Annual Report 2023

In 2022 and 2023, as part of the LTI Plan, the company has awarded the Management Board with equity instruments consisting of RSUs and Stock Options with a vesting period of three years, with 1/3 vesting each year. For further details reference is made to the table “Number of RSUs and Stock Options awarded and outstanding to Management Board” below.

Number of RSUs and stock options awarded and outstanding to Management Board

Each Supervisory Board member is subject to a Supervisory Board Director agreement. All Stock Options under the 2022 Grant of Stock Options have vested on the date of issue of new shares on 18 April 2023 in completion of Pryme N.V.’s private placement process pursuant to the change of control clause in the Supervisory Board Director agreements on the basis of Infinity Recycling B.V. on that occasion having gained a controlling interest in the company as the managing director of both Circular Rotterdam B.V. (owning 27.5 % of the shares in Pryme N.V.) and Circular Plastics Coöperatief U.A. (owning 13.81 % of the shares in Pryme N.V.) and who together at such time reached a combined 41.31 % of the shares in Pryme N.V. Pursuant to the Supervisory Board Director agreements, each Supervisory Board member is entitled to exercise his Stock Options during any exercise window that the company opens on a regular basis during his tenure on the Supervisory Board.

Number of stock options outstanding and awarded to the Supervisory Board

In October 2022 Pryme entered into a sale and leaseback transaction of installation components. The total consideration amounts to € 8.2 million of which € 7.6 million was received in 2022. In 2023 € 0.5 million was received. The remaining receivable of € 0.1 million is expected to be received in 2024.

The cash flow 2022 (€ 0.5 million) of other non-current liabilities represents the net cash flow related to the recognition of liabilities for a concrete floor at Pryme One and a liability for ground lease payments related to the Amsterdam site minus redemption in 2022. In 2023 both liabilities have been partly redeemed.

The movement in government grants in 2023 relates to 1) the utilization of the ELECTRO government grant (€ 0.4 million negative) in the income statement, 2) the recognition under movements in working capital of the last 10% of the DEI government grant (€ 0.5 million positive) and 3) the amount government grants received in advance (€ 2.4 million), consisting of ELECTRO grant for € 2.3 million and DEI grant for € 37 thousand.
The full DEI government grant (€ 5.0 million) has been recognized and deducted from the book value of Plant and equipment, without impact on cash flows.

Going concern

As a start-up company Pryme management regularly assesses the entity’s ability to continue as a going concern. This assessment is based on the strategic and operational plans, the budget plan 2024, technology and market developments, liquidity and funding forecast 2024 - 1st half 2025 and assessment of other material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern. These uncertainties include the availability and prices of feedstock, energy prices, technology disruptions and changing sustainability requirements.


Based upon Pryme’s cash position as of 31 December 2023 (€ 8.2 million), the anticipated operational, investment and financing cash flows in 2024 (€ 3.2 million positive), and the first half of 2025 (€ 2.2 million negative), Pryme management assessed and satisfied itself that using the going concern assumption is appropriate. Pryme expects to have sufficient cash flow to meet the requirements for working capital and capital expenditures for at least 12 months after the signing date of these financial statements. The cash flows referred to above relate to Pryme's current operations (Pryme One) and organization.

Basis of Preparation

The consolidated financial statements of the Group have been prepared in accordance with the IFRS Accounting Standards-EU. For all periods up to and including the year ended 31 December 2022, the Group prepared its financial statements in accordance with local generally accepted accounting principles (Dutch GAAP). These financial statements for the year ended 31 December 2023 are the first the Group has prepared in accordance with the IFRS Accounting Standards-EU. Reference is made to note 7.2.3 for information on how the Group adopted the IFRS Accounting Standards-EU.

The consolidated and company financial statements have been prepared on a historical cost basis. The consolidated and company financial statements are presented in euros and all values are rounded to the nearest thousand (€ 000), except when otherwise indicated.

Application of new and revised standards and interpretations

The overview below shows the new and revised standards that have been issued with an effective date of 1 January 2024 and later. These standards will therefore be applied in the Annual report 2024 and later.

According to our assessment, these new IFRS standards will have no material impact on Pryme’s financial statements in the period of initial application.

Basis of consolidation

Financial information relating to Group companies and other legal entities controlled by Pryme N.V., has been consolidated in the financial statements of Pryme N.V. The consolidated financial statements have been prepared in accordance with the accounting principles of Pryme N.V.

Financial information relating to the Group companies is fully included in the consolidated financial statements, eliminating the intercompany relationships and transactions.

The subsidiaries included in the consolidation are:

• Pryme Management B.V., Rotterdam (100%)
• CCT Circular CleanTech B.V., Kapelle (100%);
• CCT International B.V., Antwerpen-Berchem (100%)
• CCT Circular CleanTech Amsterdam B.V., Amsterdam (100%)

Subsidiaries are entities controlled by the Group. Pryme controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the Consolidated financial statements from the date on which control commences until the date on which control ceases, using consistent accounting policies.

Summary of significant accounting policies

The Group’s significant accounting policies are described in the relevant individual notes to the Consolidated financial statements or otherwise stated below. These policies have been consistently applied to the years presented, unless otherwise stated.

The individual notes are listed in the table of contents.

Current versus non-current classification

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.

An asset is current when it is:

• Expected to be realised or intended to be sold or consumed in the normal operating cycle
• Expected to be realised within twelve months after the reporting period

All other assets are classified as non-current.

A liability is current when:

• It is expected to be settled in the normal operating cycle
• It is due to be settled within twelve months after the reporting period

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

Foreign currencies

The Group’s consolidated financial statements are presented in euros, which is also the parent company’s functional currency. All subsidiaries report in euros.

Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.

Cash flow statement

The cash flow statement has been prepared using the indirect method. The cash items disclosed in the cash flow statement comprise cash at banks and in hand except for deposits with a maturity longer than three months. Cash flows denominated in foreign currencies have been translated at average estimated exchange rates. Exchange differences affecting cash items are shown separately in the cash flow statement. Interest paid and received as well as income taxes are included in cash from operating activities. Transactions not resulting in inflow or outflow of cash, leases included, are not recognized in the cash flow statement. Payments of lease installments qualify as repayments of borrowings under cash used in financing activities and as interest charged under cash generated from operating activities.

First-time adoption of IFRS

Background

Pryme prepared its 2022 financial statements in the Netherlands under the application of Dutch GAAP, in accordance with Title 9, Book 2 of the Dutch Civil Code. For the financial year ended 31 December 2023 Pryme decided to apply the IFRS Accounting Standards-EU as adopted by the European Union for the consolidated financial statements.

This implies that the transition date from Dutch GAAP to IFRS Accounting Standards-EU is 1 January 2022. In this note we provide a reconciliation between the financial statements under the application of Dutch GAAP and IFRS Accounting Standards-EU with an explanation of the most important differences.

Approach

In general, a company is required to determine its IFRS accounting policies and apply these retrospectively to determine its opening balance sheet under IFRS. This is reflected in the following transition tables:

• Group reconciliation of equity as of 1 January 2022 (date of transition to IFRS)
• Group reconciliation of equity as of 31 December 2022
• Consolidated Statement of Profit and Loss for the year 2022
• Consolidated Statement of Changes in Equity for the year 2022
• Consolidated Statement of Cash Flows for the year 2022

These tables show the numbers as reported under Dutch GAAP and the (financial) effects of the conversion, based on the IFRS standards. An analysis showed that only the application of IFRS 16 (leases) requires (financial) adjustments to comply with IFRS:

Notes to conversion from Dutch GAAP to IFRS

Following an assessment of the relevant IFRS standards compared to Dutch GAAP it appeared that no adjustments are required to transition from Dutch GAAP to IFRS, except for IFRS 16 (Leases), IAS 12 (Income taxes), and IAS 20 (Grants).

In the notes to the (reconciliation) tables below, further information is provided regarding the reclassifications and remeasurements related to the conversion to IFRS as adopted.

Accounting principles

We refer to note 7.2.3 for the IFRS accounting policies applied in the (consolidated) financial statements 2023 and comparative numbers 2022.

Group reconciliation of equity as of 1 January 2022 (date of transition to IFRS):

Notes to the reconciliation of equity as of 1 January 2022:

Dutch GAAP uses an Operating and Finance Lease model, which differs from IFRS 16 that applies a single lessee accounting model. IFRS accounting is similar with the Finance lease accounting in Dutch GAAP. 

The main difference in the transition from Dutch GAAP to IFRS therefore relates to the Operating leases in place at Pryme. These leases encompass land, warehouse space, various offices, and various car leases. The right-of-use assets recognized as of 1 January 2022 amount to € 0.4 million. The related leasing liabilities recognized in 2022 under IFRS amount to € 0.4 million. 

Government grants under Dutch GAAP were reported as deferred income for the total amount granted (€ 5.0 million). Installments to be received after final settlement of the grant (€ 0.5 million) were recognized as a receivable. In order to better reflect the financial position and avoid inflated balance sheet positions, advance payments not yet received (€ 0.5 million) have been deducted from both the current receivables and deferred income. The grant qualifies as investment grant and therefore has been deducted from plant and equipment as of 31 December 2023 as the grant is considered final. 

The legal reserves have been reclassified to the general reserve as the related development costs are recognized in CCT International B.V. (Belgian subsidiary).

The weighted average incremental borrowing rate applied to leasing liabilities recognized in the statement of financial position at the date of initial application was 5,5%.

Group reconciliation of equity as of 31 December 2022:

Notes to the reconciliation of equity as of 31 December 2022:

Dutch GAAP uses an Operating and Finance Lease model, which differs from IFRS 16 that applies a single lessee accounting model. IFRS accounting is similar with the Finance lease accounting in Dutch GAAP. 

The main difference in the transition from Dutch GAAP to IFRS therefore relates to the Operating leases in place at Pryme. These leases encompass land, warehouse space, certain equipment at Pryme One, various offices, the ground lease of the Amsterdam site and various car leases. The right-of-use assets recognized in 2022 amount to € 3.8 million. The related leasing liabilities recognized in 2022 under IFRS amount to € 3.8 million. Property not used in the production process (€ 4.1 million) mainly relates to plant and equipment of the Amsterdam site and has been reclassified to Plant and equipment.

For the Government Grant adjustments please refer to the notes on the equity reconciliation as of 1 January 2022.

The legal reserves have been reclassified to the general reserve as the related development costs are recognized in CCT International B.V. (Belgian subsidiary).

In 2022, according to IAS 12 (income taxes), a deferred tax liability of € 1.0 million has been recognized related to the right-of-use assets and a deferred tax asset of € 1.0 million has been recognized related to leasing liabilities.

Consolidated Statement of Profit and Loss for the year 2022:

Notes to the Statement of Profit and Loss: 

The other employee related expenses are reclassified to Personnel costs to better reflect the total Personnel costs. 

The application of IFRS 16 requires recognizing operational lease in the balance sheet as right-of-use assets and leasing liabilities and translate leasing costs under Dutch GAAP (€ 0.6 million) into depreciation (€ 0.5 million) and interest expenses (€ 0.2 million) under IFRS. The balance (€ 51 thousand negative) increases the net loss. 

Consolidated Statement of Changes in Equity for the year 2022:

Notes to the Changes in Equity:

The impact of the application of IFRS 16 on the opening balance sheet as of 1 January 2022 amounted to € 5 thousand negative. The impact of the change in accounting principles on the net result of 2022 amounts to € 51 thousand negative. As of 31 December 2022, the cumulative impact of the conversion from Dutch GAAP to the IFRS Accounting Standards-EU on equity amounts to € 56 thousand negative.

Consolidated Statement of Cash Flows for the year 2022:

Notes to the Cash flows: 

The reclassifications and remeasurements in the Statement of Cash Flows mainly relate to the recognition in the balance sheet of the (operational) leases. In 2022 under Dutch GAAP these lease payments (€ 0.6 million, of which € 0.4 million repayment of the lease liability) were reported as other operating expenses and are converted into depreciation (€ 0.5 million) and interest expenses (€ 0.2 million). This results in a lower net income after taxes (€ 51 thousand). 

The plant and equipment funded by bank (equipment) financing, following a sale and lease back transaction, are not considered right-of-use assets (‘failed’ sale in terms of IFRS 15) and remain part of the non-current assets (€ 8.3 million). The capitalized interest in 2022 arising from bank financing of € 119 thousand was included in the purchase of property, plant, and equipment in the Dutch GAAP Statement of Cash Flows. This has been reclassified to “interest paid” in the IFRS Statement of Cash Flows. The repayment of the principal amount of the bank financing (€2 thousand) is disclosed under cash flow from financing activities.

Restatement (reclassification)

In 2020, effectively as of 31 December 2019, Pryme acquired various assets related to the development, design, and construction of a chemical recycling plant (Pryme One). At the end of 2023, the Pryme One installation was completed. The costs of a self-constructed installation have to be broken down into logical components with a similar depreciation term. This analysis and review of the total costs capitalized under machinery under construction revealed that € 2.7 million of the total amount of € 50.8 million should have been disclosed as an intangible asset (development costs).

The error has been corrected by reclassifying, retrospectively to 1 January 2022, an amount of € 2.7 million from property, plant, and equipment (Machinery under construction) to Intangible assets (Development costs). Reference is made to note 7.2.3 (Group reconciliation of equity as of 1 January 2022 and as of 31 December 2022).

The legal reserves have been reclassified to the general reserve as the related development costs are recognized in CCT International B.V. (Belgian subsidiary), as the legal reserve should not have been disclosed separately due to the fact that the development costs related to a subsidiary within the group.

The changes did not have an impact on the Statement of Profit and Loss 2022 and 2023 or the Group’s operating, investing, and financing cash flows.

The main financial risks identified by the Management Board to achieve Pryme’s objectives are elaborated below:

Based on the risk assessment, mitigating actions are put in place to manage these risks. Periodically the Management Board and the Supervisory Board update and review these risks and take appropriate action, if needed.

Capital structure

To Pryme capital management, capital includes issued capital, share premium and all other equity reserves attributable to the shareholders and the net debt position. The primary objective of the Group’s capital management is to maximise the shareholder value.

The Group’s objective when managing capital is to safeguard its ability to continue as a goin concern (see note 7.2.2) in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

Pryme’s funding strategy is directed at establishing and maintaining an optimal financing structure that takes into account the current asset base as well as the current and future investment plans. As a start-up company Pryme may fail to timely obtain the necessary equity, grants, or debt funding, which could prevent the company from continuing as a going concern and preventing the company from executing its strategy to roll-out the “proof of concept plant” Pryme One and start building larger plants. Pryme works actively to maintain and further expand the current funding base.

The Group manages its capital structure and aims to expand the gearing ratio, which is ‘net debt’ divided by total equity plus net debt. The Group’s policy is to move to a gearing ratio between 20% and 40%. Within net debt the Group includes interest bearing (leasing) loans and borrowings, trade and other payables, less cash and cash equivalents. Given the nature of the long-term asset base, the company needs a large proportion of long-term funding, either equity, financing, or hybrid funding.

To achieve this overall objective, the Group’s capital management, among other things, aims to ensure that it meets (financial) conditions attached to government grants, lease agreements and other interest-bearing loans and borrowings that define capital structure requirements. These agreements do not contain obligations to meet certain financial ratios.  There have been no breaches of the (financial) conditions in the current period.

No changes were made in the objectives, policies, or processes for managing capital during the years ending on 31 December 2023 and 31 December 2022.

The preparation of the Pryme consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the related disclosures, and the disclosure of contingent assets and liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities in future periods. Despite management’s best efforts to accurately estimate such amounts, future results could materially differ from those estimates.

The following management insights, estimates and assumptions, given the nature of Pryme’s activities, might have significant impact on the financial statements. The key elements of uncertainty in the estimates are as follows:

Estimates and assumptions related to impairment test of Pryme One

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation should be based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs of disposing of the asset. This information is not available.

The value in use calculation is based on a DCF model. The cash flows are derived from the budget 2024 and a forecast for the next 7 years. Pryme is not committed to significant future investments that will enhance the performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows, production efficiency and cost level growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the CGU Pryme One are further explained in note 7.4.7.

Impairment test of intangible assets

Similar to the impairment testing for Pryme One the value in use value of the intangible assets (development costs) have been tested. Based on the anticipated revenues of Pryme One and the agreed upon Intellectual Property fees, the value in use exceeds the carrying value of the intellectual property. For further details we refer to note 7.3.1.

The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of Pryme. Such changes are reflected in the assumptions when they occur.

Estimating the incremental borrowing rate

The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available. The main source of information are the interest rates charged on new contracts. Comparing these interest rates and international benchmark interest percentages for large, mature chemical companies, we notice that for Pryme as small start-up entity, the cost of (asset-backed) debt on average lies approximately 5% above the interest rate of Dutch government bonds with a duration of 10 years.

Anticipated duration of the leasing contract for the Pryme One site

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has several lease contracts that include extension and termination options. The Group applies judgement in evaluating whether it is reasonably certain whether to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination.

After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate. For the Pryme One site, the Group assumes to make use of the extension option for 5 years starting as of 1 March 2027 till 29 February 2032, unless the lessor gives notice of termination.
Pryme further assumes to continue the lease of the main components (a reactor, two extruders and a walking floor) of the installation. For further details regarding leasing, we refer to note 7.3.3.

In addition, the renewal options for leases of motor vehicles are not included as part of the lease term because the Group typically leases motor vehicles for not more than five years and, hence, is not exercising any renewal options. Furthermore, the periods covered by termination options are included as part of the lease term only when they are reasonably certain not to be exercised.

Useful life of Plant and Equipment Pryme One

The useful life of Pryme One is closely connected to the anticipated period the Pryme One installation will be used for testing and generating process data as input for the design, construction, and production process of future larger chemical recycling plants. Pryme Management assumes that the Pryme One plant will be used for 8 years until 29 February 2032, in line with the assumed duration of the lease contract of the Pryme One site.

Useful life of intangible assets

The useful life of the asset is estimated at 5 years (straight-line), taking into consideration the anticipated technological obsolescence (rapid changes in technology), which might reflect a reduction of the future economic benefits.

Valuation of the deferred tax asset

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.

Taking into account the lack of track record for Pryme to generate profits, the uncertainties surrounding the Pryme business model and activities and the significant period anticipated to recover these losses, Pryme only recognized a deferred tax asset up to the level of the deferred tax liability related to right-of-use assets recognized in the financial statements of 2023. 

For further details reference is made to note 7.3.13.

Residual value and provision for decommissioning Pryme One

Pryme has recognized a provision for decommissioning obligations associated with the Pryme One site and installation. Our assumptions and estimates are made in relation to discount rates, the expected cost to dismantle and remove the plant from the site and the expected timing of those costs.

The estimates and the underlying assumptions are reviewed on a regular basis. Adjustments are made in the period in which the estimates were reviewed, if the adjustment affects that period, or in the relevant period and the future periods if the adjustment affects both current and future periods.

Accounting policies

Intangible assets are stated at cost less accumulated amortization and impairment losses. Impairment testing is executed if an impairment trigger is identified. This is relevant if the carrying amount of the asset (or of the cash-generating unit to which the asset belongs) is higher than its recoverable amount. With regards to the determination as to whether an intangible asset is subject to an impairment, please refer to the note below.

Research costs are recognized in the consolidated profit and loss account. Expenditure on development projects is capitalized as part of the production cost if it is likely from both a commercial and technical perspective that the project will be successful (i.e.: if it is likely that economic benefits will be realized) and the cost can be determined reliably. The amortization of capitalized development costs commences at the time when the commercial production starts and takes place over the expected future useful life of the asset. The useful life of the asset is estimated at 5 years (straight-line).

Movements in intangible assets

The development costs encompass all efforts spent on:

• Intellectual property and know-how regarding the conversion of plastic waste into a form of (pyrolysis) oil, including (claims to) patents, trademarks, etc.
• All developed design, engineering (software), tools and equipment for the above process.
• All documentation of process modules, manufacturing methods and software programs.

Amortisation started on 1 January 2024, after commencing commercial production at plant Pryme One. The remaining amortization period is therefore 5 years. Impairment testing confirmed that the carrying value is below the recoverable amount.

No borrowing costs directly attributable to the development costs have been capitalized as part of the intangible asset.

Impairment development costs

The recoverable amount of the development costs (Cash Generating Unit (CGU) R&D and Intellectual Property is determined based on a value in use calculation using the expected license payments from Pryme One covering an eight-year period. This period is in line with the expected economic life of Pryme One. As a result of this analysis, management did not identify an impairment for this CGU. Reference is made to note 7.4.6.

Accounting policies

Property, plant, and equipment mainly comprises plant and equipment of Pryme One (Rotterdam), our labscale plant at Ghent University and property not used in production (Amsterdam site).

Plant and equipment are broken down into their components and carried at cost, net of accumulated straight-line depreciation and less any impairment losses. Borrowing costs that are directly attributable to the construction of the plant form part of the cost of Plant and equipment. This also applies to externally financed equipment reported under this section. Other borrowing costs are recognised as an expense. Costs encompass the initial cost plus other direct acquisition costs (duties and transport) and installation costs that can be allocated directly, such as design and engineering costs as well as hours of own employees and contractors. Investment grants are deducted from the costs.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item are expected and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. Costs of repairs and maintenance that do not increase the future economic benefits are recognized as expenses.
To the extent that dismantling obligations exist at the end of the useful life, these estimated costs and any amendments thereto are included in the cost of the assets.  

Impairments expected at year-end of the reporting period are considered (see note 7.4.7).

Depreciation is calculated using the straight-line method to allocate the cost of the assets to their residual values over their estimated useful economic lives as follows:

• Land:                                                  No depreciation
• Plant and equipment                       8 years
• R&D facility equipment                   4 years
• Office furniture and equipment     3-5 years

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and reported as an adjustment of the depreciation or amortization of the assets involved. In 2023 no such gains or losses are included in the consolidated statement of profit and loss.

Movements in property, plant, and equipment – owned assets