TIDMDCTA
RNS Number : 5509N
Directa Plus PLC
21 May 2020
21 May 2020
Directa Plus plc
("Directa Plus" or the "Company")
Final Results for the Year to 31 December 2019
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. The Company's focus remains on developing and delivering
products and services in the Environmental Remediation and Textile
industrial verticals, whilst continuing to progress graphene
enhancements to products in other areas where Directa Plus can
identify commercial opportunities.
Summary
Financial highlights
-- Product sales and service revenue increased to EUR2.63m (2018: EUR2.25m)
-- Total income (including grants) increased to EUR2.81m (2018: EUR2.50m)
-- Loss after tax EUR3.40m (2018: EUR3.96m), in line with market expectations
-- Successful placing to raise EUR8.52m (GBP7.41m) in October
-- Acquisition of a 51 per cent majority holding in Setcar S.A.
completed in November and has been earnings accretive
-- Cash and cash equivalents at year end of EUR10.91m (2018:
EUR5.50m), providing the Group with the financial capacity to
support our growth ambitions and to withstand at least until the
end of 2021 the uncertainties and challenges created by the
COVID-19 pandemic
Proven, successful strategy maintained
-- Target existing products and markets that can be
significantly improved with the addition of Directa Plus
products
-- Working with established manufacturers and vendors worldwide,
we are able to gain market insight and access, further develop our
technologies, bring products to market faster, and capture maximum
value from the supply chain by providing expertise, know-how and
services as well as materials
-- Focus on those vertical markets in which the Company can gain
strong traction - textiles, environmental remediation, elastomers
and composites
COVID-19
-- The Company has been concerned first and foremost with the
health and wellbeing of our employees as well as those of our
industrial partners and the wider community
-- We have been able to maintain production and remain effective
as a business through remote working
-- A new Emergency COVID-19 project, using G+(R) graphene, could
offer the right balance of filtration and breathability in masks
whilst providing similar anti-bacterial performance to gowns and
gloves. We are currently undertaking studies to investigate the
potential of a new anti-viral molecule coupled with G+(R)
graphene.
Target market progress
Textiles
-- New agreement signed with partner and customer Alfredo Grassi
covering workwear and military outerwear in Europe and North
Africa
-- Potential new alliances for the workwear and transportation
markets on a worldwide basis under evaluation, with a specific
focus on the UK and the US
-- Exclusive agreement with Loro Piana for the commercialisation
of Loro Piana fabrics and garments enriched by G+(R) technology,
with an initial duration of three years and a minimum value of
EUR800,000
Environmental Remediation
-- Award of first Grafysorber(R) full service contract in July
to treat sludges and by-products for an international oil and gas
company operating European onshore wells
-- Transformational acquisition of a 51 per cent majority
holding in Setcar S.A. completed in November and has been earnings
accretive
o a further 47 per cent was acquired by the parent company of
our industrial partner GSP Group, a leading provider of offshore
integrated services for the oil and gas industry with rigs
operating in Romania, Turkey, Greece and Mexico
o well regarded business, established in 1994, that fulfils our
key strategic objective of fully integrating into the value chain
in one of our most important verticals
-- Under the new partners' ownership, Setcar gained its first
contract in December to provide a suite of environmental
decontamination services on the Trinity - 1X gas project in Block
30 offshore Romania for approximately US$1 million
-- In February 2020, Setcar gained a contract to supply
environmental services to GSP Offshore, part of GSP, with a value
of approximately EUR700,000 per annum over seven years
-- Grant of European patent in April 2020 covering the use of
Grafysorber(R) to decontaminate water containing hydrocarbons
resulting from the production of oil
Asphalt
-- Successful real world trials of G+(R) enhanced asphalt
supermodifier, Gipave, developed with partner Iterchimica, on
public roads in Rome and Oxfordshire in the UK
-- Post year end, in January 2020, six-month trial began on a
high traffic taxiway used for intercontinental aircraft at Rome's
Fiumicino airport
-- Agreement signed in April 2020 covering the exclusive supply
of G+(R) graphene to Iterchimica in the asphalt and bitumen sector
worldwide for an initial duration of three years
Corporate
-- Current patent portfolio increased to 30 patents granted,
seven of which were granted post year-end, with important grants
and filings in both the US and China in 2019
-- EU grant received in January 2020 to develop an
environmentally sustainable technology to digitally print G+(R)
graphene on fabrics
-- OEKO-TEX(R) independent non-toxic certification (an Eco
Passport) received in February 2020 for our G+(R) printing paste
technology
-- Frost and Sullivan Technology Innovation Award granted to the
Company in May 2020 for unique Grafysorber performances in
environmental remediation industry
Giulio Cesareo, Founder & CEO, said: "Without question 2019
was a landmark year for the Group in so many respects with the
Group making great strides in our textile and environmental
remediation verticals, as well as in the global asphalt market and
with the acquisition of Setcar.
"Whilst we are well positioned in our key verticals with a
growing recognition for Directa Plus and for the outstanding
benefits of our G+ technology, we do not expect to be entirely
immune from the effects of COVID-19 and hence have withdrawn
forward guidance to stakeholders until the volatility in related
markets reduces.
"April year to date revenues of EUR1.8m are almost treble those
of the same period last year, we have a strong order book and
attractive prospects including in, but not limited to, the COVID-19
related personal protective equipment markets. With this in mind,
our COVID-19 scenario planning base case revenues, albeit a
reduction against initial expectations, nonetheless show a notable
near trebling of revenue for the year.
"We have a robust balance sheet with year-end net cash of
EUR10.9m that provides us with the financial capacity therefore to
support our growth ambitions and to withstand the uncertainties and
challenges created by the COVID-19 pandemic.
"At Directa Plus we seek to be a farsighted Company, helping to
build a better future and our ambition remains undimmed. We do not
intend to let Covid-19 prevent us from capturing new opportunities
across all of our key markets."
Key Performance Indicators and Financial Summary
2019 2018
Revenue from product and service sales
(EUR'm) 2.63 2.25
Total Income* (EUR'm) 2.81 2.50
LBITDA** (EUR'm) (2.71) (3.24)
Loss after tax ***(EUR'm) (3.40) (3.96)
Cash and cash equivalents (EUR'm) 10.91 5.50
Total number of patents granted**** 23 18
*Total Income comprises revenue from product and service sales
(EUR2.63m), and other income including government grants (EUR
0.06m) and RDEC - Research and Development Expenditure Credit
(EUR0.10m).
** LBITDA represents results from operating activities before
depreciation and amortisation of EUR0.84m (2018: EUR0.67m).
Management believes that EBITDA provides a better reflection of
operational performance by removing interest, tax, depreciation and
amortisation. EBITDA is a non-GAAP measure .
*** The loss for the year of EUR3.40m is split between a
EUR3.58m loss owned by the Company and a EUR0.18m profit in respect
of non-controlling interests.
****Number of grants in portfolio at the end of the period
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 report that 2019 was a transformational year for
Directa Plus. Towards the end of the year, we completed the
purchase of a 51.0 per cent interest in the environmental services
company Setcar and further strengthened the Group's balance sheet
through an oversubscribed Placing and Open Offer. Despite the added
demands of our acquisition of Setcar, strong commercial momentum
was sustained across the business, re-enforcing our position as a
leading producer and supplier of differentiated graphene-based
products under our G+ brand. Our full year revenue of EUR2.81m was
up 17 per cent over the prior year including a EUR0.88m
contribution from Setcar since its acquisition in November 2019. We
have a robust balance sheet with year-end net cash of EUR10.9m that
provides us with the financial capacity to support our growth
ambitions and to withstand the uncertainties and challenges created
by the COVID-19 pandemic.
The Group's graphene manufacturing operations and headquarters
are located in Lomazzo in the Lombardy region of Northern Italy,
which has been one of Europe's worst affected areas for COVID-19.
As such the Board has been concerned first and foremost with the
health and wellbeing of our employees as well as those of our
industrial partners and the wider community in which we operate. It
is a testament to our executive team that the decision was taken
early to reduce the headcount at our factory to a minimum and to
move all remaining staff to work remotely. As a result, our
manufacturing operations are continuing with the production of
G+(R) products and our development activities continue apace. On
behalf of the Board I would like particularly to thank our
leadership team and our employees for their dedication and hard
work in a difficult and very challenging environment.
The benefits of our G+(R) graphene are becoming increasingly
well recognised by our existing and potential partners with whom we
are closely engaged. Our low cost, scalable manufacturing plant
uses a proprietary and patented chemical-free process to produce
pristine graphene-based materials and hybrid graphene materials for
a variety of uses. Our G+ product is proven to be non-toxic and is
available in various forms such as powder, liquid and paste and can
be tailored to optimise the performance and characteristics of our
partners end products. We are creating a generation of new products
with exceptional properties and the progress we are making in our
targeted business verticals is detailed within the Chief
Executive's Review,
The acquisition of Setcar was an important milestone for the
Group in our commercialisation strategy for our patented
Grafysorber(R) oil decontamination and remediation product. Our
partner GSP has extensive operations with an established
infrastructure, including strong third party customer
relationships, to promote the unparalleled benefits of
Grafysorber(R). The acquisition of Setcar has enabled the Group to
capture additional value for shareholders through the provision of
added value upstream services and by moving away from the provision
of Grafysorber(R) alone. We are delighted to welcome the Setcar
team to Directa Plus and look forward to delivering on our
ambitions in this key market vertical alongside further progress in
textiles, our other key vertical.
Our reputation is of course fundamental to our future success
and set alongside our growing knowledge pool and technical ability,
our forward-thinking approach continues to create new
opportunities. Post year-end we signed a worldwide agreement with
asphalt additive company Iterchimica following four years of
investment in R&D and extensive trials of Gipave, the asphalt
additive based on G+(R) graphene. The Board believes there is a
significant opportunity for Gipave to capture a material share of
the asphalt and bitumen paving market based on its proven
real-world performance.
Extensive work is currently being undertaken also to assess the
potential for G+(R) to be incorporated into medical devices such as
masks, gowns and gloves. We have long known of the strong
anti-bacterial and thermal properties of our graphene but there may
be a similar anti-viral effect also and we hope that G+(R) may be
able to assist in the fight against COVID-19.
In closing, I should like to thank our shareholders, new and
old, for their continued loyalty and support. Directa Plus
continues to position itself for a strong future and our ability to
grow which reflects our stakeholders' confidence in the business
and strategy. 2020 brings with it greater challenges and
uncertainties than usual as a result of COVID-19. We shall not
escape its impact, particularly in fashion related textiles, but
there are also reasons to be optimistic.
We now have a strong confirmed forward order book for 2020 and a
growing number of differentiated products across large, diverse end
markets. In environmental services, we expect to continue to make
progress this year through Setcar providing growing revenues and
profits that will enable us to invest further in the business. In
textiles, new product launches, potentially including bacteria and
virus inhibiting materials, as well as geographical expansion,
place the Group in a good position to support textile producers in
meeting the needs triggered by COVID-19. The Board remains
confident that 2020 will see further positive progress and
developments.
Sir Peter Middleton
Chairman
20 May 2020
Chief Executive Officer's Review
Introduction
2019 saw great progress for Directa Plus not only in our key
verticals of environmental remediation solutions and textiles, but
also in the other industrial sectors where we have developed
graphene enhanced products and services where we see material
opportunities.
Strategy and Business Model
We continue to believe that successful innovations are
collaborative, starting from existing ideas, resources and contacts
and facilitated through the introduction of competencies and assets
from partners. These are then combined together in a new market
context, resulting in new next generation products or significant
improvements to existing products.
We believe that our commercial strategy has been validated as
the best path for Directa Plus. By working with established
manufacturers and vendors, we are able to gain market insight and
access, further develop our technologies, bring products to market
faster, and capture maximum value from the supply chain.
We always seek to develop the right business model to suit the
product and partnership. This ethos means that we retain and
actively promote flexibility and optionality throughout our
Company.
Our R&D efforts throughout 2019 supported our strategy and
we have generated significant new intellectual property assets,
across our industrial landscape. We continue to find new ways to
improve and optimise products and services for end users with the
use and development of our graphene based technology.
Directa Plus's stature as a differentiated producer and supplier
of graphene continues to build strongly and during the year this
was additionally recognised through an invitation to join the
Industry Council of the US National Graphene Association (NGA), the
main body in the US advocating and promoting the commercialisation
of graphene. Membership of the NGA's Industry Council is available
to a select group of influential graphene companies that are
positioned to assume a leading role in the development of the
global graphene market. Directa is very proud to be part of the
organisation.
Potential for G+(R) to protect against the spread of
COVID-19
As you will know, Northern Italy, where our graphene
manufacturing facility and corporate offices are situated has been
badly impacted by COVID-19 and the measures necessary to prevent
its spread. Despite this, I am pleased to report that the Group
have been able to maintain production and remain effective as a
business through remote working. Keeping all our employees safe and
ensuring their wellbeing is of the utmost importance to us.
Against this backdrop, Directa Plus has been dedicating R&D
efforts to find ways to help alleviate the spread of COVID-19.
Whilst we have known of graphene's strong bacteriostatic properties
for some time, there are indications that there may similarly be an
anti-viral effect that can be utilised by applying graphene to
fabric. As such, we have been working on a new project, Emergency
COVID, which uses graphene in the production of medical devices
such as masks, gloves and gowns to provide enhanced prevention
properties that could make an important contribution in the easing
of restrictions in the second phase response to the pandemic.
We believe that Personal Protective Equipment, enhanced
appropriately by G+(R) graphene, could offer the right balance of
filtration and breathability in masks whilst providing
anti-bacterial and potentially anti-viral performance that would
also be effective in clothing such as gowns and gloves. This could
result in a safer "go to work" and "go to sport" environment for
all citizens and I hope to be able to report this time next year
that Directa Plus has been able to play its part in turning the
tide against COVID-19.
Textiles
The intelligent use of graphene in modifying fabrics can provide
a variety of performance benefits to the wearer of garments made
using these enhanced fabrics. Improved thermal regulation delivers
much higher levels of comfort and, for example, more efficient
output for sportspeople, manual or physical workers, and can expand
the range of fabrics suitable to different climactic conditions.
Graphene is applied to garments through our proprietary fabric
printing technology and through laminated graphene membranes. We
are also working on novel ways to introduce graphene to the weave
of fabrics themselves.
Directa Plus's progress in the period was extremely pleasing, in
particular the partnership with Alfredo Grassi and our exclusive
agreement with Loro Piana, as further detailed below.
Alfredo Grassi
Our long-standing industrial partnership with Alfredo Grassi
S.p.A (Grassi), was deepened in May 2019 with an agreement to
collaborate in the further development of graphene enhanced
workwear and to expand into military outerwear.
The agreement between Directa Plus and Grassi provides for
exclusive co-operation in these key sectors, leveraging on the
established advantages of our Planar Thermal Circuit(TM). The main
objectives are:
-- To promote the uptake of graphene enhanced, advanced workwear
and military outerwear in Italy, most of Europe, and North
Africa;
-- To develop new products suitable for end users in relevant industrial verticals;
-- To build a greater joint understanding of market trends and
drivers affecting demand for such products; and
-- To offer end users the maximum level of sustainability along the entire supply chain
We are also evaluating potential new alliances for the workwear
vertical on a global basis with a specific focus on the UK and the
US and will update shareholders at the appropriate time.
Loro Piana
In March 2019 we announced an exclusive agreement with Loro
Piana for the commercialisation of Loro Piana fabrics and garments
enriched by Directa's G+ technology, with an initial duration of
three years and a minimum value of EUR800,000.
Loro Piana is renowned for the quality of its fabrics and
garments, even amongst the global luxury fashion industry, and for
its extreme sensitivity to the environment along its entire value
chain. These principles align perfectly with Directa Plus's own
culture and we look forward to jointly developing and achieving
significant innovations in high quality fabrics.
Environmental remediation
Environmental remediation solutions are amongst Directa Plus's
most commercially advanced activities. The Group is successfully
gaining and fulfilling contracts using our proprietary
Grafysorber(R) technology. Grafysorber(R) is used to treat 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. Furthermore, Grafysorber(R)
is sustainably produced in common with all our products, and it is
non-flammable and reusable, with the adsorbed hydrocarbons
recoverable.
Oil & Gas supply and service contract
In July, Directa was awarded an environmental remediation
contract worth approximately EUR150,000 to treat several thousand
cubic meters of sludges and by-products for an international oil
and gas company, operating European onshore wells. Directa is
providing a full service to the customer through the supply of a
mobile treatment unit and operating the recovery process.
Setcar S.A .
The key development in the year was the announcement of our
acquisition of a 51 per cent majority holding in Setcar S.A. in
September 2019, with completion finalised in November 2019. Setcar
was established in 1994 and is a highly regarded environmental
remediation services business based in Braila, Romania, and
operating in the Black Sea region. Setcar has been a commercial
partner of Directa Plus since 2014 and previously has contributed
to the industrial development of our Grafysorber mobile
decontamination units, so we are familiar with their capabilities
and clear sighted on the potential opportunities.
The acquisition fulfils our key strategic objective of fully
integrating into the value chain in one of our most important
verticals. We are working with established industrial partners to
provide a service solution to take advantage of their expertise and
existing commercial relationships, whilst also capturing maximum
value from the supply chain.
Directa Plus acquired 51 per cent of Setcar with a further 47.03
per cent acquired by the parent company of our industrial partner
GSP Group, a leading provider of offshore integrated services for
the oil and gas industry with rigs operating in Romania, Turkey,
Greece and Mexico, for a combined total consideration of EUR4.1
million and we expect the acquisition has been earnings accretive.
The acquisition was funded out of the proceeds of a GBP7.4 million
capital raise that is detailed in our Chief Financial Officers
report.
Following its acquisition, Setcar gained its first contract to
provide a suite of environmental decontamination services on the
Trinity - 1X gas project in Block 30 offshore Romania. The value of
the Contract is estimated to be approximately US$1 million invoiced
between 2019 and first quarter 2020 and evidences the first step in
what we envisage to be a highly successful relationship for Setcar,
Directa, and our partner GSP. Post-year end, in February 2020,
Setcar also signed a contract to supply environmental services to
GSP Offshore, part of GSP, to the value of approximately EUR700,000
per annum over a period of seven years. We are pleased with the
integration of Setcar into the Group and look forward to achieving
further progress.
Other applications for G+(R)
The Group has made significant strides elsewhere in our
deployment of our graphene technology in other industrial
verticals, particularly in elastomers and composite materials.
Iterchimica
Last year we reported that as part of our partnership with
Iterchimica we had jointly undertaken the first real world trials
of a road surface enhanced with a supermodifier containing G+
graphene, on a section of Rome's Strada Provinciale Ardeatina. This
and subsequent trials have been highly successful and the product
has now been branded as Gipave. Gipave works by increasing a road
surface's resistance to deformation through its ability to manage
temperature fluctuations, leading to less cracking and warping. The
useful life of a Gipave road surface is extended and there is a
material reduction in the maintenance requirement, ultimately
saving money for public highways agencies, road users, and
taxpayers. Once laid, Gipave can be 100 per cent recycled which can
reduce the extraction of new materials from quarries and first-use
bitumen.
In April 2019 we able to report on the Rome trial, comparing
asphalt concrete with the super modifier to a traditional asphalt
surfacing, noting impressive results:
-- Enhanced service life - fatigue resistance improvement was measured at over 250 per cent;
-- Improved resistance to the passage of vehicles - mechanical
tests showed an Indirect Tensile Strength increase of 35 per
cent;
-- Greater resistance to deformation at the same load -
Stiffness Modulus was measured at different temperatures, showing
an improvement of 46 per cent at 40degC;
-- Lower permanent plastic deformation - rutting values (track
left by tyres) was 35 per cent lower at 60degC.
Following the success of the Italian trial, Gipave was deployed
in November 2019 on a busy section of road in Curbridge,
Oxfordshire in the UK and is helping to prove the benefits of the
product in different climactic conditions.
After the year end, in January 2020, a six-month trial also
began at Rome's Fiumicino airport on taxiway Alpha Alpha, a high
traffic taxiway used for intercontinental aircraft such as Boeing
777s and Airbus A380s. In view of COVID-19 restrictions we will be
working with the airport to assess and evaluate the on-going
parameters of the trial. In April 2020, Directa Plus signed a
worldwide cooperation agreement with Iterchimica, covering. the
exclusive supply of G+ graphene to Iterchimica in the asphalt and
bitumen sector worldwide for an initial duration of three
years.
Intellectual Property
Our culture of R&D and our vision to bring the benefits of
graphene to industrial sectors where we see the greatest
opportunity ensures that Directa Plus is constantly growing its
suite of intellectual property assets. Our patent portfolio is
currently composed of 30 patents (seven of which were granted
post-year end) and 24 pending patents. In 2019 we were granted five
patents.
Achievements in 2019:
-- An Italian patent covering the use of G+(R) graphene in the
manufacture of golf balls was granted in May 2019;
-- A Chinese patent, covering Directa Plus' unique process for
manufacturing pristine graphene nanoplatelets, was granted in April
2019
-- Directa Plus's unique exfoliation technology is chemical
free, has an extremely high yield, and can be varied to produce
graphene nanoplatelets with specific morphologies, with high
production volume capability. This technology and process is
protected under granted patents in Europe. In October 2019 we
successfully gained a United States patent and continue to look to
expand IP protection worldwide;
-- A further US patent was awarded in July 2019 covering the
technology that allows Directa Plus to create an ink based on its
G+(R) graphene product. In addition to its thermal properties, the
G+ ink can be used in textile applications to provide flame
retardant properties or electrical conductivity, as well as for
coating applications in, for example, the production of battery
electrodes; and
-- In September 2019, we were granted an Italian patent for
polyurethane film containing G+(R) graphene nanoplatelets,
developed with the Company's membrane partner, Novaresin. We are
currently in the process of extending this patent protection
internationally. The new membrane will be marketed under the brands
Grafytherm(TM) and Grafyshield(TM) and provides water protection as
well as breathability alongside G+ performance in respect of
thermal and electrical conductivity, infrared absorption and
bacteriostaticity. The membrane will be deployed initially in the
apparel industry.
Post year end
-- In January 2020, Directa signed an agreement with Comerio
Ercole SpA ("Comerio") to pursue joint research and development
projects using the Company's G+ technology to develop products in
the rubber and tyres, plastic and non-woven materials
industries;
-- Also in January 2020, the Company received an EU grant to
develop an environmentally sustainable technology to digitally
print its G+ graphene on fabrics;
-- The Group secured an OEKO-TEX(R) certification in February
2020 for Directa's proprietary G+ graphene printing paste
technology. An Eco Passport by OEKO-TEX(R) is an independent
non-toxic certification system for chemicals, colourants and
auxiliaries used in the textile and leather industry; and
-- In April 2020, we were granted a European patent covering
Grafysorber's use to decontaminate water containing hydrocarbons
resulting from the production of oil. This significantly increases
our potential addressable market in Europe in our environmental
vertical.
Outlook
Without question, 2019 was a landmark year for Directa Plus with
the Group making great strides, in particular in our key textile
and environmental remediation verticals. The acquisition of Setcar
has bedded in well into the Group and is proving to be as
transformative as we expected. We continue to make strong progress
in other sectors, such as asphalts, where our G+ technology and
partnerships also bring material opportunities.
It is extremely sad therefore that 2020 has started with such
uncertainty for the global economy and the global community due to
the spread of COVID-19. We have nevertheless responded quickly to
the crisis to ensure the absolute safety and wellbeing of our
employees and to protect our business. Whilst we are well
positioned in our key verticals with a growing recognition for
Directa Plus and for the outstanding benefits of our G+ technology,
we do not expect to be entirely immune from the effects of COVID-19
and as a result of heightened uncertainties have withdrawn forward
guidance to stakeholders at this time until volatility in related
markets reduces.
Nevertheless, I am pleased to report that our April year to date
revenues of EUR1.8m are almost treble those of the same period last
year and we have a strong order book. Under our COVID-19 scenario
planning, our base case scenario shows a notable near trebling of
revenue for the year, albeit a reduction against initial
expectations. In addition to this we hope to benefit from a number
of attractive prospects, not least in COVID-19 related
applications. We have a robust balance sheet with year-end net cash
of EUR10.9m that additionally provides us with the financial
capacity to support our growth ambitions and to withstand the
uncertainties and challenges created by the COVID-19 pandemic.
The concept of "lean into the future" is key to us and we shall
continue to look to understand new market needs and to leverage on
the incredible enabling properties of our G+(R) graphene in order
to satisfy them. In this respect, we hope to be able to play a
meaningful role in the provision of Personal Protection Equipment,
taking advantage of the bacteriostatic and potential antiviral
properties of our G+ graphene. We will of course keep stakeholders
appraised of the new opportunities we will target and on the likely
impacts of COVID-19 as the situation becomes clearer.
Directa Plus seeks to be a farsighted company, helping to build
a better future and our ambition as a Group remains undimmed. We do
not intend to let Covid-19 prevent us from capturing new
opportunities across all of our key markets.
Giulio Cesareo
Chief Executive Officer
20 May 2020
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. In addition, I can report
that the managing the acquisition of Setcar SA and the
post-acquisition finance and accounting activities went
smoothly.
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 sector 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 2018.
The table below summarises the KPIs with further details
contained later in my report:
2019 2018
Revenue from product sales and service
(EUR'm) 2.63 2.25
Total Income* (EUR'm) 2.81 2.50
LBITDA** (EUR'm) (2.71) (3.24)
Loss after tax *** (EUR'm) (3.40) (3.96)
Reported basic loss per share(EUR) (0.07) (0.09)
Cash and cash equivalents (EUR'm) 10.91 5.50
Total number of patents granted**** 23 18
*Total Income comprises revenue from product and service sales
(EUR2.63m), and other income including government grants (EUR
0.06m) and RDEC - Research and Development Expenditure Credit
(EUR0.10m)
** LBITDA represents results from operating activities before
depreciation and amortisation of EUR0.84m (2018: EUR0.67m).
Management believes that LBITDA provides a better reflection of
operational performance by removing interest, tax, depreciation and
amortisation. EBITDA is a non-GAAP measure .
*** The loss for the year of EUR3.40m is split between a
EUR3.58m loss owned by the Company and a EUR0.18m profit in respect
of non-controlling interests.
****Number of grants in portfolio at the end of the period
Financial Review
Revenue from product and service sales grew by 17 per cent to
EUR2.63 million (2018: EUR2.25 million) with the increase driven
from higher revenue in our environmental remediation segment,
occurred following the acquisition of Setcar, of EUR0.88 million
(2018: 0.22 million). Revenues in our textile segment were flat at
EUR1.65 million (2018: 1.66 million) consolidating on the
significant progress that was made in 2018.
Other income, which mainly includes grants and R&D
Expenditure Credit (RDEC) received by the Group, was EUR0.16
million (2018: EUR0.13 million). RDEC is an Italian government
incentive scheme designed to encourage companies to invest in
R&D by providing a tax credit and this accounted for EUR0.10
million (2018: EUR 0.10 million). Income from Government grants was
driven by grants that are directly supporting key development
activities, namely the GRATA textiles project and the Gipave
asphalts project and accounted for EUR0.06 million in total. As a
result, Directa's total income increased by 12 per cent to EUR2.81
million (2018: EUR2.50million).
The EBITDA loss for the period was in line with management
expectation at EUR2.71 million compared with a EUR3.24 million loss
for 2018 and reflects both the increase in revenue and higher
expenditure on raw materials, and also changes in inventories and
other expenses. The loss after tax reduced to EUR3.40 million
compared with EUR3.96 million for 2018.
As at 31 December 2019, inventories totalled EUR1.10 million
(2018: EUR0.86 million), a level that ensures that the Group can
meet growing demand from key clients in a timely manner.
In the short term the Group's priorities continue to be focused
on a reduction in cash consumption and an improvement in
profitability. Cash and cash equivalents at 31 December 2019 were
EUR10.91 million (2018: EUR5.5 million).
Acquisition of Setcar SA
On 25 November 2019 Directa Plus S.p.A. acquired 51 per cent of
Setcar SA. Setcar has been jointly acquired with GVC, a company
ultimately owned by the GSP group, a leading provider of offshore
integrated services for the oil and gas industry with rigs in
operation in Romania, Turkey, Greece and Mexico, who acquired
47.03% holding. The total consideration is EUR4.1 million of which
the consideration payable by the Company is EUR2.1 million.
Of the total consideration of EUR4.1 million, EUR2.1 million is
to be paid in cash to the owners of Setcar as follows:
-- EUR0.6 million upon Completion
-- EUR0.4 million on 30 April 2020
-- EUR0.85 million on the first anniversary of Completion
-- EUR0.25 million on the second anniversary of Completion.
Immediately following Completion, Directa Plus and GVC provided
a loan to Setcar, in proportion to their respective shareholdings,
in order to facilitate the payment of a EUR2 million dividend to
the vendors of Setcar.
The total consideration for the acquisition of Setcar is
allocated to the identifiable assets acquired and liabilities
assumed at fair value (Purchase Price Allocation or PPA). The
identifiable finite-lived assets are then depreciated/amortized
over their remaining useful lives. The Company used an independent
specialist to provide the fair value on a per asset basis. The
revaluation amounted to the fair value uplift of assets is EUR1.6
million (excluding deferred tax liabilities) with total assets
after the revaluation to EUR5.6 million (excluding deferred tax
liabilities) and Net Assets to EUR3.8 million.
Capital Raise
During the financial year the Group benefitted from the proceeds
of two separate capital raises for total gross proceeds of GBP8.73
million:
-- GBP1.32 million (approximately EUR1.47 million) in respect of
a conditional placing and open offer (disclosed in the 2018 Annual
Report) which settled on 9 January 2019; and
-- GBP7.41 million (approximately EUR8.61 million) in respect of
a placing and open offer of 9,882,547 ordinary shares in aggregate
(comprising 9,648,000 Placing Shares and 234,547 Open Offer Shares)
with a nominal value of GBP0.0025 each and a price of 75p that
settled on 21 October 2019.
Proceeds from the placing and open offer and conditional placing
and open offer will be applied as follows:
-- EUR2.1 million in respect of the completion of the
acquisition of the Group's 51 per cent. interest in Setcar S.A.;
and
-- EUR7.9 million to sustain the Group to cash flow break-even, and specifically to:
o exploit commercial opportunities across a developing pipeline,
including the fast-growing environmental remediation market;
o build the Group's sales and marketing reach;
o develop Directa's next generation of higher performing
products;
o improve graphene production layout to drive margin growth;
and
o maintain competitive advantage and barriers to entry.
Marco Ferrari
Chief Financial Officer
20 May 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
In euro Note 31 Dec 2019 31 Dec 2018
--------------------------------------------------------------------------------- ------ ------------ -------------
Continuing operations
Revenue 3 2,631,819 2,253,293
Other income 3/5 183,033 248,695
Changes in inventories of finished goods and work in progress 6 87,537 (133,382)
Raw materials and consumables used 7 (1,185,360) (1,299,078)
Employee benefits expenses 8 (2,148,923) (2,112,650)
Depreciation and amortisation 13/14 (837,055) (674,919)
Other expenses 9 (2,286,054) (2,197,670)
--------------------------------------------------------------------------------- ------ ------------ -------------
Results from operating activities (3,555,002) (3,915,711)
--------------------------------------------------------------------------------- ------ ------------ -------------
Finance Income 11 164,536 4,440
Finance expenses 11 (35,972) (45,143)
--------------------------------------------------------------------------------- ------ ------------ -------------
Net finance costs 128,563 (40,703)
--------------------------------------------------------------------------------- ------ ------------ -------------
Loss before tax (3,426,439) (3,956,414)
--------------------------------------------------------------------------------- ------ ------------ -------------
Tax expense 12 25,225 (414)
--------------------------------------------------------------------------------- ------ ------------ -------------
Loss after tax from continuing operations (3,401,214) (3,956,828)
--------------------------------------------------------------------------------- ------ ------------ -------------
Loss of the year (3,401,214) ( 3,956,828)
--------------------------------------------------------------------------------- ------ ------------ -------------
Other Comprehensive income items that will not be reclassified to profit or loss
Defined Benefit Plan re-measurement gains and losses 22 (12,802) 1,219
--------------------------------------------------------------------------------- ------ ------------ -------------
Other comprehensive (expense)/income for the year (net of tax) (12,802) 1,219
--------------------------------------------------------------------------------- ------ ------------ -------------
Total comprehensive (expense)/income for the year (3,414,016) (3,955,609)
--------------------------------------------------------------------------------- ------ ------------ -------------
Loss attributable to
Owner of the Parent (3,585,215) (3,961,259)
Non-controlling interests 184,001 4,431
--------------------------------------------------------------------------------- ------ ------------ -------------
(3,401,214) (3,956,828)
Total comprehensive (expense)/income attributable to:
Owners of the Company (3,598,017) (3,960,040)
Non-controlling interests 184,001 4,431
--------------------------------------------------------------------------------- ------ ------------ -------------
(3,414,016) (3,955,609)
--------------------------------------------------------------------------------- ------ ------------ -------------
Loss per share
Basic loss per share 25 (0.07) (0.09)
Diluted loss per share 25 (0.07) (0.09)
--------------------------------------------------------------------------------- ------ ------------ -------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Group Company
------------------------------ ----- ---------------------------- --------------------------
In euro Note 31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
------------------------------ ----- ------------- ------------- ------------ ------------
Assets
Intangible assets 13 2,202,452 1,467,478 - -
Investments 15 - - 21,180,336 16,180,336
Property, plant and
equipment 14 4,730,752 1,062,435 - -
Trade and other receivables 16 109,698 - - -
------------------------------ ----- ------------- ------------- ------------ ------------
Non-current assets 7,042,902 2,529,913 21,180,336 16,180,336
Inventories 6 1,095,936 862,284 - -
Trade and other receivables 16 2,943,286 2,059,217 203,404 158,594
Cash and cash equivalent 18 10,906,076 5,503,884 7,669,360 3,968,016
------------------------------ ----- ------------- ------------- ------------ ------------
Current assets 14,945,298 8,425,385 7,872,765 4,126,610
------------------------------ ----- ------------- ------------- ------------ ------------
Total assets 21,988,200 10,955,298 29,053,101 20,306,946
------------------------------ ----- ------------- ------------- ------------ ------------
Equity
Share capital 19 190,512 154,465 190,512 154,465
Share premium 19 31,395,612 22,104,240 31,395,612 2,2104,240
Foreign currency translation
reserve 4,147 - - -
Retained Earnings 19 (17,656,325) (14,044,656) (2,616,723) (2,055,143)
------------------------------ ----- ------------- ------------- ------------ ------------
Equity attributable
to owners of Group 13,933,946 8,214,049 28,969,401 20,203,562
------------------------------ ----- ------------- ------------- ------------ ------------
Non-controlling interests 19 1,240,194 27,361 - -
------------------------------ ----- ------------- ------------- ------------ ------------
Total equity 15,174,140 8,241,410 28,969,401 20,203,562
------------------------------ ----- ------------- ------------- ------------ ------------
Liabilities
Lease liabilities 21 439,690 57,011 - -
Employee benefits provision 24 416,095 335,132 - -
Other payables 24 196,690 - - -
Deferred tax liabilities 17 135,059 - - -
------------------------------ ----- ------------- ------------- ------------ ------------
Non-current liabilities 1,187,534 392,143 - -
------------------------------ ----- ------------- ------------- ------------ ------------
Loans and borrowing 20 484,701 168,701 - -
Lease liabilities 21 184,900 58,121 - -
Trade and other payables 24 4,956,926 2,094,922 83,699 103,385
------------------------------ ----- ------------- ------------- ------------ ------------
Current liabilities 5,626,527 2,321,745 83,699 103,385
------------------------------ ----- ------------- ------------- ------------ ------------
Total liabilities 6,814,061 2,713,888 83,699 103,385
------------------------------ ----- ------------- ------------- ------------ ------------
Total equity and liabilities 21,988,200 10,955,298 29,053,101 20,306,947
------------------------------ ----- ------------- ------------- ------------ ------------
The Company has taken advantage of the exemption allowed under
section 408 of the Companies Act 2006 and has not presented its own
statement of comprehensive income in these financial statements.
The Company loss after tax for the year was EUR558,846 (2018: EUR
779,197).
The financial statements were approved and authorised for issue
by the board and were signed on its behalf by Giulio Cesareo, Chief
Executive Officer, and Marco Ferrari, Chief Financial Officer, 20
May 2020
The notes below form part of these financial statements
CONSOLIDATED
STATEMENT OF
CHANGES IN EQUITY
------------------ --------- ----------- ------------ ------------- ------------- ---------------- ------------
Foreign
currency
Share Share translation Retained Non-controlling Total
In euro capital premium reserve earnings Total interests equity
------------------ --------- ----------- ------------ ------------- ------------- ---------------- ------------
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
------------------ --------- ----------- ------------ ------------- ------------- ---------------- ------------
Total
comprehensive
(expense)/income
for the year
Loss of the year - - - (3,585,215) (3,585,215) 184,001 (3,401,214)
Total other
comprehensive
(expense)/income - - - (12,802) (12,802) (12,802)
Total
comprehensive
(expense)/income
for the period - - - (3,598,017) (3,598,017)) 184,001 (3,414,016)
Capital raised 36,047 10,043,120 - - 10,079,167 - 10,079,167
Expenditure
related to the
issuance of
shares - (751,748) - - (751,748) - (751,748)
Translation
reserve 4,147 - 4,147 4,147
Share-based
payment - - - (13,652) (13,652) - (13,652)
Setcar
non-controlling
interest of
acquisition 1,028,831 1,028,831
Balance at 31
December 2019 190,512 31,395,612 4,147 (17,656,325) 13,933,946 1,240,194 15,174,140
------------------ --------- ----------- ------------ ------------- ------------- ---------------- ------------
COMPANY STATEMENT OF CHANGES IN EQUITY
In euro Share Share Retained Total
capital premium earnings equity
------------------------------------- --------- ----------- ------------ -----------
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
------------------------------------- --------- ----------- ------------ -----------
Loss for the year - - (558,846) (558,846)
Capital raised 36,047 10,043,120 - 10,079,167
Expenditure related to the issuance
of shares - (751,748) - (751,748)
Share-based payment - - (2,733) (2,733)
------------------------------------- --------- ----------- ------------ -----------
Balance at 31 December 2019 190,512 31,395,612 (2,616,722) 28,969,402
------------------------------------- --------- ----------- ------------ -----------
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
Group Company
In euro Note 2019 2018 2019 2018
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
Cash flows from operating activities
Loss for the year before tax (3,426,439) (3,956,414) (558,846) (779,197)
Adjustments for:
Depreciation 14 452,309 357,014 - -
Amortisation of intangible assets 13 384,746 317,905 - -
Share-based payment expense (13,652) 165,610 (2,733) 104,532
Finance income 11 (164,535) (4,440) (164,529) (3,194)
Finance expense 35,829 45,143 2,081 22,610
(2,731,742) (3,075,182) (724,028) (655,249)
Increase/Decrease in:
- inventories 6 (79,451) 133,382 - -
- trade and other receivables 16 240,963 (897,506) (44,811) (49,354)
- trade and other payables 24 (714,799) 758,397 (19,685) 56,949
- provisions and employee benefits 22 59,342 47,175 - -
Net cash from operating activities (3,225,687) (3,033,734) (788,524) (647,654)
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
Cash flows from investing activities
Interest received 11 2,874 4,440 3,982 3,194
Investment in intangible assets 13 (232,546) (207,158) - -
Investment in subsidiary 15 - - (5,000,000) (2,000,000)
Net cash arisen from business acquisition (137,345) - - -
Acquisition of property, plant and equipment 14 (161,589) (120,456) - -
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
Net cash used in investing activities (528,606) (323,174) (4,996,018) (1,996,806)
Cash flows from financing activities
Proceeds from Capital raise 10,079,167 2,367,385 10,079,167 2,367,385
Expenditure related to the issuance of shares (751,747) (225,304) (751,747) (225,304)
Interest paid (9,773) (16,329) - (941)
New Borrowings - 66,607 - -
Repayment of borrowings 20 (190,193) (239,344) - -
Interest of lease liabilities (16,124) - - -
Repayment of lease liabilities (115,133) - - -
Net cash from (used in) financing activities 8,996,197 1,953,015 9,327,420 2,141,140
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalent 5,241,904 (1,403,893) 3,540,797 (503,320)
Cash and cash equivalent at beginning of the year 5,503,884 6,929,446 3,968,016 4,493,006
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
Exchange (losses)/gains on cash and cash equivalents 160,548 (21,669) 160,548 (21,669)
----- ------------ ------------ ------------ ------------
Cash and cash equivalent at end of the year 10,906,076 5,503,884 7,669,360 3,968,016
------------------------------------------------------ ----- ------------ ------------ ------------ ------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2019
1. Basis of preparation
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.
All notes, except as otherwise indicated, are presented in Euros
("EUR").
I. Going Concern
The COVID-19 pandemic has had a significant, immediate impact on
the global economies and on the operations and operational funding
of participants in international supply chains.
The COVID-19 pandemic has not, to date, had a significant
adverse impact on the Group's operations but the directors are
aware that if the current situation becomes prolonged then this may
change. Further details of the current assessment of the impact on
the business are set out in the strategic report. Based on very
recent projections, the directors believe that:
a) the demand for graphene products will be volatile, although
the positive outlook and general market appetite is confirmed;
b) the demand of environmental services will impacted in the
next few months mainly in relation to the oil & gas segment due
to the fact of the depressed oil price with the combined impact of
COVID-19..
Management believes that the Group has the systems and protocols
in place to address these challenges. At the date of approval of
these financial statements it is not clear how long the current
circumstances are likely to last and what the long-term impact will
be.
As at 31 December 2019, the Group had net assets of EUR15.17m
(2018: EUR8.2m) and cash and cash equivalent of EUR10.91m (2018:
EUR5.50m) . The directors prepare annual budgets and forecasts in
order to ensure that they have sufficient liquidity in place in the
business. In addition, in response to the rapidly evolving COVID-19
situation, the directors, in formulating the plan and strategy for
the future development of the business, considered a base case
scenario involving c.25% reduction in forecast revenues. The
directors have also stress tested the base case scenario by
applying a further material reduction in forecast revenues, and
mitigation or deferral of capital and operational expenditure. In
both these scenarios, the Group is projected to have the financial
capacity to support its viability, following the uncertainties and
challenges created by the COVID-19 pandemic, until at least the end
of 2021.
The directors review regularly updates to the scenario planning
such that it can put in place mitigating actions and maintain the
viability of the company and will keep stakeholders informed as
necessary.
The directors have taken steps to utilise the various support
mechanisms, such us redundancy funds or equivalent and soft loan
specifically foreseen by governments to support companies during
the general global economy slowdown due to COVID-19. Moreover, the
directors considers several options in terms of regional and
European grants able to provide funding in the following months to
sustain the R&D activities. Operational and financial KPI are
strictly monitored.
Having regard to the above, and based on their latest assessment
of the budgets and forecasts for the business of the company, the
directors consider that there are sufficient funds available to the
Group to enable it to meet its liabilities as they fall due for a
period of not less than twelve months from the date of approval of
the financial statements. The directors therefore consider it
appropriate to adopt the going concern basis of accounting in
preparing the financial statements.
b) Basis of consolidation
I. Business combination
The Group accounts for business combination using the
acquisition method of accounting. The cost of the business
combination is measured as the aggregate of the fair value of the
assets acquired, liabilities incurred or assumed and equity
instruments issued. Costs attributable to the business combination
are expensed as incurred.
The acquiree's identifiable assets and liabilities which meet
the recognition conditions are recognised at the fair values at the
acquisition date.
Contingent liabilities are only included in the identifiable
assets and liabilities of the acquiree where there is a present
obligation at acquisition date that arises from past events and its
fair value can be measured reliably.
Any difference arising between the fair value and the tax base
of the acquiree's assets and liabilities that give rise to a
taxable or deductible difference result in the recognition of a
deferred tax liability or asset.
Non-controlling interest arising from a business combination is
measured either at their share of the fair value of the assets and
liabilities of the acquiree.
Goodwill is not amortised but it is tested on an annual basis
for impairment.
II. 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.
III. 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.
IV. 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 of the Italian operating
subsidiary is Euro ("EUR"). The functional currency of the Romanian
subsidiary is RON.
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 carrying value of capitalised development costs is reviewed
whenever events or changes in circumstances indicate that that the
carrying value of an asset may not be recoverable and at a minimum
at each reporting date. 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.
II. 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.
III. Revenues recognition
Following the acquisition of Setcar during the year, Management
has reviewed the key contracts pertaining to the environmental
services provided and determined that revenue is recognised over
time rather than at a point in time as this is the best
representation of when the performance obligations under the
contracts is provided. This is considered a key judgement for this
financial period as these revenue streams differ from those earned
by the Group in the past.
IV. Business combination
Control assessments are performed by the management, per the
requirements of IFRS 10, to establish control in the business
combination. Management believe that Directa Plus SpA has control
of Setcar SA under IFRS 10 provisions based on the following:
-- Directa Plus SpA owns directly 51% of the share capital issued by Setcar SA.
-- Based on the Articles of Association (AoA) in place, Directa
Plus SpA can control the General Meeting of Setcar SA. From the
control of the general meeting derives the control of the BoD.
-- The operations of the Company are supervised and managed by
Razvan Popescu, appointed as Director by Directa Plus.
Based on the control provided in the measures above:
-- Directa Plus is exposed to variable returns from its involvement with the investee
-- Directa Plus has the ability to use its power over the
investee to affect the amount of the investor's returns.
Business combinations are accounted for using the acquisition
method of accounting. The determination of fair value of acquired
assets and liabilities often requires management to make estimates
and assumptions. The excess of the purchase price over the
estimated fair value of the net assets acquired is then assigned to
goodwill. Goodwill is assigned to individual CGUs based on the
relative fair value and/or the CGUs that are expected to benefit
from the synergies of the business combination. Refer to note 4 for
further details in acquisitions.
Sales order backlog has been recognised as an intangible. Whilst
there are long term framework agreements in place with customers,
Management have considered a short useful economic life to reflect
that purchase orders can vary annually and there are no guaranteed
orders for longer than one year.
e) New standards adopted for the period
I. IFRS 16 - Leases
In January 2016, the IASB issued IFRS 16 "Leases" ("IFRS 16"),
which requires entities to recognise right-of use ("ROU") assets
and lease obligations on the statement of financial position. The
Group adopted IFRS 16 on 1 January 2019 using the modified
retrospective approach. The modified retrospective approach does
not require restatement of prior period financial information,
instead recognising the cumulative effect as an adjustment to the
opening retained earnings and the Group applied the standard
prospectively.
The Group has applied the standard while using the following
optional expedients permitted under the standard:
-- Short-term leases - those with terms of 12 months or less at date of adoption
-- Low-value leases
On 1 January 2019, the Group recognised a cumulative increase to
ROU assets of EUR0.57 million for leases previously classified as
operating leases, directly offset to the lease obligations. The
weighted average borrowing rate used to determine the lease
obligation at adoption was approximately 2.5%. The assets and lease
obligations related to the adoption of IFRS 16, relate to the
production facility.
The Company depreciates the ROU assets on a straight-line basis
over the length of the lease unless management determines this is
not representative of the useful life, in which case, management
will estimate the useful life of the asset to be used.
Minimum operating lease commitments as at 31 December
2018 59,083
Less: short-term leases not recognised under IFRS 16 (5,083)
Plus: effect of extension options reasonably certain
to be exercised 438,000
Undiscounted lease payments 492,000
Less: effect of discounting using the incremental borrowing
rate as at the date of initial application (35,181)
Lease liabilities for leases classified as operating
type under IAS 17 456,819
Plus: leases previously classified as finance type
under IAS 17 115,132
Lease liability as at 1 January 2019 571,951
-------------------------------------------------------------- ---------
II. IFRIC 23
IFRIC 23 interpretation addresses the accounting for income
taxes when there is uncertainty over tax treatments. It clarifies
that an entity must consider the probability that the tax
authorities will accept a treatment retained in its income tax
filings, assuming that they have full knowledge of all relevant
information when making their examination. In such a case, the
income taxes shall be determined in line with the income tax
filings. The adoption of this standard has had no effect on the
financial results of the Group.
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 and other receivables and amounts due from subsidiaries
are recognised and carried at the original invoice amount less any
provision for impairment.
The Group recognises a loss allowance for expected credit losses
("ECL") on financial assets that are measured at amortised cost
which comprise mainly trade receivables. The amount of expected
credit losses is updated at each reporting date to reflect changes
in credit risk since initial recognition of the respective
financial instrument.
The Group always recognises lifetime ECL on trade receivables.
The expected credit losses on these financial assets are estimated
using a provision matrix based on the Group's historical credit
loss experience, adjusted for factors that are specific to the
debtors, general economic conditions and an assessment of both the
current as well as the forecast direction of conditions at the
reporting date, including time value of money where
appropriate.
II. Cash and cash equivalents
Cash and cash equivalents comprise demand deposits with an
original maturity up to 3 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) Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
netted off against share premium.
d) Property, plant and equipment
I. 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.
II. 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.
III. 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:
-- IT equipment from 3 to 5 years
-- Industrial equipment, office equipment and plant and machinery from 5 to 10 years
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted where appropriate.
e) Intangible assets
Intangible assets are measured at cost less accumulated
amortisation and Government grants received (where applicable). The
carrying value of intangible assets is reviewed annually for
impairment.
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.
I. 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. The estimated useful lives of
significant intangible assets are as follows:
-- 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.
-- Brand: 25 years
-- Orderbook: 1 year
-- Others: 1 year
f) 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.
g) Goodwill
Goodwill represents the excess of the cost of a business
combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired.
Cost comprises the fair value of assets given, liabilities
assumed and equity instruments issued, plus the amount of any
non-controlling interests in the acquiree plus, if the business
combination is achieved in stages, the fair value of the existing
equity interest in the acquiree. Contingent consideration is
included in cost at its acquisition date fair value and, in the
case of contingent consideration classified as a financial
liability, remeasured subsequently through profit or loss.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in
full to the consolidated statement of comprehensive income on the
acquisition date.
h) Impairment
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. For the
purpose of impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or groups of assets (CGUs). The Group's CGUs generally
align with each subsidiary. The recoverable amount is then
estimated. The recoverable amount of an asset or a CGU is the
greater of its net present value and its fair value less costs to
sell.
Net present value is generally computed as the present value of
the future cash flows, discounted to 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 asset.
An impairment loss is recognised if the carrying amount of an
asset or a CGU exceeds its estimated recoverable amount. Impairment
losses are recognised in profit or loss. Impairment losses
recognised in respect of CGUs are allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then to
reduce the carrying amounts of the other assets in the unit on a
pro rata basis.
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, impairment losses recognised in prior
years are assessed at each reporting date for any indications that
the loss has decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates used to
determine the recoverable amount. 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 and amortisation, if no impairment loss had been
recognised.
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 Group operates diverse businesses and accordingly applies
different methods for revenue recognition, based on the principles
set out in IFRS 15.
The revenue and profits recognised in any reporting period are
based on the delivery of performance obligations and an assessment
of when control is transferred to the customer. In determining the
amount of revenue and profits to record, and associated balance
sheet items, management is required to review performance
obligations within individual contracts. This may involve some
judgemental areas.
Revenue is recognised either when the performance obligation in
the contract has been performed (so 'point in time' recognition) or
'over time' as control of the performance obligation is transferred
to the customer.
For each performance obligation to be recognised over time, the
Group applies a revenue recognition method that faithfully depicts
the Group's performance in transferring control of the goods or
services to the customer. This decision requires assessment of the
real nature of the goods or services that the Group has promised to
transfer to the customer.
-- Revenues from sale of graphene based products are typically
recognised at a point in time when goods are delivered to the
customer as with this, the customer gains the right of control over
the goods. 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.
-- Revenues from sale of equipment (such as Mobile Production
Units) are typically recognised at point in time when goods are
delivered to the customers and site acceptance test is successfully
performed.
-- Revenues from services relates mainly to environmental
services provided by Setcar which are recognised:
o on an over time basis when contracts include an obligation to
process waste once the process occurred according with the contract
in place.
o at the point in time when the waste is delivered to our
platform with no further performance obligations.
Where cost has been incurred to undertake a performance
obligation but this has not been realised at the year end the
attributable costs are carried forward as work in progress.
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 organised into the following segments:
- Textile
- Environmental
- Others
For 2019 the Environmental segment was introduced to reflect the
nature of the underlying business of Setcar. Textile and
Environmental were considered by the Management the strategic
segments 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 a specific segment have been allocated as
Head Office. 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.
2019
- Textile Environmental Others Head office Consolidated
Revenue 1,650,534 876,398 104,888 - 2,631,819
Cost of Sales* (1,138,022) (329,651) 10,450 - (1,457,223)
----------------------------- ------------ -------------- ---------- ------------ -------------
Gross Profit 512,512 546,747 115,337 - 1,174,596
----------------------------- ------------ -------------- ---------- ------------ -------------
Other income 116,062 9,180 57,792 - 183,033
Other expenses:
R&D expense (240,592) (149,165) (110,960) - (500,718)
Advisory (58,504) (1,696) - (1,018,924) (1,079,124)
Operating expenses (945,743) (682,113) (556) (867,322) (2,495,734)
Depreciation & amortisation (525,334) (263,345) (48,376) - (837,055)
----------------------------- ------------ -------------- ---------- ------------ -------------
Operating Loss (1,141,599) (540,393) 13,237 (1,886,246) (3,555,002)
----------------------------- ------------ -------------- ---------- ------------ -------------
Financial costs - - - 128,563 128,563
Tax - 25,225 - - 25,225
----------------------------- ------------ -------------- ---------- ------------ -------------
Loss of the year (1,141,599) (515,168) 13,237 (1,757,683) (3,401,214)
----------------------------- ------------ -------------- ---------- ------------ -------------
Total Assets 13,655,846 7,029,252 1,316,061 - 22,001,159
Total Liabilities (2,502,635) (4,125,358) (198,283) - (6,826,276)
2018
Textile Environment Others Head office Consolidated
Revenue 1,664,847 382,931 205,515 - 2,253,293
Cost of Sales* (1,426,378) (84,137) (145,066) - (1,655,581)
-------------------- ------------ ------------ ---------- ------------ ---------------
Gross Profit 238,469 298,793 60,449 - 597,712
-------------------- ------------ ------------ ---------- ------------ ---------------
Other income 57,899 71,334 - 119,462 248,695
Other expenses:
R&D expense (226,744) (101,400) (119,540) - (447,684)
Advisory (187,362) (46,674) (15,412) (656,597) (906,045)
Operating expenses (798,009) (184,027) (83,256) (1,626,254) (2,729,886)
Depreciation &
amortisation (490,609) (129,367) (58,527) - (678,503)
Operating Loss (1,406,357) (91,341) (216,286) (2,163,388) (3,915,711)
-------------------- ------------ ------------ ---------- ------------ ---------------
Financial costs - - (40,703) (40,703)
Tax (414) - - (414)
-------------------- ------------ ------------ ---------- ------------ ---------------
Loss of the year (1,406,771) (91,341) (216,286) (2,204,091) (3,956,828)
-------------------- ------------ ------------ ---------- ------------ ---------------
Total Assets 7,969,050 278,190 2,708,058 - 10,955,298
Total Liabilities (2,234,212) (11,604) (468,072) - (2,713,888)
*Includes changes in inventories of finished goods
2019 2018
EUR EUR
---------- ----------
Sale of products 1,732,074 2,066,876
Sale of services 899,746 186,417
Government grants 58,762 129,232
Other 124,271 119,463
---------- ----------
Total Income 2,814,853 2,501,988
Geographical breakdown of revenues are:
2019 2018
EUR EUR
---------- ----------
Italy 1,642,122 1,840,139
Romania 850,738 192,840
Rest of the world 138,959 220,314
---------- ----------
Total 2,631,819 2,253,293
The Group has transacted with two main customers in 2019, which
account for more than 10% of Group revenues for sales of products
and services. This largest customer's revenues amount to EUR947,828
(33%), whilst the next highest revenue earning customer provided
EUR413,851 (15%). 23% of the Group's revenues for sales of products
and services were recognised on an over time basis.
Other Income of EUR183,033 includes Government Grants for
EUR58,762 and R&D Expenditure Credit (RDEC) for EUR 100,706.
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. Business combination
On 25 November 2019 Directa Plus S.p.A. ("DP") acquired 51% of
the issued share capital of Setcar SA ("Setcar") in order to
integrate the control over the environmental services value chain
becoming able to provide directly, as Group, water treatment and
soil treatment services. DP management has performed a control
assessment as required under IFRS10 - Consolidated Financial
Statement and concluded that DP directs the relevant activities of
Setcar and, by virtue of this, has control over Setcar SA (details
covered in the Key Judgement section").
Setcar's Balance sheet Book Value Adjustment Fair value
---------------------------------- ----------- ----------- -----------
000' EUR 000' EUR 000' EUR
---------------------------------- ----------- ----------- -----------
Non-current assets
Setcar brand 68 317 385
Order backlog - 181 181
Other intangible assets - 17 17
PPE 2,329 1,118 3,447
Non-current receivables 118 - 118
---------------------------------- ----------- ----------- -----------
Total non-current assets 2,514 1,633 4,147
---------------------------------- ----------- ----------- -----------
Total current assets 1.448 - 1,448
---------------------------------- ----------- ----------- -----------
Total assets 3,962 1,633 5,595
---------------------------------- ----------- ----------- -----------
Net assets 2,337 1,472 3,810
---------------------------------- ----------- ----------- -----------
Non-current liabilities
Loans and Borrowings non-current 90 - 90
Provisions non-current 67 - 67
Deferred tax liabilities - 161 161
---------------------------------- ----------- ----------- -----------
Total non-current liabilities 157 161 318
Total current liabilities 1,467 - 1,467
---------------------------------- ----------- ----------- -----------
Total liabilities 1,625 161 1,785
---------------------------------- ----------- ----------- -----------
Current assets include cash and cash equivalent at the date of
acquisition equal to EUR174,801. On Completion, Directa Plus Plc
paid their share (51%) of EUR600,000. Total cash paid less cash and
cash equivalent acquired is EUR137,345.
Measurement of fair value
The valuation techniques used for measuring the fair value of
material assets acquired were as follows:
Asset Valuation Technique
Property - Office Buildings Income approach - rent capitalisation
Property - Industrial platform
and land Market approach
Plant and Equipment Cost approach
Income approach - MEEM (Multiperiod excess
Orderback log earnings method)
Brand Royalties method
The Company used an independent specialist to assist the
Management with the calculation of the fair value on a per asset
basis. The revaluation amounted to the fair value uplift of assets
is EUR1.6 million (excluding deferred tax liabilities) with fair
value of net assets acquired of EUR3.8 million and goodwill of
EUR0.3 million.
Consideration transferred
The Setcar's assets and liabilities were acquired for a
consideration price of EUR2.1 million paid in cash to the Sellers
as follows:
-- EUR0.6 million upon Completion.
-- EUR0.4 million on 30 April 2020 - Payment of the Second
Instalment will be subject to maintaining the Net Asset Value of
the Company as of Completion Date at a level at least equal to the
Net Asset Value of the Company from the date of the Accounts.
-- EUR0.85 million on the first anniversary of Completion - The
payment of the Third Instalment will be performed provided that
within one year after the Completion Date it is not proven that any
of the Seller's Warranties listed in Annex 2 of this Agreement was
incorrect, inaccurate, incomplete or misleading;
-- EUR0.25 million on the second anniversary of Completion. -
representing a security for Warranty Claims that may be raised
against the Company and/or the Sellers.
Following Completion, DP and GVC provide a EUR2 million loan to
Setcar, in proportion to their respective shareholdings in the
company, in order to facilitate the payment of a EUR2 million
dividend to the vendors of Setcar.
The total purchase consideration is therefore equal to a EUR4.1
million, of which the consideration payable by the Company is
EUR2.1 million.
Based on the financial due diligence undertaken, Management has
estimated that the full contingent consideration will be paid as no
expectation of the decline in the Net Asset Value in Setcar or any
warranties have arisen.
Detailed calculation as follows:
Purchase goodwill calculation
EUR 000 Indicative fair value
----------------------------------------------- ----------------------
Total purchase consideration 2,107
Consideration paid by NCI 1,985
Book value of assets acquired 3,962
Fair value adjustment on assets acquired 1,633
Fair value of assets acquired 5,595
----------------------------------------------- ----------------------
Book value of liabilities assumed (1,624)
Contingent and unrecorded liabilities assumed -
Indicative net deferred tax adjustment (161)
----------------------------------------------- ----------------------
Fair value of liabilities assumed (1,785)
Fair value of net assets acquired 3,810
Indicative purchase goodwill 282
If the acquisition would have occurred on 1 January 2019:
-- increased of consolidated revenue for the eleven months ended
25 November 2019 would have been EUR3.2 million
-- increased of consolidated loss for the eleven months ended 25
November 2019 would have been EUR0.3 million
5. Government Grants
Information regarding government grants:
2019 2018
EUR EUR
-------- --------
Grata 5,262 57,899
Ecopave 53,500 71,333
-------- --------
Total 58,762 129,232
In relation to government grants (Grata and Ecopave), the
operational activities refer to FY19 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:
Grata Ecopave
Starting date 2017 2017
Ending date 2019 2020
Duration (months) 31 36
Total amount 126,324 214,000
Final report submitted and accepted Yes Project still on-going
There are no capital commitments built into the ongoing grants.
Government grants have been recognised in Other Income.
6. Inventory
2019 2018
EUR EUR
---------- --------
Finished products 825,920 750,853
Spare Parts 110,393 102,400
Raw material 19,162 9,031
Working in progress 140,461 -
----------
Total 1,095,936 862,284
As at 31 December 2019 total inventory value is higher than
2018, the movement is mainly driven by Setcar's working in progress
which refers to cost and services sustained for ongoing projects..
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.
7. Raw materials and consumables
2019 2018
EUR EUR
---------- ----------
Raw material & consumables 236,191 170,007
Textile products 949,169 1,129,071
---------- ----------
Total 1,185,360 1,299,078
Total raw materials and consumables are EUR1,185,360 (2018:
EUR1,299,078) of which EUR949,169 (2018: EUR 1,129,071 ) refers to
textile products.
8. Employee benefits expenses
2019 2018
EUR EUR
---------- ----------
Wages and salaries 1,741,293 1,557,471
Social security costs 442,893 384,998
Employee benefits 94,239 84,779
Share option expense (13,652) 165,611
Other costs 5,998 18,346
---------- ----------
Total 2,270,771 2,211,205
Capitalised cost in "Intangible assets" (121,848) (98,555)
---------- ----------
Total charged to the Income Statement 2,148,923 2,112,650
The average number of employees (excluding non-executive
directors) during the period was as follows:
2019 2018
----- -----
Sales and Administration 12 8
Engineering, R&D and production 26 17
----- -----
Total 38 25
The total number of employees, employed by the Group on 31
December 2019 was 169 (2018: 27), 143 were Setcar's employees.
The Directors' emoluments (including non-executive directors)
are as follows:
2019 2018
EUR EUR
-------- --------
775,708 828,311
-------- --------
Total 775,708 828,311
A detailed analysis of the remuneration of the directors is
detailed within the Directors' Remuneration Report
9. Results from operating activities
Results from operating activities includes:
2019 2018
EUR EUR
-------- --------
Audit of the Group and Company financial statements 81,997 41,180
Audit of the subsidiaries' financial statements 31,500 18,000
Other non-audit services provided by Group's auditor 4,528 2,292
Tool Manufacturing 179,614 282,352
Travel 221,397 193,771
Technical consultancies 427,362 478,879
Marketing 26,804 172,382
-------- --------
Tool manufacturing expenses are referred mainly to fabrics
printing service and decreased to EUR179,614 (2018: EUR282,352)
thanks to the negotiation of new contracts with the suppliers.
Technical consultancies and travel are approximately in line with
previous year expenditure, meanwhile Marketing expenses decreased
to EUR26,804 (2018: EUR172,382) due to the suspension of the
relationship with the existing agency in Italy in 2019 to remap
marketing activities for the 2020 year.
11. Net Finance expenses
Finance expenses include:
2019 2018
EUR EUR
---------- --------
Interest Income (3,988) (4,440)
Interest on loans and other financial costs 10,454 8,499
Interest on financial leasing 16,700 7,830
Interest cost for benefit plan 8,819 7,145
Foreign exchanges losses/(gains) (160,548) 21,669
---------- --------
Total (128,563) 40,703
Foreign exchange income of EUR160,548 (2018: EUR21,669) are
mainly related to Sterling to Euro movement in the Group's Sterling
bank account.
12. Taxation
2019 2018
EUR EUR
--------- -----
Current tax expense 449 414
Deferred tax expense/ (recovery) (25,674) -
--------- -----
Total tax expenses (25,225) 414
Reconciliation of tax rate
2019 2018
EUR EUR
------------ ------------
Loss before tax (3,426,439) (3,956,414)
Italian statutory tax rate 24% 24%
(822,345) (949,539)
Impact of temporary differences 62,887 42,327
Losses recognised (37,662) (41,913)
Impact of tax rate in foreign jurisdiction 27,942 38,960
Losses not utilised 794,403 910,579
Total tax expenses (25,225) 414
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 EUR24,040,737 (EUR 20,467,507 in 2018).
13. Intangible assets
Development
Cost Cost Patents Goodwill Others Brands Total
EUR 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
Additions 121,848 116,021 - 14,600 - 252,469
Acquired through
acquisition 11,765 - 281,284 190,079 384,124 867,252
Balance at 31/12/2019 2,765,023 437,933 303,552 249,580 384,124 4,140,213
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
Amortisation 2019 312,504 43,483 - 22,357 6,402 384,746
Balance at 31/12/2019 1,731,795 145,348 - 52,769 6,402 1,937,761
Carrying amounts
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
Balance 31/12/2019 1,033,228 292,584 303,552 196,811 377,722 2,202,452
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+(R) technology.
Management has assessed the goodwill for impairment as at 31
December 2019. Given the short period between the valuation of
acquisition and the year-end, no impairment has been noted.
14. Property, plant and equipment
Industrial Computer Office Plant Asset right Under
Cost Equipment Equipment Equipment &Machinery Land of use constr. Total
EUR EUR EUR 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
Additions 32,052 11,117 55,131 123,843 - 456,819 - 678,962
Acquired from
acquisition 1,031,249 - 17,018 1,782,559 608,395 - 2,445 3,441,666
Balance at
31/12/2019 1,235,693 56,554 179,469 4,202,028 608,395 456,819 2,445 6,741,402
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
Depreciation
2019 89,702 5,794 19,332 263,344 - 76,136 - 452,309
Balance at
31/12/2019 193,331 36,114 67,587 1,637,482 - 76,136 - 2,010,649
Carrying
amounts
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
Balance
31/12/2019 1,042362 20,440 111,882 2,564,546 608,395 380,683 2,445 4,730,753
Asset held under financial leases with a net book value of EUR
533,957 are included in the above table within Plant &
Machinery.
15. Investments in subsidiaries
Details of the Company's subsidiaries as at 31 December 2018 are
as follows:
Shareholding
Subsidiaries Country Principal activity 2019 2018
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%
Setcar S.A. Romania Waste management and decontamination services business 51% -
Subsidiaries Place of Registered Office Place of Business
Business
Directa Plus Spa Italy Via Cavour 2, Lomazzo (CO) See registered
Italy office
Directa Textile Solutions Italy Via Cavour 2, Lomazzo (CO) See registered
Srl Italy office
Setcar S.A. Romania Str. Gradinii Publice 6, See registered
Braila Romania office
The Company's investment as capital contributions in Directa
Plus Spa are as follows:
Directa Spa
At 31 December 2017 14,180,336
------------
Additions 2,000,000
------------
At 31 December 2018 16,180,336
------------
Additions 5,000,000
------------
At 31 December 2019 21,180,336
------------
16. Trade and other receivables
Current
Group Company
2019 2018 2019 2018
EUR EUR EUR EUR
---------- ---------- -------- --------
Account receivables 2,169,307 1,367,425 - -
Tax Receivables 460,521 374,673 44,117 31,634
Other receivables 313,458 317,119 159,287 129,960
---------- ----------
Total 2,943,286 2,059,217 203,404 158,594
Non-Current
Group Company
2019 2018 2019 2018
EUR EUR EUR EUR
-------- ----- ----- -----
Other receivables 109,698 - - -
Total 109,698 - - -
Group account receivables of EUR2,169,308 are mainly composed by
three major clients, which cover 77% of the total amount.
Group Tax Receivables are composed of Italian VAT receivables of
EUR177,952, UK VAT receivables of EUR44,117, Setcar VAT receivables
of EUR137,746 and a RDEC Tax Credit receivable of EUR100,707.
Other receivables are mainly composed of governments grants
EUR182,715 and prepayments EUR126,704.
Non-current other receivables of EUR109,698 refer to specific
projects where the collection of a certain amount, although due, is
postponed to the end of the project itself.
As at 31 December 2019 the ageing of account receivables
was:
Days overdue 2019 2018
EUR EUR
---------- ----------
0-60 1,929,268 1,306,070
61-180 154,397 54,418
181-365 + 124,492 26,569
---------- ----------
Allowance of impairment (38,849) (19,631)
---------- ----------
Total 2,169,308 1,367,425
In 2019, 89% of account receivables have an ageing less of 60
days and refers to an order delivered close to the year end.
As at 31 December 2019 the Group recognised provision for
EUR19,218.
17. Deferred tax liabilities
2019 2018
EUR EUR
---------- ----------
Deferred tax liabilities 294,191 195,504
Deferred tax assets - losses (159,132) (195,504)
---------- ----------
Total 135,059 -
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 from the capitalisation of
development costs, defined benefit scheme and from the acquisition
of Setcar. The deferred tax liabilities are detailed below:
2019 2018
EUR EUR
---------- ----------
Deferred tax liabilities cost capitalised 156,695 191,885
Deferred tax liabilities other 2,437 3,619
Deferred tax liabilities arising from acquisition 135,059 -
Deferred tax assets - losses exc. Setcar (159,132) (195,504)
---------- ----------
Total 135,059 -
18. Cash and cash equivalents
Group Company
2019 2018 2019 2018
EUR EUR EUR EUR
----------- ---------- ---------- ----------
Cash at bank 10,890,718 5,503,568 7,669,360 3,968,016
Cash in hand 15,357 316 - -
----------- ---------- ---------- ----------
Total 10,906,075 5,503,884 7,669,360 3,968,016
19. Equity
2019 2018
EUR EUR
------------- -------------
Share Capital 190,512 154,465
Share Premium 31,395,612 22,104,240
Foreign currency translation reserve 4,147 -
Retained earnings (17,656,325) (14,044,656)
Non-controlling interests 1,240,194 27,361
------------- -------------
Balance at 31 December 15,174,139 8,241,410
Share Capital
Number of Ordinary Share Capital
Shares (EUR)
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
Share issue on 09 January 2019 - capital
raise ** 2,647,609 7,350
Share issue on 21 October 2019 - capital
raise *** 9,882,547 28,697
At 31 December 2019 60,998,983 190,512
* 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.
** On 09 January 2019, 2,647,609 ordinary shares with a nominal
value of GBP0.0025 each were issued as effect of the Company's
capital raise.
*** On 21 October 2019, 9,882,547 ordinary shares with a nominal
value of GBP0.0025 each were issued as effect of the Company's
capital raise.
Share Premium
In euro Share premium
EUR
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
------------------------------------------------ --------------
Shares issued on 18 January 2019 1,462,728
Expenditure relating to the raising of shares (140,939)
Shares issued on 21 October 2019 8,580,393
Expenditure relating to the raising of shares (610,808)
------------------------------------------------ --------------
At 31 December 2019 31,395,612
On 09 January 2019, 2,647,609 ordinary shares with a share
premium value of GBP0.7475 each were issued as effect of the
Company's capital raise and the amount of EUR1,462,728 was credit
to Share premium reserve.
Expenditure of EUR140,939 referred to direct cost related to the
raising of shares was deducted from the share premium.
On 21 October 2019, 9,882,547 ordinary shares with a share
premium value of GBP0.7475 each were issued as effect of the
Company's capital raise and the amount of EUR 8,580,393 was credit
to Share premium reserve.
Expenditure of EUR610,808 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.
Foreign currency translation reserve
Exchange differences resulting from the consolidation process of
Setcar are recognised in the translation reserve for an amount of
EUR4,147.
Non- controlling interest
Non-controlling interest refers to the minority shareholders of
the company who own less than 50% of the overall share capital.
As at 31 December 2019 it is composed of 49% of Setcar S.A. and
40% of Directa Textile Solutions Srl.
20. Loans and borrowings
Group Company
2019 2018 2019 2018
EUR EUR EUR EUR
-------- -------- ------- -----
Loans and borrowings 484,701 168,701 - -
-------- -------- ------- -----
Total 484,701 168,701 - -
2019 Current Non-current Repayment Interest
rate
------------------------ ---------- --------------
EUR EUR EUR
------------------------ ---------- --------------
ROBOR 6M
BANK OF TRANSILVANIA 353,506 353,506 - 12-months + 6.52%/year
-------- -------- ------------ ---------- --------------
GVC INVESTMENT COMPANY 124,537 - - 12-months 6%/year
LMT
-------- -------- ------------ ---------- --------------
Reconciliation of liabilities arising from financing
activities
Cash flows Non Cash flows
01 January Interest Capital Accrued Liabilities 31 December
2019 Paid Repayment Interest acquired 2019
EUR EUR EUR EUR EUR EUR
----------- --------- ----------- ---------- ------------ ------------
Borrowings 168,701 (1,167) (162,043) 1,167 478,043 484,701
Total 168,701 (1,167) (162,043) 1,167 478,043 484,701
21. Leases liabilities
The following table details the movement in the Group's lease
obligations for the period ended 31 December 2019:
2019 2018
EUR EUR
-------- --------
Non-current lease liabilities 439,690 57,011
Current lease liabilities 184,900 58,121
-------- --------
Total 624,590 115,133
In the previous year, the Group only recognised lease assets and
lease liabilities in relation to leases that were classified as
'finance leases' under IAS 17, 'Leases'; according to the new
adoption of IFRS 16 in FY2019 the group has also realised
additional Right of use assets, liabilities and depreciation
expenses. The assets are presented in property, plant and equipment
in note 11.
22. Employee benefits provision
2019 2018
EUR EUR
-------- --------
Employee benefits 416,095 335,132
--------
Total 416,095 335,132
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 2018 and 2019 is as follows:
EUR
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
----------------------- ---------
Service cost 65,788
Interest cost 8,819
Actuarial gain/losses 12,802
Past service cost -
Benefit paid (16,007)
----------------------- ---------
Amount at 31 December
2019 406,534
----------------------- ---------
Variables analysis
Detailed below are the key variables applied in the valuation of
the defined benefit plan liabilities.
2019 2018
------------------------- ------- ------
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 - 2019 Decrease 10% Increase 10%
Variation Variation
Rate DBO EUR Rate DBO EUR
--------------------- --------- ------ ---------- ------ ----------
Increase salary Male 1.08% (3,079) 1.32% 3,119
--------------------- ---------- ----------
Female 1.04% 1.27%
------------------------------- ------ ---------- ------ ----------
Turnover Male 1.53% (2,724) 1.87% 2,619
--------------------- ---------- ----------
Female 1.35% 1.65%
------------------------------- ------ ---------- ------ ----------
Interest rate 2.07% 11,201 2.53% (10,631)
Inflation rate 0.99% (3,203) 1.21% 3,219
23. Trade and Other payables
Non-current
Group Company
2019 2018 2019 2018
EUR EUR EUR EUR
---------- --------- ------- -------
Other payables 66,629 - - -
Contingent consideration at fair value through P&L 130,061 - - -
Total 196,690 - - -
Current
Group Company
2019 2018 2019 2018
EUR EUR EUR EUR
---------- --------- ------- -------
Trade payables 1,055,856 1,459,732 1,702 15,397
Employment costs 419,331 482,357 - -
Other payables 2,831,436 152,833 81,997 87,988
Contingent consideration at fair value through P&L 650,303 - - -
Total 4,956,926 2,094,922 83,699 103,385
Other payables mainly refer to the remaining portion of debt due
to Setcar's previous shareholders.
24. 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 2019 the Group is only exposed to
variable interest rate risk for a short term revolving 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.
The Group's cash and cash equivalents and restricted cash are
held with major financial institutions. The Group monitors credit
risk by reviewing the credit quality of the financial institutions
that hold the cash and cash equivalents and restricted cash.
The Group's trade receivables consist of receivables for revenue
mainly in Italy and Romania. Management believes that the Group's
exposure to credit risk is manageable and currently the Group's
standard payment terms are 30 to 60 days from date of invoice are
largely met from the clients. At the end of the period, 89% of
account receivables have an ageing less of 60 days and refers to
orders delivered close to the year end. As at 31 December 2019 the
Group recognised a bad debt provision for EUR19,218.
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 the exposure to credit risk is approved and
monitored on an ongoing basis individually for all significant
customers. The maximum exposure to credit risk is represented by
the carrying amount of each financial asset in the statement of
financial position. The Group does not require collateral in
respect of financial assets.
d) Exposure to credit risk
Group
Note 2019 2018
EUR EUR
Trade receivables 16 2,169,308 1,367,425
Cash and cash equivalent 18 10,906,076 5,503,884
Total 13,075,384 6,871,309
The largest customer within trade receivables account for 18.6%
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.
2019 Carrying amount Up to 1 year 1 -5 years
EUR EUR EUR
Financial liabilities
Trade payables 1,055,856 1,055,856 -
Lease Liabilities 649,287 193,598 455,689
Loans 484,701 484,701 -
Total 2,189,844 1,734,155 455,689
2018 Carrying amount Up to 1 year 1 -5 years
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
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 GBP 4,483,520
As at 31 December 2019 if the exchange rate EUR/GBP increase by
10% the impact on P&L would be a loss equal to EUR0.41 million
(if decrease by 10% would be a profit equal to EUR0.50
million).
The Group holds accounts also in other currency (such as USD and
RON) but just for business purposes and for not material
amount.
25. Earnings per share
Change in Weighted
number of Total number number of
ordinary of ordinary ordinary
shares shares Days shares
At 01 January 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
Existing shares 48,468,827 9 1,195,122
Issued on 09 Jan 2019 2,647,609 51,116,436 285 39,912,834
Issued on 21 Oct 2019 9,882,547 60,998,983 71 11,865,556
At 31 December 2019 12,530,156 60,998,983 365 52,973,511
Basic Diluted
2019 2018 2019 2018
EUR EUR EUR EUR
Loss attributable to the owners of the Parent (3,585,215) (3,961,259) (3,401,214) (3,956,828)
Weighted average number of ordinary shares in issue during the
year 52,973,511 44,376,071 53,054,737 44,376,071
Fully diluted average number of ordinary shares during the year 52,973,511 44,376,071 53,054,737 44,376,071
Loss per share (0.07) (0.09) (0.07) (0.09)
The effect of anti-dilutive potential ordinary shares are
ignored in calculating the diluted loss per share.
26. 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 2019 31 Dec 2019
Market value Performance
Black Scholes Model shares shares
Share price 69p -
Exercise price 75p -
Expected volatility 36% -
Compounded Risk-Free Interest Rate 4.25% -
Expected life 3 years -
Number of options issued* 60,000 -
*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 Granted Cancelled Expired Vested Outstanding Exercisable Grant date Exercisable
at start of during during during during at end of period date
period the the the the period option
period period period period price
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
- (25,523) (733,066) (821,288)
31
December 12 May
2019 1,639,877 (25,523) (733,066) (821,288) 60,000 75p 2017 12 May 2020
Cancelation of share options during the period relates to the
resignation employees. Share options expired over the period refers
to those performance share option that did not meet the performance
criteria on the third anniversary of the granting. Vested share
options are Market share options and Performance share options that
met the criteria on the third anniversary. No vested options were
exercised in the period.
27. Related parties
The below figures represent remuneration of key management
personnel for the Group, 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'.
2019 2018
EUR EUR
Short-term employee benefits and fees 251,353 235,646
Social security costs 69,037 64,819
320,390 300,465
For Directors remuneration please see Director's Remuneration
Report.
28. Contingent Liabilities and Commitments
The group has the following contingent liabilities relating to
bank guarantees on operating lease arrangements and government
grants.
2019 2018
EUR EUR
Bank guarantees 114,440 105,640
Total 114,440 105,640
29. Post Balance Sheet events
The COVID-19 pandemic has had a significant, immediate impact on
the global economies and on the operations. It is considered a
non-adjusting post balance sheet event as the WHO called the
Pandemic on 11th March 2020.
The COVID-19 pandemic has not, to date, had a significant
adverse impact on the Group's operations but the directors are
aware that if the current situation becomes prolonged then this may
change. Management believes that the Group has the systems and
protocols in place to address these challenges. At the date of
approval of these financial statements it is not clear how long the
current circumstances are likely to last and what the long-term
impact will be.
-ends-
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAESEADEEEAA
(END) Dow Jones Newswires
May 21, 2020 02:00 ET (06:00 GMT)
Directa Plus (LSE:DCTA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Directa Plus (LSE:DCTA)
Historical Stock Chart
From Apr 2023 to Apr 2024
