Haydale Graphene Industries plc (LON:HAYD), the global advanced materials group, has today to announced its full year results for the year ended 30 June 2017.
Operational Highlights
· Successful acquisition of USA based Advance Composites Materials (“ACM”) for US$5.2 million offering a strategic base in the USA and sales revenues of advanced materials products
· Acquisition of Thai based Innophene and set up of R&D facility and sales support for Far East customers
· Successful commissioning of plasma reactors at strategic supply chain partner AMG Mining for future production of volume masterbatch into the composite market
· ACM signs a four-year agreement to supply silicon carbide micro-fiber (“SiC”) to a global industrial manufacturer of tooling and wear-resistant solutions with a potential sales value of over US$2.6 million
· Successful project completion with GKN and Cobham to produce an Airbus Aileron with over 600% increase in electrical conductivity to combat lightning strike; and
· Development of three graphene pre-impregnated carbon fibre composite panels demonstrating significant uplifts in thermal conductivity (management of heat), electrical conductivity and mechanical properties.
Financial Highlights
· Strategic investment in Haydale of £3.26 million by Everpower International Holdings Co Ltd, which acquired a 9.9 per cent. shareholding
· Total income increased over 100% year-on-year to £3.9 million (2016: £1.92 million)
· Loss after tax of £4.75 million (2016: £3.64 million)
· Investment in R&D increased to £1.15 million (2016 £0.94 million)
· Cash at the year-end £2.09 million (2016: £2.86 million)
Post Period End Highlights:
· New Non-Executive Chairman, David Banks, appointed in July 2017
· Creation of two Strategic Business Units (SBU) focussing on sales growth in Resins, Polymers and Composites (RPC) plus Advanced Materials including recruitment of experienced MD, Keith Broadbent to head up the RPC SBU
· Formation of Taiwan operation focussed on supply of speciality inks for the high growth screen-printed bio medical test strip market with immediate sales visibility following a dozen sales orders for test products
· Extended SiC contract with major Japanese customer Tateho increasing group sales orders to £6.0 million
· Positive test results on graphene nano platelets loaded Flowtite Technology AS glass fibre reinforced plastic (“GRP”) pipes leading to second corroborative tests set for early 2018. The programme is set to develop the next generation GRP pipe systems for water and sewerage applications; and
· Testing of GNP coated cookware by leading Korean manufacturer aiming at product launch in spring 2018.
Commenting on the results Ray Gibbs, CEO of Haydale Graphene Industries Plc, said: “This has been a year of considerable developments at Haydale as the Group has moved from being R&D focused to a commercial entity with focus on repeatable revenues of our advanced materials in both Graphenes and our specialist Silicon Carbide micro fibre product. We are at the inflexion point in our evolution having built a global presence serving locally the key markets of the Far East and USA. We have grown total income by 100% and with the recent overseas investments and emphasis on increasing sales, we look at the current financial year with much optimism having built the foundations for the Group to achieve its long term strategic objectives.”
CHAIRMAN’S STATEMENT
I am delighted to present the Company’s full year results to 30 June 2017 as your new Chairman, having taken over from John Knowles, who retired in July of this year. The Group thanks John for his major contribution to the Company, which he joined prior to the IPO in April 2014. My task is to build on his foundations and to move the business on from our early commercial wins to taking the current products we have developed, and together with the new ones in the pipeline, grow the business into being a significant global advanced materials group.
Haydale has been working for over 18 months on developing products in the Far East, a market which we see as ready adopters of graphene, and our other advanced materials, and a market that offers significant potential growth. I am therefore encouraged to see our strategic focus in the Far East is starting to pay off, with a dozen sales orders received across our three sites in the Far East since the beginning of August, where we have been particularly active in supplying our tailored graphene-based inks for screen printing sensors for the self-monitoring blood glucose (“SMBG”) market. Whilst initially modest, it is the beginning of long-term repeat orders that we are looking to secure in this rapidly growing £11.54 billion market (US$15 billion). Furthermore, as previously announced, a number of our graphene-based inks have received FDA regulatory approval to test in the SMBG sector where we believe the applications can be aimed at the US market. The longevity of these products is the crucial factor in our investment into this sector which, once established, are expected to deliver regular recurring sales orders to the Group.
In addition, Haydale’s graphene has been designed into a new product range for a leading Far East cookware manufacturer who sell almost 400,000 units per month. We are in the final stages of independent testing of the product range which, if successful, is expected to be launched in the new year. The functionalised graphene material incorporated into the product was processed by our new Thai facility and has been shown to enhance the thermal response in a range of pots and pans. Once launched, our expectation is that the manufacturer will extend the graphene coating across a wider range of its cookware products. It is our firm intention to then seek other cookware manufacturers in other geographic territories to adopt this new product offering.
On the corporate front, the year under review was a very busy one, with two strategic acquisitions completed, one in the USA and one in Thailand. We now believe that we have a global presence in the world markets serving customers wanting our performance enhancing advanced materials to improve their own products. Post year end, we began operating out of Taiwan to meet demand for biomedical screen-printed sensors for the SMBG market. It is early stages but the customer engagements are looking very encouraging. We are now operating from six sites globally (two in the UK and one in each of the US, Thailand, South Korea and Taiwan), the sales from which are managed through two newly established strategic business units which began operating in July 2017 dealing with (i) resins, polymers and composites; and (ii) advanced materials, including functional inks, coatings and silicon carbide (SiC). Going forward, we will concentrate on growing our sales order book, which at the year end stood at £5.40 million and was increased post year end to approximately £6.00 million, bolstered by the new US$4.48 (£3.45) million three-year-contract announced in early September with one of our existing SiC customers, Tateho Chemical Industry Co., Limited.
As part of Haydale’s sales strategy we will continue to look to engage in focussed partnerships, collaborations, and other commercial arrangements with “best in class” companies across the globe in our chosen strategic market of composites, ceramics and functional inks/coatings, in order to introduce our products using these advanced materials.
I would like to thank the staff, our advisors and my fellow Board members for their hard work and dedication in positioning the Group for the next stage of its growth. I would also like to thank our shareholders for their continued support.
David Banks
Chairman
10 October 2017
CEO’S REVIEW
Financial Highlights
Total income for the year ended 30 June 2017 increased more than 100 per cent. year on year to £3.91 million (2016: £1.92 million), being generated from a mixture of silicon carbide sales (8½ month’s contribution from ACM, acquired in mid-October 2016), advanced composite consulting contracts, reactor sales and grant income. The EBITDA (adjusted for share-based payment charges and profit/loss on disposal of property, plant and equipment) was a loss of £4.35 million (2016: £3.36 million). We continued to invest in increasing our know-how, knowledge and understanding of mixing and dispersion techniques alongside our industry leading collaboration partners as we expensed £0.91 million of R&D spend during the year (2016: £0.51 million) and capitalised £0.24 million (2016: £0.43 million). We ended the year with cash of £2.10 million (2016: £2.86 million).
Strategy
This year has seen the continued implementation of our strategy to promote Haydale as a pre-eminent solutions provider in the commercialisation of graphene and other advanced materials. We have increased Group income in this year by more than 100 per cent. to £3.91 million and are operational across six sites in the US, UK and the Far East. Critically, in our drive to grow sales further, we now have market ready products, principally in silicon carbide micro fibres (“SiC”) from our US operation and screen printable graphene and speciality inks from our Far East businesses. Since we acquired the SiC business in October 2016, we have successfully secured additional long term orders of US$2.6 (£2.0 million) million from a new customer as announced in April this year, and recently a new contract from our key SiC customer, Tateho Chemical Company Co., Limited, worth US$4.48 million (£3.45 million) over three years that extended the previous order value by US$1.40 million (£1.08 million). These contracts, together with others across the Group, take the Group’s total order book to £6.00 million today, which will be delivered over the next three and a half years.
As previously announced, Haydale has experienced unforeseen delays with our commercial collaboration partners, Flowtite Technology AS (owned Amiantit Company) and Huntsman Advanced Materials, albeit we remain confident of future revenues from both of these next generation product developments. In particular, the results from extensive testing with Flowtite on their glass reinforced plastic (“GRP”) pipes produced in April this year incorporating our GNP material to improve impact resistance have been very encouraging and Flowtite has requested a repeat trial, set for early 2018, to corroborate these positive findings. During the course of our work with Huntsman, we have gained critical know-how and understanding of dispersion, mixing and processing of advanced nanomaterials which has assisted us in a number of related areas and significantly improved our commercial offering. Our ability to use advanced materials in way that does not affect the downstream production process of customers has been a significant factor in gaining customer acceptance of our product offering. A key example here is Haydale’s involvement in the recently announced Airbus aileron where our technology was independently verified to achieve over a 600 per cent. increase in electrical conductivity capable of defeating lightning strike impact on aircraft. Although a longer-term revenue opportunity, our work in this area, in collaboration with GKN and Cobham, has generated a product capable of immediate sales in the pre-impregnated carbon fibre composite field and opens up a range of near-term opportunities such as electro-magnetic shielding, leading-edge de-icing and anti-static applications.
Haydale’s business model utilises the expertise of best in class industrial partners to process significant volumes of graphene under licence. The carrier material (e.g. resin, polymer or ink systems) which is impregnated with a concentrated tailored advanced material (such as graphene) is known as a masterbatch. We previously reported our important agreement with the Advanced Metallurgical Group N.V. (“AMG”) culminating in the commissioning at its Hauzenburg site in Germany of two of our plasma reactors in November 2016. AMG’s facility being established will be able to satisfy the requirements of our customers and joint development partners for graphene loaded masterbatch, principally in the thermoset composite market where volumes can be substantial. As part of our agreement with AMG, we now have access to their world-wide sales force to promote our other products, principally our functional inks. Ensuring we have strategically located, dedicated processing centres, close to customer bases with a secure, sustainable, consistent, quality material supply is at the heart of our commercialisation strategy.
Acquisitions
We continue to pursue a strategy to consider suitable acquisitions if they provide Haydale access to sales of complementary products in our primary target markets. In the year under review we have been particularly active and have acquired operations in the USA and Thailand, both key geographies that we consider prime markets for our products and technical skills.
In the USA, our SiC operation acquired in October 2016 is performing to plan and growing its order book. Having established its sales growth potential, in May 2017, we acquired the minority 13.5 per cent. of our US holding company subsidiary, Haydale Technologies Inc (“HTI”), that the Group did not previously own for approximately US$0.5 million (£0.41 million), satisfied out of internal cash resources.
In Thailand, shortly after the acquisition in September 2016, we built out a high-class facility to house our patented plasma reactor technology and establish a graphene R&D centre in the prestigious Thailand Science Park capable of servicing our Far East sales effort. This facility officially was opened on 29 March 2017 by HRH Princess Maha Chakri Sirindhorn. Since then our Thai facility has supplied the functionalised graphene for our push into bio medical sensors and cookware and has secured its own funded research projects with leading Thai petrochemical processor, IRPC, and the Thailand Ministry of Energy. We have expectations that these projects will lead to follow on product sales in region. Further details of the two acquisitions are dealt with in the Strategic Report.
A major part of our sales expansion will be in China, one of the largest markets in the world for advanced composites applications. In February 2017, we secured a strategic financial partner in Everpower Holdings (a New York financial investment family office with direct access to China), to assist us in opening up this high growth market for us. We are encouraged by their commercial approach and business drive which we expect to translate into revenues to Haydale in the current financial year.
Strategic Business Units
From 1 July 2017, we created two strategic business units (SBU’s) within the Group to focus on and deliver our anticipated sales growth:
1. Resins, Polymers and Composites; and
2. Advanced Materials (including SiC and inks)
Both SBU’s have dedicated management teams with a focus on delivering sales growth and, in turn, operating profits. Each unit has a Managing Director, with Trevor Rudderham heading up Advanced Materials and Keith Broadbent running the Resins, Polymers and Composites SBU. Keith, who is based in the UK, joined Haydale in July 2017 having worked at Ultra Electronics and was previously head of production at luxury boat builders Sunseeker and Princess. Trevor, who is based in the US, has been with the Group since mid-2016 shortly before our acquisition of ACM in the Autumn of 2016.
The SBU teams are challenged with growing sales of our SiC and inks products and on the conversion of our extensive research and product development in areas such as pre-preg composites into a sales pipeline and commercial revenues of graphene enhanced products. Haydale has ambitious plans for growth in the Far East following intensive customer evaluations, especially in Korea, and our new facilities in Taiwan and Thailand.
In North America, we have successfully relaunched and rebranded ACM, and our strategy is to take advantage of a fragmented and largely untapped graphene and advanced materials market. This operation has quality technical and now commercial management to deliver ambitious growth plans. In addition, we will seek to establish our plasma reactors in the USA to enhance the full technical delivery of our materials and products to a large market.
Outlook
The Group has income visibility from its long-term grant awards, the ongoing advanced composite consulting services from the highly skilled team at Loughborough, and SiC sales orders from the US which, in aggregate, provided the Group with a record order book of £5.4 million at the year-end, that has since grown to approximately approx. £6.0 million as at the date of this report.
We see the rapidly growing self-diagnostic biomedical sensor market for diabetes monitoring as a major part of the inks sales in the current financial year through our newly opened Taiwan operation. The long-term repeatability of this market should add to our increasing sales visibility and provide a pathway for us to progress our other speciality functional ink products under development. We expect to enter into long-term supply agreements with the print houses with which we have had our conductive graphene-based ink product accepted and designed into the future sale of test strips for the SMBG market.
Haydale has evolved from an R&D focused business to a commercial entity with a real geographic presence. This past year, having grown total income by more than 100 per cent., and with the recent overseas investments and management actions highlighted in this statement and in the Strategic Report, we are expecting significant increases in product sales in the current financial year, which will build the foundations for Haydale to achieve our near and long-term growth objectives.
Ray Gibbs
Chief Executive Officer
10 October 2017
Proposed £6 million placing by way of an accelerated bookbuild (“Placing”)
Proposed subscriptions by certain Directors (“Subscription”)
and
Proposed offer to raise up to £3.0 million (“Offer”)
(the Placing, Subscription and Offer together the “Fundraising”)
Fundraising highlights
· Haydale intends to raise £6 million before expenses through a Placing arranged by Arden Partners plc (“Arden”) of 5,000,000 new Ordinary Shares (“Placing Shares”) at a price of not less than 120 pence per share (such ultimate price, to be determined by Arden in the bookbuilding process, being the “Issue Price”) with new and existing shareholders.
· Further details of the Placing are set out below and in the Appendix to this Announcement.
· Certain of the Directors of Haydale, namely David Banks, Ray Gibbs and Matt Wood intend to subscribe for, in aggregate, approximately £70,000 of new Ordinary Shares at the Issue Price, following publication of this announcement in respect of the Fundraising. This subscription will constitute a related party transaction and the details will be announced separately in due course.
· In addition to the Placing and Subscription, the Company intends to provide all Qualifying Participants with the opportunity to subscribe for new Ordinary Shares (“Offer Shares”) at the Issue Price, to raise up to £3.0 million before expenses (“Offer”).
· The funds raised from the Fundraising will be used to fund general working capital and the development of commercial opportunities.
· Completion of the Fundraising is subject, inter alia, to Shareholder approval of certain resolutions to enable the issue of the New Ordinary Shares, which will be sought at a General Meeting of the Company expected to be held at 10.00 a.m. on 27 October 2017.
· Admission of the New Ordinary Shares (“Admission”) is expected to take place on 30 October 2017.
· A Circular containing further details of the Fundraising and including a notice convening the General Meeting and application form is expected to be despatched to Shareholders following completion of the Bookbuild and will thereafter be available on the Company’s website at www.haydale.com.
· Further details of the Offer are set out below:
· It is proposed that the Offer will comprise an offer to Qualifying Participants of Offer Shares with the aggregate consideration to be received by the Company limited to £3.0 million, being the Offer Maximum. Qualifying Participants can apply for as many Offer Shares as they wish. However, the Directors reserve the right to exercise their absolute discretion (with the agreement of Arden) in the allocation of successful applications, including, without limitation, to ensure no Offer Shares are issued so as to exceed the Offer Maximum.
· It is proposed that the Offer will only be open to Qualifying Participants and, save as set out in the preceding paragraph, there is no maximum or minimum subscription per applicant. No Qualifying Participant may subscribe for Offer Shares in excess of the Offer Maximum. Multiple applications may be submitted. Qualifying Participants who are joint Shareholders may only apply for Offer Shares as joint applicants.
· The Offer is not being underwritten. The Application Form and accompanying procedure for application will set out, in detail, how Qualifying Participants may participate under the Offer.
· In order to apply for Offer Shares, Qualifying Participants should complete the Application Form in accordance with the instructions set out in the Circular to be published in due course. A further announcement setting out timings in respect of the Offer will be made in due course.
Haydale’s Chief Executive, Ray Gibbs commented: “This equity funding provides Haydale with the funds to capitalise on its sales opportunities and enhance its already growing product portfolio and sales order book. We are at the inflexion point in our evolution, and are massively excited by the opportunities we have developed both internally and from our new operations in the largest and fastest growing markets of the Far East and the USA. The confidence and support shown by our shareholders in funding our growth plans allows us to focus on delivering the future sales in substantial, sustainable global markets. We feel it is really important to give existing shareholders the opportunity to participate in the Fundraising and hence we are making the Offer to Qualifying Participants.”
