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Versarien PLC (VRS)

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Thursday 06 December, 2018

Versarien PLC

Interim Results

RNS Number : 5975J
Versarien PLC
06 December 2018
 

 

6 December 2018

 

 

 

Versarien plc

 

Interim Results

 

 

Versarien plc (AIM: VRS) ("Versarien", the "Company" or the "Group"), the advanced engineering materials group, is pleased to announce its interim results for the six months ended 30 September 2018.

 

Financial Highlights

 

·     Group revenues increased by 19% to £5.22 million (H1 2017: £4.38 million)

·     LBITDA* reduced by 16% to £0.36 million (H1 2017: £0.43 million)

·    Loss before tax remained stable at £0.78 million (H1 2017: £0.77 million) after increased investment in the graphene businesses

·    Cash of £6.07 million at 30 September 2018 (30 September 2017: £0.35 million) following successful fund raising of £5.15 million gross in September 2018

·     Net assets increased to £12.32 million (30 September 2017: £5.72 million)

 

*LBITDA (Loss Before Interest, Tax, Depreciation and Amortisation) excludes exceptional items and share-based payment charges

 

Operational Highlights

 

 

·     Nine collaboration agreements signed in the period with many other parties at varying stages of testing

·     Graphene quality assurance team strengthened with two key appointments both of whom are at the forefront of developing the international standards that will define graphene and other nanomaterials

·  Overseas expansion team strengthened by the appointment of two secondees from the Department of International Trade

·     Continued investment in graphene manufacturing capability

·     Mature businesses showing continued improvement in financial performance

 

 

Post Period Highlights

 

·   In October 2018, Versarien completed its acquisition of 62% of the Spanish company Gnanomat S.L. for £2,647,000, settled by £673,000 in cash, and the issue of 1,316,275 new ordinary shares at an agreed price of 150p per New Ordinary Share. Gnanomat S.L. specialises in incorporating graphene into supercapacitors

·     After gaining Federal Aviation Administration (FAA) certification, Versarien has received its first order for 1kg of its graphene nano platelets for use in fire retardant aircraft interior parts for a major global airline, with further orders anticipated

·     Memorandum of Understanding signed with Tungshu Optoelectronic Technology Ltd, one of the world's leading suppliers of optoelectronic display materials

·   Memorandum of Understanding signed with Jinan High-tech Financial Investment Co., Ltd to establish a manufacturing centre in the Jinan Innovation Zone, Shandong Province, China

·    Jinan High Tech Investment Fund panel of experts determine the graphene technology of Versarien to have certain world leading properties

·     New graphene enhanced polymer compound product launched, branded Polygrene

·     Memorandum of Understanding signed with CTCE, a subsidiary of China Railway Group Limited

·     AECOM place first order for compounded material as part of infrastructure project

 

 

 

Neill Ricketts, CEO of Versarien, commented:  

 

"The last few months have seen significant progress across the Group, in both our emerging technologies and more mature businesses. Expansion of the graphene business into China has attracted a large number of suitors and we are repeating the process in other Asian territories. Our collaboration agreements are progressing well, in particular with AECOM where we have recently announced the first supply of graphene enhanced compound.

 

"In line with our strategy of acquiring IP led businesses we completed the purchase of a controlling stake in Gnanomat SL and I am pleased that it has now obtained confirmation of patent approval for its production process.

 

"Our hard wear and metallic products business has shown an increase both in sales and profitability and our plastics business has increased its sales and its operating profits.

 

"With the global progress we have made over the last few months, and with funds from our placing in September we are extremely well positioned for the future and look forward to reporting further success over the coming months."

 

 

For further information please contact:

 

Versarien plc

 

Neill Ricketts - Chief Executive Officer

+44 (0) 1242 269122

Chris Leigh - Chief Financial Officer

 

 

 

Arden Partners plc (Nominated Adviser)

www.arden-partners.com

John Llewellyn-Lloyd / Dan Gee-Summons

+44 (0) 20 7614 5900

 

 

IFC Advisory (Financial PR and IR) 

www.investor-focus.co.uk

Tim Metcalfe / Graham Herring / Heather Armstrong

+44 (0) 20 3934 6630

 

 

Notes to Editors:

 

About Versarien

 

Versarien plc (AIM: VRS), is an advanced engineering materials group. Leveraging proprietary technology, the Group creates innovative engineering solutions for its clients in a diverse range of industries. Versarien has six subsidiaries operating under two divisions:

 

Graphene and Plastics

2-DTech Ltd, which specialises in the supply, characterisation and early stage development of graphene products. www.2-dtech.com  

AAC Cyroma Limited, which specialises in the supply of vacuum-formed and injection-moulded products to the automotive, construction, utilities and retail industry sectors. Using Versarien's existing graphene manufacturing capabilities, AAC will have the ability to produce graphene-enhanced plastic products.  www.aaccyroma.co.uk  

Cambridge Graphene Limited, supplies novel inks based on graphene and related materials, using patented processes to develop graphene materials technology.

  www.cambridgegraphene.com

Gnanomat S.L. ("GNA"), based in the Parque Cientifico Madrid, Spain, is a company capable of utilising Versarien's graphene products in an environmentally friendly, scalable production process for energy storage devices that offer high power density, almost instant recharging and very long lifetimes for use in electrical vehicles and portable electronics products. www.gnanomat.com 

  

Hard Wear and Metallic Products

Versarien Technologies Limited has developed an additive process for creating advanced micro-porous metals targeting the thermal management industry and supplies extruded aluminium. www.versarien-technologies.co.uk 

Total Carbide Limited, a leading manufacturer in sintered tungsten carbide for applications in arduous environments such as the oil and gas industry. www.totalcarbide.com 

 

 

Chief Executive's Statement

 

We have seen our graphene technology gain much momentum and success since the release of our annual results in July, along with good progress in all areas of the business. Our graphene products have gained significant interest both in the UK and abroad, particularly in China, where four MOUs have now been signed to both sell and manufacture our products there. Our graphene products are being tested and developed in new industries such as sub-sea insulation and the acquisition of Gnanomat S.L in October complements our strategy of incorporating graphene into energy storage devices. In addition, 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 collaborations:

 

Date

Description

Current status

Oct-17

Collaboration with Israel Aerospace Industries

Further testing to be carried out in early 2019

 

Nov-17

Collaboration with global consumer goods company

Masterbatch ready, waiting on  confirmation for testing date at UK production plant

Dec-17

Agreement with global chemical major

Masterbatch testing awaited with interest in trialling inks with films

Jan-18

Agreement with global apparel manufacturer

Commercial discussions in progress -masterbatch polymer blends to be trialled early January.

Feb-18

Agreement with shoemaker Vivobarefoot

30kg elastomer masterbatch to be sent to China factory to produce first prototypes for new soles.

Feb-18

Medical technology collaboration at Addenbrooke's hospital

Testing continues to go well with commercial discussions due to commence shortly

Mar-18

Collaboration with Team Sky for cycling equipment

Specific applications being reviewed

Mar-18

Collaboration with world-leading aerospace group

Awaiting completion of customer re-organisation to continue original project.  Additionally working on  paints for composite structures.

Apr-18

Agreement with Luxus

Active supply chain partner

May-18

Consumer goods collaboration for polymer structures in plastics

Second batch testing at a different wt% in progress with initial testing showed improvements in the weight of the bottles.

Jun-18

Commercial agreement with MediaDevil

First headphones to be supplied December 2018.  New polymer for phone cases to be tested with supply commencing 2019 Q2

Jun-18

Agreement with Arrow Greentech

AGT are actively talking with tyre producers and we are waiting on the results of the trials for bank notes.

Jul-18

Collaboration with ZapGo Limited

Secondary trials now underway in conjunction with Gnanomat.

Aug-18

Sporting goods collaboration

Samples and configured materials supplied to be compounded and tested in football boots.

Aug-18

Collaboration with Axia Materials, South Korea

Multi-partner funding application in progress

Aug-18

Construction materials collaboration with AECOM

Initial order for compounded material received

 

 

Our new graphene production equipment has duly arrived and will shortly be commissioned enabling us to produce sufficient amounts of Nanene to satisfy the current needs of the collaborations and anticipated orders. With our DIT secondees in place, and access to the engineers and scientists from leading universities such as Cambridge, Manchester and Warwick, we are continuing our focus on agreeing further collaborations and progressing our existing ones.  We anticipate that this will lead to larger orders for our graphene products and the emergence of commercial products enhanced through the use of Versarien's graphene.

 

Our collaboration with Tungshu is progressing with a number of projects identified. These include incorporating graphene ink in consumer heating systems, incorporating Gnanomat's technology into Tungshu's battery products and using graphene insole sensors in Tungshu's smart wearables.

 

Our plastic products business performed well in the first half and is providing a very useful contribution to Group performance. Our focus remains on exploring further options for incorporating graphene into injection-moulded plastics following the success of our collaboration with Media Devil, announced in June 2018.

 

Metallic Products and Hard Wear products

 

This business segment has increased its revenue and returned to profitability. It has continued to receive additional aerospace orders with Total Carbide joining the "Westcott Space Cluster", which includes the UK Space Agency, establishing itself as an aerospace supplier in addition to servicing its traditional oil and gas customer base.

 

Current trading and outlook

 

With the interest we are experiencing for both our powder and ink graphene technologies globally, the acquisition of Gnanomat, the development of graphene compounded material and a strong balance sheet we are in an excellent position to achieve the product commercialisation we are striving for.

 

Neill Ricketts

Chief Executive Officer

6 December 2018

 

 

Chief Financial Officer's Review

 

Group Results

 

Versarien's revenue for the half-year ended 30 September 2018 has increased by 19% to £5.22 million compared to the same period last year (H1 2017: £4.38 million).

 

The operating loss before exceptional items, depreciation, amortisation and share based payment charges was £0.36 million compared with a loss of £0.43 million in the comparative period last year, a reduction of £0.07 million. This is particularly pleasing given that our operating expenses before exceptional costs and share-based payments have increased by £0.2 million, principally as a result of increased investment in our graphene businesses.

 

Exceptional costs were incurred in the period of £0.07 million, which mostly relate to acquisition costs incurred for Gnanomat S.L. and costs related to the expansion into China.  The loss before tax for the period was £0.79 million (H1 2017: loss £0.77 million).

 

Group net assets at 30 September 2018 were £12.3 million (31 March 2018 £7.98 million) with cash at the period end of £6.01 million (31 March 2018: £2.30 million), which includes £4.96 million (net of expenses) from the fund raising announced on 24 September 2018.  Cash outflow from operating activities was £0.82 million (H1 2017: £1.01 million).  The Group capitalised £0.16 million (H1 2017: £0.04 million) principally in development costs and £0.11 million (H1 2017: £0.04 million) in new plant and equipment.

 

Graphene and Plastic Products

 

Revenue, principally arising from plastic products, for the period was £2.79 million (H1 2017: £2.21 million), returning an LBITDA before exceptional items of £0.28 million (H1 2017: loss £0.25 million).  The segment capitalised development costs of £0.13 million (H1 2017: £0.04 million) as work continued on developing specific applications using graphene.  Cash used by the business segment was £0.68 million, of which £0.08 million was used to acquire new assets.

 

 

Hard Wear and Metallic Products

 

Revenue for the period improved by 12% to £2.43 million (H1 2017: £2.17 million) with an increase in EBITDA before exceptional items to £0.25 million (H1 2017: £0.06 million).  The segment consumed £0.01 million in cash in the period, of which £0.02 was for new plant and machinery, and shows the operational improvements which have been made to reach an almost break even cashflow point for this division.

 

 

 

Chris Leigh

Chief Financial Officer

6 December 2018

 

 

Group statement of comprehensive income

For the half year ended 30 September 2018

 

 

Notes

Six months ended

30 September

2018

Unaudited

£'000

Six months ended

30 September

2017

Unaudited

£'000

Year ended

31 March

2018

Audited

£'000

Continuing operations

 

 

 

 

Revenue

2

5,215

4,380

9,024

Cost of sales

 

(3,772)

(3,311)

(6,496)

Gross profit

 

1,443

1,069

2,528

Other operating income

 

2

28

63

Operating expenses (including exceptional items)

 

(2,210)

(1,848)

(4,102)

Loss from operations before exceptional items

 

(693)

(751)

(1,477)

Exceptional items

3

(72)

-

(34)

Loss from operations

 

(765)

(751)

(1,511)

Finance charge

 

(23)

(21)

(50)

Loss before income tax

 

(788)

(772)

(1,561)

Income tax

 

56

-

63

Loss for the period

 

(732)

(772)

(1,498)

Loss attributable to:

 

 

 

 

- Owners of the parent company

 

(659)

(711)

(1,381)

- Non-controlling interest

 

(73)

(61)

(117)

 

 

(732)

(772)

(1,498)

Loss per share attributable to the equity holders of the Company:

 

 

 

 

Basic and diluted loss per share

4

(0.44)p

(0.54)p

(1.00)p

 

There were no comprehensive gains or losses in the year other than those included in the Group Statement of Comprehensive Income.

Group statement of financial position

As at 30 September 2018

 

 

Note

30 September

2018

Unaudited

£'000

30 September

2017

Unaudited

£'000

31 March

2018

Audited

£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible Assets

5

2,812

2,877

2,678

Property, plant and equipment

 

2,887

2,946

2,980

Deferred taxation

 

25

25

25

 

 

5,724

5,848

5,683

Current assets

 

 

 

 

Inventory

 

2,128

1,953

1,961

Trade and other receivables

 

2,400

1,732

2,437

Current tax

 

52

35

77

Cash and cash equivalents

 

6,073

353

2,296

 

 

10,653

4,073

6,771

Total assets

 

16,377

9,921

12,454

Equity

 

 

 

 

Called up share capital

 

1,522

1,313

1,486

Share premium

 

17,453

9,762

12,529

Merger reserve

 

1,256

1,256

1,256

Share-based payment reserve

 

295

146

187

Accumulated losses

 

(7,884)

(6,555)

(7,225)

Equity attributable to owners of the parent company

 

12,642

5,922

8,233

Non-controlling interest

 

(327)

(198)

(254)

Total equity

 

12,315

5,724

7,979

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Trade and other payables

 

238

195

167

Provisions

 

-

80

-

Deferred taxation

 

64

64

64

Long-term borrowings

 

495

744

456

 

 

797

1,083

687

Current liabilities

 

 

 

 

Trade and other payables

 

1,510

1,893

1,849

Invoice discounting advances

 

1,064

689

1,117

Current tax

 

212

217

284

Provisions

 

80

-

80

Current portion of long-term borrowings

 

399

315

458

 

 

3,265

3,114

3,788

Total liabilities

 

4,062

4,197

4,475

Total equity and liabilities

 

16,377

9,921

12,454

 

Group statement of changes in equity

For the half year ended 30 September 2018

 

 

Share

capital

£'000

Share

premium

account

£'000

Merger

reserve

£'000

Share-based

payment

reserve

£'000

Accumulated

losses

£'000

Non-

controlling

interest

£'000

Total

equity

£'000

At 1 April 2017 (audited)

1,313

9,762

1,256

115

(5,844)

(137)

6,465

Loss for the period

-

-

-

-

(711)

(61)

(772)

Share-based charge

-

-

               -

31

-

-

31

At 30 September 2017 (unaudited)

1,313

9,762

       1,256

146

(6,555)

(198)

5,724

Issue of shares

173

2,767

-

-

-

-

2,940

Loss for the period

-

-

-

-

(670)

(56)

(726)

Share-based payments

-

-

-

41

-

-

41

At 1 April 2018 (audited)

1,486

12,529

       1,256

187

(7,225)

(254)

7,979

Issue of shares, net of issue costs

36

4,924

-

-

-

-

4,960

Loss for the period

-

-

-

-

(659)

(73)

(732)

Share-based payments

-

-

-

108

-

-

108

At 30 September 2018 (unaudited)

1,522

17,453

1,256

295

(7,884)

(327)

12,315

 

Included within the merger reserve is £53,000 in respect of the merger with Versarien Technologies Limited and £964,000 in respect of the acquisition of Total Carbide Limited and £239,000 in respect of the acquisition of AAC Cyroma Limited.

Statement of Group cash flows

For the half year ended 30 September 2018

 

 

Six months ended

30 September

2018

Unaudited

£'000

Six months ended

30 September

2017

Unaudited

£'000

Year ended

31 March

2018

Audited

£'000

Cash flows from operating activities

 

 

 

Cash used in operations

(820)

(1,010)

(1,907)

Interest paid

(23)

(21)

(50)

Corporation tax paid

-

-

(9)

Net cash used in operating activities

(843)

(1,031)

(1,966)

Cash flows from investing activities

 

 

 

Purchase of intangible assets

(159)

(42)

(148)

Purchase of property, plant and equipment

(108)

(42)

(280)

Net cash used in investing activities

(267)

(84)

(428)

Cash flows from financing activities

 

 

 

Share issue

5,154

-

3,069

Share issue costs

(194)

-

(129)

Finance leases net of repayments

(20)

147

             1

Invoice discounting advances

(53)

(46)

382

Net cash generated from financing activities

4,887

101

3,323

Increase/(decrease) in cash and cash equivalents

3,777

(1,014)

929

Cash and cash equivalents at start of period

2,296

1,367

1,367

Cash and cash equivalents at end of period

6,073

353

2,296

 

Note to the statement of Group cash flows

For the half year ended 30 September 2018

 

 

Six months ended

30 September

2018

Unaudited

£'000

Six months ended

30 September

2017

Unaudited

£'000

Year ended

31 March

2018

Audited

£'000

Loss before income tax

(788)

(772)

(1,561)

Adjustments for:

 

 

 

Share-based payments

108

31

72

Depreciation and amortisation

226

290

604

Impairment

-

-

191

Disposal of non-current assets

-

-

4

Finance cost

23

21

50

R&D tax credit repayment

56

-

72

Increase in inventories

(167)

(65)

(73)

Decrease/(increase) in trade and other receivables

62

178

(569)

(Decrease)/increase in trade and other payables

(340)

(693)

(697)

Cash used in operations

(820)

(1,010)

(1,907)

 

Notes to the unaudited interim statements

For the half year ended 30 September 2018

 

1. Basis of preparation

Versarien plc is an AIM quoted company incorporated and domiciled in the United Kingdom under the Companies Act 2006. The Company's registered office and its principal place of business is 2 Chosen View Road, Cheltenham, Gloucestershire, GL51 9LT.

The interim financial statements were prepared by the Directors and approved for issue 6 December 2018. These interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2018 were approved by the Board of Directors on 17 August 2018 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

As permitted, these interim financial statements have been prepared in accordance with UK AIM Rules and IAS 34, "Interim Financial Reporting" as adopted by the European Union. They should be read in conjunction with the annual financial statements for the year ended 31 March 2018, which have been prepared in accordance with IFRS as adopted by the European Union. The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 March 2018, as described in those annual financial statements. Where new standards or amendments to existing standards have become effective during the year, there has been no material impact on the net assets or results of the Group.

These interim financial statements have been prepared on a going concern basis using similar assumptions to those made in the statutory accounts to 31 March 2018.

Certain statements within this report are forward looking. The expectations reflected in these statements are considered reasonable. However, no assurance can be given that they are correct. As these statements involve risks and uncertainties the actual results may differ materially from those expressed or implied by these statements.

The interim financial statements have not been audited.

2. Segmental information

 

 

Central

Graphene and Plastic

Products

Metallic and Hard Wear

Products

Intra-group

Adjustments

 TOTAL

 

£'000

£'000

£'000

£'000

£'000

Six months to 30 September 2018

 

 

 

 

 

Sales

-

2,790

2,425

-

5,215

Gross Margin

-

707

736

-

1,443

Other operating income

-

-

2

-

2

Operating expenses

(436)

(1,082)

(594)

(26)

(2,138)

Exceptional items

(72)

-

-

-

(72)

(Loss)/ profit from operations

(508)

(375)

144

(26)

(765)

Finance income/(charge)

-

(9)

(14)

-

(23)

(Loss)/profit before tax

(508)

(384)

130

(26)

(788)

 

 

 

 

 

 

2. Segmental information (continued)

 

 

 

 

 

Central

Graphene and Plastic

Products

Metallic and Hard Wear

Products

Intra-group

Adjustments

 TOTAL

 

£'000

£'000

£'000

£'000

£'000

Six months to 30 September 2017

 

 

 

 

 

Sales

-

2,207

2,173

-

4,380

Gross Margin

-

531

538

-

1,069

Other operating income

-

-

28

-

28

Operating expenses

(276)

(896)

(664)

(12)

(1,848)

Exceptional items

-

-

-

-

-

(Loss)/profit from operations

(276)

(365)

(98)

(12)

(751)

Finance income/(charge)

(1)

(10)

(10)

-

(21)

(Loss)/ profit before tax

(277)

(375)

(108)

(12)

(772)

 

 

 

 

 

 

 

 

 

 

3. Exceptional items

 

Six months ended

30 September

2018

Unaudited

£'000

Six months ended

30 September

2017

Unaudited

£'000

Year ended

31 March

2018

Audited

£'000

Acquisition costs

61

-

-

Relocation and restructuring costs

-

-

31

Release of deferred consideration

-

-

(80)

Impairment of development costs net of deferred grant income release

-

-

72

Other

11

-

11

 

72

-

34

 

Acquisition costs related mainly to the purchase of Gnanomat S.L. and fees associated with the expansion into China.

 

4. Loss per share

The loss per share has been calculated by dividing the loss after taxation of £659,000 (2017: £711,000) by the weighted average number of shares in issue of 148,859,000 (2017: 131,331,000 during the period.

 

The calculation of the diluted earnings per share is based on the basic earnings per share adjusted to allow for the issue of shares on the assumed conversion of all dilutive options. However, in accordance with IAS33 "Earnings per Share", potential Ordinary shares are only considered dilutive when their conversion would decrease the profit per share or increase the loss per share. As at 30 September 2018 there were 14,090,422 (2017: 3,819,862) potential Ordinary shares that have been disregarded in the calculation of diluted earnings per share as they were considered non-dilutive at that date.

 

 

 

 

5. Intangible assets

 

30 September

2018

Unaudited

£'000

30 September

2017

Unaudited

£'000

31 March

2018

Audited

£'000

Goodwill

2,167

 

2,167

2,167

Customer relationships/order books

87

152

113

Development costs

390

390

235

Licence

29

37

33

Intellectual property

139

131

130

Total

2,812

2,877

2,678

 

6. Dividends

As stated in the 2013 AIM Admission document the Board's objective is to continue to grow the Group's business and it is expected that any surplus cash resources will, in the short to medium term, be re-invested into the research and development of the Group's products. In view of this, no dividend is declared and the Directors will not be recommending a dividend for the foreseeable future. However, the Board intends that the Company will recommend or declare dividends at some future date once they consider it commercially prudent for the Company to do so, bearing in mind its financial position and the capital resources required for its development.

 

7. Interim Report

This interim announcement is available on the Group's website at www.versarien.com


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