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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Fusion Antibodies Plc | LSE:FAB | London | Ordinary Share | GB00BDQZGK16 | ORD 4P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 3.75 | 3.70 | 3.80 | 3.80 | 3.75 | 3.80 | 138,126 | 08:00:04 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Pharmaceutical Preparations | 2.9M | -2.6M | -0.0437 | -0.86 | 2.23M |
From Apr 2019 to Apr 2024
TIDMFAB
RNS Number : 9509X
Fusion Antibodies PLC
16 August 2018
Fusion Antibodies plc
("Fusion" or the "Company")
16 August 2018
Final results
Fusion Antibodies plc (AIM: FAB), a contract research organisation providing a range of antibody engineering services for the development of antibodies for both therapeutic drug and diagnostic applications, announces its final results for the year ending 31 March 2018.
Highlights
-- Revenue growth of 41% to GBP2.7m; adj EBITDA broadly in-line with expectations -- Admitted to trading on AIM in December 2017 -- Raised GBP5.5m before expenses -- Loss for the financial year of GBP699,941 -- Adjusted* loss for the financial year of GBP2,309 -- Adjusted* EBITDA of GBP132,018 (2017: GBP288,473) -- Cash and cash equivalents as at 31 March 2018 of GBP4.49m
* Adjusted to exclude accelerated share-based payment charges and IPO costs.
Post period end highlights
-- Facilities and technical capacity expansion is underway and will be completed by September 2018, earlier than planned and under budget
-- New affinity maturation service on schedule and expected to be introduced by December 2018 -- Mammalian antibody library on track for delivery in 2020
Paul Kerr, CEO of Fusion Antibodies commented: "This year was a transformative year, securing new investment from our AIM listing, which has been applied towards expanding our facility and capacity of services to our clients.
We see the drug development sector strong and demand for seamless, high-quality, antibody engineering services integrated into expression and cell line development services. We continue to differentiate our service offering to give our clients access to our enhanced CDRx Humanisation platform, which has delivered two antibodies for clinical trials, rescued failed development projects and not only revived them but added enhanced performance allowing new IP to be sought.
We look forward to launching our antibody affinity maturation services and growing our cell line development capacities further to continue the development of our Company."
Enquiries:
Fusion Antibodies plc www.fusionantibodies.com Dr Paul Kerr, Chief Executive Officer Via Walbrook PR James Fair, Chief Financial Officer Allenby Capital Limited Tel: +44 (0)20 3328 5656 Virginia Bull / James Reeve / Asha Chotai Walbrook PR Tel: +44 (0)20 7933 8780 or fusion@walbrookpr.com Anna Dunphy Mob: +44 (0)7876 741 001 Paul McManus Mob: +44 (0)7980 541 893
Chairman's statement
I am delighted to present the first Annual Report for the Company following our successful admission to AIM in December 2017. The year to 31 March 2018 was characterised by the delivery of strong revenue growth across the year, our successful admission to AIM and the raising of additional funds to support our on-site expansion plans, drive further organic sales growth, and to fund the development of new services.
Admission to AIM, a market operated by the London Stock Exchange
Fusion Antibodies was established in 2001 to develop monoclonal antibodies to be used as therapeutics in cancer treatment and over the years it built deep in-house expertise in antibody development, protein engineering and protein expression. From 2011, the Company ceased drug development activity and focused instead on the provision of services to third parties using its antibody and protein related expertise. In recent years revenues have grown significantly to the point where the Company needed to expand its laboratory facilities and to develop further services. The Board concluded that these developments would be optimally funded by seeking a quotation on AIM.
In December 2017, we announced the admission of our shares to trading on AIM and a successful placing with institutional investors, raising a total of GBP5.5m (before expenses) at a placing price of 82p (the "Placing"). We were pleased with the level of interest generated from new institutional investors and the funds raised are being used to support the expansion of our existing laboratory space, increase our sales and marketing efforts, and to develop new service lines.
Strategy & Progress
I am pleased to report that revenues in 2017/2018 grew by 41% over the previous financial year, despite the significant distraction in the second six months to the senior executive team caused by the AIM admission process and I thank them, and all our employees, for their hard work during the year. The year- on-year growth rate did slow in the second six months and trading has been slower than anticipated in the early part of the current year.
A large part of the revenue growth came from antibody humanisation and stable cell line development and we continue to believe that there is the potential for further significant organic growth in these areas as the use of antibodies and the outsourcing of specific R&D activities in the Pharmaceutical industry continues to grow. To ensure that we can meet this demand, we have undertaken a significant expansion of our laboratory and office space. The laboratory expansion has been completed, six months earlier than originally planned and within budget.
An additional key driver for revenue growth is expected to come from new products and service areas, and in particular our affinity maturation service and the production of a mammalian antibody library for human antibody discovery. Development continues on both and we are on schedule to launch the antibody affinity maturation service by the end of 2018, and the mammalian antibody library remains on track for 2020.
We are also investing in our sales and marketing capabilities to generate additional business and we believe that further geographical expansion of our customer base will be a key driver of revenue growth.
More details on financial performance are given in the Chief Executive Officer's report.
Board changes
At the time of the AIM admission, two of the Company's long-standing non-executive directors, Sir John Cadogan and David Moore, stepped down from the board and I would like to thank them both for their service to the Company. Immediately after the IPO, Tim Watts was appointed as a non-executive director and became Chair of the Audit Committee. I welcome Tim to the board.
Corporate governance
Good governance underpins the long term success of the business and supports the strategy for growth and the Company has adopted the Quoted Companies Alliance's Corporate Governance Code 2018.
Outlook
Although there was a slowdown in sales growth in the second half of 2017/2018 which has extended into the first quarter of 2018/2019, management has taken steps to address this, including the recruitment of more sales and marketing staff and focussing on the geographical expansion of our customer base. The company is experiencing increased competition and consequential price pressures in the current year but we continue to have a positive outlook for the underlying business drivers. We believe that further growth will come from our antibody humanisation and stable cell line development services, supported by our investments in expanding our facilities and capacity and in our sales and marketing team. The development of the new affinity maturation service is progressing well and should come on line by the end of 2018. Taking these factors together, the board considers that modest revenue growth will be achieved in 2018/2019.
I would like to extend my thanks to all staff at Fusion for their hard work and to our shareholders for their ongoing support.
Dr Simon Douglas
Chairman
15 August 2018
CEO's statement and operation review
Introduction & Company Overview
Fusion Antibodies is an established contract research organisation, providing a multi-service offering, from antibody discovery to clinical supply, to blue-chip global pharmaceutical, biotech and diagnostic companies looking to develop antibody based therapeutic drugs and diagnostics.
We provide services covering antibody identification and discovery, lead optimisation via antibody sequencing and engineering, and particularly focus on antibody humanisation, as well as offering scale up and manufacturing services. Our team has developed a proprietary technology platform called the CDRx(TM) antibody humanisation platform which can rapidly design and generate humanised antibody constructs using a data base of over 100,000 antibody sequences. We have completed over 100 antibody humanisation commercial projects and have a high success rate using this platform and, as can be seen below, we now have two client humanisation projects in clinical trials and we expect more to follow. In addition, we generate additional revenues from our high value expert witness and technical advisory services, having previously been appointed by the US court of Delaware as expert witnesses in multibillion dollar drug cases.
In May 2018, we were pleased to be informed that the antibody from our very first humanisation project, performed in 2012, has now entered into clinical trials. This will be our second client project to move into the clinical trial stage and we expect more to follow based on customer feedback. Whilst this project did not include any milestone payments, we consider that it is a strong indicator of the company's capabilities.
The Company is growing and derives its revenues primarily from fee-for-service payments. Where appropriate, milestone or success-based fees are included in certain contracts.
Business Review
Revenues for the year demonstrated strong organic growth, up by 41% to GBP2.69m (2017: GBP1.91m), continuing the growth seen in recent years.
The main driver of revenue growth came from antibody humanisation fees, substantially the largest contributor to overall sales. Sales from cell-line development services have also grown, albeit from a small base. We also continued to earn fees from providing expert witness services in the field of antibody development.
As announced in our trading update in March 2018, first half sales were particularly strong, with revenues up 70% compared to the comparable period in the previous year. Whilst trading in the second half was up against the previous comparable period, growth was affected by the significant management time required to complete our AIM admission and Placing in December 2017. Whilst this impacted revenues during the period, there was minimal impact on adjusted EBITDA due to the sales mix of higher margin services such as humanisation and cell-line development.
In terms of geographical split, revenues grew in all regions except for the UK, which reflects the expanding global reach of our new business development efforts and our targeting of the large North American market, as well as opportunities within Asia. UK sales were down 15.4% to GBP0.28m (2017: GBP0.31m), Europe grew 10.4% to GBP0.93m (2017: GBP0.85m) and the US saw sales growth of 9.6% to GBP0.82m (2017: GBP0.75m).
The biggest regional driver of growth was from sales to Rest of the World, up significantly from GBP12k in 2017 to GBP0.66m for the year ended March 2018. This growth has been achieved through the engagement of agents and distributors across Asia who are targeting a pharmaceutical market that is experiencing a big shift to monoclonal antibodies within therapeutic drug discovery. During the period, the Company secured agreements with new clients in Japan and South Korea to provide humanisation and antibody identification services.
Whilst not a large amount, we also received our first milestone payment during the period. Where appropriate, new contracts include a milestone or success-based fees and in selected cases the opportunity to share the risk in future opportunities through future royalties. The Directors believe that these have the potential to provide meaningful additional revenue streams from 2020.
Laboratory and office expansion update
Building work on the expansion of our facility in Belfast, Northern Ireland, has continued to progress according to our accelerated timetable. We remain on track to complete the expansion by the September 2018, within budget and earlier than originally planned.
Development of new services
Funds from our Placing are also being directed to the development of new service areas, namely our affinity maturation services and the creation of a mammalian antibody library for human antibody discovery. In addition, we have continued to invest in our CDRx(TM) humanisation platform to offer Antibody Developability by Design (ADD(TM) ) service to differentiate further our technical ability to provide solutions to our clients' antibodies drug candidates by enhancing manufacturability performance.
Development progress on our new antibody affinity maturation service has been good and we are planning to launch this service before the end of the calendar year. Development of our mammalian antibody library remains on track to be available for customers in 2020.
Post-period end events
Also in May, we announced the receipt of additional grants from Invest Northern Ireland ("Invest NI") to support our growth with grants potentially totalling up to GBP213,000 which can be used to create up to 28 additional jobs and support additional business development over the next 24 months. GBP168,000 of the grants cover payments for each employee as they are taken on over the next 24 months. The additional 28 jobs, if they are all filled, are expected to take our total workforce to more than 50 people and this is part of our investment programme to deliver future growth. The remaining GBP45,000 will support additional business development activity to grow our international customer base. This announcement also followed on from confirmation on 1 March 2018 of other grants from Invest NI. We are very grateful for the support provided by Invest NI as we expand the business and these grants are an important part of our strategy of investing for growth.
In June 2018, we announced the notice of termination of our existing collaboration agreement with MAB Discovery GmBH ("MAB"). The agreement specified the terms of engagement regarding our high throughput humanisation of antibodies being developed by MAB, using our CDRx(TM) platform. We are currently in discussions to develop a revised collaboration agreement. No reduction in revenues is expected as a result.
Financial Results
The year to 2018 was a period of strong organic revenue growth with total sales increasing by 41% to GBP2.69m (2017: GBP1.91m). Growth came from customer projects in all geographic regions other than the UK. The fastest growth was seen in the first six months of the financial year as H2 revenue growth was impacted by the demands of the AIM admission process.
The EBITDA loss of GBP641k (2017 profit: GBP160k) and adjusted EBITDA profit (adjusted for accelerated share-based payment charges and IPO costs) GBP132k (2017: GBP288k) was broadly in-line with expectations. A reconciliation of adjusted profit to adjusted EBITDA is set out in Note 28 to the financial statements. Performance at the EBITDA level reflects the investment that the Company has made in future growth, with investment into employees, facilities and research which are expected to deliver further significant revenue growth. The Company produced a loss before tax of GBP711k (2017: profit GBP126k) and adjusted profit before tax of GBP62k (2017: GBP255k). The Company generated cash of GBP77k from operating activities during the year (2017: GBP37k cash used in operations). Cash and cash equivalents as at 31 March 2018 totaled GBP4.5m (2017: GBP0.3m) reflecting the funds raised in our Placing. The Company's full results are set out in the financial statements included with this report.
Key Performance Indicators
The key performance indicators (KPIs) regularly reviewed by the board are:
Hot Features
Premium
KPI 2018 2017
-------------------------- ---------------- -----------------
Revenue growth year on
year 41% 29%
EBITDA (GBP641k) GBP160k
Adjusted EBITDA GBP132k GBP288k
5% of revenues 15% of revenues
Cash generated/(used in) GBP77k (GBP37k)
operations
-------------------------- ---------------- -----------------
Outlook
Although there was a slowdown in sales growth in the second half of 2017/2018 which has extended into the first quarter of 2018/2019, management has taken steps to address this, including the recruitment of more sales and marketing staff and focussing on the geographical expansion of our customer base. The company is experiencing increased competition and consequential price pressures in the current year bit we continue to have a positive outlook for the underlying business drivers. We believe that further growth will come from our antibody humanisation and stable cell line development services, supported by our investments in expanding our facilities and capacity and in our sales and marketing team. The development of the new affinity maturation service is progressing well and should come on line by the end of 2018. Taking these factors together, the board considers that modest revenue growth will be achieved in 2018/2019.
Paul Kerr
Chief Executive Officer
15 August 2018
Statement of Comprehensive Income
2018 2017
Notes Before Non-recurring After Before Non-recurring After
non-recurring items non-recurring non-recurring items non-recurring
items (note items items (note items
28) 28)
GBP GBP GBP GBP GBP GBP
Revenue 4 2,690,744 - 2,690,744 1,913,956 - 1,913,956
Cost of sales (1,207,331) - (1,207,331) (952,459) - (952,459)
Gross profit 1,483,413 - 1,483,413 961,497 - 961,497
Other operating
income 54,626 - 54,626 45,674 - 45,674
Administrative
expenses (1,475,646) (772,936) (2,248,582) (751,688) (128,953) (880,641)
Operating
(loss)/profit 5 62,393 (772,936) (710,543) 255,483 (128,953) 126,530
Finance income 8 4,043 - 4,043 - - -
Finance costs 8 (4,862) - (4,862) (615) - (615)
(Loss)/profit
before tax 61,574 (772,936) (711,362) 254,868 (128,953) 125,915
Income tax
credit/(expense) 10 (63,883) 75,304 11,421 (66,360) 60,399 (5,961)
(Loss)/profit
for the
financial
year (2,309) (697,632) (699,941) 188,508 (68,554) 119,954
Total
comprehensive
(expense)/income
for the year (2,309) (697,632) (699,941) 188,508 (68,554) 119,954
Pence Pence
(Loss)/earnings
per share
Basic 11 (4.3) 0.9
Diluted 11 (4.2) 0.8
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
The accompanying notes form an integral part of the financial statements.
Statement of Financial Position
Notes 2018 2017
GBP GBP
Assets
Non-current assets
Property, plant and equipment 12 546,734 107,253
Deferred tax assets 14 1,156,047 1,118,864
1,702,781 1,226,117
Current assets
Inventories 15 81,815 70,261
Trade and other receivables 16 926,220 571,998
Current tax receivable 6,906 2,078
Cash and cash equivalents 4,490,931 285,685
5,505,872 930,022
Total assets 7,208,653 2,156,139
Liabilities
Current liabilities
Trade and other payables 17 536,299 430,217
Borrowings 18 33,758 -
570,057 430,217
Net current assets 4,935,815 499,805
Non-current liabilities
Borrowings 18 43,529 -
Provisions for other liabilities
and charges 19 20,000 20,000
Total liabilities 633,586 450,217
Net assets 6,575,067 1,705,922
Equity
Called up share capital 21 883,648 547,655
Share premium reserve 4,872,327 6,161,269
Retained earnings/(accumulated
losses) 819,092 (5,003,002)
Total equity 6,575,067 1,705,922
The accompanying notes form an integral part of these financial statements.
The financial statements were approved by the Board on 15 August 2018, and signed on its behalf:
Dr Paul Kerr James Fair Director Director
Statement of Changes in Equity
Called up Share premium (Accumulated Total
share capital reserve losses)/Retained equity
GBP GBP earnings GBP
GBP
-------------------------- ---------------- --------------- ------------------- -----------
At 1 April 2017 547,655 6,161,269 (5,003,002) 1,705,922
-------------------------- ---------------- --------------- ------------------- -----------
Loss for the year - - (699,941) (699,941)
-------------------------- ---------------- --------------- ------------------- -----------
Capital reduction - (6,161,269) 6,161,269 -
Issue of share capital 335,993 5,270,359 - 5,606,352
Cost of issuing share
capital - (398,032) - (398,032)
Share options - value
of employee services - - 330,176 330,176
Tax credit relating
to share option scheme - - 30,590 30,590
-------------------------- ---------------- --------------- ------------------- -----------
Total transactions
with owners, recognised
directly in equity 335,993 (1,288,942) 6,522,035 5,569,086
-------------------------- ---------------- --------------- ------------------- -----------
At 31 March 2018 883,648 4,872,327 819,092 6,575,067
-------------------------- ---------------- --------------- ------------------- -----------
At 1 April 2016 547,655 6,161,269 (5,251,909) 1,457,015
-------------------------- ---------------- --------------- ------------------- -----------
Profit for the year - - 119,954 119,954
Share options - value
of employee services - - 128,953 128,953
-------------------------- ---------------- --------------- ------------------- -----------
Total transactions
with owners, recognised
directly in equity - - 128,953 128,953
-------------------------- ---------------- --------------- ------------------- -----------
At 31 March 2017 547,655 6,161,269 (5,003,002) 1,705,922
-------------------------- ---------------- --------------- ------------------- -----------
The accompanying notes form an integral part of these financial statements.
Cash Flow Statement
2018 2017
GBP GBP
------------------------------------------------------ ----------- ----------
Cash flows from operating activities
(Loss)/profit for the year (699,941) 119,954
Adjustments for:
Share based payment expense 330,176 128,953
Cost of raising capital 609,836 -
Depreciation 69,625 32,990
Finance income (4,043) -
Finance costs 4,862 615
Income tax (credit)/expense (11,421) 5,961
Increase in inventories (11,554) (70,261)
Increase in trade and other receivables (225,322) (294,373)
Increase in trade and other payables 14,974 38,787
------------------------------------------------------ ----------- ----------
Cash generated from/(used in) operations 77,192 (37,374)
Income tax received - -
------------------------------------------------------ ----------- ----------
Net cash generated from/(used in) from operating
activities 77,192 (37,374)
Cash flows from investing activities
Purchase of property, plant and equipment (444,595) (90,271)
------------------------------------------------------ ----------- ----------
Net cash used in investing activities (444,595) (90,271)
Cash flows from financing activities
Proceeds from issue of share capital 4,598,650 -
Repayment of borrowings (25,182) -
Finance income - interest received 4,043 -
Finance costs - interest paid (4,862) (615)
------------------------------------------------------ ----------- ----------
Net cash generated from/(used in) financing
activities 4,572,649 (615)
Net increase/(decrease) in cash and cash equivalents 4,205,246 (128,260)
Cash and cash equivalents at the beginning
of the year 285,685 413,945
------------------------------------------------------ ----------- ----------
Cash and cash equivalents at the end of the
year 4,490,931 285,685
------------------------------------------------------ ----------- ----------
The accompanying notes form an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 31 March 2018
1 General information
Fusion Antibodies plc is a company incorporated and domiciled in the UK, having its registered office at Marlborough House, 30 Victoria Street, Belfast BT1 3GG.
The principal activity of the company is the research, development and manufacture of recombinant proteins and antibodies, particularly in the areas of cancer and infectious diseases.
This preliminary announcement was approved for issue on 15 August 2018.
2 Significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated.
Basis of preparation
The financial information included in this preliminary announcement does not constitute statutory accounts of the company for the years ended 31 March 2018 and 31 March 2017 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 will be delivered following the company's Annual General Meeting. The auditors have reported on those accounts: their reports were (1) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The financial statements have been prepared on the historical cost convention, modified to include certain financial instruments at fair value.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest GBP1.
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and IFRS Interpretations Committee (IFRIC) as adopted by the European Union and with the Companies Act 2006 applicable to companies reporting under IFRS.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3.
Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the company has adequate resources to continue in operational existence for 12 months from the reporting date. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. In arriving at this conclusion the Directors have reviewed detailed forecast models for the company. These models are based on best estimates of future performance and have been adjusted to reflect various scenarios and outcomes that could potentially impact the forecasts.
Changes in accounting policy and disclosures
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 April 2018, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the company, except the following, set out below:
-- IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. The standard is effective for accounting periods beginning on or after 1 January 2018. The company will apply the standard retrospectively for the first time in the half year report ending 30 September 2018 and the annual report ending 31 March 2019.
IFRS 9 is applicable to financial assets and financial liabilities, and covers classification, measurement and derecognition.
On adoption of IFRS 9, the main areas of change that are relevant for the company are:
- requirement to use an expected credit loss method for impairment calculation; and - broadening of hedge accounting application with more focus on risk management alignment.
If applied at 31 March 2018 it is estimated that the credit loss impairment would have been less than GBP3,500. The full impact will be subject to a further assessment and is dependent on the instruments and balances open at the transition date.
-- IFRS 15, 'Revenue from contracts with customers', deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The standard is effective for accounting periods beginning on or after 1 January 2018. The company will apply the standard retrospectively for the first time in the half year report ending 30 September 2018 and the annual report ending 31 March 2019.
The new standard will replace existing accounting standards used to determine the measurement and timing of revenue recognition, and requires an entity to align the recognition of revenue to the transfer of goods or services at an amount that the entity expects to be entitled to in exchange for those goods or services. The standard also requires enhanced revenue disclosure.
For the company's revenue streams an initial review has been performed on a sample of service agreements and upon adoption there will be a minor delay in the recognition of revenue due to a change in the percentage of completion method currently being used. If applied at 31 March 2018 this is estimated to reduce revenues for the year then ended by GBP24,400 Given the customised nature of some of the contracts open at any given date, the company is continuing to assess the full impact on these areas of revenue in future periods.
-- IFRS 16, 'Leases', will introduce a single lessee accounting model, eliminating the previous classification of leases as either operating or finance. The standard is effective for accounting periods beginning on or after 1 January 2019. The company will apply the standard retrospectively for the first time in the half year report ending 30 September 2019 and the annual report ending 31 March 2020.
The standard will require recognition of an asset and a related liability unless the lease term is 12 months or less or the underlying asset value is low. An initial impact review indicates that the only lease currently in force that will be affected is for the company premises in Belfast.
Given that the transition date will be 1 April 2019, the final transition impact assessment is still in progress and will be dependent on the transition method selected by the company and the leases in existence at the transition date.
The standard was endorsed by the EU on 31 October 2017.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents the amount receivable for goods supplied or services rendered, net of returns, discounts and rebates allowed by the company and value added taxes. Where the consideration receivable in cash or cash equivalents is deferred, and the arrangement constitutes a financing transaction, the fair value of the consideration is measured as the present value of all future receipts using the imputed rate of interest. The company recognises revenue when (i) the significant risks and rewards of ownership have been transferred to the buyer; (ii) the company retains no continuing involvement or control over the goods; (iii) the amount of revenue can be measured reliably; and (iv) it is probable that future economic benefits will flow to the company.
Revenue in respect of the services the company provide are recognised using the percentage of completion method applied to each stage of its agreements with customers.
Grant income
Revenue grants received by the company are recognised in a manner consistent with the grant conditions. Once conditions have been met, revenue is recognised in the Statement of Comprehensive Income and shown as Other Operating Income.
Research and development
Research expenditure is written off as incurred. Development expenditure is recognised in the Statement of Comprehensive Income as an expense until it can be demonstrated that the following conditions for capitalisation apply:
-- It is technically feasible to complete the scientific product so that it will be available for use;
-- Management intends to complete the product and use or sell it; -- There is an ability to use or sell the product; -- It can be demonstrated how the product will generate probable future economic benefits;
-- Adequate technical, financial and other resources to complete the development and to use or sell the product are available; and
-- The expenditure attributable to the product during its development can be reliably measured.
Property, plant and equipment
Property, plant and equipment are initially recognised at historical cost, net of depreciation and any impairment losses.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is de-recognised. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.
Subsequently, property plant and equipment are measured at cost or valuation net of depreciation and any impairment losses.
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Software acquired with hardware is considered to be integral to that operations of that hardware and is capitalised with that equipment. Software acquired separately from hardware is recognised as an intangible asset and amortised over its estimated useful life.
Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost less estimated residual value of each asset on a straightline basis over its expected economic useful life as follows:
Leasehold improvements The lesser of the asset life
and the remaining length of the
lease
Plant and machinery 4 years
Fixtures, fittings & equipment 4 years
Impairment of non-financial assets
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.
All individual assets or cash-generating units are tested whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use. Value in use is based on estimated future cash flows from each cash-generating unit or individual asset, discounted at a suitable rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures is directly linked to the company's latest approved budgets, adjusted as necessary to exclude any restructuring to which the company is not yet committed. Discount rates are determined individually for each cash-generating unit or individual asset and reflect their respective risk profiles as assessed by the directors.
Impairment losses for cash-generating units are charged pro rata to the assets in the cash-generating unit. Cash generating units and individual assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Impairment charges are included in administrative expenses in the Statement of Comprehensive Income. An impairment charge that has been recognised is reversed if the cash-generating unit's or individual asset's recoverable amount exceeds its carrying amount.
Current tax and deferred tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised directly in equity.
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the UK, where the company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation, It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences arising between the carrying amounts of assets and liabilities and their tax bases. Deferred tax is determined using tax rates (and laws) that have been enacted, or substantively enacted, by the reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities.
Share based employee compensation
The company operates equity-settled share-based compensation plans for remuneration of its Directors and employees.
All employee services received in exchange for the grant of any share-based compensation are measured at their fair values. The fair value is appraised at the grant date and excludes the impact of any non-market vesting conditions (e.g. profitability and remaining an employee of the company over a specified time period).
Share based compensation is recognised as an expense in the Statement of Comprehensive Income with a corresponding credit to equity. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Other vesting conditions include the restriction for certain options to vest only on a takeover or listing of the company on a recognised stack market.
Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates.
The proceeds received net of any directly attributable transaction costs are credited to share capital and share premium when the options are exercised.
Financial assets
The company classifies its financial assets as loans and receivables. The classification depends on the purpose for which the asset was acquired. Management determines the classification of its financial assets at initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The company's loans and receivables comprise 'trade and other receivables' and 'cash and cash equivalents' in the Statement of Financial Position.
Financial assets are initially recognised at fair value. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the company has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently measured at amortised cost using the effective interest method.
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
The company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
For loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cashflows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the statement of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the company may measure impairment on the basis of an instrument's fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the statement of comprehensive income.
Trade receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
Cash and cash equivalents
In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less and bank overdrafts. In the statement of financial position, overdrafts are shown within borrowings in current liabilities.
Inventories
Inventories comprise consumables.
Consumables inventory is stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Cost represents the amounts payable on the acquisition of materials. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in selling and distribution.
Financial liabilities
All of the company's financial liabilities are classified as financial liabilities carried at amortised cost. The company does not use derivative financial instruments or hedge accounts for any transactions. Financial liabilities comprise Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.
Provisions
A provision is recognised in the Statement of Financial Position when the company has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability. The increase in the provision due to the passage of time is recognised as a finance cost.
Provisions for dilapidation charges that will crystallise at the end of the period of occupancy are provided for in full.
Employee benefits - Defined contribution plan
The company operates a defined contribution pension scheme which is open to all employees and directors. The assets of the schemes are held by investment managers separately from those of the company. The contributions payable to these schemes are recorded in the Statement of Comprehensive Income in the accounting period to which they relate.
Foreign currency translation
The company's functional currency is the pound sterling. Transactions in foreign currencies are translated at the exchange rate ruling at the date of transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the reporting date. Exchange differences arising on the settlement or on translating monetary items at rates different from those at which they were initially recorded are recognised in administrative expenses in the Statement of Comprehensive Income in the period in which they arise.
Equity
Equity comprises the following;
Called up share capital
Share capital represents the nominal value of equity shares.
Share premium
Share premium represents the excess over nominal value of the fair value of consideration received of equity shares, net of expenses of the share issue.
Retained earnings/(accumulated losses)
Retained earnings/(accumulated losses) represents retained profits and losses.
Leases
Leases in which a significant portion of the risks and rewards of ownership remain with the lessor are classified as operating leases and are charged to the Statement of Comprehensive Income on a straight-line basis over the period of the lease.
3 Critical accounting estimates and judgements
Many of the amounts included in the financial statements invoice the use of judgement and/or estimates. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances, having regard to prior experience, but actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policy and/or the notes to the financial statements and the key areas are summarised below:
Critical judgements in applying accounting policies
The directors do not consider there are any critical judgements in applying accounting policies.
Critical accounting estimates and assumptions
-- Deferred Taxation. The company has significant tax losses which are able to be carried forward to be offset against future profits of the company. A deferred tax asset has been calculated based on estimates of future profits against which these losses can be utilised. Deferred tax represents a significant asset of the company and therefore movements being charged through the Statement of Comprehensive Income also have the potential to affect reported profit or loss. Profits may be offset at future taxation rates of either 19% or 17%. Should GBP100,000 of taxable profits be forecast to be realised at the lower rate rather than the higher then the deferred taxation asset would reduce by GBP2,000.
-- Costs associated with the IPO. During the year the company incurred significant costs in association with issuing new shares and listing on AIM. As these two transactions occurred at the same time costs from the company's advisers contained elements relating to both the issue of shares and the listing of the shares. Where a clear division was apparent costs were allocated on that basis and, for all other costs an apportionment was made based on the directors' estimation of the proportion of work associated with each transaction. Costs in relation to the issue of new shares has been deducted from share premium and the remainder has been charged to the income statement.
-- Share Based Payments. The company operates an employee share option scheme and has recognised an annual cost in the Income Statement. The calculation of the costs is based on a number of estimates and assumptions, of which one has a significant impact on the amounts recorded in the financial statements:
o Fair value of the shares at date of grant. As a private company an open market share price was not available when options were awarded so the company has historically applied the Black-Scholes method based on the most recent price at which capital was raised. A 5% fluctuation in the fair value of shares at grant date would have resulted in the cumulative charge to the income statement being approximately GBP45,000 higher or lower (2017: GBP36,000).
4 Revenue
All of the activities of the company fall within one business segment, that of research, development and manufacture of recombinant proteins and antibodies.
Geographic analysis 2018 2017
GBP GBP
---------------------- ---------- ----------
UK (domicile) 278,414 309,150
Rest of Europe 934,877 846,628
North America 817,933 746,405
Rest of World 659,520 11,773
2,690,744 1,913,956
---------------------- ---------- ----------
In the year sales to one customer exceeded 10% of revenues, that customer accounted for GBP308,049 or 11.45% of revenues. In 2017 one customer exceeded 10% of revenues, that customer accounted for GBP198,334 or 10.37% of revenues
5 Operating (loss)/profit is stated after charging/(crediting)
2018 2017
GBP GBP
------------------------------------------------------------- ---------- ----------
Employee benefit costs
-wages and salaries 887,383 643,081
-social security costs 96,072 61,975
-other pension costs 33,915 34,733
-share based payments 330,176 128,953
------------------------------------------------------------- ---------- ----------
1,347,546 868,742
------------------------------------------------------------- ---------- ----------
Depreciation of property, plant and
equipment 69,625 32,990
Other operating expenses
Operating lease rentals - land &
buildings 73,224 40,000
Rates, utilities and property maintenance 36,126 19,910
IT costs 17,236 7,387
Fees payable to the company's auditors
* for the audit of the financial statements 18,350 9,000
222,000 -
* for the provision of reporting accountants' services
in respect of the IPO
240,350 9,000
------------------------------------------------------------- ---------- ----------
Raw materials and consumables used 628,428 591,099
Increase in inventories (11,554) (70,261)
Patent costs 15,601 45,966
Marketing costs 132,347 75,202
Loss/(profit) on foreign exchange 36,892 (21,113)
Costs associated with IPO other than 387,836 -
reporting accountants' services
Other expenses 482,478 221,013
Total cost of sales and administrative
expenses 3,455,913 1,833,100
------------------------------------------------------------- ---------- ----------
6 Average staff numbers
2018 2017
---------------------------------- ----- -----
Employed in UK
(including executive directors) 24 15
Non-executive directors 6 6
---------------------------------- ----- -----
30 21
---------------------------------- ----- -----
7 Remuneration of directors and key senior management
Directors
2018 2017
GBP GBP
----------------------------------------- -------- --------
Emoluments 301,419 189,865
Pension contributions 11,455 21,322
Fees paid to third parties for services
of directors 50,525 38,500
Total 363,399 249,687
----------------------------------------- -------- --------
Highest paid director
The highest paid director received the following emoluments:
2018 2017
GBP GBP
----------------------- ------- -------
Emoluments 87,564 77,715
Pension contributions 4,375 2,640
Total 91,939 80,355
----------------------- ------- -------
Key senior management
Key senior management is considered to be the directors of the company with total remuneration for the year of GBP363,399 (2017: GBP249,687).
8 Finance income and costs
Income 2018 2017
GBP GBP
------------------------- ------ -----
Bank interest receivable 4,043 -
------------------------- ------ -----
Cost 2018 2017
GBP GBP
-------------------------------------- ------ -----
Interest expense on other borrowings 4,857 615
Bank interest payable 5 -
-------------------------------------- ------ -----
4,862 615
-------------------------------------- ------ -----
9 Share based payments
During the year all remaining grants under the historic 2005 schemes "historic options" either lapsed or were exercised prior to the IPO. In addition, at the reporting date the company had two share based reward schemes under which options were granted during the year and are now closed to future grants and a third scheme in place for future use under which no grants had been made at the reporting date:
-- A United Kingdom tax authority approved scheme for executive directors and senior staff;
-- An unapproved scheme for awards to those, such as non-executive directors, not qualifying for the unapproved scheme; and
-- A United Kingdom tax authority approved scheme for executive directors and senior staff which incorporates unapproved options for grants to be made following listing of the company shares, "2017 EMI and Unapproved Employee Share Option Scheme".
Options awarded during the year under both the approved and unapproved schemes have no performance conditions other than the continued employment within the company. Options vest one to two years from the date of grant, which may accelerate for a change of control. Options lapse if not exercised within ten years of grant, or if the individual leaves the company prior to the vesting date, except under certain circumstances such as leaving by reason of redundancy.
At the reporting date no grants had been made under the 2017 EMI and Unapproved Employee Share Option Scheme.
The total share-based remuneration recognised in the Statement of Comprehensive Income was GBP330,176 (2017: GBP128,953). The most recent options granted in the year were valued using the Black-Scholes method. With no open market valuation, the share price on grant used a share price based on a multiple of FY 2017 revenues consistent with that used to set the share price at listing, expected volatility of 13.4% and a compound risk free rate assumed of 1.53%.
2018 2018 2017 2017
Weighted Number Weighted Number
average average
exercise exercise
price price
GBP GBP
Outstanding at beginning of
the year 1.60 74,300 1.59 75,300
------------------------------- ---------- ------------ ---------- ---------
Subdivision of each GBP1 into
GBP0.04 shares 0.06 1,857,500
------------------------------- ---------- ------------ ---------- ---------
Granted during the year 0.04 508,750 - -
Exercised during the year 0.06 (1,692,500) - -
Lapsed during the year 0.08 (168,750) 1.00 (1,000)
------------------------------- ---------- ------------ ---------- ---------
Outstanding at the end of the
year 0.04 505,000 1.60 74,300
------------------------------- ---------- ------------ ---------- ---------
The options outstanding at the end of each year were as follows:
Expiry Nominal Exercise 2018 2017
share price Number Number
value GBP
---------------- --------- --------- -------- --------
April 2017 GBP1.00 1.00 - 5,000
February 2018 GBP1.00 6.00 - 2,300
February 2018 GBP1.00 1.00 - 4,000
September 2018 GBP1.00 1.00 - 2,000
October 2019 GBP1.00 4.00 - 3,400
October 2019 GBP1.00 1.00 - 12,250
May 2021 GBP1.00 2.20 - 19,250
November 2024 GBP1.00 1.00 - 26,100
May 2027 GBP0.04 0.04 505,000 -
---------------- --------- --------- -------- --------
Total 505,000 74,300
--------------------------- --------- -------- --------
Of the total number outstanding none (2017: none) had vested at the year end.
10 Income tax (credit)/expense
2018 2017
GBP GBP
---------------------------------- --------- --------
Current tax - UK corporation tax (4,828) (2,078)
Deferred tax - origination
and reversal of temporary
differences (6,593) 8,039
Income tax (credit)/expense (11,421) 5,961
---------------------------------- --------- --------
The difference between (loss)/profit before tax multiplied by the base rate of 19% (2017: 20%) and the income tax credit/(expense) is explained in the reconciliation below:
2018 2017
GBP GBP
Factors affecting the tax charge for the
year
(Loss)/profit before tax (711,362) 125,915
------------------------------------------- ----------- ---------
(Loss)/profit before tax multiplied by
standard rate of UK corporation tax of
19% (2017: 20%) (135,159) 25,183
------------------------------------------- ----------- ---------
Provisions and expenditure not deductible
for tax purposes - permanent 119,665 (323)
Provisions and expenditure not deductible (210,784) -
for tax purposes - temporary
Reduction in deferred tax asset due to
change in enacted rate - 22,228
RDEC/R&D tax credit (4,828) (2,078)
Adjustment in recognition of deferred
tax 219,685 (39,049)
------------------------------------------- ----------- ---------
Income tax (credit)/expense (11,421) 5,961
------------------------------------------- ----------- ---------
11 Earnings per share
2018 2017
GBP GBP
-------------------------------------- ---------- --------
(Loss)/profit for the financial year (699,941) 119,954
(Loss)/earnings per share pence pence
Basic (4.3) 0.9
Diluted (4.2) 0.8
-------------------------------------- ---------- --------
Number Number
------------------------------------------- ------------ ------------
Issued ordinary shares at the end of
the year 22,091,192 13,691,375
Weighted average number of shares in
issue during the year 16,117,206 13,691,375
Dilutive effect of share options 399,732 1,178,350
------------------------------------------- ------------ ------------
Diluted weighted average number of shares
in issue during the year 16,516,938 14,869,725
------------------------------------------- ------------ ------------
Basic earnings per share is calculated by dividing the basic earnings for the year by the weighted average number of shares in issue during the year. During the year the company subdivided its ordinary shares of GBP1 into 25 ordinary shares of GBP0.04. The number of shares for 2017 has been restated by a factor of 25 for ease of comparison of earnings per new share.
Diluted earnings per share is calculated on the same basis as the basic earnings per share with a further adjustment to the weighted average number of fully paid ordinary shared to reflect the effect of partially dilutive ordinary share options.
12 Property, plant and equipment
Assets under Leasehold Plant & Fixtures, Total
construction improvements machinery fittings GBP
GBP GBP GBP & equipment
GBP
Cost
At 1 April
2017 - 156,059 483,770 60,723 700,552
Additions 205,129 - 229,220 74,757 509,106
Disposals - - (21,745) (27,793) (49,538)
At 31 March
2018 205,129 156,059 691,245 107,687 1,160,120
Accumulated
depreciation
At 1 April
2017 - 156,059 389,532 47,708 593,299
Depreciation
charged in
the year - - 63,064 6,561 69,625
Disposals - - (21,745) (27,793) (49,538)
At 31 March
2018 - 156,059 430,851 26,476 613,386
Net book value
At 31 March
2018 205,129 - 260,934 81,211 546,734
At 31 March
2017 - - 94,238 13,015 107,253
Leasehold Plant Fixtures, Total
improvements & fittings GBP
GBP machinery & equipment
GBP GBP
-------------------------- --------------- ------------ ------------- --------
Cost
At 1 April 2016 156,059 403,456 50,766 610,281
Additions - 80,314 9,957 90,271
-------------------------- --------------- ------------ ------------- --------
At 31 March 2017 156,059 483,770 60,723 700,552
-------------------------- --------------- ------------ ------------- --------
Accumulated depreciation
At 1 April 2016 148,123 368,048 44,138 560,309
Depreciation charged
in the year 7,936 21,484 3,570 32,990
-------------------------- --------------- ------------ ------------- --------
At 31 March 2017 156,059 389,532 47,708 593,299
-------------------------- --------------- ------------ ------------- --------
Net book value
At 31 March 2017 - 94,238 13,015 107,253
-------------------------- --------------- ------------ ------------- --------
At 31 March 2016 7,936 35,408 6,628 49,972
-------------------------- --------------- ------------ ------------- --------
Plant & machinery with a net book value of GBP100,303 is held under hire purchase agreements or finance leases (2017: none).
The depreciation expense is included in administrative expenses in the statement of comprehensive income in each for the financial years shown.
13 Investment in subsidiary
The company has the following investment in a subsidiary:
2018 2017
GBP GBP
---------------------------------------- ----- -----
Fusion Contract Services Limited 1 1
100% subsidiary
Dormant company
Marlborough House, 30 Victoria Street,
Belfast BT1 3GG
---------------------------------------- ----- -----
Group accounts are not prepared on the basis that the subsidiary company is dormant and not material to the financial statements.
14 Deferred tax
2018 2017
GBP GBP
------------------------------------- ---------- ----------
At 1 April 1,118,864 1,126,903
Credited/(charged) to the statement
of comprehensive in the year 6,593 (8,039)
Credited to equity in the year 30,590 -
At 31 March 1,156,047 1,118,864
------------------------------------- ---------- ----------
The movement in deferred tax assets and liabilities during the financial year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
Deferred tax Accelerated Tax losses Share RDEC Total
assets and liabilities tax depreciation GBP based tax GBP
GBP payments credit
GBP GBP
-------------------------- ------------------ ------------ ----------- -------- ----------
At 1 April 2016 16,086 1,034,639 76,178 - 1,126,903
(Charged)/credited
to Statement
of Comprehensive
Income (16,724) (50,392) 58,557 520 (8,039)
-------------------------- ------------------ ------------ ----------- -------- ----------
At 1 April 2017 (638) 984,247 134,735 520 1,118,864
(Charged)/credited
to Statement
of Comprehensive
Income (40,126) 155,058 (109,546) 1,207 6,593
Credited to equity - - 30,590 - 30,590
-------------------------- ------------------ ------------ ----------- -------- ----------
At 31 March 2018 (40,764) 1,139,305 55,779 1,727 1,156,047
-------------------------- ------------------ ------------ ----------- -------- ----------
Deferred tax assets are recognised for the carry forward of corporation tax losses to the extent that the realisation of a future benefit is probable. The deferred tax asset arising from future utilisation of taxable losses of GBP6,596,169 (2017: GBP5,414,228) is dependent on future taxable profits arising in the UK. The directors are of the opinion that it is more likely than not that there will be sufficient future taxable profits against which the tax losses can be deducted and accordingly, a deferred tax asset has been recognised.
Deferred tax assets are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted, or substantively enacted, at the reporting date. The change of rate from 19% to 17%, effective from 1 April 2020, was substantively enacted as part of the Finance Act 2016.
Deferred tax liabilities and assets expected to reverse after more than 12 months: GBP1,136,487 (2017: GBP913,843).
15 Inventories
2018 2017
GBP GBP
------------------------------- ------- -------
Raw materials and consumables 81,815 68,661
Materials for sale - 1,600
81,815 70,261
------------------------------- ------- -------
The cost of inventories recognised as an expense for the year was GBP628,428 (2017: GBP591,099).
16 Trade and other receivables
2018 2017
GBP GBP
----------------------------------- -------- ---------
Trade receivables 513,870 527,092
Provision for impairment of trade
receivables (2,994) (17,045)
----------------------------------- -------- ---------
Trade receivables - net 510,876 510,047
Other receivables 133,357 49,712
Prepayments and accrued income 281,987 12,239
----------------------------------- -------- ---------
926,220 571,998
----------------------------------- -------- ---------
The fair value of receivables approximates to their carrying value.
At the reporting date, trade receivables of GBP2,994 (2017: GBP27,045) were impaired. The individually impaired receivables related to customers which were in unexpectedly difficult circumstances. It is assessed that GBPnil (2017: GBP10,000) is expected to be recovered. The ageing of these receivables is as follows:
2018 2017
GBP GBP
--------------------- ------ -------
6 to 12 months 2,994 -
More than 12 months - 27,045
--------------------- ------ -------
2,994 27,045
--------------------- ------ -------
The carrying amount of trade and other receivables are denominated in the following currencies:
2018 2017
GBP GBP
-------------- -------- --------
UK pound 501,574 343,804
Euros 72,489 51,278
US dollar 42,119 164,677
Japanese Yen 28,051 -
-------------- -------- --------
644,233 559,759
-------------- -------- --------
The aging of unimpaired trade receivables which were past due at the reporting date was as follows:
2018 2017
GBP GBP
------------------------ -------- -------
Not more than 3 months 196,915 21,030
3 to 6 months 33,039 148
6 to 9 months 3,927 -
------------------------ -------- -------
233,881 21,178
------------------------ -------- -------
Movements on the provision for impairment of trade receivables are as follows:
2018 2017
GBP GBP
---------------------------- --------- ---------
At 1 April 17,045 44,243
Provision 2,994 17,045
Write off as uncollectible (17,045) (44,243)
---------------------------- --------- ---------
At 31 March 2,994 17,045
---------------------------- --------- ---------
The creation and release of provision for impaired receivables has been included in administrative expenses in the Statement of Comprehensive Income.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. The company does not hold any collateral as security.
17 Trade and other payables
2018 2017
GBP GBP
--------------------------------- -------- --------
Trade payables 281,284 245,633
Social security and other taxes 28,493 34,951
Other payables 15,654 16,683
Accruals and deferred income 210,868 132,950
536,299 430,217
--------------------------------- -------- --------
The fair value of payables approximates to their carrying value.
Invest Northern Ireland hold a mortgage dated 9 December 2009 for securing all monies due or to become due from the company on any account. At the reporting date a balance of GBP6,879 (2017: GBP24,235) was due to Invest Northern Ireland.
18 Borrowings
Hire purchase contracts 2018 2017
GBP GBP
-------------------------------- --------- -----
At 1 April - -
Additions in year 102,469 -
Interest 4,097 -
Repayments (29,279) -
-------------------------------- --------- -----
At 31 March 77,287 -
-------------------------------- --------- -----
Amounts due in less than 1 year 33,758 -
Amounts due after more than 1 43,529 -
year
-------------------------------- --------- -----
77,287 -
-------------------------------- --------- -----
All borrowings are denominated in UK pounds. Using a discount rate of 5.5% per annum the fair value of borrowings at the reporting date is GBP72,502.
Borrowings are secured by a fixed and floating charge over the whole undertaking of the company, its property, assets and rights in favour of Northern Bank Ltd trading as Danske Bank.
19 Provisions for liabilities
2018 2017
GBP GBP
---------------------------- ------- -------
Due after more than 1 year 20,000 20,000
---------------------------- ------- -------
Leasehold dilapidations relate to the estimated cost of returning a leasehold property to its original state at the end of the lease in accordance with the lease terms. The company's premises are held under a lease expiring 31 July 2022. The costs of dilapidations would be incurred on vacating the premises.
20 Financial instruments
The company is exposed to risks that arise from its use of financial instruments. This note describes the company's objectives, policies and processes for managing those risks and methods used to measure them. There have been no substantive changes in the company's exposure to financial instrument risks and the methods used to measure them from previous periods unless otherwise stated in this note.
The principal financial instruments used by the company, from which the financial instrument risk arises, are trade receivables, cash and cash equivalents and trade and other payables. The fair values of all the company's financial instruments are the same as their carrying values.
Financial instruments by category
Financial instruments categories are as follows:
As at 31 March Loans and Assets Derivatives Available Total
2018 receivables at fair used for sale GBP
GBP value through for hedging GBP
profit GBP
or loss
GBP
Trade receivables 510,876 - - - 510,876
Other receivables 133,357 - - - 133,357
Cash and cash
equivalents 4,490,931 - - - 4,490,931
Total 5,135,164 - - - 5,135,164
As at 31 March Loans and Assets Derivatives Available Total
2017 receivables at fair used for for sale GBP
GBP value through hedging GBP
profit GBP
or loss
GBP
------------------- -------------- --------------- ------------- ----------- ---------
Trade receivables 510,047 - - - 510,047
Other receivables 49,712 - - - 49,712
Cash and cash
equivalents 285,685 - - - 285,685
------------------- -------------- --------------- ------------- ----------- ---------
Total 845,444 - - - 845,444
------------------- -------------- --------------- ------------- ----------- ---------
As at 31 March 2018 Liabilities Derivatives Other Total
at fair used for financial GBP
value through hedging liabilities
profit or GBP at amortised
loss cost
GBP GBP
---------------------- ----------------- -------------- -------------- --------
Trade payables - - 281,284 281,284
Other payables - - 15,654 15,654
Accruals - - 200,197 200,197
Secured borrowings - - 77,287 77,287
---------------------- ----------------- -------------- -------------- --------
Total - - 574,422 574,422
---------------------- ----------------- -------------- -------------- --------
As at 31 March 2017 Liabilities Derivatives Other Total
at fair used for financial GBP
value through hedging liabilities
profit or GBP at amortised
loss cost
GBP GBP
----------------------- ----------------- -------------- -------------- --------
Trade payables - - 245,633 245,633
Other payables - - 16,683 16,683
Accruals and deferred
income - - 132,950 132,950
----------------------- ----------------- -------------- -------------- --------
Total - - 395,266 395,266
----------------------- ----------------- -------------- -------------- --------
Capital management
The company's objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the company may issue new shares or sell assets to provide working capital.
Consistent with others in the industry at this stage of development, the company has relied on issuing new shares and cash generated from operations.
General objectives, policies and processes - risk management
The company is exposed through its operations to the following financial instrument risks: credit risk; liquidity risk and foreign currency risk. The policy for managing these risks is set by the Board following recommendations from the Chief Financial Officer. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the company's competitiveness and flexibility. The policy for each of the above risks is described in more detail below.
Credit risk
Credit risk arises from the company's trade and other receivables, and from cash at bank. It is the risk that the counterparty fails to discharge their obligation in respect of the instrument.
The company is mainly exposed to credit risk from credit sales. It is company policy to assess the credit risk of new customers before entering contracts. Also, for certain new customers the company will seek payment at each stage of a project to reduce the amount of the receivable the company has outstanding for that customer.
At the year end the company's bank balances were all held with Northern Bank Ltd trading as Danske Bank (Moody's rating P-1).
Liquidity risk
Liquidity risk arises from the company's management of working capital, and is the risk that the company will encounter difficulty in meeting its financial obligations as they fall due.
At each board meeting, and at the reporting date, the cash flow projections are considered by the Board to confirm that the company has sufficient funds and available funding facilities to meet its obligations as they fall due.
Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
The company seeks to transact the majority of its business in its reporting currency (GBPSterling). However, many customers and suppliers are outside the UK and a proportion of these transact with the company in US Dollars, Euros and Japanese Yen. For that reason the company operates current bank accounts in US Dollars and Euros as well as in its reporting currency. To the maximum extent possible receipts and payments in a particular currency are made through the bank account in that currency to reduce the amount of funds translated to or from the reporting currency. Cash flow projections are used to plan for those occasion when funds will need to be translated into different currencies so that exchange rate risk is minimised.
If the exchange rate between Sterling and the Dollar, Euro or Japanese Yen had been 10% higher/lower at the reporting date the effect on profit and equity would have been approximately GBP7,393 (2017: GBP7,300) higher/lower, GBP23,017 (2017: GBP 17,400) higher/lower and GBP2,550 (2017: GBPnil) higher/lower respectively.
21 Called up share capital
2018 2017
GBP GBP
--------------------------------------------------- -------- ---------
Allotted, called up and fully paid
* 547,655 Ordinary shares of GBP1 - 547,655
883,648 -
* 22,091,192 Ordinary shares of GBP0.04
--------------------------------------------------- -------- ---------
883,648 547,655
--------------------------------------------------- -------- ---------
During the year the company subdivided each ordinary share of GBP1 into 25 ordinary shares of GBP0.04 and issued and allotted 8,399,817 shares for GBP5,606,352.
Number of Nominal
shares in value
issue GBP
----------------------------------- ----------- --------
At 1 April 2017 547,655 547,655
----------------------------------- ----------- --------
Subdivision of ordinary shares 13,691,375 547,655
GBP0.04 ordinary shares issued in
the year 8,399,817 335,993
----------------------------------- ----------- --------
At 31 March 2018 22,091,192 883,648
----------------------------------- ----------- --------
22 Capital commitments
At 31 March 2018 the company had contracted for but not incurred capital expenditure of GBP232,653 (2017: GBPnil).
23 Operating lease commitments
2018 2017
GBP GBP
------------------------------------- -------- -------
Minimum operating lease payments
falling due
Within 1 year - land and property 75,000 40,000
In 1 to 2 years - land and property 75,000 -
In 2 to 5 years - land and property 175,000 -
------------------------------------- -------- -------
24 Retirement benefits obligations
The company operates a defined contribution scheme, the assets of which are managed separately from the company. During the year the company charged GBP33,915 to the Statement of Comprehensive Income (2017: GBP34,733) in respect of Company contributions to the scheme. At the reporting date there was GBP5,779 (2017: GBP4,481) payable to the scheme and included in other payables.
25 Transactions with related parties
The company had the following transactions with related parties during the year:
Invest Northern Ireland ("Invest NI") is a shareholder in the company. The company received invoices for rent and estate services amounting to GBP78,957 (2017: GBP49,295). A balance of GBP6,879 (2017: GBP24,235) was due and payable to Invest NI at the reporting date. The company claimed various grants during the year from Invest NI amounting to GBP47,591 (2017: GBP45,674). A balance of GBP2,660 was due on submitted claims from Invest NI (2017: GBPnil).
Director Colin Walsh is also a director of Crescent Capital. During the year Crescent Capital charged the company GBP10,800 (2017: GBP10,000) for his services as a director and other consultancy and at the reporting date an amount of GBP2,000 (2017: GBP5,000) was payable to Crescent Capital.
Director Alan Mawson is also a director of Clarendon Fund Managers. During the year Clarendon Fund Managers charged the company GBP33,607 (2017: GBP33,641) for his services as a director and at the reporting date an amount of GBPnil (2016: GBP27,000) was payable to Clarendon Fund Managers.
26 Events after the reporting date
There have been no events from the reporting date to the date of approval which need to be reported.
27 Ultimate controlling party
There is no ultimate controlling party.
28 Adjusted results
2018 2017
GBP GBP
---------------------------------------- ---------- --------
(Loss)/profit before tax (711,362) 125,915
Accelerated share based payment charge
(note a) 163,100 128,953
IPO costs (note b) 609,836 -
---------------------------------------- ---------- --------
61,574 254,868
---------------------------------------- ---------- --------
(a) In advance of the IPO, share options granted before 31 March 2017 (historic options) were accelerated so they vested and were exercised before the company listed on AIM. As a result the expense charged to the Statement of Comprehensive Income for the two years ended 31 March 2018 was significantly increased over the annual charge to profits that would be expected. In order to understand the underlying performance of the business, these exceptional charges have been adjusted to arrive at the adjusted results. The total expense for share based payments for the year was GBP330,176 (2017: GBP128,853) which includes the charge for options granted in the year (2017: GBPnil) in addition to the GBP163,100 above.
(b) In the year an expense of GBP609,836 was charged to the Statement of Comprehensive Income for professional fees in relation to listing on AIM, a market operated by the London Stock Exchange. These charges are non-recurrent and do not include ongoing adviser fees in respect of the AIM listing.
Reconciliation of adjusted profit to adjusted EBITDA
2018 2017
GBP GBP
---------------------------------------- -------- --------
Profit before tax before non-recurring
items 61,574 254,868
Finance income (4.043) -
Finance expense 4,862 615
Depreciation 69,625 32,990
---------------------------------------- -------- --------
Adjusted EBITDA 132,018 288,473
---------------------------------------- -------- --------
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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August 16, 2018 02:00 ET (06:00 GMT)
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