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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Venture Life Group Plc | LSE:VLG | London | Ordinary Share | GB00BFPM8908 | ORD 0.3P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.25 | 0.60% | 42.25 | 42.00 | 42.50 | 42.25 | 41.75 | 42.25 | 75,298 | 15:29:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Misc Retail Stores, Nec | 43.98M | 520k | 0.0041 | 103.05 | 53.16M |
From Apr 2019 to Apr 2024
TIDMVLG
RNS Number : 3725K
Venture Life Group PLC
21 September 2016
VENTURE LIFE GROUP PLC
("Venture Life" or the "Group")
Unaudited interim results for the six months ended 30 June 2016
Venture Life (AIM: VLG), the international consumer self-care group focused on developing, manufacturing and commercialising products for the ageing population, presents its unaudited interim results for the six months ended 30 June 2016.
Financial highlights:
-- Revenue increased 40% to GBP6.1 million (H1 2015: GBP4.4 million)
-- Gross profit increased 47% to GBP2.3 million (H1 2015: GBP1.5 million), giving a gross margin of 37%
(H1 2015: 35%)
-- Adjusted EBITDA profit of GBP0.1 million (H1 2015: loss of GBP0.4 million)
-- Loss before tax, amortisation and exceptional items of GBP0.3 million (H1 2015: loss of GBP0.4 million)
-- Cash at period end of GBP1.6 million (31 December 2015: GBP2.9 million)
Commercial highlights:
-- Acquisition of the UltraDEX oral care products brand with Periproducts Limited in March 2016 for GBP5.7 million, funded in part by a GBP1.7 million placing and the issue of a convertible bond raising GBP1.9 million
-- Nine new long term exclusive distribution agreements signed, including: - UltraDEX in Spain, Malaysia and China - Benecol once-a-day liquid sachet in Turkey and Jordan
Post-period end highlights:
-- Three exclusive distribution agreements signed for Procto-eze (Greece and Taiwan) and Vonalei (Greece)
-- Full Lubatti skin-care range now stocked and on sale through Gialen Group Co. Ltd, the Group's partner in China
-- A number of major UK retailers to increase store distribution and product listings for UltraDEX in Q4 2016
Commenting on the results, Jerry Randall, Chief Executive Officer of Venture Life, said: "The Group made good progress in the first half of 2016. The strong revenue growth compared with the same period in 2015, and moving into positive EBITDA for the first time, are testament not only to the hard work and determination of every single employee of Venture Life, but also to the strategy pursued by the Board to utilise our significant operational leverage to drive revenue and profitability. The acquisition of UltraDEX has brought a step change to our Brands business and we are already realising the anticipated synergies, thereby validating our original assessment that the acquisition could bring significant upside to the Group. This is now the second successful acquisition we have undertaken in two years, and I expect us to continue to explore M&A opportunities to complement our core organic growth, and drive sustainable profitability for the Group over the long term."
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Jerry Randall, Chief Executive Officer
James Hunter, Chief Financial Officer
Panmure Gordon (UK) Limited (Nominated Adviser
and Broker) +44 (0) 20 7886 2500
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(Corporate Finance)
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001
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (MAR)
Non-Executive Chair's and Chief Executive Officer's Statement
Overview
The first half of 2016 has seen Venture Life make significant progress against its strategic objectives. The acquisition of Periproducts Limited on 4 March 2016 was a major milestone in the development of the Group, bringing the well-established UltraDEX oral care products brand into our portfolio. The revenue from this acquisition combined with good organic growth across the rest of the business has seen total revenue for the first half of 2016 climb 40% to GBP6.1 million (H1 2015: GBP4.4 million). The Group has also achieved an adjusted EBITDA profit for the first time in its history.
In addition, we have concluded our first international partnering deals on the Benecol once-a-day liquid sachet and the UltraDEX brand, both key assets in our portfolio. Our full range of 14 Lubatti skin-care products has, since the end of July, been stocked in almost all of Gialen's 1,300 stores, and we now expect to see an acceleration of the development of this brand in the Chinese market.
In the Group's Manufacturing business, revenues continued to grow steadily both through organic growth and manufacturing new products for existing and new customers. We have also signed a new agreement to develop and manufacture a number of products for the Italian pharmaceutical company, Menarini Farmaceutica Internazionale Srl ("Menarini").
We operate under two divisions: (1) Brands - where we own, or have developed under licence, branded products that are manufactured at our facility in Italy (Biokosmes), or externally for us, and (2) Development & Manufacturing - which offers new product development services and outsourced manufacturing services to third parties, as well as supporting in-house product development opportunities for eventual commercialisation through the Brands division.
Commercial review - Brands
Revenue for the Brands business grew to GBP1.2 million in the first half of 2016 (H1 2015: GBP0.1 million), and now represents approximately 20% of the Group's total revenue. A significant part of this growth has come from the revenue acquired with the Periproducts business, contributing revenue of GBP0.9 million in the four months since acquisition. However, there was also strong organic growth of the Brands segment of over 100% to GBP0.3 million (H1 2015: GBP0.14 million). The Directors believe that this business division has the greater growth potential within the Group and we expect to see Brands account for approaching 50% of Group revenues by 2019.
Periproducts revenue derives from sales of the UltraDEX fresh breath brand range, which includes daily oral rinses, toothpastes, an oral spray, and accessories including inter-dental brushes. The revenue is almost entirely generated in the UK, through major retailers including Boots, Tesco, Sainsbury's, Waitrose, Superdrug, Amazon and Ocado. Following a period of slow decline in sales in the years prior to the acquisition, we believe there is significant opportunity to revitalise the UltraDEX brand in the UK, as well as expand into international markets. Already we have signed three long term international distribution agreements for this brand, in Spain, Malaysia and China. Revenue expected in 2016 from the agreement in Spain alone will be substantially ahead of the GBP60,000 of total international sales of UltraDEX made in the whole of 2015, the year prior to acquisition. The product already had an existing registration for Spain and as it has recently received registration in Malaysia we are expecting UltraDEX revenue from Malaysia as well as Spain in 2016. However, because the registration process in China is lengthier, registration is not likely until late 2017 at the earliest. We continue to see good international interest in the UltraDEX range and expect to sign further long term distribution agreements in key territories around the world.
During the 2016 year to date the Group has been allowed patents in the USA, New Zealand, South Africa and Mexico for its multicomponent oral care composition used in the UltraDEX Recalcifying and Whitening Daily Oral Rinse, a product for fresh breath for consumers with sensitive teeth. These add to the pre-existing patents in the UK and USA.
The integration of the Periproducts business into the Group is progressing well, and validation of the processes for manufacturing UltraDEX product in our facility in Italy is well-advanced. The first order for the new Spanish partner will be largely produced at our facility.
The second set of seven Lubatti skin-care products was shipped into China in Q1 2016 and the full range has been listed in almost all of the Gialen stores in China since the end of July. We look forward to monitoring sell-through progress in H2 2016 now that the full range is in store and promotion of the product range has started. The arrival of the full range in store has been accompanied by extensive training from our marketing team, and the range is also currently being supported by an incentive programme for Gialen sales staff.
The new Benecol once-a-day liquid sachet has now been partnered in two territories with long term distribution agreements, the most significant of which is for Turkey. The process for registering the sachet is underway in these territories, and will be launched into the respective markets once complete. We continue to receive good interest in this product and expect to complete more long term distribution agreements in due course.
In addition to UltraDEX, Benecol and Lubatti, we continue to focus on the international exploitation of key brands within the portfolio, including NeuroAge, through exclusive distribution agreements. Furthermore, our retail presence in the UK now with UltraDEX gives us the opportunity to look at commercialising more of our brands in the UK market.
In the six months to June 2016 we concluded a total of nine international distribution agreements covering six products, and we concluded a further three agreements post period end.
Commercial review - Development & Manufacturing
Good progress continues to be made at Biokosmes, with revenues for this part of our business (excluding the manufacture of the Group's own brands reported above) increasing by 15% in the first half of 2016 to GBP4.9 million (H1 2015: GBP4.2 million). This has been achieved through a combination of organic growth of existing products, and the development and manufacture of new products for new and existing customers. There continues to be considerable capacity at our facility and we remain focused on driving additional revenues through this fixed cost base which will accelerate the contribution of incremental profit and enhance our operating profit margins.
This strong growth looks set to be maintained through the second half of 2016 with the order book for Biokosmes at 30 June 2016 significantly ahead of the same point last year, giving us strong visibility for the remainder of the year. We have continued to attract more new customer projects, and during the period we signed an agreement to develop and then manufacture on a long term basis a number of products for the Italian pharmaceutical company, Menarini. This is a significant new partnership for us.
In addition, and following a successful inspection by the Brazilian regulatory authority, Anvisa, we began the manufacturing of our first product to be shipped into Brazil for one of our major customers. This provides good validation of our strategy to partner and grow with our customers in new territories and we remain optimistic as to our ability to continue to generate similar opportunities in the future.
We have continued to invest in the facility to support the Group's overall revenue growth, including specific additions to our existing filling and warehousing capabilities for the manufacture of the UltraDEX line. We are now ready to manufacture the first UltraDEX products, less than six months after acquiring the brand, and the first order for our new Spanish partner this autumn will be largely manufactured at Biokosmes. Over time, we expect to deliver improved profitability for the product as we reduce the cost of manufacture and achieve greater scale.
Progress continues on the development of further products through our development team at Biokosmes:
-- two new products for hot flushes in the Vonalei women's health range have been developed and submitted for CE mark approval;
-- development of a new anti-fungal product and a new product for inflammatory skin conditions will both complete in 2016 with the products expected to be available for partnering in Q1 2017.
For many years, including prior to its acquisition by Venture Life in 2014, Biokosmes has been developing a novel topical product for the relief of photo-sensitivity of the skin, a condition which regularly affects patients using certain drug treatments. Drugs that can cause photo-sensitivity include anti-infectives, anti-inflammatories, anti-tumorals, psychotropic, and cardiology drugs, and it is estimated that photosensitivity accounts for some 3% of all drug eruptions treated by dermatologists. This condition is currently poorly treated and we believe our product represents the first product specifically designed for such patients. A patent has recently been granted in Italy over this product, and we expect to register this patent in other major territories and begin commercialisation in 2017.
Financial review
During the period under review, the Group completed the acquisition of Periproducts Limited for total consideration of GBP5.7 million. The acquisition was funded through the issue of new equity for cash raising GBP1.5 million (net of expenses), the issue of a convertible bond raising GBP1.7 million (net of expenses), deferred consideration of GBP0.4 million, and using some of the Group's existing cash resources. The details of this acquisition are shown in Note 12 to the unaudited interim financial statements. The revenue from Periproducts is reported within the Group's Brands segment.
Statement of comprehensive income
Group revenue for the six month period was GBP6.1 million, an increase of 40% on the GBP4.4 million reported for the same period in 2015. H1 2016 revenue includes the consolidation of Periproducts revenue from 4 March 2016, the date of acquisition. With the acquisition of Periproducts and strong organic growth, the Brands segment now accounts for nearly 20% of Group revenue, compared with 12% for the full year 2015 and we expect this proportion to continue to increase.
The Group generated gross profit of GBP2.3 million (H1 2015: GBP1.5 million), at a gross margin of 37%. This is an increase in gross profit of 47% compared with H1 2015 and an improvement in gross margin from the average 35% achieved in H1 2015 and 33% achieved in the full year 2015. The increase is primarily due to the sales of higher-margin UltraDEX product.
Administrative expenses increased during the period, albeit at a lower rate than the revenue and gross profit increase, as we begin to see the benefits of our operational gearing. Expenses totalled GBP2.7 million (H1 2015: GBP2.4 million) and this increase of GBP0.3 million is accounted for entirely by the additional administrative costs incurred at Periproducts since its acquisition. Whilst we expect some of the administrative costs at Periproducts to begin to reduce in H2 2016 as we continue to integrate the business, advertising and promotional costs will be higher in H2 2016 as we invest in above the line advertising to build the UltraDEX brand and support our key retail accounts in the UK. Expenses represented 44% of income in H1 2016 compared to 50% for the full year 2015 and 55% in H1 2015, and we expect this metric to continue to improve.
For the first time the Group has generated a positive adjusted EBITDA, with earnings before interest, tax, depreciation, amortisation, share based payments and exceptional items of GBP0.1 million (H1 2015: loss of GBP0.4 million). On an enlarged Group pro forma basis, adjusted EBITDA was GBP0.2 million on revenue of GBP6.6 million, compared with a loss of GBP0.3 million on revenue of GBP5.8 million in H1 2015.
Pro-forma* six Six months to Six months to
months to
30 June 2016 30 June 2016 30 June 2015
(Unaudited) (Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
Loss before tax (776) (854) (755)
Adjusted for:
Finance costs/(income) 317 321 (88)
Depreciation 84 84 75
Amortisation 418 409 338
Share based payments 14 14 33
Exceptional items 142 142 -
EBITDA 199 116 (397)
* Pro forma - stated as if Periproducts had been acquired on
1 January 2016, the beginning of the reporting period
The Group recorded a loss before tax, amortisation and exceptional items for the period of GBP0.3 million, compared with a loss of GBP0.4 million recorded in H1 2015.
Finance costs increased to GBP0.3 million in H1 2016 from a net finance income of GBP0.1 million in H1 2015. The increase was in part due to increased interest charges arising from the issue of the convertible bond in connection with the acquisition of Periproducts, as well as the impact of a strengthening euro on the Group's euro denominated debt.
Loss per share was 2.8p (H1 2015: loss of 2.7p).
Statement of financial position and cash flow
Cash and cash equivalents stood at GBP1.6 million as at 30 June 2016 (31 December 2015: GBP2.9 million). Total debt stood at GBP6.3 million (30 June 2015: GBP3.2 million, 31 December 2015: GBP3.3 million). The increase of GBP3.0 million in debt since 31 December 2015 is explained as follows:
- issue of convertible bonds in connection with the acquisition of Periproducts - GBP1.7 million (valued on 'amortised cost' basis)
- deferred consideration payable to the vendors of Periproducts - GBP0.4 million - short-term working capital facilities - GBP0.5 million
- increase in sterling value of EUR2.5 million of interest bearing loans of Biokosmes - GBP0.2 million
- increase in sterling value of EUR2m vendor loan note issued in connection with the acquisition of Biokosmes - GBP0.2 million
Net cash outflows totalled GBP1.3 million (H1 2015: net cash outflow of GBP1.6 million). The principal components of the net cash outflows are as follows:
- cash used in operations - GBP0.58 million (six months to 30 June 2015: GBP1.1 million used)
- acquisition of Periproducts (net of cash acquired) - GBP4.3 million (six months to 30 June 2015: GBPnil)
- proceeds from issue of new shares (net of expenses) - GBP1.5 million (six months to 30 June 2015: GBPnil)
- proceeds from issue of convertible bond (net of expenses) - GBP1.75 million (six months to 30 June 2015: GBPnil)
- draw down of short-term working capital facilities - GBP0.5 million (six months to 30 June 2015: repayment of GBP0.4 million)
- investment in tangible and intangible assets - GBP0.2 million (six months to 30 June 2015: investment of GBP0.3 million)
Summary and outlook
The outlook for the Group continues to improve, and the recent acquisition of Periproducts has helped us to record a positive EBITDA for the first time. We believe our Brands business offers a significant opportunity to deliver shareholder value through further organic growth as more of our products reach commercialisation and as we revitalise the UltraDEX brand. The growing order book for our Development & Manufacturing services is encouraging and we are well positioned for these additional revenues to translate to improved profitability as they flow through our fixed manufacturing cost base.
The strong revenue growth in the first half is set to continue through the second half, and with a strong order book in hand, we expect to see the momentum continuing to build in the business, and we remain optimistic about the future prospects for the Group.
Lynn Drummond - Non-Executive Chair
Jerry Randall - Chief Executive Officer
Unaudited Interim Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2016
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2015
Note 2016 2015
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Revenue 4 6,121 4,372 9,077
Cost of sales (3,868) (2,841) (6,073)
------------ ----------------------- -------------
Gross profit 2,253 1,531 3,004
Operating expenses (2,263) (2,063) (3,853)
Amortisation of intangible assets 5 (409) (338) (658)
------------ ----------------------- -------------
Total administrative expenses (2,672) (2,401) (4,511)
Other income 28 27 59
Operating loss before exceptional
items (391) (843) (1,448)
------------ ----------------------- -------------
Exceptional items 6 (142) - (246)
Operating loss (533) (843) (1,694)
------------ ----------------------- -------------
Finance income 7 - 136 152
Finance costs 7 (321) (48) (95)
Loss before tax (854) (755) (1,637)
------------ ----------------------- -------------
Tax 8 (155) (170) (124)
Loss for the period attributable
to the equity shareholders of
the parent (1,009) (925) (1,761)
------------ ----------------------- -------------
Other comprehensive income/(expense)
which may be subsequently reclassified
to the income statement 9 293 (169) (119)
Total comprehensive loss for
the period attributable to equity
shareholders of the parent (716) (1,094) (1,880)
------------ ----------------------- -------------
Basic and diluted loss per share
(pence) attributable to equity
shareholders of the parent 10 (2.81) (2.69) (5.12)
Unaudited Interim Condensed Consolidated Statement of Financial Position
As at 30 June 2016
Note 30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
ASSETS GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 13 16,500 12,689 12,527
Property, plant and equipment 1,229 979 1,120
17,729 13,668 13,647
------------ ------------ ------------
Current assets
Inventories 3,352 2,043 2,235
Trade and other receivables 4,448 3,357 3,173
Taxation - - 5
Cash and cash equivalents 1,583 3,253 2,857
------------ ------------ ------------
9,383 8,653 8,270
------------ ------------ ------------
TOTAL ASSETS 27,112 22,321 21,917
------------ ------------ ------------
EQUITY & LIABILITIES
Capital and reserves
Share capital 14 110 103 103
Share premium account 14 13,289 11,826 11,826
Merger reserve 7,656 7,656 7,656
Convertible bond reserve 15 109 - -
Foreign currency translation
reserve 89 (254) (204)
Share-based payment reserve 381 351 367
Retained earnings (6,969) (5,110) (5,946)
------------ ------------
Total equity attributable
to equity holders of the
parent 14,665 14,572 13,802
------------ ------------ ------------
Liabilities
Current liabilities
Trade and other payables 4,570 3,351 3,718
Taxation 275 122 -
Interest bearing borrowings 615 201 38
Convertible bond 15 171 - -
Vendor loan notes 50 42 43
------------ ------------ ------------
5,681 3,716 3,799
------------ ------------ ------------
Non-current liabilities
Interest bearing borrowings 2,399 1,555 1,806
Convertible bond 15 1,506 - -
Vendor loan notes 1,562 1,365 1,373
Statutory employment provision 677 490 586
Deferred tax liability 622 623 551
------------ ------------ ------------
6,766 4,033 4,316
------------ ------------ ------------
Total liabilities 12,447 7,749 8,115
------------ ------------ ------------
TOTAL EQUITY & LIABILITIES 27,112 22,321 21,917
------------ ------------ ------------
Unaudited Interim Condensed Consolidated Statement of Changes in Equity attributable to the equity shareholders of the parent
As at 30 June 2016
Foreign
Share Convertible currency Share-based
Share premium Merger bond translation payment Retained Total
capital account reserve reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- ------- ------- ----------- ----------- ----------- -------- --------
Balance at 1
January 2015
(Audited) 103 11,826 7,656 - (85) 318 (4,171) 15,647
Loss for the
period - - - - - - (925) (925)
Other
comprehensive
expense - - - - (169) - - (169)
------- ------- ------- ----------- ----------- ----------- -------- --------
Total
comprehensive
expense - - - - (169) - (925) (1,094)
Share options
charge - - - - - 33 - 33
Dividends - - - - - - (14) (14)
Balance at 30
June 2015
(Unaudited) 103 11,826 7,656 - (254) 351 (5,110) 14,572
------- ------- ------- ----------- ----------- ----------- -------- --------
Loss for the
period - - - - - - (836) (836)
Other
comprehensive
income - - - - 50 - - 50
------- ------- ------- ----------- ----------- ----------- -------- --------
Total
comprehensive
income/(expense) - - - - 50 - (836) (786)
Transactions with
shareholders:
Share options
charge - - - - - 16 - 16
------- ------- ------- ----------- ----------- ----------- -------- --------
Balance at 31
December 2015
(Audited) 103 11,826 7,656 - (204) 367 (5,946) 13,802
------- ------- ------- ----------- ----------- ----------- -------- --------
Loss for the
period - - - - - - (1,009) (1,009)
Other
comprehensive
expense - - - - 293 - - 293
------- ------- ------- ----------- ----------- ----------- -------- --------
Total
comprehensive
expense - - - - 293 - (1,009) (716)
Transactions with
shareholders:
Issue of share
capital 7 1,463 - - - - - 1,470
Issue of
convertible bond - - - 109 - - - 109
Share options
charge - - - - - 14 - 14
Dividends - - - - - - (14) (14)
------- ------- ------- ----------- ----------- ----------- -------- --------
Balance at 30
June 2016
(Unaudited) 110 13,289 7,656 109 89 381 (6,969) 14,665
------- ------- ------- ----------- ----------- ----------- -------- --------
Six months Six months Year ended
ended ended 31 December
2015
30 June 30 June (Audited)
2016 2015
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
Cash flow from operating activities:
Loss before tax (854) (755) (1,637)
Finance income - (136) (152)
Finance cost 321 48 95
Operating loss (533) (843) (1,694)
Adjustments for:
- Depreciation of property, plant
and equipment 83 75 171
- Amortisation of intangible assets 409 338 658
- Finance costs (87) (48) (80)
- Share-based payment expense 14 33 49
------------- ------------- -------------
Operating cash flow before movements
in working capital (114) (445) (896)
Taxation received/(paid) 42 (23) (231)
Increase in inventories (518) (423) (492)
Increase in trade and other receivables (99) (409) (125)
Increase in trade and other payables 107 243 635
------------- ------------- -------------
Net cash used in operating activities (582) (1,057) (1,109)
------------- ------------- -------------
Cash flow from investing activities:
Finance income - 136 5
Acquisition of subsidiary - net cash
acquired 948 - -
Acquisition of subsidiary - net cash
payment (5,206) - -
Purchases of property, plant and
equipment (79) (114) (303)
Development expenditure in respect
of intangible assets (139) (171) (289)
Proceeds on disposal of tangible
assets 7 16 16
------------- -------------
Net cash used by investing activities (4,469) (133) (571)
------------- ------------- -------------
Cash flow from financing activities:
Proceeds from issue of ordinary shares 1,700 - -
Transaction costs of issue of shares (230) - -
Proceeds from issue of convertible
bond 1,900 - -
Transaction costs of issue of convertible
bond (150) - -
Movements in interest-bearing borrowings 505 (383) (313)
Dividends paid (14) (14) (14)
------------- -------------
Net cash from financing activities 3,711 (397) (327)
------------- ------------- -------------
Net decrease in cash and cash equivalents (1,340) (1,587) (2,007)
Net foreign exchange difference 66 (93) (69)
Cash and cash equivalents at beginning
of period 2,857 4,933 4,933
------------- ------------- -------------
Cash and cash equivalents at end
of period 1,583 3,253 2,857
------------- ------------- -------------
Unaudited Interim Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2016
Notes to the Unaudited Interim Condensed Consolidated Financial Statements for the six months ended 30 June 2016
1. Corporate information
The Interim Condensed Consolidated Financial Statements of Venture Life Group plc and its subsidiaries (collectively, the Group) for the six months ended 30 June 2016 ("the Interim Financial Statements") were approved and authorised for issue in accordance with a resolution of the directors on 20 September 2016.
Venture Life Group plc ("the Company") is domiciled and incorporated in the United Kingdom, and is a public company whose shares are publicly traded. The Group's principal activities are the development, manufacture and distribution of healthcare and dermatology products.
2. Basis of preparation
The Interim Financial Statements have been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union. The Interim Financial Statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's Consolidated Financial Statements for the year ended 31 December 2015 ("the 2015 Consolidated Financial Statements") which have been prepared in accordance with IFRS as adopted by the European Union.
The financial information contained in the Interim Financial Statements, which are unaudited, does not constitute statutory accounts in accordance with the Companies Act 2006. The financial information for the year ended 31 December 2015 is extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies and on which the auditor issued an unqualified opinion that did not include an emphasis of matter reference or statement made under section 498(2) or (3) of the Companies Act 2006.
3. Accounting policies
The accounting policies adopted in the preparation of the Interim Financial Statements are consistent with those followed in the preparation of the 2015 Consolidated Financial Statements.
Foreign currencies
The assets and liabilities of foreign operations are translated into sterling at exchange rates ruling at the balance sheet date. Revenues generated and expenses incurred in currencies other than sterling are translated into sterling at rates approximating to the exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation of assets and liabilities of foreign operations are recognised directly in the foreign currency translation reserve.
The sterling/euro exchange rates used in the Interim Financial Statements and prior reporting periods are as follows:
Six months Six months Year ended
ended ended 31 December
Sterling/euro exchange rates 30 June 2016 30 June 2015 2015
Average exchange rate for
the period 1.301 1.356 1.376
Exchange rate at the period
end 1.209 1.416 1.357
4. Segmental Information
Management has determined the operating segments based on the reports reviewed by the Group Board of Directors (Chief Operating Decision Maker) that are used to make strategic decisions. The Board considers the business from a line-of-service perspective and uses operating profit/(loss) as its profit measure. The operating profit/(loss) of operating segments is prepared on the same basis as the Group's accounting operating profit/(loss).
In the 2015 Consolidated Financial Statements, the operations of the Group were segmented as Brands, which includes sales of healthcare and skin care products under distribution agreements and direct to UK retailers, and Manufacturing. In these Interim Financial Statements, the Manufacturing segment has been renamed as Development & Manufacturing to reflect more accurately the nature of operations at the Group's facility in Italy (Biokosmes). The Periproducts business which was acquired during the period is included within the Brands reporting segment.
4.1 Segment Revenue and Results
The following is an analysis of the Group's revenue and results by reportable segment.
Development Consolidated
Brands & Manufacturing Eliminations Group
GBP'000 GBP'000 GBP'000 GBP'000
Six months to 30 June 2016
Revenue
External sales 1,234 4,887 - 6,121
Inter-segment sales - 192 (192) -
-------- ----------------- ------------- -------------
Total revenue 1,234 5,079 (192) 6,121
-------- ----------------- ------------- -------------
Results
Operating (loss)/profit
before exceptional items
and excluding central administrative
costs (106) 679 - 573
-------- ----------------- ------------- -------------
Development Consolidated
Brands & Manufacturing Eliminations Group
GBP'000 GBP'000 GBP'000 GBP'000
Six months to 30 June 2015
Revenue
External sales 138 4,234 - 4,372
Inter-segment sales - 110 (110) -
-------- ----------------- ------------- -------------
Total revenue 138 4,344 (110) 4,372
-------- ----------------- ------------- -------------
Results
Operating (loss)/profit
before exceptional items
and excluding central administrative
costs (610) 720 - 110
-------- ----------------- ------------- -------------
Development Consolidated
Brands & Manufacturing Eliminations Group
Year to 31 December 2015 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External sales 1,067 8,010 - 9,077
Inter-segment sales - 603 (603) -
-------- ----------------- ------------- -------------
Total revenue 1,067 8,613 (603) 9,077
-------- ----------------- ------------- -------------
Results
Operating (loss)/profit
before exceptional items
and excluding central administrative
costs (826) 1,090 - 264
-------- ----------------- ------------- -------------
The reconciliation of segmental operating loss to the Group's operating loss before exceptional items excluding central administrative costs is as follows:
Six months Six months Year ended
ended
30 June ended 31 December
2016
(Unaudited) 30 June 2015
2015
(Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Operating profit before exceptional items
and excluding central administrative costs 573 110 264
Central administrative costs (964) (953) (1,712)
Exceptional expenses (142) - (246)
Operating loss (533) (843) (1,694)
Net finance (cost)/income (321) 88 57
------------ ------------ -------------
Loss before tax (854) (755) (1,637)
------------ ------------ -------------
5. Amortisation of intangible assets
Six months Six months Year ended
ended
30 June ended 31 December
2016
(Unaudited) 30 June 2015
2015
(Unaudited) (Audited)
Amortisation of: GBP'000 GBP'000 GBP'000
Acquired intangible assets (a) (284) (284) (568)
Acquired intangible assets (b) (53) - -
Patents, trademarks and other intangible
assets (37) (36) (62)
Capitalised development costs (35) (18) (28)
------------ ------------ -------------
(409) (338) (658)
------------ ------------ -------------
(a) Customer relationship and product formulation intangible assets acquired as part of the acquisition of Biokosmes Srl in March 2014. These intangible assets are being amortised over five years to 31 March 2019.
(b) Customer relationships, patents and trademark intangible assets acquired as part of the acquisition of Periproducts Limited in March 2016. The customer relationships and trademark intangible assets are being amortised over five years to 28 February 2021. The patent intangible assets are being amortised over ten years to 28 February 2026.
6. Exceptional items
Six months Six months Year ended
ended
30 June ended 31 December
2016
(Unaudited) 30 June 2015
2015
(Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Restructuring costs (9) - -
Costs incurred in acquisitions (133) - (246)
Total exceptional items (142) - (246)
------------ ------------ -------------
There were no exceptional items in the six months to 30 June 2015.
7. Finance income and costs
Six months Six months Year ended
ended
30 June ended 31 December
2016
(Unaudited) 30 June 2015
2015
(Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Finance income
Foreign exchange gains on vendor
loan notes (a) - 153 92
Foreign exchange gains on other assets
and liabilities (a) - (17) -
Mark to market gain on vendor loan
notes - - 60
------------------- ------------ -------------
Total finance income - 136 152
Finance costs
Foreign exchange losses on vendor
loan notes (a) (179) - -
Foreign exchange losses on other
assets and liabilities (a) 4 - -
Interest charge on interest bearing
borrowings (23) (20) (38)
Finance cost of vendor loan notes (43) (28) (57)
Finance cost of convertible bond
(b) (80) - -
Total finance costs (321) (48) (95)
------------------- ------------ -------------
(a) Foreign exchange gains and losses include the revaluation of balance sheet assets and liabilities held in currencies other than the reporting currency of the underlying entity. At the end of each month, the Group's EUR2 million vendor loan note is revalued using the period end sterling/euro foreign exchange rate and accounts for most of the foreign exchange gains and losses of the Group. The sterling/euro foreign exchange rate at 31 December 2015 was 1.3551 and 1.2085 at 30 June 2016. This movement in exchange rate generated a foreign exchange loss of GBP179,000 in the period. This compares to a gain in the six month period to 30 June 2015 of GBP153,000 and a gain of GBP92,000 in the year to 31 December 2015. Other smaller foreign exchange gains and losses relate to the revaluation of the Group's other assets and liabilities that are not held in the reporting currency of the Group's subsidiaries and foreign exchange differences that arise on the settlement of foreign currency transactions with customers and vendors of the Group.
(b) Under IAS 39, the liability element of the convertible bond is measured at amortised cost. This is detailed further in note 15. The amortised cost calculation creates a monthly charge which is recognised in finance costs and equates to approximately GBP20,000 per month.
8. Taxation
The Group calculates the income tax expense for the period using the tax rate that would be applicable to the expected total annual earnings. The major components of income tax expense in the Interim Condensed Statement of Comprehensive Income are as follows:
Six months Six months Year ended
ended ended 31 December
30 June 2016 30 June 2015
2015
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Current income tax 222 216 266
Adjustment in respect of earlier
periods - - 11
Deferred income tax expense related
to origination and reversal of
timing differences (67) (46) (153)
-------------- ------------ -------------
Income tax expense recognised
in statement of comprehensive
income 155 170 124
-------------- ------------ -------------
The current income tax expense is based on the profits of the Development & Manufacturing business based in Italy. The UK based businesses on a combined basis are currently loss making and so there are no UK income tax charges due in respect of trading for the first six months to 30 June 2016.
The Group has not recognised the deferred tax asset on losses made by the UK based businesses on a combined basis as although management are expecting the UK based businesses on a combined basis to become profitable, it is not currently certain when there will be sufficient taxable profits against which to offset such losses.
At the period end the estimated tax losses amounted to GBP6,690,000 (30 June 2015: GBP4,559,000; 31 December 2015: GBP5,328,000).
9. Other comprehensive income/(expense)
Other comprehensive income/(expense) represents the foreign exchange difference on the translation of the assets, liabilities and reserves of Biokosmes which has a functional currency of Euros. The movement is shown in the foreign currency translation reserve between the date of acquisition of Biokosmes, when the GBP/EUR rate was 1.193 and the balance sheet date rate at 30 June 2016 of 1.209 (at 31 December 2015 of 1.357 and at 30 June 2015 of 1.416), and is an amount that may subsequently be reclassified to profit and loss.
10. Loss per share
Six months Six months Year ended
ended ended 30 December
30 June 2016 30 June 2015
2015
(Unaudited) (Unaudited) (Audited)
Weighted average number of ordinary
shares in issue 35,968,571 34,403,534 34,403,534
Loss attributable to equity holders
of
the Company (GBP'000) (1,009) (925) (1,761)
Basic and diluted loss per share
(pence) (2.81) (2.69) (5.12)
The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic earnings per share. This is because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore not dilutive under the terms of IAS 33.
11. Dividends
Amounts recognised as distributions to equity holders in the period:
Six months Six months Year ended
ended ended 31 December
2015
30 June 2016 30 June 2015 (Audited)
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
Final dividend 14 14 14
-------------- ------------- -------------
12. Business combinations
On 4 March 2016 the Company completed the acquisition of 100% of the share capital of Periproducts Ltd ("Periproducts"), a UK based oral healthcare products company. The acquisition consideration paid was GBP5.7 million, comprising GBP4 million plus the value at the date of completion of current net assets of Periproducts of some GBP1.7 million. The acquisition was funded through the Company's own resources and by way of a Placing of new ordinary shares raising GBP1.7 million (gross) and the issue of a 3 year 9% Convertible Bond raising GBP1.9 million.
The Group acquired Periproducts because it expands its existing product portfolio into an attractive area of the consumer healthcare market. The Group also expects to generate a number of synergies from the acquisition to improve the profitability of the acquired entity and the Group as a whole. The acquisition has been accounted for using the acquisition method. The Interim Condensed Consolidated Financial Statements include the results of Periproducts for the period from 4 March 2016 to 30 June 2016.
The fair values of the identifiable assets and liabilities of Periproducts as at the date of acquisition were:
Fair Value
GBP'm
ASSETS
Non-current assets:
Customer relationships* 0.6
Patents and trademarks* 0.3
Current assets:
Inventories 0.3
Trade and other receivables 0.8
Cash and cash equivalents 0.9
Total assets 2.9
-----------
LIABILITIES
Current liabilities:
Trade and other payables (0.3)
Non-current liabilities:
Deferred tax liabilities (0.2)
Total liabilities (0.5)
-----------
Net assets acquired 2.4
Goodwill 3.3
-----------
Total consideration 5.7
Satisfied by:
Cash paid on completion 5.2
Deferred consideration in the form of
a loan from the Vendors 0.4
Cash payment due on finalisation of
completion accounts 0.1
Total consideration 5.7
===========
Cash flows from business combination
during the period
Cash and cash equivalents included in
undertaking acquired 0.9
Cash paid on completion (5.2)
-----------
Net cash outflow arising on acquisition
and in cash flow statement (4.3)
===========
*Intangible assets identified as part of the Periproducts acquisition. See note 5(b) for further details.
The Company is currently still in the process of agreeing the completion accounts with the vendors of Periproducts and expects to reach agreement shortly. Depending on the outcome of these discussions, there may be small changes to the final consideration paid and goodwill acquired, as shown above and in note 13.
Revenue and profit impact of the acquisition
Periproducts contributed revenues of GBP0.9 million and operating profit before exceptional expenses of GBP0.2 million in the period from 4 March 2016 (the date of acquisition) to 30 June 2016.
If the acquisition had taken place on 1 January 2016, the first day of the reporting period under review, total Group revenue and operational loss before exceptional items for the period would have been GBP6.6 million and (GBP0.3 million) respectively.
13. Intangible assets
Development Patents Other intangible
costs and trademarks Goodwill assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation:
At 1 January 2015 1,322 544 9,796 1,995 13,657
Additions 151 20 - - 171
Disposals (10) (110) - - (120)
Foreign exchange (83) - - - (83)
------------ ---------------- --------- ----------------- ------------------
At 30 June 2015 1,380 454 9,796 1,995 13,625
Additions 116 2 - - 118
Foreign exchange 42 - - - 42
At 31 December
2015 1,538 456 9,796 1,995 13,785
Additions 139 - - - 139
Acquisition - 307 3,298 546 4,151
Foreign exchange 95 - - - 95
------------ ---------------- --------- ----------------- ------------------
At 30 June 2016 1,772 763 13,094 2,541 18,170
------------ ---------------- --------- ----------------- ------------------
Amortisation:
At 1 January 2015 141 235 - 299 675
Charge for the
period 104 35 - 199 338
Disposals - (45) - - (45)
Foreign exchange (32) - - - (32)
------------ ---------------- --------- ----------------- ------------------
At 30 June 2015 213 225 - 498 936
Charge for the
period 90 30 - 200 320
Foreign exchange 2 - - - 2
------------ ---------------- --------- ----------------- ------------------
At 31 December
2015 305 255 - 698 1,258
Charge for the
period 127 44 - 238 409
Foreign exchange 3 - - - 3
------------ ---------------- --------- ----------------- ------------------
At 30 June 2016 435 299 - 936 1,670
------------ ---------------- --------- ----------------- ------------------
Carrying value:
At 30 June 2015 1,167 229 9,796 1,497 12,689
------------ ---------------- --------- ----------------- ------------------
At 31 December
2015 1,233 201 9,796 1,297 12,527
------------ ---------------- --------- ----------------- ------------------
At 30 June 2016 1,337 464 13,094 1,605 16,500
------------ ---------------- --------- ----------------- ------------------
There were no impairment charges recorded in the current or prior periods.
14. Share capital and share premium
Ordinary Ordinary Share Merger
shares of Shares premium reserve
0.3p each
No. GBP'000 GBP'000 GBP'000
Audited at 1 January 2014 16,961,424 51 2,668 50
Share issue 12,942,110 39 5,113 7,606
---------- -------- -------- --------
Unaudited at 30 June 2014 29,903,534 90 7,781 7,656
Share issue 4,500,000 13 4,045 -
---------- -------- -------- --------
At 31 December 2014 and 31 December
2015 34,403,534 103 11,826 7,656
Share issue 2,428,572 7 1,463 -
---------- -------- -------- --------
Unaudited at 30 June 2016 36,832,106 110 13,289 7,656
---------- -------- -------- --------
There were no movements in share capital or share premium between 31 December 2014 and 31 December 2015.
On 4 March 2016 2,428,572 new ordinary 0.3p shares of Venture Life Group plc were issued as part of the fund raising for the acquisition of Periproducts Ltd. The share issue raised GBP1.7 million gross, (GBP1.5 million net of expenses).
In connection with the placing in March 2016 to raise new equity to acquire Periproducts, the Company entered into an agreement to issue warrants to one of the Group's appointed brokers. The warrants will give the warrant holders the right to be issued with up to 262,053 new ordinary 0.3p shares in the Company at a subscription price of 94.5p (being a 35% premium to the Placing Price of 70p) before 3 March 2019. As at 30 June 2016 the warrants had not been issued and it has therefore not been possible to determine accurately the related expense. Consequently no accounting entry has been made in the Interim Financial Statements. It is expected, however, that the warrants will be issued before 31 December 2016 and, if so, will be reported in the Group's 2016 Report & Accounts.
15. Convertible bond
During the period a convertible bond with a principal value of GBP1.9 million was issued as part of the funding for the Periproducts acquisition. The bond carries a 9% coupon with interest payable quarterly over a three year term with full repayment of the convertible bond due on 3 March 2019. Bondholders have the right to convert their bonds to shares in the Group at a conversion price of 87.5p per Venture Life share (87.5p representing a 25% premium to the 70 pence placing price of the new equity at the time of the acquisition) which can be exercised at any point before 3 March 2019.
Under IAS 32, this convertible bond is accounted for as a compound financial instrument. The fair value of the convertible bond is determined using a discounted cash flow method. The difference between the GBP1.9 million principal value of the bond and the present value of the future fixed interest payments and capital repayment is recorded in equity as a convertible bond reserve, representing the value of the convertible element of the bond.
Bond issue fees incurred have been allocated between liabilities and equity as a proportion of the value of each element. The fees held against the liability element are released to the Income Statement over the three year life of the bond.
The value of the liability and associated costs are held on the balance sheet at amortised cost. The initial amortised cost valuation gave a carrying value, net of fees, of GBP1.6 million which was recorded as a liability at 4 March 2016. This will increase to its principal value of GBP1.9 million over the life of the bond to 3 March 2019, with interest costs being taken to the Income Statement on a monthly basis. The resulting equity value is GBP0.1 million which is recorded as a convertible bond reserve.
16. Related party transactions
The following transactions with related parties are considered by the Directors to be significant for the interpretation of the Interim Condensed Financial Statements for the six month period to 30 June 2016 and the balances with related parties at 30 June 2016 and 31 December 2015:
In March 2014 the Company issued 3% convertible loan notes with a nominal amount of EUR2,000,000 to the vendors of Biokosmes including Gianluca Braguti, a Director of the Company. Mr Braguti's interest in the convertible loan notes amounted to EUR1,980,000. Interest is accrued on the loan notes at 3% per year and is paid in October and April each year.
Under the terms of the Share Purchase Agreement dated 28 November 2013 and signed between the Company and the vendors of Biokosmes, one of whom was Gianluca Braguti, the vendors agreed to indemnify the Company in full for any net liability arising from certain litigation cases which had not settled at the time of completion of the acquisition on 27 March 2014. At the period end the amount due to the Company under the indemnity totalled EUR250,935, of which Gianluca Braguti's liability is EUR248,426. Settlement of this liability will be made when the final outstanding case is concluded.
In March 2016 the Company issued a 9% convertible bond for GBP1.9m. The bond was issued to a number of bondholders including Jerry Randall and Gianluca Braguti, both Directors of the Company. Both Directors subscribed to GBP200,000 of the issued bond. Interest is accrued on the bond at 9% and is paid in March, June, September and December each year.
Key transactions with other related parties
Biokosmes Immobiliare Srl, a company 100% owned by Gianluca Braguti, a director and shareholder of the Group provided property lease services to Biokosmes Srl, the Group's Italian subsidiary, totalling EUR230,000 in the six months to 30 June 2016 (EUR245,968 in the six months to 30 June 2015). At 30 June 2016, the Group owed Biokosmes Immobiliare Srl EUR782,150 (EUR882,459 at 31 December 2015).
17. Financial instruments
Set out below is an overview of financial instruments held by the Group as at:
30 June 2016 30 June 2015 31 December 2015
----------------------------- -----------------------------
Loans and Total financial Loans and Total financial Loans and Total financial
receivables assets receivables assets receivables assets
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets:
Trade and other
receivables
(a) 4,290 4,290 3,279 3,279 3,030 3,030
Cash and cash
equivalents 1,583 1,583 3,253 3,253 2,857 2,857
Total 5,873 5,873 6,532 6,532 5,887 5,887
------------ --------------- ------------ --------------- ------------ ---------------
30 June 2016 30 June 2015 31 December 2015
--------------------------- --------------------------- ---------------------------
Liabilities Total Liabilities Total Liabilities Total
(amortised financial (amortised financial (amortised financial
cost) liabilities cost) liabilities cost) liabilities
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial
liabilities:
Trade and other
payables (b) 3,105 3,105 1,868 1,868 2,430 2,430
Convertible
bond 1,677 1,677 - - - -
Vendor loan
note 1,612 1,612 1,407 1,407 1,416 1,416
Interest
bearing
debt 3,014 3,014 1,756 1,756 1,844 1,844
----------- -------------- ----------- -------------- ----------- --------------
Total 9,408 9,408 5,031 5,031 5,690 5,690
----------- -------------- ----------- -------------- ----------- --------------
(a) Trade and other receivables excludes prepayments
(b) Trade and other payables excludes accruals and deferred revenue
During the period, the treatment of the Vendor loan notes was reviewed and as a result the classification has been revised to reflect it as a financial instrument at amortised cost rather than fair value through profit or loss.
18. Post balance sheet events
There were no post balance sheet events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFIRASIIFIR
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September 21, 2016 02:00 ET (06:00 GMT)
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