-based fan blades from super alloys, generating maiden revenues of almost £0.1 million.
Penetration into the newly identified anti-corrosion powder coating market of HCT's SiC is also progressing well, with a potential new customer currently undergoing trials at two sites in the US. The opportunity for Haydale is to incorporate silicon carbide into epoxy-based coatings for ferrous structures. Follow on orders for evaluation in this high growth market have continued in both January and February 2018, and the Group is working towards being able to supply commercial quantities over the next six to nine months.
Inks and Coatings
Haydale's temporary facilities in Taiwan were successfully audited during the Period by two leading ink screen-printing corporations, one of which operates in biomedical sensors for the growing global diabetes market. Following the Group's successful fundraise in October 2017, investment in infrastructure and scale-up in Taiwan has started to deliver increased capacity and capabilities in anticipation of increased demand. During the Period, the Group sold and supplied bespoke samples of its graphene enhanced and functional inks for product evaluation and testing to more than 30 companies in the APAC region. Increasing customer engagements are such that the Group plans to move to a 10,000 sq. ft. facility in Kaohsiung by the end of the current financial year, which will be capable of meeting significant demand for our graphene-based and speciality conductive ink products.
Following a successful first trial, a second safety trial is underway by a leading Korean cookware manufacturer, who has incorporated Haydale's functionalised graphene nano-platelets within the inner coating of their pots and pans. Through Haydale's operations in Thailand, the Group has targeted three major Thai cookware manufacturers who are seeking improvements in the thermal performance of their next generation cookware products.
We are pleased to report that the Group's Thai operation has sold, and is to install and commission, a HT60 reactor to a leading Thai petrochemical processor, IRPC, before the end of June 2018. This reactor sale includes a follow-on research contract worth approximately £0.3 million to our Thai operation over the next 12 months. The research contract includes functionalising certain of IRPC's bi-products to specifically improve electrical performance and increase value.
Resins, Polymers and Composites SBU ('RPC')
The RPC SBU has delivered strong sales growth in the Period. A second trial for Haydale's graphene-enhanced resin system for Flowtite A/S's GRP pipes was carried out on 28 February 2018, following encouraging initial evaluation reports in September 2017. The expectation is for the test results to be received by the end of June 2018.
In the Period, Haydale has secured new grant funded projects of £0.5 million for delivery in this and into the next financial year. Each grant project secured is intended to lead to the development, and ultimately sale, of a next generation product and allows Haydale to work alongside some significant international corporations. More pleasingly, since the Period end, our dedicated team has secured a further approximate £0.7 million of additional grant and commercial projects funding for delivery over the remainder of the current year and into subsequent financial years. Two of these awards are in the aerospace sector, one being a follow-on from our successful graphene conductive aileron project demonstrating the feasibility to counter lightning strike and the other, being the development of a graphene conductive adhesive, to be used in aerospace applications aimed at removing the need for lead based solder.
The composite industry is looking to make structures smart and provide self-diagnostics. Included within the grant awards secured above, Haydale has won, as part of a £1.3 million consortium, a project grant aimed at embedding diagnostic graphene sensors into a composite structure, where the value to Haydale is approximately £0.25 million over the next 18 months. The project applies graphene to a customised composite substrate to achieve real time defect sensing, during the manufacturing process of a composite where crucially, the mechanical performance is not degraded. The graphene sensors are to be embedded into the composite material, delivering whole life savings for the asset owner, through reduced manufacturing time and in-situ assessment. A new generation smart material.
In our traditional thermoset market, following the recent delivery to National Grid of the first batch of Haydale's proprietary composite gas transition inspection covers, a repeat order for £0.11 million has been secured for delivery in the current financial year.
Haydale continues to add to its IP base, with both know-how and granted patents. Increasingly, the knowledge-based systems in our business have taken on more prominence rather than the process patents. This is especially true for the dispersion capability we have developed in our operations. The Group's intention remains to secure added protection through the development of product patents which we have filed for graphene products, such as pressure sensors, printed heated garments for sporting goods and PATit, our transparent conductive ink used in anti-counterfeiting.
We are also pleased to report that the Group was advised in September 2017 that the North American patent office has granted a patent on Haydale's patented plasma process. This will ensure that Haydale's functionalisation process will be protected in the US, UK, Europe, Japan, China, and Australia.
Total unaudited income recognised in the period, which comprised commercial revenue and income from grant projects, was up more than 67 per cent. on the same period last year at £2.49 million (H1FY17: £1.49 million). The Group's forward order book remained strong at the end of the Period at £4.75 million, which we are pleased to report has grown to approximately £5.4 million as of today's date, providing improved visibility on future income. Both SBUs recorded income increases of approximately £0.5 million on a like-for-like basis, with AMAT posting sales of £1.3 million and RPC delivering income of £1.2 million in the Period. The Group's gross margin for the Period reduced to approximately 60% compared to 70% in the prior period, due principally to a change in product mix sold by HCT which is set to continue for the foreseeable future.
As Haydale transitions to commercial sales its own investment in development projects has reduced in the six months under review. Total R&D expenditure was approximately £0.5 million (H1FY17: £0.7 million), of which £0.4 million was expensed in the period, with £0.1 million being capitalised and will be amortised over 20 years. Other administration costs during the Period totalled £3.77 million, up from £3.04 million in the corresponding period last year, due principally to an increased headcount across the Group and an inclusion of a full six months' of HCT's costs in the Period, which the Group acquired in mid-October 2016. The Group expects to report other admin costs in the second half of the current financial year to be broadly similar to those incurred in the Period. Expenditure on capital equipment during this period was £0.2 million, similar to that spent in H1FY17. Loss for the Period from continuing operations was £2.2 million, a reduction of £0.2 million from the same period last year.
Given the Group's increasing international presence, its reported financial performance, especially when comparing to prior periods, is impacted marginally by changes in foreign exchange rates, in particular movements in the £/US$ exchange rate. The Group takes reasonable steps to minimise the effect of changes in FX rates to its performance and position, notwithstanding that the recent 5% strengthening of the £ vs the US$ in the first two months of 2018 compared to the average during the Period is likely to impact marginally on the Group's reported income for the current financial year.
The Group's unaudited net assets at 31 December 2017 were £15.4 million (31 December 2016: £7.8 million). The Group's borrowings reduced £0.3 million during the Period to £1.0 million at the period end (30 June 2017: £1.3 million). Cash at the period end was £8.0 million (30 June 2017: £2.1m), bolstered by the equity fundraising during the Period which raised £9.3 million (before expenses) through the issue of 7,731,060 new Ordinary Shares at a price of £1.20 to new and existing investors. As at 31 December 2017 and at the date of this announcement, the Company has 27,328,773 ordinary shares in issue.
During the Period, John Knowles retired as Chairman and was replaced by David Banks. We are extremely grateful to John for his contribution to the Group, especially through its listing process in 2014, and the Board wishes him well for the future. David joins the Group at an exciting inflection point, with income growth now at almost 70 per cent. period-on-period, and we look forward to benefiting from David's wise counsel and guidance as we drive towards profitability.
Whilst Haydale's activities were expansion focused in the previous financial year, we can see an even greater level of activity now that we have both product sales and a pipeline of engineered performance enhancing applications for customers with known requirements starting to generate income across the Group.
The Group's transition from technically focused research and development to a sales-led operation is gathering momentum, but it is not without its challenges. It requires focus and dedication, with the right people in place and our introduction of dedicated SBUs has been instrumental in achieving that focus.
Haydale's geographic coverage and expanding product base offers a unique proposition in the graphene and advanced materials world in which we operate. The Group has won new business in the US, through a focused sales effort and investment in new products. Our Far East graphene and functional inks business now has foundations in place and its pipeline of potential new customers looks strong, especially around FDA approved inks for bio-medical diabetes testing sensors. We are making investment in the region to accommodate the expected growth in graphene and speciality inks, based around our new facility in Taiwan. Our three APAC units (S. Korea, Thailand, and Taiwan) work well together, with complimentary skill sets.
The composite industry is inherently conservative and dominated by large corporates who plan carefully and thoroughly. Hence, the lesson we have learned is that their desire for implementation of new products takes time and resources, albeit the results can be significant in revenue generation. The traditional composite-based application engineering solutions consultancy in Loughborough and the processing and dispersion team in Ammanford have been working well together such that they have several potential contracts under discussion utilising their traditional skills whilst now incorporating property enhancements from using graphene and other nanomaterials at their disposal. The Group's dispersion capabilities will be crucial in its push to commercialise composite products.
The Haydale team is clearly focused on revenue generation and the drive to profitability, building on the almost 70 per cent. increase in revenue generation delivered in the period under review. We look forward to reporting future success and news in the coming months.
Chief Executive Officer
1 March 2018
31 Dec 2017
31 Dec 2016
30 Jun 2017
|Cost of sales||(852)||(313)||(894)|
|Research and development expenditure||(433)||(548)||(908)|
|Share based payment expense||(114)||(187)||(351)|
|Other administrative expenses||(3,768)||(3,037)||(7,090)|
|LOSS FROM OPERATIONS||(2,670)||(2,595)||(5,338)|
|LOSS BEFORE TAXATION||(2,739)||(2,624)||(5,635)|
|LOSS FOR THE PERIOD FROM CONTINUING OPERATIONS||(2,182)||(2,403)||(4,752)|
|Other comprehensive income:|
|Items that may be reclassified to profit or loss:|
|Exchange differences on translation of foreign operations||-||-||(74)|
|Remeasurements of defined benefit pension scheme||(148)||-||(36)|
|TOTAL COMPREHENSIVE LOSS FOR THE PERIOD FROM CONTINUING OPERATIONS||(2,330)||(2,403)||(4,862)|
|Loss per share attributable to owners of the Parent|
31 Dec 2017
31 Dec 2016
30 Jun 2017
|Property, plant and equipment||4,848||5,287||5,074|
|Deferred tax asset||536||-||679|
|Cash and bank balances||7,992||1,127||2,091|
|Trade and other payables||1,975||1,631||2,305|
|TOTAL NET ASSETS||15,422||7,840||8,905|
|Capital and reserves attributable to equity holders of the parent|
|Share premium account||27,539||15,356||18,936|
|Share-based payment reserve||1,121||843||1,007|
|Retained (deficits) / profits||(13,647)||(8,520)||(11,317)|
|Foreign exchange reserve||(138)||83||(113)|
|Six months||Six months||Year|
|31 Dec 2017||31 Dec 2016||30 Jun 2017|
|Cash flow from operating activities|
|Loss before taxation||(2,739)||(2,624)||(5,635)|
|Amortisation of intangible assets||102||35||157|
|Capitalised loan costs written off||-||-||77|
|Depreciation of property, plant and equipment||320||250||560|
|Share-based payment charge||114||187||351|
|(Profit)/Loss on disposal of property, plant and equipment||51||-||-|
|Net interest expense||20||-||-|
|Operating cash flow before working capital changes||(2,063)||(2,123)||(4,193)|
|(Increase)/ decrease in inventories||(25)||152||(12)|
|Decrease / (increase) in trade and other receivables||316||(620)||(596)|
|(Decrease) / increase in payables and deferred income||(517)||170||260|
|Income tax received||-||54||412|
|Net cash flow from operating activities||(2,289)||(2,367)||(4,129)|
|Cash flow used in investing activities|
|Purchase of property, plant and equipment||(247)||(225)||(415)|
|Purchase of intangible assets||(80)||-||(245)|
|Proceeds from disposal of property, plant and equipment||20||-||-|
|Acquisition of subsidiary net of cash acquired||-||4||4|
|Purchase of non-controlling shareholding||-||-||(413)|
|Net cash flow in investing activities||(307)||(221)||(1,069)|
|Cash flow used in financing activities|
|Proceeds from issue of share capital||9,277||2,591||6,058|
|Share issue costs||(520)||(157)||-|
|New bank loans raised||-||1,405||1,408|
|Repayments of borrowings||(259)||(2,921)||(2,817)|
|Net cash flow from financing activities||8,429||889||4,352|
|Effects of exchange rate changes||68||(36)||75|
|Net increase / (decrease) in cash and cash equivalents||5,901||(1,735)||(771)|
|Cash and cash equivalents at beginning of the financial period||2,091||2,862||2,862|
|Cash and cash equivalents at end of the financial period||7,992||1,127||2,091|
|At 1 July 2016||305||11,840||656||(39)||(6,117)||(44)||6,601|
|Comprehensive loss for the period||-||-||-||-||(2,403)||-||(2,403)|
|Recognition of share-based payments||-||-||187||-||-||-||187|
|Issue of ordinary share capital||44||3,673||-||-||-||-||3,717|
|Transaction costs in respect of share issues||-||(157)||-||-||-||-||(157)|
|Other Comprehensive Income||-||-||-||-||-||(227)||(227)|
|At 31 December 2016||349||15,356||843||83||(8,520)||(271)||7,840|
|Comprehensive loss for the period||-||-||-||-||(2,348)||-||(2,348)|
|Recognition of share-based payments||-||-||164||-||-||-||164|
|Issue of ordinary share capital||43||3,580||-||-||-||-||3,623|
|Retirement benefit obligations||-||-||-||-||(36)||-||(36)|
|Repurchase of NCI||-||-||-||-||(413)||44||(369)|
|Other comprehensive loss||-||-||-||-||-||227||227|
|Foreign currency reserve||-||-||-||(196)||-||-||(196)|
|At 30 June 2017||392||18,936||1,007||(113)||(11,317)||-||8,905|
|Comprehensive loss for the period||-||-||-||(2,182)||-||(2,182)|
|Recognition of share-based payments||-||-||114||-||-||114|
|Issue of ordinary share capital||155||8,603||-||-||-||8,758|
|Other Comprehensive Income||-||-||-||(148)||-||(148)|
|At 31 December 2017||547||27,539||1,121||(138)||(13,647)||-||15,422|
The full results including the notes to the financial statements are available in the PDF Download.
Page last updated: 1 March 2018