TIDMAGY
RNS Number : 5419N
Allergy Therapeutics PLC
25 September 2019
Allergy Therapeutics plc
("Allergy Therapeutics" or the "Group")
Preliminary Results
25 September 2019 Allergy Therapeutics plc (AIM:AGY), the fully
integrated specialty pharmaceutical company specialising in allergy
vaccines, today announces preliminary results for the year ended 30
June 2019.
Highlights
Financial Highlights
-- 8% revenue growth (both reported and constant rate(1) ) to GBP73.7m (2018: GBP68.3m)
-- 22% increase in pre-R&D operating profit to GBP11.3m
(2018: GBP9.3m) as a result of sales growth and lower overhead cost
growth
-- Strong cash balance of GBP27.4m at 30 June 2019 (2018: GBP15.5m)
-- Net profit of GBP3.5m for the year including Inflamax
settlement of GBP6m (2018: Net loss of GBP7.5m)
Operating Highlights
-- Good growth across key countries and products with 0.5point
increase in market share(2) in European business to 14.1%
(2018:13.6%)
-- Scale up of VLP-based (virus like particle) Peanut product
going well following encouraging initial discussions with
regulatory authorities; Phase I trial due to commence next year
-- Successful Modified House Dust Mite Phase I safety trial
-- Primary endpoint of Birch MATA MPL Phase III trial not met
but learnings being applied to clinical field-trial planning
-- Successful completion of legal action resulting in GBP6m
settlement with costs recovered in 2020
Manuel Llobet, Chief Executive Officer of Allergy Therapeutics,
commented: Allergy Therapeutics has traded well in 2019 with good
sales growth, cost control and the favourable settlement of legal
action delivering profitability for the year. Clinically, the
unexpected failure of the Birch trial has been a disappointment,
but we have learned from this outcome and will apply the lessons to
our future clinical field-trials including the Grass MATA MPL Phase
III trial. We are looking forward to the first in human peanut
trial in the summer of next year. With our strong cash position,
successful core products and exciting R&D pipeline, we look
forward to the future with confidence."
(1) 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.
(2) Market data and internal estimates for 12 months to 30 June
2019 for Allergy Therapeutics' direct sales competitive markets
excluding UK and Switzerland due to lack of competitor
information.
This announcement contains inside information for the purposes
of Article 7 of Regulatory (EU) No596/2014.
Analyst briefing and webcast today
Manuel Llobet, Chief Executive Officer, and Nick Wykeman, Chief
Financial Officer, will host a meeting and webcast for analysts to
provide an update on the Group, followed by a Q&A session, at
09.30am BST today at the offices of Panmure Gordon & Co, One
New Change, London, EC4M 9AF.
Dial-in details are:
Webcast link: https://edge.media-server.com/mmc/p/rwpq8gxe
UK dial-in: +44 (0) 2071 928000
US dial-in: +16315107495
Conference ID: 4269897
For further information, please contact:
Allergy Therapeutics
+44 (0) 1903 845 820
Manuel Llobet, Chief Executive Officer
Nick Wykeman, Chief Financial Officer
Panmure Gordon
+44 (0) 20 7886 2500
Freddy Crossley, Emma Earl, Corporate Finance
Erik Anderson, Corporate Broking
Consilium Strategic Communications
+44 20 3709 5700
Mary-Jane Elliott / David Daley / Nicholas Brown / Olivia
Manser
allergytherapeutics@consilium-comms.com
Stern Investor Relations, Inc.
+1 212 362 1200
Christina Tartaglia
christina@sternir.com
Notes for editors:
About Allergy Therapeutics
Allergy Therapeutics is an international commercial
biotechnology company focussed on the treatment and diagnosis of
allergic disorders, including aluminium free immunotherapy vaccines
that have the potential to cure disease. The Group sells
proprietary and third party products from its subsidiaries in nine
major European countries and via distribution agreements in an
additional ten countries. Its broad pipeline of products in
clinical development include vaccines for grass, tree and house
dust mite, and peanut allergy vaccine in pre-clinical development.
Adjuvant systems to boost performance of vaccines outside allergy
are also in development.
Formed in 1999 out of Smith Kline Beecham, Allergy Therapeutics
is headquartered in Worthing, UK with more than 11,000m2 of
state-of-the-art MHRA-approved manufacturing facilities and
laboratories. The Group, which has achieved double digit compound
annual growth since formation, employs c.500 employees and is
listed on the London Stock Exchange (AIM:AGY). For more
information, please see www.allergytherapeutics.com
Chairman's Statement
Commercial performance
Commercial performance this year has been strong with growth in
sales and further gains in market share in an increasingly tough
regulatory environment. It is encouraging to see growth across many
areas of the business, including a significant increase in
pre-R&D operating profit as well as a net profit for the
year.
Clinical performance
This year's clinical performance was affected by the results of
the pivotal Phase III Birch trial. Whilst missing the primary
endpoint was unexpected, we have learned valuable lessons from the
trial that will be applied in the next clinical field-trial.
Notably, however, we had a successful outcome of our modified House
Dust Mite MATA Phase I trial and the commercial scale up of the
Virus Like Particle (VLP) -based Peanut product is progressing
well. In the next 12 months, we expect to begin the first in-human
trial of the Peanut product. VLP is an exciting technology platform
that offers great potential in many other allergy areas and we look
forward to its clinical development.
In June 2019, litigation concluded in our favour against a
Clinical Research Organisation (CRO), Inflamax, relating to the
poorly-run Phase II Grass MATA MPL trial that took place in the US
in 2015-16. Compensation of GBP6m has been agreed and , although no
agreement in respect of legal costs was reached at the balance
sheet date, a cost reimbursement of GBP3.2m has been received and
will be recognised in 2020. This was an important result for the
Group. We have always had full confidence in the Grass MATA MPL
product and it is good to have this matter resolved.
Board
The Board is committed to maintaining and developing effective
corporate governance processes.
Following a review of the Board succession plans, we
strengthened the Board with the appointment of Mary Tavener as a
Non-Executive Director. It is intended that Mary will succeed
Stephen Smith as Chairman of the Audit Committee, following the
release of this year's Annual Results. Mary brings with her an
impressive breadth of executive experience at AIM listed businesses
and her perspective will be invaluable.
Looking Ahead
The Board and management continue to focus on growing our
current business through the delivery of patient-focused,
short-course injectable treatments while developing a pipeline of
next-generation allergy immunology products. Initial sales for the
year look strong and we have much to look forward to in the
mid-term with opportunities for the Grass MATA MPL product in the
US and the development of the VLP platform.
The Group recognises that there will be increasing regulatory
requirements in the allergy sector presenting both challenges and
opportunities in the short and mid-term.
On behalf of the Board, I would like to thank all the employees
of Allergy Therapeutics for their commitment, creativity and
teamwork.
CEO Report
This year's performance has shown yet again that Allergy
Therapeutics' focus on scientifically advanced products that are
convenient for patients is the right approach for our business. Net
sales grew by 8% to GBP73.7m (2018 GBP68.3m) in constant and actual
terms, in a market where grass pollen incidence dipped due to the
very high temperatures at the end of last summer. The Group
continued to gain market share within its core markets in Europe
and data for the key markets, in which we operate, for the 12
months to June 2019 showed a market share increase of 0.5 points to
14.1% from 13.6%. Our operating profit before R&D grew 22%, as
a result of leveraging our sales growth which is a measure used by
management to assess the trading performance. The strong operating
performance and the settlement of the legal case with Inflamax led
to a net profit of GBP3.5m. We ended the year with a strong cash
balance of GBP27.4m.
European business
The European business has continued to expand with particularly
strong growth in Austria, the Netherlands and Spain. In terms of
products, Venomil, Acarovac Plus, Pollinex and Pollinex Quattro
were the top performers. Higher sales of Venomil, used for bee and
wasp allergies, have been driven by a number of allergists using
the product for the first time. The increase of Pollinex and
Pollinex Quattro has been driven by increased penetration of the
markets due to the quality of the products and the expertise of our
sales and marketing team. We continue to look for new markets and
we are exploring potential partnership options for the Chinese
market.
Clinical trials
This year was affected by the results of the Birch MATA MPL
Phase III trial. The results were unexpected given the two
successful Phase II Birch trials and success of this product on a
named-patient basis. Extensive work has been undertaken to
understand the reasons for the results, including engaging with
external experts and our analysis is still underway. We will ensure
that the learnings are applied to the fully funded Grass MATA MPL
Phase III trial due to start, subject to final design, in autumn
2020. If this clinical trial is successful, the only further trial
that will be required before submission of the Biological Licence
Application (BLA) is the completion of the safety database, opening
up a potential US market of approximately USD2bn.
The Group is in dialogue with the German regulatory authorities
about the results of the Birch MATA MPL Phase III. The team will
focus first on applying the lessons to the Grass MATA MPL trial
before returning to any further clinical trial in relation to
Birch.
Litigation
As reported in June 2019, the Group has accepted a financial
settlement of USD7.6m (GBP6.0m) plus costs from Inflamax following
successful litigation in relation to the Grass Phase II trial
undertaken in the US in 2015 and 2016. This credit is disclosed in
the R&D expenses. The Group had commenced proceedings in the
English High Court for breach of contract and misrepresentation. In
July 2019, the Group received a further $4.1m of legal cost
reimbursement that will be reported in the 2020 financial year as
no agreement in respect of legal costs was reached at the balance
sheet date. The result has drawn a line under the trial and
achieved compensation for the costs incurred.
Pipeline Progress
In May 2019, we announced the successful completion of the House
Dust Mite Phase I trial to evaluate safety and tolerability of our
investigational house dust mite allergy vaccine. The Phase II
dosing trial is currently planned to start in 2020. The product,
which is the only short-course treatment for perennial house dust
mite, is state of the art and has great potential with patients
across Europe, the USA and China. The estimated global market is
$3-4bn.
The VLP-based Peanut product continues to progress well at this
early stage. We had successful meetings with the Paul Ehrlich
Institute (PEI) and Swissmedic, the Swiss regulatory authority, to
discuss an outline protocol for the first in-human trial that is
due to take place in the summer of next year. The project has been
fully endorsed by both regulatory authorities. The industrial
scale-up of the product is progressing well with completion of
manufacture of the Investigational Medicinal Product (IMP) batches
and stability testing about to begin. There is a potential global
market of USD8bn for a product treating this current unmet
need.
The German TAV process continues with the Oralvac Mite Phase II
trial due to start within the 2020 financial year. Additionally,
discussions are underway within the European Member states to
harmonise marketing authorisations for all allergen medicinal
products. Consultation is at an early stage but the indication is
that regulatory requirements for all allergen products will be
increasing but that approval of a product in one European country
will provide access to all of the European member states. All our
products that began the TAV process remain in it with further work
expected on the remaining products.
Outlook
Management expects that the next financial year will show
further growth in sales. Gross margin percentage is likely to be
similar to the 2019 financial year. Other operating costs are
likely to rise reflecting additional cost in technical support in
preparation for Brexit of approximately GBP1.5m. Research and
development costs are likely to be slightly higher than in 2019 as
we prepare for the Grass Phase III trial, due to begin in autumn
2020 subject to final design, as well as the Oralvac Mite Phase II
trial.
The Group has made preparations, where possible, relating to
Brexit contingency planning including capital investments of
GBP1.3m on cold storage facilities and a quality control laboratory
in Spain and moving stock of approved products to the Spanish
facility in advance of the deadline. The Group continues to monitor
all developments closely.
We remain positive about the future of Allergy Therapeutics and
are excited for the year ahead.
Financial Review
Overview
The core business has continued to grow profitably with results
for the 12 months to 30 June 2019 achieving an operating profit
excluding R&D(2) of GBP11.3 m (2018: GBP9.3 m). Including
R&D expense of GBP7.0 m (2018: GBP16.0 m), the Group reported
an operating profit of GBP4.4 m (2018: loss GBP6.7 m). The
operating profit includes a one-off settlement of USD7.6m (GBP6.0m)
relating to the Inflamax litigation. The net profit after tax for
the period was GBP3.5 m (2018: loss of GBP7.5 m).
Revenue
Revenue increased by 8% to GBP73.7 m (2018: GBP68.3 m). The
impact of currency has been negligible in comparison to the prior
year with the weighted average Euro exchange rate in the year was
EUR1.12 to GBP1 compared to EUR1.13 in 2018. Revenue at constant
currency(1) was 8% higher at GBP74.0 m (2018: GBP68.3 m) as shown
in the table below:
2019 2019 2019 2018 2018 2018
Germany Other Total Germany Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- ------ ------ -------- ------ ------
Revenue 45.0 28.7 73.7 42.0 26.3 68.3
Add rebates 3.8 - 3.8 4.2 - 4.2
-------------------------- -------- ------ ------ -------- ------ ------
Gross revenue 48.8 28.7 77.5 46.2 26.3 72.5
Adjustment to retranslate
at prior year foreign
exchange rate 0.2 0.1 0.3
-------------------------- -------- ------ ------ -------- ------ ------
Gross revenue at constant
currency(1) 49.0 28.8 77.8 46.2 26.3 72.5
-------------------------- -------- ------ ------ -------- ------ ------
2019 2019 2019 2018 2018 2018
Germany Other Total Germany Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- ------ ------ -------- ------ ------
Revenue 45.0 28.7 73.7 42.0 26.3 68.3
Adjustment to retranslate
at prior year foreign
exchange rate 0.2 0.1 0.3
-------------------------- -------- ------ ------ -------- ------ ------
Revenue at constant
currency(1) 45.2 28.8 74.0 42.0 26.3 68.3
-------------------------- -------- ------ ------ -------- ------ ------
(1) 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.
(2) Operating profit (pre-R&D) is calculated by adding back
R&D expenditure for the year to the operating profit of the
year to arrive at an operating profit (pre-R&D) of GBP11.3m
(2018: GBP9.3m).
Revenue from Germany was 61% (2018: 61%) of total reported
revenue. Rebates were lower this year due to changes in product
composition that may not continue in 2020. Sales of Venomil and
Acarovac Plus continued to grow very strongly while Pollinex and
Pollinex Quattro achieved reasonable growth. Total sales from other
products contributed GBP3.8 m for the year ended 30 June 2019
(2018: GBP4.1 m).
Revenue in Germany grew well in the year with revenue at
constant currency(1) increasing to GBP45.2 m (2018: GBP42.0 m), an
increase of 8%.
All the main European markets (except for Italy) exhibited good
sales growth at constant currency(1) with Spain showing 12%; the
Netherlands 16%; Austria 13% and Germany 8%. The Group continues to
develop new and existing markets to reduce reliance on the German
market
Gross profit
Cost of sales increased to GBP18.4 m (2018: GBP17.0 m). The
gross margin was 75% (2018: 75%), leading to a gross profit of
GBP55.3 m (2018: GBP51.3 m).
Operating expenses
Total overheads were GBP1.1 m lower than prior year at GBP57.6 m
(2018: GBP58.7 m), excluding the credit in relation to the Inflamax
legal settlement. This was due to a GBP3m reduction in R&D
expenses in the year due to lower clinical activity partially
offset by increased administration expenses.
Sales, marketing and distribution costs which were mainly in
continental Europe, remained flat at GBP27.0 m (2018: GBP27.1 m).
Other administration expenses increased by GBP2.1 m to GBP17.6 m
(2018: GBP15.5 m) which included GBP0.6m of Brexit-related costs.
The rest of the increase was driven by additional investment in
compliance and support functions.
Other income in the year of GBP0.6 m (2018: GBP0.6 m) was all
due to R&D tax credits in the UK.
Tax
The current and prior year tax charges are predominately made up
of provisions for tax in the Italian and German subsidiaries.
Balance sheet
Property, plant and equipment increased by GBP1.4 m to GBP11.5 m
(2018: GBP10.1 m) with investment in new manufacturing plant to
replace older equipment and increase automation. Goodwill was
similar to last year at GBP3.4 m (2018: GBP3.4 m), whilst other
intangible assets were reduced slightly due to GBP1.4 m (2018:
GBP1.5 m).
Total current assets, excluding cash, increased to GBP19.2 m
(2018: GBP15.3 m). Inventory increased further by GBP0.6 m due to
early production of commercial stock as part of Brexit preparations
(cover for approved products for the 2020 financial year). Trade
and other receivables have increased due to a receivable related to
the legal settlement (GBP3.2m) as well as timing. Cash and cash at
hand increased to GBP27.4 m from GBP15.5 m in 2018.
The fair value of derivative financial instruments was a
liability of GBP0.4 m in 2019 (2018: GBP0.1 m).
Retirement benefit obligations, which relate solely to the
German pension scheme, increased to GBP11.7 m (2018: GBP10.3 m).
The increase in the liability was mainly driven by the reduction in
the discount rate from 1.85% to 1.45%.
The Group had a net cash inflow of GBP11.8 m in the year (2018:
GBP6.6 m cash outflow) primarily due to an equity raise, good
trading and settlement of the Inflamax legal case.
Currency
The Group uses forward exchange contracts to mitigate exposure
to the effects of exchange rates. The current policy of the Group
is to cover, on average, about 70% of the net Euro exposure for a
year on a declining basis.
Financing
The Group's debt on its balance sheet relates to activities in
Spain and consists of the loans acquired as a result of the
Alerpharma acquisition (GBP0.9 m) and further loans (GBP1.5 m)
arranged to fund development of products in the Spanish market. The
overdraft facility was unused at 30 June 2019 but has since been
renewed for a further 12 months to cover seasonal funding
requirements.
In July 2018, the Group completed a successful placing and
subscription of 40m shares, raising GBP10.6m gross (GBP10.2m net of
expenses).
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. For further details, see Note 1, Going concern.
Legal
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 m (GBP1.1 m at that time) 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 reinstated. Therefore, as at 30 June
2019, no provision has been recognised for the repayment of the
rebate refund of EUR1.4 m (GBP1.2 m). This position will be kept
under review.
Consolidated Income Statement for the year ended 30 June
2019
Year Year Year Year
to to to to
30 June 30 June 30 June 30 June
2019 2019 2018 2018
Note GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- ---- --------- -------- -------- --------
Revenue 3 73,717 68,346
Cost of sales (18,379) (17,013)
---------------------------------------------- ---- --------- -------- -------- --------
Gross profit 55,338 51,333
Sales, marketing and distribution costs (26,995) (27,133)
Administration expenses - other (17,595) (15,543)
Research and development costs - expenditure
for the year (12,987) (16,017)
- credit relating to legal settlement 6,037 -
- total research and development costs (6,950) 16,017
---------------------------------------------- ---- --------- -------- -------- --------
Total administration expenses (24,545) (31,560)
Other income 5 593 630
---------------------------------------------- ---- --------- -------- -------- --------
Operating profit/(loss) 4,391 (6,730)
Finance income 7 103 154
Finance expense 6 (201) (320)
---------------------------------------------- ---- --------- -------- -------- --------
Profit/(loss) before tax 4,293 (6,896)
Income tax (826) (637)
---------------------------------------------- ---- --------- -------- -------- --------
Profit/(loss) for the period 3,467 (7,533)
---------------------------------------------- ---- --------- -------- -------- --------
Profit/(loss) per share 8
Basic (pence per share) 0.55p (1.27)p
Diluted (pence per share) 0.52p (1.27)p
---------------------------------------------- ---- --------- -------- -------- --------
Consolidated Statement of Comprehensive Income for the year
ended 30 June 2019
Year Year
to to
30 June 30 June
2019 2018
Note GBP'000 GBP'000
---------------------------------------------------------- ----- -------- --------
Profit/(loss) for the period 3,467 (7,533)
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement of net defined benefit liability (906) (278)
Remeasurement of investments - retirement benefit assets (42) (39)
Revaluation gains - freehold land and buildings 312 _
Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translation of foreign operations 130 (68)
----------------------------------------------------------------- -------- --------
Total comprehensive profit/(loss) 2,961 (7,918)
----------------------------------------------------------------- -------- --------
Consolidated Balance Sheet
30 June 30 June
2019 2018
Note GBP'000 GBP'000
--------------------------------------------- ---- --------- ---------
Assets
Non-current assets
Property, plant and equipment 11,481 10,096
Intangible assets - goodwill 3,432 3,406
Intangible assets - other 1,408 1,543
Investments - retirement benefit asset 5,551 5,043
--------------------------------------------- ---- --------- ---------
Total non-current assets 21,872 20,088
Current assets
Inventories 9 9,409 8,808
Trade and other receivables 9,776 6,587
Cash and cash equivalents 27,440 15,533
--------------------------------------------- ---- --------- ---------
Total current assets 46,625 30,928
--------------------------------------------- ---- --------- ---------
Total assets 68,497 51,016
--------------------------------------------- ---- --------- ---------
Liabilities
Current liabilities
Trade and other payables (15,736) (13,890)
Current borrowings 10 (694) (644)
Derivative financial instruments (429) (97)
--------------------------------------------- ---- --------- ---------
Total current liabilities (16,859) (14,631)
--------------------------------------------- ---- --------- ---------
Net current assets 29,766 16,297
--------------------------------------------- ---- --------- ---------
Non-current liabilities
Retirement benefit obligations (11,747) (10,346)
Deferred taxation liability (318) (309)
Non-current provisions (273) (282)
Long-term borrowings 10 (1,742) (2,414)
--------------------------------------------- ---- --------- ---------
Total non-current liabilities (14,080) (13,351)
--------------------------------------------- ---- --------- ---------
Total liabilities (30,939) (27,982)
--------------------------------------------- ---- --------- ---------
Net assets 37,558 23,034
--------------------------------------------- ---- --------- ---------
Equity
Capital and reserves
Issued share capital 11 646 606
Share premium 112,576 102,420
Merger reserve - shares issued by subsidiary 40,128 40,128
Reserve - share-based payments 3,023 1,656
Revaluation reserve 1,207 949
Foreign exchange reserve (845) (975)
Retained earnings (119,177) (121,750)
--------------------------------------------- ---- --------- ---------
Total equity 37,558 23,034
--------------------------------------------- ---- --------- ---------
Consolidated Statement of Changes in Equity
Merger
reserve- Reserve
shares - Foreign
Issued Share issued share-based Revaluation exchange Retained Total
capital premium by subsidiary payment reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------------- ------------ ----------- --------- --------- --------
At 30 June 2017 604 102,420 40,128 900 1,254 (907) (114,434) 29,965
Exchange differences on
translation
of
foreign operations - - - - - (68) - (68)
Remeasurement of net
defined
benefit liability - - - - - - (278) (278)
Remeasurement of
investments
- retirement benefit
assets - - - - - - (39) (39)
----------------------- -------- -------- -------------- ------------ ----------- --------- --------- --------
Total other
comprehensive income - - - - - (68) (317) (385)
Loss for the period
after tax - - - - - - (7,533) (7,533)
----------------------- -------- -------- -------------- ------------ ----------- --------- --------- --------
Total comprehensive
income - - - - - (68) (7,850) (7,918)
Transfer of
depreciation on
revalued property - - - - (305) - 305 -
Transactions with
owners:
Share-based payments - - - 985 - - - 985
Shares issued 2 - - - - - - 2
Transfer of lapsed
options
to retained earnings - - - (229) - - 229 -
At 30 June 2018 606 102,420 40,128 1,656 949 (975) (121,750) 23,034
----------------------- -------- -------- -------------- ------------ ----------- --------- --------- --------
Exchange differences on
translation
of foreign operations - - - - - 130 - 130
Valuation gains taken
to equity
(Land and buildings) - - _ _ 312 _ - 312
Remeasurement of net
defined
benefit liability - - - - - - (906) (906)
Remeasurement of
investments
- retirement benefit
assets - - - - - - (42) (42)
----------------------- -------- -------- -------------- ------------ ----------- --------- --------- --------
Total other
comprehensive loss - - - - 312 130 (948) (506)
Profit for the period
after
tax - - - - - - 3,467 3,467
----------------------- -------- -------- -------------- ------------ ----------- --------- --------- --------
Total comprehensive
income - - - - 312 130 2,519 2,961
Transfer of
depreciation on
revalued property - - - - (54) - 54 -
Transactions with
owners:
Share-based payments - - - 1,367 - - - 1,367
Shares issued 40 10,560 - - - - - 10,600
Share issue costs _ (404) _ _ _ _ _ (404)
At 30 June 2019 646 112,576 40,128 3,023 1,207 (845) (119,177) 37,558
----------------------- -------- -------- -------------- ------------ ----------- --------- --------- --------
Consolidated Cash Flow Statement
Year Year
to to
30 June 30 June
2019 2018
Note GBP'000 GBP'000
-------------------------------------------------------- ---- -------- --------
Cash flows from operating activities
Profit/(loss) before tax 4,293 (6,896)
Adjustments for:
Finance income 7 (103) (154)
Finance expense 6 201 320
Non-cash movements on defined benefit pension plan 273 381
Depreciation and amortisation 2,090 2,020
Impairment of intangible assets - 224
Loss on disposal of fixed assets - 5
Net monetary value of above the line R&D tax credit (593) (630)
Charge for share-based payments 1,367 985
Movement in fair valuation of derivative financial
instruments 332 (307)
Foreign exchange revaluation on US Dollar cash deposits (36) (10)
(Increase)/decrease in trade and other receivables (1,864) 3,303
(Increase) in inventories (543) (1,330)
Increase/(decrease) in trade and other payables 162 (1,762)
-------------------------------------------------------- ---- -------- --------
Net cash generated/(used) by operations 5,579 (3,851)
Bank loan fees and interest paid (204) (318)
Income tax 225 367
-------------------------------------------------------- ---- -------- --------
Net cash generated/(used) by operating activities 5,600 (3,802)
Cash flows from investing activities
Interest received 151 48
Payments for retirement benefit investments (405) (367)
Payments for intangible assets (289) (179)
Payments for property, plant and equipment (2,810) (2,005)
-------------------------------------------------------- ---- -------- --------
Net cash used in investing activities (3,353) (2,503)
Cash flows from financing activities
Proceeds from issue of equity shares 10,600 -
Share issue costs (404) -
Share options exercised - 2
Repayment of borrowings (651) (398)
Proceeds from borrowings - 102
-------------------------------------------------------- ---- -------- --------
Net cash generated by/(used in) financing activities 9,545 (294)
-------------------------------------------------------- ---- -------- --------
Net increase/(decrease) in cash and cash equivalents 11,792 (6,599)
Effects of exchange rates on cash and cash equivalents 115 10
Cash and cash equivalents at the start of the period 15,533 22,122
-------------------------------------------------------- ---- -------- --------
Cash and cash equivalents at the end of the period 27,440 15,533
-------------------------------------------------------- ---- -------- --------
Cash at bank and in hand 27,440 15,533
Bank overdraft - -
-------------------------------------------------------- ---- -------- --------
Cash and cash equivalents at the end of the period 27,440 15,533
-------------------------------------------------------- ---- -------- --------
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.
Whist the financial information included in this announcement
has been prepared in accordance with EU adopted IFRS, this
announcement itself does not contain sufficient information to
comply with EU adopted IFRS. Statutory accounts for the year ended
30 June 2018 have been delivered to the Registrar of Companies and
those for the year to 30 June 2019 will be delivered following the
Company's annual general meeting. The auditors have reported on
those accounts. Their reports were unqualified and did not draw
attention to any matters by way of emphasis without qualifying
their report and did not contain statements under section 498(2) or
(2) Companies Act 2006 or equivalent preceding legislation.
Allergy Therapeutics is an International commercial
biotechnology Group focused on the treatment and diagnosis of
allergic disorders including immunotherapy vaccines that have the
potential to cure disease.
The Group's financial statements have been prepared in
accordance with IFRS in issue as adopted by the European Union
('EU') and with those parts of the Companies Act 2006 that are
relevant to the Group preparing its accounts in accordance with EU
adopted IFRS.
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 BN14 8SA and its shares are listed on the
AIM.
The consolidated financial statements for the year ended 30 June
2019 (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 24 September 2019.
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.
IFRS 9 'Financial Instruments' (effective 1 January 2018)
IFRS 9 "Financial Instruments" introduced extensive changes to
IAS 39's guidance on the classification and measurement of
financial assets and introduced a new "expected credit loss" model
for the impairment of financial assets. IFRS 9 also provided new
guidance on the application of hedge accounting. The impairment
model required recognition for any expected credit losses rather
than being restricted to only those that have been incurred. No
significant changes arose to receivable balances through adopting
IFRS 9.
IFRS 15 'Revenue from Contracts with Customers' (issued in May
2014 and effective 1 January 2018)
IFRS 15 supersedes previous 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.
The Company chose to implement the new standard through the
recognition of the cumulative effect of the retrospective
application of the new
standard as at the beginning of the period of initial
application on 1 July 2018, with no restatement of comparative
periods.
The standard provides a principles-based approach to the
recognition of revenue, following a five-step procedure.
The Group has reviewed its contracts with customers under the
five-step method using a portfolio approach, treating all sales as
having substantially the same terms and conditions attached. Sales
in specific territories that have differentiating factors have been
considered as exceptions.
The Group's revenues are almost entirely derived from the sale
of allergy vaccines and probiotics products. The Group considers
that all of its performance obligations have been fulfilled once
the products have been delivered to customers and will continue to
recognise revenue at that point.
The Group does not currently maintain a warranty returns
provision as the historical experience shows that returns are
insignificant. The Group does not provide extended warranties that
are considered to represent a separate performance obligation with
respect to the sale of goods and therefore do not recognise
warranty revenues separately. The Group will continue to monitor
warranty returns and will create a returns provision if necessary
in future periods.
In respect of royalty income (less than GBP0.5m p.a), earnings
are derived from distributors' further sales on to customers. The
Group has evaluated that the amounts reported under IFRS 15 are
materially consistent with the previous treatment under IAS 18. The
Group sells to distributors at an initially low margin and there is
further consideration receivable by the Group when the distributor
sells the products. This is variable deferred consideration and is
considered as part of the initial assessment of the transaction
price for goods supplied, forming part of the fair valuation of
consideration receivable. In these instances, the variable deferred
consideration is accrued at a discounted value at the point of
delivery.
The Group has concluded that the new standard has not had any
impact on the amount or timing of recognition of reported revenue
for periods up to 30 June 2018 and 30 June 2019.
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 2019 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 16 'Leases' (effective 1 January 2019)
IFRS 16 removes the current distinction between an operating and
finance lease, introducing consistent requirements for all leases
similar to the current finance lease accounting. Management are
currently assessing the detailed impact on the Group's financial
statements.
The Group will implement IFRS 16 with effect from 1 July 2019,
using the modified retrospective approach. Each lease is being
evaluated and the finance lease creditor will be calculated as the
discounted value of the remaining rentals payable under the lease
contract (including any extensions that are considered probable).
Right of use assets will be recognised equal to the finance lease
creditor. It is expected that a liability of approximately GBP8m
will be recognised on 1 July 2019 with an equal right of use asset
recognised at the same time. There will be no restatement of prior
year balances.
If IFRS 16 had been in force during the year ended 30 June 2019,
the profit before tax for the year would have remained unchanged.
EBITDA would have increased by GBP1.5m.
Going concern
Operating profit in the year was GBP4.4 million (2018: GBP6.7
million loss); net cash inflow from operations was GBP5.6 million
(2018: GBP3.9 million net cash outflow). The inflow was due to good
trading and settlement of the Inflamax legal case. Excluding the
R&D expenditure, the Group would have reported an operating
profit of GBP11.3 million (2018: GBP9.3 million).
Detailed budgets have been prepared, including cash flow
projections for the periods ending 30 June 2020 and 30 June 2021.
These projections include assumptions on the trading performance of
the operating business and the continued availability of the
existing bank facilities. The Group had a cash balance of GBP27.4m
at 30 June 2019 and the overdraft facility was renewed in August
2019. In July 2018, 40,000,000 Ordinary Shares of 0.1 pence each
were issued pursuant to a placing and subscription at a price of
26.5 pence per share
raising GBP10.6m (before expenses). After making appropriate
enquiries, which included a review of the annual budget and latest
forecast,
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 preparing these financial
statements.
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.
The accounting policies and presentation of figures in this
preliminary announcement are consistent with those in the full
financial statements that will be published shortly.
Consolidation
The Group's financial statements consolidate those of the Parent
Company and all of its subsidiaries drawn up to 30 June 2019. 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.
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 asset and be identifiable. 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 the
Consolidated Income Statement in the expense category consistent
with the function of the intangible asset in either administration
costs or marketing and distribution costs.
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; and
-- 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, R&D expenditure is charged to the Consolidated
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.
Segmental reporting
The Group's operating segments are market based and are reported
in a manner consistent with the internal reporting provided to the
Group's Chief Operating Decision Maker ('CODM') which has been
identified as the Executive Directors. The CODM is responsible for
allocating resources and assessing the performance of the operating
segments.
In identifying its operating segments, management follow the
Group's revenue lines which represent the main geographical
markets
within which the Group operates. These operating segments are
managed separately as each requires different local expertise,
regulatory knowledge and a specialised marketing approach. Each
market-based operating segment is engaged in production, marketing
and selling within a particular economic environment that is
different from that in segments operating in other economic
environments. All inter-segment transfers are carried out at arm's
length prices.
Revenue recognition
IFRS 15 - Accounting Policy:
The Group has adopted IFRS 15 'Revenue from Contracts With
Customers', which came into effect on 1 July 2018 and replaced IAS
18 'Revenue'.
The Group's previously stated revenue recognition policy, which
outlined the Group's compliance with IAS 18, and was applied during
the year ended 30 June 2018, was as follows:
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 prorated to
agree to
the total fee receivable. Where there is an ongoing
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 IAS18.
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 IAS18.16.
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 and in
accordance with IAS18.14(d) revenue is adjusted at that time.
Since April 2014, the current rebate in force has been set at
7%. The rebate also incorporates a price moratorium and this
applies to certain products in Germany.
The Group's revised revenue recognition policy, effective for
the year ended 30 June 2019 is as follows:
Revenue generated from a contract for the sale of goods is
recognised on delivery when all conditions have been fulfilled to
the customer such as the supply of vaccines.
The Group recognises revenue in accordance with the requirements
of IFRS 15 and in the five step model set out within the
standard.
STEP 1 Identifying the contract with the Customer
The Group accounts for contracts with a customer within the
scope of IFRS 15 only when all of the following criteria are
met:
a. The Group and the customer have approved the contract (in
writing, orally or in accordance with other customary business
practices) and are committed to perform their respective
obligations;
b. The Group can identify each party's rights regarding the
services to be transferred;
c. The Group can identify the payment terms for services to be
transferred;
d. The contract has commercial substance (i.e. the risk, timing
or amount of the Group's future cash flows is expected to change as
a result of the contract); and
e. It is probable that the Group will collect the consideration
to which it will be entitled in exchange for the services that will
be transferred to the customer. In evaluating whether
collectability of an amount of consideration is probable, the Group
considers only the customer's ability and intention to pay that
amount of consideration when it is due.
At contract inception, the Group assesses the services promised
within the contract and shall identifies as a performance
obligation each promise to transfer to the customer either:
a. A good service (or a bundle of services) that is distinct;
or
b. A series of distinct services that are substantially the same
and that have the same pattern of transfer to the customer
STEP 2 identifying the performance obligations
With the exception of trivial amounts, the only identifiable
performance obligation is the delivery of products.
STEP 3 determining the transaction price
For the majority of supplies, the goods are sold at an agreed
list price (or a variation of the list price as agreed between the
parties). In these cases there is no variable consideration
The one exception is in the Canadian market where the Group
sells to a distributor at an 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 and therefore forms part
of the transaction price. In these instances, the deferred
consideration is accrued at a discounted value at the point of
delivery. This further consideration is calculated at a fixed
percentage of the distributor's sales revenue in relation to these
products less certain costs associated with their sale. The
distributor revenue and selling costs are estimated based on their
selling price lists and accumulated experience. Although this
additional revenue is variable in nature it is not of a significant
value.
There is no material difference between the timing of cash
receipts and the timing of revenue recognition in respect of
revenue contracts.
STEP 4 Allocating the transaction price to the separate
performance obligations
There is only one performance obligation and accordingly the
transaction price is allocated to the delivery of the product.
STEP 5 Recognising revenue when performance obligations are
satisfied
The performance obligation is satisfied at the point in time
when the product is delivered to the customer. Each transaction is
recognised as a separate chargeable event.
IFRS 15 OTHER DISCLOSURES
All revenue recognised in the income statement is from contracts
with customers and no other revenue has been recognised.
Disclosures regarding impairment losses are detailed in Note 19,
trade and other receivables
A disaggregation of revenue is reported in Note 3, Revenue.
Revenue by segment is reported in Note 4, Segmental reporting.
Revenue for each item is recognised when the goods are provided
to the client and the obligation to pay the Group arises at the
same time. Control passes to the customer once the goods are
delivered, at which point the Group becomes entitled to
consideration for the goods provided. The Group sells on credit and
debtors are typically recovered between 20 to 90 days later.
Further details regarding this are detailed in Note 19, trade and
other receivables.
As at 30 June 2019 there were no remaining performance
obligations for revenue recognised in the year.
All obligations pertaining to revenue recognised has been met.
No revenue was recognised relating to obligations not yet
performed. No revenue has been recognised in the period relating to
obligations met in the preceding period.
Significant judgements regarding the timing of transactions or
price are detailed in Note 2, Judgements in applying in accounting
policies.
Transaction price is set out in individual contractual
agreements and there is a range of prices based on the goods
sold.
No assets were recognised from costs to obtain or fulfil a
contract with any customer.
Expenditure recognition
Operating expenses are recognised in the Consolidated Income
Statement upon utilisation of the service or at the date of their
origin.
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. The 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 on equipment used in production,
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.
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 R&D costs.
Costs expensed
in the year amounted to GBP13.0 million which together with a
credit relating to a legal settlement of GBP6.0 million resulted in
total net R&D expenditure for the year of GBP7.0 million (2018:
GBP16.0 million).
b) The Group had been awarded a provisional exemption to the
increased statutory rebate charge in Germany for the period July to
December 2012 by BAFA. 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 from the German authorities was
subsequently collected.
In February 2015, the provisional exemption was withdrawn by
BAFA. The Group has lodged an appeal and, following legal advice,
believe that the exemption will be reinstated. 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 (GBP1.2 million now) with a corresponding impact on net
income and net assets.
c) In respect of net revenue of GBP2.2m (2018: GBP1.8m) relating
to certain products, an assessment has been made on the likelihood
of a retrospective change in the level of rebates being applied.
Details of this have been noted in Note 12, (Contingent
liabilities).
d) In respect of the reimbursement of legal costs relating to
the Inflamax claim disclosed in notes 14 and 15, based on the legal
opinion from
the Group's solicitors, the directors have applied judgement in
determining that the claim for the reimbursement of legal costs
represented
a contingent asset in accordance with IAS 37 as at the balance
sheet date and did not represent a financial asset in accordance
with IFRS
9, as there was no contractually enforceable right to cash at
that point in time. Based on the legal opinion from the Group's
solicitors, the
directors have also applied judgement in assessing that the
likelihood of the legal costs being reimbursed was more than
probable but not
virtually certain as at 30 June 2019, and have accordingly
disclosed the matter as a contingent asset in accordance with IAS
37. Had the
directors taken the view that the legal cost reimbursement was
virtually certain as at 30 June 2019 an asset would have been
recognised.
Sources of estimation uncertainty
a) Determining whether goodwill is impaired requires an
estimation of the value in use of the CGU 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 CGU
and a suitable discount rate in order to calculate the present
value. In relation to the goodwill in respect of the German CGU,
there is no likely scenario in which this goodwill would be
impaired. Discount rates would have to rise beyond 5000% or annual
cash inflows would have to reduce by more than GBP20m pa before the
goodwill would be impaired.
In relation to the goodwill in respect of the Spanish CGU,
possible impairment was sensitised with a discount rate of 27% (an
increase of 10%) and alternatively with reduced annual cash inflows
of GBP0.5m with neither of these scenarios indicating an
impairment.
b) The Group operates equity-settled share-based compensation
plans for remuneration of its employees comprising 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 judgement and experience of
previous awards to estimate the probability that the awards will
vest, which impacts the fair valuation of the compensation. The key
variables to be estimated are the number of awards that will lapse
before the vesting date due to leavers, and the number of awards
that will vest in relation to the non-market performance tests.
3. Revenue
An analysis of revenue by category is set out in the table
below:
2019 2018
GBP'000 GBP'000
-------------------------------------------- ------------- --------
Sale of goods at a point in time 73,676 68,321
Rendering of services transferred over time 41 25
-------------------------------------------- ------------- --------
73,717 68,346
-------------------------------------------- ------------- --------
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 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, Spain and Portugal) and Rest of World
(including the UK).
For all material regions that have been aggregated, management
consider that they share similar economic characteristics. They are
also similar in respect of the products sold, types of customer,
distribution channels and regulatory environments.
Revenue by segment
Revenue Revenue
from Inter Total from Inter Total
external segment segment external segment segment
customers revenue revenue customers revenue revenue
2019 2019 2019 2018 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---------- -------- -------- ---------- -------- --------
Central Europe
Germany 45,021 - 45,021 42,020 - 42,020
Other 10,967 - 10,967 9,672 - 9,672
----------------------------- ---------- -------- -------- ---------- -------- --------
55,988 - 55,988 51,692 - 51,692
----------------------------- ---------- -------- -------- ---------- -------- --------
Southern Europe
Italy 4,989 - 4,989 5,138 - 5,138
Spain 7,308 - 7,308 6,551 - 6,551
Other 682 - 682 644 - 644
----------------------------- ---------- -------- -------- ---------- -------- --------
12,979 - 12,979 12,333 - 12,333
----------------------------- ---------- -------- -------- ---------- -------- --------
Rest of World (including UK) 4,750 35,056 39,806 4,321 29,164 33,485
73,717 35,056 108,773 68,346 29,164 97,510
----------------------------- ---------- -------- -------- ---------- -------- --------
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 the Czech Republic, Slovakia,
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 arm's-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.
The following revenue table is based on a budget currency rate
of EUR1.21: GBP1.00 which was the rate used in the 2019 budget.
Revenue Revenue
from from
external external
customers customers
2019 2018
GBP'000 GBP'000
---------------- ---------- ----------
Central Europe
Germany 42,065 38,148
Other 10,388 9,054
---------------- ---------- ----------
52,453 47,202
---------------- ---------- ----------
Southern Europe 12,169 11,256
UK 1,966 1,832
Other 2,719 2,487
---------------- ---------- ----------
69,307 62,777
---------------- ---------- ----------
The Group has no customers which individually account for 10% or
more of the Group's revenue.
Depreciation and amortisation by segment
2019 2018
GBP'000 GBP'000
----------------------------- -------- --------
Central Europe 279 276
Southern Europe 407 406
Rest of World (including UK) 1,404 1,338
----------------------------- -------- --------
2,090 2,020
----------------------------- -------- --------
EBITDA by segment
2019 2018
GBP'000 GBP'000
------------------------------ -------- --------
Allocated EBITDA
Central Europe 283 (867)
Southern Europe (448) (381)
Rest of World (including UK) 6,646 (3,462)
------------------------------ -------- --------
Allocated EBITDA 6,481 (4,710)
Depreciation and amortisation (2,090) (2,020)
------------------------------ -------- --------
Operating profit/(loss) 4,391 (6,730)
Finance income 103 154
Finance expense (201) (320)
------------------------------ -------- --------
Profit/(loss) before tax 4,293 (6,896)
------------------------------ -------- --------
The negative EBITDA in the Southern Europe segment arises as a
result of applying the Group's transfer pricing policy.
Total assets by segment
2019 2018
GBP'000 GBP'000
------------------------------- -------- --------
Central Europe 17,562 15,180
Southern Europe 8,674 8,632
Rest of World (including UK) 78,756 58,271
------------------------------- -------- --------
104,992 82,083
Inter-segment assets (7,728) (5,034)
Inter-segment investments (28,767) (26,033)
------------------------------- -------- --------
Total assets per balance sheet 68,497 51,016
------------------------------- -------- --------
Included within Central Europe are non-current assets to the
value of GBP2,620,000 (2018: GBP2,604,000) relating to goodwill and
within Southern Europe assets to the value of GBP2,863,000 (2018:
GBP2,691,000) relating to freehold land and buildings. There were
no material additions (excluding foreign exchange differences) to
non-current assets in any country except the UK where non-current
asset additions totalled GBP2,439,000 (2018: GBP1,497,000).
Total liabilities by segment
2019 2018
GBP'000 GBP'000
------------------------------------ -------- --------
Central Europe (18,450) (15,571)
Southern Europe (5,090) (5,334)
Rest of World (including UK) (15,127) (12,111)
------------------------------------ -------- --------
(38,667) (33,016)
Inter-segment liabilities 7,728 5,034
------------------------------------ -------- --------
Total liabilities per balance sheet (30,939) (27,982)
------------------------------------ -------- --------
5. Other income
2019 2018
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Net monetary value of above the line R&D tax credit 593 630
---------------------------------------------------- -------- --------
6. Finance expense
2019 2018
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Interest on borrowing facility 11 63
Net interest expenses on defined benefit pension liability 190 198
Other interest and charges - 59
----------------------------------------------------------- -------- --------
201 320
----------------------------------------------------------- -------- --------
7. Finance income
2019 2018
GBP'000 GBP'000
------------------------------ -------- --------
Bank interest 12 51
Interest on investment assets 76 90
Other finance income 15 13
------------------------------ -------- --------
103 154
------------------------------ -------- --------
Other finance income relates to the unwinding of the discount on
accrued revenue.
8. Earnings per share
2019 2018
GBP'000 GBP'000
------------------------------------------------------------ -------- --------
Profit/(loss) after tax attributable to equity shareholders 3,467 (7,533)
------------------------------------------------------------ -------- --------
Shares Shares
'000 '000
---------------------------------------------------------------- ------- -------
Issued Ordinary Shares at start of the period 596,169 594,118
Ordinary Shares issued in the period 40,000 2,051
---------------------------------------------------------------- ------- -------
Issued Ordinary Shares at end of the period 636,169 596,169
---------------------------------------------------------------- ------- -------
Weighted average number of Ordinary Shares for the period 632,835 595,099
Potentially dilutive share options 36,868 30,062
---------------------------------------------------------------- ------- -------
Weighted average number of Ordinary Shares for diluted earnings
per share 669,703 625,161
---------------------------------------------------------------- ------- -------
Basic earnings per Ordinary Share (pence) 0.55p (1.27)p
---------------------------------------------------------------- ------- -------
Diluted earnings per Ordinary Share (pence) 0.52p (1.27)p
---------------------------------------------------------------- ------- -------
9. Inventories
2019 2018
GBP'000 GBP'000
------------------------------ -------- --------
Raw materials and consumables 2,343 2,164
Work in progress 2,845 2,778
Finished goods 4,221 3,866
------------------------------ -------- --------
9,409 8,808
------------------------------ -------- --------
The value of inventories measured at fair value less cost to
sell was GBP322,000 (2018: GBP347,000). The movement in the value
of inventories measured at fair value less cost to sell during the
year gave rise to a credit of GBP25,000 which was dealt with in the
Consolidated Income Statement.
10. Borrowings
2019 2018
GBP'000 GBP'000
-------------------- -------- --------
Due within one year
Bank loans 694 644
-------------------- -------- --------
694 644
-------------------- -------- --------
2019 2018
GBP'000 GBP'000
-------------------------- -------- --------
Due in more than one year
Bank loans 1,742 2,414
-------------------------- -------- --------
1,742 2,414
-------------------------- -------- --------
There is an overdraft facility provided by NatWest Bank 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
NatWest Bank 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 s.r.l. and
Allergy Therapeutics Iberica S.L. In addition, the Group has issued
a lien over the Group's interest in the equity of subsidiary
undertakings as security against the banking facilities. The
overdraft facility was renewed in August 2019. The overdraft was
unused at 30 June 2019 (2018: Nil).
As part of the acquisition of Alerpharma S.A., 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 S.A.
Capital repayments
due
--------------- ----------------------- -----------------------------
<1 year 1-5 years >5 years
Interest rate GBP'000 GBP'000 GBP'000
--------------- ----------------------- -------- --------- --------
Bank Inter (1) 3 month Euribor +0.55% 139 97 -
Bank Inter (2) 1 month Euribor +5.0% 36 142 126
Santander (1) 12 month Euribor +2.5% 135 115 -
Tecnoalcala Interest free 26 78 -
Santander (2) Fixed rate of 2.5% 358 1,000 -
CDTI Interest free - 154 30
--------------- ----------------------- -------- --------- --------
694 1,586 156
--------------------------------------- -------- --------- --------
No new loans were taken out during the year.
11. Issued share capital
2019 2019 2018 2018
Shares GBP'000 Shares GBP'000
----------------------------------- ----------- -------- ----------- --------
Authorised share capital
Ordinary Shares of 0.10 pence each
1 July and 30 June 790,151,667 790 790,151,667 790
Deferred Shares of 0.10 pence each
1 July and 30 June 9,848,333 10 9,848,333 10
----------------------------------- ----------- -------- ----------- --------
Issued and fully paid
Ordinary Shares of 0.10 pence
At 1 July 596,168,616 596 594,117,768 594
Issued during the year:
Share placing 40,000,000 40 2,050,848 2
----------------------------------- ----------- -------- ----------- --------
At 30 June 636,168,616 636 596,168,616 596
----------------------------------- ----------- -------- ----------- --------
Issued and fully paid
Deferred shares of 0.10 pence
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 646,016,949 646 606,016,949 606
----------------------------------- ----------- -------- ----------- --------
The deferred shares have no voting rights, dividend rights or
value attached to them.
In July 2018, 40,000,000 ordinary shares of 0.1p each were
issued pursuant to a placing and subscription at a price of 26.5p
per share raising GBP10.6m (before expenses).
Share options issued on vesting of LTIP awards were exercised in
the year with proceeds of GBPnil (2018: GBP2,000).
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 2019 was EURNil; GBPNil (2018: EUR66,917;
GBP59,229).
A cross-guarantee exists between Allergy Therapeutics (Holdings)
Ltd, Allergy Therapeutics (UK) Ltd, Bencard Allergie GmbH, Allergy
Therapeutics Italia s.r.l. and Allergy Therapeutics Iberica S.L. in
which the liabilities of each entity to NatWest Bank plc are
guaranteed by
all the others.
In respect of net revenue relating to certain products there is
a risk that up to GBP4.0m cumulative revenue (2018:GBP1.8m) may be
reversed due to a retrospective change in the level of rebate being
applied (2019: GBP2.2m recognised and 2018: GBP1.8m
recognised).
.
On 23 February 2015, the Company received notification that the
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 EUR1.4m (GBP1.1m at that time, now
GBP1.3m) 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 reinstated.
Therefore, as at 30 June 2019, no provision has been recognised for
the repayment of the rebate refund.
This position will be kept under review.
13. Ultimate control
There is no overall ultimate controlling party.
14. Contingent asset
During the year the Group settled its legal dispute with
Inflamax (the Clinical Research organisation who had carried out
the inconclusive Grass Phase II trial on its behalf in 2016/2017).
The Group received damages of $7.6m (GBP6.0m) from Inflamax which
has been fully paid as at the year end.
In addition to the claim for damages that was settled, the Group
was also pursuing a claim in respect of reimbursement of legal
costs incurred in connection with the claim.
At the balance sheet date there was no verbal or contractual
agreement to the legal costs claim. This is not included in these
financial statements as a financial asset due to the uncertainty at
the balance sheet date about reimbursement of these costs.
15. Events after the balance sheet date
In July 2019, Inflamax paid the Group $4.1m (GBP3.2m) in respect
of legal costs which will be recognised in the Group's financial
statements for the year ended 30 June 2020.
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 EAENLAAANEAF
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