TIDMPVCS
RNS Number : 3648S
PV Crystalox Solar PLC
17 March 2016
PV Crystalox Solar PLC
Preliminary Results
For the year ended 31 December 2015
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
2015.
Highlights
Shipment volumes broadly unchanged at 203MW (2014: 212MW)
Strategy review period extended in view of improved market
conditions
Further restructuring measures to reduce fixed costs
Burden of major long term polysilicon contract removed
ICC arbitration evidentiary hearing scheduled for July 2016
Overview of results
Revenues EUR64.5m (2014: EUR53.3m)
LBT of EUR(13.7)m (2014: EUR(4.7)m)
Net cash from operating activities EUR(12.9)m (2014:
EUR(15.7)m)
Net Cash EUR12.7m (2014:EUR 24.6m)
Inventories EUR23.2m (2014: EUR28.6m)
Iain Dorrity, Chief Executive Officer commented
"The spot price for wafers, the Group's primary product, has
shown some modest recovery during recent months while the price of
polysilicon, the key raw material, has fallen to historic lows. The
net result of these divergent trends is that wafer prices now
exceed the Group's cash cost of production. A recent report from
Bloomberg New Energy Finance has highlighted that while
considerable surplus capacity exists in the polysilicon, cell and
module sectors, the wafer sector could be a potential bottleneck
with capacity closely matched to demand. Consequently the tight
wafer supply situation and higher wafer prices are expected to
persist in the short term."
John Sleeman, Chairman, commented
"The Board remains mindful of the need to protect shareholder
value and accordingly believes that extending the period of the
strategic review is in the best interest of shareholders. Whilst
the Board believes that the long term outlook for the solar
industry remains positive and our short term commitment remains
strong, our longer term participation remains dependent upon
sensible trading conditions in 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 INTRODUCTION
Dear Shareholder
Photovoltaic market conditions have been extremely challenging
for several years with industry overcapacity depressing prices
across the value chain. As a result the Group has since November
2011 been operating under a cash conservation strategy to protect
shareholder value whilst preserving the Group's core production
capabilities. At the time of the 2015 Interim results the Group
announced that it intended to carry out a strategic review of the
business. The review was to take account of the Group's cash
position and production cost structure, industry overcapacity and
the prospects for rational pricing returning to the market. In view
of changes in market conditions during recent months that have
positively impacted the Group's competitive position the Board
considered it sensible to extend the review period. This extension
will also provide time to take full account of the outcome of the
ongoing dispute with a long term wafer contract customer where we
have filed for ICC arbitration. The judgment of the arbitral
tribunal is expected later in the year and while the outcome is
uncertain, the value of any award if our claim is upheld could be a
multiple of the Group's market capitalisation.
During 2015 the Group has carried out further restructuring in
order to reduce its fixed costs and has made continued progress in
achieving manufacturing cost reductions. Under the current improved
market conditions the Group's cash cost of wafer production is now
below the market price. The Group has also concluded successfully
its obligations under the larger of its two polysilicon purchase
contracts which has been a financial burden for several years.
.
In 2015 wafer shipments of 203MW were broadly similar to the
previous year. Under the cash conservation strategy we trade excess
polysilicon and in 2015 we sold significantly higher volumes than
in 2014 with the overall result that our total revenues of EUR64.5
million were 20.9% higher than in 2014. We remain, however, loss
making and the loss before tax increased to EUR13.7 million
compared to EUR4.7 million in 2014 as the levels of other income
and exchange gains experienced in 2014 were not repeated in 2015.
Net cash at the year end was EUR12.7 million which was EUR11.9
million lower than the EUR24.6 million held at the end of 2014.
Our employees remain one of the Group's key strengths and are
vital in ensuring that we retain our core production capabilities.
I would like to thank all our employees for their commitment and
contribution during these challenging times. In particular, I thank
our Japanese employees for their professionalism following the
Group's decision to wind up its Tokyo based subsidiary at the end
of 2015 and wish them well in the future. Japan had previously been
the Group's major wafer manufacturing centre and was our major
market until 2013. The decision to wind up operations in Japan
followed a marked decline in cell manufacturing and the Group's
lack of an active customer base there.
The Board remains committed to maintaining governance levels
above those required for a company with a standard listing to
ensure that the right people, systems and processes are in place to
manage risk and to deliver the Group's agreed strategy. Our
internal review found that the Board is operating effectively, and
full details of our governance activities can be found in the
Corporate Governance section of the Annual Report.
The Board remains mindful of the need to protect shareholder
value and accordingly believes that extending the period of the
strategic review is in the best interest of shareholders. Whilst
the Board believes that the long term outlook for the solar
industry remains positive and our short term commitment remains
strong, our longer term participation remains dependent upon
sensible trading conditions in the solar marketplace.
John Sleeman
Chairman
16 March 2016
STRATEGIC REPORT - OPERATIONAL AND FINANCIAL REVIEW
Operational review of 2015
Market Environment
2015 was another year of strong growth for global PV
installations but difficulties persisted for manufacturers as
excess capacity, primarily in China, continued to depress prices
across the value chain. Prices fell to historic lows during the
first half of the year following a short lived recovery seen at the
end of 2014. The market environment improved for cell and wafer
companies during the second half of the year with prices recovering
back to the levels seen at the beginning of the 2015.
The situation for polysilicon producers further worsened in the
second half of the year with oversupply and anti dumping duties in
China causing prices to plummet. Spot prices fell by 30% during
2015 and week on week declines have continued into 2016. With spot
market prices of $13/kg now well below cash costs of production and
little prospect of recovery in the short term, some polysilicon
producers have been forced to take drastic action. In recent weeks
some companies have opted to write down production assets while
others have temporarily or permanently shut down production.
However, at the same time new production capacity has been brought
on stream.
Chinese companies continue to dominate the global PV market:
seven out of the world's top ten module manufacturers are based
there and account for around 45% of global output. However, several
companies suffer from excessive debt levels with one major company
collapsing into insolvency in 2015 and others surviving only with
support from state or local government owned banks.
Wafers
The spot price for wafers, the Group's primary product, has
shown some modest recovery during recent months while the price of
polysilicon, the key raw material, has fallen to historic lows. The
net result of these divergent trends is that wafer prices now
exceed the Group's cash cost of production. A recent report from
Bloomberg New Energy Finance has highlighted that while
considerable surplus capacity exists in the polysilicon, cell and
module sectors, the wafer sector could be a potential bottleneck
with capacity closely matched to demand. Consequently the tight
wafer supply situation and higher wafer prices are expected to
persist in the short term.
Group operations in 2015
Operational capabilities
In recent years the Group's strategy has been to maintain a
balance between cash conservation and managing its contractual
obligations whilst maintaining a limited market presence and
retaining its core production capabilities in UK, Germany and Japan
until sensible market conditions return.
During 2015 the Group has carried out further restructuring and
made further cuts to its fixed costs by ceasing operations in
Japan. The Group's has shifted its focus from wafering at
sub-contractors in Japan to increasing its in-house wafer
production in Germany where considerable progress has been achieved
in cost reduction.
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The Group has also cut its fixed costs by permanently closing
its oldest ingot production facility in the UK which had been
mothballed since 2011 in order to align better its capacity with
anticipated future demand. Despite the closure, ingot capacity of
450MW remains and is significantly greater than current production
levels.
Japan
The Group's subsidiary in Japan was set up in 2002 to manage
both local productions of wafers from ingots/blocks shipped from
the UK and wafer sales to end-customers. At that time Japan was the
major manufacturing centre for the global solar cell industry with
several leading PV companies based there. Japan also provided a
thriving sub-contract wafering industry and the majority of the
Group's total wafer output throughout the last decade was produced
in Japan.
Japan remained the Group's major geographical market until 2013
but by the end of 2013 the Group no longer had an active customer
base in Japan as PV companies there were increasingly outsourcing
cell production to China and Taiwan. The Group maintained wafering
operations in Japan but wafers were instead supplied to customers
in Asia. Production was eventually suspended during 2015. As a
consequence of these changes the Group decided to wind up its Tokyo
based subsidiary at the end of 2015.
Polysilicon Contracts
In common with most PV companies the Group has been burdened by
long term polysilicon purchase contracts with prices considerably
in excess of market prices. The Group has enjoyed good support from
its two suppliers and has been able to negotiate adjustments to
contract pricing.
The Group has now concluded its obligations under the largest
contract and took delivery of the final shipment of polysilicon
under that contract in December 2015. Annual volumes under the
remaining contract are significantly lower and are consistent with
current production volumes. Shipments are now scheduled to continue
until late 2018.
Wafer supply contracts
The Group has a significant outstanding long term sales contract
with one of the world's leading PV companies which has failed to
purchase wafers in line with its obligations since 2013. The supply
contract was signed in 2008 and related to wafer shipments over a
seven year period with prices which reflected market prices at that
time and which are considerably above current levels. Despite
extensive negotiations it has not been possible to reach a mutually
acceptable agreement and a request for arbitration was filed in
March 2015 with the International Court of Arbitration of the
International Chamber of Commerce. The evidentiary hearing of the
arbitral tribunal is now scheduled to take place in Frankfurt in
July 2016.
One other wafer supply contract remains with a customer which
entered insolvency and where shipments stopped in 2012. Claims had
been registered with the administrator and a small settlement had
been expected before the end of 2015 but should now be received
during 2016.
Revenues
Wafer shipments in 2015 of 203MW (2014:211MW) were broadly in
line with those in the previous year despite the suspension of
wafering in Japan. Monthly production output in Germany during H1
2015 was 43% higher than the average run rate during 2014 and was
increased by a further 25% during H2. Shipments were further
boosted by running down wafer inventory.
The Group's wafer customers are in Taiwan, which has the largest
cell manufacturing base outside China, and in Europe where a few
companies have survived the shakeout in recent years. Our wafers
are particularly valued for use in modules for the French PV market
where incentives in the form of higher feed in tariffs are offered
when two out of the three parts of the manufacturing process
(wafer/cell/module) are carried out in the EU. In December 2015 the
French government announced the results of its CR3 tender which
will replace the current scheme and awarded 800MW of PV projects
which must be completed within a two year period. The carbon
footprint of the complete module is a critically important factor
for these projects. Accordingly, the Group expects to maintain its
competitive position as the low carbon footprint of our wafers is
more favourable than product from competitors based in China and
Taiwan.
As in previous years, polysilicon deliveries under the
polysilicon contracts during 2015 were considerably in excess of
the Group's reduced production requirements and surplus volumes
were traded on the spot market in order to manage inventories and
maintain cash flows. Trading prices were much lower than the
previous year but conditions were more favourable and enabled
traded volumes to be significantly higher. Nevertheless inventory
levels still increased during the year.
During 2015 the Group commenced selling blocks to third party
customers. Block shipment volumes were equivalent to around 9MW and
are expected to be higher during 2016.
Strategic Review
At the time of the Group's interim results on 27 August 2015,
the Board indicated that it was to carry out a strategic review of
the business which it intended to complete by the end of 2015. The
review was to take account of the Group's cash position and
production cost structure, industry overcapacity and the prospects
for rational pricing returning to the market. A very high level
summary of the review is as follows:
-- At the end of 2015 the Group had EUR12.7 million of cash and
EUR23.2 million of inventories.
-- The Group has been successful in achieving both variable and fixed cost reductions.
-- Wafer prices have improved in recent months while excess
capacity continues to depress polysilicon prices.
-- The divergent trends in polysilicon and wafer prices mean
that wafer prices now exceed the Group's cash cost of production,
but do not cover all the overheads.
-- The Group has significant polysilicon inventory and under
current circumstances conversion into
wafers is now a more favourable option than trading the surplus polysilicon at market prices.
-- The Group has filed for ICC arbitration in March 2015 in a
dispute with a long term wafer contract customer who had failed to
honour its purchase obligations. The evidentiary hearing of the
arbitral tribunal is scheduled for July with a judgment expected
before the end of the year.
In view of the recent positive developments in the PV market
environment the Board have decided that it would be prudent for the
Group to extend the review period to assess the ongoing impact of
these changes on the Group's business. Meanwhile the Group will
continue its strategy of maintaining a balance between cash
conservation and managing its contractual obligations whilst
maintaining a limited market presence and retaining its core
production capabilities.
Financial review
In 2015 Group revenue increased by 20.9% to EUR64.5 million
(2014: EUR53.3 million). This was mainly due to an increase in the
level of trading of surplus polysilicon feedstock compared to
2014.
During 2015 the Group recognised other income of EUR1.2 million
which was EUR10.9 million lower than in 2014 when customer
compensations included a settlement from the administrator of one
of the long-term contract customers in insolvency.
The positive gross margin in the year was EUR0.2 million whereas
in 2014 there was a negative gross margin of EUR12.4 million. This
was driven by changes in the onerous contract provision ("OCP")
element within cost of materials and services partially offset by
an inventory write down. In 2015 there was a net EUR17.4 million
release in this element of the OCP whilst 2014 was negatively
impacted by net charges of EUR8.2 million. Due to IFRS requirements
changes to the OCP are recorded in costs of materials and services,
currency gain and finance cost. Details of the onerous contract
provision are discussed later in this review. During 2015 there was
an inventory write down of EUR5.5 million as a result of the fall
in spot price of polysilicon feedstock during the year.
Within personnel expenses, gross wages and salaries at EUR7.3
million were 25.9% higher than in 2014 due primarily to a 16%
increase in the average number of Group employees associated with
63% increase in wafer production volumes in Germany and additional
compensation costs of EUR0.6 million as a result of the wind up of
the Japanese subsidiary. The impact of shift from wafer production
at sub-contractors in Japan to in-house wafer production on the
income statement is that the direct cost of labour is reported in
personnel costs whereas wafer production costs at the subcontractor
in Japan were recorded in costs of material and services.
Other expenses at EUR5.4 million were EUR1.2 million higher than
in 2014 mainly due to legal costs, bad debts and land and building
operating lease charges. Of these other expenses, legal costs
incurred as a result of the arbitration case involving the customer
with the outstanding long term sales contract have resulted in
those costs being EUR0.6m more than in the previous year.
The Group's annual depreciation charge in 2015 remained modest
at EUR0.4 million. During the year the Group surrendered the leases
at one of its two production sites and disposed of the furnaces.
These furnaces were fully depreciated and last produced ingots in
2011. It should be noted that the Group's remaining plant and
equipment, which was largely written down between 2011 and 2013,
remains available for use and a significant increase in ingot
production can be achieved without a significant increase in
capital expenditure or an increase in the annual depreciation
charge.
Currency gains and losses, which are significantly impacted by
the OCP, were a loss of EUR0.2 million in 2015 compared to a gain
of EUR9.0 million in 2014.
Net interest expense was EUR0.6 million (2014: EUR2.3 million)
mainly due to the unwinding of the discount rate used in the
calculation of the Group's OCP.
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Overall the Group generated a loss before taxes of EUR13.7
million (2014: EUR4.7 million). This increased loss of EUR9 million
was driven mainly by EUR11.0 million reduction in other income,
EUR9.2 million lower currency gains, together with higher personnel
costs (EUR1.8 million) and other expenses (EUR1.2 million) partly
offset by an improvement in gross margins of EUR12.6 million and
EUR1.7 million lower finance costs.
The Group's cash position at year end of EUR12.7 million was
EUR11.9 million lower than the net position of EUR24.6 million at
the start of the year. EUR12.9 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 EUR0.8 million
and EUR0.2 million proceeds from sale of property, plant and
equipment.
Inventories decreased during the year by EUR5.4 million from
EUR28.6 million at the end of 2014 to EUR23.2 million at the end of
2015. Finished product reduced by EUR4.0 million as wafer inventory
was sold down. Work in progress reduced by EUR3.4 million primarily
due to the cessation of wafer production in Japan which has
eliminated the need for lengthy sea freight shipments of ingots
from the UK Consolidating wafer production in Germany greatly
reduces time taken to turn polysilicon feedstock into
multi-crystalline silicon wafers in our three-stage production
process. Raw materials inventory increased by EUR1.9 million
compared to 2014 as the increased volume of polysilicon in stock
was partially offset by the lower price per kg at the year end.
Closing polysilicon feedstock inventory was written down to reflect
a reduction in the spot price at the end of 2015. This resulted in
a EUR5.5 million inventory write down in 2015.
Onerous contract provision ("OCP")
In common with many PV companies, the Group previously entered
into long-term contracts with two suppliers of polysilicon, which
were both in operation during 2015. These contracts were made to
secure the supply of raw material necessary to service the Group's
long-term wafer supply contracts. However, since the middle of
2011, the market prices of wafers and polysilicon have fallen
significantly below the prices agreed in the original contracts
meaning that these commitments to purchase polysilicon became
onerous.
In previous years, an onerous contract provision has been
required in line with IAS 37, however as a result of changes in the
underlying assumptions no provision is necessary in the current
year. The provision has been removed from the financial statements,
due to numerous variables changing within the industry, leading to
the Group being able to sell wafers at a positive gross margin at
this point of time. The key change is the increase in wafer sales
prices during Q4 2015 means the Group is able to sell wafers at a
positive gross margin. The completion of the larger contract in
December 2015 also eliminated a large percentage of the provision
seen in the prior year.
The total reduction in the provision of EUR15.5million in the
year has been driven by a number of factors. These include:
-- EUR10.4 million of the provision from the prior year was
utilised during 2015. This reflects the fact that the majority of
the prior year provision was attributable to the larger contract
which ended in 2015.
-- EUR7.1million of the provision was released. EUR5.5million of
this was due to favourable price negotiations on the larger
contract in the period. The remaining EUR1.6million reflects the
ability of the Group to manufacture wafers at a positive gross
margin using polysilicon from the remaining contract. This leads to
the continuing contract no longer being considered onerous.
-- The remainder of the movement is a EUR0.7 million increase
due to the unwinding of the discount rate and a EUR1.2 million
foreign exchange translation movement.
2015 2014
EUR'000 EUR'000
--------------------------------------- -------- --------
Provisions brought forward 15,541 26,526
Unwinding of discount factor 666 2,390
Additional provision - 9,715
Released (7,053) (1,553)
Exchange differences 1,209 (8,903)
Utilised (10,363) (12,634)
--------------------------------------- -------- --------
Provisions carried forward - 15,541
--------------------------------------- -------- --------
In determining the closing level of provision required in the
current year, assumptions were made as to how the polysilicon is
expected to be used and subsequently to calculate any losses that
will be generated from that use. In 2014 the Group strategy was 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 continued in 2015, although the price at
which the excess polysilicon could be traded declined by one third
throughout the year.
In 2016 the Group expects to continue to both produce wafers for
sale and to trade excess polysilicon which is currently held in
inventory. Due to the increase in the wafer sales price in Q4 2015,
wafers can now be sold for a price higher than the production costs
(excluding overheads). This has formed the basis for management's
conclusion that no onerous contract provision is required.
Going concern
The Group's directors continue to operate a cash conservation
strategy to enable the Group to manage its operations whilst market
conditions remain difficult. The recent improvement in market
conditions mean that the Group's cash cost of wafer production is
now below the market price. A description of the 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 contracted sales volumes and prices and contracted purchase
volumes and prices are based on management's expectations and
contractual terms from the remaining polysilicon supply contract
and are consistent with the Group's experience in the first part of
2016. The Group looked at the sensitivity in the model by
considering different sales volumes and prices and noted that a
significant drop in either would leave the Group in a cash positive
position in March 2017.
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
should market conditions allow. In order to manage inventory levels
the Group continues to sell excess polysilicon into the spot
market.
On 31 December 2015 there was a net cash balance of EUR12.7
million, including funds held by an employee benefit trust. The
value of the polysilicon inventory was EUR20.3 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.
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.
Outlook
Even on a conservative basis, analysts again forecast double
digit growth for global PV installations in 2016 and 2017. With the
Group's cost structure now aligned better with market prices than
for several years the Board takes a slightly more optimistic view
of the industry environment. The Board remains acutely aware that
such favourable conditions may only be temporary but believes that
extending the period of the strategic review is in the best
interest of shareholders, especially in view of the judgement of
the arbitral tribunal which is expected later in 2016.
Iain Dorrity
Chief Executive Officer
16 March 2016
Consolidated statement of comprehensive income
For the year ended 31 December 2015
2015 2014
Total Total
Notes EUR'000 EUR'000
------------------------------------------------------------------------------------------- ----- -------- --------
Revenues 8 64,464 53,333
Cost of materials and services 3 (64,268) (65,694)
Personnel expenses 4 (8,447) (6,620)
Depreciation and impairment of property, plant and equipment and amortisation of intangible
assets (382) (337)
Other income 2 1,187 12,132
Other expenses 5 (5,390) (4,163)
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Currency gains and losses 28 (184) 9,043
------------------------------------------------------------------------------------------- ----- -------- --------
Loss before interest and taxes ("EBIT") (13,020) (2,306)
Finance income 6 78 106
Finance cost 6 (721) (2,450)
------------------------------------------------------------------------------------------- ----- -------- --------
Loss before taxes ("EBT") (13,663) (4,650)
Income taxes 7 (94) (2)
------------------------------------------------------------------------------------------- ----- -------- --------
Loss for the year attributable to owners of the parent (13,757) (4,652)
------------------------------------------------------------------------------------------- ----- -------- --------
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit or loss:
Currency translation adjustment 2,867 2,498
------------------------------------------------------------------------------------------- ----- -------- --------
Total comprehensive loss
Attributable to owners of the parent (10,890) (2,154)
------------------------------------------------------------------------------------------- ----- -------- --------
Basic and diluted (loss)/earnings per share in Euro cents
From loss for the year 9 (8.8) (3.0)
------------------------------------------------------------------------------------------- ----- -------- --------
The accompanying notes form an integral part of these financial
statements.
Consolidated balance sheet
As at 31 December 2015
2015 2014
Notes EUR'000 EUR'000
---------------------------------- ------ -------- --------
Intangible assets 15 12 38
Property, plant and equipment 16 2,049 2,355
Other non-current assets 17 5,179 5,425
---------------------------------- ------ -------- --------
Total non-current assets 7,240 7,818
---------------------------------- ------ -------- --------
Cash and cash equivalents 10 12,691 24,592
Trade accounts receivable 11 5,658 5,341
Inventories 12 23,186 28,630
Prepaid expenses and other assets 13 3,381 12,380
Current tax assets 14 5 16
---------------------------------- ------ -------- --------
Total current assets 44,921 70,959
---------------------------------- ------ -------- --------
Total assets 52,161 78,777
Trade accounts payable 19 1,436 1,762
Deferred revenue 25 3,518 3,235
Accrued expenses 20 1,885 1,564
Provisions 21 - 14,577
Deferred grants and subsidies 22 70 111
Current tax liabilities 23 117 156
Other current liabilities 24 96 72
---------------------------------- ------ -------- --------
Total current liabilities 7,122 21,477
---------------------------------- ------ -------- --------
Accrued expenses 20 42 111
Provisions 21 - 1,019
Other non-current liabilities 222 236
---------------------------------- ------ -------- --------
Total non-current liabilities 264 1,366
---------------------------------- ------ -------- --------
Share capital 26 12,332 12,332
Share premium 50,511 50,511
Other reserves 25,096 25,096
Shares held by the EBT (679) (679)
Share-based payment reserve 472 741
Reverse acquisition reserve (3,601) (3,601)
Accumulated losses (21,388) (7,631)
Currency translation reserve (17,968) (20,835)
---------------------------------- ------ -------- --------
Total equity 44,775 55,934
---------------------------------- ------ -------- --------
Total liabilities and equity 52,161 78,777
---------------------------------- ------ -------- --------
The accompanying notes form an integral part of these
statements.
The financial statements on pages -- to -- were approved by the
Board of directors on 16 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 2015
Shares Share- Retained
held based Reverse earnings/ Currency
Share Share Other by the payment acquisition (accumulated translation Total
capital premium reserves EBT reserve reserve losses) reserve equity
Notes EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------- ----- ------- ------- --------- ------- ------- ----------- ------------ ----------- --------
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)
-------------- ----- ------- ------- --------- ------- ------- ----------- ------------ ----------- --------
Loss 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
-------------- ----- ------- ------- --------- ------- ------- ----------- ------------ ----------- --------
As at 1
January 2015 12,332 50,511 25,096 (679) 741 (3,601) (7,631) (20,835) 55,934
Share-based
payment
charge - - - - (269) - - - (269)
Transactions
with owners - - - - (269) - - - (269)
-------------- ----- ------- ------- --------- ------- ------- ----------- ------------ ----------- --------
Loss for the
year - - - - - - (13,757) - (13,757)
Currency
translation
adjustment - - - - - - - 2,867 2,867
-------------- ----- ------- ------- --------- ------- ------- ----------- ------------ ----------- --------
Total
comprehensive
loss - - - - - - (13,757) 2,867 (10,890)
-------------- ----- ------- ------- --------- ------- ------- ----------- ------------ ----------- --------
As at 31
December 2015 12,332 50,511 25,096 (679) 472 (3,601) (21,388) (17,968) 44,775
-------------- ----- ------- ------- --------- ------- ------- ----------- ------------ ----------- --------
Consolidated cash flow statement
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For the year ended 31 December 2015
2015 2014
Notes EUR'000 EUR'000
------------------------------------------------------------------------ ----- -------- --------
Loss before taxes (13,663) (4,650)
Adjustments for:
Net interest expense 6 643 2,344
Depreciation and amortisation 15,16 382 337
Inventory writedown 12 5,538 -
Charge for retirement benefit obligation and share-based payments 26,27 (314) -
Decrease in provisions 21 (17,468) (14,761)
Gain from the disposal of property, plant and equipment and intangibles (191) (2)
Losses/(gains) in foreign currency exchange (145) 156
Change in deferred grants and subsidies (41) (48)
------------------------------------------------------------------------ ----- -------- --------
(25,259) (16,624)
------------------------------------------------------------------------ ----- -------- --------
Changes in working capital
Decrease/(increase) in inventories 12 1,729 (14,847)
Decrease/(increase) in accounts receivables 11,13 813 9,074
Decrease in accounts payables and deferred income 20 (512) (2,926)
Decrease in other assets 17 10,322 9,576
Decrease/(increase) in other liabilities 24 23 22
------------------------------------------------------------------------ ----- -------- --------
(12,884) (15,725)
------------------------------------------------------------------------ ----- -------- --------
Income taxes (paid) / received 14 (121) 7
Interest received 78 44
------------------------------------------------------------------------ ----- -------- --------
Net cash used in operating activities (12,927) (15,674)
------------------------------------------------------------------------ ----- -------- --------
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 249 2
Proceeds/(repayment) of investment grants and subsidies 22 - 7
Payments to acquire property, plant and equipment and intangibles 15,16 (20) (251)
------------------------------------------------------------------------ ----- -------- --------
Net cash generated from / (used in) investing activities 229 (242)
------------------------------------------------------------------------ ----- -------- --------
Cash flow from financing activities
Repayment of bank and other borrowings 19 - (712)
Interest paid 6 (23) (1)
------------------------------------------------------------------------ ----- -------- --------
Net cash used in financing activities (23) (713)
------------------------------------------------------------------------ ----- -------- --------
Cash generated from continuing and discontinued operations (12,721) (16,629)
Effects of foreign exchange rate changes on cash and cash equivalents 820 1,321
------------------------------------------------------------------------ ----- -------- --------
Cash and cash equivalents at beginning of the year 24,592 39,900
------------------------------------------------------------------------ ----- -------- --------
Cash and cash equivalents at end of the year 12,691 24,592
------------------------------------------------------------------------ ----- -------- --------
The accompanying notes form an integral part of these financial
statements.
Notes to the consolidated financial statements
For the year ended 31 December 2015
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 2015
were approved by the Board of directors on 16 March 2016.
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 the Statement of Comprehensive Income.
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.
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, 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.
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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 of which one is remaining at
the end of 2015. Given the significant unexpected decline in market
prices for polysilicon and silicon wafers, the resultant cost of
polysilicon under these contracts has meant in recent years the
Group expecting losses on these contracts. However, the spot price
for wafers has shown some modest recovery during recent months
while the price of polysilicon, the key raw material has fallen to
historical lows and is still declining. The net result of these
divergent trends is that wafer prices now exceed the Group's cash
cost of production.
Consequently the financial statements no longer include a
provision (2014: EUR15.5 million) for the discounted total of
currently anticipated losses under these contracts.
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
2017.
Basis of consolidation
The Group financial statements consolidate those of the Group
and its subsidiary undertakings drawn up to 31 December 2015.
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.
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
The Group's directors continue to operate a cash conservation
strategy to enable the Group to manage its operations whilst market
conditions remain difficult. The recent improvement in market
conditions mean that the Group's cash cost of wafer production is
now below the market price. A description of the 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 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
2016.
During the year one of the Group's two long-term contracts with
external suppliers for purchase of polysilicon, our main raw
material, for volumes in excess of current reduced production
requirements ended. 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, coupled with the
recovery in wafer pricing seen in the fourth quarter of 2015, the
base plans indicate that the Group will be able to operate within
its net cash reserves for the foreseeable future.
On 31 December 2015 there was a net cash balance of EUR12.7
million ((2014: 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.
Effects of new accounting pronouncements
Accounting standards, IFRICs and other guidance in effect or
applied for the first time in 2015
-- Annual improvements 2013
-- 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 IAS 19 regarding defined benefit plans
-- Annual improvements 2012
-- Amendment to IFRS 11, 'Joint arrangements'
-- Amendment to IAS 16, 'Property, plant and equipment' and IAS 38, 'Intangible assets'
-- Amendments to IAS 16, 'Property, plant and equipment'
-- IFRS 14, 'Regulatory deferral accounts'
-- Amendments to IAS 27. 'Separate financial statements'
-- Amendments to IFRS 10, 'Consolidated financial statements'
and IAS 28, 'Investments in associates and join ventures'
-- Annual improvements 2014
-- Amendment to IAS1, 'Presentation of financial statements'
-- Amendment to IFRS 10 and IAS 28 on investment entities
-- IFRS 9, 'Financial instruments'
-- IFRS 15 'Revenue from contracts with customers'
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.
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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 IAS 17. 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.
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.
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.
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.
Defined contribution pension 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.
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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.
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
2015 2014
EUR'000 EUR'000
------------------------------------------------------------ -------- --------
Recognition of accrued grants and subsidies for investments 455 48
Sale of property, plant and equipment 191 2
Customer compensations - 10,222
Supplier compensations 36 1,234
Research and development grants 83 264
Miscellaneous 422 362
------------------------------------------------------------ -------- --------
1,187 12,132
------------------------------------------------------------ -------- --------
Customer compensations relate to settlements with two of the
Group's previous contract wafer customers.
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.
2015 2014
EUR'000 EUR'000
---------------------------------------------------------- -------- --------
Cost of raw materials, supplies and purchased merchandise 64,900 54,785
Change in unfinished and finished goods 7,356 (1,166)
Inventory writedowns 5,538 -
Onerous contract (release)/charge (see note 21) (17,414) 8,162
Purchased services 3,887 3,913
---------------------------------------------------------- -------- --------
Cost of materials and services 64,268 65,694
---------------------------------------------------------- -------- --------
4. Personnel expenses
2015 2014
EUR'000 EUR'000
------------------------------------------ -------- --------
Staff costs for the Group during the year
Wages and salaries 7,256 5,808
Social security costs 901 861
Other pension costs 251 263
Employee share schemes 39 (312)
Total 8,447 6,620
------------------------------------------ -------- --------
Included within pension costs is EURnil (2014: EURnil) relating
to actuarial losses on defined benefit pension obligations.
Employees
The Group employed a monthly average of 141 employees during the
year ended 31 December 2015 (2014: 122).
2015 2014
Number Number
--------------- ------- -------
Germany 85 70
United Kingdom 51 47
Japan 5 5
--------------- ------- -------
141 122
--------------- ------- -------
2015 2014
Number Number
--------------- ------- -------
Production 80 66
Administration 61 56
--------------- ------- -------
141 122
--------------- ------- -------
The Group employed 136 employees at 31 December 2015 (31
December 2014: 138).
The remuneration of the Board of directors, including
appropriations to pension accruals, is shown in the Directors'
Remuneration Report--.
5. Other expenses
2015 2014
EUR'000 EUR'000
----------------------------------------------- -------- --------
Land and building operating lease charges 2,508 2,162
Repairs and maintenance 136 102
Selling expenses 9 29
Technical consulting, research and development 28 44
Legal costs 659 35
Other professional services 950 692
Insurance premiums 222 269
Travel and advertising expenses 97 104
Bad debts 418 -
Staff related costs 72 197
Other 291 529
----------------------------------------------- -------- --------
5,390 4,163
----------------------------------------------- -------- --------
Amounts payable to the Group's auditors:
2015 2014
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 94 84
Fees payable to the Company's auditors and their associates for other services:
- The audit of the Company's subsidiaries pursuant to legislation 74 106
- Other assurance services 11 5
------------------------------------------------------------------------------------------------ -------- --------
179 195
------------------------------------------------------------------------------------------------ -------- --------
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.
2015 2014
Total Total
EUR'000 EUR'000
------------------------------------------------------------ -------- --------
Finance income 78 106
------------------------------------------------------------ -------- --------
Finance expense:
Expense of Group borrowings - (1)
Expense of pension commitment (31) (59)
Expense of prior year tax (24) -
Expense of unwinding provision discounting charge (note 21) (666) (2,390)
------------------------------------------------------------ -------- --------
Finance expense (721) (2,450)
------------------------------------------------------------ -------- --------
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7. Income taxes
2015 2014
Total Total
EUR'000 EUR'000
------------------------------------- -------- --------
Current tax:
Current tax on loss for the year 2 2
Adjustment in respect of prior years 92 -
------------------------------------- -------- --------
Total current tax 94 2
------------------------------------- -------- --------
Deferred tax (note 18):
Total deferred tax - -
------------------------------------- -------- --------
Total tax charge 94 2
------------------------------------- -------- --------
The total tax rate for the German companies is 32.275% (2014:
32.275%). The effective total tax rate in the United Kingdom was
20.25% (2014: 21.5%) and the total tax rate in Japan was 35.07%
(2014: 39.91%). These rates are based on the legal regulations
applicable or adopted at the balance sheet date.
The rate of corporation tax in the UK will fall to 19% with
effect from 1 April 2017 and to 18% in 2020. The German rate will
be unchanged in 2016 and in Japan it is expected the rate will fall
to 31.33% from April 2016 onwards.
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:
2015 2014
EUR'000 EUR'000
--------------------------------------------------------------- -------- --------
Loss before tax (13,663) (4,650)
--------------------------------------------------------------- -------- --------
Expected income tax credit at UK tax rate 20.25% (2014: 21.5%) (2,766) (1,000)
Adjustments for foreign tax rates (447) (395)
Income not subject to tax (1,375) (1,563)
Losses not relieved during the year - 845
Adjustment in respect of prior years 92 -
Utilisation of tax losses and other deductions 3,154 535
Expenses not deductible for tax 1,436 1,580
--------------------------------------------------------------- -------- --------
Total tax charge 94 2
--------------------------------------------------------------- -------- --------
8. Segment reporting
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance, has been identified
as the Group 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 2015
United Rest of Rest of
Japan Taiwan Canada 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 325 - - 4,012 60,127 - - 64,464
By country from which derived 325 31,271 20,462 109 17 8,573 3,707 64,464
-------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Non-current assets*
By entity's country of domicile 2 - - 740 6,498 - - 7,240
-------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
* Excludes: financial instruments, deferred tax assets and
post-employment benefit assets.
Two customers accounted for more than 10% of Group revenue each
and sales to these customers are as follows (figures in
EUR'000):
1. 27,254 (Taiwan) and
2. 20,462 (Canada).
Geographical information 2014
United Rest of Rest of
Japan Taiwan Canada 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 - 149 26 10,325 5,008 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).
9. Earnings per share
Net earnings per share is computed by dividing the net loss 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
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.
2015 2014
------------------------------------ ----------- -----------
Basic shares (average) 156,425,065 156,353,503
Basic loss per share (Euro cents) (8.8) (3.0)
Diluted shares (average) 159,804,673 160,308,111
Diluted loss per share (Euro cents) (8.8) (3.0)
------------------------------------ ----------- -----------
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:
2015 2014
-------------------------------------------------------------------- ----------- -----------
Shares in issue (see note 27) 160,278,975 160,278,975
Weighted average number of EBT shares held (3,853,910) (3,925,472)
Weighted average number of shares for basic EPS calculation 156,425,065 156,353,503
Dilutive share options 3,379,608 3,954,608
-------------------------------------------------------------------- ----------- -----------
Weighted average number of shares for fully diluted EPS calculation 159,804,673 160,308,111
-------------------------------------------------------------------- ----------- -----------
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
-------------------
2015 2014
EUR'000 EUR'000
------------------------- -------- ---------
Cash at bank and in hand 12,627 22,754
Short-term bank deposits 64 1,838
------------------------- -------- ---------
12,691 24,592
------------------------- -------- ---------
11. Trade accounts receivable
As at 31 December
-------------------
2015 2014
EUR'000 EUR'000
--------------- -------- ---------
Japan 92 118
Germany 471 5
United Kingdom 5,095 5,218
--------------- -------- ---------
5,658 5,341
--------------- -------- ---------
All receivables have short-term maturity. During the year net
receivables of EUR418k were written off (2014: EURnil).
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
-------------------
2015 2014
EUR'000 EUR'000
-------------------------- -------- ---------
Not more than three months - -
-------------------------- -------- ---------
These amounts represent the Group's maximum exposure to credit
risk at the year end. All amounts outstanding as at 31 December
2015 and due at date of signing had been received.
12. Inventories
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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
-------------------
2015 2014
EUR'000 EUR'000
------------------ -------- ---------
Finished products 1,001 4,994
Work in progress 857 4,220
Raw materials 21,328 19,416
------------------ -------- ---------
23,186 28,630
------------------ -------- ---------
Inventory writedowns of EUR5.5m are included in cost of
materials in 2015 (2014: EURnil).
13. Prepaid expenses and other assets
As at 31 December
-------------------
2015 2014
EUR'000 EUR'000
--------------------- -------- ---------
VAT 354 2,125
Prepaid expenses 2,557 10,122
Energy tax claims 124 79
Other current assets 346 54
--------------------- -------- ---------
3,381 12,380
--------------------- -------- ---------
Prepaid expenses primarily comprise polysilicon feedstock
deposits.
14. Current tax assets
As at 31 December
-------------------
2015 2014
EUR'000 EUR'000
----------------------- -------- ---------
Income tax recoverable 5 16
----------------------- -------- ---------
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 2015 1,084
Additions 5
Net effect of foreign currency movements 27
----------------------------------------- ---------
At 31 December 2015 1,116
----------------------------------------- ---------
Accumulated amortisation
At 1 January 2015 1,046
Charge for the year 32
Net effect of foreign currency movements 26
----------------------------------------- ---------
At 31 December 2015 1,104
----------------------------------------- ---------
Net book amount
At 31 December 2015 12
----------------------------------------- ---------
At 31 December 2014 38
----------------------------------------- ---------
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
----------------------------------------- ---------
16. Property, plant and equipment
Other
Plant and furniture and
machinery equipment Total
EUR'000 EUR'000 EUR'000
----------------------------------------- ---------- -------------- --------
Cost
At 1 January 2015 81,995 4,612 86,607
Additions - 19 19
Disposals (11,679) (57) (11,736)
Net effect of foreign currency movements 3,314 118 3,432
----------------------------------------- ---------- -------------- --------
At 31 December 2015 73,630 4,692 78,322
----------------------------------------- ---------- -------------- --------
Accumulated depreciation
At 1 January 2015 79,923 4,329 84,252
Charge for the year 222 128 350
On disposals (11,622) (54) (11,676)
Net effect of foreign currency movements 3,236 111 3,347
----------------------------------------- ---------- -------------- --------
At 31 December 2015 71,759 4,514 76,273
----------------------------------------- ---------- -------------- --------
Net book amount
At 31 December 2015 1,871 178 2,049
----------------------------------------- ---------- -------------- --------
At 31 December 2014 2,072 283 2,355
----------------------------------------- ---------- -------------- --------
Other
Plant and furniture and
machinery equipment Total
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
----------------------------------------- ---------- -------------- --------
17. Other non-current assets
As at 31 December
-------------------
2015 2014
EUR'000 EUR'000
---------------------------------------------------------- -------- ---------
Polysilicon feedstock deposits (covering periods to 2018) 5,179 5,288
Prepaid expenses - 83
Other assets - 54
---------------------------------------------------------- -------- ---------
5,179 5,425
---------------------------------------------------------- -------- ---------
18. Deferred taxes
Analysis of deferred tax assets and liabilities:
2015 2014
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 2015 there were unrecognised potential
deferred tax assets in respect of losses of EUR56.6 million (2014:
EUR49.5 million).
19. Trade accounts payable
As at 31 December
-------------------
2015 2014
EUR'000 EUR'000
--------------- -------- ---------
Japan 111 337
United Kingdom 701 928
Germany 624 497
--------------- -------- ---------
1,436 1,762
--------------- -------- ---------
The book value of these payables is materially the same as the
fair value.
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20. Accrued expenses
2015 2014
EUR'000 EUR'000
------------------------------- -------- --------
Rents and ancillary rent costs 681 493
Salary related costs 632 509
Other accrued expenses 572 562
------------------------------- -------- --------
Current accruals 1,885 1,564
------------------------------- -------- --------
Non-current accruals 42 111
------------------------------- -------- --------
Total accruals 1,927 1,675
------------------------------- -------- --------
21. Provisions
Movement in provisions is shown below:
Onerous
contract Warranty
provision provisions Total
EUR'000 EUR'000 EUR'000
----------------------------- ---------- ----------- --------
Provisions brought forward 15,541 54 15,595
Unwinding of discount factor 666 - 666
Additional provision - - -
Released (7,053) (54) (7,107)
Exchange differences 1,209 - 1,209
Utilised (10,363) - (10,363)
----------------------------- ---------- ----------- --------
Provisions carried forward - - -
----------------------------- ---------- ----------- --------
Warranty provisions unwound over a year from the date of sale,
per the terms of the warranty agreement with customers.
The onerous contract provision was 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.
22. 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
-------------------
2015 2014
EUR'000 EUR'000
------------------ -------- ---------
Investment grants 70 111
------------------ -------- ---------
Current portion 70 111
------------------ -------- ---------
23. Current tax liabilities
As at 31 December
-------------------
2015 2014
EUR'000 EUR'000
--------------- -------- ---------
United Kingdom - -
Germany 116 155
Japan 1 1
--------------- -------- ---------
117 156
--------------- -------- ---------
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.
24. Other current liabilities
As at 31 December
-------------------
2015 2014
EUR'000 EUR'000
-------------------- -------- ---------
Payroll liabilities 30 32
Other liabilities 66 40
-------------------- -------- ---------
96 72
-------------------- -------- ---------
25. 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 2015, such deposits amounted to
EUR3.2 from one customer (2014: EUR3.2 million from one customer).
Additionally EUR0.3m revenue from one customer was deferred as
required by IFRS 15 (2014: nil).
As at 31 December
-------------------
2015 2014
EUR'000 EUR'000
-------- -------- ---------
Current 3,518 3,235
-------- -------- ---------
26. Share capital
2015 2014
EUR'000 EUR'000
------------------------------------------------------------------ -------- --------
Allotted, called up and fully paid
160,278,975 (2014: 160,278,975) ordinary shares of 5.2 pence each 12,332 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.
Shares held by the EBT
At 31 December 2015, 3,853,910 ordinary shares of 5.2 pence were
held by the EBT (2014: 3,853,910). The market value of these shares
was EUR0.471 million (2014: EUR0.640 million). Additionally, the
cash balance held by the EBT on 31 December 2015 was EUR0.739
million (2014: EUR1.015 million).
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 13 pence per ordinary share of 5.2 pence each.
This adjustment altered the value of the shares held by the EBT and
reduced retained earnings by EUR6.868 million.
27. 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 (see pages --
and --)
No awards were made during 2015 (2014: 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 2015 (2014: 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
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.
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 2015 (2014: nil).
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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 vested on 31 March 2015 and
following the decision of the Remuneration Committee to permit the
recipients to receive cash from the EBT to settle the awards all
awards were settled in cash.
On 31 March 2015 SABP awards were granted key senior employees
over 1,975,000 shares. These awards are due to vest on 31 March
2016.
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.
No awards vested in 2015. 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 EUR269,000--
(2014: EUR181,000) 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
2014 2,185,731 - 246,416 1,400,000 79.7 9,216
Share grants and options granted during the year - 2,550,000 - - - -
Share grants and options forfeited during the year (2,185,731) - - - - -
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 -
--------------------------------------------------- ----------- ----------- --------- --------- -------- -------
Share grants and options granted during the year - 1,975,000 - - - -
Share grants and options forfeited during the year - (2,550,000) - - - -
Share grants vested during the year - - - - - -
Options exercised during the year - - - - - -
--------------------------------------------------- ----------- ----------- --------- --------- -------- -------
Share grants and options outstanding at 31 December
2015 - 1,975,000 - 1,400,000 79.7 4,608
--------------------------------------------------- ----------- ----------- --------- --------- -------- -------
Exercisable at 31 December 2015 - - - 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 2014.
29. Risk management
The main risks arising from the Group's financial instruments
are credit risk, exchange rate fluctuation risks, interest rate
risk and liquidity 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 2015 42.3% of the Group's sales are related
to the largest customer (2014: 41.5%). The number of customers
accounting for approximately 95% of the annual revenue was ten,
which was up from seven in 2014. 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 2015 95% (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:
Average Year end
rate rate
------------------- ------- --------
Euro: Japanese Yen 134.34 131.28
Euro: US Dollar 1.1101 1.0908
Sterling: Euro 1.3771 1.3570
------------------- ------- --------
Hedging strategy
The Group sells to customers in the worldwide photovoltaic
market and sells in two main currencies: US Dollars (95%) and Euros
(5%). It operates its wafering factory within the Eurozone and
during the early part of 2015 paid 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 2015 the net loss on foreign currency adjustments was
EUR0.2 million (2014: Gain of EUR9.0 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:
2015 2014
EUR'million EUR'million
------------------------------------------------- ------------ ------------
Revaluation of cash balances 0.2 (0.1)
Revaluation of Group loans/intercompany account (0.1) (0.1)
Revaluation of Group raw material deposits 0.4 (1.3)
Accounts receivable/accounts payable revaluation (0.3) 0.2
Revaluation of balance sheet provisions - 10.3
------------------------------------------------- ------------ ------------
Total currency (loss)/gain (0.2) 9.0
------------------------------------------------- ------------ ------------
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In addition to the above, upon translation of net assets in the
consolidation, there was a positive impact in 2015 of EUR2.9
million (2014: positive EUR2.5 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.
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 2015 of EUR12.7
million (2014: EUR24.6 million) and places these cash funds on
deposit with various quality banks subject to a counterparty 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 (2014: EUR0.1 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 2015 the Group had a net cash balance of EUR12.7
million (2014: EUR24.6 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.
Financial assets and liabilities
Book Loan and Amortised Non-
value receivables cost financial Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------ -------- ------------ --------- ---------- --------
2015
Assets:
Cash and cash equivalents 12,691 12,691 - - 12,691
Accounts receivable 5,658 5,658 - - 5,658
Prepaid expenses and other assets 3,381 - - 3,381 3,381
Non-financial assets 30,431 - - 30,431 30,431
------------------------------------ -------- ------------ --------- ---------- --------
Total 52,161 18,349 - 33,812 52,161
------------------------------------ -------- ------------ --------- ---------- --------
Liabilities:
Accounts payable trade (1,436) - (1,436) - (1,436)
Accrued expenses (1,927) - (1,927) - (1,927)
Provisions - - - - -
Miscellaneous current liabilities (96) - - (96) (96)
Miscellaneous long-term liabilities (222) - (222) - (222)
Non-financial liabilities (3,705) - - (3,705) (3,705)
------------------------------------ -------- ------------ --------- ---------- --------
Total (7,386) - (3,585) (3,801) (7,386)
------------------------------------ -------- ------------ --------- ---------- --------
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 12,380
Non-financial assets 36,464 - - 36,464 36,464
------------------------------------ -------- ------------ --------- ---------- --------
Total 78,777 29,987 - 48,790 78,777
------------------------------------ -------- ------------ --------- ---------- --------
Liabilities:
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)
------------------------------------ -------- ------------ --------- ---------- --------
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.
2015 2014
EUR'000 EUR'000
---------------------------------------- -------- --------
Cash and cash equivalents (see note 10) 12,691 24,592
Bank and other borrowings (see note 19) - -
---------------------------------------- -------- --------
Total net cash 12,691 24,592
---------------------------------------- -------- --------
Total equity 44,775 55,934
---------------------------------------- -------- --------
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.
29. 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.
30. 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.
31. Other financial obligations
Lease agreements (operating leases)
The leases primarily relate to rented buildings and have terms
of no more than six years. The future aggregate minimum lease
payments under non-cancellable operating leases are as follows:
As at 31 December
-------------------
2015 2014
EUR'000 EUR'000
----------------------- -------- ---------
Less than one year 1,310 1,056
Two to five years 2,740 2,855
Longer than five years 227 556
----------------------- -------- ---------
4,277 4,467
----------------------- -------- ---------
There were no significant purchase commitments at the year
end.
32. Related party disclosures
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