Flying Brands Limited Half-year Report (1888A)

TIDMFBDU

RNS Number : 1888A

Flying Brands Limited

10 September 2018

Flying Brands Limited (the "Company" or the "Group")

Half Yearly Report (Unaudited)

For the Period Ended 30 June 2018

Flying Brands announces today its preliminary financial results for the six months ended 30 June 2018.

Highlights

-- Completion of acquisition of Imaging Biometrics, marking major move into the growing medical imaging market;

   --     Continued revenue growth of the company's existing CE Marked and FDA cleared product; 

-- Significant strengthening of executive management including appointment of new Operating CEO;

-- Material progress made on award of FDA approval for Company's StoneChecker software; high expectation of FDA Approval in near term and generation of first StoneChecker revenues by end of the year;

-- Post period end, successful completion of GBP500,000 capital raise at 2.5p ensuring sufficient financial resources for at least the next 12 months.

For further information, please contact:

 
 Flying Brands Limited 
  Trevor Brown/Dr Qu Li/Mr Vinod 
  Kaushal                            0207 469 0930 
 Peterhouse Capital Limited 
  Heena Karani/Lucy Williams         0207 220 9797 
 

Chief Executive's Statement

The main events during the period or completed shortly thereafter include:

-- Following the acquisition of Imaging Biometrics, Flying Brands is now a revenue producing business;

-- The launch of a capital raising program, which was successfully completed in August at 2.5p;

   --      The appointment of David Smith as Operating CEO. 

I report in more detail below.

Imaging Biometrics (IB)

During the period, IB's software development team initiated and completed the work necessary to integrate IB Neuro, IB Delta T1 maps, IB Diffusion, and IB DCE into cloud-based computing platforms offered by EnvoyAI, QMENTA, and Medimsight. IB entered into distribution agreements with each of those organizations thus enabling immediate and widespread access to IB's branded software on-line via a "fee-per-click" basis. This work also furthered the development of a fully automated processing approach. This is particularly important for IB Neuro, IB's flagship product, which generates dynamic susceptibility contrast (DSC) perfusion parameters with the option to quantify relative cerebral blood volume (rCBV) values. This step towards the automated generation of quantitative perfusion parameters is a significant milestone and one that helps to combat the rising cost pressures for large and small healthcare providers alike.

IB also completed the code modifications required to port its software to a PC-based DICOM viewer. The viewer is analogous to the Apple (Mac) based platform, OsiriX, which was the initial host platform for IB software "plug-ins". This is a significant opportunity as the vast majority of health care systems and clinics are predominately PC-based. Thus, it is anticipated that sites who are interested in accessing IB's advanced imaging solutions will find an easier path for adoption with a PC-based offering.

In June 2018, IB exhibited at the annual American Society of Neuro Radiology (ASNR) show in Vancouver, CA and was present at the International Society of Magnetic Resonance in Medicine (ISMRM) in Paris, France. At each of those meetings, several scientific studies were presented in which IB's software was used to obtain the results.

In order to remain compliant as an ISO13485 certified company, during the period, IB continued to put forth efforts to update its existing Quality Management System (QMS) in preparation of the required transition to the new standard, ISO13485:2016. The new standard supersedes ISO13485:2003 and has an increased emphasis on a "risked-based approach" throughout the life-cycle of a medical device. Maintaining compliance with this quality standard underscores IB's commitment to providing high-quality products and services to its clients. An independent certification audit is scheduled for early Q4.

IB also worked closely with Stone Checker in preparing the resubmission of a US Food and Drug Administration (FDA) 510(k) application for StoneChecker Software. The 510(k) authorizes market clearance in the USA for StoneChecker Software. Multiple teleconferences and phone conversations with the FDA helped strengthen the 510(k) application which we believe were sufficiently addressed by the team.

StoneChecker Software (SC or StoneChecker)

The first six months has been dominated by discussions with the FDA concerning certification or marketing clearance of the SC software. The original 510(k) application was submitted to the FDA in March 2018. The FDA has wrestled with the challenge of clearing sophisticated medical software, particularly software using algorithms derived from the latest artificial intelligence techniques and has engaged in an active two-way discussion concerning the most suitable predicate software product for the 510(k) application. This dialogue with the FDA has resulted in the adoption of a new predicate software product which the FDA has agreed will result in a more efficient and definitive approach with a clearance decision expected in Q3/4.

The FDA acknowledged receipt of IB's renewed submission in August 2018. The FDA publicly states its performance goal is to process 510(k) submissions within 90 calendar days and based upon their published results, the majority of decisions are rendered within this period.

The award of a CE certification at the end of 2017 has enabled management to undertake both clinical and commercial discussions during the first six months of 2018. The overwhelming theme of the clinical discussions has been the widely recognised importance of having a reproducible measuring device for accurately describing and comparing kidney stones. The irregular shape of kidney stones has created problems over many years in establishing the true volume of a kidney stone and has made the accurate reproduction of measurements such as skin to kidney stone extremely difficult. Clinicians have fed back to the SC management team that a reproducible software such as the SC product will enable different research studies and alternative treatment modalities to be compared accurately. There have also been frequent discussions with clinicians about the appropriate accuracy threshold which StoneChecker software has to achieve in order for doctors to use it in their everyday practice. The reviews are mixed but tend towards requiring between 85 to 90% predictive accuracy before the software can be routinely used. StoneChecker management are creating data collection and feedback processes from actual lithotripsy treatment outcomes to enable the software to continue to learn and improve and reach this required predictive level.

Commercial discussions have been on-going and there have been successful developments in each continent. The first fully signed commercial agreement has been reached in South Korea where the product is currently undergoing local clinical evaluation through the work of StoneChecker distributor ISG. There has been progress in a number of European countries including the UK. Commercial sales are expected in Q4.

David Smith, Operating CEO. Strategic overview and introductory statement:

"I have worked in the medical device business for 30 years, and as an entrepreneur in the field for the last 15 years, seeking out opportunities to improve patient healthcare and create outstanding value for shareholders. Often this work has been focused on producing a better, more efficient tool for use in the operating room. The improvements in health care delivery have been important, but relatively small, yet the businesses have been financially successful.

When I was approached by Flying Brands to become their COO, and the CEO of their operating businesses, what immediately struck me was the opportunity to be the architect in the way that healthcare is delivered. This is an opportunity for a leap in healthcare, not the creeping change I have previously successfully delivered. A healthcare revolution, not the evolution I have previously managed.

Imagine a world where expensive and invasive medical treatments are only used on patients that truly need it. Currently, resource consuming and painful biopsies are sought to confirm the presence or absence of disease in the face of ambiguous results from medical imaging. In an average hospital, hundreds of scans are taken daily, searching for disease. Imagine a software that is capable of detecting diseased patients and differentiating them from healthy patients, allowing healthcare practitioners to focus their care on the patients that need it the most. Imagine a software that improves its diagnostic capability over time, becoming more intelligent with each successful diagnosis and providing this knowledge and 'Artificial Intelligence' to those responsible for our healthcare.

I believe that Flying Brands through its operating businesses, has the capability to develop the software able to deliver such a revolution ".

Prospects for H2 2018

Post period end, FB successfully raised GBP500,000 at 2.5p to fund the further development of the businesses which should ensure that we have sufficient financial resources for at least the next 12 months.

We expect continued revenue growth of the company's existing CE Marked and FDA cleared products, and recently have seen an increase in the number of customer demonstrations requested; the first step in the selling process.

We expect to be awarded a 510(k) clearance for StoneChecker, giving this product market access to the USA. We also expect to generate the first revenues from this product before the end of the year.

In South Korea the MFDS regulatory approval process has also been initiated for StoneChecker which would give the company's partner the ability to sell from around the end of the year.

The IB Clinic suite of products is currently being evaluated by a number of leading institutions for incorporation into their radiology practices and we have seen a marked increase in the number of demonstrations requested for our suite of software products from opinion leading institutions. We would expect some of these inquiries to be converted into sales revenue during H2 2018 and H1 2019.

Imaging Biometrics' development efforts are being concentrated into following main areas:

a) Continuing to refine the company's proprietary algorithms that are capable of distinguishing between real brain tumour growth and "pseudo progression"; the appearance of growth associated with scarring or damage created by radiotherapy;

b) Further exploitation of the company's ability to automatically generate quantitative perfusion parameters which it believes are unique and powerful diagnostic tools;

c) Developing a 'cloud based' version of the software that can be easily and inexpensively accessed by every single hospital with internet access. This gives access to the company's suite of products for a per patient 'click fee' giving the customer the option to own the software and have financial responsibility for maintaining it or simply access it on a 'per patient" basis. The individual hospital's choice will be predicated on the budget available, their competence in maintaining the software on their servers and the overall number of patients for whom they intend to access the service;

d) Benefiting from Machine Learning (an aspect of Artificial Intelligence), so that the company's algorithms improve over time, becoming more sensitive and predicting more accurately the presence or absence of brain tumour progression. In effect, the more widely used the product is, the more accurate it becomes;

e) Using lightly modified versions of the existing perfusion and diffusion algorithms in new areas so that Imaging Biometrics can exploit opportunities in different parts of the body; and

f) Continuing to develop core lab post processing services for Contract Research Organizations to assist them in the evaluation of new and emerging pharmaceutical/treatment therapies.

Outlook

The company is entering an exciting phase of development. We look forward to updating shareholders as events unfold.

Trevor Brown

Chief Executive

Results for the 2018 interim financial period

A summary of the key financial results is set out in the table below:

 
                                        30.6.2018 
                                          GBP'000 
---------------------  -------------------------- 
 Revenue                                      126 
 Operating expenses                         (487) 
---------------------  -------------------------- 
 Operating loss                             (361) 
 Finance costs                               (10) 
---------------------  -------------------------- 
 Loss before tax                            (371) 
 Taxation                                       - 
 
 Loss for the period                        (371) 
 
 

Interest

The net interest cost for the Group for the period was GBP0.01m (2017: GBPnil).

Loss before tax

Loss before tax for the period was GBP0.37m (2017: GBP0.2m).

Taxation

Taxation charge was GBPnil for the period (2017: GBPnil).

Earnings per share

Basic and diluted earnings per share for the period were 0.55p loss (2017: 0.62p loss).

Financial position

The Group's balance sheet as at 30 June 2018 can be summarised as set out in the table below:

 
                                    Assets   Liabilities   Net assets 
                                     GBP'm         GBP'm        GBP'm 
                                   GBP'000       GBP'000      GBP'000 
--------------------------------  --------  ------------  ----------- 
 Non-current assets                    486             -          486 
 Current assets and liabilities         31         (288)        (257) 
 Loans and provisions                    -             -            - 
 Total as at 30 June 2018              517         (288)          229 
--------------------------------  --------  ------------  ----------- 
 Total as at 31 December 2017          693         (103)          590 
--------------------------------  --------  ------------  ----------- 
 

Cash flow

Net cash outflow for 2018 was GBP0.4m (2017: GBP0.4m inflow).

This outflow reflects the purchase of a subsidiary and operations of the Group during the period. The overall movement in creditors was GBP0.2m (2017: GBP0.04m).

Consolidated Income Statement

6 months ended 30 June 2018

 
                                                (Audited) 
                                   Half year    Full year   Half year 
                                       ended        ended       ended 
                                    30.06.18   31.12.2017   30.6.2017 
                                     GBP'000      GBP'000     GBP'000 
 Revenue                                 126            -           - 
 Cost of sales                             -            -           - 
--------------------------------  ----------  -----------  ---------- 
 Gross profit                              -            -           - 
 Operating expenses                    (487)        (258)       (192) 
--------------------------------  ----------  -----------  ---------- 
 Operating loss                        (361)        (258)       (192) 
 Net finance expense                    (10)         (23)           - 
 Loss before tax                       (371)        (281)       (192) 
 Taxation                                  -            -           - 
--------------------------------  ----------  -----------  ---------- 
 Loss for the period                   (371)        (281)       (192) 
 Loss attributable to the Group        (371)        (281)       (192) 
--------------------------------  ----------  -----------  ---------- 
 
 
  Loss per share expressed in 
   pence per share 
 From continuing and total operations: 
 Basic & diluted                           (0.55)   (0.56)   (0.62) 
 
 

Consolidated Statement of Comprehensive Income

6 months ended 30 June 2018

 
                                                              (Audited) 
                                        Half year             Full year  Half year 
                                            ended                 ended      ended 
                                         30.06.18            31.12.2017  30.6.2017 
                                          GBP'000               GBP'000    GBP'000 
--------------------------------------  ---------  --------------------  --------- 
Loss profit for the period                  (371)                 (281)      (192) 
Sale of treasury shares                         -                 (840)          - 
 
Total comprehensive loss attributable 
 to the Group                               (371)               (1,121)      (192) 
 
 

Consolidated Balance Sheet

As at 30 June 2018

 
                                                                    (Audited) 
                                               30.06.18            31.12.2017             30.6.2017 
                                                GBP'000               GBP'000               GBP'000 
 
 Assets 
 Non-current assets 
 Goodwill                                           439                   248                   243 
 Development costs                                   47                    47                    35 
 Total non-current assets                           486                   295                   278 
 
 Current assets 
 Trade and other receivables                         26                    11                     4 
 Cash                                                 5                   387                   498 
----------------------------------  -------------------  --------------------  -------------------- 
 Total current assets                                31                   398                   502 
 Current liabilities 
 Trade and other payables                         (288)                 (103)                  (93) 
 Net current (liabilities)/assets                 (257)                   295                   409 
 Non - current liabilities 
 Loan                                                 -                     -                 (375) 
 Net Assets/(liabilities)                           229                   590                   312 
 
 Share capital                                      676                   676                   590 
 Share premium                                   18,418                18,418                18,633 
 Capital redemption reserve                          24                    24                    22 
 Merger reserve                                     160                   160                     - 
 Treasury shares                                      -                     -                 (840) 
 Convertible loan equity reserve                    379                   369                    53 
 Warrant reserve                                      -                     -                    13 
 Retained earnings                             (19,428)              (19,057)              (18,159) 
 Total equity attributable to 
  equity holders of the parent                      229                   590                   312 
----------------------------------  -------------------  --------------------  -------------------- 
 

Consolidated statement of changes in equity

6 months ended 30 June 2018

 
 
                                                                                 Convertible 
                                                  Capital                          loan note 
                             Share     Share   redemption    Merger  Treasury      / warrant   Retained        Total 
                           capital   premium      reserve   reserve    shares        reserve   earnings       equity 
                           GBP'000   GBP'000      GBP'000   GBP'000   GBP'000        GBP'000    GBP'000      GBP'000 
------------------------  --------  --------  -----------  --------  --------  -------------  ---------  ----------- 
Balance at 1 January 
 2017                          310    18,062           22         -     (840)            423   (17,949)           28 
 
Loss for the period              -         -            -         -         -              -      (281)        (281) 
Total comprehensive 
 loss                            -         -            -         -         -              -      (281)        (281) 
------------------------  --------  --------  -----------  --------  --------  -------------  ---------  ----------- 
 
Shares redeemed in 
 period                        (2)         -            2         -         -              -          -            - 
Warrants exercised               -         -            -         -         -           (13)         13            - 
Shares issued in period        368       409            -       160         -              -          -          937 
Cost of shares issued                   (53)            -         -         -              -          -         (53) 
Sale of treasury shares          -         -            -         -       840              -      (840)            - 
Movement in year                 -         -            -         -         -           (41)          -         (41) 
Balance at 31 December 
 2017                          676    18,418           24       160         -            369   (19,057)          590 
Loss for the period              -         -            -         -         -             10      (371)        (361) 
Total comprehensive 
 loss                            -         -            -         -         -             10      (371)        (361) 
------------------------  --------  --------  -----------  --------  --------  -------------  ---------  ----------- 
Balance at 30 June 
 2018                          676    18,418           24       160         -            379   (19,428)          229 
 
 

Consolidated Cash Flow Statement

6 months ended 30 June 2018

 
                                                                  (Audited) 
                                        Half year                 Full year                 Half year 
                                            ended                     ended                     ended 
                                         30.06.18                  31.12.17                  30.06.17 
                                          GBP'000                   GBP'000                   GBP'000 
--------------------------------------  ---------  ------------------------  ------------------------ 
Loss for the period                         (371)                     (281)                     (192) 
Adjustment for: 
(Increase)/decrease in receivables           (15)                         3                        10 
Increase/(decrease) in payables               185                        44                        41 
(Increase)/decrease in goodwill              (87)                        -                          - 
Net finance expenditure                        10                        23                         - 
Net cash used in operating activities       (278)                     (211)                     (141) 
 
Cash flows from investing activities 
Purchase of subsidiaries                    (104)                         -                         - 
Purchase of intangible assets                   -                      (47)                         - 
Net cash from/(used in) investing 
 activities                                 (104)                      (47)                         - 
--------------------------------------  ---------  ------------------------  ------------------------ 
 
Cash flows from financing activities 
Shares issued                                   -                       580                       573 
Cost of shares issued                           -                       (1)                         - 
Net cash from/(used in) financing 
 activities                                     -                       579                       573 
--------------------------------------  ---------  ------------------------  ------------------------ 
Net increase/(decrease) in cash 
 and cash equivalents                       (382)                      321                        432 
--------------------------------------  ---------  ------------------------  ------------------------ 
Cash and cash equivalents brought 
 forward                                      387                        66                        66 
--------------------------------------  ---------  ------------------------  ------------------------ 
Cash and cash equivalents carried 
 forward                                        5                       387                       498 
--------------------------------------  ---------  ------------------------  ------------------------ 
 

Summary of significant accounting policies

The principal accounting policies adopted in the preparation of these financial results are set out below. These policies have been consistently applied to all financial periods presented, unless otherwise stated.

Basis of preparation and going concern basis

Flying Brands Limited (the Company) is a limited liability company incorporated and domiciled in Jersey. The consolidated financial results of the Company comprise the Company and its subsidiaries (together referred to as the Group). The accounting policies of the Company are the same as for the Group except where separately disclosed.

These consolidated financial results have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the European Union (adopted IFRS).

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in this review. The financial position of the Group, its cash flows and liquidity position are described in this business review. In addition, the below notes to the financial results include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposure to credit risk and liquidity risk. As highlighted in below, the Group meets its day to day working capital requirements through its on-going cash flows.

Basis of consolidation

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities generally accompanying a shareholding of more than one half of the voting rights.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is recorded as goodwill. The results of the subsidiary undertakings acquired or disposed of during the period are included in the Consolidated Income Statement from the date that control commences until the date control ceases.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Segment reporting

The Group is currently a cash shell and the directors believe that there is no benefit to show any segmental reporting until a new strategy is undertaken.

Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquirer. Acquisition-related costs are recognised in profit or loss as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs. Changes in the fair value of contingent consideration classified as equity are not recognised.

Where a business combination is achieved in stages, the Group's previously-held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

The acquirer's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3(2008) are recognised at their fair value at the acquisition date, 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 related 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 in accordance with that Standard.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date, and is subject to a maximum of one year.

Impairment

(a) Financial assets

A financial asset is assessed at each reporting date to determine whether there is any evidence that it is impaired. A financial asset is considered impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. Individual significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the consolidated income statement.

(b) Non-financial assets

The carrying amounts of the Group's non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each reporting date. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. 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 risk specific to the asset. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the consolidated income statement. An impairment loss in respect of goodwill is not reversed irrespective of whether that loss is recovered subsequently. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised.

Financial assets

All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL), 'held-to-maturity' investments, 'available-for-sale' (AFS) financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Trade receivables

Trade receivables are recognised initially at amortised cost, which is the fair value of consideration receivable and is adjusted for provision or impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all the monies due. The amount of the provision is recognised in the consolidated income statement immediately.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statement.

Bank borrowings and other loans

Interest-bearing loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Share capital

(a) Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

(b) Repurchase of share capital (treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/from retained earnings.

Taxation

Income tax payable is provided on taxable profits using tax rates enacted or substantively enacted at the balance sheet date.

Deferred taxation is provided in full, using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial results. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related balance sheet tax asset is realised or the deferred liability is settled. Deferred income tax assets are recognised to the extent that it is possible that future taxable profit will be available against which temporary differences can be utilised. Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Financial instruments

(a) Financial guarantee contracts

Where Group companies enter into financial guarantee contracts to guarantee the indebtedness of other companies within the Group, the Group considers these to be insurance arrangements, and accounts for them as such. In this respect, the Group treats the guarantee contract as a formal contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.

(b) Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

Financial risk and credit management

The Group has exposure to the following risks from its use of financial instruments:

   (a)   Liquidity risk 
   (b)   Interest rate risk 

This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risks and the Group's management of capital. Further quantitative disclosures are included throughout these consolidated financial results.

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework.

The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities.

The Group Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

(a) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The strategy of the Directors (outlined earlier) is designed to address the risk that the Group has insufficient liquid resources to satisfy its requirements.

(b) Interest rate risk

The Group has no floating rate loans. Thus the Group has no exposure to interest rate risk.

Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Directors monitor the return on capital, which the Group defines as net operating income divided by total shareholders' equity. The Board also monitors the level of dividends to ordinary shareholders.

From time to time the Group purchases its own shares on the market; the timing of these purchases depends on market prices. Primarily the shares are intended to be used for issuing shares under the Group's share option programme. Buy and sell decisions are made on a specific transaction basis by the Board of Directors; the Group does not have a defined share buy-back plan.

There were no changes in the Group's approach to capital management during the period.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below.

(a) Going concern basis of preparation

The Directors decision to prepare these accounts on a going concern basis is based on assumptions which are discussed above and in the business review.

Earnings per share

Basic and diluted

Earnings per share is calculated by dividing the (loss)/profit attributable to the equity holders of the Company by the weighted average number of Ordinary shares in issue during the period, excluding Ordinary shares purchased by the Company and held as treasury shares. The Company previously had one category of dilutive potential Ordinary shares: LTIP awards. These have all lapsed.

 
                                    Half year  Full year  Half year 
                                        ended      ended      ended 
                                     30.06.18   31.12.17    30.6.17 
                                      GBP'000    GBP'000    GBP'000 
----------------------------------  ---------  ---------  --------- 
(Loss)/profit attributable to 
 equity holders of the Company 
 (GBP'000)                              (371)      (281)      (192) 
Weighted average number of shares 
 in issue (Number '000)                67,559     49,860     30,881 
(Loss)/earnings per share (pence)      (0.55)     (0.56)     (0.62) 
 
 

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END

IR SSEFMWFASEFU

(END) Dow Jones Newswires

September 10, 2018 02:00 ET (06:00 GMT)