10 May 2023

Directa Plus plc

("Directa Plus", the "Group" or the "Company")

Final Results

Strong performance delivers revenue ahead of market expectations

and solid growth across the Group

Directa Plus (AIM: DCTA), a leading producer and supplier of graphene nanoplatelets based products for use in consumer and industrial markets, announces its full year results for the year ended 31 December 2022.

 Financial highlights

·    Product sales and service revenue increased by 26% to €10.86m (2021: €8.62m), slightly above consensus market expectations

·    Total income (including grants) increased by 19.4% to €11.28m (2021: €9.45m)

·    Adjusted LBITDA * increased to €3.15m (2021: €2.49m)

·    Loss before tax increased to €5.33m (2021: €3.38m)

·    Reported (basic) Loss per share was €0.07 (2021: €0.06)

·    Cash and cash equivalents at year end of €5.73m (2021: €11.13m)

·    Total patents granted at year end of 80 (2021: 72)

* Adjusted LBITDA represents loss from operating activities before tax, interest, depreciation and amortization, adjusted by one-off income, inventory write-offs, non-recurring legal expenses and onerous contract provision (please refer to the CFO statement for further details).

Target market progress

Environmental Remediation (75% of revenue (2021: 76%))

·    Installed two production units to increase production capacity and benefits derived from lower unit production costs.

·    Commercial Agreement with UK based REDA Energy to distribute Grafysorber® oil response products in agreed territories in Northern Europe.

·    Authorisation from the US Federal Environment Protection Agency (EPA) for Grafysorber® technology to be used on any oil contamination on US territory.

·    Established pipeline of active tenders and high value opportunities.

Textiles (23% of revenue (2021: 21%))

·    First exclusive supply agreement in Latin America with CIA Miguel Caballero SAS in Colombia.

·    Contract extension with Alfredo Grassi S.p.A. to broaden the collaboration for the workwear markets in Italy and France.

·    Supply agreement with Officine di Cartigliano in Italy to improve equipment performance and address antistatic issues.

·    Continued to partner with a global chemicals and materials group on an exclusive basis to develop specific products for the global air filtration markets.

·    Post period end granted an Italian patent for G+ graphene technology for air filtration applications.

Others

·    New major contract in the composites vertical covering the resurface of a total of 250 km section of the A4 Torino-Milano motorway section with Gipave, a sustainable asphalt solution containing G+ graphene.

·    New exclusive agreement with Pigmentsolution GmbH to support the development and distribution of Directa Plus's new patented Graphene Plus (G+) paints product, Grafyshield G+, initially in Germany, Austria, Switzerland, and Poland.

·    Continued investment in next generation manufacturing equipment to materially reduce direct production costs and to mitigate inflationary cost pressures.

Commenting on the results, Giulio Cesareo, Founder & CEO, said: "I am incredibly proud of the successes achieved by our dedicated team this year against a challenging economic backdrop. We have secured several contract wins and invested in our technology to position the business to serve a range of customers globally as the awareness of the capabilities of graphene continues to grow.

"In the current climate, businesses across all sectors are turning to more sustainable methods and our G+ technology has the ability to sit right at the heart of many of these sectors globally. The prospects for Directa Plus are increasingly positive and we have entered FY23 in a robust position. Our focus now is on developing our core verticals which are able to generate significant product demand and higher recurring revenue from customers. With an expanding network of customers and partners, a record order book alongside a strong balance sheet, I am confident in the Group's ability to deliver on its growth ambitions for the year ahead."

Enquiries:

Notes to Editors

Directa Plus (www.directa-plus.com) is one of the largest producers and suppliers of graphene-based products for use in consumer and industrial markets. The Company's graphene manufacturing capability uses proprietary patented technology based on a plasma super expansion process. Starting from natural graphite, each step of Directa Plus' production process - expansion, exfoliation and drying - creates graphene-based materials and hybrid graphene materials ready for a variety of uses and available in various forms such as powder, liquid and paste.

This proprietary production process uses a physical process, rather than a chemical process, to process graphite into pristine graphene nanoplatelets, which enables Directa Plus to offer a sustainable, non-toxic product, without unwanted by-products.

Directa Plus' products are made of hybrid graphene materials and graphene nano-platelets. The products (marketed as G+(R)) have multiple applications due to its properties. These G+(R) products can be categorised into various families, with different products being suitable for specific practical applications.

Directa Plus was established in 2005 and is based in Lomazzo (Como, Italy) and has been listed on the AIM market of the London Stock Exchange since May 2016. Directa Plus holds the Green Economy Mark from London Stock Exchange which recognises companies that contribute to the global green economy.

For further information please visit http://www.directa-plus.com/

Chairman's statement

I am pleased to provide my first report as Chairman of Directa Plus covering a year of strong operational and strategic progress. The Group delivered revenue growth of 26% from products and services to €10.86m and LBITDA increased to €3.61m. These results were achieved in a context challenged by inflationary cost pressures and supply chain disruption that impacted customer scheduling.

During the year the Group secured a number of important new business wins, further strengthening our position within the expanding graphene market and demonstrating our increasing commercial traction. We continue to see growing interest in the ability of graphene to transform the performance of our customers' products and to support a more sustainable future. The Group has maintained its focus on developing and delivering market leading products and services within our two principal business verticals: Environmental Remediation and Textiles. We remain focused on prioritising those verticals where we have already established strong momentum and where there is high potential in terms of commercialisation and financial returns. I am confident therefore in the Group's ability to continue delivering for all its stakeholders.

Delivering on our strategy

A robust and sustainable strategy remains at the core of the Group's activities and is focused around four key pillars: a unique, low-cost graphene production process; the manufacture of pristine graphene nanoplatelets free of chemical pollutants and tailored to customers' needs; a reduced time to market for new products, benefiting from considerable accumulated knowhow and strong IP; and market reach leveraged through carefully assessed partnerships. Our strategy and financial results are covered in more detail in the Chief Executive Officer's statement.

The market for graphene-based products is broad and developing rapidly and expected to be worth €0.5bn p.a. by 2026, a compound annual growth of 36%. Directa Plus is very well positioned to capitalise on this growth through its unique platform technology that supplies G+ graphene material into many applications and products, created in close collaboration with our partners and customers. Whilst the Group is focused on developing its core vertical markets, there is also the opportunity to expand into new markets as and when appropriate for the business, as graphene continues to revolutionise new and existing products and materials.

Focused on customer needs

With strong foundations laid over the last few years we are encouraged by the accelerated levels of interest in the Group's offering and we continue to gain wider recognition for our proven, innovative products.

We have partnered with a number of new organisations in the year to offer the high-performance benefits of our G+ graphene and we are confident in our commercial prospects. We have established new, long-standing and deepening partnerships with leading industrial companies across a range of sectors, including a global chemicals and materials group, Alcantara and REDA Energy that provide opportunities for growth as we leverage on their established expertise and international reach.

The Group has also secured a number of notable new customers and contracts during the year across all key verticals and markets, including MC Armor in South America and Alfredo Grassi SpA in Italy in the textiles sector, Reda Energy in the UK environmental sector and a major Gipave asphalt contract. Notably, we also signed a new exclusive agreement with Pigmentsolution, a European distributor of speciality chemicals and ingredients, to support the development and distribution of the Group's new patented Grafyshield G+ product that enhances the anti-corrosion and flame-retardant properties of paint systems. These wins throughout the year demonstrate the increasing appetite for our products and our competitive advantage as we continue to build on our leading position in the graphene market.

Board changes

I became interim Chairman following the Annual General Meeting in June 2022 at which Sir Peter Middleton stepped down as Chairman and today I am delighted to accept the Board's invitation to be Chairman.

During the year we were pleased to welcome two new Non-Executive Directors to the Board: General Wesley Clark, in October, and Sarah Cope, in November. Among many accreditations, General Clark is a businessman with experience across a variety of sectors and his experience and contacts will enable us to gain faster access to the most significant high-potential graphene opportunities in the United States.  He has in-depth knowledge of the US innovation eco-system, not only in the defence sector but also in oil and gas and new energy, including batteries and renewables.  Sarah has over twenty years of financial and capital market experience and has previously advised AIM listed companies in the Oil and Gas sector. Her knowledge will help us in our next phase of development as we address global decontamination markets with Grafysorber®.

We entered 2023 with a high calibre Board with a diverse range of strengths and experience that Directa Plus can benefit from. 

Summary and outlook

The Group made significant progress in 2022 and is well positioned to serve a growing customer base globally. I would particularly like to take this opportunity to thank our dedicated team who have continued to work hard to strengthen our position within the graphene market.

The new business wins in the year, alongside the grant of important new patents, demonstrates the breadth and depth of our graphene technology that can be used across a wide range of growth markets. As the awareness of the capabilities of graphene continues to build, it is clear that large supply chains are now increasingly considering incorporating graphene into their product portfolios to enhance performance and to provide more sustainable solutions.

Whilst we remain cognisant of inflationary pressures, I am confident in our ability to continue to mitigate these throughout our current financial year. We entered 2023 in a robust position, with an expanding network of customers and partners, a record order book and a supportive market backdrop. The Board is confident in the Group's ability to take advantage of the substantial opportunities that lie ahead. 

Richard Hickinbotham
Chairman

9 May 2023

Chief Executive Officer's Review

2022 was a year of solid operational performance fuelled by new contract wins and increasing traction in the graphene market. We delivered strong top line growth and maintained focus on developing and delivering market leading products and services in our two core business verticals: Environmental Remediation and Textiles.

As one of the largest producers and suppliers of graphene-based products, we have built Directa Plus with a clear strategy based on our four key pillars:

1.    A unique graphene production process with strong IP - we have designed and patented an in-house process, that is simple, scalable and sustainable, utilising physics without the need for over complicated and pollutive chemistry;

2.    Pristine G+ graphene - we produce graphene nanoplatelets with tunable xyz dimensions tailored to the needs of each vertical and customer;

3.    Time to market - we have continued to build considerable product and process knowhow since our first product launch in 2015 and we now have 43 products on the market;

4.    Partnerships - we aim to work with leading industrial partners with large international footprints that provide significant growth opportunities: These partners are important reference customers that support the roll out of graphene enhance products and services globally.

The strong foundation of our key pillars enabled us to achieve our target to scale production capacity to 100t p.a. in the year and to deliver double digit revenue of with a 63% CAGR over the past 5 years.

Our mission remains to deliver the best quality graphene at the best possible price in the most sustainable way, whilst supporting the industrialisation of existing and new vertical applications. The Group continued to enhance products in other areas based on its patented technology, where it has identified significant potential commercial opportunities, including paints, composites, concrete, polymers and Lithium-Sulphur batteries.

By delivering on our core strategy we achieved another year of strong growth with revenue ahead 26% on the previous year at €10.86m, slightly above market expectations due to a solid trading performance in December 2022, and LBITDA and LBT in line with expectations.

During the year we experienced revised timelines on some orders due to the re-profiling of certain projects, as a result of the uncertain macroeconomic backdrop. We have nevertheless achieved continued growth across the business' key vertical markets and geographies.

Like many businesses in the year, the Group was impacted by higher energy and raw material costs, which affected our direct production costs, and general cost increases on outsourced services. We worked to mitigate these potential impacts by increasing the price of our own products and also implementing a cost reduction plan including investment in new milling equipment that reduced direct production costs. These measures allowed the Group to progressively improve margins over the second half of the year and to position the business to withstand future headwinds by taking full advantage of the technology platform we have developed.

The development of graphene technology and its applications is accelerating across a range of industries due to its exceptional properties, including electrical and thermal conductivity, antibacterial and antivirus efficacy. Directa Plus is well positioned to capitalise on this opportunity using our patented process for the production of pristine, chemical free, graphene nanoplatelets, tailored to new and existing partners' and customers' requirements.  We expect to build a substantial business by positioning Directa Plus in the verticals where technology capabilities, at attractive costs, meet with market opportunities and growing customer acceptance.

The Company entered 2023 in a solid position, building on momentum from the end of the prior year. With an expanding network of customers and partners, a record order book and a supportive market backdrop, we are confident in the Group's ability to take advantage of the huge opportunity that is ahead.

Strategy

We are building a highly scalable business by targeting new and existing products and markets that can be significantly improved with the addition of our graphene-based products. We work closely with our partner network, benefitting from their knowledge of different markets, strong reputation and commercial channels to identify the right opportunities that will deliver commercialisation and financial return.

We continuously monitor potential markets where we believe that for a relatively small investment, we can develop products that can generate high commercial traction and which have a fast time to market, such as paints and filtration.

Sustainability is at the heart of our operations and acts as a powerful differentiator from our competitors. We have amassed 43 certifications over the years, all reporting the absence of negative impacts on biological systems.

We consider the health and safety of all stakeholders and environmental protection as top priorities, and we have implemented a proactive approach by continuously monitoring our production process and products. 

During the year, we delivered strong top line growth and maintained focus on developing and delivering market leading products and services in our two core business verticals - Environmental Remediation and Textiles. The Company continued to deliver enhancements, based on its patented technology, to products in other areas where Directa Plus has identified significant potential commercial opportunities, including paints, composites, concrete, polymers, and Lithium-Sulphur batteries.

Environmental remediation (75% of annual revenue)

Environmental remediation activities are principally carried out through Setcar, a subsidiary company based in Romania. Significant progress was achieved in this key vertical in 2022 with another year of strong growth with revenues ahead 24% and Grafysorber technology rapidly gaining traction in a number of new markets. Grafysorber® is a truly ground-breaking technology that is the only commercially available hybrid graphene-based solution for treating water contaminated by hydrocarbons. Grafysorber has many advantages over traditional products and can work on a wide range of hydrocarbon and several other organic pollutants. It absorbs 100 times its weight, it is safe for the operators and the environment, and it is light and easy to handle.

We have continued to invest to further improve performance and to broaden the range of potential applications, in addition to our existing water treatment products and services.

In the first half of the year we installed our first production unit for Grafysorber® materials in Romania. In response to growing demand, the Group has subsequently installed a second Grafysorber® production unit into Romania to further increase production capacity.

In April 2022 the Group received authorisation from the US Federal Environment Protection Agency (EPA) for Grafysorber® technology to be used on any oil contamination on US territory, providing the business with an entrance into the very large US oil decontamination market. The Group is also looking to further expand product and service sales into Asia over the longer term.

In the UK, the Company signed a Commercial Agreement with UK based REDA Energy in July 2022, a leading chemical manufacturer and supplier to the oil and gas industry, to distribute Grafysorber® oil response products in agreed territories in Northern Europe. The Commercial Agreement follows the successful testing of Directa Plus's products by REDA customers in the North Sea. Directa Plus has been able to further improve its oil spill response products, enhancing their ease of use and performance. The Group delivered REDA's first product order in June 2022 and it is now also exploring wider opportunities for the application of the Group's water decontamination technology.

The Group keeps working on a number of large and small contracts providing waste treatment and decontamination services, both locally and internationally.

Directa Plus still awaits the final decision on the award of a significant contract in Romania for the Group's Environmental Remediation services and the Directors continue to believe that the Group is well positioned to secure the tender.

Textiles (23% of annual revenue)

Directa Plus continued to gain strong commercial momentum in the Textiles vertical during the year with revenue growth of 33%. There is significant interest in incorporating technology into wearables which will further expand the broad spread of applications for G+® graphene that is now incorporated into fabrics through four different technologies:

·    G+® PLANAR THERMAL CIRCUIT®: a functional print that can be applied to any type of fabrics, creating a circuit.

·    G+® MEMBRANES: G+® is incorporated into the polyurethane membrane that can be laminated self-standing or combined with a PTFE membrane directly to a fabric.

·    G+® DYEING: The fabric is immersed in a water-based bath containing G+® yielding a completely antimicrobial fabric.

·    G+® COATINGS: a special coating process, based on water, able to obtain high-performance polyurethane, enhanced with G+®.

Workwear

A key highlight includes the signing of an extension agreement with Alfredo Grassi S.p.A, a European workwear manufacturer, to broaden the existing collaboration to include our Planar Thermal Circuit® (PTC®) for the workwear markets in Italy and France. This will enable the development of new products for Grassi which will increase comfort for the wearer - a key differentiator as temperatures increase around the world. We have been working with Grassi for over five years and this extension agreement demonstrates the reliability of our technology and ability to deliver consistently for our customers. It will enable us to further develop our understanding of market trends and drivers affecting demand for workwear products.

Military

We secured our first exclusive supply agreement for printed graphene textile Planar Thermal Circuit® (PTC®) in Latin America with a Columbian based manufacturer of ballistic protection clothing, CIA Miguel Caballero SAS. Directa Plus will provide a total of 77,500 linear metres of PTC® printed material over a four year period, commencing from October 2022, for a total contract value of over €1 million. This agreement further demonstrates the applicability of our technology to a wide range of materials.

Luxury

We continue to work with a major luxury Italian brand, which has been a customer since 2019, generating important volumes and relying on our technology to promote its technical fabrics collections.

Automotive

In April 2022, the Company signed a Letter of Intent (LOI) with a leading global supplier of automotive interiors to Tier 1 manufacturers. The supplier intends to develop a suite of new products for the automotive industry based on the antimicrobial properties (antibacterial and antiviral), thermal comfort and electrical conductivity properties of G+® enhanced fabrics.

The LOI has a 12-month term and sees Directa Plus and the supplier agree to combine resources, competence and expertise to develop G+® enhanced fabrics into a suite of ready to use products for the automotive industry. If both parties are satisfied with the results achieved after the 12 months, the partners shall undertake to negotiate a Supply Agreement between the two companies.  Directa Plus is already working with the supplier to produce prototypes for a number of global Tier 1 car manufacturers.

Air filters

In March 2023, the Company was granted an Italian patent for its G+® graphene technology for air-filtering applications and the development of an industrial-tested G+ product for the expanding air filtration market. This significant award is in partnership with an Italian-based global chemicals and materials company. The companies have been working together since December 2021 on an exclusive basis to develop specific products for the global air and water filtration markets.

Textiles for consumer electronics

Directa Plus continues to collaborate with the soft goods division of a major international developer and manufacturer of consumer electronics and related services. The agreement covers the potential application of G+® as a protective covering for consumer devices, exploiting its antiviral-antibacterial properties as well as its thermal and electrical conductivity. The partnership has delivered exceptional results to date with the collaboration continuing to demonstrate the potential for significant volumes in the coming years.

Other textiles applications

We secured a supply agreement with Officine di Cartigliano, an Italian based leader in the production of tanning equipment for the textile industry for its G+® technology, worth €150,000 over one year on a take or pay basis. Officine di Cartigliano will be using a formulation of the Company's G+® based textile finishing application to improve the performance of its equipment, particularly to address antistatic issues.

The Group is also exploring the sportswear industry to exploit the G+ heat dispersion and antimicrobial properties to understand the potential of this vast market.

Additional potential high return verticals

Composites

The asphalt applications of the Group's G+ graphene technology have great potential and the product developed with Iterchimica provides exceptional results in terms of increased durability and reduced carbon footprint. Market interest for the product is growing internationally and is gaining significant commercial traction.

In March 2022, Oxfordshire County Council conducted its second trial of a patented asphalt concrete modifier developed by Iterchimica and enhanced by our Graphene Plus product.  This follows an initial pilot trial in Oxfordshire in 2019. The new trial will see two identical stretches of Marsh Lane in Oxford, which carries around 10,000 vehicles a day along a key city route, resurfaced with different materials.  Half of a 700-metre stretch of the road will be laid with GiPave®, while the rest will be resurfaced using conventional asphalt, so that the two surfaces can be compared.

In the second half of the year we secured a new major contract for the A4 Torino-Milano motorway section, managed by the ASTM Group to provide a sustainable, resilient and safe asphalt made with G+® graphene and specially selected recycled hard plastics (e.g., toys, fruit crates, litter bins). The asphalt will re-use 70% of milled material from the existing pavement, thus reducing the use of new natural aggregates to only 30%. The works will involve both directions for a total of 250 km.

GiPave® was developed by Iterchimica with the support of Directa Plus and resulted from a three-year research programme with a patent filed in 2017. The product uses waste plastics that would not normally be recycled and the asphalt containing GiPave® can itself be entirely recycled - promoting the 'circular economy,' which reduces waste and the need for new materials.

Paints

Another area showing considerable early potential is within the graphene-based paints vertical. We have developed a graphene-based paint solution which provides enhanced anti-flame and anti-corrosion properties compared to normal paints. We have hired a team of experienced people in the field and initiated positive discussions with major international players in Europe and Asia to accelerate commercialisation and we are excited about the potential of this technology.

In the second half of the year we signed a new exclusive agreement with Pigmentsolution GmbH, a European distributor of speciality chemicals and ingredients, to support the development and distribution of Directa Plus's new patented Graphene Plus (G+) product, Grafyshield G+, initially in Germany, Austria, Switzerland and Poland, with the potential for further expansion in Europe. The initial 12 month contract will enable us to assess these important markets and measure the potential for further territorial expansion in the longer-term. It is a significant win for the Group as it demonstrates the appetite for and competitive advantage of our Grafyshield G+ product.

The global anticorrosion coating market is estimated to be valued at 41.20 USD billion by 2027, and the global flame-retardant coating market is estimated to be 4.83 USD billion.

Lithium-Sulphur Batteries

Lithium-Sulphur is a next generation battery chemistry offering advantages over Lithium-Ion as it has a superior energy density, significant cost advantages and a superior safety profile. We have continued to support our partner NexTech in the development of this technology, in which G+® will play a key role in terms of technical properties and the supply of the product at the scale necessary to satisfy the needs of the market. In the first half of the year, we agreed the removal of exclusivity originally agreed in the contract, and this allows Directa Plus to collaborate with other players in the industry.

We remain focused on supporting the development of such a potentially disruptive technology and we have already targeted another Lithium-Sulphur battery producer to accelerate the technology's commercialisation.

Others

We have maintained our investment in potential additional high return opportunities that could generate significant value for the Group in the upcoming years. The Group is currently looking with great interest at G+ applications in the concrete and polymers industries.

Intellectual Property

As at March 2023, the Group's patent portfolio comprised 81 patents granted and 37 pending, grouped into 22 families.  This has increased from 72 patents granted and 27 pending, grouped into 19 families in March 2022.

New patents during the year include:

·    an Italian patent covering the use of the Company's G+® applied to textile substrates for high bacterial filtration efficiency media for filtration applications;

·    a grant of a US patent titled "Golf ball comprising graphene". The patent will enable Directa Plus to license its technology in the key US market; and

·    a patent from the United States Patent and Trademark Office for the grant of a patent covering the Company's G+® embedded polyurethane membrane, developed explicitly for the textile industry, together with its production method and its applications.

We aim to create value from our wide IP portfolio. Discussions on potential licensing contracts are ongoing with potential for further patent applications and awards in 2023.

Environmental, Social and Governance policies

Environmental, Social and Governance considerations are an important part of what drives Directa Plus' business. 

Environment

Graphene Plus is a unique product, produced in a unique and sustainable way; G+® products are obtained through a proprietary patented process based on the physical transformation of natural graphite: (i) water-based process, (ii) no chemistry, (iii) high purity, (iv) zero discharge of hazardous chemicals.

In our production process we consider raw materials supply chains, energy consumption, water and wastewater, atmospheric emissions, the production of waste and any effect on biodiversity. We are constantly assessing our production processes, working with recognised environmental organisations to ensure the safety and sustainability of our products.  Our method of producing G+® always uses low energy consumption and low waste generation, making the entire process environmentally friendly.

With regards to our commercialisation strategy, it is our mandate to only work with environmentally responsible industrial partners, and to seek to improve products in existing markets. This means that we can help produce and sell better quality products than are currently available, with better performance and longer life for end-users.

Environmental remediation is a key division at the heart of this and we have been ISO 14001 certified since 2016.

In December 2021 Directa Plus received the Green Economy Mark from the London Stock Exchange, with over 75% of revenue contributions derived from the Environmental Remediation division.

Social

The Board considers one of its key stakeholder groups to include its workforce and makes efforts to support our employees where possible. We are a responsible employer and carefully consider all aspects of employee rights, equal opportunities, health and safety at work and training and education. We also have a remuneration policy intended to attract, retain and motivate high calibre executives to deliver outstanding shareholder returns and at the same time maintain an appropriate compensation balance with the other employees of the Group.

With respect to our local community, Directa Plus is well-known and deeply rooted in the Milan area. We promote our regional economy by identifying local suppliers, with whom it is possible to structure lasting partnerships. We believe it is essential to actively contribute to initiatives that can have a positive impact on the social fabric of the area.

Governance

The Board fully supports good corporate governance and recognises that it enhances its decision-making processes by improving the success of the Company and increasing shareholder value over the medium to long-term.

The Company complies with the Quoted Companies Alliance corporate governance code (the "QCA Code") and the Directors propose that the Company should continue to do so having regard to the Company's size, board structure, stage of development and resources.

ESG Rating

Directa Plus has embarked on the development of a full ESG Strategy and has engaged Integrum, an independent ESG ratings agency. With the objective to gather initial data upon which the Company can enhance its ESG reporting and practices for transparency for all stakeholders.

Integrum assessed and scored the company against robust frameworks including the SASB framework, Minerva Analytics and the Cambridge Impact Framework (latter against the UN Sustainability Goals).

Measures including managing greenhouse gas emissions and waste consumption were assessed as well as the company's policy on incorporating ESG concerns into Directa Plus' products and services and managing risk from government regulations and policy proposals that address social factors affecting the industry. 

The Company was then ranked relative to specific sub-sector peers and an overall score, and rating was applied. The Company was given a 'B' rating.

Outlook

This year we secured a number of high-level wins in our core verticals, Environmental Remediation and Textiles. We also invested in our technology and expanded our customer and partner networks to position the business to be able to successfully serve a range of customers globally as awareness of the capabilities of graphene continues to grow.

The Company has entered the new financial year in a solid position, building on the momentum established in 2022. With an expanding network of customers and partners, a record order book and a supportive market backdrop, we are confident in the Group's ability to take advantage of the huge opportunity that is ahead.  

As we build scale we expect to drive further production efficiencies and are excited about potential opportunities to expand our capacity with new installations in new geographic locations.

In parallel, we aim to create value from our wide IP portfolio. We are discussing potential licensing contracts that could accelerate the spread of our technology worldwide and generate positive cashflows for the Group.

While aware of the ongoing macroeconomic pressures, we have a dedicated and experienced team and supportive market tailwinds. The Board is confident in delivering results for 2023 in line with current expectations.

Giulio Cesareo
Chief Executive Officer

9 May 2023

Chief Financial Officer's Review

2022 was an important year of growth, in which the Group delivered a 26% increase in product and service revenue underpinned by strong traction in Environmental Remediation and Textiles. Noting the challenging and adverse market conditions, Directa Plus has efficiently managed its financial resources, mitigated the main risks and is working hard to improve its business growth and to recover margin.

Key Performance Indicators

The Board measures the performance of the Group through a number of important financial and non-financial KPIs.  In a young business with a number of different vertical markets, identifying measurable data that will provide useful insight year-on-year is not always straightforward but the KPIs below aim to help shareholders understand the Group's progress.

Summary of financial KPIs with further details contained later in this report:

·    Product sales and service revenue increased by 26% to €10.86m (2021: €8.62m), above market expectations

·    Total income (including grants) increased by 19.4% to €11.28m (2021: €9.45m)

·    Adjusted LBITDA* increased to €3.15m (2021: €2.49m)

·    Loss before tax increased to €5.33m (2021: €3.38m)

·    Reported (basic) Loss per share was €0.07 (2021: €0.06)

·    Cash and cash equivalents at year end of €5.73m (2021: €11.13m)

* Adjusted EBITDA loss represents results from operating activities before tax, interest, depreciation and amortisation, adjusted by one-off income, inventory write-offs, non-recurring legal expenses and onerous contract provision (details below).

Financial review

In 2022, the Group delivered another year of significant growth. Revenue from products and services increased by 26% to €10.86 million (2021: €8.62 million), and total income by 19.4% to €11.28 million (2021: €9.45 million).

The increase in revenue was driven by our two main verticals. Environmental Remediation services gained further traction with revenue growth of 24% to €8.14 million, supported by new and expanded contracts delivered by our subsidiary Setcar, leveraging on our technology and promoting G+ in the oil & gas industry globally. Textiles grew by 33%, with sales of €2.46 million due to the contribution of recurring and new contracts.

During the year, global markets were challenged by adverse macro-economic and geopolitical conditions. The war in Ukraine, together with post-pandemic supply chain issues, led to double digit inflation trends and created unprecedented market conditions. In the first half of the year, the Group was impacted by cost increases, from significant energy cost rises to increases in the cost of subcontracted services and general expenses. Management has sought to mitigate these cost pressures through price increases for the Group's products and investment to significantly reduce direct production costs. Our investment in next generation milling equipment in particular has built on Directa's throughput cost reduction project that was successfully begun six years ago. These actions, focused on margin recovery, are expected to have a material positive effect that will be increasingly evident during the new financial year.

Alternative performance measures

This  report includes both statutory and adjusted financial measures, the latter of which the Directors believe better reflect the underlying performance of the Group by excluding certain items that if included could distort a reader's understanding of the results.

The table below shows a reconciliation of statutory and adjusted measures for LBITDA and Loss before taxation.

Adjustments refer to:

·    one-off other income of €0.5 million reported in the 2021 accounts from the release of an undue obligation to the former shareholders of Setcar;

·    inventory write-off of €0.11 million in 2022, attributable to obsolete Co-Masks which are now experiencing a low market demand following the end of the Covid-19 pandemic;

·    legal costs of €0.16 million linked to the protection of Directa Plus' IP portfolio and disbursements relating to a lawsuit that dates back to 2017;

·    provision of €0.19 million for the total expected loss in 2023 on the conclusion of an onerous long-term contract where recovery is deemed uncertain under IFRS15. The Group is currently in discussion with the customer to seek an acceptable resolution;

·    Non-cash exchange rate effects, especially on the conversion of GBP cash balances to Euro.

In December 2021, the Group completed a fundraise with gross proceeds of £7 million, by way of a placing and subscription to accelerate additional investment in development of both our primary and secondary vertical markets. As of December 2022, the Group had €5.73 million of cash and cash equivalents. The forecasts prepared by the Directors show that the Group has sufficient liquidity in place to support the plan and strategy for the future developments of the business over the next 18 months. However, the Directors also modelled some downside scenarios, based on contract losses or delays and margin reductions, that could adversely impact the Group and require it to search for additional funds before December 2024, and could represent a material uncertainty over going concern. Nevertheless, the Board has a reasonable expectation that the Group has adequate resources in place to maintain investment and operations in line with its strategic business plan, and they have concluded it is appropriate to adopt the going concern basis of accounting in the preparation of the financial statements.

Whilst the war in Ukraine, inflation, and increased Central Bank interest rates pose on-going challenges, we are monitoring these external factors and continue to react to mitigate any potential further risk. In the short term, the Group's priorities continue to be focused on the reduction of cash consumption and improving profitability as we develop our core verticals to deliver for our shareholders, partners and customers.

Giorgio Bonfanti

Chief Financial Officer

9th May 2023

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION

The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own statement of comprehensive income in these financial statements. The Company loss after tax for the year was €1,200,138 (2021: €709,825).