TIDMAGM
RNS Number : 4068E
Applied Graphene Materials PLC
18 October 2018
18 October 2018
Applied Graphene Materials plc
("Applied Graphene Materials", "the Group" or "the Company")
Full year results for the year ended 31 July 2018
Applied Graphene Materials, the producer of specialty graphene
materials, is pleased to announce its full year results for the
year ended 31 July 2018.
Operational and commercial highlights
-- James Briggs Limited (JBL), a leading independent coatings
business, launching a range of graphene enhanced primer products,
delivering significantly improved barrier protection
-- Following the successful completion of real world trials
carried out over a one year period, national truck company Brit
Tipp using AGM graphene for its barrier properties in vehicle
coatings
-- Tier one automotive supplier Magna carrying out further
investigations into utilising AGM graphene following launch of
Fenyr supercar, using graphene enhanced components
-- Customer completes testing of Genable(R) 4400 and is now
looking to launch a product targeted at the electronics sector
-- Airbus Defence and Space (Airbus) working to finalise
materials qualification ahead of a product launch
-- Genable(R) dispersion range launched for coatings systems and being well received
Financial overview
-- Total income GBP0.2 million (2017: GBP0.3 million)
-- EBITDA* Loss of GBP4.0 million (2017: loss of GBP4.1
million)
-- PBTA** Loss of GBP4.2 million (2017: loss of GBP4.3
million)
-- Loss before tax Loss of GBP4.5 million (2017: loss of GBP4.3 million)
-- Cash at bank GBP10.4 million (2017: GBP4.7 million)
-- Diluted EPS Loss of 8.2 pence per share (2017: loss of 13.8 pence)
-- Adjusted diluted EPS Loss of 7.5 pence per share (2017: loss of 13.8 pence)
* EBITDA comprises loss before interest, tax, exceptional costs,
depreciation and amortisation.
** PBTA comprises loss before tax, exceptional costs and
amortisation.
Adrian Potts, Chief Executive Officer, commented:
"The business has continued to make considerable progress during
the year, particularly in the coatings sector where we are starting
to see some real commercial momentum.
Having invested significantly in developing our understanding as
to how best to exploit the benefits that graphene has to offer, we
are now beginning to see this investment come to fruition, with the
focus very much on converting the 120 plus commercial engagements
into long term supply agreements, many of which we are unable to
disclose due to confidentiality agreements.
The announcement by JBL that they are launching a graphene
enhanced product in the near future represents the successful
completion of their testing programme. Although the launch is
likely to be slightly later than originally anticipated this
represents an important milestone for the business. The launch of
our Genable(R) product range combined with our test results earlier
in the year has been well received across the coatings sector and
this has enabled us to accelerate a number of programmes. Nowhere
is this more evident than the work we have done with Britt Tipp,
who having completed their in-house testing regime, are now
utilising AGM's graphene in coatings for their vehicles in order to
provide additional barrier properties.
Our joint composites development programme with Magna is
beginning to produce some very encouraging results in a number of
potential applications and I remain confident that over the coming
twelve months we will be able to report an ever increasing number
of customers, who having completed their testing programme are
looking to enter into commercial supply agreements."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Applied Graphene Materials' results presentation, with audio
commentary, is expected to be made available on its website at
http://www.appliedgraphenematerials.com in due course.
For further information, please contact:
Applied Graphene Materials +44 (0) 1642 438 214
Adrian Potts, Chief Executive Officer
Gareth Jones, Chief Financial Officer
N+1 Singer +44 (0) 207 496 3000
Richard Lindley / James White
Hudson Sandler +44 (0) 207 796 4133
Charlie Jack / Emily Dillon
Notes to Editors
Applied Graphene Materials works in partnership with its
customers using its knowledge and expertise to provide bespoke
graphene dispersions and formats to deliver enhancements and
benefits for a wide range of applications. The Group's strategy is
to target commercial applications in three core markets: coatings,
composites and functional materials.
The Group has developed proprietary bottom-up processes which
are capable of producing high purity graphene nanoplatelets using a
continuous process. The manufacturing process is based on
sustainable, readily available raw materials and therefore does not
rely on the supply of graphite, unlike a number of other graphene
production techniques. Applied Graphene Materials owns the
intellectual property and know-how behind this process.
Applied Graphene Materials was founded by Professor Karl Coleman
in 2010 with its operations and processes based on technology that
he initially developed at Durham University. The Group was admitted
to AIM in November 2013, raising GBP11 million, and is based at the
Wilton Site on Teesside. In January 2016 the Group raised GBP8.5m
to support its ongoing activities and in October 2017 the Group
raised a further GBP9.8m.
Business review
Overview
The financial year has seen significant developments in a number
of areas within the business. Whilst these achievements are not
always visible from the outside, they have proven to be critical
steps in our evolution as a business and create a platform to
enable the exploitation of the benefits graphene has to offer. It
is only by ensuring we have the necessary building blocks in place
that we will ultimately provide the base from which to develop
further a successful technology-led organisation.
Jon Mabbitt stepped down as CEO at the end of July after five
years of service, working to establish these solid foundations. He
had been with the business from its very early days and took it to
the point of commercial inflection. On 9 October 2018 it was
announced that David Blain would be joining the business as Chief
Financial Officer to succeed Gareth Jones. It is now incumbent on
me and the rest of the team to take the Company to the next level,
leveraging off that platform, and the significant ongoing
development work, to generate real-top line growth that will in
time lead to financial independence.
As a Company I believe we remain well positioned to support the
anticipated growth in graphene product demand. AGM has remained
singularly focused on being the industry-leading formatted graphene
material supplier. Whilst it may be tempting to stray downstream
and develop semi-finished graphene containing products we know that
in the long run this would be counter-productive and eventually the
real gains will come from being a high value-added specialty
chemical business.
During the year we have strengthened our performance data in our
core markets of coatings and composites, which have served to
attract yet more interest from new potential customers and added to
the appetite from existing customer engagements. The 120 plus
active customer engagements we hold are starting to bear fruit as
the evaluation phases come to completion and they move forward into
product integration and toward mainstream production.
February 2018 saw the first extended operation on the new
production plant for A-GNP35, AGM's process for making high surface
area graphene nanoplatelets. This capital investment will enable
sufficient raw material to be made for the expected demand over the
coming years, and has given us confidence that we can easily expand
the capacity in a cost-effective, modular fashion, as demand
increases. The two grades of AGM graphene nanoplatelet, A-GNP10 and
A-GNP35, differ in their chemical composition and physical shape,
and have been designed to deliver different specific bulk
performance gains when added into host materials at low
loadings.
At the JEC exhibition in Paris in March 2018 we displayed our
patented Structural Ink(R) printing technology. This attracted a
lot of interest from both end users (aerospace manufacturers, motor
sport racing teams, and sports goods producers) as well as the
composite material supply chain (prepreggers, kit-cutting machine
companies and resin producers). We have subsequently designed and
acquired a larger capacity printing capability that we have started
to promote to the industry, both via a turn-key technology package
and by a toll-coating service. This exciting process is a
synergistic enabler for the addition of graphene in automated
manufacturing of composite materials and could equally be applied
to other markets as a platform technology.
Commercial progress
We remain focused on our three core markets of coatings,
composites and functional materials, where we are actively engaged
with more than 120 customers. Each sector contains a variety of
customers from the small niche, very active players to global
manufacturers, covering a diversified range of applications. They
are all linked by the belief that by incorporating graphene into
their product they can significantly enhance their product
offerings and hence achieve a competitive advantage. As a business
we share that belief and are working with each partner to support
and provide technical input as required, to enable them to realise
the potential we believe our product has to offer.
Coatings sector
The majority of engagements within this sector are focused
around the exceptional barrier performance gains that small
additions of graphene can offer. This can relate to acting as a
moisture diffusion barrier to significantly enhance anti-corrosive
protection, particularly in harsh environments such as oil and gas
and marine environments. The launch of the Genable(R) product range
in May 2018 has proved to be a catalyst in many ways. Genable(R)
has enabled us to offer the coatings market a standardised platform
range of products that can readily be incorporated and can operate
in a host of coatings applications, including the most hostile of
conditions.
In what is traditionally a conservative industry the
introduction of a robust data-backed innovative product has
generated significant excitement and interest, with both
manufacturers and end users alike. There are currently numerous
work streams ongoing, testing and developing potential
applications, often supported directly by our technical teams. This
collaborative approach is the same that we adopted when working
with JBL. In May 2018, after an extensive testing programme, JBL
announced that its first graphene products were coming to fruition.
Work is currently underway to finalise the launch and ramp-up
programmes to enable us to meet the increased demand in the current
financial year.
AGM continues to work with HMG Paints in the development and
commercialisation of graphene containing anti-corrosion coatings.
Following initial formulation, a development programme was
undertaken working with an innovative commercial vehicle company,
Brit Tipp. Subsequently this extended to field testing through a
number of commercial tipper truck contracts. These "real world"
trials have progressed very well and Brit Tipp is currently bidding
on several larger contracts based on customer feedback around this
enhanced coating system. In parallel, HMG and AGM have continued to
expand their understanding of how to further optimise graphene
performance and their combined focus is now on bringing a new
product to the broader market within the first half of 2019.
Elsewhere in the coatings sector the business has circa 74
ongoing engagements across many industries, with the industrial and
automotive sectors comprising around 40% of the opportunities.
These range in size from small independent niche players through to
multi-national organisations.
In order to further support the application of graphene based
coatings into the widest range of coatings opportunities, we are
evolving our products to enable customers to address the most
extreme corrosion and barrier challenges with an AGM graphene
solution.
Composites sector
The global composites market is estimated to be worth in excess
of EUR70 billion per annum, of which over 50% relates to component
parts. Customers within this sector are very often targeting
improved mechanical performance of a product, whilst also reducing
weight, by the inclusion of graphene. Manufacturers of sporting
goods and products tend to be at the forefront of innovation, where
incremental technological gains make for commercial advantage.
Currently 11% of our composite engagements relate to this sector,
and include the likes of Century rods. Whilst the majority of these
sports related opportunities tend to be with niche players, the
ability and willingness of this sector to incorporate new products
rapidly into their range means that they represent some of our most
advanced projects in terms of commercialisation. Other early
adopters are expected to be in the high performance motorsport
industry.
Large opportunities for composites lie within the aerospace and
automotive industries, which combined account for 55% of our
composite engagements. In many cases there is a critical safety
element, fundamental to the success of these projects, and as such
the testing regimes tend to be more extensive and therefore take
longer. In keeping with many of our engagements the nature of the
arrangements very often restricts what can be disclosed as our
partners look to develop product in a discreet fashion. An
exception to this is our engagement with Magna Exteriors, a
division of the Magna Group, a $39 billion revenue, tier 1
automotive supplier. In March this year it launched the Fenyr
supercar at the Geneva Motor Show incorporating AGM graphene into
the tailgate of the vehicle. Following on from this, Magna is now
investigating ways in which it can utilise AGM graphene within its
product range, and a number of projects are currently underway.
Our patented technology Structural Ink(R), which enables us to
selectively deposit graphene onto composite materials in a targeted
fashion via innovative printing techniques, continues to generate
significant levels of interest amongst potential customers. The
technology was first publically demonstrated at JEC in Paris in
March this year and as a direct result of this a number of
interested parties have commenced testing the product, with a view
to incorporating it into their offering. The Structural Ink(R)
programme will not only enable us to add graphene to customers'
product, but in cases where demand is larger there is the potential
to offer a turn-key solution, providing customers with the
capability to directly oversee the application process. Such an
approach is of particular interest to the automotive and aviation
industries, where volumes are greater and where automated
manufacturing is widespread. Our focus is on this automated
integration as a means of gaining traction with graphene in this
sector. The positive feedback following the launch of Structural
Ink(R) has encouraged the business to accelerate the investment
programme and in June 2018 an additional GBP74,000 investment was
made to install increased printing capacity. The new printer is
operational, and has already begun supplying evaluation materials
to interested parties.
Functional materials
We continue to work closely with Airbus, with a view to
concluding the product qualification of the second thermal paste
adhesive material for space use during 2018. Following on from
this, Airbus is planning to carry out application-specific space
flight qualifications of the product concluding later in the year.
It is Airbus' intention to specify this product immediately
thereafter onto its next-generation satellite platform, with first
flight application and initial production sales now anticipated in
early 2019. We are proud to have partnered with Airbus on this
initiative, and to be able to see the fruition of many months of
effort.
Elsewhere, a customer recently completed an in-depth assessment
of the Genable(R) 4400 product range. Feedback from the programme
indicates that the product exhibits outstanding thermal
conductivity for heat sink applications, and it is in the process
of looking to launch a product into the electronics sector.
Following on from an extensive development programme involving
AGM and specialist oil company Puraglobe, the German business
launched its Graphenics(R) product range to a number of target
customers earlier in the year for evaluation. The product range is
targeted at innovative lubricant technology businesses for
applications as broad as gear oil, metal working and driveline
fluids. By incorporating graphene into existing products the aim is
to offer finished lubricant manufacturers with product providing
greater protection against friction and wear, which ultimately will
extend the lifecycle of parts and reduce the downtime of
equipment.
A number of development programmes are ongoing at this time as
Puraglobe's customers look to evaluate the benefits. Initial
feedback remains positive and the expectation remains that during
the course of the forthcoming financial year the business will
generate revenues from this specific application.
Technological and manufacturing capabilities
We have continued to invest in our technical capabilities
throughout the year and are resolute in our commitment to
furthering our understanding of graphene's potential within our
core markets. We believe it is only by remaining at the
technological forefront of this emerging industry that this will
provide us with the ability with which to succeed.
In March 2018, the USA patent office approved our patent
application for our unique manufacturing process. Our technical
teams have continued to push the boundaries when working with
graphene, filing three further patent applications during the year,
in relation to the dispersing of graphene to enable ease of use.
This work led directly to the launch of the Genable(R) range of
products in May 2018. The Genable(R) family is a data backed
standard range of dispersions, primarily targeted at the coatings
sector that provides formulating chemists with a known set of
criteria from which to base their calculations. Initial feedback
from customers has been extremely positive and enabled us to engage
with partners which up until that point had stated that they did
not wish to explore the potential benefits graphene has to
offer.
Outlook
The business remains well positioned for significant growth,
with a clearly defined strategy and strong leadership along with a
well-developed and ever maturing opportunity pipeline. The overall
quantum and level of engagement continue to increase as we move
into the commercialisation phase of development. The adoption of
our graphene by JBL, Brit Tipp, Airbus and Puraglobe are key
milestones for us and provide growing evidence that customers are
beginning to recognise the significant benefits graphene can offer.
Although both JBL and Airbus are now reaching the point of
commercial inflection the completion of the testing regime required
to meet customer expectations has taken longer than originally
expected, and consequently the ramp-up in sales is likely to be
later than previously anticipated.
As a business we are absolutely focused on continuing to
commercialise our offering and increasing the rate of market
adoption and penetration during the coming year and beyond.
The increasing commercialisation is in no small part down to the
relationships we have developed, which then allow us to work
alongside customers, providing critical technical input on how best
to incorporate the graphene. Working with any nanomaterial is a
highly technical challenge and success can only be achieved by
recruiting and retaining people with real talent. Continuing to
develop our knowledge base and relationships will enable us to
capitalise on the benefits graphene has to offer in a multitude of
applications. The well-established foundations are beginning to
materialise into real commercial opportunities, and the expectation
remains that the business will see revenues building, which will
ultimately lead to a profitable business.
Adrian Potts
Chief Executive Officer
17 October 2018
Financial review
Revenue
Revenue for the year was GBP77,000 (2017: GBP97,000) arising
from the supply of production orders and evaluation quantities of
graphene to commercial partners.
Other income
Other income, which comprises grant income and RDEC revenue, was
GBP126,000 (2017: GBP168,000). Grants received generally relate to
funding for the development of new graphene applications or the
creation of new jobs.
Loss on ordinary activities before interest, tax, exceptional
costs, depreciation and amortisation (EBITDA)
EBITDA for the Group reduced from a loss of GBP4,059,000 in 2017
to a loss of GBP3,984,000 for the year ended 31 July 2018. The loss
incurred reflects the ongoing costs of working with commercial
partners and the significant efforts undertaken to support those
customers.
Exceptional costs
Exceptional costs recognised in the year were GBP307,000 (2017:
GBPnil). These costs principally relate to fees paid in relation to
the issue of new shares in the current year (GBP185,000) and the
disposal of licence fees and patents costs relating to a technology
no longer being developed following the introduction of the A-GNP35
production facility (GBP122,000).
Net finance income
Net finance income for the year was GBP57,000 (2017: GBP33,000).
The Group has benefited from interest earned on money raised from
the placing that took place in the year.
Loss on ordinary activities before tax, exceptional costs and
amortisation (PBTA)
PBTA for the year reduced from a loss of GBP4,277,000 in 2017 to
a loss of GBP4,238,000 for the year ended 31 July 2018. The losses
within the year continue to reflect ongoing costs of working with
commercial partners and the significant efforts undertaken to
support those customers.
Loss on ordinary activities before tax
A loss on ordinary activities before tax of GBP4,545,000 (2017:
loss of GBP4,277,000) was recognised. This includes exceptional
costs of GBP307,000 mainly connected to payments made in relation
to the issue of new shares.
Tax
The Group has not recognised any tax assets in respect of
trading losses arising in the current financial year or accumulated
losses in previous financial years. The tax credit recognised in
the current financial year is in relation to the receipt of R&D
tax credits for 2017 and an estimate of R&D tax credits due for
2018. The credit recognised in the prior financial year was in
relation to the receipt of R&D tax credits for 2015 and
2016.
Earnings per share
Diluted earnings per share was a loss of 8.2 pence per share
(2017: loss of 13.8 pence per share). Adjusted diluted earnings per
share (before exceptional costs) was a loss of 7.5 pence per share
(2017: loss of 13.8 pence per share).
Dividend
No dividend has been proposed for the year ended 31 July 2018
(2017: GBPnil).
Cash flow
Net cash used in operations was GBP4,005,000 (2017:
GBP3,962,000). During the year, net working capital utilised
increased by GBP12,000 (2017: increase of GBP95,000).
Capital expenditure of GBP257,000 (2017: GBP684,000) has been
incurred in the year mainly relating to the development of the
production process and related production assets. Net proceeds
arising from the issue of shares totalled GBP9,375,000 (2017:
GBP407,000).
Balance sheet
Net assets have increased to GBP12,121,000 (2017: GBP6,068,000),
principally reflecting the cash generated from the issue of shares
offset by the trading loss for the year.
Cash at bank at 31 July 2018 was GBP10,443,000 (2017:
GBP4,708,000). The proceeds from the issue of shares have been
placed on deposit with a small number of financial institutions for
time periods ranging between instant access and up to 95 days in
maturity.
Accounting policies
The Group's consolidated financial information has been prepared
in accordance with International Financial Reporting Standards as
adopted in the EU. The accounting policies used in the consolidated
financial information are consistent with those set out in the
audited financial statements.
Going concern
After making enquiries and producing cash flow forecasts, the
Directors have reasonable expectations, as at the date of approving
the financial statements, that the Company and the Group will have
adequate resources to fund the activities of the Company and the
Group for at least twelve months from the date of the approval of
the financial statements. Although the business continued to make
losses throughout the year to July 2018, these losses primarily
relate to the development of the production process and production
assets. The increased level of commercial engagements provides the
Directors with reasonable expectations that the Group continues to
demonstrate meaningful progress. Therefore, the financial
statements have been prepared on a going concern basis.
Principal risks and uncertainties
Risk management forms an integral part of the business planning
and review cycle.
As a business we strive to achieve the right balance between
risk and reward. The Board reviews and updates risks within the
business on a regular basis. Having identified a potential risk
each risk is assessed individually both in terms of likelihood of
occurrence and for the potential financial impact on the business.
A further assessment is then made to ensure that the exposure to
any risk is mitigated wherever feasible.
The Directors believe the following risks to be the most
significant for potential investors. However, the risks listed do
not necessarily comprise all of those associated with an investment
in the Group and are not set out in any particular order or
priority. Additional risks and uncertainties not currently known to
the Directors, or which the Directors currently deem not to be
significant, may also have an adverse effect on the Group and the
information set out below does not purport to be an exhaustive
summary of the risks affecting the Group. In particular, the
Group's performance may be affected by changes in market or
economic conditions and in legal, regulatory and tax
requirements.
Broadly, risks are categorised into seven types: strategic and
planning; financial and IT; operational and quality; technical;
safety, health and environment (SHE) and regulatory; commercial and
reputation; and people. Significant risks facing the Group are
listed below.
-- Consistency of product - as the business begins to supply
graphene in ever larger quantities it is essential that the quality
of the product is maintained. Working with nanomaterials is
extremely technical and if products are not produced to a
consistently high quality there is a risk that the products will
not deliver the potential benefits and customers may look for
alternative suppliers. As the business looks to gear up its
manufacturing capabilities to meet demand, it is essential that
even at higher volumes the quality of material is maintained. In
addition to working under strict operating procedures the business
has implemented a series of quality control measures to ensure
there is no drop off in product quality. Operating and quality
procedures are continually reviewed and where appropriate improved,
in order to ensure the highest quality is maintained at all
times.
-- Intellectual property - the Group's business is based on a
combination of patents granted, patent applications and know-how.
The Group's success will depend in part on its ability to maintain
adequate protection of its intellectual property and know-how.
There is no certainty that patent applications will be granted,
such applications and know-how will be a source of competitive
advantage to the Group, or that others have not developed similar
or better applications or know-how. Significant costs may be
incurred in asserting intellectual property rights and there is no
certainty that intellectual property could not become known in a
manner (for example, cyber-attack) which provided the Group with no
recourse. The Group takes protection of its intellectual property
very seriously, with information restricted on a need to know
basis. Confidentiality clauses are used extensively throughout the
business in a variety of forms, and key files and documents are
maintained separately in a secure manner.
-- Financial, operational and management information systems -
the efficient operation and management of the Group depends on the
proper operation and performance of financial, operational and
management information systems. Any failure in such systems via a
cyber-attack may result in a loss of control and adversely impact
the Group's ability to operate effectively. The business takes a
multi-faceted approach to ensuring its systems are able to support
the business. This ranges from a series of back-up procedures,
training and physical and virtual defence mechanisms. Regular
reviews are undertaken to assess what additional precautions if any
are required.
-- Safety, health and environment - the Group's operations are
subject to numerous safety, health and environmental and regulatory
requirements, both in the UK and overseas, which are likely to
become more complicated, stringent and onerous as the Group grows
or as time passes. Failure to comply in any way with SHE or
regulatory requirements could result in the Group being unable to
manufacture or supply graphene, incurring significant costs and
liabilities, or being subject to claims and lawsuits, which could
adversely affect its operations and financial condition. Graphene
is also a relatively new material with a limited number of studies
having been undertaken into its effects on biological systems. If
evidence emerges that graphene has a deleterious effect then this
may adversely impact the Group's business and financial position.
The Group undertakes regular training programmes to ensure best
operating practices are maintained. This is assessed through an
extensive audit programme along with health and safety meetings,
which are held on a monthly basis. Employees who work with the
product in its raw form operate under strict operating procedures
with designated protective clothing at all times. In addition, they
are required to undertake regular health checks.
-- Key personnel - the Group has in place an experienced and
motivated senior management team and is beginning to build strength
in depth. If the Group is unable to retain and attract suitably
skilled and qualified people, then the Group's performance and
prospects may be adversely impacted. The loss of one or more key
personnel could have an adverse impact on the Group's operations,
reputation, relationships and future prospects. In order to both
attract and retain individuals with the necessary skills and
motivation, the Group has a range of incentives and support
processes in place. In addition to a comprehensive financial
package of both short and long term incentives, individuals receive
regular updates in an open and transparent manner, both on an
individual and team basis. Training and development programmes are
tailored to meet the needs and aspirations of the individual.
-- Acceptance of the Group's products - early stage of
operations and acceptance of graphene. The Group is at an early
stage of development and the success of the Group will depend on
the acceptance and attribution of value to graphene produced by the
business. Timescales to the successful development of applications
for graphene are significantly determined by the product
development cycle of customers. There can be no guarantee that
either acceptance of graphene or attribution of value will be
forthcoming. The business remains focused on its core markets and
applications where it believes graphene can offer real benefits as
a high-end additive. In addition to continuing to invest in and
develop in-house expertise, the technical teams look to maintain
close working relationships with customers, to provide technical
support and thereby reduce the time to market.
Cautionary statement
The Business and Financial reviews have been prepared for the
shareholders of the Company, as a body, and no other persons. Their
purpose is to assist shareholders of the Company to assess the
strategies adopted by the Group and the potential for those
strategies to succeed and for no other purpose. The Business and
Financial reviews, contain forward-looking statements that are
subject to risk factors associated with, amongst other things, the
economic and business circumstances occurring from time to time in
the sectors and markets in which the Group operates. It is believed
that the expectations reflected in these statements are reasonable
but they may be affected by a wide range of variables which could
cause actual results to differ materially from those currently
anticipated. No assurances can be given that the forward-looking
statements in the Business and Financial reviews will be realised.
The forward-looking statements reflect the knowledge and
information available at the date of preparation.
Gareth Jones
Chief Financial Officer
17 October 2018
Consolidated income statement and statement of comprehensive
income
for the year ended 31 July 2018.
2018 2017
Note GBP'000 GBP'000
---------------------------------------------- ---- ------- -------
Revenue 5 77 97
Other income 126 168
---------------------------------------------- ---- ------- -------
203 265
Cost of sales (250) (385)
---------------------------------------------- ---- ------- -------
Gross loss (47) (120)
Operating expenses (4,555) (4,190)
---------------------------------------------- ---- ------- -------
EBITDA (3,984) (4,059)
Exceptional costs (307) -
Depreciation of property, plant and equipment (311) (251)
---------------------------------------------- ---- ------- -------
Operating loss (4,602) (4,310)
Finance income 57 33
---------------------------------------------- ---- ------- -------
PBTA (4,238) (4,277)
Exceptional costs (307) -
---------------------------------------------- ---- ------- -------
Loss before tax 5 (4,545) (4,277)
Tax credit 3 1,046 1,234
---------------------------------------------- ---- ------- -------
Loss for the year attributable to equity
shareholders (3,499) (3,043)
Other comprehensive income - -
---------------------------------------------- ---- ------- -------
Total comprehensive expense (3,499) (3,043)
---------------------------------------------- ---- ------- -------
Earnings per share (pence per share)
Basic 6 (8.2) (13.8)
Diluted 6 (8.2) (13.8)
---------------------------------------------- ---- ------- -------
EBITDA comprises loss before interest, tax, exceptional costs,
depreciation and amortisation
PBTA comprises loss before tax, exceptional costs and
amortisation
Consolidated statement of changes in shareholders' equity
as at 31 July 2018
Called
up Share
share premium Merger Accumulated Total
capital account reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------- -------- ------- ----------- -------
As at 1 August 2016 437 18,243 1,231 (11,399) 8,512
Loss for the year and total
comprehensive expense - - - (3,043) (3,043)
IFRS 2 share based payments - - - 192 192
Issue of shares (net) 9 398 - - 407
---------------------------- ------- -------- ------- ----------- -------
As at 31 July 2017 446 18,641 1,231 (14,250) 6,068
Loss for the year and total
comprehensive expense - - - (3,499) (3,499)
IFRS 2 share based payments - - - 177 177
Issue of shares (net) 543 8,832 - - 9,375
---------------------------- ------- -------- ------- ----------- -------
As at 31 July 2018 989 27,473 1,231 (17,572) 12,121
---------------------------- ------- -------- ------- ----------- -------
Consolidated statement of financial position
as at 31 July 2018
2018 2017
Note GBP'000 GBP'000
------------------------------ ---- -------- --------
Assets
Non-current assets
Intangible assets 78 138
Property, plant and equipment 1,881 1,936
------------------------------ ---- -------- --------
1,959 2,074
------------------------------ ---- -------- --------
Current assets
Inventories 56 45
Trade and other receivables 612 151
Cash 10,443 4,708
------------------------------ ---- -------- --------
11,111 4,904
------------------------------ ---- -------- --------
Total assets 13,070 6,978
Liabilities
Current liabilities
Trade and other payables (949) (910)
------------------------------ ---- -------- --------
Total liabilities (949) (910)
------------------------------ ---- -------- --------
Net current assets 10,162 3,994
------------------------------ ---- -------- --------
Net assets 12,121 6,068
------------------------------ ---- -------- --------
Equity
Called up share capital 8 989 446
Share premium account 27,473 18,641
Merger reserve 1,231 1,231
Accumulated losses (17,572) (14,250)
------------------------------ ---- -------- --------
Total equity 12,121 6,068
------------------------------ ---- -------- --------
Consolidated cash flow statement
for the year ended 31 July 2018
2018 2017
Note GBP'000 GBP'000
--------------------------------------------- ---- ------- -------
Operating activities
Net cash used in operations 7 (4,005) (3,962)
Finance income 53 52
R&D tax credit received 3 631 1,234
--------------------------------------------- ---- ------- -------
Net cash used in operating activities (3,321) (2,676)
--------------------------------------------- ---- ------- -------
Investing activities
Purchase of intangible assets (62) (41)
Purchase of property, plant and equipment (257) (684)
--------------------------------------------- ---- ------- -------
Net cash used in investing activities (319) (725)
--------------------------------------------- ---- ------- -------
Financing activities
Net proceeds from issue of Ordinary shares 9,375 407
--------------------------------------------- ---- ------- -------
Net cash generated from financing activities 9,375 407
--------------------------------------------- ---- ------- -------
Net increase/(decrease) in net cash and
cash deposits 5,735 (2,994)
Net cash and cash deposits at 31 July 2017 4,708 7,702
--------------------------------------------- ---- ------- -------
Net cash and cash deposits at 31 July 2018 10,443 4,708
--------------------------------------------- ---- ------- -------
Net cash and cash deposits include:
--------------------------------------------- ---- ------- -------
Cash (maturity less than 95 days) 10,443 4,708
--------------------------------------------- ---- ------- -------
Net cash and cash deposits at 31 July 2018 10,443 4,708
--------------------------------------------- ---- ------- -------
Notes to the annual financial results
for the year ended 31 July 2018
1 General information
The principal activity of Applied Graphene Materials plc is the
manufacture, dispersion and development of applications for
graphene. The Group operates principally in the United Kingdom.
The Company is incorporated and domiciled in the United Kingdom
and its registered number is 8708426. The address of the registered
office is The Wilton Centre, Redcar, Cleveland, TS10 4RF. The
Company was incorporated on 27 September 2013.
The consolidated financial information was approved for issue on
17 October 2018.
2 Basis of accounting
The consolidated financial information for the year ended 31
July 2018 has been presented under the historical cost accounting
convention, as modified by financial assets and liabilities at fair
value through the income statement and share based payments at fair
value, and in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union, IFRS IC
interpretations and those parts of the Companies Act 2006
applicable to companies reporting under IFRS. The consolidated
financial information has been prepared on a going concern
basis.
The consolidated financial information included in this
announcement has been extracted from the audited financial
statements of the Group for the year ended 31 July 2018. The
content of this announcement has been agreed with the Company's
auditors. This announcement of financial results does not
constitute the Group's financial statements. The Group's 2018
Annual report and financial statements, on which the Company's
auditors, RSM UK Audit LLP, have given an unqualified opinion in
accordance with the Companies Act 2006, are to be delivered to the
Registrar of Companies following the Company's Annual General
Meeting.
The accounting policies used in the consolidated financial
information are consistent with those set out in the audited
financial statements. If any new IFRS standards or interpretations
are issued then these may impact on the financial statements of the
Group in future years. The Group will continue to review its
accounting policies in the light of emerging industry consensus on
the practical application of IFRS.
The preparation of consolidated financial information in
conformity with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best
knowledge of the amounts, events or actions, actual events
ultimately may differ from those estimates.
The consolidated financial information does not include all
financial risk management information and disclosures required in
the annual financial statements.
3 Taxation
The Group has not recognised any tax assets in respect of
trading losses arising in either the current financial year or
accumulated losses in previous financial years. The tax credits
recognised arise from the receipt of R&D tax credits.
4 Dividends
No dividend has been proposed for the year ended 31 July 2018
(2017: GBPnil).
5 Segmental analysis
Operating segments are defined as components of an enterprise
about which separate financial information is available that is
evaluated regularly by the Chief Operating Decision Maker (CODM) in
deciding how to allocate resources and in assessing performance.
The Group's Chief Executive Officer has been identified as the
CODM. Revenue and profits arising from that operating segment are
the same as presented on the face of the consolidated income
statement and statement of comprehensive income.
The Group currently has one operating segment, as reported
revenue for the year is not considered to be of sufficient
magnitude to warrant identifying different operating segments. As
the business evolves this is an area that will be assessed on a
regular basis and additional segmental reporting will be provided
at the appropriate time.
6 Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to Ordinary shareholders by the weighted average
number of shares in issue during each year. The weighted average
number of shares in issue during the year used in the calculation
of basic earnings per share was as follows:
2018 2017
million million
----------------------------------------------------- ------- -------
Weighted average number of shares for basic earnings
per share 42.7 22.1
----------------------------------------------------- ------- -------
Diluted earnings per share is the basic earnings per share
adjusted for the effect of the conversion into fully paid shares of
the weighted average number of share options outstanding during the
year. The weighted average number of shares in issue during the
year used in the calculation of diluted earnings per share was as
follows:
2018 2017
million million
------------------------------------------------------- ------- -------
Weighted average number of shares for diluted earnings
per share 43.6 23.0
------------------------------------------------------- ------- -------
Adjusted earnings per share has been calculated so as to exclude
the effect of exceptional costs including related tax charges and
credits. Adjusted earnings used in the calculation of basic and
diluted earnings per share reconciles to basic earnings as
follows:
2018 2017
GBP'000 GBP'000
---------------------------------------------- ------- -------
Basic earnings (3,499) (3,043)
Exceptional costs 307 -
---------------------------------------------- ------- -------
Adjusted earnings (3,192) (3,043)
---------------------------------------------- ------- -------
Earnings per share (pence per share)
Basic (8.2) (13.8)
Diluted (8.2) (13.8)
---------------------------------------------- ------- -------
Adjusted earnings per share (pence per share)
Basic (7.5) (13.8)
Diluted (7.5) (13.8)
---------------------------------------------- ------- -------
The Group was loss making for the years ended 31 July 2018 and
31 July 2017. Therefore, the dilutive effect of share options has
not been taken account of in the calculation of diluted earnings
per share or adjusted diluted earnings per share, since this would
decrease the loss per share for each of the years reported.
7 Notes to the cash flow statement
2018 2017
GBP'000 GBP'000
------------------------------------------------------ ------- -------
Continuing operations
Loss for the year attributable to equity shareholders (3,499) (3,043)
R&D tax credit (1,046) (1,234)
Finance income (57) (33)
Depreciation of property, plant and equipment 311 251
Exceptional costs 307 -
------------------------------------------------------ ------- -------
EBITDA (3,984) (4,059)
Depreciation of property, plant and equipment (311) (251)
Exceptional costs (307) -
------------------------------------------------------ ------- -------
Operating loss (4,602) (4,310)
Depreciation of property, plant and equipment 311 251
Disposal of intangible assets 121 -
IFRS 2 share based payments 177 192
Increase in inventories (10) (7)
(Increase)/decrease in receivables (96) 39
Increase/(decrease) in payables 94 (127)
------------------------------------------------------ ------- -------
Net cash used in operations (4,005) (3,962)
------------------------------------------------------ ------- -------
8 Share capital
Number
of Total
Ordinary
shares GBP'000
--------------------------------------------------- ---------- -------
Allotted, called up and fully paid
At 1 August 2017 - Ordinary shares of 2 pence each 22,290,763 446
Issued on 31 October 2017 27,138,617 543
At 31 July 2018 - Ordinary shares of 2 pence each 49,429,380 989
--------------------------------------------------- ---------- -------
On 31 October 2017, 27,138,617 Ordinary shares of 2 pence each
were issued at a price of GBP0.36 per share to institutional and
other investors.
9 Related party transactions
Transactions between Applied Graphene Materials plc and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
Transactions with shareholders
The following purchases with shareholders and companies
controlled by former Directors of the Group were recorded,
excluding VAT, during the year:
2018 2017
GBP'000 GBP'000
--------------------------------------------------- ------- -------
Durham University (shareholder)
Staff secondment, consultancy and other fees (4) 57
Top Technology Limited (controlled by shareholder)
Non-Executive Director fees 15 16
IP2IPO (shareholder)
Non-Executive Director expenses 1 -
The following balances were owed by the Group at the end of the
year in respect of the transactions set out above:
2018 2017
GBP'000 GBP'000
----------------------- ------- -------
Durham University 10 64
Top Technology Limited 5 9
Remuneration of key management personnel
The remuneration of the Directors and the key management
personnel of the Group is set out below in aggregate for each of
the categories specified in IAS 24 Related Party Disclosures:
2018 2017
GBP'000 GBP'000
------------------------------------------------- ------- -------
Short term employee benefits (excluding bonuses) 705 643
Bonuses 100 -
National insurance contributions 82 81
Pension contributions 48 39
Payments to third parties 15 15
IFRS 2 share based payments 84 146
1,034 924
------------------------------------------------- ------- -------
Remuneration of key management includes remuneration paid by
subsidiary undertakings in the current and prior financial
years.
10 Seasonality
The Group experiences no material variations in performance
arising due to seasonality.
11 Availability of Annual Report
It is anticipated that the Annual Report will be sent to all
shareholders on 9 November 2018. Electronic copies of the report
will also be available on Applied Graphene Materials' website at
www.appliedgraphenematerials.com.
12 Annual General Meeting
The 2018 Annual General Meeting is to be held at The Farndale
Room, The Wilton Centre, Redcar, Cleveland, TS10 4RF on 18 December
2018 at 11.00am.
13 Post balance sheet events
On 1 September 2018, the Group entered into a two year lease
agreement to rent the premises currently occupied by the business.
Total rent payable per annum under the terms of the agreement are
GBP148,000 with indexation applied on the anniversary of the
commencement date.
On 1 August 2018 Dr Adrian Potts was appointed Chief Executive
Officer of the Group having previously been employed as Vice
President, Business Development, North America.
On 9 October 2018 it was announced that David Blain would be
joining the business as Chief Financial Officer to succeed Gareth
Jones.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EANEXFFDPFFF
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