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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Genedrive Plc | LSE:GDR | London | Ordinary Share | GB00B1VKB244 | ORD 1.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 5.875 | 5.75 | 6.00 | 5.875 | 5.75 | 5.875 | 602,490 | 15:20:02 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Coml Physical, Biologcl Resh | 55k | -5.15M | -0.0447 | -1.31 | 6.76M |
From Apr 2019 to Apr 2024
TIDMGDR
RNS Number : 5878O
Genedrive PLC
03 October 2019
genedrive plc
("genedrive" or the "Company")
Audited Final Results
genedrive plc (AIM: GDR), the near patient molecular diagnostics company, announces its audited Final Results for the year ended 30 June 2019.
Financial Highlights
-- Revenue up 21.6% to GBP2.36m (2018: GBP1.94m)
-- Successful fund-raise of GBP6.0m (gross), a combination of GBP3.5m equity and GBP2.5m convertible loan
-- Cash at 30 June 2019 of GBP5.2m (2018: GBP3.5m) -- Unaudited cash at 26 September 2019 GBP3.9m
Operational Highlights
-- Genedrive(R) Hepatitis C (HCV) assay registered in 12 countries -- World Health Organization process under way to Pre-Qualify the Genedrive(R) Hepatitis C test
-- GBP0.9m of orders fulfilled for the US Department of Defense (DoD) with further orders on hand for delivery in 2019/20
-- Antibiotic Induced Hearing Loss (AIHL) test time reduced to under 30 minutes and hospital training for trials commenced post year end
David Budd, Chief Executive Officer of Genedrive plc, said: "With two assays now on market and two assays in development, we continue to make good progress on delivering our strategy. On behalf of the Board, I would like to thank our shareholders for their continued support during the year and we look forward to an exciting future."
For further details please contact:
Hot Features
Premium
genedrive plc www.genedriveplc.com
David Budd: CEO / Matthew Fowler: CFO +44 (0)161 989 0245
Peel Hunt LLP +44 (0)20 7418 8900
James Steel / Oliver Jackson
Stanford Capital Partners Limited +44 (0)20 3815 8880
Patrick Claridge / John Howes
Walbrook PR Ltd (Media Relations +44 (0)20 7933 8780 or genedrive@walbrookpr.com
& Investor Relations)
+44 (0)7980 541 893 / +44 (0)7876
Paul McManus / Anna Dunphy 741 001
Notes to Editors
About genedrive plc
genedrive plc is a molecular diagnostics company developing and commercialising a low cost, rapid, versatile, simple to use and robust point of need molecular diagnostics platform for the diagnosis of infectious diseases and for use in patient stratification (genotyping), pathogen detection and other indications. The Genedrive(R) HCV-ID kit has received CE-IVD Certification and has been launched in Africa and Asia Pacific. genedrive has distribution agreements with subsidiaries of Sysmex Corporation for the distribution of the Genedrive(R) platform in the EMEA and SE Asia (ex-India), and with ARKRAY Healthcare pvt Ltd for the distribution of the Genedrive(R) HCV-ID Kit and Genedrive(R) platform in India. The Company has assays on market for the detection of certain biological targets and has tests in development for tuberculosis (mTB) and Antibiotic Induced Hearing Loss (AIHL).
Further details can be found at: www.genedriveplc.com and www.genedrive.com.
CHAIRMAN'S STATEMENT
We are executing our strategy to drive material revenues by June 2022
The Company remains focused and increasingly positioned to exploit opportunities in low- and middle-income countries with our Global Health assays (HCV and mTB) and in developed markets with our military and hearing assays (DoD and AIHL). We remain committed to the opportunities achievable by a focused molecular testing company. Core to the execution of our plan was the fund-raising of GBP6.0m (gross) in December 2018, which supports our aims and has strengthened our cash position.
Delivering Our Strategy
I am pleased that we are executing on our strategy to deliver material revenues from multiple assays by the end of our financial year ending 2022. During the year we saw revenue growth from our on-market assays (HCV and DoD) and good progress with our new product development programmes.
Despite the positive progress overall, commercialisation of our HCV assay has lagged behind our previous expectations principally owing to a slower than anticipated rate of country registrations and the overall level of funding for HCV drugs and diagnostics. Funding remains in its infancy in many countries, requiring increased focus on those countries where we believe the opportunity looks likely to grow. We now expect the revenue ramp for the assay to occur in the year to June 2020, behind our original plans.
Our commercial relationship with the DoD exceeded our expectations in the year and underpinned much of our financial performance. We fulfilled large orders for both assays and units during the year totalling GBP0.9m. Discussions with the customer have progressed and we are confident of further orders. Owing to the nature of the work we still lack absolute clarity on the potential, but the continued engagement and order flow provides us with confidence on the future business and the performance of Genedrive(R) as an effective molecular diagnostic technology.
Governance and People
The Board recognises that a strong governance framework, internal controls, values and culture firmly embedded across the organisation are vitally important and, as such, the Board remains focused on ensuring its own effectiveness and that of the governance processes throughout the Group. We believe we have a Board that reflects our strategy and ambition and will continue to review its effectiveness.
Outlook
Overall our on-market assays are beginning to build commercial traction. Multiple orders for DoD products were fulfilled in the year and we already have new orders for 2019/20. HCV commercialisation has been slower than anticipated, but we hope to overcome delays encountered in the next 12 months and remain optimistic of WHO pre-qualification by the end of the calendar year.
Looking further ahead, we have exciting opportunities with AIHL and mTB. The AIHL assay could be transformative to the lives of many children as well as placing genedrive at the front line of NHS urgent care for neonates. In addition to the UK market, the test has applicability across Europe and North America and represents significant potential for the Company should we be able to access these markets. The mTB assay would also give the Company access to the large and well-funded tuberculosis testing market.
I remain confident of genedrive's ability to deliver growth from its on-market assays and genuinely excited by the potential of our in-development assays.
Finally I would like to take this opportunity to thank our staff, customers and shareholders for their valuable support during the year.
Dr Ian Gilham
Chairman
3 October 2019
CHIEF EXECUTIVE'S STATEMENT
Overview
The opportunities for genedrive plc are significant. We are working and developing products for important global healthcare and environmental pathogen concerns, based in the dynamic and scientifically rich city of Manchester. Over the past few years we have recruited and cultivated a talented team of experienced, clever, and knowledgeable IVD professionals that share my vision of building a business that contributes to global efforts in the eradication of disease and providing more immediate patient care. Each week we make strides forward in our development, positioning in the market, and commercial capability of the Company and its products.
During the year we continued to execute on our strategy to bring material assay revenues to genedrive by the financial year ending June 2022. The fund raising in December 2018 (GBP6.0m gross) improved our cash position and strengthened our balance sheet. We now have two products on market: HCV and our military portfolio for the US DoD; and two exciting products in development: AIHL and mTB. Continued successful execution of this strategy will leave the Company well placed to generate returns for our shareholders.
Our Performance with On Market Assays
HCV
The Genedrive(R) HCV ID Kit is the first low cost, qualitative HCV molecular decentralised testing product on the market. Molecular testing for HCV represents a potentially large market for Genedrive(R) that should be efficiently serviced via our partnerships, which include Sysmex for EMEA and Asia, Arkray for India and others for rest of world regions.
The process to Pre-qualify (PQ) the HCV product with WHO is currently on-going. The process of registrations and approvals is often not in our direct control, and we use our experience and judgement to predict timelines. The WHO PQ site Quality Audit was completed in January with no significant findings. However, the clinical study is taking much longer than originally expected owing to a shortage of certain low viral level samples for analysis, and then subsequently the need to repeat some small sets of data collection So while the process continues past our originally expected timelines, we remain optimistic that we can achieve WHO pre-qualification by the end of the calendar year.
Similarly, in country registrations are taking longer than anticipated. As the first entry of Genedrive(R) into these markets, most countries require a performance study after the registration process, the duration of which can be unpredictable. At June 2019 Genedrive was registered in 12 countries, below our initial target. We are targeting additional registrations during 2019/20 and significantly we expect the product will be approved for distribution in India by January. India is the largest single market for our product and we are confident of attracting demand during 2019/20.
Pathogen detection tests for US DoD
The initial development phase of the DoD agreement ended in the prior year and transitioned into a standard commercial arrangement. We were very pleased to see the strong uptick in the commercial volume received during 2019. We fulfilled multiple large orders and booked GBP0.9m of revenue.
Quality issues with a component supplier meant another large DoD order was delayed into the 2019/20 fiscal year. The supply issue was ultimately resolved and we will soon complete establishment of dual sourcing for this key component. The DoD have placed orders for 2019/20, remained fully positive and engaged during this supply issue and supported the move to a second supplier.
The DoD work has been a real success for genedrive, supporting the development of Genedrive(R) capabilities, providing funding to the Group, delivering a complex product to the customer specification, and providing ongoing revenue. Their continued engagement and support makes us very optimistic about the future potential of the business and we remain confident it will be a recurring part of our future revenues.
In-Development Assays
AIHL
The Group was part of an award from UK NHS National Health Research in June 2018 for the development and implementation of a point of care test for the prevention of hearing loss in newborn children. This opportunity is well suited to genedrive's design, needing multiple, low cost units to deliver fast testing at a point of need.
The full value of the award was just over GBP1m with GBP0.6m allocated to genedrive. The programme is approximately halfway through, now entering clinical validation. Since commencing the grant work we have reduced the test time to under 30 minutes, which easily exceeds the clinical turn-around time requirement. Hospital trials for the clinical validation are scheduled to commence in November, and should take circa six months. These trials will assess the application of the assay in an urgent care setting, and are focused around the practical implications of testing neonates in a variety of intensive care environments. Product launch is planned for Autumn 2020 and it is expected that commercial traction from early adopters will follow swiftly on from clinical approvals, with further demand anticipated following write-up and inclusion in pediatric care guidelines; if successful there is every reason to be positive for widespread adoption across the NHS.
The market is attractive as being both large and at a higher margin compared to Global Health related tests. Outside of the UK the test will be equally applicable in Europe and North America, although we would likely need to partner for entrance into North America owing to the costs of regulatory hurdles.
mTB (Tuberculosis)
The market for mTB testing is one of the largest molecular testing markets in the world and in terms of market dynamics it is well defined. It is an important market for the Group and a vital component of our strategy.
We were awarded a GBP1.1m development grant from Innovate UK in January 2018 to develop an automated sample module for the Genedrive(R) system. The project commenced at the start of the financial year and much of the product development performed to date has been covered under the grant. During the year we have also reformulated the test and designed the Innovate funded companion product to the Genedrive(R) that automates the extraction and concentration of mTB from a patient sample. As price is a significant driver in the developing world, we positioned costings at the core of design and have the potential to deliver at a market leading cost point at volume.
We remain on track to bring a product to market in the financial year ending June 2021 further supporting our assay strategy.
Outlook
We have two assays on market and two assays in development. While the year has seen slower commercial traction on HCV than we hoped, growth in DoD and the prospects for 2019/20 are positive and the Group is focused on generating material revenues across multiple assays during the financial year ending 2022. Our pipeline provides us with confidence that we will continue to make good progress.
David Budd
Chief Executive Officer
3 October 2019
FINANCIAL REVIEW
Overview
Revenue and other income for the year was GBP2.4m (2018: GBP1.9m). Research and development costs were GBP4.9m (2018: GBP5.2m) while administration costs were GBP1.9m, down slightly from the prior year (GBP2.0m). The operating loss for the year was GBP4.0m (2018: GBP7.4m) and is stated after the effects of exceptional items.
Financing costs were GBP0.5m (2018: GBP0.4m), broadly in line with the prior year. The finance cost of the convertible loans was GBP0.9m (2018: GBP0.5m), offsetting this finance cost were GBP0.6m (2018: GBPnil) of gains; which arose on the December 2018 amendment of the convertible loan and on share price movements in the year. In addition there was a GBP0.3m loss (2018: GBP0.1m gain) on the US dollar denominated convertible loan owing to the dollar exchange rate.
The tax credit for the year was GBP0.9m (2018: GBP0.8m) and the expected tax receivable on the balance sheet is GBP1.0m (2018: GBP1.0m).
The loss for the financial year after tax was GBP3.6m (2018: GBP6.0m).
Exceptional items
Two items have been separated out on the income statement to give a clear picture of underlying trading for the year.
As part of the fund-raise that closed in December 2018, the terms of deferred consideration payable to the former owners of Visible Genomics were amended. The fair value of the amended terms was GBP0.6m lower than the pre-amendment figure and this gain has been treated as exceptional on the face of the income statement.
On 8 June 2018 the Group disposed of the business and assets of its Services Divisions. The balance sheet at that time included deferred consideration of GBP0.5m. During June 2019 the acquirer made a payment under the terms of the deferred consideration clauses for its first six months of trading. The payment was under the forecasted amount and as such the deferred consideration on the balance sheet has been written down to its expected value. A charge of GBP0.2m has been recorded to reflect the lower than expected first six months payment.
The exceptional income in the period was GBP0.4m compared to an exceptional cost of GBP2.1m in the prior year which was an impairment to the carrying value of intangible assets.
Cash Resources
Net cash outflow from operations was GBP4.6m (2018: GBP3.8m). The Operating losses were GBP4.4m (2018: GBP4.3m) with working capital consuming GBP0.2m (2018: GBP0.6m contribution).
The tax credit received was GBP1.0m (2018: GBP1.2m) and relates to cash received under the Corporation Tax Research and Development tax relief scheme operated in the UK. The current year tax debt is GBP1.0m (2018: GBP1.0m).
The net proceeds from financing activities were GBP5.6m (2018: GBPnil). The proceeds from equity were GBP3.2m and GBP2.4m from the issue of the new convertible loan note. Cash paid to the former owner of Visible Genomics of GBP0.3m has been included in net financing as the payment was contingent on a successful fund-raise.
The increase in cash was GBP1.7m (2018: GBP1.6m decrease) meaning a closing cash position of GBP5.2m (2018: GBP3.5m).
Balance Sheet
Balance sheet net liabilities at 30 June 2019 totaled GBP2.5m (30 June 2018: GBP2.4m). The Company was in a net liability position throughout the year and so section 656 of the Companies Act 2006 was not a requirement.
Non-current assets closed at GBP0.3m (2018: GBP0.5m). The decline is owing to the write-down in the carrying value of deferred consideration receivable on the disposal of the Services business. The portion of consideration for Services that will be received at least 12 months from the balance sheet date has been fair valued, discounted and reported as non-current, GBP0.2m (2018: GBP0.3m).
Current assets of GBP6.9m (2018: GBP5.4m) included cash of GBP5.2m (2018: GBP3.5m) following the successful December 2018 fund-raise and tax receivable of GBP1.0m (2018: GBP1.0m) for the current year Corporation Tax Research and Development tax claim. The remaining working capital related items make up GBP0.8m (2018: GBP0.9m).
Current liabilities were GBP1.2m (2018: GBP2.7m) with the large reduction related to the amendment to the Visible genomic contingent consideration agreement that saw elements of the prior year liability move to equity GBP0.3m, an element paid GBP0.3m and the remainder credited to the income statement as an exceptional gain GBP0.6m.
Capital and reserves were bolstered by the December 2018 fund-raise, with a GBP3.2m equity injection in addition to the GBP0.3m of shares to be issued as part of the Visible genomics amendment.
Matthew Fowler
Chief Financial Officer
Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2019
Year ended Year ended
30 June 30 June
2019 2018
Note GBP'000 GBP'000
------------------------------------------------------------------- ---- ---------- ----------
Continuing operations
Revenue 2 2,362 1,938
------------------------------------------------------------------- ---- ---------- ----------
Research and development costs 3 (4,877) (5,180)
Administrative costs 3 (1,934) (2,022)
------------------------------------------------------------------- ---- ---------- ----------
Trading loss (4,449) (5,264)
Exceptional items 4 439 (2,111)
------------------------------------------------------------------- ---- ---------- ----------
Operating Loss 3 (4,010) (7,375)
------------------------------------------------------------------- ---- ---------- ---------- Net finance costs 7 (508) (413) ------------------------------------------------------------------- ---- ---------- ---------- Loss on ordinary activities before taxation (4,518) (7,788) Taxation on ordinary activities 8 882 758 ------------------------------------------------------------------- ---- ---------- ---------- Loss for the financial year from continuing operations (3,636) (7,030) ------------------------------------------------------------------- ---- ---------- ---------- Discontinued operations Profit for the year from discontinued operations 9 - 1,063 ------------------------------------------------------------------- ---- ---------- ---------- Loss/total comprehensive expense for the financial year (3,636) (5,967) ------------------------------------------------------------------- ---- ---------- ---------- Loss per share (pence) from continuing operations - Basic and diluted 11 (14.0) (37.6) ------------------------------------------------------------------- ---- ---------- ---------- Loss per share (pence) from continuing and discontinued operations - Basic and diluted 11 (14.0) (31.9) ------------------------------------------------------------------- ---- ---------- ----------
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2019
30 June 30 June
2019 2018
Note GBP'000 GBP'000
----------------------------------------- ---- -------- --------
Assets
Non-current assets
Plant and equipment 12 164 165
Contingent consideration receivable 13 153 340
----------------------------------------- ---- -------- --------
317 505
----------------------------------------- ---- -------- --------
Current assets
Inventories 14 123 171
Trade and other receivables 15 556 551
Contingent consideration receivable 13 106 172
Current tax asset 971 980
Cash and cash equivalents 16 5,184 3,529
----------------------------------------- ---- -------- --------
6,940 5,403
----------------------------------------- ---- -------- --------
Liabilities
Current liabilities
Deferred revenue 17 (88) -
Trade and other payables 18 (1,129) (1,470)
Deferred consideration payable in shares 19 - (1,250)
----------------------------------------- ---- -------- --------
(1,217) (2,720)
----------------------------------------- ---- -------- --------
Net current assets 5,723 2,683
----------------------------------------- ---- -------- --------
Total assets less current liabilities 6,040 3,188
----------------------------------------- ---- -------- --------
Convertible bond (8,518) (5,625)
----------------------------------------- ---- -------- --------
Net liability (2,478) (2,437)
----------------------------------------- ---- -------- --------
Capital and reserves
Share capital
Called-up equity share capital 510 282
Other reserves 28,112 24,745
Accumulated losses (31,100) (27,464)
----------------------------------------- ---- -------- --------
Total deficit (2,478) (2,437)
----------------------------------------- ---- -------- --------
The financial statements were approved by the Board of Directors and authorised for issue on 3 October 2019. They were signed on its behalf by:
David Budd Matthew Fowler
Chief Executive Officer Chief Financial Officer
------------------------
Company number: 06108621
------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2019
Other Accumulated
Share capital reserves losses Total equity
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- ----------------- ------------ ------------
Balance at 30 June 2017 281 24,657 (21,497) 3,441
----------------------------------------- ------------- ----------------- ------------ ------------
Share issue 1 - - 1
Transfer of shares to SIP members - 33 - 33
Equity-settled share-based payments - 55 - 55
Transactions settled directly in equity 1 88 - 89
Total comprehensive expense for the year - - (5,967) (5,967)
----------------------------------------- ------------- ----------------- ------------ ------------
Balance at 30 June 2018 282 24,745 (27,464) (2,437)
----------------------------------------- ------------- ----------------- ------------ ------------
Share issue 228 3,015 - 3,243
Deferred consideration equity component 315 315
Equity-settled share-based payments - 49 - 49
FX on translation of overseas assets (12) (12)
Transactions settled directly in equity 228 3,367 - 3,595
Total comprehensive expense for the year - - (3,636) (3,636)
----------------------------------------- ------------- ----------------- ------------ ------------
Balance at 30 June 2019 510 28,112 (31,100) (2,478)
----------------------------------------- ------------- ----------------- ------------ ------------
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 30 JUNE 2019
Year ended Year ended
30 June 30 June
2019 2018
GBP'000 GBP'000
----------------------------------------------------------------------------------- ---------- ----------
Cash flows from operating activities
Operating loss for the year (4,010) (7,375)
Depreciation, amortisation and impairment 98 3,117
Exceptional items (all non-cash) (439) -
ATL Research credits (89) (59)
Share-based payment (credit)/expense 49 (12)
----------------------------------------------------------------------------------- ---------- ----------
Operating loss before changes in working capital and provision (4,391) (4,329)
Decrease/(increase) in inventories (12) 241
Decrease in trade and other receivables 60 119
Increase/(Decrease) in deferred revenue 88 (115)
(Decrease) in trade and other payables (346) (547)
----------------------------------------------------------------------------------- ---------- ----------
Cash flow from discontinued operations - 864
----------------------------------------------------------------------------------- ---------- ----------
Net cash outflow from operations (4,601) (3,767)
----------------------------------------------------------------------------------- ---------- ----------
Tax received 980 1,220
----------------------------------------------------------------------------------- ---------- ----------
Net cash outflow from operating activities (3,621) (2,547)
----------------------------------------------------------------------------------- ---------- ---------- Cash flows from investing activities Finance income 7 18 13 Acquisition of plant and equipment and intangible assets, net of loss on disposals (97) (24) Proceeds from disposal of discontinued operations 13 57 957 Cash paid to settle deferred consideration (300) - ----------------------------------------------------------------------------------- ---------- ---------- Net cash inflow/(outflow) from investing activities (322) 946 ----------------------------------------------------------------------------------- ---------- ---------- Cash flows from financing activities Proceeds from share issue 25 3,243 - Proceeds from bond issue 2,366 - Net inflow from financing activities 5,609 - ----------------------------------------------------------------------------------- ---------- ---------- Net increase/(decrease) in cash equivalents 1,666 (1,601) Cash and cash equivalents at beginning of year 3,529 5,129 Effects of exchange rate changes on cash and cash equivalents (11) 1 ----------------------------------------------------------------------------------- ---------- ---------- Cash and cash equivalents at end of year 5,184 3,529 ----------------------------------------------------------------------------------- ---------- ---------- Analysis of net funds Cash at bank and in hand 16 5,184 3,529 ----------------------------------------------------------------------------------- ---------- ---------- Net funds 5,184 3,529 ----------------------------------------------------------------------------------- ---------- ----------
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 30 JUNE 2019
General Information
genedrive plc ('the Company') is a company incorporated and domiciled in the UK.
genedrive plc and its subsidiaries (together, 'the Group') is a molecular diagnostics business developing and commercialising a low-cost, rapid, versatile, simple to use and robust point-of-need or point-of-care diagnostics platform for the diagnosis of infectious diseases and for use in patient stratification (genotyping), pathogen detection and other indications.
genedrive plc is a public limited company, whose shares are listed on the London Stock Exchange Alternative Investment Market.
1. Significant accounting policies
This note provides a list of the principal accounting policies adopted in the preparation of these consolidated financial statements to the extent that they have not already been disclosed in the other notes below. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods represented in these consolidated financial statements.
Basis of accounting
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation, IFRS Interpretations Committee ('IFRSIC') and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared on a historical cost basis as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
The consolidated financial statements consolidate those of the Company and its subsidiaries (together referred to as 'the Group'). They are presented in pounds sterling and all values are rounded to the nearest one thousand (GBPk) except where otherwise indicated.
Following the disposal of the Group's Services business, on 8 June 2018, the respective prior year results for this business are disclosed as a discontinued operation.
The Group funds its day-to-day working capital requirements through its bank resources.
Going concern: The Directors have concluded that it is necessary to draw attention to the revenue and cost forecasts in the business plans. In order for the Group and Company to continue as a going concern, there is a requirement to achieve a certain level of sales. Given the Company is in the early stages of commercializing its products, the forecast level of sales in the next 12 months is subject to uncertainty. If an adequate sales level cannot be achieved to support the Group and Company, the Directors have the options to reduce ongoing spend or seek additional funding from shareholders. While the Board is confident that it will achieve the required revenue and has a successful track record in both cutting costs and raising funds, there remains uncertainty as to the level of sales that will be achieved, the amount of cost reduction that may be required and the amount of funding that could be raised from shareholders.
This combination of factors represents a material uncertainty that may cast significant doubt on the Group and Company's ability to continue as a going concern. However, based on the relative likelihood of achieving versus not achieving, the Board believe it is appropriate to continue to adopt the going concern basis of accounting in preparing these financial statements. These financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern.
The auditors' report on the 2019 financial statements contains an "emphasis of matter regarding a material uncertainty relating to going concern" section, drawing attention to the existence of a material uncertainty that may cast significant doubt about the Group's and Parent Company's ability to continue as a going concern.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Inter-company transactions, balances and unrealised gains on transaction between Group companies are eliminated. Unrealised losses are also eliminated. Where necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.
Revenue
Revenue is measured at the fair value of the consideration received or receivable and net of discounts and sales-related taxes.
Revenue recognition
a. Contract revenue
Contract revenue is recognised by reference to the stage of completion of the related transaction at the end of the reporting period. The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group's activities, as described below.
b. Collaboration & licensing revenue
Contractually agreed upfront payments and similar non-refundable payments in respect of collaboration or licence agreements which are not directly related to ongoing research activity are recorded as deferred income and recognised as revenue over the anticipated duration of the agreement. Where the anticipated duration of the agreement is modified, the period over which revenue is recognised is also modified.
Non-refundable milestone and other payments that are linked to the achievement of significant and substantive technological or regulatory hurdles in the research and development process are recognised as revenue upon the achievement of the specified milestone.
Income which is related to ongoing research activity is recognised as the research activity is undertaken, in accordance with the contract.
c. Other income - development grant funding
Income receivable in the form of Government grants to fund product development is recognised as development grant funding over the periods in which the Group recognises, as expenses, the related eligible costs which the grants are intended to compensate and when there is reasonable assurance that the Group will comply with the conditions attaching to them and that the income will be received. Government grants whose primary condition is that the Group should purchase or otherwise acquire non-current assets are recognised as deferred revenue in the Consolidated Balance Sheet and transferred to the Statement of Comprehensive Income on a systematic and rational basis over the useful lives of the related assets.
d. Product sales
Revenue from product sales is recognised on shipment to customers in line with contractual agreements.
Segment reporting
A segment is a group of assets, liabilities and operations engaged in providing products or services that are subject to risks and returns that are different from those of other parts of the business. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.
Research and development
Research expenditure is written off as it is incurred. Development expenditure is written off as it is incurred up to the point of technical and commercial validation. Thereafter, costs that are measurable and attributable to the project are carried forward as intangible assets, subject to having met the following criteria:
-- demonstration that the product will generate profitable future economic benefit and of an intention and ability to sell the product;
-- assessment of technical feasibility;
-- confirmation of the availability of technical, financial and other resources to complete the development;
-- management intends to complete the development so the product will be available for use; and -- the expenditure attributable to the development can be reliably measured.
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated so as to write off the cost of an intangible asset, less its estimated residual value, over the useful economic life of that asset, as follows:
-- Acquired intellectual property - the shorter of 5% straight-line basis or their estimated useful life.
-- Developed intellectual property - the shorter of 10% straight-line basis or their estimated useful life.
-- Patents - over the shorter of 17 years or their estimated useful lives on a straight-line basis.
No amortisation is charged on those assets which are not yet available for use.
Plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:
Lab equipment - 25% reducing balance basis
Fixtures & fittings - straight-line over 48 months
Other equipment - straight-line over 48 months
Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged to the income statement over the period of the lease.
Impairment of non-financial assets
Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment 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 carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows ('Cash Generating Units'). Prior impairments of non-financial assets are reviewed for possible reversal at each reporting date.
Foreign currencies
(a) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in sterling which is the Group's presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement, except when deferred in equity as qualifying net investment hedges. Non-monetary items carried at fair value and denominated in foreign currencies are retranslated at the rates prevailing on the date when fair value is determined. The foreign currency risks relating to assets and liabilities are detailed in note 21.
Share-based payments
The Group issues equity-settled share-based payments to certain employees (including Executive Directors). The fair value of the employee services received in exchange for the grant of the options is calculated using appropriate valuation models and is recognised as an expense over the vesting period.
The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted. Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management's best estimate, experience and behavioural considerations.
At each Balance Sheet date, the entity revises its estimates of the number of options that are expected to become exercisable.
It recognises the impact of the revision of original estimates, if any, in the Income Statement, and a corresponding adjustment to equity, over the remaining vesting period.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
The issuance by the Company of share options to employees of its subsidiary represents additional capital contributions and the fair value of such options and awards is therefore recognised as an increase in the Company's investment in Group undertakings with a corresponding increase in total equity shareholders' funds.
Share Incentive Plan (SIP)
The Company operates a SIP scheme and both issues new shares to settle the liability and offers the cash equivalent to employees. The liability to settle the shares accrued under the SIP scheme is thus treated as a cash-settled liability on the balance sheet with the cost of the liability being expensed to the income statement. The balance sheet liability is adjusted periodically to reflect the change in the share price over the life of the scheme with the movement taken to the income statement. Any shares bought in anticipation of settling the SIP scheme are held as a debit in reserves. Where a leaver requests to take shares instead of cash, as permitted under the SIP scheme, the historic cost of shares acquired is moved from reserves to the balance sheet liability.
Pension contributions
Contributions to personal pension plans of employees on a defined contributions basis are charged to the income statement in the period in which they are payable.
Exceptional items
Items which are both material, either qualitatively or quantitatively, and infrequent in nature are presented as exceptional items so as to provide a better indication of the Company's underlying business performance and are shown separately on the face of the Income Statement. Items classed as exceptional in the Income Statement are treated as exceptional in the cash flow until the items are fully unwound.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated on a first-in and first-out basis and includes bought-in cost and, where appropriate, other direct costs. Net realisable value represents the estimated selling price less applicable selling costs. Where applicable, provision is made for slow-moving and obsolete inventory.
Trade and other receivables
Trade and other debtors are recognised and carried forward at invoiced amounts less provisions for any doubtful debts. Bad debts are written off when identified. After initial recognition, these are carried forward at amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents are included in the balance sheet at cost. Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.
Interest-bearing loans and borrowings
All loans and borrowings are recognised initially at cost, which is the fair value of the consideration received, net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are measured at amortised cost using the effective interest method. Gains or losses are recognised in the consolidated income account when liabilities are derecognised or impaired, as well as through the amortisation process.
Investments
Investments in subsidiaries are stated at cost less any provisions for impairment. An impairment is recognised when the recoverable amount of the investment is less than the carrying amount.
Taxation
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted, or substantively enacted, by the balance sheet date.
Taxation credits which fall under the category of Above the Line Research & Development credits ('ATL Research credit') as detailed in the Finance Act 2013 are offset against the expenditure to which they relate and, in the Statement of Profit and Loss, are disclosed within Contract and Discovery and development costs, as appropriate.
Deferred tax is recognised in respect of all temporary differences identified at the balance sheet date, except to the extent that the deferred tax arises from the initial recognition of goodwill (if amortisation of goodwill is not deductible for tax purposes) or the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting profit nor taxable profit and loss. Temporary differences are differences between the carrying amount of the Group's assets and liabilities and their tax base.
Deferred tax liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where an entity has a legally enforceable right to offset and either intends to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax is provided on temporary differences arising in subsidiaries, jointly controlled entities and associates, except where the timing of reversal of the temporary difference will not reverse in the foreseeable future. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Measurement of deferred tax liabilities and assets reflects the tax consequence expected to fall from the manner in which the asset or liability is recovered or settled.
Financial instruments (including convertible bond)
Financial instruments are classified and accounted for, according to the substance of the contractual arrangement, as either financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
As disclosed in note 19, the Company has in issue a convertible bond which is a compound instrument comprising a liability component, or debt host, and an equity derivative component.
On initial recognition, convertible bonds are recorded at fair value net of issue costs. The initial fair value of the debt host is determined using the market interest rate applied by a market participant for an equivalent non-convertible debt instrument. Subsequent to initial recognition, the debt host is recorded using the effective interest method until extinguished on conversion or maturity of the bonds. The amortisation of the debt host and the interest payable in each accounting period is expensed as a finance cost.
Equity derivatives embedded in the convertible instruments which are required to be recorded as financial liabilities are initially recognised at fair value. At each reporting date, the fair values of the derivative are reassessed by management. Where there is no market for such derivatives, the Company uses option pricing models to measure the fair value.
The amortisation of the debt host, interest payable in the period and gains or losses on the fair value of the derivative are disclosed with Finance income and costs detailed in note 7.
Parent Company assets
The assets of the Parent Company are subject to impairment review in each financial period.
New standards and interpretations not applied
The Group has not early adopted any Standards in the current or prior year.
The following new standards have been adopted in the year:
IFRS 9 Financial Instruments: The Standard was adopted on 1 July 2018, replacing IAS 39 Financial Instruments. This Standard covers the classification, measurement, impairment and derecognition of financial assets and financial liabilities together with a new hedge accounting model. IFRS 9 requires the Group to recognise expected credit losses and to update these estimates periodically to reflect changes in the credit risk of financial assets. The Group transition to this Standard has not had a material impact on the financial statements.
IFRS 15 Revenue from Contracts with Customers: The Standard was adopted on 1 July 2018, replacing IAS 11 Construction Contracts and IAS 18 Revenue. This Standard requires the separation of performance obligations within contracts with customers and the contractual value to be allocated to each of the performance obligations. Revenue is then recognised as each performance obligation is satisfied. The Group transition to this standard has not had a material impact on the financial statements.
The following amendments have been adopted in the year:
-- IFRS 2 (amendments) Classification and Measurement of Share-based Payment Transactions -- IAS 40 (amendments) Transfers of Investment Property -- Annual Improvements to IFRS Standards 2014-2016 Cycle -- Amendments to IAS 28 Investments in Associates and Joint Venture -- IFRS IC 22 Foreign Currency Transactions and Advance Consideration
The above interpretations and revised Standards have not had any material impact on the amounts reported in these financial statements or the disclosures required. At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
-- FRS 16 Leases -- IFRS 17 Insurance Contracts -- Amendments to IFRS 9 Prepayment Features with Negative Compensation -- Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures
-- Annual improvements to IFRS Standards 2015-2017 Cycle, Amendments to IFRS 3 Business Combinations, IFRS 11 Joint Arrangements,
-- IAS 12 Income Taxes and IAS 23 Borrowing Costs -- Amendments to IAS 19 Employee Benefits, Plan Amendment, Curtailment or Settlement
-- IFRS 10 Consolidated Financial Statements and IAS 28 (amendments) Sale or Contribution of Assets Between an Investor and its Associates or Joint Venture
-- IFRS IC 23 Uncertainty over Income Tax Treatments
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods except as follows:
IFRS 16 is effective for annual periods beginning 1 January 2019 and will replace IAS 17 Leases. It will introduce changes to lessee accounting by removing the distinction between operating and finance leases, requiring the recognition of a right-of-use asset and a lease liability at the commencement of all leases. Leases previously classified as operating leases with lease payments recorded in the Consolidated Income Statement will now be included in the Consolidated Balance Sheet.
IFRS 16 application will result in an increase in current assets and financial liabilities due to the recording of the right-of-use asset and future lease liabilities. The Group estimates that upon transition on 1 July 2019, the Group will recognise a right-of-use lease asset that is expected to be between GBP0.2m and GBP0.4m and a financial lease liability that matches the right-of-use asset. Operating profit will not be impacted materially as the operating leases in the Group are less than 18 months in duration.
The Group results announcement for the half year ending 31 December 2019 will be the first to be prepared under IFRS 16.
Critical accounting estimates
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 Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed below:
Determining what components of expenditure fit the definitions of the R&D tax credit regime requires an estimation and interpretation of tax rules on research and development costs. There have been no changes to historic assumptions in the year and there is no expectation of a change in the level of uncertainty within the next financial year. If the qualifying costs used to calculate the R&D tax credits are 10% higher/lower than estimated then the value of the tax debtors in the balance sheet would increase/(decrease) by GBP97k.
Determining the market value of the debt component of the convertible bond requires the Board to make a judgement about the market rate of interest to apply to instrument of this nature. The single biggest variable is the discount rate used to present the value of the loan items. The Company assessed the variable and determined that 10% was an appropriate discount rate. If the discount rate used to value the convertible items was 2.5% higher, 12.5%, the value of the balance sheet liability would fall by GBP0.8m. If the discount rate used to value the convertible items was 2.5% lower, 7.5%, the value of the balance sheet liability would increase by GBP0.9m.
Determining the going concern basis of preparation of the accounts required judgment as to the level of cash at the balance sheet date and the forecasted performance over the projected period. Judgment was required to assess the expected level of cash generation from revenue and cash consumption from R&D spend.
The consideration for the disposal of the Services business included deferred consideration based on the R&D tax credits claimed by the business in the three years post disposal. The deferred consideration is carried at the discounted fair value of the expected R&D tax credits. The estimated value of the R&D tax credits is the value claimed in the period ending December 2018.
Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
2. Segmental reporting
For internal reporting and decision-making, the Group is organised into one segment - Diagnostics. Diagnostics is commercialising the Genedrive(R) Point-of-Need molecular testing platform. In future periods, and as revenue grows, the Group may review management account information by type of assay and thus split out Diagnostics into segments - however for now the single segment is appropriate.
The chief operating decision maker primarily relies on turnover and operating profit to assess the performance of the Group and make decisions about resources to be allocated to each segment. Geographical factors are reviewed by the chief operating decision maker, but as substantially all operating activities are undertaken from the UK, geography is not a significant factor for the Group. Accordingly, only sales have been analysed into geographical statements.
The results of the operating division of the Group are detailed below:
Diagnostics Administrative
segment costs Total
=======================================================
Business segments GBP'000 GBP'000 GBP'000
======================================================= ----------- -------------- -------
Year ended 30 June 2019
------------------------------------------------------- ----------- -------------- -------
Revenue 2,362 - 2,362
------------------------------------------------------- ----------- -------------- -------
Segment EBITDA (2,483) (1,868) (4,351)
Less depreciation and amortisation (32) (66) (98)
Exceptional items - 439 439
------------------------------------------------------- ----------- -------------- -------
Operating loss (2,515) (1,495) (4,010)
------------------------------------------------------- ----------- -------------- -------
Net finance costs (508)
------------------------------------------------------- ----------- -------------- -------
Loss on ordinary activities before tax (4,518)
Taxation 882
------------------------------------------------------- ----------- -------------- -------
Loss for the financial year from continuing operations (3,636)
Total comprehensive expense for the year (3,636)
------------------------------------------------------- ----------- -------------- -------
Diagnostics Administrative
segment costs Total
Business segments GBP'000 GBP'000 GBP'000
----------- -------------- -------
Year ended 30 June 2018
------------------------------------------------------- ----------- -------------- -------
Revenue 1,938 - 1,938
------------------------------------------------------- ----------- -------------- -------
Segment EBITDA (2,325) (1,934) (4,259)
Less depreciation and amortisation (917) (88) (1,005)
Exceptional items - (2,111) (2,111)
------------------------------------------------------- ----------- -------------- -------
Operating loss (3,242) (4,133) (7,375)
------------------------------------------------------- ----------- -------------- -------
Net finance costs (413)
------------------------------------------------------- ----------- -------------- -------
Loss on ordinary activities before tax (7,788)
Taxation 758
------------------------------------------------------- ----------- -------------- -------
Loss for the financial year from continuing operations (7,030)
Profit for the year from discontinued operations 1,063
------------------------------------------------------- ----------- -------------- -------
Total comprehensive expense for the year (5,967)
------------------------------------------------------- ----------- -------------- -------
Diagnostics Administrative
segment costs Total
GBP'000 GBP'000 GBP'000
------------------------ ----------- -------------- -------
Year ended 30 June 2019
------------------------ ----------- -------------- -------
Segment assets 720 6,532 7,252
------------------------ ----------- -------------- -------
Segment liabilities (598) (9,132) (9,730)
------------------------ ----------- -------------- -------
Year ended 30 June 2018
------------------------ ----------- -------------- -------
Segment assets 608 5,300 5,908
------------------------ ----------- -------------- -------
Segment liabilities (584) (7,761) (8,345)
------------------------ ----------- -------------- -------
Geographical segments
The Group's operations are located in the United Kingdom. The following table provides an analysis of the Group's revenue by customer location:
Year ended Year ended
30 June 30 June
2019 2018
------------------
All on continuing
operations GBP'000 GBP'000
------------------ ---------- ----------
United Kingdom 1,439 230
Europe 16 59
United States of
America 907 1,602
Rest of world - 47
------------------ ---------- ----------
2,362 1,938
------------------ ---------- ----------
Revenue from continuing operations during the year related to grant income and funded development programmes of GBP1,401k (2018: GBP1,811k) and product sales of GBP961k (2018: GBP127k).
Revenues from customers accounting for more than 10% of total revenue in the current or prior years are detailed below:
(a) GBP907k of revenue was derived from the US Department of Defense (2018: GBP1,602k); and (b) GBP1,100k of revenue was derived from Innovate UK (2018: GBP221k).
3. Operating loss
The Group operating loss is stated after charging/(crediting):
Year ended Year ended
30 June 30 June
2019 2018
Note GBP'000 GBP'000
--------------------------------------------------------------- ---- ---------- ----------
Research and development expenditure 4,877 5,180
ATL Research credit 8 (89) (177)
Amortisation of intangible assets - 897
Gain on settlement of deferred consideration payable in shares (635) -
Impairment of deferred consideration receivable 4 196 -
Depreciation of owned tangible fixed assets 12 98 182
Impairment of intangible assets 12 - 2,111
Staff costs 5 2,775 4,051
Auditors' remuneration, fees payable for
- the audit of the Parent Company and consolidated accounts 10 10
- the audit of the Company's subsidiaries 81 52
Operating lease costs - property rent 294 484
--------------------------------------------------------------- ---- ---------- ----------
The auditors' remuneration for the current year includes GBP26,500 for auditing costs associated with risks related to the 2018 fund-raise.
4. Exceptional items
Year ended Year ended
30 June 30 June
2019 2018
GBP'000 GBP'000
----------------------------------------------------------------- ---------- ----------
Exceptional gain on settlement of deferred consideration payable 635 -
Impairment of deferred consideration receivable (196) -
Impairment of intangible assets - (2,111)
----------------------------------------------------------------- ---------- ----------
439 (2,111)
----------------------------------------------------------------- ---------- ----------
During the year the Company entered into a fifth deed of amendment in relation to the Visible Genomics Sale and Purchase Agreement. The fifth deed of amendment became effective on 10 December 2018 and varied the remaining GBP1,250,000 consideration payable. The difference between the total fair value of amended consideration payable and the GBP1,250,000 created a gain of GBP635,000 (2018: GBPnil) which has been treated as exceptional. See note 18.
The carrying value of deferred consideration receivable on the disposal of Epistem trade assets was reviewed in the year following receipt of an amount received for an initial part period. The value of expected deferred consideration receiveable has been written down to GBP446k and created an impairment charge of GBP196k (2018: GBPnil).
In the prior year management undertook a carrying value review of intangible assets and determined that the carrying value should be written down to GBPnil and this created an impairment charge of GBP2,111k in the income statement. The write down results in no intangible assets on the balance sheet.
5. Particulars of employees
The average number of staff employed by the Group during the financial year was:
Year ended Year ended
30 June 30 June
2019 2018
No No
------------------------- ---------- ----------
Discontinued operations - 28
Research and development 31 32
Administration 13 12
------------------------- ---------- ----------
44 72
------------------------- ---------- ----------
The reduction in headcount follows the disposal of the Services Divisions in 2018.
The aggregate employee costs (including Directors) were:
Year ended Year ended
30 June 30 June
2019 2018
GBP'000 GBP'000
Wages, salaries and other benefits 2,402 3,557
Social security costs 271 350
Equity-settled share-based payments 49 55
Pension cost - defined contribution plans 56 65
Cost of SIP matching shares provision (3) 24
------------------------------------------ ---------- ----------
2,775 4,051
------------------------------------------ ---------- ----------
6. Directors' remuneration (key management)
Year ended Year ended
30 June 30 June
2019 2018
GBP'000 GBP'000
------------------------------------------ ---------- ----------
Wages, salaries and other benefits 980 1,183
Social security costs 120 154
Equity-settled share-based payments 47 45
Pension cost - defined contribution plans 22 18
Cost of SIP matching shares provision (1) 4
------------------------------------------ ---------- ----------
1,168 1,404
------------------------------------------ ---------- ----------
For the current and prior year the key management of the Company is the senior management team of the Company and comprises Executive Board members plus four members of the senior staff.
7. Net finance costs
Year ended Year ended
30 June 30 June
2019 2018
------------------------------------------------------------------
Group GBP'000 GBP'000
------------------------------------------------------------------ ---------- ----------
Interest income on bank deposits 18 13
Gain on amendment to convertible bond 325 -
Movement in fair value of derivative embedded in convertible bond 318 -
Finance cost of convertible bond (889) (531)
Foreign exchange movement in convertible bond (280) 105
------------------------------------------------------------------ ---------- ----------
(508) (413)
------------------------------------------------------------------ ---------- ----------
8. Taxation on ordinary activities
(a) Recognised in the income statement
Continuing operations Discontinued operations Total
----------------------- ------------------------- ----------------------
Year ended Year ended Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June 30 June 30 June
2019 2018 2019 2018 2019 2018
Current tax: GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ---------- ------------ ----------- ---------- ----------
Research and development tax credits (971) (817) - (163) (971) (980)
Less: recognised as ATL Research
credit 89 59 - 118 89 177
-------------------------------------- ----------- ---------- ------------ ----------- ---------- ----------
Total tax credit for the year (882) (758) - (45) (882) (803)
-------------------------------------- ----------- ---------- ------------ ----------- ---------- ----------
(b) Reconciliation of the total tax charge
The tax assessed on the loss on ordinary activities for the year is lower (2018: higher) than the weighted average applicable tax rate for the year ended 30 June 2019 of 19.00% (2018: 19.00%). The differences are explained below:
Year ended Year ended
30 June 30 June
2019 2018
GBP'000 GBP'000
----------------------------------------------------- ---------- ----------
Loss before taxation on continuing operations (4,518) (7,788)
Tax using UK corporation tax rate of 19.00% (19.00%) (858) (1,480)
Adjustment in respect of R&D tax credit recognised
above the line (ATL) 4 59
Adjustment in respect of R&D tax credit claimed (379) (380)
Items not deductible for tax purposes - permanent 11 543
Items not deductible for tax purposes - temporary - (11)
Deferred tax not recognised 304 490
Rate differences 36 21
----------------------------------------------------- ---------- ----------
Total tax credit for the year (882) (758)
----------------------------------------------------- ---------- ----------
No deferred tax assets are recognised at 30 June 2019 (2018: GBPnil). Having reviewed future profitability in the context of trading losses carried, it is not probable that there will be sufficient profits available to set against brought forward losses.
The Finance Act 2016, which was subsequently enacted on 15 September 2016, includes provisions to reduce the corporation tax rates to 19.0% with effect from 1 April 2017 and 18.0% with effect from 1 April 2020. In addition, the Finance Bill 2017 was substantively enacted on 6 September 2017 which introduced a further reduction in the main rate of corporation tax from 18.0% to 17.0% from 1 April 2020. Both changes are reflected in the balance sheet figures and the overall effect on the deferred tax balance and tax credit for the year is not material.
In accordance with the provisions of the Finance Act 2000 in respect of research and development allowances, the Group is entitled to claim tax credits for certain research and development expenditure. These credits are disclosed partly as Above the line research & development credits ('ATL Research credits') within Research and development costs and partly as Research and development tax credits within Taxation on ordinary activities. The total amount included in the financial statements in respect of Continuing operations for the year ended 30 June 2019 was GBP971k (2018: GBP817k) which included GBP89k (2018: GBP59k) disclosed as ATL Research credit deducted from Research and development costs with the balance of GBP882k (2018: GBP758k) disclosed within Taxation on ordinary activities as detailed above.
9. Disposal of business segment
Year ended
30 June
2018
-----------------------------
Group GBP'000
----------------------------- ----------
Fair value of sales proceeds 1,521
Costs of disposal (163)
Net assets disposed of (717)
----------------------------- ----------
Profit on disposal 641
----------------------------- ----------
On 8 June 2018 the Group disposed of the business and assets of its 'Services' business. This division comprised the segments previously reported as Preclinical Research Services and Pharmaco-genomics Services. The consideration was GBP1,150k subject to normal working capital adjustments, plus up to an additional GBP750k deferred consideration based on the Research and development tax credits earned by the business in the 36 months post disposal. Management have made their best estimate of the future cash flows expected from the disposal and discounted these using the Company's WACC of 12.5%. The costs of the disposal of GBP163k include legal costs and corporate finance costs.
Result of discontinued operations
The results of the discontinued operation, which have been included in the income statement, were as follows:
Year ended Period ended
30 June 8 June
2019 2018
-----------------------------------------------
Discontinued operations GBP'000 GBP'000
----------------------------------------------- ---------- ------------
Revenue - 2,783
Operating costs - (2,524)
Above the line tax credit - 118
----------------------------------------------- ---------- ------------
Profit before tax - 377
----------------------------------------------- ---------- ------------
Attributable tax credit - 45
----------------------------------------------- ---------- ------------
Profit on disposal of discontinued operations - 641
----------------------------------------------- ---------- ------------
Profit attributable to discontinued operations - 1,063
----------------------------------------------- ---------- ------------
The disposed business was not a separate legal entity. Any theoretical tax expense in the periods above would have been settled via Group relief.
During the year to 30 June 2019, the business contributed GBPnil (2018: GBP332k) to the Company's net operating cash flows. All of these cash flows were from operating activities and there were no investing or financing cash flows in the period.
Year ended Period ended
30 June 8 June
2019 2018
--------------------------------------------------
Discontinued operations GBP'000 GBP'000
-------------------------------------------------- ---------- ------------
Proceeds from disposal of business 57 957
Operating cash flows from discontinued operations - 332
-------------------------------------------------- ---------- ------------
Net cash flow from discontinued operations 57 1,289
-------------------------------------------------- ---------- ------------
10. Loss attributable to members of the parent company
genedrive plc has not presented its own statement of comprehensive income as permitted by Section 408 of the Companies Act 2006. The loss dealt with in the accounts of genedrive plc was GBP5,131k (2018:loss GBP9,401k).
11. Earnings per share per share
2019 2018
Group GBP'000 GBP'000
----------------------------------------------------------- ------- -------
Loss for the year after taxation continuing operations (3,636) (7,030)
Profit for the year after taxation discontinued operations - 1,063
----------------------------------------------------------- ------- -------
2018 2017
---------------------------------------------------------------------
Group Number Number
--------------------------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares in issue 26,037,433 18,692,269
Potentially dilutive ordinary shares - -
--------------------------------------------------------------------- ---------- ----------
Adjusted weighted average number of ordinary shares in issue 26,037,433 18,692,269
--------------------------------------------------------------------- ---------- ----------
Loss per share on continuing operations
- Basic (14.0)p (37.6)p
- Diluted (14.0)p (37.6)p
--------------------------------------------------------------------- ---------- ----------
Loss per share on continuing operations and discontinuing operations
- Basic (14.0)p (31.9)p
- Diluted (14.0)p (31.9)p
--------------------------------------------------------------------- ---------- ----------
Earnings per share on discontinued operations
- Basic - 5.7p
- Diluted - 5.7p
--------------------------------------------------------------------- ---------- ----------
The basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders for the year by the weighted average number of ordinary shares in issue during the year.
As the Company is loss making, no potentially dilutive options have been added into the EPS calculation. Had the Company made a profit in the period: there would be no potentially dilutive share options because, as shown in note 20, all share options in issue are underwater; there would be 79,129 of dilutive SIP shares, (as described in note 20, the total accrued shares under the SIP should all shares meet their vesting criteria is 97,993 and the Company holds 18,864 to meet the SIP commitments).
12. Plant and equipment
Lab Fixtures Other
equipment & fittings equipment Total
--------------------------------
Group GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- ---------- --------- -------
Cost
At 1 July 2018 220 114 215 549
Additions 78 - 21 99
Disposals - - (4) (4)
-------------------------------- --------- ---------- --------- -------
At 30 June 2019 298 114 232 644
-------------------------------- --------- ---------- --------- -------
Accumulated depreciation
At 1 July 2018 150 84 150 384
Charge for the year 32 24 42 98
Depreciation on disposed assets - - (2) (2)
-------------------------------- --------- ---------- --------- -------
At 30 June 2019 182 108 190 480
-------------------------------- --------- ---------- --------- -------
Net book value
At 30 June 2018 70 30 65 165
-------------------------------- --------- ---------- --------- -------
At 30 June 2019 116 6 42 164
-------------------------------- --------- ---------- --------- -------
13. Contingent consideration receivable
Greater than Less than
12 months 12 months Total
GBP'000 GBP'000 GBP'000
------------------------------ ------------ --------- -------
Balance at 30 June 2017 - - -
------------------------------ ------------ --------- -------
Disposal of Services Business 340 172 512
------------------------------ ------------ --------- -------
Balance at 30 June 2018 340 172 512
------------------------------ ------------ --------- -------
Received in the period - (57) (57)
Impairment of (187) (9) (196)
------------------------------ ------------ --------- -------
Balance at 30 June 2019 153 106 259
------------------------------ ------------ --------- -------
Under the terms of sale and purchase agreement for the disposal of the Services business, a total of GBP512k of future contingent consideration was held on the balance sheet at June 2018. In June 2019 GBP57k was received for the first six months of trading of the new entity. The amount received was lower than the amount expected and so an impairment charge of GBP196k (2018: GBPnil) was posted to value the deferred consideration at the new fair value.
14. Inventories
2019 2018
---------------
Group GBP'000 GBP'000
--------------- ------- -------
Raw materials 123 171
Finished goods - -
--------------- ------- -------
123 171
--------------- ------- -------
Genedrive units are treated as raw materials. The units are required to go through a testing and software process before being sold.
The inventory valuation at 30 June 2019 is stated net of a provision of GBP60k (2018: GBPnil) to write down inventories to their net realisable value. The net charge to the income statement in the year in respect of inventory net realisable value was GBP60k (2018: GBPnil).
15. Trade and other receivables
2019 2018
--------------------------------
Group GBP'000 GBP'000
-------------------------------- ------- -------
Trade receivables 65 182
Less: provisions for impairment - (23)
-------------------------------- ------- -------
Trade receivables - net 65 159
Other receivables 307 132
Prepayments 184 260
-------------------------------- ------- -------
556 551
-------------------------------- ------- -------
Analysis of trade receivables
2019 2018
GBP'000 GBP'000
------------------------------ ------- -------
Neither impaired nor past due 65 127
Past due but not impaired - 32
------------------------------ ------- -------
Trade receivables 65 159
------------------------------ ------- -------
At the year end, net trade receivables were aged as follows:
2019 2018
----------------------------------------------
Group GBP'000 GBP'000
---------------------------------------------- ------- -------
Not overdue 65 127
Less than 1 month overdue - -
Later than 1 month less than 3 months overdue - -
Later than 3 months overdue - 32
---------------------------------------------- ------- -------
Total 65 159
---------------------------------------------- ------- -------
The movement in the impairment provision for trade receivables is as follows:
2019 2018
-----------------------------
Group GBP'000 GBP'000
----------------------------- ------- -------
Opening provision 23 218
Written off in the year (23) (218)
Charge for the year - 23
----------------------------- ------- -------
Closing provision at 30 June - 23
----------------------------- ------- -------
Ageing of impaired receivables
2019 2018
----------------------
Group GBP'000 GBP'000
---------------------- ------- -------
Greater than 3 months - 23
---------------------- ------- -------
There is no other class of financial assets that is past due but not impaired except for trade receivables. The Group's credit period generally ranges up to 60 days.
16. Cash and cash equivalents
2019 2018
-------------------------
Group GBP'000 GBP'000
------------------------- ------- -------
Cash at bank and in hand 5,184 3,529
------------------------- ------- -------
5,184 3,529
------------------------- ------- -------
Cash and cash equivalents comprise current accounts held by the Group with immediate access and short-term bank deposits with a maturity of three months or less. Market rates of interest are earned on such deposits. The credit risk on such funds is limited because the counter parties are banks with high credit ratings assigned by international credit rating agencies.
17. Deferred revenue
The items recorded as deferred revenue are to be recognised over future periods as follows:
2019 2018
---------------------------------------
Group GBP'000 GBP'000
--------------------------------------- ------- -------
Amounts to be recognised within 1 year 88 -
--------------------------------------- ------- -------
Deferred revenue relates to the AIHC grant where cash received was ahead of revenue recognised at 30 June 2019.
18. Trade and other payables
2019 2018
---------------
Group GBP'000 GBP'000
--------------- ------- -------
Trade payables 402 392
Accruals 611 886
Other payables 116 192
--------------- ------- -------
1,129 1,470
--------------- ------- -------
19. Deferred consideration payable in shares
2019 2018
------------------
Group GBP'000 GBP'000
------------------ ------- -------
Payable in shares - 1,250
------------------ ------- -------
During the year the Company entered into a fifth deed of amendment in relation to the Visible Genomics Sale and Purchase Agreement. The fifth deed of amendment became effective on 10 December 2018 and varied the remaining GBP1,250,000 consideration payable to:
i) A payment of GBP300,000 in cash 20 business days after 10 December 2018. ii) An allotment of 869,565 shares in genedrive plc on 10 December 2019. iii) An allotment of 500,000 shares in genedrive plc on 10 December 2021.
The fair value of the future shares to be issued was calculated based on the share price on the date the deed became effective and was 23.0p per share. The aggregate value of shares to be issued was booked into reserves as a separate component of equity, see note 25.
The difference between the total fair value of the shares (GBP315,000) and the cash payment made (GBP300,000) and the GBP1,250,000 provision on the balance sheet immediately before the deed became effective has been taken to the income statement and disclosed as an exceptional item.
20. Convertible bond
GHIF GHIF BGF BGF Total Total
host derivative host derivative host derivative Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- ------- ---------- ------- ---------- ------- ---------- -------
Balance at 30 June 2017 5,195 4 - - 5,195 4 5,199
---------------------------------------------- ------- ---------- ------- ---------- ------- ---------- -------
Increase in fair value 227 - - - 227 - 227
Finance costs on convertible bond 304 - - - 304 - 304
Foreign exchange movement in convertible bond (105) - - - (105) - (105)
---------------------------------------------- ------- ---------- ------- ---------- ------- ---------- -------
Balance at 30 June 2018 5,621 4 - - 5,621 4 5,625
---------------------------------------------- ------- ---------- ------- ---------- ------- ---------- -------
Fair value impact of Deed of Amendment (563) 238 - - (563) 238 (325)
Issue of loan note (BGF) - - 2,104 396 2,104 396 2,500
Prepaid arrangement fees (BGF) - - (122) - (122) - (122)
Movement in fair value of embedded derivative - (99) - (219) - (318) (318)
Finance cost of convertible bonds 710 - 168 - 878 - 878 Foreign exchange movement (GHIF) 280 - - - 280 - 280 ---------------------------------------------- ------- ---------- ------- ---------- ------- ---------- ------- Balance at 30 June 2019 6,048 143 2,150 177 8,198 320 8,518 ---------------------------------------------- ------- ---------- ------- ---------- ------- ---------- -------
Global Health Investment Fund 1 LLC (GHIF)
On 21 July 2014, the Company entered into a Collaboration and Convertible Bond Purchase Agreement ('Agreement') with the Global Health Investment Fund 1 LLC ('GHIF'). The purpose of the Agreement was to fund the Company's development, production and commercialisation of Genedrive(R) to address Global Health Challenges and achieve Global Health Objectives. Further, as part of the Agreement, GHIF and the Company entered into a Global Access Commitment. Under the Global Access Commitment, the Company will undertake appropriate regulatory strategic steps and registrations to secure access for Genedrive(R) in developing countries in tuberculosis, malaria or other infectious diseases as agreed between the parties.
On 23 June 2016, the Company and GHIF entered into a Deed of Amendment & Restatement of the Agreement, which came into effect on 11 July 2016. The principal effects of the Deed of Amendment were to extend the maturity of the GHIF Bond by two years to 21 July 2021. To split the GHIF Bond into two tranches: the first tranche of US $2m has a Conversion Price of GBP1.50 per ordinary share and the second tranche of US$6m has a Conversion Price remaining at GBP4.89 per ordinary share.
During the year to 30 June 2019, the Company entered into a second deed of amendment with the Global Health Investment Fund 1 LLC (GHIF) that became effective on the 10 December 2018. The principal effects of the Deed of Amendment were to alter the June 2016 Deed of Amendment and Restatement of the five-year $8.0m and 5% coupon convertible bond with GHIF as follows:
-- The maturity date of the GHIF bond was extended from December 2021 to December 2023. -- The deferment of interest period was extended from January 2019 to January 2022. -- The strike price of the first $2m tranche was reduced from 150p to 28.75p. -- The strike price of the second $6m tranche was reduced from 489p to 150p.
All other terms remained the same. The amendment has been treated as a modification and not an extinguishment because material elements of the changes are unaffected and the difference of the cash flows before and after the amendment are approximately equal to 10.4%. The future cash flows from the bond have been discounted at a cost of capital rate of 10.0%.
Business Growth Fund (BGF)
The Company entered into an agreement with the Business Growth Fund (BGF) that became effective on 10 December 2018. Under the terms of the agreement BGF and the Company entered into a convertible loan arrangement. The main terms of the convertible loan note are:
-- GBP2.5m loan that matures on 30 June 2025. -- Interest accrues on the loan at a rate of 7%, payable quarterly.
-- Interest can be deferred into the principal up until 31 December 2021 and then needs to be paid in full.
-- The loan converts at 28.75p which was 125% of the share price on 10 December.
-- Certain warranties have been granted by the Company and the Executive Directors to BGF and BGF consent is required on certain matters.
-- The loan came conditional with a GBP1m subscription to the December 2018 fund-raising process.
-- The maximum number of shares to be issued to BGF on conversion of the loan notes, when aggregated with the ordinary shares held by BGF and persons acting in concert with BGF, is capped at 29.9% of the issued share capital of the Company.
The convertible loan has been stated at its fair value and will be subsequently measured at amortised cost. The future cash flows from the bond have been discounted at a cost of capital rate of 10.0%, with loan arrangement costs being prepaid and amortised against the life of the loan.
The convertible nature of the loan grants BGF an option to convert to equity at a certain share price; this has been valued as the residual amount, representing the value of the equity conversion component, and treated as a derivative option.
Accounting for the convertible bonds
IFRS requires the convertible bonds to be accounted for as a compound instrument, comprising a Debt host (liability component) and a Derivative (equity component). The Debt host is required to be recorded initially at fair value. Whilst the coupon is 5%, IFRS requires that the fair value is calculated based on the rate of interest which a market participant would lend to the Company.
Given the nature of the Company's activities, the Company has used a rate of 10.0% in calculating this liability. The Derivative has been valued using a Quanto Option Valuation model which takes account of the multicurrency aspects of the convertible bond. The variables used in running the model are as follows: volatility of the Company's share price 24%, expected life of the Derivative 4.4 years, risk-free interest rate 0.58% and a dividend yield of 0%.
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
FR BRBDGSUGBGCD
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October 03, 2019 02:00 ET (06:00 GMT)
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