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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Abcam Plc | LSE:ABC | London | Ordinary Share | GB00B6774699 | ORD 0.2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1,226.00 | 1,240.00 | 1,246.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMABC
RNS Number : 1362R
ABCAM Plc
09 September 2014
9 September 2014
For immediate release
ABCAM PLC
("Abcam" or "the Company")
Preliminary Results for the Year Ended 30 June 2014
Abcam plc (AIM: ABC), a global leader in the supply of life science research tools, is pleased to announce its preliminary results for the year ended 30 June 2014.
HIGHLIGHTS
-- Catalogue revenue increased by 10.0% on a constant currency basis to GBP118.0m (2012/13: GBP111.3.m). On a reported basis the increase was 6.0%
-- Total revenue increased by 8.6% on a constant currency basis (4.7% on a reported basis) to GBP128.0m (2012/13: GBP122.2m)
-- Underlying gross margin grew slightly but the effect of exchange rates reduced reported margins to 70.6% (2013: 71.0%)
-- After increased investment to drive future growth, adjusted operating profit* increased slightly to GBP46.6m (2012/13: GBP46.5m). Reported operating profit increased to GBP43.3m (2013: GBP42.8m)
-- Adjusted diluted earnings per share (EPS)* increased by 2.8% to 18.06 pence (2012/13: 17.57 pence). Reported EPS increased by 4.2% to 17.02 pence (2012/13: 16.34 pence)
-- Closing cash and term deposits were GBP56.9m (30 June 2013: GBP38.3m) -- Excellent progress in implementing our key organic growth initiatives -- Dividend increased by 10.1% to 7.75 pence per share (2012/13: 7.04 pence)
-- Opened a new office in Shanghai, China, providing us greater access to local markets and improving the consumer experience
* Excluding GBP3.3m (2012/13: GBP3.3m) of acquisition-related intangible amortisation costs and no one-off charges (2012/13: GBP0.4m) and, in the case of EPS, the related tax effect.
Commenting on the preliminary results, Jonathan Milner, Abcam's Chief Executive Officer, said:
"Over the last year, Abcam has continued to deliver strong results. Investment in our organic growth strategy is beginning to come through, and we are pleased to report increased revenue, profit and dividend. The growth from our catalogue products of 10.0%, above the growth of the wider market is particularly pleasing, and demonstrates that consumers continue to recognise the quality of our products. The 2014/15 financial year has started well and we are optimistic that our continued investments in new products and capabilities, coupled with increased geographic penetration, will continue to drive sales."
POST PERIOD-END EVENTS
Abcam has separately announced today that Alan Hirzel will succeed Jonathan Milner as Chief Executive Officer. Alan takes on the role of Chief Executive having spent the last year as Chief Marketing Officer of Abcam and having served on the Board since January 2014. Jonathan Milner will continue to play an active role in the company as Deputy Chairman with responsibility for business development and will remain the company's largest shareholder.
Peter Keen, a Board member since 2005, will not be seeking re-election at the AGM, in line with corporate governance best practice for independent directors.
More information can be found at www.abcamplc.com.
For further information please contact:
Abcam + 44 (0) 1223 696000 Jonathan Milner / Jeff Iliffe / Alan Hirzel Numis Securities + 44 (0) 20 7260 1000 Michael Meade - Nominated Advisor James Black - Corporate Broking Peel Hunt LLP - Joint Broker + 44 (0) 20 7418 8900 Clare Terlouw / Jock Maxwell MacDonald - Corporate Broking Brunswick Group + 44 (0) 20 7404 5959 Justine McIlroy / Robin Wrench / Emma Walsh
There will be a presentation for analysts at 0930 (UK time) today at Brunswick Group, 16 Lincoln's Inn Fields, London, WC2A 3ED. A live video webcast and slide presentation of this event will be available on www.abcamplc.com. We recommend you register at 0915 (UK time).
There is also conference call dial-in +44 (0) 20 3003 2666, the password is Abcam.
Notes for editors
About Abcam
Abcam plc is a leading provider of life science research tools and services, with a wide range of products and expert technical support, enabling scientists to analyse living cells at the molecular level and improving the understanding of health and disease.
Abcam is committed to providing scientists with an extensive choice of reagents and tools, with the most comprehensive, honest and up-to-date datasheets and customer reviews, fast delivery and helpful customer service & technical support. The Company's catalogue evolves with scientific research trends and is growing each year to provide customers with products to meet their research needs. The range now includes primary and secondary antibodies, proteins, peptides, lysates, biochemicals, immunoassays and other kits. Abcam also supports its customers by hosting a range of global scientific events, forums and webinars, providing opportunities for scientists to get together and present their work.
Headquartered in Cambridge, UK, Abcam has eight global subsidiary offices enabling local services, multi-language support and sells to over 100 countries. The Company was founded in 1998, and now employs over 740 people. Abcam was admitted to AIM in 2005 (AIM: ABC).
To find out more, please visit www.abcamplc.com
CHAIRMAN'S STATEMENT
I am pleased to report further progress of the Group during the year. Stripping out the negative effect from the relative strengthening of Sterling, overall revenue growth was 8.6%, and revenues from the sale of products sold through our catalogue, which is the focus of our growth strategy, grew by 10.0%. Allowing for currency fluctuations, the overall reported revenue growth was 4.7%, of which catalogue sales grew by 6.0%. After increased investment in the business to support our growth, adjusted profit before tax was GBP46.8m, which is marginally higher than last year (2012/13: GBP46.6m).
It has been an exciting year as we have been diligently building around the organic growth strategy that we outlined in September 2013. As part of these activities we have made investments across the business, particularly in people, processes and product development. Significant progress has been made and we are pleased to see the effect of these growth initiatives beginning to come through. Our push into eastern markets has continued in the year with the opening of our new office in Shanghai, China, in February 2014. Having a local presence dramatically improves our delivery lead times, enhances consumer experience, and presents a number of strategic opportunities, which include the building of direct relationships with major companies in the region.
Elsewhere in western territories the environment for government-funded research is more challenging, driven by large fiscal deficits. That said, however, we are beginning to see signs of stability in the US as modest funding increases are approved.
New product additions for the year were 11,521, taking the total catalogue to over 133,000 products. The level of additions is below that in recent years as we increasingly focus on in-house development to high-value targets. During the year we launched 1,733 new RabMAb(R) products, making us the largest provider of rabbit monoclonal antibodies globally.
Dividends
The strong balance sheet and cash generation capability of the Group has allowed us to sustain the progressive improvement in dividends. This year the Board is proposing a final dividend of 5.62 pence per share, which when added to the interim dividend of 2.13 pence represents an increase of 10.1% for the year as a whole. Subject to shareholder approval the final dividend will be paid on 28 November 2014 to shareholders on the register on 7 November 2014.
Board changes
There have been a number of Board changes since the start of the 2013/14 financial year, which have been made to support the business in its next phase of growth or in compliance with best governance practice. Some of these changes have been announced today and others over the year. They are as follows:
-- Alan Hirzel has been appointed as CEO with immediate effect, having joined the Board earlier in the year;
-- At the same time Jonathan Milner moves from CEO to a newly created Deputy Chairman position and will have an active role in the continued development of the company;
-- Louise Patten joined the Board earlier in the year and is Chairman of the Remuneration Committee. She will assume the Senior Independent Director role following the AGM in November;
-- After nine years Peter Keen will not be seeking re-election to the Board at the Annual General Meeting (AGM) in November, in line with best practice for independent non-executive directors; and
-- As announced earlier in the year I, Michael Redmond, will be stepping down from the Board at the AGM and one of our non-executive directors Murray Hennessy will be taking over as Chairman of the Board.
More details on the Board changes can be found at www.abcamplc.com.
I am delighted to welcome both Alan and Louise to the Board and am confident they are already playing a significant role in Abcam's ongoing development.
Peter Keen joined the Board in 2005 prior to the Company's flotation on AIM, during which time he has served as Chairman of the Remuneration and Audit Committees and as the Senior Independent Director. As also announced today, in line with best practice, Peter has decided not to seek re-election at the next AGM, at which he will have served nine years. We are most grateful for the huge contribution he has made to the operation of the Board and the development of the business during that time.
Lastly, as announced in June 2014, after five years as Chairman I have decided to step down from the Board following the AGM, to be held later this year, and my fellow Board member, Murray Hennessy, will be taking over the role of Chairman. Murray has served as a Non-Executive Director for almost three years and has developed a deep understanding of Abcam. He brings extensive experience in international customer-facing industries and online businesses, and is the ideal candidate to take over and help lead Abcam's next phase of growth.
Corporate governance
Over the course of the year the Board and its committees have addressed the corporate governance requirements arising from changes to regulations. We have expanded our Strategic Report, making our business model and key strategic priorities more transparent, and increased disclosures on matters affecting audit and remuneration.
The composition of the Board is kept under regular review to ensure that its members bring the appropriate skills required to improve its effectiveness and performance. I am pleased to report that the Board has functioned well in all respects during the year, providing knowledgeable and robust challenge and support to the Executive Directors. I am also confident that the changes described above will enable the Board to continue to do so as Abcam's business continues to grow.
Awards
In October 2013 we were delighted to be named 'Company of the Year' in the 2013 AIM Awards. The award is presented to the company that has best demonstrated it is a responsible, fully accountable, dynamic business with strong growth prospects. Above all, the winner is deemed to be a well-managed business, having attracted public funding to enhance and develop its growth potential to the full.
During the year we were also proud to have been voted as Management Today's 'Most Admired Company' in the Healthcare and Household sector. The Britain's Most Admired Companies Awards are an important indicator of the highest performing companies in British business that embed excellence throughout their organisation.
Outlook
During 2013/14 we have begun to see the benefits of our investments to drive organic growth and expect to see further progress in the coming year. Looking ahead, our market intelligence indicates tentative signs that market conditions may be improving in the US, and we are cautiously optimistic of greater certainty around the level of centrally funded research expenditure. While we remain cautious about the prospects for a recovery to historical levels of funding growth, the 2014/15 financial year has started well and we are optimistic that our continued investments in new products and capabilities, coupled with increased geographic penetration, will continue to drive sales.
I would like to thank all the members of the Abcam family for the progress made in year and look forward to repeated success in 2014/15.
Mike Redmond
Chairman
8 September 2014
CHIEF EXECUTIVE OFFICER'S REVIEW
The year ended 30 June 2014 has been an exciting and busy time for Abcam.
We have invested in our organic growth strategy and are pleased to see its impact beginning to come through. Sales growth from our catalogue products of 10.0% on a constant currency basis is above the growth of the wider market and demonstrates that consumers continue to recognise the quality of our products.
The key to our success in the year and beyond lies in the continued focus and investment around our five strategic goals:
-- grow our core reagents business faster than the market; -- establish new growth platforms; -- create a scalable organisation; -- sustain attractive economics; and -- selectively pursue partnerships and acquisitions
Successful execution of our strategy demands that we increasingly focus on listening to our consumers and ensuring that we use the insights gained to shape our business. I am delighted with the progress that we have made on each of these goals during the year and the plans we have in place for the future.
Our business model
Scientific researchers are at the core of our business model. By understanding our consumer needs, we are able to drive the direction of the business to help advance their research.
Life science researchers work in different locations and on different protein targets, but they need the right products to help them achieve their goal of 'discovering the next big scientific breakthrough'. It is essential that the reagents researchers use are of the highest quality, enabling experiments that are conclusive, consistent and repeatable. Researchers need to be able to select the right product based on extensive data from product testing and validation. Recommendations from their peers also help make their choice easier. By ensuring our products meet these needs our consumers will become repeat purchasers and will recommend us to their peers.
Our consumer-centric approach, along with our wealth of product data, global manufacturing capabilities, and network of OEM suppliers, make our business model robust and defensible. In turn this enables us to build strong, long-lasting partnerships with the scientific community and provides the flexibility to capture market share in under-penetrated segments. In the future, this approach will move us closer to being the brand most recommended by life science researchers.
Our beginnings
Adding products, building knowledge, sharing data
Our flexible sourcing model enables us to grow our product offering in line with researchers' needs. This is achieved by sourcing products from OEM suppliers, of which there are now more than 400, as well as manufacturing products in-house. We also developed our own in-house production capabilities in order to add more high-quality products to our catalogue.
We were the first company to add extensive and transparent product characterisation and validation data, which is sourced by our in-house laboratories, our network of collaborators and independent consumer product reviews Abreviews.
Emerging today
Innovating to meet the needs of the scientific researcher
To keep up with the pace of scientific research, we look at ways that we can add further dimensions to our product ranges and extend our expertise. One of the ways in which have achieved this is through the acquisition of companies that share our values and are leaders in innovating to meet the needs of the scientific research community.
These acquisitions have enabled us to develop new products, allowing us to target underserved segments in the marketplace. Our patented RabMAb(R) technology has provided opportunities to partner with key research organisations so we can provide new product innovations that will enhance researchers' experiments by providing antibodies of the highest quality possible. As a result of these acquisitions and our increased focus on in-house innovation approximately 38.8% of Group revenues are derived from own manufactured products, services and licences.
The wealth of data that supports our product offering builds trust with consumers and provides us with insight on where our sourcing and innovation efforts should be focused within life science research.
Our future
Consumer insight and improved consumer loyalty
We are increasingly moving our business model towards a focus on understanding what happens at each consumer touch point. By continually enriching these interactions we will provide a more intelligent and targeted offering.
We will better anticipate consumers' needs by building stronger links with the scientific community at conferences and other events, providing expert technical support, through collaborations with research leaders and through the use of web analytics to help us better understand purchasing preferences and habits. We also continue to encourage feedback through regular consumer surveys and focus groups, which help us update product datasheets, provide useful technical resources and improve service levels.
Our aim is to improve our listening, our service and our responsiveness to better serve our consumers as we grow. We will also look at opportunities to partner with scientific organisations and make strategic investments which align and enrich our business within the field of life science research.
Marketplace and trends
The following table outlines our revenues in each geographic region, along with estimated underlying growth rates:
Hot Features
Premium
Revenue Revenue Increase Underlying
2013/14 2012/13 in reported growth
GBP000 GBP000 revenue rate
------------------------ --------- --------- ---------------- -----------
The Americas 51,268 48,711 5.3% 9.2%
EMEA 42,037 38,287 9.8% 9.2%
Japan 11,116 12,035 (7.6%) 11.5%
Asia Pacific 13,570 12,279 10.5% 14.1%
------------------------ --------- --------- ---------------- -----------
Product revenue 117,991 111,312 6.0% 10.0%
------------------------ --------- --------- ---------------- -----------
Non-product revenue(1) 9,964 10,894 (8.5%) (5.6%)
------------------------ --------- --------- ---------------- -----------
Total reported
revenue 127,954 122,206 4.7% 8.6%
------------------------ --------- --------- ---------------- -----------
(1) Includes custom services, IVD/IHC, royalties and licence income
The Americas
The Americas remain our largest geographic segment and is dominated by the US, which represents over 90% of the region's revenue. We have made good progress there in the year, in particular through investing in our sales and marketing capabilities. An improved marketing effort around our RabMAb(R) products has helped to increase the number of consumers taking advantage of the benefits of our RabMAb(R) technology. There are geographic pockets of high levels of research activity within the US and during the year we have restructured our regional account team to ensure we have appropriate representation in all these key regions. We have also seen early signs of an improved environment for centrally funded research budgets. Sequestration worries and budget indecision, which were such a dominant feature of the 2012/13 financial year, showed signs of subsiding in 2013/14, and the National Institutes of Health (NIH) received a budget increase of 3.5% for its fiscal year to September 2014. While this does not entirely reverse the cuts of sequestration, it does alleviate some of the uncertainty and negative sentiment, at least in the short term.
Outside the US the changes we put in place to improve consumer service in Canada continue to be well received, and we have also seen good progress in Brazil, where the distributor change made last year is beginning to have a positive impact. Favourable market growth makes Brazil an important part of our Americas strategy, and we continue to review the best way to reduce lead times and improve consumer service.
Europe, Middle East and Africa (EMEA)
Our largest markets within the EMEA region are UK, Germany and France, which on a combined basis account for 54% of the region's sales. Continuing the recent trend the UK performed very well in the year, while France and Germany performed satisfactorily with each growing at slightly below the wider EMEA rate.
The relative performance of the countries in the EMEA region has been broadly consistent with the macro-economic trends of each region. However, in some of the smaller southern European markets performance was mixed. Growth in Italy improved slightly in the years, albeit still below that seen in the wider EMEA region, while funding pressures meant Spain remained broadly flat. Notable strong performance was seen in Switzerland, where we saw the full year effects of changes made to the way in which products are imported.
We continue to improve our levels of service wherever possible and have recently introduced a small regional account team to help build closer relationships with potential high-value organisations.
Japan
Revenues from Japan grew by 11.5% on a constant currency basis, with 14.1% growth in the second half. We continue to see the positive effect of the stimulus package that was announced by the government in 2013 with the goal of investing $11bn into science and technology. The effects of this stimulus are expected to carry over into the beginning of our 2014/15 financial year and it is positive that the government remains supportive of science and technology as a means to stimulate growth.
Asia Pacific
China has been a big focus for us and featured prominently within our strategy to develop additional growth platforms. We opened our new Shanghai office in February 2014 and after a period of transition earlier in the year we are pleased to see the impact of having a greater local presence coming through in Q4. Overall growth in China on a constant currency basis was 15.5%. Having the new office means that we have greatly improved our capacity and flexibility to hold inventory in mainland China, dramatically reducing our lead times and improving the consumer's experience.
Outside of China growth was good overall, as strong performances in South Korea and Singapore were offset by a small decline in Taiwan, where the funding environment has been more difficult.
Non-product revenue
Non-product revenue represents revenues derived from sales outside of the Abcam online catalogue and on a combined basis were GBP10.0m in the year (2012/13: GBP10.9m), representing 7.8% of overall revenues in the year.
Our capability to offer custom services will continue to be an important component in our strategy for building relationships with key researchers, enabling us to provide innovative products for our catalogue. However, as previously announced, the size of this area of our business needs to be appropriate for our overall strategy and, consequently, revenue from custom services has declined in the year. We have restructured our custom services cost base accordingly to be consistent with expected future levels of activity.
Revenue from royalties and licences derives from legacy agreements which were put in place prior to the acquisition of Epitomics. Under these agreements several life science companies were granted access to parts of the RabMAb(R) technology for the development of their own rabbit monoclonal antibodies, in return for which they pay royalties and licence fees. Such agreements are not aligned with our strategy and therefore such revenues are anticipated to decline over time. Consequently revenue growth in the year was flat.
Our in-vitro diagnostics immunohistochemistry (IVD IHC) business performed well in the year albeit from a small base. This area of our business sells antibodies developed using our RabMAb(R) technology to anatomical pathologists. A handful of large instrumentation manufacturers dominate this market, several of which are now customers. Our success in this marketplace is reliant on gaining an effective route to market and we are delighted to have signed a global strategic marketing agreement with Cell Marque after the year end.
Market trends and funding environment outlook
Funding
A large percentage of Abcam's revenues are derived from consumers who are publicly funded through research grants. The nature of the market means that it is very difficult to give a precise measure but it is thought to be somewhere around 80% of our revenues. Our remaining consumers are spread across the pharmaceutical, biotechnology and in-vitro diagnostics markets.
Over the last few years the austerity measures in the US and European markets have meant that real-term government funding increases into life science research have been small or in some circumstance funding has actually declined. During that time Abcam's revenues have continued to grow by taking market share, which is testimony to the strength of our business. However, the global government research funding environment is relevant when considering Abcam's growth potential, in terms of its impact on market growth.
More recent data suggests tentative signs of improvement, with the NIH being granted a 3.5% increase in funding in the year to September 2014. Despite this we retain our cautious outlook on the US and European funding environments.
Slower funding increases in the West, combined with strong investment in life science research by China, has resulted in a shift of spending towards the East. It is estimated that China's research funding increased by 33% per annum between 2007 and 2012, while the US total share of global research funding shrank from 51% to just 45% over the same period.
The research reagents that Abcam sells are fundamental to the work life scientists across the world are performing every day. We therefore feel that, when compared to larger capital intensive spending, our products are more resilient to changes in short-term funding.
Quality
As the market matures and funding remains under pressure we are increasingly seeing consumers seeking higher quality products. Consumers are unwilling to waste their funds or, moreover, their biological samples on products that do not work. Suppliers who are able to provide higher quality products are likely to see a greater share of market growth. Therefore the continued introduction of high-quality products, such as those developed using our RabMAb(R) technology, is a key part of our strategy.
Efficiency
We have seen a strong performance from our kits and assays business during the year. Just as consumers are seeking high-quality products, they are increasingly looking for kits containing products that have been validated to work together. These kits offer consumers greater productivity through improved repeatability and a higher level of certainty that the product will work.
Board Changes
As announced today Alan Hirzel has been appointed as Chief Executive Officer. I have worked closely with Alan over the last year and he has been inspirational in the evolution of our strategy. Alan brings a rich and deep background in both life sciences and management, with an impressive knowledge of our markets. He has my full confidence and I believe there is no one better to take the company forward on the next phase of our journey. I look forward to continuing to work closely with him and the strong leadership team at Abcam in my new role as Deputy Chairman, helping to seek out new technologies and opportunities which will further strengthen the company.
Other Board changes are set out in more detail in the Chairman's statement and I am delighted to welcome Louise Patten and look forward to working with Murray Hennessy in his role as Chairman after the next AGM.
At that meeting Peter Keen and Mike Redmond who have been on the Board for nine and five years respectively will be standing down. I would like to pass on my personal thanks to both for their guidance and wisdom which has helped Abcam become the company it is today.
Summing up
We have a clear strategy and a strong business model, and during the year began to see the benefits of investment made to fuel organic growth. The 2014/15 financial year has started well and with a strong team in place we look forward to driving growth in the business.
Jonathan Milner
Chief Executive Officer
8 September 2014
STRATEGY
1. Grow our core reagent business faster than the market
Significant medium and longer-term opportunities exist for revenue growth from our existing consumer base, as well as by attracting new consumers to our products.
We aim to drive this growth by:
-- being more consumer-centric;
-- focusing our marketing and product development launches on targets and research areas with the greatest scientific value to our consumers;
-- using our flexible sourcing to find the best quality products;
-- increasing focus on faster growing product lines where we have the greatest competitive advantage, such as RabMAb(R) primaries;
-- continuing to build relationships with key opinion leaders and scientists 'at the bench' to guide our product development pipeline to meet current research needs; and
-- improving our information-rich product datasheets by adding helpful and relevant scientific data to enable scientists to make informed product decisions.
Progress in the year
We have made substantial process on this initiative. During the year we:
-- solidified our position as market leader in rabbit monoclonal antibodies through our RabMAb(R) technology and increased the conversion of consumers to its benefits. The resulting growth from RabMAb(R) products was 17.1% in the year on a constant currency basis, easily outstripping the broader primary antibody market growth;
-- introduced over 1,730 RabMAb(R) products; -- launched a new marketing and innovation initiative to focus on high-value protein targets;
-- added 11,521 new products in the year with a growing percentage focused on the research areas where we are building strength;
-- introduced a new selection of Alexa Fluor(R) conjugated secondary antibodies to our existing range. Alexa Fluor(R) dyes guarantee bright staining and low background. The new colour variants were selected to provide an increased selection for multi-colour staining;
-- hosted 17 scientific events and 15 webinars during the year, allowing us to connect to over 3,300 consumers. These conferences provide us the opportunity to increase awareness of our products and ensure we remain abreast of the work our consumers are undertaking; and
-- added several new features to the website to improve consumers experience and engagement.
Focus for 2014/15
Focus on developing high-quality products to high-value targets, particularly where we can leverage our proprietary RabMAb(R) technology.
Continue to grow the catalogue around research areas which we believe offer the greatest market potential.
Establish linkages across our product categories to increase the purchase of non-primary antibody products.
2. Establish new growth platforms
There are opportunities to drive our growth by adding new product ranges or services which are attractive to our consumer base, either in the same or adjacent segments in which we operate, and by extending our geographic penetration.
Abcam has established a market-leading position within the primary antibody research market; however, there are segments of this market where we see lower penetration. As such there is greater opportunity for growth from understanding the consumer's needs within each segment of the market and tailoring our product offering accordingly.
Furthermore, there are several product segments adjacent to the research primary antibody market in which we are under penetrated. There is an opportunity to increase our market share in these areas by utilising our product sourcing capability to develop and launch high quality, innovative new products for our consumer base.
Progress in the year
In 2013/14 sales from our kits and assays grew by 42.3% on a constant currency basis over the prior year, with over 770 high-quality products added to this line including innovations such as SimpleStep ELISE(TM).
We launched a new range of SimpleStep ELISA(TM) kits in September 2013. These kits have a greatly simplified protocol when compared with standard multi-step ELISAs, providing significant time savings and ease of use. The kits require no specialised training or instrumentation and, in contrast to standard ELISA, achieve increased accuracy by reducing the number of sample handling steps. In addition, a more efficient in-solution binding process provides superior sensitivity and specificity. We added 150 of these kits to our catalogue during the year.
Following the conclusion of a large consumer intelligence gathering exercise, involving over 14,000 life science researchers, we have segmented our consumers into several distinct groupings, within each of which we assess that we have varying levels of market share. Each segment has different product and service needs, and during the year we have begun to differentiate our product offering and marketing messages to meet the needs of these segments.
To support our focus on increasing geographic reach and improving distribution channels to rapidly growing markets, we opened a new office in Shanghai, China, in February 2014. The office houses consumer and technical support functions provided by native Mandarin speakers, as well as a full logistics operation offering both control and speed advantages over our previous bonded warehouse arrangement. This means that consumers now benefit from improved delivery times and service levels. The proximity of the office also means we can support consumers with more specific needs through our extensive range of products and services. Since its opening we have reached a headcount of 13 staff by the year end.
Focus for 2014/15
Continue to use our data and consumer insight to prioritise which kits and assays to provide and incorporate our RabMAb(R) technology into new product development where appropriate.
Make market share gains in activity assays, proteins and peptides, immunoassays, and research biochemicals.
Continue penetration into market segments where Abcam has a lower share of consumer spend.
Use our office in Shanghai to drive the growth of revenues from China.
3. Scale organisation capabilities
Our people are one of our major assets and are instrumental in creating an efficient and scalable organisation. We aim to attract and retain the best people, empower them to succeed and build the capabilities necessary to deliver our strategy.
We believe that staff engagement is important to the success of our business. We invest in our employees by hiring a mix of graduates and industry experts, developing them and providing a supportive culture to maximise their capability and potential.
We also strive to maintain a lean and efficient organisation by streamlining and investing in our processes to ensure we meet consumers' needs in terms of breadth, quality and availability of products.
By ensuring we leverage our operational efficiency and cost-effectiveness, we aim to deliver consistent profitable growth.
Progress in the year
We have undertaken a significant internal re-organisation in 2013/14, the result of which is that the Group now has a single global management structure. By providing clearer accountability, closer working relationships and tight alignment to our strategic objectives, we believe that the new structure will make a significant contribution to our future success.
To support our organic growth initiatives we have also invested in the quality of our senior management by recruiting high-calibre and experienced talent to head up each of our major product categories. This talent recruitment drive extended across the organisation to ensure we had the right people in place to support our continued organic growth plans. In addition, we implemented a common set of cultural behaviours to help ensure we retain our dynamic and positive culture as we grow.
We have also invested further in our core IT systems to ensure they support the delivery of our next stage of growth.
Focus for 2014/15
Implement a common set of performance targets and merit-based incentives across the Group to reward success.
Invest in our consumer relationship management software, to support our increased focus on consumers, and our accounting software, to ensure the continued provision of timely and accurate financial data as we grow.
Implement a multi-year review of our IT platform to ensure that it supports our objectives and provides the necessary flexibility and speed of delivery as our business develops.
Began work on relocating our manufacturing facility in Hangzhou to improve our capabilities and enable more targeted production in line with our strategy.
Conclude planning for a new site in the UK as we look to combine our current three offices/laboratories in Cambridge into one consolidated headquarters.
4. Sustain attractive economics
By ensuring that we leverage our operational efficiency and cost-effectiveness, we will be able to deliver sustainable, profitable growth.
We aim over the longer term to grow our revenues in excess of our cost base and invest only in high-return projects.
Progress in the year
During the year we restructured our cost base to maximise cost-effectiveness.
Catalogue revenues grew by 10.0% on a constant currency basis, which outpaced the growth seen in the broader markets. For example, funding for life science research in the US declined 5.0% in US fiscal year 2013 and increased by 3.2% in US fiscal year 2014; however, our US revenues grew by 4.5% on a constant currency basis in the year to June 2013 and 8.6% for the year to June 2014.
Adjusted operating profit margins in 2013/14 reduced to 36.4% from 38.1%, reflecting the additional selective investment made to support the organic growth initiatives. We attained a return on capital employed (ROCE) of 24.5%.
Gross margins were broadly flat as the positive impact from product mix, pricing and inventory management was more than offset by the negative impact from foreign exchange rates.
We remain highly cash generative, with GBP51.2m of cash flow from operations in the year. Closing balance sheet cash was GBP56.9m without any debt. Our strong balance sheet provides us with the flexibility to execute on investment and acquisition opportunities should they arise.
Focus for 2014/15
We remain focused on generating strong revenue growth above that of our markets. We will continue to make investments that we feel will drive medium to long-term revenue growth. Shareholder return is important as is ensuring a healthy return on capital employed.
5. Selectively pursue partnerships and acquisitions
To supplement the other components of our strategy we will increasingly seek to work with partners that offer complementary products in the life science market. These partnerships may take a wide range of forms from licensing and co-developments through to equity investments and acquisitions.
We seek to work with partners who share our mission of enabling researchers to discover more, as well as working directly with collaborators to enable their research.
Progress in the year
Within the year we worked with over 20 research collaborations across a host of activities such as product co-development, product validation and research sponsorship.
Negotiations with Cell Marque during the year resulted in the signing of a global strategic marketing agreement with them after the year end. Under this agreement Abcam gains access to Cell Marque's extensive distribution channel and sales force into the IVD market to sell our IVD grade products derived from our RabMAb(R) technology. We are delighted at the opportunity to work so closely with one of the world's largest IVD distributors.
Focus for 2014/15
Actively seek out new partnerships and investment opportunities that support our strategy and leverage our competitive advantage.
Continue to work with collaborators on the co-development of innovative products which enable our consumers to discover more.
KEY PERFORMANCE INDICATORS
As part of Abcam's growth strategy, the executive management has refocused its attention on a narrower set of KPIs which best support the growth initiatives discussed earlier.
This is the first time these new KPIs have been implemented and, as such, no previous targets were established; however, looking forward we have outlined targets for the coming year. Success against these KPIs forms a component of the Board and senior management's bonus packages.
(1) All growth numbers are on a constant currency basis
RabMAb(R) primaries revenue growth
During the year we saw a continued increase in demand from consumers for RabMAb(R) primaries. While the market still remains heavily based on traditional polyclonal and mouse monoclonal antibodies, we are seeing more consumers switching to RabMAb(R) primaries for the greater specificity and lot-to-lot consistency benefits they offer.
Within 2013/14 RabMAb(R) primaries contributed to 15.2% of Group product revenue and grew at 17.1% on a constant currency basis (2013: 33.5%). The reduction of revenue growth during the year was partly attributable to the impact of the distributor transitions in China, higher levels of promotional activity and some reclassification of products used for diagnostics purposes into the IVD area of our business. Going forward we see RabMAb(R) primaries as a large part of Abcam's growth strategy and an increasing contributor to the Group's revenue. We are targeting a growth rate of 15-20% for 2014/15 against a market growth of primary antibodies of around 3-5%.
Non-primaries revenue growth
Abcam grew the proportion of Group product revenues derived from products other than primary antibodies ('non-primaries') to 16.6% in 2013/14. This represented growth of 34.3% on a constant currency basis and continues a trend of high growth in recent years coming from this range of products. Going forward non-primaries revenue growth will be a key component of our success as we seek to attain similar levels of market penetration to that we enjoy in the primary antibody market.
As we move into 2014/15 we will continue to invest in new products and new platforms that are complementary to our consumer base and it is expected that a high portion of the impact from these initiatives will be felt within our non-primaries revenue. We are targeting a growth rate of 25-30% for 2014/15.
Net Promoter Score (NPS)
Abcam's vision is to be the brand most recommended by life science researchers. As such it is increasingly important that we focus on our consumers and listen to their feedback. At several points within the year we conduct formal consumer surveys to determine their likelihood of recommending Abcam's products and services to a colleague. The balance of detractors and promoters is then computed into an NPS using standard industry methods. As we seek to measure success against our vision our NPS will be an important metric. In 2013/14 our NPS for primary antibodies was 18% (2012/13: 19%).
To meet our targets for NPS next year Abcam will need to achieve a score of 20-22%.
Market position
Abcam operates in several different markets with varying market positions. Since its inception Abcam has risen to be the market leader in the research primary antibody market and our internal market intelligence suggests that when looking at the key markets in which we are focused, we have the following positions:
Number 1 in research primary antibodies
Number 3 in activity assays
Number 4 in proteins and peptides
At least number 5 in immunoassays
At least number 5 in research biochemicals
For the coming year we seek to maintain our number 1 position in research primary antibodies as well as to improve towards number 1 or number 2 in at least two other areas.
FINANCIAL REVIEW
While reported revenues for the year were up by 4.7% to GBP128.0m, stripping out the negative effect from the relative strengthening of Sterling during the year shows a much stronger underlying performance, with revenue growth from sales of products in our catalogue of 10.0%, or 8.6% overall. After increased investment in the business, adjusted profit before tax was GBP46.8m, which is marginally higher than last year (GBP46.6m).
As outlined in last year's report, the 2013/14 financial year has been one of investment in support of our growth strategy, the success of which demands that we listen to our consumers and ensure that we use the insights gained to shape our business. In practical terms this has meant increased headcount, particularly at the senior level, new product development activities and investment in operational assets such as the website and the new office in Shanghai.
At the same time we have been careful not to lose our focus on tight cost and cash control. As indicated at the time of our interims the Directors are recommending that the annual dividend for the current year should increase by 10.1%, which at 43.0% is above that of our recent policy of distributing 40% of adjusted post-tax profit. The Directors feel that this dividend is justified given the profit impact of the increased investment this year in organic growth initiatives aimed at delivering future profits, as well as the underlying financial strength and the continued cash-generative nature of the business.
The table below shows revenues, costs and expenses for the year, which have been adjusted to aid comparison by separately identifying the amortisation of acquisition-related intangible assets.
Adjusted income statement
2013/14 2012/13
Reported Reported
Adjusted Acquisition-related IFRS Adjusted Acquisition-related IFRS
income intangible income income intangible Integration income
statement amortisation statement statement amortisation cost statement
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 127,954 127,954 122,206 122,206
Cost of sales (37,569) (37,569) (35,500) (35,500)
---------------- ---------- -------------------- ---------- ---------- -------------------- ------------ ----------
Gross profit 90,385 90,385 86,706 86,706
---------------- ---------- -------------------- ---------- ---------- -------------------- ------------ ----------
Administration
and management
expenses (35,501) (1,517) (37,018) (33,987) (1,525) (400) (35,912)
R&D expenses (8,306) (1,748) (10,054) (6,189) (1,757) (7,946)
---------------- ---------- -------------------- ---------- ---------- -------------------- ------------ ----------
Operating
profit 46,578 (3,265) 43,313 46,530 (3,282) (400) 42,848
Finance income 238 238 129 129
Finance costs - - (83) (83)
---------------- ---------- -------------------- ---------- ---------- -------------------- ------------ ----------
Profit before
tax 46,816 (3,265) 43,551 46,576 (3,282) (400) 42,894
Taxation (10,697) 1,191 (9,506) (11,452) 1,258 (42) (10,236)
---------------- ---------- -------------------- ---------- ---------- -------------------- ------------ ----------
Profit after
tax 36,119 (2,074) 34,045 35,124 (2,024) (442) 32,658
---------------- ---------- -------------------- ---------- ---------- -------------------- ------------ ----------
Earnings
per share
Basic 18.16p (1.04)p 17.12p 17.70p (1.02)p (0.22)p 16.52p
Diluted 18.06p (1.04)p 17.02p 17.57p (1.01)p (0.22)p 16.34p
---------------- ---------- -------------------- ---------- ---------- -------------------- ------------ ----------
Revenue
The relative strengthening of sterling during the year against the other currencies in which the Group trades has partly offset the underlying growth in revenues, particularly in the second half of the year. Consequently, while on a constant currency basis (in which we assume exchange rates had remained unchanged from 2012/13) product revenues grew by 10.0% and overall revenues by 8.6%, the reported revenue for the year of GBP128.0m represents 4.7% growth on the prior year.
Gross margins
Gross margins decreased slightly to 70.6% in 2013/14 from 71.0% in the prior year as the positive impact on margins from good inventory management and product mix was more than offset by the impact of exchange rates, mainly those of the US Dollar to Sterling. The majority of our cost of sales is denominated in US dollars (approximately 74.7%, versus 55.6% of sales in the year) and there has been a rapid and sustained weakening of the Dollar over the year. Given that there is often a delay between the timing of the purchasing or manufacturing stock and its subsequent sale, such movements have resulted in an adverse mismatch between the exchange rate used to translate Dollar denominated sales and that used to translate the associated cost of units sold.
Operating profit and expenses
Administration and management expenses
As foreshadowed last year, in order to further support the new activities being undertaken to drive medium and long-term organic growth, investment has been made in 2013/14 which has increased the cost base. The table below identifies these costs and shows that after adjusting for them, non-recurring items in 2012/13, restatements to allow for exchange rate movements and the gains arising on forward selling currency contracts (as described in note 21), the base cost of the business in 2012/13 increased by 6.4% in 2013/14, which is below the growth in revenues.
Change in administration and management expense
2013/14 2012/13
GBP000 GBP000
Total administration and management expenses (as
reported) 37,018 35,912
Acquisition-related intangible amortisation (1,517) (1,525)
Gains on forward selling contracts 1,659 947
Share-based payments charge (678) (1,211)
Impact of restating 2012/13 to 2013/14 rates (724)
One-off market and product review and integration
costs (1,702)
Recruitment and remuneration of senior personnel (1,291)
Costs of Shanghai office (571)
Incremental amortisation of IT related capital expenditure (881)
Base administration and management expenses before
new activities in 2013/14 33,739 31,697
------------------------------------------------------------ -------- --------
Research and development expenditure
Research and development (R&D) expenditure relates to the development of new products, as well as costs incurred in searching for and developing production process improvements. These costs do not meet the requirements to be capitalised as an intangible asset and are therefore expensed through the income statement as incurred.
Total R&D expenditure increased to GBP10.1m in the year from GBP7.9m in 2012/13, or to GBP8.3m from GBP6.2m excluding the amortisation of acquisition-related intangibles. This reflects increased investment in new product development as part of our organic growth strategy, particularly around products utilising RabMAb(R) technology, expanding the range of directly conjugated antibodies and in-house development of immunoassays. Many of these products are against high-value targets which present additional manufacturing challenges.
Earnings and tax
The adjusted profit before tax was GBP46.8m on which the effective tax rate was 22.8%, which was lower than the 24.6% reported last year due to a reduction in the UK corporation tax rate and the full year effect of the Group re-organisation that took place in 2012/13. After taking into account the deferred tax impact of acquisition-related intangible amortisation, the reported effective tax rate was 21.8% (2012/13: 23.9%).
Balance sheet and cash flow
Goodwill and other intangibles
Goodwill at the year end was GBP73.5m versus GBP82.0m in the prior year. The decrease is due to exchange rate movements arising because the functional currency of the acquired companies to which the goodwill relates is predominately US dollars.
The decision was taken in 2012/13, following the changes made post acquisition to how MitoSciences, Ascent Scientific and Epitomics were structured and integrated within the Group, that it was appropriate to reallocate the goodwill arising from those acquisitions to a single cash-generating unit (CGU), which would reflect the re-organised business structure. Goodwill is not amortised under IFRS but is subject to impairment review at least on an annual basis. Consequently, during the year, the Directors performed a review which involved making various assumptions regarding the future performance of the business. After considering various scenarios that could reasonably occur, the Directors concluded that no impairment was required. For more details, please see note 12 to the financial statements.
Other intangible assets at 30 June 2014 were GBP30.2m compared with GBP33.1m at 30 June 2013. This movement primarily reflects the amortisation of the intangible assets offset by the additions to capitalised software costs from the investment in our core IT systems and the impact of exchange rates on non-sterling denominates assets, which was partly described in more detail above.
Following a review of software costs previously capitalised an impairment charge of GBP0.5m was taken in the year to reflect those elements which as our strategy has developed now relate to work which will no longer recover its carrying value. Other intangible assets are amortised over their estimated useful lives, and the amortisation of acquisition-related intangible assets has been added back in arriving at adjusted profit, as outlined above.
Capital expenditure
Additions of property, plant and equipment and intangible assets totalled GBP7.4m (2012/13: GBP7.3m).
This reflects continued investment in support of our organic growth strategy. The major items include:
-- continuation of the core IT investment that began in 2011/12 to support the next stage of Abcam's growth. A total of GBP3.5m was capitalised in the year, including GBP0.8m of internal salary cost;
-- development of new hybridomas using our RabMAb(R) technology of GBP1.5m, with a further GBP0.3m expenditure on hybridomas under construction;
-- office equipment expenditure of GBP0.8m. This is an increase of GBP0.4m over the prior year, mainly due to the opening of our Shanghai office in February 2014; and
-- investment in laboratory equipment of GBP0.7m.
Cash flow
Our track record of strong cash generation continued in the year and we finished the period with net cash and term deposits of GBP56.9m (2012/13: GBP38.3m) and no bank debt (2012/13: GBPnil).
Cash generated by operations was GBP51.2m, or 39.9% of Group revenue (2012/13: GBP51.8m, 42.4% of revenue), as working capital again contributed positively to cash flow, albeit the positive inflow was GBP0.9m lower than last year. The overall net movement in cash and term deposits in 2013/14 was GBP18.6m (2012/13: GBP20.8m).
Looking forward
It is encouraging to see the early signs of increased organic growth coming through in 2013/14. In the coming year we will continue to invest in areas such as product development, eCommerce, marketing and infrastructure. We believe that these investments will drive sales in the medium to long term and provide a healthy return.
As we grow and reinvest in our business we will continue to focus on tight cost management and effective financial controls to ensure we sustain attractive economics.
Jeff Iliffe
Chief Financial Officer
8 September 2014
Consolidated income statement
For the year ended 30 June 2014
Year Year
ended ended
30 June 30 June
2014 2013
Notes GBP000 GBP000
--------------------------------------------------- ----- -------- --------
Revenue 5 127,954 122,206
Cost of sales (37,569) (35,500)
--------------------------------------------------- ----- -------- --------
Gross profit 90,385 86,706
--------------------------------------------------- ----- -------- --------
Administration and management expenses excluding
share-based payments charge (36,340) (34,701)
Share-based payments charge 27 (678) (1,211)
--------------------------------------------------- ----- -------- --------
Total administration and management expenses (37,018) (35,912)
--------------------------------------------------- ----- -------- --------
R&D expenses excluding share-based payments charge (9,791) (7,766)
Share-based payments charge 27 (263) (180)
--------------------------------------------------- ----- -------- --------
Total R&D expenses (10,054) (7,946)
--------------------------------------------------- ----- -------- --------
Operating profit 43,313 42,848
Finance income 9 238 129
Finance costs 9 - (83)
--------------------------------------------------- ----- -------- --------
Profit before tax 43,551 42,894
Taxation 10 (9,506) (10,236)
--------------------------------------------------- ----- -------- --------
Profit for the year attributable to the owners
of the parent 6 34,045 32,658
--------------------------------------------------- ----- -------- --------
Earnings per share
Basic 11 17.12p 16.52p
Diluted 11 17.02p 16.34p
--------------------------------------------------- ----- -------- --------
Consolidated statement of comprehensive income
For the year ended 30 June 2014
Year ended Year ended
30 June 30 June
2014 2013
GBP000 GBP000
---------------------------------------------------------- ---------- ----------
Profit for the year 34,045 32,658
---------------------------------------------------------- ---------- ----------
Items that may be reclassified to profit or loss
Movement on cash flow hedges 2,491 (2,244)
Exchange differences on translation of foreign operations (11,116) 1,510
Tax relating to components of other comprehensive income (550) 1,304
---------------------------------------------------------- ---------- ----------
Other comprehensive (expense)/income for the year (9,175) 570
---------------------------------------------------------- ---------- ----------
Total comprehensive income for the year 24,870 33,228
---------------------------------------------------------- ---------- ----------
Reconciliation of adjusted financial measures
For the year ended 30 June 2014
Year ended Year ended
30 June 30 June
2014 2013
GBP000 GBP000
------------------------------------------------------ ---------- ----------
Profit before tax 43,551 42,894
------------------------------------------------------ ---------- ----------
Integration costs - 400
Amortisation of acquisition-related intangible assets 3,265 3,282
------------------------------------------------------ ---------- ----------
Profit before tax (adjusted) 46,816 46,576
------------------------------------------------------ ---------- ----------
Balance sheets
At 30 June 2014
Consolidated Company
--------------------------------- ----- ------------------ ------------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
Notes GBP000 GBP000 GBP000 GBP000
--------------------------------- ----- -------- -------- -------- --------
Non-current assets
Goodwill 12 73,549 81,954 - -
Intangible assets 13 30,176 33,107 5,836 4,361
Property, plant and equipment 14 8,502 7,501 3,835 1,565
Investments 15 - - 96,147 95,840
Deferred tax asset 16 2,258 5,011 485 2,395
Loan receivable 19 - - 39,133 44,175
Term deposits 1,000 1,000 1,000 1,000
Derivative financial instruments 21 180 29 180 29
--------------------------------- ----- -------- -------- -------- --------
115,665 128,602 146,616 149,365
--------------------------------- ----- -------- -------- -------- --------
Current assets
Inventories 17 14,753 15,330 13,321 15,630
Trade and other receivables 18 17,843 17,440 13,248 15,062
Cash and cash equivalents 55,278 35,388 49,013 25,295
Term deposits 584 1,923 - -
Available-for-sale asset 20 623 703 - -
Derivative financial instruments 21 1,848 531 1,848 531
--------------------------------- ----- -------- -------- -------- --------
90,929 71,315 77,430 56,518
--------------------------------- ----- -------- -------- -------- --------
Total assets 206,594 199,917 224,046 205,883
--------------------------------- ----- -------- -------- -------- --------
Current liabilities
Trade and other payables 22 (14,036) (14,317) (16,526) (13,314)
Current tax liabilities (2,782) (2,325) (4,145) (4,716)
Derivative financial instruments 21 (14) (1,339) (14) (1,339)
--------------------------------- ----- -------- -------- -------- --------
(16,832) (17,981) (20,685) (19,369)
--------------------------------- ----- -------- -------- -------- --------
Net current assets 74,097 53,334 56,745 37,149
--------------------------------- ----- -------- -------- -------- --------
Non-current liabilities
Deferred tax liability 16 (8,841) (11,284) - -
Derivative financial instruments 21 (21) (375) (21) (375)
--------------------------------- ----- -------- -------- -------- --------
(8,862) (11,659) (21) (375)
--------------------------------- ----- -------- -------- -------- --------
Total liabilities (25,694) (29,640) (20,706) (19,744)
--------------------------------- ----- -------- -------- -------- --------
Net assets 180,900 170,277 203,340 186,139
--------------------------------- ----- -------- -------- -------- --------
Equity
Share capital 24 401 399 401 399
Share premium account 24 17,692 16,395 17,692 16,395
Merger reserve 24 56,513 56,513 56,513 56,513
Own shares 24 (2,143) (1,872) (2,143) (1,872)
Translation reserve 24 (8,718) 2,203 - -
Share-based payments reserve 24 6,441 5,893 6,113 5,370
Hedging reserve 24 893 (1,048) 893 (1,048)
Deferred tax reserve 24 (98) 1,252 (121) 1,022
Retained earnings 109,919 90,542 123,992 109,360
--------------------------------- ----- -------- -------- -------- --------
Total equity attributable to the
owners of the parent 180,900 170,277 203,340 186,139
--------------------------------- ----- -------- -------- -------- --------
The financial statements of Abcam plc, registered number 3509322, were approved by the Board of Directors and authorised for issue on 8 September 2014.
They were signed on its behalf by:
Jeff Iliffe
Director
Consolidated statement of changes in equity
For the year ended 30 June 2014
Share Share-based Deferred
Share premium Merger Own Translation payments Hedging tax Retained Total
capital account reserve shares reserve(1) reserve(2) reserve(3) reserve(4) earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ------- ------- ------- ------- ----------- ----------- ---------- ---------- -------- --------
Balance as at
1 July
2013 399 16,395 56,513 (1,872) 2,203 5,893 (1,048) 1,252 90,542 170,277
-------------- ------- ------- ------- ------- ----------- ----------- ---------- ---------- -------- --------
Profit for the
year - - - - - - - - 34,045 34,045
Exchange
differences
on
translation
of
foreign
operations - - - - (10,921) (195) - - - (11,116)
Movements on
cash
flow hedges - - - - - - 2,491 - - 2,491
Tax relating
to components
of other
comprehensive
income - - - - - - (550) - - (550)
-------------- ------- ------- ------- ------- ----------- ----------- ---------- ---------- -------- --------
Total
comprehensive
income for
the year - - - - (10,921) (195) 1,941 - 34,045 24,870
Issue of share
capital 2 1,297 - (484) - (198) - - - 617
Own shares
disposed
of on release
of
shares - - - 213 - - - - (213) -
Credit to
equity
for
share-based
payments - - - - - 941 - (1,350) - (409)
Payment of
dividends - - - - - - - - (14,455) (14,455)
-------------- ------- ------- ------- ------- ----------- ----------- ---------- ---------- -------- --------
Balance as at
30
June 2014 401 17,692 56,513 (2,143) (8,718) 6,441 893 (98) 109,919 180,900
-------------- ------- ------- ------- ------- ----------- ----------- ---------- ---------- -------- --------
Share Share-based Deferred
Share premium Merger Own Translation payments Hedging tax Retained Total
capital account reserve shares reserve(1) reserve(2) reserve(3) reserve(4) earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ------- ------- ------- ------- ----------- ----------- ---------- ---------- -------- --------
Balance as at
1 July
2012 397 15,300 56,513 (1,586) 746 4,449 671 2,017 69,706 148,213
-------------- ------- ------- ------- ------- ----------- ----------- ---------- ---------- -------- --------
Profit for the
year - - - - - - - - 32,658 32,658
Exchange
differences
on
translation
of
foreign
operations - - - - 1,457 53 - - - 1,510
Movements on
cash
flow hedges - - - - - - (2,244) - - (2,244)
Tax relating
to components
of other
comprehensive
income - - - - - - 525 - 779 1,304
-------------- ------- ------- ------- ------- ----------- ----------- ---------- ---------- -------- --------
Total
comprehensive
income for
the year - - - - 1,457 53 (1,719) - 33,437 33,228
Issue of share
capital 2 1,095 - (381) - - - - - 716
Own shares
disposed
of on release
of
shares - - - 95 - - - - (95) -
Credit to
equity
for
share-based
payments - - - - - 1,391 - (765) - 626
Payment of
dividends - - - - - - - - (12,506) (12,506)
-------------- ------- ------- ------- ------- ----------- ----------- ---------- ---------- -------- --------
Balance as at
30
June 2013 399 16,395 56,513 (1,872) 2,203 5,893 (1,048) 1,252 90,542 170,277
-------------- ------- ------- ------- ------- ----------- ----------- ---------- ---------- -------- --------
1 Exchange differences on translation of overseas operations.
2 IFRS 2 charge for fair value of share-based options and awards.
3 Gains and losses recognised on cash flow hedges.
4 Portion of deferred tax asset arising on outstanding share options and share options exercised.
Company statement of changes in equity
For the year ended 30 June 2014
Share-based Deferred
Share Share Merger Own payments Hedging tax Retained Total
capital premium reserve shares reserve(1) reserve(2) reserve(3) earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- -------- -------- -------- ------- ----------- ----------- ----------- --------- --------
Balance as at 1
July
2013 399 16,395 56,513 (1,872) 5,370 (1,048) 1,022 109,360 186,139
------------------- -------- -------- -------- ------- ----------- ----------- ----------- --------- --------
Profit for the year - - - - - - - 29,300 29,300
Movements on cash
flow
hedges - - - - - 2,491 - - 2,491
Tax relating to
components
of other
comprehensive
income - - - - - (550) - - (550)
------------------- -------- -------- -------- ------- ----------- ----------- ----------- --------- --------
Total comprehensive
income
for the year - - - - - 1,941 - 29,300 31,241
Issue of share
capital 2 1,297 - (484) (198) - - - 617
Own shares disposed
of
on exercise of
share
options - - - 213 - - - (213) -
Share-based
payments
charge recognised
on
behalf of
subsidiaries - - - - 307 - - - 307
Credit to equity
for
share-based
payments - - - - 634 - (1,143) - (509)
Payment of
dividends - - - - - - - (14,455) (14,455)
------------------- -------- -------- -------- ------- ----------- ----------- ----------- --------- --------
Balance as at 30
June
2014 401 17,692 56,513 (2,143) 6,113 893 (121) 123,992 203,340
------------------- -------- -------- -------- ------- ----------- ----------- ----------- --------- --------
Share-based Deferred
Share Share Merger Own payments Hedging tax Retained Total
capital premium reserve shares reserve(1) reserve(2) reserve(3) earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- -------- -------- -------- ------- ----------- ----------- ----------- --------- --------
Balance as at 1
July
2012 397 15,300 56,513 (1,586) 4,386 671 1,787 68,727 146,195
Profit for the
year(4) - - - - - - - 52,524 52,524
Movements on cash
flow
hedges - - - - - (2,244) - - (2,244)
Tax relating to
components
of other
comprehensive
income - - - - - 525 - 710 1,235
------------------- -------- -------- -------- ------- ----------- ----------- ----------- --------- --------
Total comprehensive
income
for the year - - - - - (1,719) - 53,234 51,515
Issue of share
capital 2 1,095 - (381) - - - - 716
Own shares disposed
of
on exercise of
share
options - - - 95 - - - (95) -
Credit to equity
for
share-based
payments - - - - 984 - (765) - 219
Payment of
dividends - - - - - - - (12,506) (12,506)
------------------- -------- -------- -------- ------- ----------- ----------- ----------- --------- --------
Balance as at 30
June
2013 399 16,395 56,513 (1,872) 5,370 (1,048) 1,022 109,360 186,139
------------------- -------- -------- -------- ------- ----------- ----------- ----------- --------- --------
1 IFRS 2 charge for fair value of share-based options and awards.
2 Gains and losses recognised on cash flow hedges.
3 Portion of deferred tax asset arising on outstanding share options and share options exercised.
4 Profit for the prior year includes GBP13,973,000 of non distributable earnings relating to the gain on disposal resulting from an intra group transfer of a subsidiary undertaking (see note 15 for further details).
Cash flow statements
For the year ended 30 June 2014
Consolidated Company
------------------------------------------ ----- ------------------ ------------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
Notes GBP000 GBP000 GBP000 GBP000
------------------------------------------ ----- -------- -------- -------- --------
Profit before tax 43,551 42,894 37,840 41,923
Finance income (238) (129) (3,361) (1,902)
Finance costs - 83 22 200
Operating profit for the year 43,313 42,848 34,501 40,221
Adjustments for:
Depreciation of property, plant and
equipment 14 1,882 1,990 852 871
Amortisation of intangible assets 13 4,831 3,838 1,767 774
Impairment loss on intangible assets 13 454 - 454 -
Change in fair value of derivatives
outstanding at year end (655) (99) (655) (99)
Share-based payments charge 27 941 1,391 634 984
------------------------------------------ ----- -------- -------- -------- --------
Operating cash flows before movements
in working capital 50,766 49,968 37,553 42,751
Decrease/(increase) in inventories 252 1,288 2,309 (2,091)
(Increase)/decrease in receivables (280) (4,493) 6,575 (6,584)
Increase/(decrease) in payables 508 4,625 1,719 (280)
------------------------------------------ ----- -------- -------- -------- --------
Cash generated by operations 51,246 51,388 48,156 33,796
Income taxes paid (9,948) (11,872) (8,926) (8,574)
Finance costs paid - (82) - (200)
------------------------------------------ ----- -------- -------- -------- --------
Net cash inflow from operating activities 41,298 39,434 39,230 25,022
------------------------------------------ ----- -------- -------- -------- --------
Investing activities
Investment income 231 115 3,318 1,934
Proceeds on disposal of property,
plant and equipment - 8 - -
Purchase of property, plant and equipment (3,828) (3,675) (1,500) (963)
Purchase of intangible assets (3,647) (3,548) (3,492) (3,513)
Acquisition of subsidiaries, net of
cash and term deposits acquired - 42 - 42
Dividends received - - - 6,558
Decrease in term deposits 1,187 520 - -
------------------------------------------ ----- -------- -------- -------- --------
Net cash (used in)/arising from investing
activities (6,057) (6,538) (1,674) 4,058
------------------------------------------ ----- -------- -------- -------- --------
Financing activities
Dividends paid 25 (14,455) (12,506) (14,455) (12,506)
Proceeds on issue of shares 617 716 617 716
Net cash used in financing activities (13,838) (11,790) (13,838) (11,790)
------------------------------------------ ----- -------- -------- -------- --------
Net increase/(decrease) in cash and
cash equivalents 21,403 21,106 23,718 17,290
Cash and cash equivalents at beginning
of year 35,388 14,037 25,295 8,005
Effect of foreign exchange rates (1,513) 245 - -
------------------------------------------ ----- -------- -------- -------- --------
Cash and cash equivalents at end of
year 55,278 35,388 49,013 25,295
------------------------------------------ ----- -------- -------- -------- --------
Reconciliation to total cash and cash equivalents and term deposits
Consolidated Company
-------------------------------- ---------------- ----------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
-------------------------------- ------- ------- ------- -------
Cash and cash equivalents 55,278 35,388 49,013 25,295
Term deposits (non-current) 1,000 1,000 1,000 1,000
Term deposits (current) 584 1,923 - -
Total cash and cash equivalents
and term deposits 56,862 38,311 50,013 26,295
-------------------------------- ------- ------- ------- -------
Notes to the financial statements
For the year ended 30 June 2014
1. General information
Abcam plc (the Company) is incorporated in the UK under the Companies Act 2006. The address of the registered office is 330 Cambridge Science Park, Milton Road, Cambridge CB4 0FL, UK.
The Group is a producer and distributor of high-quality research-grade antibodies and associated protein research tools. The Group operates through its ultimate parent company Abcam plc and through its wholly owned subsidiaries Abcam Inc, Abcam KK, Abcam (Hong Kong) Limited, Ascent Scientific Limited, Abcam Trading (Shanghai) Co. Limited, Epitomics Inc, Epitomics (Hangzhou) Biotechnology Co. Limited and MitoSciences Inc, allowing it to serve a global customer base of over 100 countries.
2. Adoption of new and revised standards
Standards affecting the financial statements
In the current year, the following new and revised Standards and Interpretations have been adopted and have affected the amounts reported in these financial statements:
IFRS 13 'Fair value measurement'. This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs.
Standards not affecting the reported results nor the financial position
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
IFRS 9 Financial instruments IFRS 10 Consolidated financial statements IFRS 12 Disclosure of interests in other entities IFRS 15 Revenue from contracts with customers IAS 16 (amended) Property, plant and equipment IAS 27 (revised) Separate financial statements IAS 36 (amended) Impairment of assets IAS 38 (amended) Intangible assets Amendments to IFRS 7 and IAS 32 Offsetting financial assets and financial liabilities ------------------------ -----------------------------------------------------
The Directors do not expect that the adoption of these Standards and Interpretations in future periods will have a material impact on the financial statements of the Group.
3. Significant accounting policies
Basis of accounting
The annual financial statements of Abcam plc are prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS and comply with Article 4 of the EU IAS Regulation.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The Group financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (GBP000) except when otherwise indicated.
The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the preparation of the statements for the year ended 30 June 2013 except where disclosed otherwise in this note.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company made up to 30 June each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies in line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition of a subsidiary is the fair values at the date of exchange of the assets transferred, the liabilities incurred and the equity interests issued by the Group. Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination that meet the recognition criteria under IFRS 3 (2008) are measured at their fair values at the date of acquisition, except that:
-- deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
-- liabilities or equity instruments relating to the replacement by the Group of an acquiree's share-based payment awards are measured in accordance with IFRS 2 Share-based Payment; and
-- assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured as per that Standard.
Investments in subsidiaries are accounted for at cost less impairment. Where applicable, cost is adjusted to reflect changes in consideration arising from contingent consideration amendments.
The Directors have reconsidered the treatment adopted in 2010/11 and 2011/12 and have concluded that the option to recognise share premium on shares issued as part consideration for acquisitions was not available therefore merger relief has been applied with the merger reserve being created. However as there is no impact on net assets, profit or cash flows, balance sheets as at 30 June 2012 have not been presented.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is reviewed and tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed in subsequent periods. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash generating units or groups of cash generating units that are expected to benefit from the business combination in which the goodwill arose. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.
In accordance with IAS 21 goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are treated as assets and liabilities of that foreign operation and as such are translated at the relevant foreign exchange rate at the balance sheet date.
Revenue and income recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.
Sales of goods are recognised when goods are despatched and title has passed.
Custom service revenue is recognised proportionately when the outcome of each discrete stage of the contract can be estimated reliably and is based on the stage of completion of the contract activity per agreed milestones set out in the contract. Where the outcome cannot be estimated reliably, revenue is recognised to the extent of costs incurred where it is probable these will be recovered. In instances where it is probable that the costs will be in excess of the contract revenue, the expected loss is recognised as an expense immediately.
Licence fee income is recognised on delivery of the licensed technology where the Group's continued performance or future research and development services are not required. Payments received prior to this are recorded as deferred income.
Royalty revenue is recognised based on the contractual terms and the substance of the agreements with the counterparty.
Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.
Dividend income from investments is recognised when the shareholders' rights to receive payment have been established.
Revenue derived from the Company's conferences is recognised when the conference is held; however, it is not material.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rentals payable under operating leases are charged to income on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purposes of the consolidated financial statements, the results and financial position of each Group company are expressed in sterling, which is the functional currency of the Company and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated to the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for:
-- exchange differences on transactions entered into to hedge certain foreign currency risks (see below under financial instruments/hedge accounting); and
-- exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment.
For the purpose of presenting consolidated financial statements, the results of the operations of the Company's overseas subsidiaries are translated at the monthly exchange rates during the period and their balance sheets at the rates prevailing at the balance sheet date. Exchange differences arising on the translation of the opening net assets and results of operations are classified as equity and recognised in the Group's foreign currency translation reserve.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the nature of the Group's obligations under the schemes is equivalent to those arising in a defined contribution retirement benefit scheme. The Group has no further obligations once the contributions have been paid.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes some items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except where it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the straight-line method, on the following bases:
Office equipment, fixtures and fittings Two to five years Laboratory equipment One to five years Computer equipment Three years Hybridomas Three to eight years Motor vehicles Five years
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income. Residual values of assets and their useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Intangible assets
Payments made to acquire software, distribution rights, capitalised development work and contract based intangibles from third parties are capitalised at cost and amortised on a straight-line basis over their estimated minimum useful lives. The principal economic lives used for this purpose are as follows:
Up front licence fees Three years Distribution rights One to ten years Software One to five years Contract based Term of contract Customer relationships Seven to ten years Patents, technology and know-how Five to fifteen years Trade names Eight years
Expenditure on development activities including internally generated intangible assets is recognised as an asset if and only if it meets the recognition criteria set out in IAS 38 Intangible Assets. Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and an attributable portion of production overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the standard cost method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Provision is made for obsolete, slow moving or defective items where appropriate.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Available-for-sale financial assets
The Group has an investment in unlisted shares which is not traded in an active market but is classified as an available-for-sale financial asset and stated at cost less any provision for impairment.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently held at amortised cost, less provision for impairment. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired. When a trade receivable is considered uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Term deposits
Term deposits represent bank deposits and a charitable bond all with an original maturity of over three months.
Financial liabilities and equity
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. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.
Trade payables
Trade payables are initially recognised at fair value and subsequently held at amortised cost.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Derivative financial instruments
Forward contracts are used by the Group to manage its exposure to the risk associated with the variability in cash flows in relation to both recognised assets or liabilities and forecast transactions.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. The resulting gain or loss is recognised in the income statement immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the income statement depends on the nature of the hedge relationship.
A derivative is presented as a non-current asset or non-current liability if the remaining maturity of the instrument is more than twelve months and it is not expected to be realised or settled within twelve months. Other derivatives are presented as current assets or current liabilities.
Hedge accounting
The Group designates certain derivatives as either hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges).
At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is effective in offsetting changes in fair values or cash flows of the hedged item.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss and is included in the 'administration and management expenses' line of the income statement.
Amounts deferred in equity are recycled in the income statement in the periods when the hedged item is recognised in profit or loss, in the same line of the income statement as the recognised hedged item.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payment. In accordance with IFRS 1, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 July 2006.
Incentives in the form of shares are provided to employees under share option, SIP and LTIP schemes. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of the number of shares that will eventually vest.
Fair value of options issued under the Group's share option schemes is measured by the use of the Monte Carlo Simulation.
Fair value of the awards under the Group's LTIP is measured by the use of the Monte Carlo Simulation for the TSR portion and the Black Scholes Model for the EPS portion.
Fair value of an equity settled payment under the SIP is measured as the face value of the award on the date of grant.
The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non- transferability, exercise restrictions and behavioural considerations. Charges made to the income statement in respect of share-based payments are credited to the share-based payments reserve.
At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.
When the options are exercised, the company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.
The Group operates an employee share benefit trust as part of its incentive plans for UK-based employees. All assets and liabilities of the trust are recorded in the balance sheet as assets and liabilities of the Company until such time as the assets are awarded to the beneficiaries. All income and expenditure of the trust is similarly brought into the results of the Company.
Own shares
Own equity instruments which are acquired are recognised at cost and deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration is recognised in reserves.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities as at the date of reporting the financial statements, and the reported amounts of revenues and expenditure during the year. These estimates and judgements are continually evaluated and based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances prevailing at that time. In preparation of the consolidated financial statements, estimates and assumptions have been made by the Directors concerning the fair value of share options, the estimated useful lives of fixed assets, accruals and provisions required, the carrying value of investments, the recoverability of deferred tax assets, the carrying value of goodwill and other intangible assets and other similar evaluations. Actual amounts may differ from those estimates.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of intangibles
As part of the business combinations the Group acquired the following intangible assets: licence fees, customer relationships, patents, trade names, technology and know how. Further to this the Group capitalises IT development costs relating to the rebuilding of the Group's IT core systems, since these costs meet the recognition criteria of IAS 38. The Group reviews the carrying amount of all intangible assets held at each balance sheet date and an impairment was considered necessary for a specific IT project not considered appropriate for use in the business. An impairment of the carrying value of GBP454,000 has been recognised in the year (2013: GBPnil).
Impairment of goodwill
The Group determines whether goodwill is impaired on at least an annual basis or more frequently when there are indications of possible impairment. The impairment review requires a value in use calculation of the cash generating units to which the goodwill is allocated. In estimating the value in use, management is required to make an estimate of the expected future cash flows attributable to the cash generating unit and to choose an appropriate discount rate to calculate the present value of those cash flows. The carrying amount of goodwill at 30 June 2014 was GBP73,549,000 (2013: GBP81,954,000). Further details are given in note 12.
Property, plant and equipment and intangible assets carrying value
Property, plant and equipment and intangible assets (excluding goodwill) represents 18.7% (2013: 20.3%) of the Group's total assets; estimates and assumptions made may have a material impact on their carrying value and related depreciation and amortisation charge. See note 13 'Intangible assets' and note 14 'Property, plant and equipment' for further details.
Valuation of own manufactured inventory
The standard costs used for the valuation of own manufactured inventory require a number of assumptions concerning the allocation of overheads. These assumptions are based primarily on management's estimates of time spent in each relevant area of activity and normal levels of activity.
Provision for slow moving or defective inventory
The provision for slow moving inventory is based on management's estimation of the future sales of each of the group's products over the next five years (or period from the balance sheet date to the expiry date of the product, whichever is the shorter), taking into account actual sales of those products in previous years and applying an assumed growth rate based on historical trends where available.
Should forecast sales (incorporating the projected growth rates) differ from those estimated by management, both the level of provision against existing inventory and the rates of provision applied to inventory in future periods would need to be revised.
Provisions for income taxes
The Group is subject to income taxes in various jurisdictions. Significant judgement is employed to determine the income tax provision on a global basis. There are numerous transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters differs from amounts initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
5. Operating segments
Products and services from which reportable segments derive their revenues
The Directors consider that there are no identifiable business segments that are engaged in providing individual products or services or a group of related products and services that are subject to risks and returns that are different to the core business. The information reported to the Group's Chief Executive Officer, who is considered the chief operating decision maker, for the purposes of resource allocation and assessment of performance is based wholly on the overall activities of the Group. The Group has therefore determined that it has only one reportable segment under IFRS 8, which is 'sales of antibodies and related products'. The Group's revenue and results and assets for this one reportable segment can be determined by reference to the Group's income statement and balance sheet.
The Group has no individual product or customer which comprises more than 10% of its revenues.
Geographical information
The Group's revenue from external customers and information about its non-current segment assets (excluding deferred tax and derivative financial instruments) by geographical location is detailed below:
Revenue Non-current assets
---------------------- --------------------
Year ended Year ended As at As at
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
---------------- ---------- ---------- --------- ---------
US 55,210 53,399 92,493 107,233
Japan 11,462 12,594 71 109
Germany 9,350 8,393 - -
UK 9,400 8,314 19,622 15,187
China 7,315 6,544 1,032 1,010
Other countries 35,217 32,962 9 23
---------------- ---------- ---------- --------- ---------
127,954 122,206 113,227 123,562
---------------- ---------- ---------- --------- ---------
Revenues are attributed to countries on the basis of the customer's location. No country included within 'Other countries' contributes more than 5% of the Group's total revenue.
6. Profit for the year
Profit for the year has been arrived at after charging/(crediting):
Year
ended Year ended
30 June 30 June
2014 2013
Notes GBP000 GBP000
----------------------------------------------------------------- ----- -------- ----------
Foreign exchange differences arising on financial instruments
at fair value through profit or loss (655) (99)
Other net foreign exchange differences (1,004) (848)
R&D expenditure (including amortisation as detailed
below) 10,054 7,946
Operating lease rentals - land and buildings 23 2,600 2,180
Depreciation of property, plant and equipment 14 1,882 1,990
Amortisation of intangible assets included within administration
and management expenses 13 1,566 556
Amortisation of acquisition-related intangible assets
included within administration and management expenses 13 1,517 1,525
Impairment loss on intangible assets 13 454 -
Amortisation of acquisition-related intangible assets
included within R&D expenditure 13 1,748 1,757
Cost of inventories recognised as an expense 35,872 33,411
Write down of inventories recognised as an expense 1,697 2,088
Staff costs 8 26,239 24,372
Impairment loss recognised on trade receivables 18 101 (18)
Auditor's remuneration 7 138 293
----------------------------------------------------------------- ----- -------- ----------
7. Auditor's remuneration
A detailed analysis of the auditor's remuneration on a worldwide basis is provided below:
Year ended Year ended
30 June 30 June
2014 2013
GBP000 GBP000
-------------------------------------------------------------- ---------- ----------
Fees payable to the Company's auditor for the audit of
the parent company and the consolidation 95 96
Total audit fees 95 96
- Audit-related assurance services(*) 20 20
- Audit of the Company's subsidiaries pursuant to legislation 10 4
- Taxation compliance services - 65
- Other taxation advisory services - 98
- Other assurance services - 10
- Other services 13 -
Total other services fees 43 197
-------------------------------------------------------------- ---------- ----------
Total auditor's remuneration 138 293
-------------------------------------------------------------- ---------- ----------
* This relates to the interim review.
The auditor's remuneration for the year ended 30 June 2014 relates to PricewaterhouseCoopers LLP following its appointment as auditor during the year. The comparatives relate to the previous auditor, Deloitte LLP. Details on the Company's policy on the use of the auditor for other services are set out in the Audit Committee Report.
8. Employees and remuneration
The average monthly number of employees (including Executive Directors) was:
Group
----------------------
Year ended Year ended
30 June 30 June
2014 2013
Number Number
------------------------------------------------------- ---------- ----------
Management, administrative, marketing and distribution 437 400
Laboratory 297 290
------------------------------------------------------- ---------- ----------
734 690
------------------------------------------------------- ---------- ----------
Their aggregate remuneration comprised:
Group
----------------------
Year ended Year ended
30 June 30 June
2014 2013
GBP000 GBP000
------------------------------------------------------ ---------- ----------
Wages and salaries 21,644 20,007
Social security costs 3,231 2,431
Other pension costs 1,207 977
Charge in respect of share options and awards granted 941 1,391
------------------------------------------------------ ---------- ----------
Total staff costs 27,023 24,806
------------------------------------------------------ ---------- ----------
Staff costs capitalised(*) (784) (434)
------------------------------------------------------ ---------- ----------
Net staff costs 26,239 24,372
------------------------------------------------------ ---------- ----------
* GBP784,000 (2013: GBP434,000) relates to Group staff costs directly attributable to the rebuild of the IT core systems being capitalised as part of an internally generated intangible asset under IAS 38 (see note 13).
The remuneration of the Directors is set out in the Directors' Remuneration Report.
9. Net finance income
Year ended Year ended
30 June 30 June
2014 2013
GBP000 GBP000
----------------------------------- ---------- ----------
Interest on cash and term deposits 238 129
Facility fees - (83)
Net finance income 238 46
----------------------------------- ---------- ----------
10. Taxation
Year ended Year ended
30 June 30 June
2014 2013
Note GBP000 GBP000
------------- ---- ---------- ----------
Current tax 9,984 10,084
Deferred tax 16 (478) 152
------------- ---- ---------- ----------
9,506 10,236
------------- ---- ---------- ----------
UK corporation tax is calculated at 22.5% (2013: 23.75%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
The Finance Act 2013, which provided for a reduction in the main rate of UK corporation tax to 21% effective from 1 April 2014 and a further reduction to 20% from 1 April 2015, was substantively enacted in July 2013. This further rate reduction has been reflected in the calculation of deferred tax at the balance sheet date.
The charge for the year can be reconciled to the profit per the income statement as follows:
Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June
2014 2014 2013 2013
GBP000 % GBP000 %
----------------------------------------------- ---------- ---------- ---------- ----------
Profit before tax 43,551 42,894
----------------------------------------------- ---------- ---------- ---------- ----------
Tax at the UK corporation tax rate of 22.5%
(2013: 23.75%) 9,799 22.5 10,188 23.8
Effect of different tax rates of subsidiaries
operating in different jurisdictions 563 1.3 502 1.2
Tax effect of expenses that are not deductible
in determining taxable profit 322 0.7 254 0.6
Additional relief in relation to overseas
entities (778) (1.8) (442) (1.0)
R&D tax credit uplift (479) (1.1) (369) (0.9)
Prior year adjustments 52 0.1 93 0.2
Effect of difference between closing deferred
tax rate and current tax rate 27 0.1 10 -
----------------------------------------------- ---------- ---------- ---------- ----------
Tax expense and effective rate for the
year 9,506 21.8 10,236 23.9
----------------------------------------------- ---------- ---------- ---------- ----------
11. Earnings per share
The calculation of the basic and diluted EPS is based on the following data:
Year ended Year ended
30 June 30 June
2014 2013
GBP000 GBP000
------------------------------------------------------- ----------- -----------
Earnings
Earnings for the purposes of basic and diluted EPS
being net profit attributable to owners of the parent 34,045 32,658
------------------------------------------------------- ----------- -----------
Number Number
------------------------------------------------------- ----------- -----------
Number of shares
Weighted average number of ordinary shares for the
purposes of basic EPS 198,858,251 197,743,410
Effect of dilutive potential ordinary shares:
- Share options 1,159,930 2,176,531
------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for the
purposes of diluted EPS 200,018,181 199,919,941
------------------------------------------------------- ----------- -----------
Basic EPS is calculated by dividing the earnings attributable to the owners of the parent by the weighted average number of shares outstanding during the year. Diluted EPS is calculated on the same basis as basic EPS but with a further adjustment for the weighted average shares in issue to reflect the effect of all dilutive potential ordinary shares. The number of dilutive potential ordinary shares is derived from the number of share-based options and awards granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year and where it is considered performance conditions will be met.
Adjusted earnings per share
The calculation of adjusted EPS excluding integration costs and amortisation of acquisition-related intangible assets is based on earnings of:
Year ended Year ended
30 June 30 June
2014 2013
GBP000 GBP000
-------------------------------------------------------------- ---------- ----------
Earnings for the purposes of basic and diluted EPS being
net profit attributable to the owners of the parent 34,045 32,658
Integration costs - 400
Amortisation of acquisition-related intangible assets 3,265 3,282
Tax effect of adjusting items (1,191) (1,216)
-------------------------------------------------------------- ---------- ----------
Profit after tax excluding integration costs and amortisation
of acquisition-related intangible assets 36,119 35,124
-------------------------------------------------------------- ---------- ----------
The denominators used are the same as those detailed above for both basic and diluted earnings per share.
Adjusted EPS after adding back acquisition costs and amortisation of associated intangible assets:
Year ended Year ended
30 June 30 June
2014 2013
--------------------- ---------- ----------
Adjusted basic EPS 18.16p 17.76p
Adjusted diluted EPS 18.06p 17.57p
--------------------- ---------- ----------
The adjusted EPS information is considered to provide a fairer representation of the Group's trading performance.
12. Goodwill
GBP000
------------------------------------------------- -------
Cost
At 1 July 2012 82,356
Fair value adjustments during measurement period (1,367)
Exchange differences 965
------------------------------------------------- -------
At 1 July 2013 81,954
Exchange differences (8,405)
------------------------------------------------- -------
At 30 June 2014 73,549
------------------------------------------------- -------
Accumulated impairment losses
At 1 July 2012, 1 July 2013 and 30 June 2014 -
------------------------------------------------- -------
Carrying amount
At 30 June 2012 82,356
At 30 June 2013 81,954
------------------------------------------------- -------
At 30 June 2014 73,549
------------------------------------------------- -------
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:
Year Year
ended ended
Carrying value Exchange 30 June 30 June
1 July 2013 differences(*) 2014 2013
GBP000 GBP000 GBP000 GBP000
------------------------------- -------------- --------------- -------- --------
Goodwill relating to the Abcam
group CGU 81,954 (8,405) 73,549 81,954
------------------------------- -------------- --------------- -------- --------
* Goodwill is converted at the exchange rate on the date of acquisition and retranslated to the balance sheet rate.
Following the acquisitions of Mitosciences, Ascent and Epitomics there has been considerable change in the way these entities are structured and integrated within the Abcam group. These changes include redirecting sales through the Abcam platform and the centralisation of the marketing, technical and operational support. Consequently the discrete financial information which is available for an individual entity does not reflect the true substance of the performance of that entity and the value being added. This means it is not possible to accurately assess the fair value in use of the acquired entities which formerly constituted the separately identifiable CGUs to determine whether or not there is an indication of goodwill impairment.
IAS 36 requires that following a reorganisation in the business which results in a change in the composition of CGUs, goodwill should be reallocated to the units affected. Considering the changes above, in the prior year the Directors considered it appropriate to reallocate the goodwill arising from the acquisitions to a single CGU, which would reflect the reorganised business structure. This CGU is tested for impairment on a group wide basis using the future forecast cash flows arising from the Abcam business as a whole.
The Group performs an annual test for goodwill impairment or more frequently if there are any indications that goodwill might be impaired.
The recoverable amount of the CGU is determined from value in use calculations. The key assumptions considered most sensitive for the value in use calculations are those regarding the discount rates, growth rates and anticipated movements in selling prices and direct costs during the period.
Management has projected cash flows based on financial forecasts over a period of four years. No growth rate has been used in the extrapolation of cash flows beyond the four years. A discount rate of 11% has been estimated using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU.
Management has performed sensitivity analysis on the key assumptions mentioned above. Based on the results of this analysis, management is satisfied that the recoverable amount of goodwill exceeds its carrying amount. As such, no impairment of goodwill has been recognised at the balance sheet date.
Due to the headroom which exists between the recoverable amount and the carrying value there is currently no reasonable possible change in any of these key assumptions which would cause the CGU's carrying amount to exceed its recoverable amount.
13. Intangible assets
Group
Patents,
Upfront Assets technology
licence Distribution Contract under Customer and Trade
fees rights Software based construction relationships know-how names Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------- -------- ------------ -------- -------- ------------- ------------- ----------- ------- -------
Cost
At 1 July
2012 443 1,474 380 3,567 773 5,455 22,812 2,236 37,140
Fair value
adjustments - - - (115) - (665) 8 (214) (986)
Additions 59 258 73 - 3,248 - - - 3,638
Transfer to
asset
in use - - 3,803 - (3,803) - - - -
Disposals (5) - (15) - - - - - (20)
Exchange
differences - - 3 - - - - - 3
------------- -------- ------------ -------- -------- ------------- ------------- ----------- ------- -------
At 1 July
2013 497 1,732 4,244 3,452 218 4,790 22,820 2,022 39,775
Additions 47 229 175 - 3,306 106 - - 3,863
Transfer to
asset
in use - - 3,324 - (3,324) - - - -
Disposals (19) (868) (543) - - - - - (1,430)
Exchange
differences - - (8) (200) - (262) (1,261) (121) (1,852)
------------- -------- ------------ -------- -------- ------------- ------------- ----------- ------- -------
At 30 June
2014 525 1,093 7,192 3,252 200 4,634 21,559 1,901 40,356
------------- -------- ------------ -------- -------- ------------- ------------- ----------- ------- -------
Accumulated
amortisation
At 1 July
2012 357 1,274 237 266 - 134 528 47 2,843
Charge for
the year 63 66 427 775 - 497 1,757 253 3,838
Disposals - - (15) - - - - - (15)
Exchange
differences - - 2 - - - - - 2
------------- -------- ------------ -------- -------- ------------- ------------- ----------- ------- -------
At 1 July
2013 420 1,340 651 1,041 - 631 2,285 300 6,668
Charge for
the year 56 152 1,353 771 - 500 1,748 251 4,831
Impairment - - 454 - - - - - 454
Disposals (2) (867) (543) - - - - - (1,412)
Exchange
differences - - (2) (100) - (55) (173) (31) (361)
------------- -------- ------------ -------- -------- ------------- ------------- ----------- ------- -------
At 30 June
2014 474 625 1,913 1,712 - 1,076 3,860 520 10,180
------------- -------- ------------ -------- -------- ------------- ------------- ----------- ------- -------
Carrying
amount
At 30 June
2013 77 392 3,593 2,411 218 4,159 20,535 1,722 33,107
------------- -------- ------------ -------- -------- ------------- ------------- ----------- ------- -------
At 30 June
2014 51 468 5,279 1,540 200 3,558 17,699 1,381 30,176
------------- -------- ------------ -------- -------- ------------- ------------- ----------- ------- -------
Company
Upfront Assets
licence Distribution under
fees rights Software construction Total
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------- -------- ------------ -------- ------------- -------
Cost
At 1 July 2012 434 1,637 338 773 3,182
Additions 59 490 54 3,248 3,851
Transfer to asset in use - - 3,803 (3,803) -
---------------------------------------- -------- ------------ -------- ------------- -------
At 1 July 2013 493 2,127 4,195 218 7,033
Additions 47 229 127 3,306 3,709
Transfer to asset in use - - 3,324 (3,324) -
Disposals (15) (868) (543) - (1,426)
---------------------------------------- -------- ------------ -------- ------------- -------
At 30 June 2014 525 1,488 7,103 200 9,316
---------------------------------------- -------- ------------ -------- ------------- -------
Accumulated amortisation and impairment
At 1 July 2012 356 1,314 228 - 1,898
Charge for the year 63 303 408 - 774
---------------------------------------- -------- ------------ -------- ------------- -------
At 1 July 2013 419 1,617 636 - 2,672
Charge for the year 55 381 1,331 - 1,767
Impairment - - 454 - 454
Disposals (2) (868) (543) - (1,413)
---------------------------------------- -------- ------------ -------- ------------- -------
At 30 June 2014 472 1,130 1,878 - 3,480
---------------------------------------- -------- ------------ -------- ------------- -------
Carrying amount
At 30 June 2013 74 510 3,559 218 4,361
---------------------------------------- -------- ------------ -------- ------------- -------
At 30 June 2014 53 358 5,225 200 5,836
---------------------------------------- -------- ------------ -------- ------------- -------
The amortisation period for the upfront licence fees is three years and software is between one and five years. The amortisation period for the distribution rights is the term of the agreement.
Contract-based intangibles predominately relates to two agreements: an agreement with the University of Oregon, under which the university supplies monoclonal antibodies to MitoSciences, which has full rights and entitlement to commercially exploit these materials in exchange for an ongoing fee. The remaining amortisation period is 11 years, being the remaining term of the agreement; and an agreement between Epitomics and Loyola University Chicago for access to a patent. The remaining amortisation period is to February 2015, being the expiry date of the agreement.
Assets under construction relate to the development of the core IT systems architecture. These are not amortised until being available for use in the business.
Customer relationships relates to access to new customers as part of the Epitomics acquisition, namely in the reagents and services business. The remaining amortisation period is eight years in line with the history of the business.
Patents, technology and know-how relates to the acquired RabMAb(R) technology as part of the Epitomics business. The remaining amortisation period is 13 years, being the remaining term of the primary patent.
Trade names relate to RabMAb(R) and Epitomics. The remaining amortisation period is six years.
14. Property, plant and equipment
Group
Office
equipment, Hybridomas
Computer Laboratory fixtures under Motor
equipment equipment and fittings Hybridomas construction vehicles Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---------- ---------- ------------- ---------- ------------- --------- -------
Cost
At 1 July 2012 1,559 7,914 2,237 1,404 735 96 13,945
Additions 329 1,274 238 1,343 437 52 3,673
Disposals (122) (36) (7) - (35) - (200)
Exchange differences - 113 28 40 25 8 214
At 1 July 2013 1,766 9,265 2,496 2,787 1,162 156 17,632
Additions 332 710 768 1,468 257 6 3,541
Transfer to asset in
use - - - 342 (342) - -
Disposals (176) (301) (63) - - (5) (545)
Exchange differences (57) (307) (197) (284) (133) (19) (997)
At 30 June 2014 1,865 9,367 3,004 4,313 944 138 19,631
------------------------- ---------- ---------- ------------- ---------- ------------- --------- -------
Accumulated depreciation
At 1 July 2012 1,125 5,619 1,268 168 - 2 8,182
Charge for the year 277 933 456 305 - 19 1,990
Disposals (119) (36) (6) - - - (161)
Exchange differences 1 71 35 10 - 3 120
At 1 July 2013 1,284 6,587 1,753 483 - 24 10,131
Charge for the year 312 762 476 312 - 20 1,882
Disposals (175) (284) (60) - - (5) (524)
Exchange differences (40) (143) (120) (52) - (5) (360)
At 30 June 2014 1,381 6,922 2,049 743 - 34 11,129
------------------------- ---------- ---------- ------------- ---------- ------------- --------- -------
Carrying amount
At 30 June 2013 482 2,678 743 2,304 1,162 132 7,501
------------------------- ---------- ---------- ------------- ---------- ------------- --------- -------
At 30 June 2014 484 2,445 955 3,570 944 104 8,502
------------------------- ---------- ---------- ------------- ---------- ------------- --------- -------
Company
Office
equipment, Hybridomas
Computer Laboratory fixtures under
equipment equipment and fittings Hybridomas construction Motor vehicles Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---------- ---------- ------------- ---------- ------------- -------------- -------
Cost
At 1 July 2012 1,104 5,990 993 223 - - 8,310
Additions 234 491 81 61 - - 867
Disposals (47) (1) - - - - (48)
------------------------- ---------- ---------- ------------- ---------- ------------- -------------- -------
At 1 July 2013 1,291 6,480 1,074 284 - - 9,129
Additions 198 456 289 1,242 945 6 3,136
Disposals (161) (250) (25) - - - (436)
------------------------- ---------- ---------- ------------- ---------- ------------- -------------- -------
At 30 June 2014 1,328 6,686 1,338 1,526 945 6 11,829
------------------------- ---------- ---------- ------------- ---------- ------------- -------------- -------
Accumulated depreciation
At 1 July 2012 824 5,102 674 139 - - 6,739
Charge for the year 189 400 216 66 - - 871
Disposals (45) (1) - - - - (46)
------------------------- ---------- ---------- ------------- ---------- ------------- -------------- -------
At 1 July 2013 968 5,501 890 205 - - 7,564
Charge for the year 210 379 149 113 - 1 852
Disposals (161) (236) (25) - - - (422)
------------------------- ---------- ---------- ------------- ---------- ------------- -------------- -------
At 30 June 2014 1,017 5,644 1,014 318 - 1 7,994
------------------------- ---------- ---------- ------------- ---------- ------------- -------------- -------
Carrying amount
At 30 June 2013 323 979 184 79 - - 1,565
------------------------- ---------- ---------- ------------- ---------- ------------- -------------- -------
At 30 June 2014 311 1,042 324 1,208 945 5 3,835
------------------------- ---------- ---------- ------------- ---------- ------------- -------------- -------
15. Investments in subsidiaries
The Company's subsidiaries at 30 June 2014 are:
Proportion
Country Proportion of voting
of of shares power
incorporation held held
------------------------------------------------ --------------- ---------- ----------
Abcam Australia Pty Limited Australia 100% 100%
Abcam Inc US 100% 100%
Abcam KK Japan 100% 100%
Abcam (Hong Kong) Limited Hong Kong 100% 100%
Abcam Epitomics Holdings, Inc US 100% 100%
Abcam LLC US 100% 100%
Abcam Trading (Shanghai) Co., Limited China 100% 100%
Abcam (US) Limited UK 100% 100%
Abcam US Group Holdings Inc US 100% 100%
Ascent Scientific Limited UK 100% 100%
Ascent Scientific LLC US 100% 100%
Camgene Limited (dormant) UK 100% 100%
Epitomics Inc US 100% 100%
Epitomics (Hangzhou) Biotechnology Co., Limited China 100% 100%
Epitomics (Hong Kong) Limited (dormant) Hong Kong 100% 100%
MitoSciences Inc US 100% 100%
The Abcam Employee Share Benefit Trust Limited UK 100% 100%
------------------------------------------------ --------------- ---------- ----------
Analysis of changes in investments
GBP000
---------------------------------------------- ---------
At 1 July 2012 123,112
Transfer of shares in subsidiary undertakings (113,102)
Purchase of shares in subsidiary undertaking 85,872
Fair value adjustment to acquired subsidiary (42)
---------------------------------------------- ---------
At 30 June 2013 95,840
---------------------------------------------- ---------
Capital contribution* 307
---------------------------------------------- ---------
At 30 June 2014 96,147
---------------------------------------------- ---------
*The capital contribution represents share-based payment charges for share options issued by the Company to employees of its subsidiaries.
Following the acquisition of Epitomics Inc in April 2012, the Group undertook a restructuring to consolidate the ownership of its US subsidiaries. On 20 December 2012, Abcam plc transferred its shareholding in Epitomics Inc, MitoSciences Inc and Abcam Inc to Abcam (US) Limited, an indirect subsidiary of the Company.
In consideration for the shares of US subsidiaries, Abcam plc received total consideration of GBP127.1m made up of shares in Group companies of GBP85.9m and intra-group receivables of $67m (see note 19).
16. Deferred tax assets and liabilities
The following are the deferred tax liabilities and assets recognised by the Group and Company and movements thereon during the current and prior reporting periods.
Group
Accelerated Cash Acquired Other
tax flow Share-based intangible temporary
depreciation hedges payment assets differences Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ------------- ------- ----------- ----------- ------------ -------
At 30 June 2012 (858) (213) 2,776 (12,937) 2,696 (8,536)
(Charge)/credit to income (520) - 227 1,259 (1,118) (152)
Fair value adjustments 26 - - 394 2,230 2,650
Credit/(charge) to equity - 525 (841) - - (316)
Exchange differences (44) - - - 125 81
-------------------------- ------------- ------- ----------- ----------- ------------ -------
At 30 June 2013 (1,396) 312 2,162 (11,284) 3,933 (6,273)
Credit/(charge) to income 658 - 85 1,191 (1,456) 478
Charge to equity - (550) (1,350) - - (1,900)
Exchange differences 125 - - 1,252 (265) 1,112
-------------------------- ------------- ------- ----------- ----------- ------------ -------
At 30 June 2014 (613) (238) 897 (8,841) 2,212 (6,583)
-------------------------- ------------- ------- ----------- ----------- ------------ -------
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
30 June 30 June 30 June
2014 2013 2012
GBP000 GBP000 GBP000
------------------------- ------- -------- --------
Deferred tax assets 2,258 5,011 4,401
Deferred tax liabilities (8,841) (11,284) (12,937)
------------------------- ------- -------- --------
(6,583) (6,273) (8,536)
------------------------- ------- -------- --------
The deferred tax liability of GBP8,841,000 (2013: GBP11,284,000) has been recognised in relation to the acquired intangible assets as a result of the acquisitions. Amounts released from this liability during the period were GBP1,191,000 (2013: GBP1,259,000), representing the decrease of the deferred tax liability in line with amortisation charged against the carrying value of the associated intangible assets.
Company
Accelerated Cash Other
tax flow Share-based temporary
depreciation hedges payment differences Total
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ------------- ------- ----------- ------------ -------
At 30 June 2012 51 (213) 2,545 30 2,413
(Charge)/credit to income (9) - 226 5 222
Credit/(charge) to equity - 525 (765) - (240)
-------------------------- ------------- ------- ----------- ------------ -------
At 30 June 2013 42 312 2,006 35 2,395
(Charge)/credit to income (70) - - (147) (217)
Charge to equity - (550) (1,143) - (1,693)
-------------------------- ------------- ------- ----------- ------------ -------
At 30 June 2014 (28) (238) 863 (112) 485
-------------------------- ------------- ------- ----------- ------------ -------
At the balance sheet date, there are no aggregate temporary differences associated with undistributed earnings of subsidiaries for which a deferred tax liability has not been recognised (2013: GBPnil). No temporary differences exist in the current year as a result of a change to the UK tax legislation which largely exempts dividends from UK tax if received on or after 1 July 2009. The Directors believe that all dividends to be paid by the Company's subsidiaries will meet the criteria for exemption from UK tax.
17. Inventories
Group Company
---------------- ----------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
----------------- ------- ------- ------- -------
Raw materials 834 1,113 - -
Work in progress 1,079 739 - -
Finished goods 12,840 13,478 13,321 15,630
----------------- ------- ------- ------- -------
14,753 15,330 13,321 15,630
----------------- ------- ------- ------- -------
18. Financial assets
Trade and other receivables
Group Company
---------------- ----------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
----------------------------------------- ------- ------- ------- -------
Amounts receivable for the sale of goods 12,620 11,886 4,124 3,900
Allowance for doubtful debts (479) (411) (196) (140)
----------------------------------------- ------- ------- ------- -------
12,141 11,475 3,928 3,760
Amounts owed by subsidiary undertakings - - 7,689 9,413
Other debtors 2,386 4,578 754 1,139
Prepayments 3,316 1,387 877 750
----------------------------------------- ------- ------- ------- -------
17,843 17,440 13,248 15,062
----------------------------------------- ------- ------- ------- -------
Trade receivables
The average credit period taken for sales is 35.3 days (2013: 34.5 days). No interest has been charged on the receivables. Trade receivables are provided for based on estimated irrecoverable amounts determined by reference to past default experience. The Group and Company have provided fully for all receivables over 90 days past due because historical experience is such that receivables that are past due beyond 90 days are generally not recoverable. Trade receivables between 30 days and 90 days are provided for based on estimated irrecoverable amounts from the sale of goods determined by reference to past default experience.
Credit limits for each customer are reviewed on a monthly basis. No customer represents more than 5% of the total balance of trade receivables.
The analysis below shows the balances included in debtors which are past due at the reporting date for which the Group or Company has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. Neither the Group nor Company holds any collateral or other credit enhancements over these balances, nor do they have a legal right to offset against any amounts owed to the counterparty.
Ageing of past due but not impaired receivables
Group Company
---------------- ----------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
---------------------- ------- ------- ------- -------
0 to 30 days overdue 2,281 2,532 632 877
30 to 60 days overdue 332 277 12 31
---------------------- ------- ------- ------- -------
2,613 2,809 644 908
---------------------- ------- ------- ------- -------
Movement in the allowance for doubtful debts
Group Company
---------------- ----------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
----------------------------------------- ------- ------- ------- -------
Balance at the beginning of the year (411) (433) (140) (101)
Impairment losses recognised through the
income statement (101) 18 (56) (39)
Exchange differences on translation of
foreign operations 33 4 - -
Balance at the end of the year (479) (411) (196) (140)
----------------------------------------- ------- ------- ------- -------
In determining the recoverability of a trade receivable the Group and Company consider any change in the credit quality of the receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.
Ageing of impaired receivables
Group Company
---------------- ----------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
-------------------------- ------- ------- ------- -------
0 to 30 days overdue 163 81 66 23
30 to 60 days overdue 164 201 75 77
60 to 90 days overdue 116 78 32 20
More than 90 days overdue 36 51 23 20
-------------------------- ------- ------- ------- -------
479 411 196 140
-------------------------- ------- ------- ------- -------
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
19. Loan receivable
Group Company
---------------- ----------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
-------------------------------------- ------- ------- ------- -------
Amount owed by subsidiary undertaking - - 39,133 44,175
-------------------------------------- ------- ------- ------- -------
The amount owed to the Company represents two interest-bearing loans due from Abcam US Group Holdings Inc of $33m and $34m, interest being incurred at rates of 7.34% and 8.69% respectively. The loans are repayable on 20 December 2017 and 2019 respectively and are unsecured. The movement in the year is due to foreign exchange. See note 15 for further details.
20. Available-for-sale financial asset
30 June 30 June
2014 2013
GBP000 GBP000
------- ------- -------
Shares 623 703
------- ------- -------
As part of the Epitomics acquisition the Group acquired a 13% interest in Plexbio Co., Limited (Plexbio), a privately owned biotechnology company headquartered in Taiwan. Plexbio was established to research, develop and manufacture in vitro diagnostic (IVD) kits. The movement in the year is due to foreign exchange. See note 26 for further details.
21. Derivative financial instruments
Group and Company: 30 June 2014
Current Non-current
------------------ ------------------
Asset Liability Asset Liability Total
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------------- ------- --------- ------- --------- -------
Derivatives that are designated and effective
as hedging instruments carried at fair value
Forward exchange contracts 862 - - - 862
Derivatives carried at fair value through
profit and loss (FVTPL)
Forward exchange contracts that are not
designated in hedge accounting relationships 986 (14) 180 (21) 1,131
---------------------------------------------- ------- --------- ------- --------- -------
1,848 (14) 180 (21) 1,993
---------------------------------------------- ------- --------- ------- --------- -------
Group and Company: 30 June 2013
Current Non-current
------------------ ------------------
Asset Liability Asset Liability Total
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------------- ------- --------- ------- --------- -------
Derivatives that are designated and effective
as hedging
instruments carried at fair value
Forward exchange contracts 145 (1,160) 29 (375) (1,361)
Derivatives carried at fair value through
profit and loss (FVTPL)
Forward exchange contracts that are not
designated in hedge accounting relationships 386 (179) - - 207
---------------------------------------------- ------- --------- ------- --------- -------
531 (1,339) 29 (375) (1,154)
---------------------------------------------- ------- --------- ------- --------- -------
Further details of derivative financial instruments are provided in note 26.
22. Trade and other payables
Group Company
---------------- ----------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
---------------------------------------- ------- ------- ------- -------
Amounts falling due within one year
Trade payables 3,737 4,812 3,107 3,930
Amounts owed to subsidiary undertakings - - 7,663 4,579
Accruals and deferred income 7,986 7,579 5,317 4,501
Other taxes and social security 1,534 1,239 431 295
Other payables 779 687 8 9
---------------------------------------- ------- ------- ------- -------
14,036 14,317 16,526 13,314
---------------------------------------- ------- ------- ------- -------
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. At 30 June 2014, the Group had an average of 32.8 days of purchases (2013: 32.1 days) outstanding in trade payables (excluding accruals and deferred income). Most suppliers do not charge interest for the first 60 days of the invoice. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timetable. The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
23. Commitments
Year ended Year ended
30 June 30 June
2014 2013
GBP000 GBP000
--------------------------------------------------------- ---------- ----------
Minimum lease payments under operating leases recognised
as an expense in the year:
- Land and buildings 2,600 2,180
--------------------------------------------------------- ---------- ----------
At the balance sheet date, the Group and Company had outstanding commitments for future minimum lease payments under
non cancellable operating leases, all of which relate to land and buildings, which fall due as follows:
Group Company
---------------- ----------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
--------------------------------------- ------- ------- ------- -------
Within one year 2,458 2,251 1,032 833
In the second to fifth years inclusive 5,544 6,227 2,802 3,180
After five years - 23 - -
--------------------------------------- ------- ------- ------- -------
8,002 8,501 3,834 4,013
--------------------------------------- ------- ------- ------- -------
The above table reflects the committed cash payments under operating leases, rather than the expected charge to the income statement in the relevant periods. The charge in 2014/15 on these operating leases is expected to be GBP2.4m for the Group and GBP1.0m for the Company. There are no commitments relating to the acquisition of property, plant and equipment and intangible assets (2013: GBPnil).
24. Capital and reserves
Share capital
Group and Company
30 June 30 June
2014 2013
GBP000 GBP000
------------------------------------------------------- ------- -------
Issued and fully paid:
200,446,300 (2013: 199,378,377) ordinary shares of 0.2
pence each 401 399
------------------------------------------------------- ------- -------
The movement during the year on the Company's issued and fully paid shares was as follows:
2014 2014 2013
Number GBP000 GBP000
----------------------------- ----------- ------- -------
Balance at beginning of year 199,378,377 399 397
Issue of share capital 1,067,923 2 2
----------------------------- ----------- ------- -------
Balance at end of year 200,446,300 401 399
----------------------------- ----------- ------- -------
The Company has one class of ordinary shares which carry no right to fixed income. The share capital issued during the year arose from the exercise of share options.
Share premium
Group and Company
GBP000
------------------------------------------ ------
Balance at 1 July 2012 15,300
Premium arising on issue of equity shares 1,095
------------------------------------------ ------
Balance at 1 July 2013 16,395
Premium arising on issue of equity shares 1,297
------------------------------------------ ------
Balance at 30 June 2014 17,692
------------------------------------------ ------
There were no costs of issue incurred during the year or the previous year.
Own shares
Group and Company
GBP000
----------------------------------- -------
Balance at 1 July 2013 (1,872)
Acquired in the period (484)
Disposed of on exercise of options 213
----------------------------------- -------
Balance at 30 June 2014 (2,143)
----------------------------------- -------
This balance represents the cost of 981,901 shares with a nominal value of GBP1,964 in Abcam plc (2013: 786,145 with a nominal value of GBP1,572) which were issued by the Company at market value and held by the Abcam Employee Share Benefit Trust. These shares are held in order to satisfy the free shares and matching shares elements of the SIP. See note 27 for further details of this scheme.
Reserves
Translation reserve
The translation reserve comprises foreign currency differences from the translation of the financial statements of foreign operations.
Share-based payment reserve
The share-based payment reserve comprises the IFRS 2 charge for the fair value of share-based options and awards.
Hedging reserve
The hedging reserve comprises gains and losses recognised on cash flow hedges and the associated deferred tax assets and liabilities created.
Deferred tax reserve
The deferred tax reserve comprises the portion of the deferred tax arising on outstanding share options exercised and not taken to the income statement in accordance with IAS 12.
Merger reserve
The merger reserve comprises the premium issued on shares allotted as consideration for acquisitions where conditions for merger relief are satisfied.
25. Dividends
Year ended Year ended
30 June 30 June
2014 2013
GBP000 GBP000
---------------------------------------------------------- ---------- ----------
Amounts recognised as distributions to the owners of
the parent in the year:
Final dividend for the year ended 30 June 2013 of 5.10
pence (2012: 4.36 pence) per share 10,187 8,650
Interim dividend for the year ended 30 June 2014 of 2.13
pence (2013: 1.94 pence) per share 4,268 3,856
---------------------------------------------------------- ---------- ----------
Total distributions to owners of the parent in the period 14,455 12,506
---------------------------------------------------------- ---------- ----------
Proposed final dividend for the year ended 30 June 2014
of 5.62 pence (2013: 5.10 pence) per share 11,265 10,168
---------------------------------------------------------- ---------- ----------
The proposed final dividend is subject to approval of the shareholders at the AGM and has not been included as a liability in these financial statements.
26. Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern whilst maximising the return to stakeholders. The capital structure of the Group consists of cash and cash equivalents and equity attributable to the owners of the parent, comprising issued capital, reserves and retained earnings.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3. Foreign exchange contracts are measured using quoted forward exchange rates and the yield curves derived from quoted interest rates matching maturities of these contracts.
Categories of financial instruments
Group Company
carrying value carrying value
-------------------------------------------- ------------------ ------------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
-------------------------------------------- -------- -------- -------- --------
Financial assets
Loans and receivables
Amounts owed by subsidiary undertakings - - 46,822 53,588
Trade receivables 12,141 11,475 3,928 3,760
Other receivables 1,194 1,282 - -
13,335 12,757 50,750 57,348
Cash and cash equivalents and term deposits
Cash and cash equivalents and term deposits 56,862 38,311 50,013 26,295
-------------------------------------------- -------- -------- -------- --------
Total financial assets 70,197 51,068 100,763 83,643
-------------------------------------------- -------- -------- -------- --------
Financial liabilities
Other financial liabilities at amortised
cost
Trade and other payables(*) (12,502) (13,078) (16,095) (13,019)
Total financial liabilities (12,502) (13,078) (16,095) (13,019)
-------------------------------------------- -------- -------- -------- --------
* Financial liabilities at amortised cost within trade and other payables consist of trade payables, accruals, intercompany payables and other payables.
The Directors consider there to be no material difference between the book value and the fair value of the Group's financial assets and liabilities at the balance sheet date. This is because most of the financial assets and liabilities are short term.
Fair value measurements recognised in the balance sheet
Financial instruments that are measured subsequent to initial recognition at fair value have been classified using a fair value hierarchy that reflects the significance of the inputs used in measuring the fair value of those instruments. The fair value hierarchy has the following levels:
-- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
-- Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable market inputs).
The following table presents the Group's assets and liabilities carried at fair value by valuation method.
Level
1 Level 2 Level 3 Total
30 June 2014 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- -------- --------
Assets
Derivative financial instruments - 2,028 - 2,028
Available-for-sale asset - - 623 623
Total assets - 2,028 623 2,651
--------------------------------- -------- -------- -------- --------
Liabilities
Derivative financial instruments - (35) - (35)
--------------------------------- -------- -------- -------- --------
Total liabilities - (35) - (35)
--------------------------------- -------- -------- -------- --------
Level
1 Level 2 Level 3 Total
30 June 2013 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- -------- --------
Assets
Derivative financial instruments - 560 - 560
Available-for-sale asset - - 703 703
Total assets - 560 703 1,263
--------------------------------- -------- -------- -------- --------
Liabilities
Derivative financial instruments - (1,714) - (1,714)
--------------------------------- -------- -------- -------- --------
Total liabilities - (1,714) - (1,714)
--------------------------------- -------- -------- -------- --------
There were no transfers between levels during the year.
Level 2 derivative financial instruments comprise forward foreign exchange contracts. These forward foreign exchange contracts have been fair valued using forward exchange rates that are quoted in an active market.
The Level 3 available-for-sale asset is an unlisted equity instrument stated at cost less any provision for impairment. The Directors believe that no reasonably foreseeable changes to key assumptions would result in a significant change in fair value.
The Group's finance department performs the valuations of financial assets required for financial reporting purposes, including Level 3 fair values. It reports directly to the Chief Financial Officer (CFO). Discussions of valuation processes and results are held between the CFO and the valuation team at least once every six months, in line with the Group's reporting dates.
Risk in relation to the use of financial instruments
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group or the Company. Trade receivables consist of a large number of customers spread across diverse geographical areas. The Group does not have a significant credit risk exposure to any single counterparty. Ongoing credit evaluation is performed on the financial condition of trade receivables and consideration is given as to whether there is any impairment in the value of any amounts owing.
The standard payment terms for receivables other than intra-group balances are 30 days. Any variation in these terms requires authorisation by senior management. Year-end debtor days are 35.3 days (2013: 34.5 days). All overdue debts are provided for where collectability is considered doubtful or the value of the debt is impaired. Objective evidence of impairment could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 35.3 days, as well as observable changes in international or local economic conditions.
The standard payment term for intra-group receivables is 45 days. There is not considered to be any risk of impairment of these receivables unless the financial assets of the entity holding the corresponding liability are impaired.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are major financial institutions. Funds are split between at least two institutions. The carrying amount best represents the maximum exposure to credit risk.
Market risk
The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group enters into forward exchange contracts to hedge the exchange rate risk arising on the sales of goods and services denominated in US dollars, euros and Japanese yen.
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. The Group's policy is to maintain natural hedges where possible, by matching foreign currency revenue and expenditure. Exchange rate exposures are managed within approved policy parameters utilising forward exchange contracts.
The carrying amounts of the Group's foreign currency denominated monetary assets and liabilities at the reporting date, not denominated in the local functional currency, are as follows:
Liabilities Assets
------------------ ---------------- ----------------
30 June 30 June 30 June 30 June
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
------------------ ------- ------- ------- -------
Euros (96) (247) 4,893 7,020
US dollars (8,824) (5,758) 10,942 11,813
Japanese yen (10) (33) 2,924 3,146
Hong Kong dollars - - 82 84
------------------ ------- ------- ------- -------
(8,930) (6,038) 18,841 22,063
------------------ ------- ------- ------- -------
Foreign currency sensitivity analysis
The Group's principal functional currency is sterling. The Group is mainly exposed to fluctuations in US dollars, euros and Japanese yen exchange rates.
The following table details the Group's sensitivity to an 8% increase and decrease in the sterling exchange rate against the relevant foreign currencies on the Group's profit before tax and equity. 8% represents management's assessment of the reasonable possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and forward exchange contracts in the balance sheet at the end of the relevant accounting period and adjusts their translation at the period end for an 8% change in foreign currency rates. It does not represent the overall impact on Group profitability if the exchange rate sensitivity had been applied through the reporting period. A positive number indicates an increase in profit or equity.
US dollar currency Euro currency Yen currency
impact impact impact
-------------------- ---------------- ----------------
2014 2013 2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ --------- --------- ------- ------- ------- -------
Effect of an 8% strengthening
in relevant exchange rate
on:
Profit or loss 311 448 356 501 216 231
Other equity 1,996 2,182 2,211 1,840 618 631
Effect of an 8% weakening
in relevant exchange rate
on:
Profit or loss (366) (685) (417) (589) (254) (271)
Other equity (2,343) (2,402) (2,593) (2,160) (726) (741)
------------------------------ --------- --------- ------- ------- ------- -------
In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk since it is limited to the year end exposure and does not reflect the exposure during the year.
Forward exchange contracts
It is the policy of the Group to enter into forward exchange contracts to manage the risk associated with anticipated sales transactions out to 18 months within 30% to 95% of the exposure generated. Upon maturity of a forward exchange contract, the Group may enter into a new contract designated as a separate hedging relationship.
Foreign currency forward contracts are valued using quoted forward exchange rates and the yield curves derived from quoted interest rates matching maturities of the contracts.
The following table details the forward exchange contracts outstanding as at the year end:
Foreign Contract Fair
value
Average currency value gain/(loss)
rate 30 June 30 June 30 June
30 June 2014 2014 2014
Outstanding contracts 2014 000 GBP000 GBP000
--------------------------------------- -------- ------------ -------- -------------
Sell US dollars
Less than 3 months 1.55 $10,800 6,951 627
3 to 6 months 1.67 $9,571 5,715 111
7 to 12 months 1.67 $20,556 12,279 214
13 to 18 months 1.68 $12,142 7,240 86
--------------------------------------- -------- ------------ -------- -------------
1.65 $53,069 32,185 1,038
--------------------------------------- -------- ------------ -------- -------------
Sell euros
Less than 3 months 1.19 EUR6,750 5,653 246
3 to 6 months 1.22 EUR8,369 6,851 128
7 to 12 months 1.22 EUR15,704 12,842 201
13 to 18 months 1.23 EUR11,075 9,015 69
--------------------------------------- -------- ------------ -------- -------------
1.22 EUR41,898 34,361 644
--------------------------------------- -------- ------------ -------- -------------
Sell yen
Less than 3 months 150.92 Yen333,000 2,207 281
3 to 6 months 172.13 Yen350,381 2,036 8
7 to 12 months 171.43 Yen693,680 4,046 18
13 to 18 months 170.76 Yen391,512 2,293 4
--------------------------------------- -------- ------------ -------- -------------
167.14 Yen1,768,573 10,582 311
--------------------------------------- -------- ------------ -------- -------------
Total of outstanding forward contracts 77,128 1,993
--------------------------------------- -------- ------------ -------- -------------
Foreign Contract Fair
Value
Average currency value gain/(loss)
rate 30 June 30 June 30 June
30 June 2013 2013 2013
Outstanding contracts 2013 000 GBP000 GBP000
--------------------------------------- -------- ------------ -------- -------------
Sell US dollars
Less than 3 months 1.57 $7,590 4,846 (151)
3 to 6 months 1.55 $10,290 6,620 (159)
7 to 12 months 1.55 $21,050 13,546 (331)
13 to 18 months 1.55 $10,800 6,951 (173)
--------------------------------------- -------- ------------ -------- -------------
1.56 $49,730 31,963 (814)
--------------------------------------- -------- ------------ -------- -------------
Sell euros
Less than 3 months 1.20 EUR5,725 4,786 (118)
3 to 6 months 1.19 EUR6,750 5,668 (121)
7 to 12 months 1.19 EUR13,500 11,328 (267)
13 to 18 months 1.19 EUR6,750 5,653 (154)
--------------------------------------- -------- ------------ -------- -------------
1.19 EUR32,725 27,435 (660)
--------------------------------------- -------- ------------ -------- -------------
Sell yen
Less than 3 months 126.21 Yen298,645 2,366 384
3 to 6 months 151.32 Yen306,890 2,028 (11)
7 to 12 months 151.29 Yen639,420 4,226 (34)
13 to 18 months 150.92 Yen333,000 2,207 (19)
--------------------------------------- -------- ------------ -------- -------------
145.74 Yen1,577,955 10,827 320
--------------------------------------- -------- ------------ -------- -------------
Total of outstanding forward contracts 70,225 (1,154)
--------------------------------------- -------- ------------ -------- -------------
At 30 June 2014, the fair value of contracts held as cash flow hedges is an asset of GBP862,000 (2013: liability of GBP1,361,000). The remaining contracts are not held as cash flow hedges. The gain on the financial assets at fair value through the profit and loss account was GBP655,000 (2013: GBP99,000).
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements.
The Group manages liquidity risk by maintaining adequate reserves and banking facilities, continually monitoring cash flows and matching the maturity profiles of financial assets and liabilities.
The Group and Company hold cash deposits at call or with a maturity of up to five years. At 30 June 2014, the average maturity of balances was 805 days (2013: 693 days) of fixed rate deposits not sensitive to changes in interest rates. Sufficient funds are readily available to the Company to meet operational requirements.
Trade payables are normally payable within 30 days of invoice and the standard payment terms for intra-group receivables are 45 days.
Liquidity risk tables - financial liabilities
All trade and other payable balances are capital and do not include accrued interest.
Between
six months
Less than and one
six months year Total
GBP000 GBP000 GBP000
----------------------------------------------- ----------- ----------- --------
Group
2014
Trade and other payables (12,502) - (12,502)
(12,502) - (12,502)
----------------------------------------------- ----------- ----------- --------
Company
2014
Trade and other payables (8,432) - (8,432)
Trade payables owed to subsidiary undertakings (3,363) - (3,363)
Loans payable to subsidiary undertakings - (4,300) (4,300)
(11,795) (4,300) (16,095)
----------------------------------------------- ----------- ----------- --------
Between
six months
Less than and one
six months year Total
GBP000 GBP000 GBP000
----------------------------------------------- ----------- ----------- --------
Group
2013
Trade and other payables (13,078) - (13,078)
(13,078) - (13,078)
----------------------------------------------- ----------- ----------- --------
Company
2013
Trade and other payables (8,440) - (8,440)
Trade payables owed to subsidiary undertakings (4,579) - (4,579)
(13,019) - (13,019)
----------------------------------------------- ----------- ----------- --------
Interest rate risk sensitivity analysis
An increase of 0.25% in the average interest rate during the year would have resulted in an increase in interest received by the Group of GBP119,000 (2013: GBP70,000) and by the Company of GBP95,000 (2013: GBP44,000). A decrease of 0.25% in the average interest rate during the year would have resulted in a reduction in interest received by the Group of GBP119,000 (2013: GBP70,000) and by the Company of GBP95,000 (2013: GBP44,000). There would have been no effect on equity reserves.
The average cash and term deposits balance throughout the year has been used as the basis for the calculations. A 0.25% increase or decrease in interest rates represents management's assessment of the reasonable possible change in interest rates.
27. Share-based payments
Equity-settled share option scheme
The Company operates a number of share option schemes for certain employees of the Group. The share-based payments charge relates to option awards from the EMI scheme, Unapproved Share Option Plan, the Abcam Inc share scheme, the Abcam 2005 share option scheme, the Abcam Company Share Option Plan (CSOP), the LTIP and the SIP. Option grants under each scheme have been aggregated.
The vesting period ranges from one to four years. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options are forfeited if the employee leaves the Group before the options vest.
The volatility of the options is based on the average of standard deviations of daily continuous returns on Abcam plc shares. The dividend yield is based on Abcam's actual dividend yield in the past.
The risk-free rate is the yield on UK Government gilts at each date of grant. The employee exercise multiple is based on published statistics for a portfolio of companies. The employee exit rate is based on management's expectations and, in accordance with IFRS 2, is applied after vesting.
The Group recorded a total share-based payments expense of GBP941,000 in the year (2013: GBP1,391,000), of which GBP678,000 (2013: GBP1,211,000) was included within administration and management expenses and GBP263,000 (2013: GBP180,000) was included within R&D expenses.
Summary of all schemes, excluding SIP and LTIP
Options outstanding as at 30 June 2014 had an exercise price of between 12.5 pence and 464 pence (2013: 5 pence and 385 pence). The weighted average remaining contractual life is 7.28 years (2013: 7.16 years). The weighted average fair value of the options outstanding at the end of the year was 68.37 pence (2013: 78.02 pence). The Group recorded a total share-based payments expense of GBP568,000 (2013: GBP573,000) in the year relating to all schemes excluding the SIP and LTIP.
2014 2013
----------------------------------- ---------------------------------
Weighted Weighted
Weighted average Weighted average
Number average share price Number average share price
of exercise at date of of exercise at date
share price exercise share price of exercise
options pence pence options pence pence
------------------------- --------- ---------- ------------ --- --------- --------- --------------
Outstanding at beginning
of year 2,371,600 260.95 - 2,618,082 173.35 -
Granted during year 687,945 464.00 - 796,060 385.00 -
Forfeited during year (494,329) 392.32 - (198,625) 293.19 -
Exercised during year (529,750) 122.80 446.36 (843,917) 93.82 406.38
------------------------- --------- ---------- ------------ --- --------- --------- --------------
Outstanding at end of
year 2,035,466 331.77 - 2,371,600 260.95 -
------------------------- --------- ---------- ------------ --- --------- --------- --------------
Exercisable at end of
year 660,947 162.95 - 956,369 95.51 -
------------------------- --------- ---------- ------------ --- --------- --------- --------------
Enterprise Management Incentive (EMI) scheme
2014 2013
----------------- -------- -----------------------
Weighted Weighted
Weighted average Weighted average
average share price Number average share price
Number of exercise at date of of exercise at date
share price exercise share price of exercise
options pence pence options pence pence
------------------------- --------- --------- ------------ --- -------- --------- ------------
Outstanding at beginning
of year 278,710 60.57 - 359,987 57.29 -
Exercised during
year (131,215) 62.45 465.99 (81,277) 46.04 427.23
------------------------- --------- --------- ------------ --- -------- --------- ------------
Outstanding at end
of year 147,495 58.89 - 278,710 60.57 -
------------------------- --------- --------- ------------ --- -------- --------- ------------
Exercisable at end
of year 147,495 58.89 - 278,710 60.57 -
------------------------- --------- --------- ------------ --- -------- --------- ------------
The size of the Group means that since 2009 it is no longer able to grant awards under the EMI scheme.
The vesting dates and expected cash receivable on exercise relating to the options outstanding are detailed in the table below.
2014 2013
------------ -------- --------------
Cash Cash
Exercise receivable Number Exercise receivable
Number of options price on exercise of options price on exercise
Vesting date Expiry date outstanding pence GBP000 outstanding pence GBP000
------------- ------------- ------------------- -------- ------------ ------------ -------- --------------
5 May 2007 5 May 2014 - - - 1,200 5.0 -
27 May 2008 27 May 2015 7,900 12.5 1 7,900 12.5 1
7 September 7 September
2009 2016 19,270 56.0 11 83,825 56.0 47
8 November 8 November
2010 2017 120,325 62.4 75 161,575 62.4 101
7 May 2011 7 May 2018 - - - 24,210 82.6 20
Total 147,495 87 278,710 169
--------------------------- --------- --------- -------- ------------ ------------ -------- --------------
Unapproved Share Option Plan
2014 2013
------ --------------- ------- ---------------------------
Weighted
Weighted average
Weighted average Weighted share
average share price average price
Number of exercise at date Number of exercise at date
share price of exercise share price of exercise
options pence pence options pence pence
------------------------- ----------- --------- -------------- ----------- --------- ------------
Outstanding at beginning
of year 376,270 73.45 - 746,150 57.95 -
Exercised during year (205,810) 82.60 426.00 (369,880) 42.18 427.74
------------------------- ----------- --------- -------------- ----------- --------- ------------
Outstanding at end of
year 170,460 62.40 - 376,270 73.45 -
------------------------- ----------- --------- -------------- ----------- --------- ------------
Exercisable at end of
year 170,460 62.40 - 376,270 73.45 -
------------------------- ----------- --------- -------------- ----------- --------- ------------
Further grants of unapproved options are now being made under the Abcam 2005 Share Option Scheme.
The vesting dates and expected cash receivable on exercise relating to the options outstanding are detailed in the table below.
2014 2013
------------ -------- --------------
Cash Cash
Exercise receivable Number Exercise receivable
Number of options price on exercise of options price on exercise
Vesting date Expiry date outstanding pence GBP000 outstanding pence GBP000
------------- ------------- ------------------- -------- ------------ ------------ -------- --------------
8 November 8 November
2010 2017 170,460 62.4 106 170,460 62.4 106
7 May 2011 7 May 2018 - - - 205,810 82.6 170
Total 170,460 106 376,270 276
--------------------------- --------- --------- -------- ------------ ------------ -------- --------------
The Abcam 2005 Share Option scheme
2014 2013
--------- ------------ --------- -------------------
Weighted Weighted
Weighted average Weighted average
average share price Number average share price
Number of exercise at date of of exercise at date
share price exercise share price of exercise
options pence pence options pence pence
------------------------- --------- --------- ------------ --- ----------- ----------- ------------
Outstanding at beginning
of year 1,114,907 302.18 - 842,673 254.88 -
Granted during year 558,241 464.00 - 652,183 385.00 -
Forfeited during year (410,597) 396.04 - (119,661) 346.37 -
Exercised during year (73,643) 187.27 462.98 (260,288) 141.69 397.79
------------------------- --------- --------- ------------ --- ----------- ----------- ------------
Outstanding at end of
year 1,188,908 395.46 - 1,114,907 302.18 -
------------------------- --------- --------- ------------ --- ----------- ----------- ------------
Exercisable at end of
year 156,590 242.49 - 122,750 118.33 -
------------------------- --------- --------- ------------ --- ----------- ----------- ------------
The vesting dates and expected cash receivable on exercise (subject to performance conditions being met for options yet to vest) relating to the options outstanding are detailed in the table below.
2014 2013
------------ -------- --------------
Cash Cash
Exercise receivable Number Exercise receivable
Number of options price on exercise of options price on exercise
Vesting date Expiry date outstanding pence GBP000 outstanding pence GBP000
------------- ------------- ------------------- -------- ------------ ------------ -------- --------------
6 November 6 November
2011 2018 45,100 92.4 42 86,750 92.4 80
9 November 9 November
2012 2019 28,375 180.8 51 36,000 180.8 65
2 December 2 December
2013 2020 83,115 345.0 287 120,833 345.0 417
1 November 1 November
2014 2021 201,410 370.0 745 275,031 370.0 1,018
1 November 1 November
2014 2022 149,475 385.0 575 263,190 385.0 1,013
1 November 1 November
2015 2022 128,559 385.0 495 201,548 385.0 776
1 November 1 November
2016 2022 74,714 385.0 288 131,555 385.0 506
25 November 25 November
2015 2023 211,746 464.0 983 - - -
25 November 25 November
2016 2023 160,472 464.0 745 - - -
25 November 25 November
2017 2023 105,942 464.0 492 - - -
Total 1,188,908 4,703 1,114,907 3,875
--------------------------- -------- ---------- -------- ------------ ------------ -------- --------------
The Abcam CSOP
2014 2013
-------------------- --------- --------------- ---------
Weighted Weighted
average average
Weighted share Weighted share
average price Number average price
Number of exercise at date of exercise at date
share price of exercise share price of exercise
options pence pence options pence pence
------------------------- -------------- --------- -------------- --------- --------- --------------
Outstanding at beginning
of year 601,713 310.46 - 658,477 265.24 -
Granted during year 129,704 464.00 - 143,877 385.00 -
Forfeited during year (83,732) 374.11 - (78,964) 212.59 -
Exercised during year (119,082) 218.91 449.64 (121,677) 184.23 387.07
------------------------- -------------- --------- -------------- --------- --------- --------------
Outstanding at end of
year 528,603 359.39 - 601,713 310.46 -
------------------------- -------------- --------- -------------- --------- --------- --------------
Exercisable at end of
year 186,402 270.40 - 178,639 180.80 -
------------------------- -------------- --------- -------------- --------- --------- --------------
The vesting dates and expected cash receivable on exercise (subject to performance conditions being met for options yet to vest) relating to the options outstanding are detailed in the table below.
2014 2013
------------ -------- --------------
Cash Cash
Exercise receivable Number Exercise receivable
Number of options price on exercise of options price on exercise
Vesting date Expiry date outstanding pence GBP000 outstanding pence GBP000
------------- ------------- ------------------- -------- ------------ ------------ -------- --------------
9 November 9 November
2012 2019 84,685 180.8 153 179,748 180.8 325
2 December 2 December
2013 2020 101,717 345.0 351 148,879 345.0 514
1 November 1 November
2014 2021 107,520 370.0 398 132,959 370.0 492
1 November 1 November
2015 2022 115,202 385.0 444 140,127 385.0 539
25 November 25 November
2016 2023 119,479 464.0 554 - - -
Total 528,603 1,900 601,713 1,870
--------------------------- --------- --------- -------- ------------ ------------ -------- --------------
Fair value calculation
The fair value of the option schemes, other than those options with market based performance criteria, has been calculated using the trinomial method. The inputs into the model are as follows:
The Abcam 2005 Share Option Scheme
The fair value of options issued after September 2006 with market based performance criteria is calculated using the Monte Carlo model. The inputs into the Monte Carlo model are as follows:
1 November 1 November 1 November 25 November 25 November 25 November
Grant date 2012 2012 2012 2013 2013 2013
--------------------------- ---------- ---------- ---------- ----------- ----------- -----------
Share price at grant
(pence) 389 389 389 464 464 464
Fair value at valuation
date (pence) 89 96 103 75 110 115
Exercise price (pence) 385 385 385 464 464 464
Expected volatility 33% 33% 33% 24% 31% 30%
Expected life (years) 5 6 7 5 6 7
Expected dividend yield 1.56% 1.56% 1.56% 1.70% 1.70% 1.70%
Risk-free rate 0.28% 0.41% 0.61% 0.52% 0.89% 1.28%
Employee exercise multiple 2 2 2 2 2 2
Employee exit rate 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
--------------------------- ---------- ---------- ---------- ----------- ----------- -----------
The Abcam CSOP
1 November 25 November
Grant date 2012 2013
------------------------------------- ---------- -----------
Share price at grant (pence) 389 464
Fair value at valuation date (pence) 96 108
Exercise price (pence) 385 464
Expected volatility 33% 31%
Expected life (years) 6 6
Expected dividend yield 1.56 1.70
Risk-free rate 0.41% 0.89%
Employee exercise multiple 2 2
Employee exit rate 0.00% 0.00%
------------------------------------- ---------- -----------
SIP
All UK based employees are eligible to participate in the SIP whereby employees buy shares in the Company. These shares are called partnership shares and are held in trust on behalf of the employee. For every partnership share bought by the employee up to a limit of GBP1,500 per tax year the Company will give the employee one share free of charge (matching shares), provided the employee remains employed by the Company for a period of at least three years. The employees must take their shares out of the plan on leaving the Company and will not be entitled to the matching shares if they leave within three years of buying the partnership shares. In addition, the Company can also award employees up to a maximum of the HMRC approval limit which during the year was GBP3,000 of shares (free shares) per tax year. There are no vesting conditions attached to the free shares, other than being continuously employed by the Company for three years from the date of grant.
Number of Number of
free shares matching shares
--------------------------------- ------------------ ------------------
2014 2013 2014 2013
--------------------------------- -------- -------- --------- -------
Outstanding at beginning of year 591,272 540,330 154,857 130,749
Granted during year 111,119 138,607 29,867 37,374
Forfeited during year (39,156) (32,645) (5,819) (5,631)
Released during year (85,704) (55,020) (20,976) (7,635)
--------------------------------- -------- -------- --------- -------
Outstanding at end of year 577,531 591,272 157,929 154,857
--------------------------------- -------- -------- --------- -------
Exercisable at end of year 268,880 251,325 66,261 58,450
--------------------------------- -------- -------- --------- -------
For the purposes of IFRS 2 the fair value of these matching shares and free shares is determined as the market value of the shares at the date of grant. No valuation model is required to calculate the fair value of awards under the SIP. The fair value of an equity based payment under the SIP is the face value of the award on the date of grant because the participants are entitled to receive the full value of the shares and there are no market based performance conditions attached to the awards.
The Group recognised a total expense of GBP475,000 (2013: GBP561,000) in the year relating to matching and free share awards.
LTIP
The Company approved a new LTIP in 2008. Full details of the performance conditions are outlined in the Directors' Remuneration Report. All awards are nil cost options which vest, subject to achievement of the relevant performance conditions, after three years, and can be exercised over the following seven years. Save as permitted in the LTIP rules, awards lapse on an employee leaving the Company.
Details of performance share awards outstanding during the year are as follows:
LTIP awards LTIP awards
2014 2013
--------------------------------- ----------- -----------
Outstanding at beginning of year 1,771,767 1,887,156
Granted during year 190,224 161,044
Forfeited during year (338,510) (58,700)
Exercised during year* (454,609) (217,733)
--------------------------------- ----------- -----------
Outstanding at end of year 1,168,872 1,771,767
--------------------------------- ----------- -----------
Exercisable at end of year 522,307 966,929
--------------------------------- ----------- -----------
*The weighted average sales price for exercises in the year was 435 pence (2013: 410 pence). Of the 454,609 options exercised during the year 6,407 were exercised in exchange for cash (2013: 31,988).
The aggregate of the fair values of the awards made on 25 November 2013 is GBP856,137 (2013: GBP600,348).
The estimated fair values of the awards are calculated using the Monte Carlo model, with the Black Scholes model used to calculate those with a performance condition based on EPS. The inputs into the models for awards granted are as follows:
1 November 25 November 9 December
Grant date 2012 2013 2013
-------------------------- ---------- ----------- ----------
Weighted average exercise
price (pence) - - -
Expected volatility 33% 31% 29%
Expected life (years) 3 3 3
Expected dividend yield 1.56% 1.70% 1.66%
Risk-free rate 0.41% 0.87% 0.99%
-------------------------- ---------- ----------- ----------
The Group recognised a net credit of GBP102,000 (2013: an expense of GBP257,000) in the year related to performance share awards under the LTIP due to a credit back of charges relating to non-market based performance conditions not being met.
28. Retirement benefit schemes
Defined contribution schemes
The UK-based employees of the Company have the option to be members of a defined contribution pension scheme managed by a third party pension provider. For each employee who is a member of the scheme the Company will contribute a fixed percentage of each employee's salary to the scheme. The only obligation of the Group with respect to this scheme is to make the specified contributions.
Employees of the Group's subsidiaries in the US, Japan, China and Hong Kong are members of state-managed retirement benefit schemes operated by the governments of the US, Japan, China and Hong Kong respectively. Depending on location, the subsidiaries are required to contribute a specified percentage of payroll costs to the retirement benefit schemes to fund the benefits. The only obligation of the Group with respect to the retirement benefit schemes is to make the specified contributions as required by law.
The total cost charged to the income statement in respect of these schemes during the year ended 30 June 2014 was GBP1,207,000 (2013: GBP977,000). As at 30 June 2014 contributions of GBP83,000 (2013: GBP84,000) due in respect of the current reporting period had not been paid over to the schemes.
29. Related party transactions
Remuneration of key management personnel
The remuneration of the Senior Leadership Team and the executive and non-executive directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual directors is provided in the audited part of the Directors' Remuneration Report.
30 June 30 June
2014 2013
Group and Company GBP000 GBP000
-------------------------------------- ------- -------
Short-term employee benefits and fees 3,155 2,290
Post-employment benefits 107 88
Share-based payments charge 190 866
-------------------------------------- ------- -------
3,452 3,244
-------------------------------------- ------- -------
Directors' transactions
Dividends totalling GBP2,175,556 were paid in the year in respect of ordinary shares held by the Company's executive and non-executive directors.
During the year the Company made sales to Horizon Discovery Limited, of which Jonathan Milner is a non executive director, totalling GBP5,413 (2013: GBP3,711).
Company transactions with its subsidiaries
The Company provided goods for resale to, purchased goods from, received dividends from, and was charged management fees by its subsidiaries in the current and prior year as summarised in the following table:
30 June 30 June
2014 2013
GBP000 GBP000
------------------------ ------- -------
Sales of goods 62,812 55,539
Purchase of goods (7,495) (8,549)
Dividends received - 6,557
Management fees charged (1,209) (1,705)
------------------------ ------- -------
54,108 51,842
------------------------ ------- -------
Amounts remaining outstanding at the year end can be seen in the Company Balance Sheet.
30. Income statement for the Company
As permitted by section 408 of the Companies Act 2006 the Company has elected not to present its own income statement for the year. Abcam plc reported a profit for the year ended 30 June 2014 of GBP29,300,000 (2013: GBP52,524,000). Profit for the prior year included GBP13,973,000 of non-distributable earnings relating to the gain on disposal resulting from an intra-group transfer of a subsidiary undertaking (see note 15 for further details).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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