TIDMDCTA
RNS Number : 4148W
Directa Plus PLC
17 April 2019
17 April 2019
Directa Plus plc
("Directa Plus" or the "Company")
Final Results for the Year to 31 December 2018
Directa Plus (AIM: DCTA), a producer and supplier of
graphene-based products for use in consumer and industrial markets,
announces its final results for the 12 months ended 31 December
2019.
Directa Plus's focus is principally on the two sectors where it
has established strong commercial advantage through developing and
launching products with a technological lead: Environmental, based
on our Grafysorber(R) product for treating oil contaminated water;
and, Textiles (based on our G+ products and technology).
Financial highlights
-- Product and service sales revenue more than doubled to
EUR2.25m (2017: EUR0.95m), total income (including grants) also
more than doubled to EUR2.50m (2017: EUR1.23m)
-- Loss after tax EUR3.96m (2017: EUR3.95m)
-- Successful placing to raise GBP3.45m in December, with GBP1.32m received post period end
-- Cash and cash equivalents at year end of EUR5.50m (2017:
EUR6.93m), increased by placing proceeds of EUR1.47m received in
January 2019
Proven, successful strategy maintained
-- Target existing products and markets that can be
significantly improved with the addition of Directa Plus
products
-- Focus on those vertical markets in which the Company can gain
strong traction - textiles, environmental, elastomers and
composites
-- Seek further agreements with companies that have
international footprints to use as springboards to wider global
markets
-- Maximise revenue opportunities by supplying expertise,
know-how and services as well as materials
-- Sharing in the proceeds of customers' growth from new
products alongside supplying an essential ingredient
Target market progress
Textiles
-- Workwear: new orders received from Alfredo Grassi
-- Denim: new products launched with Arvind
-- Ski wear: third collection launched with Colmar
-- Cycling: launch of Aero Jersey with Oakley
-- Luxury: new products to be developed with Loro Piana
Environmental
-- Grafysorber(R) water treatment technology - moved into sales
generation with integrated oil and gas services provider GSP
-- Successful conclusion of field trials with OMV Petrom with commercial negotiations underway
-- Successful participation in PDO (Oman's national oil company)
Tier 2 Oil Spill Response Exercise
-- Collaboration with Ambienthesis to investigate applications
in remediation and reclamation markets
Elastomers
-- Strategic agreement signed with Marangoni to enter automotive
markets with the cold re-treading of bus and truck tyres
Composites
-- Partnership with Iterchimica to use G+ products as an
additive to extend the life and resilience of asphalts on roads and
exclusivity agreement with global luxury accessories producer
Corporate
-- Significant new patents filed or granted covering flame
retardant properties and elastomeric formulae for tyres bringing
the total number of patents to 18 granted and 23 pending
-- CEO and Founder Giulio Cesareo joins the prestigious industry
council of the US National Graphene Association
-- New 19% shareholder, California based Nant Capital,
controlled by well-known medical, science and media entrepreneur
Patrick Soon-Shiong
Giulio Cesareo, Founder & CEO, said: "2018 has seen
accelerating commercial traction with agreements and collaborations
signed, and orders received, for products to be delivered over the
next twelve months. We are gaining real, measurable commercial
traction and maintaining our technological and commercial lead over
our competitors, demonstrated by the number of products launched in
our customers' markets and by the number of agreements already
signed which are generating revenue. There is every reason to look
forward with great excitement to the coming year's activity at
Directa Plus as we move forward on a number of extremely promising
fronts."
Key Performance Indicators and Financial Summary
2018 2017
Revenue from product and service sales
(EUR'm) 2.25 0.95
Total Income* (EUR'm) 2.50 1.23
EBITDA** (EUR'm) (3.24) (3.16)
Loss after tax(EUR'm) (3.96) (3.95)
Cash and cash equivalents (EUR'm)*** 5.50 6.93
Total number of patents granted 18 15
* Total Income comprises revenue from product and service sales
(EUR2.25m), and other income including government grants (EUR
0.13m) and RDEC - Research and Development Expenditure Credit
(EUR0.10)
** EBITDA represents results from operating activities before
depreciation and amortisation of EUR0.67m (2017: EUR0.63m). This is
a non-GAAP measure. Management decided to use EBITDA to provide a
clearer reflection of operations by stripping out interests, tax,
depreciation and amortization.
*** Before receipt of GBP1.32m (EUR1.47m) following completion
in January 2019 of the Conditional Placing and Open Offer announced
in December 2018
For further information please visit
http://www.directa-plus.com/ or contact:
Directa Plus plc +39 02 36714458
Giulio Cesareo, CEO
Marco Ferrari, CFO
Cantor Fitzgerald Europe (Nominated Adviser
and Joint Broker) +44 20 7894 7000
Rick Thompson, Philip Davies, Will Goode
(Corporate Finance)
Caspar Shand Kydd (Sales)
N+1 Singer (Joint Broker) +44 20 7496 3069
Mark Taylor, Lauren Kettle
Tavistock (Financial PR and IR) +44 20 7920 3150
Simon Hudson, Edward Lee
This announcement has been released by Giulio Cesareo, Chief
Executive, on behalf of the Company.
Chairman's Statement
I am pleased to be presenting the results of a very successful
year, which has seen the Group gain significant commercial momentum
as we advanced our operational and strategic targets, confirming
our position as a leading producer and supplier of graphene-based
products under our G+ brand. Our full year revenue of EUR2.5m
reflects this progress - being more than double that of 2017.
This success has been due to the close working relationships we
strive to maintain with our customers. A high degree of
collaboration allows us to find and develop the best methods and
applications for the use of G+ graphene to enhance products in our
key industrial verticals: textiles; environmental improvement;
elastomers; and composites - alongside customers' designers and
engineers.
Treating sales and product development as part of the same
ongoing process allows us to gain our customers' respect as a
supplier and manufacturing partner, which is particularly important
as a young company forging new commercial relationships. In
addition, this partnership role allows us to establish Directa Plus
higher in the manufacturing value chain - by moving closer to end
users we are able to better understand consumer demand and capture
a greater share of the profits than would be the case if we were
simply a commodity supplier.
We are creating a next generation of products with significantly
enhanced properties for our customers, and the progress we have
made in each business vertical is detailed in the Chief Executive's
Review.
To take a slightly wider view of our commercialisation strategy
- there are a number of criteria we look for in identifying the
industries in which we want to operate and companies with whom we
want to partner.
In our view the best and fastest route to commercial success and
profitability is to use G+ graphene to improve existing products
and processes, rather than trying to develop entirely new
categories. With this in mind, we are seeking to target existing
markets with clear potential for substantial revenues where
products can be improved through graphene applications.
Similarly, in potential partners we look for leading
international businesses with significant global footprints who
have the capability to manufacture and deploy products on a large
scale. The potential benefits that this can bring in terms of
revenue are clear, but in addition, working with some of the
world's leading manufacturers in one sector gives us significant
additional credibility and exposure when approaching new potential
partners in other sectors.
We can offer existing and potential partners, as well as
shareholders, firm guarantees about the quality of our G+ graphene
and our environmental and sustainability credentials. The Group's
G+ graphene manufacturing capability uses proprietary patented
technology based on a plasma super expansion process. Starting from
natural graphite, each step of our production process - expansion,
exfoliation and drying - creates graphene-based materials and
hybrid graphene materials ready for a variety of uses and available
in various forms such as powder, liquid and paste.
This proprietary production process uses heat, rather than a
chemical process, to process graphite into pristine graphene
nanoplatelets, which enables Directa Plus to offer a sustainable,
non-toxic product, without unwanted by-products. As the process is
low cost and, crucially, scalable - we do not foresee any issues in
meeting customer demand for our product.
At a corporate level I would like to welcome new shareholders
from our successful capital raise in December and thank existing
shareholders for their support in this fundraise. I would also like
to welcome a new shareholder, Patrick Soon-Shiong, who bought, also
through his controlled company Nant Capital, a 19% shareholding in
Directa Plus after the end of the financial year.
Finally, I would like to thank our leadership team and our
employees for their continued hard work. Directa Plus is enjoying
an extremely exciting period of growth, with rapid developments in
a wide number of areas, and the passion and energy that is
contributed throughout the business is invaluable.
On behalf of the Board and myself I am confident in saying that
Directa Plus is extremely well positioned for another year of
growth and development, and I look forward to the Group's future
success.
Sir Peter Middleton
Chairman
16 April 2019
Chief Executive Officer's Review
Directa Plus saw another year of significant progress during
2018, improving its position in key markets and making strides in
the commercialisation strategy through new products and
partnerships, clear vision and discipline in execution.
The two primary markets we focus on are textiles and
environmental, followed by elastomers and composites. The majority
of the Directa Plus' R&D resources are focused on the two
primary markets to develop the next generation of G+ products to
enhance performance, while in elastomers and composites, the goal
of the Group is to market the G+ products already engineered for
those markets.
Strategy and Business model
The Group is well placed to take advantage of market momentum,
leveraging on the unique G+ graphene properties. By incorporating
Directa Plus' unique graphene blends, identified by the G+ brand,
our customers can revolutionise the performance, increase the
competitiveness and extend the life cycle of their own end
products.
Integrating our intellectual property into new products allows
our customers to gain significant competitive advantage and as
outlined in the Chairman's Statement, as a Group, we are committed
to sharing in the proceeds of customers' growth from new products,
rather than merely supplying an essential ingredient. The
commercialisation model we follow is based on capturing for our
shareholders a proportion of these additional revenues and profits.
This could take the form of royalty payments, upfront enabling
licence payments, joint-ventures to get closer to end-users, or a
combination of all three.
We seek to embed our products first with Italian (and regional)
companies with large international footprints proving the business
cases to provide reference customers, before rolling out globally.
The success of this strategy can be seen in our progress in each of
our key sectors, where we have established strong commercial
advantage through developing and launching products with a
technological lead:
-- Textiles, based on our G+ Planar Thermal Circuit technology;
-- Environmental, based on our Grafysorber(R) product for treating oil contaminated water;
-- Elastomers, based on our G+ product specifically engineered to enhance tyre performances; and
-- Composite materials, based on our G+ products specifically
engineered to enhance composite materials, mechanical performances,
and to improve asphalt's life cycle
Expanded partnership and product lines
Textiles
There are broad market applications for the integration of G+
graphene products into textiles across multiple segments, as our
Planar Thermal Circuit(R) revolutionises temperature control for
natural and synthetic fabrics, and so for the end consumers of
garments. These benefits are delivered via our G+ printing paste
which can be printed on customers' fabrics and via our graphene
enhanced membranes which can be laminated on customers' fabrics.
Moreover, during the period, a testing phase started with a major
world-wide membrane producer.
Our present subsectors of focus are workwear, denim, sportswear
and luxury goods, where partners are already finding that G+
products that are non-toxic, dermatologically tested and
hypoallergenic can significantly augment their product ranges.
Alfredo Grassi
In July 2018, Alfredo Grassi S.p.A (Grassi), placed an order
with Directa Plus worth EUR0.70 million which we believe represents
one of the largest amount of textile material to be treated with
graphene nanoplatelets by any company in the world to date.
This new order followed Grassi's successful public tender to
provide workwear incorporating G+ to an Italian government agency.
This is the second such tender to be won by Grassi, having already
supplied G+-enhanced workwear to an Italian state-owned
company.
Workwear represents a significant target market for the Group's
G+ technology and in Italy alone there are approximately 250,000
law enforcement, fire and safety and military personnel whose
clothing needs to be renewed every three years. Directa Plus and
Grassi continue to work together to develop and market new product
lines in areas where Grassi is has a commercial presence.
In October, we received two more orders for the workwear market
with an aggregate value for Directa Plus of approximately
EUR500,000 of which EUR150,000 was delivered in FY18 and EUR350,000
is expected to be delivered in this financial year.
The Board remains excited about the future opportunities that
workwear business could bring to Directa Plus on a global
basis.
Arvind
It has been a pleasure to work closely with Arvind Limited,
India's leading textile-to-retail-and-brands conglomerate, since we
signed our first agreement covering textiles in May 2018, and in
particular with the CEO of Arvind Denims, Mr Aamir Akhtar.
The May agreement set out an exclusive collaboration, to infuse
the high-performance benefits of our graphene-based products into
Arvind's denim fabrics. Arvind Denim produces over 100 million
metres of fabrics and six million pairs of jeans per year, and
supplies a portfolio of brands that are distinctive and relevant
across diverse consumers, including Cherokee, Excalibur, Flying
Machine, Gant, Levi's, Nautica, Pierre Cardin Paris, Tommy
Hilfiger, and Wrangler.
Directa Plus' G+ Planar Thermal Circuit application can be
printed directly onto denim to significantly increase comfort via
heat dissipation, with additional benefits including energy
harvesting, data transmission and a reduced odour effect. Arvind
and Directa Plus jointly launched the world's first graphene
enhanced G+ jeans, shirt and jackets at the Kingpins Show in
Amsterdam in October 2018 - an invitation-only denim conference and
trade show attended by all the key market players with the
objective of shaping the future of denim. A further joint
presentation entitled 'Graphene Plus upgraded for Functional Denim'
was given by both companies at the Denim Première Vision event in
London in December 2018.
Directa Plus and Arvind believe that the 'smart denim' that will
result from the collaboration will yield some of the most
innovative, widely-used fabrics in the denim market in the years
ahead.
Colmar
Colmar, the high-end sports and activewear company launched its
Winter 2018/19 collection, marking Colmar's third skiwear range
with Directa Plus. The new collection has been expanded to consist
of 31 garments incorporating G+, including male and female ski
jackets and, for the first time, graphene-enhanced ski trousers. It
follows the commercial success of two previous ski collections, as
well as spring/summer garments.
Oakley
July saw the launch of a New Aero Jersey enhanced with Directa
Plus' G+ graphene - a first of its kind cycling garment. Designed
by Oakley(R), in collaboration with Bioracer, a designer and
manufacturer of innovative, customised clothing for cycling teams
and individuals, as well as for other sporting activities. The Aero
Jersey incorporates our G+ planar thermal circuit to distribute the
heat generated by the cyclist's body and dissipates it when needed
to significantly improve the comfort of the wearer and enable
riders to use less energy to regulate their body temperature. We
are already analyzing with the Oakley's innovation team further
potential development and opportunities.
Environmental remediation
We established a number of key new relationships in our
environmental vertical this year and demonstrated commercial
viability most clearly by moving beyond proof of concept and
testing into revenue generation with one of our customers.
Our proprietary Grafysorber(R) technology is a
commercially-available graphene-based solution for treating water
contaminated by hydrocarbons and is at least five times more
effective than current technologies - adsorbing more than 100 times
its own weight of oil-based pollutants. In addition, Grafysorber(R)
is sustainably produced, non-flammable and reusable, with the
adsorbed hydrocarbons recoverable.
Ambienthesis
The potential to expand our environmental remediation processes
beyond hydrocarbons would add a new dimension to the vertical and
greatly expand the industries and geographies we could service.
To that end we have signed a collaboration agreement with
Ambienthesis S.p.A. a specialist in the reclamation, environmental
remediation and treatment, recovery and disposal of hazardous and
non-hazardous waste, listed on the Milan Stock Exchange.
Phase One of the agreement consists of the testing of products,
plants and services, using the Group's G+ graphene products for the
remediation of soil and groundwater and industrial waste waters at
Ambienthesis' plant in Orbassano, Turin. The testing will start in
the first half of 2019 and will take place using a mobile treatment
plant provided by Directa Plus, specifically engineered for the
project.
The outcome of Phase One will then define the basis of a
potential commercial agreement between the parties as the second
phase of the process. In line with our strategy, the collaboration
with Ambienthesis allow us to prove a new business case in the
environmental area that could be replicated and open very important
commercial opportunities.
GSP
GSP is an integrated services provider to the Oil & Gas
industry, with a global presence. It operates a diversified fleet
which includes mobile offshore drilling rigs, offshore support
vessels, construction vessels, heavy lift crane barges, ROVs and a
Saturation Diving System. In November we announced the signing of a
EUR200,000 contract to supply GSP with a graphene-based
Grafysorber(R) mobile production unit and a set of G+ oil
adsorption barriers.
The first sale of our Grafysorber(R) technology for
environmental remediation represents a significant development for
Directa Plus. We are committed to developing both new products and
processes to capture significant revenue from the value chain and
this contract is a key indicator of the potential of the
vertical.
OMV Petrom
Industrial field testing of Grafysorber(R) was successfully
completed in April last year at an oil treatment plant operated by
OMV Petrom, a leading Romanian integrated Oil & Gas company and
one of the largest in Southern Europe.
The purpose of the field tests was to trial the ability of
Directa Plus' Grafysorber(R), which was used in a dedicated
treatment facility on an OMV Petrom site to remove petroleum
hydrocarbons from produced water and sludges. We are now in the
final negotiation phase with OMV Petrom for a multi-year commercial
agreement for our water treatment solutions.
PDO
In December we successfully participated in a Tier 2 Oil Spill
Response Exercise undertaken by Petroleum Development Oman, the
leading exploration and production company in the Sultanate of
Oman.
The Gulf Region is a key area for the further development of our
environmental business based on the Grafysorber(R) product, and so
this represents an important opportunity.
Elastomers
As demonstrated through our activity on cycle tyres, the
incorporation of G+ is expected to materially enhance the
performance of retreaded automotive tyres by increasing grip,
durability and fuel efficiency as well as extending lifespan and
addresses a much larger market. We are strengthening our business
relationship with the main players in the tyre industry to
commercially exploit the unique properties G+, leveraging on
Directa Plus' IP.
Marangoni
A strategic agreement with Marangoni S.p.A., signed in April
2018, allows us, thanks to the unique properties of the G+ based
product, to improve the performance of Marangoni compounds in truck
and bus tyre retreading. On November 2018 G+ enhanced rings have
been mounted on bus tire and installed on Milan ATM bus for field
test; results of G+ tread durability versus reference are expected
by June 2019. In the meanwhile the technical teams are working on
an industrial assessment of the project with the goal to optimize
all the relevant aspects of the G+ re-treading process - production
process, tread design, formulation fine tuning, to be ready for
industrial production by the end of 2019.
Based in Italy, Marangoni is an international group with 10
production facilities and 1,300 employees worldwide and is the
market leader in the supply of technologies and materials for the
cold retreading of truck and bus radial tyres.
Composites
The applications for composite materials are extremely broad and
encompass a huge array of products providing a clear example of the
benefits we can derive through entering the market via partnerships
with existing large companies.
At present we are working on two main partnerships in the
composites space - one with a global luxury accessories provider
and another with Iterchimica S.p.A. one of the largest Italian
companies in the field of additives for asphalt and paving
technologies.
Fashion accessory producer
In April 2018, we entered into a 12-month exclusivity agreement
and nine-month development agreement with an existing customer, a
global luxury accessories producer, to produce accessories with
increased mechanical properties derived from our G+ graphene-based
products. Directa Plus has commenced work with the client at our
Advanced Development Area facility, which has the added benefit of
reducing the time it will take to bring the product to market.
The value of the exclusivity and the development agreement,
ahead of entering into an anticipated commercial contract, amounts
to approximately EUR130,000 in 2018.
Iterchimica
In partnership with Iterchimica we can report that we have laid
the first road surface in the world with a supermodifier containing
graphene, on a section of Rome's Strada Provinciale Ardeatina - a
famously busy route.
This real-world application is part of a commercial test of
Ecopave - based on Directa Plus's graphene product - Ecopave has
been developed by Directa Plus with Iterchimica, to provide better
roads, that are more sustainable and with less maintenance needs,
with consequent benefits for public authorities, citizens and
general contractors.
Ecopave materially increases the surface's physical and
mechanical performance by increasing resilience to deformation and
by decreasing sensitivity to variations in ambient temperature.
Successful laboratory tests showed that Ecopave can increase
fatigue resistance up to 250 per cent, extending significantly the
service life of the road surface at a lower life cycle cost than
existing tarmacs.
Additionally, once laid, Ecopave can be 100 per cent recycled
which can reduce the extraction of new materials from quarries and
first-use bitumen.
Test results received and disclosed post period end have proven
the unique properties of Ecopave, exceeding the expectations. We
are very confident on future market opportunities and conversation
are ongoing with players in UK, USA and Oman.
Intellectual Property
Expanding and protecting our intellectual property is rightly a
central element of our commercial strategy since the Directa Plus'
foundation. We are at the forefront of the commercialisation of
graphene and at the year end had 18 patents granted with an
additional two granted post period end and 23 patents pending (plus
1 filed post period) in respect of our G+ technology covering
process, applications and products.
Significant new patents this year cover flame retardant
compositions of G+ without the addition of toxic chemicals and G+
elastomeric compositions for tyres.
Post period
Our senior management team has significant experience of
operating in the United States and our reputation in this important
market continues to grow. This was illustrated by my joining the
influential and prestigious Industry Council of the US National
Graphene Association in February of 2019. Moreover, I will take
part in the "Graphene on Capitol Hill" event keynoted by senator
Roger Wicker, chairman of the Senate Commerce Committee, on May
22(nd) 2019 in Washington D.C. Representatives from the Department
of Defense (DOD), Department of Energy (DOE), National Aeronautics
and Space Administration (NASA), and Economic Development
Administration (EDA), as well as state legislators, members of the
Congress, and international dignitaries will be in attendance to
discuss invigorating graphene-focused collaborations between
business and government in the national and international
verticals.
I relish the opportunity to contribute to what is likely the
world's leading forum on the development of graphene and its use in
an increasing number of products.
The arrival of Dr. Patrick Soon-Shiong as a new shareholder is a
significant endorsement for Directa Plus. Going forward we intend
to explore any potential synergy with his company Nant to penetrate
the US market to support G+ graphene momentum.
Finally, I would also like to note an exclusivity agreement
signed with Loro Piana for the commercialisation of fabrics and
garments enriched by our G+ technology. Loro Piana is one of the
world's most renowned fabric manufacturers and it is a real
privilege to be able to work together. The agreement is on a
worldwide basis with an initial duration of three years for a
minimum value of EUR800,000.
Outlook
2018 has seen accelerating commercial traction with agreements
and collaborations signed, and orders received, for products to be
delivered over the next twelve months. We are gaining real,
measurable commercial traction and maintaining our technological
and commercial lead over our competitors, demonstrated by the
number of products launched in our customers' markets and by the
number of agreements already signed which are generating
revenue.
We have increasingly well-established relationships in all of
our key target verticals: textiles; environmental remediation
industries; elastomers; and composites verticals, with a number of
globally recognised corporate leaders. Pleasingly, our
commercialisation strategy of adding value and capturing value in
the supply chain is working well - helping to strengthen our
relationships with our customers.
As result of the continuous improvement project called
"Throughput Project" we will be able to improve industrial layout
to increase production efficiency, driving industrial margin.
As a company we always value practice over theory, recognising
that in a fast-evolving future there will be a higher cost waiting
and planning than doing.
There is every reason to look forward with great excitement to
the coming year's activity at Directa Plus as we move forward on a
number of extremely promising fronts.
Guilio Cesareo
Chief Executive Officer
16 April 2019
Chief Financial Officer's Review
I am pleased to present the results of what has been another
busy and important year for the Group. We have continued to shape
and improve the finance team, focusing our activities on accuracy,
timing and efficiency of the internal reporting to support our
commercial and strategic decision making.
Key Performance Indicators
The Board measures the performance of the Group through a number
of important financial and non-financial KPIs. In a young business
with a number of client verticals, identifying measurable data that
will provide useful insight year-on-year is not always
straightforward but the KPIs below should help shareholders
understand the Group's progress. Our financial KPIs show
significant improvement compared to 2017.
The table below summarises the KPIs with further details
contained later in my report:
2018 2017
Revenue from product and service sales
(EUR'm) 2.25 0.95
Total Income* (EUR'm) 2.50 1.23
EBITDA** (EUR'm) (3.24) (3.16)
Loss after tax (EUR'm) (3.96) (3.95)
Reported basic loss per share (0.09)p (0.09)p
Cash and cash equivalents*** (EUR'm) 5.50 6.93
Total number of patents granted 18 15
* Total Income comprises revenue from product and service sales
(EUR2.25m), and other income including government grants (EUR
0.13m) and RDEC and other income (EUR0.12)
** EBITDA represents results from operating activities before
depreciation and amortisation of EUR0.67m (2017: EUR0.63m). This is
a non-GAAP measure. Management decided to use EBITDA to provide a
clearer reflection of operations by stripping out interests, tax,
depreciation and amortization.
*** Before receipt of GBP1.32m (EUR1.47m) following completion
in January 2019 of the Conditional Placing and Open Offer announced
in December 2018
Financial Review
Total Income increased by 108% to EUR2.5 million (2017: EUR1.2
million).
Revenue from product and service sales grew by 137% to EUR2.25
million (2017: EUR0.95 million) with the increase coming mainly
from higher revenue in our textiles segment to EUR1.66 million
(2017: EUR0.77 million).
Other income, which mainly includes grants and R&D
Expenditure Credit (RDEC) received by the Group, was EUR0.25
million (2017: EUR0.28 million). RDEC is an Italian government
incentive scheme designed to encourage companies to invest in
R&D by providing a tax credit and accounted for EUR0.10 million
(2017: EUR 0.08 million).
Income from Government grants was driven by grants that are
directly supporting key development activities, namely the GRATA
textiles project and the Eco Pave asphalts project, as described in
the CEO review, which accounted for EUR0.06 million (2017: EUR 0.03
million) and EUR0.07 million (2017: 0.04 million) respectively.
The EBITDA loss for the period was in line with management
expectation and was slightly higher at EUR3.24million compared with
a EUR3.16 million loss for 2017, primarily due to increased raw
materials and consumables costs, and a change in the inventory that
partially offset the increase of the top line. Over the period, we
remained focused on improving the value captured within the textile
supply chain and managing relationships and agreements with clients
and suppliers, to lay the foundations for improving margins in the
next future.
The loss after tax for the year was flat at EUR3.96 million
compared with EUR3.95 million for 2017. This reflects both the
increase in revenue and higher expenditure on raw materials, and
changes in inventories and other expenses.
Across the Group we have continued to invest in new equipment
and technology. We invested EUR0.12 million (2017: EUR0.34 million)
related mainly to the purchase of industrial equipment to improve
our manufacturing process. Moreover, laboratory equipment to
support the development of applications, particularly in our
textile and environmental markets, were also acquired during the
period. Investment in intangible assets of EUR0.21 million (2017:
EUR0.12 million) mainly related to capitalised development costs
and IP activity.
As at 31 December 2018, inventories totalled EUR0.86 million
(2017: EUR1.0 million), ensuring that Directa Plus can supply key
clients in a timely manner as it receives increasing orders.
In the short term the Group's priorities continue to focus on
the reduction in cash consumption and improvement in profitability.
Cash and cash equivalents at 31 December 2018 were EUR5.5 million
(2017: EUR6.9 million) with the reduction principally due to:
-- increased cash outflow from operating activities totalling
EUR3.0 million (2017: EUR2.8 million);
-- modest investments in tangible and intangible assets of
EUR0.3 million (2017: EUR0.5 million) for reasons set out
above;
-- cash in from financing activities equal to EUR2.0 million
(2017: expense of EUR0.3 million) which includes borrowing
repayments, interest costs and the Firm Placing undertaken in
December 2018 and concluded in January 2019, of which the details
of which are set out below.
Details about Patents granted are covered in the CEO's
statement.
A description of the principal risks and uncertainties facing
the Group is included within the Directors' Report.
Capital Raise
The capital raise was undertaken between December 2018 and
January 2019 raising the total gross amount of GBP3.45 million,
with the Company's joint brokers Cantor Fitzgerald Europe and N+1
Singer responsible for placing the shares. The capital raise
consisted of a placing and an open offer.
The placing of 6,300,000 new Ordinary Shares issued at price of
50 pence per share raising gross proceeds of GBP3.15 million was
divided in two steps:
-- a Firm Placing on 17 December 2018 raising GBP2.13 million
(gross), through the placing of 4,256,000 ordinary shares with a
nominal value of GBP0.0025 each, to be reported in FY18 accounts.
Proceeds of capital raise are reported in Euro and are equal to
EUR2.37 million of gross proceeds and EUR2.14 million of net
proceeds
-- a post period end Conditional placing (being subject to
shareholder approval at general meeting) settled on 9 January 2019
raisingGBP1.02 million (EUR1.14 million) equal to 2,044,000
ordinary shares with a nominal value of GBP0.0025 each with the
proceeds to be shown on the 2019 balance sheet.
The post period Open Offer in early January 2019 in which
shareholders were invited to participate raised an additional
GBP0.30 million (EUR0.33 million) that will be shown on the 2019
balance sheet.
The funds will help sustain the Group until we reach cash flow
break-even, and specifically the Board intends to use the proceeds
of the Placing to:
-- exploit commercial opportunities across a developing pipeline;
-- build sales and marketing reach;
-- develop the next generation of higher performing products;
-- improve industrial layout to drive industrial margin; and
-- maintain competitive advantage and barriers to entry.
Marco Ferrari
Chief Financial Officer
16 April 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
In euro Note 31 Dec 2018 31 Dec 2017
---------------------------------------------------------------------------------- ------ ------------ ------------
Continuing operations
Revenue 3 2,253,293 952,199
Other income 3/4 248,695 281,493
Changes in inventories of finished goods and work in progress 5 (133,382) 390,291
Raw materials and consumables used 6 (1,299,078) (607,338)
Employee benefits expenses 7 (2,112,650) (2,203,558)
Depreciation and amortisation 12/13 (674,919) (633,784)
Other expenses 8 (2,197,670) (1,973,687)
Results from operating activities (3,915,711) (3,794,384)
---------------------------------------------------------------------------------- ------ ------------ ------------
Finance Income 10 4,440 5,501
Finance expenses 10 (45,143) (157,309)
---------------------------------------------------------------------------------- ------
Net finance costs (40,703) (151,808)
---------------------------------------------------------------------------------- ------ ------------ ------------
Loss before tax (3,956,414) (3,946,192)
---------------------------------------------------------------------------------- ------ ------------ ------------
Tax expense 11 (414) (1,239)
Loss after tax from continuing operations (3,956,828) (3,947,431)
---------------------------------------------------------------------------------- ------ ------------ ------------
Loss of the year (3,956,828) (3,947,431)
---------------------------------------------------------------------------------- ------ ------------ ------------
Other Comprehensive income items that will not be reclassified to profit or loss
Defined Benefit Plan re-measurement gains and losses 20 1,219 (4,704)
Other comprehensive (expense)/income for the year (net of tax) 1,219 (4,704)
---------------------------------------------------------------------------------- ------ ------------ ------------
Total comprehensive (expense)/income for the year (3,955,609) (3,952,135)
---------------------------------------------------------------------------------- ------ ------------ ------------
Loss attributable to
Owner of the Parent (3,961,259) (3,948,133)
Non-controlling interests 4,431 702
---------------------------------------------------------------------------------- ------ ------------ ------------
(3,956,828) (3,947,431)
Total comprehensive (expense)/income attributable to:
Owners of the Company (3,960,040) (3,952,837)
Non-controlling interests 4,431 702
---------------------------------------------------------------------------------- ------ ------------ ------------
(3,955,609) (3,952,135)
---------------------------------------------------------------------------------- ------ ------------ ------------
Loss per share
Basic loss per share 23 (0.09) (0.09)
Diluted loss per share 23 (0.09) (0.09)
---------------------------------------------------------------------------------- ------ ------------ ------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Group Company
------------------------------- ----- ---------------------------- --------------------------
In euro Note 31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17
------------------------------- ----- ------------- ------------- ------------ ------------
Assets
Intangible assets 12 1,467,478 1,572,309 - -
Investments 14 - - 16,180,336 14,180,336
Property, plant and equipment 13 1,062,435 1,284,412 - -
Non-current assets 2,529,913 2,856,721 16,180,336 14,180,336
------------------------------- ----- ------------- ------------- ------------ ------------
Inventories 5 862,284 995,666 - -
Trade and other receivables 15 2,059,217 1,161,711 158,594 109,240
Cash and cash equivalent 17 5,503,884 6,929,446 3,968,016 4,493,006
Current assets 8,425,385 9,086,823 4,126,610 4,602,246
------------------------------- ----- ------------- ------------- ------------ ------------
Total assets 10,955,298 11,943,544 20,306,946 18,782,582
------------------------------- ----- ------------- ------------- ------------ ------------
Equity
Share capital 18 154,465 142,628 154,465 142,628
Share premium 18 22,104,240 19,973,996 2,2104,240 19,973,996
Retained Earnings 18 (14,044,656) (10,250,225) (2,055,143) (1,380,478)
------------------------------- ----- ------------- ------------- ------------ ------------
Equity attributable to owners
of Group 8,214,049 9,866,399 20,203,562 18,736,146
------------------------------- ----- ------------- ------------- ------------ ------------
Non-controlling interests 27,361 22,930 -
------------------------------- -----
Total equity 8,241,410 9,889,329 20,203,562 18,736,146
------------------------------- ----- ------------- ------------- ------------ ------------
Liabilities
Loans and borrowings 19 57,011 211,791 - -
Employee benefits provision 20 335,132 282,031 - -
Non-current liabilities 392,143 493,822 - -
------------------------------- ----- ------------- ------------- ------------ ------------
Loans and borrowing 19 226,823 244,780 - -
Trade and other payables 21 2,094,922 1,315,613 103,385 46,436
Current liabilities 2,321,745 1,560,393 103,385 46,436
------------------------------- ----- ------------- ------------- ------------ ------------
Total liabilities 2,713,888 2,054,215 103,385 46,436
------------------------------- ----- ------------- ------------- ------------ ------------
Total equity and liabilities 10,955,298 11,943,544 20,306,947 18,782,582
------------------------------- ----- ------------- ------------- ------------ ------------
The financial statements were approved and authorised for issue
by the board and signed on its behalf by:
Neil Warner,
Chairman of the Audit Committee
16 April 2019
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Non-controlling Total
------------- ------------
Retained
In euro Capital premium Earnings Total interests Equity
-------------------------------- -------- ----------- ------------- ------------ ---------------- --------------
Balance at 31 December 2016 142,628 19,973,996 (6,552,965) 13,563,659 22,228 13,585,887
-------------------------------- -------- ----------- ------------- ------------ ---------------- --------------
Total comprehensive
(expense)/income for the year - - - - - -
Loss for the year - - (3,948,133) (3,948,133) 702 (3,947,431)
Total other comprehensive
(expense)/income - - (4,704) (4,704) - (4,704)
Total comprehensive
(expense)/income for the
period - - (3,952,837) (3,952,837) 702 (3,952,135)
Share-based payment - - 255,578 255,578 - 255,578
Non-controlling interests on
Directa Textiles Solutions - - - - - -
-------------------------------- -------- ----------- ------------- ------------ ---------------- --------------
Balance at 31 December 2017 142,628 19,973,996 (10,250,224) 9,866,400 22,930 9,889,329
-------------------------------- -------- ----------- ------------- ------------ ---------------- --------------
Total comprehensive
(expense)/income for the year
Loss of the year - - (3,961,259) (3,961,259) 4,431 (3,956,828)
Total other comprehensive
(expense)/income - - 1,219 1,219 1,219
Total comprehensive
(expense)/income for the
period - - (3,960,040) (3,960,040) 4,431 (3,955,609)
Capital raised 11,837 2,355,548 - 2,367,385 - 2,367,385
Expenditure related to the
issuance of shares - (225,304) - (225,304) - (225,304)
Share-based payment - - 165,610 165,610 - 165,610
Balance at 31 December 2018 154,465 22,104,240 (14,044,656) 8,214,049 27,361 8,241,410
-------------------------------- -------- ----------- ------------- ------------ ---------------- --------------
COMPANY STATEMENT OF CHANGES IN EQUITY
Share Share Retained Total
In euro Capital Premium Earnings Equity
------------------------------------- --------- ----------- ------------ -----------
Balance at 31 December 2016 142,628 19,973,996 (766,745) 19,349,879
------------------------------------- --------- ----------- ------------ -----------
Loss for the year - - (900,374) (900,374)
Share-based payment reserve - - 286,641 286,641
------------------------------------- --------- ----------- ------------ -----------
Balance at 31 December 2017 142,628 19,973,996 (1,380,478) 18,736,146
------------------------------------- --------- ----------- ------------ -----------
Loss for the year - - (779,197) (779,197)
Capital raised 11,837 2,355,548 - 2,367,385
Expenditure related to the issuance
of shares - (225,304) - (225,304)
Share-based payment - - 104,532 104,532
------------------------------------- --------- ----------- ------------ -----------
Balance at 31 December 2018 154,465 22,104,240 (2,055,143) 20,203,562
------------------------------------- --------- ----------- ------------ -----------
CONSOLIDATED STATEMENT OF CASH FLOW
Group Company
------------------------------------------------------ ----- -------------------------- --------------------------
In euro Note 2018 2017 2018 2017
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
Cash flows from operating activities
Loss for the year before tax (3,956,414) (3,946,191) (779,197) (900,374)
Adjustments for:
Depreciation 13 357,014 347,042 - -
Amortisation of intangible assets 12 317,905 286,742 - -
Share-based payment expense 165,610 255,578 104,532 163,743
Finance income 10 (4,440) (5,501) (3,194) -
Finance expense 10 45,143 157,309 22,610 131,647
Tax expenses - (1,239)
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
(3,075,182) (2,906,260) (655,249) (604,984)
Increase/Decrease in:
- inventories 5 133,382 (390,291) - -
- trade and other receivables 15 (897,506) 13,344 (49,354) 203,854
- trade and other payables 21 758,397 442,867 56,949 14,094
- provisions and employee benefits 20 47,175 44,051 - -
Net cash from operating activities (3,033,734) (2,796,291) (647,654) 387,036
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
Cash flows from investing activities
Interest received 10 4,440 5,501 3,194 -
Investment in intangible assets 12 (207,158) (122,347) - -
Investment in subsidiary - - (2,000,000) (3,000,000)
Loan to associate - - - -
Acquisition of property, plant and equipment 13 (120,456) (340,071) - -
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
Net cash used in investing activities (323,174) (456,917) (1,996,806) (3,000,000)
Cash flows from financing activities
Proceeds from Capital raise 2,367,385 - 2,367,385 -
Expenditure related to the issuance of shares (225,304) - (225,304) -
Interest paid on loans and borrowings 10 (16,329) (20,481) (941) (3,378)
New Borrowings 66,607
Repayment of borrowings 19 (239,344) (236,164) - -
Net cash from (used in) financing activities 1,953,015 (256,645) 2,141,140 (3,378)
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalent (1,403,893) (3,509,853) (503,320) (3,390,414)
Cash and cash equivalent at beginning of the year 6,929,446 10,570,211 4,493,006 8,011,689
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
Exchange (losses)/gains on cash and cash equivalents (21,669) (130,912) (21,669) (128,269)
----- ------------ ------------ ------------ ------------
Cash and cash equivalent at end of the year 5,503,884 6,929,446 3,968,016 4,493,006
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
1. Basis of preparation
The financial information contained in this announcement does
not constitute statutory financial statements within the meaning of
Section 435 of the Companies Act 2006.
a) Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards,
International Accounting Standards and Interpretations
(collectively IFRSs) as adopted for use in the European Union and
with those parts of Company Act 2006 to companies preparing their
financial statements under the adopted IFRS.
The principal accounting policies are summarised below. They
have all been applied consistently throughout the year and the
preceding year, unless otherwise stated.
The financial statements have been prepared on a going concern
basis as since the Directors believe that the Group has adequate
resources to remain in operation for the foreseeable future.
All notes, except as otherwise indicated, are presented in Euros
("EUR").
b) Basis of consolidation
I. Subsidiaries
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The total comprehensive income of non-wholly owned subsidiaries
is attributed to owners of the parent and to the non-controlling
interests in proportion to their relative ownership interests.
II. Transaction eliminated on consolidation
The consolidated financial statements present the results of the
Company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
III. Non-controlling interest
Non-controlling interest in the net assets of the consolidated
subsidiaries are identified separately from the Group's equity.
Non-controlling interests consist of the amount of those interests
at the date of the original business combination and the
non-controlling shareholder's share changes in equity since the
date of the combination. The non-controlling interest's share of
losses, where applicable, are attributed to the non-controlling
interests irrespective of whether the non-controlling shareholders
have a binding obligation and are able to make an additional
investment to cover the losses.
c) Functional and presentation currency
These financial statements are presented in Euro ("EUR") and is
considered by the Directors to be the most appropriate presentation
currency to assist the users of the financial statements. The
functional currency of the Company and operating subsidiary is Euro
("EUR").
d) Use of estimates and judgements
The preparation of the financial statements in conformity with
IFRS, as adopted by the EU, requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities.. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised if the revision affects
only that period.
Critical estimates and assumptions that have the most
significant effect on the amounts recognised in the financial
statements and/or have a significant risk of resulting in a
material adjustment within the next financial year are as
follows:
I. Carrying value of capitalised development costs
The Group capitalises development costs provided the recognition
conditions meet the criteria set out in IAS 38.
During the year costs have been capitalised in relation to
projects to enhance and develop the production process and the
industrial application for G+ Graphene. The majority of the
capitalised costs relate to internal employee costs and Management
are able to separately identify time spent on these projects
through the group's internal time card management program.
Management and the directors continually assess the commercial
potential of the technology and products in development. The costs
capitalised in period have resulted in the development of new IP
and Management has assessed that there is sufficient evidence to
support that economic benefit will flow.
Intangible assets are amortised over their expected or known
useful lives on a straight-line basis beginning from the point they
are available for use. The estimated useful life is the lower of
the legal duration (term of patents - usually 20 years) and the
useful economic life. The estimated useful lives of intangible
assets are regularly reviewed. Management currently estimates based
on the development program the estimated useful life for intangible
assets is currently 10 years. The useful economic life is based on
management's estimate of the time period over which the assets will
generate future cash flows.
II. Valuation and recoverability of Inventory
Inventories are stated at the lower of cost or net realisable
value. The cost of inventories comprises of net prices paid for
materials purchased, production labour cost and factory overhead.
Net realisable value represents the estimated selling price less
all estimated costs of completion and costs to be incurred in
marketing, selling and distribution. Inventory provisions are
recognised for slow-moving, obsolete or unsalable inventory and are
reviewed on a six monthly basis. The valuation of Inventory
includes key estimates and judgments made by Management including
normal production capacity, market demand and selling
opportunities. If actual demand or usage were to be lower than
estimated, inventory provisions for excess or obsolete inventory
may be required.
III. Defined benefit scheme
Provision for benefits upon termination of employment related to
amounts accrued by Italian companies for employment retirement. In
determining this provision Management employs actuarial techniques,
including the involvement of an external experts. All key estimates
applied have been included in note 20.
IV. Revenues recognition
The revenues recognition in conformity with IFRS 15 requires
management to make judgements, estimates and assumptions. Regarding
the sale of equipment in the year the Management have reviewed the
contract and analysed it with reference to IFRS 15. Three
performance obligations were identified including the sale of
equipment, the provision of training and a two year warranty. The
cost of the training was determined based on the average cost per
hour of the employees providing the training while the warranty
costs calculation was based on internal calculation and historical
maintenance data. The consideration relating to the warranty has
been deferred and will be recognise in line with the performance
obligation.
e) New standards adopted for the period
I. IFRS 9 - Financial instruments
IFRS 9 'Financial Instruments' was published in July 2014 and
was effective and adopted on 1 January 2018. It is applicable to
financial assets and financial liabilities, and covers the
classification, measurement, impairment and de-recognition of
financial assets and financial liabilities together with a new
hedge accounting model. The Group's financial assets comprise trade
and other receivables and cash and short-term deposits.
The adoption of IFRS 9 has changed the Group's accounting for
impairment losses for financial assets by replacing IAS 39's
incurred loss approach with a forward-looking expected credit loss
(ECL) approach. IFRS 9 requires the Group to recognise an allowance
for ECLs for all debt instruments not held at fair value through
profit or loss and contract assets in the scope of IFRS 15.
As all of the Group's trade receivables and other current
receivables which the Group measures at amortised cost are short
term (i.e., less than 12 months) and considering the client's
credit rating and risk management policies in place, the change to
a forward-looking ECL approach did not have a material impact on
the amounts recognised in the financial statements. Adoption of
IFRS 9 has also not resulted in any restatement of comparative
balances.
II. IFRS 15 - Revenues form contract with customers
IFRS 15 is effective for the year beginning 1 January 2018,
therefore it has been adopted for the period. IFRS 15 provides a
single principles based five-step model to be applied to all sales
contracts, where the key focus is on the transfer of control of
goods and services to customers. It replaces models included in IAS
11 (Construction Contracts) and IAS 18 (Revenue). Management
decided to implement new internal procedures and controls in order
to prevent any potential revenue recognition issues arising.
Particular attention was given to contracts which bundled both the
sale of goods and on-going services including after sales
warranties.. Management has put controls in place to both identify
each performance obligation in the sales contracts, how the
consideration is derived and ensuring revenue is only recognised
when control is passed. The company adopted a modified
retrospective approach whereby the comparatives are not restated
and are presented using the principals set out in IAS 18. Adopting
IFRS 15 did not have an impact on revenue recognised in the current
period. Initial application of IFRS 15 did also not have any impact
on brought forward reserves.
New standards and interpretations not yet adopted
III. IFRS 16 - Leases
IFRS 16 is effective for the year beginning 1 January 2019. IFRS
16 provides a single lessee accounting model, requiring companies
to recognise right of use assets and lease liabilities for all
applicable leases. Therefore existing operating leases will be
accounted for similarly to finance leases under the current IAS 17,
resulting in the recognition of additional assets within property,
plant and equipment in respect of the right of use of the lease
assets, and additional lease liabilities. The operating leases
charges currently reflected within operating expenses (and EBITDA)
will be eliminated and instead depreciation and finance charges
will be recognised in respect of the lease assets and liabilities.
On adoption of IFRS 16, the adjustments expected is an increase of
Asset and Debt of circa EUR0.56 million.
2. Significant accounting policies
a) Functional and foreign currency
The financial statements of each Group company are measured
using the currency of the primary economic environment in which
that company operates (the functional currency). The consolidated
financial statements record the results and financial position of
each Group company in Euro, which is the functional currency of the
Company and the presentational currency for the consolidated
financial statements.
I. Transaction and balances
Transactions in foreign currencies are converted in to the
respective functional currencies at initial recognition, using the
exchange rates at the transaction date. Monetary assets and
liabilities at the end of the reporting period are translated at
the rates ruling at the reporting date. Non-monetary assets and
liabilities are not retranslated. All exchange differences are
recognised in profit or loss. On consolidation, the results of
overseas operations not in Euro are translated at the rates
approximating to those ruling when the transactions took place. All
assets and liabilities of overseas operations are translated at the
rate ruling at the reporting date. Exchange differences arising on
translating the opening net assets at closing rate and the results
of overseas operations at actual rate are recognised in other
comprehensive income.
b) Financial instruments
There are no other categories of financial assets other than
those listed below:
I. Trade and other receivables and amounts due from subsidiaries
Trade receivables are recognised and carried at the original
invoice amount less any provision for impairment. Other receivables
and amounts due from subsidiaries are recognised and measured at
the original invoice amount less any provision for impairment. The
Group and Company apply the expected credit loss model in respect
of trade receivables. The Group and Company track changes in credit
risk and recognise a loss allowance based on lifetime ECLs for each
customer at each reporting date.
II. Cash and cash equivalents
Cash and cash equivalents comprise demand deposits with an
original maturity up to three months, are readily convertible to a
known amount of cash and are subject to an insignificant risk of
change in value.
There are no other categories of financial liabilities other
than those listed below:
III. Trade and other payables
Trade payables are stated at their amortised cost.
IV. Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the asset of the Group after deducting all of
its liabilities. Equity instruments issued by the Company are
recorded at the proceeds received net of direct issue costs.
c) Leases
a. Finance leases
At inception of an arrangement, the Group determines whether the
arrangement is or contains a lease.
Minimum lease payments made under finance leases are apportioned
between the finance expense and the reduction of the outstanding
liability. The finance expense is allocated to each period during
the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
b. Operating leases
Payments made under operating leases are recognised in profit or
loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised as an integral part of the total
lease expense, over the term of the lease.
d) Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
e) Property, plant and equipment
a. Recognition and measurement
Property, plant and equipment are measured at cost less
accumulated depreciation, Government grants received (where
applicable) and accumulated impairment losses.
Costs capitalised include expenditure that are directly
attributable to the acquisition of the asset.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and
equipment (calculated as the difference between the net proceeds
from disposal and the carrying amount of the item) are recognised
in profit or loss.
b. Subsequent costs
Subsequent expenditure is capitalised only when it is probable
that the future economic benefits associated with the expenditure
will flow to the Group. Ongoing repairs and maintenance are
expensed as incurred.
c. Depreciation
Items of property, plant and equipment are depreciated on a
straight-line basis in the statement of comprehensive income over
the estimated useful lives of each component.
Items of property, plant and equipment are depreciated from the
date that they are installed and are ready for use, or in respect
of internally constructed assets, from the date that the asset is
completed and ready for use.
The estimated useful lives of significant items of property,
plant and equipment are as follows:
-- Computer equipment 20% yearly
-- Industrial equipment, office equipment and plant and machinery 15% yearly
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted where appropriate.
f) Intangible assets
Intangible assets are measured at cost less accumulated
amortisation and Government grants received (where applicable).
Patent rights acquired and development expenditure are
recognised at cost.
Expenditure on internally developed products is capitalised if
it can be demonstrated that:
- it is technically feasible to develop the product
- adequate resources are available to complete the
development
- there is an intention to complete and sell the product
- the Group is able to sell the product
- sale of the product will generate future economic benefits,
and
- expenditure on the project can be measured reliably.
Capitalised development costs are amortised over the period the
Group expects to benefit from selling the products developed
(Useful Economic Life). The amortisation expense is included within
the cost of sales in the consolidated statement of comprehensive
income.
Development expenditure not satisfying the above criteria and
expenditure on the research phase of internal projects are
recognised in the consolidated statement of comprehensive income as
incurred.
Capitalised development expenditure is measured at cost less
accumulated amortisation and impairment losses.
Other intangible assets that are acquired by the Group and have
finite useful lives are measured at cost less accumulated
amortisation and accumulated impairment losses.
a. Amortisation
Intangible assets are amortised on a straight-line basis in
profit or loss over their estimated useful lives, from the date
that they are available for use.
-- Patents and research and development costs concerning G+
technology, are amortised over the lower of the legal duration of
the patent (typically 20 years) and the economic useful life. These
are currently amortised over 10 years.
-- Other intangible assets 5 years
g) Inventories
Inventories are stated at the lower of cost or net realisable
value. The cost of inventories comprises of net prices paid for
materials purchased, production labour cost and factory overhead.
Net realisable value represents the estimated selling price less
all estimated costs of completion and costs to be incurred in
marketing, selling and distribution. Inventory provisions are
recognised for slow-moving, obsolete or unsalable inventory and are
reviewed on a six months basis.
h) Impairment
At each reporting date, the carrying amounts of the Company's
assets are reviewed to determine whether there is any indication of
impairment. If any such indication exists, then the asset's
recoverable amount is estimated to determine the extent of the
impairment, if any. The recoverable amount of an asset is the
greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the assets. An impairment loss is
recognized in operations if the carrying amount of an asset exceeds
its recoverable amount. For an asset that does not generate
independent cash flows, the recoverable amount is determined for
the cash generating unit to which the asset belongs. An impairment
loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortization, if no impairment
loss had been recognized.
i) Employee benefits
Defined benefit scheme surpluses and deficits are measured
at:
- The fair value of plan assets at the reporting date; less
- Plan liabilities calculated using the projected unit credit
method discounted to its present value using yields available on
high quality corporate bonds that have maturity dates approximating
to the terms of the liabilities; plus
- Unrecognised past service costs; less
- The effect of minimum funding requirements agreed with scheme
trustees.
Remeasurements of the net defined obligation are recognised
directly within equity. The remeasurements include:
- Actuarial gains and losses
- Return on plan assets (interest exclusive)
- Any asset ceiling effects (interest exclusive).
Service costs are recognised in profit or loss, and include
current and past service costs as well as gains and losses on
curtailments.
Net interest expense (income) is recognised in profit or loss,
and is calculated by applying the discount rate used to measure the
defined benefit obligation (asset) at the beginning of the annual
period to the balance of the net defined benefit obligation
(asset), considering the effects of contributions and benefit
payments during the period.
Gains or losses arising from changes to scheme benefits or
scheme curtailment are recognised immediately in profit or
loss.
Settlements of defined benefit schemes are recognised in the
period in which the settlement occurs.
For more information please see note 20.
j) Revenues
The majority of the Group's revenue is derived from a single
performance obligation, being the sale of goods with revenue
recognised at a point in time when control of the goods has
transferred to the customer. This is generally when the goods are
delivered to the customer. However, for export sales, control might
also be transferred when delivered either to the port of departure
or port of arrival, depending on the specific terms of the contract
with a customer. There is limited judgement needed in identifying
the point control passes: once physical delivery of the products to
the agreed location has occurred, the Group no longer has physical
possession, usually will have a present right to payment (as a
single payment on delivery) and retains no control of the goods in
question. If other performance obligations are identified
Management will deploy the required process to identify the value
of each obligation to allow the recognition in line with IFRS 15.
The Group also has revenue from contracts with bundled performance
obligations, being the sale of goods, the provision of training,
and a two-year warranty. The cost of the training was determined
based on the average cost per hour of the employees providing the
training while the warranty costs calculation was based on internal
calculation and historical maintenance data. The consideration
relating to the warranty has been deferred and will be recognise in
line with the performance obligation.
k) Government grants
Government grants are recognised when there is reasonable
assurance that the entity will comply with the relevant conditions
and the grant will be received. Grants are recognised in profit or
loss on a systematic basis where the Group has recognised the
initial expenses that the grants are intended to compensate. Where
a grant has been received as a contribution for property, plant and
equipment, or capitalised development costs, the income received
has been credited against the asset in the statement of financial
position.
l) Finance income and finance costs
Finance income comprises interest income on funds invested.
Interest income is recognised in the profit or loss, using the
effective interest method. Finance costs comprise interest expense
on borrowings.
Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are
recognised in profit or loss using the effective interest
method.
m) Investments in subsidiaries (Company only)
Investments are stated at their cost less any provision for
impairment (then refer to h) Impairment).
n) Taxation
Tax expense comprises current and deferred tax. Current and
deferred tax is recognised in the profit or loss except to the
extent that it relates to a business combination, or items
recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to
tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes.
Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
-- temporary differences related to investments in subsidiaries
and jointly controlled entities to the extent that it is probable
that they will not reverse in the foreseeable future; and
-- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
A deferred tax asset is recognised for deductible temporary
differences to the extent that it is probable that future taxable
profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
3. Operating segments
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the chief operating decision makers (CEO,
CFO, COO and CTO), as defined in IFRS 8, in order to allocate
resources to the segments and to assess its performance.
For management purposes, considering also the materiality the
Group is organized into the following segments:
- Textile
- Others
For 2018 this breakdown was appropriate for the nature on the
underlying businesses. Textile was considered by the Management the
strategic segment able to sustain the growth. Management's
strategic needs are constantly monitored and an update of the
segments will be provided if required. Any further update of the
segment analysis will be reflected in this section.
Segment profit/(loss) represents the profit/(loss) earned by
each segment, including all the direct costs that are directly
correlated with the segment. Overhead, assets and liabilities not
directly attributable to the segment have been allocated using the
revenues as main driver.
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. Comparative figures have been calculated
in 2018 on the basis that the operating segments existed in the
previous financial despite in 2017 a proper segment analysis was
not in place.
2018
Textile Others Head office Consolidated
Revenue 1,664,847 588,446 - 2,253,293
Cost of Sales* (1,426,378) (229,203) - (1,655,581)
----------------------------- ------------ ---------- ------------ -------------
Gross Profit 238,469 359,243 - 597,712
----------------------------- ------------ ---------- ------------ -------------
Other income 57,899 71,334 119,462 248,695
Other expenses:
R&D expense (226,744) (220,940) - (447,684)
Advisory (187,362) (62,086) (656,597) (906,045)
Operating expenses (798,009) (305,623) (1,626,254) (2,729,886)
Depreciation & amortisation (490,609) (187,894) - (678,503)
Operating Loss (1,406,357) (345,966) (2,163,388) (3,915,711)
----------------------------- ------------ ---------- ------------ -------------
Financial costs - - (40,703) (40,703)
Tax (414) - - (414)
----------------------------- ------------ ---------- ------------ -------------
Loss of the year (1,406,771) (345,966) (2,204,091) (3,956,828)
----------------------------- ------------ ---------- ------------ -------------
Total Asset 7,969,050 2,986,248 - 10,955,298
Total Liabilities (2,234,212) (479,676) - (2,713,888)
2017
Textile Others Head office Consolidated
Revenue 765,182 187,017 - 952,199
Cost of Sales* (391,323) 119,523 - (271,800)
----------------------------- ------------ ---------- ------------ -------------
Gross Profit 373,859 306,540 - 680,399
----------------------------- ------------ ---------- ------------ -------------
Other income 63,158 133,684 84,651 281,493
Other expenses:
R&D expense (246,236) (209,422) - (455,658)
Advisory (25,293) (16,733) (617,306) (659,332)
Operating expense (1,427,294) (552,592) (1,027,616) (3,007,502)
Depreciation & amortisation (456,893) (176,891) - (633,784)
Operating Loss (1,718,698) (515,414) (1,560,272) (3,794,384)
----------------------------- ------------ ---------- ------------ -------------
Financial cost - - (151,808) (151,808)
Tax (1,239) - - (1,239)
----------------------------- ------------ ---------- ------------ -------------
Loss of the year (1,719,937) (515,414) (1,712,080) (3,947,431)
----------------------------- ------------ ---------- ------------ -------------
Total Asset 8,641,783 3,301,761 - 11,943,544
Total Liabilities (1,600,701) (453,513) - (2,054,215)
*Includes Changes in inventories of finished goods
2018 2017
EUR EUR
---------- ----------
Sale of products 2,066,876 858,218
Sale of services 186,417 93,981
Government grants 129,232 196,842
Other revenue 119,463 84,651
---------- ----------
Total Income 2,501,988 1,233,692
Geographical breakdown of revenues are:
2018 2017
EUR EUR
---------- --------
Italy 1,840,139 786,400
Rest of the world 413,154 165,799
---------- --------
Total 2,253,293 952,199
The Group has transacted with two main customers in 2018, which
account for more than 10% of Group revenues for sales of products
and services. This largest customer's revenues amount to EUR939,752
(42%), whilst the next highest revenue earning customer provided
EUR242,517 (11%).
Other revenues of EUR119,463 includes R&D Expenditure Credit
(RDEC) for EUR101,267. The RDEC is an Italian incentive scheme
(art.3 DL 145/2013) designed to encourage companies to invest in
research and development. The credit can be used to reduce
corporation tax or to offset outstanding payables related to social
security.
4. Government Grants
Information regarding government grants:
2018 2017
EUR EUR
------------- --------
MAT4BAT - 62,351
Grata 57,899 63,158
Ecopave 71,333 71,333
------------- --------
Total 129,232 196,842
In relation to government grants (Grata and Ecopave), the
operational activities refer to FY18 and related to these projects
have been completed. Company has complied with the relevant
conditions of the grants.
The key terms of Government grants are:
MAT4BAT Grata Ecopave
Starting date 2013 2017 2016
Ending date 2017 2019 2019
Duration (months) 42 31 36
Total amount 304,700 126,324 214,100
Final report submitted and accepted Yes Project still on-going Project still on-going
There are no capital commitments built into the ongoing grants.
Government grants have been recognized in Other Income.
5. Change in Inventory & Inventory
2018 2017
EUR EUR
-------- --------
Finished products 750,853 877,082
Spare Parts 102,400 102,400
Raw material 9,031 16,184
--------
Total 862,284 995,666
As at 31 December 2018 total inventory value is lower than 2017,
the movement is mainly driven by the reduction of finished products
inventory due to the increasing sales during the year. Spare parts
inventory was required to enhance maintenance efficiency and is
composed of a small number of critical items with a material cost
per unit. The spare parts inventory value is maintained steady in
2018.
6. Raw materials and consumables
2018 2017
EUR EUR
---------- --------
Raw material & consumables 170,007 127,052
Textile products 1,129,071 480,286
---------- --------
Total 1,299,078 607,338
Total raw materials and consumables are EUR1,299,078 (2017:
EUR607,338) of which EUR1,129,071 (2017: EUR480,286) refers to
textile products. The movement is mainly driven by the increasing
sales in textile segment.
7. Employee benefits expenses
2018 2017
EUR EUR
---------- ----------
Wages and salaries 1,557,471 1,585,058
Social security costs 384,998 346,515
Employee benefits 84,779 75,519
Share option expense 165,611 255,578
Other costs 18,346 22,952
---------- ----------
Total 2,211,205 2,285,622
Capitalised cost in "Intangible assets" (98,555) (82,064)
---------- ----------
Total charged to the Income Statement 2,112,650 2,203,558
The average number of employees (excluding non-executive
directors) during the period was as follows:
2018 2017
----- -----
Sales and Administration 8 8
Engineering, R&D and production 17 17
----- -----
Total 25 25
The total number of employees, employed by the Group on 31
December 2018 was 26 (2017: 24)
The Directors' emoluments (including non-executive directors)
are as follows:
2018 2017
EUR EUR
-------- --------
Wages and salaries 828,311 845,847
-------- --------
Total 828,311 845,847
8. Results from operating activities:
Results from operating activities includes:
2018 2017
EUR EUR
------------------------------------------------------ -------- --------
Audit of the Group and Company financial statements 41,180 34,927
Audit of the subsidiaries' financial statements 18,000 18,000
Other non-audit services provided by Group's auditor 2,292 30,188
Tool Manufacturing 282,352 145,597
Operating leases 154,046 210,083
Travel 193,771 153,640
Marketing 172,382 58,072
------------------------------------------------------ -------- --------
Tool manufacturing expanses are referred mainly to fabrics
printing service and increased to EUR282,352 (2017: EUR145,597) for
the effect of the increasing sales in textile sector. Operating
leases includes the renting of the Italian production facility
(EUR129,806) and office rent of the Parent company (EUR14,341).
Marketing expenses increased to 172,382 (2017: 58,072) during the
period due to increased marketing activities related to G+
brand.
9. Leases
Operating leases relate to the Group's Head Office and plant and
machinery held on operating leases.
Future minimum lease payments
2018 2017
EUR EUR
------- -------
Less than one year 59,083 59,092
Between one and five years - -
More than five years - -
Total 59,083 59,092
Finance lease liabilities are payable as follows:
Future minimum lease payments
2018 2017
EUR EUR
-------- --------
Less than one year 61,735 61,735
Between one and five years 59,570 121,305
More than five years - -
Total 121,305 183,040
Present value of minimum lease payments 2018 2017
EUR EUR
-------- --------
Less than one year 59,898 59,898
Between one and five years 54,567 108,369
More than five years - -
Total 114,465 168,267
10. Net Finance expenses
Finance expenses include:
2018 2017
EUR EUR
-------- --------
Interest Income (4,440) (5,501)
Interest on loans and other financial costs 8,499 9,715
Interest on financial leasing 7,830 10,766
Interest cost for benefit plan 7,145 5,918
Foreign exchanges losses 21,669 130,910
-------- --------
Total 40,703 151,808
At 31 December 2018 interest on loans and other financial costs
amount to EUR8,499 (2017: EUR9,715). The slight reduction is a
consequence of debt repayments made in the year. Foreign exchange
losses of EUR21,669 (2017: EUR130,910) are mainly related to
Sterling to Euro movement in the Group's Sterling bank account.
11. Taxation
2018 2017
EUR EUR
----- ------
Current tax expenses 414 1,239
Deferred tax expenses - -
----- ------
Total tax expenses 414 1,239
Reconciliation of tax rate
2018 2017
EUR EUR
------------ ------------
Loss before tax (3,956,414) (3,946,191)
Italian statutory tax rate 24% 24%
(949,539) (947,086)
Impact of temporary differences 42,327 38,880
Losses recognised (41,913) (37,641)
Impact of tax rate in foreign jurisdiction 38,960 49,610
Losses not utilised 910,579 897,476
Total tax expenses 414 1,239
Tax losses carried forward have been recognised as a deferred
tax asset up to the point that they are recoverable against taxable
temporary differences. All other tax losses are carried forward and
not recognised as a deferred tax asset due to the uncertainty
regarding generating future taxable profits. Tax losses carried
forward are EUR20,467,507 (EUR 16,791,913 in 2017).
12. Intangible assets
Development
Cost Cost Patents Goodwill Others Total
EUR EUR EUR EUR EUR
Balance at 31/12/2016 2,426,042 197,250 22,268 29,408 2,674,968
Additions 82,064 47,394 - 2,393 132,450
------------ --------- --------- ------- -----------
Balance at 31/12/2017 2,508,106 244,643 22,268 32,401 2,807,418
Additions 123,305 77,269 - 12,500 213,074
------------ --------- --------- ------- -----------
Balance at 31/12/2018 2,631,411 321,912 22,268 44,901 3,020,492
Amortisation
Balance at 31/12/2016 882,901 45,210 - 18,811 948,367
Amortisation 2017 257,101 24,464 - 5,177 286,742
------------ --------- --------- ------- -----------
Balance at 31/12/2017 1,140,002 69,674 - 23,988 1,235,109
Amortisation 2018 279,289 32,191 - 6,424 317,905
Balance at 31/12/2018 1,419,291 101,865 - 30,312 1,553,014
Carrying amounts
Balance 31/12/2016 1,543,141 152,040 22,268 9,153 1,726,602
Balance 31/12/2017 1,368,104 174,969 22,268 6,969 1,572,309
Balance 31/12/2018 1,212,120 220,046 22,268 14,489 1,467,478
As disclosed in note 1(d) development costs capitalised in the
year are mainly based on time spent by employees who are directly
engaged in the development of the G+ technology.
13. Property, plant and equipment
Industrial Computer Office Plant &
Cost Equipment Equipment Equipment Machinery Total
EUR EUR EUR EUR EUR
Balance at 31/12/2016 138,660 33,646 84,171 1,880,994 2,137,471
Additions 21,909 2,218 19,549 304,591 348,267
Balance at 31/12/2017 160,570 35,864 103,720 2,185,585 2,485,739
Additions 11,822 9,573 3,600 110,041 135,036
Balance at 31/12/2018 172,392 45,437 107,320 2,295,626 2,620,775
Depreciation
Balance at 31/12/2016 53,353 21,138 19,018 760,778 854,287
Depreciation 2017 25,615 4,324 14,092 303,008 347,039
----------- ----------- ----------- ----------- ----------
Balance at 31/12/2017 78,968 25,462 33,110 1,063,786 1,201,326
Depreciation 2018 26,661 4,857 15,145 310,351 357,014
Balance at 31/12/2018 105,629 30,319 48,255 1,374,137 1,558,340
Carrying amounts
Balance 31/12/2016 85,307 12,508 65,153 1,120,216 1,283,184
Balance 31/12/2017 81,601 10,402 70,610 1,121,799 1,284,412
Balance 31/12/2018 66,763 15,118 59,065 921,489 1,062,435
Assets held under financial leases with a net book value of EUR
146,879 are included in the above table within Plant &
Machinery.
14. Investments in subsidiaries
Details of the Company's subsidiaries as at 31 December 2018 are
as follows:
Shareholding
Subsidiaries Country Principal activity 2018 2017
Producer and supplier of graphene based materials and
Directa Plus Spa Italy related products 100% 100%
Commercialise textile membranes, including
Directa Textile Solutions Srl Italy graphene-based technical and high-performance membranes 60% 60%
Subsidiaries Place of Registered Office Place of Business
Business
Directa Plus Spa Italy Via Cavour 2, Lomazzo See registered
(CO) Italy office
Directa Textile Solutions Italy Via Cavour 2, Lomazzo See registered
Srl (CO) Italy office
The Company's investment as capital contributions in Directa
Plus Spa are as follows:
Directa Spa
At 31 December 2016 11,057,438
------------
Additions 3,122,898
------------
At 31 December 2017 14,180,336
------------
Additions 2,000,000
------------
At 31 December 2018 16,180,336
15. Trade and other receivables
Current
Group Company
2018 2017 2018 2017
EUR EUR EUR EUR
---------- ---------- -------- --------
Account receivables 1,367,425 552,612 - 34,345
Tax Receivables 374,673 397,305 31,634 24,219
Other receivables 317,119 211,794 129,960 50,676
---------- ----------
Total 2,059,217 1,161,711 158,594 109,240
Group Tax Receivables are composed of Italian VAT receivables of
EUR241,772, UK VAT receivables of EUR31,634 and a RDEC Tax Credit
receivable of EUR101,267.
Other receivables are mainly composed of governments grants
EUR151,986, prepayments EUR160,298.
As at 31 December 2018 the ageing of account receivables
was:
Days overdue 2018 2017
EUR EUR
---------- --------
0-30 1,263,847 539,015
31-180 97,554 7,878
181-365 + 6,024 5,719
---------- --------
Total 1,367,425 552,612
In 2018, 92% of account receivables have an ageing of 30 days
and relate to an order delivered close to the year end. The total
trade receivables write-off for the year was EUR3,584 (0.3% of the
gross account receivables).
16. Deferred tax liabilities
2018 2017
EUR EUR
---------- ----------
Deferred tax liabilities 195,504 237,831
Deferred tax assets - losses (195,504) (237,831)
---------- ----------
Total - -
Deferred tax assets have been recognised on losses brought
forward to the extent that they can be offset against taxable
temporary differences in line with the requirements of IAS 12.
The deferred tax liabilities arise on the capitalisation of
development costs and the accounting for the defined benefit
scheme. The deferred tax liabilities are detailed below:
2018 2017
EUR EUR
------------------ ---------------------
Capitalised development costs 191,885 227,076
Other 3,619 10,755
Total 195,504 237,831
Recognised in Deferred
Net balance profit or Recognised in Net balance 31 tax
01 Jan 2017 loss OCI Dec 2017 liabilities
EUR EUR EUR EUR EUR
Capitalised development costs 262,266 (35,191) - 227,075 227,075
Other 14,445 (3,689) - 10,756 10,756
--------------- --------------- ------------------ ---------------- -------------
Total 276,711 (38,880) - 237,831 237,831
Recognised in Deferred
Net balance profit or Recognised in Net balance 31 tax
01 Jan 2018 loss OCI Dec 2018 liabilities
EUR EUR EUR EUR EUR
--------------- --------------- ------------------ ---------------- -------------
Capitalised development costs 227,075 (35,190) - 191,885 191,885
Other 10,756 (7,137) - 3,619 3,619
--------------- --------------- ------------------ ---------------- -------------
Total 237,831 (42,327) - 195,504 195,504
17. Cash and cash equivalents
Group Company
2018 2017 2018 2017
EUR EUR EUR EUR
---------- ---------- ---------- ----------
Cash at bank 5,503,568 6,929,012 3,968,016 4,493,006
Cash in hand 316 434 - -
---------- ---------- ---------- ----------
Total 5,503,884 6,929,446 3,968,016 4,493,006
18. Equity
2018 2017
EUR EUR
------------- -------------
Share Capital 154,465 142,628
Share Premium 22,104,240 19,973,996
Retained earnings (14,044,656) (10,250,225)
Non-controlling interests 27,361 22,930
------------- -------------
Balance at 31 December 8,241,410 9,889,329
Share Capital
Number of
ordinary Share
shares Capital (EUR)
At 1 January 2016 503,100 503,100
Share reduction on 25 April 2016* - (439,649)
Share sub-division on 19 May 2016** 19,620,900 -
Share issue on 27 May 2016 - convertible
loans*** 7,055,493 23,191
Share issue on 27 May 2016 - IPO*** 17,033,334 55,986
At 31 December 2016 44,212,827 142,628
------------------------------------------ ----------- --------------
At 31 December 2017 44,212,827 142,628
Share issue on 17 December 2018 -
capital raise **** 4,256,000 11,837
------------------------------------------ ----------- --------------
At 31 December 2018 48,468,827 154,465
*On 25 April 2016, the issued ordinary shares were redenominated
from EUR to GBP into an aggregate nominal value of GBP398,908,
comprising 503,100 ordinary shares of GBP0.7929 each, at the spot
rate of exchange of 0.7929. The aggregate nominal value of the
issued ordinary shares was then reduced to GBP50,310 comprising
503,100 ordinary shares of GBP0.10 each.
**On 19 May 2016, each ordinary share of GBP0.10 in the issued
share capital of the Company was sub-divided into 40 ordinary
shares resulting in 20,124,000 shares of GBP0.0025 each.
*** On 27 May 2016, 24,088,827 ordinary shares with a nominal
value of GBP0.0025 each were issued at the Company's initial public
offering. Of the 24,088,827 new ordinary shares, 7,055,493 shares
were issued through the exercise of convertible loan notes. The
remaining 17,033,334 shares were issued to institutional and other
investors.
**** On 17 December 2018, 4,256,000 ordinary shares with a
nominal value of GBP0.0025 each were issued as effect of the
Company's capital raise.
Share Premium
Share
In euro premium
EUR
At 01 January 2016 3,885,816
Cancellation of share premium account on 25 April
2016 (3,885,816)
Shares issued on 27 May 2016 21,934,648
Expenditure relating to the raising of shares (1,960,652)
At 31 December 2016 19,973,996
--------------------------------------------------- ------------
At 31 December 2017 19,973,996
--------------------------------------------------- ------------
Shares issued on 18 December 2018 2,355,548
Expenditure relating to the raising of shares (225,304)
--------------------------------------------------- ------------
At 31 December 2018 22,104,240
--------------------------------------------------- ------------
On 25 April 2016, the share premium account of the Company was
cancelled and the amount of EUR3,885,816 was credited to a
distributable reserve. Expenditure of EUR1,960,652 relating to the
raising of shares has been deducted from the share premium.
On 18 December 2018, 4,256,000 ordinary shares with a share
premium value of GBP0.4975 each were issued as effect of the
Company's capital raise and the amount of EUR2,355,548 was credit
to Share premium reserve.
Expenditure of EUR225,304 referred to direct cost related to the
raising of shares was deducted from the share premium.
Share capital
Financial instruments issued by the Directa Plus Group are
treated as equity only to the extent that they do not meet the
definition of a financial liability. The Directa Plus Group's
ordinary shares are classified as equity instruments.
Share premium
To the extent that the company's ordinary shares are issued for
a consideration greater than the nominal value of those shares (in
the case of the company, GBP0.0025 per share), the excess is deemed
Share Premium. Costs directly associated with the issuing of those
shares are deducted from the share premium account, subject to
local statutory guidelines.
19. Loans and borrowings
Non-current
Group Company
2018 2017 2018 2017
EUR EUR EUR EUR
------- -------- ----- -------------
Finance leases 57,011 115,132 - -
Loans - 96,659 - -
------- -------- ----- -------------
Total 57,011 211,791 - -
Current
Group Company
2018 2017 2018 2017
EUR EUR EUR EUR
-------- -------- ----- -------------
Finance leases 58,122 53,906 -
Loans 168,701 190,874 -
-------- -------- ----- -------------
Total 226,823 244,780 -
2018 Current Non current
EUR EUR EUR Repayment Interest rate
Intesa San EURIBOR 3M +
Paolo 50,798 50,798 - 6-months 2.5%
------- -------- ------------ ----------
Finlombarda
(Atanor) 45,860 45,860 - 3- months Fixed 0.5%
------------- ------- -------- ------------ ---------- --------------
Intesa San
Paolo 66,607 66,607 - 3-months Fixed 3.6%
------------- ------- -------- ------------ ---------- --------------
All of the above loans are unsecured.
Net Debt Reconciliation
Cash flows
Cash inflow
01 January Accrued Capital from short term 31 December
2018 Interest Repayment Interest Paid loan 2018
EUR EUR EUR EUR EUR EUR
----------- ---------------- ---------------- -------------- ---------------- ----------------
Borrowings 287,533 8,499 (185,439) (8,499) 66,607 168,701
Lease
liabilities 169,038 7,830 (53,905) (7,830) - 115,133
----------- ---------------- ---------------- -------------- ---------------- ----------------
Total 456,571 16,329 (239,344) (16,329) 66,607 283,834
----------- ---------------- ---------------- -------------- ---------------- ----------------
20. Employee benefits provision
2018 2017
EUR EUR
-------- --------
Employee benefits 335,132 282,031
--------
Total 335,132 282,031
Provisions for benefits upon termination of employment primarily
related to provisions accrued by Italian companies for employee
retirement, determined using actuarial techniques and regulated by
Article 2120 of the Italian Civil code. The benefit is paid upon
retirement as a lump sum, the amount of which corresponds to the
total of the provisions accrued during the employees' service
period based on payroll costs as revalued until retirement.
Following the changes in the law regime, from January 1 2007
accruing benefits have been contributing to a pension fund or a
treasury fund held by the Italian administration for
post-retirement benefits (INPS). For companies with less than 50
employees it will be possible to continue this scheme as in
previous years. Therefore, contributions of future TFR provisions
to pension funds or the INPS treasury fund determines that these
amounts will be treated in accordance to a defined contribution
scheme, not subject to actuarial evaluation. Amounts already
accrued before 1 January 2007 continue to be accounted for a
defined benefit plan and to be assessed on actuarial
assumptions.
The breakdown for 2017 and 2018 is as follows:
EUR
Amount at 31 December
2016 227,358
----------------------- --------
Service cost 44,764
Interest cost 5,918
Actuarial gain/losses 4,704
Past service cost -
Benefit paid (714)
----------------------- --------
Amount at 31 December
2017 282,031
----------------------- --------
Service cost 52,059
Interest cost 7,145
Actuarial gain/losses (1,219)
Past service cost -
Benefit paid (4,883)
----------------------- --------
Amount at 31 December
2018 335,132
----------------------- --------
Variables analysis
Detailed below are the key variables applied in the valuation of
the defined benefit plan liabilities.
2018 2017
------------------------- ------- ------
Annual rate interest 2.30% 2.30%
------------------------- ------- ------
Annual rate inflation 1.10% 1.10%
------------------------- ------- ------
Annual increase TFR 7.41% 7.41%
------------------------- ------- ------
Tax on revaluation 17.00% 17.00%
------------------------- ------- ------
Social contribution 0.50% 0.50%
------------------------- ------- ------
Increase salary male 1.20% 1.20%
------------------------- ------- ------
Increase salary female 1.15% 1.15%
------------------------- ------- ------
Rate of turnover male 1.70% 1.70%
------------------------- ------- ------
Rate of turnover female 1.50% 1.50%
Sensitivity analysis
Detailed below are tables showing the impact of movements on key
variables:
Actuarial hypothesis - 2018 Decrease 10% Increase 10%
Variation Variation
Rate DBO EUR Rate DBO EUR
--------------------- --------- ------ ---------- ------ ----------
Increase salary Male 1.08% (2,868) 1.32% 2,934
---------- ----------
Female 1.04% 1.27%
------------------------------- ------ ---------- ------ ----------
Turnover Male 1.53% (2,088) 1.87% 2,386
---------- ----------
Female 1.35% 1.65%
------------------------------- ------ ---------- ------ ----------
Interest rate 2.07% 10,099 2.53% (9,561)
Inflation rate 0.99% (2,816) 1.21% 2,8561
21. Trade and Other payables
Group Company
2018 2017 2018 2017
EUR EUR EUR EUR
---------- ---------- -------- -------
Trade payables 1,459,732 768,016 15,397 23,403
Employment costs 482,357 397,567 - -
Other payables 152,833 150,030 87,988 23,033
---------- ---------- -------- -------
Total 2,094,922 1,315,613 103,385 46,436
22. Financial instruments
Financial risk management
The Group's business activities expose the Group to a number of
financial risks:
a) Market risk
Market risk arises from the Group's use of interest bearing,
tradable and foreign currency financial instruments. It is the risk
that the fair value of future cash flow of a financial instrument
will fluctuate because of changes in interest rates or foreign
exchange rates. As at 31 December 2018 the Group is only exposed to
variable interest rate risk on the Intesa San Paolo loan. If the
interest rate had increased or decreased by 100 basis points during
the year the reported loss after taxation would not have been
materially different to that reported.
b) Capital Risk
The Group's objectives for managing capital are to safeguard the
Group's ability to continue as going concern, so that it can
continue to provide returns for shareholders and benefits for other
stakeholders and to provide an adequate return to shareholders by
pricing products and services commensurately with the level of
risk. There were no changes in the Group's approach to capital
management during the year.
c) Credit Risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group's credit risk is primarily
attributable to its trade receivables. Every new customer is
internally analysed for creditworthiness before the Group's
standard payment and delivery terms and conditions are offered.
Advance payment usually applies for the first order and where a
customer has a low credit rating. The Group's standard payment
terms are 30 to 60 days from date of invoice.
Credit risk also arises from cash and cash equivalents and
deposits with banks and financial institutions. The Group works
with leading banks and financial institutions, both in UK and in
Italy, independently rated with the equivalent of investment grade
and above.
d) Exposure to credit risk
Group
Note 2018 2017
EUR EUR
---------- ----------
Trade receivables 15 1,367,425 552,6012
Cash and cash equivalent 17 5,503,884 6,929,012
----------
Total 6,871,309 7,481,624
The largest customer within trade receivables account for 45.6%
of debtors. Management continually monitor this dependence on the
largest customers and are continuing to develop the commercial
pipeline to reduce this dependence, spreading revenues across a
variety of customers.
e) Liquidity risk
It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due. Liquidity risk
arises from the Group's management of working capital and the
finance charges and principal repayments on its debt instruments.
The Group manages liquidity risk by maintaining adequate reserves
and banking facilities and by continuously monitoring forecast and
actual cash flows. The Board reviews regularly the cash position to
ensure there are sufficient resources for working capital
requirements and to meet the Group's financial commitments.
2018 Carrying Up to 1 year 1 -5 years
amount EUR EUR
EUR
---------- ---------------- -------------
Financial liabilities
Trade payables 1,459,732 1,459,732 -
Debts for financial
leasing 118,325 61,735 56,590
Loans 168,701 168,701
---------- ---------------- -------------
Total 1,746,758 1,690,168 56,590
2017 Carrying Up to 1 year 1 -5 years
amount EUR EUR
EUR
---------- ---------------- -------------
Financial liabilities
Trade payables 768,016 768,016 -
Debts for financial
leasing 180,060 61,735 118,325
Loans 287,533 190,874 96,659
---------- ---------------- -------------
Total 1,235,609 1,020,625 214,984
f) Currency risk
The Group usually raises money issuing shares in pounds, it
follows that the Group usually holds sterling bank accounts as
result of capital raise. Sterling bank accounts are mainly used to
manage expenses of the Company (such as UK advisors, LSE fees and
costs related to the Board) in UK. The cash held in Sterling
continues to be subject to currency risk.
EUR
Cash held in EUR 2,804,659
Cash held in GBP 2,699,225
As at 31 December 2017 if the exchange rate EUR/GBP increase by
10% the impact on P&L would be a loss equal to EUR0.25 million
(if decrease by 10% would be a profit equal to EUR0.3 million).
23. Earnings per share
Change in
number of Total number Weighted number
ordinary of ordinary of ordinary
shares shares Days shares
----------------------- ----------- ------------- ----- ----------------
At 1 January 2015 - 503,100 - 20,124,000
----------------------- ----------- ------------- ----- ----------------
At 30 June 2015 - 503,100 - 20,124,000
----------------------- ----------- ------------- ----- ----------------
At 31 December 2015 - 503,100 - 20,124,000
----------------------- ----------- ------------- ----- ----------------
Existing shares 503,100 140 7,697,705
Share sub-division on
19 May 2016 19,620,900 20,124,000 8 439,869
Issued on 27 May 2016 24,088,827 44,212,827 218 26,334,416
At 31 December 2016 43,709,727 44,212,827 366 34,471,990
----------------------- ----------- ------------- ----- ----------------
At 31 December 2017 44,212,827 365 44,212,827
Existing shares 44,212,827 351 42,516,993
Issued on 18 December
2018 4,256,000 48,468,827 14 1,859,078
----------------------- ----------- ------------- ----- ----------------
At 31 December 2018 4,256,000 48,468,827 365 44,376,071
----------------------- ----------- ------------- ----- ----------------
Basic Diluted
2018 2017 2018 2017
EUR EUR EUR EUR
Loss for the year (3,956,828) (3,947,431) (3,956,828) (3,947,431)
Weighted average number of ordinary shares in issue during
the year 44,376,071 44,212,827 44,376,071 44,212,827
Fully diluted average number of ordinary shares during the
year 44,376,071 44,212,827 44,376,071 44,212,827
Loss per share (0.09) (0.09) (0.09) (0.09)
------------ ------------ ------------ ------------
24. Share Schemes
The Company established the Employees' Share Scheme for
employees and executive directors and the NED Share Scheme for the
Chairman and non-executive directors on 19 May 2016. The Employees'
Share Scheme is administered by the Remuneration Committee. The NED
Share Scheme is administered by the Executive Directors.
The Directors are entitled to grant awards over up to 10 per
cent of the Company's issued share capital from time to time.
Awards over a total of 1,675,609 Ordinary Shares were granted on or
around the date of Admission (27 May 2016). No awards have yet been
exercised, leaving a total of 1,639,877 outstanding as at the year
end, as cancellation occurred for those employees who left the
Group in 2018. The main terms of the Share Schemes are set out
below:
Eligibility
All persons who at the date on which an award is granted under
the Employees' Share Scheme are employees (or employees who are
also office-holders) of a member of the Group and are eligible to
participate. The Board may also grant market value share options to
non-executive directors under the NED Share Scheme. The
Remuneration Committee decides to whom awards are granted under the
Employees' Share Scheme, the number of Ordinary Shares subject to
an award, the exercise date(s) (subject to the below) and the
performance conditions (if any) which must be achieved in order for
the award to be exercisable.
Types of Award
Awards granted under the Employees' Share Scheme can take the
form of performance shares and/or market value share options.
"Performance shares" are share options with an exercise price equal
to the nominal value of a share, while "Market value share options"
are share options with an exercise price equal to the market value
of a share at the date of grant. The right to exercise the award is
generally dependent upon the participant remaining an officer or
employee throughout the performance period and, except in the case
of market value share options granted to the Chairman or
non-executive directors, the satisfaction of performance
conditions. This is subject to the good leaver provisions described
below. Awards granted under the Share Schemes will not be
pensionable.
Individual Limits
The value of Ordinary Shares over which an employee or executive
director may be granted awards under the Employees' Share Scheme in
any financial year of the Company shall not exceed 200 per cent of
his basic rate of salary at the date of grant. The value of
Ordinary Shares over which a non-executive director may be granted
market value share options under the NED Share Scheme in any
financial year of the Company shall not exceed 150 percent of his
annual rate of fees.
Performance Targets
The Remuneration Committee will impose objective targets which
will determine the extent to which awards will vest. Targets for
awards to be granted to executive directors and senior employees on
or prior to Admission are based on growth in EBITDA, share price
and production capacity targets in line with the Company's
forecasts prior to Admission.
The Remuneration Committee may modify or amend the performance
targets if changes to the Company or its business mean that the
targets are no longer relevant or appropriate. However, any new or
amended conditions will not be materially any more or less
challenging than the original conditions were expected to be at the
time they were imposed. The vesting of market value share options
granted to non-executive directors will not be subject to
performance conditions.
Variation of share capital
Awards granted under the Share Schemes may be adjusted to
reflect variations in the Company's share capital.
Vesting of awards
Awards will vest on the third anniversary of the date of grant
to the extent that the performance targets have been met. Vested
awards may generally be exercised between the third and tenth
anniversaries from the date of grant.
The inputs to the Black-Scholes model were as follows:
31 Dec 2018 31 Dec 2018
Market value Performance
Black Scholes Model shares shares
------------------------------------ -------------- -------------
Share price 75p 75p
Exercise price 75p 0.25p
Expected volatility 70% 70%
Compounded Risk-Free Interest Rate 4.25% 4.25%
Expected life 3 years 3 years
Number of options issued* 540,337 1,099,540
------------------------------------ -------------- -------------
*Number of options issued is an input of the Black-Scholes model
and refers to the total outstanding options granted by the Company.
This is not representing any option issued in the period.
Details of the number of share options outstanding are as
follows:
Outstanding Cancelled Outstanding Exercisable
at start of during the at end of period Exercisable
period Granted period period option price Grant date date
31 December
2016 - 1,675,609 1,675,609
------------- ---------- -------------- ------------- ------------- ------------ --------------
1,099,540 - - 1,099,540 0.25p
576,070 60,000 - 636,070 75.00p 12 May 2017 12 May 2020
------------- ---------- -------------- ------------- ------------- ------------ --------------
31 December
2017 1,675,610 60,000 - 1,735,610
------------- ---------- -------------- ------------- ------------- ------------ --------------
- - (95,733) (95,733)
31 December
2018 1,735,610 (95,733) 1,639,877
------------- ---------- -------------- ------------- ------------- ------------ --------------
Cancelation of share options during the period relates to the
resignation of two employees and one Non-Executive Director.
25. Related parties
The below figures represent remuneration of key management
personnel for Directa Plus Spa, who are part of the Executive
Management Team but not part of the Board of Directa Plus PLC. The
remuneration is set out below in aggregate for each of the
categories specified in IAS 24 'Related Party Disclosures'.
2018 2017
EUR EUR
-------- --------
Short-term employee benefits and fees 235,646 227,162
Social security costs 64,819 46,498
-------- --------
300,465 273,660
For Directors remuneration please see Director's Remuneration
Report in the Annual Report.
26. Contingent Liabilities
The group has the following contingent liabilities relating to
bank guarantees on operating lease arrangements and government
grants.
2018 2017
EUR EUR
-------- --------
Operating leases 105,640 105,640
Total 105,640 105,640
27. Post Balance Sheet events
As part of the capital raise that was undertaken in December
2018, a Conditional placing occurred post period, on 9 January
2019, to raise GBP1.02 million equal to 2,044,000 ordinary shares
with a nominal value of GBP0.0025 each. That will be shown on the
2019 balance sheet. As part of the same process, the Company
undertook an Open Offer in early January 2019 in which shareholders
will have been invited to participate. The Open Offer raised an
additional GBP0.3 million that will be shown on the 2019 balance
sheet.
-ends-
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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 CKADPKBKBCQD
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