TIDMPVCS
RNS Number : 8442H
PV Crystalox Solar PLC
19 March 2015
PV Crystalox Solar PLC
Preliminary Results
For the year ended 31 December 2014
PV Crystalox Solar PLC and its subsidiaries (the "Group"), a
long established supplier of photovoltaic ('PV') silicon wafers,
today announces preliminary results for the year ended 31 December
2014.
Highlights
-- Cash conservation strategy continued during 2014
-- There were no shipments to long term contract customers
-- We have strengthened relationships with new customers in Taiwan and Europe.
-- Wafer shipments were in line with production 212MW (2013: 211MW)
Overview of results
-- Revenues EUR53.3m (2013: EUR71.4m)
-- LBT on continuing operations of EUR(4.7)m (2013: profit of EUR6.6m)
-- Net cash from operating activities on continuing operations EUR(15.7)m (2013: EUR4.4m)
-- Net Cash EUR24.6m (2013:EUR 39.2m)
-- Inventories EUR28.6m (2013: EUR13.0m)
Iain Dorrity, Chief Executive Officer commented
"The Group has made steady progress during 2014 in its limited
objectives to ramp up production output and consolidate
relationships with its newly developed customer base, which is
mainly in Taiwan. However the industry environment remains
intensely competitive and continues to be disrupted by US-China
trade disputes."
John Sleeman, Chairman, commented
"The Board continues to believe that our cash conservation
strategy is the necessary response to current market conditions,
enabling us to protect shareholder value whilst preserving the
Group's core production capabilities. Whilst the Board remains
committed to the solar industry, our future is dependent upon
sensible trading conditions returning to the solar
marketplace."
Enquiries:
PV Crystalox Solar PLC +44 (0) 1235 437188
Iain Dorrity, Chief Executive Officer
Matthew Wethey, Chief Financial Officer
and Group Secretary
About PV Crystalox
PV Crystalox Solar is a long established supplier to the global
photovoltaic industry, producing multicrystalline silicon wafers
for use in solar electricity generation systems.
Our customers, solar cell producers primarily in Asia, process
these wafers into solar modules to harness the clean, silent and
renewable power from the sun. We continue to contribute to making
solar power cost competitive with conventional hydrocarbon power
generation and, as such, continue to seek to drive down the cost of
production whilst increasing solar cell efficiency.
Chairman's statement
The photovoltaic market continues to experience significant
growth in global installations, however pressure on pricing and
international trade disputes make it very challenging for all
manufacturers. As a consequence, PV Crystalox Solar has continued
to protect shareholder value by operating in cash conservation
mode, with some increase in production, albeit at levels far below
our maximum capacity, and with a strong focus on cost control.
In 2014 we maintained wafer shipments at the same level as in
2013, but trading volumes of excess polysilicon were significantly
lower than in 2013. As a consequence our revenues of EUR53.3
million were 25% lower than 2013 and our year end polysilicon
inventory was EUR14.2 million higher. There was a reduction in
profitability during 2014 mainly due to the negative impact of
revised assumptions in respect of the onerous contract provision
which was partly offset by higher levels of other income due to a
customer settlement received in 2014. As a result the loss before
tax from continuing operations was EUR4.7 million compared to the
EUR6.6 million profit in 2013. Net cash at the year end was EUR24.6
million which was EUR14.6 million lower than the EUR39.2 million
held at the end of 2013.
Our employees are one of the Group's key strengths and are vital
in ensuring that we retain our core production capabilities. During
2014 we ramped up production volumes in order to consolidate
relationships with our newly developed customer base. This required
an increase in our staff numbers from 88 at the end of 2013 to 138
at the end of 2014. Many of these additional employees had
previously been employed within the Group but had left following
the restructuring in 2011 and 2013. I would like to welcome them
back and to thank all our employees for their continuing
outstanding commitment and contribution.
I would also like to thank Peter Finnegan, who retired from his
role as Chief Financial Officer of the Group on 31 May 2014. The
Board expresses its gratitude to Peter for his contribution to the
success of the Group and wishes him well for the future. Following
Peter Finnegan's departure Matthew Wethey took over the Chief
Financial Officer role in addition to his role as Group
Secretary.
The Board continues to believe that our cash conservation
strategy is the necessary response to current market conditions,
enabling us to protect shareholder value whilst preserving the
Group's core production capabilities. Whilst the Board remains
committed to the solar industry, our future is dependent upon
sensible trading conditions returning to the solar marketplace.
John Sleeman
Chairman
18 March 2015
OPERATIONAL AND FINANCIAL REVIEW
Operational review of 2014
The Group has made steady progress during 2014 in its limited
objectives to ramp up production output and consolidate
relationships with its newly developed customer base, which is
mainly in Taiwan. However the industry environment remains
intensely competitive and continues to be disrupted by US-China
trade disputes. Pricing across the value chain has shown
considerable volatility and market conditions have deteriorated
markedly since the middle of the year with renewed pressure on
pricing. Wafer prices saw a modest recovery in late 2013 and peaked
in Q1 2014 but have declined thereafter barring a short lived rally
in Q4 to reach levels close to historic lows during Q1 2015.
Current wafer prices are 10% below the Q1 2014 peak with premium
wafers suffering an even greater fall of close to 20%. In contrast
the decline in the pricing of polysilicon, the key raw material,
has not been less precipitous and has further squeezed already
negative margins.
On a positive note the Group's production and material costs,
which are primarily incurred in euro and Japanese yen, have
benefited from foreign currency effects during the year and
increasingly so in recent months. Both currencies have
significantly weakened against the US dollar and accordingly costs
in US dollar terms have declined considerably. With wafer market
prices denominated in US dollars the reduction in production costs
has effectively offset some of the impact of the market price
declines. However despite these currency effects our production
costs exceed market prices.
The Group not only faces the challenge of aligning production
costs with market prices but also has to deal with the shrinking
accessible customer base for our wafers following the dramatic
shift in global manufacturing during recent years. Most EU
manufacturers have declared bankruptcy or shutdown operations and
solar cell production in Europe has declined alarmingly. Cell
production in Japan which had been historically a major
manufacturing centre has been drastically reduced as companies have
opted to outsource manufacturing. The Group did not make any
shipments in 2014 to Japan which had previously been the major
market for the Group and accounted for 34% of wafer volumes as
recently as 2013. The PV industry is now dominated by companies in
other regions within Asia and by companies in China in particular.
It is sobering to note that ten of the 20 leading global
crystalline silicon solar cell makers are based in China and seven
in Taiwan with China-based makers accounting for 55% of global
capacity and 20% by those based in Taiwan. The abundance of local
suppliers makes competing in the Chinese market impractical and so
the Group's focus is on customers in Taiwan and those survivors in
Europe, where the weaker euro is providing a lifeline.
The Group continues to operate in cash conservation mode with
reduced output, a strong focus on internal cost reduction and
quality improvement programmes. As announced previously in the 2013
Annual Report, production volumes have been increased during 2014
to consolidate links with our new customers. The increased output
has enabled wafer shipments (2014:212MW) to be maintained at levels
in line with those achieved in the previous year (2013:211MW) when
almost half was supplied from inventory. Nevertheless the Group
remains cautious and, in view of the unfavourable market pricing no
increase in output is anticipated for 2015 and production levels
will be restricted to around 30% of our 750MW operating
capacity.
In common with most PV companies the Group is burdened by long
term contractual commitments for purchase of polysilicon which were
made during 2008-2010 when market supply was very restricted. As in
previous years the Group has continued to negotiate on a periodic
basis with its two polysilicon suppliers to modify pricing and
volumes under its long term contracts and has been able to reach
accommodation to date. The prices negotiated were significantly
below contract prices but were at a premium to market prices.
Nevertheless, the agreed polysilicon purchase volumes during the
year still significantly exceeded the Group's production
requirements. During H1 2014 the Group was successful in trading
excess polysilicon at market prices in order to manage inventory.
However, as result of market oversupply and changes in Chinese
import regulations, trading became much more difficult from the
second half of the year onwards and polysilicon inventory has risen
accordingly.
The Group's larger polysilicon contract is due to expire at the
end of 2015. In the case of the other contract an amendment was
formally concluded during 2014 to secure fixed prices significantly
below the original contract levels and to reschedule volumes over
an extended period.
During 2007 and 2008, Group companies entered into a number of
long-term agreements with customers to supply wafers at prices
which are very considerably above current market levels. Three
wafer supply contracts remained at the start of 2014 although in
two cases, customers have entered insolvency and shipments stopped
in 2011 and 2012 respectively. Claims had been registered with the
respective administrators and a settlement was finally agreed in
one case whereby the Group received a cash payment of EUR8.7million
in August 2014. A settlement with the other customer in insolvency
is expected before the end of 2015, although the magnitude of any
cash payment is expected to be significantly lower.
The final remaining long-term contract customer is one of the
world's leading PV companies which has failed to purchase wafers in
line with its contractual obligations. Despite negotiations over
the last two years we have been unable to reach an agreement on
pricing which would enable us to resume the supply of wafers. Due
to the absence of any substantive progress it has become necessary
to seek resolution through arbitration and a request has been filed
recently with the International Court of Arbitration of the
International Chamber of Commerce (ICC) in Paris.
Financial review
Despite wafer sales volumes being in line with the prior year,
Group revenue in 2014 decreased by 25.4% to EUR53.3 million (2013:
EUR71.4 million). This was mainly due to a significant reduction in
the level of trading of surplus polysilicon feedstock, with the
result that raw material inventories increased by EUR14.2 million
during the year. In addition the average selling price of and the
margins achieved for wafers were significantly lower following the
ending of sales to contract customers in 2013, when 34% of shipment
volumes were sold at a premium to spot prices.
During 2014 the Group recognised other income of EUR12.1 million
which was EUR9.4 million higher than in 2013. The main reason for
this increase was receipt in H2 2014 of a settlement with the
administrator of one of the long-term contract customers in
insolvency.
The income statement was impacted by negative changes to the
onerous contract provision ("OCP") which resulted in an additional
charge being recorded in the year. Due to IFRS requirements changes
to the OCP impact costs of materials and services, currency gain
and finance cost. Details of the onerous contract provision are
discussed later in this review.
Within personnel costs, gross wages and salaries at EUR5.8
million were 12% higher than in 2013. This increase in gross wages
and salaries was mainly due to a 9% increase in the number of Group
employees, following the increase in production volumes, and a cost
of living pay increase which was awarded from 1 January 2014.
The Group's annual depreciation charge in 2014 was a modest
EUR0.3 million. It should be noted that the Group's plant and
equipment, which was largely written down between 2011 and 2013,
remains available for use and a significant increase in production
can be achieved without a significant increase in capital
expenditure or an increase in the annual depreciation charge.
Net interest expense was EUR2.3 million (2013: EUR3.9 million)
mainly due to the unwinding of the discount rate used in the
calculation of the Group's OCP.
As a result the Group generated a loss before taxes of EUR4.7
million (2013: profit of EUR6.6 million).
When looking at the amounts attributable to equity holders, the
EUR4.7 million loss in 2014 equated to a loss per share of EUR0.03.
In 2013 the profit of EUR6.2 million on continuing operations was
offset by losses of EUR2.6 million on discontinued operations to
give an overall profit in the year of EUR3.6 million, which
resulted in earnings per share of EUR0.01.
The Group's cash position at year end of EUR24.6 million was
EUR14.6 million lower than the net position of EUR39.2 million at
the start of the year. EUR15.7 million of this was from net cash
out flows on operating activities. This was partially offset by
positive foreign exchange rate changes on cash of EUR1.3 million.
It should be noted that, whilst net cash flows on operating
activities included inflows of EUR0.9 million due to working
capital changes, inventories increased from EUR13.0 million to
EUR28.6 million during 2014.
Onerous contract provision ("OCP")
In common with many PV companies, the Group has long-term
contractual commitments for the purchase of polysilicon. In the
Group's case there are two external supply contracts. These
contracts were made to secure the supply of raw material necessary
to service the Group's long-term wafer supply contracts. Given the
significant decline in market prices for polysilicon and silicon
wafers since the contracts were signed, the contracted cost of
polysilicon under these agreements means the Group is likely to
incur losses in respect of these contracts. Consequently these
contracts have become onerous so the Board provides for the present
value of the amount at which the Group expects to purchase
polysilicon less the amount at which the Group expects to be able
to sell polysilicon or wafers taking into account associated
manufacturing costs.
The OCP unwinds from period to period as the related contracts
move towards expiry and is periodically recalculated to reflect
changes in the underlying assumptions. During 2014 the reduction in
the onerous contract provision was EUR11.0 million (2013: EUR25.5
million). This reduction in the provision was driven by a number of
factors. These include:
-- EUR12.6million of utilisation being approximately half of the
prior year provision, reflecting the fact that the majority of the
prior year provision was in respect of the contract ending on 31
December 2015 and the volumes that remain to be taken have halved
with only a year of the contract remaining at 31 December 2014.
-- There have also been significant foreign exchange gains made
against the Euro and the Yen when comparing to the USD selling
price, meaning the contract prices have become more favourable to
the Group. This reduced the provision by a further EUR8.9m.
-- These gains were offset by EUR9.7m of additional provision
required as a result of movements in pricing assumptions where it
has been seen over the past six months that the polysilicon sales
price the Group has achieved no longer reflects the spot price. As
such whilst quarterly negotiations have resulted in a 'predictable'
purchase price (in that movements have broadly reflected spot
movements), the price at which polysilicon can be sold has reduced
resulting in an increased loss and therefore an increase in the
provision.
-- The remainder of the movement is a EUR2.4m increase due to
the unwinding of the discount rate and EUR1.6m of release due to
taking lower volumes than expected.
2014 2013
EUR'000 EUR'000
----------------------------- -------- --------
Provisions brought forward 26,526 52,047
Unwinding of discount factor 2,390 4,597
Additional provision 9,715 -
Released (1,553) (11,652)
Exchange differences (8,902) (5,736)
Utilised (12,634) (12,730)
----------------------------- -------- --------
Provisions carried forward 15,542 26,526
----------------------------- -------- --------
In determining the closing level of provision required in the
current year, assumptions are made as to how the polysilicon is
expected to be used and subsequently to calculate the losses that
will be generated from that use. In 2013 the Group strategy changed
to both produce wafers for sale, subject to demand, and to trade
excess polysilicon as opposed to trading all future purchases of
polysilicon. This strategy operated in 2014, however the price at
which the excess polysilicon could be traded and the value it has
in production of wafers have converged to mean there is now no
difference in margin whether it is traded or used in manufacture.
Accordingly the decision to either trade polysilicon or manufacture
wafers has no impact on the OCP.
Going concern
The Group's directors continue to operate its cash conservation
strategy to enable the Group to manage its operations whilst market
conditions remain difficult.
A description of the current market conditions and the Group's
actions to conserve cash are included in the Strategic Report.
As part of its normal business practice, the Group regularly
prepares both annual and longer-term plans which are based on the
directors' expectations concerning key assumptions. The assumptions
around wafer and polysilicon sales volumes and prices and
contracted polysilicon purchase volumes and prices are based on
management's expectations which are consistent with the Group's
experience in 2014 and in the first part of 2015.
The Group has long-term contracts with two external suppliers
for the purchase of polysilicon, our main raw material. The Group's
management has been successful in reaching accommodation with these
suppliers to secure periodic contract amendments and to adjust
prices and volumes. As a result, these amendments have brought the
terms more in line with current market pricing. To manage inventory
levels and a positive cash position the Group will continue to sell
surplus polysilicon during 2015.
The nature of the Group's operation means that it can vary
production levels to match market requirements and to balance the
requirements of the Group's customers. During Q1 2014 the Group
doubled production output compared to 2013. This was as a result of
wafer production cost reductions and to consolidate existing
customer relationships and to develop new ones. The Group
maintained production at that level during 2014 and this has
continued in Q1 2015. These customers were based in Taiwan and the
two largest Taiwanese customers accounted for 61% of Group revenue
in 2014.
As a result of these actions and related modelling assumptions
the Group's base plans indicate that the Group will be able to
operate within its net cash reserves for the foreseeable future. On
31 December 2014 the balance of cash or cash equivalents was
EUR24.6 million.
Therefore, whilst any consideration of future matters involves
making a judgement at a particular point in time about future
events that are inherently uncertain, the Directors, after careful
consideration and after making appropriate enquiries, are of the
opinion that the Group has adequate resources to continue in
operational existence for at least twelve months from the date of
approval of the financial statements. Thus the Group continues to
adopt the going concern basis of accounting in preparing the annual
financial statements.
Outlook
Double digit growth in global PV installations is again
forecasted for 2015 but there is little expectation in the short
term of any relief of the pricing pressure that has been
experienced in recent months. This challenging market and the
irrational behaviour of participants is expected to endure during
the year and so the Board does not expect any return to
profitability for the underlying business during 2015. The Board
continues to view positively the growth prospects for the PV
industry but is also mindful of the need to protect shareholder
value. Accordingly it will be imperative during the forthcoming
period to establish definitively whether the Group can achieve a
cost structure which is compatible with market pricing.
Iain Dorrity
Chief Executive Officer
18 March 2015
Consolidated statement of comprehensive income
for the year ended 31 December 2014
2014 2013
Total Total
Notes EUR'000 EUR'000
---------------------------------------------------- ----- -------- --------
Continuing operations:
Revenues 8 53,333 71,442
Cost of materials and services 3 (65,694) (55,103)
Personnel expenses 4 (6,620) (6,454)
Depreciation and impairment of property,
plant and equipment and amortisation of intangible
assets (337) (441)
Other income 2 12,132 2,696
Other expenses 5 (4,163) (4,693)
Currency gains and losses 30 9,043 3,081
---------------------------------------------------- ----- -------- --------
(Loss) / profit before interest and taxes
("EBIT") (2,306) 10,528
Finance income 6 106 796
Finance cost 6 (2,450) (4,698)
---------------------------------------------------- ----- -------- --------
(Loss) / profit before taxes ("EBT") (4,650) 6,626
Income taxes 7 (2) (390)
---------------------------------------------------- ----- -------- --------
(Loss) / profit for the year from continuing
operations (4,652) 6,236
Discontinued operations:
Loss for the year from discontinued operations 36 - (2,577)
---------------------------------------------------- ----- -------- --------
(Loss) / profit for the year attributable
to owners of the parent (4,652) 3,659
---------------------------------------------------- ----- -------- --------
Other comprehensive income / (loss)
Items that may be reclassified subsequently
to profit or loss:-
Currency translation adjustment 2,498 (4,974)
---------------------------------------------------- ----- -------- --------
Total comprehensive loss
Attributable to owners of the parent (2,154) (1,315)
---------------------------------------------------- ----- -------- --------
Basic and diluted (loss) / earnings per share
in Euro cents
From continuing operations 9 (3.0) 1.7
From discontinued operations 9 - (0.7)
---------------------------------------------------- ----- -------- --------
From (loss) / profit for the year 9 (3.0) 1.0
---------------------------------------------------- ----- -------- --------
The accompanying notes form an integral part of these financial
statements.
Consolidated balance sheet
as at 31 December 2014
2014 2013
Notes EUR'000 EUR'000
----------------------------------------- ------ -------- --------
Intangible assets 15 38 44
Property, plant and equipment 16 2,355 2,351
Pension surplus 27 - 108
Other non-current assets 17 5,425 14,626
Total non-current assets 7,818 17,129
----------------------------------------- ------ -------- --------
Cash and cash equivalents 10 24,592 39,900
Trade accounts receivable 11 5,341 13,473
Inventories 12 28,630 13,009
Prepaid expenses and other assets 13 12,380 11,504
Current tax assets 14 16 70
----------------------------------------- ------ -------- --------
Total current assets 70,959 77,956
----------------------------------------- ------ -------- --------
Total assets 78,777 95,085
----------------------------------------- ------ -------- --------
Loans payable 19 - 690
Trade accounts payable 20 1,762 2,827
Deferred revenue 26 3,235 3,342
Accrued expenses 21 1,564 2,689
Provisions 22 14,577 12,594
Deferred grants and subsidies 23 111 152
Current tax liabilities 24 156 199
Other current liabilities 25 72 50
----------------------------------------- ------ -------- --------
Total current liabilities 21,477 22,543
----------------------------------------- ------ -------- --------
Accrued expenses 21 111 146
Provisions 22 1,019 13,969
Other non-current liabilities 236 43
----------------------------------------- ------ -------- --------
Total non-current liabilities 1,366 14,158
----------------------------------------- ------ -------- --------
Share capital 28 12,332 12,332
Share premium 50,511 50,511
Other reserves 25,096 25,096
Shares held by the EBT (679) (7,610)
Share-based payment reserve 741 922
Reverse acquisition reserve (3,601) (3,601)
(Accumulated losses) / retained earnings (7,631) 4,067
Currency translation reserve (20,835) (23,333)
----------------------------------------- ------ -------- --------
Total equity 55,934 58,384
----------------------------------------- ------ -------- --------
Total liabilities and equity 78,777 95,085
----------------------------------------- ------ -------- --------
The accompanying notes form an integral part of these
statements.
The financial statements were approved by the Board of directors
on 18 March 2015 and signed on its behalf by:
Iain Dorrity Company number
Chief Executive Officer 06019466
Consolidated statement of changes in equity
for the year ended 31 December 2014
Retained
Shares earnings
held Share-based Reverse / Currency
Share Share Other by the payment acquisition (Accumulated translation Total
capital premium reserves EBT reserve reserve losses) reserve equity
Note EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
As at 1
January
2013 12,332 75,607 - (8,640) 819 (3,601) 36,693 (18,359) 94,851
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
Shareholder
return 35 - - - - - - (36,285) - (36,285)
Issue and
redemption
of B shares 28 - (25,096) 25,096 - - - - - -
Share-based
payment
charge - - - - 103 - - - 103
Award of
shares - - - 119 - - - - 119
B share
capital
in shares for
the EBT 29 - - - 911 - - - - 911
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
Transactions
with owners - (25,096) 25,096 1,030 103 - (36,285) - (35,152)
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
Profit for the
year - - - - - - 3,659 - 3,659
Currency
translation
adjustment - - - - - - - (4,974) (4,974)
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
Total
comprehensive
loss - - - - - - 3,659 (4,974) (1,315)
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
As at 31
December
2013 12,332 50,511 25,096 (7,610) 922 (3,601) 4,067 (23,333) 58,384
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
As at 1
January
2014 12,332 50,511 25,096 (7,610) 922 (3,601) 4,067 (23,333) 58,384
Revaluation of
shares held
by
the EBT 28 - - - 6,868 178 - (7,046) - -
Share based
payment
charge - - - - 444 - - - 444
Award of
shares - - - 63 (803) - - - (740)
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
Transactions
with owners - - - 6,931 (181) - (7,046) - (296)
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
Profit for the
year - - - - - - (4,652) - (4,652)
Currency
translation
adjustment - - - - - - - 2,498 2,498
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
Total
comprehensive
loss - - - - - - (4,652) 2,498 (2,154)
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
As at 31
December
2014 12,332 50,511 25,096 (679) 741 (3,601) (7,631) (20,835) 55,934
-------------- ---- ------- -------- --------- ------- ----------- ----------- ------------ ----------- --------
Consolidated cash flow statement
for the year ended 31 December 2014
2014 2013
Note EUR'000 EUR'000
---------------------------------------------------- ----- -------- --------
CONTINUING OPERATIONS
(Loss) / profit before taxes (4,650) 6,626
Adjustments for:
Net interest expense 6 2,344 3,902
Depreciation and amortisation 15,16 337 441
Inventory writedown 12 - 681
Charge for retirement benefit obligation and
share-based payments 27,29 - 35
Decrease in provisions 22 (14,761) (31,747)
Gain from the disposal of property, plant and
equipment and intangibles (2) (1,072)
Losses / (gains) in foreign currency exchange 156 (500)
Derecognition of grants and subsidies - 20
Change in deferred grants and subsidies (48) (57)
---------------------------------------------------- ----- -------- --------
(16,624) (21,671)
---------------------------------------------------- ----- -------- --------
Changes in working capital
(Increase) / decrease in inventories 12 (14,847) 20,965
Decrease / (increase) in accounts receivables 11,13 9,074 (5,731)
Decrease in accounts payables and deferred income 20,21 (2,926) (214)
Decrease in other assets 17 9,576 9,508
Decrease / (increase) in other liabilities 25 22 (335)
---------------------------------------------------- ----- -------- --------
(15,725) 2,522
---------------------------------------------------- ----- -------- --------
Income taxes received 14 7 1,118
Interest received 44 796
---------------------------------------------------- ----- -------- --------
Net cash (used in) / generated from operating
activities (15,674) 4,436
---------------------------------------------------- ----- -------- --------
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 2 1,190
Proceeds / (Repayment) of investment grants
and subsidies 23 7 (2,477)
Payments to acquire property, plant and equipment
and intangibles 15,16 (251) (122)
---------------------------------------------------- ----- -------- --------
Net cash used in investing activities (242) (1,409)
---------------------------------------------------- ----- -------- --------
Cash flow from financing activities
Repayment of bank and other borrowings 19 (712) (3,356)
Dividends paid 35 - (36,285)
Interest paid 6 (1) (101)
---------------------------------------------------- ----- -------- --------
Net cash used in financing activities (713) (39,742)
---------------------------------------------------- ----- -------- --------
Net change in cash and cash equivalents available
from continuing operations (16,629) (36,715)
---------------------------------------------------- ----- -------- --------
Consolidated cash flow statement (continued)
for the year ended 31 December 2014
2014 2013
Note EUR'000 EUR'000
----------------------------------------------------- ----- -------- --------
DISCONTINUED OPERATIONS
Earnings before taxes - (1,855)
Adjustments for:
Depreciation and amortisation 15,16 - 38
Impairment 15,16 - (720)
(Recognition)/derecognition of grants and subsidies - (18,452)
Loss from the disposal of property, plant and
equipment and intangibles - 20,250
----------------------------------------------------- ----- -------- --------
- (739)
----------------------------------------------------- ----- -------- --------
Changes in working capital
Decrease/(increase) in inventories 12 - 816
Decrease in accounts payables and deferred income 20,21 - (3,794)
Decrease in other assets 17 - 366
(Increase)/decrease in other liabilities 25 - (138)
----------------------------------------------------- ----- -------- --------
Net cash used in operating activities - (3,489)
----------------------------------------------------- ----- -------- --------
Cash flow from investing activities
Payments to dispose of property, plant and equipment
and intangibles 15,16 - (12,261)
----------------------------------------------------- ----- -------- --------
Net cash used in investing activities - (12,261)
----------------------------------------------------- ----- -------- --------
Net change in cash and cash equivalents available
from discontinued operations - (15,750)
----------------------------------------------------- ----- -------- --------
Cash generated from continuing and discontinuing
operations (16,629) (52,465)
Effects of foreign exchange rate changes on
cash and cash equivalents 1,321 (2,315)
----------------------------------------------------- ----- -------- --------
Cash and cash equivalents at beginning of the
year 39,900 94,680
----------------------------------------------------- ----- -------- --------
Cash and cash equivalents at end of the year 24,592 39,900
----------------------------------------------------- ----- -------- --------
The accompanying notes form an integral part of these financial
statements.
Notes to the consolidated financial statements
for the year ended 31 December 2014
1. Group accounting policies
Basis of preparation
The Consolidated Financial Statements of the Group have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union, IFRIC
interpretations and the Companies Act 2006 applicable to companies
reporting under IFRS. The financial information has also been
prepared under the historical cost convention except that it has
been modified to include certain financial assets and liabilities
(including derivatives) at their fair value through profit and
loss. These policies have been consistently applied to all years
presented unless otherwise stated.
PV Crystalox Solar PLC is incorporated and domiciled in the
United Kingdom.
The financial statements for the year ended 31 December 2014
were approved by the Board of directors on 18 March 2015.
Functional and presentational currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the "functional
currency"). The functional currency of the parent company is
Sterling. The financial information has been presented in Euros,
which is the Group's presentational currency. The Euro has been
selected as the Group's presentational currency as this is the
currency used in its significant contracts. The financial
statements are presented in round thousands.
Foreign currency translation
Transactions in foreign currencies are translated into the
functional currency of the respective entity at the foreign
exchange rate ruling at the date of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are translated to the functional currency at the
foreign exchange rate ruling at that date. Non-monetary assets and
liabilities that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate at the date
of the transaction. Non-monetary assets and liabilities that are
stated at fair value are translated to the functional currency at
foreign exchange rates ruling at the date the fair value was
determined. Exchange gains and losses on monetary items are charged
to EBIT.
The assets and liabilities of foreign operations are translated
to Euros at foreign exchange rates ruling at the balance sheet
date. The income and expenses of foreign operations are translated
into Euros at the average foreign exchange rates of the year that
the transactions occurred in. In the Consolidated Financial
Statements exchange rate differences arising on consolidation of
the net investments in subsidiaries are recognised in other
comprehensive income under "Currency translation adjustment".
Use of estimates and judgements - overview
The preparation of financial statements in conformity with
adopted IFRS requires management to make judgements and estimates
that affect the application of policies and reported amounts of
assets, liabilities, income, expenses and contingent liabilities.
Estimates and assumptions mainly relate to the useful life of
non-current assets, the discounted cash flows used in impairment
testing, the establishing of provisions for onerous contracts,
taxes, share-based payment and inventory valuations. Estimates are
based on historical experience and other assumptions that are
considered reasonable under the circumstances. Actual values may
vary from the estimates. The estimates and the assumptions are
under continuous review with particular attention paid to the life
of material plant.
Critical accounting and valuation policies and methods are those
that are both most important to the depiction of the Group's
financial position, results of operations and cash flows and that
require the application of subjective and complex judgements, often
as a result of the need to make estimates about the effects of
matters that are inherently uncertain and may change in subsequent
years. The critical accounting policies that the Group discloses
will not necessarily result in material changes to our financial
statements in any given year but rather contain a potential for
material change. The main accounting and valuation policies used by
the Group are outlined in the following notes. While not all of the
significant accounting policies require subjective or complex
judgements, the Group considers that the following accounting
policies should be considered critical accounting policies.
1. Group accounting policies (continued)
Use of estimates - property, plant and equipment impairment
Property, plant and equipment are depreciated over their
estimated useful lives. The estimated useful lives are based on
estimates of the period during which the assets will generate
revenue. The carrying amount of the Group's non-financial assets,
other than inventories and deferred tax assets, are subject to
regular impairment testing and are reviewed annually and upon
indication of impairment.
Having considered the current and, lack of certainty of, future
profitability of other Group companies, the majority of property,
plant and equipment has previously been written down to scrap
value.
Although we believe that our estimates of the relevant expected
useful lives, our assumptions concerning the business environment
and developments in our industry and our estimations of the
discounted future cash flows are appropriate, changes in
assumptions or circumstances could require changes in the analysis.
This could lead to additional impairment charges or allowances in
the future or to valuation write backs should the expected trends
reverse.
Use of estimates - deferred taxes
To compute provisions for taxes, estimates have to be applied.
These estimates involve assessing the probability that deferred tax
assets resulting from deductible temporary differences and tax
losses can be utilised to offset taxable income in the future.
Due to the lack of certainty around future profits, all deferred
tax assets continue to be unrecognised in the year's balance
sheet.
Use of estimates - provisions - onerous contract provisions
In keeping with normal practice in the industry at the time, the
Group entered into long-term supply contracts for its raw material,
polysilicon, with two major suppliers. Given the significant
unexpected decline in market prices for polysilicon and silicon
wafers, the resultant cost of polysilicon under these contracts
means the Group is expecting losses on these contracts.
Consequently the financial statements include a provision of
EUR15.5million (2013: EUR26.5 million) for the discounted total of
currently anticipated losses under these contracts.
Any further renegotiation of these contracts or improvement in
market pricing would reduce this provided for loss.
Use of estimates - inventory valuation
Given the significant unexpected decline in market prices for
polysilicon and silicon wafers, the carrying amount of inventory
has been reduced to net realisable value.
Net realisable value has been determined as estimated selling
price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
Any improvement in anticipated selling prices would reduce the
level of writedown necessary and would be taken as profit in
2015.
1. Group accounting policies (continued)
Basis of consolidation
The Group financial statements consolidate those of the Group
and its subsidiary undertakings drawn up to 31 December 2014.
Subsidiaries are entities over which the Group has the power to
control the financial and operating policies so as to obtain
benefits from its activities. The Group obtains and exercises
control through voting rights.
The results of any subsidiary sold or acquired are included in
the Consolidated Statement of Comprehensive Income up to, or from,
the date control passes.
Consolidation is conducted by eliminating the investment in the
subsidiary with the parent's share of the net equity of the
subsidiary.
The Group owns 100% of the voting rights in PV Crystalox Solar
Kabushiki Kaisha. Non-controlling interests in equity of EUR43,400
are related to non-redeemable preferred stock, subject to a
guaranteed annual dividend payment of EUR2,000. As the fair value
of the resulting dividend liabilities reduces the equity portion to
marginal amounts, all non-controlling interests have been
reclassified as liabilities.
On acquisition of a subsidiary, all of the subsidiary's
separately identifiable assets and liabilities existing at the date
of acquisition are recorded at their fair value reflecting their
condition at that date. Goodwill arises where the fair value of the
consideration given for a business exceeds the fair value of such
net assets. So far no acquisitions have taken place since inception
of the Group.
Amounts reported in the financial statements of subsidiaries
have been adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group. All intra-group
transactions, balances, income and expenses are eliminated upon
consolidation.
Going concern
A description of the market conditions including the continued
suppression in spot prices of wafers during 2014 and the Group's
actions to conserve cash are included in the Operational
Review.
As part of its normal business practice, the Group regularly
prepares both annual and longer-term plans which are based on the
directors' expectations concerning key assumptions. The assumptions
around contracted sales volumes and prices and contracted purchase
volumes and prices are based on management's expectations and are
consistent with the Group's experience in the first part of
2015.
The Group has long-term contracts with two external suppliers
for purchase of polysilicon, our main raw material, for volumes in
excess of current reduced production requirements. The Group's
management has been successful in reaching accommodation with these
suppliers to secure periodic contract amendments and adjust prices
and volumes. As a result, these amendments have brought the terms
more in line with current market pricing. To manage inventory
levels the Group continues to sell excess polysilicon into the spot
market.
The nature of the Group's operation means that it can vary
production levels to match market requirements. As part of the cash
conservation measures and the associated planning assumptions,
production output currently remains reduced to match expected
demand. In line with the Group's strategy of retaining flexibility
in production levels, production can be brought back on stream when
market conditions allow.
As a result of these modelling assumptions the base plans
indicate that the Group will be able to operate within its net cash
reserves for the foreseeable future.
On 31 December 2014 there was a net cash balance of EUR24.6
million, including funds held by an employee benefit trust.
Therefore, whilst any consideration of future matters involves
making a judgement at a particular point in time about future
events that are inherently uncertain, the directors, after careful
consideration and after making appropriate enquiries, are of the
opinion that the Group has adequate resources to continue in
operational existence for at least twelve months from the date of
approval of the financial statements. Thus the Group continues to
adopt the going concern basis of accounting in preparing the annual
financial statements.
1. Group accounting policies (continued)
Effects of new accounting pronouncements
Accounting standards, IFRICS and other guidance in effect or
applied for the first time in 2014
-- IFRS 10, 'Consolidated financial statements'
-- IFRS 11, 'Join arrangements'
-- IFRS 12, 'Disclosures of interests in other entities'
-- Amendments to IFRS 10, 11 & 12 on transition guidance
-- IAS27, 'Separate financial statements'
-- IAS28, 'Associates and joint ventures'
-- Amendments to IFRS 10, 12 & IAS27 on consolidation for investment entities
-- Amendments to IAS32 on Financial instruments asset and liability offsetting
-- Amendment to IAS36, 'Impairment of asset' on recoverable amount disclosures
-- Amendment to IAS39, 'Financial instruments: Recognition and
measurement' on novation of derivatives and hedge accounting.
-- IFRIC 21, 'Levies'
The above have not made a material difference to the financial
statements.
In issue, but not yet effective
The following interpretations are in issue, but not yet
effective. The Group does not believe that any will have a material
impact on the Group's financial positions, results of operations or
cash flows.
-- Amendment to IAS19 regarding defined benefit plans
-- Annual improvements 2012, Annual improvements 2013 & Annual improvements 2014
-- Amendment to IFRS11, 'Joint arrangements'
-- Amendment to IAS16, 'Property, plant & equipment' & IAS38, 'Intangible Assets'
-- Amendments to IAS16, 'Property, plant and equipment'
-- IFRS 14, 'Regulatory deferral accounts'
-- Amendments to IFRS10, 'Consolidated financial statements'
& IAS28, 'Investments in associates and join ventures'
-- IFRS15, 'Revenue from contracts with customers'
-- IFRS9, 'Financial instruments'
-- Amendments to IFRS9, 'Financial instruments', regarding general hedge accouting
1. Group accounting policies (continued)
Intangible assets
Intangible assets are stated at cost net of accumulated
amortisation. The Group's policy is to write off the difference
between the cost of intangible assets and their estimated
realisable value systematically over their estimated useful life.
Amortisation of intangible assets is recorded under "Depreciation
and impairment of property, plant and equipment and amortisation of
intangible assets" in the Consolidated Statement of Comprehensive
Income.
Acquired computer software licences and patents are capitalised
on the basis of the costs incurred to purchase and bring into use
the software.
The capitalised costs are written down using the straight-line
method over the expected economic life of the patents and licences
(five years) or the software under development (three to five
years).
Internally generated intangible assets - research and
development expenditure
Expenditure on research activities undertaken with the prospect
of gaining new scientific or technical knowledge and understanding
is recognised in the Consolidated Statement of Comprehensive
Income.
Property, plant and equipment
Property, plant and equipment is stated at acquisition or
construction cost, net of depreciation and provision for
impairment. No depreciation is charged during the period of
construction. The cost of own work capitalised is comprised of
direct costs of material and manufacturing and directly
attributable costs of manufacturing overheads. All allowable costs
up until the point at which the asset is physically able to operate
as intended by management are capitalised. The capitalised costs
are written down using the straight-line method.
The Group's policy is to write off the difference between the
cost of property, plant and equipment and its residual value
systematically over its estimated useful life. Reviews of the
estimated remaining lives and residual values of individual
productive assets are made annually, taking commercial and
technological obsolescence as well as normal wear and tear into
account.
The total useful lives range from five to ten years for plant
and machinery and up to 15 years for other furniture and equipment.
Property, plant and equipment are reviewed for impairment at each
balance sheet date or upon indication that the carrying value may
not be recoverable.
The gain or loss arising on disposal of an asset is determined
as the difference between the disposal proceeds and the carrying
amount of the asset and is recognised in the Consolidated Statement
of Comprehensive Income.
Impairment
The carrying amount of the Group's non-financial assets, is
subject to impairment testing upon indication of impairment.
If any such indication exists, the asset's recoverable amount is
estimated. An impairment loss is recognised for the amount by which
the asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market
conditions less costs of disposal and value in use based on an
internal discounted cash flow evaluation. The asset is subsequently
reviewed for possible reversal of the impairment at each reporting
date.
Leased assets
Leases are categorised as per the requirements of IAS17. Where
risks and rewards are transferred to the lessee, the lease is
classified as a finance lease. All other leases are classed as
operating leases.
Rentals under operating leases are charged to the Consolidated
Statement of Comprehensive Income on a straight-line basis over the
lease term. Lease incentives are spread over the total period of
the lease.
The obligations from operating lease contracts are disclosed
among financial obligations.
For the reporting year, no assets were recorded under finance
leases.
Other income
Income other than that from sale of silicon products is
recognised at the point of entitlement to receipt and shown as
other income.
1. Group accounting policies (continued)
Financial instruments
Financial assets and financial liabilities are recognised on the
Group's Balance Sheet when the Group becomes a party to the
contractual provisions of the instrument. Financial instruments are
recorded initially at fair value net of transaction costs if
changes in value are not charged directly to the Consolidated
Statement of Comprehensive Income. Subsequent measurement depends
on the designation of the instrument, as follows:
Amortised cost
-- short-term borrowing, overdrafts and long-term loans are held at amortised cost; and
-- accounts payable which are not interest bearing are
recognised initially at fair value and thereafter at amortised cost
under the effective interest method.
Held for trading
-- derivatives, if any, comprising interest rate swaps and
foreign exchange contracts, are classified as held for trading.
They are included at fair value, upon the valuation of the local
bank.
Loans and receivables
-- non-interest bearing accounts receivable are initially
recorded at fair value and subsequently valued at amortised cost,
less provisions for impairment. Any change in their value through
impairment or reversal of impairment is recognised in profit or
loss net of any advance payment held by the Group where a right of
offset exists; and
-- cash and cash equivalents comprise cash balances and call
deposits with maturities of less than three months together with
other short-term highly liquid investments that are readily
convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value.
Interest and other income resulting from financial assets are
recognised in profit or loss on the accruals basis, using the
effective interest method.
Inventories
Inventories are stated at the lower of cost or net realisable
value.
Acquisition costs for raw materials are usually determined by
the weighted average method.
For finished goods and work in progress, cost of production
includes directly attributable costs for material and manufacturing
and an attributable proportion of manufacturing overhead expenses
(including depreciation) based on normal levels of activity.
Selling expenses and other overhead expenses are excluded. Interest
is expensed as incurred and therefore not included. Net realisable
value is determined as estimated selling price for silicon wafers
or polysilicon less all estimated costs of completion and costs to
be incurred in marketing, selling and distribution.
Contingent liabilities
Provisions are made for contingent liabilities where there is an
obligation at the balance sheet date, an adverse outcome is
probable and associated costs can be estimated reliably. Where no
obligation is present at the balance sheet date no provision is
made, although, where material, the contingent liability will be
disclosed in a note.
1. Group accounting policies (continued)
Current and deferred taxes
Current tax is the tax currently payable based on taxable profit
for the year, including any under or over provisions from prior
years.
Deferred income taxes are calculated using the liability method
on temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor on the initial recognition of
an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit.
Deferred tax on temporary differences associated with shares in
subsidiaries is not provided if reversal of these temporary
differences can be controlled by the Group and it is probable that
reversal will not occur in the foreseeable future. In addition, tax
losses available to be carried forward as well as other income tax
credits to the Group are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are provided in full. Deferred tax
assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be
offset against future taxable income. Current and deferred tax
assets and liabilities are calculated at tax rates that are
expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the balance
sheet date.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the Consolidated Statement of
Comprehensive Income, except where they relate to items that are
charged or credited directly to equity in which case the related
deferred tax is also charged or credited directly to equity.
Public grants and subsidies
As the German wafering operation is located in a region
designated for economic development, the Group received both
investment subsidies and investment grants. Government grants and
subsidies relating to capital expenditure were credited to the
"Deferred grants and subsidies" account and released to the
Consolidated Statement of Comprehensive Income by equal annual
instalments over the expected useful lives of the relevant assets
under "Other income".
Government grants of a revenue nature, mainly for research and
development purposes, were credited to the Consolidated Statement
of Comprehensive Income in the same year as the related
expenditure.
All required conditions of these grants have been met and it is
the Group's intention that they will continue to be met.
Provisions
Provisions are formed where a third party obligation exists,
which will lead to a probable future outflow of resources and where
this outflow can be reliably estimated. Provisions are measured at
the best estimate of the expenditure required to settle the
obligation, discounted to present value. The resulting charge upon
the discounting being unwound is recorded as a finance cost.
Accruals
Accruals are recognised when an obligation to meet an outflow of
economic benefit in the future arises at the balance sheet
date.
Accruals are initially recognised at fair value and subsequently
at amortised cost using the effective interest method.
Revenue recognition
Revenue is recognised when the significant risks and rewards of
ownership have been transferred to the customer. Ownership is
considered to have transferred once products have been received by
the customer unless shipping terms dictate any different. Revenues
exclude intra-group sales and value added taxes and represent net
invoice value less estimated rebates, returns and settlement
discounts. The net invoice value is measured by reference to the
fair value of consideration received or receivable by the Group for
goods supplied.
The Group has outsourced some elements of production to external
companies. In cases in which the Group retains power of disposal
over the product or product element, a sale is only recognised
under IFRS when the final product is sold. The final product is
deemed to have been sold when the risks and rewards of ownership
have been transferred to a third party.
1. Group accounting policies (continued)
Finance income and costs
Net financing costs comprise interest payable on borrowings
calculated using the effective interest rate method, interest
receivable on funds invested and dividend income and gains.
Interest income is recognised in the Consolidated Statement of
Comprehensive Income as it accrues, using the effective interest
method.
Exceptional items
Exceptional items are those items that in the directors' view
are required to be separately disclosed by virtue of their size or
incidence to enable a full understanding of the Group's financial
performance.
Due to the current volatility in the PV industry and any
(previously) unusual charges being in keeping with those of other
similar companies, the directors' believe that separate disclosure
would not therefore be beneficial.
Defined benefit pension plan
A defined benefit plan is a pension plan that defines an amount
of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of
service and compensation.
The liability recognised in the Balance Sheet in respect of
defined benefit pension plans is the present value of the defined
benefit obligation at the balance sheet date less the fair value of
plan assets. The defined benefit obligation is calculated annually
by independent actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined
by discounting the estimated future cash outflows using interest
rates of Government bonds at the balance sheet date with a ten year
maturity, adjusted for additional term to maturity of the related
pension liability.
Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions are charged or credited
directly to the Consolidated Statement of Comprehensive Income in
the period in which they arise.
Past service costs are recognised immediately in profit or loss,
unless the changes to the pension plan are conditional to the
employees remaining in service for a specified period of time (the
vesting period).
Defined contribution plan
For defined contribution plans, the Group pays contributions to
pension insurance plans on a contractual basis. The Group has no
further payment obligations once the contributions have been paid.
The contributions are recognised as employee benefit expenses when
they are incurred.
Employee benefit trust
All assets and liabilities of the Employee Benefit Trust ("EBT")
have been consolidated in these financial statements as the Group
has de facto control over the trust's net assets as the parent of
its sponsoring company.
Deferred revenue and other long-term assets
As is common practice within the sector, the Group, where
appropriate, both seeks to receive deposits from customers in
advance of shipment and makes deposits in advance of supplies of
silicon tetrachloride and polysilicon feedstock.
These deposits are held on the Balance Sheet and matched against
revenue/cost as appropriate.
Deposits received from customers are not discounted, as the
effect is not considered to be material.
Share-based payments
The Group has applied the requirements of IFRS 2, 'Share-based
Payments'. The Group issues equity-settled share-based payments to
certain employees. These are measured at their fair value at the
date of the grant using an appropriate option pricing model and are
expensed over the vesting year, based on the Group's estimate of
the number of shares that will eventually vest. Grants of shares
made during 2008 and 2007 are not subject to performance criteria
and were valued at the date of the grant at market value. During
2011 awards were granted under the Performance Share Plan to
employees. The share options granted are subject to performance
criteria required for the option to vest and are considered in the
method of measuring fair value. Fair value is assessed using the
Black-Scholes method.
Charges made to the Consolidated Statement of Comprehensive
Income in respect of share-based payments are credited to the
share-based payment reserve.
1. Group accounting policies (continued)
Shareholders' equity
Shareholders' equity is comprised of the following balances:
-- share capital is comprised of 160,278,975 ordinary shares of 5.2 pence each
-- share premium represents the excess over nominal value of the
fair value of consideration received for equity shares, net of
expenses of share issue;
-- other reserves arising from the issue and redemption of B shares in 2013;
-- investment in own shares is the Group's shares held by the
EBT that are held in trust for the benefit of employees;
-- share-based payment reserve is the amount charged to the
Consolidated Statement of Comprehensive Income in respect of shares
already granted or options outstanding relative to the vesting date
or option exercise date;
-- the reverse acquisition reserve is the difference between the
value of the assets acquired and the consideration paid by way of a
share for share exchange on 5 January 2007;
-- accumulated losses / retained earnings is the cumulative profit retained by the Group; and
-- currency translation reserve represents the differences
arising from the currency translation of the net assets in
subsidiaries.
2. Other income
2014 2013
EUR'000 EUR'000
------------------------------------------------------------ -------- --------
Recognition of accrued grants and subsidies for investments 48 57
Sale of property, plant & equipment 2 1,190
Customer compensations 10,222 -
Supplier compensations 1,234 180
Research and development grants 264 494
Miscellaneous 362 775
------------------------------------------------------------ -------- --------
12,132 2,696
------------------------------------------------------------ -------- --------
Customer compensations relate to settlements with two of the
Group's previous contract wafer customers.
Supplier compensation in 2014 relates to a release of a
provision for a previously cancelled supply contract.
3. Cost of materials and services
The cost of materials is attributable to the consumption of
silicon, ingots, wafers, chemicals and other consumables as well as
the purchase of merchandise.
2014 2013
EUR'000 EUR'000
---------------------------------------------------------- -------- --------
Cost of raw materials, supplies and purchased merchandise 54,785 46,961
Change in finished goods and work in progress (1,166) 17,286
Inventory writedowns - 681
Onerous contract charge (see note 22) 8,162 (11,652)
---------------------------------------------------------- -------- --------
Purchased services 3,913 1,827
---------------------------------------------------------- -------- --------
Cost of materials and services 65,694 55,103
---------------------------------------------------------- -------- --------
4. Personnel expenses
2014 2013
EUR'000 EUR'000
--------------------------------------------------------- -------- --------
Staff costs for the Group during the year - continuing
operations
Wages and salaries 5,808 5,196
Social security costs 861 820
Other pension costs 263 179
Employee share schemes (312) 243
Restructuring costs - 16
--------------------------------------------------------- -------- --------
Total 6,620 6,454
--------------------------------------------------------- -------- --------
Staff costs for the Group during the year - discontinued
operations
Wages and salaries - 787
Social security costs - 229
Other pension costs - 2
Restructuring costs - -
--------------------------------------------------------- -------- --------
Total - 1,018
--------------------------------------------------------- -------- --------
Total - continuing and discontinued 6,620 7,472
--------------------------------------------------------- -------- --------
Included within pension costs of continuing operations is EURnil
(2013: EURnil) relating to actuarial losses on defined benefit
pension obligations.
Employees
The Group employed a monthly average of 122 employees during the
year ended 31 December 2014 (2013: 153).
2014 2013
Number Number
--------------------------------------------- ------- -------
Germany 70 115
United Kingdom 47 33
Japan 5 5
--------------------------------------------- ------- -------
122 153
--------------------------------------------- ------- -------
Of which, related to discontinued operations - 41
--------------------------------------------- ------- -------
2014 2013
Number Number
--------------- ------- -------
Production 66 90
Administration 56 63
--------------- ------- -------
122 153
--------------- ------- -------
The Group employed 138 employees at 31 December 2014 (31
December 2013: 88).
The remuneration of the Board of directors, including
appropriations to pension accruals, is shown in the Directors'
Remuneration Report.
5. Other expenses
2014 2013
EUR'000 EUR'000
----------------------------------------------- -------- --------
Land and building operating lease charges 2,162 2,151
Repairs and maintenance 102 95
Selling expenses 29 13
Technical consulting, research and development 44 145
External professional services 727 1,225
Insurance premiums 269 280
Travel and advertising expenses 104 133
Bad debts - 133
Staff related costs 197 47
Other 529 471
----------------------------------------------- -------- --------
4,163 4,693
----------------------------------------------- -------- --------
Amounts payable to the Group's auditors:
2014 2013
EUR'000 EUR'000
------------------------------------------------------------ -------- --------
Fees payable to the Company's auditors and their associates
for the audit of the parent company and consolidated
financial statements 84 96
Fees payable to the Company's auditors and their associates
for other services:
- The audit of the Company's subsidiaries pursuant
to legislation 106 114
- Other assurance services 5 77
195 287
------------------------------------------------------------ -------- --------
Other assurance services relate to the restructure of the Group
and the shareholder return.
6. Finance income and costs
Finance income and costs are derived/incurred on financial
assets/liabilities and recognised under the effective interest
method.
The resulting charge upon unwinding the discount charge on
provisions is recorded as a finance cost.
2014 2013
Total Total
EUR'000 EUR'000
-------------------------------------------------- -------- --------
Finance income 106 796
-------------------------------------------------- -------- --------
Finance expense:
Expense of Group borrowings (1) (41)
Expense of pension commitment (59) (60)
Expense of unwinding provision discounting charge
(note 22) (2,390) (4,597)
-------------------------------------------------- -------- --------
Finance expense (2,450) (4,698)
-------------------------------------------------- -------- --------
7. Income taxes
2014 2013
Total Total
EUR'000 EUR'000
-------------------------------------------------- -------- --------
Current tax:
Current tax on loss for the year 2 200
Total current tax 2 200
-------------------------------------------------- -------- --------
Deferred tax (note 18):
Derecognition of previously recognised tax losses - 190
-------------------------------------------------- -------- --------
Total deferred tax - 190
-------------------------------------------------- -------- --------
Total tax charge 2 390
-------------------------------------------------- -------- --------
The total tax rate for the German companies is 32.275% (2013:
32.275%). The effective total tax rate in the United Kingdom was
21.5% (2013: 23.25%) and the total tax rate in Japan was 39.91%
(2013: 39.91%). These rates are based on the legal regulations
applicable or adopted at the balance sheet date.
The Finance Act 2013 included legislation to further reduce the
main rate of corporation tax in the UK to 20% with effect from 1
April 2015. The German rate will be unchanged in 2015 and in Japan
it is expected the total rate will fall to 37.11% from 2016
onwards.
The impact of these changes on net deferred tax liabilities at
31 December 2014, profit for the year (underlying and statutory)
and comprehensive income for the year has not been significant. The
impact of these further changes is not expected to be material.
The tax on the Group's results before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to the losses of the consolidated entities as
follows:
2014 2013
EUR'000 EUR'000
---------------------------------------------------- -------- --------
(Loss) / profit before tax (4,650) 6,626
---------------------------------------------------- -------- --------
Expected income tax (credit)/expense at UK tax rate
21.5% (2013: 23.25%) (1,000) 1,541
Adjustments for foreign tax rates (395) (474)
Taxation on intercompany sale of the shares - 183
Income not subject to tax (1,563) (86)
Derecognition of previously recognised tax losses - 190
Unrelieved tax losses 845 1,374
Chargeable gains - 152
Utilisation of tax losses and other deductions 535 (2,391)
Expenses not deductible for tax 1,580 (99)
Total tax charge 2 390
---------------------------------------------------- -------- --------
8. Segment reporting
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance, has been identified
as the executive Board. The Group is organised around the
production and supply of one product, multicrystalline silicon
wafers. Accordingly, the Board reviews the performance of the Group
as a whole and there is only one operating segment. Disclosure of
reportable segments under IFRS 8 is therefore not made.
Geographical information 2014
Rest Rest Rest
of United of of
Japan Taiwan Asia Germany Kingdom Europe World Group
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------------------- -------- -------- -------- -------- -------- -------- -------- --------
Revenues
By entity's country
of domicile 174 - - 2,607 50,552 - - 53,333
By country from
which derived 199 37,626 4,623 149 26 10,325 385 53,333
---------------------- -------- -------- -------- -------- -------- -------- -------- --------
Non-current assets(*)
By entity's country
of domicile 216 - - 1,005 6,597 - - 7,818
---------------------- -------- -------- -------- -------- -------- -------- -------- --------
* Excludes: financial instruments, deferred tax assets and
post-employment benefit assets.
Three customers accounted for more than 10% of Group revenue
each and sales to these customers are as follows (figures in
EUR'000):
1. 22,154 (Taiwan);
2. 10,509(Taiwan); and
3. 6,289 (Rest of Europe).
Geographical information 2013
Rest Rest Rest
of United of of
Japan Taiwan Asia Germany Kingdom Europe World Group
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------------------- -------- -------- -------- -------- -------- -------- -------- --------
Revenues
By entity's country
of domicile 17,463 - - 12,681 41,298 - - 71,442
By country from
which derived 17,356 14,042 7,124 9,560 30 8,351 14,979 71,442
---------------------- -------- -------- -------- -------- -------- -------- -------- --------
Non-current assets(*)
By entity's country
of domicile 403 - - 1,085 15,533 - - 17,021
---------------------- -------- -------- -------- -------- -------- -------- -------- --------
* Excludes: financial instruments, deferred tax assets and
post-employment benefit assets.
Three customers accounted for more than 10% of Group revenue
each and sales to these customers are as follows (figures in
EUR'000):
1. 16,813 (Japan);
2. 14,979 (Rest of World); and
3. 9,575 (Germany).
9. Earnings per share
Net earnings per share is computed by dividing the net
(loss)/profit for the year attributable to ordinary shareholders by
the weighted average number of ordinary shares outstanding during
the year.
Diluted net earnings per share is computed by dividing the
(loss)/profit for the year by the weighted average number of
ordinary shares outstanding and, when dilutive, adjusted for the
effect of all potentially dilutive shares, including share
options.
2014 2013
------------------------------------------------- ----------- -----------
Basic shares (average) 156,353,503 381,393,715
Basic (loss) / profit per share - continuing
operations (Euro cents) (3.0) 1.7
Basic loss per share - discontinued operations - (0.7)
Basic (loss) / profit per share (Euro cents) (3.0) 1.0
Diluted shares (average) 160,308,111 383,849,862
Diluted (loss) / profit per share - continuing
operations (Euro cents) (3.0) 1.7
Diluted loss per share - discontinued operations - (0.7)
Diluted (loss) / profit per share (Euro
cents) (3.0) 1.0
------------------------------------------------- ----------- -----------
As the Group is currently loss making, the diluted loss per
share is equal to the basic loss per share.
Basic shares and diluted shares for this calculation can be
reconciled to the number of issued shares (see note 28) as
follows:
2014 2013
-------------------------------------------- ----------- ------------
Shares in issue (see note 28) 160,278,975 416,725,335
Weighted average number of EBT shares held (3,925,472) (10,740,873)
Share consolidation (including EBT shares) - (24,590,747)
-------------------------------------------- ----------- ------------
Weighted average number of shares for basic
EPS calculation 156,353,503 381,393,715
Dilutive share options 3,954,608 2,456,147
-------------------------------------------- ----------- ------------
Weighted average number of shares for fully
diluted EPS calculation 160,308,111 383,849,862
-------------------------------------------- ----------- ------------
10. Cash and cash equivalents
All short-term deposits are interest bearing at the various
rates applicable in the business locations of the Group.
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
------------------------- --------- --------
Cash at bank and in hand 22,754 30,486
Short-term bank deposits 1,838 9,414
------------------------- --------- --------
24,592 39,900
------------------------- --------- --------
11. Trade accounts receivable
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
--------------- --------- --------
Japan 118 5,706
Germany 5 3,638
United Kingdom 5,218 4,129
--------------- --------- --------
5,341 13,473
--------------- --------- --------
All receivables have short-term maturity. During the year no
receivables were written off (2013: EUR133,238).
None of the unimpaired trade receivables are past due at the
reporting date. The age of financial assets past due but not
impaired is as follows:
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
--------------------------- --------- --------
Not more than three months - 527
These amounts represent the Group's maximum exposure to credit
risk at the year end. All amounts outstanding as at 31 December
2014 were received in the first two months of 2015.
12. Inventories
Inventories include finished goods and work in progress (ingots
and blocks), as well as production supplies. The change in
inventories is included in the Consolidated Statement of
Comprehensive Income in the line "Cost of materials".
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
------------------ --------- --------
Finished products 4,994 4,440
Work in progress 4,220 3,361
Raw materials 19,416 5,208
------------------ --------- --------
28,630 13,009
------------------ --------- --------
No Inventory writedowns are included in cost of materials in
2014 (2013: EUR0.7 million).
13. Prepaid expenses and other assets
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
--------------------- --------- --------
VAT 2,125 1,684
Prepaid expenses 10,122 9,705
Energy tax claims 79 64
Other current assets 54 51
--------------------- --------- --------
12,380 11,504
--------------------- --------- --------
Prepaid expenses primarily comprise polysilicon feedstock
deposits.
14. Current tax assets
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
----------------------- --------- --------
Income tax recoverable 16 70
----------------------- --------- --------
Income tax recoverable relates to reclaimable capital gains tax
on interest received.
15. Intangible assets
Intangible assets relate to software licenses.
Total
EUR'000
----------------------------------------- ---------
Cost
At 1 January 2014 1,061
Additions 22
Net effect of foreign currency movements 1
----------------------------------------- ---------
At 31 December 2014 1,084
----------------------------------------- ---------
Accumulated amortisation
At 1 January 2014 1,017
Charge for the year 29
Net effect of foreign currency movements -
----------------------------------------- ---------
At 31 December 2014 1,046
----------------------------------------- ---------
Net book amount
At 31 December 2014 38
----------------------------------------- ---------
At 31 December 2013 44
----------------------------------------- ---------
Total
EUR'000
----------------------------------------- ---------
Cost
At 1 January 2013 1,526
Disposals (406)
Net effect of foreign currency movements (59)
----------------------------------------- ---------
At 31 December 2013 1,061
----------------------------------------- ---------
Accumulated amortisation
At 1 January 2013 1,410
Charge for the year 60
Disposals (406)
Net effect of foreign currency movements (47)
----------------------------------------- ---------
At 31 December 2013 1,017
----------------------------------------- ---------
Net book amount
At 31 December 2013 44
----------------------------------------- ---------
At 31 December 2012 116
----------------------------------------- ---------
16. Property, plant and equipment
Other
Plant furniture Assets
and and under
machinery equipment construction Total
EUR'000 EUR'000 EUR'000 EUR'000
----------------------------------------- ---------- ---------- ------------- --------
Cost
At 1 January 2014 78,933 4,463 - 83,396
Additions 169 60 - 229
Disposals (468) (11) - (479)
Net effect of foreign currency movements 3,361 100 - 3,461
----------------------------------------- ---------- ---------- ------------- --------
At 31 December 2014 81,995 4,612 - 86,607
----------------------------------------- ---------- ---------- ------------- --------
Accumulated depreciation
At 1 January 2014 76,883 4,162 - 81,045
Charge for the year 228 80 - 308
On disposals (468) (11) - (479)
Net effect of foreign currency movements 3,280 98 - 3,378
----------------------------------------- ---------- ---------- ------------- --------
At 31 December 2014 79,923 4,329 - 84,252
----------------------------------------- ---------- ---------- ------------- --------
Net book amount
At 31 December 2014 2,072 283 - 2,355
----------------------------------------- ---------- ---------- ------------- --------
At 31 December 2013 2,050 301 - 2,351
----------------------------------------- ---------- ---------- ------------- --------
Freehold Other
land Plant furniture Assets
and and and under
buildings machinery equipment construction Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------------------------------- ---------- ---------- ---------- ------------- ---------
Cost
At 1 January 2013 12,955 184,595 6,972 1,141 205,663
Additions - 81 43 (2) 122
Reclassification - 1,093 - (1,093) -
Disposals (12,948) (105,767) (2,449) (46) (121,210)
Net effect of foreign currency movements (7) (1,069) (103) - (1,179)
----------------------------------------- ---------- ---------- ---------- ------------- ---------
At 31 December 2013 - 78,933 4,463 - 83,396
----------------------------------------- ---------- ---------- ---------- ------------- ---------
Accumulated depreciation
At 1 January 2013 12,312 174,949 6,554 1,042 194,857
Charge for the year 2 317 100 0 419
Reclassification - 995 - (995) -
On disposals (12,307) (98,334) (2,413) (46) (113,100)
Net effect of foreign currency movements (7) (1,044) (79) (1) (1,131)
----------------------------------------- ---------- ---------- ---------- ------------- ---------
At 31 December 2013 - 76,883 4,162 - 81,045
----------------------------------------- ---------- ---------- ---------- ------------- ---------
Net book amount
At 31 December 2013 - 2,050 301 - 2,351
----------------------------------------- ---------- ---------- ---------- ------------- ---------
At 31 December 2012 643 9,646 418 99 10,806
----------------------------------------- ---------- ---------- ---------- ------------- ---------
Assets under construction related to future plant and machinery
yet to be bought into production at which point they are
reclassified as such.
17. Other non-current assets
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
---------------------------------------------------- --------- --------
Polysilicon feedstock deposits (covering periods to
31 March 2018) 5,288 14,301
Prepaid expenses 83 68
Other assets 54 257
---------------------------------------------------- --------- --------
5,425 14,626
---------------------------------------------------- --------- --------
18. Deferred taxes
Analysis of deferred tax assets and liabilities:
2014 2013
EUR'000 EUR'000
------------------------ -------- --------
Tax loss carried forward - -
------------------------ -------- --------
Deferred tax assets arising as a result of losses are recognised
where, based on the Group's budget, they are expected to be
realised in the foreseeable future.
As at 31 December 2014 there were unrecognised potential
deferred tax assets in respect of losses of EUR49.5 million (2013:
EUR48.1 million).
The gross movement on the deferred income tax account is as
follows:
2014 2013
EUR'000 EUR'000
------------------------------------- -------- --------
At 1 January - 190
Exchange differences - -
Derecognition of deferred tax assets - (190)
Income statement charge - -
------------------------------------- -------- --------
At 31 December - -
------------------------------------- -------- --------
19. Loans payable
As at 31 December
-------------------
2014 2013 Interest
Underwriter EUR'000 EUR'000 Maturity rate
--------------------------------------------- --------- -------- -------- --------
Sumitomo Mitsui Banking Corporation ("SMBC") - 690 01/14 n/a
--------------------------------------------- --------- -------- -------- --------
Previous loans were in Japanese Yen at a rate of 0.95%.
20. Trade accounts payable
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
--------------- --------- --------
Japan 337 853
United Kingdom 928 1,348
Germany 497 626
--------------- --------- --------
1,762 2,827
--------------- --------- --------
The book value of these payables is materially the same as the
fair value.
21. Accrued expenses
2014 2013
EUR'000 EUR'000
------------------------------- -------- --------
Rents and ancillary rent costs 493 295
Salary related costs 509 470
Contract volume penalties - 1,153
Other accrued expenses 562 771
------------------------------- -------- --------
Current accruals 1,564 2,689
------------------------------- -------- --------
Non-current accruals 111 146
------------------------------- -------- --------
Total accruals 1,675 2,835
------------------------------- -------- --------
22. Provisions
Movement in provisions is shown below:
Onerous
contract Warranty
provision provisions Total
EUR'000 EUR'000 EUR'000
------------------------------ ----------- ------------ ---------
Provisions brought forward 26,526 37 26,563
Unwinding of discount factor 2,390 - 2,390
Additional provision 9,715 17 9,732
Released (1,553) - (1,553)
Exchange differences (8,902) - (8,902)
Utilised (12,634) - (12,634)
------------------------------- ----------- ------------ ---------
Provisions carried forward 15,542 54 15,596
------------------------------- ----------- ------------ ---------
Onerous
contract Warranty
provision provisions Total
EUR'000 EUR'000 EUR'000
--------------------------- ---------- ----------- --------
Short-term element 14,523 54 14,577
Long-term element 1,019 - 1,019
--------------------------- ---------- ----------- --------
Provisions carried forward 15,542 54 15,596
--------------------------- ---------- ----------- --------
Warranty provisions unwind over a year from the date of sale,
per the terms of the warranty agreement with customers.
The onerous contract provision is an allowance for the loss
arising on the difference between raw material costs under these
contracts and the anticipated selling price of the Group's end
product. This is discussed further in note 1. This provision will
unwind over the length of the contracts, between one and four
years.
23. Deferred grants and subsidies
The grants from governmental institutions are bound to specific
terms and conditions. The Group is obliged to observe retention
periods of five years for the respective assets in the case of
investment subsidies as well as of five years for assets under
investment grants, and to retain a certain number of jobs created
in conjunction with the underlying assets. In cases of breach of
the terms, the grants received must be repaid. In the past, the
grants received were subject to periodic audits, which were
concluded without significant findings or adjustments.
The deferred grants and subsidies in the year under review
consist of the following:
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
------------------ --------- --------
Investment grants 111 152
------------------ --------- --------
Current portion 111 152
------------------ --------- --------
24. Current tax liabilities
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
--------------- --------- --------
United Kingdom - 43
Germany 155 155
Japan 1 1
--------------- --------- --------
156 199
--------------- --------- --------
Current tax liabilities comprise both corporation and other
non-VAT tax liabilities, calculated or estimated by the Group
companies, as well as corresponding taxes payable abroad due to
local tax laws, including probable amounts arising on completed or
current tax audits.
25. Other current liabilities
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
-------------------- --------- --------
Payroll liabilities 32 23
Other liabilities 40 27
-------------------- --------- --------
72 50
-------------------- --------- --------
26. Deferred revenue
Where appropriate the Group enters into long-term contracts with
its customers and may request payment deposits from them ahead of
the supply of goods. At 31 December 2014, such deposits amounted to
EUR3.2 million from one customer (2013: EUR3.3 million from two
customers).
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
-------- --------- --------
Current 3,235 3,342
-------- --------- --------
27. Pension surplus/benefit
The obligation relates to fixed post-retirement payments for one
former employee and one former employee's surviving spouse granted
in 2005. The plan has been fully funded by insurance contracts held
and paid in by the Group. In case of insolvency the benefits have
been ceded to the beneficiaries directly. The scheme is not
significant to the Group. Movements to the surplus/benefit are
included within pension costs on the Consolidated statement of
comprehensive income.
28. Share capital
Ordinary shares of 5.2 pence each (2013: 5.2 pence)
2014 2014 2013 2013
Shares EUR'000 Shares EUR'000
----------------------------------- ----------- -------- ------------- --------
Allotted, called up and fully paid
At 1 January 160,278,975 12,332 416,725,335 12,332
Share consolidation (note 35) - - (256,446,360) -
At 31 December 160,278,975 12,332 160,278,975 12,332
----------------------------------- ----------- -------- ------------- --------
Summary of rights of share capital
The ordinary shares are entitled to receipt of dividends. On
winding up, their rights are restricted to a repayment of the
amount paid up to their share in any surplus assets arising. The
ordinary shares have full voting rights.
B Shares at 7.25 pence each
2014 2014 2013 2013
Shares EUR'000 Shares EUR'000
----------------------- ------- -------- ------------- --------
Issued and fully paid
At 1 January - - - -
Issue of B shares - - 288,216,112 25,096
Redemption of B Shares - - (288,216,112) (25,096)
At 31 December - - - -
----------------------- ------- -------- ------------- --------
On 27 November 2013, 288,216,112 B shares were issued at 7.25
pence each, resulting in a total of EUR25.096 million (GBP20.896
million) being credited to the B share capital account in "other
reserves". On 4 December 2013, 288,216,112 B shares were redeemed
at 7.25 pence each and an amount of EUR25.096 million (GBP20.896
million) was deducted from the B share capital account in "other
reserves".
C Shares/deferred shares at 0.0000001 pence each
2014 2014 2013 2013
Shares EUR'000 Shares EUR'000
-------------------------------- ------------- -------- ----------- --------
Issued and fully paid
At 1 January 128,509,223 - - -
Issue of C shares - - 128,509,223 -
Cancellation of deferred shares (128,509,223) - - -
At 31 December - - 128,509,223 -
-------------------------------- ------------- -------- ----------- --------
On 27 November 2013, 128,509,223 C shares were issued at
0.0000001 pence each, resulting in a total of EUR0.16 being
credited to the C share capital account. On 11 December 2013, these
shares paid a dividend of 7.25 pence each totalling EUR11.189
million (GBP9.317 million) and were immediately reclassified as
deferred shares of 0.0000001 pence each. The deferred shares remain
outstanding at the year end.
At a Board meeting on 18 March 2014 the Board agreed to purchase
the deferred shares with a nominal value of EUR0.16 and to cancel
them in accordance with the Companies Act 2006.
Shares held by the EBT
At 31 December 2014, 3,853,910 ordinary shares of 5.2 pence were
held by the EBT (2013: 4,100,326 ordinary shares of 5.2 pence). The
market value of these shares was EUR640k (2013: EUR712k).
Additionally, the EBT holds cash including the received cash in
December 2013 following its election for B shares in the return of
cash to shareholders. The cash balance held by the EBT on 31
December 2014 was EUR1,015k (2013: EUR946k).
In December 2014 the Directors agreed to write down the value of
the shares held by the EBT to the market value at 31 December 2014.
The share price was 13p per ordinary share of 5.2 pence each. This
adjustment alters the value of the shares held by the EBT and
reduces retained earnings by EUR6,868k.
29. Share-based payment plans
In December 2013 a return of cash was made to all and was
accompanied by a 5 for 13 share consolidation to maintain broad
comparability of the share price. As a result the Board has agreed
not to alter outstanding awards as a result of the share
consolidation. Thus outstanding awards which were previously based
on ordinary shares of 2 pence each are now the same number of
ordinary shares of 5.2 pence each.
Share-based payment plans
The Group established the PV Crystalox Solar PLC EBT on 18
January 2007, which has acquired, and may in the future acquire,
the Company's ordinary shares for the benefit of the Group's
employees.
The Group currently has four share incentive plans in operation
which are satisfied by grants from the EBT.
PV Crystalox Solar PLC Performance Share Plan ("PSP")
This plan was approved by shareholders at the 2011 AGM under
which awards are made to employees, including executive directors,
consisting of a conditional right to receive shares in the Company.
The awards will normally vest after the end of a three year
performance period, to the extent that performance conditions are
met as detailed in the Directors' Remuneration Report.
No awards were made during 2014 (2013: nil).
On 26 May 2011 awards over up to 3,038,454 ordinary shares were
granted to key senior employees including the three executive
directors on the Board at that time. These awards were subject to
achieving growth in both total shareholder return and earnings per
share in the performance period ending on 31 December 2013. In view
of the failure to achieve the minimum required performance as
described in the Remuneration Report these awards lapsed.
PV Crystalox Solar PLC Executive Directors Deferred Share Plan
("EDDSP")
At the AGM on 28 May 2009 a bonus plan (with deferred share
element) for executive directors was approved by the Company's
shareholders in the context of bringing the arrangements more in
line with market practice and aligning executive directors' pay
more closely with the interests of the Company's shareholders. Half
of each bonus was to be payable in cash and the other half deferred
and payable in shares under the EDDSP which vests three years after
the award date. Awards of deferred shares under the EDDSP are to be
satisfied on vesting by the transfer of shares from the existing PV
Crystalox Solar PLC Employee Benefit Trust.
No awards were made during 2014 (2013: nil). On 24 March 2011
awards over 358,423 shares were made to executive directors. As
detailed in the Directors' Remuneration Report the award over the
remaining 246,416 shares vested in May 2014.
PV Crystalox Solar PLC Long Term Incentive Plan ("LTIP")
This is a long-term incentive scheme under which awards are made
to employees consisting of the right to acquire ordinary shares for
a nominal price subject to the achievement of specified performance
conditions at the end of the vesting period which is not less than
three years from the date of grant. Under the LTIP it is possible
for awards to be granted which are designated as a Performance
Share Award, a Market Value Option or a Nil Cost Option. To date
Performance Share Awards and Market Value Options have been
granted.
Performance Share Award ("PSA")
A PSA is a conditional award of a specified number of ordinary
shares which may be acquired for nil consideration. The PSAs
granted to date have all been initial awards where there is no
specified performance condition. The vesting period of each award
is three years from the date of grant.
No awards were issued in 2014 (2013: nil). No awards are
outstanding under this scheme.
Market Value Option ("MVO")
An MVO is an option with an exercise price per share equal to
the market value of a share on the date of grant. The vesting
period of each award is three years from the date of grant and the
award must be exercised no later than ten years following the date
of grant.
On 24 November 2008 an MVO over 200,000 ordinary shares was
granted to a senior employee and this option is exercisable from 24
November 2011 at GBP1.00 per share subject to an agreed performance
criteria. This option is now exercisable at any time until 23
November 2018.
On 26 March 2009 an MVO over 200,000 ordinary shares was granted
to a senior employee and this option is exercisable from 26 March
2012 at 76 pence per share subject to an agreed performance
criteria; and on 25 September 2009 MVO awards over 1,200,000
ordinary shares were granted to key senior employees and these
options are exercisable from 25 September 2012 at 76.9 pence per
share subject to agreed performance criteria.
No awards were issued in 2014 (2013: nil).
PV Crystalox Solar PLC Share Award Bonus PLAN ("SABP")
This plan was approved by the Board in January 2014 under which
awards can be made to employees, excluding the executive directors.
Under the SABP conditional awards are granted for a specific number
of ordinary shares which may be acquired for nil consideration. On
30 January 2014 SABP awards were granted key senior employees over
2,550,000 shares. These awards are due to vest on 31 March
2015.
PV Crystalox Solar PLC Share Incentive Plan ("SIP")
The SIP is an employee share scheme approved by HM Revenue and
Customs in accordance with the provisions of Schedule 8 to the
Finance Act 2000. On 26 February 2008 awards were granted to UK
employees of 500 shares each over a total of 37,000 ordinary shares
of 2 pence. These 37,000 ordinary shares of 2 pence each were
transferred from the EBT into the SIP. The shares in the SIP were
subject to the share consolidation so that each holding of 500
ordinary shares of 2 pence became a holding of 192 shares of 5.2
pence following the 5 for 13 share consolidation in 2013
During 2014 awards over 4,608 shares vested due to employees
leaving the Group as good leavers due to redundancy or
retirement.
The Group recognised a total credit before tax of EUR181,000
(2013: EUR103,000) related to equity-settled share-based payment
transactions during the year.
The number of share options and weighted average exercise price
(WAEP) for each of the schemes is set out as follows:
MVO WAEP
PSP(*) SABP(*) EDDSP(*) MVO price SIP(*)
Number Number Number Number Pence Number
---------------------------------------------- ------------ ---------- ---------- ---------- --------- ---------
Share grants and options outstanding at 1
January 2013 3,038,454 - 419,568 1,600,000 79.7 24,000
Share grants and options granted during the - - - - - -
year
Share grants and options forfeited during the
year (852,723) - - (200,000) - -
Share grants vested during the year - - (173,152) - - -
Impact of share consolidation (14,784)
Options exercised during the year - - - - - -
---------------------------------------------- ------------ ---------- ---------- ---------- --------- ---------
Share grants and options outstanding at 31
December 2013 2,185,731 - 246,416 1,400,000 79.7 9,216
---------------------------------------------- ------------ ---------- ---------- ---------- --------- ---------
Exercisable at 31 December 2013 - - - 1,400,000 79.7 -
---------------------------------------------- ------------ ---------- ---------- ---------- --------- ---------
Share grants and options granted during the - 2,550,000 - - - -
year
Share grants and options forfeited during the (2,185,731) - - - - -
year
Share grants vested during the year - - (246,416) - - (4,608)
Options exercised during the year - - - - - -
---------------------------------------------- ------------ ---------- ---------- ---------- --------- ---------
Share grants and options outstanding at 31
December 2014 - 2,550,000 - 1,400,000 79.7 4,608
---------------------------------------------- ------------ ---------- ---------- ---------- --------- ---------
Exercisable at 31 December 2014 - - - 1,400,000 79.7 -
---------------------------------------------- ------------ ---------- ---------- ---------- --------- ---------
* The weighted average exercise price for the PSP, SABP, PSA and
SIP options is GBPnil.
No share options were exercised during the year and no options
were exercised in 2013.
30. Risk management
The main risks arising from the Group's financial instruments
are credit risk, exchange rate fluctuation risks, interest rate
risk, liquidity risk and commodity price risk. The Board reviews
and determines policies for managing each of these risks and they
are, as such, summarised below. These policies have been
consistently applied throughout the period.
Credit risk
The main credit risk arises from accounts receivable. All trade
receivables are of a short-term nature, with maximum payment terms
of 60 days, although the majority of customers currently have
payment terms of 45 days. In order to manage credit risk, local
management defines limits for customers based on a combination of
payment history and customer reputation. Credit limits are reviewed
by local management on a regular basis. As a supplier to some of
the leading manufacturers of solar cells, the Group has a limited
number of customers. In 2014 41.5% of the Group's sales are related
to the largest customer (2013: 23.5%). The number of customers
accounting for approximately 95% of the annual revenue was seven,
which was down from twelve in 2012. Where appropriate, the Group
requests payment or part payment in advance of shipment, which
generally covers the cost of the goods. Different forms of
retention of title are used for security depending on local
restrictions prevalent on the respective markets. The maximum
credit risk to the Group is the total of accounts receivable,
details of which can be seen in note 11.
Cash is not considered to be a high credit risk due to all funds
being immediately available, consideration being given to the
institution in which it is deposited and the setting of
counterparty limits. All institutions used have a minimum Moody's
credit rating of Ba3.
Exchange rate fluctuation risks
In the financial year 2014, 93% of sales revenue was invoiced in
US Dollars potentially exposing the Group to exchange rate
risks.
Significant cash funds are denominated in currencies other than
the presentational currency of the Group. Excess cash funds not
needed for local sourcing are exposed to exchange rate and
associated interest fluctuation risks, particularly so in the
United Kingdom. The exchange rate risk is based on assets held in
currencies other than Euros.
The spot prices of wafers and polysilicon are quoted in US
Dollars and this influences the price the Group can obtain. The
Group sells its products in a number of currencies (mainly US
Dollars, Euros and Japanese Yen) and also purchases goods and
services in a number of currencies (mainly Euros, Japanese Yen,
Sterling and to a small extent US Dollars).
The following exchange rates were used to translate individual
companies' financial information into the Group's presentational
currency:
Year
Average end
rate rate
------------------- ------- ------
Euro: Japanese Yen 140.43 145.81
Euro: US Dollar 1.329 1.2155
Sterling: Euro 1.2409 1.2780
------------------- ------- ------
Hedging strategy
The Group sells to customers in the worldwide photovoltaic
market and sells in two main currencies: US Dollars (93%) and Euros
(7%). It operates its wafering factory within the Euro zone and
pays for the sub-contracting of wafer production in Japan in
Japanese Yen. However, the ingot manufacturing operation is within
the United Kingdom and therefore a relatively small proportion of
overall costs are in Sterling, being mainly related to personnel
costs, overheads and utilities (most of the raw materials are
purchased in Euros and Japanese Yen).
During 2014 the net gain on foreign currency adjustments was
EUR9.0 million (2013: gain of EUR3.1 million). This gain was mainly
related to the revaluation of balance sheet provisions (in
particular the onerous contract provision, the conversion of
currency balances in respect of Group advances or loans, currency
debtor/creditor balances, currency advance payments to raw material
suppliers and currency cash balances. These can be broken down into
the following broad categories:
2014 2013
EUR'million EUR'million
------------------------------------------------- ------------ ------------
Revaluation of cash balances (0.1) (1.0)
Revaluation of Group loans/intercompany account (0.1) 0.5
Revaluation of Group raw material deposits (1.3) (0.7)
Accounts receivable/accounts payable revaluation 0.2 0.1
Revaluation of balance sheet provisions 10.3 4.2
------------------------------------------------- ------------ ------------
Total currency gain 9.0 3.1
------------------------------------------------- ------------ ------------
In addition to the above, upon translation of net assets in the
consolidation, there was a positive impact in 2014 of EUR2.5
million (2013: negative EUR5.0 million) recording as a currency
translation adjustment which is shown in the Consolidated Statement
of Comprehensive Income as "other comprehensive income".
Interest rate risk
The Group has limited exposure to interest rate fluctuation
risks, since the Group does not have any borrowings. The Group has
borrowing facilities in Japan which are available to be drawn.
These borrowing facilities when drawn are subject to variable
interest rates. All variable interest rate loans are of a
short-term nature with a maturity of less than twelve months. The
Group had no borrowings at the end of 2014 but did have borrowings
in Japanese Yen of EUR0.7 million at the end of 2013. Accordingly,
there is technically a downside risk that Japanese Yen interest
rates may increase substantially from the current relatively low
levels, although the current lack of borrowings means that this
risk equates to an insignificant amount.
On 31 December 2014 there were no Group borrowings in Japanese
Yen (2013: EUR0.7 million at an interest rate of approximately
0.95%. For each 1% rise in the Japanese Yen interest rates Group
interest costs would remain unchanged but based on the 2013
borrowing levels would increase by EUR7,000..
Further sensitivity analysis of the accruals and loans
outstanding at the year end has not been disclosed as these are
virtually all current and paid in line with standard payment
terms.
The Group had a cash balance at the end of 2014 of EUR24.6
million (2013: EUR39.9 million) and places these cash funds on
deposit with various quality banks subject to a counter party limit
of EUR15 million. Accordingly, there is an interest rate risk in
respect of interest receivable which amounted to EUR0.1 million in
the year (2013: EUR0.8 million). The Group is cash positive and
current interest rates are low. The risk of interest rates falling
is considered small and in any case would have a small impact on
the Group's income statement and cash flows. Group management
considers that in the medium term it is more likely that interest
rates might rise. The impact of interest rate rises would
positively impact the Group's profits and cash flow.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group manages
its exposure to liquidity risk by regularly reviewing net debt and
forecast cash flows to ensure that current cash resources are
available to meet its business objectives. The Group is exposed to
the worldwide photovoltaic market where wafer prices have remained
below industry production costs for several years. Accordingly, the
market pricing of the Group's main product (silicon wafers) has
been under pressure. Against this difficult market background,
Group management introduced a cash conservation strategy in 2011.
This cash conservation plan has been maintained, so that the Group
can optimise its cash position whilst these conditions persist.
Various measures have been taken to adjust production to levels
appropriate to current market conditions. At the same time
production capacity has been maintained so that this can be
utilised when market conditions allow. The next phase of the Cash
Conservation Plan covers the period until 31 December 2015. Due to
changing market and economic conditions, the expenses and
liabilities actually arising in the future may differ materially
from the estimates made in this plan.
On 31 December 2014 the Group had a net cash balance of EUR24.6
million (2013: EUR39.2 million) and this together with cash flow
projections from the cash conservation plan indicate, assuming the
projections are broadly correct, that the Group will have adequate
cash reserves until at least twelve months beyond the signing of
the accounts.
The Group also regularly monitors its compliance with its debt
covenants. During the financial year, all covenants have been
complied with. The Group has borrowing facilities in Japanese Yen
which are available to be drawn.
Commodity price risk
The main raw material used in the production of multicrystalline
silicon wafers is polysilicon feedstock which the Group obtains
through two long term contracts, There is a commodity price risk
that an increase in the market price of the polysilicon will
adversely affect the cost of producing wafers. The Group has
historically managed this risk by having long term contracts with
polysilicon producers which guarantee both the supply of
polysilicon and price of that polysilicon.
At present the pricing in the contracts is significantly above
current market levels. The Group manages this by obtaining
flexibility in terms of price, volume and timing of deliveries by
negotiating amendments to the terms of our long-term contracts with
our suppliers. Where we have excess polysilicon we look to trade
the excess volumes.
Financial assets and liabilities
Loan
Book and Amortised Non-
value receivables cost financial Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------ -------- ------------ --------- ---------- --------
2014
Assets:
Cash and cash equivalents 24,592 24,592 - - 24,592
Accounts receivable 5,341 5,341 - - 5,341
Prepaid expenses and other assets 12,380 54 - 12,326 12,328
Non-financial assets 36,464 - - 36,464 36,464
------------------------------------ -------- ------------ --------- ---------- --------
Total 78,777 29,987 - 48,790 78,777
------------------------------------ -------- ------------ --------- ---------- --------
Liabilities:
Loans payable short-term - - - - -
Accounts payable trade (1,762) - (1,762) - (1,762)
Accrued expenses (1,675) - (1,675) - (1,675)
Provisions (15,596) - - (15,596) (15,596)
Miscellaneous current liabilities (72) - - (72) (72)
Miscellaneous long-term liabilities (236) - (236) - (236)
Non-financial liabilities (3,502) - - (3,502) (3,502)
------------------------------------ -------- ------------ --------- ---------- --------
Total (22,843) - (3,673) (19,170) (22,843)
------------------------------------ -------- ------------ --------- ---------- --------
2013
Assets:
Cash and cash equivalents 39,900 39,900 - - 39,900
Accounts receivable 13,473 13,473 - - 13,473
Prepaid expenses and other assets 11,504 51 - 11,453 11,504
Non-financial assets 30,208 - - 30,208 30,208
------------------------------------ -------- ------------ --------- ---------- --------
Total 95,085 53,424 - 41,661 95,085
------------------------------------ -------- ------------ --------- ---------- --------
Liabilities:
Loans payable short-term (690) - (690) - (690)
Accounts payable trade (2,827) - (2,827) - (2,827)
Accrued expenses (2,835) - (2,835) - (2,835)
Provisions (26,563) - - (26,563) (26,563)
Miscellaneous current liabilities (50) - - (50) (50)
Miscellaneous long-term liabilities (43) - (43) - (43)
Non-financial liabilities (3,693) - - (3,693) (3,693)
------------------------------------ -------- ------------ --------- ---------- --------
Total (36,701) - (6,395) (30,306) (36,701)
------------------------------------ -------- ------------ --------- ---------- --------
Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns to shareholders and other stakeholders and to
maintain an optimal capital structure that strikes the appropriate
balance between risk and the cost of capital.
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce
debt.
The Group from time to time uses debt as a natural hedging
instrument, where amounts are borrowed in the same foreign currency
as it holds assets (for instance debtors) denominated in the same
foreign currency. However, these borrowings have always been lower
than the balance of cash and cash equivalents in any period.
Accordingly, the Group has maintained a net cash positive position.
This is a different approach to others in the photovoltaic industry
where being heavily indebted (particularly in China) has become the
norm. The directors believe that the Group's policy of not carrying
any net debt has significantly reduced the Group's risk, which has
been particularly important during the current extremely difficult
market conditions.
The Group defines capital as all elements of equity.
The Group's capital (plus its cash and cash equivalents) is set
out in the following table. The Group is not subject to any
externally imposed capital requirements.
2014 2013
EUR000 EUR000
---------------------------------------- ------- -------
Cash and cash equivalents (see note 10) 24,592 39,900
Bank and other borrowings (see note 19) - (690)
---------------------------------------- ------- -------
Total net cash 24,592 39,210
---------------------------------------- ------- -------
Total equity 55,774 58,384
---------------------------------------- ------- -------
The Group is net cash positive and therefore does not have any
gearing. Accordingly, the leverage ratio has no meaning and has not
been calculated.
31. Calculation of fair value
There are no publicly traded financial instruments (e.g.
publicly traded derivatives and securities held for trading and
available-for-sale securities) nor any other financial instruments
held at fair value.
32. Contingent liabilities
The Group did not assume any contingent liabilities for third
parties. No material litigation or risks from violation of third
parties' rights or laws are pending at the time of approval of
these financial statements.
33. Other financial obligations
Lease agreements (operating leases)
The leases primarily relate to rented buildings and have terms
of no more than ten years. The future aggregate minimum lease
payments under non-cancellable operating leases are as follows:
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
----------------------- --------- --------
Less than one year 1,056 1,428
Two to five years 2,855 2,105
Longer than five years 556 1,033
----------------------- --------- --------
4,467 4,566
----------------------- --------- --------
The group also leases buildings under cancellable operating
lease arrangements. The group is required to give a six-month
notice for the termination of these agreements. The lease
expenditure charged to the income statement during the year is
disclosed in note 5.
There were no significant purchase commitments at the year
end.
34. Related party disclosures
Related parties as defined by IAS24 comprise the senior
executives of the Group and also companies that these persons could
have a material influence on as related parties as well as other
Group companies. During the reporting year, none of the
shareholders had control over or a material influence in the parent
company.
Transactions between the Company and its subsidiaries have been
eliminated on consolidation.
As part of a settlement with the administrators of a previous
customer, Iain Dorrity is 1 of 3 directors of a subsequently formed
SPV.
The remuneration of the directors, who are the key management
personnel of the Group, is set out in the audited part of the
Directors' Remuneration Report.
35. Dividends and return of cash
In December 2013 a return of cash was made to all shareholders
of 7.25 pence per share by way of a B and C share scheme, which
gave shareholders (other than certain overseas subsidiaries) a
choice between receiving the cash in the form of income or capital.
The return of cash was accompanied by a 5 for 13 share
consolidation to maintain broad comparability of the share price
and return per share of the ordinary shares before and after the
creation of the B and C shares. The return of cash was approved by
shareholders on 19 November 2013.
2014 2013
Shareholder Return EUR000 EUR000
------------------------- ------- -------
Income option (C share) - 11,189
Capital option (B share) - 25,096
------------------------- ------- -------
Total shareholder return - 36,285
------------------------- ------- -------
No other dividends were paid in 2014 (2013: GBPnil).
36. Discontinued operations
Analysis of the result of discontinued operations and the result
recognised on the remeasurement of assets is as follows:
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
------------------------------------------------------- --------- --------
Revenue - 316
Expenses - (2,169)
------------------------------------------------------- --------- --------
Loss before tax of discontinued operations - (1,853)
Tax - (2)
------------------------------------------------------- --------- --------
Loss after tax of discontinued operations - (1,855)
------------------------------------------------------- --------- --------
Pre-tax loss recognised on the remeasurement of assets
of disposal group - (722)
Tax - -
------------------------------------------------------- --------- --------
After tax loss recognised on the remeasurement of
assets of disposal group - (722)
------------------------------------------------------- --------- --------
Loss for the year from discontinued operations - (2,577)
------------------------------------------------------- --------- --------
Cash flows relating to the discontinued operations were as
follows:
As at 31 December
-------------------
2014 2013
EUR'000 EUR'000
--------------------- --------- --------
Operating cash flows - (3,488)
Investing cash flows - (12,261)
--------------------- --------- --------
- (15,749)
--------------------- --------- --------
37. Post balance sheet events
There are no significant post balance sheet events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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