COMPANY STATEMENT OF CHANGES IN EQUITY

	Share	Share	Retained	Total
In euro	Capital	premium	Earnings	equity
Balance at 31 December 2019	190,512	31,395,612	(2,616,722)	28,969,402
Loss for the year	-	-	(956,408)	(956,408)
Capital raised	484	-	-	484
Expenditure related to the issuance of shares	-	-	-	-
Share-based payment	-	-	-	-
Balance at 31 December 2020	190,996	31,395,612	(3,573,130)	28,013,478
Loss for the year	-	-	(709,825)	(709,825)
Capital raised	14,397	8,306,293	-	8,320,690
Expenditure related to the issuance of shares	-	(542,878)	-	(542,878)
Share-based payment	-	-	62,708	62,708
Balance at 31 December 2021	205,393	39,159,027	(4,220,247)	35,144,173

 

CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS

		Group		Company
In euro	Note	2021	2020	2021	2020
Cash flows from operating activities
Loss for the year before tax		(3,384,853)	(4,657,387)	(709,825)	(956,408)
Adjustments for:
Depreciation	12	994,021	1,020,387	-	-
Amortisation of intangible assets	11	549,547	670,485	-	-
Share-based payment expense	7	130,910	19,286	62,708	-
Finance income	9	(221,622)	(1,175)	(211,056)	(867)
Finance expense		56,524	326,118	988	227,367
Interest of lease liabilities	9	18,157	21,589	-	-
		(1,857,316)	(2,600,697)	(857,185)	(729,908)
Increase/Decrease in:
- inventories		5,072	(280,011)	-	-
- trade and other receivables	14	(493,008)	179,292	(39,029)	37,142
- trade and other payables		(1,207,601)	(1,398,380)	55,073	33,047
- provisions and employee benefits		37,457	24,844	-	-
Net cash from operating activities		(3,515,396)	(4,074,952)	(841,141)	(659,720)
Cash flows from investing activities
Interest received	9	1,616	1,175	-	867
Investment in intangible assets		(299,056)	(434,898)	-	-
Investment in subsidiary	13	-	-	(2,000,000)	(2,500,000)
Contingent consideration	21	(572,268)	(208,097)	-	-
Acquisition of property, plant and equipment		(767,719)	(195,991)	-	-
Net cash used in investing activities		(1,637,427)	(837,811)	(2,000,000)	(2,499,133)
Cash flows from financing activities
Proceeds from Capital raise	17	8,320,690	484	8,320,690	484
Expenditure related to the issuance of shares	17	(542,878)	-	(542,878)	-
Interest paid	9	(45,426)	(45,647)	(988)	(2,148)
New Borrowings	18	1,511,719	1,874,243	-	-
Repayment of borrowings	18	(81,666)	(360,164)	-	-
Repayment of lease liabilities		(179,646)	(100,235)	-	-
Net cash from (used in) financing activities		8,982,793	1,368,681	7,776,824	(1,664)
Net increase (decrease) in cash and cash equivalent		3,829,970	(3,544,082)	4,935,683	(3,160,516)
Cash and cash equivalent at beginning of the year		7,080,492	10,906,076	4,283,625	7,669,360
Exchange (losses)/gains on cash and cash equivalents		220,006	(281,502)	211,056	(225,219)
Cash and cash equivalent at end of the year		11,130,468	7,080,492	9,430,364	4,283,625

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021

 

1.    Basis of preparation

a)     Statement of compliance

These consolidated and parent Company financial statements have been prepared in accordance with UK-adopted International Accounting Standards (IFRSs).The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the preceding year, unless otherwise stated.

All notes, except as otherwise indicated, are presented in Euros ("€").

 

I.          Going Concern

As of 31 December 2021, the Group (including the Company) had net assets of €16.03m (2020: €10.66m) and cash and cash equivalent of €11.13m (2020: €7.08m).

 

The Directors are aware that there is an ongoing need to monitor the cash flow requirements of the Company and Group for the upcoming months, particularly in light of the recent developments in the markets due to the COVID-19 pandemic, the recent war in Ukraine and inflation trends, which have had a significant, impact on global economies and more likely will affect the upcoming months.  In this regard, the Group prepares annual budgets and forecasts in order to ensure that they have sufficient liquidity to meet liabilities and commitments as they fall due. The Directors regularly review updates to the scenario planning such that the Board can put in place appropriate mitigating actions within their control.

 

Considering the recent capital raise undertaken in December 2021, which resulted in £7 million of additional gross funds, and based on the most recent cash flow projections, the Directors believe that the Group will have sufficient funds in place, up to a period of 12 months from the approval date of the financial statements, to meet liabilities as and when they fall due. Despite this, given the current global economic status, the Directors have carried out a downward sensitivity analysis stressing the base financial projections by applying a further material reduction in forecast revenues, and modelling mitigation or deferral of capital and operational expenditure within the control of Management and the Board. Based on these downward scenarios, the Directors believe that the Company will still have the funds to support the Group as a going concern until the end of 2023.

 

The Directors therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

 

b)    Basis of consolidation

I.           Business combination

The Group accounts for business combination using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair value of the assets acquired, liabilities incurred or assumed, and equity instruments issued. Costs attributable to the business combination are expensed as incurred.

 

The acquiree's identifiable assets and liabilities which meet the recognition conditions are recognised at the fair values at the acquisition date.

 

Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date that arises from past events and its fair value can be measured reliably.

 

Any difference arising between the fair value and the tax base of the acquiree's assets and liabilities that give rise to a taxable or deductible difference results in the recognition of a deferred tax liability or asset.

 

Non-controlling interest arising from a business combination is measured at their share of the fair value of the assets and liabilities of the acquiree.

 

Goodwill is not amortised, but it is tested on an annual basis for impairment.

 

II.        Subsidiaries

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

 

The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.

 

III.     Transactions eliminated on consolidation

The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

 

IV.    Non-controlling interest

Non-controlling interest in the net assets of the consolidated subsidiaries are identified separately from the Group's equity. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholder's share changes in equity since the date of the combination. The non-controlling interest's share of losses, where applicable, are attributed to the non-controlling interests irrespective of whether the non-controlling shareholders have a binding obligation and are able to make an additional investment to cover the losses. 

 

c)    Functional and presentation currency

These financial statements are presented in Euro ("€") and is considered by the Directors to be the most appropriate presentation currency to assist the users of the financial statements. The functional currency of the Company and of the Italian operating subsidiaries is Euro ("€"). The functional currency of the Romanian subsidiary is RON.

 

d)    Use of estimates and judgements

The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances and the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period.

 

Critical estimates and judgements that have the most significant effect on the amounts recognised in the financial statements and/or have a significant risk of resulting in a material adjustment within the next financial year are as follows.

 

Estimates

I.           Valuation of share based payments

The estimation related to share based payment expenses includes the selection of an appropriate valuation option pricing model, consideration as to the inputs necessary for the valuation model chosen, and the estimation of the number of awards that will ultimately vest. Inputs subject to estimation relate to the future volatility of the share price which has been estimated based on the historical observed volatility from trading in the Company's shares, over a historical period of time between the date of the grant and the date of exercise. Management has used a Monte-Carlo model to calculate the fair value of the awards which include market based performance conditions. Further disclosure of inputs relevant to the calculations is set out in note 24 to the financial statements.

 

II.        Carrying value of goodwill

The carrying value of goodwill, and the cash generating units (CGUs) to which it relates, is assessed annually for impairment through comparing the recoverable amount to the CGU's carrying value. The value in use calculations require estimates in relation to uncertain items, including management's expectations of future revenue growth, operating costs, profit margins, operating cashflows and the discount rate applied. Future cash flows used in the value in use calculations are based on our latest two-year financial plans. Expectations about future growth reflect expectations of growth in the markets applicable to the group. The future cashflows are discounted using a pre-tax discount rate that reflects current market assessments of the time value of money. The discount rate used is adjusted for the specific risk to the group, including the countries to which cash flows will be generated. Further disclosure of evaluations is set out in note 11 to the financial statements.

 

III.      Valuation of inventory

Inventories are stated at the lower of cost or net realisable value. The cost of inventories comprises of net prices paid for materials purchased, production labour cost and factory overhead. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Inventory provisions are recognised for slow-moving, obsolete or unsalable inventory and are reviewed on a six-monthly basis. The valuation of Inventory includes key estimates and judgments made by Management including normal production capacity, market demand and selling opportunities. If actual demand or usage were to be lower than estimated, inventory provisions for excess or obsolete inventory may be required.

 

2.    Significant accounting policies

a)    Functional currency

The financial statements of each Group company are measured using the currency of the primary economic environment in which that company operates (the functional currency). The consolidated financial statements record the results and financial position of each Group company in Euro, which is the functional currency of the Company and the presentational currency for the consolidated financial statements.

 

I.     Transaction and balances

Transactions in foreign currencies are converted into the respective functional currencies at initial recognition, using the exchange rates at the transaction date. Monetary assets and liabilities at the end of the reporting period are translated at the rates ruling at the reporting date. Non-monetary assets and liabilities are not retranslated. All exchange differences are recognised in profit or loss. On consolidation, the results of overseas operations not in Euro are translated at the rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at closing rate and the results of overseas operations at actual rate are recognised in other comprehensive income.

 

b)    Financial instruments

There are no other categories of financial assets other than those listed below:

 

I. Trade and other receivables and amounts due from subsidiaries

Trade and other receivables and amounts due from subsidiaries are recognised and carried at the original invoice amount less any provision for impairment.

 

The Group recognises a loss allowance for expected credit losses ("ECL") on financial assets that are measured at amortised cost which comprise mainly of trade receivables. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

 

The Group always recognises lifetime ECL on trade receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.

 

II.        Cash and cash equivalents

Cash and cash equivalents comprise demand deposits with an original maturity of up to 3 months which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.

 

There are no other categories of financial liabilities other than those listed below:

 

III.      Trade and other payables

Trade payables are stated at their amortised cost.

 

IV.    Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. At initial recognition, financial liabilities are measured at their fair value, minus transaction costs that are directly attributable, and are subsequently measured at amortised cost.

 

An equity instrument is any contract that evidences a residual interest in the asset of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.

 

V.        Leases

On commencement of a contract which gives the Group the right to use assets for a period of time in exchange for consideration, the Group recognises a right-of-use asset and a lease liability. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payment made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payment unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group's incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments, variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reducing for payment made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

 

c)    Share capital

 

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are netted off against share premium.

 

d)    Property, plant and equipment

I.     Recognition and measurement

Property, plant and equipment are measured at cost less accumulated depreciation, Government grants received (where applicable) and accumulated impairment losses.

 

Costs capitalised include expenditure that are directly attributable to the acquisition of the asset.

 

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

 

Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) are recognised in profit or loss.

 

II.    Subsequent costs

Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred.

 

III.   Depreciation

Items of property, plant and equipment are depreciated on a straight-line basis in the statement of comprehensive income over the estimated useful lives of each component.

 

Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.

 

The estimated useful lives of significant items of property, plant and equipment are as follows:

·    IT equipment from 3 to 5 years

·    Industrial equipment, office equipment and plant and machinery from 5 to 10 years

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted where appropriate.

 

e)    Intangible assets

Intangible assets are measured at cost less accumulated amortisation and Government grants received (where applicable). The carrying value of intangible assets is reviewed annually for impairment.

 

Patent rights acquired and development expenditure are recognised at cost.

 

Expenditure on internally developed products is capitalised if it can be demonstrated that:

- it is technically feasible to develop the product

- adequate resources are available to complete the development

- there is an intention to complete and sell the product

- the Group is able to sell the product

- sale of the product will generate future economic benefits, and

- expenditure on the project can be measured reliably.

 

Capitalised development costs are amortised over the period the Group expects to benefit from selling the products developed (Useful Economic Life). The amortisation expense is included within the cost of sales in the consolidated statement of comprehensive income.

 

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the consolidated statement of comprehensive income as incurred.

 

Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses.

 

Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.

 

I.     Amortisation

Intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, from the date that they are available for use. The estimated useful lives of significant intangible assets are as follows:

 

·    Patents concerning G+® technology generate significant value to the Group over a period of 20 years, in line with the legal duration of the patent and their useful lives. However, on a conservative basis, such costs are amortised over a period of 10 years. 

·    Brand: 5 years

·    Development costs concerning personnel capitalized: 5 years

·    Others: 5 years

 

f)     Inventories

Inventories are stated at the lower of cost or net realisable value. The cost of inventories comprises of net prices paid for materials purchased, production labour cost and factory overhead. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Inventory provisions are recognised for slow-moving, obsolete or unsalable inventory and are reviewed on a six months basis.

 

g)    Goodwill

Goodwill represents the excess of the cost of a business combination over the Group's interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired.

 

Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree.  Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, remeasured subsequently through profit or loss.

 

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

 

h)    Impairment

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end.  Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (CGUs). The Group's CGUs generally align with each subsidiary. The recoverable amount is then estimated. The recoverable amount of an asset or a CGU is the greater of its net present value and its fair value less costs to sell.

 

Net present value is generally computed as the present value of the future cash flows, discounted to present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

 

An impairment loss is recognised if the carrying amount of an asset or a CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to reduce the carrying amounts of the other assets in the unit on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortisation, if no impairment loss had been recognised.

 

i)     Employee benefits

Defined benefit scheme surpluses and deficits are measured at:

-     The fair value of plan assets at the reporting date; less

-     Plan liabilities calculated using the projected unit credit method discounted to its present value using yields available on high quality corporate bonds that have maturity dates approximating to the terms of the liabilities; plus

-     Unrecognised past service costs; less

-     The effect of minimum funding requirements agreed with scheme trustees.

 

Remeasurements of the net defined obligation are recognised directly within equity. The remeasurements include:

-     Actuarial gains and losses

-     Return on plan assets (interest exclusive)

-     Any asset ceiling effects (interest exclusive).

 

Service costs are recognised in profit or loss and include current and past service costs as well as gains and losses on curtailments.

 

Net interest expense (income) is recognised in profit or loss and is calculated by applying the discount rate used to measure the defined benefit obligation (asset) at the beginning of the annual period to the balance of the net defined benefit obligation (asset), considering the effects of contributions and benefit payments during the period.

 

Gains or losses arising from changes to scheme benefits or scheme curtailment are recognised immediately in profit or loss.

 

Settlements of defined benefit schemes are recognised in the period in which the settlement occurs.

 

For more information please see note 20.

 

j)     Revenues

The Group operates diverse businesses and accordingly applies different methods for revenue recognition, based on the principles set out in IFRS 15.

 

The revenue and profits recognised in any reporting period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer. In determining the amount of revenue and profits to record, and associated balance sheet items, management is required to review performance obligations within individual contracts. This may involve some judgemental areas.

 

Revenue is recognised either when the performance obligation in the contract has been performed (so 'point in time' recognition) or 'over time' as control of the performance obligation is transferred to the customer.

 

For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group's performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer.

 

·    Revenues from sale of graphene based products are typically recognised at a point in time when goods are delivered to the customer as with this, the customer gains the right of control over the goods. However, for export sales, control might also be transferred when delivered either to the port of departure or port of arrival, depending on the specific terms of the contract with a customer. 

·    Revenues from sale of equipment (such as Mobile Production Units) are typically recognised at point in time when goods are delivered to the customers and site acceptance test is successfully performed.

·    Revenues from services relates mainly to environmental services provided by Setcar which are recognised:

o  at a point in time basis when contracts include an obligation to process waste once the process occurred according with the contract in place.

o  at the point in time when the waste is delivered to our platform with no further performance obligations.

o  over time in accordance with agreed project milestones being delivered.

 

Where cost has been incurred to undertake a performance obligation but this has not been realised at the year end the attributable costs are carried forward as work in progress.

 

k)    Government grants

Government grants are recognised when there is reasonable assurance that the entity will comply with the relevant conditions and the grant will be received. Grants are recognised in profit or loss on a systematic basis where the Group has recognised the initial expenses that the grants are intended to compensate. Where a grant has been received as a contribution for property, plant and equipment, or capitalised development costs, the income received has been credited against the asset in the statement of financial position.

 

l)     Finance income and finance costs

Finance income comprises interest income on funds invested. Interest income is recognised in the profit or loss, using the effective interest method. Finance costs comprise interest expense on borrowings.

 

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

 

m)  Investments in subsidiaries (Company only)

Investments are stated at their cost less any provision for impairment (for details refer to note h).

 

n)    Taxation

Tax expense comprises current and deferred tax. Current and deferred tax is recognised in the profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

 

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

 

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

 

Deferred tax is not recognised for:

·    temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

·    temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and

·    taxable temporary differences arising on the initial recognition of goodwill.

 

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

 

A deferred tax asset is recognised for deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

 

Adoption of new and revised standards

 

New standards, interpretations and amendments effective from 1 January 2021

The IFRS financial information has been drawn up on the basis of accounting policies consistent with those applied in the financial statements for the year to 31 December 2020, except for the following:

·    Interest Rate Benchmark Reform - Amendment to IFRS 7, IFRS 9, IFRS 16 and IAS 39.

 

The application of the above standards has had no impact on the disclosures or the amounts recognised in the Group's consolidated financial statements.

 

New standards, interpretations and amendments not yet effective

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.

 

The following amendments are effective for the period beginning 1 January 2022:

• Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);

• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);

• Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); a

• References to Conceptual Framework (Amendments to IFRS 3).

 

The following amendments are effective for the period beginning 1 January 2023:

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

• 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).

 

In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The amendments also clarify that 'settlement' includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments were originally effective for annual reporting periods beginning on or after 1 January 2022. However, in May 2020, the effective date was deferred to annual reporting periods beginning on or after 1 January 2023. In response to feedback and enquiries from stakeholders, in December 2020, the IFRS Interpretations Committee (IFRIC) issued a Tentative Agenda Decision, analysing the applicability of the amendments to three scenarios. However, given the comments received and concerns raised on some aspects of the amendments, in April 2021, IFRIC decided not to finalise the agenda decision and referred the matter to the IASB. In its June 2021 meeting, the IASB tentatively decided to amend the requirements of IAS 1 with respect to the classification of liabilities subject to conditions and disclosure of information about such conditions and to defer the effective date of the 2020 amendment by at least one year. The Group is currently assessing the impact of these new UK adopted accounting standards and amendments. The Group will assess the impact of the final amendments to IAS 1 on classification of its liabilities once the those are issued by the IASB.

 

The Group does not believe that the amendments to IAS 1, in their present form, will have a significant impact on the classification of its liabilities, as the conversion feature in its convertible debt instruments is classified as an equity instrument and therefore, does not affect the classification of its convertible debt as a non-current liability.

 

3.    Operating segments

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision makers (CEO, CFO, COO and CTO), as defined in IFRS 8, in order to allocate resources to the segments and to assess its performance.

 

For management purposes, also considering the materiality the Group is organized into the following segments:

-     Textile

-     Environmental

-     Others

 

Textile and Environmental were considered by Management the strategic segments able to sustain the growth. Management's strategic needs are constantly monitored and an update of the segments will be provided if required. Any further update of the segment analysis will be reflected in this section.

 

Segment profit/(loss) represents the profit/(loss) earned by each segment, including all the direct costs that are directly correlated with the segment. Overhead, assets and liabilities not directly attributable to a specific segment have been allocated as Head Office.

 

As the business evolves this is an area that will be assessed on a regular basis and additional segmental reporting will be provided at the appropriate time.

 

2021

	Textile	Environmental	Others	Headoffice	Consolidated
Revenue	1,843,506	6,560,771	210,821	-	8,615,098
Cost of Sales*	(1,002,845)	(3,030,602)	(107,310)	-	(4,140,757)
Gross Profit	840,661	3,530,169	103,511	-	4,474,341
Other income	174,484	607,049	-	49,872	831,405
Other expenses:
R&D expense	(317,422)	(45,450)	(25,966)	-	(388,838)
Advisory	(50,004)	(481,992)	-	(887,722)	(1,419,718)
Operating expenses	(536,615)	(2,519,008)	(135,782)	(2,294,012)	(5,485,417)
Depreciation & amortisation	(331,492)	(1,177,445)	(34,630)	-	(1,543,567)
Operating Loss	(220,388)	(86,677)	(92,867)	(3,131,862)	(3,531,794)
Net financial costs	-	-	-	146,941	146,941
Tax	-	(44,620)	-	-	(44,620)
Loss of the year	(220,388)	(131,297)	(92,867)	(2,984,921)	(3,429,473)

 

Total assets	5,642,443	15,086,933	1,038,326	-	21,767,702
Total liabilities	1,746,301	3,739,745	250,546	-	5,736,592

 

2020

	Textile	Environmental	Others	Head Office	Consolidated
Revenue	1,943,924	4,360,864	129,692	-	6,434,480
Cost of Sales*	(1,221,579)	(1,971,859)	(74,872)	-	(3,268,310)
Gross Profit	722,345	2,389,005	54,820	-	3,166,170
Other income	85,980	204,450	27,206	28,189	345,826
Other expenses:
R&D expense	(96,915)	(25,500)	-	-	(122,415)
Advisory	(50,752)	(335,248)	-	(905,021)	(1,291,022)
Operating expenses	(1,332,294)	(2,214,108)	(138,874)	(1,033,266)	(4,718,541)
Depreciation & amortisation	(508,331)	(1,143,250)	(39,291)	-	(1,690,872)
Operating Loss	(1,179,967)	(1,124,652)	(96,138)	(1,910,098)	(4,310,855)
Financial costs	-	-	-	(346,532)	(346,532)
Tax	-	-	-	124,414	124,414
Loss of the year	(1,179,967)	(1,124,652)	(96,138)	(2,132,216)	(4,532,973)

 

Total assets	5,609,005	11,083,261	1,014,317	-	17,706,582
Total liabilities	2,443,527	2,680,121	1,920,685	-	7,044,333

*Includes Changes in inventories of finished goods.

 

		2021	2020
		€	€
Sale of products		2,898,224	2,137,289
Sale of services		5,716,874	4,297,191
Government grants		166,112	159,815
Other		665,293	186,011
Total Income		9,446,503	6,780,306

 

Geographical breakdown of revenues is:

 

	2021	2020
	€	€
Italy	1,755,329	1,555,622
Romania	6,563,839	4,495,661
Rest of the world	295,930	383,197
Total	8,615,098	6,434,480

 

The Group has transacted with 3 main customers in 2021, which accounted for more than 10% of Group revenues for sales of products and services. This largest customer accounted for 16% of revenues (€1,349,981), the second largest to 12% (€1,006,649), whilst the third for 11% (€907,323).

 

Other Income of €831,405 mainly includes the release of an undue obligation for €503,904, as the former shareholders of Setcar renounced to dividends not paid yet, Government Grants for €166,112, and R&D Expenditure Credit (RDEC) for €33,425. The RDEC is an Italian incentive scheme (art.3 DL 145/2013) designed to encourage companies to invest in research and development. The credit can be used to reduce corporation tax or to offset outstanding payables related to social security.

 

4.    Government Grants

Information regarding government grants:

 

	2021	2020
	€	€
Innodriver	25,000	-
Inno4covid	99,889	-
Green.Tex	30,616	54,278
COVID-19 government grants	-	103,536
Techfast	10,607	-
Total	166,112	157,814

 

During 2021, the Company took part in Inno4Covid, a European project for fostering innovation, prevention and surveillance in response to Covid-19. The project was 100% financed for a total amount of €99,889, of which 50% was collected during the year.

 

Directa Plus keeps investing in the activities related to the Green.Tex project, whose deadline was extended up until April 2022.

 

In 2021, the Company was also awarded with the inclusion in the Tech Fast project, with an overall value of approximately €290,000, financed at 50%. The tender, concerning eco-innovation for industrial antimicrobial and antiviral filtration through the use of graphene, will end in 2022.

 

Directa Plus also obtained the Innodriver grant (€25,000) to support the study of new products in the textile sector.

 

The key terms of government grants are:

 

			Green.Tex	Tech fast	Inno4covid	Innodriver	Ecopave
Starting date			2020	2021	2021	2021	2017
Ending date			2022	2022	2021	2021	2021
Duration (months)			21	12	8	n.a.	37
Total amount			96,192	147,028	99,889	25,000	214,000
Final report submitted			on-going	on-going	Yes	Yes	Yes

 

There are no capital commitments built into the ongoing grants. Government grants have been recognised within other income.

 

5.    Inventory

		2021 €	2020 €
Finished products		1,141,372	1,071,173
Spare parts		76,663	110,808
Raw material		93,798	97,712
Working in progress		59,042	96,254
Total		1,370,875	1,375,947

 

As of 31 December 2021, total inventory value is in line with 2020; the finished products mainly referred to Directa Plus SpA. Spare parts inventory was required to enhance maintenance efficiency and is composed of a small number of critical items with a material cost per unit.

 

6.    Raw materials and consumables

	2021	2020
	€	€
Raw material & consumables	2,711,528	1,670,305
Textile products	922,783	894,012
Total	3,634,311	2,564,317

The increase in raw materials is in line with the business growth.

 

7.    Employee benefits expenses

 

	2021	2020
	€	€
Wages and salaries	3,525,876	3,264,227
Social security costs	559,856	496,428
Employee benefits	111,964	89,169
Share option expense	130,910	19,286
Other costs	103,877	62,099
Total	4,432,483	3,931,208
Capitalised cost in "Intangible assets"	(135,528)	(161,935)
Total charged to the Income Statement	4,296,955	3,769,274

 

The average number of employees (excluding non-executive directors) during the period was as follows:

 

	2021	2020
Sales and Administration	30	27
Engineering, R&D and production	165	166
Total	195	193

 

The total average number of employees of the Group as at 31 December 2021 was 195 (2020: 193), of which 166 employed by Setcar.

 

The Directors' emoluments (including non-executive directors) are as follows:

	2021	2020
Wages and salaries	773,683	836,709
Total	195	193

 

The aggregate emoluments (wages, salaries and social contributions) of the highest paid Director totalled €527k (2020: €495k).

 

Share-base payment expenses were €130,910, of which €62,708 accounted for in the Parent Company accounts as directly attributable to the Executive Directors.  

 

8.    Other expenses 

Other expenses include:

 

	2021 €	2020 €
Audit of the Group and Company financial statements	81,991	79,347
Audit of the subsidiaries' financial statements	36,230	37,968
Other non-audit services provided by Group's auditor	5,978	4,422
Tool manufacturing	296,965	508,363
Analyses & tests	377,028	128,152
Travel	69,659	78,012
Technical consultancies	277,117	223,732
Shipping and logistic expenses	260,014	365,317
Insurance	165,347	112,122
Marketing	32,989	27,866
Legal, tax and administrative consultancies	915,234	962,365

Analyses & tests expenses (€377,028) and technical consultancies refer to R&D activities outsourced to external labs and universities. Both cost categories have increased over the last year in line with the business growth.

 

The increase in the insurance expenses (€165,347) was mainly driven by the hard market conditions, which led to a general increase in premiums.

 

9.    Net Finance expenses

Finance expenses include:

		2021 €	2020 €
Interest Income		(1,616)	(1,175)
Interest on loans and other financial costs		45,426	45,719
Interest on lease liabilities		18,157	21,589
Interest cost for benefit plan		11,098	10,131
Foreign exchanges losses/(gains)		(220,006)	270,268
Total		(146,941)	346,532

 

Foreign exchange income of €220,006 (2020: -€270,268) includes €211,056 of Sterling to Euro movement in the Group's Sterling bank accounts.

 

10.  Taxation

		2021 €	2020 €
Current tax (expense)/income		(1,727)	404
Deferred tax expense/ (recovery)		(42,893)	(124,818)
Total tax expenses		(44,620)	(124,414)

 

Reconciliation of tax rate

		2021 €	2020 €
Loss before tax		(3,384,853)	(4,657,387)
Italian statutory tax rate		24%	24%
		(812,365)	(1,117,773)
Impact of temporary differences		4,431	155,430
Losses recognised		(49,052)	(31,016)
Impact of tax rate in foreign jurisdiction		(35,491)	47,820
Losses not utilised		847,857	1,069,953
Total tax expenses		(44,620)	(124,414)

 

Tax losses carried forward have been recognised as a deferred tax asset up to the point that they are recoverable against taxable temporary differences. All other tax losses are carried forward and not recognised as a deferred tax asset due to the uncertainty regarding generating future taxable profits. Tax losses carried forward are €31,494,057(€27,762,446 in 2020).

 

11.  Intangible assets

Cost	Development Cost	Patents	Goodwill	Others	Brands	Total
	€	€	€	€	€	€
Balance at 31/12/2019	2,765,023	437,933	303,552	249,580	384,124	4,140,213
Additions	379,998	111,151	-	35,814	-	526,963
Currency translation differences	(218)	(3,344)	(5,204)	(289)	(7,107)	(16,162)
Balance at 31/12/2020	3,144,804	545,740	298,348	285,105	377,017	4,651,014
Additions	135,527	172,307	-	(1,063)	-	306,771
Currency translation differences	(184)	-	(4,391)	(3,059)	(5,996)	(13,630)
Balance at 31/12/2021	3,280,147	718,047	293,957	280,983	371,021	4,944,154
Amortisation
Balance at 31/12/2019	1,731,795	145,349	-	54,214	6,402	1,937,760
Amortisation 2020	357,746	218,247	-	18,593	75,899	670,485
Balance at 31/12/2020	2,089,541	363,596	-	72,807	82,301	2,608,245
Amortisation 2021	389,299	71,829	-	13,797	74,621	549,547
Currency translation differences	(271)	-	-	(3,313)	(2,330)	(5,914)
Balance at 31/12/2021	2,478,569	435,425	-	83,291	154,592	3,151,877
Carrying amounts
Balance 31/12/2019	1,033,228	292,584	303,552	196,811	377,722	2,202,452
Balance 31/12/2020	1,055,262	182,145	298,348	213,743	294,715	2,042,767
Balance 31/12/2021	801,578	282,623	293,957	199,137	216,428	1,792,277

 

As disclosed in note 1(d) development costs capitalised in the year are mainly based on time spent by employees who are directly engaged in the development of the G+® technology.

 

Management, throughout the support of external experts, carried out an impairment test on goodwill accounted following the acquisition of Setcar S.A. in 2019.

 

The CGU is represented by Setcar itself, whose carrying amount as of 31 December 2021 was estimated equal to €5.1m.

 

The impairment review of the CGU is based on an assessment of the CGU's value in use ("VIU"). In calculating VIU, the estimated future cash flows are discounted to their present value using a pre-tax discount rate of 10.9% that reflects current market assessments of the time value of money and the risks specific to the asset/CGU and a perpetual annual growth rate of 1.6%.

 

Based on such assumptions, the recoverable amount was estimated equal to €27.4m. In addition, a sensitivity analysis was performed, assuming a +/- 0.5% variation in the discount rate and a +/- 0.5% variation in the perpetuity growth rate. This led to a recoverable amount estimated in the range of €26m and €29m.

 

As a conclusion, the verifications have shown that the book values can be fully recovered and no goodwill impairment is required as of 31 December 2021.

 

12.  Property, plant and equipment

Cost	Industrial Equipment	Computer Equipment	Office Equipment	Plant & Machinery	Land	ROU Assets	Under Costr.	Total
	€	€	€	€	€	€	€	€
Balance at 31/12/2019	1,235,693	56,554	179,469	4,202,028	608,395	456,819	2,445	6,741,402
Additions	52,825	17,967	9,391	171,819	-	322,309	-	574,356
Disposals	-	-	-	(23,343)	-	-	-	(23,343)
Currency translation differences	(21,101)	-	(16,232)	(53,298)	(11,257)	-	-	(101,934)
Balance at 31/12/2020	1,267,415	74,521	172,627	4,297,207	597,138	779,128	2,445	7,190,481
Additions	392,141	10,095	13,934	416,922	-	-	-	833,092
Disposals	(6,435)	-	(3,143)	(31,124)	-	-	-	(40,703)
Currency translation differences	(32,070)	-	(2,228)	(50,895)	(9,498)	-	(38)	(94,728)
Balance at 31/12/2021	1,621,051	84,616	181,189	4,632,110	587,640	779,128	2,407	7,888,141
Depreciation
Balance at 31/12/2019	193,331	36,113	67,587	1,637,482	-	76,136	-	2,010,649
Depreciation 2020	378,873	7,693	35,432	517,406	-	80,984	-	1,020,388
Currency translation differences	(17,894)	-	(2,356)	(30,851)	-	-	-	(51,101)
Balance at 31/12/2020	556,309	43,807	100,663	2,123,314	-	157,120	-	2,981,213
Depreciation 2021	287,741	9,312	49,791	544,774	-	102,402	-	994,021
Currency translation differences	(21,983)	-	(4,986)	(43,089)	-	-	-	(70,059)
Balance at 31/12/2021	822,067	53,119	145,468	2,624,999	-	259,522	-	3,905,175
Carrying amounts
Balance 31/12/2019	1,042,362	20,440	111,882	2,564,546	608,395	380,683	2,445	4,730,752
Balance 31/12/2020	711,106	30,714	71,965	2,173,892	622,008	597,138	2,445	4,209,268
Balance 31/12/2021	798,985	31,496	35,722	2,007,110	519,606	519,606	2,407	3,982,966

 

Assets held under financial leases with a net book value of € 557,243 are included in the above table within Plant & Machinery.

 

13.  Investments in subsidiaries

Details of the Company's subsidiaries as at 31 December 2021 are as follows:

 

			Shareholding
Subsidiaries	Country	Principal activity	2021	2020
Directa Plus Spa	Italy	Producer and supplier of graphene based materials and related products	100%	100%
Directa Textile Solutions Srl	Italy	Commercialise textile membranes, including graphene-based technical and high-performance membranes	73.5%	73.5%
Setcar S.A.	Romania	Waste management and decontamination services business	52%	51%

 

Subsidiaries	Place of Business	Registered Office	Place of Business
Directa Plus Spa	Italy	Via Cavour 2, Lomazzo (CO) Italy	See registered office
Directa Textile Solutions Srl	Italy	Via Cavour 2, Lomazzo (CO) Italy	See registered office
Setcar S.A.	Romania	Str. Gradinii Publice 6, Braila Romania	See registered office

 

The Company's investment as capital contributions in Directa Plus Spa are as follows:

	Directa Spa
At 31 December 2019	21,180,336
Additions	2,500,000
At 31 December 2020	23,680,336
Additions	2,000,000
At 31 December 2021	25,680,336

 

14.  Trade and other receivables

 

Current

	Group		Company
	2021	2020	2021	2020
	€	€	€	€
Account receivables	2,339,369	2,174,967	-	-
Tax Receivables	465,953	443,857	49,539	23,265
Other receivables	500,171	238,636	155,752	142,997
Total	3,305,493	2,857,460	205,291	166,262

 

Non-Current

	Group		Company
	2021	2020	2021	2020
	€	€	€	€
Other receivables	185,623	140,649	-	-
Total	185,623	140,649	-	-

 

Group account receivables of €2,339,369 are mainly composed by seven major clients, covering 60% of the total amount.

 

Group Tax Receivables are composed of Italian VAT receivables of €278,812, UK VAT receivables of €49,539, Romanian VAT receivables of €50,785, RDEC Tax Credit receivables of €73,894 and other Italian Tax receivables of €12,923.

 

Other receivables are mainly composed of governments grants for €213,160 and prepayments for €277,089.

 

Non-current other receivables of €185,623 refer to specific projects where the collection of a certain amount, although due, is postponed to the end of the project itself.  

 

As at 31 December 2021 the ageing of account receivables was:

 

Days overdue	2021	2020
	€	€
0-60	1,771,113	1,895,323
61-180	251,458	50,372
181-365	101,450	231,109
365 +	215,348	57,786
Total	2,339,369	2,174,967

 

As at 31 December 2021 the Group recognised provision for €46,892€ mainly referred to Setcar's overdue debts.

 

15.  Deferred tax liabilities

		2021	2020
		€	€
Deferred tax liabilities		174,158	138,147
Deferred tax assets - losses		(84,661)	(129,724)
Total		89,497	8,423

 

Deferred tax assets have been recognised on losses brought forward to the extent that they can be offset against taxable temporary differences in line with the requirements of IAS 12.

 

The deferred tax liabilities arise from the capitalisation of development costs and defined benefit scheme are detailed below:

	2021	2020
	€	€
Deferred tax liabilities Cost Capitalized	86,313	121,504
Deferred tax liabilities Other	(1,652)	8,220
Deferred tax liabilities arising from acquisition	89,497	8,423
Deferred tax assets - losses exc. Setcar	(84,661)	(129,724)
Total	89,497	8,423

 

16.  Cash and cash equivalents

	Group		Company
	2021	2020	2021	2020
	€	€	€	€
Cash at bank	11,126,683	7,075,447	9,430,364	4,283,625
of which restricted cash	40,000	-	-	-
Cash in hand	3,785	5,045	-	-
Total	11,130,468	7,080,492	9,430,364	4,283,625

 

The Company holds €40,000 of restricted cash as a guarantee for a performance bond provided by a bank for a major contract in the Environmental vertical.

 

17.  Equity

		2021	2020
		€	€
Share Capital		205,393	190,996
Share Premium		39,159,027	31,395,612
Foreign currency translation reserve		(23,109)	(7,015)
Retained earnings		(25,352,139)	(21,824,229)
Non-controlling interests		2,041,938	906,885
Balance at 31 December		16,031,110	10,662,249

 

Share Capital

	Number of
	Ordinary	Share
	Shares	Capital (€)
At 31 December 2019	60,998,983	190,512
Share issue on 26 June	111,980	309
Share issue on 30 June	63,624	175
At 31 December 2020	61,174,587	190,996
Share issue on 14 January *	190,872	535
Share issue on 29 December - capital raise **	1,670,518	4,962
Share issue on 30 December - capital raise **	2,996,149	8,900
At 31 December 2021	66,032,126	205,393

* On 14 January 2021, 190,872 ordinary shares with a nominal value of £0.0025 each were issued as effect of the exercise of options of ordinary shares for Directors and Senior Managers.

** On 29 and 30 December 2021, 4,666,667 ordinary shares with a nominal value of £0.0025 each were issued as effect of the Company's capital raise.

 

Share Premium

		Share
In euro		premium
		€
At 31 December 2019		31,395,612
Shares issued		-
Expenditure relating to the raising of shares		-
At 31 December 2020		31,395,612
Shares issued		8,306,293
Expenditure relating to the raising of shares		(542,878)
At 31 December 2021		39,159,027

 

On 29 and 30 December 2021, as a result of the Company's capital raise, 4,666,667 ordinary shares were issued at a price of £1.5 each. The Company accounted for €8,306,293 of gross share premium reserve, net of €542,878 of expenditure directly referred to the transaction. 

 

Share capital

Financial instruments issued by the Directa Plus Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Directa Plus Group's ordinary shares are classified as equity instruments.

 

Share premium

To the extent that the company's ordinary shares are issued for a consideration greater than the nominal value of those shares (in the case of the company, £0.0025 per share), the excess is deemed Share Premium. Costs directly associated with the issuing of those shares are deducted from the share premium account, subject to local statutory guidelines.

 

Foreign currency translation reserve

Exchange differences resulting from the consolidation process of Setcar are recognised in the translation reserve for an amount of € 7,183.

 

Non- controlling interest

Non-controlling interest refers to the minority shareholders of the company who own less than 50% of the overall share capital.

 

As of 31 December 2021, non-controlling interest is composed by 48% of Setcar S.A. and 26.46% of Directa Textile Solutions Srl.

 

18.  Loans and borrowings

		Group		Company
		2021	2020	2021	2020
		€	€	€	€
Non-current Loans and borrowings Current Loans and borrowings		2,403,881 65,840	1,017,716 981,065	- -	- -
Total		2,469,721	1,998,781	-	-

 

	2021 €	Current €	Non current €	Repayment	Interest rate
BANK OF TRANSILVANIA	660,328	-	660,328	36-months	Variable 4.7% ROBOR 3M + 2,5%/year
BANK OF TRANSILVANIA IMM INV	464,143	-	464,143	60-months	Variable 4.11% ROBOR 3M +2.11%/year+2%
GVC INVESTMENT COMPANY LMT	16,630	16,630	-	12-months	1.5%/year
INTESA SAN PAOLO	300,000	18,393	281,607	72-months	1.5%/year + EURIBOR 3M
INTESA SAN PAOLO	25,000	3,076	21,924	72-months	1.5%/year + EURIBOR 3M
INTESA SAN PAOLO	-500,000	-	500,000	72-months	1.5%/year + EURIBOR 3M
BANCA POPOLARE DI SONDIO	500,000	24,121	475,879	72-months	1.5%/year + EURIBOR 3M

 

Reconciliation of liabilities arising from financing activities

		Cash flows		Non Cash flows
Borrowings	01 January	Capital Repayment	Liabilities acquired	Accrued Interest	Loan conversion into equity	31 December 2021
	2021
	€	€	€	€	€	€
	1,998,781	(81,666)	1,511,719	1,642	(960,755)	2,469,721
Total	1,998,781	(81,666)	1,511,719	1,642	(960,755)	2,469,721

 

19.  Leases liabilities

The following table details the movement in the Group's lease obligations for the period ended 31 December 2021:

		2021	2020
		€	€
Non-current lease liabilities		463,047	627,138
Current lease liabilities		217,537	214,935
Total		680,584	842,073

 

20.  Employee benefits provision

		2021	2020
		€	€
Employee benefits		500,535	444,483
Total		500,535	444,483

 

Provisions for benefits upon termination of employment primarily related to provisions accrued by Italian companies for employee retirement, determined using actuarial techniques and regulated by Article 2120 of the Italian Civil code.  The benefit is paid upon retirement as a lump sum, the amount of which corresponds to the total of the provisions accrued during the employees' service period based on payroll costs as revalued until retirement.  Following the changes in the law regime, from January 1 2007 accruing benefits have been contributing to a pension fund or a treasury fund held by the Italian administration for post-retirement benefits (INPS).  For companies with less than 50 employees it will be possible to continue this scheme as in previous years.  Therefore, contributions of future TFR provisions to pension funds or the INPS treasury fund determines that these amounts will be treated in accordance to a defined contribution scheme, not subject to actuarial evaluation. Amounts already accrued before 1 January 2007 continue to be accounted for a defined benefit plan and to be assessed on actuarial assumptions.

 

The breakdown for 2020 and 2021 is as follows:

€

Amount at 31 December 2019	406,534
Service cost	57,081
Interest cost	10,131
Actuarial gain/losses	(7,821)
Past service cost	-
Benefit paid	(21,442)
Amount at 31 December 2020	444,483
Service cost	47,536
Interest cost	11,098
Actuarial gain/losses	6,457
Benefit paid	(9,039)
Amount at 31 December 2021	500,535

 

Variables analysis

Detailed below are the key variables applied in the valuation of the defined benefit plan liabilities. 

 

	2021	2020
Annual rate interest	2.30%	2.30%
Annual rate inflation	1.10%	1.10%
Annual increase TFR	7.41%	7.41%
Tax on revaluation	17.00%	17.00%
Social contribution	0.50%	0.50%
Increase salary male	1.20%	1.20%
Increase salary female	1.15%	1.15%
Rate of turnover male	1.70%	1.70%
Rate of turnover female	1.50%	1.50%

 

Sensitivity analysis

Detailed below are tables showing the impact of movements on key variables:

 

Actuarial hypothesis - 2021		Decrease 10%		Increase 10%
			Variation		Variation
		Rate	DBO €	Rate	DBO €
Increase salary	Male	1.08%	(4,767)	1.32%	1,277
	Female	1.04%		1.27%
Turnover	Male	1.53%	(4,962)	1.87%	1,325
	Female	1.35%		1.65%
Interest rate		2.07%	11,788	2.53%	(14,631)
Inflation rate		0.99%	(6,032)	1.21%	2,546

 

21.  Trade and Other payables

 

Non-current

	Group		Company
	2021 €	2020 €	2021 €	2020 €
Other payables	64,357	65,397	-	-
Total	64,357	65,397	-	-
Current
	Group		Company
	2021 €	2020 €	2021 €	2020 €
Trade payables	946,694	1,364,787	93,332	54,725
Employment costs	609,397	519,466	-	-
Other payables	375,807	1,228,655	78,486	62,020
Contingent consideration at fair value through P&L	-	572,268	-	-
Total	1,931,898	3,685,176	171,818	116,745

 

In 2021 Setcar released an obligation to its former shareholders for a total amount of €504k, accounted as other income in the Consolidated statement of comprehensive income. As of December 2020, this amount was accounted within other payables.

 

Over 2021 the Group paid the last tranches of contingent consideration to the former shareholders of Setcar for a total amount of €572,268.

 

22.  Financial instruments

 

Financial risk management

The Group's business activities expose the Group to the following financial risks:

 

a)    Market risk

Market risk arises from the Group's use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value of future cash flow of a financial instrument will fluctuate because of changes in interest rates or foreign exchange rates. As at 31 December 2021 the Group is exposed to variable interest rate risk for a short term revolving loan and for the loans recently issued by Directa Plus SpA under the Italian Government Covid-19 Recovery Plan. Those loans, being 90% guaranteed by the Italian Government, bear a low interest rate (1.5% + EURIBOR) and, if the interest rate had increased or decreased by 100 basis points during the year the reported loss after taxation would not have been materially different to that reported.

 

b)    Capital Risk

The Group's objectives for managing capital are to safeguard the Group's ability to continue as going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. There were no changes in the Group's approach to capital management during the year.

 

c)    Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group's credit risk is primarily attributable to its trade receivables that the Company consider defaulted if any instalment is unpaid more than sixty (60) days past its original due date or where there is evidence that identifies the debtor's state of insolvency.

 

The Group's cash and cash equivalents and restricted cash are held with major financial institutions. The Group monitors credit risk by reviewing the credit quality of the financial institutions that hold the cash and cash equivalents and restricted cash.

 

The Group's trade receivables consist of receivables for revenue mainly in Italy and Romania. Management believes that the Group's exposure to credit risk is manageable and currently the Group's standard payment terms are 30 to 60 days from date of invoice are largely met from the clients. At the end of the period, 74% of account receivables have an ageing less of 60 days and refers to orders delivered close to the year end. As at 31 December 2021 the Group recognised a cumulated bad debt provision for €46,893.

 

Every new customer is internally analysed for creditworthiness before the Group's standard payment and delivery terms and conditions are offered. Advance payment usually applies for the first order and the exposure to credit risk is approved and monitored on an ongoing basis individually for all significant customers. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position. The Group does not require collateral in respect of financial assets.

 

d)    Exposure to credit risk

 

Group

	Note		2021 €	2020 €
Trade receivables	14		2,339,369	2,174,967
Cash and cash equivalent	16		11,130,468	7,080,492
Total			13,469,837	9,255,459

 

The largest customer within trade receivables account for 13% of debtors. Management continually monitors this dependence on the largest customers and are continuing to develop the commercial pipeline to reduce this dependence, spreading revenues across a variety of customers.

 

e)    Liquidity risk

It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments.  The Group manages liquidity risk by maintaining adequate reserves and banking facilities and by continuously monitoring forecast and actual cash flows. The Board reviews regularly the cash position to ensure there are sufficient resources for working capital requirements and to meet the Group's financial commitments.

 

2021	Carrying amount €	Up to 1 year €	1 -5 years €
Financial liabilities
Trade payables	946,694	946,694	-
Lease Liabilities	680,584	217,537	463,047
Loans	2,469,721	65,840	2,403,881
Total	4,096,999	1,230,071	2,866,928

 

2020	Carrying amount €	Up to 1 year €	1 -5 years €
Financial liabilities
Trade payables	1,364,787	1,364,787	-
Lease Liabilities	842,073	214,935	627,138
Loans	1,998,781	959,520	1,064,310
Total	4,205,641	2,539,242	1,691,448

 

f)     Currency risk

The Group usually raises money issuing shares in pounds, it follows that the Group usually holds sterling bank accounts as result of capital raise. Sterling bank accounts are mainly used to manage expenses of the Company (such as UK advisors, LSE fees and costs related to the Board) in UK. The cash held in Sterling continues to be subject to currency risk.

 

	EUR
Cash held in GBP	9,159,734

 

As of January 2022, to reduce the exposure to liquidity risk, Directors decided to translate GBP 4.5 million into EUR. As at 24^th March 2022 the total cash held in GBP is equal to £3.5 million. If the exchange rate EUR/GBP increase by 10% the impact on P&L would be a loss equal to €0.4 million (if decrease by 10% would be a profit equal to €0.4 million).

 

The Group holds accounts also in other currency (such as USD and RON) but just for business purposes and for not material amount.

 

23.  Earnings per share

	Change in number of ordinary shares	Total number of ordinary shares	Days	Weighted number of ordinary shares
At 31 December 2020	175,604	61,174.587	365	61,087,158
Existing shares		61,174,587	13	2,178,821
Issued on 14 Jan 2021	190,872	61,365,459	349	58,675,466
Issued on 29 Dec 2021	1,670,518	63,035,977	2	345,403
Issued on 30 Dec 2021	2,996,149	66,032,126	1	180,909
At 31 December 2021	4,857,539	66,032,126	365	61,380,599

 

		Basic		Diluted
		2021 €	2020 €	2021 €	2020 €
Loss attributable to the owners of the Parent		(3,652,364)	(4,195,011)	(3,652,364)	(4,195,011)
Weighted average number of ordinary shares in issue during the year		61,380,599	61,087,158	-	-
Fully diluted average number of ordinary shares during the year		-	-	61,649,085	61,477,110
Loss per share		(0.06)	(0.07)	(0.06)	(0.07)

 

The effect of anti-dilutive potential ordinary shares is ignored in calculating the diluted loss per share.

 

24.  Share Schemes

The 2020 Employees' Share Scheme is administered by the Remuneration Committee.

 

The Directors are entitled to grant awards over up to 10 per cent of the Company's issued share capital from time to time.

 

Under the 2020 Employees' Share Scheme, in November 2020 1,801,000 options over Ordinary Shares were granted to key employees and additional 150,000 options were granted to an Executive Director in June 2021 under the same Scheme. As of 31 December 2021, the total number of outstanding Ordinary Shares awards is 1,184,000, of which 517,000 vested after the first year and 250,000 were revoked.

 

At the date of this report, an additional 539,080 share options had vested in 2020 under the 2016 Employees' and NED Share Schemes that have not yet been exercised.

 

The main terms of the 2020 Employee's Share Schemes are set out below:

 

Eligibility

All persons who at the date on which an award is granted under the Employees' Share Scheme are employees (or employees who are also office-holders) of a member of the Group and are eligible to participate. The Remuneration Committee decides to whom awards are granted under the Employees' Share Scheme, the number of Ordinary Shares subject to an award, the exercise date(s) (subject to the below) and the conditions which must be achieved in order for the award to be exercisable.

 

Types of Award

Awards granted under the Employees' Share Scheme have the form of market value share options. "Market value share options" are share options with an exercise price equal to the market value of a share at the date of grant. The right to exercise the award is generally dependent upon the participant remaining an officer or employee throughout the performance period. This is subject to the good leaver provisions described below. Awards granted under the Share Schemes will not be pensionable.

 

Individual Limits

The value of Ordinary Shares over which an employee or Executive Director may be granted awards under the Employees' Share Scheme in any financial year of the Company shall not exceed 200 per cent of his basic rate of salary at the date of grant.

 

Variation of share capital

Awards granted under the Share Schemes may be adjusted to reflect variations in the Company's share capital.

 

Vesting of awards

Outstanding awards will vest over three years in equal one third tranches on each anniversary of the grant date to the extent that the market-based performance targets have been met. Vested awards may generally be exercised between the third and tenth anniversaries from the date of grant. 75% of vested shares can be exercised after the third anniversary, while the remaining 25% from the fourth.

 

The inputs to the Monte-Carlo simulation were as follows:

 

	Monte-Carlo simulation
		Market value shares
Share price		60p
Exercise price		66p
Expected volatility		54%
Compounded Risk-Free Interest Rate		0.10%
Expected life		6 years
Number of options issued*		1,801,000

 

*Number of options issued is an input of the Monte-Carlo simulation and refers to the total options granted by the Company in November 2020. This is not representing any option issued in the period.

 

Details of the number of share options outstanding are as follows:

 

	Outstanding at start of period	Granted during the period	Cancelled during the period	Expired during the period	Vested during the period	Outstanding at end of period	Exercisable period option price	Grant date	Exercisable date
31 December 2019	1,639,877		(25,523)	(733,066)	(821,288)	60,000	75p	12 May 2017	12 May 2020
31 December 2020	60,000	1,801,000	-	-	(60,000)	1,801,000	66p	12 Nov 2020	12 Nov 2023
31 December 2021	1,801,000	150,000	(250,000)	-	(517,000)	1,184,000	66p - 118p	12 Nov 2020 - 15 Jun 2021	12 Nov 2023 - 15 Jun 2023

 

Cancelation of share options during the period relates to the resignation of employees. Share options expired over the period refers to those performance share options that did not meet the performance criteria on the third anniversary of their granting. Vested share options are Market share options that met the criteria on the third anniversary.

 

As of 14 January 2021, two Directors and two Senior Managers of the Company had exercised 190,872 ordinary shares, originally vested under the 2016 Employees Share Scheme.

 

25.  Related parties

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

 

Remuneration of key management personnel

The below figures represent remuneration of key management personnel for the Group, who are part of the Executive Management Team but not part of the Board of Directa Plus PLC. The remuneration is set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures'.

 

	2021	2020
	€	€
Short-term employee benefits and fees	407,451	278,619
Social security costs	102,469	68,576
	509,920	347,195

 

The increase in 2021 is mainly explained by the fact that during the year an employee was appointed as part of the Executive Management Team of Directa Plus SpA.

 

Transactions with shareholders

The following sales with shareholder of the Group were recorded, excluding VAT, during the year:

	2021	2020
	€	€
Sale of products	-	3,948

 

Products are sold on normal commercial terms and conditions.

 

Other transaction Group

Other related party transactions during the year under review are shown in the table below:

	2021	2020
	€	€
Sale of products	19,395	15,886

 

Products are sold on normal commercial terms and conditions

 

26.  Contingent Liabilities and Commitments

The group has the following contingent liabilities relating to bank guarantees on operating lease arrangements and government grants.

		2021 €	2020 €
Bank guarantees		163,340	141,553

 

27.  Post Balance Sheet events

At the date of this report, it is still unrealistic to properly assess the potential impacts of the Ukrainian conflict on the Group. Directors are monitoring the evolution of the macro-economic scenario and consequently re-adjusting, where necessary, the Group's strategy and operational priorities. The Group is likely to be hit by inflation trends (as a consequence of the increase in energy and transportation costs) and, presumably, by some contracts slowdown. However, Directors believe that overall, the conflict will not affect the going concern of the Group, and, under certain circumstances, it will create some potential opportunities, such as from the price increase of oil and other materials could generate significant outturns for the Group and its clients.

 

On 15 March 2022, Directa Plus S.p.A. granted its subsidiary Setcar SA a loan of €1 million, payable in 1 year with an annual interest rate of 4.5%. Those funds, raised in the context of the capital increase completed in December 2021, will support Setcar in responding to significant new tenders and provide additional liquidity for its general working capital purposes.

 

-ends-