TIDMAGY
RNS Number : 5940Z
Allergy Therapeutics PLC
21 September 2015
21 September 2015
Allergy Therapeutics plc
("Allergy Therapeutics" or "the Company")
Preliminary report for the year ended 30 June 2015
Significant progress made towards becoming a global provider of
allergy solutions
Allergy Therapeutics plc, the fully integrated specialty
pharmaceutical company specialising in allergy vaccines, announces
preliminary results for the year ended 30 June 2015.
Highlights
-- 11% increase in revenue at constant currency* to GBP46.6m (2014: GBP42.0m)
-- 3% increase in revenue to GBP43.2m (2014: GBP42.0m)
-- Gross profit increased 4% to GBP31.1m (2014: GBP30.0m)
-- Operating profit increased 50% to GBP1.8m before impact of
revaluation of US dollar cash deposits (2014: GBP1.2m)
-- Operating profit of GBP0.7m (2014: GBP1.2m)
-- Net cash generated by operations increased to GBP2.5m (2014: GBP2.3m)
-- GBP20m fund raising (net of expenses) in March 2015 to fund US clinical study programme
-- Acquisition of Alerpharma S.A. in early June strengthens Spanish business
-- Positive results from Acarovac Plus clinical study
demonstrates excellent patient tolerability
-- Continued successful rollout of European probiotic products
Manuel Llobet, Chief Executive Officer, commented:
"This year we have made significant progress towards becoming a
global provider of allergy solutions. Following our successful
placing to raise GBP20 million net in March we have resumed the
clinical development programme for Pollinex Quattro Grass in the
US. Pollinex Quattro Grass has the potential to be the first
seasonal subcutaneous allergy vaccine to reach the US market, which
would be a transformational event for the Company.
We also strengthened our European position, demonstrating double
digit growth in a flat market and significantly outperforming our
competition. The acquisition of Alerpharma in June enables the
Company to continue to build a strong growth platform in Europe and
to further open up the opportunity for an increase in market share
in Spain. Growth in the European markets is expected to be
relatively slow in the coming year but with the continued momentum
across the Company's activities, the outlook is very positive and
we expect to increase our market share into the next year,
delivering improved top-line growth. The Company will continue its
plan to consolidate its position in the European markets, as well
as progressing with the clinical development programme within the
regulated framework in Germany (TAV)."
* Constant currency uses prior year weighted average exchange
rates to translate current year foreign currency denominated
revenue to give a year on year comparison excluding the effects of
foreign exchange movements. See table in financial review for an
analysis of revenue.
For further information:
+44 (0) 1903 845
Allergy Therapeutics 820
Manuel Llobet, Chief Executive Officer
Ian Postlethwaite, Finance Director
+44 (0) 20 7886
Panmure Gordon 2500
Freddy Crossley / Peter Steel / Duncan Monteith,
Corporate Finance
Tom Salvesen, Corporate Broking
+44 (0) 20 3727
FTI Consulting 1000
Simon Conway / Victoria Foster Mitchell
Note to editors:
About Allergy Therapeutics
Allergy Therapeutics is a specialty pharmaceutical company
focused on allergy vaccination. It has a growing business achieving
revenue in the last financial year of GBP43 million mainly in
Europe through its own sales and marketing infrastructure and
further afield through distributors.
CHAIRMAN'S STATEMENT
This year we have made more significant progress towards
becoming a global provider of allergy solutions and the Company is
now delivering on all three aspects of its growth strategy:
We are resuming the clinical development programme for Pollinex
Quattro Grass in the US, having invested US$100 million to date. As
previously disclosed, the programme relaunch follows in-depth
discussions with the US Food and Drug Administration (FDA)
regarding our clinical trial protocols and route to registration
for the product. We plan to submit a Biological Licence Application
(BLA) to the FDA for Pollinex Quattro Grass for regulatory approval
in 2018, with the anticipated registration of the product in 2019.
The US allergy immunotherapy market is estimated to be worth $2
billion in 2008.
Importantly, our US development plans are fully funded following
our successful placing to raise GBP20 million net in March. This is
a significant milestone for Allergy Therapeutics and introduces
new, important institutional investors to the Company.
Pollinex Quattro Grass has the potential to be the first
seasonal subcutaneous immunotherapy (SCIT) allergy treatment to
receive regulatory approval in the US, as well as becoming the
Company's first product to be approved for the US market. Apart
from a proven ability to provide a cure versus symptom relief, the
short course of treatment is shown to be superior to alternatives
on the market in terms of patient acceptance and compliance, which
are key issues in this area and will, we believe, translate into
good uptake for the product. We are excited by the transformational
opportunity that Pollinex Quattro Grass represents for the Company,
as we continue to work hard to address the unmet needs of the US
allergy market through our innovative solutions for allergy
sufferers.
Inorganic growth is a key focus; in June we announced the
acquisition of Alerpharma, a privately owned company based in
Spain, spun-out from a leading Spanish biopharmaceutical company,
Zeltia S.A. The acquisition provides Allergy Therapeutics with the
opportunity to increase our product range, cross-sell products and
strengthen our competitive position in Spain, our second largest
market. Alerpharma also brings a newly-built state-of-the-art 2,200
sq. m manufacturing facility in the Alcalá de Henares technological
park near Madrid. The initial stage of the integration process is
progressing well and is expected to be completed by January
2016.
The multiple paid for Alerpharma, at approximately one times the
previous year's sales, provides us with an opportunity to create
value for our shareholders. We will continue to seek synergistic
consolidation opportunities in the specific immunotherapy (SIT)
market or allergy related areas, such as respiratory, dermatology,
allergy immunomodulation or diagnostics.
Our established revenue model in Europe is progressing well. We
have demonstrated organic double digit growth in a flat market,
significantly outperforming our competition and becoming, once
again, the best performer in relation to its competitors in
specific immunotherapy in Europe. This progress is consistent with
our ambition to strengthen our European position and build a solid
platform for global expansion. Revenues achieved during the year
are detailed in the Financial Review.
During the first half of our fiscal year, and as a result of the
takeover of CFR Pharmaceuticals by Abbott Laboratories Inc.
("Abbott"), Alejandro Weinstein stepped down from the Board of
Allergy Therapeutics and was succeeded by Jean-Yves Pavée, Senior
Vice President of Developed Markets for Abbott's Established
Products division. Alejandro joined the Board in 2009 and I would
like to take this opportunity to thank him for his contribution,
valuable guidance and support. We are pleased to welcome Jean-Yves
to our Board.
In conclusion, I would like to express my appreciation to all
Allergy Therapeutics employees for their commitment, dedication and
hard work during the year and we look forward to making further
significant progress in executing our growth strategy in the coming
years.
Peter Jensen
Chairman
18 September 2015
CHIEF EXECUTIVE OFFICER'S REVIEW
Specific allergy immunotherapy is expected to become a global
market of approximately $2-3 billion by 2020, with very few
companies well placed to take advantage of this market opportunity.
I am confident that with our highly competent team, coupled with
our ultra-short, aluminium free allergy vaccines, we are well
positioned to be one of these companies.
At a commercial level, we have once again been the best
performing company in our competitive European markets, with an
evolution index of 107 (where every unit above 100 represents 1%
growth above the market's growth) and sales growth of 11% in
constant currency. This strong organic growth and market
penetration highlights our focus on ensuring three important
building blocks for the business:
a) We have the right products with our range of short course and
ultra-short course, aluminium free allergy vaccines, which are
patient-friendly, save time and are, therefore, highly convenient.
Our products are becoming increasingly accepted in all our key
markets and represent a potential, early indicator of the fast
penetration that our products could have in the US allergy
market.
b) We have the right sales teams in place. The team consistently
delivers at or above management's expectations and receives
on-going training to be the best scientific partner for our
doctors.
c) We have the right marketing strategies and our messages are
well understood by our base of prescribers.
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September 21, 2015 02:01 ET (06:01 GMT)
With Pollinex Quattro we have developed an efficient solution to
address the seasonal allergy market, with grass, tree and ragweed
being the most predominant allergens. Now that this franchise is in
late stage clinical development and has proven to be commercially
successful (in Europe on a named patient basis), our Product
Development team is working to expand our product portfolio by
developing an ultra-short franchise in the perennial allergy
market, where house dust mite is one of the most important
allergens.
We are currently developing Acarovac Quattro, a potential
breakthrough ultra-short course treatment for house dust mite
allergy, using a similar technological platform to Pollinex Quattro
(allergoid + microcrystalline tyrosine (MCT) + monophosphoryl lipid
A (MPL)) to replicate the success of our Pollinex Quattro product
range.
Last year, we launched Acarovac Plus, a short course allergy
product to treat house dust mite allergy, in Spain, which became
our fastest growing product in that country this year. This rapid
commercial acceptance, along with the positive results in symptom
reduction scores of more than 50% (as announced in July(1) ),
increases our confidence in the market penetration prospects for
Acarovac Quattro.
The activity within our strengthened R&D department has been
exceptional. The scientific team has been running our clinical
programmes in Europe and planning the resumption of our clinical
activities in the US. Our team has also been working on new and
improved products and has designed a comprehensive programme of
clinical trials to continue the development of our innovative
product portfolio.
Another significant project has been the work done with MCT
which is a depot/adjuvant system used in our products with the
potential to be used in other vaccines. Depot adjuvants are used in
vaccines to act as a carrier for the antigen, enabling presentation
to the immune system over an extended period of time, therefore
maximising the immune response before the body clears the antigen.
MCT is a patented depot adjuvant formulation of the biodegradable
amino acid tyrosine that combines the optimal drug stability
profile of our short course vaccine delivery with extensive safety
data consistent with its natural origin. MCT has been designed to
provide defined particle size and structure along with a strong
antigen binding capacity to enhance its use as a powerful immune
system potentiator.
We have invested in our Medical Department which continues to
provide support for our entire product range in all commercial
markets but has also been handling the new body of regulation in
the pharmacovigilance area, while our back office departments -
Supply Operations, Quality Control, Quality Assurance - have
ensured the Company has remained compliant and maintained high
standards of reliability.
Summary and outlook
Immunotherapy is expected to be the fastest growing segment in
the allergic rhinitis treatment market, estimated at $12 billion by
2016 (Visiongain). It is expected that over the next seven years,
the immunotherapy market will more than double its size, growing at
a compound annual growth rate of around 11%. The key driver of this
growth will be the development of the US registered products
market, where three oral vaccines were launched last year. Now that
we have resumed our clinical programme in the US, we have the
potential to be the first seasonal SCIT allergy vaccine to reach
the US market, which is predominantly a SCIT market. This puts
Allergy Therapeutics in a privileged position to become a global
leading provider of allergy solutions, as shown by Pollinex Quattro
Grass.
Growth in the European allergy market is expected to be
relatively flat in the coming year but with the continued momentum
across the Company's activities, the outlook is very positive and
we expect to continue to increase our market share into the next
year delivering improved top line growth. The Company will continue
its plan to consolidate its position in the European markets as
well as progressing its clinical development programme within the
Therapieallergene-Verordnung (TAV) framework in Germany.
Finally, we are very excited by the opportunity in the US
market. We have made good progress in appointing a contract
research organisation (CRO) and during the next year plan to
advance rapidly to the Phase III challenge chamber study for MATA
MPL Grass, keeping us on our time-line of submitting a BLA during
2018. This would be a transformational opportunity for the
company.
We are a thriving company with a healthy product pipeline with
an on-going mission to improve the lives of millions of allergy
sufferers worldwide.
Manuel Llobet
CEO
18 September 2015
(1) Roger, A., Depreux, N., Jurgens Y., Heath M, Garcia G.,
Skinner M, A novel and well tolerated mite allergoid subcutaneous
immunotherapy: Evidence of clinical and immunologic efficacy.
Immunity, Inflammation and Disease, 2014; 2 (2); 92-98
FINANCIAL REVIEW
Overview
The results for the twelve months to 30 June 2015 demonstrate
continuing profitability despite difficult market conditions and
continued investment in clinical studies, with an operating profit
of GBP0.7 million (2014: GBP1.2 million). Operating profit includes
a non-cash charge of GBP1.1m for the revaluation at the balance
sheet date of US dollar cash deposits held for the US clinical
studies. Operating profit before this charge was GBP1.8m (2014:
GBP1.2m), a 51% improvement. During the year investment in clinical
studies was maintained at GBP1.3 million (2014: GBP1.5 million).
The acquisition of the Alerpharma group for EUR3.8m plus deferred
consideration, expected to be around EUR0.2m, took place in June
2015 (note 11). The Alerpharma group added revenue of GBP0.2m and
no profit, for the period consolidated.
Revenue
Despite weak allergy vaccine markets in Europe, revenue at
constant currency* was 11% better at GBP46.6 million (2014: GBP42.0
million). This can be seen in the table below:
2015 2015 2015 2014 2014 2014
Germany Other Total Germany Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 27.1 16.1 43.2 25.8 16.2 42.0
Add rebates 2.9 - 2.9 3.8 - 3.8
Gross revenue 30.0 16.1 46.1 29.6 16.2 45.8
Adjustment to retranslate
at prior year foreign
exchange rate 2.5 1.1 3.6
Gross revenue at constant
currency* 32.5 17.2 49.7 29.6 16.2 45.8
--------------------------------- --------- ------- ------ -------- ------ ------
Revenue 27.1 16.1 43.2 25.8 16.2 42.0
Adjustment to retranslate
at prior year foreign
exchange rate 2.2 1.2 3.4
--------- ------- ------ -------- ------ ------
Revenue at constant currency* 29.4 17.2 46.6 25.8 16.2 42.0
* Constant currency uses prior year weighted average exchange rates
to translate current year foreign currency denominated revenue to
give a year on year comparison excluding the effects of foreign exchange
movements.
---------------------------------------------------------------------------------------
Despite a weaker EUR: GBP weighted average exchange rate during
the year compared to the prior year, revenue increased by 3% to
GBP43.2 million (2014: GBP42.0 million). The weighted average EUR:
GBP exchange rate in the year was 1.27 compared to 1.17 in the
previous year; the weaker Euro negatively impacted revenue by
GBP3.4 million. The Group has continued to grow its revenue in
markets outside Germany in order to reduce its reliance on the
German market, but, with the company's strong performance in
Germany this year, revenue from Germany grew from 61% of the total
reported revenue to 63%, although it is still significantly lower
than that reported in 2009 of 73%. The key flagship product
Pollinex Quattro, which accounts for 49% of total sales, grew very
well in the year at a constant currency growth rate of 7.5%. In
addition to the sale of allergy vaccines, the Group has continued
to look to increase its revenue from other products, which includes
probiotic sales. Total sales from other products contributed GBP3.2
million for the year ended 30 June 2015 (2014: GBP3.0 million).
Revenue in Germany grew well in the year with revenue at
constant currency increasing to GBP29.4 million (2014: GBP25.8
million); an increase of 14%. During the year, the Group was
subject to the full rebate charge in Germany. In the prior year,
the rebate charge in H1 was 16% of sales, reducing to 6% in January
2014, before finally being set at a new on-going level of 7% in
April 2014.
On 23 February 2015, the Company received notification that The
Federal Office for Economics and Export ("BAFA") had made a
decision to reverse their preliminary exemption to the increased
manufacturers rebate in Germany for the period July to December
2012. The Company was granted a preliminary exemption to the
increased rebate for this period by BAFA in 2013. The Company
recognised revenue of EUR1.4 million (GBP1.1 million) against this
exemption in the year ended 30 June 2013. All other preliminary
exemptions (granted for periods up to 30 June 2012) have previously
been ratified as final by BAFA. After taking legal advice, the
Company has lodged an appeal against this decision and is confident
that the exemption will be re-instated. Therefore, as at 30 June
2015, no provision has been recognised for the repayment of the
rebate refund. This position will be kept under review.
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In Spain (excluding the newly acquired Alerpharma S.A.) and
Italy, sales at constant currency increased by 8%, which is a
strong result given the weak market during the year. Similarly,
Austria showed strong growth in sales of 10% in the year at
constant currency.
Gross Profit
Despite the increased sales, tight management of manufacturing
helped minimise increases in cost of sales to GBP12.2 million
(2014: GBP12.0 million). This, together with the revenue increase
of GBP1.3 million, increased the gross margin percentage by 30
basis points to 71.8%, leading to a gross profit of GBP31.1 million
(2014: GBP30.0 million).
Operating Expenses
Total overheads are GBP1.5 million higher against the prior year
at GBP30.4 million (2014: GBP28.9 million). Distribution costs,
which are mainly European sales and marketing costs, were
positively impacted by a weaker Euro, decreasing by GBP0.8 million
to GBP17.1 million (2014: GBP17.9 million). However, administration
expenses increased to GBP10.2 million (2014: GBP8.0 million), an
increase of GBP2.2 million on the prior year. The major driver
behind this increase was foreign exchange; the company booking a
non-cash loss of GBP1.1m on its US dollar cash deposits due to the
weakening dollar netted with a small gain on the fair valuation of
Euro assets of GBP0.4 million (2014: GBP0.7 million). The remainder
of the increase was due to increased support costs on the Company's
IT systems to comply with new German banking requirements,
acquisition fees relating to the Alerpharma purchase and staff
employment costs. Further work relating to the dose ranging study
for Pollinex Quattro Birch continued during the year as well as the
commencement of the US study programme, and these were the main
factors behind the year's R&D costs of GBP3.1 million (2014:
GBP3.0 million).
Tax
The current year tax charge is predominately made up of the
reversal of the brought forward deferred tax asset, on the
assumption that in future years the Company will be loss making as
a result of increased investments in the US clinical program, and
provisions for tax in the Italian and German subsidiaries. The tax
charge in the prior year relates mainly to the Italian
subsidiary.
Balance Sheet
Property, plant and equipment increased by GBP1.8 million to
GBP8.8 million as a result of the acquisition of Alerpharma.
Excluding this, the depreciation charge for the period equalled new
equipment purchases. Goodwill increased to GBP3.0 million with the
acquisition of Alerpharma (2014: GBP2.5 million), whilst other
intangible assets have risen by GBP0.7 million, again mainly as a
result of the Alerpharma purchase.
Total current assets excluding cash have increased by GBP0.4
million to GBP12.6 million (2014: GBP12.2 million). This is mainly
due to an increase in fair value of derivative financial
instruments.
Retirement benefit obligations, which relate solely to the
German pension scheme, increased to GBP6.8 million (2014: GBP6.4
million). The increase in the liability was driven by a fall in
German bond yields at the year-end compared to the previous
year.
Net cash generated by operations remained positive, increasing
slightly, with a reported inflow of GBP2.5 million (2014: GBP2.3
million).
Financing
In March 2015, 94,117,650 new ordinary shares of 0.1 pence each
("Ordinary Shares") were placed with institutional and other
investors raising proceeds of GBP20.8 million before expenses;
GBP20.0 million to the Company after expenses. The net proceeds of
the placing will be used to fund the clinical development of
Pollinex Quattro Grass through to a BLA to obtain FDA regulatory
approval in the US. Pollinex Quattro Grass could become the first
licensed seasonal SCIT allergy vaccine authorised for marketing in
the US, where the value of the market is estimated at $2
billion.
At the same time, the convertible loan notes which were issued
by the Company on 30 March 2012, to CFR International SpA, were
converted into 41,674,938 new Ordinary Shares (the "Conversion
Shares") at 9.7 pence per Ordinary Share.
The Group had no debt on its balance sheet at the close of the
financial year other than the loans acquired as a result of the
Alerpharma acquisition (GBP1.7 million). The annual overdraft had
been fully repaid in November 2014 and has been renewed for a
further 12 months to cover the seasonal funding requirements over
the summer of 2015.
The Directors believe that the Group will have adequate
facilities for the foreseeable future and accordingly they continue
to adopt the going concern basis in preparing the full year
results.
Ian Postlethwaite
Finance Director
18 September 2015
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2015
Year Year Year to Year to
to to 30 June 30 June
30 June 30 June
2015 2015 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000
Note
---------------------------------------- ----- --------- --------- --------- ---------
Revenue 3 43,230 41,955
Cost of sales (12,179) (11,951)
---------------------------------------- ----- --------- --------- --------- ---------
Gross profit 31,051 30,004
Sales, marketing and distribution
costs (17,060) (17,922)
Administration expenses -
other (10,218) (7,986)
Research and development costs (3,121) (2,963)
---------------------------------------- ----- --------- --------- --------- ---------
Administration expenses (13,339) (10,949)
Other income 73 76
---------------------------------------- ----- --------- --------- --------- ---------
Operating profit 725 1,209
Finance income 6 147 170
Finance expense 5 (218) (295)
---------------------------------------- ----- --------- --------- --------- ---------
Profit before tax 654 1,084
Income tax (546) (343)
---------------------------------------- ----- --------- --------- --------- ---------
Profit for the period 108 741
---------------------------------------- ----- --------- --------- --------- ---------
Earnings per share 7
Basic (pence per share) 0.02p 0.16p
Diluted (pence per share) 0.02p 0.16p
Consolidated Statement of Comprehensive
Income
for the year ended 30 June 2015
Year Year to
to 30 June
30 June
2015 2014
GBP'000 GBP'000
Profit for the period 108 741
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement of net defined
benefit liability (932) (271)
Remeasurement of investments
- retirement benefit assets 8 (10)
Items that will be reclassified
subsequently to profit or loss:
Exchange differences on translation
of foreign operations (119) (191)
Total comprehensive (loss)/profit (935) 269
========================================= ==== ========= ========= ========= ===========
CONSOLIDATED BALANCE SHEET
30 June 30 June
2015 2014
Note GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 8,750 7,030
Intangible assets - goodwill 2,980 2,480
Intangible assets - other 2,020 1,291
Investments - retirement benefit
asset 3,160 3,212
Deferred taxation asset - 174
Total non-current assets 16,910 14,187
Current assets
Trade and other receivables 5,060 5,368
Inventories 8 6,747 6,469
Cash and cash in hand 21,199 2,029
Derivative financial instruments 783 345
---------------------------------------- ----- ------------------- ----------
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September 21, 2015 02:01 ET (06:01 GMT)
Total current assets 33,789 14,211
---------------------------------------- ----- ------------------- ----------
Total assets 50,699 28,398
---------------------------------------- ----- ------------------- ----------
Liabilities
Current liabilities
Trade and other payables (7,169) (6,425)
Current borrowings 9 (251) (49)
Total current liabilities (7,420) (6,474)
Net current assets 26,369 7,737
---------------------------------------- ----- ------------------- ----------
Non-current liabilities
Retirement benefit obligations (6,755) (6,418)
Deferred taxation liability (298) (136)
Non-current provisions (211) (222)
Other non-current liabilities (113) (73)
Long term borrowings 9 (1,433) -
---------------------------------------- -----
Total non-current liabilities (8,810) (6,849)
---------------------------------------- ----- ------------------- ----------
Total liabilities (16,230) (13,323)
---------------------------------------- -----
Net assets 34,469 15,075
======================================== ===== =================== ==========
Equity
Capital and reserves
Issued share capital 10 556 420
Share premium 91,463 67,716
Merger reserve - shares issued
by subsidiary 40,128 40,128
Reserve - EBT 67 67
Reserve - share based payments 591 465
Reserve - convertible loan notes - 3,652
Revaluation reserve 1,178 1,178
Foreign exchange reserve (140) (21)
Retained earnings (99,374) (98,530)
---------------------------------------- ----- ------------------- ----------
Total equity 34,469 15,075
======================================== ===== =================== ==========
These financial statements were approved by the Board of
Directors on 18 September 2015 and were signed on its behalf by
Manuel Llobet Ian Postlethwaite
Chief Executive Officer Finance Director
Registered number: 05141592
Consolidated Statement of Changes in Equity
Issued Share Merger Reserve Reserve Reserve Foreign Retained Total
Capital premium reserve - - share - Revaluation exchange earnings equity
- shares shares based convertible reserve reserve
issued held payment loan
by in note
subsidiary EBT
--------- -------- ----------- -------- -------- ------------ ------------- --------- ----------------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June
2013 420 67,716 40,128 67 679 3,652 1,178 170 (99,339) 14,671
Exchange
differences
on
translation
of foreign
operations - - - - - - - (191) - (191)
Remeasurement
of net
defined
benefit
liability - - - - - - - - (271) (271)
Remeasurement
of
investments
- retirement
benefit
assets - - - - - - - - (10) (10)
--------- -------- ----------- -------- -------- ------------ ------------- --------- ----------------- --------
Total other
comprehensive
income - - - - - - - (191) (281) (472)
Profit for
the period
after tax - - - - - - - - 741 741
--------- -------- ----------- -------- -------- ------------ ------------- --------- ----------------- --------
Total
comprehensive
income - - - - - - - (191) 460 269
Transactions
with
shareholders
-Convertible
loan note - - - - - - - - (49) (49)
Share based
payments - - - - 184 - - - - 184
Shares issued - - - - - - - - - -
Transfer of
lapsed
options
to retained
earnings - - - - (398) - - - 398 -
--------- -------- ----------- -------- -------- ------------ ------------- --------- ----------------- --------
At 30 June
2014 420 67,716 40,128 67 465 3,652 1,178 (21) (98,530) 15,075
========= ======== =========== ======== ======== ============ ============= ========= ================= ========
Exchange
differences
on
translation
of foreign
operations - - - - - - - (119) - (119)
Remeasurement
of net
defined
benefit
liability - - - - - - - - (932) (932)
Remeasurement
of
investments
- retirement
benefit
assets - - - - - - - - 8 8
--------- -------- ----------- -------- -------- ------------ ------------- --------- ----------------- --------
Total other
comprehensive
income - - - - - - - (119) (924) (1,043)
Profit for
the period
after tax - - - - - - - - 108 108
--------- -------- ----------- -------- -------- ------------ ------------- --------- ----------------- --------
Total
comprehensive
income - - - - - - - (119) (816) (935)
Transactions
with
shareholders
-Convertible
loan note - - - - - - - - (86) (86)
Conversion
of loan note
to equity 42 3,832 - - - (3,652) - - (222) -
Share based
payments - - - - 406 - - - - 406
Shares issued 94 19,915 - - - - - - - 20,009
Transfer of
lapsed
options
to retained
earnings - - - - (280) - - - 280 -
At 30 June
2015 556 91,463 40,128 67 591 - 1,178 (140) (99,374) 34,469
========= ======== =========== ======== ======== ============ ============= ========= ================= ========
Consolidated Cash Flow Statement
Year to Year to
30 June 30 June
2015 2014
GBP'000 GBP'000
Note
--------------------------------------------- --- ----- --------- ---------
Cash flows from operating activities
Profit before tax 654 1,084
Adjustments for:
Finance income 6 (147) (170)
Finance expense 5 218 295
Non cash movements on defined benefit
pension plan 290 160
Depreciation and amortisation 1,293 1,287
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Charge for share based payments 406 184
Movement in fair valuation of derivative
financial instruments (438) (669)
Disposal of intangible assets and property,
plant and equipment - 1
(Increase)/ decrease in trade and other
receivables (448) 1,689
(Increase) in inventories (424) (625)
Increase/ (decrease) in trade and other
payables 1,079 (911)
-------------------------------------------------- ----- --------- ---------
Net cash generated by operations 2,483 2,325
Interest paid (304) (102)
Income tax (174) (50)
-------------------------------------------------- -----
Net cash generated by operating activities 2,005 2,173
Cash flows from investing activities
Interest received 65 71
Investments (275) (281)
Acquisition of Alerpharma Group (2,653) -
Cash acquired on acquisition of Alerpharma 1,301 -
Group
Payments for intangible assets (13) (22)
Payments for property plant and equipment (1,091) (898)
Net cash used in investing activities (2,666) (1,130)
Cash flows from financing activities
Proceeds from issue of equity shares (net 20,079 -
of issue costs)
Net cash generated by financing activities 20,079 -
--------------------------------------------- --- ----- --------- ---------
Net increase in cash and cash equivalents 19,418 1,043
Effects of exchange rates on cash and
cash equivalents (248) (78)
Cash and cash equivalents at the start
of the period 2,029 1,064
-------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at the end of
the period 21,199 2,029
================================================== ===== ========= =========
Cash at bank and in hand 21,199 2,029
Bank overdraft - -
---------------------------------------- ------- ------
Cash and cash equivalents at the end
of the period 21,199 2,029
---------------------------------------- ------- ------
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined in
Section 435 of the Companies Act 2006.
Allergy Therapeutics is a specialty pharmaceutical company
focused on allergy vaccination.
Allergy Therapeutics plc is the Group's parent company. The
Company is a limited liability company incorporated and domiciled
in England. The address of Allergy Therapeutics plc's registered
office and its principal place of business is Dominion Way,
Worthing, West Sussex and its shares are listed on the Alternative
Investment Market (AIM).
The consolidated financial statements for the year ended 30 June
2015 (including comparatives) have been prepared under the
historical cost convention except for land and buildings and
derivative financial instruments which have been measured at fair
value. They were approved and authorised for issue by the Board of
Directors on 18 September 2015.
New standards adopted
There are no IFRS or IAS interpretations that are effective for
the first time in this financial period that have had a material
impact on the Group.
Standards, amendments and interpretations to existing standards
that are not yet effective and have not been early adopted by the
Group in the 30 June 2015 financial statements
At the date of authorisation of these financial statements,
certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective. Not all of
these have yet been adopted by the EU. The Group has not adopted
any of these pronouncements early. The new standards, amendments
and interpretations that are expected to be relevant to the Group's
financial statements are as follows:
IFRS 9 Financial Instruments (effective 1 January 2018)
This IFRS replaces IAS39 and addresses the usefulness for users
of financial statements by simplifying the classification and
measurement requirements for financial instruments. Management are
currently assessing the detailed impact on the Group's financial
statements.
IFRS 15 Revenue from Contracts with Customers (issued in May
2014 and effective 1 January 2018)
IFRS 15 supersedes current revenue recognition guidance
including IAS 18, Revenue, and specifies how and when entities
recognise revenue as well as requiring such entities to provide
users of financial statements with more informative, relevant
disclosures. The standard provides a single, principles based
five-step model to be applied to all contracts with customers.
Management anticipate that the above pronouncements will be
adopted in the Group's financial statements in line with the
effective dates stated above. Management are currently assessing
their detailed impact on the Group's financial statements.
Other new standards and interpretations have been issued but are
not expected to have a material impact on the Group's financial
statements.
Going concern
For the year ended 30 June 2015, and for the sixth year in
succession, the Group has reported an operating profit and an
operating cash inflow. Operating profit in the period was GBP0.7
million (2014: GBP1.2 million); net cash from operations was GBP2.5
million (2014: GBP2.3 million).
The Group has prepared detailed budgets, including cash flow
projections, for the periods ending 30 June 2016 and 30 June 2017.
These projections include assumptions on the trading performance of
the operating business and the continued availability of the
existing overdraft facilities. After making appropriate enquiries,
which included a review of the annual budget, by considering the
cash flow requirements for the foreseeable future and the effects
of sales and other sensitivities on the Group's funding plans, the
Directors continue to believe that the Group will have adequate
resources to continue in operational existence for the foreseeable
future and accordingly have applied the going concern principle in
drawing up the financial statements. In reaching this view, the
Directors have considered and prioritised the actions that could be
taken to offset the impact of any shortfall in operating
performance.
2. ACCOUNTING POLICIES (extract)
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all years presented unless otherwise
stated.
Consolidation
The Group's financial statements consolidate those of the parent
company and all of its subsidiaries drawn up to 30 June 2015. The
parent controls a subsidiary if it is exposed, or has rights, to
variable returns from its involvement with the subsidiary and has
the ability to affect those returns through its power over the
subsidiary.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated on the
date control ceases.
Inter-company transactions, balances and unrealised gains and
losses on transactions between Group companies are eliminated
except for unrealised losses if they show evidence of
impairment.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring accounting policies used into
line with those used in the Group.
The Group applies the acquisition method in accounting for
business combinations. The consideration transferred by the Group
to obtain control of a subsidiary is calculated as the sum of the
acquisition-date fair values of assets transferred, liabilities
incurred and the equity interests issued by the Group, which
includes the fair value of any liability arising from a contingent
consideration arrangement. Acquisition costs are expensed as
incurred.
The Group recognises identifiable assets acquired and
liabilities assumed in a business combination regardless of whether
they have been previously recognised in the acquiree's financial
statements prior to the acquisition. Assets acquired and
liabilities assumed are measured at their acquisition-date fair
values.
Goodwill is stated after separate recognition of identifiable
intangible assets. It is calculated as the excess of the sum of a)
fair value of consideration transferred, b) the recognised amount
of any non-controlling interest in the acquiree and c)
acquisition-date fair value of any existing equity interest in the
acquiree, over the acquisition-date fair values of identifiable net
assets. If the fair values of identifiable net assets exceed the
sum calculated above, the excess amount (i.e. gain on a bargain
purchase) is recognised in profit or loss immediately.
Goodwill
Goodwill arising from business combinations is the difference
between the fair value of the consideration paid and the fair value
of the assets and liabilities and contingent liabilities acquired.
It is initially recognised as an intangible asset at cost and is
subject to impairment testing on an annual basis or more frequently
if circumstances indicate that the asset may have been impaired.
Details of impairment testing are described in the accounting
policies.
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Intangible assets acquired as part of a business combination
Intangible assets acquired in a business combination are
identified and recognised separately from goodwill where they
satisfy the definition of an intangible asset and their fair values
can be measured reliably. The cost of such intangible assets is
their fair value at the acquisition date.
Subsequent to initial recognition, intangible assets acquired in
a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses. Intangible assets
are amortised over their useful economic life as follows
Trade names 15 years
Customer relationships 5 years
Know-how and patents 10 years
Distribution agreements 15 years/ period of contract
Externally acquired intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation and
any accumulated impairment losses.
Intangible assets are amortised over their useful economic life
as below and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for intangible
assets is reviewed at least at each financial year end.
Computer software 7 years
Other intangibles 15 years
Changes in the expected useful life or the expected pattern of
consumption of future economic benefits embodied in the asset is
accounted for by changing the amortisation period or method, as
appropriate, and are treated as changes in accounting estimates.
The amortisation expense on intangible assets is recognised in
income statement in the expense category consistent with the
function of the intangible asset.
Internally generated intangible assets
An internally generated intangible asset arising from
development (or the development phase) of an internal project is
recognised if, and only if, all of the following have been
demonstrated:
-- the technical feasibility of completing the intangible asset
so that it will be available for use or sale
-- the intention to complete the intangible asset and use or sell it
-- the ability to use or sell the intangible asset
-- how the intangible asset will generate probable future economic benefits
-- the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset
-- the ability to measure reliably the expenditure attributable
to the intangible asset during its development
The amount initially recognised for internally generated
intangible assets is the sum of the expenditure incurred from the
date when the intangible asset first meets the recognition criteria
listed above. Where no internally generated intangible asset can be
recognised, research and development expenditure is charged to the
income statement in the period in which it is incurred.
Subsequent to initial recognition, internally generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses. Amortisation shall
begin when the asset is available for use, i.e. when it is in the
location and condition necessary for it to be capable of operating
in the manner intended by management.
Amortisation of all intangible assets is calculated on a
straight line basis over the useful economic life using the
following annual rates:
Manufacturing know-how 15 years
Non-competing know-how 4 years
Other intangibles 15 years
These periods were selected to reflect the assets' useful
economic lives to the Group.
The cost of amortising intangible assets is included within
administration expenses in the consolidated income statement.
Revenue recognition
Revenue is measured by reference to the fair value of
consideration received or receivable by the Group for goods
supplied and services provided, net of statutory rebates paid in
Germany and excluding value added tax. Revenue is recognised upon
the performance of services or transfer of risk to the
customer.
Sale of goods
Revenue from the sale of goods is recognised when all the
following conditions have been satisfied:
-- the Group has transferred to the buyer the significant risks
and rewards of ownership of the goods, which is generally when the
customer has physically received the goods.
-- the Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the goods sold which is again when the customer has
physically received the goods.
-- the amount of revenue can be measured reliably.
-- it is probable that the economic benefits associated with the
transaction will flow to the Group, and
-- the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
Where the Group provides services to new distributors, which
mainly include marketing and customer information, in exchange for
an up-front lump sum fee, revenue is recognised in line with these
services being delivered. Services are fair valued and pro-rated to
agree to the total fee receivable. Where there is an on-going
responsibility to provide services, the balance relating to those
services is recognised in future periods as the service is
performed.
Part of the Group's overseas sales are made through distributors
and agents.
Arrangements for sales through distributors
For all distributor arrangements, the distributor is invoiced at
the time of delivery and title to the product passes upon full and
final settlement of the invoice to which the delivery relates. The
distributor has full discretion over the setting of the final
selling price to the end customer and is responsible for all
customer returns of product.
It is considered that the significant risks and rewards of
ownership of the product are transferred to the distributor at the
point of delivery and therefore revenue is recognised at this point
in accordance with IAS 18.
Where the Group sells to distributors at initially low margin
and there is further consideration receivable by the group, this
deferred consideration forms part of the fair valuation of
consideration receivable by the Group for goods supplied. In these
instances the deferred consideration is accrued at a discounted
value at the point of delivery.
Arrangements for sales through agents
For all agreements with agents, the agent places orders with the
Group, and goods are then shipped to them. The Group however, holds
title to these products until they are sold on to a third party.
The selling price to the end user is set by the relevant Government
body and the agent receives a fixed percentage of this selling
price. The agent notifies the Group monthly on stock levels and
this is reconciled to a statement which generates an invoice for
payment by the agent. The Group is responsible for any customer
returns of product.
It is considered that the significant risks and rewards of
ownership of the product are not transferred from the Group until
the agent has sold the product to a third party and therefore
revenue on these sales is recognised only at this point by the
Group in accordance with IAS 18.16.
Statutory Rebates
In Germany, Pharmaceutical companies are required to pay a
manufacturer's rebate to the government as a contribution to the
cost of medicines paid for by the State and private health funds.
This is similar to a sales tax and the rebate is therefore treated
as a deduction from revenue in accordance with IAS18.8.
Rebates have been in the region of 6% (inclusive of VAT).
However, in 2010 the German government increased the rate to 16%.
In certain circumstances, companies could apply for an exemption
from the rebate increase, for limited periods at a time. If the
application for the exemption is successful, a preliminary
exemption is normally granted to be converted to a final exemption
at a later date when audited financial statements are
available.
Allergy Therapeutics plc has been successful in obtaining
preliminary exemptions up to 30 June 2012, which have been
subsequently confirmed as final.
Revenue is recognised initially net of the full rebate, as at
that stage it is not considered probable that any refund of the
rebate will be received. When the preliminary exemption is granted,
it is considered probable, based on our past experience, that the
rebate refund will be received. Therefore, as it is probable that
the economic benefits will flow to Allergy Therapeutics Plc, in
accordance with IAS 18.14(d), revenue is adjusted at that time.
As of April 2014, the Rebate has been set at 7%.
Inventories
Inventory is carried at the lower of cost or net realisable
value. The costs of raw materials, consumables, work in progress
and finished goods are measured by means of weighted average cost
using standard costing techniques. Cost of finished goods and work
in progress comprises direct production costs such as raw
materials, consumables, utilities and labour, and production
overheads such as employee costs, depreciation, maintenance and
indirect factory costs. Standard costs are reviewed regularly in
order to ensure relevant measures of utilisation, production lead
time and appropriate levels of manufacturing expense are reflected
in the standards.
Net realisable value is calculated based on the selling price in
the normal course of business less any costs to sell.
Research & Development Investment Credits
Investment credits are directly related to the Group's
qualifying research and development expenditure and have a monetary
value that is independent of the Group's tax liability. Such
investment credits are dealt with in other income in the income
statement.
Convertible loan notes
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Convertible loan notes are regarded as compound instruments
consisting of a liability component and an equity component. At the
date of issue the fair value of the liability component is
estimated using a discount rate for an equivalent liability without
the conversion feature. The difference between the proceeds of
issue of the convertible loan note and the fair value assigned to
liability component, representing the embedded option to convert
the liability into equity of the Group, is included in equity.
Use of accounting estimates and judgements
Many of the amounts included in the financial statements involve
the use of judgement and/or estimation. 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 policies and/or the notes
to the financial statements and the key areas are summarised
below:
Judgements in applying accounting policies
a) Capitalisation of development costs requires analysis of the
technical feasibility and commercial viability of the project
concerned. Capitalisation of the costs will be made only where
there is evidence that an economic benefit will accrue to the
Group. To date no development costs have been capitalised and all
costs have been expensed in the income statement as research and
development costs, GBP3.1 million (2014: GBP3.0 million)
b) Where the Group sells to distributors at initially low margin
and there is further consideration receivable by the group, this
deferred consideration forms part of the fair valuation of
consideration receivable by the Group for goods supplied. In these
instances the deferred consideration is accrued at a discounted
value at the point of delivery.
The directors considered the following points in applying this
accounting treatment:
Although a significant portion of the sales price is received
upon a further sale to an end customer, substantially all the risks
and rewards of ownership are passed to the distributor when the
goods are shipped, and the distributor is acting as principal (not
merely as agent) when arranging to resell the goods. The directors
have reached this conclusion because;
i. The group does not have any continued managerial involvement
in the distributor's onward sale of goods;
ii. The distributor does not have the right to return any goods.
More information on the reasoning behind the treatment of sales
to distributors can be found in the 'Sale of goods' accounting
policy description.
c) Land and buildings are carried at valuation and are re-valued
every 2-3 years. The last revaluation of the Italian freehold
property took place in June 2013. The directors do not consider the
current carrying value to be materially different to the fair
value, based on their experience of the local market and enquiries
of local valuers. Therefore no impairment provision for this asset
is required. The next external valuation will take place in the
year to 30 June 2016. The Freehold property in Spain was revalued
in June 2015. The directors do not consider an impairment provision
to be required.
d) The Group had been awarded a provisional exemption to the
increased rebate charge in Germany for the period July to December
2012. Revenue of GBP1.1 million (equivalent of EUR1.4 million) was
recognised in the year ended 30 June 2013 in relation to this
exemption and the refund was subsequently collected. In February
2015, the provisional exemption was withdrawn. The group has lodged
an appeal and, following legal advice, believe that the exemption
will be re-instated. While the Group is confident that the
exemption will be confirmed, there is a possibility that this will
not happen. If the exemption is not confirmed then the Group will
ultimately have to repay EUR1.4 million (GBP1.0 million) with a
corresponding impact on net income and net assets.
Sources of estimation uncertainty
a) Depreciation rates are based on estimates of the useful lives
and residual values of the assets involved. There is inherent
uncertainty in the useful lives of assets, which means that they
are constantly reviewed by management.
b) Estimates of future profitability are required for the
decision whether or not to carry forward a deferred tax asset.
c) Determining whether goodwill is impaired requires an
estimation of the value in use of the cash generating unit to which
the goodwill has been allocated. This value in use calculation
requires an estimation of the future cash flows expected to arise
from the cash generating unit and a suitable discount rate in order
to calculate the present value.
d) Inventory standard costs are reviewed regularly in order to
ensure relevant measures of utilisation, production lead time and
appropriate levels of manufacturing expense are reflected in the
standards.
e) In relation to the accrued additional revenue due from
distributors referred to in the Judgements section (point (b)
above); there is some uncertainty that the additional revenue will
crystallise as it is dependent on a further sale by the
distributor. The directors consider that the additional
consideration can be measured reliably because it is based on a
fixed list price, and our past experience indicates that the
distributor will sell the vaccines.
The directors have assessed that the accrued consideration of
GBP0.1 million is recoverable and will crystallise in future
periods and has been carried forward in prepayments and accrued
income (2014: GBP0.2m).
f) The Group operates equity-settled share based compensation
plans for remuneration of its employees comprising Long Term
Incentive Plan (LTIP) schemes. Employee services received in
exchange for the grant of any share based compensation are measured
at their fair values and expensed over the vesting period. The fair
value of this compensation is dependent on whether the provisional
share awards will ultimately vest, which in turn is dependent on
future events which are uncertain. The directors use their judgment
and experience of previous awards to estimate the probability that
the awards will vest, which impacts the fair valuation of the
compensation.
3. REVENUE
An analysis of revenue by category is set out in the table
below:
2015 2014
GBP'000 GBP'000
Sale of goods 43,205 41,871
Rendering of services 25 84
43,230 41,955
======== ========
Rendering of services relates to the supply of services to a new
distributor to assist them in setting up operations in their
territory.
4. SEGMENTAL REPORTING
The Group's operating segments are reported based on the
financial information provided to the Executive Directors, who are
defined as the Chief Operating Decision-Maker (CODM), to enable
them to allocate resources and make strategic decisions.
The CODM reviews information based on geographical market
sectors and assesses performance at an EBITDA (operating profit
before interest, tax, depreciation and amortisation) and operating
profit level. Management have identified that the reportable
segments are Central Europe (which includes the following operating
segments; Germany, Austria, Switzerland and the Netherlands),
Southern Europe (Italy and Spain), the UK (including Latin America)
and Rest of World.
Revenue by segment
Revenue from Inter Total Revenue Inter Total
External Customers Segment Segment from External Segment Segment
Revenue Revenue Customers Revenue Revenue
2015 2015 2015 2014 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Central Europe
Germany 27,137 27,137 25,782 25,782
Other 5,997 5,997 5,902 5,902
-------------------- --------- --------- --------------- --------- ---------
33,134 33,134 31,684 31,684
Southern Europe 6,888 6,888 6,718 6,718
UK 1,054 22,900 23,954 927 34,890 35,817
Rest of World 2,154 2,154 2,626 2,626
-------------------- --------- --------- --------------- --------- ---------
43,230 22,900 66,130 41,955 34,890 76,845
==================== ========= ========= =============== ========= =========
Revenues from external customers in all segments are derived
principally from the sale of a range of pharmaceutical products
designed for the immunological treatment of the allergic
condition.
Rest of World revenues include sales through distributors and
agents in several markets including Czech and Slovak Republics,
Canada and South Korea. These include rendering of services
revenues (note 3). Inter-segment revenues represent sales of
product from the UK to the operating subsidiaries. The price is set
on an arms-length basis which is eliminated on consolidation.
The CODM also reviews revenue by segment on a budgeted constant
currency basis, to provide relevant year on year comparisons.
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The following revenue table is based on a budget currency rate
of EUR 1.20: GBP1.00 which was the rate used in the 2015
budget.
Revenue Revenue
from External from External
Customers Customers
2015 2014
GBP'000 GBP'000
Central Europe
Germany 28,719 25,198
Other 6,193 5,545
--------------- ---------------
34,911 30,743
Southern Europe 7,290 6,565
UK 1,054 927
Other 2,158 2,626
--------------- ---------------
45,413 40,861
=============== ===============
The Group has no customers which individually account for more
than 10% of the Group's revenue.
Depreciation and amortisation by segment
2015 2014
GBP'000 GBP'000
Central Europe 139 154
Southern Europe 143 105
UK 1,011 1,028
-------- --------
1,293 1,287
======== ========
EBITDA by segment
2015 2014
Allocated EBITDA GBP'000 GBP'000
Central Europe (452) (810)
Southern Europe (93) (236)
UK 2,562 3,542
-------- --------
Allocated EBITDA 2,017 2,496
Depreciation and amortisation (1,293) (1,287)
-------- --------
Operating profit 724 1,209
Finance income 147 170
Finance expense (218) (295)
-------- --------
Profit before tax 653 1,084
======== ========
Total assets by segment
2015 2014
GBP'000 GBP'000
Central Europe 8,692 8,489
Southern Europe 5,450 3,608
UK 58,809 37,626
----------- ---------
72,951 49,723
Inter-segment assets (2,691) (2,572)
Inter-segment investments (19,561) (18,753)
----------- ---------
Total assets per Balance Sheet 50,699 28,398
=========== =========
Included within Central Europe are non-current assets to the
value of GBP2,980,000 (2014: GBP2,480,000) relating to Goodwill and
within Southern Europe assets to the value of GBP1,608,000 (2014:
GBP1,085,000) relating to freehold land and buildings.
Total liabilities by segment
2015 2014
GBP'000 GBP'000
Central Europe (9,779) (9,932)
Southern Europe (4,164) (1,861)
UK (4,874) (4,101)
--------- ---------
(18,817) (15,894)
Inter-segment liabilities 2,587 2,571
--------- ---------
Total liabilities per Balance Sheet (16,230) (13,323)
========= =========
5. FINANCE EXPENSE
2015 2014
GBP'000 GBP'000
Interest on borrowing facility 27 39
Change in fair value of derivative financial
instrument - (13)
Net interest expenses on defined benefit liability 191 206
Other interest and charges - 63
-------- --------
218 295
======== ========
6. FINANCE INCOME
2015 2014
GBP'000 GBP'000
Bank interest 22 5
Interest on investment assets 82 99
Other finance income 43 66
----------- --------
147 170
=========== ========
Other finance income relates to the unwinding of the discount on
accrued revenue.
7. EARNINGS PER SHARE
2015 2014
GBP'000 GBP'000
Profit after tax attributable to equity shareholders 108 741
Shares Shares
'000 '000
Issued ordinary shares at start of the period 409,867 409,867
Ordinary shares issued in the period 135,981 -
Issued ordinary shares at end of the period
Ordinary shares to be issued on conversion
of loan note (Note 10)
-------- --------
545,848 409,867
- 41,675
-------- --------
Ordinary shares 545,848 451,542
Weighted average number of shares for the
period 475,197 451,542
Potentially dilutive share options 23,045 19,965
-------- --------
Weighted average number of shares for diluted
earnings per share 498,242 471,507
Basic earnings per share (pence) 0.02p 0.16p
Diluted earnings per share (pence) 0.02p 0.16p
======== ========
8. INVENTORIES
2015 2014
GBP'000 GBP'000
Raw materials and consumables 1,675 1,854
Work in progress 2,937 3,144
Finished goods 2,135 1,471
-------- --------
6,747 6,469
======== ========
The value of inventories measured at fair value less cost to
sell was GBP334,000 (2014: GBP162,000).
9. BORROWINGS
2015 2014
GBP'000 GBP'000
Due within one year
Convertible loan note - 49
Bank Loans 251 -
251 49
-------- --------
2015 2014
GBP'000 GBP'000
Due in more than one year
Bank Loans 1,433 -
1,433 -
-------- --------
There is an overdraft facility provided by The Royal Bank of
Scotland Plc which has a variable limit during the year up to a
maximum of GBP7 million. Interest on the overdraft is at the bank's
base rate plus a fixed margin of 2.50%. The facility is secured in
favour of The Royal Bank of Scotland Plc by means of debentures
granted by the Company and its principal subsidiaries and share
pledge agreements relating to Bencard Allergie GmbH, Allergy
Therapeutics Italia SRL and Allergy Therapeutics Iberica SL. The
overdraft facility is due for renewal in May 2016.
The Convertible loan notes were issued in April 2012 (Note 10)
and converted into equity in March 2015. The convertible loan note
liability in 2014 related to the interest payable over the next
year.
As part of the acquisition of Alerpharma SA, the group acquired
loans totalling EUR2,386,000 (GBP1,684,000). The loans are secured
by way of a charge on land and buildings owned by Alerpharma Group
SA.
Capital Repayments Due
Interest rate <1Year 1-5 Years >5 Years
GBP'000 GBP'000 GBP'000
Bank Inter (1) 3 month Euribor + 0.55% 103 411 63
Bank Inter (2) 1 month Euribor + 5.0% 33 131 182
Santander 12 month Euribor + 2.5% 95 380 122
Tecnoalcala Interest Free 20 82 62
-------- ---------- ---------
251 1,004 429
-------- ---------- ---------
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10. ISSUED SHARE CAPITAL
2015 2015 2014 2014
Shares GBP'000 Shares GBP'000
Authorised share capital
Ordinary shares of 0.10p
each
1 July and 30 June 790,151,667 790 790,151,667 790
Deferred shares of 0.10p
each
1 July and 30 June 9,848,333 10 9,848,333 10
Issued and fully paid
Ordinary shares of 0.10p
At 1 July 409,866,831 410 409,866,831 410
Issued during the year:
Share options exercised 188,500 - - -
Conversion of convertible
loan 41,674,938 42 - -
Share placing 94,117,650 94 - -
At 30 June 545,847,919 546 409,866,831 410
============ ======== ============ ========
Issued and fully paid
Deferred shares of 0.10p
At 1 July 9,848,333 10 9,848,333 10
Issued during the year - - - -
At 30 June 9,848,333 10 9,848,333 10
============ ======== ============ ========
Issued share capital 555,696,252 556 419,715,164 420
============ ======== ============ ========
The deferred shares have no voting rights, dividend rights or
value attached to them.
Share options were exercised in the year with proceeds of
GBP34,000 (2014: Nil).
In April 2012, Allergy Therapeutics plc issued a convertible
loan note to a major investor, CFR Pharmaceuticals SA (CFR). The
loan agreement stated that the loan of GBP4,042,469 would be repaid
on 20 April 2014 or an earlier date advised by the note holder
(with at least 15 business days' notice). On the repayment date,
the loan had to be repaid and on the same date the note holder had
to purchase 41,674,938 shares at a fixed price of 9.7p per share.
Interest is payable at a rate of 3% per annum during the term of
the notes.
The Directors concluded that the repayment of the principal and
the mandatory investment were linked such that in substance this
represents the conversion of the loan into a fixed number of
shares, and hence the loan note was split into a liability and an
equity component. The liability component of GBP222,000 represented
the present value of the interest payments on the loan, with the
balance of GBP3,820,000 treated as equity.
Before the conversion date of the loan, CFR and Allergy
Therapeutics plc mutually agreed to amend the agreement to defer
the repayment date until 31 March 2015. The only substantive effect
of this amendment was the agreement to pay further interest of
GBP135,000 over the remaining period of the loan. This is
effectively a loss on the remeasurement of the debt. As this was
incurred with an equity shareholder, it was treated as a
transaction with owners and dealt with directly in the statement of
changes in equity (2015: GBP86,000, 2014: GBP49,000).
On 31 March 2015 the convertible loan was repaid and on the same
date 41,674,938 shares at a fixed price of 9.7p per share were
issued to the note holder in accordance with the loan
agreement.
On 31 March 2015 94,117,650 new ordinary shares of 0.1 pence
each were placed with institutional and other investors at a fixed
price of 22.1p per share, raising GBP20 million net for the purpose
of investing in a number of US clinical studies.
11. ACQUISITIONS
As part of its strategy to strengthen its sales base outside
Germany, on 5 June 2015, Allergy Therapeutics plc acquired 100% of
the issued share capital of Alerpharma SA via a subsidiary.
Alerpharma S.A. wholly owns the Spanish-based allergy immunotherapy
company Instituto de Immunologia y Alergia, S.A.U. ("Inmunal").
Inmunal is Alerpharma's principal operating subsidiary, and is
highly regarded with well-established product lines in
immunotherapy vaccines, bacteriological vaccines and diagnostics
and was established in 1989.
The initial consideration for the acquisition of EUR3.8 million
was paid to the vendor in cash at completion, funded from the
Company's operational cash flows. The total consideration includes
a potential earn-out payment based on certain 2016 sales
performance criteria, payable to the vendor in 2017. It is not
possible to calculate exactly how much will be payable but the
group do not expect it to exceed EUR650,000. The Group's best
estimation of the amount payable, is EUR205,000.
The allocation of the purchase price to the assets and
liabilities of Alerpharma S.A at the acquisition date was as
follows:
Pre-acquisition Adjustment Recognised
Carrying amount to fair value at acquisition
date
GBP'000 GBP'000 GBP'000
Property, plant and equipment 1,219 670 1,889
Intangible assets 26 830 856
----------------- --------------- ----------------
Total non-current assets 1,245 1,500 2,745
Trade and other receivables 81 - 81
Inventories 122 - 122
Cash and cash equivalents 1,301 - 1,301
----------------- --------------- ----------------
Total Assets 2,749 1,500 4,249
Trade and other payables (1,952) - (1,952)
Net deferred taxation
asset/ (liability) 387 (555) (168)
----------------- ---------------
Net identifiable assets
and liabilities 1,184 945 2,129
----------------- ---------------
Goodwill 637
----------------
Cost of acquisition 2,766
----------------
The cost of acquisition above includes the cash paid
GBP2,653,000 (EUR3,758,000) plus the discounted future contingent
consideration of GBP113,000 (EUR160,000).
The contingent consideration will be determined by the future
sales performance of the Alerpharma group and has been classified
as level 3 in the fair valuation hierarchy. The estimated cash
outflow before discounting is GBP145,000 (EUR205,000) and reflects
management's estimates of Alerpharma's sales performance in the 12
months to December 2016. The discount rate used is 17% based on the
Company's weighted average cost of capital related to the Spanish
CGU. The effects on the fair value of risk and uncertainty in the
future cash flow are dealt with by adjusting the estimated cashflow
rather than adjusting the discount rate. If Alerpharma's sales
performance were to be 10% better than expected then the discounted
liability would increase by GBP276,000 (EUR391,000). If
Alerpharma's sales performance were to be 5% or more below
expectation then the discounted liability would reduce to Nil.
Legal and professional fees associated with the acquisition
amounted to GBP205,000 and were expensed in the year ended 30 June
2015. These were shown under administration costs within the
consolidated income statement.
In relation to trade debtors that existed at the acquisition
date, there are no balances which are not expected to be
collected.
The acquisition gave rise to goodwill due to the value derived
from intangible assets in perpetuity, beyond their recognised
useful lives; the value of the assembled workforce; and the
synergies that can be realised now that Alerpharma is part of an
enlarged global group.
The intangible assets, which are recognised at fair value,
comprise the following:
i) Trade names
The Company's marketing-related intangible asset was valued by
means of the royalty savings (relief-from-royalty) method of the
income approach. Under this premise, it is assumed that a company,
without a similar asset, would license the right to use the
marketing-related intangible asset and pay a royalty related to
turnover achieved.
ii) Customer relationships
The Customer related intangible asset was valued using the
replacement cost method. At the valuation date, the Company had
existing relationships with a number of doctors in the medical
industry. The valuation captures the effort that would be required
to replace such relationships.
iii) Know-how and patents
The technology related intangible asset was valued using the
royalty savings (relief-from-royalty) method. Under this premise,
it is assumed that a company, without a similar asset, would
license the right to use the technology-based intangible assets and
pay a royalty related to turnover achieved.
The acquisition of Alerpharma S.A took place on 5 June 2015 and
as a consequence traded for three weeks as a member of the Group.
It contributed GBP0.2 million in revenue and GBP0.0 million of the
Group's operating profit.
12. CONTINGENT LIABILITIES
Allergy Therapeutics (UK) Ltd, a subsidiary of Allergy
Therapeutics plc, has given a guarantee in lieu of deposits for
leases on cars and rented office space of Bencard Allergie GmbH.
The amount as at 30 June 2015 was EUR107,426; GBP75,839 (2014:
EUR107,426; GBP85,996).
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