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Final Results

19 Mar 2020 07:00

RNS Number : 7163G
PV Crystalox Solar PLC
19 March 2020
 

PV Crystalox Solar PLC

("PV Crystalox", the "Company" or the "Group")

 

Preliminary Results for the year ended 31 December 2019

 

PV Crystalox Solar a long established supplier to the global PV industry now also providing slicing services for high technology ceramics and optics industries in Germany is pleased to announce its preliminary results for the year to 31 December 2019.

 

Highlights

· Transforming business by applying our wire sawing expertise to cutting of non-silicon materials

· £38.5million capital returned in June 2019 (equivalent to 24 pence per share) for shareholders

· Further capital return of up to £2 million via tender offer proposed for Q3 2020

Overview of results

l Revenues €0.5m (2018: €6.3m)

l (Loss) / earnings before tax of €(2.4)m (2018: €1.6m)

l Net cash €8.6m (2018: €54.0m)

 

Iain Dorrity, Chief Executive Officer commented

"As part of the continuing resolution of the Company's affairs the Board will continue its endeavours to complete the transformation of the manufacturing operation in Germany and to resolve any potential challenge from tax authorities regarding the distribution of payments received under the arbitration settlement in 2018. "

 

Enquiries:

 PV Crystalox Solar PLC

+44 (0) 1235 437160

Iain Dorrity, Chief Executive Officer

Matthew Wethey, Chief Financial Officer and Group Secretary 

 

 

 

 

 

 

About PV Crystalox

 

PV Crystalox Solar a long established supplier to the global PV industry now also providing slicing services for the high technology ceramics and optics industries in Germany.

 

Chairman's introduction 

Dear Shareholder

As a result of the dire PV industry environment which has persisted since 2011, the Group had been operating in cash conservation mode to protect shareholder value whilst preserving the Group's core production capabilities. The Board made the decision in 2017 to significantly reduce those capabilities and closed the Group's production facilities in the United Kingdom. Then in H1 2018 the Group terminated multicrystalline silicon wafer production in Germany and restructured that operation to use its existing capabilities to develop new business opportunities in the cutting of non-silicon materials.

 In November 2018 the Group received the final payment of a €28.8 million settlement of all claims and obligations relating to the wafer supply contract and arbitration award from a customer. Subsequently the Group announced in February 2019 that following an extensive review of the strategic options for the future of the Group, the Board had concluded that returning a large proportion of available cash, as part of an orderly resolution of the Group's affairs, would be in the best interests of shareholders rather than the pursuit of acquisitions

On 21 June 2019 the Group returned 24 pence per existing ordinary share to shareholders on the register at that time, which was implemented through a reduction of the capital reserves. The reduction of the Company's share premium account and of the nominal value of the ordinary shares enabled the Company to make a return of capital to shareholders of £38.5 million (€43.4 million) in aggregate. This was accompanied by a 1 for 22 share consolidation. The value returned pursuant to the return of capital represented 93% of the Company's market capitalisation (based on the average closing middle market price for the three business days prior to the consolidation of 25.8 pence per existing ordinary share). Following the share capital consolidation there are 7,285,408 new ordinary shares.

Total revenues of €0.5 million were 92% lower than in the prior year and in 2019 the loss before tax was €2.4 million which compared to a profit before tax of €1.6 million in 2018. Year end net cash of €8.6 million was €45.4 million lower than at the beginning of the year, primarily as result of the return of capital.

During the last two years the Board has explored various options to maximise any value from the listing of the Group's shares on the Official List but has been unable to identify any viable opportunities. The Board has thus concluded that a further return of capital would now be an appropriate course of action, following which it intends to cancel the Company's listing on the Official List. Contingent on receipt of the payment relating to the settlement of a legacy wafer supply contract which is expected before the end of H1, the intention is to return a maximum of £2 million to shareholders by way of a tender offer in Q3.

The Board remains mindful of the need to protect shareholder value and believes that this will be best served by continuing the transformation of the manufacturing operation in Germany and resolving any challenge from tax authorities regarding the distribution of payments received under the arbitration settlement in 2018. A sale to a third party or a transfer of the business to the existing management team remains the ultimate objective. Meanwhile the Board is implementing measures to reduce head office overheads.

 

John Sleeman

Chairman

18 March 2020

 

OPERATIONAL AND FINANCIAL REVIEW

 

Operational review of 2019

Extremely challenging PV market conditions have persisted since 2011 when overcapacity primarily in China caused a collapse in pricing across the value chain. This difficult environment led initially to the shutdown of Group's UK production and mass redundancies in 2017 and eventually necessitated the Group's exit from PV manufacturing. Major restructuring followed in Germany during 2018 and the closure of the UK facilities was finally completed in that year. Following an extensive review of the strategic options for the future of the Group the Board advised in March 2019 that returning a large proportion of available cash, as part of an orderly resolution of the Group's affairs, would be in the best interest of shareholders. A capital return of €43.4million (£38.5million, which was the maximum under a capital reorganisation) was duly completed in June 2019 following approval at a General Meeting held in May. In parallel the Board concluded the transformation of the manufacturing operation in Germany would be preferable to closure and ultimately offers the potential for a favourable outcome for all stakeholders through a sale to a third party or a transfer of the business to the existing management team.

As part of the programme to transform the business in Germany, one of the two production buildings was vacated at the end of 2019 and the operational facilities downsized and consolidated into the remaining building. Some silicon wafering capabilities have been retained as limited contract wafering is periodically carried out for a PV customer in Germany. The funded PV related research and development activities for which grants of €0.4 million were received in 2019 are continuing.

With around 20 employees now remaining in Germany we are applying our wire sawing expertise to the cutting and slicing of a variety of materials other than silicon and focusing on the requirements of the optical, medical and semiconductor industries in Germany. Successful trials have been carried out in the cutting of glass, fused silica, alumina and other ceramics and have demonstrated the benefits of wire sawing in improved cutting yields. While some of these customer relationships have already been consolidated into regular contracting business, the overall financial performance has been below expectations. Progress has been hampered to some extent by the global slowdown in the notoriously cyclical semiconductor industry which in 2019 suffered its worst downturn in almost two decades. The World Semiconductor Trade Statistics organization projects growth of 5.9% in 2020 but ongoing US-China trade tensions and the recent Covid-19 coronavirus outbreak pose a threat to any recovery.

Wafer supply contracts

Group companies entered into a number of long-term wafer supply contracts prior to 2010. While the Group responded to the subsequent adverse market conditions by agreeing adjusted terms in several cases, no agreement was possible with three customers which either entered insolvency or defaulted on the contracts. The Group has successfully recovered €129.5 million to date in compensation from four customers as follows:

In 2012 the Group negotiated a settlement of €91 million for termination of a supply contract with a customer which had elected to exit the PV industry because of the challenging PV industry environment.

Following a lengthy dispute which in 2015 had necessitated filing for arbitration by the International Court of Arbitration of the International Chamber of Commerce, an agreement was finally concluded in 2018 with one customer whereby we received a payment of €28.8 million in settlement of all claims and obligations under a wafer supply contract.

The Group indicated in its 2019 Interim Results that further receipts were expected relating to a historic settlement of a wafer supply contract with another customer which did not fulfil its obligations. Receipts of €8.5 million in aggregate have been collected in 2014 and 2016 and further cash inflows of approximately €1 million are anticipated during the next two years with the bulk of the amount now expected before the end of H1 2020. As this receipt is not virtually certain to be received it has not been recorded as a receivable in the financial statements at 31 December 2019.

Receipts totaling €1.5 million were collected in 2016 and 2018 in resolution of the Group's other outstanding wafer supply contract, where the customer had entered insolvency and shipments stopped in 2012. A further final receipt is still expected at the conclusion of the insolvency process although the timing is uncertain and it is unlikely to be significant unless the administrator is successful in a claim against the management board whose members are covered by a D&O insurance policy.

Financial Review

In 2019 the Group has concentrated on slicing services for the high technology ceramics and optics industries in Germany following the restructure of German production operations and shutdown of multicrystalline silicon wafer production at the end of H1. As a result Group revenues in 2019 of €0.5 million were 92% lower than in 2018 (€6.3 million).

The Group's loss before taxes was €2.4 million (2018: profit of €1.6 million). This reduction in profitability was mainly driven by a decrease in other income and a larger currency loss in 2019 than in 2018 which was partially offset by improved gross margins, lower personnel costs, depreciation and impairment and other expenses. Other income in 2019 was significantly below 2018 when other income was boosted by the receipt of €8.2 million from a customer in settlement of a wafer supply contract .

Currency losses of €0.4 million in 2019, were €0.8 million higher than in 2018, and arose mainly on converting euro balances into sterling ahead of the return of capital.

Slicing services in 2019 delivered a gross profit of €0.1 million compared to a gross loss of €1.0 million in 2018. Personnel costs of €1.5 million in 2019 were €3.1 million lower than in 2018 following the restructuring in 2018 and the resulting lower employee numbers in 2019. Depreciation and impairment charges were negligible in 2019 but were €0.7 million in 2018 as a result of an impairment charge of €0.6 million following the termination of multicrystalline silicon wafer operations. Other expenses in 2019 were €0.8 million lower than in 2018.

The Group's net cash position at the end of the period was €8.6 million, which was €45.4 million lower than the net position of €54.0 million at the start of the year. This decrease was primarily due to the capital return of €43.4 million to shareholders.

 

Going concern

The Group's directors are required to make an assessment as to whether it is appropriate to prepare the financial statements on a going concern basis by considering the Group's ability and intention to continue in business.

The Group has been operating a cash conservation strategy to maximise cash held and to enable the Group to manage its operations whilst market conditions remain difficult. A description of the market conditions and the Group's plans are included in the Strategic Report.

On 31 December 2019 there was a net cash balance of €8.6 million. As part of its normal business practice, the Group regularly prepares both annual and longer-term plans which are based on the directors' expectations concerning key assumptions. Within these plans the directors have included returning a maximum of £2 million to shareholders through a tender offer. The £2 million is dependent on receiving €0.9m from customers relating to historic settlements that are not recorded in the balance sheet as receivables at 31 December 2019. If the €0.9m is not received then the return to shareholders will be reduced accordingly. The directors, after careful consideration and after making appropriate enquiries, are of the opinion that the levels of net cash outflows remain low such that Group has sufficient cash to continue in operational existence for at least twelve months from the date of approval of the financial statements, in March 2020.

The Group intends to continue operations at PV Crystalox Solar Silicon GmbH, in Germany which involve the cutting of silicon and non-silicon materials together with a continued focus on research and development activities. Once the Group has resolved the issues surrounding the transfer pricing risks with the German tax authorities a sale to a third party or a transfer of the business to the existing management team remains our ultimate objective.

As a result of this assessment the directors have concluded that the Group has the ability and the intention to continue in business. It should be noted that whilst the Group and PV Crystalox Solar Silicon GmbH have been prepared on a going concern basis the operations at Crystalox Limited have not following the announcement on 13 July 2017 that Group intended to cease United Kingdom manufacturing operations in H2 2017. 

 

Outlook

During the last two years the Board has explored various options to maximise any value from the listing of the Group's shares on the Official List but has been unable to identify any viable opportunities. The Board has thus concluded that cancelling the Company's listing on the Official List preceded by a further return of capital would now be an appropriate course of action. Contingent on receipt of the payment relating to the settlement of a legacy wafer supply contract which is expected before the end of H1, the intention is to return a maximum of £2 million to shareholders by way of a tender offer. The Board will be recommending that the shareholders approve the necessary measures at a general meeting which should enable the cash return to be completed before the end of Q3 2020. Further information will be provided in a circular to shareholders in due course. Following the completion of the Tender Offer the Board intends to cancel the Company's listing.

As part of the continuing resolution of the Company's affairs the Board will continue its endeavours to complete the transformation of the manufacturing operation in Germany and to resolve any potential challenge from tax authorities regarding the distribution of payments received under the arbitration settlement in 2018. A sale of the German business to a third party or a transfer to the existing management team remains the ultimate objective and together with a resolution of the tax issues should enable a further cash return to shareholders in due course. As our ability to accelerate the liquidation process is limited and also economic considerations make such action unfavourable, our focus is on minimising the cash burn during the next 12-18 months while the outstanding issues are resolved. Accordingly the Board is implementing various measures to reduce overheads. Non-executive director salaries were reduced by 50% from January 2020 and similar reductions are planned for the CEO and CFO during the year along with the closure of the UK office.

 

 

Iain DorrityChief Executive Officer

18 March 2020

 

Consolidated statement of comprehensive income

For the year ended 31 December 2019

 

Notes

2019

€'000

2018

€'000

Revenues

2

531

6,308

Cost of materials and services

3

(387)

(7,378)

Personnel expenses

4

(1,505)

(4,567)

Depreciation and impairment of property, plant and equipment and amortisation of intangible assets

 

(25)

(655)

Other income

5

559

9,556

Other expenses

6

(1,213)

(2,025)

Currency (losses)/gains

 

(444)

324

(Loss)/profit before interest and taxes ("EBIT")

 

(2,484)

1,563

Finance income

7

46

64

(Loss)/profit before taxes ("EBT")

 

(2,438)

1,627

Income taxes

8

158

(264)

(Loss)/profit for the year attributable to owners of the parent

 

(2,280)

1,363

Other comprehensive (loss)/income

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

Currency translation adjustment

 

681

(537)

Actuarial loss on defined benefit pension scheme

9

-

(126)

Total comprehensive (loss)/income

 

 

 

Attributable to owners of the parent

 

(1,599)

700

Basic and (loss)/diluted profit per share in Euro cents:

 

 

 

From (loss)/profit for the year - basic

10

(3.2)

0.9

From (loss)/profit for the year - diluted

10

(3.2)

0.9

 

The accompanying notes form an integral part of these financial statements.

 

Consolidated balance sheet

As at 31 December 2019

 

 

Notes

2019

€'000

2018

€'000

Intangible assets

11

2

-

Property, plant and equipment

12

36

51

Total non-current assets

 

38

51

Cash and cash equivalents

13

8,608

53,964

Trade accounts receivable

14

27

40

Inventories

15

72

125

Income tax claims

16

158

-

Prepaid expenses and other assets

18

171

537

Total current assets

 

9,036

54,666

Total assets

 

9,074

54,717

Trade accounts payable

19

104

99

Accrued expenses

20

521

911

Current tax liabilities

21

943

1,348

Deferred tax liabilities

22

-

-

Other current liabilities

23

13

21

Total current liabilities

 

1,581

2,379

Share capital

24

326

12,332

Share premium

 

-

50,511

Other reserves

 

-

25,096

Shares held by the EBT

 

(61)

(372)

Share-based payment reserve

 

125

162

Reverse acquisition reserve

 

(3,601)

(3,601)

Accumulated profits/(losses)

 

15,622

(7,194)

Currency translation reserve

 

(4,918)

(24,596)

Total equity

 

7,493

52,338

Total liabilities and equity

 

9,074

54,717

The accompanying notes form an integral part of these financial statements.

The financial statements on pages 42 to 60 were approved by the Board of Directors on 18 March 2020 and signed on its behalf by:

 

 

 

Iain Dorrity Company number

Chief Executive Officer 06019466

 

Consolidated statement of changes in equity

For the year ended 31 December 2019

 

 

Share

capital

€'000

Share

premium

€'000

Other

reserves

€'000

Shares held

by the EBT

€'000

Share-based

payment

reserve

€'000

Reverse

acquisition

reserve

€'000

Accumulated

Profit/ (losses)

€'000

Currency

translation

reserve

€'000

Total

equity

€'000

As at 1 January 2018

12,332

50,511

25,096

(372)

294

(3,601)

(8,431)

(24,059)

51,770

Share-based payment credit

-

-

-

-

(132)

-

-

-

(132)

Transactions with owners

-

-

-

-

(132)

-

-

-

(132)

Profit for the year

-

-

-

-

-

-

1,363

-

1,363

Currency translation adjustment

-

-

-

-

-

-

-

(537)

(537)

Actuarial loss

-

-

-

-

-

-

(126)

-

(126)

Total comprehensive income

-

-

-

-

-

-

1,237

(537)

700

As at 31 December 2018

12,332

50,511

25,096

(372)

162

(3,601)

(7,194)

(24,596)

52,338

As at 1 January 2019

12,332

50,511

25,096

(372)

162

(3,601)

(7,194)

(24,596)

52,338

Capital reorganisation

(12,006)

(50,511)

-

-

-

-

43,423

19,094

-

Capital reorganisation

-

-

(25,096)

-

-

-

25,096

-

-

Capital return

-

-

-

535

-

-

(43,423)

-

(42,888)

Share-based payment charge

-

-

-

(224)

(37)

-

-

(97)

(358)

Transactions with owners

(12,006)

(50,511)

(25,096)

311

(37)

-

25,096

18,997

(43,246)

Loss for the year

-

-

-

-

-

-

(2,280)

-

(2,280)

Currency translation adjustment

-

-

-

-

-

-

-

681

681

Total comprehensive (loss)/income

-

 

-

 

-

 

-

 

-

 

-

 

(2,280)

 

681

 

(1,599)

 

As at 31 December 2019

326

-

-

(61)

125

(3,601)

15,622

(4,918)

7,493

 

 

Consolidated cash flow statement

For the year ended 31 December 2019

 

 

2019

€'000

2018

€'000

(Loss)/profit before taxes

(2,438)

1,627

Adjustments for:

 

 

Net interest income

(46)

(64)

Depreciation, impairment and amortisation

25

655

Inventory writedown

-

591

Credit/(charge) for share-based payments

(262)

(132)

Change in provisions

-

(1,385)

Gain from the disposal of property, plant and equipment and intangibles

(70)

(27)

(Gains)/losses in foreign currency exchange

(414)

145

 

(3,205)

1,410

Changes in working capital

 

 

Decrease in inventories

53

3,197

Decrease in accounts receivables

13

1,000

Decrease in accounts payables and deferred income

(375)

(329)

Decrease in other assets

370

22,549

Decrease in other liabilities

(8)

(147)

 

(3,152)

27,680

Income taxes paid

(394)

-

Interest received

46

64

Net cash (used in)/generated from operating activities

(3,500)

27,744

Cash flow from investing activities

 

 

Proceeds from sale of property, plant and equipment

70

29

Payments to acquire property, plant and equipment and intangibles

(12)

(12)

Net cash generated from/(used in) investing activities

58

17

Cash flow from financing activities

 

 

Capital return to shareholders

(43,423)

-

EBT participation in capital return

535

-

Net cash used in financing activities

(42,888)

-

Cash (used in)/generated from operations

(46,330)

27,761

Effects of foreign exchange rate changes on cash and cash equivalents

974

(678)

Cash and cash equivalents at the beginning of the year

53,964

26,881

Cash and cash equivalents at the end of the year

8,608

53,964

The accompanying notes form an integral part of these financial statements.

 

 

Notes to the consolidated financial statements

For the year ended 31 December 2019

 

1. Group accounting policies

Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The financial information has also been prepared under the historical cost convention except that it has been modified to include certain financial assets and liabilities (including derivatives) at their fair value through profit and loss. These policies have been consistently applied to all years presented unless otherwise stated.

PV Crystalox Solar PLC is incorporated and domiciled in the United Kingdom.

The address of the registered office is 11B(ii) Park House, Milton Park, Abingdon, OX14 4RS.

The financial statements for the year ended 31 December 2019 were approved by the Board of Directors on 18 March 2020.

Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The functional currency of the parent company is Sterling. The financial information has been presented in Euros, which is the Group's presentational currency. The Euro has been selected as the Group's presentational currency as this is the currency used in its significant contracts. The financial statements are presented in round thousands.

Foreign currency translation

Transactions in foreign currencies are translated into the functional currency of the respective entity at the foreign exchange rate ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the date the fair value was determined. Exchange gains and losses on monetary items are charged to the Statement of Comprehensive Income.

The assets and liabilities of foreign operations are translated to Euros at foreign exchange rates ruling at the balance sheet date. The income and expenses of foreign operations are translated into Euros at the average foreign exchange rates of the year that the transactions occurred in. In the Consolidated Financial Statements exchange rate differences arising on consolidation of the net investments in subsidiaries are recognised in other comprehensive income under "Currency translation adjustment".

Non-going concern entities

Subsidiary accounts for Crystalox Limited are no longer prepared on a going concern basis and include an estimate of all related costs either committed to or incurred in the period. Where the Company continues to trade any losses incurred in so doing are booked in the same period as revenue derived and therefore no accrual is made for these. The preparation of these accounts differs from that of going concern in that:

· non-current assets/liabilities become current;

· assets are written down to a recoverable amount; and

· provision for wind-down costs is charged to the income statement.

Use of estimates and judgements - overview

The preparation of financial statements in conformity with adopted IFRS requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income, expenses and contingent assets and liabilities. Estimates and assumptions mainly relate to the useful life of non-current assets, the discounted cash flows used in impairment testing, taxes, share-based payments and inventory valuations. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. Actual values may vary from the estimates. The estimates and the assumptions are under continuous review with particular attention paid to the life of material plant.

Critical accounting and valuation policies and methods are those that are both most important to the depiction of the Group's financial position, results of operations and cash flows and that require the application of subjective and complex judgements, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent years. The critical accounting policies that the Group discloses will not necessarily result in material changes to our financial statements in any given year but rather contain a potential for material change. The main accounting and valuation policies used by the Group are outlined in the following notes. While not all of the significant accounting policies require subjective or complex judgements, the Group considers that the following accounting policies should be considered critical accounting policies.

Use of estimates - deferred taxes

To compute provisions for taxes, judgements have to be applied.

There is a risk that an intra-group compensation payment could be challenged by tax authorities under transfer pricing rules resulting in a higher tax liability. The Group believe this likelihood is remote and have not recognised a provision.

Other estimates involve assessing the probability that deferred tax assets resulting from deductible temporary differences and tax losses can be utilised to offset taxable income in the future.

Due to the lack of certainty around future profits, all deferred tax assets continue to be unrecognised in the year's balance sheet.

Use of estimates - inventory valuation

Given the decline in market prices for silicon wafers to below the Group's cost of production, the carrying amount of inventory is recorded at net realisable value.

Net realisable value has been determined as estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Basis of consolidation

The Group financial statements consolidate those of the Group and its subsidiary undertakings drawn up to 31 December 2019. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

The results of any subsidiary sold or acquired are included in the Consolidated Statement of Comprehensive Income up to, or from, the date control passes.

Consolidation is conducted by eliminating the investment in the subsidiary with the parent's share of the net equity of the subsidiary.

On acquisition of a subsidiary, all of the subsidiary's separately identifiable assets and liabilities existing at the date of acquisition are recorded at their fair value reflecting their condition at that date. Goodwill arises where the fair value of the consideration given for a business exceeds the fair value of such net assets. So far no acquisitions have taken place since inception of the Group.

Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. All intra-group transactions, balances, income and expenses are eliminated upon consolidation.

Going concern

The Group's directors are required to make an assessment as to whether it is appropriate to prepare the financial statements on a going concern basis by considering the Group's ability and intention to continue in business.

The Group has been operating a cash conservation strategy to maximise cash held and to enable the Group to manage its operations whilst market conditions remain difficult. A description of the market conditions and the Group's plans are included in the Strategic Report.

On 31 December 2019 there was a net cash balance of €8.6 million. As part of its normal business practice, the Group regularly prepares both annual and longer-term plans which are based on the directors' expectations concerning key assumptions. Within these plans the directors have included returning a maximum of £2 million to shareholders through a tender offer. The £2 million is dependent on receiving €0.9m from customers relating to historic settlements that are not recorded in the balance sheet as receivables at 31 December 2019. If the €0.9m is not received then the return to shareholders will be reduced accordingly. The directors, after careful consideration and after making appropriate enquiries, are of the opinion that the levels of net cash outflows remain low such that Group has sufficient cash to continue in operational existence for at least twelve months from the date of approval of the financial statements, in March 2020.

The Group intends to continue operations at PV Crystalox Solar Silicon GmbH, in Germany which involve the cutting of silicon and non-silicon materials together with a continued focus on research and development activities. Once the Group has resolved the issues surrounding the transfer pricing risks with the German tax authorities a sale to a third party or a transfer of the business to the existing management team remains our ultimate objective.

As a result of this assessment the directors have concluded that the Group has the ability and the intention to continue in business. It should be noted that whilst the Group and PV Crystalox Solar Silicon GmbH have been prepared on a going concern basis the operations at Crystalox Limited have not following the announcement on 13 July 2017 that Group intended to cease United Kingdom manufacturing operations in H2 2017. 

Effects of new accounting pronouncements

Accounting standards, IFRICs and other guidance in effect or applied for the first time in 2019

· IFRS 16 'Leases'

· IFRIC 23 'Uncertainty over income tax treatments'

IFRS 16 'Leases' and IFRIC 2315 'Uncertainty over income tax treatments' are new accounting standards that are effective for the year ended 31 December 2019. As explained, IFRS 16 and IFRIC 23 were adopted without restating comparative information. The new accounting policies are set out in note 1.

 

a) IFRS 16 'Leases'

IFRS 16 replaces the provisions of IAS 17. The core principle of the guidance is that leases are to be accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets and leases with a duration of 12 months or less. Where this is the case it is permitted to expense lease payments over the lease term without the requirement to recognise a right-of-use-asset and a corresponding liability on the balance sheet. The Group's property leases are all short term in nature and other leases are low value assets. As a result the Group has taken advantage of the permitted exemptions.

 

b) IFRIC 23 'Uncertainty over income tax treatments'

IFRIC 23 applies where there is uncertainty over the acceptable income tax treatment of an item. For the Group this a risk that an intra-group compensation payment made in 2018 could be challenged by tax authorities under transfer pricing rules resulting in a higher tax liability. The Directors consider it probable that their position will ultimately be accepted by the tax authorities and have therefore not recorded a provision. It is probable that the Group will incur legal and professional fees as a result of defending the position but, given the early stage of the dispute, it is not possible to meaningfully quantify those costs that may be incurred at the date the balance sheet.

 

The above have not made a material difference to the financial statements.

In Issue, but not yet effective

· Amendments to IFRS 3 - Definition of business

· Amendments to IAS 1 and IAS 8 - Definition of material

The Group does not believe that any of these will have a material impact on the Group's financial positions, results of operations or cash flows, but will complete a full exercise assessing their impact during 2020.

Intangible assets

Intangible assets are stated at cost net of accumulated amortisation. The Group's policy is to write off the difference between the cost of intangible assets and their estimated realisable value systematically over their estimated useful life. Amortisation of intangible assets is recorded under "Depreciation and impairment of property, plant and equipment and amortisation of intangible assets" in the Consolidated Statement of Comprehensive Income.

Acquired computer software licences and patents are capitalised on the basis of the costs incurred to purchase and bring into use the software.

The capitalised costs are written down using the straight-line method over the expected economic life of the patents and licences (five years) or the software under development (three to five years).

Internally generated intangible assets - research and development expenditure

Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding is recognised in the Consolidated Statement of Comprehensive Income.

Property, plant and equipment

Property, plant and equipment is stated at acquisition or construction cost, net of depreciation and provision for impairment. No depreciation is charged during the period of construction. The cost of own work capitalised is comprised of direct costs of material and manufacturing and directly attributable costs of manufacturing overheads. All allowable costs up until the point at which the asset is physically able to operate as intended by management are capitalised. The capitalised costs are written down using the straight-line method.

The Group's policy is to write off the difference between the cost of property, plant and equipment and its residual value systematically over its estimated useful life. Reviews of the estimated remaining lives and residual values of individual productive assets are made annually, taking commercial and technological obsolescence as well as normal wear and tear into account.

The total useful lives range from five to ten years for plant and machinery and up to 15 years for other furniture and equipment. Property, plant and equipment are reviewed for impairment at each balance sheet date or upon indication that the carrying value may not be recoverable.

The gain or loss arising on disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the Consolidated Statement of Comprehensive Income.

Impairment

The carrying amount of the Group's non-financial assets is subject to impairment testing upon indication of impairment.

If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs of disposal and value in use based on an internal discounted cash flow evaluation. The asset is subsequently reviewed for possible reversal of the impairment at each reporting date.

Leased assets

IFRS 16 replaces the provisions of IAS 17. It was adopted on 1 January 2019 but the Group has not restated comparatives for the 2019 reporting period, as permitted under the specific transition provisions in the standard.

The objective of IFRS 16 is to report information that (a) faithfully represents lease transactions and (b) provides a basis for users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. To meet that objective, a lessee should recognise assets and liabilities arising from a lease.

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

Where the lessee elects not to apply the requirements in paragraphs 22-49 to either short-term leases or leases for which the underlying asset is of low value, the lessee shall recognise the lease payments associated with those leases as an expense on a straight-line basis over the lease term.

For the reporting year all leases were short-term or low value so expenses for these leases have been recognised on a straight line basis over the lease term. The impact to the Group at 1 January 2019 was immaterial and therefore no adjustment was recorded to equity for the adoption of IFRS 16 at that date.

Other income

Income other than that from sale of silicon products and slicing services is recognised at the point of entitlement to receipt and shown as other income.

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Financial instruments are recorded initially at fair value net of transaction costs. Subsequent measurement depends on the designation of the instrument, as follows:

Amortised cost

· short-term borrowing, overdrafts and long-term loans are held at amortised cost; and

· accounts payable which are not interest bearing are recognised initially at fair value and thereafter at amortised cost under the effective interest method.

Loans and receivables

· Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are recognised initially at the amount of consideration that is unconditional. The group holds the trade receivables with the objective of collecting the contractual cash flows, and so it measures them subsequently at amortised cost using the effective interest method.

· non-interest bearing accounts receivable are initially recorded at fair value and subsequently valued at amortised cost, less provisions for impairment. Any change in their value through impairment or reversal of impairment is recognised in profit or loss net of any advance payment held by the Group where a right of offset exists; and

· cash and cash equivalents comprise cash balances and call deposits with maturities of less than three months together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

Interest and other income resulting from financial assets are recognised in profit or loss on the accruals basis, using the effective interest method.

Inventories

Inventories are stated at the lower of cost or net realisable value.

Acquisition costs for raw materials are usually determined by the weighted average method.

For finished goods and work in progress, cost of production includes directly attributable costs for material and manufacturing and an attributable proportion of manufacturing overhead expenses (including depreciation) based on normal levels of activity. Selling expenses and other overhead expenses are excluded. Interest is expensed as incurred and therefore not included. Net realisable value is determined as estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Contingent liabilities

Provisions are made for contingent liabilities where there is an obligation at the balance sheet date, an adverse outcome is probable and associated costs can be estimated reliably. Where no obligation is present at the balance sheet date no provision is made, although, where material, the contingent liability will be disclosed in a note.

Current and deferred taxes

Current tax is the tax currently payable based on taxable profit for the year, including any under or over provisions from prior years.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.

Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Consolidated Statement of Comprehensive Income, except where they relate to items that are charged or credited directly to equity, in which case the related deferred tax is also charged or credited directly to equity.

Public grants and subsidies

As the German wafering operation is located in a region designated for economic development, the Group received both investment subsidies and investment grants. Government grants and subsidies relating to capital expenditure were credited to the "Deferred grants and subsidies" account and released to the Consolidated Statement of Comprehensive Income by equal annual instalments over the expected useful lives of the relevant assets under "Other income".

Government grants of a revenue nature, mainly for research and development purposes, were credited to the Consolidated Statement of Comprehensive Income in the same year as the related expenditure.

All required conditions of these grants have been met and it is the Group's intention that they will continue to be met.

Accruals

Accruals are recognised when an obligation to meet an outflow of economic benefit in the future arises at the balance sheet date.

Accruals are initially recognised at fair value and subsequently at amortised cost using the effective interest method.

Revenue recognition

Revenue is recognised in according with the requirements of IFRS 15 'Revenue from Contracts with Customers'. The Company recognises revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is delivered in a five-step model framework:

1. Identify the contract(s) with the customer;

2. Identify the performance obligations in the contract;

3. Determine the transaction price;

4. Allocate the transaction price to the performance obligations in the contract; and

5. Recognise revenue when (or as) the entity satisfy a performance obligation.

Revenue is recognised when control of the products have been transferred to the customer. Control is considered to have transferred once products have been received by the customer unless shipping terms dictate any different. Revenues exclude intra-group sales and value added taxes and represent net invoice value less estimated rebates, returns and settlement discounts. The net invoice value is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied.

Finance income and costs

Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, dividend income and gains and financial income and costs relating to the defined benefit pension scheme.

Interest income is recognised in the Consolidated Statement of Comprehensive Income as it accrues, using the effective interest method.

Defined contribution pension plan

For defined contribution plans, the Group pays contributions to pension insurance plans on a contractual basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are incurred.

Employee Benefit Trust

All assets and liabilities of the Employee Benefit Trust ("EBT") have been consolidated in these financial statements as the Group has de facto control over the trust's net assets as the parent of its sponsoring company.

Share-based payments

The Group has applied the requirements of IFRS 2, 'Share-based Payments'. The Group issues equity-settled share-based payments to certain employees. These are measured at their fair value at the date of the grant using an appropriate option pricing model and are expensed over the vesting year, based on the Group's estimate of the number of shares that will eventually vest. Grants of shares made during 2008 and 2007 are not subject to performance criteria and were valued at the date of the grant at market value. During 2011 awards were granted under the Performance Share Plan to employees. The share options granted are subject to performance criteria required for the option to vest and are considered in the method of measuring fair value. Fair value is assessed using the Black-Scholes method.

Charges made to the Consolidated Statement of Comprehensive Income in respect of share-based payments are credited to the share-based payment reserve.

Shareholders' equity

Shareholders' equity is comprised of the following balances:

· share capital is comprised of 7,285,408 ordinary shares of 3.0206 pence each;

· share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of share issue, following the capital reorganisation in May 2019 the value of share premium at 31 December 2019 is €nil;

· other reserves arising from the issue and redemption of B shares in 2013, following the capital reorganisation in May 2019 the value of other reserves at 31 December 2019 is €nil;

· investment in own shares is the Group's shares held by the EBT that are held in trust for the benefit of employees;

· share-based payment reserve is the amount charged to the Consolidated Statement of Comprehensive Income in respect of shares already granted or options outstanding relative to the vesting date or option exercise date;

· the reverse acquisition reserve is the difference between the value of the assets acquired and the consideration paid by way of a share for share exchange on 5 January 2007;

· accumulated losses is the cumulative loss retained by the Group; and

· currency translation reserve represents the differences arising from the currency translation of the net assets in subsidiaries.

 

2. Segment reporting

The chief operating decision-maker, who is responsible for allocating resources and assessing performance, has been identified as the Group Board. The Group is organised around the production and supply of wafers from silicon and non-silicon materials. Accordingly, the Board reviews the performance of the Group as a whole and there is only one operating segment. Disclosure of reportable segments under IFRS 8 is therefore not made.

Geographical information 2019

 

 

Taiwan

€'000

Germany

€'000

United

Kingdom

€'000

Rest of

Europe

€'000

Rest of

world

€'000

Group

€'000

Revenues

 

 

 

 

 

 

 

By entity's country of domicile

 

-

531

-

-

-

531

By country from which derived

 

-

426

-

-

105

531

Non-current assets[*]

 

 

 

 

 

 

 

By entity's country of domicile

 

-

38

-

-

-

38

 

Four customers accounted for more than 10% of Group revenue and sales to the customers based in Germany were €171,000, €90,000 and €69,000 with sales to one customer based in Korea of €105,000.

Geographical information 2018

 

 

Taiwan

€'000

Germany

€'000

United

Kingdom

€'000

Rest of

Europe

€'000

Rest of

world

€'000

Group

€'000

Revenues

 

 

 

 

 

 

 

By entity's country of domicile

 

-

350

5,958

-

-

6,308

By country from which derived

 

5,958

274

-

-

76

6,308

Non-current assets*

 

 

 

 

 

 

 

By entity's country of domicile

 

-

51

-

-

-

51

 

 

One customer in Taiwan accounted for more than 10% of Group revenue, with sales to this customer of €5,958 (figures in €'000).

3. Cost of materials and services

The cost of materials is attributable to the consumption of silicon, ingots, wafers, chemicals and other consumables as well as the purchase of merchandise.

 

 

2019

€'000

2018

€'000

Cost of raw materials, supplies and purchased merchandise

117

3,904

Change in unfinished and finished goods

48

2,939

Purchased services

222

535

Cost of materials and services

387

7,378

 

4. Personnel expenses

 

2019

€'000

2018

€'000

Staff costs for the Group during the year

 

 

Wages and salaries

1,497

3,952

Social security costs

247

517

Other pension costs

42

56

Employee share schemes

(281)

42

Total

1,505

4,567

 

Employees

The Group employed a monthly average of 23 employees during the year ended 31 December 2019 (2018: 64).

 

2019

Number

2018

Number

Germany

20

60

United Kingdom

3

4

 

23

64

 

 

2019

Number

2018

Number

Production

16

28

Administration

7

36

 

23

64

 

The Group employed 22 employees at 31 December 2019 (31 December 2018: 24).

The remuneration of the Board of Directors, including appropriations to pension accruals, is shown in the Directors' Remuneration Report.

5. Other income

 

2019

€'000

2018

€'000

Customer compensations

-

8,161

Gain on disposals of assets held for sale/ property, plant and equipment

70

369

Sale of uncapitalised assets

-

339

Research and development grants

372

382

Miscellaneous

117

305

 

559

9,556

 

Customer compensations relate to the realisation of payments received in respect of unfulfilled customer purchase obligations and includes €nil million (2018: €8.2 million) in relation to the arbitration award/settlement agreement.

 

6. Other expenses

 

2019

€'000

2018

€'000

Lease expenses

419

426

Repairs and maintenance

30

47

Technical consulting, research and development

61

68

Legal costs

143

530

Other professional services

383

517

Insurance premiums

59

99

Travel and advertising expenses

22

44

Staff related costs

21

29

Other

75

265

 

1,213

2,025

 

Amounts payable to the Group's auditors

 

2019

€'000

2018

€'000

Fees payable to the Company's auditors and their associates for the audit of the parent companyand consolidated financial statements

88

83

Fees payable to the Company's auditors and their associates for other services:

 

 

- The audit of the Company's subsidiaries pursuant to legislation

43

45

- Other assurance services

-

4

 

131

132

 

7. Finance income

Finance income and costs are derived/incurred on financial assets/liabilities and recognised under the effective interest method.

 

2019

€'000

2018

€'000

Finance income

46

64

 

8. Income taxes

 

2019

€'000

2018

€'000

Current tax:

 

 

Current tax on (loss)/profit for the year

(158)

(140)

Adjustment in respect of prior years

-

404

Total current tax

(158)

264

Deferred tax (note 22):

 

 

Total deferred tax

-

-

Total tax (credit)/charge

(158)

264

 

The total tax rate for the German companies is 32.275% (2018: 32.275%). The total tax rate in the United Kingdom was 19% (2018: 19.0%). These rates are based on the legal regulations applicable or adopted at the balance sheet date.

The rate of corporation tax in the United Kingdom and Germany rate will be unchanged in 2020. The impact of these changes is not expected to be material.

The tax on the Group's results before tax differs from the theoretical amount that would arise using the effective UK tax rate applicable to the losses of the consolidated entities as follows:

 

 

 

2019

€'000

2018

€'000

(Loss)/profit before tax

(2,438)

1,627

Expected income tax charge at United Kingdom tax rate of 19.00% (2017: 19.25%)

(463)

309

Adjustments for foreign tax rates

(159)

-

Unrecognised adjustments to deferred tax

563

(395)

Adjustment in respect of prior years

-

264

Utilisation of tax losses and other deductions

(158)

-

Expenses not deductible for tax

59

86

Total tax (credit) / charge

(158)

264

 

9. Actuarial gains on defined benefit scheme

Actuarial losses represent the net of movements in the defined benefit obligation and the asset value of the Group's defined benefit pension scheme.

Following the transfer of the last remaining pension obligation to an insurance company there was loss of €126k being a €791k release of benefit obligation and €917k decrease in value of the plan assets in the year ending 31 December 2018.

 

10. Earnings per share

Net earnings per share is computed by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted net earnings per share is computed by dividing the net profit for the year by the weighted average number of ordinary shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including share options.

 

2019

2018

Basic shares (average)

72,054,280

158,305,912

Basic (loss)/earnings per share (Euro cents)

(3.2)

0.9

Diluted shares (average)

72,079,013

159,250,047

Diluted (loss)/earnings per share (Euro cents)

(3.2)

0.9

 

Basic shares and diluted shares for this calculation can be reconciled to the number of issued shares (see note 24) as follows:

 

2019

2018

Shares in issue (see note 24)

160,278,975

160,278,975

Share consolidation (including EBT shares)

(87,324,900)

-

Weighted average number of EBT shares held

(899,795)

(1,973,063)

Weighted average number of shares for basic EPS calculation

72,054,280

158,305,912

Dilutive share options

24,733

944,135

Weighted average number of shares for fully diluted EPS calculation

72,079,013

159,250,047

 

11. Intangible assets

Intangible assets relate to software licences.

 

 

Total

€'000

 

Cost

 

 

At 1 January 2019

801

 

Additions

2

 

Disposals

(3)

 

At 31 December 2019

800

 

Accumulated amortisation

 

 

At 1 January 2019

801

 

Charge for the year

-

 

Disposals

(3)

 

At 31 December 2019

798

 

Net book amount

 

 

At 31 December 2019

2

 

At 31 December 2018

-

 

 

 

Total

€'000

 

Cost

 

 

At 1 January 2018

824

 

Disposals

(23)

 

At 31 December 2018

801

 

Accumulated amortisation

 

 

At 1 January 2018

818

 

Charge for the year

4

 

Impairment

2

 

Disposals

(23)

 

At 31 December 2018

801

 

Net book amount

 

 

At 31 December 2018

-

 

At 31 December 2017

6

 

     

 

 

 

12. Property, plant and equipment ("PPE")

 

 

Plant and

machinery

€'000

Other

furniture and

equipment

€'000

Total

€'000

 

Cost

 

 

 

 

At 1 January 2019

20,423

2,805

23,228

 

Additions

-

10

10

 

Disposals

(8,642)

(220)

(8,862)

 

Reclassification

49

(49)

-

 

At 31 December 2019

11,830

2,546

14,376

 

Accumulated depreciation

 

 

 

 

At 1 January 2019

20,392

2,785

23,177

 

Depreciation charge for the year

17

8

25

 

Reclassification

40

(40)

-

 

On disposals

(8,642)

(220)

(8,862)

 

At 31 December 2019

11,807

2,533

14,340

 

Net book amount

 

 

 

 

At 31 December 2019

23

13

36

 

At 31 December 2018

31

20

51

 

Plant and

machinery

€'000

 

 

Other

furniture and

equipment

€'000

Total

€'000

 

Cost

 

 

 

 

At 1 January 2018

25,270

2,890

28,160

 

Additions

6

47

53

 

Disposals

(4,853)

(132)

(4,985)

 

At 31 December 2018

20,423

2,805

23,228

 

Accumulated depreciation

 

 

 

 

At 1 January 2018

24,802

2,707

27,509

 

Depreciation charge for the year

43

29

72

 

Impairment charge for the year

400

179

579

 

On disposals

(4,853)

(130)

(4,983)

 

At 31 December 2018

20,392

2,785

23,177

 

Net book amount

 

 

 

 

At 31 December 2018

31

20

51

 

At 31 December 2017

468

183

651

 

         

 

13. Cash and cash equivalents

All short-term deposits are interest bearing at the various rates applicable in the business locations of the Group.

 

As at 31 December

 

2019

€'000

2018

€'000

Cash at bank and in hand

8,608

53,964

 

8,608

53,964

 

 

14. Trade accounts receivable

 

As at 31 December

 

2019

€'000

2018

€'000

Germany

27

40

 

27

40

 

All receivables have short-term maturity. During the year receivables of €nil were written off (2018: €nil).

All amounts outstanding as at 31 December 2019 and due at date of signing had been received, consequently there is no provision for doubtful debts (2018: €nil).

None of the unimpaired trade receivables are past due at the reporting date.

These amounts represent the Group's maximum exposure to credit risk at the year end.

15. Inventories

Inventories include finished goods as well as production supplies. The change in inventories is included in the Consolidated Statement of Comprehensive Income in the line "Cost of materials".

 

As at 31 December

 

2019

€'000

2018

€'000

Finished products

3

53

Work in progress

2

-

Raw materials

67

72

 

72

125

 

€nil of inventory write downs are included in cost of materials in 2019 (2018: €591,000).

16. Income tax claims

 

As at 31 December

 

2019

€'000

2018

€'000

Germany

158

-

 

158

-

    

 

Income tax recoverable relates to carry back of 2019 losses against 2018 taxable profits.

17. Assets held for sale

 

As at 31 December

 

2019

€'000

2018

€'000

At 1 January

-

390

Sold

-

(390)

At 31 December

-

-

 

The brought forward assets held for sale had an estimated fair value of €Nil (2018:€586,000).

18. Prepaid expenses and other assets

 

As at 31 December

 

2019

€'000

2018

€'000

VAT

21

36

Prepaid expenses

62

59

Energy tax claims

33

26

Other current assets

55

416

 

171

537

 

Other current assets in 2018 include €0.3 million in relation to the sale of the insurance asset. The payment for this was received in January 2019.

19. Trade accounts payable

 

As at 31 December

 

2019

€'000

2018

€'000

United Kingdom

22

18

Germany

82

81

 

104

99

 

 

20. Accrued expenses

 

As at 31 December

 

2019

€'000

2018

€'000

Rents and ancillary rent costs

134

129

Salary related costs

30

183

Other accrued expenses

357

599

 

521

911

 

21. Current taxes liabilities

 

As at 31 December

 

2019

€'000

2018

€'000

United Kingdom

-

405

Germany

943

943

 

943

1,348

 

Current tax liabilities comprises corporation and other non-tax liabilities, calculated or estimated by the Group companies, as well as corresponding taxes abroad due to local tax laws, including probable amounts arising on completed or current tax audits.

In the prior years, other income was received into PV Crystalox Solar Silicon (PVCSS), the German subsidiary company, from its customer in settlement of all claims and obligations relating to the wafer supply contract and arbitration award. As a result of this contractual breach and the fact that physical delivery of wafers was foregone, PVCSS did not purchase the agreed silicon block quantities from Crystalox Limited. As compensation for the shortfall in block volumes a settlement was paid to Crystalox Limited. The group is in discussions with the German tax authorities regarding this onward settlement and it is possible that this will result in a higher tax liability, up to a maximum of €1.9 million, due to different tax rates in the two jurisdictions and tax attributes available for offset. Management consider it probable that their position will ultimately be accepted by the tax authorities and have therefore not recorded a provision. It is probable that the group will incur legal and professional fees as a result of defending the position but, given the early stage of the dispute, it is not possible to meaningfully quantify those costs that may be incurred at the date of the financial statements.

22. Deferred tax liabilities

Deferred tax assets arising as a result of losses are recognised where, based on the Group's budget, they are expected to be realised in the foreseeable future.

As at 31 December 2019 there were unrecognised potential deferred tax assets in respect of losses of €46.8 million (2018: €43.8 million).

Deferred tax liabilities

 

As at 31 December

 

2019

€'000

 2018

€'000

United Kingdom

-

-

Germany

-

-

 

-

-

 

Deferred tax liabilities, calculated or estimated by the Group companies, comprise taxes payable due to local tax laws, including probable amounts arising on completed or current tax audits. Movement in the year is shown below.

 

2019

€'000

2018

€'000

As at 1 January

-

1,084

Charged to income statement

-

(1,084)

As at 31 December

-

-

 

23. Other current liabilities

 

As at 31 December

 

2019

€'000

2018

€'000

Payroll liabilities

13

21

 

13

21

 

 

As at 31 December

 

2019

€'000

2018

€'000

Short term

13

21

 

13

21

 

24. Share capital

 

2019

€'000

2018

€'000

Allotted, called up and fully paid

 

 

7,285,408 ordinary shares of 3.0206 pence each (2018: 160,278,975 ordinary shares of 5.2 pence each)

326

12,332

 

Summary of rights of share capital

The ordinary shares are entitled to receipt of dividends. On winding up, their rights are restricted to a repayment of the amount paid up to their share in any surplus assets arising. The ordinary shares have full voting rights.

Shares held by the EBT

At 31 December 2019, 89,684 ordinary shares of 3.0206 pence were held by the EBT (2018: 1,973,063). The market value of these shares was €66,000 (2018: €550,000). Additionally, the cash balance held by the EBT on 31 December 2019 was €1,192,000 (2018: €595,000).

 

As at 31 December

Shares held by the EBT

2017

Number

2018

Number

Opening balance

1,973,063

1,973,063

Share consolidation

(1,883,379)

-

Closing balance of shares at 3.0206 pence (2017: 5.2 pence)

89,684

1,973,063

 

25 Share-based payment plans

The Group established the PV Crystalox Solar PLC EBT on 18 January 2007, which has acquired, and may in the future acquire, the Company's ordinary shares for the benefit of the Group's employees.

During the year the Group had two share incentive plans in operation which are satisfied by grants from the EBT.

PV Crystalox Solar PLC Executive Directors' Deferred Share Plan ("EDDSP")

At the AGM on 28 May 2009 a bonus plan (with deferred share element) for executive directors was approved by the Company's shareholders in the context of bringing the arrangements more in line with market practice and aligning executive directors' pay more closely with the interests of the Company's shareholders. Half of each bonus was to be payable in cash and the other half deferred and payable in shares under the EDDSP, which vests three years after the award date. Awards of deferred shares under the EDDSP are to be satisfied on vesting by the transfer of shares from the existing PV Crystalox Solar PLC Employee Benefit Trust.

On 31 March 2017 awards over 544,135 shares were made to Iain Dorrity, as detailed in the Directors' Remuneration Report. No awards were made during 2018 or 2019. As a result of the share consolidation the number of shares subject to the award were reduced by 519,402 to 24,733.

Market Value Option ("MVO")

An MVO is an option with an exercise price per share equal to the market value of a share on the date of grant. The vesting period of each award is three years from the date of grant and the award must be exercised no later than ten years following the date of grant.

On 24 November 2008 an MVO over 200,000 ordinary shares was granted to a senior employee and this option was exercisable from 24 November 2011 at £1.00 per share subject to agreed performance criteria. This option was forfeited when the employee left the Group in May 2018.

On 26 March 2009 an MVO over 200,000 ordinary shares was granted to a senior employee and this option is exercisable from 26 March 2012 at 76.0 pence per share subject to agreed performance criteria, and on 25 September 2009 MVO awards over 1,200,000 ordinary shares were granted to key senior employees and these options are exercisable from 25 September 2012 at 76.9 pence per share subject to agreed performance criteria.

One of the employees to whom an award over 200,000 ordinary shares was issued on 25 September 2009 left the Group after the closure of PV Crystalox Solar KK during 2016 and the award was forfeited. Two employees to whom awards over 400,000 ordinary shares were issued on 25 September 2009 left the Group after being made redundant from Crystalox Limited during in April and May 2018 and the awards were forfeited. One of the employees to whom an award over 200,000 ordinary shares was issued on 25 September 2009 left the Group to pursue other career opportunities during October 2018 and the award was forfeited.

Awards over 400,000 shares were forfeited in 2019 (2018: 800,000). There were two awards exercisable at 1 January 2019: one over 200,000 shares at an exercise price of 76.0 pence per share expired on 26 March 2019; the other over 200,000 shares at an exercise price of 76.9 pence per share expired on 25 September 2009.

The Group recognised a total credit before tax of €37,000 (2018: €132,000) related to equity-settled share-based payment transactions during the year.

The number of share options and weighted average exercise price ("WAEP") for each of the schemes is set out as follows:

 

 

 

EDDSP*

Number

MVO

Number

MVO WAEP

price

Pence

Share grants and options outstanding at 1 January 2018

 

 

544,135

1,200,000

79.7

Share grants and options granted during the year

 

 

-

-

-

Share grants and options forfeited during the year

 

 

-

(800,000)

-

Share grants and options outstanding at 31 December 2018

 

 

544,135

400,000

76.5

Exercisable at 31 December 2018

 

 

-

400,000

76.5

Share grants and options granted during the year

 

 

-

-

-

Share grants and options expired during the year

 

 

-

(400,000)

-

Impact of share consolidation

 

 

(519,402)

-

-

Options exercised during the year

 

 

-

-

-

Share grants and options outstanding at 31 December 2019

 

 

24,733

-

-

Exercisable at 31 December 2019

 

 

-

-

-

 

* The weighted average exercise price for the EDDSP options is £nil.

 

26. Risk management

The main risks arising from the Group's financial instruments are credit risk, exchange rate fluctuation risks, interest rate risk and liquidity risk. The Board reviews and determines policies for managing each of these risks and they are, as such, summarised below. These policies have been consistently applied throughout the period.

Credit risk

Credit risk arises from cash and cash equivalents, as well as credit exposure to customers including outstanding receivables. The main credit risk arises from accounts receivable. All trade receivables are of a short-term nature, with maximum payment terms of 60 days, although the majority of customers currently have payment terms of 45 days. In order to manage credit risk, local management defines limits for customers based on a combination of payment history and customer reputation. Credit limits are reviewed by local management on a regular basis. Where appropriate, the Group requests payment or part payment in advance of shipment, which generally covers the cost of the goods. Different forms of retention of title are used for security depending on local restrictions prevalent on the respective markets. The maximum credit risk to the Group is the total of trade accounts receivable details of which can be seen in note 14.

Cash is not considered to be a high credit risk due to all funds being immediately available, consideration being given to the institution in which it is deposited and the setting of counterparty limits. All institutions used have a minimum Moody's credit rating of A3.

Exchange rate fluctuation risks

Significant cash funds are denominated in currencies other than the presentational currency of the Group. Excess cash funds not needed for local sourcing are exposed to exchange rate and associated interest fluctuation risks, particularly so in the United Kingdom. The exchange rate risk is based on assets held in currencies other than Euros.

The following exchange rates were used to translate individual companies' financial information into the Group's presentational currency:

 

Average

rate

Year-end

rate

Euro:US Dollar

1.1194

1.1215

Sterling:Euro

1.1414

1.1755

 

During 2019 the net loss on foreign currency adjustments was €0.4 million (2018: gain of €0.3 million).

In addition to the above, upon translation of net assets in the consolidation, there was a Positive impact in 2019 of €0.7 million (2018: negative impact of €0.5 million) recording as a currency translation adjustment which is shown in the Consolidated Statement of Comprehensive Income as "other comprehensive income".

Interest rate risk

The Group has limited exposure to interest rate fluctuation risks, since the Group does not have any borrowings.

Sensitivity analysis of the accruals and loans outstanding at the year end has not been disclosed as these are all current and paid in line with standard payment terms.

The Group had a cash balance at the end of 2019 of €8.6 million (2018: €54.0 million) and places these cash funds on deposit with various quality banks subject to a counterparty limit of €15 million. Accordingly, there is an interest rate risk in respect of interest receivable which amounted to €nil in the year (2018: €0.1 million). The Group is cash positive and current interest rates are low. The risk of interest rates falling is considered small and in any case would have a small impact on the Group's income statement and cash flows. Group management considers that in the medium term it is more likely that interest rates might rise. The impact of interest rate rises would positively impact the Group's profits and cash flow.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

On 31 December 2019 the Group had a net cash balance of €8.6 million (2018: €54.0 million) and this together with cash flow projections from the cash conservation plan indicate, assuming the projections are broadly correct, that the Group will have adequate cash reserves until at least twelve months beyond the signing of the accounts.

Financial assets and liabilities

Fair value of financial instruments

There is no significant difference between the book values and fair values of the financial assets and liabilities of the Group and the latter are reviewed on a regular basis to ensure that no such exposure arises or, if it does, to enable the Group to take action to mitigate or eliminate any such potential loss. The carrying value of financial assets and liabilities is summarised in the table below:

 

2019

€'000

2018

€'000

Financial assets measured at amortised cost:

 

 

Cash and cash equivalents

8,608

53,964

Accounts receivable

27

40

Prepaid expenses and other assets

171

537

Current tax asset

158

-

 

8,964

54,541

Financial assets measured at amortised cost:

 

 

Accounts payable trade

(104)

(99)

Accrued expenses

(521)

(911)

 

(625)

(1,010)

 

Capital management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns to shareholders and other stakeholders and to maintain an optimal capital structure that strikes the appropriate balance between risk and the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group defines capital as all elements of equity.

The Group's capital (plus its cash and cash equivalents) is set out in the following table. The Group is not subject to any externally imposed capital requirements.

 

2019

€'000

2018

€'000

Cash and cash equivalents (see note 13)

8,608

53,964

Total net cash

8,608

53,964

Total equity

7,493

52,338

 

The Group is net cash positive and therefore does not have any gearing. Accordingly, the leverage ratio has no meaning and has not been calculated.

27. Calculation of fair value

There are no publicly traded financial instruments (e.g. publicly traded derivatives and securities held for trading and available-for-sale securities) nor any other financial instruments held at fair value.

28. Contingent liabilities

The Group did not assume any contingent liabilities for third parties. No material litigation or risks from violation of third parties' rights or laws are pending at the time of approval of these financial statements.

 In the prior years, other income was received into PV Crystalox Solar Silicon (PVCSS), the German subsidiary company, from its customer in settlement of all claims and obligations relating to the wafer supply contract and arbitration award. As a result of this contractual breach and the fact that physical delivery of wafers was foregone, PVCSS did not purchase the agreed silicon block quantities from Crystalox Limited. As compensation for the shortfall in block volumes a settlement was paid to Crystalox Limited. The group is in discussions with the German tax authorities regarding this onward settlement and it is possible that this will result in a higher tax liability, up to a maximum of €1.9 million, due to different tax rates in the two jurisdictions and tax attributes available for offset. Management consider it probable that their position will ultimately be accepted by the tax authorities and have therefore not recorded a provision. It is probable that the group will incur legal and professional fees as a result of defending the position but, given the early stage of the dispute, it is not possible to meaningfully quantify those costs that may be incurred at the date of the financial statements.

29. Other financial obligations

Lease agreements

The leases primarily relate to rented buildings and have terms of less than 12 months.

Payments associated with short term leases and all low value assets are recognised on a straight line basis as an expense in profit and loss. Low value assets mainly comprise vehicles leased in Germany.

The Income statement shows the following amounts relating to leases

 

2019

€'000

2018

€'000

Buildings

412

414

Vehicles

6

12

 

419

426

 

The future minimum lease payments are as follows:

 

As at 31 December

2019

€'000

2018

€'000

Less than one year

286

392

Two to five years

-

-

Longer than five years

-

-

 

286

392

 

30. Related party disclosures

Related parties as defined by IAS 24 comprise the senior executives of the Group, including their close family members, and also companies that these persons could have a material influence on as related parties as well as other Group companies. During the reporting year, none of the shareholders had control over or a material influence in the parent company.

Transactions between the Company and its subsidiaries have been eliminated on consolidation.

The remuneration of the directors, who are the key management personnel of the Group, is set out in the audited part of the Directors' Remuneration Report.

31. Capital reorganisation, return of capital and dividends paid

Following approval by shareholders at a general meeting in May 2019 the Group reorganised its capital structure by reducing the share premium account and nominal value of the ordinary shares. In June 2019 a return of this capital was made to all shareholders of 5.2 pence ordinary shares which gave shareholders a return of 22 pence per 5.2 pence ordinary share. The total shareholder return was €43.423 million. The return of capital was accompanied by a 1 for 22 share consolidation. The return of capital was approved by shareholders at a general meeting on 14 May 2019.

No dividends were paid in 2019 (2018: €nil).

32. Post-balance sheet events

There are no significant post-balance sheet events.

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
FR UWRURROUOAUR
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