Versarien plc (LON: VRS), the advanced engineering materials group, has today announced its interim results for the six months ended 30th September 2019, a period in which the Company made further progress with its graphene commercialisation strategy.
Financial Highlights
· Group revenues of £4.38 million (H1 2018: £5.22 million)
· Adjusted LBITDA* of £0.90 million (H1 2018: £0.36 million)
· Loss before tax of £2.12 million (H1 2018: £0.79 million)
· Cash of £2.64 million at 30 September 2019 (30 September 2018: £6.07 million)
· Net assets of £11.87 million (30 September 2018: £12.32 million)
*Adjusted LBITDA (Loss Before Interest, Tax, Depreciation and Amortisation) excludes exceptional items and share-based payment charges
Operational Highlights
· First graphene company in the world to complete the US Graphene Council’s “Verified Graphene Producer” programme
· Continued progress in international expansion, including receiving the first graphene orders in the US and Japan
· Large-scale industrial prototype to improve rail transportation infrastructure, using Versarien’s graphene enhanced polymer technology showcased and successfully in test to date.
· Successfully incorporated wholly foreign owned enterprise in China (Beijing Versarien Technology Company Limited) with a business license granted by the relevant Chinese authorities
· Receipt of EU REACH approval to manufacture up to ten tonnes of graphene per annum
· Significant improvement in financial performance compared to H1 2018 for the Group’s hard wear and metallic products businesses
Post Period Highlights
· Commercial partnership agreement signed with the Company’s textile sector collaboration partner, MAS Innovation (Private) Limited, the first demonstration of Versarien’s graphene commercialisation strategy with a major global partner
· Further global success with a collaboration agreement signed with Refractory Solutions Insertec S.L.U. a Company headquartered in Spain
· Non-binding heads of terms signed with Jinan Bo Guan Building Engineering Co., Ltd (“JBG”) to form a manufacturing joint venture located in Zhucheng City, Shangdong, providing further opportunities in China in addition to the ongoing discussions and progress with Beijing Institute of Graphene Technology Co. Ltd (“BIGT”) and the China International Graphene Industry Union (“CIGIU”)
· Graphene incubation facility being established in Fangshan with CIGIU/BIGT in line with AGM statement and contractual negotiations continuing
Neill Ricketts, CEO of Versarien, commented:
“Over the period under review and subsequently, we have been progressing our business both in the UK and globally. The focus remains on our graphene commercialisation strategy and we are now actively working on 40 mainstream projects with our commercial partners, have a further 24 projects underway and active research ongoing on another 17. We continue to focus on the projects most likely to produce near-term significant revenue streams. These include graphene-enhanced transportation arches, 3D printing of concrete, aircraft interior parts, parts for down hole drilling in the oil and gas sector and graphene enhanced textiles.
“The Company has scaled up its manufacturing capacity to be able to produce three tonnes of graphene per annum and with the award of Graphene REACH registration, we are now in a position to be able to supply product as we near commercialisation. The large-scale industrial prototype arch showcased clearly demonstrates the significant benefits graphene technology can bring. We are also looking at opportunities to secure long term supply agreements with high quality graphite mines.
“Discussions with the Beijing Institute of Graphene Technology Co. Ltd and the China International Graphene Industry Union are still ongoing, aided by having been granted a business license for our Wholly Foreign Owned Enterprise (“WFOE”) in China. In line with the AGM statement, we have collaborated with CIGIU/BIGT and have registered the WFOE at the recently publicised Beijing Graphene Industry Innovation Centre Seed Incubation Park. We continue to maintain our primary position which is to ensure, so far as reasonably possible, that we protect our IP and therefore continue to assess other opportunities for factory location which are put to us in addition to any that may be proposed under the BIGT/CIGIU process.
“We have also signed a non-binding term sheet with the intention of setting up manufacturing in Shangdong. under a joint venture between Versarien and Jinan Bo Guan Building Engineering Co., Ltd with controlling ownership residing with Versarien. JBG would, together with associates, be responsible for the construction of a graphene valley park over a three-year period and JBG have expressed an interest in taking a strategic investment stake in Versarien as part of any transaction. Legally binding contracts have yet to be signed and updates on progress will be made in due course.
“As well as progressing our technology base it is pleasing to note that our hard wear and metallic products business has shown a significant increase in profitability on stable sales following the efficiency improvements that were implemented in the last financial year.
“We continue to use the cash received from our placing last year to develop application IP through our collaborations, to expand into Europe, the USA, China and South Korea as well as to develop new products such as Biogrene. Together with our accreditation as a verified graphene producer we are confident for the future ahead and look forward to reporting further success over the coming months.”
Chief Executive’s Statement
Our graphene technology continues to gain significant interest both in the UK and abroad, and for some of our collaborations, we are reaching the end of the testing cycle. Our graphene products are also being tested and developed in new products with existing collaborators, as well as gaining momentum in incorporating graphene into energy storage devices following a full year of Gnanomat S.L being part of the Group.
Our discussions with the Beijing Institute of Graphene Technology Co. Ltd (BIGT) and the China International Graphene Industry Union (“CIGIU”) are still ongoing, aided by having been granted a business license for our WFOE in China. In line with the AGM statement, we have collaborated with CIGIU/BIGT and have registered the WFOE at the recently publicised Beijing Graphene Industry Innovation Centre Seed Incubation Park. We continue to maintain our primary position which is to ensure, so far as reasonably possible, that we protect our IP and therefore continue to assess other opportunities for factory location which are put to us in addition to any that may be proposed under the BIGT/CIGIU process.
In addition, we have also signed a non-binding term sheet with the intention of setting up manufacturing in Shangdong under a joint venture between Versarien and Jinan Bo Guan Building Engineering Co., Ltd with controlling ownership residing with Versarien. JBG would, together with associates, be responsible for the construction of a graphene valley park over a three-year period and JBG have expressed an interest in taking a strategic investment stake in Versarien as part of any transaction. Legally binding contracts have yet to be signed and updates on progress will be made in due course.
Whilst progress in China has been slower than we initially anticipated, we are pleased that we have a number of options and any delays have been more than offset by progress elsewhere.
Furthermore, I am pleased to report our more mature businesses have returned improved financial performance.
Graphene and Plastic Products
We are pleased to provide an update on our graphene and other 2D materials collaborations:
| Start date | Description | Current status |
| Oct 17 | Collaboration with Israel Aerospace Industries | The project, which is long-term, forms part of continuing development work in CFRP composites with GEIC and WMG. There are multiple phases of work to be carried out with different 2D materials and other additives. |
| Nov 17 | Collaboration with global consumer goods company | Following initial blow moulding test results, the project was subject to some delay due to customer R&D moving from Europe to the UK. The parties are now engaged in commercial discussions to evaluate cost-benefit value. |
| Dec 17 | Agreement with global chemical major | Following positive test results the collaborator is providing funding for a wider study into barrier development. Further discussions have also taken place for wider collaboration on other products, including bottles and recycling streams. |
| Jan 18 | Agreement with global apparel manufacturer, MAS Innovation (Private) Limited | Following the announcement of the Letter of Intent in July 2019, the companies have now signed a Commercial Partner Agreement. The agreement allows for the parties to secure additional commercial deals from a number of third parties, who have expressed interest following trials. The companies have developed several different prototype garments using the company’s Graphinks material. Development work has now commenced on infused yarns with graphene. |
| Feb 18 | Agreement with shoemaker, Vivobarefoot | Production relocation caused temporary delay to the project. Since, positive progress is being made with initial formulations created and successfully tested. Scale-up formulations are being trialled, which offer the opportunity for the company to create a complete material solution. Further project work on textiles and leathers has now commenced in conjunction with additional parties. |
| Feb 18 | Medical technology collaboration at Addenbrooke’s hospital | Following 18 months of initial trials, the companies are now in negotiations for the commercialising of new products in the wound dressing sector. |
| Mar 18 | Collaboration with Team Ineos (formerly Team Sky) for cycling equipment | Project held up due to change of sponsor. The parties are currently discussing new projects, with textile development part of the discussion. |
| Mar 18 | Collaboration with world-leading aerospace group | This longer-term project features work on specific parts and continues with WMG and other parties. |
| Apr 18 | Agreement with Luxus | Active supply chain partner, who is working with us on various projects. |
| May 18 | Consumer goods collaboration for polymer structures in plastics | Further phases of tests are now on-going, which features new product design and use different bio-polymers. |
| Jun 18 | Commercial agreement with MediaDevil | Due to demand from customers, we are working on new phone cases which feature graphene in bio-polymers trademarked as “Biogrene”. New batches of materials are currently being compounded and will be sent to production factories shortly. |
| Jun 18 | Agreement with Arrow Greentech | The parties are negotiating a joint development agreement for the development and marketing of the water-soluble films. The companies continue to test a number of other products for the securities sector. |
| Jul 18 | Collaboration with ZapGo Limited | Progress continues to be made on testing, with the companies now moving on to fourth phase testing. |
| Aug 18 | Sporting goods collaboration | New Polygrene blend being formulated for trial at customer factory. In addition, the companies are collaborating on other shoe development and garments. |
| Aug 18 | Collaboration with Axia Materials, South Korea | The project, which involved a consortium of companies has been postponed as a result of consortium funding difficulties |
| Aug 18 | Construction materials collaboration with AECOM | Following the launch of the AECOM CNCT Arch at Network Rail facility in Bristol, the product has been subject to further tests, with positive test data reported to date. |
| Oct 18 | Collaboration with Advanced Insulation | Testing at customer facilities is ongoing. |
| Dec 18 | Collaboration with Chinese Aerospace Company | This longer-term project, which is focused on several materials for different parts continues at an R&D level. |
| Dec 18 | MOU China Railway | The project, which involves GEIC and other civil engineering parties, continues to progress well. The testing features trials with various grades of construction materials for different construction applications. |
| Dec 18 | LOI/MOU Tungshu Optoelectronics | The multiple projects identified progress at different levels due to longer-term and medium terms needs. Testing on inks show highly useful properties for new generation household heating applications. |
| March 19 | Further collaboration with Chinese Aerospace Company | The parties continue to progress through the work plan created. |
| May 19 | Collaboration agreement with BP Polymers | Tests on sample materials continue at an R&D level. |
| Oct 19 | Refractory Materials Collaboration | New project with work plans being developed between the parties. |
We are excited with the progress of our collaborations during and after the period and for those coming to the end of their testing phase. The next stage is to negotiate commercial supply agreements and we are having a number of discussions to achieve this goal. With our increased graphene production capacity, and with our REACH registration in place, we are well positioned to fulfil orders when those agreements progress into orders.
As announced in July 2019 our first Japanese order is progressing well, with ongoing R&D work being conducted at the customer’s R&D facility in the US, with the company giving on-going support. Similarly, our US oil & gas customer, whose first order was announced in June 2019, is showing continued advancement. The masterbatch materials were subject to new tests at a scaled-up level, with satisfactory results achieved. Additional development work is underway and further commercial discussions are anticipated in Q1 2020.
Gnanomat continues to develop its energy storage technology and a Spanish patent for it was granted in April 2019 with formal collaboration agreements with potential partners in discussion. Its funding comes, in the main, from Versarien’s resources, but it has also been successful in obtaining a grant from the Spanish Ministry of Science and is applying for further grants from the newly formed European Battery Alliance, as well as from other EU sources.
Our plastic products business performed satisfactorily in the period, still generating profits despite a fall in revenue from H1 2018 due, in large part, by challenging market conditions caused by the uncertainty of the current economic climate. Our intention remains to incorporate graphene into our injection-moulded plastics, and we have a number of trials and tests at customer sites and test facilities.
Metallic Products and Hard Wear products
This business segment has reported slightly increased revenue and significantly increased its profitability during the period, compared to H1 2018, following the implementation of efficiency improvements detailed in the results for the year ended 31 March 2019.
Significantly, Total Carbide has signed up to the national SPRINT business innovation programme, which provides funded access to space-related expertise and facilities at The Open University. The project will enable them to reduce the weight and increase the strength of its throat nozzles for rocket and space propulsion systems by adding our product Hexotene into a heat resistant ceramic.
Current trading and outlook
Having access to the funds raised last year has enabled us to make significant progress across our Group companies. Our focus remains on the commercialisation of our graphene and other 2D materials by progressing our strategies for growth simultaneously in various end-user sectors. This has enabled us to make significant steps towards commercialisation of our products.
With the large-scale AECOM prototype having been showcased, it demonstrates the real and near-term possibilities of graphene, and with our position as the first company in the world to receive accreditation for graphene, coupled with the REACH registration, we are in the best possible position to be a major part of the imminent “Graphene Revolution.”
