RNS Number : 6246R
HeiQ PLC
30 October 2023
 

30 October 2023

 

HeiQ Plc

("HeiQ" or "the Company")

Half year results for the period ended 30 June 2023

HeiQ Plc (LSE:HEIQ), a leading company in materials innovation and hygiene technologies, announces its interim results for the period ending 30 June 2023 ("H1 2023").

These results are published concurrently with the Company's final results for the full year ended 31 December 2022 ("FY 22").

Restoration of Trading:

 

As detailed in the FY 22 results, upon uploading the Annual Report 2022 to the National Storage Mechanism, expected to be completed today, the Company will make an immediate request to the FCA for the Company's Ordinary Shares to be restored to trading on the Main Market of the London Stock Exchange as soon as practicable thereafter. A further announcement will be made confirming the exact time and date of resumption of trading.

 

Financial Overview:

 

·      Revenue reduced by 26% to US$20.5 million (H1 2022 restated*: US$27.6 million)

·      Gross profit margin of 40.9% (H1 2022 restated*: 41.5% in H1 2022)

·      Adjusted EBITDA of US-$3.6 million (H1 2022 restated*: US$0.7 million)

·      Operating loss of US-$6.0 million (H1 2022 restated*: US-$1.6 million)

·      Loss after taxation of US$-6.5 million (H1 2022 restated*: profit of US-$1.9 million)

·      Cash balance as at 30 June 2023 of US$7.3 million

 

* Details on restatements of prior year financial information are disclosed in Note 2 of the Consolidated Financial Statements.

 

Operational Overview:

 

Trading conditions for the markets of our commercialized product range continued to be challenging during H1 2023 and, as highlighted in detail in our Full Year results for the 12 months to 31 December 2022, the Company took decisive steps to reduce its cost base and reorganize the business to maintain its innovation and differentiation capabilities during the period under review. With costs reduced and operations adapted in light of the challenging headwinds our entire industry is facing, the Company expects H2 2023 trading to stabilize.

 

Post Period:

 

The Company is closely monitoring the market and is ready to take further cost reduction action, should it need to. We continue to add value to our high potential key innovation initiatives through focused investment, to position ourselves for when the macro-economic difficulties abate.

 

While the Board considers the Company has adequate resources, it is in discussions with financial institutions to replace the currently uncommitted credit facilities by committed, long-term facilities.

 

Equity analyst and shareholder presentations:

 

Following the resumption of trading in its ordinary shares the Company will announce registration details for two live presentations. These presentations will cover today's results and will be held separately for both equity analysts and investors.

For further information, please contact:

 

HeiQ Plc

Carlo Centonze (CEO)

+41 56 250 68 50

Cavendish Securities Plc (Broker)

Stephen Keys / Callum Davidson

+44 (0) 207 397 8900

SEC Newgate (Media Enquiries)

Elisabeth Cowell / Tom Carnegie / Molly Gretton

+44 (0) 20 3757 6882

HeiQ@secnewgate.co.uk

 

About HeiQ

HeiQ is a Swiss-based international company that innovates pioneering and differentiating materials in partnership with established global brands. We bridge the academic and commercial worlds to conceive performance-enhancing materials and technologies, working with aligned brands to research, manufacture and bring products to market, aiming for lab to consumer in months. Our goal is to improve the lives of billions by innovating the materials that go into everyday products, making them more hygienic, comfortable, protective, and sustainable.

 

Our strong IP portfolio positions us as an innovation leader for niche, premium and high-margin products in the textile chemicals, man-made fibers, paints and coatings, antimicrobial plastics, probiotics and household cleaner markets. We have also expanded into healthcare facilities, probiotic cleaning, and hygiene coatings markets to help make hospitals and healthcare environments more hygienic.

 

We have developed over 200 technologies in partnership with 300 major brands. With a substantial research and development pipeline, including key technology development projects HeiQ AeoniQ, HeiQ ECOS, HeiQ GrapheneX, and HeiQ Synbio, HeiQ aims to deliver shareholder value through sales growth and entry into new lucrative markets through disruptive innovation and M&A.

 

We have built a strong reputation for ESG & sustainable innovation, having won multiple awards including the Swiss Technology Award twice and the Swiss Environmental Award. Under experienced leadership, we are committed to driving our profit in close connection with people and the planet. For more information, please visit www.heiq.com.

 

Chairwoman's Statement

Due to the delay in the publication of the audited annual accounts 2022, these interim financial statements 2023 are published at the same time as the annual accounts 2022.

While further details on trading and HeiQ's performance in H1 2023 can be found in the CEO Statement in the annual report 2022, I provide a short synopsis here for our investors.

Trading conditions for the markets of our commercialized product range continued to be challenging during H1 2023 and, as highlighted in detail in our Full Year results for the 12 months to December 31, 2022, we took focused steps to reduce our cost base and reorganize the business during the period under review.

We believe that the actions taken since the start of the year mean we will be better positioned to manage the challenging macro-economic environment, while continuing to build value in our core innovations to preserve our ability to deliver when the market demand turns.

Financial Review

Results

Six months to

Six months to

Year ended

 


June 30,

2023

June 30,

2022

December 31,

2022

 


US$'000

US$'000

US$'000

 


 

(restated*)

 


Revenue

20,500

27,558

47,202

 

Cost of sales

(12,110)

 (16,127)

(33,745)

 

Gross profit

8,390

11,431

13,457


Other income

946

 2,748

4,832

 

Selling and general administrative expenses

(14,263)

 (14,016)

(30,969)

 

Impairment loss on intangible assets

-

-

(11,651)

 

Impairment loss on property, plant & equipment

-

-

(730)

 

Other expenses

(1,075)

 (1,735)

(4,184)

 

Operating loss

(6,002)

(1,572)

(29,245)

 

Depreciation of property, plant and equipment

710

 644

1,282

 

Amortization of intangible assets

1,069

666

1,435

 

Depreciation of right-of-use assets

479

497

938

 

Impairment losses and write-offs

-

-

13,278

 

Share options and rights granted to Directors and employees

132

486

138

 

Adjusted EBITDA

(3,612)

721

(12,174)

 

EBITDA Margin (adjusted)

(17.6%)

2.6%

(25.8%)

 

\* The results have been restated in the comparative period as described in Note 2 to the consolidated financial statements.

Revenues

Total revenues in H1 2023 decreased by 26% to US$20.5 million (H1 2022: US$ 27.6 million) driven by weak demand across the markets in which we operate.

Gross margin

Gross margin slightly decreased from 41.5% in H1 2022 to 40.9% in H1 2023, driven primarily by overcapacity in the markets which resulted in price pressure.

Selling & general administration costs "SG&A"

SG&A costs grew by 1.7% to US$14.3 million in H1 2023 compared to the previous year (H1 2022: US$14.0 million). The Company implemented various cost reduction measures during the period and expects to see the full benefit of the measures materialize in H2 2023. Cost saving measures have included a reduction of FTE's as well as re-location of functions/FTE's to locations with lower employer costs per FTE.

Liquidity as of 30 June 2023 & Going Concern Assessment

As of June 30, 2023, the Company reports a cash balance of US$7.3 million (December 31, 2022: US$8.5 million). To manage its cash balance, the Group has access to credit facilities totalling CHF9.0 million (approximately US$9.8 million as of September 30, 2023). The credit facilities are in place with two different banks and both contracts have materially the same conditions. The facilities are not limited in time, can be terminated by either party at any time and allow overdrafts and fixed cash advances with a duration of up to twelve months.

As of September 30, 2023, the Group has drawn CHF6.3 million of the facilities (CHF2.4 million as of December 31, 2022) (see Note 2 for details including maturity dates). The facilities are not committed, but the Board has not received any indication from financing partners that facilities are at risk of being terminated. Furthermore, the Board is in discussions with financial institutions to replace the currently uncommitted credit facilities by committed, long-term facilities, but the outcome of these discussions remains uncertain.

The Group's directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and operate within its credit facilities for the period 12 months from date of signature. Nevertheless, the Board acknowledges the uncommitted status of the facilities which could be terminated requiring the refinancing of debts, and which casts material uncertainty on the going concern assessment until appropriate longer-term funding is in place. Further disclosures on the going concern assessment are made in the notes to the financial statements.

Principal risks and uncertainties

The Group has an established, structured approach to identifying and assessing the impact of financial and operational risks on its business. The principal risks and uncertainties for the remainder of the financial year are not expected to change materially from those included on pages 38 to 42 of the Annual Report and Accounts 2022. The risks identified relate to the following areas: Delivery on growth strategy; Increase in competition; Geographical risks; IP protection and first mover advantage; Regulatory risks; Reputational risks and failure to build brand equity; Innovation pipeline; Supply chain disruptions; Personnel/Workforce; Interruption of IT system operations; Liquidity risk; currency risks; Product liability. Further information in relation to the Group's financial position and going concern is included in note 2.

Outlook

With our costs reduced and operations adapted in light of the challenging headwinds our entire industry is facing, we expect H2 2023 trading to stabilize. We are closely monitoring the market and are ready to take further cost reducing action, should we need to. We continue to add value to our high potential key innovation initiatives through focused investment, to position ourselves for when the macro-economic difficulties abate.

I would like to end my statement by thanking our investors, team, advisors and customers for their support during what has been a very challenging period for the company.

 

 

Esther Dale-Kolb

Chairwoman

October 26, 2023

 

 

 

 

Condensed consolidated statement of profit and loss and other comprehensive income

For the six months ended June 30, 2023


 

 

Six months to

Six months to

Year ended

 




June 30,

2023

June 30,

2022

December 31,

2022

 


Note


US$'000

US$'000

US$'000

 





(restated*)


 

Revenue

5


20,500

27,558

47,202

 

Cost of sales

7

 

(12,110)

 (16,127)

(33,745)

 

Gross profit



8,390

11,431

13,457

 

Other income

8

 

946

 2,748

4,832

 

Selling and general administrative expenses

9

 

(14,263)

 (14,016)

(30,969)

 

Impairment loss on intangible assets

16

 

-

-

(11,651)

 

Impairment loss on property, plant & equipment

17

 

-

-

(730)

 

Other expenses

11

 

(1,075)

 (1,735)

(4,184)

 

Operating loss



(6,002)

(1,572)

(29,245)

 

Finance income

12

 

5

 442

683

 

Finance costs

13

 

(384)

 (524)

(1,273)

 

Loss before taxation



(6,381)

 (1,654)

(29,835)

 

Income tax

14

 

(146)

 (254)

21

 

Loss after taxation



(6,527)

 (1,908)

(29,814)

 


 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

Exchange differences on translation of foreign operations

 

 

429

(1,090)

(1,914)

 

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



429

(1,090)

(1,914)

 

Actuarial gains/(losses) from defined benefit pension plans

 

 

-

-

1,380

 

Income tax relating to items that will not be reclassified subsequently to profit or loss

 

 

-

-

(276)

 

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



-

-

1,104

 

Other comprehensive income (loss) for the year



429

(1,090)

(810)

 




 

 

 

 

Total comprehensive loss for the year



(6,098)

(2,998)

(30,624)

 


 

 

 

 

 

 

Loss attributable to:

 

 

 

 

 

 

Equity holders of HeiQ

 

 

(6,436)

 (1,705)

(29,251)

 

Non-controlling interests

 

 

(91)

 (203)

(563)

 


 

 

(6,527)

(1,908)

(29,814)

 

 

Total Comprehensive loss attributable to:

 

 

 

 

 

 

Equity holders of the Company

 

 

(6,007)

(2,795)

(30,061)

 

Non-controlling interests

 

 

(91)

(203)

(563)

 


 


(6,098)

(2,998)

(30,624)

 

Loss per share:

 

 

 

 

 

 

Basic (cents) **

 

 

(4.58)

(1.29)

(21.92)

 

\* The consolidated statement of profit and loss and other comprehensive income has been restated in the comparative period as described in Note 2.

*\* The effect of share options is anti-dilutive and therefore not disclosed.

 

Condensed consolidated statement of financial position

As at June 30, 2023



As at

June 30,

2023

As at

June 30,

2022

As at

December 31,

2022


Note

US$'000

US$'000

US$'000




(restated*)


ASSETS





Intangible assets

16

21,672

 32,766

20,442

Property, plant and equipment

17

8,944

 6,823

9,802

Right-of-use assets

18

8,355

 8,163

7,819

Deferred tax assets

28

579

 1,510

538

Other non-current assets

19

182

 153

137

Non-current assets


39,732

 49,415

38,738

Inventories

20

14,406

 16,184

13,168

Trade receivables

21

8,256

 18,118

6,487

Other receivables and prepayments

22

4,231

 2,022

4,262

Cash and cash equivalents

 

7,274

 9,488

8,488

Current assets


34,167

 45,812

32,405

Total assets


73,899

 95,227

71,143

 

 

 

 

 

EQUITY AND LIABILITIES





Issued share capital and share premium

24

206,246

 200,606

205,874

Other reserves

26

(127,456)

 (127,862)

(128,017)

Retained deficit

 

(45,902)

 (10,775)

(39,466)

Equity attributable to HeiQ shareholders


32,888

 61,969

38,391

Non-controlling interests

 

1,857

 2,087

1,948

Total equity


34,745

 64,056

40,339

Lease liabilities

 

7,089

 7,148

6,558

Long-term borrowings

27

1,866

 1,561

1,445

Deferred tax liability

28

1,337

 2,144

1,253

Other non-current liabilities

29

5,772

 7,593

4,714

Total non-current liabilities


16,064

 18,446

13,970

Trade and other payables

30

8,653

 6,959

5,322

Accrued liabilities

31

3,692

 2,178

4,978

Income tax liability

14

243

 111

314

Deferred revenue

32

1,365

672

1,285

Short-term borrowings

27

7,471

 1,583

2,893

Lease liabilities

 

1,121

 1,130

1,264

Other current liabilities

34

545

 92

778

Total current liabilities


23,090

 12,725

16,834

Total liabilities


39,154

31,171

30,804

Total equity and liabilities


73,899

 95,227

71,143

\* The comparative period of the consolidated statement financial position has been added this year because it was restated as described in Note 2.

 

The Notes form an integral part of these Condensed Consolidated Financial Statements. The Financial Statements were approved and authorized for issue by the Board of Directors on October 26, 2023 and signed on its behalf by:

 

 

Xaver Hangartner

Chief Financial Officer

Condensed consolidated statement of changes in equity

For the six months ended June 30, 2023


 

 



Issued share capital and share premium

Other reserves

Retained deficit

Equity attributable to HeiQ shareholders

Non-controlling interests

Total equity

 

Note

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Balance at January 1, 2022


195,714

(127,195)

(11,525)

56,994

2,541

59,535

Loss after taxation

 

-

-

(29,251)

(29,251)

(563)

(29,814)

Other comprehensive (loss)/income

 

-

(810)

-

(810)

-

(810)

Total comprehensive (loss)/income for the year


-

(810)

(29,251)

(30,061)

(563)

(30,624)

Issuance of shares

24

10,160

-

-

10,160

-

10,160

Share-based payment charges

26

-

(12)

-

(12)

-

(12)

Dividends paid to minority shareholders

26

-

-

-

-

(243)

(243)

Capital contributions from minority shareholders

 

-

-

-

-

764

764

Adjustments arising from change in non-controlling interests

 

-

-

(2,445)

(2,445)

(616)

(3,061)

Transfer on disposal of non-controlling interest

 

-

-

3,755

3,755

65

3,820

Transactions with owners

 

10,160

(12)

1,310

11,458

(30)

11,428

Balance at December 31, 2022

 

205,874

(128,017)

(39,466)

38,391

1,948

40,339


 







Loss after taxation

 

 -  

 -  

 (6,436)

 (6,436)

 (91)

 (6,527)

Other comprehensive (loss)/income

 

 -  

 429

 -  

 429

 -  

 429

Total comprehensive (loss)/income for the year


 -  

 429

 (6,436)

 (6,007)

 (91)

 (6,098)

Issuance of shares

24

 372

 -  

 -  

 372

 -  

 372

Share-based payment charges

26

 -  

 132

 -  

 132

 -  

 132

Transactions with owners

 

 372

 132

 -  

 504

 -  

 504

Balance at June 30, 2023

 

 206,246

 (127,456)

 (45,902)

32,888

1,857

 34,745

 

 

Condensed consolidated statement of cash flows

For the six months ended June 30, 2023



Six months to

Six months to

Year ended



June 30, 2023

June 30, 2022

December 31, 2022


Note

US$'000

US$'000

US$'000




(Restated*)


Cash flows from operating activities





Loss before taxation


 (6,381)

(1,654)

(29,835)

Cash flow from operations reconciliation:





Depreciation and amortization

16-18

 2,258

1,807

3,655

Impairment expense

11

-

-

12,380

Net loss on disposal of assets


 17

3

(5)

Write-off of intangible assets

11

 14

-

897

Fair value gain on derivative liability

8

(248)

-

(371)

Finance costs


 217

124

273

Finance income


 (5)

(1)

(2)

Pension expense


 43

117

247

Non-cash equity compensation

25

 132

486

138

Gain from lease modification


 (9)

(68)

(68)

Other costs paid in shares

24

-

-

235

Currency translation


 (594)

(684)

 (61)

Working capital adjustments:





(Increase)/decrease in inventories

37

 (1,238)

 (2,414)

 602

Decrease/(Increase) in trade and other receivables

37

 (1,617)

 (1,608)

 7,783

(Decrease)/Increase in trade and other payables

37

 3,118

 2,448

 2,543

Cash used in operations


 (4,293)

 (1,444)

(1,589)

Taxes paid

14

 (506)

 (529)

(870)

Net cash used in operating activities


 (4,799)

 (1,973)

(2,459)

Cash flows from investing activities





Consideration for acquisition of businesses

37

 -

(1,587)

(1,587)

Cash assumed in asset acquisition

37

 2

-

65

Purchase of property, plant and equipment

17

 (584)

(1,060)

(3,418)

Proceeds from the disposal of property, plant and equipment


 815

37

53

Development and acquisition of intangible assets

16

 (665)

(1,946)

(3,865)

Interest received


5

1

2

Net cash used in investing activities


 (427)

(4,555)

(8,750)

Cash flows from financing activities





Interest paid on borrowings


 (122)

 (42)

(110)

Repayment of leases


 (614)

 (452)

(992)

Interest paid on leases


 (95)

 (82)

(163)

Proceeds from disposals of minority interests


-

 2,459

4,792

Proceeds from borrowings

27

 4,998

 823

3,465

Repayment of borrowings

27

 (265)

 (197)

(904)

Dividends paid to minority shareholders

26

-

 (243)

(243)

Net cash from financing activities


 3,902

 2,266

5,845

Net decrease in cash and cash equivalents


 (1,324)

 (4,262)

(5,364)

Cash and cash equivalents - beginning of the year


 8,488

 14,560

14,560

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


 110

 (810)

(708)

Cash and cash equivalents - end of the year


 7,274

 9,488

8,488

* The consolidated statement of cash flows has been restated for the comparative period as described in Note 2.

 

Notes to the Condensed Consolidated Financial Statements for the six months ended June 30, 2023

1.      General information

HeiQ Plc (the Company) is a company limited by shares incorporated and registered in the United Kingdom. Its ultimate controlling party is HeiQ Plc. The address of the Company's registered office is 5th Floor, 15 Whitehall, London, SW1A 2DD.

These financial statements are presented in United States Dollars (US$) which is the presentation currency of the Group, and all values are rounded to the nearest thousand dollars except where otherwise indicated.

2.      Basis of preparation and measurement

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 December 31, 2022. 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 December 31, 2022.

Statutory accounts for the year ended December 31, 2022 have been filed with the Registrar of Companies in October 2023 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 contained a matter (material uncertainty in regards to the going concern assumption) 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 October 26, 2023.

Going concern

The unaudited condensed consolidated interim financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realization of the assets and the settlement of liabilities in the normal course of business.

To manage its cash balance, the Group has access to credit facilities totalling CHF9.0 million (approximately US$9.8 million as of September 30, 2023). The credit facilities are in place with two different banks but with materially the same conditions. The facilities are not limited in time, can be terminated by either party at any time and allow overdrafts and fixed cash advances with a duration of up to twelve months. In case one or the other party terminates the agreement, fixed cash advances become due upon their defined maturity date. The facilities do not contain financial covenants, but they do require the delivery of certain financial and operational information within a defined timeframe after the balance sheet date. As the publication of audited accounts for the year 2022 was delayed, the Company was not able to submit these accounts within the contractually defined timeframe but has received extensions to do so from both banks until October 31, 2023.

As of September 30, 2023, the Group has drawn CHF6.3 million of the facilities (CHF2.4 million as December 31, 2022) as follows:

 

Term / Maturity date

CHF

November 27, 2023

4.5 million

June 17, 2024

0.8 million

September 30, 2024

1.0 million

 

The Group's forecasts and projections for the next 12 months reflect the very challenging trading environment and show that the Group should be able to operate within the level of its current facility for at least 12 months from the date of signature of these financial statements if the facility drawdowns remain available. While the facilities are not committed, the Board has not received any indication from financing partners that the facilities are at risk of being terminated. Furthermore, the Board is in discussions with financial institutions to replace the currently uncommitted credit facilities by committed, long-term facilities, but the outcome of these discussions remains uncertain.

Nevertheless, the Board acknowledges the uncommitted status of the facilities which could be terminated without notice during the forecast period requiring the refinancing of debts as per above maturity date indicates that a material uncertainty exists that may cast significant doubt on the Group's and Parent Company's ability to continue as a going concern, and therefore the Group may not be able to realize its assets and discharge its liabilities in the normal course of business.

After considering the forecasts, sensitivities, and mitigating actions available to management and having regard to the risks and uncertainties to which the Group is exposed (including the material uncertainty referred to above), the Group's directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and operate within its credit facilities for the period 12 months from date of signature. Accordingly, the financial statements continue to be prepared on a going concern basis.

Basis of consolidation

The Condensed Consolidated Financial Statements comprise the financial statements of the Company and its subsidiaries. Business combinations are accounted for under the acquisition method.

Restatement of prior period errors

As explained in Note 2 of the 2022 statutory accounts, several errors were corrected which affected the years ended December 31 2022 and December 31 2021. These corrections led to the following restatements of the June 30, 2022 accounts:

Overstatement of lease assets and liabilities: Similarly to the correction as per December 31, 2021, mainly balance sheet accounts were affected by the restatement. Right-of-use assets and lease liabilities were derecognized, and some payables were reclassified to loans.

PPA Chrisal: Accounting for 51% of intangible assets acquired instead of 100%: The correction of the error led to an increase in intangible assets as disclosed in the restated 2021 accounts, however, with the higher base amount amortization for the six months ended June 30, 2022 is also higher for the period which is reflected in an overall smaller adjustment to the balance sheet.

Correcting revenue recognition of take-or-pay contracts: The correction of the revenue recognition in years prior to 2022, led to smaller balances of trade receivable and accrued liabilities being carried forward to the June 2022 accounts.

Goodwill impairment Chrisal CGU and RAS CGU: The intangible asset balance brought forward to June 2022 has been reduced by the goodwill impairment posted in the 2021 accounts.

Correcting revenue recognition of R&D services: Revenues amounting to $2 million for R&D services were incorrectly recognized in the 2022 interim statements. During the audit of 2022 financial statements, it was found that the Group's performance obligations relating to a research and development project had not been fulfilled and that revenue recognition in relation to milestones was not appropriate. A further US$3.3 million of deferred revenue has been reclassified to long-term as a consequence of this change in accounting policy.

 

The effect of the restatements on the six months ended June 30, 2022 is shown in the following tables:

 

Consolidated statement of financial position

June 30, 2022

 

US$'000

As presented

Restatement Revenue recognition

Restatement Goodwill impairment

Restatement Leasing

Restatement PPA Chrisal

Restatement R&D revenues

As Restated

Assets








Intangible assets

33,448

-

 (2,310)

-

 1,628

-

 32,766

Right-of-use assets

9,114

-

-

(951)

-

-

 8,163

Deferred tax assets

874

-

-

-

-

-

 1,510

Trade receivables

21,512

(3,394)

-

-

-

-

18,118

Other receivables and prepayments

5,143

(3,121)

-

-

-

-

2,022

Total Assets

102,739

 (5,879)

 (2,310)

 (951)

 1,628

 -

 95,227









Capital and reserves








Retained deficit

(2,249)

 (3,957)

 (2,310)

 3

 (262)

 (2,000)

10,775 (10,775)

Non-controlling interests

601

-

-

 3

 1,483

 -

 2,087

Total Equity

71,096

 (3,957)

 (2,310)

 6

 1,221

 (2,000)

 64,056









Liabilities








Leases (non-current)

7,977

-

-

 (829)

-

-

 7,148

Long-term borrowings

668

-

-

 893

-

-

 1,561

Deferred tax liability

1,737

-

-

-

407

-

2,144

Other non-current liabilities

2,293

-

-

-

-

5,300

7,593

Trade and other payables

7,928

-

-

(969)

-

-

6,959

Accrued liabilities

4,100

(1,922)

-

-

-

-

2,178

Deferred revenue

3,972

-

-

-

-

(3,300)

672

Short-term borrowings

1,503

-

-

80

-

-

1,583

Leases (current)

1,262

-

-

(132)

-

-

1,130

Total Liabilities

31,643

 (1,922)

-

 (957)

 407

-

 31,171

 

 

 

Consolidated statement of comprehensive income

June 30, 2022

 

US$'000

As presented

Restatement Revenue recognition

Restatement Goodwill impairment

Restatement Leasing

Restatement PPA Chrisal

Restatement R&D revenues

As Restated

Net result for the period








Revenue

30,280

(722)

-

-

-

(2,000)

(27,558)

Selling and general administration expense

(13,878)

-

-

 (7)

(131)

-

(14,016)

Finance costs

(537)

 -

-

 13

-

-

 (524)

Income tax

 (287)

-

-

-

33

-

 (254)

Income (loss) after taxation

906

(722)

-

6

(98)

(2,000)

 (1,654))

Income (loss) after taxation attributable to HeiQ Stockholders

 1,112

(722)

-

 3

(98)

(2,000)

(1,705)

Income after taxation attributable to non-controlling interest

 (206)

-

-

3

-

-

 (203)

Income (loss) after taxation

906

(722)

-

 6

(98)

(2,000)

(1,908)

 

 

Earnings per share

June 30, 2022

 

US$'000

As presented

Restatement Revenue recognition

Restatement Goodwill impairment

Restatement Leasing

Restatement PPA Chrisal

Restatement R&D revenues

As Restated

Basic earnings (loss) per share

0.84

(0.55)

-

-

(0.07)

(1.51)

(1.29)

 

New standards, interpretations and amendments not yet effective for the current period

The following new standards and amendments were effective for the first time in these financial statements but did not have a material effect on the Group:

?      Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);

?      Classification of Liabilities as Current or Non-current (Amendments to IAS 1);

?      Definition of Accounting Estimates (Amendments to IAS 8); and

?      Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).

3.      Significant accounting policies

The Company has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its 2022 financial statements.

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

Acquisition of Tarn Pure

On January 12, 2023, HeiQ Plc, completed the acquisition of the entire issued share capital of Tarn-Pure Holdings Ltd ("Tarn-Pure"). Tarn-Pure is a UK-based intellectual property company holding critical EU and UK regulatory registrations to sell elemental copper and elemental silver for use in disinfecting hygiene applications. To acquire Tarn-Pure, HeiQ paid the vendors £530,000 (approximately US$621,000) in cash with an additional £317,000 (approximately US$372,000) satisfied through the issuance of 455,435 new ordinary shares of 30p each in the Company (the "Consideration Shares"), issued at a price of 69.6p per share resulting in a total consideration of £847,000 (approximately US$993,000). The purchase price allocation has not been finalized yet and is subject to possible changes in valuation of the assets acquired. it will be completed in the 2023 annual report.

The following table provides an overview of the preliminary purchase price allocation. It summarizes the consideration paid, the fair value of assets acquired, liabilities assumed, and goodwill arising on acquisition at the acquisition date.

Preliminary purchase price allocation

US$'000

Consideration:


Cash paid to shareholders

621

Shares issued to shareholders

372

Total Consideration

993

 

 

Fair value of net assets acquired:


Inventory

13

Cash

 2

Trade and other receivables

23

Borrowings

 (42)

Intangible assets identified on acquisition:

 

Customer Relationship

 123

Regulatory asset

682

Deferred tax liability on intangible assets

 (201)

Total net assets

599

Goodwill

 394

Total

 993

5.      Revenue

The Group's focus on materials innovation which includes scientific research, manufacturing and consumer ingredient branding. The primary source of revenue is the production and sale of functional ingredients, materials and finished goods. Other sources of revenue include research and development, take-or-pay and exclusivity services. 

The following table reconciles HeiQ Group's revenue for the periods presented:   


Six months to

June 30,

2023

Six months to

June 30,

2022

Year ended

December 31,

2022

Revenue by type of product

US$'000

US$'000

US$'000

Revenue recognized at point in time

 

 

 

Functional ingredients

 15,747

 21,156

36,175

Functional materials

 546

 434

2,000

Functional consumer goods

 2,702

 5,042

6,827

Services

980

 160

160

Revenue recognized over time

 

 

 

Services

525

766

2,040

Total revenue

20,500

27,558

47,202

 

Unsatisfied performance obligations

The transaction prices allocated to unsatisfied and partially unsatisfied obligations at June 30, 2023 are as set out below:

 

 

 

As at

June 30,

2023

As at

December 31,

2022

Unsatisfied performance obligations

 

 

US$'000

US$'000

Exclusivity services

 

 

1,800

2,100

Research and development services

 

 

3,500

3,750

Total unsatisfied performance obligations



5,300

 5,850

Management expects that 10 per cent of the transaction price allocated to the unsatisfied contracts as of June 2023 will be recognized as revenue during the 2023 reporting period (US$0.5 million). The remaining 90 per cent, US$4.8 million will be recognized in the 2024 (US$1.1 million), 2025 (US$3.1 million) and 2026 financial year (US$0.6 million).

Disclosure related to contracts with customers

Contract assets and contract liabilities are disclosed under Note 23 and Note 33, respectively. Impairment losses recognized on any receivables or contract assets arising from the Group's contracts with customers are disclosed under Note 21 and Note 23, respectively.

6.      Operating Segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Company.

For management purposes, the Group is organised into business units and the following reportable segments:

 

Segment

Activity

Textiles & Flooring

Provide innovative ingredients to make textiles & flooring more functional, durable and sustainable.

Life Sciences

Offer biotech solutions to replace harmful substances in domestic, commercial and industrial usage, for a more balanced microbiome and environment

Antimicrobials

Functionalize different hard surfaces in everyday products and our surroundings

Other activities

All other activities of the Group including Innovation Services, Business Development, and other non-allocated functions.

 

In 2023 new overhead allocation rules were introduced and as a result more overhead costs were allocated to segments. 2022 segment revenue and profits are restated below using the new rules to allow for like for like comparison.

Segment revenues and profits

The following is an analysis of the Group's revenue and results by reportable segment:


 

 

 

 

 

Six months to June 30, 2023

Textiles & Flooring

Life Sciences

Antimicrobials

Other activities

Total

US$'000

US$'000

US$'000

US$'000

US$'000

Revenue

          15,531

   2,479

   1,164

     1,326

 20,500

Operating profit (loss)

            1,117

     (693)

  (1,710)

    (4,716)

 (6,002)

Finance result





(379)

Loss before taxation





(6,381)

Taxation





(146)

Loss after taxation





(6,527)

 

Depreciation and amortization






Property, plant and equipment

 298

                171

 15

 227

 710

Right-of use assets

 90

 74

 22

 292

 479

Intangible assets

144                   (144)

        277

        401

          247

      1,069

 

Impairment loss






Property, plant and equipment

-

-

-

-

-

Intangible assets

-

-

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months to June 30, 2022

Textiles & Flooring

Life Sciences

Antimicrobials

Other activities

Total

US$'000

US$'000

US$'000

US$'000

US$'000

Revenue

 19,538

 3,891

 3,028

 1,102

 27,558

Operating profit (loss)

 2,682

 (537)

 (468)

 (3,249)

(1,572)

Finance result





(82)

Loss before taxation





(1,654)

Taxation





(254)

Loss after taxation





(1,908)

 

Depreciation and amortization






Property, plant and equipment

        208

        173

          17

        246

     644

Right-of use assets

          75

          72

          24

        325

     497

Intangible assets

          36

        274

        349

             7

     666

 

Impairment loss






Property, plant and equipment

-

-

-

-

-

Intangible assets

-

-

-

-

-

 

Year ended December 31, 2022

Textiles & Flooring

Life Sciences

Antimicrobials

Other activities


US$'000
(restated)

US$'000
(restated)

US$'000
(restated)

US$'000
(restated)

Total
US$'000

Revenue

 34,184

 6,164

 4,182

 2,672

 47,202

Operating profits loss

 (4,231)

 (5,537)

 (10,116)

 (9,359)

 (29,245)

Finance result





                (590)

Loss before taxation





(29,835)

Taxation





21

Loss after taxation





(29,814)

 

Depreciation and amortization






Property, plant and equipment

334

335

28

585

      1,282

Right-of use assets

123

145

42

628

          938

Intangible assets

(107)

550

699

293

      1,435

 

Impairment loss






Property, plant and equipment

-

 730

-

-

 730

Intangible assets

 -  

 2,402

 8,247

 1,002

 11,651

 

Segment revenue reported above represents revenue generated from external customers. There were no intersegment sales in the six months ended June 30, 2023 (2022: nil).

 

Geographic information

 

 

Six months to June 30, 2023

Six months to June 30, 2022

Year ended December 31, 2022

Revenue by region

 

US$'000

US$'000

US$'000

North & South America

 

  9,694

 

11,098

20,425

Asia

 

 4,798

8,955

13,376

Europe

 

 5,848

7,327

13,109

Others

 

 160

178

293

Total revenue


 20,500

27,558

47,202

 

 

 

 

 

 

As at

As at December 31,

 

 

June 30, 2023

2022

Non-current assets by region

 

US$'000

US$'000

Europe

 

 28,956

22,290

Asia

 

 2,701

 8,102

North & South America

 

 7,557

 7,734

Others

 

 518

 612

Total non-current assets


39,732

38,738

 

Information about major customers

During the six months ended June 30, 2023, no customers individually totalled more than 10% of total revenues (2022: none).

7.      Cost of sales

 

 

Six months to

June 30,

2023

Six months to

June 30,

2022

Year ended

 December 31,

 2022

Cost of sales

 

US$'000

US$'000

US$'000

Material expenses

 

10,351

12,114

20,942

Personnel expenses

 

1,563

1,477

2,830

Depreciation of property, plant and equipment

 

352

342

652

Other costs of sales

 

(156)

2,194

9,321

Total cost of sales


12,110

16,127

33,745

 

Other costs of goods sold include freight and custom costs, warehousing and allowances on inventory.

8.      Other income

 

 

Six months to

June 30,

2023

Six months to

June 30,

2022

Year ended

December 31,

2022

Other income

 

US$'000

US$'000

US$'000

Gain on disposal of property plant and equipment

 

12

9

21

Foreign exchange gains

 

517

2,334

3,539

Fair value gain on derivative liabilities

 

248

-

371

Other income

 

169

405

901

Total other income


946

2,748

4,832

9.      Selling and general administration expenses

Selling and general administration expenses

 

Six months to

June 30,

2023

Six months to

June 30,

2022

Year ended

 December 31,

 2022

 

US$'000

US$'000

US$'000

 

 

(restated*)

 

Personnel expenses

 

6,849

7,808

14,977

Depreciation of property, plant and equipment

 

358

302

630

Amortization

 

1,069

666

1,435

Depreciation of right-of-use assets

 

479

497

938

Net credit losses on financial assets and contract assets

 

-

-

85

Other

 

5,508

4,743

 12,904

Total selling and general administration expenses


14,263

14,016

30,969

 

Other selling and general administration expenses include costs for infrastructure, professional services and marketing as well as R&D and laboratory related costs, information technology & data expenses, sales representative & distribution expenses.

10.    Personnel expenses

 

 

Six months to

June 30,

2023

Six months to

June 30,

2022

Year ended

 December 31,

 2022

Personnel expenses

 

US$'000

US$'000

US$'000

Wages & salaries

 

7,224

7,930

15,274

Social security & other payroll taxes

 

802

624

1,685

Pension costs

 

254

244

710

Share-based payments

 

132

486

138

Total personnel expenses


8,412

9,285

17,807

 

Reported as cost of sales (Note 7)

 

1,563

1,477

2,830

Reported as selling and general administration expense (Note 9)

 

6,849

7,808

14,977

Total personnel expenses


8,412

9,285

17,807

11.    Other expenses

 

 

Six months to

June 30,

2023

Six months to

June 30,

2022

Year ended

 December 31,

 2022

Other expenses

 

US$'000

US$'000

US$'000

Foreign exchange losses

 

928

1,621

3,050

Loss on disposal of property, plant and equipment

 

30

12

16

Transaction costs relating to mergers and acquisitions

 

23

-

50

Write off intangible assets

 

14

-

897

Other

 

80

102

171

Total other expenses


1,075

1,735

4,184

12.    Finance income

 

 

Six months to

June 30,

2023

Six months to

June 30,

2022

Year ended

 December 31,

 2022

Finance income

 

US$'000

US$'000

US$'000

Interest income

 

3

1

5

Gains on foreign currency transactions

 

-

440

678

Other

 

2

1

-

Total finance income


5

442

683

 

13.    Finance costs

 

 

Six months to

June 30,

2023

Six months to

June 30,

2022

Year ended

 December 31,

 2022

Finance costs

 

US$'000

US$'000

US$'000

 

 

(restated*)

 

Lease finance expense

 

95

81

163

Interest on borrowings

 

122

43

110

Bank fees

 

167

34

98

Loss on foreign currency transactions

 

-

366

902

Total finance costs


384

524

1,273

14.    Income tax

The components of the provision for taxation on income included in the "Statement of profit or loss and other comprehensive income" are summarized below:

 

 

Six months to

June 30,

2023

Six months to

June 30,

2022

Year ended

 December 31,

 2022

Current income tax expense

 

US$'000

US$'000

US$'000

Swiss corporate income taxes

 

21

30

58

United States state and federal taxes

 

101

383

393

Taiwan corporate income taxes

 

81

78

118

Belgium corporate income taxes

 

83

76

(123)

Germany corporate income taxes

 

-

(17)

51

Others

 

11

79

63

Total current income tax expense


297

629

560

Deferred income tax expense

 

 

 

 

 

 

 

 

 

 

(restated*)

 

Switzerland

 

(22)

(69)

90

United States

 

(4)

(71)

(606)

China

 

(2)

(128)

117

Austria

 

(2)

(4)

20

Belgium

 

(68)

(71)

(136)

Others

 

(53)

(32)

(66)

Total deferred income tax expense (income)


(151)

(375)

(581)

 

 

 

 

 

Total income tax expense (income)


(146)

(254)

(21)

 

 

 

As at June 30,

As at December 31,

 

 

2023

2022

Net tax (assets)/liabilities

 

US$'000

US$'000

Opening balance - (prepaid taxes)

 

(343)

51

Assumed on asset acquisition

 

-

(32)

Income tax expense for the year

 

297

560

Taxes paid

 

(506)

(870)

Foreign currency differences

 

(3)

(52)

Net tax (asset)/liability


(555)

(343)

 

 

As at

 

As at

 

 

June 30,

December 31,

 

 

2023

2022

Net tax (assets) liabilities

 

US$'000

US$'000

Prepaid income taxes

 

(798)

(657)

Income tax liabilities

 

243

314

Net tax (asset)/liability


(555)

(343)

15.    Earnings per share

The calculation of the basic earnings per share is based on the following data:

 

 

Six months to

June 30,

2023

Six months to

June 30,

2022*

Year ended

 December 31,

 2022

Earnings

 

US$'000

US$'000

US$'000

Loss attributable to the ordinary equity holders of the parent entity

 

(6,436)

(1,705)

(29,251)

*Earnings have been restated in the comparative period as described in note 2.

The effect of share options is anti-dilutive and therefore not disclosed.

 

 

As at

June 30,

2023

As at

June 30,

2022

As at

December 31,

 2022

Number of shares

 

US$'000

US$'000

US$'000

Weighted average number of ordinary shares for the purposes of basic earnings per share

 

140,507,712

131,781,726

133,426,953

 

Basic earnings per share is calculated by dividing the profit/loss after tax attributable to the equity holders of the Company by the weighted average number of shares in issue during the year. The effect of share options is anti-dilutive and therefore not disclosed.

16.    Intangible assets


Goodwill

Internally developed assets

Brand names and customer relations

Acquired technologies

Total

Cost

    US$'000

US$'000

   US$'000

   US$'000

    US$'000

US$'000

As at January 1, 2022

21,382

3,509

4,503

3,180

2,332

34,906

Additions arising from internal development

-

2,165

-

-

-

2,165

Other acquisitions

-

-

-

-

1,700

1,700

Disposals / write-offs

-

(85)

-

-

(812)

(897)

Currency translation differences

(795)

5

(160)

(165)

14

(1,101)

As at December 31, 2022

20,587

5,594

4,343

3,015

3,234

36,773

Additions arising from internal development

-

 

583

-

-

-

583

Business combinations

394

-

123

-

682

1,199

Other acquisitions

-

-

-

-

82

82

Disposals / write-offs

-

(14)

-

-

-

(14)

Currency translation differences

294

162

61

57

73

647

As at June 30, 2023

21,275

6,325

4,527

3,072

4,071

39,270

Amortization and accumulated impairment losses

 

 

 

As at January 1, 2022

 2,305

 474

 602

 234

 518

 4,133

Amortization for the period

-

198

695

334

208

1,435

Impairment loss

10,576

880

73

-

122

11,651

Currency translation differences

(750)

3

(72)

(45)

(24)

(888)

As at December 31, 2022

12,131

1,555

1,298

523

824

16,331

Amortization for the period

-

331

360

167

211

1,069

Currency translation differences

158

48

(5)

(3)

-

198

As at June 30, 2023

12,289

1,934

1,653

687

1,035

17,598

Net book value

 

 

 

 

 

 

As at December 31, 2022

8,456

4,039

3,045

2,492

2,410

20,442

As at June 30, 2023

8,986

4,391

2,874

2,385

3,036

21,672

17.    Property, plant and equipment


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, 2022

 7,288

 536

 914

 474

 1,523

 10,735

Additions

2,272

26

197

50

2,736

5,280

Disposals

(69)

(12)

-

-

-

(81)

Reclassifications

(407)

59

-

348

-

-

Currency translation differences

(233)

(1)

(21)

(23)

(91)

(369)

As at December 31, 2022

8,851

608

1,090

849

4,168

15,565

Additions

504

32

2

42

4

584

Disposals

(807)

(45)

(3)

-

-

(855)

Reclassifications

(32)

-

-

32

-

-

Currency translation differences

118

2

29

17

41

207

As at June 30, 2023

8,634

597

1,118

940

4,213

15,502

Depreciation and accumulated impairment losses

 

 

 

 

As at January 1, 2022

 2,723

 330

 619

 86

 112

 3,870

Charge for the year

763

90

218

83

128

1,282

Eliminated on disposal

(27)

(5)

-

-

-

(32)

Impairment loss

730

-

-

-

-

730

Reclassifications

(222)

-

-

222

-

-

Currency translation differences

(67)

-

(9)

(3)

(7)

(86)

As at December 31, 2022

3,900

415

828

388

233

5,764

Charge for the period

437

42

59

55

117

710

Eliminated on disposal

-

(21)

(1)

-

-

(22)

Currency translation differences

68

1

24

7

7

106

As at June 30, 2023

4,405

437

910

450

356

6,558

Net book value

 

 

 

 

 

 

As at December 31, 2022

4,951

193

262

461

3,935

9,802

As at June 30, 2023

4,229

160

208

490

3,856

8,944

 

18.    Right-of-use assets


Land and buildings

Motor vehicles

Machinery and equipment

Total

Cost

    US$'000

    US$'000

US$'000

US$'000

As at January 1, 2022

 8,913

 611

 341

 9,865

Additions

 86

 174

 1,921

 2,181

Disposals due to expiry of lease

-

 (36)

-

 (36)

Disposals due to business combination*

 (467)

-

-

 (467)

Modification to lease terms**

 (1,199)

-

-

 (1,199)

Currency translation differences

 (381)

 (67)

 (26)

 (474)

As at December 31, 2022

 6,952

 682

 2,236

 9,870

Additions

 98

 93

 791

 982

Disposals due to expiry of lease

 (220)

-

-

 (220)

Modification to lease terms**

 (253)

 (54)

-

 (307)

Currency translation differences

 160

 18

 30

 208

As at June 30, 2023

 6,737

 739

 3,057

 10,533

Depreciation

 

 

 

 

As at January 1, 2022

 1,716

 109

 66

 1,891

Depreciation for the year

 730

 140

 68

 938

Disposals due to expiry of lease

-

 (36)

-

 (36)

Modification to lease terms**

 (693)

-

-

 (693)

Currency translation differences

 (34)

 (6)

 (9)

 (49)

As at December 31, 2022

 1,719

 207

 125

 2,051

Depreciation for the period

 357

 76

 46

 479

Disposals due to expiry of lease

 (118)

-

 (32)

 (150)

Modification to lease terms**

 (173)

 (16)

-

 (189)

Currency translation differences

 (21)

 5

 3

 (13)

As at June 30, 2023

 1,764

 272

 142

 2,178

Net book value

 

 

 

 

As at December 31, 2022

5,233

475

2,111

7,819

As at June 30, 2023

 4,973

 467

 2,915

 8,355

 

*With the acquisition of ChemTex Laboratories' property, plant and equipment, the Group no longer has a lease liability with a third party.

*\* The Group agreed to shorten the agreed lease terms of two existing leases from 2032 to 2027. These modifications have resulted in a reduction in the total amounts payable under the leases and a reduction to both of the right-of-use assets and lease liabilities with effect from the date of modification.

19.    Other non-current assets

 

 

As at

 

As at

 

 

June 30, 2023

 

December 31, 2022

Other non-current assets

 

US$'000

 

US$'000

Deposits

 

96

 

80

Other prepayments

 

86

 

57

Other non-current assets


182

 

137

 

20.   Inventories

 

 

As at

 

As at

 

 

June 30, 2023

 

December 31, 2022

Inventories

 

US$'000

 

US$'000

Functional ingredients

 

11,044

 

7,420

Functional materials

 

1,188

 

4,000

Functional consumer goods

 

2,174

 

1,748

Total inventories


14,406

 

13,168

 

The cost of inventories recognized as an expense in the six months ended June 30, 2023 in respect of continuing operations was US$12,110,000 (December 31, 2022: US$33,597,000).

21.    Trade receivables

 

 

As at

As at

 

 

June 30, 2023

December 31, 2022

Trade receivables

 

US$'000

US$'000

Not past due

 

 5,027

 2,788

< 30 days

 

 1,256

 520

31-60 days

 

 402

 781

61-90 days

 

 667

 215

91-120 days

 

 94

 180

>120 days

 

 1,223

 2,407

Total trade receivables


 8,669

 6,891

Provision for expected credit losses


 (413)

 (404)

Total trade receivables (net)


 8,256

 6,487

 

The average credit period on sales of goods varies by region from 30 - 120 days. No interest is charged on outstanding trade receivables. The Group always measures the loss allowance for trade receivables at an amount equal to lifetime ECL. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor's current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast.

As at June 30, 2023, the Group has recognized an expected credit loss of US$413,000 (2021: US$404,000).

22.   Other receivables and prepayments

 

 

As at

 

As at

 

 

June 30, 2023

 

December 31, 2022

Total other receivables and prepayments

US$'000

 

US$'000

Contract assets

 

108

 

115

Receivables from tax authorities

 

2,271

 

1,864

Prepayments

 

969

 

1,023

Other receivables

 

883

 

1,260

Total other receivables and prepayments


4,231

 

4,262

23.    Contract assets

Amounts relating to contract assets are balances due from customers under construction contracts that arise when the Group receives payments from customers in line with a series of performance-related milestones. The Group recognizes a contract asset for any work performed. Any amount previously recognized as a contract asset is reclassified to trade receivables at the point at which it is invoiced to the customer.

 

 

 

 

 

 

 

As at

June 30, 2023

 

As at

December 31, 2022

Contract assets

                  US$'000

US$'000

Research and development services

108

65

Exclusivity services

-

50

Total contract assets

108

115

 

Current assets

108

115

Non-current assets

-

-

Total contract assets

108

115

 

Revenues related to research and development services were recognized at the point of delivering proof of concept and completing testing services. Performance obligations related to exclusivity services were deemed fulfilled by the Group upon completion of the contractual term. Payment for the above services is not due from the customer yet and therefore a contract asset is recognized.

The directors of the Company always measure the loss allowance on amounts due from customers at an amount equal to lifetime ECL, taking into account the historical default experience, the nature of the customer and where relevant, the sector in which they operate. There has been no change in the estimation techniques or significant assumptions made during the current reporting period in assessing the loss allowance for the amounts due from customers under construction contracts.

Lifetime Expected credit losses on contract assets

The following table details the risk profile of amounts due from customers based on the Group's provision matrix. Based on the historic default experience, the following expected credit loss has been recognized:


 

As at

June 30, 2023

 

As at

December 31, 2022

Expected credit loss

                  US$'000

US$'000

Expected credit loss rate

0%

0%

Estimated total gross carrying amount at default

108

115

Lifetime ECL

-

-

Net carrying amount

108

115

24.   Issued share capital and share premium

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


 

Number of shares

Share capital

Share premium

Totals


 

No.

US$'000

US$'000

US$'000

Balance as of January 1, 2022


130,583,536

51,523

144,191

195,714

Issue of shares to vendors of Life Materials


347,552

141

471

612

Issue of shares as deferred consideration


3,461,615

1,359

2,921

4,280

Issue of shares to Advisory Board and others


164,721

60

175

235

Issue of shares to vendors of ChemTex Labs


2,176,884

795

1,177

1,972

Issue of shares to vendors of Chrisal


3,348,164

1,223

1,838

3,061

Balance as at December 31, 2022


140,082,472

55,101

150,773

205,874

Issue of shares Tarn Pure (a)


455,435

160

212

372

Balance as at June 30, 2023


140,537,907

55,261

150,985

206,246

 

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

The share premium account represents the amount received on the issue of ordinary shares by the Company in excess of their nominal value and is non-distributable.

The Company issued new ordinary shares for the following:

On January 12, 2023, HeiQ plc completed the acquisition of 100% of the issued share capital and voting rights of Tarn Pure for a total consideration of US$993,000. The purchase consideration was payable partly in cash (US$621,000) and partly by the issue of 455,435 new ordinary shares for (US$372,000). See Note 4 for details.

25.    Share-based payments

Equity-settled Share Option Scheme

Following employee departures, the number of options expected to vest dropped to 2,279,236 as per June 30, 2023 (December 31, 2022: 2,497,281). The expense arising from these share-based payment transactions was US$132,000 for the six months ended June 30, 2023 which compares against an income of US$12,000 for the year ended December 31, 2022 following a drop in market expectations during the second half of 2022. In the six months ended June 30, 2022, the Group incurred an expense of US$415,000.

Other share-based payments

Remuneration of US$764,000 in relation to the acquisition of Life Materials Technologies Limited is linked to a service period of five years. An expense of US$75,000 was recognized in the six months ended June 30, 2023 (six months ended June 30, 2023: US$71,000; year ended December 31, 2022: US$150,000). The remainder of approximately US$469,000 is expected to be expensed over the period from July 1, 2023, to June 30, 2026.

26.   Other reserves

Other reserves comprise the share-based payment reserve, the merger reserve, the currency translation reserve and the other reserve.

The retained deficit comprises all other net gains and losses and transactions with owners not recognized elsewhere.

Movements in the other reserves were as follows:

 

 

 

Share- based payment reserve

Merger reserve

Currency translation reserve

Other reserve

Total Other reserves


Note

US$'000

US$'000

US$'000

US$'000

US$'000 

Balance at January 1, 2022


 474

(126,912)

       387

(1,144)

  (127,195)

Other comprehensive (loss)/income


-  

       -  

     (1,914)

1,104

(810)

Total comprehensive (loss)/income for the year

 

       - 

               -

     (1,914)

1,104

          (810)

Share-based payment charges

25

  (12)

 -

 -

 -

(12)         

Transactions with owners

 

   (12)

 -

 -

-

  (12)

Balance at December 31, 2022


  462

(126,912)

(1,527)

(40)

(128,017)

Other comprehensive (loss)/income


 -  

 -  

 429

 -  

 429

Total comprehensive (loss)/income for the period

 

 -  

 -  

 429

 -  

 429

Share-based payment charges


 132

 -  

 -  

 -  

 132

Transactions with owners

 

 132

 -  

 -  

 -  

 132

Balance at June 30, 2023


 594

 (126,912)

(1,098)

 (40)

 (127,456)

 

The share-based payment reserve arises from the requirement to fair value the issue of share options at grant date. Further details of share options are included at Note 25.

The currency translation reserve represents cumulative foreign exchange differences arising from the translation of the financial statements of foreign subsidiaries and is not distributable by way of dividends.

Dividend paid by subsidiary

In June 2022, HeiQ Chrisal N.V. declared and paid a dividend of ?470,000 (approximately US$496,000) of which 49% or US$243,000 was paid to minority shareholders.

Capital contributions from minority shareholders

The Group received in 2022 a capital contribution from a minority shareholder of US$764,000 which arose from a waived loan.

27.    Borrowings

The Group's borrowings are held at amortized cost. They consist of the following:

 


As at
June 30, 2022

As at
December 31, 2022

Borrowings

US$'000

US$'000

Unsecured bank loans

8,533

3,573

Secured bank loans

213

628

Loans from non-controlling interest

591

137

Total borrowings

9,337

4,338

 

The other principal features of the Group's borrowings are as follows:

Unsecured bank loans

A credit facility amounting to CHF 2,400,000 (US$2,574,000) was taken out in December 2022 which incurs interest at a fixed rate of 2.2%. It was repaid on February 28, 2023 and the loan was replaced with a new credit facility worth CHF 4,500,000 (US$ 4,964,000).

Several loans amounting to US$1.6 million were assumed through the acquisition of Chrisal. They finance the acquisition of property, plant and equipment as well as the prepayment of provisional taxes. A further ?277,000 was taken out in February 2023 which is repayable over ten years. As at June 30, 2023, a total of ?1,271,000 (US$1,387,000) is outstanding (December 2022: ?938,000 (US$999,000)). The loans are repayable over a period of up to ten 10 years. These loans all have fixed interest rates between 0.78 and 3.95% and the weighted average fixed interest rate on the outstanding balances is 2.85%.

Loans from non-controlling interests

A loan is payable to a minority shareholder of Life-Materials Latam Ltda, Brazil. Interest is fixed at 0.5%. There is no specific repayment date, but the loan is payable once the entity is able to repay it. The balance was BRL 1,020,000 (approximately US$210,000) as at June 30, 2023 (December 31, 2022 is BRL 715,683 (US$137,000).

Secured bank loans

A bank loan taken out in October 2020 which incurs interest at a fixed rate of 3.25% and which is secured on property owned by a company which is controlled by a minority shareholder of HeiQ Medica. It is repayable in equal monthly instalments of ?8,000 (US$9,500) over eight years up to September 2028. As at June 30, 2023, ?542,500 (US$592.000) is outstanding (December 31, 2022: US$629,000).

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


As at
June 30, 2023

As at
December 31, 2022

Maturity of borrowings

                  US$'000

                  US$'000

Not later than one year

7,471

2,893

Later than one year but less than five years

721

1,029

After more than five years

1,145

416

Total borrowings

9,337

4,338

 

28.   Deferred tax

The following are the major deferred tax liabilities and assets recognized by the Group and movements thereon during the current and prior reporting period.


Pension fund obligations

Tax losses

Share-based payments

Capital allowances, depreciation and other temporary differences

Total

Deferred tax

   US$'000

  US$'000

 US$'000

     US$'000

US$'000

Balance at January 1, 2022

 429

 178

 85

 (1,686)

 (994)

Charge to profit or loss

 49

 (150)

1

 681

 581

Charge to other comprehensive income

 (276)

 -  

 -  

 -  

 (276)

Foreign currency differences

 (12)

 (28)

 5

9

 (26)

Balance as at December 31, 2022

 190

-

 91

 (996)

 (715)

Charge to profit or loss

 9

 -

 25

 117

 151

Business combinations

-

-

-

(201)

(201)

Foreign currency differences

 6

 -

1

-

 7

Balance as at June 30, 2023

 205

-

 117

 (1,080)

 (758)

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

 

 

As at
June 30, 2023

 

As at
December 31, 2022

Deferred tax

 

US$'000

 

US$'000

Deferred tax assets

 

 579

 

 538

Deferred tax liabilities

 

 (1,337)

 

 (1,253)

Net deferred tax assets (liabilities)


 (758)

 

 

Deferred tax liabilities related to capital allowances and depreciation decreased following the amortization of intangible assets acquired in the business combinations in 2021.

29.   Other non-current liabilities

Other non-current liabilities

As at

June 30, 2023

US$'000

As at
December 31, 2022

US$'000

Defined benefit obligation IAS 19 Switzerland

1,023

952

Defined benefit obligation IAS 19 Thailand

130

134

Contract liabilities

4,233

3,614

Deferred grant income

386

14

Total other non-current liabilities

5,772

4,714

 

30.    Trade and other payables


 

As at

June 30, 2023

 

As at

December 31, 2022

Trade and other payables

                  US$'000

US$'000

Trade payables

6,086

3,321

Payables to tax authorities

326

375

Other payables

2,241

1,626

Total trade and other payables

8,653

5,322

 

Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. Other payables relate to employee-related expenses, utilities and other overhead costs.  Typically, no interest is charged on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

The directors consider that the carrying amount of trade payables approximates to their fair value.

31.    Accrued liabilities


As at

June 30, 2023

As at

December 31, 2022

Accrued liabilities

                  US$'000

US$'000

Costs of goods sold

909

875

Personnel expenses

1,415

1,737

Other operating expenses

1,368

2,366

Total accrued liabilities

3,692

4,978

32.    Deferred revenue


As at

June 30, 2023

As at

December 31, 2022

Deferred revenue

                  US$'000

US$'000

 

 

Contract liabilities

1,230

1,176

Prepayments for unshipped goods

80

94

Deferred grant income

55

15

Total deferred revenue

1,365

1,285

33.    Contract liabilities


As at

June 30, 2023

As at

December 31, 2022

Contract liabilities

US$'000

US$'000

Exclusivity agreements

1,585

1,832

Research and development services

3,878

2,958

Total contract liabilities

5,463

4,790

 

Current liabilities (Note 32)

1,230

1,176

Non-current liabilities (Note 29)

4,233

3,614

Total contract liabilities

5,463

4,790

 

Revenue relating to both exclusivity and research and development services is recognized over time although the customer pays up-front in full for these services. A contract liability is recognized for revenue relating to the services at the time of the initial sales transaction and is released over the service period.

34.    Other current liabilities


As at

June 30, 2023

As at

December 31, 2022

Current liabilities

                  US$'000

US$'000

Deferred consideration in relation to acquisitions

92

92

Call option liability

453

686

Other current liabilities

545

778

35.    Contingent assets and liabilities

On October 10, 2022 the Group announced that it has filed a complaint in the United States District Court for the Western District Of North Carolina, Charlotte Division, against ICP Industrial Inc, for breaching its Exclusive Agreement terms. Because of the claimed contract breach, the Group has not recognized any income or assets from the contract. Within the same legal proceeding, ICP Industrial Inc, has filed a counter claim against the Group. Although the Group is confident in its legal position, the outcome of the legal proceedings as well as the court-mandated mediation remains uncertain. Therefore, while a future economic benefit is expected, it can not be reliably quantified at this point in time and could bear the risk of prejudice given the ongoing legal proceedings.

36.    Provisions

Provisions

 

As at

June 30, 2023

US$'000

As at

December 31, 2022

US$'000

Current liabilities

 

-

339

Non-current liabilities

 

-

-

Total provisions

 

-

339

 

 

Legal/Compliance provision

Total

Current liabilities

                  US$'000

US$'000

Balance at January 1, 2022

-

-

Additional provision in the year

339

339

Utilization of provision

-

-

Exchange difference

-

-

Balance as at December 31, 2022

339

339

Additional provision in the period

-

-

Utilization of provision

(339)

(339)

Exchange difference

-

-

Balance as at June 30, 2023

-

-

 

The Group was contacted by the United States Environmental Protection Agency ("EPA") in connection with violations of the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA") pertaining to mislabelling. As at December 31, 2022, the Company has assessed the claim and made a provision for US$339,000 which was paid in May 2023.

This provision is reported in Note 31 as Accrued liabilities - Other operating expenses.

37.    Notes to the statements of cash flows

Non-cash transactions

Certain shares were issued during the year for a non-cash consideration as described in Note 24.

During the year ended December 31, 2022, additions to buildings and land amounting to US$1,862,000 million were financed by issuing shares.

Working capital reconciliation:

The Company defines working capital as trade receivables, other receivables and prepayments less trade and other payables, accrued liabilities and deferred revenue.

Six months ended June 30, 2023

Opening balances

Assumed on acquisition of subsidiaries

Change in balance

Closing balances

US$'000

US$'000

US$'000

US$'000

Inventories

 

13,168

 13

1,225

 14,406

Trade receivables

 

6,487

 11

1,758

 8,256

Other receivables and prepayments

 

4,262

 12

(43)

 4,231

Trade and other receivables and prepayments


10,749

 23

1,715

 12,487

Trade and other payables


5,322

-

3,331

8,653

Accrued liabilities


4,978

-

(1,286)

3,692

Deferred revenue incl. non-current contract liabilities


4,913

-

1,072

5,985

Trade and other payables, accrued liabilities and deferred revenue

15,213

-

3,117

18,330

 

 

Six months ended June 30, 2022

Opening balances

Assumed on acquisition of subsidiaries

Change in balance

Closing balances

US$'000

US$'000

US$'000

US$'000

Inventories

 

 13,770

-

 2,414

16,184

Trade receivables

 

14,656

-

 3,462

 18,118

Other receivables and prepayments

 

3,876

-

 (1,854)

 2,022

Trade and other receivables and prepayments


18,532

-

 1,608

20,140

Trade and other payables


8,271

-

 (1,312)

 6,959

Accrued liabilities


3,386

-

 (1,208)

 2,178

Deferred revenue incl. non-current contract liabilities


1004

-

 4,968

5,972

Trade and other payables, accrued liabilities and deferred revenue

12,661

-

2,448

15,109

 

Year ended December 31, 2022

Opening balances

Assumed on acquisition of assets

 Change in balance

Closing balances

US$'000

US$'000

US$'000

US$'000

Inventories

 

 13,770

-

(602)

13,168

Trade receivables

 

 14,656

-

(8,169)

6,487

Other receivables and prepayments

 

 3,876

-

386

4,262

Trade and other receivables and prepayments

 18,532

-

(7,783)

10,749

Trade and other payables


8,271

-

(2,949)

5,322

Accrued liabilities


 3,386

9

1,583

4,978

Deferred revenue incl. non-current contract liabilities


 1,004

-

3,909

4,913

Trade and other payables, accrued liabilities and deferred revenue

 12,661

9

2,543

15,213

Consideration for acquisition of businesses (Note 4)

Six months ended June 30, 2023


US$'000

Consideration payment for acquisition of Tarn Pure


621

Cash assumed on acquisition of Tarn Pure


(2)

Net consideration payment for acquisitions of businesses and assets


619

 

Year ended December 31, 2022


US$'000

Consideration payment for acquisition of Life Materials Technologies Ltd


1,400

Consideration payment for acquisition of ChemTex assets


187

Net consideration payment for acquisitions of businesses and assets


1,587

38.    Related party transactions

The Group have not identified any significant transactions with related parties. There are no loans outstanding with related parties.

39.    Material subsequent events

As communicated on July 06, 2023, HeiQ Plc sold a 1.5% minority interest in HeiQ AeoniQ GmbH to MAS Holdings for US$1.5 million. It was also agreed that a further 1% shareholding will be sold to MAS Holdings for US$1 million subject to the achievement of a mutually agreed milestone.

40.   Ultimate controlling party

As at June 30, 2023, the Company did not have any single identifiable controlling party.

 

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