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 2018 (the 'Period' or 'H1FY19').
Post Period End Highlights
Commenting on the interim results, David Banks, Interim Executive Chairman of Haydale, said:
“We will continue to implement the management actions already started to re-set the cost base and consolidate the Group's position over the next 6 months with our focus on SiC, functionalised inks and graphene composites. There will be a marginal impact on sales in the current financial year as the changes are bedded in. However, we are recruiting specific sales personnel to deliver on our expected growth over the medium term without adding to the cost base, as we move from R&D to commercial sales. We are looking to leverage our significant investment made in our US business to create a stable platform for the Group to enable us to achieve our plan to profitability."
This period has been one of considerable change for Haydale as the anticipated take up of our products and services did not materialise at the rate predicted. As a result, we have made management changes and are realigning the cost base to the revenues which should enable us to reach monthly cash flow breakeven by the end of 2020.
We welcomed Keith Broadbent to the Board as Chief Operating Officer on 5 September 2018 and Laura Redman-Thomas as Chief Financial Officer on 21 December 2018.
The Group's commercial revenues for the Period were £1.64 million and, whilst down on the corresponding period last year, which included the sales of a functionalisation reactor, was up 20% on the second half of the last financial year.
As announced on 9 November 2018, we have taken actions to reduce our annualised costs by over £1.0 million and there are additional cost savings to be made as the Group's operations focus on our core markets of silicon carbide, functional inks and graphene enhanced pre-pregs. Inevitably this has resulted in a reduction in our staff numbers and contractors, which will have reduced from 85 at the end of August 2018 to below 70 by the end of March 2019. Our Ammanford site, which has historically been our R&D operation for the Group is now a profit centre and has already started selling our functionalised inks.
We are focusing on three main areas where we can make money, silicon carbide (“SiC"), functionalised inks and graphene enhanced composites. We have invested heavily in our SiC business in the US that we acquired in late 2017 to enable it to move our products up the value chain by producing our own cutting tools (“Blanks") for the turbine jet engine market. Pleasingly, our new products are now pre-qualified with the three leading Western manufacturers. We have also expanded the market for SiC into S. Korea and also opened new markets for SiC in paints and coatings for the petrochemical pipes and propeller markets. We anticipate that this business will become EBITDA positive in the coming months which will enable us to make better use of its $5.5 million of tangible assets, including our recent $1.5 million investment in the Blanks machinery.
Our functionalised inks business is focused on biomedical sensors and pressure Sensors. We have now sold over 200kg of biomedical ink and, whilst take-up has been slower than anticipated, we are now seeing growing demand and good customer feedback. In pressure sensor inks, we have received the first commercial orders for piezoresistive ink from HP1 that is printed in an array within an equestrian riding helmet that records relevant data in a head impact. We are also looking to develop our PATit technology for non-visualised graphene security coding both with our Far East licensee, TKS, and ourselves as announced on 19 November 2018. Also, we are developing graphene enhanced wearables with EIS (English Institute of Sport) for a muscle enhancing heating application (announced 18 September 2018) and with Makalot, a large contract clothing manufacturer based in the Far East (announced today). Trials are also ongoing with customers in heating inks.
Enhanced composites has attracted the most hype in the graphene space and this is the area where we have had to make the most changes to align our cost base to the demand and so we are now clearly focused on the early adopters. Whilst the large multi-nationals have not progressed the projects as expected, we have taken the knowledge and know how gained to exploit easier to access and quicker markets around thermal improvement in automotive tooling with BAC Mono and the Niche Vehicle Network program, and also in mechanical strength in premium bike frames.
Probably the most important development during the Period has been the significant improvements achieved in our functionalisation HDPlasTM plasma process that is being verified by independent third parties to show that we have improved the surface chemistry from 4% to 20%. There are now 11 of our plasma reactors around the world, including our most recent one which is located at the Graphene Engineering Innovation Centre in Manchester (“GEIC"). We anticipate revenues will be generated from our reactor at the GEIC in due course as those reactors already installed in CPI and IRPC are doing.
The Group's unaudited commercial income recognised in the Period of £1.64 million was lower than that recognised in the corresponding period last year of £2.04 million, but 20% higher than that reported in the 2nd half of the last financial year (H2FY18: £1.36 million). £1.28 million of the Group's revenues for the Period derived from the sales of the Group's Silicon Carbide nanomaterials manufactured in the US (H1FY18: £1.15 million), with the balance being sales of functionalised and speciality inks and composite consulting.
As Haydale transitions to commercial sales, our investment in development projects has reduced in the six months under review to £0.25 million (H1FY18: £0.43 million). Other administration costs during the Period totalled £4.29 million, up from £3.77 million in the corresponding period last year, due principally to an increased headcount across the Group. However, as previously announced, a re-focussing of the Group's operations over the last 3 months will result in administrative costs reducing going forward, together with the Group's headcount and number of contractors. Loss for the Period before taxation was £3.47 million compared to £2.74 million a year earlier. Increased expenditure on capital equipment during this Period of £0.96 million (H1FY18: £0.25 million) was due to the Group's investment in new production facilities in its US operations, the benefits of which are expected to be felt in the coming months.
The Group's unaudited net assets at 31 December 2018 were £9.26 million (31 December 2017: £15.42 million). The Group's borrowings reduced £0.10 million during the Period to £0.80 million at the period end (30 June 2018: £0.90 million). Cash at the period end was £0.96 million (30 June 2018: £5.09m), including the £0.25 million of new equity funds received in December 2018, for which shares were admitted to trading on AIM in January 2019. The reduction in cash balances during the Period of £4.13 million was broadly made up of £2.80 million of operational losses, £0.23 million used in working capital, £0.96 million of capital expenditure and the balance being repayments of borrowings.
On 21 December 2018, the Company announced that it had entered into a new £0.75 million loan facility with the Development Bank of Wales (“DBW Loan") to assist with the Group's general working capital. As at the date of this announcement, the Company confirms that it has fully drawn down the DBW Loan.
No new ordinary shares were issued during the Period, but post Period end, the Company issued 1,250,000 new ordinary shares at a price of 20p each to raise £250,000. As at 31 December 2018, the Company had 27,328,773 ordinary shares in issue and, at the date of this announcement, the Company has 28,578,773 ordinary shares in issue.
In September 2018, Keith Broadbent was appointed to the role of the Group's COO and I became the Group's Interim Executive Chairman. In December 2018, Laura Redman-Thomas joined as Group CFO, replacing Matt Wood, and Ray Gibbs, former CEO, stepped down from the Board. In January 2019, Roger Smith, a non-executive director and founder of the Group, stepped down from the Board. On behalf of the Board, I would like to thank Ray, Matt and Roger for their service to the Group.
We will continue to implement the management actions already started to re-set the cost base and consolidate the Group's position over the next 6 months with our focus on SiC, functionalised inks and graphene composites. There will be a marginal impact on sales in the current financial year as the changes are bedded in. However, we are recruiting specific sales personnel to deliver on our expected growth over the medium term without adding to the cost base, as we move from R&D to commercial sales. We are looking to leverage our significant investment made in our US business to create a stable platform for the Group to enable us to achieve our plan to profitability.
Interim Executive Chairman
22 February 2019
For the six months ended 31 December 2018
31 Dec 2018
31 Dec 2017
30 Jun 2018
|Cost of sales||(758)||(852)||(1,403)|
|Research and development expenditure||(250)||(433)||(878)|
|Share based payment expense||(147)||(114)||(291)|
|Other administrative expenses||(4,292)||(3,768)||(7,684)|
|LOSS FROM OPERATIONS||(3,435)||(2,670)||(6,022)|
|LOSS BEFORE TAXATION||(3,471)||(2,739)||(6,117)|
|LOSS FOR THE YEAR FROM CONTINUING OPERATIONS||(3,328)||(2,182)||(5,267)|
|Other comprehensive income:|
|Items that may be reclassified to profit or loss:|
|Exchange differences on translation of foreign operations||5||(25)||(47)|
|Remeasurements of defined benefit pension scheme||(109)||(148)||(99)|
|TOTAL COMPREHENSIVE LOSS FOR THE YEAR FROM CONTINUING OPERATIONS||(3,432)||(2,355)||(5,413)|
|Loss per share attributable to owners of the Parent|
As at 31 December 2018
31 Dec 2018
31 Dec 2017
30 Jun 2018
|Property, plant and equipment||5,751||4,848||5,061|
|Deferred tax asset||680||536||550|
|Cash and bank balances||961||7,992||5,092|
|Trade and other payables||2,197||1,975||2,172|
|TOTAL NET ASSETS||9,256||15,422||12,541|
|Capital and reserves attributable to equity holders of the parent|
|Share premium account||27,539||27,539||27,539|
|Share-based payment reserve||1,445||1,121||1,298|
|Retained (deficits) / profits||(20,120)||(13,647)||(16,683)|
|Foreign exchange reserve||(155)||(138)||(160)|
For the six months ended 31 December 2018
|Six months||Six months||Year|
|31 Dec 2018||31 Dec 2017||30 Jun 2018|
|Cash flow from operating activities|
|Loss before taxation||(3,471)||(2,739)||(6,117)|
|Amortisation of intangible assets||180||102||149|
|Capitalised loan costs written off||-||-||75|
|Depreciation of property, plant and equipment||411||320||675|
|Share-based payment charge||147||114||291|
|Loss/(Profit) on disposal of property, plant and equipment||-||51||(60)|
|Pension plan contributions||(120)||-||-|
|Pension - net interest expense||19||20||37|
|Operating cash flow before working capital changes||(2,798)||(2,063)||(4,855)|
|(Increase)/ decrease in inventories||(233)||(25)||190|
|(Increase) / decrease in trade and other receivables||(108)||316||266|
|Increase/(decrease) in payables and deferred income||112||(517)||159|
|Cash used in operations||(3,027)||(2,289)||(4,240)|
|Income tax received||76||-||269|
|Net cash used in operating activities||(2,951)||(2,289)||(3,971)|
|Cash flow used in investing activities|
|Purchase of property, plant and equipment||(964)||(247)||(723)|
|Purchase of intangible assets||-||(80)||(175)|
|Proceeds from disposal of property, plant and equipment||-||20||83|
|Acquisition of subsidiary – deferred consideration||-||-||(444)|
|Net cash used in investing activities||(964)||(307)||(1,259)|
|Cash flow used in financing activities|
|Proceeds from issue of share capital (net of share issue costs)||-||8,757||8,757|
|Repayments of borrowings||(149)||(259)||(446)|
|Net cash flow from financing activities||(185)||8,429||8,216|
|Effects of exchange rate changes||(31)||68||15|
|Net (decrease) / increase in cash and cash equivalents||(4,131)||5,901||3,001|
|Cash and cash equivalents at beginning of the financial period||5,092||2,091||2,091|
|Cash and cash equivalents at end of the financial period||961||7,992||5,092|
|At 1 July 2017||392||18,936||1,007||(113)||(11,317)||8,905|
|Total comprehensive loss for the period||-||-||-||(25)||(2,330)||(2,355)|
|Recognition of share-based payments||-||-||114||-||-||114|
|Issue of ordinary share capital||155||9,123||-||-||-||9,278|
|Transaction costs in respect of share issues||-||(520)||-||-||-||(520)|
|At 31 December 2017||547||27,539||1,121||(138)||(13,647)||15,422|
|Total comprehensive loss for the period||-||-||-||(22)||(3,036)||(3,058)|
|Recognition of share-based payments||-||-||177||-||-||177|
|At 30 June 2018||547||27,539||1,298||(160)||(16,683)||12,541|
|Total comprehensive loss for the period||-||-||-||5||(3,437)||(3,432)|
|Recognition of share-based payments||-||-||147||-||-||147|
|At 31 December 2018||547||27,539||1,445||(155)||(20,120)||9,256|
Equity share capital and share premium
The balance classified as share capital and share premium includes the total net proceeds on issue of the Company's equity share capital, comprising £0.02 ordinary shares. The share premium account can only be used for bonus issues, to provide for the premium payable on redemption of debentures or to write off preliminary expenses, or expenses of, or commissions paid on, or discounts allowed on, any issues of shares or debentures of the company.
Share premium account
The share premium account represents the amount received on the issue of ordinary shares in excess of their nominal value and is non-distributable.
Share-based payment reserve
The share-based payment reserve comprises the cumulative expense representing the extent to which the vesting period of share options has expired and management's best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest.
The retained profits reserve comprises the cumulative effect of all other net gains, losses and transactions with owners (e.g. dividends) not recognised elsewhere.
The full results including the notes to the financial statements are available in the PDF Download.
Page last updated: 22 February 2019