TIDMPVCS
RNS Number : 7711H
PV Crystalox Solar PLC
15 March 2018
PV Crystalox Solar PLC
("PV Crystalox", the "Company" or the "Group")
Preliminary Results for the year ended 31 December 2017
PV Crystalox, the long established supplier to the global
photovoltaic industry of multicrystalline silicon wafers for use in
solar electricity generation systems is pleased to announce its
preliminary results for the year to 31 December 2017.
Highlights
-- ICC arbitration final award rendered in November 2017
-- Wafer shipment volumes up 28% at 146MW (2016: 114MW)
-- Closure of United Kingdom manufacturing operations during H2 2017
-- Look for a buyer or restructure German wafer production operations during 2018
Overview of results
-- Revenues EUR26.4m (2016: EUR56.7m)
-- EBT of EUR12.0m (2016: EBT of EUR1.7m)
-- Net cash (used in) /from operating activities EUR(1.2)m (2016: EUR18.0m)
-- Net cash EUR26.9m (2016: EUR28.8m)
-- Inventories EUR3.9m (2016: EUR11.2m)
-- Other income of EUR20.5m recognised in relation to arbitration award.
o Additional income to be recognised in 2018.
Iain Dorrity, Chief Executive Officer commented
"After seven years the Board has concluded that there is no real
prospect of any change in market conditions which might permit a
return to profitability for the Group's wafering operation without
further investment. Instead the Board has concluded that it should
instead seek a buyer who would be willing to develop the silicon
wafering operation. In parallel consultations will take place with
the workers council in Germany to explore the merits of
significantly restructuring the operation to focus on the cutting
of non-silicon materials such as glass and quartz together with a
continued focus on research and development activities."
John Sleeman, Chairman, commented
"Following receipt of the funds from the arbitration award
mentioned above, the Group is expected to have a substantial net
cash position. In the light of this the board intends to explore
options for the future of the Company in order to maximise
shareholder value. These may include a cash return to shareholders,
the acquisition of an existing business or a combination of these
alternatives."
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 continues to contribute to making solar power
cost competitive with conventional hydrocarbon power generation
and, as such, continues to seek to drive down the cost of
production whilst increasing solar cell efficiency.
We are the only remaining pure play wafer manufacturer in Europe
and are able to take advantage of any EU specific manufacturing
incentives. The Group has focused on the French niche low carbon
footprint wafer market, where it has some competitive advantage.
The Group exports the vast majority of its wafers to customers
around the world.
Chairman's statement
In view of the difficult industry environment which has
persisted since 2011, the Group has been operating under a cash
conservation strategy to protect shareholder value whilst
preserving the Group's core production capabilities. The Board has
been conducting an ongoing strategic review and in July 2017 it
made the decision to close the Group's production facilities in the
United Kingdom, to source blocks from a third party supplier and
process these into wafers from its facility in Germany. As is
explained in more detail in the operational and financial review
the Board has now decided to seek a buyer who would continue
silicon wafering and in parallel to consult with the workers
council on restructuring the wafering operations in Germany. A
restructure would substantially reduce wafer production output and
regrettably this would lead to significant job losses in
Germany.
On 8 November 2017 the Group announced that it had received
notification of the final award rendered by the International Court
of Arbitration of the International Chamber of Commerce ("Court of
Arbitration") in the matter filed by the Group in March 2015 and
arising from an outstanding long term wafer supply contract with
one of the world's leading PV companies. The award requires the
customer, who has failed to purchase wafers in line with its
contractual obligations, to pay the amount of around EUR36 million
including interest to the Group as at 31 December 2017. Once
payment has been made the customer has the right to receive the
outstanding 22.9 million wafers. After taking account of the cost
of supplying the wafers, at 31 December 2017, the Group expected a
minimum net income of EUR20.5 million. On 13 March 2018 the Group
was informed, by the Court of Arbitration, that the customer's
request for correction had been disallowed meaning that the
expected minimum net income is increased by EUR3.1 million. This
will be recognised in the results for the year ended 31 December
2018.
Wafer sales volumes in 2017 of 146MW were 28% higher than the
114W achieved in 2016 but we traded significantly less polysilicon
volumes than in 2016. Total revenues of EUR26.4 million were 54%
lower than in the prior year. As a result of recognising EUR20.5
million in relation to the arbitration award we achieved a profit
before tax of EUR12.0 million. Net cash of EUR26.9 million at the
end of the period was EUR1.9 million lower than at the beginning of
the year, but does not include any settlement from the arbitration
award.
The closure of our United Kingdom production operations has
resulted in a significant reduction in our staff numbers there. Of
the 44 staff employed there when the closure was announced 37 left
during 2017 and the remaining 7 employees will leave during H1
2018. Our employees have been vital to the Group's ability to
pursue the cash conservation strategy since 2011 and I would like
to thank all of them for their commitment and contribution during
these challenging times.
The Board remains committed to maintaining governance at their
historic levels to ensure that the right people, systems and
processes are in place to manage risk and to deliver the Group's
agreed strategy. These governance levels are above those required
for a company with a standard listing. The Board has again reported
against the Quoted Companies Alliance Corporate Governance Code and
our internal review found that the Board is operating effectively.
I have now been a member of the Board and its committees for ten
years and in the normal course of events I would have stood down
after serving for nine years and a new non-executive director would
have been appointed. The Board believes that given the current
circumstances the most appropriate course of action is that I
should remain in office. All directors will retire at the 2018 AGM
and will offer themselves for re-election. Full details of our
governance activities can be found in the Corporate Governance
section of the Annual Report.
Following receipt of the funds from the arbitration award
mentioned above, the Group is expected to have a substantial net
cash position. In the light of this the board intends to explore
options for the future of the Company in order to maximise
shareholder value. These may include a cash return to shareholders,
the acquisition of an existing business or a combination of these
alternatives.
Operational and financial review
Operational review of 2017
Market environment
Market prices continued to decline across all sectors of the PV
value chain (except polysilicon) during 2017 although there was a
modest and short lived price recovery during a four month period
from April to August 2017. Multicrystalline wafer prices remained
under acute pressure and fell by around 15%. The impact on wafer
manufacturers has been exacerbated by a corresponding increase in
polysilicon prices during the period and into 2018 when prices
peaked at close to a three year high in January 2018. Prices
essentially remained decoupled from production costs due to
industry over-capacity in China which continued to consolidate its
dominant position both in manufacturing and end market demand.
According to data released by the China PV Industry Association,
China accounted for 71% of global PV module production and 68% of
solar cells in 2017. The country's position in wafer production was
even stronger with a market share of 83% while for polysilicon it
was 56%.
Group operations in 2017
Wafers
Group wafer shipments totalled 146MW in 2017 an increase of 28%
on the 114MW shipped in 2016 and were broadly in line with
production volumes. A minor increase in wafer dimensions from 156mm
to 156.75mm was carried out during Q1 2017 in line with a change in
the industry standard. All 156mm inventory was sold during the year
and wafers in inventory at the year end are 156.75mm. As in the
previous year, the vast majority of the Group's wafers were used in
modules for the French PV market where the low carbon footprint
obtained by wafering in Germany was beneficial. This special market
supported demand but only provided limited insulation from the
pricing pressure which was ravaging the PV industry.
France had a cumulative installed PV capacity of around 7.4GW in
June 2017 and has set an ambitious growth target to reach 20GW by
the end of 2023. The French government has an ongoing solar energy
tender program of 2.5GW per year and the Energy Regulatory
Commission requires an official carbon footprint assessment of all
modules to be eligible for the auctions. The carbon footprint is
the second most important factor taken into consideration after
price.
Ingot and block production
In March 2017 the Group announced the termination of
multicrystalline silicon ingot production in the United Kingdom. It
was intended that once these ingot production facilities had been
closed that the Group would instead source ingots from external
sources. After the announcement the Group continued to produce some
of its own ingots and purchased the balance of the required ingots
all of which were processed into blocks in the United Kingdom.
These blocks were then processed into wafers in our German
facility.
The Group advised in July 2017 the closure of all United Kingdom
manufacturing operations in order to better align production costs
with market prices and further reduce overheads. In addition to the
closure of ingot production facilities the Group proposed ceasing
block production in the United Kingdom and instead source blocks
from an external supplier. Following a consultation process with
its United Kingdom workers all production, both ingot and block,
ceased at the end of August 2017.
By purchasing blocks directly from an external supplier the
Group's intention was to maintain its operational wafer production
capabilities in Germany and continue its focus on the niche low
carbon footprint wafer market where it has some competitive
advantage.
Since August 2017, work in the United Kingdom has focused on
clearing the production facilities and the former head office and
returning the buildings to the landlord. The programme is now close
to a successful conclusion following the surrender of two leases at
the end of 2017 and a further lease at the end of January 2018.
Advanced negotiations are ongoing for an agreement to vacate and to
terminate the lease on the remaining building on 31 March 2018.
Polysilicon contracts and polysilicon revenue
The Group is no longer burdened with purchase obligations under
long term polysilicon contracts following the settlement of the
last outstanding contract in September 2016. The legacy of the
polysilicon contracts was a significant build up of raw material
inventory at the end of 2015 due to annual purchase volumes being
considerably in excess of production requirements together with a
slowdown in the polysilicon market during 2015. The Group was able
to achieve a significant reduction in inventory level by trading
surplus volumes in 2016. This trading continued in 2017 albeit at a
lower level and outstanding polysilicon inventory was successfully
eliminated during Q4 2017.
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. Subsequently in an attempt to
find an amicable solution both parties agreed to follow a mediation
process led by an external mediator during December 2016 but
without success.
The evidentiary hearing of the arbitral tribunal eventually took
place in Frankfurt in late March 2017 and the final award rendered
by the International Court of Arbitration of the International
Chamber of Commerce was received on 8 November 2017. The award
requires the customer, to pay the amount of around EUR36 million
including interest to the Group. Once payment has been made the
customer has the right to receive the outstanding 22.9 million
wafers.
No payment has yet been made to the Group despite interest
continuing to accrue at a rate of around EUR180,000 per month.
Negotiations have taken place in recent weeks without success as
yet to explore whether any agreement could be reached to eliminate
the wafer deliveries together with a corresponding reduction in the
payment.
As reported previously a partial resolution of the other
outstanding wafer supply contract, with a customer which entered
insolvency and where shipments stopped in 2012, has been achieved.
Claims had been registered with the administrator and an interim
settlement of EUR0.96 million was received during H1 2016. The
expected final payment has been increased from EUR0.375 million to
EUR0.562 million following approval from the insolvency court
although the timing remains uncertain.
Financial Review
In 2017 Group revenues decreased by 53.5% to EUR26.4 million
(2016: EUR56.7 million). Despite the volume of wafer shipments
increasing by 28% the decrease in revenues was mainly due to a
decline in sales of excess polysilicon feedstock when compared to
2016.
During 2017 the Group recognised other income of EUR23.8
million, which was EUR18.4 million higher than in 2016. EUR21.8
million of this income was in relation to customer compensations
including EUR20.5 million for the final arbitration award. It
should be noted that the Group expects to recognise further income
for the arbitration award in 2018 once a final agreement has been
reached with the customer over the outstanding wafer
obligations.
The positive gross margin in the year was EUR1.7 million whereas
in 2016 there was a gross margin of EUR8.1 million. Two factors
contributed to the positive margin in 2016: sales of excess
polysilicon inventory at prices above the 2015 year end valuation
as a result of the rebound in polysilicon spot prices during H1
2016 and stronger wafer sales prices during that period.
Personnel expenses of EUR8.2 million (2016: EUR7.6 million) were
8.1% higher than those in 2016 due to termination payments in
relation to the closure of United Kingdom production operations
partly offset by lower employee numbers there.
Other expenses at EUR4.7 million were EUR3.2 million lower than
in 2016 mainly due to the EUR4.3 million cost of cancelling the
polysilicon purchase contract, where the Group forfeited a
significant portion of its outstanding prepayment in 2016. Partly
offsetting this were higher legal costs in 2017 due to pursuing the
arbitration award.
The Group's annual depreciation and impairment charge in 2017 at
EUR0.7 million was EUR0.5 million higher than in 2016 due to an
impairment charge of EUR0.5 million which was recognised following
a review of the recoverable value of certain assets. It should be
noted that the Group's remaining plant and equipment, was largely
written down between 2011 and 2013.
There was a negligible currency gain in 2017 compared to a much
larger gain of EUR3.9 million in 2016. Approximately two thirds of
the 2016 gain related to the retranslation of the polysilicon
contract deposit, whilst the remainder of the gain mostly related
to revaluing foreign currency cash balances held in the UK.
Overall the Group generated a profit before taxes of EUR12.0
million (2016: profit of EUR1.7 million). The EUR10.3 million
increase compared to 2016 was driven largely by increases in other
income of EUR18.4 million and reductions in other expenses of
EUR3.2 million. Offsetting this was a EUR6.4 million reduction in
gross margin and EUR3.9 million in currency gains together with
increases in personnel costs (EUR0.6 million) and depreciation and
impairment EUR0.5 million.
The Group's cash position at the year end of EUR26.9 million was
EUR1.9 million lower than the net position of EUR28.8 million at
the start of the year. Net cash outflows of EUR1.2 million used in
operating activities and negative foreign exchange rate changes on
cash of EUR1.0 million were partially offset by EUR0.3 million of
net cash generated from investing activities.
Inventories decreased during the year by EUR7.3 million from
EUR11.2 million at the end of 2016 to EUR3.9 million at the end of
2017. Raw materials inventory decreased by EUR3.6 million compared
to 2016. Finished product decreased by EUR1.5 million as wafer
inventory decreased. Work in progress was no longer recognised
following the closure of United Kingdom production operations and
consequently decreased by EUR2.1 million. Previously work in
progress included ingots and blocks processed at Crystalox
Limited.
Going concern
The Group's directors are required to make an assessment as to
whether it is appropriate to prepare the financial statements on a
going concern basis by considering the Group's ability and
intention to continue in business.
The Group have been operating a cash conservation strategy to
maximise cash held and to enable the Group to manage its operations
whilst market conditions remain difficult. A description of the
market conditions and the Group's plans to conserve cash is
included in the Strategic Report.
On 31 December 2017 there was a net cash balance of EUR26.9
million, and a cash inflow of at least EUR20.5 million expected
from the arbitration award. 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 directors, after careful consideration and after
making appropriate enquiries, are of the opinion that the levels of
net cash outflows remain low such that Group has sufficient cash to
continue in operational existence for at least twelve months from
the date of approval of the financial statements, in March
2019.
The Group intends to continuing wafering operations at close to
capacity during H1 2018 and has announced in these financial
statements an intention to sell or restructure the wafering
operation at PV Crystalox Solar Silicon GmbH, in Germany. Under the
restructuring option the Group will focus on the cutting of
non-silicon materials together with a continued focus on research
and development activities.
As a result of this assessment the directors have concluded that
the Group has the ability and the intention to continue in
business. It should be noted that whilst the Group and PV Crystalox
Solar Silicon GmbH have been prepared on a going concern basis the
operations at Crystalox Limited have not following the announcement
on 13 July 2017 that Group intended to cease United Kingdom
manufacturing operations in H2 2017.
Strategy
The Group has been operating in cash conservation mode since
2011 when the PV industry was first impacted by Chinese
manufacturing overcapacity and pricing collapsed. During the
intervening years the Group has progressively restructured and
pursued cost reduction programmes while attempting to maintain key
operational capabilities in the expectation that market supply and
demand might come into equilibrium and pricing environment become
more rational. In addition it has been successful in managing its
working capital especially by reducing inventory.
Regrettably no improvement in market conditions has materialised
during the intervening seven years. Despite claims of unfair trade
practices and anti-dumping investigations in Europe and USA,
Chinese players in the PV industry have become totally dominant and
the market environment transformed. PV manufacturing in Europe has
been virtually eliminated while PV installations in Europe which
accounted for around 75% of global demand in 2011 now account for
less than 10%. At the same time PV installations in China have
grown at an extraordinary rate such that China has been the largest
global market since 2013 and accounted for around 50% of global
demand in 2017. It is worth noting that China installed around 50GW
in 2017 which exceeded the total global demand in 2014.
After seven years the Board has concluded that there is no real
prospect of any change in market conditions which might permit a
return to profitability for the Group's wafering operation without
further investment. Currently the Group uses slurry wafering
technology which has been the dominant technology for
multicrystalline wafer production for many years. Fixed abrasive
wafering (FAW) using diamond wire where the abrasive grains are
fixed to the wire, offers significant cost reductions through
reduced silicon consumption. The technology has been successfully
adopted for monocrystalline wafering in recent years and is now
being extensively applied to multicrystalline wafer production in
China.
Investment in new diamond wire saws should thus improve the
Group's competitive position and also enable diversification into
production of monocrystalline wafers. However with little prospect
of any relaxation in the extreme pricing pressure from Chinese
companies the Board does not believe such investment is in
shareholders' interests. Instead the Board has concluded that it
should instead seek a buyer who would be willing to develop the
silicon wafering operation. In parallel consultations will take
place with the workers council in Germany to explore the merits of
significantly restructuring the operation to focus on the cutting
of non-silicon materials such as glass and quartz together with a
continued focus on research and development activities. The Group
has been developing capabilities in cutting of non-silicon
materials during the last 12 months and sees interesting
opportunities for growth albeit on a smaller scale than silicon
wafering but importantly without the intense price competition.
Outlook
During the first half of the year our focus will be on
completing the clearing of UK facilities and resolving the future
of our German wafering facility. Wafering is expected to terminate
at the end of June but in the meantime we will decide on two
possible alternative options either finding a buyer for the
operation or significantly restructuring to focus on cutting of
non-silicon materials.
The Group expects soon to reach an understanding with the
customer regarding the arbitration award and will have a
substantial cash position following receipt of the funds. As a
consequence the board will explore options for the future which
might include return of cash to shareholders or the acquisition of
an existing business.
Consolidated Statement of Comprehensive Income
For The Year Ended 31 December 2017
2017 2016
Notes EUR'000 EUR'000
----------------------------------- ------ --------- ---------
Revenues 2 26,364 56,732
Cost of materials and services 3 (24,681) (48,622)
Personnel expenses 4 (8,231) (7,611)
Depreciation and impairment
of property, plant and equipment
and amortisation of intangible
assets (667) (226)
Other income 5 23,800 5,376
Other expenses 6 (4,656) (7,870)
Currency gains 33 3,860
----------------------------------- ------ --------- ---------
Profit before interest and
taxes ("EBIT") 11,962 1,639
Finance income 7 65 97
Finance cost 7 (25) (36)
----------------------------------- ------ --------- ---------
Profit before taxes ("EBT") 12,002 1,700
Income taxes 8 (1,084) 44
----------------------------------- ------ --------- ---------
Profit for the year attributable
to owners of the parent 10,918 1,744
----------------------------------- ------ --------- ---------
Other comprehensive income
/ (loss)
Items that may be reclassified
subsequently to profit or loss:
Currency translation adjustment (1,204) (4,887)
Actuarial gains on defined
benefit pension scheme 9 295 -
----------------------------------- ------ --------- ---------
Total comprehensive income
/ (loss)
Attributable to owners of the
parent 10,009 (3,143)
----------------------------------- ------ --------- ---------
Basic and diluted profit per
share in Euro cents:
From profit for the year -
basic 10 6.9 1.1
From profit for the year -
diluted 10 6.8 1.1
----------------------------------- ------ --------- ---------
The accompanying notes form an integral part of these financial
statements.
Consolidated Balance Sheet
As At 31 December 2017
2017 2016
Notes EUR'000 EUR'000
------------------------------- ------ --------- ---------
Intangible assets 11 6 7
Property, plant and equipment 12 651 1,780
Other non-current assets 13 429 -
------------------------------- ------ --------- ---------
Total non-current assets 1,086 1,787
------------------------------- ------ --------- ---------
Cash and cash equivalents 14 26,881 28,827
Trade accounts receivable 15 1,548 2,446
Inventories 16 3,914 11,217
Assets held for sale 17 390 -
Prepaid expenses and other
assets 18 22,430 1,292
------------------------------- ------ --------- ---------
Total current assets 55,163 43,782
------------------------------- ------ --------- ---------
Total assets 56,249 45,569
------------------------------- ------ --------- ---------
Trade accounts payable 19 1,037 2,006
Accrued expenses 20 806 1,469
Provisions 21 1,385 -
Deferred tax liabilities 22 1,084 -
Other current liabilities 23 167 55
------------------------------- ------ --------- ---------
Total current liabilities 4,479 3,530
------------------------------- ------ --------- ---------
Accrued expenses - 31
Other non-current liabilities - 281
------------------------------- ------ --------- ---------
Total non-current liabilities - 312
------------------------------- ------ --------- ---------
Share capital 24 12,332 12,332
Share premium 50,511 50,511
Other reserves 25,096 25,096
Shares held by the EBT (372) (372)
Share-based payment reserve 294 260
Reverse acquisition reserve (3,601) (3,601)
Accumulated losses (8,431) (19,644)
Currency translation reserve (24,059) (22,855)
------------------------------- ------ --------- ---------
Total equity 51,770 41,727
------------------------------- ------ --------- ---------
Total liabilities and equity 56,249 45,569
------------------------------- ------ --------- ---------
The accompanying notes form an integral part of these financial
statements.
The financial statements were approved by the Board of Directors
on 14 March 2018 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 2017
Shares Share-
held based Reverse Currency
Share Share Other by the payment acquisition Accumulated translation Total
capital premium reserves EBT reserve reserve losses reserve equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
As at 1 January
2016 12,332 50,511 25,096 (679) 472 (3,601) (21,388) (17,968) 44,775
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Share-based
payment
credit/(charge) - - - 307 (212) - - - 95
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Transactions
with owners - - - 307 (212) - - - 95
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Profit/(loss)
for the year - - - - - - 1,744 (4,887) (3,143)
Currency
translation
adjustment - - - - - - - - -
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Total
comprehensive
profit/(loss) - - - - - - 1,744 (4,887) (3,143)
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
As at 31
December 2016 12,332 50,511 25,096 (372) 260 (3,601) (19,644) (22,855) 41,727
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
As at 1
January 2017 12,332 50,511 25,096 (372) 260 (3,601) (19,644) (22,855) 41,727
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Share-based
payment
credit/(charge) - - - - 34 - - - 34
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Transactions
with owners - - - 34 - - - 34
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Profit for the
year - - - - - - 10,918 - 10,918
Currency
translation
adjustment - - - - - - - (1,204) (1,204)
Actuarial gains - - - - - - 295 - 295
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Total
comprehensive
profit/(loss) - - - - - - 11,213 (1,204) 10,009
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
As at 31
December 2017 12,332 50,511 25,096 (372) 294 (3,601) (8,431) (24,059) 51,770
----------------- -------- -------- --------- -------- -------- ------------ ----------- ------------ --------
Consolidated Cash Flow Statement
For The Year Ended 31 December 2017
2017 2016
EUR'000 EUR'000
------------------------------------------ --------- ---------
Profit before taxes 12,002 1,700
Adjustments for:
Net interest (income)/expense (40) (61)
Depreciation and amortisation 667 226
Inventory writedown - -
Credit for retirement benefit obligation
and share-based payments 48 161
Change in provisions 1,385 -
Gain from the disposal of property, (254) -
plant and equipment and intangibles
Losses/(gains) in foreign currency
exchange 14 700
Change in deferred grants and subsidies - (70)
------------------------------------------ --------- ---------
13,822 2,656
Changes in working capital
Decrease in inventories 7,148 9,639
Decrease in accounts receivables 755 395
Decrease in accounts payables and
deferred income (1,534) (1,181)
(Increase)/decrease in other assets (21,591) 6,490
(Decrease)/increase in other liabilities 112 (57)
------------------------------------------ --------- ---------
(1,288) 17,942
Income taxes received/(paid) 1 (69)
Interest received 40 97
------------------------------------------ --------- ---------
Net cash generated (used in)/from
operating activities (1,247) 17,970
------------------------------------------ --------- ---------
Cash flow from investing activities
Proceeds from sale of property, 431 -
plant and equipment
Payments to acquire property, plant
and equipment and intangibles (133) (131)
------------------------------------------ --------- ---------
Net cash generated from/(used in)
investing activities 298 (131)
------------------------------------------ --------- ---------
Cash flow from financing activities
Interest paid - -
------------------------------------------ --------- ---------
Net cash used in financing activities - -
------------------------------------------ --------- ---------
Cash (used in)/generated from operations (949) 17,839
Effects of foreign exchange rate
changes on cash and cash equivalents (997) (1,703)
------------------------------------------ --------- ---------
Cash and cash equivalents at the
beginning of the year 28,827 12,691
------------------------------------------ --------- ---------
Cash and cash equivalents at the
end of the year 26,881 28,827
------------------------------------------ --------- ---------
The accompanying notes form an integral part of these financial
statements.
Notes to The Consolidated Financial Statements
For The Year Ended 31 December 2017
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 2017
were approved by the Board of Directors on 14 March 2018.
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".
Non going concern entities
Subsidiary accounts no longer prepared on a going concern basis
include an estimate of all related costs either committed to or
incurred in the period. Where the Company continues to trade any
losses incurred in so doing are booked in the same period as
revenue derived and therefore no accrual is made for these. The
preparation of these accounts differ from that of going concern in
that:
-- Non current assets / liabilities become current
-- Assets are written down to a recoverable amount
-- Provision for wind down costs is charged to the income statement
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 assets and
liabilities. Estimates and assumptions mainly relate to the useful
life of non-current assets, the discounted cash flows used in
impairment testing, taxes, share-based payments 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.
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 - inventory valuation
Given the decline in market prices for silicon wafers to below
the Group's cost of production, the carrying amount of inventory is
recorded at 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
2018.
Use of estimates - arbitration award
To compute the value of the arbitration award which was
recognised during the year, estimates have been applied. Whilst the
arbitration award suggested an amount payable to the Group, both
customer and the Group have sought clarification on specific points
which have delayed payment to the Group. In addition the Group have
estimated the cost of supplying the outstanding wafers as at 31
December 2017. The Group have made an assessment of the amounts in
the arbitration award for which clarification is not being sought
and for supplying the wafers to determine the minimum amount that
would have been received at 31 December 2017.
Basis of consolidation
The Group financial statements consolidate those of the Group
and its subsidiary undertakings drawn up to 31 December 2017.
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 are required to make an assessment as to
whether it is appropriate to prepare the financial statements on a
going concern basis by considering the Group's ability and
intention to continue in business.
The Group have been operating a cash conservation strategy to
maximise cash held and to enable the Group to manage its operations
whilst market conditions remain difficult. A description of the
market conditions and the Group's plans to conserve cash is
included in the Strategic Report.
On 31 December 2017 there was a net cash balance of EUR26.9
million, and a cash inflow of at least EUR20.5 million expected
from the arbitration award. 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 directors, after careful consideration and after
making appropriate enquiries, are of the opinion that the levels of
net cash outflows remain low such that Group has sufficient cash to
continue in operational existence for at least twelve months from
the date of approval of the financial statements, in March
2019.
The Group intends to continuing wafering operations at close to
capacity during H1 2018 and has announced in these financial
statements an intention to sell or restructure the wafering
operation at PV Crystalox Solar Silicon GmbH, in Germany. Under the
restructuring option the Group will focus on the cutting of
non-silicon materials together with a continued focus on research
and development activities.
As a result of this assessment the directors have concluded that
the Group has the ability and the intention to continue in
business. It should be noted that whilst the Group and PV Crystalox
Solar Silicon GmbH have been prepared on a going concern basis the
operations at Crystalox Limited have not following the announcement
on 13 July 2017 that Group intended to cease United Kingdom
manufacturing operations in H2 2017
Effects of new accounting pronouncements
Accounting standards, IFRICs and other guidance in effect or
applied for the first time in 2017
-- IFRS 14, 'Regulatory deferral accounts'
-- Annual improvements 2014
-- Amendment to IFRS 11, 'Joint arrangements' on acquisition of
an interest in a joint operation
-- Amendment to IAS 16, 'Property, plant and equipment' and IAS
38,'Intangible assets', on depreciation and amortization
-- Amendments to IAS 27, 'Separate financial statements' on the equity method
-- Amendment to IFRS 10 and IAS 28 on investment entities applying the consolidation exception
-- Amendment to IAS 1, 'Presentation of financial statements' on the disclosure initiative
-- Amendments to IAS 7, Statement of cash flows on disclosure initiative
-- Amendments to IAS 12, 'Income taxes' on Recognition of
deferred tax assets for unrealised losses
The above have not made a material difference to the financial
statements.
In issue, but not yet effective
-- IFRS 9 'Financial instruments'
-- IFRS 15, Revenue from contracts with customers
-- IFRS 16 'Leases'
-- Amendments to IFRS 2, 'Share based payments', on clarifying
how to account for certain types of share-based payment
transactions
The Group does not believe that any of these will have a
material impact on the Group's financial positions, results of
operations or cash flows, but will complete a full exercise
assessing their impact during 2018.
Intangible assets
Intangible assets are stated at cost net of accumulated
amortisation. The Group's policy is to write off the difference
between the cost of intangible assets and their estimated
realisable value systematically over their estimated useful life.
Amortisation of intangible assets is recorded under "Depreciation
and impairment of property, plant and equipment and amortisation of
intangible assets" in the Consolidated Statement of Comprehensive
Income.
Acquired computer software licences and patents are capitalised
on the basis of the costs incurred to purchase and bring into use
the software.
The capitalised costs are written down using the straight-line
method over the expected economic life of the patents and licences
(five years) or the software under development (three to five
years).
Internally generated intangible assets - research and
development expenditure
Expenditure on research activities undertaken with the prospect
of gaining new scientific or technical knowledge and understanding
is recognised in the Consolidated Statement of Comprehensive
Income.
Property, plant and equipment
Property, plant and equipment is stated at acquisition or
construction cost, net of depreciation and provision for
impairment. No depreciation is charged during the period of
construction. The cost of own work capitalised is comprised of
direct costs of material and manufacturing and directly
attributable costs of manufacturing overheads. All allowable costs
up until the point at which the asset is physically able to operate
as intended by management are capitalised. The capitalised costs
are written down using the straight-line method.
The Group's policy is to write off the difference between the
cost of property, plant and equipment and its residual value
systematically over its estimated useful life. Reviews of the
estimated remaining lives and residual values of individual
productive assets are made annually, taking commercial and
technological obsolescence as well as normal wear and tear into
account.
The total useful lives range from five to ten years for plant
and machinery and up to 15 years for other furniture and equipment.
Property, plant and equipment are reviewed for impairment at each
balance sheet date or upon indication that the carrying value may
not be recoverable.
The gain or loss arising on disposal of an asset is determined
as the difference between the disposal proceeds and the carrying
amount of the asset and is recognised in the Consolidated Statement
of Comprehensive Income.
Impairment
The carrying amount of the Group's non-financial assets is
subject to impairment testing upon indication of impairment.
If any such indication exists, the asset's recoverable amount is
estimated. An impairment loss is recognised for the amount by which
the asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market
conditions less costs of disposal and value in use based on an
internal discounted cash flow evaluation. The asset is subsequently
reviewed for possible reversal of the impairment at each reporting
date.
Leased assets
Leases are categorised as per the requirements of 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.
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.
Future expected wind down costs for Group companies no longer
classed as going concern are included within provisions.
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, dividend income and gains and
financial income and costs relating to the defined benefit pension
scheme.
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.
Defined benefit pension plan
For defined benefit plans, the Group previously made
contributions to pension insurance plans in Germany which covered
the estimated liability for the two German members. These amounts
have historically been shown netted off due to the fact that the
gross balances were not deemed to be material to the financial
statements. During 2017 the liability was reduced due to the death
of the spouse of one of the employees. The insurance asset will
continue to pay out to the Group over the next ten years and
therefore an asset has been recognised along with a corresponding
actuarial gain in the Consolidated Statement of Comprehensive
Income. The plans are reviewed annually by an actuary and any
actuarial gains or losses are recorded in other comprehensive
income.
Employee Benefit Trust
All assets and liabilities of the Employee Benefit Trust ("EBT")
have been consolidated in these financial statements as the Group
has de facto control over the trust's net assets as the parent of
its sponsoring company.
Deferred revenue and other long-term assets
As is common practice within the sector, the Group, where
appropriate, both seeks to receive deposits from customers in
advance of shipment and makes deposits in advance of supplies of
silicon tetrachloride and polysilicon feedstock.
These deposits are held on the balance sheet and matched against
revenue/cost as appropriate.
Deposits received from customers are not discounted, as the
effect is not considered to be material.
Share-based payments
The Group has applied the requirements of IFRS 2, 'Share-based
payments'. The Group issues equity-settled share-based payments to
certain employees. These are measured at their fair value at the
date of the grant using an appropriate option pricing model and are
expensed over the vesting year, based on the Group's estimate of
the number of shares that will eventually vest. Grants of shares
made during 2008 and 2007 are not subject to performance criteria
and were valued at the date of the grant at market value. During
2011 awards were granted under the Performance Share Plan to
employees. The share options granted are subject to performance
criteria required for the option to vest and are considered in the
method of measuring fair value. Fair value is assessed using the
Black-Scholes method.
Charges made to the Consolidated Statement of Comprehensive
Income in respect of share-based payments are credited to the
share-based payment reserve.
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 is the cumulative loss retained by the Group; and
-- currency translation reserve represents the differences
arising from the currency translation of the net assets in
subsidiaries.
2. 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 2017
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 - - - 3,418 22,946** - - 26,364
By country from
which derived - 16,966 1,993 312 - 816 6,277 26,364
--------------------- ---------- --------- --------- --------- --------- --------- --------- ---------
Non-current assets*
By entity's country
of domicile - - - 1,086 - - - 1,086
--------------------- ---------- --------- --------- --------- --------- --------- --------- ---------
Notes
* Excludes: financial instruments, deferred tax assets and
post-employment benefit assets.
** Includes sales of surplus polysilicon feedstock.
One customer in Taiwan accounted for more than 10% of Group
revenue, with sales to this customer of EUR16,720 (figures in
EUR'000).
Geographical information 2016
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 - - - 2,648 54,084** - - 56,732
By country from
which derived 14 18,399 26,536 246 15 6,796 4,726 56,732
--------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Non-current assets*
By entity's country
of domicile - - - 660 1,127 - - 1,787
--------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Notes
* Excludes: financial instruments, deferred tax assets and
post-employment benefit assets.
** Includes sales of surplus polysilicon feedstock.
Two customers accounted for more than 10% of Group revenue each
and sales to these customers are as follows (figures in
EUR'000):
1. 26,536 (Canada); and
2. 18,399 (Taiwan).
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.
2017 2016
EUR'000 EUR'000
----------------------------------- --------- ---------
Cost of raw materials, supplies
and purchased merchandise 20,681 48,971
Change in unfinished and finished
goods 1,699 (4,402)
Purchased services 2,301 4,053
----------------------------------- --------- ---------
Cost of materials and services 24,681 48,622
----------------------------------- --------- ---------
4. Personnel expenses
2017 2016
EUR'000 EUR'000
---------------------------------- --------- ---------
Staff costs for the Group during
the year
Wages and salaries 7,000 6,261
Social security costs 843 893
Other pension costs 356 323
Employee share schemes 32 134
---------------------------------- --------- ---------
Total 8,231 7,611
---------------------------------- --------- ---------
Included within pension costs is nil (2016: EUR87k) relating to
actuarial losses on defined benefit pension obligations.
Employees
The Group employed a monthly average of 126 employees during the
year ended 31 December 2017 (2016: 138).
2017 2016
Number Number
---------------- -------- --------
Germany 89 88
United Kingdom 37 50
126 138
---------------- -------- --------
2017 2016
Number Number
Production 76 84
Administration 50 54
---------------- -------- --------
126 138
---------------- -------- --------
The Group employed 98 employees at 31 December 2017 (31 December
2016: 139).
The remuneration of the Board of Directors, including
appropriations to pension accruals, is shown in the Directors'
Remuneration Report.
5. Other income
2017 2016
EUR'000 EUR'000
-------------------------------------- --------- ---------
Customer compensations 21,811 4,618
Recognition of accrued grants and
subsidies for investments - 70
Gain on disposals of property, plant 256 -
and equipment
Supplier compensations 33 33
Research and development grants 520 411
Miscellaneous 1,180 244
-------------------------------------- --------- ---------
23,800 5,376
-------------------------------------- --------- ---------
Customer compensations relate to realisation of payments
received in respect of unfulfilled customer purchase obligations
and includes EUR20.516m in relation to arbitration proceedings.
On 13 March 2018 the Group was informed, by the Court of
Arbitration, that the customer's request for correction had been
disallowed meaning that the expected minimum net income is
increased. The additional customer compensations income of EUR3.1
million will be recognised in the results for the year ended 31
December 2018.
6. Other expenses
2017 2016
EUR'000 EUR'000
------------------------------------ --------- ---------
Land and building operating lease
charges 2,018 1,810
Repairs and maintenance 99 138
Selling expenses 1 5
Technical consulting, research and
development 38 72
Legal costs 1,144 525
Other professional services 182 529
Insurance premiums 167 201
Travel and advertising expenses 61 73
Bad debts 7 -
Cost of cancelling supply contract
(see below) - 4,266
Staff related costs 82 65
Other 857 186
------------------------------------ --------- ---------
4,656 7,870
------------------------------------ --------- ---------
The Group's last remaining supply contract was cancelled during
2016 and, as part of the mutual agreement, the Group forfeited a
proportion of the deposit previously made.
Amounts payable to the Group's auditors
2017 2016
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 76 71
Fees payable to the Company's auditors
and their associates for other services:
- The audit of the Company's subsidiaries
pursuant to legislation 53 70
- Other assurance services 9 4
------------------------------------------- --------- ---------
138 145
------------------------------------------- --------- ---------
7. Finance income and costs
Finance income and costs are derived/incurred on financial
assets/liabilities and recognised under the effective interest
method.
2017 2016
EUR'000 EUR'000
------------------------------- --------- ---------
Finance income 65 97
------------------------------- --------- ---------
Finance expense:
Expense of pension commitment (25) (36)
Finance expense (25) (36)
------------------------------- --------- ---------
8. Income taxes
2017 2016
EUR'000 EUR'000
-------------------------------------- --------- ---------
Current tax:
Current tax on loss for the year - -
Adjustment in respect of prior years - (44)
-------------------------------------- --------- ---------
Total current tax - (44)
-------------------------------------- --------- ---------
Deferred tax (note 22):
Total deferred tax 1,084 -
-------------------------------------- --------- ---------
Total tax charge/(credit) 1,084 (44)
-------------------------------------- --------- ---------
The total tax rate for the German companies is 32.275% (2016:
32.275%). The effective total tax rate in the United Kingdom was
19.25% (2017: 20.0%). These rates are based on the legal
regulations applicable or adopted at the balance sheet date.
The rate of corporation tax in the United Kingdom will fall to
17% in 2020. The German rate will be unchanged in 2017. The impact
of these 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 effective UK tax rate
applicable to the losses of the consolidated entities as
follows:
2017 2016
EUR'000 EUR'000
-------------------------------------- --------- ---------
Profit before tax 12,002 1,700
-------------------------------------- --------- ---------
Expected income tax charge at United
Kingdom tax rate of 19.25% (2016:
20.0%) 2,310 340
Adjustments for foreign tax rates 1,249 19
Income not subject to tax (141) (5)
Unrecognised adjustments to deferred
tax (2,481) (146)
Adjustment in respect of prior years - (44)
Utilisation of tax losses and other
deductions - (169)
Expenses not deductible for tax 147 (39)
-------------------------------------- --------- ---------
Total tax (credit)/charge 1,084 (44)
-------------------------------------- --------- ---------
9. Actuarial gains
Actuarial gains represent the net of movements in the defined
benefit obligation and the asset value of the Group's defined
benefit pension scheme.
Following the death of one beneficiary in the year there was a
gain of EUR295k being a EUR759k release of benefit obligation and
EUR464k decrease in the value of the plan assets (2016:
EURnil).
10. Earnings per share
Net earnings per share is computed by dividing the net profit
for the year attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year.
Diluted net earnings per share is computed by dividing the loss
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.
2017 2016
--------------------------------------- ------------ ------------
Basic shares (average) 158,307,027 157,843,010
Basic earnings per share (Euro cents) 6.9 1.1
Diluted shares (average) 160,051,162 159,047,618
Diluted earnings per share (Euro
cents) 6.8 1.1
--------------------------------------- ------------ ------------
Basic shares and diluted shares for this calculation can be
reconciled to the number of issued shares (see note 24) as
follows:
2017 2016
--------------------------------------- ------------ ------------
Shares in issue (see note 24) 160,278,975 160,278,975
Weighted average number of EBT shares
held (1,971,948) (2,435,965)
--------------------------------------- ------------ ------------
Weighted average number of shares
for basic EPS calculation 158,307,027 157,843,010
Dilutive share options 1,744,135 1,204,608
--------------------------------------- ------------ ------------
Weighted average number of shares
for fully diluted EPS calculation 160,051,162 159,047,618
--------------------------------------- ------------ ------------
11. Intangible assets
Intangible assets relate to software licences.
Total
EUR'000
------------------------------------------ ---------
Cost
At 1 January 2017 863
Additions 5
Reclassification to assets held for
sale (23)
Disposals (20)
Net effect of foreign currency movements (1)
------------------------------------------ ---------
At 31 December 2017 824
------------------------------------------ ---------
Accumulated amortisation
At 1 January 2017 856
Charge for the year 6
Reclassification to assets held for
sale (23)
Disposals (19)
Net effect of foreign currency movements (2)
------------------------------------------ ---------
At 31 December 2017 818
------------------------------------------ ---------
Net book amount
At 31 December 2017 6
------------------------------------------ ---------
At 31 December 2016 7
------------------------------------------ ---------
Total
EUR'000
------------------------------------------ ---------
Cost
At 1 January 2016 1,116
Additions 5
Disposals (283)
Net effect of foreign currency movements 25
------------------------------------------ ---------
At 31 December 2016 863
------------------------------------------ ---------
Accumulated amortisation
At 1 January 2016 1,104
Charge for the year 10
Disposals (283)
Net effect of foreign currency movements 25
------------------------------------------ ---------
At 31 December 2016 856
------------------------------------------ ---------
Net book amount
At 31 December 2016 7
------------------------------------------ ---------
At 31 December 2015 12
------------------------------------------ ---------
12. Property, plant and equipment (PPE)
Other
Plant furniture
and and
machinery equipment Total
EUR'000 EUR'000 EUR'000
-------------------------------- ----------- ----------- ---------
Cost
At 1 January 2017 66,336 4,260 70,596
Additions 3 136 139
Reclassification to assets
held for sale* (23,293) (237) (23,530)
Disposals (16,228) (1,213) (17,441)
Net effect of foreign currency
movements (1,548) (56) (1,604)
-------------------------------- ----------- ----------- ---------
At 31 December 2017 25,270 2,890 28,160
-------------------------------- ----------- ----------- ---------
Accumulated depreciation
At 1 January 2017 64,711 4,105 68,816
Depreciation charge for the
year 108 40 148
Impairment charge for the year 502 11 513
Reclassification to assets
held for sale (22,949) (191) (23,140)
On disposals (16,062) (1,202) (17,264)
Net effect of foreign currency
movements (1,508) (56) (1,564)
-------------------------------- ----------- ----------- ---------
At 31 December 2017 24,802 2,707 27,509
-------------------------------- ----------- ----------- ---------
Net book amount
At 31 December 2017 468 183 651
-------------------------------- ----------- ----------- ---------
At 31 December 2016 1,625 155 1,780
-------------------------------- ----------- ----------- ---------
Other
Plant furniture
and and
machinery equipment Total
EUR'000 EUR'000 EUR'000
-------------------------------- ----------- ----------- ---------
Cost
At 1 January 2016 73,630 4,692 78,322
Additions 104 25 129
Disposals (1,187) (252) (1,439)
Net effect of foreign currency
movements (6,211) (205) (6,416)
-------------------------------- ----------- ----------- ---------
At 31 December 2016 66,336 4,260 70,596
-------------------------------- ----------- ----------- ---------
Accumulated depreciation
At 1 January 2016 71,759 4,514 76,273
Charge for the year 174 42 216
On disposals (1,187) (249) (1,436)
Net effect of foreign currency
movements (6,035) (202) (6,237)
-------------------------------- ----------- ----------- ---------
At 31 December 2016 64,711 4,105 68,816
-------------------------------- ----------- ----------- ---------
Net book amount
At 31 December 2016 1,625 155 1,780
-------------------------------- ----------- ----------- ---------
At 31 December 2015 1,871 178 2,049
-------------------------------- ----------- ----------- ---------
13. Other non-current assets
As at 31 December
-------------------------
2017 2016
EUR'000 EUR'000
------------------------- --------- ---------
Other non-current assets 429 -
------------------------- --------- ---------
429 -
------------------------- --------- ---------
The Group have historically paid in to an insurance policy for
two German employees that served to match the liabilities that
arose under a legacy pension scheme. These amounts have
historically been shown netted off due to the fact that the gross
balances were not deemed to be material to the financial
statements. During 2017 the liability was reduced due to the death
of the spouse of one of the employees. The insurance asset will
continue to pay out to the Group over the next ten years and
therefore an asset has been recognised.
14. 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
-------------------------- --------------------
2017 2016
EUR'000 EUR'000
-------------------------- --------- ---------
Cash at bank and in hand 26,881 28,763
Short-term bank deposits - 64
-------------------------- --------- ---------
26,881 28,827
-------------------------- --------- ---------
15. Trade accounts receivable
As at 31
December
---------------- --------------------
2017 2016
EUR'000 EUR'000
---------------- --------- ---------
Germany 30 35
United Kingdom 1,518 2,411
---------------- --------- ---------
1,548 2,446
---------------- --------- ---------
All receivables have short-term maturity. During the year
receivables of EUR7k were written off (2016: EURnil).
All amounts outstanding as at 31 December 2017 and due at date
of signing had been received, consequently there is no provision
for doubtful debts (2016: EURnil).
None of the unimpaired trade receivables are past due at the
reporting date.
These amounts, together with the customer compensations detailed
in note 17, represent the Group's maximum exposure to credit risk
at the year end.
16. Inventories
Inventories include finished goods as well as production
supplies. The change in inventories is included in the Consolidated
Statement of Comprehensive Income in the line "Cost of materials".
Previously, work in progress included ingots and blocks processed
at Crystalox Ltd.
As at 31 December
-------------------
2017 2016
EUR'000 EUR'000
------------------- --------- ---------
Finished products 2,598 4,115
Work in progress - 2,146
Raw materials 1,316 4,956
------------------- --------- ---------
3,914 11,217
------------------- --------- ---------
No Inventory writedowns are included in cost of materials in
2017 (2016: EURnil).
17. Assets held for sale
As at 31 December
------------------------- --------------------
2017 2016
EUR'000 EUR'000
------------------------- --------- ---------
At 1 January - -
Cost transferred 23,530 -
Depreciation transferred (23,140) -
------------------------- --------- ---------
At 31 December 390 -
------------------------- --------- ---------
The above assets have an estimated fair value of EUR586k.
18. Prepaid expenses and other assets
As at 31 December
------------------------ --------------------
2017 2016
EUR'000 EUR'000
------------------------ --------- ---------
VAT 611 321
Prepaid expenses 551 338
Energy tax claims 113 133
Customer compensations 21,077 -
Other current assets 78 500
------------------------ --------- ---------
22,430 1,292
------------------------ --------- ---------
Customer compensations relate to realisation of payments
received in respect of unfulfilled customer purchase obligations
and includes EUR20.516m in relation to arbitration proceedings.
19. Trade accounts payable
As at 31 December
---------------- --------------------
2017 2016
EUR'000 EUR'000
---------------- --------- ---------
United Kingdom 32 1,520
Germany 1,005 486
---------------- --------- ---------
1,037 2,006
---------------- --------- ---------
20. Accrued expenses
2017 2016
EUR'000 EUR'000
-------------------------------- --------- ---------
Rents and ancillary rent costs 437 676
Salary related costs 130 260
Other accrued expenses 239 533
-------------------------------- --------- ---------
Current accruals 806 1,469
-------------------------------- --------- ---------
Non-current accruals - 31
-------------------------------- --------- ---------
Total accruals 806 1,500
-------------------------------- --------- ---------
21. Provisions
Building lease related Staff costs related Total
EUR'000 EUR'000 EUR'000
---------------------------- ----------------------- -------------------- ---------
Provisions brought forward
at 1 January 2017 - - -
Additional provision 520 865 1,385
Provisions carried forward
at 31 December 2017 520 865 1,385
----------------------------- ----------------------- -------------------- ---------
All provisions are short-term and relate to the winding down of
operations in the UK.
22. Deferred tax
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 2017 there were unrecognised potential
deferred tax assets in respect of losses of EUR44.5 million (2016:
EUR50.4 million).
Deferred tax liabilities
As at 31
December
--------------- --------------------
2017 2016
EUR'000 EUR'000
--------------- --------- ---------
United Kingdom - -
Germany 1,084 -
1,084 -
--------------- --------- ---------
Deferred tax liabilities, calculated or estimated by the Group
companies, comprise taxes payable due to local tax laws, including
probable amounts arising on completed or current tax audits.
Movement in the year is shown below.
2017 2016
EUR'000 EUR'000
---------------------------- --------- ---------
As at 1 January - -
Charged to income statement 1,084 -
---------------------------- --------- ---------
As at 31 December 1,084 -
---------------------------- --------- ---------
23. Other liabilities
As at 31
December
--------------------- --------------------
2017 2016
EUR'000 EUR'000
--------------------- --------- ---------
Payroll liabilities 35 314
Other liabilities 132 22
--------------------- --------- ---------
167 336
--------------------- --------- ---------
As at 31
December
------------ --------------------
2017 2016
EUR'000 EUR'000
------------ --------- ---------
Short term 167 55
Long term - 281
------------ --------- ---------
167 336
------------ --------- ---------
24. Share capital
2017 2016
EUR'000 EUR'000
------------------------------------ --------- ---------
Allotted, called up and fully
paid
160,278,975 (2016: 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 2017, 1,973,063 ordinary shares of 5.2 pence were
held by the EBT (2016: 1,971,910). The market value of these shares
was EUR0.461 million (2016: EUR0.546 million). Additionally, the
cash balance held by the EBT on 31 December 2017 was EUR0.603
million (2016: EUR0.627 million).
25. 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.
During the year the Group had six share incentive plans in
operation which are satisfied by grants from the EBT.
PV Crystalox Solar PLC Performance Share Plan ("PSP")
This plan was approved by shareholders at the 2011 AGM under
which awards are made to employees, including executive directors,
consisting of a conditional right to receive shares in the Company.
The awards will normally vest after the end of a three-year
performance period, to the extent that performance conditions are
met as detailed in the Directors' Remuneration Report.
No awards were made during 2017 (2016: nil).
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.
On 31 March 2017 awards over 544,135 shares were made to Iain
Dorrity, as detailed in the Directors' Remuneration Report. No
awards were made during 2016.
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.
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 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 76.0 pence per share subject to 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.
One of the employees to whom an award over 200,000 ordinary
shares was issued on 25 September 2009 left the Group after the
closure of PV Crystalox Solar KK during 2016 and the award was
forfeited].
No awards were issued or lapsed in 2017 (2016: nil).
PV Crystalox Solar PLC Share Award Bonus Plan ("SABP")
This plan was approved by the Board in January 2014 under which
awards can be made to employees, excluding the executive directors.
Under the SABP conditional awards are granted for a specific number
of ordinary shares which may be acquired for nil consideration. On
31 March 2015 SABP awards were granted to key senior employees over
1,975,000 shares. These awards vested on 31 March 2016.
No awards were issued in 2017 (2016: none).
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 United
Kingdom employees of 500 shares each over a total of 37,000
ordinary shares of 2 pence. These 37,000 ordinary shares of 2 pence
each were transferred from the EBT into the SIP. The shares in the
SIP were subject to the share consolidation so that each holding of
500 ordinary shares of 2 pence became a holding of 192 shares of
5.2 pence following the 5 for 13 share consolidation in 2013.
During 2017 awards over 3,455 shares vested due to employees
leaving the Group as good leavers due to redundancy and/or where
the employees had held the award for more than five years and were
able to withdraw the shares from the SIP without incurring a tax
personal liability. The balance of 1,153 shares which had
previously been within the SIP as a result of leavers forfeiting
their shares was transferred to the EBT. At the end of 2017 the
Group closed the SIP. No awards vested in 2016.
The Group recognised a total credit before tax of EUR32,000
(2016: EUR212,000) 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
2016 - 1,975,000 - 1,400,000 79.7 4,608
Share grants and options granted during the year - - - - - -
Share grants and options forfeited during the
year - - - (200,000) - -
Options exercised during the year - (1,975,000) - - - -
-------------------------------------------------- --------- ------------ -------- ---------- --------- --------
Share grants and options outstanding at 31
December 2016 - - - 1,200,000 79.7 4,608
-------------------------------------------------- --------- ------------ -------- ---------- --------- --------
Exercisable at 31 December 2016 - - - 1,200,000 79.7 -
-------------------------------------------------- --------- ------------ -------- ---------- --------- --------
Share grants and options granted during the year - - 544,135 - - -
Share grants and options forfeited during the
year - - - - - (1,153)
Share grants vested during the year - - - - - (3,455)
-------------------------------------------------- --------- ------------ -------- ---------- --------- --------
Options exercised during the year - - - - - -
-------------------------------------------------- --------- ------------ -------- ---------- --------- --------
Share grants and options outstanding at 31
December 2017 - - 544,135 1,200,000 79.7 -
-------------------------------------------------- --------- ------------ -------- ---------- --------- --------
Exercisable at 31 December 2017 - - - 1,200,000 79.7 -
-------------------------------------------------- --------- ------------ -------- ---------- --------- --------
Note
* The weighted average exercise price for the PSP, SABP, PSA and
SIP options is GBPnil.
26. 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 and the
customer compensations debtor. 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
2017 63.4% of the Group's sales are related to the largest customer
(2016: 46.8%). The number of customers accounting for approximately
95% of the annual revenue was 12, which was up from six in 2016.
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 customer compensations debtor relates to the
realisation of payments due from arbitration award and from the
liquidators of former customers. The maximum credit risk to the
Group is the total of trade accounts receivable and the customer
compensations debtor, details of which can be seen in notes 15 and
18.
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 A3.
Exchange rate fluctuation risks
In the financial year 2017 33% (2016: 95%) 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 and Euros) and also purchases goods and services in a
number of currencies (mainly Euros 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: US Dollar 1.1299 1.1979
Sterling: Euro 1.1411 1.1262
----------------- -------- ---------
Hedging strategy
The Group sells to customers in the worldwide photovoltaic
market and sells in two main currencies: US Dollars (33%) and Euros
(67%). Sales to the largest customer (63.4%) are in Euros however
the selling price is agreed on a monthly basis by reference to the
spot price for wafers which is quotes in US Dollars. It operates
its wafering factory in Germany, with local costs in Euros.
However, during 2017 the ingot and block production operations were
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 US Dollars and Euros).
During 2017 the net gain on foreign currency adjustments was
EUR0.0 million (2016: gain of EUR3.9 million).
In addition to the above, upon translation of net assets in the
consolidation, there was a negative impact in 2017 of EUR1.2
million (2016: negative impact of EUR4.9 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 all current and
paid in line with standard payment terms.
The Group had a cash balance at the end of 2017 of EUR26.9
million (2016: EUR28.8 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 (2016: 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. 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 2017 the Group had a net cash balance of EUR26.9
million (2016: EUR28.8 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 Cash and Amortised Non-
value receivables cost financial Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- --------- ------------- ---------- ----------- ---------
2017
Assets:
Cash and cash equivalents 26,881 26,881 - - 26,881
Accounts receivable 1,548 1,548 - - 1,548
Prepaid expenses and other
assets 22,820 22,820 - - 22,820
Non-financial assets 5,000 - - 5,000 5,000
----------------------------- --------- ------------- ---------- ----------- ---------
Total assets 56,249 51,249 - 5,000 56,249
----------------------------- --------- ------------- ---------- ----------- ---------
Liabilities:
Accounts payable trade (1,037) - (1,037) - (1,037)
Accrued expenses (806) - (806) - (806)
Provisions (1,385) (1,385) - (1,385)
Other current liabilities (167) - - (167) (167)
Other long-term liabilities - - - - -
Non-financial liabilities (1,084) - - (1,084) (1,084)
----------------------------- --------- ------------- ---------- ----------- ---------
Total liabilities (4,479) - (3,228) (1,251) (4,479)
----------------------------- --------- ------------- ---------- ----------- ---------
2016
Assets:
Cash and cash equivalents 28,827 28,827 - - 28,827
Accounts receivable 2,446 2,446 - - 2,446
Prepaid expenses and other
assets 1,292 1,292 - - 1,292
Non-financial assets 13,004 - - 13,004 13,004
----------------------------- --------- ------------- ---------- ----------- ---------
Total assets 45,569 32,565 - 13,004 45,569
----------------------------- --------- ------------- ---------- ----------- ---------
Liabilities:
Accounts payable trade (2,006) - (2,006) - (2,006)
Accrued expenses (1,500) - (1,500) - (1,500)
Other current liabilities (55) - - (55) (55)
Other long-term liabilities (281) - (281) - (281)
Non-financial liabilities - - - - -
----------------------------- --------- ------------- ---------- ----------- ---------
Total liabilities (3,842) - (3,787) (55) (3,842)
----------------------------- --------- ------------- ---------- ----------- ---------
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.
2017 2016
EUR'000 EUR'000
----------------------------------------- --------- ---------
Cash and cash equivalents (see note 14) 26,881 28,827
Bank and other borrowings - -
----------------------------------------- --------- ---------
Total net cash 26,881 28,827
----------------------------------------- --------- ---------
Total equity 51,770 41,726
----------------------------------------- --------- ---------
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.
27. 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.
28. 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.
29. Other financial obligations
Lease agreements (operating leases)
The leases primarily relate to rented buildings and have terms
of no more than five years. The future aggregate minimum lease
payments under non-cancellable operating leases are as follows:
As at 31
December
------------------------ --------------------
2017 2016
EUR'000 EUR'000
------------------------ --------- ---------
Less than one year 555 1,116
Two to five years 919 1,956
Longer than five years - 15
------------------------ --------- ---------
1,474 3,087
------------------------ --------- ---------
The above represent the contractual obligation at balance sheet
date.
Subsequently agreement was reached, subject to contract, with
the relevant landlord to reduce this total commitment to
EUR826k.
There were no significant purchase commitments at the year
end.
30. Related party disclosures
Related parties as defined by IAS 24 comprise the senior
executives of the Group, including their close family members, and
also companies that these persons could have a material influence
on as related parties as well as other Group companies. During the
reporting year, none of the shareholders had control over or a
material influence in the parent company.
Transactions between the Company and its subsidiaries have been
eliminated on consolidation.
The remuneration of the directors, who are the key management
personnel of the Group, is set out in the audited part of the
Directors' Remuneration Report.
31. Dividends and return of cash
No dividends were paid in 2017 (2016: EURnil).
32. Post-balance sheet events
There are no significant post-balance sheet events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR MMGMFMDZGRZZ
(END) Dow Jones Newswires
March 15, 2018 03:00 ET (07:00 GMT)
Pv Crystalox Solar (LSE:PVCS)
Historical Stock Chart
From Jun 2024 to Jul 2024
Pv Crystalox Solar (LSE:PVCS)
Historical Stock Chart
From Jul 2023 to Jul 2024
