Source - LSE Regulatory
RNS Number : 1410N
HeiQ PLC
28 September 2021
 

28 September 2021

 

HeiQ Plc

("HeiQ" or "the Company")

 

Interim Results for six months to 30 June 2021

 

Positive progress in executing growth strategy through strengthened product portfolio and increased customer base despite significant Covid-19 pandemic related headwinds

 

HeiQ Plc (LSE:HEIQ), an established global brand in materials and textile innovation which operates in high-growth markets, is pleased to announce its interim results for six months to 30 June 2021.

 

Financial highlights:

·    Revenue of US$25.8m, decreased compared to an exceptionally strong pandemic related 1HY 2020 (US$30.1m), and up +27% compared to 2HY 2020 (US$20.3m) reflecting consumer driven demand for innovative functionality from brands.

·    Significantly improved operating cash flow to US$2.9m, +930% on 1HY 2020 (US$0.3m)

·    Gross profit margin of 50.2%, a decrease from the prior year comparable period 1HY 2020 (57.4%) as a result of cost increases for freight (-1.5%), raw materials (-3%) and price pressure on specific products such as personal protection equipment and masks (-2.5%)

·    Adjusted EBITDA of US$4.8m, lower than 1HY 2020 (US$12.0m) and up 147% on the prior half year period 2HY 2020 (US$1.9m)

·    Operating costs of US$10.6m, up 48% (1HY 2020: US$7.2m) reflecting the investments across sales channels, digitization, branding, regulatory and innovation in line with our communicated strategy for future growth

·    Well-funded balance sheet with improved US$20 million cash and low leverage

 

Operational highlights:

·    Customer base more than doubled organically, especially in Greater China where 140 new mills were added and leading Chinese brands such as such as Fila, BLBM, Xtep and Yougor have been won

·   Three capability-building acquisitions during the period totaling US$26.7m, partially paid in shares, strengthening hygiene product offerings:

Acquisition of 51% of Chrisal B.V. (Belgium), a profitable, high-margin and leading industrial biotech business. Chrisal provides HeiQ with a strong position in the $50bn probiotics market.

Acquisition of RAS AG (Germany) (100%), a company with strong IP in nanowire technologies and antimicrobials for medical applications

Acquisition of 100% of Life Material Technologies Limited (Thailand and Brazil), a leader in antimicrobial ingredients based on botanical active substances

·   Progress in implementing internal strategic initiatives such as further digitization of the Group to reinforce our sales channels, by establishing a full legal entity in Shanghai, China and onboarding additional sales personnel in different regions.

·    Innovation pipeline saw ten new projects enter the pipeline during the period and seven new product launches

·  Continued investment into new IP-rich innovations, people, digital, company structure, corporate processes and systems to capitalise on the significant market opportunity available

 

Post period-end highlights:

·    13 products launched to market in Q3 2021

·    Continued advancements of exciting innovations such as HeiQ GrapheneX battery applications and infection preventing coating technology for implants and hard surfaces, aligned with HeiQ's strategy to be a leading materials innovation company, moving beyond textiles

 

Carlo Centonze, co-founder and CEO, HeiQ plc, said: 

"While external short term headwinds in our daily operations impacted 1HY 2021, our long-term strategy is delivering and demand for our +200 innovation portfolio remains strong. We have a robust balance sheet and cash position and benefit from low leverage and we continue to see encouraging tailwinds such as the growth in demand for sustainable textiles technology and hygiene functionality which reaffirm our long-term strategy. We are actively engaged in a number of significant projects, which would have an impact on the outcome for the full year. We launched seven new products in 1HY 2021, 13 in Q3 with two further ones scheduled for Q4, testament to our position as a trusted innovation partner to blue-chip brands.

 

"HeiQ has a leading reputation in the markets it serves, a proven track record of innovation and differentiation and of acquiring, as well as integrating complimentary businesses. While there are various external market factors that may impact operations that are beyond our control, we remain ideally positioned to gain market share, secure new customers and create value for all our stakeholders with a strong balance sheet and a clear strategy supported by mega- and consumer trends."  

 

This announcement contains inside information

 

For further information, please contact:

 

HeiQ Plc

Carlo Centonze (CEO)

+41 56 250 68 50

Arlington Group Asset Management Limited (Financial Advisor and Joint Broker)

Charles Cannon Brookes

 

+44 (0) 207 389 5017

Cenkos Securities plc (Joint Broker)

Stephen Keys / Callum Davidson

 

+44 (0) 207 397 8900

SEC Newgate (Media Enquiries)

Elisabeth Cowell / Megan Kovach

+44 (0) 20 3757 6882

HeiQ@secnewgate.co.uk

 

 

Chairwoman's Statement

Strong Progress with our Strategic Initiatives

After listing on the London Stock Exchange in December 2020, I am pleased to report on our first six months as a listed company to 30 June 2021 ("1HY 2021").

During the first half of 2021, HeiQ has made positive progress in what has been a challenging trading environment for the sector in which we operate. We see megatrends confirming our long term strategy to provide hygiene, comfort, protection and product & process sustainability by innovating in every day materials and products. For instance, consumers are seeking more comfort benefits in their clothes; increased germ awareness lead to higher demand for hygiene on all products; lockdown accelerated e-commerce adaptation and the request for branded functionality and superior technologies. While short term headwinds in our daily supply operations impacted 1HY 2021, our long term strategy is delivering and demand for our +200 innovation portfolio remains strong.

Following our listing and fundraising at the end of last year, we swiftly started to execute our growth strategy, expanding our product portfolio, customer base and manufacturing capacity to solidify our position in key markets with significant middle and long term growth potential, both through M&A and organically. Our customer base was increased, especially in Greater China where 140 new mills were added and leading Chinese brands such as Annil, BLBM, Fila, Xtep and Yougor have been on boarded with HeiQ technologies. Having established ourselves as an innovation leader in the US$24 billion textile chemicals market, HeiQ is moving beyond textiles to become a leader in material innovations. We believe that our current portfolio and future pipeline is ideally positioned to benefit from major consumer trends.

The three capability-building acquisitions of Chrisal B.V. (Belgium) (51%), RAS AG (Germany) (100%) and Life Material Technologies Limited (Thailand and Brazil) (100%) were identified, evaluated and completed within this reporting period.

These acquisitions provide HeiQ with a well-rounded hygiene offering, including new sustainable natural products, positioning our business as one of the top three technology providers in the functional ingredients space and enabling HeiQ to take a larger share of the hygiene ingredients market. We are delighted to report that, to date, all three acquisitions are operating in line with our expectations with first cross-selling synergies expected to be realized in 2HY 2021.

Alongside these three acquisitions, HeiQ has also progressed with internal strategic initiatives such as further digitization of the Group to reinforce our sales channels, establishing a full legal entity in Mainland China and onboarding additional sales personnel in different regions. At the same time, we strengthened our regulatory and innovation teams to support the growing innovation pipeline. In 1HY 2021, ten new projects have started and seven products have been launched, three in protection, three in comfort and one in hygiene.

These operational achievements were delivered during a period of challenging global market conditions, which also impacted many businesses and our competitors around the world. Macro-economic issues such as supply chain instability, together with freight and raw material costs, increasing by up to 500% and 300% respectively over 1HY 2020, have had a significant impact on our supply; lockdowns in some key regions for our industry, particularly South Asia, resulted in delay and loss of sales due to forced shutdown of manufacturing facilities. The market for facemasks and personal protection equipment (PPE) is under extreme price pressures caused by low-cost suppliers flooding the market in Q1 2021 and there being large amounts of excess stock from the previous year.

For HeiQ, the battle to secure raw materials and maintain global supply chains in 1HY 2021 caused projects to be put on hold or cancelled by customers. For example, one major new sales project with a potential annual turnover of US$3m was delayed by several months and had a direct impact on our reported income for the period.

In summary, the first half of 2021 has seen us develop a healthy and promising innovation pipeline for functionalities that are clearly demanded by our business customers and the end consumers. We have been able to progress on various projects and build our capability for future growth, but due to the difficult market conditions outlined above, we have not executed on all sales opportunities in our pipeline at the start of the year.

Financial Review

As well as the macro-economic factors referred to above, there was the expected reduction in demand for facemasks and personal protection equipment (PPE) which impacted our hygiene product offerings that had experienced an exceptional six-month period to 30 June 2020 ("1HY 2020") as a result of pandemic related inventory-building by customers. While the hygiene sales were maintained thanks to an active market diversification, standard PPE sales and sales of functional ingredients to PPE makers were lower than the comparable period. As a result, sales decreased by 14% to US$25.8m in 1HY 2021 compared to 1HY 2020, although it was pleasing to note that recurring revenue during the period increased year-on-year.

Notably, revenue for the Group was 27% above the prior six-month period to 31 December 2020 ("2HY 2020") (2HY 2020: US$20.3m) with sustainable growth being achieved in our two largest functionalities, hygiene and comfort, whilst our sales in product & process sustainability, affected strongly by current market headwinds, remained stable but poised to grow when supply normalizes. As expected, our sales in protection were reduced by less PPE demand but we expect to generate growth in the outdoor apparel market in 2022 and beyond, thanks to three promising innovations launched in Q1 2021. This overall positive trend for our functional offerings reflects the underlying increase in consumer demand for functionalities on textiles and other surfaces.

Overall gross margin during the period stood at 50.2% for 1HY 2021 and decreased both compared to the prior half year period (2HY 2020: 52.8%) and the prior year comparable period (1HY 2020: 57.4%). The decrease in gross margin is driven mainly by cost increases for freight (-1.5%) and raw materials (-3%) and, as mentioned, price pressure on specific products as well as our product mix (-2.5%). Due to the competitive environment in the textile chemicals sales to mills and HeiQ's fixed brand pricing terms, it was not possible to pass on input price increases to all our customers on short notice.

Despite these short term external challenges, HeiQ benefits from a strong balance sheet liquidity and we have a track record of profitability.

As an innovator, HeiQ is investing significantly in its future growth and continued to do so in 1HY 2021 despite the challenging market conditions to ensure that we are positioned ahead of our peers and well placed for long term growth. As such our operating costs ("SG&A") have increased both compared to the prior period (2HY 2020: +18%) and the prior year comparison period (1HY 2020: +48%). Investments have been made in particular in sales channels, digitization, branding, regulatory and innovation in line with the communicated intended use of proceeds for our long term growth from the fundraising in December 2020. Despite these investments, our cost base has been growing significantly slower than our revenues (Revenues: +92% since 1HY 2019; SG&A: +67% since 1HY 2019)

Our adjusted EBITDA for 1HY 2021 significantly improved to US$4.8m, which represents a +147% increase on the prior half year period (2HY 2020: US$1.9m), although it was lower than 1HY 2020 (US$ 12.0m).

 

 

Six months to

Six months to

Year ended

 

 

 

June 30,

June 30,

December 31,

 

 

2021

2020

2020

 

Comprehensive income

US$'000

US$'000

US$'000

 

Revenue

 25,795

30,129

 50,401

Cost of sales

 (12,840)

(12,842)

 (22,402)

Gross profit

 12,955

17,287

 27,999

Other operating income

 3,166

898

 4,744

Selling and general administrative expenses

 (10,576)

(7,151)

 (16,117)

Other operating expenses

 (2,238)

(182)

 (5,127)

Operating profit

 3,307

10,852

 11,499

Depreciation of property, plant and equipment

 591

 351

 776

Amortization of intangible assets

 205

 59

 110

Depreciation of right-of-use assets

 279

 196

 368

Share options and rights granted to Directors and employees

387

580

 1,217

Adjusted EBITDA

4,769

12,038

13,970

EBITDA Margin (adjusted)

18.5%

40.0%

27.7%

               

Outlook

HeiQ is a diversified business that offers four functions (hygiene, comfort, protection and product & process sustainability), in four forms (ingredients, materials, finished goods and services), which is well established and rapidly expanding across multiple significant growth markets. Megatrends such as rising demand for sustainable, comfortable textiles, increased concern over global warming and pollution, increased desire to protect against germs or disease transmitting insects, and the ongoing growth of e-commerce underpin our long-term growth strategy. Additionally, our strong industry reputation and proven track record for rapid deep innovations mean that we are well positioned to capitalize on the opportunities we see. In concrete terms, we are strategically and financially engaging key customers into our innovation pipeline and at the same time leveraging the customer base and product ranges of our acquisitions to generate additional revenues. In the current market conditions, our ability to supply these newly secured customer programs throughout 2HY 2021 will be essential for our short term success.

We anticipate that the rest of 2021 will continue to be unpredictable with the previously mentioned headwinds, for us, our customers and our competitors worldwide. While we are engaging in a number of significant projects, which would have an impact on the outcome for the full year, with various factors remaining outside of our control, we cannot be certain that all of these projects will materialize in 2HY 2021.

Over the coming months, we plan to focus on the integration of our acquired businesses, expanding our sales organization and to continue driving the digitalization of our organization to optimize our value creation and value capturing processes. We see many customer innovation projects achieving significant progress, which is testament to the continued demand and market opportunity for functional textiles and materials as well as our rapid innovation capabilities. This capability also means that we can develop new technologies and make it consumer-ready in months. In Q4, we hope to finally start three large innovation programs which are expected to contribute up to US$9m sales per year.

The demand for our current and future technology offering remain sound and we are executing our long term growth strategy and strengthening our innovation and differentiation capabilities as planned. We launched seven new products in 1HY, 13 in Q3 with two further ones scheduled for Q4. Our disruptive technology platform of highly porous graphene membrane reached the milestone of completed pilot commercialization plant design and filed a strong application IP for the next generation of lighter, faster charging and longer lasting batteries. Our acquired medical device coatings recently reached the milestone of clinical human studies approval in Germany. This trial will see our partner, AAP Implants, testing our coating on their trauma implants in 16 hospitals over the next 18 months to assess its efficacy in the prevention of Surgical Site Infections. Our innovations open doors for us to further penetrate new markets and deliver strong growth to our shareholders in the years ahead.

In summary, although 1HY 2021 has given us some short term global supply chain challenges, we are pleased with the progress we have made in our internal initiatives, as well as the investment in building new sales channels and penetrating new markets, making sure that we are always well positioned to satisfy the growing demand for our offerings and to create value for all our stakeholders.  

Esther Dale-Kolb

Chairwoman

28 September 2021

 

Consolidated Statement of Comprehensive Income

For the 6 months ended June 30, 2021

 

 

 

 

Six months to

Six months to

Year ended

 

 

 

June 30,

June 30,

December 31,

 

 

2021

2020

2020

 

Comprehensive income

Note

US$'000

US$'000

US$'000

 

Revenue

6

 25,795

30,129

 50,401

Cost of sales

7

 (12,840)

(12,842)

 (22,402)

Gross profit

 

 12,955

17,287

 27,999

Other operating income

6

 3,166

898

 4,744

Selling and general administrative expenses

7

 (10,576)

(7,151)

 (16,117)

Other operating expenses

7

 (2,238)

(182)

 (5,127)

Operating profit

 

 3,307

10,852

 11,499

Deemed cost of listing

 

 -  

-

 (1,402)

Transaction costs of relisting

 

 -  

-

 (1,871)

Other income

 

 38

-

 -  

Other costs

 

 (213)

 (11)

 (69)

Finance income

 

 520

-

 68

Finance costs

16

 (282)

(241)

 (1,184)

Share of (losses) / profits of associates

 

 -  

-

 (15)

Income before taxation

 

 3,370

10,600

 7,026

Taxation

8

 (522)

(2,010)

 (2,112)

Income after taxation

 

 2,848

8,590

 4,914

 

 

 

 

 

Earnings per share (cents) - basic                                                           

9

2.46

8.32

4.41

Earnings per share (cents) - diluted

9

2.38

8.32

4.21

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

Exchange differences on translation of foreign operations

 

 

 

 (1,723)

622

 2,469

Items that may be reclassified to profit or loss in subsequent periods

 

 

 

 (1,723)

622

 2,469

Actuarial losses from defined benefit pension plans

 

 

 -  

-

 (731)

Items that will not be reclassified to profit or loss in subsequent periods

 

 

 

-

-

 

 (731)

Total comprehensive income for the period/year

 

 

1,125

9,212

6,652

 

 

 

 

 

 

Income attributable to:

 

 

 

 

 

Equity holders of HeiQ

 

 

 3,126

8,602

4,991

Non-controlling interests

 

 

 (278)

(12)

 (77)

 

 

 

2,848

8,590

4,914

 

 

 

 

 

 

Comprehensive income / (loss) attributable to:

 

 

 

 

 

Equity holders of the Company

 

 

 1,403

9,224

6,729

Non-controlling interests

 

 

 (278)

(12)

(77)

 

 

 

1,125

9,212

6,652

               

 

Consolidated statement of financial position

For the 6 months ended June 30, 2021

 

 

 

 

As at

 

As at

 

 

 

June 30,

 

December 31,

 

 

 

2021

 

2020

Assets

Note

 

US$'000

 

US$'000

Intangible assets

10

 

 28,553

 

 5,264

Property, plant and equipment

11

 

 6,995

 

 5,467

Right-of-use assets

12

 

 4,393

 

 2,564

Deferred tax assets

8

 

 980

 

 826

Other non-current assets

 

 

 811

 

 206

Non-current assets

 

 

 41,732

 

 14,327

Inventories

 

 

 12,523

 

 13,328

Trade receivables

13

 

 16,653

 

 13,437

Other receivables and prepayments

 

 

 2,641

 

 2,609

Cash and cash equivalents

 

 

 19,910

 

 25,695

Current assets

 

 

 51,727

 

 55,069

Total assets

 

 

 93,459

 

 69,396

 

 

 

 

 

 

Equity and Liabilities

 

 

 

 

 

Share capital

14

 

 50,725

 

 49,559

Capital reserve

14

 

 141,009

 

 134,537

Other reserve

 

 

 (2,043)

 

 (2,043)

Share-based payment reserve

14

 

 437

 

 50

Merger reserve

 

 

 (126,912)

 

 (126,912)

Currency translation reserve

 

 

 1,214

 

 2,937

Retained deficit

 

 

 (5,585)

 

 (8,711)

Equity attributable to owners of the parent

 

 

58,845

 

 49,417

Non-controlling interests

 

 

 1,264

 

 (20)

Total equity

 

 

 60,109

 

 49,397

Lease liabilities

 

 

 3,820

 

 2,304

Long-term borrowings

16

 

 1,301

 

1,400

Deferred tax liability

8

 

 829

 

 857

Other non-current liabilities

15

 

 3,358

 

 3,425

Total non-current liabilities

 

 

 9,308

 

 7,986

Trade and other payables

 

 

 11,942

 

 5,815

Accrued liabilities

 

 

 2,955

 

 3,214

Income tax liability

8

 

 1,259

 

 1,495

Deferred revenue

 

 

 776

 

 -  

Short-term borrowings

16

 

 1,145

 

 173

Lease liabilities

 

 

 676

 

 349

Other current liabilities

17

 

 5,289

 

 967

Total current liabilities

 

 

 24,042

 

 12,013

Total liabilities

 

 

 33,350

 

 19,999

Total liabilities and equity

 

 

93,459

 

69,396

 

Consolidated statement of changes in shareholders' equity

For the 6 months ended June 30, 2021

 

 

 

Share

capital

Capital

reserve

Other

reserve

Share- based payment reserve

Merger

reserve

Currency translation

reserve

Retained deficit

Non- controlling interests

Total

equity

 

Note

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Balance at January 1, 2020

 

2,696

25,168

(1,312)

-

-

467

(13,702)

23

13,340

Income after taxation

 

-

-

 

-

-

-

 4,991

 (77)

4,914

Other comprehensive (loss)/income

 

-

-

 (731)

 -  

 -  

 2,469

-

 -  

 1,738

Total comprehensive (loss)/income for the year

 

 -  

 -  

 (731)

 -  

 -  

 2,469

 4,991

 (77)

 6,652

Reverse acquisition adjustment

 

 39,587

 89,866

-

-

 (126,912)

-

-

-

 2,542

Issuance of shares

 

 7,276

 20,763

-

-

-

-

-

-

 28,039

Cost of share issues

 

-

 (1,260)

-

-

-

-

-

-

 (1,260)

Share-based payment charges

 

-

-

-

 50

-

-

-

-

 50

Capital contributions from non-controlling interests

 

-

-

-

-

-

-

-

 34

 34

Transactions with owners

 

 7,276

 19,503

 -  

 50

 -  

 -  

 -  

 34

 26,863

Balance at December 31, 2020

 

 49,559

 134,537

 (2,043)

 50

 (126,912)

 2,937

 (8,711)

 (20)

 49,397

 

Income after taxation

 

-

-

-

-

-

-

 3,126

 (278)

 2,848

Other comprehensive (loss)/income

 

-

-

 -  

 -  

 -  

 (1,723)

-

 -  

 (1,723)

Total comprehensive (loss)/income for the year

 

 

 -  

 

 -  

 

-  

 

 -  

 

 -  

 

(1,723)

 

3,126

 

(278)

 

1,125

Issuance of shares

14

 1,166

 6,472

-

 

-

-

-

-

 7,638

Share-based payment charges

14

-

-

-

 387

-

-

-

-

 387

Business combinations

 

 -  

 -  

-

 

 -  

-

 -  

 1,562

 1,562

Transactions with owners

 

 1,166

 6,472

 -  

 387

 -  

 -  

 -  

 1,562

 9,587

Balance at June 30, 2021

 

 50,725

 141,009

 (2,043)

 437

 (126,912)

 1,214

 (5,585)

 1,264

60,109

 

 

Consolidated statement of cash flows

For the 6 months ended June 30, 2021

 

 

Six months to

Six months to

Year ended

 

June 30,

June 30,

December 31,

 

2021

2020

2020

Cash flows from operating activities

US$'000

US$'000

US$'000

Income before taxation

3,370

10,600

7,026

Cash flow from operations reconciliation:

 

 

 

Depreciation and amortization

1,075

606

1,254

Loss on disposal of property, plant and equipment

-

11

46

Loss on disposal of investments

-

-

22

Finance costs

160

214

399

Finance income

(5)

-

(68)

Expected credit loss on trade receivables

135

247

377

Pension expense

132

176

176

Non-cash equity compensation

387

550

1,217

Share of loss / (profit) of associates

-

-

15

Deemed cost of listing

-

-

1,402

Foreign exchange differences

(118)

342

(164)

Working capital adjustments:

 

 

 

Decrease (Increase) in inventories

2,369

(4,507)

(8,161)

Decrease (Increase) in trade and other receivables

320

(8,923)

(5,165)

Increase (decrease) in trade and other payables

(3,489)

965

2,777

Cash generated from operations

4,336

281

1,153

Taxes paid

(1,442)

-

(48)

Net cash generated from operating activities

2,894

281

1,105

Cash flows from investing activities

 

 

 

Consideration paid for acquisitions of businesses (Note 18)

(8,444)

(294)

(1,424)

Cash assumed on acquisitions of businesses (Note 18)

2,121

-

27,111

Purchase of property, plant and equipment

(284)

(307)

(932)

Proceeds from the disposal of property, plant and equipment

66

7

10

Development of intangible assets

(1,329)

(44)

(635)

Proceeds from the disposal of associated company

-

-

7

Finance income

5

-

68

Net cash from / (used in) investing activities

(7,865)

(638)

24,205

Cash flows from financing activities

 

 

 

Finance costs

(160)

(214)

(399)

Repayment of leases

(263)

(191)

(354)

Proceeds from borrowings

472

752

752

Repayment of borrowings

(113)

-

(3,487)

Net cash (used in) / from financing activities

(64)

347

(3,488)  

Net increase (decrease) in cash and cash equivalents

 (5,035)

(10)

21,822

Cash and cash equivalents - beginning of the year

 25,695

3,603

3,603

Effects of exchange rate changes on the balance of cash held in foreign currencies

 (750)

50

270

Cash and cash equivalents - end of the period/year

 19,910

3,643

25,695

 

 

 

 

Note: Non-cash transactions: Certain shares were issued during the year for a non-cash consideration as described in Note 16.

 

Notes to the Consolidated Financial Statements for the six months ended June 30, 2021

HeiQ Plc ("the Company'') and its subsidiaries (together, "the Group'') is an established global brand in materials and textile innovation which operates in high-growth markets, creating some of the most effective, durable and high-performance textile effects available worldwide. The principal activity of the Company is that of a holding company for the Group, as well as performing all administrative, corporate finance, strategic and governance functions of the Group.

The Company was incorporated on May 14, 2014 as Auctus Growth Limited, in England and Wales under the Companies Act 2006 with company number 09040064, with an investment strategy to undertake an acquisition of a target company or business. The Company was re-registered as a public company on July 24, 2014. On December 4, 2020, the Company's name was changed to HeiQ Plc. The Company's registered office is 5th Floor, 15 Whitehall, London, SW1A 2DD.

The Company was admitted to listing on the Official List by way of a Standard Listing in accordance with Chapter 14 of the Listing Rules and to trading on the London Stock Exchange's Main Market for listed securities on August 22, 2014. 

Following the reverse takeover by the Company of HeiQ Materials AG ("HeiQ"), an established global brand in materials and textile innovation, the Company's enlarged share capital was admitted to the standard segment of the Official List and initiation of trading on the London Stock Exchange's Main Market commenced on December 7, 2020 under the ticker 'HEIQ'. The ISIN of the Ordinary Shares is GB00BN2CJ299 and the SEDOL Code is BN2CJ29.

a.     Basis of preparation

The unaudited condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and International Accounting Standard 34 "Interim Financial Reporting" (IAS 34). Other than as noted below, the accounting policies applied by the Group in the preparation of these interim financial statements are the same as those set out in the Company's audited financial statements for the year ended 31 December 2020. These financial statements have been prepared under the historical cost convention except for certain financial and equity instruments that have been measured at fair value.

These condensed financial statements do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's financial position and performance since the audited financial statements for the year ended 31 December 2020. 

Statutory accounts for the year ended 31 December 2020 have been filed with the Registrar of Companies and the auditor's report was unqualified, did not contain any statement under Section 498(2) or 498(3) of the Companies Act 2006 and did not contain any matters to which the auditors drew attention without qualifying their report.

The condensed interim financial statements are unaudited and have not been reviewed by the auditors and were approved by the Board of Directors on 27 September 2021.

Unless otherwise stated, the Condensed Consolidated Financial Statements are presented in United States Dollars ($) which is the presentational currency of the Group, and all values are rounded to the nearest thousand dollars except where otherwise indicated.

b.     Going concern

The Interim Financial Statements have been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realization of assets and the settlement of liabilities in the normal course of business. The Directors have reviewed the Group's overall position and outlook and are of the opinion that the Group is sufficiently well funded to be able to operate as a going concern for at least the next twelve months from the date of signing these financial statements.

c.     Basis of consolidation

The Condensed Consolidated Financial Statements comprise the financial statements of the Company and its subsidiaries.

On 7 December 2020, HeiQ Plc became the legal parent of HeiQ Materials AG by way of reverse acquisition. The cost of the acquisition is deemed to have been incurred by HeiQ Materials AG, the legal subsidiary, in the form of equity instruments issued to the owners of the legal parent. This acquisition has been accounted for as a reverse acquisition.

Business combinations other than reverse acquisitions are accounted for under the acquisition method.

d.     New standards, interpretations and amendments effective for the current period

The following new amendment is effective for the first time in these financial statements but did not have a material effect on the Group:

 

− IBOR Reform and its Effects on Financial Reporting - Phase 2

The Company has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its 2020 annual financial statements, except for amendments to IFRS 16: COVID-19 Related Rent Concessions beyond 30 June 2021, which were adopted on 1 January 2021. The amendment has had no impact on these interim financial statements.

 

Other new and amended standards and Interpretations issued by the IASB that will apply for the first time in the next annual financial statements are not expected to impact the Group as they are either not relevant to the Group's activities or require accounting which is consistent with the Group's current accounting policies.

 

Use of estimates and judgements

There have been no material revisions to the nature and amounts of estimates of amounts reported in prior periods.

 

4.   Significant events and transactions

a.     Acquisition of Chrisal NV

On March 9, 2021, HeiQ Iberia Unipessoal Lda acquired 51% of the share capital and voting rights of Chrisal NV, a company incorporated in Belgium. Chrisal NV is a biotechnology company and a leader in innovative ingredients and consumer products that incorporate the benefits of probiotics and synbiotics. It has technology platforms with the purpose of creating healthy and sustainable microbial ecosystems. The application of its proprietary technology includes cosmetics, personal care, textiles, wound dressings, water purification, air treatment and cleaning products. The company has its office, manufacturing site and bottling facility in Lommel, Belgium.

The purchase consideration was payable partly in cash (€5,000,000, equivalent to approximately US$6,054,000) and partly by the issue of 1,101,928 new ordinary shares for €2,500,000 (US$2,982,000), equivalent to a total consideration of US$ 9,036,000.

The acquisition is part of the Group's strategy of becoming a global leader in materials innovation and allows access to the broader market of microbial surface management and a bio-based green complementary technology platform to its successful antimicrobials.

The following table summarizes the consideration paid for the goodwill, the fair value of assets acquired, liabilities assumed and non-controlling interests at the acquisition date:

 

Fair value

Consideration

US$'000

Cash paid to Chrisal NV shareholders

6,054

Shares issued to Chrisal NV shareholders

2,982

Total consideration

9,036

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed

 

Cash and cash equivalents

1,774

Property, plant and equipment

1,872

Right-of-use assets

1,696

Trade and other receivables

1,563

Inventories

1,176

Trade and other payables

(1,912)

Deferred revenue

(739)

Tax liabilities

(198)

Borrowings

(369)

Lease liabilities

(1,696)

Intangible assets identified on acquisition

 

2,077

Total identifiable net assets

 

5,244

 

 

Non-controlling interests

(1,562)

Goodwill

5,354

 

 

Total

9,036

 

The goodwill arising is attributable to the acquired workforce, anticipated future profit from expansion opportunities and synergies of the business. The goodwill arising from the acquisition has been allocated to the Synbiotic CGU. Fair value adjustments have been recognized for property, plant and equipment and acquisition-related intangible assets which are in alignment with accounting policies of the Group.

 

Acquisition-related intangible assets relate to the following:

 

Acquisition-related intangible assets

Useful life

US$'000

Valuation of technology assets

10

869

Valuation of brand assets

10

521

Valuation of customer relations

5

667

Patents

5

20

Total Intangible assets identified on acquisition

 

2,077

 

Acquisition costs of US$46,000 have been charged to the statement of comprehensive income in the period relating to the acquisition of Chrisal NV.

 

Chrisal NV contributed US$1,788,000 of revenue for the period between the date of acquisition and the balance sheet date and US$462,000 of profit before tax. If the acquisition of Chrisal NV had been completed on the first day of the financial year, Group revenues would have been US$849,000 higher and Group profit attributable to equity holders of the parent would have been US$374,000 higher.

b.     Acquisition of RAS AG

On April 29, 2021, the Company completed the acquisition of 100% of the share capital and voting rights of RAS AG, a company based in Regensburg, Germany. The acquisition was for a consideration of €5.1 million (approximately US$6.1 million), with €1.25 million (US$1.48 million) payable in cash and €3.85 million (US$4.66 million) through the issue of 1,701,821 new ordinary shares by the Company. It includes an additional earn out consideration dependent on RAS AG's growth and 2021 calendar year EBIT. The earn-out consideration is capped at an additional €5 million payable in shares for achieving a €2 million EBIT in 2021 and will be satisfied through the issuance of new ordinary shares. The earnout was estimated to be €2.55million (US$3 million) resulting in an overall consideration of €7.65million (US$91.9 million).

 

On the basis of internal forecasts, the Company has estimated the additional earn-out consideration at €2,550,000 (equivalent to approximately US$3,052,000), amounting to a total consideration payable equivalent to US$9,190,000.

 

RAS AG is a materials innovation company that drives the development of resource-efficient and sustainable products. RAS AG develops and manufactures highly functionalized materials for this purpose. This includes the manufacture of antimicrobial, hygiene-enhancing additives and durable antimicrobial coating systems which are sold worldwide under the trademark agpure®, and transparent electrically conductive and infrared reflective coatings sold under the ECOS® trademark. The acquisition is in line with HeiQ's strategic goal to gain market share in hygiene solutions by providing antimicrobial surface hygiene technologies to the healthcare and other sectors. This is building on the acquisition of Chrisal N.V. Belgium concluded earlier in the year, which gives HeiQ expanded access to the healthcare sector through probiotic and synbiotic cleaners.

 

The following table summarizes the consideration paid for the goodwill, the fair value of assets acquired, and liabilities assumed at the acquisition date:

 

Fair value

Consideration

US$'000

Cash paid to RAS AG shareholders

1,482

Shares issued to RAS AG shareholders

4,656

Contingent consideration payable

3,052

Total consideration

9,190

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed

 

Cash and cash equivalents

273

Property, plant and equipment

179

Right-of-use assets

139

Trade and other receivables

1,041

Inventories

410

Trade and other payables

(380)

Tax liabilities

(315)

Lease liabilities

(139)

Intangible assets identified on acquisition

1,451

Total identifiable net assets

2,659

 

 

Goodwill

6,531

 

 

Total

9,190

 

The goodwill arising is attributable to the acquired workforce, anticipated future profit from expansion opportunities and synergies of the business. The goodwill arising from the acquisition has been allocated to the Nanowire and Antimicrobial CGUs. Fair value adjustments have been recognized for acquisition-related intangible assets which are in alignment with accounting policies of the Group.

 

Acquisition-related intangible assets relate to the following:

 

Acquisition-related intangible assets

Useful life

US$'000

Valuation of technology assets

10

1,071

Valuation of customer relations

5

380

Intangible assets identified on acquisition

 

1,451

 

Acquisition costs of US$51,000 have been charged to the statement of comprehensive income in the period relating to the acquisition of RAS AG.

 

RAS AG contributed US$725,000 of revenue for the period between the date of acquisition and the balance sheet date and US$364,000 of profit before tax. If the acquisition of RAS AG had been completed on the first day of the financial year, Group revenues would have been US$937,000 higher and Group profit attributable to equity holders of the parent would have been US$591,000 higher.

 

HeiQ RAS GmbH, a joint-venture company previously accounted for under the equity-method, became a wholly-owned subsidiary on acquisition of HeiQ RAS AG.

c.     Acquisition of Life Material Technologies Limited

On 15 June 2021, the Company completed the acquisition of 100% of the share capital and voting rights of Life Material Technologies Limited, Hong Kong ("LIFE").

 

The Acquisition was for an upfront consideration of US$6.45 million, with US$2.55 million payable in cash (the "Cash Consideration") and US$3.9 million to be satisfied through the issue of new ordinary shares by HeiQ (the "Share Consideration"). Additional earn-out consideration of up to US$2,038,000 may be payable in cash (US$1,400,000) and through the issue of new ordinary shares (US$638,000) in 2022 based on LIFE's financial performance during 2021.

 

The Share Consideration was settled on 9 July 2021 by the issue of 1,887,883 new ordinary shares ("Consideration Shares") to the sellers of LIFE, at a price of £1.496201 per share, which was the intraday volume-weighted average price (the "VWAP") of HeiQ shares on the London Stock Exchange in the last five trading days preceding the closing of the Acquisition.

 

LIFE is a materials technology company that has developed a strong portfolio of smart ingredients and formulations with applications in numerous industries. This includes the development and distribution of bio-based antimicrobial additives and treatments used by manufacturers of plastics, coatings, textiles, ceramics and paper, that inhibit or manage bacteria, fungi, algae, and other micro-organisms that come in contact with treated materials. LIFE has the broadest technology platform in the industry, using inorganic, organic and bio-based botanical active substances.

 

The following table summarizes the consideration paid for the goodwill, the fair value of assets acquired and liabilities assumed at the acquisition date:

 

Fair value

Consideration

US$'000

Cash paid to LIFE shareholders

2,550

Shares issued to LIFE shareholders

3,900

Contingent consideration payable

2,038

Total consideration

8,488

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed

 

Cash and cash equivalents

56

Property, plant and equipment

29

Right-of-use assets

121

Trade and other receivables

1,910

Inventories

485

Trade and other payables

(394)

Tax liabilities

(20)

Borrowings

(210)

Lease liabilities

(121)

Intangible assets identified on acquisition

2,219

Total identifiable net assets

4,075

 

 

Goodwill

4,413

 

 

Total

8,488

 

The goodwill arising is attributable to the acquired workforce, anticipated future profit from expansion opportunities and synergies of the business. The goodwill arising from the acquisition has been allocated to the Antimicrobial CGU. Fair value adjustments have been recognized for acquisition-related intangible assets which are in alignment with accounting policies of the Group.

Acquisition-related intangible assets relate to the following:

 

Acquisition-related intangible assets

Useful life

US$'000

Valuation of technology assets

10

561

Valuation of brand assets

10

1,048

Valuation of customer relations

5

610

Intangible assets identified on acquisition

 

2,219

 

Acquisition costs of US$102,000 have been charged to the statement of comprehensive income in the period relating to the acquisition of LIFE.

LIFE contributed US$444,000 of revenue for the period between the date of acquisition and the balance sheet date and US$85,000 of profit before tax. If the acquisition of LIFE had been completed on the first day of the financial year, Group revenues would have been US$2,053,000 higher and Group profit attributable to equity holders of the parent would have been US$474,000 higher.

 

The Directors consider that the Group has one reportable segment, that of materials innovation which focuses on scientific research, manufacturing and consumer ingredient branding. Accordingly, all revenues, operating results, assets and liabilities are allocated to this activity.

The Group also analyses and measures its performance into geographic regions, specifically Europe, North & South America and Asia.

The Group's activities are materials innovation which focuses on scientific research, manufacturing and consumer ingredient branding. The primary source of revenue is the production and sale of functional ingredients, materials, and functional consumer goods. Other sources of revenues include research and development services as well as laboratory work.

The Group classifies the functionalities of the different type of products into the functionalities of Comfort, Hygiene, Protection and Product & Process Sustainability.

Revenues were mainly generated in regions Europe, North & South America and Asia. The following table reconciles HeiQ Group's revenue for the periods presented: 

 

Six months to

June 30,

2021

Six months to

June 30,

2020

Year ended

December 31,

2020

 

Revenue by type of product

US$'000

US$'000

US$'000

 

Functional ingredients

20,090

26,331

 42,023

 

Functional materials

200

10

 764

 

Functional consumer goods

4,655

3,713

7,444

 

Services / Others

850

75

 170

 

Total revenue

25,795

30,129

50,401

 

 

 

 

 

 

 

 

Six months to

June 30,

2021

Six months to

June 30,

2020

Year ended

December 31,

2020

 

Revenue by functionality

US$'000

US$'000

US$'000

 

Comfort

5,419

4,115

8,937

 

Hygiene

13,790

14,256

23,370

 

Protection

997

3,042

4,093

 

Product & Process Sustainability

5,358

4,917

10,022

 

Other

231

3,799

3,979

 

Total revenue

25,795

30,129

50,401

 

 

 

 

 

 

 

Six months to

June 30,

2021

Six months to

June 30,

2020

Year ended

December 31,

2020

 

Revenue by territory

US$'000

US$'000

US$'000

 

North & South America

9,551

11,125

 19,813

 

Asia

8,880

13,396

 19,887

 

Europe

7,093

5,368

 10,429

 

Others

271

240

 272

 

Total revenue

25,795

30,129

50,401

 

                 

 

During the period ended June 30, 2021, one customer individually totaled more than 10% of total revenues (2020: no customers). 

 

 

 

 

Six months to

June 30,

2021

Six months to

June 30,

2020

Year ended

December 31,

2020

Other operating income

US$'000

US$'000

US$'000

Foreign exchange gains

2,030

249

3,986

Other

1,136

649

758

Total other operating income

3,166

898

4,744

 

 

Six months to

June 30,

2021

Six months to

June 30,

2020

Year ended

December 31,

2020

Cost of goods sold

US$'000

US$'000

US$'000

Material expenses

 10,033

 9,685

 17,586

Personnel expenses

 1,070

 652

 1,279

Depreciation of property, plant and equipment

 280

 174

 382

Other costs of goods

 1,457

 2,331

3,155

Total cost of goods sold

 12,840

 12,842

22,402

 

Selling and general administration

Six months to

June 30,

2021

Six months to

June 30,

2020

Year ended

December 31,

2020

expenses

US$'000

US$'000

US$'000

Personnel expenses

 5,468

 4,154

9,091

Commissions

 583

 679

 1,133

Audit expense

 14

 5

 108

Depreciation of property, plant and equipment

 311

 177

 394

Amortization of intangible assets

 205

 59

 110

Depreciation of right-of-use assets

 279

 196

 368

Other

 3,716

 1,881

 4,913

Total selling and general administration expenses

10,576

7,151

16,117

 

 

Six months to

June 30,

2021

Six months to

June 30,

2020

Year ended

December 31,

2020

Personnel expenses

US$'000

US$'000

US$'000

Wages and salaries

5,363

3,707

 8,290

Social security and other payroll taxes

 471

205

 415

Pension costs

 317

314

 448

Share-based payments

387

580

 1,217

Total personnel expenses

6,538

4,806

10,370

 

 

 

Six months to

June 30,

2021

Six months to

June 30,

2020

Year ended

December 31,

2020

Other operating expenses

US$'000

US$'000

US$'000

Foreign exchange losses

1583

182

5,124

Other

655

-

3

Total other operating expenses

 2,238

182

5,127

 

The components of the provision for taxation on income included in the "Consolidated Statement of Other Comprehensive Income" are summarized below:

 

 

Six months to

June 30,

2021

Six months to

June 30,

2020

Year ended

December 31,

2020

Current income tax expense

US$'000

US$'000

US$'000

Swiss corporate income taxes

(6)

1,329

304

United States state and federal taxes

314

712

1,112

Taiwan corporate income taxes

83

-

161

United Kingdom corporate income taxes

-

-

-

Belgium corporate income taxes

176

-

-

Germany corporate income taxes

127

-

-

Thailand corporate income taxes

4

-

-

Total current income tax expense

698

2,041

1,577

 

 

Six months to

June 30,

2021

Six months to

June 30,

2020

Year ended

December 31,

2020

Deferred income tax expense

US$'000

US$'000

US$'000

Switzerland

(78)

(31)

588

Portugal

(46)

-

(28)

Taiwan

2

-

(25)

Spain

(38)

 

 

United Kingdom

(16)

 

 

Total deferred income tax expense (income)

(176)

(31)

535

 

Total income tax expense

522

2,010

2,112

 

 

Period ended

June 30,

2021

 

Year ended

December 31,

2020

Tax liability

US$'000

 

US$'000

Opening balance - (Prepaid taxes)

1,495

 

(42)

Tax liability acquired in business combinations

534

 

 

Income tax expense for the period / year

698

 

1,577

Taxes paid

(1,442)

 

(48)

Foreign currency movements

(26)

 

8

Closing balance

1,259

 

1,495

 

The Group had net deferred tax assets of US$151,000 as at June 30, 2021 (Net tax liabilities of US$31,000 at December 31, 2020)

The components of the net deferred income tax assets and liabilities are as follows:

 

 

Period ended

June 30,

2021

 

Year ended

December 31,

2020

Deferred taxes

US$'000

 

US$'000

Deferred tax assets

 

 

 

Pension fund obligations

653

 

655

Tax losses recognized

327

 

171

Total deferred tax assets

980

 

826

Deferred tax liabilities

 

 

 

Capital allowances and depreciation

(829)

 

(857)

Total deferred tax liabilities

(829)

 

(857)

Net deferred tax assets (liabilities)

151

 

(31)

 

As at June 30, 2021, the Group had approximately US$327,000 of tax losses available to be carried forward against future profits (December 31, 2020: US$171,000; June 30, 2020: US$2.2 million).

In applying judgement in recognizing deferred tax assets, management has critically assessed all available information, including future business profit projections and the track record of meeting forecasts. Management expects the deferred tax asset to be substantially recovered in 2021.

9.   Earnings per share

The calculation of earnings per share is based on the following earnings and number of shares:

 

 

Six months to

June 30,

2021

Six months to

June 30,

2020

Year ended

December 31,

2020

Earnings per share

US$'000

US$'000

US$'000

Profit after tax attributable to owners of the Company

3,126

8,602

4,991

Basic earnings per share (cents)

2.46

8.32

4.41

Diluted earnings per share (cents)

2.38

8.32

4.21

Basic weighted average number of shares in issue

127,214,811

103,398,3131)

113,143,731

Diluted weighted average number of shares in issue

131,222,146

103,398,3131)

118,666,601

 

1)    The weighted average number of shares in issue for the six months to June 30, 2020 has been calculated by reference to the weighted average number of Ordinary Shares of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement. There were no dilutive equity instruments as at June 30, 2020.

 

Goodwill

 

 

Trademarks & patents

 

Internally developed assets

Brands

& Customer relations

 

Acquired technologies

 

Total

 

 

Cost

    US$'000

    US$'000

US$'000

   US$'000

   US$'000

US$'000

As at January 1, 2020

3,393

417

1,128

295

-

5,233

Additions through business combinations

123

-

-

-

-

123

Additions arising from internal development

-

33

602

-

-

635

Currency translation differences

-

41

121

-

-

162

As at December 31, 2020

3,516

491

1,851

295

-

6,153

Additions through business combinations

 16,319

 20

159  

 3,221

 2,501

 22,220

Additions arising from internal development

 -  

 14

 1,315

 -  

 -  

 1,329

Currency translation differences

 -  

 (13)

 (71)

 -  

 -

 (84)

As at June 30, 2021

19,835

 512

 3,254

3,516

 2,501

 29,618

 

Amortization

 

 

 

 

 

 

As at January 1, 2020

-

249

384

78

-

711

Amortization for the year

-

70

11

29

-

110

Currency translation differences

-

31

37

-

-

68

As at December 31, 2020

-

350

432

107

-

889

Amortization for the period

 -  

 34

 11

 108

 52

 205

Currency translation differences

 -  

 (11)

 (17)

 -  

 (1)  

 (29)

As at June 30, 2021

 -  

 373

 426

 215

 51

 1,065

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

As at December 31, 2020

3,516

141

1,419

188

-

5,264

As at June 30, 2021

 19,835

 139

 2,828

3,301

2,450

 28,553

 

 

Machinery and equipment

Motor vehicles

Computers and software

Furniture and fixtures

Land and buildings

 

Total

 

 

Cost

    US$'000

    US$'000

US$'000

   US$'000

   US$'000

US$'000

As at January 1, 2020

5,189

343

665

100

-

6,297

Additions through business combinations

1,224

 -  

1

12

-

1,237

Additions

629

191

77

35

-

932

Disposals

 (628)

 (46)

 (2)

 (18)

-

 (694)

Currency translation differences

365

4

69

3

-

441

As at December 31, 2020

6,779

492

810

132

-

8,213

Additions through business combinations

 191

 18

 24

 172

 1,675

 2,080

Additions

 180

 50

 35

 5

 14

 284

Disposals

 -  

 -  

 -  

 -  

 (66)

 (66)

Currency translation differences

 (196)

 (2)

 (36)

 (4)

 (33)

 (271)

As at June 30, 2021

 6,954

 558

 833

 305

 1,590

 10,240

 

Depreciation

 

 

 

 

 

 

As at January 1, 2020

1,917

180

285

31

-

2,413

Acquisition on business combination

42

 -  

-

 -

-

42

Charge for the year

538

84

142

12

-

776

Eliminated on disposal

 (607)

 (24)

  -

 (7)

-

 (638)

Currency translation differences

112

2

37

2

-

153

As at December 31, 2020

2,002

242

464

38

-

2,746

Charge for the period

 388

 56

 82

 15

 50

 591

Currency translation differences

 (69)

 

 (22)

 

 (1)

 (92)

As at June 30, 2021

 2,321

 298

 524

 53

 49

 3,245

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

As at December 31, 2020

4,777

250

346

94

-

5,467

As at June 30, 2021

4,633

260

309

252

1,541

6,995

 

 

 

Land and buildings

Motor vehicles

Machinery and equipment

Total

Cost

    US$'000

    US$'000

US$'000

US$'000

As at January 1, 2020

3,757

111

22

3,890

Additions

76

-

32

108

Disposals due to expiry of lease

 (306)

 (43)

 (14)

 (363)

Currency translation differences

174

8

1

183

As at December 31, 2020

3,701

76

41

3,818

Additions through business combinations

 1,186

 300

 470

 1,956

Additions

 69

 56

 101

 226

Currency translation differences

 (92)

 (7)

 (10)

 (109)

As at June 30, 2021

4,864

425

602

5,891

 

Depreciation

 

 

 

 

As at January 1, 2020

1,077

80

19

1,176

Charge for the year

345

16

7

368

Disposals due to expiry of lease

 (306)

 (43)

 (14)

 (363)

Currency translation differences

66

7

0

73

As at December 31, 2020

1,182

60

12

1,254

Charge for the period

211

28

40

279

Currency translation differences

 (32)

 (3)

 -

 (35)

As at June 30, 2021

1,361

85

52

1,498

 

 

 

 

 

Net book value

 

 

 

 

As at December 31, 2020

2,519

16

29

2,564

As at June 30, 2021

3,503

340

550

4,393

 

The majority of trade receivables are current, and the Directors believe these receivables are collectible. The Directors consistently assess the collectability of these receivables. As at June 30, 2021, the Directors considered a portion of these receivables uncollectable and recorded a provision in the amount of US$716,000 (June 30, 2020: US$319,000 ; December 31, 2020: US$551,000).

 

As at

June 30,

2021

 

As at

December 31,

2020

Trade receivables

US$'000

 

US$'000

Trade receivables

17,369

 

13,988

Provision for expected credit loss

(716)

 

(551)

Total trade receivables

16,653

 

13,437

 

Movements in the Company's share capital were as follows:

 

Note

Number of shares

Share capital

Share premium

Totals

 

 

No.

US$'000

US$'000

US$'000

Balance as of January 1, 2020

 

2,668,999

350

1,305

1,655

Consolidation of shares

 

(1,779,346)

-

-

-

Placing of shares

 

11,789,142

4,641

12,684

17,325

Subscription for shares

 

6,068,000

2,389

6,529

8,918

Issue of shares to acquire HeiQ Materials AG

 

106,759,900

42,027

114,865

156,892

Shares issued in lieu of fees

 

385,209

152

414

566

Costs of share issues

 

-

-

(1,260)

(1,260)

Balance as at December 31, 2020

 

125,891,904

49,559

134,537

184,096

Issue of shares to acquire Chrisal NV

 

1,101,928

456

2,526

2,982

Issue of shares to acquire RAS AG

 

1,701,821

710

3,946

4,656

Balance as at June 30, 2021

 

128,695,653

50,725

141,009

191,734

 

The par value of all shares is £0.30. All shares in issue were allotted, called up and fully paid.

As described in Note 4 above, the Company issued a further 1,887,883 new ordinary shares on 9 July 2021 to the sellers of LIFE, at a price of £1.496201 per share, equivalent to US$4,085,000.

Share Option Scheme

The Company has adopted the HeiQ plc Option Scheme. Under the Option Scheme, awards may be made only to employees and executive directors. The Board will administer the Option Scheme with all decisions relating to awards made to executive directors taken by the Remuneration Committee.

 

A total of 6,260,000 awards were made under the Option Scheme pursuant to re-admission on December 7, 2020. No options were issued, exercised, forfeited or lapsed during the six months ended June 30, 2021. Accordingly, all options remained in place at June 30, 2021.

 

The share-based payment expense arising from these share-based payment transactions recognized in the period ended June 30, 2021 was US$387,000 (year ended December 31, 2020: US$50,000).

 

As at

June 30,

2021

 

As at

December 31,

2020

Other non-current liabilities

US$'000

 

US$'000

Defined benefit obligation IAS 19

3,264

 

3,276

Deferred consideration in relation to the acquisition of:

 

 

 

-       Chem-Tex assets

94

 

149

Total other non-current liabilities

3,358

 

3,425

 

The principal changes in borrowings during the period ended June 30, 2021 were as follows:

-       a loan of US$250,000 payable to the former owners of Life Materials who are now minority shareholders of HeiQ which was settled in July 2021.

-       a bank loan taken out in November 2020 and assumed in the business acquisition of HeiQ Chrisal which incurs interest at Euribor + 0.987% and is secured by buildings. It is repayable or renewable by November 2021. As at June 30, 2021, €300,000 (US$356,000) is outstanding; and

-       a bank loan taken out in April 2021 which incurs interest at 0.97% and is secured by buildings. It is repayable by March 2022. As at June 30, 2021, €191,000 (US$227,000) is outstanding.

The following table provides a reconciliation of the Group's future maturities of its total borrowings for each period presented:

 

 

As at

June 30,

2021

 

As at

December 31,

2020

Borrowings

US$'000

 

US$'000

Not later than one year

1,145

 

173

Later than one year but less than five years

1,060

 

1,043

After more than five years

241

 

357

Total borrowings

2,446

 

1,573

 

The following table represents the Group's finance costs for each period presented:

 

As at

June 30,

2021

As at

June 30,

2020

As at

December 31,

2020

Finance costs

US$'000

US$'000

US$'000

Amortization of deferred finance costs - acquisition costs

71

123

245

Lease finance expense

42

26

52

Interest on borrowings

58

64

108

Bank fees

31

18

46

Loss on foreign currency transactions

80

10

733

Total finance costs

282

241

1,184

 

 

As at

June 30,

2021

 

As at

December 31,

2020

Other current liabilities

US$'000

 

US$'000

Deferred consideration in relation to the acquisition of:

 

 

 

-       Chem-Tex assets

199

 

967

-       RAS AG

3,052

 

-

-       Life Material Technologies Limited

2,038

 

-

Total other current liabilities

5,289

 

967

 

Deferred consideration relating to the acquisition of RAS AG and Life totaling US$5.2m is payable in cash (US$1.4m) and in (US$3.8m) HeiQ shares in 2022 and relates to earnout payments described in note 4.

The deferred consideration and related financing expense are summarized below:

 

As at

June 30,

2021

 

As at

December 31,

2020

Deferred consideration

US$'000

 

US$'000

Balance brought forward

1,116

 

2,103

Payable on acquisitions during the period

5,090

 

-

Amortization of fair value discount

71

 

245

Consideration settled in cash

(908)

 

(1,267)

Foreign exchange differences

14

 

35

Deferred consideration carried forward

5,383

 

1,116

Current liability

5,289

 

967

Non-current liability

94

 

149

Total 

5,383

 

1,116

 

Net debt reconciliation:

Six months ended June 30, 2021

Opening balances

New agreements

Assumed on acquisition of subsidiaries

Cash movements

Foreign exchange differences

Closing balances

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Cash and cash equivalents

 25,695

 

 2,121

 (7,156)

 (750)

 19,910

Leases

 (2,652)

 (226)

 (1,956)

 263

 75

 (4,496)

Borrowings

 (1,573)

 (472)

 (579)

 113

 63

 (2,448)

Totals

 21,470

 (698)

 (414)

 (6,780)

 (612)

 12,966

Year ended December 31, 2020

Opening balances

New agreements

Assumed on acquisition of subsidiaries

Cash movements

Foreign exchange differences

Closing balances

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Cash and cash equivalents

 3,603

 -

 -

 21,822

 270

 25,695

Leases

 (2,784)

 (222)

 -

 354

 -

 (2,652)

Borrowings

 (2,478)

 (61)

 (1,512)

 2,735

 (257)

 (1,573)

Totals

 (1,659)

 (283)

 (1,512)

 24,911

 13

 21,470

 

Reconciliation of cash movements on business combinations:

Cash assumed on acquisition of Chrisal NV

 

1,774

Cash assumed on acquisition of RAS AG

 

273

Cash assumed on acquisition of RAS GmbH

 

18

Cash assumed on acquisition of Life Material Technologies Ltd

 

56

Cash assumed on acquisitions of businesses

 

2,121

 

 

 

Consideration payment for acquisition of Chrisal NV

 

(6,054)

Consideration payment for acquisition of RAS AG

 

(1,482)

Consideration payment for acquisition of Chem-Tex assets

 

(908)

Consideration payment for acquisitions of businesses

 

(8,444)

 

The Directors are not aware of any contingencies or other provisions which might impact on the Group's operations or financial position.

Two companies controlled by a director of HeiQ USA are the landlord for two buildings in the United States which are leased to HeiQ USA. These leases have been capitalized as right-of-use assets in accordance with IFRS 16 "Leases". The total amount paid in the six months ended June 30, 2021 was US$80,000 (six months ended June 30, 2020: US$80,000.

A bank loan of €800,000 (US$950,000) is secured on property owned by a company which is controlled by a minority shareholder of HeiQ Medica.

 

In June 2021, Chrisal NV sold a house for €250,000 to a minority shareholder of Chrisal NV and shareholder of HeiQ based on estimated open-market value. As part of the purchase price allocation, the proceeds of €250,000 were included within other receivables on acquisition.

 

Loans of €459,000 (US$562,000) and €130,000 (US$154,000) are payable to a company controlled by minority shareholders of HeiQ Medica. One loan is payable to a minority shareholder of HeiQ Medica.

 

A loan of US$250,000 is payable to the former owners of Life Materials who are now minority shareholders of HeiQ. See note 18 for further details.

 

A loan of €40,000 (US$47,000) is payable to a minority shareholder of HeiQ Medica. The loan is repayable on demand and does not incur any interest.

As described in Note 4 c, the Company settled the Share Consideration due on the acquisition of Life Material Technologies Limited on 9 July 2021 by the issue of 1,887,883 new ordinary shares at a price of £1.496201 per share.

As at 30 June 2021, the Company did not have any single identifiable controlling party.

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