REG - Iofina PLC - Final Results
02/05/2024 07:00
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RNS Number : 9140M Iofina PLC 02 May 2024
2 May 2024
Iofina plc
("Iofina", the "Company" or the "Group")
(AIM: IOF)
2023 FULL YEAR RESULTS
Revenue up 18.5% to $50 million
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 2023 (the "Period").
Higher sales of crystalline iodine drive 18.5% revenue growth, profits
resilient despite higher inflation and input costs:
· Revenue of $50.0m (2022: $42.2m); Sixth successive year of revenue
growth
· Gross profit of $15.7m (2022: $15.8m)
· Adjusted EBITDA(1) of $10.8m (2022: $11.5m)
· Operating profit of $8.6m (2022: $9.6m)
· Profit before tax of $8.3m (2022: $10.0m)
Strong balance sheet and swing to net cash position:
· Cash of $6.5m at year-end up 10.0% (2022: $5.9m)
· Further debt reduction moved the Company into a net cash position of
$1.2m
Investing for growth:
· Capital investment into chemical and new iodine plants doubled to
$6.2m (2022: $3.1m)
· Signed agreement in Q4 2023 for IO#10
2024 so far:
· Production of 123.7 MT of crystalline iodine in Q1 from Iofina's six
IOsorb® plants
· The iodine global spot price started around the mid to upper sixties
$ per kg and prices are expected to stay at these levels into the second half
of 2024
· IO#10 is currently on schedule and expected to be operational in Q3
2024
· Potential sites for IO#11 identified
· Renewal of iodide-rich brine water supply agreements for two IOsorb®
plants
(1)Refer to the Consolidated Statement of Comprehensive Income for calculation
Commenting, President and CEO, Dr. Tom Becker, stated:
"Iofina delivered another strong year across the business, which culminated in
record sales of just over $50m. Despite the impact of sustained inflation and
higher input costs during 2023, profits remained resilient and were only
marginally down on last year. The business has continued to generate cash and
further reduced its debt level, moving into a net cash position of $1.2m. We
have made important investments for growth, in particular the completion and
switch on of IO#9 in June 2023 as well as further R&D within our
derivatives business to introduce new products to our customers.
"In Q4 2023, we announced the agreement was signed for IO#10 and we remain on
track to have this in operation in Q3 2024. Like IO#9, the new plant is
expected to add 100MT-150MT of crystalline iodine per annum. We are also
pleased that negotiations are progressing well with several interested parties
for IO#11, with potential sites identified. Outside of the construction of new
IOsorb® plants, the Board continues to examine other potential growth
projects that complement Iofina's existing skill set and range of products,
which may present cross-selling opportunities.
"2024 has started well, with Q1 production up 15.5% year-on-year as recently
announced, and iodine prices continue to remain at their higher, favourable
levels. We have also confirmed the long-term agreement to supply two IOsorb®
plants with iodide-rich brine water with the current supplier. The security in
the new agreement ensures the Company can keep on track with its strategy in
aiming to increase production from our existing plants and to match the
increased production with additional sales."
Enquiries:
Dr. Tom Becker
CEO & President
Iofina plc
Tel: +44 (0)20 3006 3135
Nomad & Broker:
Henry Fitzgerald-O'Connor/Harry Rees
Canaccord Genuity Limited
Tel: +44 (0)20 7523 8000
Media Contact:
Charles Goodwin/Shivantha Thambirajah/Zara McKinlay
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® IOsorb® technology. Iofina currently operates six
producing IOsorb® 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
celebrated its 40(th) anniversary in 2023 as a preeminent halogen-based
specialty chemicals company.
www.iofina.com (http://www.iofina.com)
Contents
COMPANY
INFORMATION.......................................................................................................
..2
CHAIRMAN'S
STATEMENT........................................................................................................
..3
FINANCIAL
REVIEW..................................................................................................................
..8
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
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF IOFINA
PLC......................................37
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
.....................................................47
CONSOLIDATED BALANCE SHEET
..............................................................................................
48
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY.....................................49
CONSOLIDATED CASH FLOW STATEMENT
.................................................................................
50
COMPANY BALANCE SHEET
........................................................................................................51
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY.............................................52
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS...........................................................53
COMPANY INFORMATION
Directors
L J Baller
T M Becker
W D Bellamy
M T Lewin
J F Mermoud
M Fallin Christensen
Secretary
Simon Holden
Company number 05393357
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 Canaccord Genuity Limited
88 Wood Street
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
Iofina delivered another strong performance in 2023 against a backdrop of
higher inflation, which saw input costs rise materially across all industries.
We achieved increased revenues for the sixth consecutive year of $50.0m, an
increase of 19% on the previous year (2022: $42.2m). The Group's adjusted
EBITDA of $10.8m was marginally down from the previous year (2022: $11.5m).
Gross profit reduced marginally from $15.8m in 2022 to $15.7m and profit
before tax was $8.3m (2022: $10.0m).
Cash started the year at $5.9m and ended $0.6m higher at $6.5m. This included
paying off $1.4m of the bank term loan per the borrowing schedule and
investing heavily into capital projects. We remain strategically
well-positioned to finance our ongoing operational investment program through
a strong cash position and availability of bank facilities, which includes
$4.0m of currently undrawn loans for new plant construction. The Group's net
debt of $0.9m improved to a net cash position of $1.2m and net cash inflow
from operating activities was strong at $8.4m.
Iofina produced 559 metric tonnes ("MT") of crystalline iodine in 2023, an
increase of 8.3% over 2022 (516 MT). Average prices per kilogram achieved for
sales of crystalline iodine, based on 100% iodine, decreased 2.8% on the
previous year to an average of $69.19 per kg for 2023, whilst non-iodine
product sales fell by 25% from $10.8m in 2022 to $8.1m in 2023 due to slowing
end market demand.
One of the Key Performance Indicators ("KPI's") the Company utilises to
measure progression showed a healthy bank term debt to Adjusted EBITDA ratio
of 0.50 for year-end 2023. This compared to 0.58 for year-end 2022 (1.19 for
year-end 2021). In 2017, we set out to reduce the Group's debt-to-EBITDA ratio
to below one from an unhealthy and unsustainable 15.53 ratio. The
debt-to-EBITDA ratio is a leverage metric that measures the amount of income
that is available to pay down debt before covering interest, taxes,
depreciation, and amortisation expenses. Industry standards indicate a term
debt to EBITDA ratio of below three is standard and acceptable. A
debt-to-EBITDA ratio below one indicates that the Group is generating enough
cash from operations to cover its debts plus has excess funds for other
purposes such as plant expansion. In addition, the Company was able to reduce
its net debt position from $0.9m to a net cash position of $1.2m, as stated
above, while at the same time doubling capital investments and reinvestments
into chemical and iodine plants of $6.2m (2022: $3.1m).
Iofina remains committed to the safety of our employees and our communities.
We continue to improve upon our robust Environmental Health and Safety
("EH&S") programs and apply the tenets of these programs in our daily
activities. At the end of 2023, the Group has not had a Lost Time Incident
("LTI") in 993 days has not experienced any LTI's so far in 2024. Iofina
continues to invest heavily in training and software for EH&S and is
committed to the highest standards.
We have built an excellent business with diversified, low-cost production
across a diverse array of IOsorb® plants and a specialty chemicals business,
supplying customers globally across several end markets. While many of our
KPI's were encouraging in 2023, overall results were mixed as we tried to
maintain a stronger sales margin, giving up lower-margin business, whilst
dealing with inflationary pressures, especially on new plant construction.
Iofina Chemical ("IC")
IC operates as the Group's chemical derivatives manufacturer and processes all
product sales. Sales in 2023 exceeded $50m for the first time in the Group's
history. Iodine prices, which remain strong, contributed to this achievement,
along with new product offerings. The largest revenue driver was direct sales
of Iofina-produced crystalline iodine, which had strong global demand in 2023.
Total sales of other iodine and non-iodine derivatives were mixed and declined
year-on-year. After recording strong sales of Hydriodic acid ("HI") and
Iodopropynyl butylcarbamate ("IPBC") in 2022, sales of these compounds were
down in 2023 versus the prior year. These declines were likely a result of
inventory adjustments by customers, with slower demand for HI in agricultural
applications, and some consolidation in the IPBC market over the last two
years. However, we do expect IPBC sales to bounce back in 2024. Methyl
iodide, which is used in pharmaceutical applications, acetic acid
manufacturing and as a methylating agent in organic specialty chemical
manufacturing, was a strong performer for IC in 2023. As previously
communicated, changes in product mixes year over year are common and we will
continue to drive sales of all IC products.
IC production and sales of non-iodine halogen derivatives remain a strategic
segment of the Group. These compounds add to the diversity of our offerings
and support various applications including biocides and semiconductor etchant
uses. Non-iodine sales accounted for 16% of the Group's total sales in 2023,
with overall sales for these non-iodine derivatives falling in 2023. Iofina
expects semiconductor demand to be the key driver of sales for our non-iodine
derivatives in 2024 as this sector continues to strengthen.
IC is an ISO 9001:2015 certified company, continuing to meet or exceed our
internal KPI's regarding IC's quality performance to ensure it is delivering
quality compounds timely that meet or exceed customer expectations.
In 2023, several plant improvements at IC were authorised, including the
installation of a new chiller to support the production of numerous iodine
derivatives, process improvements to produce a specialty gas used in
semiconductor applications, and equipment replacements in our Sodium Iodide
and Methyl Iodide processes. The most significant changes in 2023 affected
IPBC, where improvements have resulted in faster reaction times, reduced
costs, and increased quality. Additionally, IC added equipment to produce a
new IPBC formulation for the Group.
As a specialty chemical manufacturer, IC handles numerous hazardous substances
and performs various chemical reactions in large quantities. It is imperative
that IC follow a robust safety program and we strive for continual improvement
in these safety-related measures. IC is proud to have had no LTI's in the last
1,181 days as of 31 December 2023 and no LTI's so far in 2024. Additionally,
IC management continues to build, with our employees, a strong culture focused
on safety and performance.
Research and Development ("R&D") is critical for IC to meet the Group's
expectations of continued growth. The IPBC improvements, mentioned above, were
accomplished due to our R&D efforts. Additionally, the IC research team
has focused on the following areas: systems to recover iodine from specific
industrial waste streams, the development of iodine compounds used in the
agricultural industry which is expected to be produced by IC in 2024,
developing of synthetic routes for new iodine compounds for IC, and the
development of a new synthesis of a specialty fluorinated gas. The investments
that IC continues to make in its R&D facilities and team are expected to
enhance future new product opportunities and margins realised by the Group.
As Iofina continues its expansion strategy, the Company recognised it needed
to add resources to the Group to accomplish our goals. To that end, IC hired a
new Sales and Marketing Manager in 2023 who has extensive experience in the
specialty chemical industry. In 2024, the Company's website will go through a
restructuring process to drive more traffic and further enhance the
capabilities of Iofina. With the increased marketing efforts, we expect to
expand our customer base and identify new opportunities for existing
offerings. Finally, the Company believes the new strategy will obtain new
R&D opportunities, within our core chemistries, to drive additional growth
and further new research for our customers growing needs.
Iodine Market
The global demand for iodine in 2023 was mixed. Overall, we believe that the
consumption of iodine slightly decreased in 2023 versus the previous year.
There were areas of strong growth including X-ray contrast media applications,
with other segments declining in demand such as automotive uses and some
agricultural applications due to end-market production constraints.
Additionally, there were likely some inventory corrections, especially at the
beginning of 2023, that contributed to the year-over-year decline in iodine
demand.
Nevertheless, prices remained robust and demand for Iofina's crystalline
iodine was strong among our growing customer base. Spot iodine prices began
the year near $70/kg and ended 2023 in the mid to upper sixties per kilogram.
At the time of writing, iodine prices are in the same range as year-end 2023
levels. The largest iodine application, X-ray contrast agents, is expected
to continue to grow while the totality of the rest of the iodine derivative
market is likely to stabilise or slightly increase in 2024. Barring any
unforeseen global recession or any unexpected change in supply, Iofina expects
near-term prices to remain relatively steady. The growth of Iofina's
production in 2023 and 2024 is not expected to impact the overall supply and
demand equilibrium in the global iodine market, and therefore not negatively
impact iodine prices. We believe as Chile modernises to fully incorporate
water conservation through desalination and renewable energy, this will begin
to protect the fragile ecosystems of the Atacama Desert but will also likely
increase the production cost of iodine.
Iofina Resources ("IR")
IR operates as the Group's iodine manufacturer and conducts exploration
efforts for future growth in the extraction of valuable substances, such as
iodine, from brine waters. IR has developed its proven technology to obtain
iodine from produced water brines, which are a by-product of oil and gas
production. IR currently operates six IOsorb® iodine plants in the state of
Oklahoma. In 2023, IR continued to execute its growth strategy and switched on
its newest plant IO#9 in June 2023. It also began construction of an
additional iodine plant, IO#10, in late 2023, which is expected to be
completed in Q3 2024. IR produced 559.3 MT of crystalline iodine in 2023, an
8% increase year-on-year. With a full year of production from IO#9, and
additional production expected from IO#10, IR expects to produce a record
amount of iodine for the Group in 2024.
The opening of IO#9 is a significant achievement for IR. This iodine
production plant operates with a new brine supply partner in a new core area
of production. We note that there were challenges in the timing of the opening
of this plant, and the costs associated with the building of IO#9. We have
documented and learned lessons that we will apply to the construction of
future IOsorb® plants. In late 2023, the Group announced the start of
construction of a new plant IO#10 in the same new core area in Oklahoma as
IO#9. Once operational, IO#10 is expected to produce 100-150 MT of crystalline
iodine annually, with this plant operating with a large new brine supply
partner. IR has recently welcomed back our former VP of Operations from a
Fortune 100 company into a new role to focus on managing new major business
development and overseeing the new construction of IO#10. This project manager
was heavily involved in the building of past iodine plants and has extensive
experience in iodine recovery and exploration. As previously communicated, IR
expects to double its production from 2021 levels in the next few years, and
the development of new plants such as IO#9 and IO#10 is part of that process
to achieve that goal.
To that, the IR team continues to strengthen its business development efforts
to increase future production. We have added personnel to our geological team
to provide additional capabilities to meet our growth goals and to have
adequate resources to explore new areas both inside and outside of our current
core production regions. IR continues its intern program in conjunction with
an Oklahoma university to provide additional support to our exploration
efforts.
We continue to make positive progress towards finalising the plans and
agreements necessary for our next plant, IO#11. The Directors of Iofina will
make the proper business decision regarding the timing of IO#11 based on
market and business management factors. The most likely location for IO#11
will be in our new core area in Oklahoma where IO#9 is based, and IO#10 is
being developed. IR is exploring other opportunities both in our Oklahoma core
areas, as well as in two other states in the US. We are excited about the
future growth opportunities outside of our current core areas, which could be
a step change in the magnitude of growth for Iofina.
Outside of IO#9, IR operates five other IOsorb® iodine production plants.
These plants performed as expected in 2023, and we recently announced, on 16
April 2024, a market-rate brine fee agreement with a long-term partner at two
of our sites. This agreement will help better align our partner to maximise
brine flow to those two plants. These five historic plants are situated in
Western Oklahoma, and three different partners supply our plants with produced
brine water. We continue to ensure we maintain good relationships with each
partner. IR's focus at these plants in 2023 emphasised working with our
partners to maximise brine water inputs and to achieve maximum efficiencies to
produce iodine from these plants. As these plants age, it is important to
reinvest in these facilities to avoid production downtime and ensure cost
controls at these plants are a focus for the Group. To that, our maintenance
team continues to improve its preventative maintenance program to be more
proactive in our approach to maintaining our facilities rather than reactive.
Costs of raw materials to process the brine water into iodine continued to
increase in 2023, however, chemical cost increases in 2023 were lower than
those of 2022. We have worked with our major raw material suppliers, and have
supply agreements in place to minimise the impact of inflation of chemicals
used in our process. We will continue to source from various suppliers, and we
may explore producing these chemicals ourselves if needed.
IR continues to make strides in our safety culture and systems. The Group has
invested in software to aid in our EH&S program as well as increase
training for our employees. This system has improved IR's data collection of
important EH&S information and enhanced our corrective action program to
continually improve how we operate. IR had no LTIs in 993 days as of 31
December 2023 and no LTI's in 2024 at the time of writing. In late 2023, IR
hired an additional dedicated EH&S employee to support our facilities as
we continue to build and operate additional iodine plants.
Outlook
As we go into 2024, IO#10 currently appears to be in a location of strong
brine flows and good iodine content and will be a material addition to the
Group. We believe that our current focus area of future plants will be a
paradigm shift for the Group, and it will ignite our long-term development
plans as we seek to diversify geographically from prior plant locations. In
2023, we were able to provide evidence that Iofina is a highly attractive and
profitable Group, and we continued to share our story with global
institutional funds, family offices, and retail investors. Our shareholder
register expanded in the financial year with the addition of new institutional
holdings. We will continue to hold roadshows and investor programs in 2024
under the stewardship of Canaccord Genuity, the Company's nominated adviser
and broker. We have a strategic plan to stabilise costs from inflationary
pressures, which will help as we go into the next growth phase.
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 through internal research, development, and
joint ventures. We are focused on developing strategies to reduce our reliance
on our current oil and gas partners and explore new geographic areas in North
America. We continue to analyse all potential business partnerships and
product combinations in our chemical Group that could be beneficial to
shareholders as a growing halogen chemistry Group, and we always continue to
focus on calculated opportunities in our approach to growth.
I would like to thank all our shareholders for their continued support. We are
looking forward to appraising the excellent developments we are seeing as we
move the Company forward in setting continued record years.
Lance J Baller
Non-Executive Chairman
Iofina plc
1 May 2024
FINANCIAL REVIEW
Summary 2023 v 2022
· Sixth successive year of record revenue
· Revenue increased by 19% from $42.2m to $50.0m
· Gross profit decreased by 1% from $15.8m to $15.7m
· Adjusted EBITDA declined by 6% from $11.5m to $10.8m
· Profit before tax decreased by 17% from $10.0m to $8.3m
· Net debt of $0.9m became net cash of $1.2m*
· Capital investment into chemical and iodine plants was $6.2m (2022:
$3.1m)
*excludes lease liabilities
Trading results
Turnover Crystallised 2023 Crystallised 2022
Iodine 85% Sales Iodine 85% Sales
MT $m MT $m
Crystallised iodine 423 24.9 220 13.3
Derivatives 185 12.9 221 16.3
Prilled iodine 4.1 1.8
Total iodine sales 608 41.9 441 31.4
Non-iodine 8.1 10.8
Total sales $50.0 $42.2
Revenue increased by 19% from $42.2m to $50.0m with the main driver being
strong demand for the Company's crystallised iodine. Volumes sold increased by
92% from 220MT to 423MT, and the average price achieved (based on 100% prilled
iodine equivalent) was only 3% below the record levels achieved in 2022, at
$69.19 per kg compared to $71.20 per kg.
Derivative compounds turnover declined by 21% from $16.3m to $12.9m as some
expected demand did not materialise and pricing was an issue for some
products. Consequently, resources were shifted towards better opportunities in
the raw iodine market.
The higher level of iodine sales was facilitated by an increase in production
to 559MT from 516MT in 2022, reflecting a contribution of 32MT from the new
IO#9 plant that commenced production in July 2023. There was also an efficient
conversion of production into sales, with 608MT of crystallised iodine sold in
total compared to production of 559MT (2022: 441MT sold compared to 516MT
produced).
Prilled iodine sales more than doubled from $1.8m to $4.1m, representing
further success with iodine sales channels.
Non-iodine sales fell back by 25% from $10.8m to $8.1m, reflecting some
reduction in demand for the Company's specialty chemical gases.
Gross profit fell slightly by 1% from $15.8m (38% of sales) to $15.7m (31% of
sales). Iodine prices showed only a slight decline, but the average cost of
iodine production increased by more than 20%. The areas chiefly responsible
for the increase in cost were plant chemicals and maintenance. Also,
internally produced iodine aside, the sales mix was less favourable for
profitability, with a reduction in non-iodine sales.
Adjusted EBITDA fell by $0.7m (6%) from $11.5m (27% of sales) to $10.8m (22%
of sales). As well as the factors mentioned above, SG&A costs increased
somewhat with some investment in personnel and programmes to support the
planned expansion of the business.
Interest swap derivative asset
The swap contract that pegs interest on 70% of the bank loan to 3.99%
continues to deliver benefits in the continuing higher interest rate
environment. The swap rebate for 2023 amounted to $152k (2022: $23K). The
derivative asset resulting from the swap contract has been revalued at $161k
as at 31 December 2023 (31 December 2022: $249K) by reference to market
expectations for future SOFR rates, and an amount of $88k has been charged
against 2023 income to reflect the unwinding of the benefit (2022 credit:
$249k).
Profit before tax
Profit before tax decreased by $1.7m (17%) from $10.0m (2022) to $8.3m (2023).
In addition to the factors set out above there was also an exceptional
credit of $0.45m in 2022 (Note 12) with nothing in that category for 2023.
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 $6.2m in capital projects and equipment in the year (2022:
$3.1m). Approximately $4m of this 2023 capex relates to the continued
construction of the IO#9 plant in Oklahoma, which was completed mid-year and
produced 32MT of iodine in the second half, with total costs amounting to
$5.8m. A further $0.3m was spent in 2023 on the beginning of construction of
IO#10 plant, and a $5m capital commitment for this plant is disclosed in Note
27. Most of the balance of expenditure ($1.2m) relates to new projects,
process improvements and replacements at the Iofina Chemical plant.
Cash flow
Cash started the year at $5.9m and ended $0.6m higher at $6.5m, after paying
off $1.4m of the bank term loan in accordance with the borrowing schedule and
investing $6.2m in capital projects. Net debt of $0.9m improved to net cash of
$1.2m. Net cash inflow from operating activities was $8.4m.
Malcolm Lewin
Chief Financial Officer
Iofina plc
1 May 2024
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 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® (WET®) and WET® IOsorb® 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
are used as a raw material to produce iodine at the Group's multiple IOsorb®
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
Company's WET® IOsorb® technology has unique elements that allow Iofina to
handle brines which contain residual hydrocarbons and efficiently produce
high-quality iodine. The Directors of the Company believe that Iofina's
production process, which utilises 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. Compounds containing iodine 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® 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 a low
cost, differentiates Iofina from other iodine producers. This has been proven
by the expansion of production and opening of new IOsorb® plants such as
IO#9, which opened in 2023, and IO#10 which is under construction and
scheduled to open in Q3 2024. Additionally, the Directors believe that the
Group's technology to produce iodine is far more environmentally friendly
compared to other producers. By using a produced water waste stream from the
oil and gas industry to isolate iodine versus isolating iodine from ores,
Iofina's process is considered 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
whilst focusing on our core expertise is important. Iofina Resources
diversifies its iodine production through multiple IOsorb® production plants,
with multiple brine suppliers in western Oklahoma. The technology the Group
has developed, utilising 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® plants increases
production, profit, and diversification. Continued expansion of the Group's
geological model provides opportunities for Iofina outside of its current core
areas.
Iofina Chemical produces a wide range of 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. 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 rose significantly between 2021 through mid-year 2022, exceeding
$70/kg by July 2022 and stabilising at these levels through early 2023.
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. As an iodine manufacturer, iodine prices have a significant impact on
the Group's gross profit margins.
During 2023, Iofina believes the total global demand for iodine was slightly
lower than in 2022, with some inventory corrections at the beginning of the
year contributing to this slightly lower demand. Demand for X-ray contrast
media applications, continued to show significant increases, whilst other
applications such as automotive and some agricultural applications had weaker
demand. Currently, iodine prices remain high versus historical levels, and the
range of prices remains larger than typical historical prices. Spot prices
peaked above $70/kg during 2022 and have settled into the current range of mid
to upper sixties per kilogram. Contracted iodine prices for large customers
are generally slightly lower than spot prices. Demand for Iofina's iodine and
iodine derivatives was mixed in 2023, with Iofina Chemical seeing mixed demand
for some of its iodine derivatives but strong demand for Iofina's crystalline
iodine. Although it is difficult to predict, we expect demand for iodine to
slightly increase versus 2023 levels as most inventory corrections have
already occurred and it is now less likely that a global recession will occur.
We expect iodine prices to remain steady at least through H1 2024 but we note
that any additional Chilean production coming onstream may increase overall
global iodine supplies. Inflation in 2023 has remained at high levels but less
than in 2022. However, this has resulted in higher costs for Iofina's raw
materials, labour and energy.
The Directors recognised that, as the Company built its IOsorb® 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 most of these goals were achieved and iodine market
conditions became more favourable, the Directors commenced the next phase of
Iofina's business plan with a 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 successfully lowered its 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 has continued its expansion
efforts and successfully opened IO#9 in June 2023 and is currently
constructing IO#10 which is expected to open in Q3 2024.
The Group is committed to establishing new routes to growth and is
investigating new locations and partnerships to expand iodine production.
Lessons learned from past expansion play a role in management's iodine plant
growth. Building of future IOsorb® plants will be done prudently to ensure to
the best of our knowledge that Iofina has a long-term, low-cost iodine
production. With an expanding iodine market and Iofina's improved balance
sheet, Iofina will likely embark on additional iodine plants after IO#10
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® 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 give the Group further diversity.
Iofina Chemical invested in multiple projects in 2023, and will continue to
invest in areas to expand current products and develop new products for 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
2023 2022
$'000 $'000
Revenue from sales of iodine and iodine derivatives $41,940 $31,422
Revenue from non-iodine products $8,096 $10,776
Total revenue $50,036 $42,198
Total pounds of product shipped (LBS '000) 1,824 1,640
Crystallised iodine produced (Metric Tonnes) 559 516
IOsorb® plants in operation (year-end) 6 5
Commentary on some of the above indicators is to be found in the Chairman's
Statement on pages 3 to 7.
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 8 to 9.
Objectives
At the end of 2023, the Group had six operating IOsorb® iodine production
facilities in the two core areas of Oklahoma and a seventh under construction.
While the theoretical capacity of these plants is very high, the practical
capacity of the plants is somewhat lower. Practical capacity considers
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 utilising existing brine produced from oil
and gas production and quickly bring these sites into production. The
execution of a prudent growth strategy continued with the start of
construction of IO#8 in late 2019, which was completed in April 2020, and we
continue to open new iodine plants, including IO#9 which opened in June of
2023. 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. As previously stated, the Group expects to continue
its iodine production and expects to double iodine production from 2021 levels
in the next few years. In late 2023, the Group began construction on IO#10
with an expectation to complete this plant in Q3 2024.
Brine supply to our IOsorb® 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
maximise 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 realise
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.
The 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 concerning 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 of 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 2024 will occur with the completion of IO#10 and
we expect to determine the site for IO#11. The Directors will evaluate market
conditions and detailed information on potential future plant sites before
spending capital on new IOsorb® plants.
Iofina Chemical has continued its progress to improve current processes,
ensure capacity meets demand, and continue R&D efforts to bring new
product lines in line with our core chemistries. These include investments in
both iodine-based products and other non-iodine specialty chemicals.
Significant capital investment projects in 2023 at Iofina Chemical included
ongoing methyl fluoride process improvements and IPBC process enhancements. In
2023, Iofina Chemical hired a new sales manager to support current sales
channels as well as develop new sales channels for current products and
identify other product opportunities for future growth. Iofina expects in
the second half of 2024 to bring a new iodine compound, used in agricultural
applications, to the market. We are also actively pursuing multiple R&D
projects aimed at new iodine and halogen-based compounds, many of which are
for new applications. 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.
Lastly, 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® 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® 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®
plants. The salt-water disposal wells that our partners operate may have
temporary or permanent issues which would likely affect the brine supply to
IOsorb® plants. In the past, reduction of capital spent by our partners for
new drilling and completion 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. Contract terms regarding brine supply are a risk to our iodine source.
Iofina strives to maintain good relationships with our partners who provide
the brine water to our existing IOsorb® 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 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
the ability to obtain key raw materials and may result in increased costs for
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 minimise
any negative impacts on the business, but these protocols only reduce risk and
cannot eliminate it. 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 and the current Middle East conflicts
have not directly affected Iofina's operations. Additional political sanctions
or negative impacts on global economies because of these conflicts may
adversely impact our business. Iofina does not have any current sales exposure
with Russia, Ukraine, or in or around the Middle East. 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 a risk of additional earthquakes and regulation moving forward. Changes
in laws or regulation of brine streams could affect brine availability or the
cost of producing iodine.
As a specialty chemical manufacturer, new regulations based on chemical uses,
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®
facility and has obtained ISO 9001:2015 certification.
Changes in Markets and Competition: Iofina is 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 current high-interest rate
environment implemented by central banks to combat inflation may slow down
global economies. 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. Future planned expansions of iodine production in Chile
may change the market's 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 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 substantial demand for iodine and
iodine-incorporated products has continued through today. As a result, iodine
prices rose significantly between H1 2021 and mid-year 2022. During H2 2022,
iodine prices peaked and have subsequently slowly come off these highs during
2023 and have currently settled in the mid to upper sixties per kilogram.
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 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 2023, 13% of revenue recognised was attributable to one
long-term customer and six 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 are 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 2023, Iofina
executed a new agreement for IO#10 with a new brine supply partner. Post
Period, we announced market rate brine fee agreements with a long-term brine
supplier for two of our sites.
Regulation and Trade: Iofina's 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 expenses 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 the 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.
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 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
higher than ideal specialty chemical derivative end products and in-process
goods. By the end of 2023, the total inventory levels declined slightly from
31 December 2022 levels. Inventories are cyclical within our business and
management closely tracks these inventories along with known and anticipated
demand for products 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 products
due to labour shortages.
Significant Shareholders: Significant shareholders may have the ability to
effect changes that result in a material adverse effect on 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 remain relatively high and have
negatively impacted debt costs. The Group adjusted its capital improvement
credit line to a $4 million term loan with a drawdown period through to 1 July
2024, to be used for IO#10 plant expenditures and other Capex projects as
appropriate. This line carries variable interest rates.
Inflation in the USA and globally remained relatively high in 2023, but
declined compared to 2022. However, the costs of goods, energy, and labour
have increased substantially in the last few years and while inflation is
declining, it is still a risk for the Group moving forward. The ability to
maintain margins in an increasingly 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 on our business.
Going concern
The Group has performed well in 2023 and is performing as anticipated in 2024
and generating cash. In 2023, the Group achieved a profit before taxation of
$8.3m and a net cash inflow from operating activities of $8.4m. Net debt of
$0.9m at the end of 2022 improved to net cash of $1.2m as of 31 December 2023.
The markets into which the Group sells its products continue to experience
good 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
1 May 2024
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 Company adopted the 2018 Quoted Companies Alliance
Corporate Governance Code (the "QCA Code") in line with the London Stock
Exchange's AIM Rules. The QCA Code was reissued on 13 November 2023 and the
Company will be following the principles set out therein for 2024. The three
themes for the 2023 QCA Code are: (1) deliver growth; (2) maintain a dynamic
management framework; and (3) build trust.
This Statement, in conjunction with the corporate governance statement
published on our website (see: https://iofina.com/corporate-governance/)
follows the 10 principles of the 2018 QCA Code and how we have applied it.
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
(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 2023.
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 28.
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
1 May 2024
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. The
Company has adopted the 2018 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® (WET®) IOsorb®
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®. 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 2018 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, Mary Fallin Christensen 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 1 2
Dr Thomas Becker 11 - -
Malcolm Lewin 10 - -
Dr William Bellamy 10 1 2
J. Frank Mermoud 10 1 2
Mary Fallin Christensen 11 - 1
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/
(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
(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:
2023 2022
Salary Bonus Total $ Salary Bonus Total $
Lance Baller 122,120 - 122,120 109,620 - 109,620
Dr. Thomas Becker 286,388 45,000 331,388 274,400 30,000 304,400
Malcolm Lewin 181,020 35,000 216,020 175,275 25,000 200,275
William Bellamy 42,500 - 42,500 30,000 - 30,000
Frank Mermoud 42,500 - 42,500 30,000 - 30,000
Mary Fallin Christensen 42,500 - 42,500 30,000 - 30,000
Total $717,028 $80,000 $797,028 $649,295 $55,000 $704,295
No pension contributions were paid on behalf of the directors in 2022 or 2023.
Directors' and officers' insurance is in place on a Group-wide basis.
The interests of the Directors in office as at 31 December 2023 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
2023
1 January 2023
L J
Baller
5,500,000
5,500,000
Dr. T M
Becker
139,430
139,430
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
2023 are set out in the table below. No further options have been granted
between 31 December 2023 and the date of signing these financial statements.
No Directors exercised options in 2023.
Name 2018 Options granted 2019 Options granted 2020 Options granted 2022 Options granted 2023 Options granted
Dr T Becker 660,000 242,000 266,200 266,200 266,200
M Lewin 330,000 165,000 181,500 181,500 181,500
L Baller 220,000 165,000 165,000 165,000 165,000
Dr W Bellamy 110,000 82,500 82,500 82,500 82,500
JF Mermoud - 82,500 82,500 82,500 82,500
M Fallin Christensen - - 82,500
82,500 82,500
1,320,000 737,000 860,200 860,200 860,200
Exercise price 16.2p 21.3p 12.5p 17.6p 31.8p
Lapse date 13/06/28 24/07/29 15/12/30 8/3/32 27/4/33
On behalf of the Board
Dr. Thomas M. Becker
Chief Executive Officer and President
1 May 2024
Environmental, Social, and Governance ('ESG')
The Group has continually maintained a philosophy and commitment to perform
its operations in a safe, responsible manner regarding 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 across global industries. Iofina chose 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® IOsorb®
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, with the vast majority of IC's processes
being 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 minimising 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 continuing to progress in a long-term initiative to
replace some large older blowers with more efficient units. Iofina Chemical
improved a process to remove a raw material input and reduce the time to
create a batch of the material, which will improve the overall environmental
impact of production. Iofina continues to implement strategies to reduce the
environmental impacts of current operations, as well as continually evaluating
the minimisation of emissions from new plants and processes. Upgrades and new
processes undergo a review which comprises evaluations to minimise energy use
and environmental impact.
The Group's total energy consumption at our manufacturing facilities in 2023
was:
Electricity (kWh) 11,404,278; Natural gas (CCF) 67,281; for the 1267 MT of
goods produced in 2023 by the Group. In 2022, consumption was: Electricity
(kWh) 11,390,576; Natural gas (CCF) 70,945; for the 1496 MT of goods produced
in 2022 by the Group.
The Company is continuing to develop metrics to measure the Group's
environmental impact.
Company and Group information
Iofina plc is a company incorporated in England and Wales; company number
05393357, with a registered office at 48 Chancery Lane, London WC2A 1JF (c/o
Keystone Law, Attn: Simon Holden). SECR is prepared for the Group's UK
activities and reported below.
Streamlined energy and carbon reporting (SECR)
Group's greenhouse gas emission data
Year End Base Year
31 December 2023
Scope 3
Emissions in MT CO2e from business travel involving trips where the journey 28.67 28.67
started or ended in the UK including emissions from air, taxi, hotel stays,
etc.
Intensity ratio MT CO2e per $m of income 0.573 0.573
Reporting Period
The reporting period for SECR data is 1 January 2023 through 31 December
2023.
Methodology and Discussion
We have followed the 2019 UK Government Environmental Reporting Guidelines and
have calculated emissions based on 2023 UK Government Conversion Factors.
The SECR data lists 2023 levels and 2023 will be considered the 'base year'
for future reporting as 2023 is the first year that Iofina was required to
communicate this SECR information. Scope 3 emissions are listed as required in
the reporting guidelines. We have chosen to report the ratio of CO2e per $m of
income, as this is a reasonable reflection of the business activities. The
Scope 3 emissions reported only reflect the impact on UK travel activities.
The company is committed to reduce environmental impacts, as discussed in the
previous section of this report, as well as minimise the impact of UK
travel. Some initiatives to reduce impacts due to UK travel include taking
direct flights when available and affordable, holding virtual meetings with
stakeholders to minimise frequency of trips to the UK from Iofina's USA based
employees, and using public transportation in the UK whenever possible.
Targets
Iofina continues to prioritise the minimisation of environmental impacts of
our UK operations by minimising any trips to and from the UK and holding
virtual meetings when appropriate. We will continue to utilise public
transportation in the UK on trips whenever practical. We feel that our
current travel actions in the UK are appropriate and will continue to maintain
these policies. We expect that the Group's total Scope 3 emissions per $m of
income to reduce by 10% over the next five years.
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 communities.
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 2023 there were zero Lost Time Incidents ('LTI') for the Group. In fact,
the Group has not experienced a LTI in over three years.
Iofina Lost Time Incidents
2022 2023
Lost Time Incidents 0 0
Incident Rate 0 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.
Community
Iofina is committed to being a socially 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 continues to investigate 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.
Total Board Members %Male %Female %Non-executive % Executive CEO/Chairman separate 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 2023 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 the preparation of the Group's
financial statements is applicable law and UK adopted International Accounting
Standards. The financial reporting framework that has been applied in the
preparation of the Parent Company's financial statements is FRS 101 'Reduced
Disclosure Framework applicable in the UK and Republic of Ireland' ("FRS 101"
or "UK GAAP") and in accordance with the provisions of the Companies Act 2006.
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 2023 and of
the Group's profit for the year then ended;
· the Group financial statements have been properly prepared in
accordance with UK adopted International Accounting Standards;
· the Parent Company financial statements have been properly prepared
in accordance with FRS 101 and as applied in accordance with the provisions of
the Companies Act 2006; 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 consolidated cash flow forecasts The cash flow forecasts demonstrates that the Group will have a cash flow
incorporating all entities within the Group covering the period to 31 December surplus throughout the forecast period. These incorporated all budgeted and
2025. These are based on their expectation of future costs, including budgeted committed expenditure, the schedule of repayment for the term loan and
operating and capital expenditure on all of the group's operating plants movements in working capital.
licence areas and expectations of future iodine production levels and
commodity price. We challenged management on assumptions used including iodine prices, iodine
production and sales, inflation and various other costs. In reviewing the cash
Our review included: flow forecasts, we separately sensitised the commodity price to determine the
maximum the price of iodine could fall by, assuming a constant volume, in
· Assessing the transparency, completeness and accuracy of the matters order for the cash to be depleted to Nil by the end of the forecast period.
covered in the going concern disclosure and management's cash flow Overall, the price of iodine would need to decrease by 51% in 2024 and 58% in
projections; 2025 in order for EBITDA to be Nil for both years of the forecasts. Given the
price of iodine has been increasing since 2018, this is not considered likely.
· Reviewing the cash flow forecasts, the methodology behind these,
challenging the assumptions with management and corroborating them with our We have further sensitised the demand for crystallised iodine, reducing it to
historical knowledge of the Group; Nil. The results of this still showed a positive EBITDA for the group as a
result of the flex in variable costs.
· Performing a sensitivity analysis on the budgets provided to assess
the change in revenue and iodine prices that would need to occur to push the We compared managements forecast to actual results post year end and noted
Group into a cash negative position; timing differences and no other material variances.
· Ensuring arithmetic accuracy of the model; We have compared the prior year cash flow projection with the current year
actual results and noted some differences noted in demand of lower gross
· Obtaining post year end management information and comparing these to margin products and the remaining differences for cash flow due to timing
forecasts to assess whether budgeting is reasonable and the results are in only.
line with expectations;
Finally, we have obtained the loan covenants submitted to the lender post year
· Comparing the prior year budgeted cash flow with actual results to end as well as recalculated loan covenants for 31 December 2024 and 2025
assess management's ability to budget; and showing no breaches based on actual or budgeted figures.
· Reviewing post year end loan covenants submitted as well as
recalculated based on projected figures to ensure compliance.
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 Chief Financial Officer
(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:
(applicable to the Group) · Documenting our understanding of management's process for evaluating
revenue recognition and assessing the design effectiveness and implementation
of related key controls;
Under IFRS 15, the entity shall recognise revenue to depict the transfer of · Testing a sample of transactions throughout the year to ensure the
goods or services to customers in an amount that reflects the consideration to recognition is in line with IFRS 15, the Group accounting policy and to ensure
which the entity expects to be entitled in exchange for those goods or the accuracy and occurrence of revenue;
services.
· Tested a sample of transactions pre and post year end to assess
whether sales are accounted for in the correct period;
The revenue stream for the group is derived from sale of iodine derivatives, · Tested a sample of post year end credit notes to ensure no large
iodine chemicals and ancillary products, all of which are fundamental to the credit notes were issued post year end relating to 2023 sales; and
financial statements and a systematic error in the calculation could lead to a
material error. · Using our data analytics software to assess the correlations between
revenue entries, trade receivables and subsequent cash receipt. This would
identify whether any subsequent reversal of trade receivables should have
impacted the recognition of the revenue.
In this regards, we therefore consider that there is a significant risk over
the cut off, occurrence and accuracy of revenue recognition.
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 of property plant and equipment Our audit work included, but was not restricted to:
(applicable to the Group) · Reviewing Management's assessment of forecasted cash flows and
challenged significant movements in forecasted cash flows compared to historic
performance;
Under International Accounting Standard 36 'Impairment of Assets' (IAS 36), · Reviewing Management's forecasted cash flows that feed into the
companies are required to assess whether there is any indication that an asset discounted cash flow model and challenged significant assumptions with
may be impaired at each reporting date. reference to historic results, market trends, appropriateness of discount
rates and future expectations of commodity prices and sales growth;
· Critically analysing whether or not the IOSorb plants should be
Property, plant and equipment represent a significant balance in the financial viewed as one Cash Generating Unit ("CGU") or multiple CGU's;
statements with a combined net book value of $24.8m (2022 - $20.6m). The
balance is primarily comprised of the IOSorb plants, equipment and machinery · Challenging management and gained an understanding of what is
and construction in progress. considered a cash generating unit; and
· Performing a downside sensitivity analysis and held discussions with
Management to assess the likelihood of certain circumstances crystallising.
The estimated recoverable amount of these balances is subjective due to the
inherent uncertainty involved in forecasting and probability of the related
future cash flows which is based on expected future cash flows of the IOSorb
plants. The Group's accounting policy on Impairment is shown in Principal Accounting
Policies for the consolidated financial statements and related disclosures are
included in note 1m.
Significant management judgement and estimation uncertainty is involved in
this area, where the primary inputs are:
Key observations
• Estimating cash flow forecasts; and
As a result of the audit procedures we performed and, after considering
• Selecting appropriate assumptions such as growth rate, Iodine prices and management's disclosures of the judgements applied by them, we have concluded
discount rate. that no impairments are required.
We therefore identified the risk over the valuation of property plant and We have confirmed the estimates and judgements utilised within the models
equipment as a significant risk. applied in relation to the impairment of property, plant and equipment are
within acceptable ranges.
We are also satisfied that the plants should be considered one CGU.
Valuation of Inventory Our audit work included, but was not restricted to:
(applicable to the Group) · Reviewed the inventory valuation on a sample basis to assess whether
it is held at the lower of cost and net realisable value;
· Considered the inputs used and accuracy of the billable of materials
Inventory primarily consists of iodine and iodine derivatives. Inventory calculation to value the initial cost per unit of the inventory; and
should be held at the lower of cost and net realisable value.
· Considered the inputs used and accuracy of calculations of the value
The net realisable value is the estimated selling price in the ordinary course of overheads absorbed into inventory. We challenged these assumptions with
of business less any applicable selling expenses. As at 31 December 2023, the management to ensure they are appropriate.
inventory is valued at $10.1m (2022 - $10.2m). There is a risk that the
carrying value in the Group accounts is higher than the recoverable amount and
therefore materially misstated. Further, there is the added risk of the
complexity of the measurement of the costs of conversion of the inventory and The Group's accounting policy on Inventories is shown in Principal Accounting
the estimates and judgements around this. Policies for the consolidated financial statements and related disclosures are
included in note 1o.
We therefore identified the valuation of inventory as a key audit matter,
which was 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 of investments in subsidiaries and Our audit work included, but was not restricted to:
intercompany balances
· obtaining and reviewing the director's assessment of impairment with
(applicable to the Company only) regards to investment and loans due from its subsidiaries to assess whether
the treatment of the balances was in line with IAS 36;
· reviewing the results of the impairment reviews undertaken by the
Due to the material size of the investments in, and loans to, the subsidiaries directors and critically assess and challenge management for the assumptions
the directors should critically consider if any indicators of impairment exist used within the impairment review to ensure they are appropriate;
in relation to the balances.
· reviewing the 2023 forecasts against actual results to determine the
The estimated recoverable amount of these balances is subjective due to the Directors' historic forecasting accuracy;
inherent uncertainty involved in forecasting the profitability of the
subsidiaries. · performing a sensitivity analysis on the key inputs mentioned above
with the key being the decline in Iodine prices and sales growth; and
Where indicators of impairment have been identified a robust review of the
investments held by the Parent Company and any amounts due from subsidiaries · calculating the enterprise value of the company and compared to net
to the Parent Company should be undertaken by the directors to confirm the book value ("NBV") of the investment and loans due to subsidiaries.
value in use of these amounts and that there are no indications, or
requirements for, impairments of the amounts. The Group's accounting policy on impairment is shown in Principal Accounting
Policies for the consolidated financial statements and related disclosures are
Significant management judgement and estimation uncertainty is involved in included in note 1m.
this area, where the primary inputs are:
• Estimating cash flow forecasts;
Key observations
• Selecting an appropriate assumption such as growth rate and discount rate.
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 no impairments are required.
We therefore identified the valuation of investments in subsidiaries and
intercompany balances as a key audit matter, which was one of the most
significant assessed risks of material misstatement.
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 Measure Group Parent
Overall materiality We determined materiality for the financial statements as a whole to be We determined materiality for the financial statements as a whole to be
$415,700 (2022: $501,500). $366,700 (2022: $374,000).
How we determine it For 2023 materiality is based 5% of Profit Before Tax ("PBT") for the Group. As the Parent is a holding company, materiality was based on 1% of gross
assets.
Rationale for benchmarks applied As a trading group, materiality based on PBT is an appropriate factor given As a holding company, materiality is based on 1% of the total assets of the
the group's performance in the past few years has been steadily increasing. group. This is appropriate as the company is a holding company.
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 60% for the Company:
$311,800 (2022: $376,000) $220,000 (2022: $280,000)
Specific materiality We also determine a lower level of specific materiality for certain areas such
as directors' remuneration and related party transactions of $2,000.
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.
$20,750 (2022: $25,000) $16,600 (2022: $19,000)
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, UK adopted International Accounting
Standards and United Kingdom Generally Accepted Accounting Practice. 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 posting
manual journal entries to manipulate financial performance, management bias
through judgements and assumptions in significant accounting estimates, in
particular in relation to revenue recognition, and significant one-off or
unusual transactions.
Our audit procedures were designed to respond to those identified risks,
including non-compliance with laws and regulations (irregularities) and the
QCA's Code on Corporate Governance and fraud that are material to the
financial statements. Our audit procedures included but were not limited to:
• 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), US tax authorities and OSHA (Occupational Safety
& Health Administration);
• Review of correspondence with legal advisors;
• Discussing with management their policies and procedures regarding
compliance with laws and regulations;
• Enquiries of management and review of internal audit committee
reports in so far as they related to the financial statements;
• Enquiring of management as to actual and potential litigation and
claims;
• Review of relevant legal or professional costs within the
accounting records for any evidence of previously un-detected or un-reported
instances of non-compliance;
• Communicating identified laws and regulations throughout our
engagement team and remaining alert to any indications of non-compliance
throughout our audit; and
• Considering the risk of acts by the company which were contrary to
the applicable laws and regulations, including fraud.
Our audit procedures in relation to fraud included but were not limited to:
• Making enquiries of the management on whether they had knowledge
of any actual, suspected or alleged fraud;
• Gaining an understanding of the internal controls established to
mitigate risks related to fraud;
• Substantively testing of revenue and testing of journals to
identify unusual transactions and evaluating whether there was evidence of
bias by the Directors that represented a risk of material misstatement due to
fraud;
• Performed analytical procedures to identify any unusual or
unexpected relationships;
• Assessed whether judgements and assumptions made in determining
the accounting estimates were indicative of potential bias;
• Investigated the rationale behind any significant or unusual
transactions;
• Discussing amongst the engagement team the risks of fraud; and
• Addressing the risks of fraud through management override of
controls by performing journal entry testing.
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
(http://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
1 May 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2023 2022
Note $'000 $'000
Revenue 3 50,036 42,198
Cost of sales 4 (34,382) (26,369)
Gross profit 15,654 15,829
Administrative expenses 4 (4,873) (4,361)
Depreciation and amortisation 4 (2,187) (1,824)
Operating profit 8,594 9,644
Other income
Release of plant acquisition accrual 12 - 450
Profit before finance expense 8,594 10,094
Finance income 7 135 13
Interest payable 6 (327) (326)
Interest swap derivative asset 19 (88) 249
Profit before taxation 4 8,314 10,030
Taxation 8 (1,750) (2,165)
Profit for the year attributable to owners of the parent $6,564 $7,865
Earnings per share attributable to owners of the parent:
- Basic 9 $0.034 $0.041
- Diluted 9 $0.033 $0.040
2023 2022
Adjusted EBITDA: $'000 $,000
Profit before finance expense 8,594 10,094
Depreciation and amortisation 2,187 1,824
EBITDA 10,781 11,918
Net other income - (450)
Adjusted EBITDA $10,781 $11,468
All activities are classed as continuing.
The accompanying notes form part of these financial statements.
CONSOLIDATED BALANCE SHEET
31 December 31 December
2023 2022
Note $'000 $'000
Assets
Non-current assets
Intangible assets 10 103 283
Goodwill 11 3,087 3,087
Property, plant and equipment 12 24,784 20,557
Deferred tax asset 23 240 1,932
Term loan - interest swap asset 19 161 249
Total non-current assets 28,375 26,108
Current assets
Inventories 13 10,138 10,184
Trade and other receivables 15 15,491 10,487
Cash and cash equivalents 16 6,518 5,927
Total current assets 32,147 26,598
Total assets $60,522 $52,706
Equity and liabilities
Current liabilities
Trade and other payables 17 9,933 7,538
Term loan - due within one year 19 1,429 1,429
Lease liabilities 18 141 101
Total current liabilities 11,503 9,068
Non-current liabilities
Term loan - due after one year 19 3,928 5,357
Lease liabilities 18 341 309
Total non-current liabilities 4,269 5,666
Total liabilities $15,772 $14,734
Equity attributable to owners of the parent
Issued share capital 21 3,107 3,107
Share premium 60,687 60,687
Share-based payment reserve 22 2,367 2,153
Retained losses (15,467) (22,031)
Foreign currency reserve (5,944) (5,944)
Total equity $44,750 $37,972
Total equity and liabilities $60,522 $52,706
The financial statements on pages 47 to 81 were approved and authorised for
issue by the Board and were signed on its behalf on 1 May 2024.
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 2022 $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
Transactions with owners
Share-based expense - - 214 - - 214
Total transactions with owners - - 214 - - 214
Profit for the year attributable to owners of the parent - - - 6,564 - 6,564
Total comprehensive income attributable to owners of the parent - - - 6,564 - 6,564
Balance at 31 December 2023 $3,107 $60,687 $2,367 $(15,467) $(5,944) $44,750
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 December 31 December
2023 2022
$'000 $'000
Cash flows from operating activities
Profit before taxation 8,314 10,030
Adjustments for:
Depreciation 1,966 1,643
Loss on disposal of fixed asset 41 -
Amortisation of intangible assets 180 180
Share-based payments 214 146
Revaluation of derivative asset 88 (249)
Lease finance 199 -
Finance expense 327 327
Finance income (135) (13)
Tax paid (40) (31)
Operating cash inflow before changes 11,154 12,033
in working capital
Changes in working capital
Increase in trade and other receivables (5,004) (4,329)
Decrease/(increase) in inventories 46 (3,888)
Increase in trade and other payables 2,376 1,737
Net cash inflow from operating activities 8,572 5,551
Cash flows from investing activities
Interest received 135 13
Acquisition of property, plant and equipment (6,234) (3,087)
Net cash outflow from investing activities (6,099) (3,074)
Cash flows from financing activities
Term loan repayments (1,429) (1,429)
Interest paid (309) (311)
Lease payments (144) (74)
Net cash outflow from financing activities (1,882) (1,814)
Net increase in cash and cash equivalents 591 665
Cash and cash equivalents at beginning of year 5,927 5,262
Cash and cash equivalents at end of year $6,518 $5,927
COMPANY BALANCE SHEET
31 December 31 December
2023 2022
Note $'000 $'000
Assets
Non-current assets
Investment in subsidiary undertakings 26 17,299 17,199
Total non-current assets 17,299 17,199
Current assets
Due from subsidiaries 26 19,186 20,112
Trade and other receivables 15 6 2
Cash and cash equivalents 16 179 94
Total current assets 19,371 20,208
Total assets $36,670 $37,407
Equity and liabilities
Current liabilities
Trade and other payables 17 203 152
Total current liabilities 203 152
Equity attributable to the owners of the parent
Issued share capital 21 3,107 3,107
Share premium 60,687 60,687
Share-based payment reserve 22 2,367 2,153
Retained losses (23,935) (22,933)
Foreign currency reserve (5,759) (5,759)
Total equity 36,467 37,255
Total equity and liabilities $36,670 $37,407
The directors have taken advantage of the exemption offered by section 408 of
the Companies Act 2006 not to present a separate statement of comprehensive
income for the parent company.
The parent company has also taken advantage of certain disclosure exemptions
conferred by FRS 101 and has not provided a Cash Flow Statement.
The loss for the financial year dealt with in the financial statements of the
parent company was $1,002k (2022 loss $911k).
The financial statements on pages 47 to 81 were approved and authorised for
issue by the Board and were signed on its behalf on 1 May 2024
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 2022 $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
Transactions with owners
Share-based expense - - 214 - - 214
Total transactions with owners - - 214 - - 214
Loss attributable to owners of the parent - - - (1,002) - (1,002)
Total comprehensive income for the year - - - (1,002) - (1,002)
Balance at 31 December 2023 $3,107 $60,687 $2,367 $(23,935) $(5,759) $36,467
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 accounts of the parent company, Iofina
plc, have been prepared in accordance with FRS101 'Reduced Disclosure
Framework applicable in the UK and Republic of Ireland' (FRS 101). The company
has taken advantage of certain disclosure exemptions conferred by FRS101,
including not presenting a Company Cash Flow Statement.
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 applicable and effective for reporting periods beginning after the
date of these financial statements and have not been adopted early, including:
- IFRS16 Amendments (Lease Liability in a Sale and Leaseback)
- IAS1 Amendments (Classification of Liabilities as Current or
Non-current)
- IAS1 Amendments (Non-current Liabilities with Covenants)
- IAS7 Amendments (Supplier Finance Arrangements)
Implementation of the above is not expected to have a material effect on the
Group's financial statements in the future.
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 2023, 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 2023. 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 1.2436 in 2023
(2022 1.2334), and at 31 December 2023 was 1.273 (2022: 1.209).
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® 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 (28 months)
§ Vehicle finance leases: term of the leases (57 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 and construction in progress are not depreciated.
l) Financial instruments
1) 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.
2) 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 2023 and 2022, 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
2d.
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
assesses 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 2023 the
Group had four leases, one for office space and three for vehicles.
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 7.43% 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® 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 $36.4m (2022: $37.3M) has been evaluated for impairment. The
investment amounts include debts due from subsidiaries of $19.2m (2022
$20.1m). 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 $36.4m (2022:
$37.3M) compares to carrying amounts of the subsidiaries' net assets,
excluding loans from the parent company, of $44.5m (2022: $38.0m). 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 7.43%. The Group has concluded that no impairment
provision is required.
e. The deferred tax asset balance of $240k (Note 23) includes the tax
benefit of prior years US Federal tax losses not yet recovered of $2.6m (31
December 2022 $9.2m). This assumes that these tax losses can be recovered in
the near term against taxable income. Management concurs with this treatment
in light of the continuing level of profitability being achieved by the Group.
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
2023 2022
$ $
Assets
Halogen Derivatives and Iodine 60,522 52,706
Total $60,522 $52,706
Liabilities
Halogen Derivatives and Iodine 15,772 14,734
Total $15,772 $14,734
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.
3. Segment reporting (continued)
31 December 31 December
2023 2022
$'000 $'000
Assets
UK 185 96
USA 27,974 23,927
32,363 28,683
Total $60,522 $52,706
Liabilities
UK 204 153
USA 15,568 14,581
Total $15,772 $14,734
Revenue
North America 17,448 19,822
Asia 25,952 17,960
South America 4,131 3,588
Europe 2,379 783
Other 126 45
Total $50,036 $42,198
c. Significant customers - in 2023 Iofina Chemical had seven customers in
excess of 5% of sales (2022 six customers). 2023 percentages were 13%, 8%, 8%,
8%, 6%, 6%, 6% (2022 percentages were 11%, 8%, 7%, 7%, 6%,6%). The amounts in
excess of 10% of sales for individual customers were: 2023 $6,448,680 (13%)
and 2022 $4,665,925 (11%).
4. Profit before taxation
Profit before taxation is stated after charging:
Year ended Year ended
31 December 31 December
2023 2022
$'000 $'000
Depreciation expense 1,966 1,643
Deficit on disposal of fixed asset 41 -
Amortisation expense 180 180
Other:
Annual audit fees for audit of parent company and consolidated financial 140 125
statements
4. Profit before taxation (continued)
Cost of sales - analysis by nature
Year ended Year ended
31 December 31 December
2023 2022
$'000 $'000
Raw materials 15,345 12,872
Freight 530 657
Sales commission 806 378
Labour, manufacturing overhead and royalties 17,701 12,462
$34,382 $26,369
Administrative expenses - analysis by nature
Year ended Year ended
31 December 31 December
2023 2022
$'000 $'000
Remuneration and benefits 3,194 2,955
Share-based payments 214 146
Office expenses 283 254
Professional services 658 655
Travel 227 169
Rent 31 (34)
Other 266 216
$4,873 $4,361
Research and development expenses recognised during the period were $237k
(2022: $237k), 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
2023 2022
Number Number
Production 91 80
Administrative 15 14
Sales 2 1
Total staff 108 95
Year ended Year ended
31 December 31 December
2023 2022
$'000 $'000
Wages and salaries 8,306 7,245
Social security costs 1,385 1,120
$9,691 $8,365
5. Staff numbers and costs (continued)
Of the total staff costs above, $6,746k (2022: $5,600k) is included within
cost of sales and $2,946k (2022: $2,765k) 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
2023 2022
$'000 $'000
Wages and salaries 1,029 1,116
Social security costs 112 85
Total key management cost $1,141 $1,201
Included within wages and salaries above is $331k (2022: $309k) in respect of
the highest paid director. No options were exercised by a director in 2023
(2022 Nil).
6. Finance expense
Year ended Year ended
31 December 31 December
2023 2022
$'000 $'000
Term loan interest 309 310
IFRS16 lease interest 18 16
Total finance expense $327 $326
7. Finance income
Year ended Year ended
31 December 31 December
2023 2022
$'000 $'000
Interest income 135 13
$135 $13
8. Taxation
Year ended Year ended
31 December 31 December
2023 2022
$'000 $'000
Current tax 60 31
Deferred tax (Note 23) 1,690 2,134
$1,750 $2,165
Tax reconciliation:
Profit on ordinary activities before tax 8,314 10,030
Tax at UK income tax rate of 23.5% (2022: 19%) 1,954 1,905
Effects of:
Temporary differences 968 (149)
Permanent differences 3 10
UK losses not recognised 259 165
Difference in tax rates US/UK 113 203
Tax effect of US rate change (340) -
State losses benefit (277)
Credits not recognised as deferred tax asset (1,029) -
Other adjustments 39
Current tax 60 31
Total tax charge/(credit) $1,750 $2,165
As previously disclosed, the Group has accumulated US Federal tax losses that
are expected to be deductible from US Federal taxable profits subject to
agreement with the relevant tax authorities. As of 31 December 2023 these
losses were estimated to be approximately $2.6 million (2022: $9.2 million).
To the extent US Federal tax losses are not utilised to offset current income
taxes they will begin to expire in 2035.
9. Earnings per share
The calculation of earnings per ordinary share is based on the profit after
tax attributable to shareholders of $6,564k (2022 profit $7,865k) and the
weighted average number of ordinary shares outstanding of 191,858,408 (2022:
191,858,408). After including the weighted average effect of dilutive share
options of 5,000,400 (2022: 4,186,203) the diluted weighted average number of
ordinary shares outstanding was 196,858,808 (2022 196,044,611).
10. Intangible assets (Group)
Details of intangible assets are set out below:
Intangible assets WET® patent Customer relationships Patent portfolio EPA registrations Total
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2022 2,700 661 187 271 3,819
At 31 December 2022 & 2023 $2,700 $661 $187 $271 $3,819
Accumulated amortization
At 1 January 2022 2,237 661 212 271 3,356
Charge for the year 180 - - - 180
At 31 December 2022 2,417 661 187 271 3,536
Charge for the year 180 - - - 180
At 31 December 2023 $2,597 $661 $187 $271 $3,716
Carrying amounts
At 31 December 2021 $463 - - - $463
At 31 December 2022 $283 - - - $283
At 31 December 2023 $103 - - - $103
Intangible assets were acquired in the acquisition of H&S Chemical in
2009.
WET® Patent
The WET® 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® 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® 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 0.5 years
11. Goodwill (Group)
Carrying amounts $'000
At 31 December 2021, 31 December 2022 and 31 December 2023 $3,087
Goodwill arose on the acquisition of H&S Chemical in 2009 and is wholly
allocated to Iofina Chemical Goodwill impairment testing is conducted
annually, based on projected cash flow to be generated.
The Chemical business has been in operation for 40 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 and projected
cash flows over the next five years and a discount rate of 7.43% 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 $14.2m between the
value in use of the business of $22.5m and the carrying value of $8.3m,
comprising goodwill of $3.1m, other intangible assets of $0.1m, and fixed
assets of $5.1m. In order for the value in use to equal the carrying value it
would be necessary for the discount rate to rise to 20.5% or the long term
growth rate to be 38.0% negative or projected EBITDA to be lower by 48.0%.
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)
Freehold Land Buildings Equipment and Machinery Construction in Progress Total
Right of use
$'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2022 $209 $2,044 $752 $26,276 $751 $30,032
Additions - 18 - 230 2,885 3,133
Transfers - (37) - 103 (113) (46)
At 31 December 2022 $209 $2,025 $752 $26,610 $3,524 $33,119
Additions - (20) - 230 6,024 6,234
Transfers - 765 - 6,785 (7,763) (213)
Disposals - - - (57) - (57)
At 31 December 2023 $209 $2,770 $752 $33,567 $1,784 $39,082
Accumulated depreciation
At 1 January 2022 - $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
Charges for the year - 107 104 1,755 - 1,966
Transfers - - - (213) - (213)
Disposals (16) (16)
At 31 December 2023 - $717 $509 $13,074 - $14,299
Carrying amounts
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
At 31 December 2023 $209 $2,054 $242 $20,495 $1,785 $24,784
Right-of-use assets
Right-of-use assets relate to the Group's lease on office premises in Denver,
Colorado, which expires in April 2026. Liabilities for future payments are
shown in Note 18.
Release of plant acquisition accrual
In 2023 an accrual balance of $0.45m relating to the acquisition of #IO2 plant
was no longer considered to be required, and was therefore 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
2023 2022
$'000 $'000
Raw materials 5,672 7,231
Work in progress 4,431 2,895
Finished goods 35 58
$10,138 $10,184
At year end, there were no provisions against the carrying value of
inventories (2022: nil). During the year, the cost of inventories recognised
as expense and included in 'cost of sales' amounted to $33,044k (2022:
$25,334k).
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 19).
Financial assets and liabilities
Group Loans and receivables at amortised cost Financial liabilities at amortised cost Total
Investment and swap asset at fair value
2023 $'000 $'000 $'000 $'000
Cash and cash equivalents 6,518 6,518
Trade receivables 14,638 14,638
Interest rate swap asset 161 161
$21,317
Trade payables 3,146 3,146
Accrued liabilities 6,788 6,788
Lease liabilities 482 482
Term loan 5,357 5,357
$15,773
2022
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
14. Financial instruments (continued)
Company Loans and receivables at amortised cost Financial liabilities at amortised cost Total
2023 $'000 $'000 $'000
Cash and cash equivalents 179 179
Other receivables 6 6
Due from subsidiaries 19,186 19,186
$19,371
Accruals 203 203
$203
2022
Cash and cash equivalents 94 94
Other receivables 2 2
Due from subsidiaries 20,112 20,112
$20,208
Accruals 153 153
$153
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 2023, 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 $179k (GBP £141k) 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.
14. Financial instruments (continued)
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 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.
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:
Group Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 6 years
At 31 December 2023: $'000 $'000 $'000 $'000
Trade payables 3,146 - - -
Accrued liabilities 2,864 3,924 - -
Lease liabilities 35 106 141 200
Term loan 357 1,071 1,429 2,499
$6,402 $5,102 $1,570 $2,699
Group Up to 3 months Between 3 and 12 months Between 1 and 2 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
Commodity risk
The Group is exposed to movements in the price of raw iodine. Sales of iodine
based products were
$41,940k (2022: $31,422k). The effects of changes in the price of iodine on
2023 revenue and profits are set out in the Financial Review on pages 8 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
2023 2022
$'000 $'000
Trade receivables 14,638 9,950
Prepayments and other receivables 853 537
$15,491 $10,487
Company
31 December 31 December
2023 2022
$'000 $'000
Prepayments and other receivables 6 2
$6 $2
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.
16. Cash and cash equivalents
Group
31 December 31 December
2023 2022
$'000 $'000
Cash in US Dollar accounts 6,339 5,833
Cash in GB Pound Sterling accounts 179 94
$6,518 $5,927
Company
31 December 31 December
2023 2022
$'000 $'000
Cash in GB Pound Sterling accounts 179 94
$179 $94
17. Trade and other payables
Group 31 December 31 December
2023 2022
$'000 $'000
Trade payables 3,146 2,510
Accrued expenses and deferred income 6,787 5,028
$9,933 $7,538
Company
31 December 31 December
2023 2022
$'000 $'000
Accrued expenses 203 152
$203 $152
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 19, the Group and
Company have not pledged any assets as collateral for any liabilities or
contingent liabilities.
18. Lease liabilities
Group 31 December 31 December
2023 2022
$'000 $'000 $'000 $'000 $'000 $'000
Total Office Lease Vehicles Total Office Lease Vehicles
Lease liabilities - current 141 108 33 101 101 -
309 309 -
Lease liabilities - non-current 341 183 158
$482 $291 $191 $410 $410 -
Movements: 2023 2022
$'000 $'000 $'000 $'000 $'000 $'000
Total Office Lease Vehicles Total Office Lease Vehicles
Opening balance 410 410 - 468 468 -
Lease finance 199 - 199 - - -
Payments (144) (132) (13) (74) (74) -
Interest accrued 18 13 5 16 16 -
$482 $291 $191 $410 $410 -
Lease liabilities relate to:
1) The Group's lease on office premises in Denver, Colorado, which runs
till 30 April 2026;
2) The acquisition of vehicles on credit terms over the five years to 15
September 2028 for use at the Group's Oklahoma plants.
19. Term loans and other facilities
Group Term loan
$'000
At 1 January 2022 $8,214
Term loan instalment repayments (1,429)
At 31 December 2022 $6,785
Term loan instalment repayments (1,429)
At 31 December 2023 $5,357
Due within one year $1,429
Due after one year $3,928
The above bank facilities, with First Financial Bank of Ohio, are fully
secured by fixed and floating charges and the principal terms are:
Term loan
a) The term loan balance of $5.4m (20221 $6.8m) 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
2025, 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 2.11% above SOFR, subject to a minimum SOFR rate of 1.00%. No amounts were
drawn and outstanding at 31 December 2023.
Project loan facilities
c) There is a $4 million term loan with a drawdown period through to 1 July,
2024 to be used for IO#10 plant expenditures and other Capex projects as
appropriate. A seven-year term begins from 1 July, 2024 with interest payable
during the drawdown period. The interest rate is 2.11% plus SOFR (1 month
Secured Overnight Financing Rate) subject to a minimum of 1%. No drawings have
as yet been made on this loan.
19. Term loans and Revolving loan facility (continued)
Swap contract
d) The derivative asset resulting from the swap contract described above has
been revalued at $161k as at 31 December 2023 (2022: $249k) by reference to
market expectations for future SOFR rates, and included in the balance sheet.
An amount of $88k has been charged to comprehensive income (2022 credit
$249k). During the year the swap contract generated a net reduction of
interest otherwise payable of $152k (2022: $23k).
20. Net debt
Net debt excludes lease liabilities totalling $482k (2022 $410k) and is made
up as follows:
Group 2023 2022
$'000 $'000
Term loan (5,357) (6,785)
Cash and cash equivalents 6,518 5,927
Net cash/(debt) at 31 December $1,161 $(858)
21. Share capital
31 December 31 December
2023 2022
Authorised:
Ordinary shares of £0.01 each - number of shares 1,000,000,000 1,000,000,000
- nominal value £10,000,000 £10,000,000
Allotted, called up and fully paid:
Ordinary shares of £0.01 each - number of shares 191,858,408 191,858,408
- nominal value £1,918,584 £1,918,584
There was no change in share capital or share premium in 2023.
22. Share based payments
On 27 April 2023 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 27 April 2023 of 31.75p per share, with 50%
vesting after one year on 27 April 2024 and 50% vesting after two years on 27
April 2025. 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 31.75p, an expected term of 5.75 years, historical volatility of
69.07% and a risk free rate of 3.59%. The resulting valuation of $300,355 is
being amortised over the vesting periods, and $152,709 has been charged as an
expense in respect of the period from 27 April 2023 to 31 December 2023. The
total options expense for 2023 was $214,199, and also included $61,590 in
respect of options granted as of 9 March, 2022.
22. Share based payments (continued)
No options lapsed or were forfeited or exercised during the year. There were
6,197,100 total options outstanding at 31 December 2023, representing 3.23% of
shares in issue.
Options granted to directors and key employees and outstanding at 31 December
2023 are as follows:
Date of Grant Number of Options Vesting Share Price Exercise Price Exercise Price 2023 Exercise Price 2022
Date
£ £ $ $
13 June 2018 880,000 13 June 2019 0.162 0.162 0.21 0.20
13 June 2018 880,000 13 June 2020 0.162 0.162 0.21 0.20
25 July 2019 451,000 25 July 2020 0.213 0.213 0.27 0.26
25 July 2019 451,000 25 July 2021 0.213 0.213 0.27 0.26
16 December 2020 570,850 16 December 21 0.125 0.125 0.16 0.15
16 December 2020 570,850 16 December 22 0.125 0.125 0.16 0.15
9 March 2022 598,350 9 March 2023 0.176 0.176 0.22 0.21
9 March 2022 598,350 9 March 2024 0.176 0.176 0.22 0.21
27 April 2023 598,350 27 April 2024 0.318 0.318 0.40 -
27 April 2023 598,350 27 April 2025 0.318 0.318 0.40 -
Weighted average 6,197,100 £0.20 £0.20 $0.25 $0.20
The weighted average contractual life of options outstanding at 31 December
2023 was 6.7 years (2022 7.1 years).
Exercise prices for 2023 shown in USD are based on the US Dollar/Pounds
Sterling exchange rate at 31 December 2023 of 1.27 (2022 1.21). Options
outstanding at 31 December 2023 expire the earlier of ten years from grant
date or 90 days after the termination of service to the Company.
2023 Number of Options Weighted average exercise price 2022 Number of Options Weighted average exercise price
£ $ £ $
Options outstanding
At 1 January 5,000,400 £0.17 $0.21 3,803,700 £0.16 $0.20
Granted 1,196,700 £0.32 $0.40 1,196,700 £0.18 $0.21
At 31 December 6,197,100 £0.20 $0.25 5,000,400 £0.17 $0.20
Options exercisable
At 1 January 3,803,700 £0.16 $0.21 3,232,850 £0.17 $0.21
Vested 598,350 £0.18 $0.22 570,850 £0.13 $0.17
At 31 December 4,402,050 £0.16 $0.21 3,803,700 £0.16 $0.20
Movements in the Share-based payment reserve were as follows:
31 December 31 December
2023 2022
$'000 $'000
Balance 1 January 2,153 2,007
Share-based payment charge 214 146
Balance 31 December $2,367 $2,153
23. Deferred tax
Group 2023 2022
$'000 $'000
At 1 January asset 1,932 4,066
Prior years' tax losses utilized against US Federal tax liability (1,102) (2,134)
(see Note 8)
Fixed asset basis differences (2,557) -
Accruals adjustments 938 -
Recognition of R&D business credits 1,029 -
At 31 December asset $240 $1,932
24. Related party transactions
Transactions between group companies were as follows:
2023 2022
$'000 $'000
Iofina Resources to/(from) Iofina Chemical:
Crystallised iodine sales 28,913 22,115
Expenses recharged (969) (697)
Iofina Plc to/(from) Iofina Resources:
Management fee 50 50
Funding payments (1,000) (750)
Expenses recharged (8) (7)
Share based payments contribution 37 -
Iofina Plc to/(from) Iofina Chemical:
Management fee 50 50
Expenses recharged (18) (22)
Share based payments contribution 63 -
In both 2022 and 2023 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 32. Option grants as described in note 22 are to employees and Directors.
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.
25. 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 $44.8 million as at 31 December 2023 (2022: $38.0
million).
26. Subsidiary undertakings
Investment in subsidiaries
Investment in
subsidiaries
$'000
Company
Balance at 31 December 2021 and 2022 17,199
Subsidiaries' share options contributions 100
Balance at 31 December 2023 $17,299
Due from subsidiaries
2023 2022
$'000 $'000
Company
At 1 January 20,112 20,792
Management fees 100 100
Funding from subsidiaries (1,000) (750)
Expenses recharged to Plc (26) (30)
At 31 December $19,186 $20,112
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.
Company Country of incorporation and operation Principal activity Interest in ordinary shares and voting 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%
26. 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
Iofina, Inc. 8480 East Orchard Road, Greenwood Village CO 80111, USA
Iofina Resources, Inc. 8480 East Orchard Road, Greenwood Village 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, LLC (CO) 8480 East Orchard Road, Greenwood Village CO 80111, USA
Iofina Resources, LLC (TX) 815 Brazos Street, Austin TX 78701, USA
27. Capital commitments
At 31 December 2023 the Group had capital commitments amounting to
approximately $5m in respect of the construction of #IO10 plant.
28. Post balance sheet events
There were no significant post balance sheet events.
29. 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 $600k,
but in light of considerable past experience the Company believes that amounts
actually paid will be a very small proportion of that amount.
30. 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.
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