Annual Report 2021: Disappointing top line, but strong vertical farming product programme bodes well for the future

Inside Information

Today, LED iBond International A/S’ (LED iBond) Board of Directors approved the Annual Report for 2021 to be submitted for approval at LED iBond’s annual general meeting on 25 April 2022.

Commenting on the report, Michael Brag, chairman of the board of directors, says:

- Building partnerships with new distribution partners as well as pitching our advanced lighting solutions to large construction projects simply require us to physically meet with our potential partners and customers. Therefore, the international travel restrictions in 2021 posed a major hurdle for LED iBond’s international sales activities. At the same time, the company managed to strengthen the sales and marketing team significantly, and our R&D team has finalised a comprehensive product programme for vertical farming. We are entering 2022 with a strong team, a strong vertical farming product offering and a promising pipeline that we will be able to process as the COVID-19 restraints are lifted.

Highlights of the Annual Report include:

Business development

• Smart building market - Lockdown restrictions related to the COVID-19 pandemic, supply chain bottlenecks and general uncertainties among customers and sales leads dominated the smart building segment in 2021. However, sales of LED panels to Nobia continued throughout the year. In addition, sales of upgrade panels for gas stations improved, and the company started delivery of lighting equipment for UK highway charging stations. The company expects to expand these sales activities in the coming years.

During 2021, LED iBond managed to onboard new distribution partners in Europe and Asia and will continue signing up leading distribution partners all over the world to increase the company’s commercial reach.

• Vertical farming market - To accommodate the growing interest for LED iBond’s vertical farming solutions, the company finalised the design, development, and production set-up for four different vertical farming solutions during 2021 and sold several pilot projects to various customers in Denmark and North America. The company foresees significant sales in the vertical farming market.
• UV disinfection market - Even though LED iBond obtained confirmation from the Institute of Clinical Research at the University of Southern Denmark that puriZAP, LED iBond’s handheld disinfection unit, inactivates coronavirus with an effectiveness of up to 99.97 %, market demand has disappointed, since the fight against COVID-19 in general has concentrated on vaccination and testing. Therefore, LED iBond did not receive the expected orders for UV disinfection equipment in 2021, neither directly, nor via its spin-off companies LED VirusKill and LED Aviation. The company is currently exploring new and more niche-focussed application areas for PuriZap. As part of this exploration, the company took over full ownership of LED VirusKill in 2021.
• Technology and product development - During 2021, most of LED iBond’s R&D resources were allocated to finalising the company’s vertical farming product portfolio. R&D activities also comprised several product improvements, including new versions of the patented replaceable LED plug, the canopy solution for EV charging stations and “the Plane” from LED iBond’s architectural lighting portfolio.

The EUDP development project for intelligent infrastructure solutions progressed as planned. During the year, the company decided to take full project responsibility, while the two project partners agreed to continue as sub suppliers to the project. In 2021 the company received grants relating to the EUDP project of approx. DKK 3 million. In line with the change in accounting principles mentioned in note 9 in the consolidated financial statement, this income will be recognized as income over the coming years, i.e. amortized together with the cost of the assets relating to the grants.

• Patents - In 2021, LED iBond maintained its extensive patent portfolio to secure continued broad international coverage of its intellectual property rights. The company has secured and publicly announced additional patent approvals on a regular basis throughout the year.
• Organisation - In 2021, LED iBond implemented an organisational change to refocus commercial activities on sales and sales lead generation, resulting in several staff replacements with specialists who are now concentrating on expanding the company’s international network of resellers and distributors. The company also strengthened the marketing department with additional staff.

In addition, the company implemented several substitutions and additions to the executive management team and board of directors during the year, including creating and filling the CTO position from January 2022.

Financial outlook

• As previously announced, following a strategic review in March 2022, the board of directors and the executive management decided to revise the financial outlook of LED iBond as follows:
  • Revenue of DKK 10-30 million for 2022
    (reduced from DKK 70 million)
  • Positive cash flow from operations in 2023
    (a one-year delay relative to the previous outlook),
  • Long-term EBITDA-margin above 30 %
    (unchanged)

Financial development

• In Q4, LED iBond generated revenues of TDKK 372, a drop of TDKK 2,354 or 86 % relative to Q4 of 2020. This change is mainly due to lower sales to spin-offs.
• In Q4 2021, the company changed accounting principle for grants and compensations. As a result, grants recognised as income during Q1-Q3 2021 (TDKK 3,073) has been reversed and recorded as deferred income.
• EBIT for Q4 amounted to a loss of TDKK 11,297, a deterioration of 122 % relative to the previous Q4, mainly caused by one-off expenses (inventory write-downs of approx. DKK 1 million) and depreciations. For 2021, EBIT came to a loss of TDKK 26,094 against a loss of TDKK 18,834 in 2020, an increase of TDKK 7,260, mainly driven by higher staff cost, depreciations, and lower revenue.
• The result before tax for Q4 was a loss of TDKK 12,063 against TDKK 6,067 in Q4 of 2020, the difference to be explained by higher staff cost and higher depreciations. The 2021 result before tax was a loss of TDKK 27,909 against a loss of TDKK 23,226 in 2020 of the year before.
• The total cash flow for Q4 shows an outflow of TDKK 6,350, against an outflow of TDKK 5,548 in Q4 of 2020. The total cash flow for 2021 shows an inflow of TDKK 15,873 against a total inflow of TDKK 3,505 in 2020. The increased inflow is mainly explained by the capital raise in April 2021.
• On 31 December 2021, the company’s equity amounted to TDKK 70,373 against TDKK 42,769 on 31 December 2020, and net cash amounted to TDKK 35,966, compared to TDKK 14,447 on 31 December 2020.

FINANCIAL HIGHLIGHTS, 2021

TDKK	Q4 2021	Q4 2020	Change	Full year 2021	Full year 2020	Change
Profit & Loss
Revenue of goods sold	372	2,726	-2,354	5,380	7,362	-1,982
Grants & Compensation	-3,073	0	-3,073	0	1,664	-1,664
EBITDA	-8,469	-2,400	-6,069	-14,189	-8,110	-6,079
EBIT	-11,297	-5,401	-5,896	-26,094	-18,834	-7,260
Net Financial expenses (Ex. IPO Costs)	-114	-666	552	-1,163	-1,360	197
Profit/loss before tax	-12,063	-6,067	-5,996	-27,909	-23,226	-4,683
Profit/loss	-8,708	-4,206	-4,502	-21,066	-17,430	-3,636
Balance Sheet
Total assets				94,210	67,024	27,186
Total equity				70,373	42,769	27,604
Net working capital				35,966	14,447	21,519
Net interest-bearing debt,				9,199	14,430	-5,231
Cash flow statement
Cash flow from operating activity	-4,659	-653	-4,006	-12,670	-9,409	-3,261
Cash flow from investing activity	-2,316	-4,803	2,487	-14,449	-11,154	-3,295
Cash flow from financing activity	625	-92	717	42,992	24,068	18,924
Change in cash and cash equivalents	-6,350	-5,548	-802	15,873	3,505	12,368

The annual report for 2021 is available here:
https://ledibond.com/wp-content/uploads/2022/03/LED_Consolidated_annual_report_2021.pdf