TIDMHEIQ
RNS Number : 6192J
HeiQ PLC
28 April 2022
28 April 2022
HeiQ Plc
("HeiQ" or "the Company")
Results for the year ended 31 December 2021
Strengthening of core business and executing on growth
strategy
HeiQ Plc (LSE: HEIQ), an established global brand in materials
and textile innovation that operates in high-growth markets, is
pleased to announce its preliminary results for the full year ended
31 December 2021. The Company's audited annual report and accounts
will be published in May and a further announcement will be made in
due course.
Financial highlights:
-- Revenue up 15% to US$57.9 million, ahead of expectations (2020: US$50.4 million)
-- Gross profit margin down 9.2% to 46.6% (2020: 55.8%) due to
higher raw materials and logistics cost (price increased as of
January 2022)
-- Adjusted EBITDA decreased by 54% to US$6.5 million (2020:
US$14.1 million), in line with market expectations and reflecting
planned increase in SG&A costs to strengthen innovation and
support future growth
-- Profit before tax of US$2.7 million (2020: US$7.1 million)
and profit after tax of US$2.5 million (2020: US$5.0 million)
-- A well-funded balance sheet with net cash of US$12.9 million
-- Operating cash flow increased by 215% to US$3.5 million (2020: US$1.1 million)
-- Diluted EPS down 53% to US$0.0201 (2020: US$0.0432)
Operational highlights:
-- Completed 3 industrial biotech and bio-antimicrobials
capability building acquisitions in six months for US$27.5 million,
strengthening HeiQ's hygiene offering
-- Launched 20 new products to market and filed 5 new patents
-- Potential blockbuster technologies progressing very positively:
o Launched HeiQ AeoniQ, the world's first climate positive fibre
with an implied valuation of US$200million and >US$10million
investments from HUGO BOSS and The LYCRA Company
o Patent pending proof of concept for lithium metal batteries
achieved for HeiQ GrapheneX
o Third party high impact publication on HeiQ Synbio as best
solution to address nosocomial healthcare acquired infections and
multi-resistances in hospitals.
-- Expanded HeiQ Portugal to form a service centre for finance, marketing, and IT
-- Progressed HeiQ's market leading ESG position by commercializing impactful technologies
-- Significantly expanded HeiQ's capabilities and team by
growing from 140 to more than 200 HeiQans (+20 sales and +30
Innovation)
Post period-end highlights:
-- Made significant investment in the advancement of disruptive technology platforms and their commercialisation
-- Secured investment to commercialize HeiQ AeoniQ, including
building a US$5m pilot commercialization plant to be launched to
market with high impact brand partners
-- Investing in a US$2m pilot commercialization plant for HeiQ
GrapheneX membrane technology and in the process of securing joint
development partners
-- First-quarter trading in line with expectations and ahead of same period previous year
Carlo Centonze, co-founder and CEO, HeiQ plc, said: "Following a
momentous 2020, we made continued progress in executing our
strategic objectives in 2021, as part of our goal to become a
leading materials innovation company. Through the transformative
acquisitions of Chrisal, RAS, and Life during the period, our
capabilities platform has been significantly strengthened and
enhanced, paving the way for additional future success. We
continued to make strong progress with our HeiQ GrapheneX and HeiQ
Synbio blockbuster technologies, and together with the launch of
HeiQ AeoniQ, our climate positive yarn, we are today in a position
of tremendous opportunity for value creation.
"In 2022, with the support of our robust foundation from recent
acquisitions and innovation, we will continue executing our growth
strategy, ensuring we are always one step ahead. The consolidated
growth across our core products in existing and new markets has
enabled us to be cash generative and will see us continue to invest
in the advancement of our disruptive technology platforms and their
commercialization. As a result, we will be targeting double digit
growth across our existing products in 2022.
"This continues to be an exciting time for HeiQ, with the
megatrend tailwinds favouring our offerings. Combined with our
existing progress and momentum, the outlook for the Group and our
stakeholders is bright and I look forward to keeping shareholders
up to date with our progress in the next year."
Analyst Briefing
Carlo Centonze, CEO, and Xaver Hangartner, CFO will host a
webinar for equity analysts at 09:30am BST today. Any equity
analysts wishing to register should contact SEC Newgate at
HeiQ@secnewgate.co.uk where further details will be provided.
Whilst substantially complete, the audit sign-off process has
not yet been finalised. No material amendments to the preliminary
disclosures contained within this announcement are expected within
the audited financial statements to be published in May.
For further information, please contact:
HeiQ Plc
Carlo Centonze (CEO) +41 56 250 68 50
Cenkos Securities plc (Joint Broker) +44 (0) 207 397
Stephen Keys / Callum Davidson 8900
------------------
SEC Newgate (Media Enquiries) +44 (0) 20 3757
Elisabeth Cowell / Axaule Shukanayeva 6882
/ Molly Gretton HeiQ@s ecnewgate
. co.uk
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CHAIR'S STATEMENT
Strengthening our core business
2021 was a year of continuous progress and consolidation for the
Group. HeiQ's growth platform has been significantly strengthened
and enhanced with three major acquisitions of Chrisal, RAS and Life
during the period.
The complementary product portfolios of these three newly
acquired entities have expanded our capabilities, expertise and
product offerings in hygiene specialities and provided us access to
new applications and markets. Having an established culture of
innovation in their DNA, these businesses have been integrated into
HeiQ within a very short space of time.
Another highlight was the launch of our disruptive HeiQ AeoniQ
technology, a high-performance climate positive cellulose yarn with
potentially revolutionary environmental benefits and we had brand
partners such as HUGO BOSS and The LYCRA Company investing into the
scale-up to realise the enormous potential of this game-changing
technology together.
While achieving these value adding milestones, we also had to
overcome significant challenges presented by the COVID-19 pandemic.
We have faced constraints in the form of much longer lead times
through all global raw material supply chains, production shutdown
due to lockdowns of our customers and up to 500% higher logistics
costs, as well as longer delivery times of products to our
customers. Nevertheless, with the determination and adaptability of
our team, we have been able to maintain supply to our customers,
although at higher cost. My special thanks go to our customers,
suppliers and distribution partners for their ongoing support of
HeiQ in a highly challenging environment.
Broadening our hygiene technology solutions offering
HeiQ has earned its place as an innovator among lifestyle brands
and as a leader in multiple textile functionalities. In recent
years, we have been growing our reputation as the leader in
providing hygiene solutions, not only for textiles but also for
coatings, plastics, hospital cleaning products, industrial water
treatment and consumer goods. A much higher awareness of hygiene
and ongoing consumer demand for hygiene solutions continue to drive
our offering in this space. With studies suggesting that by 2050
there will be an estimated 10 million deaths per year due to
antimicrobial resistance, HeiQ has the mission to introduce our
effective and sustainable hygiene solutions to market. Our
strategic entrance into the medical mask business in the previous
years, which contributed to about 10% of our business, is now
giving us access to customers for our new hygiene offerings and a
much bigger and sustainable annual revenue potential.
People and sustainability
During 2021 we made substantial investments into our workforce
and increased our personnel by about 50% to create a stronger
global organization capable of growing our innovation product
range, market share and geographical footprint.
Today we are a truly global and diverse organization with more
than 200 HeiQans spanning 29 nationalities, working across 19 legal
entities. Having adopted flexible working arrangements, our highly
motivated, professional and agile teams are accustomed and skilled
at working and interacting with our customers both online and
offline, irrespective of time zones.
Sustainability is at the core of everything we do and it has
been a driving force for HeiQ since day one. We made substantial
progress in 2021 by collecting carbon emissions data at the Group
level which will enable us to set carbon reduction targets. We
deployed our expertise into market technologies with a launch of
HeiQ AeoniQ with its tremendous downstream ESG potential. We
conducted a survey of our employees and customers to learn about
which ESG areas they want us to focus on.
Dividend
In order to continue to prioritize investment in our disruptive
technology growth opportunities such as HeiQ AeoniQ, HeiQ GrapheneX
and HeiQ Synbio, the Board has decided not to pay a dividend for
the year 2021.
Board
In addition to completing these three acquisitions, during the
period, the Board's focus was on delivering HeiQ's strategy to
create clear management structures, workflows and scalability. The
Board is committed to the principles which underpin good corporate
governance and have revised and upgraded the corresponding policies
and processes in place.
Outlook
HeiQ is well positioned for the future. We are an agile, nimble,
responsive and dynamic business, with several very relevant
technology propositions, ever growing ESG credentials, increasingly
strong brand equity and established positions in high-growth
markets. Having first movers' advantage, we have a strong sense of
upcoming consumer trends and the ability to quickly respond to
those trends and develop the technologies that will be in high
demand in a few years' time. We enjoy the trust of our customers
thanks to our track record of being a true innovator and
differentiator.
We have a rich R&D pipeline with high commercial potential
and we are opening doors to many exciting new markets. As we
continue to integrate our acquisitions and leverage our
capabilities, we will proactively seek to increase our penetration
in these new markets.
I would like to convey my sincere thanks to our amazing HeiQ
team for their highly motivated engagement during 2021.
Our goals for 2022 are ambitious and although times remain
uncertain and may continue to be challenging, HeiQ has the strong
foundation, growth strategy, drive and innovative culture to
succeed in achieving its goals. I am confident that we will
continue to grow as a key innovation player in multiple
industries.
Esther Dale-Kolb
Chair
CHIEF EXECUTIVE OFFICER'S REVIEW
Accelerating towards our ambitions
Following a momentous 2020, we made strong progress in
accelerating HeiQ towards its strategic objectives throughout 2021.
We completed three transformative acquisitions in six months and
significantly expanded our capabilities and team growing from 140
to more than 200 HeiQans (+20 sales and +30 Innovation). We
launched our disruptive HeiQ AeoniQ climate positive yarn, securing
investment from our first commercialization partners, and made
strong progress with our HeiQ GrapheneX and HeiQ Synbio blockbuster
technologies. In many ways, 2021 reminded me a lot of the
exhilaration I experienced during take off accelerations in my
service as a Swiss army pilot.
We achieved topline growth despite having faced our strongest
ever headwinds in the form of supply chain disruptions and
lockdowns, demonstrating the strong continued demand for our IP.
Having said that, our gross margin has been temporarily impacted by
these factors. Now Europe is being rocked by the war in Ukraine,
with as yet unknown consequences for the oil price, food
availability, supply and logistics. We managed to overcome the
challenges of 2021 thanks to an extremely agile and resilient team
and an outstanding commitment by each and every HeiQan. I would
like to thank them all and trust that with all hands on deck in
2022 we can ride any storm thrown at us again. As an ongoing
measure, we have adjusted our prices wherever and as soon as
possible to compensate the increased raw material and logistic
costs, diversified our supplier base and invested in a global ERP
to streamline our operations.
Our business is in a strong position to weather external
pressures. In addition to our core products, we own seven
technology platforms and have a healthy innovation pipeline. One of
our platforms, our climate positive HeiQ AeoniQ fiber, received an
implied valuation of US$ 200 million with investments from Hugo
Boss and The LYCRA Company. A subsidiary holding the technology
platform being valued more than our listed entity (as of March
2022) demonstrates the potential value of our IP.
With US$ 14.6 million cash, >US$ 9 million available credit
lines and with only US$ 1.7 million of borrowings, our balance
sheet gives us scope to act on the value creating opportunities in
our pipeline. Our cash generative business (cashflow from operating
activities) has financed our innovations since 2010, and with only
US$ 55 million raised since inception in 2005 we have maintained a
lean IP value creation approach.
Operational and financial performance
In 2021 the Group achieved record revenue of US$ 57.9 million.
Our goal to generate revenues of US$ 300 million in the medium term
has not changed.
Our business model is to grow organically, complemented by
making selective capability building acquisitions, and
commercializing or licensing our disruptive innovations.
Acquisitions of the complementary green hygiene IP platforms of
Chrisal, RAS and Life have allowed us to become one of the top 3
hygiene specialities player with the most sustainable product
range, giving us an entry into multiple new lucrative markets,
beyond textiles. 2021 saw our brand equity grow exponentially once
again. Our credentials as a green innovator are acknowledged by
textile brands and increasingly by consumers too. This will allow
us to maintain premium margins and deploy innovations with
impact.
Our major contract wins with ICP in hygiene paper coatings and
our acquisition of RAS with durable hard surface hygiene coatings
have led to the creation of our new Coatings & Plastics
business unit, which includes a low eEmissivity technology platform
"ECOS" with the potential to grow into our fourth blockbuster
technology for defence, building and automotive markets.
People and sustainability
HeiQ remains a nimble and agile company, with the potential to
make a significant positive environmental impact through our work
with large retail brands to create technology solutions that make
their downstream products more sustainable.HeiQ AeoniQis a prime
example of this.
Being sustainable is core to our ethos, as well as a source of
competitive advantage. Sustainable alternatives capable of
disrupting existing markets are a key opportunity for the Group,
including:
-- natural vs. oil based polymers
-- bio-based vs. Quarternary ammonium salt based actives
-- botanical technologies vs. metals
-- probiotic bacteria vs. chemical biocides and disinfectants
Sustainability progress summary
With the expansion of our team this year, we achieved a new
level of diversity. With 29 nationalities now represented across
HeiQ, our shared values and mission are more important than ever.
Our inclusive culture and flat hierarchy are vital for fostering
idea exchange, particularly important for an innovative business
known for our speed to market. Despite a competitive job market, we
have still managed to bring in some exciting talent.
Current trading and outlook
Having laid a strong foundation with our acquisitions and
innovation, we have ambitious plans and will continue to stay one
step ahead.
Organic growth across our products in existing and new markets
allows us to be cash generative, enabling substantial investment in
the advancement of our disruptive technology platforms and their
commercialization or royalty licensing. As such, we are targeting
double-digit growth of across our existing products in the next
year.
We have a tremendous opportunity for value creation with HeiQ
AeoniQ, HeiQ GrapheneX and HeiQ Synbio. We will continue to invest
in the commercialization of AeoniQ, including building a US$ 5m
pilot commercialization plant and launching it to market with a
dozen brand partners. We will also invest in a US$ 2m pilot
commercialization plant for our GrapheneX membrane technology and
aim to secure a JDA with leading battery and rugged electronics
players. With the recently published paradigm shifting study by the
Charité hospital in Berlin on HeiQ Synbio we will push for strong
claims approval and commercialization to healthcare globally.
The complementary skillsets and locations of our businesses will
allow us to disrupt new markets and deploy our technologies
globally. But we must remain lean and agile while growing, so
another key goal is to strengthen our integration across all
subsidiaries by harmonizing digital technologies and operating
procedures. We will continue to prioritize attracting the talent we
need to fuel our growth, transformation and innovation strategy,
which we have been successful so far.
The megatrend tailwinds favor HeiQ's offerings. Combined with
our existing progress and momentum, the outlook for the Group and
our stakeholders is bright.
Carlo Centonze
CEO
FINANCIAL REVIEW
Strengthening of foundation while driving growth in times of
uncertainty
2021 was a transitional, yet successful year for HeiQ where we
were able to grow revenues by 15% from USD 50 million in 2020 to
USD 58 million in 2021. HeiQ achieved various milestones on its
growth path despite being challenged by the different waves of the
COVID-19 pandemic and its impact on global economies throughout the
year. By acquiring three companies in adjacent fields, we were not
only able to strengthen our range of solutions for hygiene, but
also enter new markets like coatings, plastics and symbiotic
cleaners.
However our investments were not limited to acquisitions. We
also continued to invest significantly in our organization with
over 60 more employees in 2021. Our innovation pipeline progressed
significantly - spearheaded by HeiQ AeoniQ which was announced to
market in Q4 2021. As we developed our innovation pipeline, we
continue to evolve from a "specialty chemicals" business with
strong IP into an innovator that monetises its IP through
licensing, in addition to our own commercialisation. In the 2021
Statement of Comprehensive Income however, our own
commercialization of IP dominates the picture. We expect to see an
increasing portion of revenues derived from monetization of IP in
2022.
In order to have the required scalability of our organization in
place on our journey towards the USD 300 million revenue target, we
kicked-off a group-wide digitalization program to give the entire
group unified, state-of-the art tools that are scalable as we
grow.
HeiQ experienced strong topline growth (+15%) in FY21, whilst
pressure on gross margins caused by headwinds from higher raw
materials and logistics costs previously flagged in the interim
results have continued into the second half of the year (Gross
Margin 2021: 46.6% vs. 55.8% in 2020). The investments in people,
innovation pipeline and organization have been driving the increase
(+51%) in selling and general administrative expenses
(SG&A).
Year ended Year ended
31 December 31 December
2021 2020 (restated)
USD '000 USD '000 Growth
----------------------------------- ----------- --------------- ------
Revenue 57,874 50,401 15%
Cost of sales (30,898) (22,268)
Gross profit 26,976 28,133 -4%
Gross profit margin 46.6% 55.8%
Other operating income 6,426 4,744
Selling and general administrative
expenses (24,465) (16,117)
Other operating expenses (5,820) (5,127)
------------------------------------ ----------- --------------- ------
Operating profit 3,117 11,633 -73%
------------------------------------ ----------- --------------- ------
Operating profit margin 5.4% 23.1%
------------------------------------ ----------- --------------- ------
Deemed cost of listing - (1,402)
Transaction costs (206) (1,871)
Other income 199 -
Other costs (361) (69)
Finance income 534 68
Finance costs (597) (1,184)
Share of (losses) / profits
of associates - (15)
Income before taxation 2,686 7,160
Taxation (212) (2,112)
------------------------------------ ----------- --------------- ------
Income after taxation 2,474 5,048 -51%
------------------------------------ ----------- --------------- ------
Adjusted EBITDA 6,483 14,104 -54%
------------------------------------ ----------- --------------- ------
EBITDA margin (adjusted) 11.2% 28.0%
------------------------------------ ----------- --------------- ------
Contribution from entities acquired in 2021
In 2021, HeiQ acquired controlling stakes in three companies:
Chrisal NV (Belgium - 51% acquired), RAS AG (Germany - 100%
acquired) as well as Life Material Technologies Limited (Hong Kong
- 100% acquired). Revenue contribution in 2021 of the acquired
entities amounts to USD 10.0 million and the contribution to profit
before tax amounts to USD 1.3 million after deduction of
transaction costs totalling USD 0.2 million.
The total consideration including contingent payments for all
three companies is expected to amount to USD 27.5 million in total,
with USD 11.5 million settled in cash and USD 16.0 million in HeiQ
plc shares. As of December 31, 2021 USD 21.6 million had been
settled (USD 10.1 million in cash, USD 11.5 million in shares), USD
0.6 million was settled in shares on February 25, 2022 and USD 5.3
million are still contingent and are to be settled in Q2 2022 (USD
1.4 million in cash and USD 3.9 million in shares). Total net
assets of USD 10.2 million and goodwill of USD 18.6 million have
been recorded, while non-controlling interests amount to USD 1.3
million.
Revenues
Revenues increased in 2021 by 15% and amounted to USD 57.9
million for the year (2020: USD 50.4 million), despite the
challenges experienced through unstable markets, local lock-downs
and supply chain issues.
Backed by the acquisitions of HeiQ Chrisal and HeiQ RAS,
revenues in Europe have been growing significantly from USD 10.4
million in 2020 to USD 16.2 million in 2021 (+56%). Revenues in the
Americas have also seen a strong growth by 9% and amounted to USD
21.7 million in 2021 (2020: USD 19.8 million). This growth was
driven by organic growth accounting for approximately 70% of the
growth whereas acquisition contributed about 30% to it. Asia, our
third key region, saw slightly lower revenues of USD 19.6 million
in 2021 (2020: USD 19.9 million). This was mainly driven by high,
non-recurring revenues in 2020 which could not be compensated for
entirely as well as lockdowns in Southeast Asia.
In 2021 we saw a healthy allocation of revenues between our
three key regions with the Americas accounting for 37% of revenues
(2020: 39%), Asia 34% (2020: 39%) and Europe accounting for 28%
(2020: 21%) which makes us less exposed to regional political or
economic developments.
Sales by form:
Functional Ingredients remain the key form of how we bring
functionality to our customers and with revenues of USD 43.7
million accounted for 75% of total sales in 2021 (2020: USD 42.0
million or 83% of revenues). 2021 includes acquired revenues of USD
4.0 million and thus on a like for like basis shows a decrease of
USD -2.3 million which was caused by declining demand of functional
ingredients related to face mask applications and other pandemic
related items compared to 2020.
Revenues from Functional Materials amount to USD 0.9 million in
2021 and achieved a growth of 11% compared to 2020 (USD 0.8
million). While in 2020, this category was dominated by filter
materials sold for face masks, in 2021 the main materials sold are
masterbatches as well as our insulation technology XReflex and show
also replacement of non-recurring sales with recurring
business.
Revenues from Functional Consumer Goods amount to USD 10.1
million in 2021 (2020: USD 7.4 million) and thus achieved
significant growth (USD +2.6 million or +35%) driven by revenues
related to the product range of HeiQ Chrisal (USD 3.8 million).
Excluding acquired revenues, the category would show a decrease of
USD -1.2 million (-16%) which reflects non-recurring opportunities
that we were able materialize back in 2020. Accordingly, the
composition of this category changed significantly as the Synbio
products of HeiQ Chrisal (like household cleaners) have been
added.
Consistent with our strategy to grow monetization of IP and
knowledge through services and licencing, revenues grew by USD 3.1
million to reach USD 3.3 million in 2021 (2020: USD 0.2 million).
While USD 1.7 million of service revenues have been onboarded
through the acquisition of HeiQ RAS, significant contributions also
relate to royalty related exclusivity fees recognized in 2021 (USD
0.6 million).
Sales by function:
Hygiene accounted for revenues of USD 29.3 million in 2021
(2020: USD 29.2 million) - an increase of 1%. This is equivalent to
51% of total revenues in 2021 and includes acquired sales of in
total USD 8.3 million. The organic growth of USD - 8.2 million
reflects the non-recurring opportunities that we were able to
materialize in 2020 and that we were not fully able to compensate
with the growth of the recurring business.
Resource Efficiency, with a share of 23% of total revenues, was
our second largest functionality for which revenues amounted to USD
13.5 million in 2021 (2020: USD 10.0 million) representing a growth
of 35%. Acquired revenues for resource efficiency amount to USD 1.7
million in 2021 whereas the organic growth amounts to USD 1.8
million and reflects that post-pandemic economic recovery we have
seen in 2021 in the industries relevant to this category.
Comfort, with 22% share of total revenues, achieved significant
growth of 76% in 2021 and respective revenues amount to USD 13.0
million in 2021 (2020: USD 7.4 million). This growth of USD 5.6
million was achieved organically and reflects the strong demand for
our comfort technologies.
Revenues for protection of USD 2.1 million in 2021 (2020: USD
3.9 million) accounted for 4% of total revenues in 2021 and does
not include any acquired revenues. Also this category was supported
in 2020 by non-recurring opportunities.
Gross Profit
Gross profit for the year 2021 amounted to USD 27.0 million
(2020: USD 28.1 million), representing a gross profit margin of
46.6% (2020: 55.8%). The decrease in margin was mainly caused by
increased material costs. While material costs accounted for 35% of
sales in 2020, this ratio increased to 42% in 2021 (45% excluding
acquisitions). This higher portion of material costs was driven by
two factors: 1) inflation of raw material prices across the board
and on a global scale throughout the year and 2) change in the
product mix sold as non-recurring sales in 2020 were replaced with
recurring business at lower marginality. Besides material costs,
also freight costs increased substantially in 2021 compared to 2020
in general.
Selling and general administration expenses (SG&A)
SG&A costs amounted to USD 24.5 million in 2021 - an
increase of USD 8.4 million or 52% compared to 2020 (USD 16.1
million). The main portion of the increase in SG&A costs
relates to the acquisitions made in 2021 - with the acquisitions we
have onboarded SG&A costs totalling USD 5.3 million for the
year 2021. The remaining organic increase of USD 3 million (+19%)
is driven by the growth of the organization with personnel expenses
increasing by USD 1.2 million (FTE: + 33). Marketing expenses
increased significantly as well (USD +0.8 million) like other,
general SG&A expense (USD +1 million) as organization has been
strengthened across the board.
As a percentage of sales, overall SG&A costs increased from
32% in 2020 to 42% in 2021 (40% excluding the effect of
acquisitions). The increase aligns with our strategic investments
as it represents mainly investments in human capital required for
future growth.
Other operating income and expenses
Other operating income and expense consist mainly of foreign
exchange impacts on operating assets. In 2021, foreign exchange
gains of USD 5.0 million offset foreign exchange losses of USD 4.7
million. Other operating income and expenses not related to foreign
exchange gains and losses amounted to USD 0.2 million (net
income).
Operating profit / adjusted EBITDA
As a result of a lower average gross margin and higher SG&A
costs in 2021 relative to 2020, operating profit decreased by USD
8.5 million from USD 11.6 million in 2020 to USD 3.1 million in
2021. Adjusted EBITDA amounted to USD 6.5 million in 2021 - a
decrease of USD 7.6 million compared to the previous year (2020:
USD 14.1 million).
HeiQ adjusts EBITDA for share options and rights granted to
Directors and employees.
Adjusted EBITDA
----------------------------------------------- ------ ----------------
USD '000 2021 2020 (restated)
----------------------------------------------- ------ ----------------
Operating profit 3'117 11'633
----------------------------------------------- ------ ----------------
Depreciation 2'110 1'144
----------------------------------------------- ------ ----------------
Amortization 758 110
----------------------------------------------- ------ ----------------
Share options and rights granted to Directors
and employees 498 1'217
----------------------------------------------- ------ ----------------
Adjusted EBITDA 6'483 14'104
----------------------------------------------- ------ ----------------
Cashflow
Net cash generated from operating activities in the year 2021
amounts to USD 3.5 million vs. USD 1.1 million in 2020 (+215%).
Besides the acquisition of businesses, significant investments have
also been made in internally developed intangible assets - our
innovation pipeline (USD 3.0 million in 2021) while cash payments
for financing activities have been reduced significantly and
amounted to USD 1.3 million for 2021. Overall, cash generated from
the operating business has been invested into growth (investments
into intangible asset development and equipment) as well as for
repayment of leases and borrowings.
Statement of financial position
HeiQ continues to operate with a strong balance sheet. Total
assets grew from USD 69.6 million to USD 101.9 million (+ USD 32.3
million resp. 46.3%) while total liabilities amounted to USD 37.2
million as of December 31, 2021 - plus USD 17.2 million or 86%
compared to 2020 (USD 20.0 million). The increases in the financial
positions were driven mainly by the three acquisitions concluded in
2021 for a total consideration of USD 27.5 million.
The equity ratio remained strong at 63% of total assets as of
December 31, 2021 (2020: 71%) and with USD 14.6 million of cash as
of December 31, 2021 (2020: USD 25.7 million) HeiQ remains well
positioned for further investments in view of its strategic growth
targets.
Non-current assets increased significantly from USD 14.3 million
(December 31, 2020) to USD 49.2 million as of December 31, 2021 as
a result of the acquisitions and their related intangible
assets.
At USD 52.7 million as of December 31, 2021, current assets
remained stable (2020: USD 55.3 million). After high inventory
levels at the end of 2020, inventory value at the end of 2021
remained stable despite 15% higher revenues in 2021 compared to
2020. Receivables increased by USD 4.6 million or 34% as of
December 31, 2021, driven by higher revenues (+15%), with a
particular growth in sales towards the end of the year. Cash as at
December 31, 2021 was USD 14.6 million. This demonstrates a
continuing healthy cash position for the business although reflects
a higher than expected cash burn because of lower gross margins and
increases in SG&A costs previously mentioned, as well as higher
overdue accounts receivables.
The increase in total liabilities was mainly driven by the
acquisitions, the growth of the business and liabilities related to
leased assets. Other current liabilities of USD 6.0 million include
not yet settled purchase price payments.
Xaver Hangartner,
Chief Financial Officer
Consolidated statement of comprehensive income
For the year ended December 31, 2021
Year ended Year ended
December 31, December 31,
2020
2021 (Restated*)
Note US$'000 US$'000
------------------------------------------- ---- ------------ ------------
Revenue 7 57,874 50,401
Cost of sales 8 (30,898) (22,268)
Gross profit 26,976 28,133
Other operating income 7 6,426 4,744
Selling and general administrative
expenses 8 (24,465) (16,117)
Other operating expenses 8 (5,820) (5,127)
------------------------------------------- ---- ------------ ------------
Operating profit 3,117 11,633
------------------------------------------- ---- ------------ ------------
Deemed cost of listing 5 - (1,402)
Transaction costs 5 (206) (1,871)
Other income 7 199 -
Other costs 8 (361) (69)
Finance income 21 534 68
Finance costs 21 (597) (1,184)
Share of (losses) / profits of associates - (15)
Income before taxation 2,686 7,160
Taxation 9 (212) (2,112)
------------------------------------------- ---- ------------ ------------
Income after taxation 2,474 5,048
------------------------------------------- ---- ------------ ------------
Earnings per share (cents) - basic 10 2.07 4.53
------------------------------------------- ---- ------------ ------------
Earnings per share (cents) - diluted 10 2.01 4.32
------------------------------------------- ---- ------------ ------------
Other comprehensive income:
Exchange differences on translation
of foreign operations (1,662) 2,469
------------------------------------------- ---- ------------ ------------
Items that may be reclassified to
profit or loss in subsequent periods (1,662) 2,469
Actuarial gains / (losses) from defined
benefit pension plans 899 (731)
------------------------------------------- ---- ------------ ------------
Items that will not be reclassified
to profit or loss in subsequent periods 899 (731)
------------------------------------------- ---- ------------ ------------
Total comprehensive income for the
year 1,763 6,786
------------------------------------------- ---- ------------ ------------
Income attributable to:
Equity holders of HeiQ 2,676 5,125
Non-controlling interests (202) (77)
------------------------------------------- ---- ------------ ------------
2,474 5,048
------------------------------------------- ---- ------------ ------------
Comprehensive income/(loss) attributable
to:
Equity holders of the Company 1,913 6,863
Non-controlling interests (202) (77)
------------------------------------------- ---- ------------ ------------
1,711 6,786
------------------------------------------- ---- ------------ ------------
* The financial statements for 2020 have been restated for the
correction of an error as described in Note 30.
Consolidated statements of financial position
As at December 31, 2021
As at As at
December 31, December 31,
2021 2020
(Restated)
Note US$'000 US$'000
----------------------------------- ----- --- ------------- --- -------------
ASSETS
Intangible assets 11 32,212 5,264
Property, plant and equipment 12 6,865 5,467
Right-of-use assets 13 9,079 2,564
Deferred tax assets 9 701 826
Other non-current assets 14 333 206
----------------------------------- ----- --- ------------- --- -------------
Non-current assets 49,190 14,327
----------------------------------- ----- --- ------------- --- -------------
Inventories 15 13,770 13,540
Trade receivables 16 18,050 13,437
Other receivables and prepayments 16 6,275 2,609
Cash and cash equivalents 14,560 25,695
----------------------------------- ----- --- ------------- --- -------------
Current assets 52,655 55,281
----------------------------------- ----- --- ------------- --- -------------
Total assets 101,845 69,608
----------------------------------- ----- --- ------------- --- -------------
EQUITY AND LIABILITIES
Share capital 17 51,523 49,559
Capital reserve 17 144,191 134,537
Other reserve 18 (1,144) (2,043)
Share-based payment reserve 18 474 50
Merger reserve 5 (126,912) (126,912)
Currency translation reserve 18 1,275 2,937
Retained deficit 18 (5,823) (8,499)
----------------------------------- ----- --- ------------- --- -------------
Equity attributable to HeiQ
shareholders 63,584 49,629
Non-controlling interests 1,053 (20)
----------------------------------- ----- --- ------------- --- -------------
Total equity 64,637 49,609
----------------------------------- ----- --- ------------- --- -------------
Lease liabilities 13 8,176 2,304
Long-term borrowings 21 670 1,400
Deferred tax liability 9 1,894 857
Other non-current liabilities 20 2,619 3,425
----------------------------------- ----- --- ------------- --- -------------
Total non-current liabilities 13,359 7,986
----------------------------------- ----- --- ------------- --- -------------
Trade and other payables 22 9,359 5,815
Accrued liabilities 22 4,538 3,214
Income tax liability 9 51 1,495
Deferred revenue 22 1,774 -
Short-term borrowings 21 1,004 173
Lease liabilities 13 1,054 349
Other current liabilities 22 6,069 967
----------------------------------- ----- --- ------------- --- -------------
Total current liabilities 23,849 12,013
----------------------------------- ----- --- ------------- --- -------------
Total liabilities 37,208 19,999
----------------------------------- ----- --- ------------- --- -------------
Total liabilities and equity 101,845 69,608
----------------------------------- ----- --- ------------- --- -------------
The Notes form an integral part of these Consolidated Financial
Statements. The Financial Statements were approved and authorized
for issue by the Board of Directors on and signed on its behalf
by:
Xaver Hangartner, Chief Financial Officer, April 27, 2022
Consolidated statement of changes in shareholders' equity
For the year ended December 31, 2021
Share-
based Currency Non-
Share Capital Other payment Merger translation Retained controlling Total
capital reserve reserve reserve reserve reserve deficit interests equity
Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------- ---- ------- -------- -------- -------- ---------- ----------- -------- ----------- -------
Balance at
January
1, 2020 (as
restated) 2,696 25,168 (1,312) - - 467 (13,624) 23 13,340
Income after
taxation
(restated) - - - - - - 5,125 (77) 5,048
Other
comprehensive
(loss)/income - - (731) - - 2,469 - - 1,738
Total
comprehensive
(loss)/income
for
the year - - (731) - - 2,469 5,125 (77) 6,786
---------------- ---- ------- -------- -------- -------- ---------- ----------- -------- ----------- -------
Reverse
acquisition
adjustment 39,587 89,866 - - (126,912) - - - 2,542
---------------- ---- ------- -------- -------- -------- ---------- ----------- -------- ----------- -------
Issuance of
shares 17 7,276 20,763 - - - - - - 28,039
Cost of share
issues - (1,260) - - - - - - (1,260)
Share-based
payment
charges 17 - - - 50 - - - - 50
Capital
contributions
from
non-controlling
interests - - - - - - - 34 34
Transactions
with
owners 7,276 19,503 - 50 - - - 34 26,863
---------------- ----
Balance as at
December
31, 2020 (as
restated) 49,559 134,537 (2,043) 50 (126,912) 2,937 (8,499) (20) 49,609
---------------- ---- ------- -------- -------- -------- ---------- ----------- -------- ----------- -------
Income after
taxation 2,676 (202) 2,474
Other
comprehensive
(loss)/income 899 - - (1,662) - (763)
Total
comprehensive
(loss)/income
for
the year - - 899 - - (1,662) 2,676 (202) 1,711
---------------- ---- ------- -------- -------- -------- ---------- ----------- -------- ----------- -------
Issuance of
shares 17 1,964 9,654 - - - - - - 11,618
Share-based
payment
charges 17 - - - 424 - - - - 424
Amounts arising
on business
combinations 5 - - - - - - - 1,275 1,275
Transactions
with
owners 1,964 9,654 - 424 - - - 1,275 13,317
Balance as at
December
31, 2021 51,523 144,191 (1,144) 474 (126,912) 1,275 (5,823) 1,053 64,637
---------------- ---- ------- -------- -------- -------- ---------- ----------- -------- ----------- -------
Consolidated statement of cash flows
For the year ended December 31, 2021
Year ended Year ended
December December
31, 31,
2020
2021 (Restated)
Cash flows from operating activities US$'000 US$'000
------------------------------------------- ---- ----------- --- ------------
Income before taxation 2,686 7,160
Cash flow from operations reconciliation:
Depreciation and amortization 2,868 1,254
Impairment expense 144 -
Gain on disposal of property, plant
and equipment (54) -
Loss on disposal of property, plant
and equipment 20 46
Loss on disposal of investments - 22
Gain on earnout consideration 80 -
Finance costs 221 399
Finance income (18) (68)
Pension expense 156 176
Non-cash equity compensation 498 1,217
Share of loss / (profit) of associates - 15
Deemed cost of listing - 1,402
Foreign exchange differences (360) (164)
Working capital adjustments:
(Increase)/decrease in inventories 1,420 (8,295)
(Increase) in trade and other receivables (5,372) (4,788)
Increase in trade and other payables 3,654 2,777
------------------------------------------------- ----------- --- ------------
Cash generated from operations 5,943 1,153
Taxes paid (2,462) (48)
------------------------------------------------- ----------- --- ------------
Net cash generated from operating
activities 3,481 1,105
------------------------------------------------- ----------- --- ------------
Cash flows from investing activities
Consideration for acquisition of
businesses (Note 25) (10,994) (1,424)
Cash assumed on acquisition of
businesses (Note 25) 2,137 27,111
Purchase of property, plant and
equipment (994) (932)
Proceeds from the disposal of property,
plant and equipment 138 10
Development of intangible assets (2,969) (635)
Proceeds from the disposal of investments - 7
Finance income 18 68
------------------------------------------------- ----------- --- ------------
Net cash from / (used in) investing
activities (12,664) 24,205
------------------------------------------------- ----------- --- ------------
Cash flows from financing activities
Finance costs (221) (399)
Repayment of leases (790) (354)
Proceeds from borrowings 472 2
Repayment of borrowings (803) (2,737)
Net cash used in financing activities (1,342) (3,488)
------------------------------------------------- ----------- --- ------------
Net (decrease) / increase in cash
and cash equivalents (10,525) 21,822
------------------------------------------------- ----------- --- ------------
Cash and cash equivalents - beginning
of the year 25,695 3,603
Effects of exchange rate changes
on the balance of cash held in
foreign currencies (610) 270
------------------------------------------------- ----------- --- ------------
Cash and cash equivalents - end
of the year 14,560 25,695
------------------------------------------------- ----------- --- ------------
Note: Non-cash transactions: Certain shares were issued in 2020
for a non-cash consideration as described in Note 17.
Notes to the Consolidated Financial Statements for the year
ended December 31, 2021
1. General information
HeiQ Plc (the "Company") and its subsidiaries (together, the
"Group") is an IP innovator and established global brand in
materials and textile innovation, adding hygiene, comfort,
protection and sustainability to the products we use every day.
Active in multiple markets: textiles, carpets, antimicrobial
plastics, conductive coatings, medical devices, probiotic household
cleaners, personal care and hospital hygiene, HeiQ has created some
of the most effective, durable and high-performance technologies in
these markets today. The principal activity of the Company is that
of a holding company for the Group, as well as performing all
administrative, corporate finance, strategic and governance
functions of the Group.
The Company was incorporated on May 14, 2014 as Auctus Growth
Limited, in England and Wales under the Companies Act 2006 with
company number 09040064. The Company was re-registered as a public
company on July 24, 2014. On December 4, 2020, following a reverse
takeover of Swiss based HeiQ Materials AG, the Company's name was
changed to HeiQ Plc. The Company's registered office is 5th Floor,
15 Whitehall, London, SW1A 2DD.
After the reverse takeover, the Company's enlarged share capital
was re-admitted to the standard segment of the Official List and
initiation of trading on the London Stock Exchange's Main Market
commenced on December 7, 2020 under the ticker 'HEIQ'. The ISIN of
the Ordinary Shares is GB00BN2CJ299 and the SEDOL Code is
BN2CJ29.
2. Basis of preparation and measurement
a. Basis of preparation
The Consolidated Financial Statements have been prepared in
accordance with UK adopted international accounting standards,
including interpretations issued by the International Financial
Reporting Interpretations Committee, applicable to companies
reporting under IFRS and the Companies Act 2006 applicable to
companies reporting under IFRS.
Unless otherwise stated, the Consolidated Financial Statements
are presented in United States dollars (US$) which is the
presentation currency of the Group, and all values are rounded to
the nearest thousand dollars except where otherwise indicated.
The individual entities' functional currencies are listed
below:
Subsidiary: Functional currency
------------------------------------- --------------------
HeiQ plc, United Kingdom GBP
------------------------------------- --------------------
HeiQ Materials AG, Switzerland CHF
------------------------------------- --------------------
HeiQ ChemTex Inc., United States
of America USD
------------------------------------- --------------------
HeiQ Pty Ltd, Australia AUD
------------------------------------- --------------------
HeiQ GrapheneX AG, Switzerland CHF
------------------------------------- --------------------
HeiQ Company Limited, Taiwan TWD
------------------------------------- --------------------
HX Company Limited, Taiwan TWD
------------------------------------- --------------------
HeiQ Medica S.L., Spain EUR
------------------------------------- --------------------
HeiQ Iberia Unipessoal Lda, Portugal EUR
------------------------------------- --------------------
HeiQ Chrisal N.V., Belgium EUR
------------------------------------- --------------------
HeiQ RAS AG, Germany EUR
------------------------------------- --------------------
HeiQ Regulatory GmbH, Germany EUR
------------------------------------- --------------------
HeiQ (China) Material Tech LTD, CNY
China
------------------------------------- --------------------
Life Material Technologies Limited, USD
Hong Kong
------------------------------------- --------------------
Life Natural Limited, Hong Kong USD
------------------------------------- --------------------
Life Materials Latam Ltda, Brazil BRL
------------------------------------- --------------------
LMT Holding Limited, Thailand THB
------------------------------------- --------------------
Life Material Technologies Limited, THB
Thailand
------------------------------------- --------------------
HeiQ AeoniQ GmbH EUR
On a single entity level, transactions in foreign currencies are
translated into the functional currency at the rate of exchange on
the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated at the exchange
rate ruling at the reporting date. The resulting gain or loss is
reflected in the "Consolidated Statement of Comprehensive Income"
within operating income or operating expense, if the balance sheet
account is of operating nature - e.g. trade and other
receivables/payables and within either "Finance income" or "Finance
costs", if the balance sheet account is of non-operating nature -
e.g. cash and cash equivalents, loans receivable, payable.
Single entities with functional currencies other than US$ are
translated into US$ as part of the consolidation where assets and
liabilities are translated at closing rate for the year-ended, and
profit and loss items are translated at an average rate for the
year. Equity transactions are translated at a historic rate. The
residual value flows into the currency translation reserve.
The Consolidated Financial Statements have been prepared under
the historical cost convention except for certain financial and
equity instruments that have been measured at fair value.
The Consolidated Financial Statements have been prepared on the
going concern basis, which contemplates the continuity of normal
business activity and the realization of assets and the settlement
of liabilities in the normal course of business. The Directors have
reviewed the Group's overall position and outlook and are of the
opinion that the Group is sufficiently well funded to be able to
operate as a going concern for at least the next twelve months from
the date of approval of these financial statements.
The preparation of Financial Statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgment and complexity, or areas where
assumptions and estimates are significant to the Consolidated
Financial Statements are disclosed in Note 3.
b. Basis of consolidation
The Consolidated Financial Statements comprise the financial
statements of the Company and its subsidiaries listed in Note 6
"Subsidiaries" to the Consolidated Financial Statements.
The basis of consolidation of the acquisition of HeiQ Materials
AG by the Company in December 2020 is described in the basis of
preparation above in Note 5(f).
Business combinations other than noted above are accounted for
under the acquisition method.
A subsidiary is defined as an entity over which the Company has
control. The Company controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
Intra-group transactions, balances and unrealized gains on
transactions are eliminated; unrealized losses are also eliminated
unless cost cannot be recovered. Where necessary, adjustments are
made to the financial statements of subsidiaries to ensure
consistency of accounting policies with those of the Group.
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.
c. Transaction costs
Transaction costs of equity transactions relating to the issue
and Re-admission of the Company's shares are accounted for as a
deduction from equity where they relate to the issue of new shares
and listing costs are charged to the Group Income Statement.
d. New standards, interpretations and amendments effective for
the current period
Adopted
One new standard impacting the Group that has been adopted in
the annual financial statements for the year ended December 31,
2021:
-- COVID-19-Related Rent Concessions beyond June 30, 2021
(Amendments to IFRS 16).
The Group has considered the above new standard and has
concluded that it is not relevant to the Group.
New standards, interpretations and amendments not yet effective
for the current period
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the Group has decided
not to adopt early. The most significant of these are as
follows:
Effective for annual periods beginning on or after January 1,
2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments
to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS
3).
Effective for annual periods beginning on or after January 1,
2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2);
-- Definition of Accounting Estimates (Amendments to IAS 8);
and
-- Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
Management anticipates that these new standards, interpretations
and amendments will be adopted in the financial statements as and
when they are applicable and adoption of these new standards,
interpretations and amendments, will be reviewed for their impact
on the financial statements prior to their initial application.
The Directors do not expect these new accounting standards and
amendments will have a material impact on the Group's financial
statements.
3. Significant accounting policies
The preparation of the Consolidated Financial Statements in
compliance with IFRS requires the Directors to exercise judgment in
applying the Company's accounting policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions
and estimates are significant to the Consolidated Financial
Statements are disclosed in Note 4 "Significant judgments,
estimates and assumptions" to the Consolidated Financial
Statements.
a. Foreign currency transactions and translation
The results and financial position of all Group entities that
have a functional currency different from the presentation currency
are translated into US$, the presentation currency, as follows:
-- assets and liabilities are translated at the closing rate at
the date of the "Statement of Financial Position";
-- income and expenses are translated at average exchange rates
(unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates,
in which case income and expenses are translated at the dates of
the transactions); and
-- all resulting exchange differences are recognized in other comprehensive income.
On consolidation, the Group recognizes in "other comprehensive
income" the exchange differences arising from the translation of
the net investment in foreign entities, and of monetary items
receivable from foreign subsidiaries for which settlement is
neither planned nor likely to occur in the foreseeable future.
b. Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses, if any. The cost of
an item of property, plant and equipment initially recognized
includes its purchase price and any cost that is directly
attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended
by the Group.
Property, plant and equipment are generally depreciated on a
straight-line basis over their estimated useful lives:
Machinery and equipment 5 - 15 years
Motor vehicles 4 - 5 years
Computers and software 3 - 5 years
Furniture and fixtures 5 - 10 years
Land and buildings 10 - 20 years
Property, plant and equipment held under leases are depreciated
over the shorter of the lease term and estimated useful life.
Research and development expenditure
Research expenditure is recognized as an expense when it is
incurred.
Development expenditure is recognized as an expense except that
costs incurred on development projects are capitalized as long-term
assets to the extent that such expenditure is expected to generate
future economic benefits. Development expenditure is capitalized
if, and only if an entity can demonstrate all of the following:
-- its ability to measure reliably the expenditure attributable to the asset under development;
-- the product or process is technically and commercially feasible;
-- its future economic benefits are probable;
-- its ability to use or sell the developed asset; and
-- the availability of adequate technical, financial and other
resources to complete the asset under development.
Capitalized development expenditure is measured at cost less
accumulated amortization and impairment losses, if any. Certain
internal salary costs are included where the above criteria are
met. These internal costs are capitalized when they are incurred in
respect of products developed for sale. Development expenditure
initially recognized as an expense is not recognized as assets in
subsequent periods.
Capitalized development expenditure in respect of such products
is amortized on a straight-line method over a period of five to ten
years when the products or services are ready for sale or use. In
the event that it is no longer probable that the expected future
economic benefits will be recovered, the development expenditure is
written down to its recoverable amount.
c. Intangible assets
All intangible assets, except goodwill, are stated at cost less
accumulated amortization and any accumulated impairment losses.
Goodwill
Goodwill represents the amount by which the fair value of the
cost of a business combination exceeds the fair value of the net
assets acquired. Goodwill is not amortized and is stated at cost
less any accumulated impairment losses.
The recoverable amount of goodwill is tested for impairment
annually or when events or changes in circumstance indicate that it
might be impaired. Impairment charges are deducted from the
carrying value and recognized immediately in the income statement.
For the purpose of impairment testing, goodwill is allocated to
each of the Group's cash generating units expected to benefit from
the synergies of the combination. If the recoverable amount of the
cash generating unit is less than the carrying amount of the unit,
the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognized for goodwill
is not reversed in a subsequent period.
Acquisition-related intangible assets
Net assets acquired as part of a business combination includes
an assessment of the fair value of separately identifiable
acquisition-related intangible assets, in addition to other assets,
liabilities and contingent liabilities purchased.
Acquisition-related intangible assets are amortized on a
straight-line basis over their useful lives which are individually
assessed.
The estimated useful lives are as follows:
Brand names 10 years
Customer relations 5 years
Technologies 10 years
Other intangible assets 5 - 10 years
Other intangible assets
Other intangible assets include those arising from internal
development, acquired rights, licenses, patent costs, concessions,
website designs and domains and trademarks.
Internally generated intangible assets 5-10 years
Other acquired assets 5-10 years
d. Impairment of financial assets
The expected credit loss model defined in IFRS 9 "Financial
Instruments" requires the Group to account for expected credit
losses and changes in those expected credit losses at each
reporting date to reflect changes in credit risk since initial
recognition of the financial assets. The credit event does not have
to occur before credit losses are recognized. IFRS 9 "Financial
Instruments" allows for a simplified approach for measuring the
loss allowance at an amount equal to lifetime expected credit
losses for trade receivables and contract assets.
The Group has one type of financial asset subject to the
expected credit loss model: trade receivables.
The expected loss rates are based on the Group's historical
credit losses. The historical loss rates are then adjusted for
current and forward-looking information on macroeconomic factors
affecting the Group's customers.
e. Impairment of non-financial assets
At each reporting date, the Directors assess whether indications
exist that an asset may be impaired. If indications do exist, or
when annual impairment testing for an asset is required, the
Directors estimate the asset's recoverable amount. An asset's
recoverable amount is the higher of an asset's or cash-generating
unit's fair value less costs to sell and its value-in-use, and is
determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from
other assets or groups of assets. Where the carrying amount of an
asset or cash-generating unit exceeds its recoverable amount, the
Directors consider the asset impaired and write the subject asset
down to its recoverable amount. In assessing value-in-use, the
Directors discount the estimated future cash flows to their present
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset. In determining fair value less costs to sell, the
Directors consider recent market transactions, if available. If no
such transactions can be identified, the Directors utilize an
appropriate valuation model.
When applicable, the Group recognizes impairment losses of
continuing operations in the "Statement of Comprehensive Income" in
those expense categories consistent with the function of the
impaired asset.
f. Right-of-use assets
A right-of-use asset is recognized at the commencement date of a
lease. The right-of-use asset is measured at cost, which comprises
the initial amount of the lease liability, adjusted for, as
applicable, any lease payments made at or before the commencement
date net of any lease incentives received, any initial direct costs
incurred, and an estimate of costs expected to be incurred for
dismantling and removing the underlying asset, and restoring the
site or asset.
Right-of-use assets are depreciated on a straight-line basis
over the unexpired period of the lease or the estimated useful life
of the asset, whichever is the shorter. Right-of use assets are
subject to impairment or adjusted for any re-measurement of lease
liabilities.
The Group has elected not to recognize a right-of-use asset and
corresponding lease liability for short-term leases with terms of
12 months or less and leases of low-value assets. Lease payments on
these assets are expensed to profit or loss as incurred.
g. Leases
The determination of whether an arrangement is, or contains, a
lease is based on the substance of the arrangement at inception
date: whether fulfilment of the arrangement is dependent on the use
of a specific asset or assets or the arrangement conveys a right to
use the asset.
Identifying leases
The Group accounts for a contract, or a portion of a contract,
as a lease when it conveys the right to use an asset for a period
of time in exchange for consideration. Leases are those contracts
that satisfy the following criteria:
-- there is an identified asset;
-- the Group obtains substantially all the economic benefits from use of the asset; and
-- the Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive
substitution rights. If the supplier does have those rights, the
contract is not identified as giving rise to a lease.
In determining whether the Group obtains substantially all the
economic benefits that arise from use of the asset, the Group
considers only the economic benefits that arise from use of the
asset, not those incidental to legal ownership or other potential
benefits.
In determining whether the Group has the right to direct use of
the asset, the Directors consider whether the Group directs how and
for what purpose the asset is used throughout the period of use. If
there are no significant decisions to be made because they are
pre-determined due to the nature of the asset, the Directors
consider whether the Group was involved in the design of the asset
in a way that predetermines how and for what purpose the asset will
be used throughout the period of use. If the contract or portion of
a contract does not satisfy these criteria, the Group applies other
applicable IFRSs rather than IFRS 16 "Leases".
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless (as is typically the case) this is not readily
determinable, in which case the Group's incremental borrowing rate
on commencement of the lease is used, which the Directors have
assessed to be between 1.75% and 5%, depending on the nature of the
asset and location.
Variable lease payments are only included in the measurement of
the lease liability if they depend on an index or rate. In such
cases, the initial measurement of the lease liability assumes the
variable element will remain unchanged throughout the lease term.
Other variable lease payments are expensed in the period to which
they relate.
On initial recognition, the carrying value of the lease
liability also includes:
-- amounts expected to be payable under any residual value guarantee;
-- the exercise price of any purchase option granted in favor of
the Group if it is reasonably certain to assess that option;
and
-- any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of termination option
being exercised.
Right-of-use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for:
-- lease payments made at or before commencement of the lease;
-- initial direct costs incurred; and
-- the amount of any provision recognized where the Group is
contractually required to dismantle, remove or restore the leased
asset.
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortized on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease
(because, for example, it re-assesses the probability of a lessee
extension or termination option being exercised), it adjusts the
carrying amount of the lease liability to reflect the payments to
make over the revised term, which are discounted at the same
discount rate that applied on lease commencement. The carrying
value of lease liabilities is similarly revised when the variable
element of future lease payments dependent on a rate or index is
revised. In both cases an equivalent adjustment is made to the
carrying value of the right-of-use asset, with the revised carrying
amount being amortized over the remaining (revised) lease term.
h. Taxation
Deferred taxation
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the Consolidated
Financial Statements. Deferred tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the
reporting date and expected to apply when the related deferred tax
is realized or the deferred liability is settled.
Deferred tax assets are recognized to the extent that it is
probable that the future taxable profit will be available against
which the temporary differences can be utilized.
Income taxation
Current income tax assets and liabilities are measured at the
amount to be recovered from, or paid to, the taxation authorities.
The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted at the reporting date in
the jurisdictions where the Group operates and generates taxable
income.
i. Revenue from contracts with customers and other income
Revenue from customer contracts is generally recognized at point
in time, once the performance obligation has been fulfilled. This
includes the sale of functional ingredients, materials or consumer
goods. Services rendered are typically also recognized at point in
time.
Revenue from licenses, including those which grant exclusivity
rights which are a separable performance obligation from the
delivery of goods are typically recognized over time according to
the contractual definition of the exclusivity period.
The Group's revenue represents the fair value of the
consideration received or receivable for the rendering of services,
licenses and similar fees as well as for the sale of functional
products in different forms (mainly ingredients, materials and
consumer goods), net of value added tax and other similar
sales-based taxes, rebates and discounts after eliminating
intercompany sales.
For fixed-price contracts, the customer pays the fixed amount
based on a payment schedule. If the services rendered by the Group
exceed the payment, an amount recoverable on contract assets is
recognized. Conversely, if the payments exceed the services
rendered, a liability is recognized. If the contract is
time-and-materials based and includes an hourly fee, revenue is
recognized over time for the amount to which the Group has the
right to invoice.
Take or pay arrangements
Certain customers have agreed, under a "take or pay" contract,
to purchase a specified minimum quantity of a range of particular
products over a specified period of time, typically in exchange for
a specified exclusivity during the same period. However, the
customer has to pay for the full quantity stated in the contract,
irrespective of whether the customer takes delivery of the minimum
quantity to which they are entitled. Upon payment of the full
amount, the contract allows customers to defer its unexercised
rights and to consume the remaining units to a later date, although
there is no compulsion to do so. If the Group expects to benefit
from such future exercise by the customer, it recognizes the
expected amount as revenue in proportion to the pattern of rights
exercised by the customer (by comparing the goods delivered to date
with those expected to be delivered overall). In cases where the
contract period is not identical with the financial reporting
period, revenue and costs are recognized at the end of the
respective contractual period. In cases where the obligation to
grant exclusivity can be valued separately from the obligation to
supply physical products, the exclusivity portion is accounted for
as described above over time.
j. Share-based payments
All of the Group's share-based awards are equity settled.
Equity-settled share-based payments to employees are measured at
the fair value of the equity instruments at the grant date.
Equity-settled share-based payments to non-employees are measured
at the fair value of services received, or if this cannot be
measured, at the fair value of the equity instruments granted at
the date that the Group obtains the goods or counterparty renders
the service. The fair value of such shares issued has been
estimated by reference to the cash consideration received for
shares issued or material third party transactions at or close to
the dates for such non-cash issues.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Directors' estimate of
equity instruments that will eventually vest, with a corresponding
increase in equity. Where the conditions are non-vesting, the
expense and equity reserve arising from share-based payment
transactions is recognized in full immediately on grant.
At the end of each reporting period, the Directors revise their
estimate of the number of equity instruments expected to vest. The
impact of the revision of the original estimates, if any, is
recognized in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to
other reserves.
k. Employee benefits
Short-term benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided. A liability is recognized for the amount expected to be
paid under short-term cash bonus or profit-sharing plans if the
Group has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and the
obligation can be estimated reliably.
Long-term benefits
Defined benefit plans
The Group operates a defined benefit pension plan in
Switzerland, which requires contributions to be made to a
separately administered fund. The cost of providing benefits under
the defined benefit plan is determined using the projected unit
credit method.
Re-measurements, comprising of actuarial gains and losses, the
effect of the asset ceiling, excluding amounts included in net
interest on the net defined benefit liability and the return on
plan assets (excluding amounts included in net interest on the net
defined benefit liability), are recognized immediately in the
statement of financial position with a corresponding debit or
credit to other reserve through "Other Comprehensive Income" in the
period in which they occur. Re-measurements are not reclassified to
profit or loss in subsequent periods.
Past-service costs are recognized in profit or loss on the
earlier of:
-- the date of the plan amendment or curtailment; and
-- the date that the Group recognizes related restructuring costs.
Net interest is calculated by applying the discount rate to the
net defined benefit liability or asset. The Group recognizes the
following changes in the net defined benefit obligation under "cost
of sales", "administration expenses" and "selling and distribution
expenses" in the consolidated statement of profit or loss (by
function):
-- service costs comprising current service costs, past-service
costs, gains and losses on curtailments and non-routine
settlements; and
-- net interest expense or income.
Defined contribution plans
The income statement expense for the defined contribution
pension plans operated represent the contributions payable for the
year.
l. Finance income and expenses
Finance expenses comprise interest payable, lease expenses
recognized in profit or loss using the effective interest method,
unwinding of the discount on provisions, and net foreign exchange
losses that are recognized in the income statement.
Finance income comprise interest receivable on cash deposits and
net foreign exchange gains.
Interest income and interest payable is recognized in profit or
loss as it accrues, using the effective interest method.
Foreign currency gains and losses are reported on a net
basis.
m. Cash and cash equivalents
For the purpose of presentation in the consolidated statement of
cash flows, cash and cash equivalents include cash on hand,
deposits held at call with financial institutions, other short-term
highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value, and
bank overdrafts.
n. Trade and other receivables
Trade receivables are recognized initially at fair value and
subsequently measured at amortized cost using the effective
interest method, less provision for impairment.
o. Inventories
Inventories are stated at the lower of cost and net realizable
value. Cost is based on the weighted average principle and includes
expenditure incurred in acquiring the inventories and other costs
in bringing them to their existing location and condition.
p. Provisions
A provision is recognized when the Group has a present
obligation, legal or constructive, as a result of a past event and
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation, and a reliable
estimate can be made. Provisions are reviewed at each reporting
date and adjusted to reflect the current best estimate. If it is no
longer probable that an outflow of economic resources will be
required to settle the obligation, the provision is reversed. Where
the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects, where
appropriate, the risks specific to the liability. When discounting
is used, the increase in the provision due to the passage of time
is recognized as an interest expense.
Contingent liabilities
Contingent liabilities are possible obligations whose existence
depends on the outcome of uncertain future events or present
obligations where the outflow of resources is uncertain or cannot
be measured reliably. Contingent liabilities are not recognized in
the Consolidated Financial Statements but are disclosed unless they
are remote.
q. Segmental reporting
The Directors consider that the Group has one reportable
segment, that of materials innovation focused on scientific
research, specialty materials manufacturing and consumer ingredient
branding. Accordingly, all revenues, operating results, assets and
liabilities are allocated to this activity.
The Group analyses and measures its sales performance into
geographic regions, specifically Europe, North & South America
and Asia as well as by form (ingredients, materials, consumer goods
or services) and function (Hygiene, Comfort, Protection,
Sustainability).
4. Significant accounting judgments, estimates and assumptions
The Directors have made the following judgments which may have a
significant effect on the amounts recognized in the Consolidated
Financial Statements:
a. Basis of consolidation
The Directors consider that the share-for-share exchange between
Auctus Growth Plc and HeiQ Materials AG to be a reverse acquisition
as HeiQ Materials AG is considered to be the acquirer. Further
details of the basis of consolidation and how the Directors
developed the most appropriate accounting policy are outlined in
the basis of consolidation within accounting policy Note 2(b). The
difference between the consideration shares transferred in the
combination ("Consideration Shares") and the fair value of the net
assets acquired has been charged to the consolidated statement of
income as a deemed cost of listing.
b. Defined benefit plans (pension benefits)
The cost of the Group's defined benefit pension plan and other
post-employment medical benefits and the present value of the
pension obligation are determined using actuarial valuations. An
actuarial valuation involves making various assumptions that may
differ from actual developments in the future. These include the
determination of the discount rate, future salary increases,
mortality rates and future pension increases. Due to the
complexities involved in the valuation and its long-term nature, a
defined benefit obligation is highly sensitive to changes in these
assumptions. All assumptions are reviewed at each reporting
date.
Further details about pension obligations are provided in Note
20 "Pensions and other post-employment benefit plans".
c. Impairment of non-financial assets
Management has applied judgment in its testing for impairment of
non-financial assets as described in Note 11.
5. Business combinations
Business combinations in 2021
a. Acquisition of Chrisal NV
On March 9, 2021, HeiQ Iberia Unipessoal Lda acquired 51% of the
share capital and voting rights of Chrisal NV, a company
incorporated in Belgium. Chrisal NV is a biotechnology company and
a leader in innovative ingredients and consumer products that
incorporate the benefits of probiotics and synbiotics. It has
technology platforms with the purpose of creating healthy and
sustainable microbial ecosystems. The application of its
proprietary technology includes cosmetics, personal care, textiles,
wound dressings, water purification, air treatment and cleaning
products. The company has its office, manufacturing site and
bottling facility in Lommel, Belgium.
The purchase consideration was payable partly in cash
(EUR5,000,000, equivalent to approximately US$6,054,000) and partly
by the issue of 1,101,928 new ordinary shares for EUR2,500,000
(US$2,982,000), equivalent to a total consideration of US$
9,036,000.
The acquisition is part of the Group's strategy of becoming a
global leader in materials innovation and allows access to the
broader market of microbial surface management and a bio-based
green complementary technology platform to its successful
antimicrobials.
Goodwill of US$ 6,163,000 was recognized and is attributable to
the acquired workforce, anticipated future profit from expansion
opportunities and synergies of the business. The goodwill arising
from the acquisition has been allocated to the Chrisal CGU. Fair
value adjustments have been recognized for property, plant and
equipment and acquisition-related intangible assets which are in
alignment with accounting policies of the Group.
Transaction costs relating to the acquisition of US$46,000 have
been charged to the Statement of Comprehensive Income in the period
relating to the acquisition of Chrisal NV.
Chrisal NV contributed US$3,825,000 of revenue for the period
between the date of acquisition and the balance sheet date and
US$565,000 of income before tax. If the acquisition of Chrisal NV
had been completed on the first day of the financial year, Group
revenues would have been US$849,000 higher and Group profit
attributable to equity holders of the parent would have been
US$206,000 lower.
b. Acquisition of RAS AG
On April 29, 2021, the Company completed the acquisition of 100%
of the share capital and voting rights of RAS AG, a company based
in Regensburg, Germany. The acquisition was for a consideration of
EUR5.1 million (approximately US$6.1 million), with EUR1.25 million
(US$1.48 million) payable in cash and EUR3.85 million (US$4.66
million) through the issue of 1,701,821 new ordinary shares by the
Company. It includes an additional earn-out consideration dependent
on RAS AG's growth and 2021 calendar year EBIT. The earn-out
consideration is capped at an additional EUR5 million payable in
shares for achieving a EUR2 million EBIT in 2021 and will be
satisfied through the issuance of new ordinary shares. On the basis
of internal forecasts, the Company has estimated the additional
earn-out consideration at EUR2.7 million (US$3.2 million) - a
correction of the EUR2.55 million (US$3.0) disclosed at interim -
resulting in an overall consideration of EUR7.8 million (US$9.37
million).
RAS AG is a materials innovation company that drives the
development of resource-efficient and sustainable products. RAS AG
develops and manufactures highly functionalized materials for this
purpose. This includes the manufacture of antimicrobial,
hygiene-enhancing additives and durable antimicrobial coating
systems which are sold worldwide under the trademark agpure(R), and
transparent electrically conductive and infrared reflective
coatings sold under the ECOS(R) trademark. The acquisition is in
line with HeiQ's strategic goal to gain market share in hygiene
solutions by providing antimicrobial surface hygiene technologies
to the healthcare and other sectors. This is building on the
acquisition of Chrisal N.V. Belgium concluded earlier in the year,
which gives HeiQ expanded access to the healthcare sector through
probiotic and synbiotic cleaners.
Goodwill of US$ 7,234,000 was recognized and is attributable to
the acquired workforce, anticipated future profit from expansion
opportunities and synergies of the business. The goodwill arising
from the acquisition has been allocated to the RAS CGUs. Fair value
adjustments have been recognized for acquisition-related intangible
assets which are in alignment with accounting policies of the
Group.
Transaction costs relating to the acquisition of US$50,000 have
been charged to the Statement of Comprehensive Income in the period
relating to the acquisition of RAS AG.
RAS AG contributed US$2,829,000 of revenue for the period
between the date of acquisition and the balance sheet date and
US$907,000 of profit before tax. If the acquisition of RAS AG had
been completed on the first day of the financial year, Group
revenues would have been US$937,000 higher and Group profit
attributable to equity holders of the parent would have been
US$570,000 higher.
HeiQ Regulatory GmbH, a joint-venture company previously
accounted for under the equity-method, became a wholly-owned
subsidiary on acquisition of RAS AG.
c. Acquisition of Life Material Technologies Limited
On June 15, 2021, the Company completed the acquisition of 100%
of the share capital and voting rights of Life Material
Technologies Limited, Hong Kong ("LIFE").
The acquisition was for an upfront consideration of US$6.45
million, with US$2.55 million payable in cash (the "Cash
Consideration") and US$3.9 million to be satisfied through the
issue of new ordinary shares by HeiQ (the "Share Consideration").
Additional earn-out consideration of US$2,038,000 is payable in
cash (US$1,400,000) and through the issue of new ordinary shares
(US$638,000) in 2022. A further US$614,000 working capital
adjustment is payable in shares in 2022. An additional US$762,000
is payable annually as remuneration in shares over a five-year
period.
The Share Consideration was settled on July 9, 2021 by the issue
of 1,887,883 new ordinary shares ("Consideration Shares") to the
sellers of LIFE, at a price of GBP1.496201 per share, which was the
intraday volume-weighted average price (the "VWAP") of HeiQ shares
on the London Stock Exchange in the last five trading days
preceding the closing of the Acquisition.
LIFE is a materials technology company that has developed a
strong portfolio of smart ingredients and formulations with
applications in numerous industries. This includes the development
and distribution of bio-based antimicrobial additives and
treatments used by manufacturers of plastics, coatings, textiles,
ceramics and paper, that inhibit or manage bacteria, fungi, algae,
and other micro-organisms that come in contact with treated
materials. LIFE has one of the broadest technology platforms in the
industry, using inorganic, organic and bio-based botanical active
substances.
Goodwill of US$ 5,202,000 was recognized and is attributable to
the acquired workforce, anticipated future profit from expansion
opportunities and synergies of the business. The goodwill arising
from the acquisition has been allocated to the Life CGU. Fair value
adjustments have been recognized for acquisition-related intangible
assets which are in alignment with accounting policies of the
Group.
Transaction costs relating to the acquisition of US$110,000 have
been charged to the Statement of Comprehensive Income in the period
relating to the acquisition of LIFE.
LIFE contributed US$3,367,000 of revenue for the period between
the date of acquisition and the balance sheet date and US$419,000
of profit before tax. If the acquisition of LIFE had been completed
on the first day of the financial year, Group revenues would have
been US$2,072,000 higher and Group profit attributable to equity
holders of the parent would have been US$566,000 higher.
d. Summary of acquisitions in 2021
The following table summarizes the consideration paid, the fair
value of assets acquired, liabilities assumed, goodwill arising on
acquisition and non-controlling interests at the acquisition
date:
Life Material
Chrisal Technologies
NV RAS AG Limited Total
US$'000 US$'000 US$'000 US$'000
Consideration:
Cash paid to shareholders 6,054 1,482 2,550 10,086
Shares issued to shareholders 2,983 4,656 3,900 11,539
Contingent consideration payable
in cash - - 1,400 1,400
Contingent consideration payable
in shares - 3,232 638 3,870
Working capital adjustment payable
in shares - - 614 614
Total Consideration payable 9,037 9,370 9,102 27,509
-------------------------------------- --------- -------- --------------- ---------
Fair value of net assets acquired:
Property, plant and equipment 1,872 179 29 2,080
Intangible Assets 20 159 401 580
Other non-current assets - - 17 17
Inventory 1,277 411 570 2,258
Cash 1,773 291 73 2,137
Trade and other receivables 874 1,184 1,480 3,538
Trade and other payables (1,900) (611) (460) (2,971)
Deferred revenue (739) - - (739)
IAS 19 Pension liability - - (92) (92)
Borrowings (369) - (210) (579)
Income tax liability (198) (420) (20) (638)
Right of use assets 1,375 139 122 1,636
Capital lease liability (1,375) (139) (122) (1,636)
Intangible assets identified
on acquisition:
Customer Relationship 667 380 610 1,657
Brands 521 - 1,048 1,569
Technology-based assets 869 1,071 561 2,501
Deferred tax liability on intangible
assets (514) (508) (111) (1,133)
Total net assets 4,153 2,136 3,896 10,185
-------------------------------------- --------- -------- --------------- ---------
Non-controlling interests (1,279) - 4 (1,275)
Goodwill 6,163 7,234 5,202 18,599
Total 9,037 9,370 9,102 27,509
-------------------------------------- --------- -------- --------------- ---------
e. Deferred consideration in relation to acquisitions
The deferred consideration includes earnout payments and a
working capital adjustment in relation to the 2021 acquisitions of
RAS AG and Life Material Technologies Limited as presented in the
table above in Note 5e. Since these liabilities are due in 2022,
the fair value of the consideration approximates its nominal
value.
Additionally, a further amount of deferred consideration
pertains to the acquisition of assets from Chem-Tex Inc. in 2017
and is payable other than in a short timeframe. The fair value of
the deferred consideration has been discounted using an imputed
interest rate of 6% (being the Group's estimated cost of debt) to
take into account the time value of money.
The deferred consideration and related financing expense are
summarized below:
Chem-Tex RAS AG Life Material Total
Technologies
Limited
As at January 1, 2020 2,103 - - 2,103
Amortization of fair value
discount 245 - - 245
Consideration settled in cash (1,267) - - (1,267)
Foreign exchange revaluation 35 - - 35
------------------------------- --------- ------- -------------- ---------
As at December 31, 2020 1,116 - - 1,116
------------------------------- --------- ------- -------------- ---------
Amortization of fair value
discount 58 - - 58
Additions from acquisitions
as per Note 5e - 3,232 2,652 5,884
Gain on earnout calculation - (80) - (80)
Consideration settled in cash (908) - - (908)
Foreign exchange revaluation 13 - - 13
------------------------------- --------- ------- -------------- ---------
As at December 31, 2021 279 3,152 2,652 6,083
------------------------------- --------- ------- -------------- ---------
Current liability 191 3,152 2,652 5,995
Non-current liability 88 - - 88
------------------------------- --------- ------- -------------- ---------
Total 279 3,152 2,652 6,083
------------------------------- --------- ------- -------------- ---------
The maturity profile of other non-current liabilities is shown
in paragraph (g) "Liquidity risk" of Note 25 "Financial risk
management" to the Consolidated Financial Statements.
Business combinations in 2020
f. Reverse acquisition
On 7 December 2020, HeiQ Plc became the legal parent of HeiQ
Materials AG by way of reverse acquisition. The cost of the
acquisition is deemed to have been incurred by HeiQ Materials AG,
the legal subsidiary, in the form of equity instruments issued to
the owners of the legal parent. This acquisition has been accounted
for as a reverse acquisition.
The accounting policy adopted by the Directors applies the
principles of IFRS 3 in identifying the accounting acquirer and the
presentation of the Consolidated Financial Statements of the legal
parent (HeiQ plc) as a continuation of the accounting acquirer's
Financial Statements (HeiQ Materials AG). This policy reflects the
commercial substance of this transaction as the original
shareholders of the subsidiary undertakings were the most
significant shareholders post transaction, owning 84.8% of the
enlarged issued share capital of the Company.
The fair value of the shares in HeiQ Materials AG has been
determined from the admission price of the HeiQ Plc shares on
Re-admission to trading on the London Stock Exchange's Main Market
of GBP1.12 per share. The value of the consideration shares was
GBP119,571,088 (equivalent to US$156,889,584). The fair value of
the notional number of equity instruments that the legal subsidiary
would have had to have issued to the legal parent to give the
owners of the legal parent the same percentage ownership in the
combined entity was 15.2 per cent of the market value of the shares
after issues, being GBP21,428,000 (US$28,124,000). The difference
between the notional consideration paid by HeiQ Plc for HeiQ
Materials AG and the HeiQ Plc net assets acquired of GBP20,360,000
(US$26,722,000) has been charged to the Consolidated Statement of
Comprehensive Income as a deemed cost of listing amounting to
GBP1,068,000 (equivalent to US$1,402,000) with a corresponding
entry to the reverse acquisition reserve.
The transaction costs associated with the reverse acquisition
and readmission totaled US$1,871,000 and have been charged to
profit and loss.
Details of net assets acquired and the deemed cost of listing
are as follows:
US$'000
Consideration effectively transferred 28,124
--------------------------------------- --------
Net assets acquired:
Cash and cash equivalents 27,105
Trade and other receivables 163
Trade and other payables (546)
Net assets acquired 26,722
--------------------------------------- --------
Deemed cost of listing 1,402
--------------------------------------- --------
The amounts transferred to the reverse acquisition were as
follows:
US$'000
HeiQ equity capital pre-combination 29,095
Deemed cost of acquisition 1,402
Consideration shares issued on acquisition (156,894)
Retained losses of Company at combination (515)
Merger reserve at December 31, 2020 and December
31, 2021 (126,912)
-------------------------------------------------- ----------
g. Acquisition of MasFabE
On December 15, 2020, the Group completed the acquisition of a
50.01% interest in a leading Spanish mask manufacturer MasFabEs
S.L. for a consideration of EUR132,751 (equivalent to US$156,570).
The company was renamed HeiQ Medica S.L. and will manufacture
medical devices with the Group's cutting-edge textile
technologies.
The following table summarizes the consideration paid for the
goodwill, the fair value of assets acquired, liabilities assumed
and non-controlling interests at the acquisition date:
US$'000
-------
Fair value of consideration 157
------------------------------------------- -------
Net assets acquired:
Property, plant and equipment 1,195
Inventories 1,152
Cash 6
Net working capital (886)
Deferred tax asset 112
Borrowings (1,512)
------------------------------------------- -------
Total identifiable net assets acquired at
fair value 67
------------------------------------------- -------
Non-controlling interests (33)
------------------------------------------- -------
Goodwill recognized on acquisition 123
------------------------------------------- -------
6. Subsidiaries
Details of the Company's subsidiaries as at December 31, 2021
are as follows:
Company Country Registered office Principal Percentage
of registration activity of ordinary
or incorporation shares held
Development,
Rütistrasse production
HeiQ Materials 12, 8952 Schlieren and sale
AG Switzerland Zurich of chemicals 100%
------------------- --------------------------- ------------------ -------------
Development,
2725 Armentrout production
HeiQ ChemTex Dr, Concord, NC and sale
Inc. United States 28025 of chemicals 100%
------------------- --------------------------- ------------------ -------------
Level 20/181 William
Street, Melbourne, Research
HeiQ Pty Ltd Australia VIC 3000 and development 100%
------------------- --------------------------- ------------------ -------------
Rütistrasse
HeiQ GrapheneX 12, 8952 Schlieren
AG Switzerland Zurich Inactive 100%
------------------- --------------------------- ------------------ -------------
No. 14 & 16, Ln.
50, Wufu 1st Rd.
HeiQ Company Luzhu District,
Limited Taiwan Taoyuan City 33850 Distribution 100%
------------------- --------------------------- ------------------ -------------
No. 14 & 16, Ln.
50, Wufu 1st Rd.
HX Company Luzhu District, Trading and
Limited Taiwan Taoyuan City 33850 production 66.70%
------------------- --------------------------- ------------------ -------------
Manufacturer
HeiQ Medica Plaza de la Estación of medical
S.L. Spain s/n, 29560 Pizarra devices 50.1%
------------------- --------------------------- ------------------ -------------
Sales agency
HeiQ Iberia Rua Eng Frederico and internal
Unipessoal Ulrich, n 2650, services
Lda Portugal 4470-605 Maia company 100%
------------------- --------------------------- ------------------ -------------
Priester Daensstraat
9, 3920 Lommel,
Chrisal NV Belgium Belgium Biotechnology 51%
------------------- --------------------------- ------------------ -------------
Rudolf Vogt Straße Materials
HeiQ RAS AG Germany 8-10, 93053 Regensburg innovation 100%
------------------- --------------------------- ------------------ -------------
HeiQ Regulatory Rudolf Vogt Straße Materials
GmbH Germany 8-10, 93053 Regensburg innovation 100%
------------------- --------------------------- ------------------ -------------
Room 2501, Xuhui
HeiQ (China) Commercial Mansion,
Material Tech No. 168 Yude Road,
LTD China Shanghai Distribution 100%
------------------- --------------------------- ------------------ -------------
Life Material Alexandra House,
Technologies 6th Floor, 16-20 Materials
Limited Hong Kong Chater Road, Central technology 100%
------------------- --------------------------- ------------------ -------------
Alexandra House,
Life Natural 6th Floor, 16-20
Limited Hong Kong Chater Road, Central Inactive 100%
------------------- --------------------------- ------------------ -------------
Rua Cerro Cora
1851Villa Romano,
Life-Materials Sao Paulo SP Brasil
Latam Ltda, Brazil CEP 05061350 Sales office 85%
------------------- --------------------------- ------------------ -------------
222 Lumpini Building
2, 247 Rajdamri
Road
LMT Holding Lumpini, Phatumwan,
Limited Thailand Bangkok 10330 Holding 96.45%
------------------- --------------------------- ------------------ -------------
222 Lumpini Building
2, 247 Rajdamri
Life Material Road
Technologies Lumpini, Phatumwan,
Limited Thailand Bangkok 10330 Trading 99.995%
------------------- --------------------------- ------------------ -------------
HeiQ AeoniQ Industriestrasse Materials
GmbH Austria 35, 3130 Herzogenburg Innovation 100%
------------------- --------------------------- ------------------ -------------
7. Revenue and other operating income
The Group's activities are materials innovation which focuses on
scientific research, manufacturing and consumer ingredient
branding. The primary source of revenue is the production and sale
of functional ingredients, materials and finished goods. Other
sources of revenues include research and development services as
well as laboratory work. Revenues were mainly generated in the
regions of Europe, North & South America and Asia.
The following table reconciles HeiQ Group's revenue for the
periods presented:
Year ended Year ended
December 31, December 31,
2021 2020
Revenues by function US$'000 US$'000
---------------------- ------------- -------------
Comfort 12,979 7,356
Hygiene 29'314 29,151
Protection 2,076 3,879
Resource Efficiency 13,505 10,015
Total revenue 57,874 50,401
----------------------- ------------- -------------
Year ended Year ended
December 31, December 31,
2021 2020
Revenues by form US$'000 US$'000
-------------------------------- ------------- -------------
Revenue recognized at point
in time
Functional ingredients 43,661 42,023
Functional materials 850 764
Functional consumer goods 10,069 7,444
Services, royalties and others 2,692 170
Revenue recognized over time
Licenses 602 -
-------------------------------- ------------- -------------
Total revenue 57,874 50,401
--------------------------------- ------------- -------------
Year ended Year ended
December 31, December 31,
2021 2020
Revenue by region US$'000 US$'000
-------------------------------- ------------- -------------
North & South America 21,689 19,813
Asia 19,636 19,887
Europe 16,237 10,429
Others 312 272
--------------------------------- ------------- -------------
Total revenue 57,874 50,401
--------------------------------- ------------- -------------
During the year ended December 31, 2021, no customers
individually totaled more than 10% of total revenues (2020:
none).
Year ended Year ended
December 31, December 31,
2021 2020
Other operating income US$'000 US$'000
------------------------------ ------------- -------------
Foreign exchange gains 5,032 3,986
Other operating income 1,394 758
------------------------------- ------------- -------------
Total other operating income 6,426 4,744
------------------------------- ------------- -------------
Year ended Year ended
December 31, December 31,
2021 2020
Other income US$'000 US$'000
------------------------------ ------------- -------------
Gain on disposal of property
plant and equipment 54 -
Gain on earnout consideration
payable (Note 5f) 80 -
Other non-operating income 65 -
------------------------------ ------------- -------------
Total other income 199 -
------------------------------ ------------- -------------
Expenses by nature
Year ended Year ended
December 31, December 31,
2021 2020
Cost of goods sold US$'000 US$'000
----------------------------------------- --- ------------ ------------
Material expenses 24,581 17,452
Personnel expenses 2,164 1,279
Depreciation of property, plant
and equipment 706 382
Other costs of goods 3,447 3,155
---------------------------------------------- ------------ ------------
Total cost of goods sold 30,898 22,268
---------------------------------------------- ------------ ------------
Year ended Year ended
December 31, December 31,
2021 2020
Selling and general administration
expense US$'000 US$'000
----------------------------------------- --- ------------ ------------
Personnel expenses 13,074 9,091
Depreciation of property, plant
and equipment 549 394
Amortization 758 110
Depreciation of right-of-use assets 855 368
Other 9,229 4,913
---------------------------------------------- ------------ ------------
Total selling and general administration
expense 24,465 16,117
---------------------------------------------- ------------ ------------
Year ended Year ended
December 31, December 31,
2021 2020
----------------------------------------- --- ------------ ------------
Personnel expenses US$'000 US$'000
----------------------------------------- --- ------------ ------------
Wages & salaries 12,708 8,290
Social security & other payroll
taxes 1,387 415
Pension costs 645 448
Share-based payments 498 1,217
Total personnel expenses 15,238 10,370
---------------------------------------------- ------------ ------------
The average monthly number of
employees was as follows: 221 97
---------------------------------------------- ------------ ------------
Year ended Year ended
December 31, December 31,
2021 2020
Other operating expenses US$'000 US$'000
Foreign exchange losses 4,671 5,124
Impairment expense 144 -
Other 1,005 3
--------------------------------- ------------- -------------
Total other operating expenses 5,820 5,127
--------------------------------- ------------- -------------
Year ended Year ended
December 31, December 31,
2021 2020
Other costs US$'000 US$'000
Loss on disposal of property,
plant and equipment 20 46
Other non-recurring costs 341 23
--------------------------------- ------------- -------------
Total other costs 361 69
--------------------------------- ------------- -------------
Year ended Year ended
December 31, December 31,
2021 2020
Auditor's remuneration US$'000 US$'000
---------------------------------- ------------- -------------
Audit of company 304 108
Total audit 304 108
----------------------------------- ------------- -------------
Audit related assurance services 6 -
Other assurance services - 115
Total assurance services 6 115
----------------------------------- ------------- -------------
8. Taxation
For the year ending December 31, 2021, the Group had a tax
expense of US$212,000 (2020: US$2,112,000). The effective tax rate
was (7.9%) (2020: 29.5%). The effective tax rate was primarily
impacted by temporary differences.
The components of the provision for taxation on income included
in the "Statement of Profit or Loss and Other Comprehensive Income"
are summarized below:
Year ended Year ended
December 31, December 31,
2021 2020
Current income tax expense US$'000 US$'000
----------------------------------- ------------- -------------
Swiss corporate income taxes (282) 304
United States state and federal
taxes (33) 1,112
Taiwan corporate income taxes 200 161
Belgium corporate income taxes 186 -
Germany corporate income taxes 301 -
Others 39 -
Total current income tax expense 411 1,577
------------------------------------ ------------- -------------
Deferred income tax expense
Switzerland (190) 588
China (146) -
United States 138 -
Spain 108 -
Others (109) (53)
Total deferred income tax expense (199) 535
------------------------------------ ------------- -------------
Total income tax expense 212 2,112
------------------------------------ ------------- -------------
Year ended Year ended
December 31, December 31,
2021 2020
Tax liability US$'000 US$'000
----------------------------------- ------------- -------------
Opening balance - (prepaid taxes) 1,495 (42)
Assumed on business combinations 638 -
Income tax expense for the year 411 1,577
Taxes paid (2,462) (48)
Foreign currency differences (31) 8
------------------------------------ ------------- -------------
Closing balance 51 1,495
------------------------------------ ------------- -------------
The differences between the statutory income tax rate and the
effective tax rates are summarized as follows:
Year ended
December 31, 2021
---------------------------------------------------- ---------------------
US$'000
---------------------------------------------------- ---------- ---------
Expected tax at statutory Swiss income
tax rate of 20% 537 20.0%
Increase/(decrease) in tax resulting
from:
Effect of different tax rates in
foreign jurisdictions 25 0.9%
Tax credits (58) (2.1%)
Unrecognized tax losses 378 13.6%
Non-deductible expenditure 58 2.2%
Tax exempt income (105) (3.9%)
Temporary differences (614) (22.9%)
Other - net (9) 0.1%
----------------------------------------------- --- ---------- ---------
212 7.9%
----------------------------------------------- --- ---------- ---------
Year ended
December 31, 2020
---------------------------------------------------- ---------------------
US$'000
---------------------------------------------------- ----------- --------
Expected tax at statutory Swiss income
tax rate of 20% 1,432 20.0%
Increase/(decrease) in tax resulting
from:
Effect of different tax rates in
foreign jurisdictions 175 2.5%
Tax credits (60) (0.8%)
Recognized tax losses (329) (4.6%)
Non-deductible expenditure 567 7.9%
Other - net 327 4.5%
----------------------------------------------- --- ----------- --------
2,112 29.5%
----------------------------------------------- --- ----------- --------
The Group had net deferred tax liabilities of US$1,193,000 at
December 31, 2021 (2020: US$31,000). The deferred tax assets relate
to taxable temporary differences.
The components of the net deferred income tax assets included in
non-current assets are as follows:
Year ended Year ended
December 31, December 31,
2021 2020
US$'000 US$'000
--------------------------------------- ------------- -------------
Deferred tax assets
Pension fund obligations 429 655
Tax losses 178 171
Share-based payments 88 -
Others 6 -
--------------------------------------- ------------- -------------
Total deferred tax assets 701 826
---------------------------------------- ------------- -------------
Deferred tax liabilities
Capital allowances and depreciation (1,894) (857)
Deferred tax liabilities (1,894) (857)
---------------------------------------- ------------- -------------
Net deferred tax assets (liabilities) (1,193) (31)
---------------------------------------- ------------- -------------
As at December 31, 2021, the Group had approximately US$178,000
of tax losses available to be carried forward against future
profits (2020: US$171,000).
In applying judgment in recognizing deferred tax assets,
management has critically assessed all available information,
including future business profit projections and the track record
of meeting forecasts. Management expects the deferred tax asset to
be substantially recovered in 2022.
Some tax losses were not recognized as deferred tax assets.
During the period ended 31 December 2021, such tax losses amounted
to US$378,000 (2020: US$42,000). They arose from aggregated losses
of US$1,134,000 (2020: US$154,000).
9. Earnings per share
Year ended Year ended
December 31, December 31,
2021 2020
US$'000 US$'000
------------------------------------ ------------- -------------
Profit after tax attributable
to owners of the Company 2,676 5,125
Basic earnings per share (cents) 2.07 4.53
Diluted earnings per share (cents) 2.01 4.32
Basic weighted average shares
in issue 128,871,639 113,143,731
Diluted weighted average shares
in issue 132,718,333 118,666,601
Basic earnings per share is calculated by dividing the
profit/loss after tax attributable to the equity holders of the
Company by the weighted average number of shares in issue during
the year.
Diluted earnings per share is calculated by dividing the
profit/loss attributable to the equity holders of the Company by
the weighted average number of ordinary shares outstanding during
the year plus the weighted average number of ordinary shares that
would be issued on conversion of all the dilutive potential
ordinary shares into ordinary shares.
In calculating the weighted average number of ordinary shares
outstanding (the denominator of the earnings per share calculation)
during the period in which the reverse acquisition occurs:
(a) the number of ordinary shares outstanding from the beginning
of that period to the acquisition date shall be computed on the
basis of the weighted average number of ordinary shares of the
legal acquiree (accounting acquirer) outstanding during the period
multiplied by the exchange ratio established in the merger
agreement; and
(b) the number of ordinary shares outstanding from the
acquisition date to the end of that period shall be the actual
number of ordinary shares of the legal acquirer (the accounting
acquiree) outstanding during that period.
10. Intangible assets
Brand
Internally names Other
developed and customer Acquired intangible
Goodwill assets elations technologies assets Total
Cost US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at January 1, 2020 3,393 1,128 295 - 417 5,233
Additions through business
combinations 123 - - - - 123
Additions arising from
internal development - 602 - - - 602
Other acquisitions - - - - 33 33
Currency translation
differences - 121 - - 41 162
---------------------------- --------- ----------- -------------- -------------- ------------ ---------
As at December 31,
2020 3,516 1,851 295 - 491 6,153
Reclasses* - (725) - - 725 -
Additions through business
combinations 18,599 - 3,226 2,501 580 24,906
Additions arising from
internal development - 2,390 - - - 2,390
Other acquisitions - - - - 579 579
Currency translation
differences - (7) - - (43) (50)
---------------------------- --------- ----------- -------------- -------------- ------------ ---------
As at December 31,
2021 22,115 3,509 3,521 2,501 2,332 33,978
---------------------------- --------- ----------- -------------- -------------- ------------ ---------
Amortization
As at January 1, 2020 - 384 78 - 249 711
Amortization for the
year - 11 29 - 70 110
Currency translation
differences - 37 - - 31 68
---------------------------- --------- ----------- -------------- -------------- ------------ ---------
As at December 31,
2020 - 432 107 - 350 889
Reclasses* - (19) - - 19 -
Amortization for the
year - 50 367 177 164 758
Impairment expense
for the year 123 21 - - - 144
Currency translation
differences - (10) - - (15) (25)
---------------------------- --------- ----------- -------------- -------------- ------------ ---------
As at December 31,
2021 123 474 474 177 518 1,766
---------------------------- --------- ----------- -------------- -------------- ------------ ---------
Net book value
As at December 31,
2021 21,992 3,035 3,047 2,324 1,814 32,212
---------------------------- --------- ----------- -------------- -------------- ------------ ---------
As at December 31,
2020 3,516 1,419 188 - 141 5,264
---------------------------- --------- ----------- -------------- -------------- ------------ ---------
*Regulatory registrations have been reclassed from internally
developed assets to other intangible assets.
Internally generated assets represent expenditure incurred on
development projects and IT.
Other intangible assets include acquired rights, licenses,
patent costs, concessions, website designs and domains and
trademarks.
Goodwill
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash generating units ("CGUs") that are
expected to benefit from that business combination. Management
considers that the goodwill is attributable to the textile
innovation CGU, because that is where the benefits are expected to
arise from expansion opportunities and synergies of the business.
The Directors consider that the Group has one reportable segment,
that of textile innovation focused on scientific research,
specialty materials manufacturing and consumer ingredient
branding.
The Group tests goodwill annually for impairment or more
frequently if there are indications that these assets might be
impaired. The recoverable amounts of the CGU are determined from
fair value less costs to sale. The value of the goodwill comes from
the future potential of the assets rather than using the assets as
they are (i.e. there is assumed expansionary capex which supports
growth in revenues and the value of the business and therefore
goodwill).
The key assumptions for the fair value less costs to sale
approach are those regarding sales prices, margins and a discount
rate.
The Group monitors its pre-tax Weighted Average Cost of Capital
and those of its competitors using market data. In considering the
discount rate applying to the CGU, the Directors have considered
the relative size and risks its CGU.
The impairment review uses a discount rate adjusted for post-tax
cash flows. The Group prepares cash flow forecasts derived from the
most recent financial plan approved by the Board and extrapolates
revenues, gross and net margins and cash flows for the following
five years based on forecast growth rates of the CGU. Cash flows
beyond this period are also considered in assessing the need for
any impairment provisions.
A summary of the key assumptions used in such impairment testing
is set out in Note 4 c above. With the exception of the goodwill
recognized in respect of the acquisition of MasFabEs, no impairment
was considered necessary as a result of these tests.
In the case of MasFabEs, the Company tested goodwill for
impairment and determined that the recoverable amount recognized on
acquisition was less than its carrying amount and accordingly an
impairment provision of $123,000 was made in the year ended
December 31, 2021.
Impairment of intangible assets
IFRS requires the Directors to undertake an annual test for
impairment of indefinite lived assets and, for finite lived assets,
to test for impairment if events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable.
Impairment testing is an area involving judgment in determining
estimates, requiring assessment as to whether the carrying value of
assets can be supported by the net present value of future cash
flows derived from such assets using cash flow projections which
have been discounted at an appropriate rate. In calculating the net
present value of the future cash flows, certain assumptions are
required to be made in respect of highly uncertain matters
including management's expectations of:
-- Gross margins;
-- the level of capital expenditure to support long-term growth; and
-- the selection of discount rates to reflect the risks involved.
The Directors prepare and approve cash flow projections which
are used in the fair value calculations. Changing the assumptions
selected by the Directors, in particular the discount rate, gross
margins and growth rate assumptions used in the cash flow
projections, could significantly affect their impairment evaluation
and hence the Group's results.
The sensitivity of impairment tests to changes to underlying
assumptions is summarized below. Impairment of goodwill would
result from the following changes to assumptions:
Assumption Chem-Tex Chrisal NV RAS AG Life Materials
Existing Sensitivity Existing Sensitivity Existing Sensitivity Existing Sensitivity
------------ -------------- ------------ ------------ --------- -------------- --------- --------------
Gross
margin 33% 27% 59.40% 58% 91.00% 71% 58.20% 28%
------------ -------------- ------------ ------------ --------- -------------- --------- --------------
Capex US$ 207,000 US$ 1,000,000 US$ 138,000 US$ 180,000 US$ US$ 1,400,000 US$ US$ 2,800,000
(annual 57,000 91,000
spend)
------------ -------------- ------------ ------------ --------- -------------- --------- --------------
Discount
factor 14% 22% 14% 15% 14% 23% 14% 38%
------------ -------------- ------------ ------------ --------- -------------- --------- --------------
Growth is calculated in accordance with the commercial plan for
the financial years 2022, 2023 and 2024, and 2 per cent annually in
2025 and 2026.
Internally developed assets and other intangibles with finite
lives
The Group tests internally developed assets and other
intangibles with finite lives for impairment only if there are
indications that these assets might be impaired. The Company has
concluded that no impairment is necessary. The Group has processes
in place for continually reviewing development expenditure to
ensure that projects under development are still viable.
Property, plant and equipment
Machinery Motor Computers Furniture Land and
and equipment vehicles and software and fixtures buildings Total
Cost US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------------------------ -------------- --------- ------------- ------------- ---------- -------
As at January 1, 2020 5,189 343 665 100 - 6,297
Acquisition on business combination 1,224 - 1 12 - 1,237
Additions 629 191 77 35 - 932
Disposals (628) (46) (2) (18) - (694)
Currency translation differences 365 4 69 3 - 441
------------------------------------ -------------- --------- ------------- ------------- ---------- -------
As at December 31, 2020 6,779 492 810 132 - 8,213
Acquisition on business combination 191 19 24 171 1,675 2,080
Additions 596 67 104 213 14 994
Disposals (30) (37) - (15) (68) (150)
Currency translation differences (248) (5) (24) (27) (98) (402)
------------------------------------ -------------- --------- ------------- ------------- ---------- -------
As at December 31, 2021 7,288 536 914 474 1,523 10,735
------------------------------------ -------------- --------- ------------- ------------- ---------- -------
Depreciation
As at January 1, 2020 1,917 180 285 31 - 2,413
Acquisition on business combination 42 - - - - 42
Charge for the year 538 84 142 12 - 776
Eliminated on disposal (607) (24) - (7) - (638)
Currency translation differences 112 2 37 2 - 153
------------------------------------ -------------- --------- ------------- ------------- ---------- -------
As at December 31, 2020 2,002 242 464 38 - 2,746
------------------------------------ -------------- --------- ------------- ------------- ---------- -------
Charge for the year 797 118 168 55 117 1,255
Eliminated on disposal (13) (26) - (7) - (46)
Currency translation differences (63) (4) (13) (5) (85)
------------------------------------ -------------- --------- ------------- ------------- ---------- -------
As at December 31, 2021 2,723 330 619 86 112 3,870
------------------------------------ -------------- --------- ------------- ------------- ---------- -------
Net book value
As at December 31, 2021 4,565 206 295 388 1,411 6,865
------------------------------------ -------------- --------- ------------- ------------- ---------- -------
As at December 31, 2020 4,777 250 346 94 - 5,467
------------------------------------ -------------- --------- ------------- ------------- ---------- -------
11. Right-of-use assets
Land Motor Office
and buildings vehicles equipment Total
Cost US$'000 US$'000 US$'000 US$'000
As at January 1, 2020 3,757 111 22 3,890
Additions 76 - 32 108
Disposals due to expiry of lease (306) (43) (14) (363)
Currency translation differences 174 8 1 183
----------------------------------------- --------------- ----------- ----------- --------
As at December 31, 2020 3,701 76 41 3,818
Additions through business combinations 1,186 300 150 1,636
Additions 5,147 289 393 5,829
Disposals due to expiry of lease - (33) (9) (42)
Currency translation differences (120) (21) 2 (139)
----------------------------------------- --------------- ----------- ----------- --------
As at December 31, 2021 9,914 611 577 11,102
----------------------------------------- --------------- ----------- ----------- --------
Depreciation
As at January 1, 2020 1,077 80 19 1,176
Depreciation for the year 345 16 7 368
Disposals due to expiry of lease (306) (43) (14) (363)
Currency translation differences 66 7 - 73
----------------------------------------- --------------- ----------- ----------- --------
As at December 31, 2020 1,182 60 12 1,254
Depreciation for the year 655 89 111 855
Disposals due to expiry of lease - (32) (9) (41)
Currency translation differences (34) (8) (3) (45)
----------------------------------------- --------------- ----------- ----------- --------
As at December 31, 2021 1,803 109 111 2,023
----------------------------------------- --------------- ----------- ----------- --------
Net book value
As at December 31, 2021 8,111 502 466 9,079
----------------------------------------- --------------- ----------- ----------- --------
As at December 31, 2020 2,519 16 29 2,564
----------------------------------------- --------------- ----------- ----------- --------
Future minimum lease payments associated with these leases were
as follows:
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
----------------------------------- -------------- --------------
Not later than one year 1,115 385
Later than one year and not later
than five years 3,689 1,346
Later than five years 5,525 1,162
-----------------------------------
Total minimum lease payments 10,329 2,893
Less: Future finance charges (1,099) (240)
----------------------------------- -------------- --------------
Present value of minimum lease
payments 9,230 2,653
----------------------------------- -------------- --------------
Current liability 1,054 349
Non-current liability 8,176 2,304
----------------------------------- -------------- --------------
9,230 2,653
----------------------------------- -------------- --------------
12. Other non-current assets
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
------------------------------- ------------------------ --------------
Deposits 140 55
Amounts due from third parties - 151
Other non-current assets 193 -
------------------------------- ------------------------ --------------
Other non-current assets 333 206
------------------------------- ------------------------ --------------
13. Inventories
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Functional ingredients 7,480 10,209
Functional materials 4,310 1,289
Functional consumer goods 1,822 2,042
Services 158 -
Total inventories 13,770 13,540
---------------------------- ------------- -------------
Trade receivables
The majority of trade receivables are current, and the Directors
believe these receivables are collectible. The Directors
consistently assess the collectability of these receivables. As at
December 31, 2021, the Directors considered a portion of these
receivables uncollectible and recorded a provision in the amount of
US$1,473,000 (2020: US$551,000).
As at As at
December 31, December 31,
2021 2020
Trade receivables US$'000 US$'000
------------------------------- ------------- -------------
Not past due 7,623 3,975
< 30 days 2,930 1,304
31-60 days 55 763
61-90 days 1,115 115
91-120 days 351 482
>120 days 7,449 7,349
Total trade receivables 19,523 13,988
-------------------------------- ------------- -------------
Provision for expected credit
loss (1,473) (551)
-------------------------------- ------------- -------------
Total trade receivables (net) 18,050 13,437
-------------------------------- ------------- -------------
The Group uses a simplified approach to recognize lifetime
expected losses on trade and other receivables. Expected losses
consider payment performance history, external information
available regarding credit ratings as well as future expected
credit losses.
The provision for expected loss rates is based on the Group's
historical credit loss record. Most significantly, in the case of
take-or-pay contracts, the rate of provision is 5% for amounts more
than one year past due, 20% for amounts more than two years past
due and 25% for amounts more than three years past due.
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
----------------------------------- ------------- -------------
Other receivables - from tax
authorities 1,734 1,372
Prepayments and other receivables 4,541 1,237
------------------------------------ ------------- -------------
Total other receivables and
prepayments 6,275 2,609
------------------------------------ ------------- -------------
14. Share capital and share options
Movements in the Company's share capital were as follows:
Note Number Share Share Totals
of shares capital premium
No. US$'000 US$'000 US$'000
------------------------------ ----- ----------- -------- -------- -------
Balance as of January 1, 2020 2,668,999 350 1,305 1,655
Consolidation of shares (1,779,346) - - -
Placing of shares 11,789,142 4,641 12,684 17,325
Subscription for shares 6,068,000 2,389 6,529 8,918
Issue of shares to acquire
HeiQ Materials AG 106,759,900 42,027 114,865 156,892
Shares issued in lieu of fees 385,209 152 414 566
Costs of share issues - - (1,260) (1,260)
Balance as at December 31,
2020 125,891,904 49,559 134,537 184,096
------------------------------------- ----------- -------- -------- -------
Issue of shares to acquire
Chrisal NV 1,101,928 456 2,526 2,982
Issue of shares to acquire
RAS AG 1,701,821 710 3,946 4,656
Issue of shares to acquire
Life Materials 1,887,883 798 3,182 3,980
Balance as at December 31,
2021 130,583,536 51,523 144,191 195,714
------------------------------------- ----------- -------- -------- -------
The par value of all shares is GBP0.30. All shares in issue were
allotted, called up and fully paid.
As more fully described in Note 5 above, the Company issued new
ordinary shares for the following acquisitions:
i. On March 9, 2021, the Company acquired a 51% in interest in
Chrisal N.V. payable partly in cash (EUR5,000,000, equivalent to
approximately US$6,054,000) and partly by the issue of 1,101,928
new ordinary shares for EUR2,500,000 (US$2,982,000), equivalent to
a total consideration of US$ 9,036,000.
ii. On April 29, 2021, the Company acquired a 100% interest in
RAS AG for a purchase consideration of EUR5.1 million
(approximately US$6.1 million), with EUR1.25 million (US$1.48
million) payable in cash and EUR3.85 million (US$4.66 million)
through the issue of 1,701,821 new ordinary shares by the
Company.
iii. The Company issued a further 1,887,883 new ordinary shares
on July 9, 2021 to the sellers of LIFE, at a price of GBP1.496201
per share, equivalent to US$4,085,000.
Share Option Scheme
The Company has adopted the HeiQ plc Option Scheme.
Under the Option Scheme, awards may be made only to employees
and executive directors. The Board will administer the Option
Scheme with all decisions relating to awards made to executive
directors taken by the Remuneration Committee.
Awards under the plan will be market value options, but
participants resident in jurisdictions where local securities laws
or other regulations are considered problematic may be awarded
cash-based equivalents. Any awards made are not pensionable.
All awards made will be subject to one or more performance
conditions at the discretion of the Board. Ordinary Shares received
on exercise of any options awarded under the Option Scheme may be
required to be held for a period of time before they can be
disposed of (other than disposals to satisfy any tax payable on
exercise).
The total number of Ordinary Shares which can be issued under
the Option Scheme (together with any other employees' share scheme
operated by the Company) may not exceed 10 per cent. of the
Company's ordinary share capital from time to time.
A total of 6,260,000 awards were made under the Option Scheme
pursuant to re-admission on 7 December 2020.
The key performance indicators attaching to these awards relate
to targets for sales growth (65 per cent. of the award) and
operating margin (35 per cent. of the award) over a period of three
years.
An option-holder has no voting or dividend rights in the Company
before the exercise of a Share option.
The weighted average share price at grant date of options
granted at grant date was GBP1.12 and the estimated fair value of
each share option granted was GBP0.269. This estimated fair value
was calculated by applying a Black-Scholes option pricing model. A
0.25% risk-free interest rate and an expected volatility of the
Company's share price has been used in these calculations.
On October 19, 2021 a total of 2,447,658 share options were
issued, with service periods covering January 2022 to December 2024
and an exercise price of GBP0.903 per share option.
No options were exercised, forfeited or lapsed during the year
ended December 31, 2021. Accordingly, as at December 31, 2021
8,707,658 options remained in place (2020: 6,200,000) out of which
5,204,978 options are expected to vest (2020: 6,200,000), with a
weighted average exercise price of GBP1.13 (2020: GBP1.23).
The expense and equity reserve arising from these share-based
payment transactions recognized in the year ended December 31, 2021
was US$424,000 (year ended December 31, 2020: US$50,000).
An additional expense of US$74,000 relates to share-based
payments payable in 2022 as deferred consideration in relation to
the acquisition of Life Materials AG.
Other share-based transactions
During the year ended December 31, 2020, HeiQ Materials AG
issued 18,000 shares to employees in respect of contractual
obligations for a total consideration of US$1,167,000.
15. Reserves
The share-based payment reserve arises from the requirement to
fair value the issue of share options at grant date. Further
details of share options are included at Note 17.
The currency translation reserve represents cumulative foreign
exchange differences arising from the translation of the financial
statements of foreign subsidiaries and is not distributable by way
of dividends.
The share premium account represents the amount received on the
issue of ordinary shares by the Company in excess of their nominal
value and is non-distributable.
The other reserve comprises the cumulative re-measurement of
defined benefit obligations and plan assets to fair value and which
are recognized as a component of other comprehensive income. Such
actuarial gains and losses from defined benefit pension plans are
not reclassified to profit or loss in subsequent periods.
The retained deficit comprises all other net gains and losses
and transactions with owners not recognized elsewhere.
The merger reserve was created in accordance with IFRS3
'Business Combinations'. The merger reserve arises due to the
elimination of the Company's investment in HeiQ Materials AG. Since
the shareholders of HeiQ Materials AG became the majority
shareholders of the enlarged Group, the acquisition is accounted
for as though there is a continuation of the legal subsidiary's
financial statements. In reverse acquisition accounting, the
business combination's costs are deemed to have been incurred by
the legal subsidiary.
16. Pensions and other post-employment benefit plans
The Group operates a defined benefit pension plan in
Switzerland, which requires contributions to be made to a
separately administered fund. The cost of providing benefits under
the defined benefit plan is determined using the projected unit
credit method.
Correspondingly the value of the defined benefit obligation at
valuation date is equal to the present value of the accrued
pro-rated service considering expected salary at eligibility date
and the future pension increase.
The pension scheme was with Swisscanto pension fund ("Swisscanto
Sammelstiftung") until December 31, 2021 and with AXA pension fund
from January 1, 2022 following a change in pension fund provider.
The Directors have adopted the actuarial valuation as of January 1,
2022.
Pension plan description
The pension plans grant disability and death benefits which are
defined as a percentage of the salary insured. Although the Swiss
plan operates like a defined contribution plan under local
regulations, it is accounted for as a defined benefit pension plan
under IAS19 'Employee Benefits' because of the need to accrue a
minimum level of interest on the mandatory part of the pension
accounts. Upon reaching the retirement age, the savings capital
will be converted with a fixed conversion rate into an old-age
pension. In the event that an employee leaves employment prior to
reaching a pensionable age, the cumulative balance of the savings
account is withdrawn from the pension plan and invested into the
pension plan of the employee's new employer.
Regulatory framework
Pension plan legal structure
HeiQ Materials AG is affiliated to a collective foundation. The
collective foundation operates one defined benefit pension plan for
HeiQ Materials AG. Under Swiss law, all employees are required to
be a member of the pension plan. There are minimum benefits
requested by law (for old-age, disability, death and termination).
The pension plans cover more than legally requested. Each
affiliated company has a pension plan committee. The committee is
represented by 50% of employer representatives and the remaining
50% are employee representatives.
Responsibilities of the board of trustees (and/or the employer
on the board of trustees)
The highest corporate body of the collective foundation is the
board of trustees. The board of trustees is elected out of the
affiliated companies and is also represented by 50% of employee and
employer representatives (on the level of the collective
foundation). This board handles the general management of the
pension scheme, ensures compliance with the statutory requirements,
defines the strategic objectives and policies of the pension scheme
and identifies the resources for their implementation. This board
decides also on the asset allocation and is responsible to the
authorities for the correct administration of the collective
foundation.
Special situation
The pension scheme has no minimum funding requirement (when the
pension fund is in a surplus position), although the pension scheme
has a minimum contribution requirement as specified below. Under
local requirements, where a pension fund is operated in a surplus
position, limited restrictions apply in term of the trustee's
ability to apply benefits to the members of the locally determined
"free reserves". In instances where the pension fund enters into an
underfunded status the active members, along with the employer, are
required to make additional contributions until such time the
pension fund is in a fully funded position.
Funding arrangements that affect future contributions
Swiss law provides for minimum pension obligations on
retirement. Swiss law also prescribes minimum annual funding
requirements. An employer may provide or contribute a higher amount
than as specified under Swiss law - such amounts are specified
under the terms and conditions of each of the Swiss employee's
individual terms and conditions of employment.
In addition, employers are able to make one off contributions or
prepayments to these funds. Although these contributions cannot be
withdrawn, they are available to the Company to offset its future
employer cash contributions to the plan. Although a surplus can
exist in the fund, Swiss law requires minimum annual funding
requirements to continue.
For the active members of the pension plan, annual contributions
are required by both the employer and employee. The employer
contributions must be at least equal to the employee contributions,
but may be higher, separately mentioned in the constitution of the
pension plan.
Minimum annual contribution obligations are determined with
reference to an employee's age and current salary, however as
indicated above these can be increased under the employee's terms
and conditions of employment.
In the event of the winding up of HeiQ Materials AG, or the
pension fund, HeiQ Materials AG has no right to any refund of any
surplus in the pension fund. Any surplus balance is allocated to
the members (active and pensioners).
General risk
The Group faces the risk that its equity ratio can be affected
by a poor performance of the assets of the pension fund or change
of assumptions. Therefore, sensitivities of the main assumptions
have been calculated and disclosed (see below).
The following tables summarize the components of net benefit
expense recognized in the statement of profit or loss and the
funded status and amounts recognized in the statement of financial
position for the plan:
Net benefit obligations
The components of the net defined benefits obligations included
in non-current liabilities are as follows:
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
---------------------------------------- ------------ ------------
Fair value of plan assets 10,858 6,311
Defined benefit obligation (13,003) (9,587)
----------------------------------------- ------------ ------------
Funded status (net liability) (2,146) (3,276)
----------------------------------------- ------------ ------------
Duration (years) 16.5 18.9
Expected benefits payable in
following year (393) (269)
----------------------------------------- ------------ ------------
Year ended Year ended
December 31, December 31,
2021 2020
Development of obligations and
assets US$'000 US$'000
---------------------------------------- ------------ ------------
Present value of funded obligations,
beginning of year (9,588) (6,374)
Employer service cost (521) (391)
Employee contributions (342) (237)
Past service cost 28 -
Curtailments / Settlements 65 -
Interest cost (14) (21)
Benefits paid (2,589) (1,044)
Actuarial (loss)/gain on benefit
obligation (256) (809)
Currency (loss)/gain 214 (711)
Present value of funded obligations,
end of year (13,003) (9,587)
Defined benefit obligation participants (13,003) (8,942)
Defined benefit obligation pensioners - (645)
----------------------------------------- ------------ ------------
Present value of funded obligations,
end of year (13,003) (9,587)
----------------------------------------- ------------ ------------
Fair value of plan assets, beginning
of year 6,311 4,454
Expected return on plan assets 10 14
Employer's contributions 342 237
Employees' contributions 342 237
Benefits (paid)/refunded 2,589 1,044
Admin expense (20) (15)
Actuarial gain/(loss) on plan
assets 1,380 (141)
Currency gain/(loss) (96) 481
Fair value of plan assets, end
of year 10,858 6,311
----------------------------------------- ------------ ------------
Movements in net liability recognized in statement of financial
position:
Year ended Year ended
December 31, December 31,
2021 2020
US$'000 US$'000
Net liability, beginning of
year (3,276) (1,920)
Expense recognized in profit
and loss (453) (413)
Employer's contributions (following
year expected contributions) 340 237
Prepaid (accrued) pension cost: 111 176
* operating income (expense) (107) (169)
* finance expense (4) (7)
Total gains recognized within
other comprehensive income 1,124 (950)
Currency loss 120 (230)
Net liability, end of year (2,146) (3,276)
---------------------------------------- ------------ ------------
Actual return on plan assets
16,69% -2.37%
Expected employer's cash contributions
for following year 361 295
---------------------------------------- ------------ ------------
The assets of the scheme are invested on a collective basis with
other employers. The allocation of the pooled assets between asset
categories is as follows.
Asset allocation As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
--------------------------- ------------ ------------
Cash 3.6% 0.5%
Bonds 31.7% 24.5%
Equities 34.8% 34.5%
Property (incl. mortgages) 27.0% 24.2%
Other 2.9% 16.3%
Total 100.0% 100.0%
---------------------------- ------------ ------------
Amounts recognized in other
comprehensive income Year ended Year ended
December 31, December 31,
2021 2020
US$'000 US$'000
----------------------------------- ------------ ------------
Actuarial (losses)/gains arising
from plan experience (1,449) (553)
Actuarial gains / (losses) arising
from demographic assumptions 744 -
Actuarial gains / (losses) arising
from financial assumptions 449 (256)
Re-measurement of defined benefit
obligations (256) (809)
------------------------------------ ------------ ------------
Re-measurement of assets 1,380 (141)
Deferred tax asset recognized (225) 286
Other - (96)
------------------------------------ ------------ ------------
Total recognized in OCI 899 (760)
------------------------------------ ------------ ------------
Principal actuarial assumptions (beginning of year):
The principal assumptions used in determining pension and
post-employment benefit obligations for the plan are shown
below:
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
-------------------------------- --------------- ---------------
Discount rate 0.35% 0.30%
Interest credit rate 1.00% 1.00%
Expected net return on plan
assets 0.35% 0.30%
Average future salary increases 2.00% 1.50%
Future pension increases 0.00% 0.00%
Mortality tables used BVG 2020 GT BVG 2015 GT
Average retirement age 65/64 65/64
Expected life expectation at
regular retirement age (male
/ female) 22.70 / 25.48 22.83 / 25.85
Sensitivities
A quantitative sensitivity analysis for significant assumptions
is as follows:
Sensitivities As at As at
December 31, December 31,
2021 2020
Impact on defined
benefit obligation US$'000 US$'000
-------------------- ------------ ------------
Discount rate
+ 0.25% (524) (401)
Discount rate
- 0.25% 560 432
Salary increase
+ 0.25% 72 61
Salary increase
- 0.25% (70) (59)
Pension increase
+ 0.25% 278 216
Pension decrease - -
- 0.25% (not lower
than 0%)
A negative value corresponds to a reduction of the defined
benefit obligation, a positive value to an increase of the defined
benefit obligation.
The sensitivity analyses above have been determined based on a
method that extrapolates the impact on the defined benefit
obligation as a result of reasonable changes in key assumptions
occurring at the end of the reporting period. The sensitivity
analyses are based on a change in a significant assumption, keeping
all other assumptions constant. The sensitivity analyses may not be
representative of an actual change in the defined benefit
obligation as it is unlikely that changes in assumptions would
occur in isolation from one another.
Other pension plans
Life Materials Technologies Limited, Thailand, also has a
pension scheme which gives rise to defined benefit obligations
under IAS 19. This pension plan contributed a net defined benefit
obligation of US$ 92,000 to the net assets acquired in the business
combination. Pension expense in profit and loss was US$43,000 which
results in a US$ 135,000 net defined liability as at December 31,
2021.
17. Other non-current liabilities
As at
December As at
31, December 31,
2021 2020
US$'000 US$'000
Defined benefit obligation IAS 19 Switzerland
(Note 19) 2,146 3,276
Defined benefit obligation IAS 19 Thailand
(Note 19) 135 -
Deferred consideration in relation to
Chemtex acquisition (see Note 5f) 88 149
Other 250 -
Other non-current liabilities 2,619 3,425
18. Borrowings and financing
As at December 31, 2021, the Group's borrowings consist
primarily of:
- a credit facility taken out in 2021 which incurs interest at
1% and is secured by buildings. It is repayable in 2022. As at
December 31, 2021, EUR63,000 (US$71,000) is outstanding; and
- A bank loan taken out in October 2020 which incurs interest at
2.25% and which is secured on property owned by a company which is
controlled by a minority shareholder of HeiQ Medica. It is
repayable in equal monthly instalments of EUR8,000 (US$9,500) over
eight years up to September 2028. As at December 31, 2020,
EUR685,000 (US$779,000) is outstanding - the short-term portion
being EUR95,000 (US$108,000) and the long-term portion being
EUR590,000 (US$671,000).
- A loan of EUR459,000 (US$522,000) payable to a company
controlled by a minority shareholder of HeiQ Medica. The loan is
repayable by December 31, 2022 and does not incur any interest.
In 2020, the Group's borrowings consisted primarily of:
- A bank loan taken out in October 2020 which incurs interest at
2.25% and which is secured on property owned by a company which is
controlled by a minority shareholder of HeiQ Medica. It is
repayable in equal monthly instalments of EUR8,000 (US$9,500) over
eight years up to September 2028. As at December 31, 2020,
EUR777,000 (US$951,000) is outstanding - the short-term portion
being EUR93,000 (US$114,000) and the long-term portion being
EUR684,437 (US$838,000).
- A loan of EUR459,000 (US$562,000) payable to a company
controlled by a minority shareholder of HeiQ Medica. The loan is
repayable by December 31, 2022 and does not incur any interest.
- A short-term bank loan of EUR45,000 (US$55,000) which was
repaid in January 2021 and did not incur any interest.
The following table provides a reconciliation of the Group's
future maturities of its total borrowings for each year
presented:
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Not later than one year 1,004 173
Later than one year but less than
five years 457 1,043
After more than five years 213 357
Total borrowings 1,674 1,573
The following table represents the Group's finance costs for
each year presented:
Year ended Year ended
December
31, December 31,
2021 2020
US$'000 US$'000
Amortization of deferred finance costs
- acquisition costs 58 245
Lease finance expense 145 52
Interest on borrowings 108 108
Bank fees 55 46
Loss on foreign currency transactions 231 733
Total finance costs 597 1,184
The following table represents the Group's finance income for
each year presented:
Year ended Year ended
December
31, December 31,
2021 2020
US$'000 US$'000
Interest income 4 -
Gains on foreign currency transactions 516 68
Other 14 -
Total finance income 534 68
19. Current liabilities
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Trade payables 4,090 3,590
Payables to tax authorities 1,167 485
Other payables 4,102 1,740
Total trade and other payables 9,359 5,815
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Costs of goods sold 2,481 1,093
Personnel expenses 1,525 2,052
Other operating expenses 532 69
Total accrued liabilities 4,538 3,214
As at As at
December 31, December 31,
2021 2020
US$'000 US$'000
Prepayments from customers in relation
to sales contracts 1,774 -
Total deferred revenue 1,774 -
As at
December As at
31, December 31,
2021 2020
US$'000 US$'000
Deferred consideration in relation
to acquisitions (Note 5f) 5,995 967
Deferred consideration in relation
to share-based payments (Note 17) 74 -
Other current liabilities 6,069 967
20. Fair value and financial instruments
a) Fair value
The fair value of an asset or liability is the price that would
be received to sell that asset or paid to transfer that liability
in an orderly transaction occurring in the principal market (or
most advantageous market in the absence of a principal market) for
such asset or liability. In estimating fair value, the Directors
utilize valuation techniques that are consistent with the market
approach, the income approach and/or the cost approach. Such
valuation techniques are consistently applied. Inputs to valuation
techniques include the assumptions that market participants would
use in pricing an asset or liability. IFRS 13 "Fair Value
Measurement" establishes a fair value hierarchy for valuation
inputs that gives the highest priority to quoted prices in active
markets for identical assets or liabilities and the lowest priority
to unobservable inputs. The fair value hierarchy is defined as
follows:
Level 1: Inputs are unadjusted, quoted prices in active markets
for identical assets at the measurement date.
Level 2: Inputs (other than quoted prices included in Level 1)
can include the following:
-- observable prices in active markets for similar assets;
-- prices for identical assets in markets that are not active;
-- directly observable market inputs for substantially the full term of the asset; and
-- market inputs that are not directly observable but are
derived from or corroborated by observable market data.
Level 3: Unobservable inputs which reflect the Directors' best
estimates of what market participants would use in pricing the
asset at the measurement date.
All financial instruments measured at fair value use Level 2
valuation techniques for the each of the years ended December 31,
2020 and December 31, 2021.
Level 2 fair value measurements are those including inputs other
than quoted prices included within Level 1 that are observable for
the asset or liability directly or indirectly.
There were no transfers between fair value levels during the
year ended December 31, 2021 (2020: $nil).
b) Financial instruments
For trade receivables, the Group applies the simplified approach
permitted by IFRS 9 "Financial Instruments", which requires
expected lifetime losses to be recognized from initial recognition
of the receivables.
Financial liabilities are initially measured at fair value and
subsequently measured at amortized cost.
The Group is not a financial institution. The Group does not
apply hedge accounting and its customers are considered
creditworthy and in general pay consistently within agreed payments
terms. In 2021, few customers have shown delays in payment which
are closely monitored.
A classification of the Group's financial instruments is
included in the table below:
As at As at
December
31, December 31,
2021 2020
US$'000 US$'000
Cash and cash equivalents held at amortized
cost 14,560 25,695
Trade receivables and accrued income
held at amortized cost 18,050 13,437
Financial assets at amortized cost 6,607 2,815
Financial liabilities at amortized cost (23,255) (14,820)
Borrowings and leases (10,904) (4,225)
Total 5,058 22,902
21. Financial risk management
For the purposes of capital management, capital includes issued
capital and all other equity reserves attributable to the equity
holders of the Company. The primary objective of the Directors'
capital management is to ensure that the Group maintains a strong
credit rating and healthy capital ratios in order to support its
business and maximize shareholder value.
To maintain or adjust the capital structure, the Directors may
adjust the dividend payment to shareholders, return capital to
shareholders or issue new shares. No changes were made in the
objectives, policies or processes during the year.
The Directors manage the Group's capital structure and adjust it
in light of changes in economic conditions and the requirements of
the financial covenants. The Group includes in its net debt,
interest-bearing loans and borrowings, trade and other payables,
less cash and short-term deposits.
The Group's principal financial liabilities comprise of
borrowings and trade and other payables, which it uses primarily to
finance and financially guarantee its operations.
The Group's principal financial assets include cash and cash
equivalents and trade and other receivables derived from its
operations.
a. Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates and interest rates will affect the Group's
income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market
risk exposures within acceptable parameters, while optimizing the
returns.
b. Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates. As the Group's borrowings are
either on fixed interest terms or interest-free, the Group is not
subject to interest rate risk.
c. Credit risk
Credit risk is the risk that a customer or counterparty to a
financial instrument will not meet its obligations under a contract
and arises primarily from the Group's cash in banks and trade
receivables.
d. Foreign currency risk
Foreign currency risk is the risk that the fair value or future
cash flows of an exposure will fluctuate due to changes in foreign
exchange rates. The Group's exposure to the risk of changes in
foreign exchange rates relates primarily to its financing
activities (when financial liabilities and cash are denominated
other than in a company's functional currency).
Most of the Group's transactions are carried out in US Dollars
($). Foreign currency risk is monitored closely on an ongoing basis
to ensure that the net exposure is at an acceptable level.
The Group maintains a natural hedge whenever possible, by
matching the cash inflows (revenue stream) and cash outflows used
for purposes such as capital and operational expenditure in the
respective currencies. The Group's net exposure to foreign exchange
risk was as follows:
Functional currency
AUD EUR GBP US$ Others Total
As at December 31, 2021 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Financial assets denominated
in $ 3,489 3,443 399 22,713 649 30,693
Financial liabilities
denominated in $ (24) (889) (25,268) (4,341) (103) (30,625)
Net foreign currency
exposure 3,465 2,554 (24,869) 18,372 546 68
Functional currency
CNY EUR GBP US$ Others Total
As at December 31, 2020 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Financial assets denominated
in $ 248 2,145 717 17,190 5 20,305
Financial liabilities
denominated in $ (102) (268) (475) (129) 23 (951)
Net foreign currency
exposure 146 1,877 242 17,061 28 19,354
Foreign currency sensitivity analysis:
The following tables demonstrate the sensitivity to a reasonably
possible change in foreign currency exchange rates, with all other
variables held constant.
The impact on the Group's profit before tax is due to changes in
the fair value of monetary assets and liabilities. The Group's
exposure to foreign currency changes for all other currencies is
not material.
A 10 per cent. movement in each of the Australian dollar (AUD),
Chinese yuan (CNY), euro (EUR), British pound (GBP) and US dollar
($) would increase/(decrease) net assets by the amounts shown
below. This analysis assumes that all other variables, in
particular interest rates, remain constant.
AUD EUR GBP US$ Others
As at December 31,
2021 US$'000 US$'000 US$'000 US$'000 US$'000
Effect on net assets:
Strengthened by 10% 347 255 (2,487) 1,837 54
Weakened by 10% (347) (255) 2,487 (1,837) (54)
CNY EUR GBP US$ Others
As at December 31,
2020 US$'000 US$'000 US$'000 US$'000 US$'000
Effect on net assets:
Strengthened by 10% 15 188 24 1,706 3
Weakened by 10% (15) (188) (24) (1,706) (3)
e. Cash and cash equivalents
The Company considers the credit risk in relation to its cash
holdings is low because the counterparties are banks with high
credit ratings.
f. Trade receivables
Trade receivables are due from customers and collectability is
dependent on the financial condition of each individual company as
well as the general economic conditions of the industry. The
Directors review the financial condition of customers prior to
extending credit and generally does not require collateral in
support of the Group's trade receivables. The majority of trade
receivables are current or overdue for less than 30 days and the
Directors believe these receivables are collectible. Amounts
overdue longer than 120 days relate to a limited number of
customers with long trading history. Collection of these
receivables is expected in course of the year 2022. As at December
31, 2021, the Group had two customers that individually accounted
for more than 10% of total receivables, totaling 36.4% of total
trade receivables (2020: two customers that individually accounted
for more than 10% of total receivables, totaling 38%).
g. Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they are due. The Directors
manage this risk by:
-- maintaining adequate cash reserves through the use of the
Group's cash from operations and bank borrowings; and
-- continuously monitoring projected and actual cash flows to
ensure the Group maintains an appropriate amount of liquidity.
Less than 2 to 5 > 5
1 year years years Total
Year ended December
31, 2021 US$'000 US$'000 US$'000 US$'000
Trade and other payables 9,359 - - 9,359
Borrowings 1,004 457 213 1,674
Leases (gross cash
flows) 1,115 3,689 5,525 10,329
Other liabilities 10,658 - 88 10,746
Retirement obligations - - 2,281 2,281
As at December 31,
2021 22,136 4,146 8,107 34,389
Less than 2 to 5 > 5
1 year years years Total
Year ended December
31, 2020 US$'000 US$'000 US$'000 US$'000
Trade and other payables 5,815 - - 5,815
Borrowings 1,573 - - 1,573
Leases (gross cash
flows) 385 1,346 1,162 2,893
Other liabilities 4,283 5,675 - 9,958
Retirement obligations - - 3,276 3,276
As at December 31,
2020 12,056 7,021 4,438 23,515
22. Notes to the statements of cash flows
Net debt reconciliation:
Assumed on Foreign
Opening acquisition exchange Closing
balances New agreements of subsidiaries Cash movements differences balances
Year ended December
31, 2021 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cash and cash equivalents 25,695 - - (10,525) (610) 14,560
Leases (2,652) (5,829) (1,636) 790 97 (9,230)
Borrowings (1,573) (472) (579) 803 147 (1,674)
Totals 21,470 (6,301) (2,215) (8,932) (366) 3,656
Assumed on Foreign
Opening acquisition exchange Closing
balances New agreements of subsidiaries Cash movements differences balances
Year ended December
31, 2020 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cash and cash equivalents 3,603 - - 21,822 270 25,695
Leases (2,784) (222) - 354 - (2,652)
Borrowings (2,478) (61) (1,512) 2,735 (257) (1,573)
Totals (1,659) (283) (1,512) 24,911 13 21,470
Reconciliation of cash on business combinations:
Cash assumed on acquisition of Chrisal NV 1,773
Cash assumed on acquisition of RAS AG 291
Cash assumed on acquisition of Life Material
Technologies Ltd 73
Cash assumed on acquisitions of businesses 2,137
Consideration payment for acquisition of
Chrisal NV (6,054)
Consideration payment for acquisition of
RAS AG (1,482)
Consideration payment for acquisition of
Life Materials Technologies Ltd (2,550)
Consideration payment for acquisition of
Chem-Tex assets (908)
Consideration payment for acquisitions of
businesses (10,994)
23. Contingencies and provisions
The Group is, from time to time, involved in claims and legal
proceedings. As per 31 December 2021, there is a potential claim
with regards to a customer contract in the amount of up to US$
175,000. Further, in April 2022 the Group was contacted by the
United States Environmental Protection Agency ("EPA") in connection
with potential alleged violations of the Federal Insecticide,
Fungicide and Rodenticide Act ("FIFRA") pertaining to alleged
mislabelling. However, at this point in time, the Group is not able
to assess the likelihood of a favourable or unfavourable outcome or
to quantify any possible financial impact.
The Group cannot reasonably predict the likelihood or outcome of
these activities. However, the Group does not believe that adverse
decisions in any pending or threatened proceedings related to any
matter, or any amount which may be required to be paid by reasons
thereof, will have a material effect on the financial condition or
future results of operations.
As at December 31, 2021, no amounts have been accrued related to
such matters (31 December, 2020: $nil).
24. Related party transactions
A company controlled by a director of HeiQ Materials AG supplied
materials and services totaling US$32,000 in the year ended
December 31, 2020 (2020: US$145,000). HeiQ Materials AG in turn
supplied US$88,000 (2020: nil).
In 2022 goods that were in stock as of December 31, 2021 have
been sold to a company controlled by a minority shareholder at cost
value. However, the minority shareholder is not considered a
related party to the Group. The value of the transaction amounts to
US$ 900,000.
Details of the remuneration of the directors are contained in
the Remuneration Committee Report.
25. Material subsequent events
On February 25, 2022 HeiQ Plc issued 347,552 new ordinary shares
of GBP0.30 each in the Company. These shares have been allotted to
the vendors of Life Material Technologies Limited to satisfy a
closing working capital adjustment in connection with the Company's
acquisition of Life in June 2021.
26. Ultimate controlling party
As at December 31, 2021, the Company did not have any single
identifiable controlling party.
27. Correction of prior period errors
During the compilation of the financial statements for the year
ended 31 December 2021, the Company discovered an understatement of
inventory balances in prior years in respect of direct overhead
expenses which had not been included in the inventory valuation.
The cumulative effect of these errors as at 31 December 2020 was
$212,000.
The effect of the adjustments are shown in the following
table:
Impact of adjustment on the Group's statement of financial
position
As at December Prior year As at December
31, 2020 adjustment 31, 2020
US$'000 US$'000 US$'000
(As previously (As re- stated)
stated)
Assets
Inventories 13,328 212 13,540
Total Assets 69,396 212 69,608
Capital and reserves
Retained deficit 8,711 (212) 8,499
Total Equity 49,397 (212) 49,609
The effect of the prior year adjustment as at 31 December 2019
was an understatement of inventories of US$78,000 and a
corresponding overstatement of retained losses of the same
amount.
The statement of comprehensive income for the year ended 31
December 2020 has been adjusted through a reduction in cost of
sales of $134,000 and a corresponding increase in income before
taxation. The adjustment had no impact on the taxation expense.
Impact of adjustment on the Group's statement of comprehensive
income
Year ended December Prior year Year ended December
31, 2020 adjustment 31, 2020
US$'000 US$'000 US$'000
(As previously (As re- stated)
stated)
Net result for
the year
Cost of sales (22,402) 134 (22,268)
Income before
taxation 7,026 134 7,160
Income after
taxation 4,914 134 5,048
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END
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