Heiq Regulatory News (HEIQ)

4 January 2023

HeiQ Plc

("HeiQ" or "the Company")

Trading Update & Acquisition

HeiQ Plc (LSE: HEIQ), a leading company in materials innovation and hygiene technologies, announces a trading update for its year ended 31 December 2022 (FY 2022), as well as the acquisition of Tarn-Pure Holdings Ltd.

Trading update

As reported in the Company's interim results on 13 September 2022, HeiQ made solid progress in the first half of the financial year, reporting a 17% increase in revenues, despite the continued challenging global market conditions. The Company has continued to execute on its long-term growth strategy, focussing on strengthening its innovation and differentiation capabilities.

As previously announced, HeiQ has historically demonstrated significantly stronger sales in the second half of the year, underpinned by consumer driven seasonality of its core products. The board previously commented that it remained cautiously optimistic in a strong trading performance during the second half of the year such that trading for FY 2022 would be in line with market guidance. This view was supported through the anticipation of securing additional revenues from new products and innovations, including from milestone achievements related to HeiQ AeoniQ, the world's first climate positive cellulosic fiber aiming to replace polyester.

Whilst trading during the third quarter of FY 2022 remained reasonable, worsening macroeconomic conditions into Q4 have resulted in a significant deterioration in consumer demand which, in turn, impacted the Group's sales during the period. This reduction in sales has been compounded by brands having increased their levels of inventory to all-time highs after the pandemic due to persisting supply chain concerns. HeiQ's customer base had up to 70% less demand in Q4. HeiQ's sales in China suffered especially, due to pandemic related regional lockdowns and half of the forecasted annual sales did not materialize.

Brands have become more hesitant to invest in innovations at this particular time. As such, revenues planned for Q4 2022 from new partner brands related to milestone achievements have been delayed and are expected to materialize in FY 2023 only. Accordingly, the Company expects that Group revenues for FY 2022 will be approximately 20% below market expectations at between US$ 54m to US$ 55m. Gross margin is also expected to be below market expectations at ~47% - 48%. As a consequence, the Company expects a loss before tax of between US$ 2.5m and US$ 3.5m for the same period. All FY 2022 numbers are subject to audit review and considered "preliminary".

The Industry expects global markets to continue to experience low demand for at least another six to nine months. The Company also expects trading for FY 2023 to be below market guidance, with anticipated sales and gross margins maintained at FY 2022 levels. Given the macroeconomic headwinds the Company has started to implement cost savings and will continue to review and adapt its cost basis with the objective of returning to profit before tax in FY 2023.

While the macroeconomic headwinds have prevented the Company from achieving its financial targets, this was not the case with the progress made in blockbuster technologies; In particular, HeiQ succeeded in:

- building a first pilot commercialization line for HeiQ AeoniQ, the world's first cellulosic climate positive fibre, and secured Hugo Boss as an investor and first launch partner in January 2023.

- securing the recommendation by the Robert Koch Institute for HeiQ Synbio probiotic cleaners versus disinfectants for hospitals following the publication by the Charitè Hospital Berlin.

- selling the first samples of HeiQ GrapheneX membrane to leading players in the production of batteries and handheld mobile devices and ordering the first pilot commercialization plant.

- developing the first transparent foils with HeiQ ECOS silver nanowires, conferring infrared reflection for transparent insulation of building windows and stealth technology for defence. 

Acquisition

The Company also announces that HeiQ Materials AG, Switzerland, a 100% subsidiary of HeiQ Plc, has signed an agreement to acquire 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. HeiQ generates significant silver technology sales and the acquired regulatory asset will enable it to further increase these sales. Tarn-Pure expects to report total revenues of approximately US$ 400,000 for the FY 2022, which are mostly derived from royalty sales.

Due to European Union regulatory changes in 2022, several high-volume organic and inorganic biocides are being phased out. Elemental copper and silver have received a favourable regulatory risk assessment and are poised to replace the phased-out biocides. HeiQ expects strong growth in the use of the safe and effective antimicrobials copper and silver, which are used in coatings, plastics, textiles, and water purification. With the acquisition of Tarn-Pure, HeiQ positions itself as the key supplier of elemental copper and elemental silver to the wider hygiene industry.

To acquire Tarn-Pure, HeiQ will pay its vendors a consideration of approximately £850,000, subject to adjustments for cash, working capital and debt positions as of closing date. The consideration is agreed to be paid 50% in cash and 50% through the issue of new ordinary shares in HeiQ Plc to the vendors at a significant premium to the closing market price as of 3 January 2023. The Company accordingly expects to issue approximately 613,000 new ordinary shares and the exact number of shares to be issued will be announced upon closing of the transaction, which is expected later this month.

HeiQ's EVP Tom Ellefsen said:

 "The HeiQ group has an impressive product range of antimicrobials. Thanks to the recent acquisitions of RAS Ltd., Life Materials Ltd. and Touchguard's Patents, HeiQ has built a unique capability to serve the hygiene industry with effective solutions. The acquisition of Tarn-Pure's regulatory asset strengthens HeiQ's ability to offer the market access to Europe and the UK for products containing antimicrobial copper and silver. I expect our sales in silver and copper technologies to significantly grow in 2023 thanks to now one of the strongest regulatory portfolios in the market."

This announcement contains inside information.

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About HeiQ

HeiQ is focused on improving the lives of billions of people world-wide by innovating the materials people use every day. HeiQ has strong IP which is at the forefront of global technology in the $10 billion antimicrobial fabrics market, $24 billion textile chemicals market, the $50 billion probiotics market and the $150 billion man-made fibers market. It has also moved into the medical device, healthcare and hygiene coatings markets, to help make hospitals and healthcare environments more hygienic. HeiQ aims to deliver growth for its shareholders through a combination of increased sales of its core products and by entering additional lucrative markets through disruptive innovations and M&A.

HeiQ has created some of the most effective, durable and high-performance technologies in the market today, which cool, warm, dry, repel, purify, and destroy viruses. Since 2005, HeiQ has developed over 200 technologies in partnership with 300 major brands and it has a significant R&D pipeline containing over 50 projects. The Company has won multiple awards and gained a strong reputation for the ESG & sustainable downstream effect of its innovations. HeiQ is the only company to have won the Swiss Technology award twice. It has also won the Swiss Environmental award with an innovation that saves energy and water consumption during the textile manufacturing process.

Led by an experienced leadership team, HeiQ researches new solutions for partners, delivers scaled up manufacturing from its sites across the world and helps partners market the product to end consumers - aiming for lab to consumer in months.