TIDMIOF
RNS Number : 2882X
Iofina PLC
25 April 2023
25 April 2023
Iofina plc
("Iofina", the "Company" or the "Group")
(AIM: IOF)
2022 FULL YEAR RESULTS
FIFTH SUCCESSIVE YEAR OF RECORD REVENUE AND EBITDA
Iofina plc, specialists in the exploration and production of
iodine and manufacturers of specialty chemical products, announces
its audited full year results for the 12 months to 31 December 2022
(the "Period").
Sustained demand and a strong Iodine spot price accelerated
sales and profits in 2022:
-- Revenue increased by 8% to $42.2m to (2021: $39.0m)
-- Gross profit increased by 47% to $15.8m (2021: $10.7m)
-- Adjusted EBITDA improved by 65% to $11.5m (2021: $6.9m)
-- Operating profit increased by 85% to $9.6m (2021: $5.2m)
-- Profit before tax increased by 96% to $10.0m (2021: $5.1m)
Strong balance sheet and further reduction in net debt:
-- Cash of $5.9m at year-end
-- Net debt reduced from $3.0m to $0.9m
Investing for growth:
-- Capital investment into chemical and iodine plants was $3.1m (2021: $1.5m)
-- Commenced site negotiations for future IOsorb(R) plants in the Period.
2023 so far:
-- Production of 107.1 MT of crystalline iodine in Q1 from Iofina's five IOsorb(R) plants
-- The iodine global spot price remains steady at $70/kg and
prices are expected to stay at these levels into the second half of
2023
-- IO#9 is currently scheduled to be operational before the end of Q2 2023
Commenting, President and CEO, Dr. Tom Becker, stated:
"We have delivered another strong year across the business in
terms of profitability and have invested in growth projects. Being
a low cost producer of iodine means we have continued to capitalise
on sustained, higher iodine market prices. Demand for our products
coming through Iofina Chemical remains robust and our improved cash
position of $5.9m has reduced net debt to below $1m.
"Having commenced the construction on IO#9 in Q4 2022, we remain
on track to have this in operation by the end of Q2 2023. The new
plant is expected to add 100MT-150MT of crystalline iodine per
annum, which will be a significant step change in production. We
are also pleased that negotiations are progressing well with
several interested parties for IO#10, with potential sites
identified and further testing underway. Outside of the
construction of new IOsorb(R) plants, the Board is also examining
other potential growth projects that complement Iofina's existing
skill set and range of products, which would present cross-selling
opportunities.
"2023 has started well in terms of production from our existing
plants and corresponding sales, with the market remaining strong
and the Company on track to meet its H1 production targets. We look
forward to confirming the completion and switch on of IO#9 soon and
updating shareholders on our further progress."
Investor Presentation
Iofina will be hosting a presentation for retail investors via
the Investor Meet Company platform in early May. A further
announcement will follow soon to confirm the date and time for the
event.
Enquiries:
Dr. Tom Becker
CEO & President
Iofina plc
Tel: +44 (0)20 3006 3135
Nomad & Broker:
Henry Fitzgerald-O'Connor/Patrick Dolaghan/Andrew Potts
Canaccord Genuity Limited
Tel: +44 (0)20 7523 8000
Financial Adviser:
Kingsley Wilson
Chrystal Capital Partners LLP
Tel: +44 (0)20 7850 4761
Media Contact:
Charles Goodwin/ Shivantha Thambirajah /Jazmine Clemens
Yellow Jersey PR Limited
Tel: +44 (0)7747 788 221/+44 (0)7983 521 488
About Iofina:
Iofina plc (AIM: IOF) is a vertically integrated company that
specialises in the production of Iodine and the manufacturing of
specialty chemical products. Iofina is the second largest producer
of iodine in North America and operates the manufacturing entities
Iofina Resources and Iofina Chemical.
LEI: 213800QDMFYVRJYYTQ84
ISIN: GB00B2QL5C79
Iofina Resources
Iofina Resources develops, builds, owns, and operates iodine
extraction plants using Iofina's WET(R) IOsorb(R) technology.
Iofina currently operates five producing IOsorb(R) plants in
Oklahoma and is consistently using technology and innovation to
improve and expand its operations.
Iofina Chemical
Iofina Chemical has manufactured high quality halogen speciality
chemicals derived from raw iodine, as well as non-iodine-based
products. Iofina Chemical will be celebrating its 40(th)
anniversary in 2023 as a preeminent halogen-based specialty
chemicals company.
www.iofina.com
Contents
COMPANY
INFORMATION.......................................................................................................
..2
CHAIRMAN'S
STATEMENT........................................................................................................
..3
FINANCIAL
REVIEW..................................................................................................................
..7
DIRECTORS'
BIOGRAPHIES.........................................................................................................
10
STRATEGIC
REPORT....................................................................................................................
12
S172
STATEMENT...................................................................................................................................22
CORPORATE
GOVERNANCE..................................................................................................................24
DIRECTORS'
REPORT...................................................................................................................
25
CORPORATE GOVERNANCE
STATEMENT.....................................................................................
27
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
("ESG")....................................................................34
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF IOFINA
PLC.......................................37
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
..................................................... 48
CONSOLIDATED BALANCE SHEET
...............................................................................................
49
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY...................................... 50
CONSOLIDATED CASH FLOW STATEMENT
...................................................................................
51
COMPANY BALANCE SHEET
........................................................................................................
52
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY.............................................. 53
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS...........................................................
54
COMPANY INFORMATION
Directors L J Baller
T M Becker
W D Bellamy
M T Lewin
J F Mermoud
Mary Fallin Christensen
Secretary Simon Holden
Company number 5393357
Registered office 48 Chancery Lane
London WC2A 1JF
Auditor UHY Hacker Young LLP
Quadrant House
4 Thomas More Square
London E1W 1 YW
Nominated Adviser and Broker 88 Wood Street
Canaccord Genuity Limited London EC2V 7QR
Solicitors Keystone Law Limited
48 Chancery Lane
London WC2A 1JF
Registrar Link Asset Services (Holdings) Limited
10th Floor, Central Square
29 Wellington Square
Leeds LS1 4DL
Financial PR Yellow Jersey PR Limited
Thanet House
231-232 Strand
London WC2R 1DA
CHAIRMAN'S STATEMENT
Introduction
The 2022 financial year resulted in several significant
milestones for Iofina. We achieved a fifth straight year of record
Adjusted EBITDA with an increase of 65% to $11.5m, record sales of
$42.2 m up 8.3% on 2021, and a
record average sales price of iodine was recorded. Profit before tax increased by 96% to $10.0m.
Iofina produced 516 metric tonnes (MT) of crystalline iodine in
2022. Average prices per kilogram achieved for sales of crystalline
iodine, based on 100% iodine, increased 98% on the previous year to
an average of $71.20 for 2022 whilst non-iodine product sales
increased by 26% from $8.6m to $10.8m.
Additional highlights include a bank debt to Adjusted EBITDA
ratio of 0.59 for year-end 2022 compared to 1.18 for year-end 2021
(2.62 for year-end 2020). In addition, the Company was able to
reduce its net debt from $3.0m to $0.9m while increasing capital
investments into chemical and iodine plants of $3.1m (2021: $1.5m).
Net cash inflow from operating activities was $5.6m. The Company
achieved these important milestones while having no lost time
accidents in 2022 across all facilities, which is our top priority.
For the second year in a row Iofina Chemical (IC) was awarded a
SOCMA ChemStewards Performance Award and for the first time
successfully attained ISO 9001:2015 certification. We have built an
excellent business with diversified, low-cost production across a
diverse array of IOsorb(R) plants and a specialty chemicals
business supplying customers globally across several end
markets.
Iofina Chemical (IC)
IC had a successful year with its derivatives production, which
was helped by the high price of iodine. This helped to help drive
both improved revenue and profitability. We delivered an increase
in Hydroiodic Acid (HI) production to meet higher domestic and
international demand and we also increased Iodopropynyl
butylcarbamate (IPBC) production to fulfil large orders. IC
returned to growth in our specialty chemical gases business going
back to 24/7 shifts in the second half of the year. There was some
weakness in numbers for Sodium iodide (NaI), Potassium iodide (KI),
and Methyl Iodide (Mel) but the increases in HI helped offset those
slowdowns. These shifts in product mixes year over year are common
and we will continue to drive sales of all products. During the
year we saw higher levels of employee churn at our plant due to a
more competitive U.S. labour market, but by the end of the year we
were fully staffed for 2023. We also hired to a new Maintenance
Supervisor in the second half of the year which will ensure that IC
will continue to set the standard for preventive maintenance and
safety.
2022 was a busy year for the engineering department at IC. We
began by successfully testing the new specialty gases pilot plant.
The material quality was verified by our customers to be relatively
comparable to our current process of record. We completed a key set
of renovations to our Methyl Iodide process to ensure safer
operation. One of the other big projects was running new equipment
to determine the best conditions for the recovery of an iodide
recycle stream. We have successfully completed our testing in-house
and are now working with toll manufacturers to recover this
product. Another significant achievement in 2022 was renovating the
lab air handling system with four new hoods installed and
renovating our original two hoods. We also hired a new plant
engineer in August and completed an AutoCAD class in October which
will help with process design and building design. IC's engineering
team exceeded most of their key performance indicators (KPI's)
during the year.
IC had a goal in 2022 to obtain ISO 9001:2015 certification, and
following a successful ISO audit in October, we completed ISO
certification (an internationally recognised standard that
specifies requirements for a quality management system) in
December. Additionally, much work was done on improving our quality
management system with continued work on all aspects. We have added
a quality system session to IC's quarterly training days, to ensure
all employees understand the aspects of the quality management
system. IC exceeded its quality KPI's which during the year
included on-time product deliveries of 87.9%, a high customer
satisfaction score, a high rate of completing scheduled preventive
maintenance, and kept our customer complaints below 3% at 1.24%.
The continued stress testing of IC's strategic direction and
quality policy will continue to be a focus as we continue to
improve as an organization.
Research and Development (R&D) continues to aid in process
development and new product opportunities as well as the production
of laboratory size quantities of customer orders typically for
specialized iodides. Unfortunately, from April through November the
lab HVAC renovations impacted expanded R&D efforts. Most of the
year was spent producing lab size products. Work continues on
lithium iodide and other specialty iodides. The expanded HVAC
project added four new hoods available for R&D efforts in 2023.
We have relied on R&D to help with our iodine waste stream
recovery project and work continues on the solids obtained from the
distillation to convert these to iodide products in 2023. Quality
Control and R&D implemented new instrumentation software and
added a new moisture analyser for our specialty chemical gases
detection to ensure our testing requirements are met and provide
backup instrumentation to meet customer needs.
A continued focus on safety remains key to our business and we
completed a second consecutive year with no lost time accidents at
IC. At the year-end we stood at 780 days with no loss time
incidents at IC. Continuing safety improvements are a priority for
the Company and at IC additional monthly online safety training was
added to provide training on important safety, plant and product
awareness issues. Each month employees are required to complete
between two and three training courses. This helps to reinforce
some of the important topics covered during quarterly safety and
quality training. IC was awarded another SOCMA ChemStewards
performance award for our continued success of our Employee Health
and Safety work.
Iodine Prices
Since the lows of early 2017, iodine prices have steadily
increased from early 2020, reaching $35-37/kg. During the second
half of 2020, as global economies contracted, so did the demand for
iodine, resulting in prices reducing slightly. Iodine prices began
2021 at approximately $32.5-36/kg, which was similar to where
prices were pre-pandemic in early 2020 and ended the year at $50/kg
after a significant increase in global demand for iodine. Prices
increased during 2022 to end the year at approximately $70/kg. The
increase in demand for iodine was led by human health applications
such as povidone iodide (PVPI) and X-ray contrast imaging agents.
At the time of writing, iodine prices are remaining steady with
spot pricing now generally at $70/kg and above. The last time spot
prices for iodine were above $60/kg was in June 2013. Iofina
expects iodine prices to remain steady in 2023 due to global demand
and environmental and geopolitical risks in Chile that slowed
increased production.
Iofina Resources (IR)
For IR's current assets, efforts were made to maintain and work
with our oil and gas partners to get the highest quality, quantity,
and stable brines to our production facilities. IR was successful
in our efforts to improve the consistency of brine water supply to
our IOsorb(R) plants. We saw water volumes improve and stabilize
across the Mississippian Lime Field. IR continued to work closely
with our partner operators to optimize the water volumes and
highest possible iodine concentrations. Our expansion efforts are
underway with the construction of IO#9 beginning in November.
We have maintained great relationships with our partners that
have resulted in successful projects for brine manipulation within
their systems, hardware replacements and upgrades (i.e., valves,
pipe work, flow meters, etc.), handling IR's return water issues,
and stabilizing existing brines with solid iodine concentrations.
IR's staff worked closely with our partners' field engineers
regarding their well work over program and to identify and
prioritize shut-in production wells that would be more beneficial
to IR's facilities, as well as having adequate oil production.
Several new wells in the IO#4 and IO#6 area are online and helping
add brine and iodine to these plants. Through persistence and
coordination, we were able to successfully finalize the IO#9 iodine
extraction agreement. This was with a large, new operator to IR.
Although negotiations took significant time, our efforts were
successful and IR has established a strong working relationship
with the Operator which we believe may be beneficial in developing
additional plants in both Oklahoma and Texas.
Iofina had a strong end to 2022, with H2 iodine production
surpassing our initial target and product sales remaining robust.
We produced 516MT in 2022 compared to 518.2MT in 2021. The increase
of produced water to IO#2 and IO#7 due to our efforts had the
biggest impact in H2. This increased flow was a combination of the
increase of investment by the Operator and working with the
Operator at the field level to optimize operations.
Efficiencies were improved due to completing five tower
IOsorb(R) repacks in H1 2022, which played a critical role in
exceeding the 2022 H2 projections. We continued to collect and
monitor data from each facility to improve effectiveness and have
moved more aggressively to repack plants resulting in more partial
repacks, reduced downtime and costs, and improved efficiencies.
IR added a new HSE manager in 2022. He has had an immediate
impact the on continual improvement of our safety culture. Several
initiatives have been successfully undertaken, including
modification to personal protective equipment (PPE) and respirator
requirements, improved operating conditions in the labs, and
increased training and awareness to issues of health and safety in
our operations. As we move forward into 2023, we have chosen a
software platform that will improve our data collection and
incident classification. This platform also will provide near miss
and incident corrective action improvements by using a
plan/do/check/review process to ensure sustainability and accurate
KPI reporting. There were no lost time injuries (LTI) and zero
reportable releases. IR has not experienced a LTI for 628 days.
In 2023, we are looking forward to building on the successes we
achieved in the second half of 2022. We should have continued solid
production from our existing plants, the completion of IO#9
construction in the 2nd quarter of 2023, progressing negotiations
for IO#10 and beyond, and expanding our exploration efforts.
Field exploration efforts for the targeted areas of interest for
Oklahoma have particularly been focused on future site locations
and relationship developments with key targeted operators with the
goal to identify ideal locations along with understanding their
water transport systems (WTS) and saltwater disposals (SWDs).
Through this research and development, we were able to pinpoint
the IO#9 location and construction is near completion. Our sampling
program will continue to gather data needed for future locations in
the field. Looking for future iodine facility locations is a top
priority. We have an agreement for collecting weekly samples on ten
brine aggregation points with multiple partners. IR's exploration
team has continued studies on SWD and manifold locations, at SWD
facilities in western Oklahoma, and we are working with potential
partners in the Company's northern area of interest. In Texas, we
have furthered our investigations by collecting weekly to monthly
samples on twelve individual sites of interest with multiple
potential partners. Additionally, we are furthering our research
efforts on production wells producing from new formations as well
as new aggregate points within our partner operator's WTS's.
We have started our fourth internship program with an Oklahoma
university, and it has progressed strongly. The interns are
assisting Iofina in calculating iodine values in our existing Brine
Units for royalty calculations, have assisted in a testing chemical
recycling project, and they are working on lithium sample
processing techniques. This internship duration goes from May 1,
2022, to April 30, 2024 at which time we will evaluate whether to
continue to fund this program.
Outlook
I have stated in previous annual reports that "The next few
years look to be transformational for Iofina". As a Group we still
believe this. While disappointed that we have been unable to add a
new IOsorb(R) plant each year, we believe that IO#9 will be an
important new plant in a new, strategic area and will ignite our
development plans. In 2022, we were able to evidence that Iofina is
a highly attractive and profitable Group, and we shared our story
with global institutional funds, family offices, and retail
investors. Our shareholder registry expanded in the financial year
with the addition of new institutional holdings. We will continue
to hold roadshows and investor programs in 2023 under the
stewardship of Canaccord Genuity, the Company's nominated adviser
and broker.
In 2022 we explored options to facilitate increased investor
access to Iofina with a dual listing on NASDAQ. After reviewing the
regulatory reporting requirements, ADR fees, and compliance
requirements, the Board decided the expense and additional
regulatory and administrative efforts placed on the Group's
management team would not be materially beneficial to shareholders.
At last year's annual general meeting, the Board received approval
from shareholders to buy back up to 19,185,841 ordinary shares.
Whilst we have not yet used this authority, instead focusing on
reinvesting the Group's profits into our operations, the Board will
again this year seek shareholder approval at the annual general
meeting for the ability to repurchase shares as appropriate.
In terms of our expansion, we are squarely focused on growing
our current iodine production and specialty chemical businesses,
including developing new and exciting chemical compounds. We shall
continue to develop strategies to reduce our reliance on our
current oil and gas partners and explore new geographic areas. We
have continued to explore potential business partnerships and
combinations that could be beneficial to shareholders. We continue
to focus on calculated risks in our approach to growth. In 2022 we
implemented additional key performance indicators ("KPIs") and will
continue to do so in 2023.
I would like to thank all of our shareholders for their
continued support. We are looking forward to appraising the
excellent opportunities we are seeing as we move the Company
forward in setting continued record years.
Lance J Baller
Non-Executive Chairman
Iofina plc
24 April 2023
FINANCIAL REVIEW
Summary 2022 v 2021
-- Fifth successive year of record revenue and EBITDA
-- Revenue increased by 8% from $39.0m to $42.2m
-- Gross profit increased by 47% from $10.7m to $15.8m
-- Adjusted EBITDA improved by 65% from $6.9m to $11.5m
-- Profit before tax increased by 96% from $5.1m to $10.0m
-- Net debt was reduced from $3.0m to $0.9m*
-- Capital investment into chemical and iodine plants was $3.1m (2021: $1.5m)
* excludes lease liabilities
Trading results
Turnover Crystallised 2022 Crystallised 2021
Iodine Sales Iodine Sales
85% 85%
MT $m MT $m
Crystallised
iodine 220 13.3 411 12.6
Derivatives 221 16.3 321 15.1
Prilled iodine 1.8 2.7
------------- ------ ------------- ------
Total iodine
sales 441 31.4 732 30.5
------------- -------------
Non-iodine 10.8 8.6
------ ------
Total sales $42.2 $39.0
------ ------
Revenue increased by 8% from $39.0m to $42.2m. A key factor
driving the results was a substantial increase in the iodine price
over the first half of the year to a level that has persisted since
then. The reduction in iodine sales volumes reflects exceptionally
high demand in 2021 due to restocking by customers who had held
back in 2020 due to COVID uncertainties. Although 2022 volumes were
lower turnover was nonetheless higher and gross margins were
greatly improved.
Average prices per kilogram achieved for sales of crystallised
iodine based on 100% iodine were $36.03 for 2021, rising to an
average of $71.20 for 2022, an increase of 98%. Sales volumes at
these higher price levels were 220 metric tonnes ("MT") compared to
411 MT for 2021, but the value of this turnover was higher at
$13.3m compared to $12.6m for 2021.
Average prices per kilogram of derivative compounds, based on
total weight including non-iodine chemicals, were $42.90, up 54%
from the 2021 average of $27.94. Sales volumes of derivatives were
221 MT compared to 321 MT for 2021, but the value of turnover was
higher at $16.3m compared to $15.1m for 2021.
Non-iodine sales increased by 26% from $8.6m to $10.8m,
reflecting higher volumes and led by the specialty chemical gases
business, which saw some inventory rebuilding by a major
customer.
Gross profit improved by $5.1m (47%) to $15.8m (2021 $10.7m),
representing 38% (2021 27%) of sales. This reflected the
substantial selling price increases described above, offset
somewhat by mainly inflationary cost increases of 24% for iodine
production and 20% for the Iofina Chemical plant.
Crystallised iodine production was 516MT compared to 518MT for
2021, from the same five plants. Iodine sales were split 50:50
between raw iodine and derivatives for 2022, as opposed to 56:44
for 2021.
Adjusted EBITDA improved by 65% from $6.9m to $11.5m after
deducting $4.4m in SGA expenses (2021 $3.8m) from the gross profit
of $15.8m (2021 $10.7m). Operating profit after depreciation and
amortisation of $1.8m (2021 $1.7m) was $9.6m compared to $5.2m for
2021.
Release of plant acquisition accrual
An accrual balance of $0.45m relating to the acquisition of #IO2
plant is no longer considered to be required, and has therefore
been transferred to income. No claims have been made, and the
period of validity for such claims has expired.
Interest swap derivative asset
The derivative asset resulting from the swap contract described
in Note 20 has been revalued as at 31 December 2022 by reference to
market expectations for future SOFR rates, and an amount of $0.25m
has been credited to comprehensive income (2021 $0.07m) and
included in the balance sheet.
Profit before tax
Profit before tax improved by $4.9m from $5.1m (2021) to $10.0m
(2022). The improvement reflects successful trading at
substantially higher iodine selling prices, together with
containment of inflationary cost pressures.
Tax
The Group is utilising previous years' accumulated US Federal
tax losses against current profits that would otherwise be taxable.
Based on current projections the Group expects that US Federal tax
will not be payable in respect of 2023, but is likely to become
payable in respect of 2024.
Capital investment
The Group invested $3.1m in capital projects and equipment
(2021: $1.5m), of which $1.8m relates to construction of the new
IO#9 iodine plant in Oklahoma. Most of the balance of expenditure
relates to new projects, process improvements and replacements at
the Iofina Chemical plant.
Cash flow
Cash started the year at $5.3m and ended $0.6m higher at $5.9m,
after paying off $1.4m of the bank term loan in accordance with the
borrowing schedule and investing $3.1m in capital projects. Net
debt was reduced from $3.0m to $0.9m. Net cash inflow from
operating activities was $5.6m.
Malcolm Lewin
Chief Financial Officer
Iofina plc
24 April 2023
DIRECTORS' BIOGRAPHIES
Lance J. Baller, Non-Executive Chairman
Mr. Baller was co-founder, CEO and President of Iofina Plc prior
to his departure for health reasons in June 2013. Mr. Baller was
the Group's Finance Director from 2007 until his appointment as CEO
in 2010. Mr. Baller returned as Chairman in April 2014. Mr. Baller
currently serves as CEO of Selectis Health, Inc and as a director
and as sole or principal shareholder of several privately owned
businesses, including Baller Enterprises, Inc. (personal holding
company), Titan Au, Inc, Empire Leasing LLC, Valdez Au, Inc, Extrac
Technologies Limited, Extrac, Inc, Wyoming Sand Company LLC (which
all are in gold, sand, rock, SiO2 and gravel mining), Ultimate
Investment (personal investment company) and Baller Family
Foundation, Inc. (personal family foundation) plus many others that
he has founded and successfully sold over the years. He is the
former managing partner of Shortline Equity Partners, Inc., a
mid-market merger and acquisitions consulting and investment
company. Mr. Baller is also the former Managing Partner of
Elevation Capital Management, LLC and is the former alternative
investment hedge fund manager of the Elevation Fund. He is also a
former Vice-President of Corporate Development and Communications
of Integrated Biopharma, Inc. and prior to that a vice-president of
the investment banking firms UBS and Morgan Stanley. Mr. Baller has
been a CEO, interim CEO, Chairman, CFO and secretary of various
private and public listed companies throughout his career. He has
served as Chairman to various companies and has led successful
restructurings. Mr. Baller has had extensive experience in all
aspects of corporate finance. Mr. Baller currently is on the board
of trustees of Index Fund and Digital Funds where he serves as the
chairman of the audit committee and as the audit committee
financial expert under Sarbanes-Oxley.
Dr. Thomas M. Becker, Chief Executive Officer
Dr. Becker has served as President/CEO of Iofina plc since 2014
and has led Iofina Chemical since March 2010. Previously, Dr.
Becker was the Vice President of Research and Development at
H&S/Iofina Chemical. Iofina bought H&S in July 2009. Dr.
Becker has conducted extensive research in both inorganic and
organic halogen-based chemistry. Dr. Becker has written a magnitude
of published technical papers in his career. Prior to H&S Dr.
Becker worked as an Oak Ridge Scholar on behalf of the US EPA and
for various other chemical manufacturing companies. Dr. Becker
earned a BS in Chemistry from Indiana University, and a PhD in
Chemistry from the University of Cincinnati. He has extensive
experience in scale-up of chemical processes from laboratory to
pilot to full scale production. Dr. Becker is a former member of
the Board of Governors of the Society of Chemical Manufacturers and
Affiliates ("SOCMA").
Dr. William D. Bellamy, Non-Executive Director
Dr. Bellamy is the former Senior Vice President of the Water
Business Group at CH2M HILL, Inc. ("CH2M"), a company he has worked
at for 30 years until his recent retirement. CH2M is one of the
largest consulting engineering companies in the world, providing
leadership and strategic direction for the water business and
application of technologies worldwide. Dr. Bellamy has participated
in energy and sustainability forums, including as a panellist at
the World Future Energy Conference in Abu Dhabi, the World Bank
Sustainable Cities Symposium and the Future of Water Economic
Forum. Dr. Bellamy serves as Professor of Practice at the
University of Wyoming, where he teaches graduate courses and is
responsible for securing grants and research funding in the areas
of water resources, water treatment and sustainable energy
development. Dr. Bellamy has a PhD in Civil Engineering from
Colorado State University, an MSc in Civil (Environmental)
Engineering from the University of Wyoming and a BSc in Electrical
(Bio-Medical) Engineering from the University of Wyoming.
Malcolm T. Lewin, Chief Financial Officer
Mr. Lewin was named CFO and a director of the Group in November
2016 after having joined Iofina as interim CFO in February 2016.
Mr. Lewin is based in the UK and has over 30 years of experience in
finance and accounting for both public and private companies. As
well as being a partner in a chartered accounting firm for 11
years, he has acted for various companies listed on AIM and other
exchanges. In particular, from 2000 to 2003 he was the Finance
Director of Oxford Metrics plc, an AIM company supplying motion
capture and visual geometry systems. From 2004 to 2006 he was the
Finance Director of Real Estate Investors plc, an AIM property
investment company with interests in quality commercial and
industrial properties. From 2006 to 2011 he was a Director and CFO
of Hunter Bay Minerals plc, a junior mining company listed on the
Toronto Venture Exchange with interests in South America and
Canada. From 2011 to 2014 he was CFO and Treasurer of VolitionRX
Limited, an OTC life sciences company focused on developing blood
tests for a broad range of cancer types and other conditions. Mr.
Lewin has an MA in Classics from Oxford University and qualified as
a chartered accountant with Coopers & Lybrand.
J. Frank Mermoud, Non-Executive Director
Mr. Mermoud has more than 30 years' experience in international
business, facilitating trade and investment in both the public and
private sectors. He has held senior international, economic and
commercial policy positions within the United States Government
having served as the Secretary of State's Special Representative
for Commercial and Business Affairs at U.S. Department of State
from 2002 to 2009. Mr. Mermoud is also a Non-Executive Director of
Cub Energy Inc. an oil and gas company headquartered in Houston,
Texas.
Mary Fallin Christensen, Non-Executive Director
Mary Fallin Christensen has served the State of Oklahoma for
over 30 years. She was elected the first female Governor of the
State in 2010, and was re-elected for a second term in 2014. Prior
to serving as Governor, she held a number of state and federal
positions, including serving as US Congresswoman for Oklahoma's 5th
district between 2007-2011 and serving as Lieutenant Governor of
Oklahoma between 1995-2006. Mary has been a major contributor to
natural resources industries in Oklahoma, and implemented the
State's first comprehensive energy plan as well as its State-wide
water plan. She has held several positions, including Chair of the
Southern State Energy Board, Chair of the Interstate Oil & Gas
Compact Commission, and has served on the natural resource
committee of the National Governors Association (NGA). Previously,
she also served on the United States House of Representatives
Committee on Small Business, was Small Business Chairman on the
Republican Policy Committee, and was named the "Guardian of Small
Business" by the National Federation of Independent Business. Mary
has also served on numerous Boards of Directors for both commercial
organizations and non-profits.
STRATEGIC REPORT
Principal activities and review of the business
Iofina plc ("Iofina" or the "Company") is the holding company of
a group of companies (the "Group") involved in the exploration and
isolation of iodine and the production of specialty chemicals.
Iofina Resources, Inc. is the Group's wholly owned subsidiary which
uses proprietary Wellhead Extraction Technology(R) (WET(R)) and
WET(R) IOsorb(R) methods to produce iodine from brine. Large
volumes of brine water are sourced from partnerships with oil and
gas operators and saltwater disposal ("SWD") operators in the
United States and is used as a raw material to produce iodine at
the Group's multiple IOsorb(R) plants. The Group's unique business
model isolates a resource, iodine, from a produced waste stream
that, without Iofina's technology, would be lost. The Directors of
the Company believe that Iofina's production process, which
utilizes brine water from third party oil and gas production, is
advantageous for long term sourcing of the raw material as well as
minimised production and expansion costs. Iodine containing or
other specialty chemicals are produced at and sold through the
Company's wholly owned subsidiary, Iofina Chemical, Inc., with the
major raw material being the Group's produced iodine. Additionally,
the Group's crystalline IOflo(R) iodine is sold directly to other
iodine end-users.
Iodine is a rare element that is produced only in a few
countries in the world, with approximately 90 per cent of global
production coming from Chile (60 per cent) and Japan (30 per cent,
including recycled waste streams).. Iodine and its compounds have
many human health related applications, including x-ray contrast
agents, pharmaceuticals, antiseptics, thyroid function, and others.
Additional high-volume uses of iodine include LCD screen
technology, material heat stabilisation, animal feed additives,
biocides, catalysts and more. The Group produces iodine in the
United States where the overall global iodine production is
approximately six per cent of the world's total production, but
where there is a large consumption of the world's iodine by various
American users. Iofina believes it is the second largest producer
of iodine in North America.
The ability of the Group to expand its iodine production
quickly, at low cost, differentiates Iofina from other iodine
producers. This has been proven from the expansion of production
and opening of IOsorb(R) plants IO#7 and IO#8 and the current IO#9
project which is expected to open in late Q2 2023. Additionally,
the Directors believe that the Group's technology to produce iodine
is far more environmentally friendly compared to other producers.
By using a waste stream from the oil and gas industry to isolate
iodine versus isolating iodine from ores, Iofina's process is
ecologically efficient in obtaining a valuable product from a waste
stream versus the environmentally intensive processes of mining
iodine from ores by Chilean producers.
Economically viable iodide rich brine co-produced during oil and
gas production is not common, and the Group's proprietary
geological model to locate and anticipate iodide rich sources is
unique. The Directors of Iofina are committed to producing its
products in a sustainable and environmentally friendly manner, and
to improving communications regarding our long-term strategy in
respect of Iofina's sustainable practices and other ESG tenets.
The focus of Iofina's current business model is the production
of iodine from brine and the creation and sales of specialty
chemicals through Iofina Chemical. The Directors feel strongly that
diversification within the business while focusing on our core
expertise is important. Iofina Resources diversifies its iodine
production through multiple IOsorb(R) production plants with
multiple brine suppliers in western Oklahoma. The technology the
Group has developed, utilizing a waste resource already being
produced, allows Iofina the ability to expand its operations
quickly with minimal capital expenditure. Continued prudent growth
in the number of IOsorb(R) plants increases production, profit and
diversification. Continued expansion of the Group's geological
model provides opportunities for Iofina outside of its current core
area.
Iofina Chemical produces a wide range iodine-based products with
applications in various industries including agricultural,
pharmaceutical, biocides and others, whilst additional
diversification is realised by the production of non-iodine-based
products at Iofina Chemical. The demand for various products can
change, and Iofina Chemical's ability to produce a variety of
products allows the Group to take advantage of growing markets
while not being as affected by temporarily depressed or declining
markets.
Iodine prices have risen significantly in the last 24 months,
exceeding $70/kg by July 2022 and stabilising at these levels
through early 2023 at the time of publication. Pricing at these
levels has not been seen since 2011, when a combination of the
Fukushima disaster in Japan and Chilean supply disruptions resulted
in a shortage of iodine and a price spike. Supply and demand
changes, as well as manufacturing cost increases, are the major
factors influencing the iodine price. Iodine prices slightly
retreated in H2 2020 due to lower global demand for both iodine and
iodine-based products during the COVID-19 pandemic. As an iodine
manufacturer, iodine prices have a significant impact on the
Group's gross profit margins. Prices rose marginally in H1 2021 and
then significantly from H2 2021 through to H2 2022 with demand
outpacing supply as global economies recovered and expanded as
COVID impacts waned.
During 2022, demand for iodine, particularly in X-ray contrast
media applications, continued to increase. Currently, iodine prices
remain high versus historical levels and the range of prices is
larger than typical historical prices. Spot prices began 2022 near
$50/kg and reached $70/kg and above by mid-year. Contracted iodine
prices for large customers are generally lower than spot prices,
but these also increased significantly during the year. Demand for
Iofina's iodine and iodine derivatives was robust in 2022 and this
is still the case in early 2023. We expect iodine prices to remain
steady at least through H1 2023. Whilst the iodine market has
expanded in recent years, we note that additional Chilean
production coming on stream may increase overall global iodine
supplies. Inflation in 2022 has remained at much higher levels than
recent years and has resulted in higher costs for Iofina's raw
materials, labour and energy.
The Directors recognized that, as the Company erected its
IOsorb(R) plants, it was imperative for Iofina's iodine production
costs to be amongst the lowest in the industry to be competitive.
Between 2014 and 2017 numerous initiatives were successfully
implemented to optimise Iofina's technology and lower production
costs. Once the majority of these goals were achieved and iodine
market conditions became more favourable, the Directors commenced
the next phase of Iofina's business plan with the focus on growth.
In early 2018, the Group's newest iodine plant at the time, IO#7,
was completed. By expanding our operations and building IO#7, the
Group has successfully lowered overall iodine production costs with
its most efficient plant at that time. The next major growth
development occurred in Q2 2019, when the Company performed an
equity raise to reduce debt and provide working capital for
expansion projects. The result was the construction of IO#8, which
began in late 2019 and was completed in early April 2020.
The Group is committed to establishing new routes to growth and
is investigating locations and partnerships to expand iodine
production. Currently, the Company is building IO#9 and is in
negotiations with partners on sites for IO#10. Lessons learned from
past expansion play a role in management's iodine plant growth.
Building of IOsorb(R) plants will be done in a prudent manner to
ensure to the best of our knowledge long-term, low-cost iodine
production. With an expanding iodine market and Iofina's improved
balance sheet, it is likely that Iofina will embark on IO#10 soon
after IO#9's completion, although this will only be done with the
correct evaluations of potential future sites and market
conditions.
The Directors are aware of the risk of declining brine
availability if our partners do not maintain or increase their
hydrocarbon production in areas that supply the Group's IOsorb(R)
plants. The Group continues to investigate the economics and the
technology to have better control of the iodide-rich brine supplies
that feed the current and future plants. Iofina Chemical continues
to be recognised as a world-renowned halogen specialty chemical
producer. Vertical integration of the Group's iodine into iodine
derivatives gives Iofina's customers stability of supply in
addition to the long-standing quality and technical support to
Iofina's global customers for the goods sold to them. Additionally,
the non-iodine-based halogen derivatives produced by Iofina
Chemical gives the Group further diversity. Iofina Chemical
invested in multiple projects in 2022 and will continue to invest
in areas to expand current products and develop new products to
Iofina using the Company's core expertise.
Key Performance Indicators
The Directors review a range of financial indicators to assess
and manage the Group's performance, including the following
relating to revenue and iodine production:
Year ended Year ended
31 December 31 December
2022 2021
$'000 $,000
Revenue from sales of iodine and iodine derivatives $31,422 $30,473
Revenue from non-iodine products $10,776 $8,566
Total revenue $42,198 $39,039
Total pounds of product shipped (LBS '000) 1,640 2,580
Crystallised iodine produced (Metric Tonnes) 516 518
IOsorb(R) plants in operation (year-end) 5 5
Commentary on some of the above indicators is to be found in the
Chairman's Statement on pages 3 to 6.
Further commentary on the results for the year and the financial
position at the year-end is to be found in the Financial Review on
pages 7 to 9.
Objectives
At the end of 2022 the Group had five operating IOsorb(R) iodine
production facilities in the core area of Northwestern Oklahoma and
a sixth under construction. While the theoretical capacity of these
plants is very high, the practical capacity of the plants is
somewhat lower. Practical capacity takes into account multiple
causes of downtime, including weather, repairs and maintenance,
inadequate brine (low parts per million of iodine, heavily
contaminated brine or little to no supply), power outages and other
conditions. As we have proven our technology and continue to
improve operations at current facilities, more accurate practical
capacity operating targets have been realised as well as
improvements for maximising practical capacity.
Iofina Resources' unique business model allows the Group to
determine sites for new iodine production plants utilizing existing
brine produced from oil and gas production and quickly bring these
sites into production. The execution of this prudent growth
strategy was continued with the start of construction of IO#8 in
late 2019 which was completed in April 2020. While technology and
efficiency improvements at current facilities remain an ongoing
priority, the Company continues to explore new iodine production
opportunities. This objective of strategic expansion in 2020 and
beyond is focused on sites that will continue to improve Iofina's
output with low production costs. In late 2022, the Group began
construction on IO#9 with an expectation to complete it in late Q2
2023.
Brine supply to our IOsorb(R) plants can be affected by
regulatory changes and adjustments to our partners' saltwater
disposal systems and oil production programs. Iofina continues to
work with its partners to implement plans to maximize brine input
and iodine output at each of our existing sites. The mutually
beneficial relationship between Iofina and its brine supply
partners, which allows Iofina to create iodine and for the brine
suppliers to realize value from a waste stream, is a key component
for existing projects and potentially for future sites. Continued
efforts by our business development and geological teams have
identified numerous further expansion opportunities. The Company
will continue to evaluate and potentially execute these with
current and new potential brine supply partners, when management
determines the proper timing for new sites.
Timing of future iodine production growth will be dependent on a
series of factors. These include the stability or increase of
iodine prices, global demand, availability and cost of production
at new sites, partnership agreements, oil prices and production in
areas with high iodide content brines, and the regulatory landscape
with respect to brine injection. Lower oil prices can lead to lower
oil production if certain wells become uneconomical, which in turn
can affect brine supplies from our partners. Therefore, the Group
is increasingly focused on evaluating alternative brine sourcing
opportunities to have better control brine supply at future sites.
Whilst the Directors are focused on expanding production capacity
in the right manner, it is also important to maintain the Company's
strong balance sheet and cash flow. Expansion in 2023 will occur
with the completion of IO#9 and negotiations for sites for IO#10
are ongoing. The Directors will evaluate market conditions and the
detailed information on potential future plant sites before
spending capital on new IOsorb(R) plants.
Iofina Chemical has continued to invest in current product
lines, safety improvements, and new product R&D. These include
investments in both iodine-based products and other non-iodine
specialty chemicals. Capital investment projects in 2022 at Iofina
Chemical included R&D upgrades and ongoing methyl fluoride
process improvements. In 2023, additional process upgrades and
product development projects are underway. The R&D and the
sales groups continue to investigate and research new opportunities
for applications of our existing portfolio of products, as well as
identify and produce new halogen-based derivatives to grow this
side of the business. It is also expected that Iofina Resources'
expansion plans over the next few years will result in the need for
expansion of our customer base for our products. The Iofina
Chemical sales team developed new sales channels during the
reporting period, which it will continue to expand upon, including
potential direct sales of the Group's crystalline IOflo(R) iodine
to new customers . Managing existing client relations and
developing new sales channels is a high priority for the sales
team. To help meet growth targets and maintain high standards, the
Group expects to add new talent to the sales team in 2023.
The Group reported in 2021 that IofinaEX, the hemp seed
investment, has not had any appreciable sales and was impaired to
Nil. While the Group believes these seeds are still viable for
sale, there were no recognised hemp seed sales in 2022.
Last, the Directors are committed to employee retention whilst
controlling costs. Employee safety and training are also key
objectives for the Group. A key component for the Group is the high
operational gearing whereby the Group's business model allows for
the control of administrative and fixed expenses whilst expanding
operations.
Principal risks and uncertainties
Iofina plc is subject to a number of risks and uncertainties,
which could have a material effect on its business, operations or
future performance, including but not limited to:
Raw Materials: Brine water produced from oil and gas operations
is the raw material source for Iofina's iodine production. The
Group continues to evaluate opportunities to integrate its
IOsorb(R) process into produced brine water streams associated with
hydrocarbon operations in the USA, as well as other brine stream
sources throughout the world. However, there is significant risk
and no guarantee as to the volume of commercial quantities of
iodide rich brine available to our current and future IOsorb(R)
plants. Oil and gas prices and demand for these hydrocarbons
generally will dictate whether our partners continue to expand
their production or possibly reduce hydrocarbon output. Changes in
hydrocarbon production by our partners will change the total brine
availability to isolate iodine and thus the iodine output of our
IOsorb(R) plants. The salt-water disposal wells (SWDs) that our
partners operate may have temporary or permanent issues which would
likely affect the brine supply to IOsorb(R) plants. In the past,
reduction of capital spent by our partners for new drilling and
recompletion of wells in our core area resulted in a decline in
total amounts of brine co-produced with oil and gas in our key
areas. Current brine volume availability to existing plants is
relatively steady but could change. Iofina maintains good
relationships with our partners who provide the brine water to our
existing IOsorb(R) plants. Maintaining a positive, mutually
beneficial relationship with our brine suppliers is a top priority
for the Group. By continuing an aggressive water testing program
and active exploration utilising geology and data analytics and
incorporating reservoir and production engineering, we are
constantly evaluating new potential locations for iodine extraction
in our core area and in other locations.
Iofina Chemical sources raw materials throughout the globe.
Understanding the supply chain of these materials is important to
minimise supply disruptions. Global supply change disruptions and
logistic bottlenecks can adversely affect ability to obtain key raw
materials and may result in increased costs of these materials.
Iofina Chemical has long term relationships with many of its
suppliers. Additionally, when possible, Iofina Chemical sources
materials from multiple suppliers to reduce risk. Increased
regulations can adversely affect availability and cost of
materials. Prices of raw materials and energy can change and if
increases in these prices are not able to be passed on to our
customers, it would negatively affect margins for our products.
Global Crises : Global crises, while rare, can impact businesses
significantly. The COVID-19 pandemic was an example of such an
event. Similar events in the future could have a negative effect on
the markets we serve and on the Group's profits. For instance,
COVID-19 resulted in a global economic slowdown and a reduced
demand for many of Iofina's products. These types of events can
also result in delays in shipping, worker limitations, business
closures and other challenges which may negatively affect the
Group. The diversity of Iofina's products along with the uses of
products in areas like human health applications make Iofina less
susceptible than many other businesses. During the COVID-19
pandemic, Iofina quickly implemented many protocols to minimize any
negative impacts on the business, but these protocols only reduce
risk and cannot eliminate risk. COVID-19 or other events such as
political unrest, acts of aggression (wars), other health crises,
major weather events or others would likely have a negative effect
for the Group.
Currently, Russia's invasion of Ukraine is ongoing but has not
directly affected Iofina's operations. Additional political
sanctions or negative impacts to global economies as a result of
this invasion may adversely impact our business. Iofina does not
have any current sales exposure with Russia. Other geopolitical
events could negatively affect the Group.
Environmental: The Group's operations are subject to the
environmental risks inherent in the exploration and chemical
industries. The Group is subject to environmental laws and
regulations in connection with all its operations. Although the
Group intends to comply in respect of all applicable environmental
laws and regulations, there are certain risks inherent to its
activities, such as accidental spills, leakages or other
circumstances that could expose the Group to extensive liability.
Accordingly, the Group promotes wherever possible environmental
sustainability in its working practices and seeks to minimise,
mitigate, or remedy any harmful effects from the Group's operations
on the environment at each of its operational sites. Regulations on
brine injections in the state of Oklahoma into the Arbuckle
geological formation in the Group's core area due to seismic
activity were implemented mainly in late 2015 to early 2016, and
have affected Iofina's partners' brine disposal into this formation
near some of our sites. This reduced some brine availability to
Iofina at some sites. The Group and its partners have implemented
and continue to implement strategies to minimise the effect on the
availability of iodine rich brine to Iofina due to these
regulations. Moving forward the Group and its partners will
continue to monitor these risks and act accordingly. While the
frequency and intensity of earthquakes have significantly reduced
in Oklahoma, and this reduction is likely a result of regulated
changes in brine disposal into the Arbuckle formation, there is
still risk of additional earthquakes and regulation moving forward.
Changes in laws or regulation of brine streams could affect brine
availability or the cost to produce iodine. As a specialty chemical
manufacturer, new regulations based on chemical use, adverse human
health or environmental impact are a risk and may lead to higher
costs or controlled production. Greenhouse Gas (GHG) regulations in
the USA have not impacted Iofina's ability to produce products it
currently manufactures, however if production allocations are
reduced in the
future, this would likely negatively affect Iofina's production
output. Other environmental regulations that restrict manufacturing
of chemicals that Iofina produces would have a negative impact on
the Group. The Group has a robust Environmental, Health and Safety
program and strives for continual improvement in this area.
Additionally, Iofina Chemical is a certified Chemstewards(R)
facility and obtained ISO 9001:2015 certification in 2022.
Changes in Markets and Competition: Iofina is well diversified
in the markets we serve. As a result, small changes to these
markets generally will not materially affect our business. However,
major disruptions in key markets that use iodine or the other
specialty compounds we manufacture could have a material negative
effect on the Group. The rising interest rate environment
implemented by central banks to combat inflation is likely at a
minimum slow down global economies or even create a recession. A
significant contraction in global economies may negatively affect
demand and pricing of the Group's goods. Additionally, increased
competition in the markets we serve could negatively impact prices
or the ability to sell our goods. In particular, large increases in
iodine production from competitors could negatively affect iodine
prices and the Group's market share. The planned expansion of
iodine production in Chile may change the market's current supply
and demand dynamics. However, the exact change is subject to
several factors, the scale of expansion, the timing of increased
supply and the overall global demand for iodine at the time of new
supplies coming onstream.
Iodine Price volatility: Iodine's price and demand are highly
dependent on a variety of factors, including international supply
and demand, the level of consumer product demand, the price and
availability of alternatives, actions taken by governments and
global economic and political developments. Increases in current
iodine producers' production capacities or new iodine producers
entering the market could negatively impact prices. Fluctuations in
iodine prices and, in particular, a material decline in the price
of iodine would have a material adverse effect on the Group's
business, financial condition and operations. Iodine prices are
currently elevated relative to historical trends. After a lull in
demand during the COVID-19 pandemic, demand for iodine rose
significantly in H1 2021. Continued strong demand for iodine and
iodine incorporated products have continued through today. As a
result, iodine prices rose significantly between H1 2021 and
mid-year 2022. During H2 2022 through early 2023 iodine prices have
generally stabilised.
Key customers: There are a limited number of potential customers
who purchase many of the products of the Group's chemical business,
which makes relationships with these customers, as well as the
success of those customers' businesses, critical to the Group's
success. The loss of one or more major customers could harm the
business, operating results and financial condition of the Group.
Iofina is continuing to diversify its customer base in its Chemical
subsidiary. In addition, Iofina works closely with all of its
customers to develop strong relationships, with a significant focus
on ensuring that its products and services meet the needs of its
customers and are of the highest quality. In 2022, 11% of revenue
recognised was attributable to one long term customer and five
other customers each contributed to over 5% of sales. Relations
with these customers are good.
Key Partners: Iofina partners with third-party oil and gas
producers and saltwater disposal operators to process iodine-rich
brine they extract with oil and gas production. Fluctuations of oil
and gas prices in the US can affect the financial stability of oil
and gas producers. Any changes in operator status or the financial
strength of our partners is a risk to brine production and
availability. The Group has agreements with our partners to reduce
any risk of change in status. Material changes in these brine
supply contracts with our partners could negatively affect the
Group. In 2022, Iofina executed a new agreement for IO#9 with a new
brine supply partner.
Regulation and Trade : The businesses are subject to various
significant international, federal, state and local regulations
currently in effect including but not limited to environmental,
health and safety and import/export regulations. These regulations
are complex, change frequently, can vary from country to country,
state to state and have generally increased over time. Iofina may
incur significant expense in order to comply with these regulations
or to remedy violations of them. The current federal administration
in the USA has increased regulations in our industries versus the
previous administration. Any new regulation that would increase
cost of raw materials the Group uses, reduces availability of these
raw materials or caps production of products the Group produces
would likely have a negative effect on margins.
Any failure by Iofina to comply with applicable government
regulations could result in non-compliant portions of our
operations being shut down, product recalls or impositions of civil
and criminal penalties and, in some cases, prohibition from
distributing our products or performing our services until the
products and services are brought into compliance, which could
significantly affect our operations.
IofinaEX is involved in the sale of hemp seeds, a highly
regulated industry. Laws and regulations for handling and selling
hemp seeds may change and evolve.
The Group closely monitors regulations across its businesses to
ensure that it complies with the relevant laws and regulations.
While Iofina believes that it is compliant with all laws and
regulations, any instances of non-compliance would be brought to
the attention of the appropriate authorities as soon as
possible.
Trade relationships between the USA and other areas of the
world, particularly China, have become more unstable. Increased
tariffs implemented by the USA and retaliatory tariffs imposed by
other governments against the USA have the potential to adversely
affect both raw material supply and final product sales for Iofina
in certain areas of the world. Iofina has been proactive in
reducing the impact of tariffs which directly impact the Company's
supply and sales lines.
Inventory Fluctuations: Inventory level changes can cause a
financial instability. High inventories negatively affect cash
flow, while low inventories can negatively affect sales volumes and
customer relationships. In 2021, the Group started the year with
larger than normal iodine inventories and ended the year with lower
than normal iodine inventories. In 2022, the Group ended the year
with more normalised iodine inventories and slightly elevated than
ideal specialty chemical derivative end products and in-process
goods. These inventories are cyclical within our business and
management closely tracks these inventories along with known and
anticipated demand for products in order to maintain appropriate
inventories.
Insurance may not cover all material losses: The Group strives
to carry standard insurance for our industry that would minimise
loss when events occur. However, certain scenarios or events may
not be covered by insurance and could have a negative material
impact on the Group. For example, cyber-attacks have increased
globally and while the Group has increased measures to thwart
potential cyber-attacks, we cannot guarantee these measures will
prevent a cyber-attack for which we do not carry specific
insurance.
Personnel: As a small technical organisation, the loss of key
technical or senior management employees could negatively affect
the business. Additionally, the USA labour market remains tight.
This could result in increased labour costs and a risk of delays or
inability to produce product due to labour shortages.
Significant Shareholders: Significant shareholders may have the
ability to affect changes that result in a material adverse effect
to the organisation including a change in senior management or
control of the Group or its Board of Directors.
Interest Rates and Inflation: As a result of the 2020 debt
changes that served to significantly reduce both overall debt and
interest rates for the Group, a significant portion of the debt
carries variable interest rates. While overall debt has continued
to decline, interest rates continue to rise and will likely
negatively impact debt costs. In 2022, the Group obtained credit
lines in order to support growth projects at both Iofina
Chemical and Iofina Resources. These lines carry variable interest rates.
Inflation in the USA and globally was higher in H2 2021 and
throughout 2022 relative to recent years. This has resulted in
higher costs for goods, energy, and labour. The ability to maintain
margins in an increasing inflationary environment is uncertain.
Additionally, as prices rise, there is a risk that some products
the Group sells may be replaced by cheaper alternatives which could
result in an adverse effect to the business.
Litigation: While the Group has no pending litigation matters,
there are possibilities that future judgements or settlements could
result in an adverse effect to our business.
Going concern
The Group has performed well in 2022, and is performing as
anticipated in 2023 and generating cash. In 2022 the Group achieved
a profit before taxation of $10.0m and a net cash inflow from
operating activities of $5.6m. The markets into which the Group
sells its products continue to experience strong demand. Iofina has
obtained appropriate credit facilities to fund current business
growth objectives. The Group has prepared forecasts and projections
that indicate there are adequate resources to continue in
operational existence for the foreseeable future. The Directors
consider it appropriate to continue to adopt the going concern
basis in preparing the financial statements.
On behalf of the board
Dr. Thomas M. Becker
Chief Executive Officer and President
24 April 2023
STATEMENT IN ACCORDANCE WITH SECTION 172 OF THE COMPANIES ACT
2006
As required by section 172 of the Companies Act 2006, a director
of a company must act in a way they consider, in good faith, would
most likely promote the success of the company for the benefit of
its shareholders. In doing this, the Director must have regard,
amongst other matters, to the:
(a) likely consequences of any decision in the long-term;
(b) interests of the company's employees;
(c) need to foster the company's business relationships with
suppliers, customers, and others;
(d) impact of the company's operations on the community and the environment;
(e) company's reputation for high standards of business conduct; and
(f) need to act fairly as between members of the company.
As a Board our aim is always to uphold the highest standards of
governance and business conduct, taking decisions in the interests
of the long-term sustainable success of the Group, generating value
for our shareholders and contributing to wider society. We
recognise that our business can only grow and prosper over the long
term by understanding the views and needs of our stakeholders.
Engaging with stakeholders is key to ensuring the Board has
informed discussions and factors stakeholder interests into
decision-making.
The Directors insist on high operating standards and fiscal
discipline and routinely engage with management and employees of
the Group to understand the underlying issues within the
organization. Additionally, the Board looks outside the
organization at macro factors affecting the business. The Directors
consider all known facts when developing strategic decisions and
long-term plans, taking into account their likely consequences for
the Group.
The Directors and management are committed to the interests and
well-being of Iofina's employees. Iofina is committed to the
highest levels of integrity and transparency possible with
employees and other stakeholders. Safety initiatives, consistent
training, strong benefits packages and open dialogue between all
employees are just some of the ways the Group ensures its employees
improve skill sets and work hand-in-hand with management to improve
all aspects of the Group's performance.
Other stakeholders include customers, suppliers, lenders,
industry associations, government and regulatory agencies, media,
local communities and shareholders. The Board, both individually
and together, consider that they have acted in the way they
consider would be most likely to promote the success of the Group
as a whole. To do this, there is a process of dialogue with
stakeholders to understand the issues that they might have. Iofina
believes that any supplier/customer relationship must be mutually
beneficial, and the Group is known for its commitment to details to
its customers. Communications with the Group's lenders and
shareholders occur on an ongoing basis and as questions arise. The
Group also communicates through media interviews and Twitter.
The Directors are committed to positive involvement in the local
communities where we operate. Part of this commitment is our
program 'Iofina Gives Back', where Iofina supports local charities
by donating time and goods. Additionally, Iofina adheres to
environmental regulations at its sites and supports sustainability
practices where possible.
Integrity is a key tenet for the Directors and the Company's
employees. The Company believes that any partnership must benefit
both parties. We strive to provide our stakeholders with timely and
informative responses and are always striving to meet or exceed
customers' needs.
The Board recognises its responsibilities under section 172 as
outlined above and has acted at all times in a way consistent with
promoting the success of the Company with regard to all
stakeholders.
CORPORATE GOVERNANCE
It is the Chairman's responsibility, working with Board
colleagues, to ensure that good standards of corporate governance
are embraced throughout the Group. As a Board, we set clear
expectations concerning the Group's culture, values and
behaviours.
In September 2018, the Board adopted the Quoted Companies
Alliance Corporate Governance Code (the "QCA Code"). On our website
(https://iofina.com/corporate-governance/) we set out how we seek
to comply with the 10 principles of the QCA Code. The following
sections of the Corporate Governance Statement explain how the QCA
Code is applied by the Company.
The Board comprises six Directors: the Non-Executive Chairman,
two full time Executive Directors and three Non-Executive Directors
(each of whom is considered by the Board to be independent),
reflecting a blend of different experiences and backgrounds. The
function of the Chairman is to supervise and manage the Board and
to ensure its effective control of the business. The Board believes
that its composition brings a desirable range of skills and
experience given the Group's challenges and opportunities as a
publicly quoted company, while at the same time ensuring that no
individual (or group of individuals) can dominate the Board's
decision-making.
The Board meets regularly to review, formulate and approve the
Group's strategy, budgets, corporate actions and oversee the
Group's progress towards its goals. The Board has established the
following committees to fulfil specific functions, each with
formally delegated duties and responsibilities (details of which
can be found on our website; see:
http://www.iofina.com/about/committees ): the Audit Committee and
the Remuneration Committee. These committees meet on a regular
basis and at least two times a year. The Board has elected not to
constitute a dedicated nomination committee, instead retaining such
decision making with the Board as a whole. This approach is
considered appropriate to enable all Board members to take an
active involvement in the consideration of Board candidates and to
support the Chair in matters of nomination and succession.
From time to time, separate committees may also be set up by the
Board to consider specific issues when the need arises.
DIRECTORS' REPORT
The Directors present their report and financial statements for
the Group for the year ended 31 December 2022.
Strategic report
Included in the Strategic Report on pages 12 to 21 is the review
of the business and principal risks and uncertainties.
Post balance sheet events
Post balance sheet events are set out in note 30.
Directors' responsibilities for the preparation of the financial
statements
The Directors are responsible for preparing the Strategic Report
and the Directors' Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company
financial statements for each financial year. The Directors are
required by the AIM Rules for Companies (as published by the London
Stock Exchange) to prepare Group financial statements in accordance
with UK adopted International Accounting Standards, and have
elected under company law to prepare the Company financial
statements in accordance with International Accounting
Standards.
The financial statements are required by law and UK adopted
International Accounting Standards to present fairly the financial
position of the Group and the Company and the financial performance
of the Group. The Companies Act 2006 provides, in relation to such
financial statements, that references in the relevant part of that
Act to financial statements giving a true and fair view are
references to their achieving a fair presentation.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Group for that period.
In preparing the Group and Company financial statements, the
directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with UK
adopted International Accounting Standards; and
d. prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Iofina
plc website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Results and dividends
The results for the year are set out in the consolidated
statement of comprehensive income and detailed in the Financial
Review.
The directors do not recommend payment of a dividend.
Financial instruments and risk management
Note 14 details the risk factors for the Group and how these
risks are managed, including the degree to which it is appropriate
to use financial instruments to mitigate risks.
Directors
The directors who served during the year and subsequently were
as follows:
Lance J. Baller, Non-Executive Chairman
Dr. William D. Bellamy, Non-Executive Director
J. Frank Mermoud, Non-Executive Director
Mary Fallin Christensen, Non-Executive Director
Dr. Thomas M. Becker, Chief Executive Officer and President
Malcolm T. Lewin, Chief Financial Officer
Statement as to disclosure of information to the auditor
The directors who were in office on the date of approval of
these financial statements have confirmed that, as far as they are
aware, there is no relevant audit information of which the auditor
is unaware. Each of the directors has confirmed that they have
taken all the steps that they ought to have taken as directors in
order to make themselves aware of any relevant audit information
and to establish that it has been communicated to the auditor.
Auditor
UHY Hacker Young were appointed as auditors to the Company and
in accordance with Section 485 of the Companies Act 2006 a
resolution proposing that they be reappointed will be put to the
next Annual General Meeting.
On behalf of the Board
Dr. Thomas M. Becker
Chief Executive Officer and President
24 April 2023
CORPORATE GOVERNANCE STATEMENT
The Board ensures that the Group is managed for the long-term
benefit of all shareholders with corporate governance being an
essential element of this and has adopted the Quoted Companies
Alliance ("QCA") Corporate Governance Code which is considered
appropriate for an AIM quoted company. The Board is responsible for
the overall leadership, strategy, development and control of the
Group in order to achieve its strategic objectives.
The Group is led and controlled by the Board which currently
consists of two Executive Directors and four Non-Executive
Directors. Board meetings are held on a regular basis and no
significant decision is made other than by the Directors. All
Directors participate in the key areas of decision making.
Business model, strategy and approach to risk
The Group focuses on the exploration and production of iodine
and halogen-based specialty chemical derivatives. We identify,
develop, build, own and operate iodine extraction plants, currently
focused in North America, based on Iofina's Wellhead Extraction
Technology(R) (WET(R)) IOsorb(R) technology. The Group has complete
vertical integration from the production of iodine in the field to
the manufacture of the chemical end-products derived from iodine to
the consumer, and the recycling of iodine using iodinated
side-streams from waste chemical processes. We use patented or
proprietary processes throughout all business lines. Together these
allow us to be the Technology Leaders in Iodine(R). The Group's
strategy is to continue to focus on the exploration and production
of iodine and iodine specialty chemical derivatives, delivering
growth throughout our operations. Growth is intended to be achieved
with the continued upgrading and expanding of our plants, which in
turn will boost the level of iodine production.
All the Group's activities involve an ongoing assessment of
risks, and the Group seeks to mitigate such risks where possible.
The Board has undertaken an assessment of the principal risks and
uncertainties facing the Group, including those that would threaten
its business model, future performance, solvency and liquidity.
Further, the Board has considered the longer-term viability of the
Group, including factors such as the prospects of the Group and its
ability to continue in operation for the foreseeable future. The
Board considers that the disclosures outlined in the Strategic
Report on pages 12 to 21 are appropriate. The Board considers that
these disclosures provide the information necessary for
shareholders and other stakeholders to assess the Group's future
viability and potential requirements for further capital to fund
its operations.
Having carried out a review of the level of risks that the Group
is taking in pursuit of its strategy, the Board is satisfied that
the level of retained risk is appropriate and commensurate with the
financial rewards that should result from achievement of its
strategy.
Board of Directors
As of the date of this Report the Board comprises six Directors
in total: the Non-Executive Chairman, two Executive Directors
(being the Chief Executive Officer ("CEO") and the Chief Financial
Officer ("CFO")) and three Non-Executive Directors (each of whom
are considered by the Board to be independent), reflecting a blend
of different experiences and backgrounds. The skills and experience
of the Board are set out in their biographical details on pages 10
and 11. The experience and knowledge of each of the Directors give
them the ability to challenge strategy constructively and to
scrutinize performance.
The Board is responsible to the shareholders for the proper
management of the Group. The Board and the Group's management team
are responsible for reviewing and evaluating risk and the Executive
Directors meet at least monthly to review ongoing trading
performance, discuss budgets and forecasts and new risks associated
with ongoing trading. The Board typically meets monthly to set the
overall direction and strategy of the Group, review operational and
financial performance and advise on management appointments (if
necessary). All key operational and investment decisions are
subject to Board approval. The Company Secretary is responsible for
ensuring that Board procedures are followed and applicable rules
and regulations are complied with. The number of meetings attended
by each Director can be found on page 30.
There is a clear separation of the roles of CEO and
Non-Executive Chairman. The Chairman is responsible for overseeing
the running of the Board, ensuring that no individual or group
dominates the Board's decision making and ensuring the
Non-Executive Directors are properly briefed on matters. The CEO
has the responsibility for implementing the strategy of the Board
and managing the day-to-day business activities of the Group.
Time commitment
On joining the Board, Non-Executive Directors receive a formal
appointment letter, which identifies the terms and conditions of
their appointment and, in particular, the time commitment expected
of them. A potential Director candidate (whether an Executive
Director or Non-Executive Director) is required to disclose all
significant outside commitments prior to their appointment. The
Board is satisfied that both the Chairman and the other
Non-Executive Directors can devote sufficient time to the Group's
business.
Independence of Directors
The Directors acknowledge the importance of the principles of
the QCA Code which recommends that a company should have at least
two independent Non-Executive Directors. The Board considers it has
sufficient independence on the Board and that all the Non-Executive
Directors are of sufficient competence and calibre to add strength
and objectivity to the Board, and bring considerable experience in
industry, operational and financial development of chemical
products and companies. Specifically, the Board has considered and
determined that since the date of their respective appointments
William Bellamy, J. Frank Mermoud and Mary Fallin Christensen are
independent in character and judgement, specifically that they:
-- have not been employees of the Company within the last five years;
-- do not have a material business relationship with the Group;
-- have no close family ties with any of the Group's advisers, Directors or senior employees;
-- do not hold cross-directorships or have significant links
with other Directors through involvement in other companies or
bodies; and
-- do not represent any shareholder.
The Board notes that the Independent Non-Executive Directors
have received share options in the Company. The Board does not
believe the issue of options affects their independence as they are
of a modest amount and not deemed material to the individual.
The Company Secretary maintains a register of outside interests
and any potential conflicts of interest are reported to the
Board.
If they so wish, the Non-Executive Directors have opportunities
to meet without Executive Directors being present (including after
Board and Committee meetings). Because the Board is spread out
geographically, the majority of communications between Directors is
conducted by video. However, the Board does convene in person at
least once a year, and this presents an opportunity (before, after
and between management and operational meetings) for the
Non-Executive Directors to meet in person without the Executive
Directors being present.
Professional development
Throughout their period in office, the Directors are continually
updated on the Group's business, the competitive and regulatory
environments in which it operates, corporate social responsibility
matters and other changes affecting the Group and the industry it
operates in as whole. The updates are usually provided by way of
written briefings and meetings with senior management. Directors
are also advised on appointment of their legal and other duties and
obligations as a director of an AIM quoted company both in writing
and in communications (being face-to-face meetings whenever
possible) with the Company's Nominated Adviser. The Directors also
have recourse to the Company Secretary, a qualified and practising
solicitor, who is a recognised practitioner within the AIM
community.
All the Directors are subject to election by shareholders at the
first Annual General Meeting of the Company ("AGM") after their
appointment to the Board. Each Director is required, under the
Company's articles of association, to seek re-election at least
once every three years.
Board Committees
There are two committees - the Audit Committee and the
Remuneration Committee. Their full terms of reference are published
on the Company's website at https://iofina.com/committees/.
Audit Committee
During the financial period under review, the members of the
Audit Committee were Lance Baller, Dr William Bellamy, J. Frank
Mermoud and Mary Fallin Christensen. Mr Baller is the Chairman of
the Audit Committee. The responsibilities of the committee include
the following:
-- ensuring that the financial performance of the Group is
properly monitored, controlled and reported on;
-- reviewing accounting policies, accounting treatment and disclosures in the financial reports;
-- meeting the auditors and reviewing reports from the auditors
relating to accounts and internal control systems; and
-- overseeing the Group's relationship with external auditors,
including making recommendations to the Board as to the appointment
or re-appointment of the external auditors, reviewing their terms
of engagement, and monitoring the external auditors' independence,
objectivity and effectiveness.
During the year, the committee met to review audit planning and
findings. In addition, it reviewed the appointment of auditors, and
agreed unanimously to re-elect UHY Hacker Young LLP.
Remuneration Committee
During the financial period under review, the members of the
Remuneration Committee were Dr William Bellamy, Lance Baller and J.
Frank Mermoud. Dr Bellamy is the Chairman of the Remuneration
Committee. The responsibilities of the committee include the
following:
-- reviewing the performance of the Executive Directors and
setting the scale and structure of their remuneration with due
regard to the interest of shareholders;
-- overseeing the evaluation of the Executive Directors; and
-- determining the vesting of awards, including the setting of
any performance criteria in relation to the exercise of share
options, granted under the Company's share option plan.
During the year, the committee met to discuss remuneration and
bonuses for the Executive Directors, and share option awards for
the Directors and senior management.
The Directors' remuneration information is presented on page
32.
Attendance at meetings
The Board meets regularly, typically on a monthly basis,
together with further meetings as required. The Audit and
Remuneration Committees meet as required, and try to hold a minimum
of two meetings each year.
The Directors attended the following meetings during the
year:
Board Audit Remuneration
Lance Baller 11 2 2
Dr Thomas Becker 11 - -
Malcolm Lewin 11 - -
Dr William Bellamy 9 2 2
J. Frank Mermoud 11 2 2
Mary Fallin Christensen 10 2 -
Risk management and internal control
The Board is responsible for the systems of internal controls
and for reviewing their effectiveness. The internal controls are
designed to manage rather than eliminate risk and provide
reasonable but not absolute assurance against material misstatement
or loss. The Board reviews the effectiveness of these systems
annually by considering the risks potentially affecting the
Group.
Iofina employs strong financial and management controls within
the business. Examples of control procedures include:
-- an annual budget set by the Board with regular review of progress;
-- regular meetings of Executive Directors and senior management
to review management information and follow up on operational
issues or investigate any exceptional circumstances;
-- clear levels of authority, delegation and management structure; and
-- Board review and approval of significant contracts and overall project spend.
The Company's system of internal control is designed to
safeguard the Company's assets and to ensure the reliability of
information used within the business. The system of controls
manages appropriately, rather than eliminates, the risk of failure
to achieve business objectives and provides reasonable, but not
absolute, assurance against material misstatement or loss. The
Group does not consider it necessary to have an internal audit
function due to the small size of the administrative function.
Instead, there is a detailed monthly review and authorisation of
transactions by the CFO and the CEO.
The independent auditors do not perform a comprehensive review
of internal control procedures, but do report to the Audit
Committee on the outcomes of its annual audit process. The Board
confirms that the effectiveness of the system of internal control,
covering all material controls including financial, operational and
compliance controls and risk management systems, has been reviewed
during the year under review and up to the date of approval of the
Annual Report.
The Group maintains appropriate insurance cover in respect of
actions taken against the Directors because of their roles, as well
as against material loss or claims against the Group. The insured
values and type of cover are comprehensively reviewed on a periodic
basis.
Board effectiveness and performance evaluation
The Board is mindful that it needs to continually monitor and
identify ways in which it might improve its performance and
recognises that board evaluation is useful for enhancing a board's
effectiveness.
The individual contributions of each of the members of the Board
are regularly assessed to ensure that: (i) their contribution is
relevant and effective; (ii) that they are committed; and (iii)
where relevant, they have maintained their independence. The Board
intends to review the performance of the team as a unit to ensure
that the members of the Board collectively function in an efficient
and productive manner. As required pursuant to the Company's
articles of association, one-third of the Directors must stand for
re-election by shareholders annually in rotation and all Directors
must stand for re-election at least once every three years.
The Company considers that the Board and its individual members
continue to perform effectively, that the Chairman performs his
role appropriately and that the process for evaluation of his
performance has been conducted in a professional and rigorous
manner.
Corporate Social Responsibility
The Board recognises the growing awareness of social,
environmental and ethical matters and it endeavours to take into
account the interest of the Group's stakeholders, including its
investors, employees, suppliers and business partners, when
operating the business.
Employment
The Group endeavours to appoint employees with appropriate
skills, knowledge and experience for the roles they undertake and
thereafter to develop and incentivise staff. The Board recognises
its legal responsibility to ensure the wellbeing, safety and
welfare of its employees and maintain a safe and healthy working
environment for them and for its visitors.
Investor Relations
The Board recognises the importance of communication with the
Company's shareholders to ensure that its strategy and performance
is understood and that it remains accountable to shareholders. Our
website has a section dedicated to investor matters and provides
useful information for the Company's shareholders (see:
http://iofina.com/investors/ ). The Board as a whole is responsible
for ensuring that a satisfactory dialogue with shareholders takes
place, while the Chairman and the CEO ensure that the views of the
shareholders are communicated to the Board as a whole. The Board
ensures that the Group's strategic plans have been carefully
reviewed in terms of their ability to deliver long-term shareholder
value. Fully audited Annual Reports are published, and Interim
Results notified via Regulatory News Service announcements. All
financial reports and statements are available on the Company's
website (see: http://iofina.com/investors/financial-results ).
There is an opportunity at the Annual General Meeting for
individual shareholders to question the Chairman and the Executive
Directors. Notice of the meeting is sent to shareholders at least
21 clear days before the meeting. Shareholders are given the
opportunity to vote on each separate issue. The Company counts all
proxy votes and indicates the level of proxies lodged on each
resolution, after it has been dealt with by a show of hands.
Directors' remuneration
Remuneration provided to each Director was as follows:
2022 2021
------------------------------ ------------------------------
Total Total
Salary Bonus $ Salary Bonus $
------------------------- --------- --------- --------
Lance Baller 109,620 - 109,620 109,620 - 109,620
Dr. Thomas Becker 274,400 30,000 304,400 260,000 35,000 295,000
Malcolm Lewin 175,275 25,000 200,275 191,208 27,315 218,523
William Bellamy 30,000 - 30,000 30,000 - 30,000
Frank Mermoud 30,000 - 30,000 30,000 - 30,000
Mary Fallin Christensen 30,000 - 30,000 30,000 - 30,000
Total $649,295 $55,000 $704,295 $650,828 $62,315 $713,143
--------- ---------
No pension contributions were paid on behalf of the directors in
2021 or 2022.
Directors' and officers' insurance is in place on a Group-wide
basis.
The interests of the Directors in office as at 31 December 2022
in the shares of the Company at the end of the financial year and
the beginning of the financial year or date of appointment, if
later, were as follows:
31 December 2022 1 January 2022
L J Baller 5,500,000 5,175,000
Dr. T M Becker 139,430 124,430
W D Bellamy 46,875 46,875
M T Lewin 93,750 93,750
J F Mermoud 23,750 23,750
All outstanding options over shares granted to Directors up to
31 December 2022 are set out in the table below. No further options
have been granted between 31 December 2022 and the date of signing
these financial statements. No options were granted in 2021 and no
Directors exercised options in 2022.
2018 2019 2020 2022
Options Options Options Options
Name granted granted granted granted
Dr T Becker 660,000 242,000 266,200 266,200
M Lewin 330,000 165,000 181,500 181,500
L Baller 220,000 165,000 165,000 165,000
Dr W Bellamy 110,000 82,500 82,500 82,500
JF Mermoud - 82,500 82,500 82,500
M Fallin
Christensen - - 82,500 82,500
1,320,000 737,000 860,200 860,200
Exercise
price 16.2p 21.3p 12.5p 17.6p
---------- -------- --------
Lapse date 13/06/28 24/07/29 15/12/30 8/3/32
---------- --------- -------- --------
On behalf of the Board
Dr. Thomas M. Becker
Chief Executive Officer and President
24 April 2023
Environmental, Social, and Governance ('ESG')
The Group has continually maintained a philosophy and commitment
to perform its operations in a safe, responsible manner with regard
to all stakeholders including, but not limited to, staff,
shareholders, customers and our communities.
The Group has long applied ESG tenets even before the term ESG
became commonplace. Iofina has chosen to produce our iodine from a
brine water source that is a by-product of the oil and gas
industry. By partnering with oil & gas operators, Iofina
produces iodine from this brine water, and this iodine would not be
realised if Iofina was not operating its iodine manufacturing
plants. Most of the world's iodine is manufactured from iodate
deposits in ores in Chile through processes we believe are much
more negatively intensive to the environment than our WET(R)
IOsorb(R) technology. The Group also manufactures specialty
chemicals through the Iofina Chemical division. IC has held a
long-established business philosophy to develop its processes in
aqueous-based chemistries whenever possible to reduce the use of
organic solvents. The vast majority of IC's processes are performed
in aqueous media.
The iodine compounds the Group produces have a positive impact
on society, with iodine being essential for human and animal
health. Whether it is directly through the ingestion of foods
containing iodides or fortified salt as a micro-nutrient to ensure
proper thyroid function and to stimulate proper human and animal
development; or by using iodine-containing compounds in medical
uses, such as iodinated X-ray contrast agents, production of
pharmaceuticals or the use PVP-I in antiseptic applications, iodine
plays many important roles in a healthy society.
Environmental
The Group is committed to minimizing its energy consumption and
waste generation. Energy use and environmental impacts are key
criteria when ordering and replacing equipment at our manufacturing
sites. As an example, Iofina Resources is undergoing a long-term
initiative to replace some large older blowers with more efficient
units. Iofina Chemical is upgrading a process that will replace
multiple reactors with a larger unit that will require less energy
to produce an equivalent amount of product. Upgrades and new
processes undergo a review which comprises evaluations to minimize
energy use and environmental impact.
The Group's total energy consumption at our manufacturing
facilities in 2022 was:
Electricity (kWh) 11,390,576; Natural gas (CCF) 70945; for the
1496MT of goods produced in 2022 by the Group.
The Company is continuing to develop metrics to measure the
Group's environmental impact.
Social
Health and Safety
The safety and health of Iofina's employees is the top priority
for the Group. This also extends to our contractors, visitors, and
community. Processing and creating specialty chemicals have
inherent risks. Through engineering designs, extensive training and
procedures, and PPE to name a few, our culture insists that as a
group we work together to ensure everyone's safety. We are proud of
our safety record but recognize that continual improvement is
always necessary as we evolve. Iofina is proud to report that in
2022 there were zero lost time incidents for the Group.
Iofina Lost Time Incidents
2021 2022
Lost Time Incidents 1 0
----- -----
Incident Rate 1.04 0
----- -----
Lost Time Incidents ('LTIs') are incidents where the person is
unable to work the next day of the incident. Incident rate is the
number of LTIs per 200,000 hrs. worked.
Many other health and safety metrics are evaluated and
corrective actions performed to continually improve our systems in
order to reduce incident occurrences and severity. These health and
safety matrices are routinely reviewed and discussed with upper
management.
Additionally, Iofina Chemical is honored to have received SOCMA
Chemstewards performance bronze awards in 2021 and 2022 for
Resource Management and Waste Minimization and Employee Training
respectively.
Community
Iofina is committed to being a social responsible organization.
Our program, Iofina Gives Back, is an employee-driven program
designed to support our local communities. Some of the program's
initiatives include the donation of items and funds for disaster
relief, local schools, toy/food drives, and sponsorships that
benefit first responder equipment and STEM scholarships.
Additionally, for many years, Iofina Resources has partnered
with Northwestern Oklahoma State University and the OCAST Intern
Partnership Program, which is designed to advance science and
technology opportunities and provide experience and educational
opportunities for undergraduate students. Multiple students
involved in these internships with Iofina, have gone on to achieve
advanced level science degrees.
Diversity
Iofina is an Equal Opportunity Employer and all employment
decisions at Iofina are based on individual qualifications,
particular job responsibilities, and business needs without regard
to race, color, religion, national origin, age, gender, disability
or any other status protected by laws where we operate. A culture
of respect at Iofina is our commitment to all our employees and we
demand that our team treats our fellow workers, and business
partners in a professional and non-discriminatory manner.
Historically, the job applicants that Iofina receives tend to
underrepresent minorities and females when compared to the general
population. Iofina is investigating ways to find a more diverse
pool of job applicants.
Governance
The following are summaries of some of Iofina's Governance data
and practices. Corporate policies are reviewed by the Board.
CEO/Chairman
Total separate
Board Members %Male %Female %Non-executive % Executive roles
Board
of Directors 6 83% 17% 67% 33% Yes
--------------- ------ -------- --------------- ------------ -------------
-- The Group has adopted the QCA Corporate Governance Code
-- The Group has adopted several policies including but not limited to:
o Whistleblowing Policy
o Anti-Fraud Policy
o Anti-Corruption and Bribery Policy
o Share Dealing Code
o AIM Rules Compliance Policy
Further detail regarding Corporate Governance practices can be
found on pages 22 and 24 of this report.
Independent auditor's report to the members of Iofina PLC
Opinion
We have audited the financial statements of Iofina PLC (the
'Parent Company') and its subsidiaries (the 'Group') for the year
ended 31 December 2022 which comprise the Consolidated Statement of
Comprehensive Income, the Consolidated Balance Sheet, the
Consolidated Statement of Changes in Shareholders' Equity, the
Consolidated Cash Flow Statement, the Company Balance Sheet, the
Company Statement of Changes in Shareholders' Equity and notes to
the financial statements, including the significant accounting
policies. The financial reporting framework that has been applied
in their preparation is applicable law and UK adopted International
Accounting Standards.
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 31
December 2022 and of the Group's profit and cash flows for the year
then ended;
-- the Group and Parent Company financial statements have been
properly prepared in accordance with UK adopted International
Accounting Standards; and
-- the Group financial statements have been prepared in
accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Group
and Parent Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to listed entities,
and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
director's use of the going concern basis of accounting in the
preparation of the financial statement is appropriate.
Our evaluation of the director's assessment of the entity's
ability to continue to adopt the going concern basis of accounting
included:
Evaluation of management assessment Key observations
Management have prepared detailed The cash flow forecasts demonstrates
consolidated cash flow forecasts that the Group will have a cash
incorporating all entities within flow surplus throughout the
the Group covering the period forecast period. These incorporated
to 31 December 2024. These are all budgeted and committed expenditure,
based on their expectation of the schedule of repayment for
future costs, including budgeted the term loan and movements
operating and capital expenditure in working capital.
on all of the group's operating In reviewing the cash flow forecasts,
plants licence areas and expectations we separately sensitised the
of future iodine production commodity price to determine
levels and commodity price. the maximum the price of iodine
Our review included: could fall by, assuming a constant
* Assessing the transparency, completeness and accuracy volume, in order for the cash
of the matters covered in the going concern to be depleted to Nil by the
disclosure by evaluating management's cash flow end of the forecast period.
projections for the forecast period and the Overall, the price of Iodine
underlying assumptions; would need to decrease by 66%
in 2023 and 83% in 2024 in order
for EBITDA to be Nil for both
* Review of the cash flow forecasts, the methodology years of the forecasts. Given
behind these and ensuring they are arithmetically the price of Iodine has been
correct and challenging the assumptions by discussing increasing since 2018, this
them with management and corroborating them with our is not considered likely.
historical knowledge of the Group; The likelihood of this fall
in Iodine prices lasting for
the entire forecast period is
* Obtaining post year end management information and considered by the Directors
comparing these to forecasts to assess whether to be remote and in such circumstances
budgeting is reasonable and the results are in line consider sufficient mitigating
with expectations; and actions to be available to continue
as a going concern.
We have further sensitised the
* We completed a sensitivity analysis on the budgets demand for crystallised iodine,
provided to assess the change in revenue and iodine reducing it to Nil. The results
prices that would need to occur to push the Group of this still showed a positive
into a cash negative position. EBITDA for the group as a result
of the flex in variable costs.
-----------------------------------------
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
entity's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our approach to the audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made
subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account an understanding of the
structure of the Company and the Group, their activities, the
accounting processes and controls, and the industry in which they
operate. Our planned audit testing was directed accordingly and was
focused on areas where we assessed there to be the highest risk of
material misstatement.
Our Group audit scope includes all of the group companies. At
the Parent Company level, we also tested the consolidation
procedures. The audit team communicated regularly throughout the
audit with the CFO in order to ensure we had a good knowledge of
the business of the Group. During the audit we reassessed and
re-evaluated audit risks and tailored our approach accordingly.
The audit testing included substantive testing on significant
transactions, balances and disclosures, the extent of which was
based on various factors such as our overall assessment of the
control environment, the effectiveness of controls and the
management of specific risk.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant findings, including any significant deficiencies in
internal control that we identify during the audit.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Key audit matters How our audit addressed the
key audit matters
------------------------------------------ -------------------------------------------------------------------
Revenue Recognition Our audit work included, but
was not restricted to:
Under IFRS 15, the entity shall * Documenting our understanding of management's process
recognise revenue to depict for evaluating revenue recognition and assessing the
the transfer of goods or services design effectiveness of related key controls.
to customers in an amount that
reflects the consideration to
which the entity expects to * We tested the accuracy and occurrence of revenue by
be entitled in exchange for selecting a sample of items from the Group's
those goods or services. accounting system and tracing them to supporting
documentation.
The revenue stream for the group
is derived from sale of iodine
derivatives, iodine chemicals * We audited the occurrence of revenue by consideration
and ancillary products, all of our testing in trade receivables in conjunction
of which are fundamental to with using data analytics software. This was used to
the financial statements and assist in identifying the correlation between trade
a systematic error in the calculation receivables and revenue journals being made and
could lead to a material error. subsequently the receipt of cash for those trade
receivables and therefore whether any subsequent
We therefore identified the reversal of trade receivables should have impacted
risk over the cut off of revenue the recognition of the revenue.
as a significant risk and also
considered accuracy and occurrence
assertions. * We considered the appropriateness of revenue cut-off
by testing pre and post year-end revenue items on a
sample basis to assess whether the revenue items were
accounted for in the correct period.
* Whilst performing our audit testing we assessed
whether the treatment of revenue was in accordance
with the correct recognition criteria as per the
Group accounting policy.
* Assessing whether the Company's accounting policy for
revenue recognition are in accordance with the
requirements of IFRS 15.
The Group's accounting policy
on revenue recognition is shown
in Principal Accounting Policies
for the consolidated financial
statements and related disclosures
are included in note 1d.
Key observations
As a result of the audit procedures
we performed and, after considering
management's disclosures of
the judgements applied by them,
we have concluded that revenue
recognition is materially complete,
accurate, has occurred and recognised
on an appropriate basis.
Valuation and Impairment review Our audit work included, but
of property plant and equipment was not restricted to:
* We reviewed Management's assessment of forecasted
Under International Accounting cash flows and challenged significant movements in
Standard 36 'Impairment of Assets' forecasted cash flows compared to historic
(IAS 36), companies are required performance.
to assess whether there is any
indication that an asset may
be impaired at each reporting * We reviewed Management's forecasted cash flows that
date. feed into the discounted cash flow model and
Property, plant and equipment challenged significant assumptions with reference to
are a significant balance in historic results, market trends, appropriateness of
the financial statements with discount rates and future expectations of commodity
a combined net book value of prices and sales growth.
$20.6m (2021 - $19.1m). The
balance is primarily comprised
of the IOSorb plants, equipment * We challenged management and gained an understanding
and machinery and construction of what is considered a cash generating unit.
in progress.
The estimated recoverable amount * We performed a downside sensitivity analysis and held
of these balances is subjective discussions with Management to assess the likelihood
due to the inherent uncertainty of certain circumstances crystallising.
involved in forecasting and
probability of the related future
cash flows.
The Group's accounting policy
At each reporting date, the on Impairment is shown in Principal
Group considers any indication Accounting Policies for the
of impairment to the carrying consolidated financial statements
value of its assets. The assessment and related disclosures are
is based on expected future included in note 1m.
cash flows of the IOSorb plants.
Key observations
The directors are required to As a result of the audit procedures
conduct impairment tests where we performed and, after considering
there is an indication of impairment management's disclosures of
of the asset. The assessment the judgements applied by them,
was based on the future cash we have concluded that no impairments
flows of each site using a discounted are required.
cash flow model (being the 'value
in use'). The value in use was We have confirmed the estimates
then compared to the carrying and judgements utilised within
value of fixed assets for that the models applied in relation
site. to the impairment of property,
Significant management judgement plant and equipment are within
and estimation uncertainty is acceptable ranges.
involved in this area, where
the primary inputs are:
-- Estimating cash flow forecasts;
and
-- Selecting appropriate assumptions
such as growth rate and discount
rate.
We therefore identified the
risk over the valuation of property
plant and equipment as a significant
risk.
Valuation of Inventory Our audit work included, but
Inventory primarily consists was not restricted to:
of iodine and iodine derivatives. * We engaged component auditors to attend a stocktake
Inventory should be held at at two of the Group's plant locations at the year end,
the lower of cost and net realisable where they observed an inventory count and performed
value. sample testing on inventory held.
The net realisable value is
the estimated selling price
in the ordinary course of business * We discussed, understood and tested the Group's
less any applicable selling process for calculating the cost of the finished
expenses. As at 31 December goods based on the absorption cost including
2022, the inventory is valued challenging the robustness of the key assumptions
at $10.2m (2021 - $6.3m). There with management to ensure they are appropriate.
is a risk that the carrying
value in the Group accounts
is higher than the recoverable * A sample of inventory items were tested to ensure the
amount and therefore materially product was held at the lower of Cost and Net
misstated. Further, there is Realisable Value.
the added risk of the complexity
of the measurement of the costs
of conversion of the inventory
and the estimates and judgements The Group's accounting policy
around this. on Inventories is shown in Principal
Accounting Policies for the
We therefore identified the consolidated financial statements
valuation of inventory as a and related disclosures are
key audit matter, which was included in note 1o.
one of the most significant
assessed risks of material misstatement. Key observations
As a result of the audit procedures
we performed and, after considering
Management's disclosures of
the judgements applied by them,
we have concluded that the valuation
of inventory is materially accurate
and recognised on an appropriate
basis.
We have confirmed the estimates
and judgements utilised within
the models applied in relation
to the valuation of inventory
are within acceptable ranges.
-------------------------------------------------------------------
Valuation and Impairment review Our audit work included, but
of investments in subsidiaries was not restricted to:
and intercompany balances * We utilised discounted cash flow forecasts to form an
expectation of the recoverable amount, and in
Due to the material size of addition considered the current performance of the
the investments in, and loans subsidiary entities.
to, the subsidiaries the directors
should critically consider if
any indicators of impairment * We performed a sensitivity analysis on the key inputs
exist in relation to the balances. such as a decline in iodine prices and sales growth
The estimated recoverable amount and concluded that even with the adverse movements
of these balances is subjective mentioned above in the Group's key assumptions, no
due to the inherent uncertainty potential impairment was identified.
involved in forecasting the
profitability of the subsidiaries.
Where indicators of impairment * We obtained and reviewed the Directors' assessment of
have been identified a robust impairment with regards to investment and loans due
review of the investments held from its subsidiaries in support of the valuation and
by the Parent Company and any assessed whether this was in line with IAS 36
amounts due from subsidiaries 'Impairment of Assets'.
to the Parent Company should
be undertaken by the directors
to confirm the value in use * We reviewed the 2022 forecasts against actual results
of these amounts and that there to determine the Directors' historic forecasting
are no indications, or requirements accuracy.
for, impairments of the amounts.
Significant management judgement
and estimation uncertainty is The Group's accounting policy
involved in this area, where on impairment is shown in Principal
the primary inputs are: Accounting Policies for the
-- Estimating cash flow forecasts; consolidated financial statements
-- Selecting an appropriate and related disclosures are
assumptions such as growth rate included in note 1m.
and discount rate.
Key observations
We therefore identified the As a result of the audit procedures
valuation of investments in we performed and, after considering
subsidiaries and intercompany management's disclosures of
balances as a key audit matter, the judgements applied by them,
which was one of the most significant we have concluded that no impairments
assessed risks of material misstatement. are required, in addition to
the impairment of IofinaEX,
Inc in a prior year.
We have confirmed the estimates
and judgements utilised within
the models applied in relation
to the valuation and impairment
of investments in subsidiaries
and intercompany balances are
within acceptable ranges.
------------------------------------------ -------------------------------------------------------------------
Our application of materiality
The scope and focus of our audit was influenced by our
assessment and application of materiality. We apply the concept of
materiality both in planning and performing our audit, and in
evaluating the effect of misstatements on our audit and on the
financial statements.
We define financial statement materiality as the magnitude by
which misstatements, including omissions, could reasonably be
expected to influence the economic decisions taken on the basis of
the financial statements by reasonable users.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Materiality Group Parent
Measure
Overall materiality We determined materiality We determined materiality
for the financial statements for the financial statements
as a whole to be $501,500 as a whole to be $374,000
(2021: $389,000). (2021: $311,200).
------------------------------- ------------------------------
How we determine For 2022 it is based As the Parent is a holding
it on one of the key indicators, company, materiality
being 5% of profit before was based on 1% of gross
tax for the Group (2021: assets.
1% of revenue).
------------------------------- ------------------------------
Rationale for We believe 5% of profit before tax to be the
benchmarks applied most appropriate benchmark given that the group's
performance in the past few years has been
steadily increasing.
---------------------------------------------------------------
Performance materiality On the basis of our risk assessment, together
with our assessment of the Group and Company's
control environment, our judgement is that
performance materiality for the financial statements
should be 75% of materiality for the Group
and Company:
---------------------------------------------------------------
$376,000 (2021: $291,750) $280,000 (2021: $233,400)
------------------------------- ------------------------------
Specific materiality We also determine a lower level of specific
materiality for certain areas such as directors'
remuneration and related party transactions
of $1,000.
---------------------------------------------------------------
Reporting threshold We agreed with the Audit Committee that we
would report to them all misstatements over
5% of Group and Company materiality identified
during the audit, as well as differences below
that threshold that, in our view, warrant reporting
on qualitative grounds. We also report to the
Audit Committee on disclosure matters that
we identified when assessing the overall presentation
of the financial statements.
---------------------------------------------------------------
$25,000 (2021: $19,450) $19,000 (2021: $15,560)
------------------------------- ------------------------------
Other information
The other information comprises the information included in the
annual report other than the financial statements and our auditor's
report thereon. The directors are responsible for the other
information contained within the annual report. Our opinion on the
financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial
statements themselves.
If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and
Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
strategic report or the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the Parent Company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities set out on page 25, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
group or Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
Based on our understanding of the Group and the industry in
which it operates, we identified that the principal risks of
non-compliance with laws and regulations related to the use of
regulated chemicals, tax legislation, employment and health and
safety regulations, anti-bribery, corruption and fraud and we
considered the extent to which non-compliance might have a material
effect on the financial statements. We also considered those laws
and regulations that have a direct impact on the preparation of the
financial statements such as the Companies Act 2006. We evaluated
management's incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of
override of controls), and determined that the principal risks were
related to inflated revenue and profit.
Audit procedures performed included: review of the financial
statement disclosures to underlying supporting documentation,
review of reports from the regulators, including correspondence
with SOCMA (Society of Chemical Manufacturers and Affiliates), DEA
(Drug Enforcement Administration) and OSHA (Occupational Safety
& Health Administration), review of correspondence with legal
advisors, enquiries of management and review of internal audit
committee reports in so far as they related to the financial
statements, and testing of journals and evaluating whether there
was evidence of bias by the Directors that represented a risk of
material misstatement due to fraud.
There are inherent limitations in the audit procedures described
above and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely we would become aware of it.
Also, the risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through
collusion.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at www.frc.org.uk/auditorsresponsibilities . This
description forms part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with part 3 of Chapter 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Colin Wright
(Senior Statutory Auditor)
For and on behalf of UHY Hacker Young
Chartered Accountants and Statutory Auditor
UHY Hacker Young
4 Thomas More Square
London E1W 1YW
24 April 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2022 2021
Note $'000 $,000
Revenue 3 42,198 39,039
Cost of sales 4 (26,369) (28,307)
---------------- ------------
Gross profit 15,829 10,732
Administrative expenses 4 (4,361) (3,789)
Depreciation and amortisation 4 (1,824) (1,731)
Operating profit 9,644 5,212
Other income/(expense):
---------------------------------------------------------- ----- ---------------- ------------
Release of plant acquisition accrual 12 450 -
Paycheck Protection Program loans forgiven - 1,090
Fair value loss on investments in equity instruments
designated as fair value through profit and loss - (900)
---------------------------------------------------------- ----- ---------------- ------------
Net other income 450 190
Profit before finance expense 10,094 5,402
Finance income 7 13 17
Interest payable 6 (326) (368)
Interest swap derivative asset 20 249 69
Profit before taxation 4 10,030 5,120
Taxation 8 (2,165) 4,066
---------------- ------------
Profit for the year attributable to owners of the parent $7,865 $9,186
---------------- ------------
Earnings per share attributable to owners of the parent:
* Basic 9 $0.041 $0.048
* Diluted 9 $0.040 $0.048
---------------- ------------
2022 2021
Adjusted EBITDA: $'000 $,000
Profit before finance expense 10,094 5,402
Depreciation and amortisation 1,824 1,731
-------- -------
EBITDA 11,918 7,133
Net other income (450) (190)
-------- -------
Adjusted EBITDA $11,468 $6,943
-------------------------------- -------- -------
All activities are classed as continuing.
The accompanying notes form part of these financial
statements.
CONSOLIDATED BALANCE SHEET
31 December 31 December
2022 2021
Note $'000 $'000
Assets
Non-current assets
Intangible assets 10 283 463
Goodwill 11 3,087 3,087
Property, plant and equipment 12 20,557 19,113
Deferred tax asset 25 1,932 4,066
Term loan - interest swap asset 20 249 -
------------
Total non-current assets 26,108 26,729
------------ ------------
Current assets
Inventories 13 10,184 6,296
Trade and other receivables 15 10,487 6,158
Cash and cash equivalents 17 5,927 5,262
------------ ------------
Total current assets 26,598 17,716
------------ ------------
Total assets $52,706 $44,445
------------ ------------
Equity and liabilities
Current liabilities
Trade and other payables 18 7,538 5,802
Term loan - due within one year 20 1,429 1,429
Lease liabilities 19 101 58
Total current liabilities 9,068 7,289
------------ ------------
Non-current liabilities
Term loan - due after one year 20 5,357 6,785
Lease liabilities 19 309 410
Total non-current liabilities 5,666 7,195
------------ ------------
Total liabilities $14,734 $14,484
------------ ------------
Equity attributable to owners of the parent
Issued share capital 23 3,107 3,107
Share premium 60,687 60,687
Share-based payment reserve 24 2,153 2,007
Retained losses (22,031) (29,896)
Foreign currency reserve (5,944) (5,944)
------------ ------------
Total equity $37,972 $29,961
------------ ------------
Total equity and liabilities $52,706 $44,445
------------ ------------
The financial statements on pages 48 to 82 were approved and
authorised for issue by the Board and were signed on its behalf on
24 April 2023.
Dr. Thomas M. Becker - Chief Executive Officer and President
The accompanying notes form part of these financial statements.
Company number 05393357
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to owners of the parent
Share Share Share-based Retained Foreign Total
capital premium payment losses currency equity
reserve reserve
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January
2021 $3,107 $60,687 $2,136 $(39,331) $(5,944) $20,655
Transactions with
owners
Share-based expense - - 120 - - 120
Share options lapsed
and forfeited (249) 249
Total transactions
with owners - - (129) 249 - 120
Profit for the
year attributable
to owners of the
parent - - - 9,186 - 9,186
-------- -------- ------------ ---------- --------- --------
Total comprehensive
income attributable
to owners of the
parent - - - 9,186 - 9,186
-------- -------- ------------ ---------- --------- --------
Balance at 31 December
2021 $3,107 $60,687 $2,007 $(29,896) $(5,944) $29,961
-------- -------- ------------ ---------- --------- --------
Transactions with
owners
Share-based expense - - 146 - - 146
Total transactions
with owners - - 146 - - 146
Profit for the
year attributable
to owners of the
parent - - - 7,865 - 7,865
-------- -------- ------------ ---------- --------- --------
Total comprehensive
income attributable
to owners of the
parent - - - 7,865 - 7,865
-------- -------- ------------ ---------- --------- --------
Balance at 31 December
2022 $3,107 $60,687 $2,153 $(22,031) $(5,944) $37,972
-------- -------- ------------ ---------- --------- --------
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Cash flows from operating activities
Profit before taxation 10,030 5,120
Adjustments for:
Depreciation 1,643 1,551
Amortisation 180 180
Share-based payments 146 120
Paycheck Protection Program loans forgiven - (1,090)
Impairment of investment - 900
Revaluation of derivative asset (249) -
Finance expense 327 299
Finance income (13) (17)
Tax paid (31) -
------------ ------------
Operating cash inflow before changes
in working capital 12,033 7,063
Changes in working capital
Increase in trade and other receivables (4,329) (2,873)
(Increase)/decrease in inventories (3,888) 3,360
Increase in trade and other payables 1,737 342
------------ ------------
Net cash inflow from operating activities 5,551 7,892
------------ ------------
Cash flows from investing activities
Interest received 13 17
Acquisition of property, plant and equipment (3,087) (1,485)
Net cash outflow from investing activities (3,074) (1,468)
------------ ------------
Cash flows from financing activities
Term loan repayments (1,429) (1,429)
Revolving loan facility net payments - (2,718)
Interest paid (311) (386)
Lease payments (74) (110)
Net cash outflow from financing activities (1,814) (4,643)
------------ ------------
Net increase in cash and cash equivalents 665 1,781
Cash and cash equivalents at beginning
of year 5,262 3,481
------------ ------------
Cash and cash equivalents at end of year $5,927 $5,262
------------ ------------
COMPANY BALANCE SHEET
31 December 31 December
2022 2021
Note $'000 $'000
Assets
Non-current assets
Investment in subsidiary undertakings 28 17,199 17,199
Total non-current assets 17,199 17,199
------------ ------------
Current assets
Due from subsidiaries 28 20,112 20,792
Trade and other receivables 15 2 3
Cash and cash equivalents 17 94 163
------------ ------------
Total current assets 20,208 20,958
------------ ------------
Total assets $37,407 $38,157
------------ ------------
Equity and liabilities
Current liabilities
Trade and other payables 18 152 137
Total current liabilities 152 137
------------ ------------
Equity attributable to the
owners of the parent
Issued share capital 23 3,107 3,107
Share premium 60,687 60,687
Share-based payment reserve 24 2,153 2,007
Retained losses (22,933) (22,022)
Foreign currency reserve (5,759) (5,759)
------------ ------------
Total equity 37,255 38,020
------------ ------------
Total equity and liabilities $37,407 $38,157
------------ ------------
The loss for the financial year dealt with in the financial
statements of the parent company was $911k (2021 loss $873k).
The financial statements on pages 48 to 82 were approved and
authorised for issue by the Board and were signed on its behalf on
24 April 2023
Dr. Thomas M Becker
Chief Executive Officer and President
Company number: 05393357
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to equity holders of the parent
Share
Share Share based Retained Foreign Total
capital premium payment losses currency equity
reserve reserve
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1
January 2021 $3,107 $60,687 $2,136 $(21,398) $(5,759) $38,773
Transactions
with owners
Share-based expense - - 120 - - 120
Share options
lapsed and forfeited - - (249) 249 - -
Total transactions
with owners - - (129) 249 - 120
Loss attributable
to owners of the
parent - - - (873) - (873)
Total comprehensive
income for the
year - - - (873) - (873)
-------- -------- -------- ---------- --------- ---------
Balance at 31
December 2021 $3,107 $60,687 $2,007 $(22,022) $(5,759) $38,020
Transactions
with owners
Share-based expense - - 146 - - 146
Total transactions
with owners - - 146 - - 146
Loss attributable
to owners of the
parent - - - (911) - (911)
Total comprehensive
income for the
year - - - (911) - (911)
-------- -------- -------- ---------- --------- ---------
Balance at 31
December 2022 $3,107 $60,687 $2,153 $(22,933) $(5,759) $37,255
-------- -------- -------- ---------- --------- ---------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies
The Company is a public limited company incorporated and
domiciled in the United Kingdom. The Company is listed on the AIM
Market of the London Stock Exchange.
The registered office is located at 48 Chancery Lane, London,
WC2A 1JF. The principal activities of the Company have been and
continue to be investment in subsidiaries engaged in the production
of iodine and iodine derivatives, including the arrangement of
finance for and the provision of management services to
subsidiaries.
a) Statement of compliance
These consolidated financial statements have been prepared in
accordance with UK adopted International Accounting Standards
('IFRS') and IFRS Interpretations Committee ('IFRIC') and the
Companies Act 2006 applicable to companies reporting under
IFRS.
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements.
b) New standards, interpretations and amendments
Management continues to evaluate standards, amendments and
interpretations which are effective for reporting periods beginning
after the date of these financial statements and have not been
adopted early, including:
- IFRS17 (Insurance Contracts)
- IAS1 Amendment (Classification of Liabilities)
- IAS1 Amendment (Disclosure of Accounting Policies)
- IAS8 Amendment (Definition of Accounting Estimates)
- IAS12 Amendment (Deferred Tax related to Assets and Liabilities)
Implementation of the above is not expected to have a material
effect on the Group's financial statements.
c) Basis of preparation of financial statements
The financial statements have been prepared on the historical
cost convention as modified by the revaluation of financial
liabilities at fair value through profit and loss.
The financial statements are presented in US Dollars, which is
also the Group's functional currency.
Amounts are stated in thousands of US Dollars, unless otherwise
stated.
As permitted by Section 408 of the Companies Act 2006, the
parent company's income statement has not been included in these
financial statements.
d) Revenue recognition
Revenue is measured as the amount of consideration we expect to
receive in exchange for transferring goods or providing services,
and is recognized when performance obligations are satisfied under
the terms of contracts with our customers. A performance obligation
is deemed to be satisfied when transfer of benefit of the product
or service is transferred to our customer. The transaction price of
a contract, or the amount we expect to receive upon satisfaction of
all performance obligations, is determined by reference to the
contract's terms and includes adjustments, if applicable, for any
variable consideration, such as customer rebates or commissions,
although these adjustments are generally not material. Costs
incurred to obtain contracts with customers are expensed
immediately.
Revenue consists of sales of iodine derivatives, iodine,
chemicals and ancillary products. All of our revenue is derived
from contracts with customers, and almost all of our contracts with
customers contain one performance obligation for the transfer of
goods where such performance obligation is satisfied at a point in
time. Transfer of benefit of a product is deemed to be transferred
to the customer upon shipment or delivery. Significant portions of
our sales are sold free on board shipping point or on an equivalent
basis, while delivery terms of other transactions are based upon
specific contractual arrangements. Our standard terms of delivery
are generally included in our contracts of sale, order confirmation
documents and invoices, while the timing between shipment and
delivery generally ranges between 1 and 45 days. Costs for shipping
and handling activities, whether performed before or after the
customer obtains control of the goods, are accounted for as
fulfilment costs.
e) Research and development expenditures
Expenditure on research (or the research phase of an internal
project) is recognised as an expense in the period in which it is
incurred. Costs that are directly attributable to the development
phase of a new customised chemical manufacturing process or
development of a new iodine project are recognised as intangible
assets provided they meet the following recognition
requirements:
-- completion of the intangible asset is technically feasible so
it will be available for use or sale;
-- the Group intends to complete the intangible asset and use or
sell it;
-- the Group has the ability to use or sell the intangible
asset;
-- the intangible asset will generate probable future economic
benefits;
-- there are adequate technical, financial and other resources
to complete the development and to use or sell the intangible
asset; and
-- the expenditure attributable to the intangible asset during
its development can be measured reliably.
Among other things, this requires that there is a market for the
output from the intangible asset or for the intangible asset
itself, or, if it is to be used internally, the asset will be used
in generating such benefits.
Development costs not meeting these criteria for capitalisation
are expensed as incurred. In 2021, all research and development
expenditures were expensed as incurred.
f) Going concern
The Group considers that it is now well placed financially in
light of recent reductions in debt, generation of profits and
sustained upwards trends in iodine pricing. On that basis the Group
has prepared forecasts and projections that indicate there are
adequate resources to continue in operational existence for the
foreseeable future. However, the Group recognises that there can be
no certainty where these predictions are concerned. After due
consideration of the foregoing, the Directors consider it
appropriate to continue to adopt the going concern basis in
preparing the financial statements.
g) Basis of consolidation and investments in subsidiary
undertakings
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries made up to 31
December 2021. Subsidiaries are entities over which the Group has
the power to control the financial and operating policies so as to
obtain benefits from their activities. The Group obtains and
exercises control through voting rights. The acquisition method of
accounting is used to account for the purchase of subsidiaries by
the Group. On acquisition, the subsidiary's assets and liabilities
are recorded at fair value, reflecting their condition at the date
of acquisition.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date control commences
until the date control ceases.
Intra-Group balances and any unrealised gains and losses or
income and expenses arising from intra-Group transactions are
eliminated in preparing the consolidated financial statements,
unless the losses provide an indication of impairment of the assets
transferred.
Amounts reported in the financial statements of the subsidiaries
are adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group.
Investments in subsidiary undertakings are stated in the parent
company balance sheet at cost less provision for any impairment
losses.
h) Business combinations and goodwill
Business combinations are accounted for using the acquisition
method. The acquisition method involves the recognition of the
acquiree's identifiable assets and liabilities, including
contingent liabilities, regardless of whether they were recorded in
the financial statements prior to acquisition. On initial
recognition, the assets and liabilities of the acquired subsidiary
are included in the consolidated balance sheet at their fair
values, which are also used as the basis for subsequent measurement
in accordance with the Group's accounting policies. Acquisition
costs are expensed as incurred.
Goodwill represents the excess of the fair value of
consideration payable in a business combination over the fair value
of the Group's share of the identifiable net assets of the acquiree
at the date of acquisition. Any excess of identifiable net assets
over the fair value of consideration is recognised in profit or
loss immediately after acquisition.
As described in Note 1m) below, goodwill is tested for
impairment at least annually.
i) Foreign currency
The vast majority of the Group's business is denominated in U.S.
Dollars, which is the functional currency of the main operating
subsidiaries. U.S. Dollars is the presentational currency for the
Group financial statements.
Transactions denominated in foreign currencies are translated at
the rates of exchange ruling at the date of the transaction.
Monetary assets and liabilities in foreign currencies are
translated at the rates of exchange ruling at the balance sheet
date. Non-monetary items that are measured at historical cost in a
foreign currency are translated at the exchange rate at the date of
transaction. Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange rates at the
date the fair value was determined.
Any exchange differences arising on the settlement of monetary
items or on translating monetary items at rates different from
those at which they were initially recorded are recognised in
profit and loss in the period in which they arise. Exchange
differences on non-monetary items are recognised in other
comprehensive income to the extent that they relate to a gain or
loss on that non-monetary item taken to the statement of changes in
equity, otherwise such gains and losses are recognised in profit
and loss.
The results and financial position of foreign operations (none
of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
-- assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
-- income and expenses for each statement of profit or loss and
statement of comprehensive income are translated at average
exchange rates (unless this is not a reasonable approximation of
the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the
dates of the transactions); and
-- all resulting exchange differences are recognised in other
comprehensive income.
On disposal of a foreign operation for which the presentational
and functional currencies were different in previous periods, the
cumulative translation differences are transferred to profit and
loss as part of the gain or loss on disposal. The US Dollar/Pounds
Sterling exchange rate averaged 1.2334 in 2022 (2021 1.3756), and
at 31 December 2022 was 1.209 (2021: 1.351).
j) Intangible assets
Undeveloped leasehold costs
Undeveloped leasehold costs relate to the costs of acquiring
brine leases in respect of the surface and mineral rights of
landowners in areas of interest outside of those currently
connected to the Group's operating plants.
These costs are capitalised as exploration and evaluation assets
and are carried at historical cost less any impairment losses
recognised. If areas leased provide brine to operating plants, the
related costs are transferred to the relevant plants and amortized
over the lives of those plants.
Other intangible assets
Other identifiable intangible assets arose from the acquisition
of H&S Chemical in 2009. These assets were valued by an
external, independent valuation firm. Based on the type of asset,
the useful life of each asset was estimated. The value of each
identifiable intangible asset is amortised evenly over its useful
life. The following useful lives are applied:
-- WET(R) patent: 15 years
-- Customer relationships: 10 years
-- Patent portfolio: 8 years
-- EPA registrations: 2 years
Goodwill
Goodwill represents the excess of the fair value of
consideration in a business combination over the fair value of the
Group's share of the identifiable net assets acquired. Goodwill is
carried at cost less accumulated impairment losses.
k) Property, plant and equipment
Property, plant and equipment are stated at historical cost, net
of depreciation and any provision for impairment. Cost includes
purchase price and costs directly attributable to bringing the
asset to the location and condition necessary for it to be capable
of operating in the manner intended by management, such as costs
relating to construction, site preparation, installation and
testing.
Costs relating to assets put into service at a later date are
accumulated as construction in progress, and depreciation only
commences once such assets are put into use.
Depreciation is provided at rates calculated to write off the
depreciable amount of each asset on a straight line basis over its
expected useful life, as follows:
-- Buildings: 2.5 percent per annum
-- Office lease: term of the lease (38 months)
-- Equipment and machinery:
o IOSorb plants - 5 percent per annum
o Other plant and equipment - 5 to 7 years
o Vehicles and office equipment - 20 percent per annum
o Computer equipment - 33 percent per annum
Reviews of the estimated remaining lives and residual values of
individual assets are made at least semi-annually, and adjustments
are made where appropriate. Construction in progress is also
reviewed for impairment.
Freehold land is not depreciated.
l) Financial instruments
Financial liabilities
Trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently measured at amortised cost using the effective
interest rate method.
Loan notes
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities.
Interest-bearing loans are recorded initially at their fair
value, net of direct transaction costs. Such instruments are
subsequently carried at their amortised cost and finance charges,
including premiums payable on settlement, redemption or conversion,
are recognised in profit or loss over the term of the instrument
using the effective rate of interest.
Financial assets
Cash and cash equivalents represent short term, highly liquid
investments with an original maturity of fewer than three months
that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value. At the end of
2022 and 2021, all cash amounts were in 100 percent liquid
accounts.
The Group uses the 'simplified method of expected credit
losses'. Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using the effective
interest rate method, less provision for expected credit losses.
Expected credit losses are based on the Group's historical credit
losses experienced, then adjusted for current and forward looking
information on factors affecting the Group's customers.
m) Impairment
Whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable, that asset is
reviewed for impairment. An asset's carrying value is written down
to its estimated recoverable amount (being the higher of the fair
value less costs to sell and value in use) if that is less than the
asset's carrying amount.
Goodwill is allocated to those cash-generating units that are
expected to benefit from synergies of the related business
combinations and represent the lowest level within the Group at
which management monitors goodwill.
Cash-generating units to which goodwill has been allocated are
tested for impairment at least annually. An impairment loss is
recognised for the amount by which the asset's or cash generating
unit's carrying amount exceeds its recoverable amount, which is the
higher of fair value less costs to sell and value in use. To
determine the value in use, management estimates expected future
cash flows from each cash-generating unit and determines a suitable
discount rate in order to calculate the present value of those cash
flows. The data used for impairment testing procedures are directly
linked to the Group's latest approved budget, adjusted as necessary
to exclude the effects of future reorganisations and asset
enhancements. Discount factors are determined individually for each
cash-generating unit and reflect their respective risk profiles as
assessed by management.
Impairment losses for cash-generating units reduce first the
carrying amount of any goodwill allocated to that cash-generating
unit. Any remaining impairment loss is charged pro rata to the
other assets in the cash-generating unit. With the exception of
goodwill, all assets are subsequently reassessed for indications
that an impairment loss previously recognised may no longer exist.
An impairment charge is reversed if the cash-generating unit's
recoverable amount exceeds its carrying amount.
The Group assesses on a forward-looking basis the expected
credit losses associated with its debt instruments carried at
amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
Intercompany loans due to the parent company from its subsidiaries
are tested for impairment as part of the overall investment in
those subsidiaries, by reference to the present values of estimated
future cash flows of the subsidiaries, as further described in Note
2c.
n) Equity
Equity comprises the following:
-- "Share capital" represents the nominal value of equity
shares.
-- "Share premium" represents the excess over nominal value of
the fair value of consideration received for equity shares, net of
expenses for the share issue.
-- "Share-based payment reserve" represents the cumulative fair
value of options and warrants issued by the Company and recognised
in profit and loss.
-- "Retained losses" represents accumulated losses.
-- "Foreign currency reserve" represents the cumulative
differences arising from translation of foreign operations.
o) Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost includes all expenses directly attributable to the
manufacturing process as well as suitable portions of related
production overheads, based on normal operating capacity. Costs of
ordinarily interchangeable items are assigned using the first in,
first out cost formula. Cost excludes unrealised gains arising from
intra-Group transactions. Net realisable value is the estimated
selling price in the ordinary course of business less any
applicable selling expenses. When inventory is sold the cost is
included in Cost of Sales on the Statement of Comprehensive
Income.
p) Taxation
Tax expense recognised in profit or loss is the tax currently
payable based on taxable profit for the year and deferred tax not
recognised directly in equity.
Deferred income taxes are calculated using the balance sheet
liability method. 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
according to the likelihood of their recoverability in the
foreseeable future.
Deferred tax liabilities are provided in full, with no
discounting. 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 profit or loss, 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.
q) Leases
The Group assesses whether a contract is, or contains, a lease,
at inception of the contract. The Group recognises a right-of-use
asset and a lease liability on the balance sheet at the lease
commencement date. The right-of-use asset is initially measured at
cost. This comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement
date and an estimate of any costs to restore the underlying asset
to the site on which it is located, less any lease incentives
received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the 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. Amounts relating to such assets are disclosed
separately in note 12. In addition, the Group assess the
right-of-use asset for impairment when such indicators exist.
At the commencement date, the lease liability is initially
measured at the present value of the lease payments discounted
using the Group's incremental borrowing rate at the date of
transition as the interest rate implicit in the lease could not be
readily determined. Interest is charged at the same discount rate
used to calculate the present value of the lease.
The lease liability is re-measured if the Group changes its
assessment of whether it will exercise a purchase, extension or
termination option. When the lease liability is re-measured in this
way, a corresponding adjustment is made to the carrying amount for
the right-of-use asset, or is recorded in profit or loss if the
carrying amount of the right-of-use asset has been reduced to
zero.
The Group has elected not to recognise right-of-use assets and
lease liabilities for short-term leases that have a lease term of
12 months or less and leases of low value operating value. These
are charged to profit and loss on a straight-line basis over the
period of the lease. At 31 December 2021 the Group had one lease,
for office space.
r) Share-based payments
The cost of equity settled transactions is measured at fair
value at the grant date as measured by use of the Black Scholes
model. If vesting periods or other vesting conditions apply, the
expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable.
Estimates are subsequently revised if there is any indication that
the number of share options expected to vest differs from previous
estimates. Any cumulative adjustment prior to vesting is recognised
in the current period. No adjustment is made to any expense
recognised in prior periods if share options ultimately exercised
are different to those estimated on vesting.
Charges made to profit or loss, in respect to share-based
payments, are credited to the share-based payment reserve.
s) Segment reporting (Note 3)
In identifying its operating segments, management follows the
Group's service lines, which represent the main products provided
by the Group and are based on the information presented to the
chief operating decision maker, which is the Board.
2. Significant judgements and estimates
Judgements and estimates are regularly evaluated based on
historical experience, current circumstances and expectations of
future events.
The critical estimates made in the preparation of the financial
statements are set out below. The resulting accounting estimate may
not equal the related actual result, and management must also make
judgements about current circumstances and expectations of future
events. Significant judgements made by management include:
a. Intangible and tangible assets are tested for impairment
where there is an indication that they may be impaired. In
accordance with IAS 36 - Impairment of Assets, an intangible or
tangible asset is considered impaired when its carrying amount
exceeds its recoverable amount on an individual cash generating
unit basis. The recoverable amounts of relevant cash generating
units are based on value in use calculations using management's
best estimate of future business performance. For this purpose
management regards all the iodine production plants as a single
cash generating unit given their mutual dependence on centralised
management, financial, maintenance and sales and marketing
functions. In carrying out impairment testing, management makes a
number of significant estimates in relation to the assumptions
incorporated into their calculations. These will include factors
such as growth rates and discount rates. Cash flow projections over
the next five years were used and a discount rate of 10.83% was
applied. Details and carrying values of intangible assets, goodwill
and property, plant and equipment are provided in notes 10, 11 and
12.
b. Management reviews the useful lives of depreciable and
amortisable assets at each reporting date. The carrying amounts are
analysed in notes 10 and 12. Management's estimate of the useful
lives of plant and equipment as detailed in note 1k are common life
expectancies for the industry. In particular, the expected useful
life attributed to each IOsorb(R) plant is 20 years. Changes in the
expected level of usage or other technological developments could
impact the life and residual value of these assets.
c. Management applies the accounting polices set out in Note 1o)
Inventories to determine the carrying value of raw materials, work
in progress and finished goods (Note 13). Based on historical
experience and current market intelligence, judgements are made as
regards net realisable value, which may include but are not limited
to obsolescence, usage in alternative formulations, production
needs, market demand, costs to complete production, condition,
regulatory requirements and limitations, and allocations of
production overheads to the cost of work in progress and finished
goods. Based on these assessments no requirement for provisions
against the carrying value of inventories was identified.
d. The carrying amount of the parent company's investment in its
subsidiaries of $37.3m (2021: $38.0M) has been evaluated for
impairment. The investment amounts include debts due from
subsidiaries of $20.1m (2021 $20.8m). For this purpose the two
operating subsidiaries have been treated as one unit, given the
vertical integration of the Group's operating activities. The
carrying amount of the parent company's investment of $37.3m (2021:
$38.0M) compares to carrying amounts of the subsidiaries' net
assets, excluding loans from the parent company, of $38.0m (2021:
$29.9m). An assessment has been made of the present values of the
future cash flows related to the operating activities of the
subsidiaries to determine whether any impairment losses should be
recognised. The assessment took into account cash flow projections
of the subsidiaries over the next five years, and applied a
discount rate of 10.83%. The Group has concluded that no impairment
provision is required.
e. In accordance with IAS12 and in light of the Group's recent
much improved profitability, and therefore its likely utilisation
of its accumulated US Federal tax losses in the foreseeable future,
a deferred tax asset reflecting the value of those losses at a tax
rate of 21% was set up in the balance sheet as of 31 December 2021
and credited to tax in the profit and loss account. This asset is
being amortised to the profit and loss account in line with
reductions in tax payable resulting from utilisation of the losses.
Management considers this treatment continues to be appropriate in
light of the Group's ongoing profitability. The deferred tax asset
balance at 31 December 2022 was $1.9m (see Notes 8 and 25).
3. Segment reporting
a. Business segments - The Group's operations comprise the
exploration and production of iodine with complete vertical
integration into its specialty chemical halogen derivatives
business, and are therefore considered to fall within one business
segment.
31 December 31 December
2022 2021
$ $
Assets
Halogen Derivatives and Iodine 52,706 44,445
Total $52,706 $44,445
------------ ------------
Liabilities
Halogen Derivatives and Iodine 14,734 14,484
Total $14,734 $14,484
------------ ------------
3. Segment reporting (continued)
b. Geographical segments - The Group reports by geographical
segment. The Group's activities are related to exploration for, and
development of, iodine in certain areas of the USA and the
manufacturing of specialty chemicals in the USA with support
provided by the UK office. In presenting information on the basis
of geographical segments, segment assets and the cost of acquiring
them are based on the geographical location of the assets.
31 December 31 December
2022 2021
$'000 $'000
Assets
UK 96 166
USA 52,610 44,279
------------ ------------
Total $52,706 $44,445
------------ ------------
Liabilities
UK 153 137
USA 14,581 14,347
------------ ------------
Total $14,734 $14,484
------------ ------------
Revenue
North America 19,822 19,858
Asia 17,960 15,851
South America 3,588 3,148
Europe 783 156
Other 45 26
------------ ------------
Total $42,198 $39,039
------------ ------------
c. Significant customers - in 2022 Iofina Chemical had six
customers in excess of 5% of sales (2021 five customers). 2022
percentages were 11%, 8%, 7%, 7%, 6%, 6% (2021 percentages were
10%, 9%, 7%, 7%, 6%).
4. Profit before taxation
Profit before taxation is stated after charging:
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Depreciation expense 1,643 1,551
Amortisation expense 180 180
Other:
Annual audit fees for audit of parent
company and consolidated financial statements 65 82
Fees payable to the company's auditor
for other services - 8
4. Profit before taxation (continued)
Cost of sales - analysis by nature
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Raw materials 12,872 14,912
Freight 657 782
Sales commission 378 359
Labour, manufacturing overhead and royalties 12,462 12,254
------------ ------------
$26,369 $28,307
------------ ------------
Administrative expenses - analysis by nature
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Remuneration and benefits 2,955 2,582
Share-based payments 146 120
Office expenses 254 257
Professional services 655 554
Travel 169 75
Rent (34) (19)
Other 216 220
$4,361 $3,789
------------ ------------
Research and development expenses recognised during the period
were $237k (2021: $241k), and are included in administrative
expenses above.
5. Staff numbers and costs
The average number of Group employees, including executive
directors, and their costs were:
Year ended Year ended
31 December 31 December
2022 2021
Number Number
Production 80 81
Administrative 14 14
Sales 1 1
------------ ------------
Total staff 95 96
------------ ------------
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Wages and salaries 7,245 6,454
Social security costs 1,120 1,057
------------ ------------
$8,365 $7,511
------------ ------------
5. Staff numbers and costs (continued)
Of the total staff costs above, $5,600k (2021: $5,120k) is
included within cost of sales and $2,765k (2021: $2,391k) is
included within administrative expenses.
Payments to executive directors and senior officers of
subsidiaries (considered to be key management personnel) for their
services during the year were as follows:
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Wages and salaries 1,116 941
Social security costs 85 108
------------ ------------
Total key management cost $1,201 $1,049
------------ ------------
Included within wages and salaries above is $309k (2021: $295k)
in respect of the highest paid director. No options were exercised
by a director in 2022 (2021 Nil).
6. Finance expense
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Term loan interest 310 345
Revolving loan facility interest - 27
IFRS16 lease interest 16 (4)
Total finance expense $326 $368
------------ ------------
7. Finance income
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Interest income 13 17
$13 $17
------------ ------------
8. Taxation
Year ended Year ended
31 December 31 December
2022 2021
$'000 $'000
Current tax 31 -
Deferred tax (Note 25) 2,134 (4,066)
------------ ------------
$2,165 $(4,066)
------------ ------------
Tax reconciliation:
Profit on ordinary activities before
tax 10,030 5,120
Tax at UK income tax rate of 19% (2021:
19%) 1,905 973
Effects of:
Temporary differences (149) (110)
Permanent differences 10 (32)
UK losses not recognised 165 162
Difference in tax rates US/UK 203 105
Tax charge not recognised - (1,097)
Losses carried forward recognised as
deferred tax asset - (4,066)
Current tax paid 31 -
Total tax charge/(credit) $2,165 $(4,066)
------------ ------------
As previously disclosed, the Group has accumulated US Federal
tax losses that are expected to be deductible from future US
Federal taxable profits subject to agreement with the relevant tax
authorities. As of 31 December 2022 these losses are estimated to
be approximately $9.2 million (2021: $19.4 million). To the extent
US Federal tax losses are not utilised to offset current income
taxes they will begin to expire in 2035.
In accordance with IAS 12 and in light of the Group's recent
much improved profitability, and therefore its likely utilisation
of its accumulated US Federal tax losses in the foreseeable future,
a deferred tax asset of $4.1m reflecting the value of those losses
at a tax rate of 21% was set up in the balance sheet as of December
2021 and credited to tax in the consolidated statement of income.
This asset is being adjusted to the consolidated statement of
income in line with reductions in tax payable resulting from
utilisation of the losses.
9. Earnings per share
The calculation of earnings per ordinary share is based on the
profit after tax attributable to shareholders of $7,865k (2021
profit $9,186k) and the weighted average number of ordinary shares
outstanding of 191,858,408 (2021: 191,858,408). After including the
weighted average effect of dilutive share options of 4,186,203
(2021: 1,232,450) the diluted weighted average number of ordinary
shares outstanding was 196,044,611 (2021 193,090,858).
10. Intangible assets (Group)
Details of intangible assets are set out below:
WET(R) Customer Patent EPA registrations Total
Intangible assets patent relationships portfolio
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2021 2,700 661 187 271 3,819
At 31 December
2021 & 2022 $2,700 $661 $187 $271 $3,819
-------- --------------- ----------- ------------------ -------
Accumulated amortization
At 1 January 2021 2,057 661 212 271 3,176
Charge for the
year 180 - - - 180
At 31 December
2021 2,237 661 187 271 3,356
Charge for the
year 180 - - - 180
At 31 December
2022 $2,417 $661 $187 $271 $3,536
-------- --------------- ----------- ------------------ -------
Carrying amounts
At 31 December
2020 $643 - - - $643
At 31 December
2021 $463 - - - $463
At 31 December
2022 $283 - - - $283
-------- --------------- ----------- ------------------ -------
Intangible assets were acquired in the acquisition of H&S
Chemical in 2009.
WET(R) Patent
The WET(R) Patent technology employs two different iodine
extraction methods depending on brine chemistry for optimal
efficiency. We utilised a with and without analysis, a variation of
the discounted cash-flow method, to estimate the fair value of a
WET(R) Patent at date of acquisition. The methodology compared the
cash flow generating capacity of Iofina Chemical assuming it was
operating without the benefit of the WET(R) Patent to the projected
cash flow with the benefit of the patent. The contractual life of
the patent is in excess of 20 years; however, the useful life of
the patent was estimated at 15 years based on the following:
-- Management's expectation for the expected viability of the
technology
-- Management's expectations regarding the timing of significant
substitute technology
-- The lack of comparable substitute technologies as of the
valuation date
-- The remaining amortization period is 1.5 years
11. Goodwill (Group)
Carrying amounts $'000
At 31 December 2020, 31 December 2021 and 31 December 2022 $3,087
-------
Goodwill arose on the acquisition of H&S Chemical in 2009
and is wholly allocated to the Iofina Chemical cash generating unit
of the Group. Goodwill impairment testing is conducted annually,
based on projected cash flow to be generated.
The Chemical business has been in operation for 36 years, and
much of its products and customer base are long established. For
impairment testing, a long term growth rate of 1.00% per annum was
applied to budgeted cash flows and a discount rate of 10.83% per
annum was used. On this basis the net present value of cash flow
exceeded the goodwill amount of $3,087k.
Sensitivity analysis
Projections based on the above assumptions show headroom of
$7.9m between the value in use of the business net of other assets
of $34.3m and the carrying value of $26.4m, comprising goodwill of
$3.1m, other intangible assets of $0.3m, and net business trading
assets of $23.0m. In order for the value in use to equal the
carrying value it would be necessary for the discount rate to rise
to 14.0% or the long term growth rate to be 4.25% negative or
projected EBITDA to be lower by 20.4%. Based on the results of this
impairment testing management are satisfied that a reasonably
possible change in assumptions would not lead to an impairment.
12. Property, plant and equipment (Group)
Exploration
and Evaluation
Assets
---------------
Montana Right of use
Atlantis Equipment and Construction
Field Freehold Land Buildings Machinery in Progress Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January
2021 236 209 1,730 355 25,064 636 28,230
Transfers (236) - 276 - 1,124 (1,164) -
Additions - - 38 415 168 1,279 1,900
Disposals - - - (18) (80) - (98)
--------------- --------
At 31 December
2021 - $209 $2,044 $752 $26,276 $751 $30,032
Transfers - - (37) - 103 (113) (46)
Additions - - 18 - 230 2,885 3,133
At 31 December
2022 - $209 $2,025 $752 $26,610 $3,524 $33,119
Accumulated
depreciation
At 1 January
2021 - - 492 205 8,751 - 9,448
Charges for
the year - - 57 96 1,398 - 1,551
Disposals - - - - (80) - (80)
---------- ------------- --------------- --------
At 31 December
2021 - - $549 $301 $10,069 - $10,919
Charges for
the year - - 61 104 1,479 - 1,644
At 31 December
2022 - - $610 $405 $11,548 - $12,563
--------------- -------------- ---------- ------------- --------------- -------------- --------
Carrying
amounts
At 31 December
2020 $236 $209 $1,238 $150 $16,313 $636 $18,782
At 31 December
2021 - $209 $1,495 $451 $16,207 $751 $19,113
At 31 December
2022 - $209 $1,415 $346 $15,062 $3,524 $20,557
--------------- -------------- ---------- ------------- --------------- -------------- --------
Right-of-use assets
Right-of-use assets relate to the Group's lease on office
premises in Denver, Colorado. During 2021 the expiry date of the
lease was extended from April 2022 to April 2026, and an amount of
$415k was capitalised as an addition in respect of future rentals,
in accordance with IFRS 16. Liabilities for future payments are
shown in Note 19.
Release of plant acquisition accrual
An accrual balance of $0.45m relating to the acquisition of #IO2
plant is no longer considered to be required, and has therefore
been transferred to income. No claims have been made and the period
of validity for such claims has expired.
13. Inventories
Group 31 December 31 December
2022 2021
$'000 $'000
Raw materials 7,231 4,487
Work in progress 2,895 1,753
Finished goods 58 56
------------ ------------
$10,184 $6,296
------------ ------------
At year end, there were no provisions against the carrying value
of inventories (2021: nil). During the year, the cost of
inventories recognised as expense and included in 'cost of sales'
amounted to $25,334k (2021: $27,165k).
14. Financial instruments
The Board of directors determines, as required, the degree to
which it is appropriate to use financial instruments to mitigate
risks. The main risks for which such instruments may be appropriate
are interest rate risk, foreign currency risk, credit risk,
investment risk, liquidity risk and commodity risk. The Group's
principal financial asset is cash, which is invested with major
banks. The Group has a term loan and no other borrowings currently
drawn (see Note 20).
Financial assets and liabilities
Group
Loans and receivables at Financial liabilities at Investment and swap
amortised cost amortised cost liability at fair value Total
2022 $'000 $'000 $'000 $'000
------------------------- ------------------------- ------------------------- ------------------------- --------
Cash and cash
equivalents 5,927 5,927
Trade receivables 9,950 9,950
Interest rate swap
asset 249 249
$16,126
--------
Trade payables 2,510 2,510
Accrued liabilities 5,028 5,028
Lease liabilities 410 410
Term loan 6,785 6,785
$14,733
--------
2021
------------------------- ------------------------- ------------------------- ------------------------- --------
Cash and cash
equivalents 5,262 5,262
Trade receivables 5,653 5,653
$10,915
--------
Trade payables 1,521 1,521
Accrued liabilities 4,281 4,281
Lease liabilities 468 468
Term loan 8,214 8,214
$14,484
--------
14. Financial instruments (continued)
Company Loans and receivables at amortised Financial liabilities at amortised
cost cost Total
2022 $'000 $'000 $'000
-------------------------- -------------------------------------- -------------------------------------- --------
Cash and cash equivalents 94 94
Other receivables 2 2
Due from subsidiaries 20,112 20,112
$20,208
--------
Accruals 153 153
$153
--------
2021
-------------------------- -------------------------------------- -------------------------------------- --------
Cash and cash equivalents 163 163
Other receivables 3 3
Due from subsidiaries 20,792 20,792
$20,958
--------
Accruals 137 137
$137
--------
The interest rate swap liability at fair value is valued on the
basis of Level 2 inputs as defined in IFRS 13.
Interest rate risk
Surplus funds are held within the Group's checking and savings
accounts. The benefit of fixing rates for the longer term is kept
under review, having regard to forecast cash requirements and the
levels of return available. Given the short term nature of Iofina's
surplus funds, the Group has limited interest rate risk. As of 31
December 2022, all surplus funds were invested in checking and
savings accounts that had no terms and were 100% liquid. Bank
facilities have variable interest rate terms and therefore there is
an exposure to increases in interest rates. This is mitigated by
the use of an interest rate swap to fix the rate on the majority of
the term loan. Also the interest on the revolving credit facility
(if drawn) is reduced by arrangements to sweep surplus funds into
that account.
Foreign currency risk
The Group has potential transactional currency exposure in
respect of items denominated in foreign currencies relating to the
Group's administration in the UK. The balance of cash held in
foreign currency was $94k (GBP GBP78k) as of year-end, and provides
a hedge against GBP denominated UK expenses.
Sales transactions are denominated in US Dollars, which is the
operating currency. Other impacts of foreign currency risk are not
deemed material to these financial statements.
Credit risk
The maximum exposure is reflected by the carrying amount of
financial assets. Because the counterparties to Iofina's holdings
of cash and cash equivalents are prime financial institutions,
Iofina
14. Financial instruments (continued)
does not expect any counterparty to fail to meet its
obligations. Additionally, the Group is exposed to marginal credit
risk in the form of receivables for product sales. Credit risk in
this regard is mitigated through long-term customer payment
history, insurance of certain foreign receivables, extensive credit
analysis of large purchasers, use of letters of credit, and the
requirement for partial or total payment prior to shipment for some
customers.
Investment risk
There is a risk that short term investments may not realise
their carrying value.
Liquidity risk
The Group raises funds as required on the basis of forecast
expenditure and cash inflows over the next 12 months. When
necessary, the scope and rate of activity are adjusted to take
account of the funds available. There is a risk that the Group may
not be able to raise sufficient funds to repay loans at their
maturity.
The following table sets out the contractual maturities
(representing undiscounted contractual cash flows) of financial
liabilities:
Up to
3 Between 3 and 12 Between 1 and 2
Group months months years Between 2 and 6 years
At 31 December 2022: $'000 $'000 $'000 $'000
Trade payables 2,510 - - -
Accrued liabilities 2,059 2,969 - -
Lease liabilities 19 82 260 49
Term loan 357 1,071 1,429 3,929
$4,944 $4,122 $1,689 $3,978
------------------------ --------------------- --------------------- ----------------------
Up to
3 Between 3 and 12 Between 1 and 2
Group months months years Between 2 and 6 years
At 31 December 2021: $'000 $'000 $'000 $'000
Trade payables 1,521 - - -
Accrued liabilities 1,476 2,804 - -
Lease liabilities 2 56 102 309
Term loan 357 1,071 1,429 5,357
$3,356 $3,931 $1,531 $5,666
------------------------ --------------------- --------------------- ----------------------
Commodity risk
The Group is exposed to movements in the price of raw iodine.
Sales of iodine based products were
$31,422k (2021: $30,473k). The effects of changes in the price
of iodine on 2022 revenue and profits are set out in the Financial
Review on pages 7 to 9. Iodine is produced internally and is the
most significant cost component for iodine based products.
15. Trade and other receivables
Group
31 December 31 December
2022 2021
$'000 $'000
Trade receivables 9,950 5,653
Prepayments and other receivables 537 505
$10,487 $6,158
------------ ------------
Company
31 December 31 December
2022 2021
$'000 $'000
Prepayments and other receivables 2 3
------------ ------------
$2 $3
------------ ------------
All receivables and prepayments are short term in nature. The
carrying values are considered a reasonable approximation of fair
value. There are no expected credit losses.
The Group and the Company have not received a pledge of any
assets as collateral for any receivable or asset.
17 . Cash and cash equivalents
Group
31 December 31 December
2022 2021
$'000 $'000
Cash in US Dollar accounts 5,833 5,099
Cash in GB Pound Sterling accounts 94 163
------------ ------------
$5,927 $5,262
------------ ------------
Company
31 December 31 December
2022 2021
$'000 $'000
Cash in GB Pound Sterling accounts 94 163
------------ ------------
$94 $163
------------ ------------
18. Trade and other payables
Group 31 December 31 December
2022 2021
$'000 $'000
Trade payables 2,510 1,521
Accrued expenses and deferred income 5,028 4,281
------------ ------------
$7,538 $5,802
------------ ------------
Company
31 December 31 December
2022 2021
$'000 $'000
Accrued expenses 153 137
------------ ------------
$153 $137
------------ ------------
All trade and other payables are considered short term. The
carrying values are considered to be a reasonable approximation of
fair value.
Except as regards the bank facilities described in Note 20, the
Group and Company have not pledged any assets as collateral for any
liabilities or contingent liabilities.
19. Lease liabilities
31 December 31 December
2022 2021
$'000 $'000
Lease liabilities - current 101 58
Lease liabilities - non-current 309 410
------------ ------------
$410 $468
------------ ------------
Movements: 2022 2021
$'000 $'000
Opening balance 468 186
Payments (74) (110)
Lease extension liabilities - 405
Interest accrued 16 (4)
Adjustments - (9)
------ ------
$410 $468
------ ------
Lease liabilities relate to the Group's lease on office premises
in Denver, Colorado, which was extended during 2021 to run till 30
April 2026. Liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the Group's
incremental borrowing rate on commencement of the lease or the
extension period. Lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and
are reduced by lease payments made.
20. Term loans and Revolving loan facility
Revolving
Term loan loan facility
$'000 $'000
At 1 January 2021 $9,643 $2,718
Term loan instalment repayments (1,429) -
Revolving loan facility net payments - (2,718)
---------- ---------------
At 31 December 2021 $8,214 -
Term loan instalment repayments (1,429) -
At 31 December 2022 $6,785 -
---------- ---------------
Due within one year $1,429 -
Due after one year $5,357 -
The above bank facilities, with First Financial Bank of Ohio,
are fully secured by fixed and floating charge and the principal
terms are:
Term loan
a) The term loan balance of $6.8m (2021 $8.2m) relates to a
$10.0m loan drawn down in September 2020 and repayable in full by
equal monthly instalments over the seven years to 30 September
2027. The interest rate on $7 million of the loan has been fixed to
maturity by a swap contract at 3.99%, and the interest rate on the
balance is variable monthly at 2.50% above the one month Secured
Overnight Financing Rate ("SOFR"), subject to a minimum SOFR rate
of 1.00%. Repayment of all or part of the loan may be made at any
time without penalty.
Revolving loan facility
b) The revolving loan facility is for $6.0m over the period to
September 2024, and may be drawn and repaid in variable amounts at
the Group's discretion. Amounts that may be drawn are subject to a
borrowing base of sufficient eligible discounted monthly values of
receivables and inventory, and compliance on a quarterly basis with
trailing 12 months financial covenant ratios of 1) a maximum
multiple of 2.5 total debt to EBITDA, and 2) a minimum multiple of
1.2 EBITDA net of capital expenditure to the total of principal and
interest payments on the total debt. The interest rate is variable
monthly at 2.4% above SOFR, subject to a minimum SOFR rate of
1.00%.
Additional facilities
c) There are further facilities for capital projects totalling
$4.36m that are available but have not yet been drawn.
Swap contract
d) The derivative asset resulting from the swap contract
described above as at 31 December 2022 has been revalued by
reference to market expectations for future SOFR rates, and an
amount of $249k has been credited to comprehensive income (2021
$69k) and included in the balance sheet. During the year the swap
contract generated a net reduction of interest otherwise payable of
$23k.
21. Net debt
Net debt excludes lease liabilities totalling $410k (2021 $468k)
and is made up as follows:
2022 2021
$'000 $'000
Term loan (6,785) (8,214)
Cash and cash equivalents 5,927 5,262
Net debt at 31 December $(858) $(2,952)
-------- ---------
23. Share capital
31 December 31 December
2022 2021
Authorised:
Ordinary shares of GBP0.01 each - number of shares 1,000,000,000 1,000,000,000
- nominal value GBP10,000,000 GBP10,000,000
Allotted, called up and fully paid:
Ordinary shares of GBP0.01 each - number of shares 191,858,408 191,858,408
- nominal value GBP1,918,584 GBP1,918,584
There was no change in share capital or share premium in
2022.
24. Share based payments
On 9 March 2022 options over 1,196,700 ordinary shares of the
Company, representing 0.62% of the Company's issued share capital
at that date, were granted to directors and key management
personnel. The options are exercisable at the closing share price
on 9 March 2022 of 17.6p per share, with 50% vesting after one year
on 9 March 2023 and 50% vesting after two years on 9 March 2024.
The options expire ten years from the date of grant.
The above options were valued using the Black Scholes model and
the exercise price of 17.6p, an expected term of 5.75 years,
historical volatility of 74.88% and a risk free rate of 1.9%. The
resulting valuation of $179,658 is being amortised over the vesting
periods, and $109,591 has been charged as an expense in respect of
the period from 9 March 2022 to 31 December 2022.
No options lapsed or were forfeited or exercised during the
year. In 2021 a total of 1,378,250 options either lapsed or were
forfeited. There were 5,000,400 total options outstanding at 31
December 2022, representing 2.61% of shares in issue.
24. Share based payments (continued)
Options granted to directors and key employees and outstanding
at 31 December 2022 are as follows:
Exercise Exercise
Number Vesting Share Exercise Price Price
Date of Grant of Options Date Price Price 2022 2021
GBP GBP $ $
13 June 2018 880,000 13 June 2019 0.162 0.162 0.20 0.22
13 June 2018 880,000 13 June 2020 0.162 0.162 0.20 0.22
25 July 2019 451,000 25 July 2020 0.213 0.213 0.26 0.29
25 July 2019 451,000 25 July 2021 0.213 0.213 0.26 0.29
16 December 16 December
2020 570,850 21 0.125 0.125 0.15 0.17
16 December 16 December
2020 570,850 22 0.125 0.125 0.15 0.17
9 March 2022 598,350 9 March 2023 0.176 0.176 0.21 -
9 March 2022 598,350 9 March 2024 0.176 0.176 0.21 -
Weighted average 5,000,400 GBP0.17 GBP0.17 $0.20 $0.22
The weighted average contractual life of options outstanding at
31 December 2022 was 7.1 years (2021 7.5 years).
Exercise prices shown in USD are based on the US Dollar/Pounds
Sterling exchange rate at 31 December 2022 of 1.21 (2021 1.351).
Options outstanding at 31 December 2022 expire the earlier of ten
years from grant date or 90 days after the termination of service
to the Company.
2022 Number of Weighted average exercise 2021 Number of Weighted average exercise
Options price Options price
GBP $ GBP $
Options
outstanding
At 1 January 3,803,700 GBP0.16 $0.22 5,181,950 GBP0.19 $0.26
Granted 1,196,700 GBP0.18 $0.21 - - -
Lapsed - - - (985,000) GBP0.30 $0.41
Forfeited - - - (393,250) GBP0.16 $0.22
---------------- ---------------- -------------
At 31 December 5,000,400 GBP0.17 $0.20 3,803,700 GBP0.16 $0.22
--------------- ---------------- ------------- ---------------- ---------------- -------------
Options
exercisable
At 1 January 3,232,850 GBP0.21 $0.28 3,457,250 GBP0.21 $0.28
Lapsed - GBP0.30 $0.41 (985,000) GBP0.30 $0.41
Forfeited - GBP0.17 $0.23 (261,250) GBP0.17 $0.23
Vested 570,850 GBP0.16 $0.22 1,021,850 GBP0.16 $0.22
---------------- ------------- ---------------- ---------------- -------------
At 31 December 3,803,700 GBP0.17 $0.23 3,232,850 GBP0.17 $0.23
--------------- ---------------- ------------- ---------------- ---------------- -------------
24. Share based payments (continued)
Movements in the Share-based payment reserve were as
follows:
31 December 31 December
2022 2021
$'000 $'000
Balance 1 January 2,007 2,136
Share-based payment charge 146 120
Lapsed and forfeited options - (249)
Balance 31 December $2,153 $2,007
------------ ------------
25. Deferred tax
2022 2021
$'000 $'000
At 1 January 4,066 -
Prior years US Federal tax losses available for offset against future US Federal taxable profits
(see note 8) - 4,066
Prior years tax losses utilized against US Federal tax liability (2,134) -
(see Note 8)
--------
At 31 December $1,932 $4,066
-------- -------
26. Related party transactions
Transactions between group companies were as follows:
2022 2021
$'000 $'000
Iofina Resources to/(from) Iofina Chemical:
Crystallised iodine sales 22,115 16,059
Expenses recharged (net) (200) (903)
Iofina Plc to/(from) Iofina Resources:
Management fee 50 50
Funding payments (750) (1,000)
Expenses recharged (7) (2)
Iofina Plc to/(from) Iofina Chemical:
Management fee 50 50
Expenses recharged (22) (19)
In both 2021 and 2022 all iodine produced by Iofina Resources
was sold to Iofina Chemical.
Additional related party transactions with directors, who are
considered to be key management personnel, are set out in the
Corporate Governance Statement on page 27. Option grants as
described in note 24 are to employees and Directors.
26. Related party transactions (continued)
The Company has entered into a number of unsecured related party
transactions with its subsidiary undertakings. The most significant
transactions carried out between the Company and its subsidiary
undertakings are financing.
27. Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern, to provide
returns for shareholders and to maintain an optimal capital
structure to reduce the cost of capital. The Group defines capital
as being share capital plus reserves as shown in the balance sheet.
The Directors continue to monitor the level of capital as compared
to the Group's commitments and adjust the level of capital as is
determined to be necessary by issuing new shares. Iofina plc is not
subject to any externally imposed capital requirements. The
Directors consider the capital of the Group to be the total equity
attributable to the
equity holders of the parent of $38.0 million as at 31 December 2022 (2021: $30.0 million).
28. Subsidiary undertakings
Investment in subsidiaries
Investment in
subsidiaries
$'000
Company
Balance at 31 December 2020, 2021 and 2022 $17,199
--------------
Due from subsidiaries
2022 2021
$'000 $'000
Company
At 1 January 20,792 21,712
Management fees 100 100
Funding from subsidiaries (750) (1,000)
Expenses recharged to Plc (30) (20)
At 31 December $20,112 $20,792
--------------- ---------------
The Group's debt arrangements are on a joint and several basis
with all Group companies excluding dormant subsidiaries. The
principal beneficiary of these arrangements is Iofina Resources,
Inc., and therefore the debt is accounted for in that company and
in the consolidated balance sheet, and does not appear in the
balance sheet of Iofina Plc.
Interest in
Country of ordinary shares
incorporation and voting
Company and operation Principal activity rights
Iofina, Inc. United States/CO Holding company 100%
Iofina Resources,
Inc. United States/CO Iodine production 100%
Iofina Chemical,
Inc. United States/DE Specialty chemical 100%
IofinaEX, Inc. United States/KY Dormant 100%
Iofina Resources,
LLC United States/CO Dormant 100%
Iofina Resources,
LLC United States/TX Dormant 100%
28. Subsidiary undertakings (continued)
Iofina, Inc. was established in February 2006 and is a wholly
owned subsidiary of Iofina plc. Iofina, Inc. owns the whole of the
issued share capital of Iofina Resources, Inc., Iofina Chemical,
Inc. and IofinaEX, Inc. Other entities are subsidiaries of Iofina
Resources, Inc., the iodine production company.
The registered offices of the above companies are as
follows:
Company Registered office
8480 East Orchard Road, Greenwood Village
Iofina, Inc. CO 80111, USA
Iofina Resources, 8480 East Orchard Road, Greenwood Village
Inc. CO 80111, USA
Iofina Chemical,
Inc. 306 W. Main Street, Frankfort, KY 40601, USA
IofinaEX, Inc. 212 N 2nd St., Suite 100, Richmond, KY 40475
Iofina Resources, 8480 East Orchard Road, Greenwood Village
LLC (CO) CO 80111, USA
Iofina Resources,
LLC (TX) 815 Brazos Street, Austin TX 78701, USA
29. Capital commitments
At 31 December 2022 the Group had capital commitments amounting
to approximately $2m in respect of completion of construction of
#IO9 plant.
30. Post balance sheet events
There were no post balance sheet events.
31. Contingent liabilities
The Group considers that a contingent liability exists in
respect of overdue interest on amounts that may be due in relation
to certain iodine related property rights. The theoretical exposure
is estimated at approximately $300k, but past experience suggests
that amounts actually paid will be a relatively small proportion of
that amount.
32. Ultimate controlling party
There is no ultimate controlling party of the Group.
Iofina and the environment
Iofina promotes, wherever possible, environmental sustainability
in its working practices and seeks to minimise, mitigate, or remedy
any harmful effects from the Group's operations on the environment
at each of its operational sites. To continue that effort through
all aspects of business, this report has been produced to minimise
its effect on the environment by using thinner paper, fewer pages,
smaller type set, and non--colour printing as much as possible. As
part of this effort Iofina is trying to move attention to its
online annual reports available at www.iofina.com. By being a
better steward of the environment, Iofina saves valuable
shareholder funds instead of producing glossy magazine pages
throughout the whole document.
This page does not form part of the statutory financial
statements.
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END
FR NKQBPOBKDCQB
(END) Dow Jones Newswires
April 25, 2023 02:00 ET (06:00 GMT)
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