TIDMBYOT
RNS Number : 1608O
Byotrol PLC
30 September 2019
Byotrol plc
UNAUDITED PRELIMINARY RESULTS
FOR THE YEARED 31 MARCH 2019
Byotrol plc ('Byotrol', the 'Group' or the 'Company') the
AIM-quoted anti-microbial technology company presents its Unaudited
Preliminary Results for the twelve months ended 31 March 2019.
The Directors are pleased with developments in the year with
good progress in all strategic initiatives, plus the completion of
a highly complementary acquisition, Medimark Scientific Limited
("Medimark"), in August 2018
Headline unaudited financial results for the year have been
heavily influenced by new accounting standard IFRS15 on revenue
recognition, especially as it relates to the sale of intellectual
property to Solvay in late 2018. Headlines are:
-- Revenue at GBP5.66m (2018: restated GBP1.82m)
-- Gross profit at GBP3.61m (2018: restated GBP0.69m)
-- EBITDA at GBP0.82m (2018: EBITDA loss of GBP1.47m)
-- Gross cash of GBP2.80m (2018: GBP3.85m), more than sufficient to finance continued growth
If the results had been reported on the same accounting basis as
the prior year, reported EBITDA would have been broadly in line
with market expectations of negative GBP0.45m, including absorption
of non-recurring costs of acquisition of Medimark of GBP0.12m and
US costs of GBP0.39m
Operations highlights include
-- Acquisition of Medimark on a two-year earnout for an
enterprise value of up to GBP4.5m, bringing extensive sales and
marketing expertise and leadership into the Group in human and
animal health businesses. Medimark contributed GBP1.8m in sales to
Byotrol in the seven months from acquisition until year end
-- US surface care - Byotrol24 remains on trial in 207 Target
stores in the US with sales to date satisfactory on minimal
marketing spend. Following extensive consumer and market research,
which has clearly confirmed the value of the proposition to
consumers, the Company is now seeking a partner (financial or
corporate) to accelerate growth
-- Hand hygiene - steadily increasing sales of Invirtu
alcohol-free hand sanitisers into healthcare and industry.
Exclusive supply contract signed with SC Johnson Professional,
which will now be selling our formulations into UK and Irish health
services under their brand, supported by their logistics and sales
and marketing reach
-- Continued progress in EU surface care, including new
Professional product launches into the UK and further technical
development agreements with sizeable companies, including with
Tristel plc for a new sporicidal sanitiser for the healthcare
market. Separately, we understand Solvay SA continues to make good
progress with its Actizone technology in consumer markets, in which
we maintain an ongoing commercial interest
-- First class additions to the board, including Sean Gogarty as
NED and Nic Hellyer FCA as Chief Financial Officer
-- Strengthened operational leadership through addition of Rick
Hayman, MD of Medimark, now set for a broader role in the enlarged
Group
Current Trading, year to date FYE 31 March 2020
Current trading is meeting expectations for the year to date,
although financial results are currently being held back by
continued (and cautious) net spend in the US and by the delay in
achieving financial synergies from the Medimark acquisition, whilst
the earnout mechanism remains in place (until 31 March 2020).
Commenting on the unaudited results, John Langlands, Chairman of
Byotrol plc, said:
"I am pleased with progress across all aspects of the Group. The
acquisition of Medimark is a particularly encouraging development,
as it provides the sales and marketing expertise to increase sales
volumes across all of our technologies and should start to generate
some economies of scale.
We are seeing a great deal of consolidation in our markets, much
of it driven by competitors with weak technologies or regulatory
offers. The Directors remain confident that our technology-led
positioning is the right approach in this market and remain
confident in our outlook."
Enquiries:
Byotrol plc 01925 742 000
David Traynor - Chief Executive
Nic Hellyer - Chief Financial Officer
finnCap
Geoff Nash / Teddy Whiley - Corporate Finance 020 7220 0500
Richard Chambers - ECM
Notes to Editors:
Byotrol plc (BYOT.L), quoted on AIM, is a specialist developer
of antimicrobial technologies, identifying, developing, formulating
and commercialising cutting-edge antimicrobial solutions.
Our patented suite of technologies delivers powerful,
broad-spectrum efficacy, optimised against commonly-occurring and
industry-specific pathogens.
Founded in 2005, the Company seeks to develop and commercialise
advanced antimicrobial technologies that create easier, safer and
cleaner lives for everyone.
For more information, please go to www.byotrol.co.uk
Chairman's Report
Another year of progress as the Company made a major acquisition
and reported healthy profits, albeit helped by changes in
accounting standards. The market demand for products of our type
remains strong and many suppliers are struggling to adjust to the
continually changing regulatory backdrop.
Results
The group reported revenues of GBP5.66m (2018: GBP1.82m as
restated), EBITDA of GBP0.82million (2018: loss of GBP1.47m as
restated) and a net profit of GBP0.24million (2018: loss of
GBP1.57m restated). If the results had been reported on the same
basis as 2018, the reported EBITDA would have met our expectations
of negative GBP0.45m, after charging Medimark acquisition costs of
GBP0.12m and net US costs of GBP0.39m.
The new accounting standard on revenue recognition has required
the restatement of our results for 2018 with the income on the sale
of patents and intellectual property in 2018 now being fully
accounted for in 2019.
Acquisition of Medimark
In August 2018 we acquired Medimark, a leading provider of
biocide-based infection control products into the animal and human
healthcare markets for an enterprise value of up to GBP4.5 million
(including borrowings assumed and earnout payments). The business
continues to trade well but we now expect total consideration
payable to be around GBP3.5 million.
This is a highly complementary acquisition offering extensive
sales, marketing and distribution expertise in our core markets. I
am confident that the acquisition will enable us to increase sales
of Byotrol's core products as the Medimark team are sales
professionals and have an energy and focus that will benefit the
Group once the integration of the two companies has been completed.
In particular we are looking forward to seeing Rick Hayman's team
cross-sell Byotrol's technologies into the Professional markets as
there are many opportunities for growth here. I am hopeful that we
finally have the manpower, skills and contacts to pursue the
opportunities properly.
Medimark's arrival should also free up the rest of the Byotrol
team to focus again on consumer and on technical development
agreements, where we have really good expertise and where we know
our products will sell. One particular frustration of mine is that
we have effectively again missed targets for consumer sales for
Invirtu hand sanitisers in the flu season. I accept this has
largely been a question of manpower but we have an excellent
product that more people should be using.
US operations
In the US, the board has been impressed by the progress Alex
Espalin has been able to make with Byotrol24, with limited staff
and marketing resource. Getting a new product onto Target shelves
for trial and to then steadily increase the size of that trial is
certainly an achievement. However, the US supply chain is expensive
and complex and without a rapid rise in volume we are not going to
be able to generate acceptable levels of profit. In order to
achieve the increase in volume, secure additional customers and
build the brand we will need to increase resources and capabilities
and spend significantly more on marketing. So, after much research
and analysis, we have now concluded that we need a US partner
either financial or corporate to invest with us to accelerate
growth and achieve acceptable returns. We have appointed advisors
to assist in finding a suitable partner. We have a proven product,
protected by US regulations, detailed supporting consumer research
and proof that retailers will stock the product.
Financial Resources
At the year-end we had cash resources of GBP2.8m (2018:
GBP3.85m) which is sufficient to finance our ongoing operations and
the remaining earnout payments to Medimark's vendors but not to
fund additional resources, capabilities and nationwide marketing
expenditure in the US.
Strategy
Our strategy continues to be a technology-led company that
commercialises those technologies by direct product sales, by
licensing sales and by technology sales.
Board and Employees
The Board and leadership team has been significantly
strengthened by some first class hires this year. In particular I
am very pleased to welcome to the Board Sean Gogarty as
Non-Executive Director and Nic Hellyer as Chief Financial Officer.
We have already benefitted greatly from Sean's outstanding
marketing expertise, especially with respect to our US consumer
strategy and I know that Nic's finance and deal-doing skills are
very valuable additions to the team. Byotrol's previous Head of
Finance Denise Keenan will remain as Company Secretary and take on
a new position as Chief Commercial Officer where her knowledge and
experience will bring value in her new role.
I am also pleased to welcome Rick Hayman and his team to the
group and look forward to the benefits of integration once the earn
out is completed. Our total full-time employees have now increased
to 33 and I would like to thank them all for their efforts,
commitment and enthusiasm this year.
Prospects
We have been able to attract many high calibre people as a
result of the team's conviction, energy and commitment to turning
Byotrol into a valuable business. We happily sit in the centre of a
very large market undergoing substantial change and the macro
trends that the team have been identifying since I first came on
board do indeed seem to be materialising, founded on regulatory
change and complexity. Consolidation is certainly rife, less
technically-oriented companies seem to be struggling or
disappearing from view and we see many opportunities to grow.
Current trading is meeting expectations for the year to date,
although financial results are currently being held back by
continued (and cautious) net spend in the US and by the delay in
achieving financial synergies from the Medimark acquisition, whilst
the earnout mechanism remains in place (until 31 March 2020).
The Directors remain confident that our technology-led
positioning is the right approach in this market and remain
confident in our outlook
John Langlands, Chairman
30 September 2019
Chief Executive's Report
Current Year Overview
Headline Group revenue for the year to 31 March 2019 was
GBP5.66m (2018: GBP1.82m restated), EBITDA GBP0.82m (2018: loss
GBP1.47m restated) and we are pleased to report a net profit for
the year of GBP0.24m (2018: loss GBP1.57m restated).
These numbers have been boosted substantially compared to the
previous year by: (a) the inclusion for seven months in the group
of Medimark Scientific Limited ("Medimark"), acquired on 24 August
2018 and (b) the new accounting standard for revenue recognition
IFRS15 applied to a major transaction with multi-year payments in
2018, 2019 and beyond. Whilst this was a complex contract with
multiple constituents, these parts were inter-linked in the
detailed wording of the contract in such a way that new accounting
rules now require them to be recognised as one - the underlying
cash profile of the transaction is of course unaffected and to our
mind better reflects its commercial realities.
One key improvement this year has been a big increase in trading
income (product sale and multi-year royalty and commission)
compared to history and a decrease in reliance on one-offs. With
Medimark now part of the Group, we intend to increase this further
to ensure reliable profits and cashflow, whilst still closing
one-off transactions to generate extra cash and step-change
bottom-line performance.
The Directors are happy with progress over this year and are
pleased to report continued satisfactory results for the Group as a
whole, with progress in all major initiatives.
Our market and our strategy
Byotrol develops and commercialises technologies that safely
neutralise and remove microbes from places where they can harm
living things; ours is a multi-billion dollar, growing, global
market. Until relatively recently the industry consisted of
commodity-minded multinationals selling high volumes of active
ingredients to many smaller product producers selling finished
formulations, often with exaggerated claims, or with technologies
that may have had higher toxicity than users would recognise.
Since the turn of the century super-regional regulators have
been steadily reducing the number of permitted biocides and
introducing controls over performance claims and toxicity levels.
The approval processes are generally expensive, complex and
time-consuming and are still a work in progress, particularly in
the EU, but are also making our industry safer and more efficient;
we support the new rules and currently expect the UK to persist
with them even in the event of a no-deal Brexit.
Our strategy is to take advantage of the changes in a similar
way to many pharmaceutical and pesticide firms when they went
through similar industry change - by taking a very scientific
approach to our industry and developing and commercialising unique,
high-performance and trusted technologies that are approved (and
then protected) under national and super-national regulatory rules.
We then seek to monetise those technologies by way of IP sale and
alliances, license agreements and finished product sale, in both
business and consumer markets.
Since 2014, we have been developing proprietary chemistries
which we could be sure would be regulatory-approved, would meet a
specific customer need and would have some element of uniqueness
and therefore value to them. Such development work was carried out
in parallel with an ongoing sales effort of Byotrol traditional
products that we expected would at some stage fall under the
regulatory spotlight.
We did this for many years with approximately 18 employees - 7
in the laboratory, only 3 in sales - focussed on three areas, US
surface care (regulated by the US EPA) EU surface care and EU and
personal care (both regulated under the Biocidal Products
Regulations). We financed our activities largely through a series
of commercial alliances with partners of substantial sales
reach.
The Directors have long recognised, however, that we would best
accelerate growth by building our own sales force, with the
expertise and contacts to increase the volume of sales of our new
technologies, generate economies of scale, build market share and
brand presence, and eventually take us to sustainable
profitability. This led to the acquisition of UK infection control
company Medimark in August 2018.
Medimark is based in Kent and has a broad sales, marketing and
distribution expertise in infection control products for use on
surfaces, instruments and hands for the Animal Health, Human
Health, Laboratory, Environment and Retail markets, and we believe
now gives us the required sales and marketing expertise
in-house.
As part of the deal, Byotrol agreed to pay the vendors of
Medimark via an earn-out mechanism, which remains in place. Despite
this the Byotrol and Medimark teams are starting to work well
together. At year end the combined Byotrol team now numbers 33
staff, including 7 lab scientists, 10 sales people, 6 technologies
and strengthened leadership across all business units.
Markets
Professional
Including seven months of Medimark, full year revenues increased
to GBP2.71m from GBP0.92m and gross profit to GBP1.09m from
GBP0.18m. Excluding Medimark, Byotrol's underlying full year
revenues in Professional were broadly flat year on year at
GBP0.90m.
Gross margin across both Byotrol and Medimark benefited from
some good work in supply chain in the year, also comprehensively
reducing quality issues compared to previous years
We continue to service long-standing food manufacturing
customers with a variety of specialist products, but those
relationships are decreasing further in number as we focus on the
bigger opportunities and higher margins in healthcare related
segments, across human and animal markets. Our Professional
business is therefore now focused on:
-- Medimark's presence in veterinary and in human health
markets, primarily in the UK but increasingly in export. Medimark
has continued to trade well since the acquisition and is making
good progress in all its main markets. It has also brought to the
Group new products and technologies that open up new opportunities
for Byotrol as a whole
-- Invirtu alcohol-free hand sanitiser increased across all
Professional customers. At year end our products were in over 20 UK
NHS hospitals, including 2 total conversions from suppliers of
alcohol-based products. We are pleased to report here that post
year end we completed a supply agreement with SC Johnson
Professional Ltd, whereby Byotrol will now be supplying the Invirtu
formulation to the UK and Irish health services, exclusively under
SCJP branding. This will result in increased volumes of our product
to more healthcare professionals and users, supported by premier
league marketing, logistics and sales-support.
-- Actizone-based surface disinfectants, which we have now
started selling to UK facilities management, janitorial/sanitation
and healthcare providers, again mostly via distributors. Again, we
are very encouraged by responses to the early sales calls and see
this as a strong revenue-generator in FYE 2020.
Alongside the product sale business, we continue to enter into
technical development contracts with large companies with
complementary products and customer bases. One such transaction has
been completed post year end with Tristel plc, for a surface
sanitising product that combines their best-in-class chlorine
dioxide chemistry, with our long-lasting germ-killing technology;
we expect this product to be launched in late 2019.
Petcare
Petcare revenues for the year increased to GBP0.77m from
GBP0.73m in the previous year. Gross profit fell slightly to
GBP0.33m from GBP0.34m as a result of increased manufacturing costs
in the UK.
Sales to established European customers, Pets at Home, Savic and
Beaphar remain stable. This year saw Beaphar extend the
distribution of Byotrol surface care products into Eastern Europe
following successful national regulatory registrations.
Japanese distributor, Good Smile International experienced
excellent sales growth, following the launch of its new Byotrol
surface wipe. Byotrol and Good Smile continue to have a successful
and collaborative partnership.
Following a rebranding project on our Byopet range, Pet Lovers
Centre relaunched the range into Singapore and Malaysia with an
integrated marketing campaign, resulting in the highest months
sales for the range since 2015.
Chinese customer Sunon experienced some overstocking in H1,
which resulted in lower sales this year, however the Chinese pet
market is forecasted to experience strong growth over the coming
years and Byotrol is committed to strengthening its position in the
market.
Petcare continues to be a solid performer for Byotrol and a
segment that will undoubtedly benefit further from our consumer
concept testing in the US and Medimark's expertise in animal
hygiene markets.
Consumer
Headline consumer revenues and gross profits totalled GBP2.18m
(2018: GBP0.17m restated), boosted by a change in treatment as a
result of the introduction of IFRS15.
Direct sales of finished Byotrol products to retailers and
consumers were largely flat year on year, with the team focussing
more on sales via partners and alliances.
We understand that Solvay is making good progress with its
newly-acquired (from us) Actizone technology and is steadily
increasing its technical investment. Whilst we cannot reliably
project future revenue (including via success payments to Byotrol),
we are confident that the initiative is in excellent hands and that
Solvay is taking the project further and faster than we would have
been able on our own
In the US, the trial of Byotrol24 continues in over 200 Target
supermarket stores in 2 sku formats. Since our last report we have
been investing in detailed consumer research to support the
proposition and to model likely marketing required spend. That
research has yet again confirmed consumer interest in the product
claims, but has also indicated a need to spend significantly more
on marketing and other capabilities to gain market traction. As a
result, the Directors have now begun a formal search for a US-based
financial or corporate partner to assist in growing Byotrol24, so
improving the risk/reward profile compared to other group
initiatives. This year, we have incurred costs of GBP385k in the US
and have continued to spend at a similar run rate post year
end.
In the UK, Boots is now again stocking second-generation
alcohol-free hand sanitisers under its own brand (with Byotrol logo
front of pack). We continue to see this formulation as a winning
product for Byotrol and are seeking more retailers for the
formulation.
Post year end we came to the end of our licence relationship
with Robert McBride plc and therefore to supplying surface sprays
to Tesco. This was an excellent arrangement for us for many years,
but it has now run its course and we expect to generate higher
margin opportunities with better brand equity from other consumer
initiatives.
Technology, Supply Chain and Regulatory Environment
We have now completed an upgrade of our supply chain, radically
improving quality and reliability. This has in some cases squeezed
gross margin but has reduced losses from quality problems. As
volumes increase, we expect to more than offset any gross margin
reduction from the change
We continue to improve our formulations, partly driven by
customer needs and partly driven by regulation. In particular we
have been working with the Medimark team to future-proof their
formulations under EU regulations, as well as optimizing
performance versus product claims.
The R & D team remains very excited about our newly-patented
biocide technology based on seaweed. Since the last report we have
discovered very interesting combinations of anti-viral properties
that open up the possibility of the formulation as an animal
feedstuff additive or pharmaceutical. This is a very exciting
development, but we recognise it is not our core area of expertise
and will only be developed further with a partner or consortium,
which we are now investigating.
Outlook
We continue to following developments on Brexit very carefully
and have taken all necessary steps to ensure there is minimal
impact on our business. However, with 10% of our enlarged business
now comprising export to the EU, newly imposed tariffs would be
bound to have some impact - albeit manageable - on our results.
In our last public reporting (at the time of the interim results
in December), the Group was focused on (a) monetising Actizone and
Invirtu products (b) increasing US distribution within a sensible
risk/reward profile and (c) maximising cost and revenue synergies
through integrating Medimark within the earnout framework and (d)
keeping financially stable whatever the economic and political
circumstances.
At the time of writing, all of the above are progressing
satisfactorily, although complete integration with Medimark is
pending completion of the earnout period. The teams are working
constructively on technology and on future strategy, but we will
not benefit from many financial synergies until calendar 2020.
We are keen to underpin our results with steady, visible profit
streams, so we will continue to work on increasing income from
product sales and multi-year licenses, most likely via the Medimark
sales team, We will also continue to look for one-off technical
development and IP-based deals to generate cash and to increase
profits, which have served us well to date. We do recognise that as
a larger Group now, such deals should form the 'cherry' rather than
the 'cake', but I remain very pleased to have the skills in-house
to do both and am confident that a blended approach will bring the
biggest financial returns.
The Directors remain very confident in our strategy. As we
expected, weaker technologies are now being forced out of the
market by regulators, competitors are merging or selling out to
larger entities and private equity is getting increasingly involved
in our expanding, very complex market place. It is very
encouraging, especially as the depth and spread of skills in the
board and leadership teams to take advantage of the opportunities
has now increased so substantially. Your team is very energised and
extremely positive on the outlook for our Group.
David Traynor
Chief Executive
30 September 2019
FINANCIAL REVIEW
Business Review
The principal activity of the Group during the year was the
development, patenting, licensing and sale of anti-microbial
products and technologies for business and consumer use.
Key performance indicators
Management uses a range of performance measures to monitor and
manage the business. Management consider the primary financial KPIs
for the Group to be revenue and gross margins by product segment,
adjusted as appropriate for one off or unusual revenue streams.
These are both measured and monitored closely. Current year revenue
is GBP5.66m (2018: GBP1.82m as restated) and gross margin for the
year is 64% (2018: 38% as restated). Further details of the revenue
and gross margin by segment are given below.
In addition to the financial KPIs, the Directors measure and
monitor various non-financial KPIs such as the timeliness and
efficiency of the research and development team against project
timelines and objectives and monitoring the OTIF (on time in full)
logistics performance ensuring that customers are being delivered
to on time and in full.
The Board believes these KPIs are suited to the needs of a
growing business. Further analysis of the Group's performance is
set out in the Chief Executive's Report.
Development and financial performance during the year
The results show both success in monetising proprietary
technologies developed by the Group as well as the benefits of
continuing efforts to focus on higher margin business on more
efficient commercial structures. The acquisition of the Medimark
business has diversified the Group's product range and brought a
significant new customer base.
-- Gross profit increased to GBP3.61m on turnover of GBP5.66m
(compared to gross profit of GBP0.69m on turnover of GBP1.82m in
the previous year, as restated for the effects of applying IFRS
15)
-- EBITDA of GBP0.82m versus a loss of GBP1.47m the previous year
-- Cash and cash equivalents at the year-end of GBP2.80m
compared to GBP3.85m in the prior year
INCOME STATEMENT
Revenue
As detailed further below, the Group implemented IFRS 15 Revenue
from Contracts with Customers ("IFRS 15") with effect from 1 April
2018. The principal change resulting from its application was the
recognition of revenue from the sale of licenses, IP and related
post-contract services on the satisfaction of their separate
performance obligations, without reference to contractual invoicing
milestones. In certain cases where the deliverables in a contract
are not considered to be distinct (for example where the customer
could not benefit from any of the services provided on a
stand-alone basis) such deliverables are combined as a single
performance obligation and the revenue recognised on the completion
of the contract overall.
In addition, certain contracts which have terms which allow for
instalment payments or similar over an extended period are now
treated as contracts with a "Significant Financing Component";
accordingly, the Group recognises effective interest income on the
amounts deemed to be credit extended to the customer.
The principal effect on the Group financial statements of the
adoption of IFRS 15 was to recognise approximately GBP1.93m of
revenue in 2019 which had previously been part-recognised in 2018
(approximately GBP1.32m). This change in recognition arises as the
terms of the relevant contract were deemed to represent one
performance obligation which was satisfied in the 2019 financial
year. To enable users properly to understand the significance of
this change, the 2018 results have been restated accordingly, with
a consequent increase to the reported loss in 2018.
The implementation of IFRS 15 has not affected the reporting of
revenues from other trading activities of GBP3.73m (2018:
GBP1.82m).
Cost of sales
Cost of sales of GBP2.06m (2018: GBP1.13m) represents the direct
manufacturing costs of products. Given the mix of Byotrol's
activities, gross margin across the sales mix is not a particularly
meaningful measure of performance and is better considered on a
segmental basis where the gross margin in the Professional segment
increased to 40% (2018: 20%), boosted by the acquisition of
Medimark, and in Pet a slight decrease to 43% (2018: 47%). The
increase in Consumer margin largely reflects the income from sale
of patents and IP over 2018 and 2019, as discussed in the Chief
Executive's report.
Overheads
The increase in overhead costs from GBP2.09m in 2018 to GBP2.73m
is largely due to the acquisition of the Medimark business which
brought some 13 additional staff and management. Within this,
research and development costs (expensed) have remained broadly
constant at GBP0.44m (2018: GBP0.45m).
Administrative costs include GBP0.12m of legal and other
advisory costs relating to the acquisition of Medimark (2018:
GBPnil).
Finance expense
Finance expense of GBP0.19m (2018: GBP0.024m) is principally
comprised of the non-cash cost of amounts relating to the
discounting of contingent consideration relating to the acquisition
of Medimark to their expected value as at the balance sheet date.
The balance comprises interest on a factoring facility in Medimark
and bank charges.
Profitability and earnings per share
After the revenue adjustments and costs noted above the Group
made GBP0.23m profit before tax compared to the (restated) loss of
GBP1.57m). This resulted in statutory EPS of 0.05p (2018: 0.45p
loss restated) and 0.15p on an adjusted basis (2018: 0.45p loss
restated).
Taxation
Taxable profits arising in the year to 31 March 2019 were wholly
off-settable against tax losses brought forward and accordingly no
taxation was payable. A tax credit arises from the amortisation of
a deferred tax liability relating to the intangible assets acquired
as a result of the acquisition of Medimark.
Significant tax losses remain available to the Group, however no
deferred tax asset in relation to these sums has been recognised in
the financial statements due to the unpredictability of the timing
of future profit streams.
STATEMENT OF FINANCIAL POSITION
Intangible assets
Customer relationships and acquired brands
As at the effective date of the acquisition, the Directors
calculated the fair value of the Medimark business acquired at
GBP2.93m. As explained in more detail in the notes below,
intangible assets acquired pursuant to the acquisition comprised
customer relationships, various brands and other IP relating to the
capitalised value of efficacy testing and other relevant licensing
activities. The fair value for the acquisition was allocated
approximately GBP1.86m to customer relationships, GBP0.57m to
brands (and GBP0.50m to other IP), with the residual balance over
and above other net assets acquired being ascribed to goodwill. The
customer relationships and brands acquired are being amortised over
10 years, and the other IP acquired (in common with the Group's
existing capitalised development costs) over 10 years. Net of
accumulated amortisation for the 7 months from the effective date
of acquisition, the net book value of the intangible assets thus
acquired was approximately GBP2.69m at the year end, which the
Directors consider to be in line with their fair value.
Development costs
Development costs represent the capitalised value of work
undertaken (either internally or externally by appropriate
consultants) to develop and protect patents, know-how and other
similar assets when they pass the criteria for capitalisation under
the Group accounting policy. The amortised balance at 31 March 2019
was GBP0.85m reflecting both the GBP0.50m fair value of such assets
acquired as part of the Medimark business as well as continuing
development work carried out by both the Byotrol business and
Medimark itself.
Trade and other receivables and contract assets
Trade receivables increased from GBP0.38m in 2018 to GBP0.93m
largely as a result of the Medimark acquisition which significantly
increased the number of customers and trading activity in the
Group. Contract assets of GBP0.18m (non-current) and GBP0.28m
(current) result from the recognition of certain revenue under IFRS
15.
Trade and other payables
Trade payables increased significantly from GBP0.34m in 2018 to
GBP0.84m, again principally as a result of the acquisition of the
Medimark business which brought a significant level of contracted
out manufacturing activity to the Group.
Other financial liabilities
Other financial liabilities represent the payments potentially
due to the vendors of Medimark under the terms of the sale and
purchase agreement for the Medimark acquisition. On acquisition
these liabilities were provisionally assessed at an aggregate fair
value of GBP1.27m (as discounted to the present value at the time
of acquisition) based on expectations at the time. Following a
re-assessment of accounting classifications in the Medimark
business, the performance in the 7-month period since acquisition
and updated business projections for 2020 trading, at the
completion of the measurement period at 31 March 2019 the
contingent consideration liability for payments potentially due in
the period 2019 to 2020 was reassessed at GBP0.82m. The difference
between the original fair value of the contingent consideration and
the fair value of the contingent consideration at the reporting
date has been deducted from goodwill arising on acquisition. The
carrying value of this liability will continue to be reassessed at
future reporting dates.
CASH FLOW
Operating cash flow for the year was positive at GBP0.33m; this
strengthening cash flow in part enabled the Group to make the
strategic acquisition of Medimark, which acquisition resulted in a
cash payment of GBP1.13m to the vendors (net of cash acquired).
Capital expenditure comprised GBP0.28m (2018: GBP0.15m) on the
development of intangible assets for use within the Group as well
as a minor amount on property, plant and equipment.
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2019 2018
Notes GBP'000 GBP'000
(restated)
REVENUE 1 5,660 1,820
Cost of sales 1 (2,055) (1,129)
---------- ----------
GROSS PROFIT 3,605 691
Sales and marketing costs 1 (963) (549)
Research and development costs 1 (436) (451)
Other administrative costs 1 (1,328) (1,095)
Share based compensation 17 (60) (67)
---------- ----------
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION
AND AMORTISATION (EBITDA) 818 (1,471)
Expense on amendment of convertible
loan note terms - (26)
Depreciation 8 (24) (19)
Amortisation 9 (538) (157)
---------- ----------
OPERATING PROFIT/(LOSS) 256 (1,673)
Finance income 5 41 3
Finance expense 5 (191) (24)
Research and development (R & D)
tax credits 1 124 129
---------- ----------
1
&
PROFIT/(LOSS) BEFORE TAX 2 230 (1,565)
Taxation 6 11 -
---------- ----------
PROFIT/(LOSS) FOR THE FINANCIAL YEAR 241 (1,565)
---------- ----------
OTHER COMPREHENSIVE INCOME, NET OF
TAX
Other comprehensive income which
may be reclassified to profit or
loss in subsequent periods:
Exchange differences on translation
of foreign operations 7 3
---------- ----------
Other comprehensive income 7 3
---------- ----------
TOTAL COMPREHENSIVE INCOME/(LOSS)FOR
THE YEAR 248 (1,562)
Earnings/(loss) per share - basic 7 0.05p (0.45)p
Earnings/(loss) per share - fully
diluted 7 0.05p (0.45)p
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2019 2018
Notes GBP'000 GBP'000
(restated)
ASSETS
Non-current assets
Property, plant and equipment 8 58 44
Intangible assets 9 3,751 686
Contract assets 12 176 -
---------------- ----------------
3,985 730
Current assets
Inventories 11 416 185
Trade and other receivables 12 1,521 932
Contract assets 12 275 -
Cash and cash equivalents 13 2,797 3,853
---------------- ----------------
5,009 4,970
---------------- ----------------
8,994 5,700
LIABILITIES
Current liabilities
Trade and other payables 14 1,438 594
Other financial liabilities 19 520 -
---------------- ----------------
1,958 594
---------------- ----------------
Non-current liabilities
Other financial liabilities 19 297 -
Deferred tax liabilities 6 441 -
---------------- ----------------
738 -
---------------- ----------------
Equity
Share capital 20 1,077 1,007
Share premium account 28,282 27,468
Merger reserve 1,065 1,065
Retained earnings reserve (24,126) (24,434)
---------------- ----------------
TOTAL EQUITY 6,298 5,106
---------------- ----------------
TOTAL EQUITY AND LIABILITIES 8,994 5,700
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Convertible
Share loan note Retained
capital Share premium Merger reserve reserve earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at as 1
April 2017 as
previously
reported 670 22,849 1,065 69 (23,008) 1,645
Impact of change -
in accounting
policy - - - - -
-------------- -------------- -------------- -------------- -------------- --------------
Restated balance
at 1 April 2017 670 22,849 1,065 69 (23,008) 1,645
Restated loss
for the year
(note 22) - - - - (1,565) (1,565)
Other
comprehensive
income:
Exchange
differences on
translation of
foreign
operations - - - - 3 3
-------------- -------------- -------------- -------------- -------------- --------------
Restated total
comprehensive
loss for the
year - - - - (1,562) (1,562)
Transactions
with owners:
Share issue 310 4,647 - - - 4,957
Share issue
costs - (381) - - - (381)
Share based
payments - - - - 67 67
Conversion of
convertible
loan notes 27 353 - (69) 69 380
-------------- -------------- -------------- -------------- -------------- --------------
Restated balance
at 31 March
2018 1,007 27,468 1,065 - (24,434) 5,106
Profit for the
year - - - - 241 241
Exchange
differences on
translation of
foreign
operations - - - - 7 7
-------------- -------------- -------------- -------------- -------------- --------------
Total
comprehensive
income for the
year - - - - 248 248
Share issue 70 814 - - - 884
Share based
payments - - - - 60 60
-------------- -------------- -------------- -------------- -------------- --------------
As at 31 March
2019 1,077 28,282 1,065 - (24,126) 6,298
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
2019 2018
GBP'000 GBP'000
(restated)
CASH FLOW FROM OPERATING ACTIVITIES
Profit / (Loss) for the year before tax 230 (1,565)
Adjustments for:
Share based payments 60 67
Expense on the amendment of convertible
loan note terms - 26
Depreciation 24 19
Amortisation 538 157
Finance income (41) (3)
Finance costs 191 25
Changes in working capital
(Increase) / Decrease in inventories (70) 15
(Increase) /n trade and other receivables (390) (72)
Increase in contract assets (451) -
Increase/(decrease) in trade and other
payables 239 (155)
---------------- ----------------
CASH USED IN / GENERATED FROM OPERATING
ACTIVITIES 330 (1,486)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire property, plant and
equipment (23) (19)
Cash (outflow) on acquisition of businesses (1,131) -
net of cash acquired
Payments to acquire intangible assets (283) (152)
Interest received 41 3
Finance costs (13) -
---------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES (1,409) (168)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on issue of ordinary shares - 4,957
Share issue costs - (381)
Movement in invoice discounting facility 16 -
Interest paid - (23)
---------------- ----------------
NET CASH INFLOW / (OUTFLOW) FROM FINANCING 16 4,553
---------------- ----------------
Net increase / (decrease) in cash and cash
equivalents (1,063) 2,899
Cash and cash equivalents at the beginning
of the financial year 3,853 951
Effect of foreign exchange rate changes 7 3
---------------- ----------------
Cash and cash equivalents at the end of
the financial year 2,797 3,853
BASIS OF PREPARATION
The financial statements have been prepared on a historical cost
basis except for certain financial instruments and share-based
payments that have been measured at fair value, and in accordance
with the AIM Rules, International Financial Reporting Standards
("IFRS") as adopted by the European Union that are applicable to
the Group's statutory accounts for the year ended 31 March 2019 and
the applicable provisions of the Companies Act 2006.
The Company is a limited liability company incorporated and
domiciled in England and whose shares are quoted on AIM, a market
operated by The London Stock Exchange. The registered office
address is shown on page 2. The consolidated financial information
of Byotrol plc is presented in Pounds Sterling (GBP), which is also
the functional currency of the parent. Details of the Group
operations and principal activities are shown on page 10.
BASIS OF CONSOLIDATION
The consolidated financial statements of the Group incorporate
the financial statements of the Company and its subsidiaries.
Subsidiaries are entities controlled by the Group. Control exists
when the Group has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities.
In assessing control, potential voting rights that currently are
exercisable are taken into account. The financial statements of
subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control
ceases. The accounting policies of subsidiaries have been changed
when necessary to align them with the policies adopted by the
Group.
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements. Unrealised
gains arising from transactions with equity accounted investees are
eliminated against the investment to the extent of the Group's
interest in the investee. Unrealised losses are eliminated in the
same way as unrealised gains, but only to the extent that there is
no evidence of impairment.
The Company Statement of Comprehensive Income has not been
disclosed in accordance with Section 408 Companies Act 2006. The
profit for the year of the parent company amounted to GBP879,000
(2018: loss of GBP908,000).
GOING CONCERN
Byotrol plc has prepared financial statements on a going concern
basis, which assumes the Group will continue in operational
existence for the foreseeable future. The Group's ability to meet
its future funding and working capital requirements, and therefore
continue as a going concern, is dependent upon the Group being able
to generate recurring and sustainable revenues and free cash flow
from existing customers and opportunities as well as the sales
opportunities highlighted in the Chairman and Chief Executive's
Statements. The Directors have prepared projected cash flow
information for the period ending 12 months from the date of
approval of these financial statements. These projections include
assumptions around the quantum and timing of receipts from
customers. Based on this analysis, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future and for this
reason they continue to adopt the going concern basis of
accounting. The cash and cash equivalents of the Group as at 31
March 2019 was GBP2,797,000.
ADOPTION OF NEW AND REVISED STANDARDS
Standards, amendments and interpretations adopted in the
year
Certain new standards and amendments to existing standards that
have been published and are mandatory for the first time for the
financial year beginning 1 April 2018 have been adopted and their
impact on the Group and Company is explained later in this section.
New standards, amendments to standards and interpretations which
have been issued but are not yet effective (and in some cases had
not been adopted by the EU) for the financial year beginning 1
April 2018 have not been adopted early in preparing these financial
statements. The main new accounting standards which are relevant to
the Group are set out below:
IFRS 9 Financial Instruments
The Group has adopted IFRS 9 from 1 April 2018, replacing IAS 39
Financial Instruments: Recognition and Measurement. IFRS 9 sets out
the requirements for assessing the impairment of financial assets,
requiring consideration of the likelihood of their default or
impairment, firstly by splitting out the high-risk balances and
continuing to provide for these separately, and then applying a
loss rate to the remaining balance where it is known from
experience that the loss rate is not nil.
The Group has three types of financial assets that are subject
to IFRS 9's new expected credit loss model: (1) trade receivables
from the sale of products and licenses over IP and the provision of
services; (2) contract assets arising from long-term license or
sale of IP contracts and (3) sundry deposits and other similar
assets. The Group was required to revise its impairment methodology
under IFRS 9 for each of these classes of assets: to measure the
expected credit losses, trade receivables and contract assets were
grouped based on shared credit risk characteristics and the days
past due. Contract assets have substantially the same risk
characteristics as the trade receivables for the same types of
contracts. The Group therefore concluded that the expected loss
rates for trade receivables were a reasonable approximation of the
loss rates for the contract assets. The expected loss rates were
based on the payment profiles of sales over a period of 24 months
before 31 March 2019 and the corresponding historical credit losses
experienced within this period. No reinstatement adjustment was
required on application of this standard.
IFRS 9 largely retains the existing requirements in IAS 39 for
the classification and measurement of financial liabilities and has
not had a significant effect on the Group's accounting policy.
IFRS 15 Revenue Recognition
IFRS 15 has replaced IAS 18 Revenue, IAS 11 Construction
Contracts and related interpretations and has been adopted for the
Group's IFRS financial statements for the period beginning on 1
April 2018. This standard introduces a single, five-step revenue
recognition model that is based upon the principle that revenue is
recognised at the point that control of goods or services is
transferred to the customer. The standard also updates revenue
disclosure requirements.
The Directors have considered the effect of the adoption of IFRS
15 on the Group's activities, and in particular on (i) the revenue
recognition of the Group's sale of IP (and related know-how, if
applicable); and (ii) license agreements. Under accounting policies
applicable to prior years, the Group recognised the sale of IP on
the basis of the value transferred over time and license agreements
as depending on the terms of the agreement (which might be
structured with both fixed and variable elements to the
consideration payable). The sale of finished products into both the
business and consumer market is unaffected.
Revised accounting policies under IFRS 15
Under IFRS 15 revenue is measured based on the consideration to
which the Group expects to be entitled in a contract with a
customer and excludes amounts collected on behalf of third parties.
Each element of revenue (described below) is recognised only
when:
(i) provision of the goods or services has occurred;
(ii) consideration receivable is fixed or determinable; and
(iii) collection of the amount due from the customer is
reasonably assured
Some contracts include multiple deliverables, such as the sale
of IP and the know-how required for the customer profitably to use
it. Certain contracts may include a provision for post-contract
support and other technical assistance. Where contracts include
such multiple performance obligations, the transaction price is
allocated to each performance obligation based on the Group's best
estimate of their Standalone Selling Price ("SSP") notwithstanding
any absence or contrary allocation of total cost within a contract.
Where this is not directly observable, it is estimated based on the
best available evidence, for example expected cost plus margin.
IFRS 15 also requires the Group to adjust the expected amount of
consideration to reflect the time value of money if the contract
has a significant financing component, irrespective of the
recognition of sale of IP, license or service income as the case
may be.
Application of IFRS 15
The Group has applied IFRS 15 retrospectively using the
practical expedient in paragraph C5(c) of IFRS 15, under which the
Group does not disclose the amount of consideration allocated to
the remaining performance obligations or an explanation of when the
Group expects to recognise that amount as revenue for all reporting
periods presented before the date of the initial application, i.e.
1 April 2017. The details and quantitative impact of the changes in
accounting policies are disclosed below. Furthermore, the Group has
elected to make use of the following practical expedients:
-- Completed contracts under IAS 11 and IAS 18 before the date
of transition have not been reassessed
-- As permitted by paragraph 121 of IFRS 15 the Group does not
disclose information about the remaining performance obligations
that have original expected durations of one year or less
IFRS 16 Leases (effective for 2019 financial report)
IFRS 16 (effective for the year ending 31 March 2020), which
supersedes IAS 17 Leases and related interpretations, will require
all leases to be recognised on the balance sheet, eliminating the
distinction between operating and finance leases. This IFRS will
thus require the Group to recognise any operating leases as both an
asset and a rental commitment in its consolidated statement of
financial position. Byotrol does not intend to apply the standard
retrospectively and so any difference between the carrying value of
the asset created and the corresponding liability will be applied
as an adjustment to opening equity at the date of initial
application. Any such adjustment is not expected to be
material.
ACCOUNTING POLICIES
Revenue
Based on the adoption of IFRS 15 as noted above, the Group
applies the following five steps in order to determine the basis
for revenue recognition:
(1) identify the contract with the customer;
(2) identify the separate performance obligations ("POs") in the
contract;
(3) determine the transaction price;
(4) allocate the transaction price to the separate POs; and
(5) recognise revenue when the vendor satisfies a PO.
Once these factors are determined, revenue is measured at the
fair value of the consideration received or receivable and
represents amounts receivable for products provided and license
fees and royalties earned in the normal course of business, net of
discounts and other sales related taxes. The Group's principal
revenue streams and their respective accounting treatments are as
follows:
Product Sales
Sales of goods are recognised when the goods are delivered and
the material risks and rewards of ownership have been transferred
to a third party (subject to any reservation of title in the event
of non-payment)
Royalty income
Royalty income from licensing agreements is recognised in
accordance with the substance of the relevant agreement (e.g. as a
percentage of relevant sales) when the later of the following
occurs: (a) the sale or usage occurs; or (b) the performance
obligation to which some or all of these royalties has been
allocated has been satisfied (or partially satisfied).
Sale of patents and associated intellectual property
Sales of patents and associated intellectual property are
recognised as revenue transactions where considered to be in the
normal course of business as a route to market. Sales are
recognised when the performance obligation or obligations in the
contract are satisfied and amounts due and expected to be
recoverable based on best estimates, discounted where amounts
receivable includes amounts falling due after more than one year,
where such discount amounts are expected to be material.
Other agreements
The Group also enters into other forms of agreement including
development agreements and joint marketing agreements. In those
circumstances, payment schedules may include initial upfront
payments, milestone linked payments and success fees, including
royalty payments. The Group recognises revenue from such
transactions in accordance with the fair value allocable to the
relevant performance obligations contained in the contract as and
when the performance obligation is satisfied, either at a point in
time or over time in the case of sales or usage based variable
royalty arrangements.
Share based payment charge
The Group issues equity-settled share-based payments to certain
employees, for which it has applied the requirements of IFRS2
Share-Based Payments. Equity-settled share-based payments are
measured at fair value at the date of grant, such fair value being
measured by use of the Black-Scholes model, selected by the
Directors as the most appropriate model for this purpose. Expected
volatility was based upon the historical volatility over the
expected life of the schemes. The expected life is based upon
historical data and has been adjusted based on management's best
estimates for the effects of non-transferability, exercise
restrictions and behavioural considerations. The risk-free rate
approximation was taken as the UK Government 10-year bond yield.
Vesting conditions relating to staff retention were based on
historical average turnover levels for the appropriate staff
levels. Vesting conditions relating to market-based performance
conditions were made based upon the best estimates of the
Directors.
Group share-based compensation expense was previously presented
below EBITDA. The comparatives have been restated to include this
expense above EBITDA, as considered to be a fairer
presentation.
The fair value determined at the grant date of equity-settled
share-based payments, which incorporates the market condition, is
expensed on a straight-line basis over the vesting period, based on
the Group's estimate of share options that will eventually vest, or
warrants that will be exercised, and a corresponding amount
credited to equity reserves.
Share-based payments associated with share options granted to
employees of subsidiaries of the parent company are treated as an
expense of the subsidiary company to be settled by equity of the
parent company. The share-based payment expense increases the value
of the parent company's investment in the subsidiaries and is
credited to retained earnings.
Fair value is measured by use of the Black-Scholes model. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effect of non-transferability,
exercise restrictions and behavioural considerations.
Proceeds received on exercise of share options and warrants are
credited to share capital (for the nominal value) and share premium
account (for the excess over nominal value).
Cancelled options are accounted for as an acceleration of
vesting. The unrecognised grant date fair value is recognised in
the consolidated statement of comprehensive income in the year that
the options are cancelled.
Certain employee bonuses can be paid in shares rather than cash
or a combination thereof. An estimate of the liability under such
schemes is made at each period end and an appropriate charge is
made to the statement of comprehensive income.
Current and deferred taxation
Current tax is the expected corporation tax payable or
receivable in respect of the taxable profit/loss for the financial
year using tax rates enacted or substantively enacted at the
reporting date, less any adjustments to tax payable or receivable
in respect of previous periods.
Deferred tax is recognised in respect of all temporary
differences between the carrying amounts of assets and liabilities
included in the financial statements and the amounts used for tax
purposes that will result in an obligation to pay more, or a right
to pay less or to receive more tax, with the following
exceptions:
- no provision is made relating to the initial recognition of
assets or liabilities that affect neither accounting nor taxable
profit other than those acquired as part of a business combination;
and
- provision is made for deferred tax that would arise on all
taxable temporary differences associated with investments in
subsidiaries and interests in joint ventures, except where the
Group can control the reversal of the temporary differences.
Deferred tax is measured on an undiscounted basis at the tax
rates that are expected to apply in the periods in which the asset
is realised or liability is settled, based on tax rates and laws
enacted or substantively enacted at the reporting date. Deferred
tax assets are recognised only to the extent that the Directors
consider that it is probable that there will be suitable taxable
profits from which the future reversal of the underlying temporary
differences and unused tax losses and credits can be deducted. The
Directors consider, given the current stage of the development of
the business, that deferred tax assets should not be recognised at
this stage due to the unpredictability of the timing of future
taxable profit streams.
R&D tax credits
The Group claims research and development tax credits and these
credits are judged to have characteristics akin to grants. Credits
are recognised to the extent there is reasonable assurance they
will be received which, given the necessary claims processes, can
be some time after the original expense was incurred.
Defined contribution plans
Obligations for contributions to defined contribution retirement
benefit plans are charged as an expense as they fall due.
Business combinations
The acquisition method of accounting is used to account for all
business combinations, regardless of whether equity instruments or
other assets are acquired. The consideration transferred for the
acquisition of a business (whether as a subsidiary or an asset
purchase) comprises the:
-- fair values of the assets transferred
-- liabilities incurred to the former owners of the acquired
business
-- equity interests issued by the Group
-- fair value of any asset or liability resulting from a
contingent consideration arrangement; and
-- fair value of any pre-existing equity interest in the
subsidiary.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the
acquisition date. When the consideration transferred by the Group
in a business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent
consideration is measured at its fair value on the acquisition date
and included as part of the consideration transferred in a business
combination.
Acquisition-related costs are expensed as incurred.
Business combinations may result in (inter alia) acquired
customer relationships, brands and other intellectual property
being recognised as separable intangible assets at their fair value
at the date of acquisition. These are valued using discounted cash
flow methodology, taking into account a number of key assumptions
such as retention and net income. In applying this methodology,
certain key judgements and estimates are required to be made in
respect of future cash flows together with an appropriate discount
factor for the purpose of determining the present value of those
cash flows. The key sources of estimation uncertainty with respect
to customer relationships are the future retention rate and the
income per customer generated from those customers; the key sources
of estimation uncertainty with respect to brands are the notional
royalty rate which would be payable if those brands were owned by a
third party, and their likely useful economic life; and the key
sources of estimation uncertainty with respect to other
intellectual property are the costs of replicating that property
and the length of time (and implied loss of profits) so to do.
Accounting for acquisition-related contingent consideration is
based on estimates of future performance of the acquired business
over the contractual earn-out period, as measured against the
contractually agreed performance targets. If the future results of
these businesses differ from the forecasts used for these
calculations, there may be a material change in the value of these
deferred liabilities which would be recorded in the consolidated
statement of profit and loss.
Management judgement is also required in assessing the useful
economic lives of these assets for the purpose of amortisation.
Goodwill
Goodwill is recorded as the excess of the consideration
transferred (plus the amount of any non-controlling interest in the
acquired entity, if any, and acquisition-date fair value of any
previous equity interest in the acquired entity) over the fair
value of the net identifiable assets acquired. It is initially
recognised as an asset at cost and is subsequently measured at cost
less any accumulated impairment.
For the purpose of impairment testing, goodwill is allocated to
the cash-generating units expected to benefit from the combination.
Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an
indication that the unit may be impaired. If the recoverable amount
of the cash-generating unit is less than the carrying amount of the
unit, the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. Any impairment is recognised immediately in
the income statement and is not subsequently reversed.
Where settlement of any part of cash consideration is deferred
(whether because it is contingent or otherwise), the amounts
payable in the future are discounted to their present value as at
the date of exchange. The discount rate used is the Group's
incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under
comparable terms and conditions.
Impairment of assets
At each reporting date, the Group reviews the carrying amounts
of its assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss if any.
Where the asset does not generate cash flows that are independent
from other assets, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the
estimates of future cash flows have been adjusted.
If the recoverable amount of an asset or cash-generating unit is
estimated to be less than its carrying amount, the carrying amount
of the asset or cash-generating unit is reduced to its recoverable
amount. An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a revalued amount, in which
case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset or cash-generating unit in prior years. A reversal of
an impairment loss is recognised as income immediately, unless the
relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation
increase. An impairment loss recognised on goodwill is not reversed
in a subsequent period.
Customer relationships
Customer relationships acquired are recognised as intangible
assets at their fair values on acquisition, less any impairment.
Customer relationships are amortised on a straight-line basis over
10 years.
Brands
Brands acquired are recognised as intangible assets at their
fair values on acquisition, less any impairment. Customer
relationships are amortised on a straight-line basis over 10
years.
Research and development activities
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
The Directors have reviewed the R & D activities and have
made judgements on the amount of development expenditure it is
appropriate to capitalise. The policy is that an intangible asset
(such as new products and processes) arising from the Group's
development expenditure is capitalised only if all of the following
conditions are met:
- it is probable that future economic benefits from the asset
will flow to the entity;
- the cost of the asset can be reliably measured;
- it is technically feasibility of completing the intangible
asset (so that it will be available for use or sale);
- the Group intends to complete and use or sell the asset;
- the Group is able to use or sell the asset;
- there is an external market or an internal use for the
asset;
- the Group has adequate technical, financial, and other
resources to complete the asset; and
- the cost of the asset can be measured reliably
Where no intangible asset can be so recognised, development
expenditure is recognised as an expense in the period in which it
is incurred. The Group has capitalised development expenditure
during the year. Amortisation is calculated so as to write off the
cost of an asset, less its estimated residual value, over 10 years
on a straight-line basis.
In determining the amortisation policy of an intangible asset,
its useful economic life in terms of years is considered. Where a
finite useful economic life of an asset can be estimated,
amortisation is calculated from the point to which the asset is
brought into use and charged to profit and loss over its
lifetime.
Patents, licenses and access to framework agreements
The costs incurred in purchasing licenses and establishing
patents are measured at cost, net of any amortisation and any
provision for impairment. Amortisation is calculated so as to write
off the cost of an asset, less its estimated residual value, over
the useful economic life of that asset as follows:
Intellectual property - patents over 10 years on a straight-line basis
Licenses over 10 years on a straight-line basis
Framework agreements over the term of the agreement
Any gain or loss arising on the disposal of intangible assets is
recognised within revenue where considered to be in the normal
course of business as a route to market.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any recognised impairment loss. Cost comprises
purchase price and other directly attributable costs. Depreciation
is charged so as to write off the cost or valuation of assets to
their residual values over their estimated useful lives, using the
straight-line method, on the following bases:
Plant and machinery 20% - 50% on a straight line basis
Computer equipment 33.3% on a straight line basis
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in profit or
loss.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting date. An asset's
carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount.
Deferred and contingent consideration
Contingent consideration is initially measured at fair value at
the date of completion of the acquisition and may be classified
either as equity or a financial liability. The accounting for
changes in the fair value of contingent consideration arising on
business combinations that do not quality as measurement period
adjustments depends on how the contingent consideration is
classified:
-- amounts classified as a financial liability are subsequently
remeasured to fair value at subsequent reporting dates and the
corresponding gain or loss is recognised in the Statement of
Comprehensive Income
-- contingent consideration that is classified as equity is not
remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity
Where settlement of any part of cash consideration is deferred
(whether because it is contingent or otherwise), the amounts
payable in the future are discounted to their present value as at
the date of exchange. The discount rate used is either (a) the
Group's incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent financier
under comparable terms and conditions (in respect of contingent
amounts to be settled in cash or (b) the Group's cost of equity (in
respect of contingent amounts to be settled in equity).
Impairment of tangible and intangible assets excluding
goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs. An intangible asset with an indefinite
useful life is tested for impairment annually and whenever there is
an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (cash-generating unit) is
reduced to its recoverable amount. An impairment loss is recognised
as an expense through profit and loss.
Investments
Investments consist of the Company's subsidiary undertakings.
Investments are initially recorded at cost, being the fair value of
the consideration given and including directly attributable charges
associated with the investment. Subsequently they are reviewed for
impairment if events or changes in circumstances indicate the
carrying value may not be recoverable.
Inventory
Inventory is stated at the lower of cost and net realisable
value. Cost comprises direct material cost, direct labour costs and
those overheads that have been incurred in bringing the inventories
to their present location and condition. Cost is calculated using
the weighted average method. Net realisable value represents the
estimated selling price less all estimated costs to completion and
selling costs to be incurred.
Provision is made where necessary for obsolete, slow moving
inventory where it is deemed that the costs incurred may not be
recoverable.
Financial instruments
Financial assets and financial liabilities are recognised on the
consolidated statement of financial position when the Group has
become a party to the contractual provisions of the instrument.
Trade and other receivables
The Group's financial assets consist of cash, loans, deposits,
and receivables and related contract assets. The classification of
financial assets at initial recognition depends on the financial
asset's contractual cash flow characteristics and the Group's
business model for managing them.
With the exception of trade receivables that do not contain a
significant financing component or for which the Group has applied
the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs. Trade
receivables that do not contain a significant financing component
or for which the Group has applied the practical expedient are
measured at the transaction price determined under IFRS 15 as
described in the revenue accounting policy above.
In accordance with IFRS 9 the Group recognises lifetime expected
credit losses ("ECL") for trade receivables and contract assets.
The expected credit losses on these financial assets are estimated
using a provision matrix based on the Group's historical credit
loss experience, adjusted for factors that are specific to the
debtors, general economic conditions and an assessment of both the
current as well as the forecast conditions at the reporting date,
including time value of money where appropriate.
In adopting IFRS 9 the Group has applied the Simplified Approach
applying a provision matrix to measure lifetime expected credit
losses and after taking into account customers with different
credit risk profiles and current and forecast trading conditions.
The Directors applied a percentage "probability of default" to the
receivables balance related to the underlying credit rating of the
customer which resulted in a hypothetical expected default amount
which was not material to the Group's financial statements. A
specific provision for impairment of trade receivables is
established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original
terms of the receivables. The amount of provision is the difference
between the asset's carrying amount and the present value of
estimated future cash flows, discounted at the effective interest
rate. The Group has not to restate comparatives in respect of the
application of IFRS 9.
Contract assets
Contract assets represent assets resulting from balance sheet
reclassifications arising from the adoption of IFRS 15 and relating
to income recognised but not yet invoiceable.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand,
demand deposits with banks and other short-term highly liquid
investments with original maturities of three months or less and
are classified accordingly in the financial statements.
Trade and other payables
Trade payables, classified as 'other liabilities' are initially
recognised at fair value and subsequently at amortised cost using
the effective interest method.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
Leasing costs
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are recognised as assets of the
Group at their fair value or, if lower, at the present value of the
minimum lease payments, each determined at the inception of the
lease. The corresponding liability to the lessor is recognised as a
finance lease obligation. Lease payments are apportioned between
finance charges and the reduction of lease obligation so as to
achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged directly to profit or loss,
unless they are directly attributable to qualifying assets, in
which case they are capitalised.
Rentals payable under operating leases are expensed on a
straight-line basis over the term of the relevant lease. Benefits
received and receivable as an incentive to enter into an operating
lease are also spread on a straight-line basis over the lease
term.
Foreign currencies
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
reporting date are translated at the foreign exchange rate ruling
at that date. Foreign exchange differences arising on translation
are recognised in profit or loss. Non-monetary assets and
liabilities that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate at the date
of the transaction. Non-monetary assets and liabilities denominated
in foreign currencies that are stated at fair value are translated
at foreign exchange rates ruling at the date the fair value was
determined.
On consolidation, the assets and liabilities of the Group's
overseas operations are translated at exchange rates prevailing on
the reporting date into sterling. Income and expense items are
translated at the average exchange rates for the period. Exchange
differences arising, if any, are classified as equity and
transferred to the Group's translation reserve. Such translation
differences are recognised in other comprehensive income in the
period in which the operation is disposed of.
Exchange differences arising on monetary items that form part of
the Company's net investment in its foreign operations are
recognised in the profit or loss in the reporting entity. However,
in the consolidated financial statements which include the foreign
operations, such exchange differences are recognised in equity.
1 SEGMENTAL INFORMATION
Byotrol plc manufactures products based on anti-microbial
technology in the United Kingdom ("UK") and also generates revenues
from licensing, joint development agreements and sale of patents
and associated intellectual property where considered to be in the
normal course of business as a route to market. Its customers are
based in the UK, North America and the Rest of the World. Financial
information is reported to the Board on three reportable segments,
being Professional, Consumer and Pet with revenue and gross profits
split by operating segments. Segment revenues comprise sales to
external customers and excludes gains arising on the disposal of
property, plant & equipment and finance income. Segment profit
reported to the Board represents the profit earned by each segment
before the allocation of central overheads, Directors' salaries,
finance costs and tax. For the purposes of assessing segment
performance and for determining the allocation of resources between
segments, the board reviews the current assets attributable to each
segment as well as the financial resources available. All trade
receivable assets are allocated to reportable segments. Other
current assets that are used jointly by segments are allocated to
the individual segments on a basis of revenues earned. All
liabilities are allocated to individual segments on the basis of
revenue earned. Information is reported to the board of Directors
on a product sale, licence & royalty fee and other development
fee basis as management believe that each product offering and
licensing of its products exposes the Group to differing levels of
risk and rewards due to their intrinsic nature. The segment profit
or loss, segment assets and segment liabilities are measured on the
same basis as amounts recognised in the financial statements, as
set out in the accounting policies.
Revenue recognised in Consolidated Statement of Comprehensive
Income is analysed as follows:
2019 2018
GBP'000 GBP'000
(restated)
Product sales 3,503 1,648
Royalty and licensing income 226 172
Sale of patents and associated intellectual
property 1,931 -
---------------- ------------------
Revenue 5,660 1,820
The Group considers the Group's revenue lines to be split into
three reportable segments; being Professional (including food
service, food manufacturing, industrial and health), Consumer and
Pet. This disclosure correlates with the information which is
presented to the Group's Chief Decision Maker, the Board. The
Group's revenue, profit or loss before taxation and net assets were
all derived from its principal activities.
Segmental information is presented using Group policies.
Professional Consumer Pet Total
Year ended 31 March 2019 GBP'000 GBP'000 GBP'000 GBP'000
REVENUE
United Kingdom 2,254 164 283 2,701
North America 5 2,020 - 2,025
Rest of World 451 - 483 934
---------------- ---------------- ---------------- ----------------
Total revenue 2,710 2,184 766 5,660
Cost of sales (1,617) - (438) (2,055)
---------------- ---------------- ---------------- ----------------
Gross profit 1,093 2,184 328 3,605
Centrally incurred income and expenditure not attributable to individual segments:
Sales and marketing costs (963)
Research and development costs (436)
Other administrative costs
excluding costs directly
attributable to acquisition of
subsidiary (1,210)
Costs directly attributable to
acquisition of subsidiary (118)
Depreciation and amortisation (562)
Share-based payments (60)
Finance income 41
Finance costs (191)
Research and development (R & D)
tax credits 124
----------------
Profit before tax 230
Included within the revenues of the Professional segment is
revenue of GBP0.19m relating to customer A (2018: GBP0.24m).
Included within the revenues of the Pet segment is revenue of
GBP0.29m relating to customer B (2018: GBP0.25m). Included within
the revenues of the Consumer segment is revenue of GBP1.93m
relating to customer C (2018: GBPnil).
Continuing operations
Professional Consumer Pet Total
Year ended 31 March 2018 GBP'000 GBP'000 GBP'000 GBP'000
REVENUE (RESTATED)
United Kingdom 891 172 283 1,346
North America 3 - - 3
Rest of World 23 - 448 471
---------------- ---------------- ---------------- ----------------
Total revenue 917 172 731 1,820
Cost of sales (742) - (387) (1,129)
---------------- ---------------- ---------------- ----------------
Gross Profit (restated) 175 172 344 691
Central income and expenditure not attributable to individual segments:
Sales and marketing costs (549)
Research and development costs (451)
Other administrative costs (1,095)
Depreciation and amortisation (176)
Share-based payments (67)
Expense on amendment of convertible
loan note terms (26)
Finance income 3
Finance costs (24)
Research and development (R & D) tax
credits 129
----------------
Loss before tax (restated) (1,565)
The Group's operations are located in the United Kingdom.
The following table provides an analysis of the Group's current
assets and current liabilities, where identifiable, by segment.
Professional Pet Consumer Total
Year ended 31 March 2019 GBP'000 GBP'000 GBP'000 GBP'000
Segment current assets 2,594 615 1,800 5,009
Segment current liabilities 1,756 113 89 1,958
Professional Pet Consumer Total
Year ended 31 March 2018 GBP'000 GBP'000 GBP'000 GBP'000
Segment current assets (restated) 1,481 2,007 1,482 4,970
Segment current liabilities 226 121 247 594
2 PROFIT / (LOSS) BEFORE TAX
Profit / (Loss) before tax is stated after
charging/(crediting)
2019 2018
GBP'000 GBP'000
Amortisation 538 157
Depreciation of property, plant
and equipment 24 19
Auditor's remuneration
- as auditor 55 34
- other services 1 2
Research & development costs 436 451
Research and development (R & D)
tax credits (124) (129)
Operating lease costs - office
rent 82 82
Impairment of trade receivables 16 82
Foreign exchange differences 1 5
Amounts payable to Mazars LLP and their associates in respect of
both audit and non-audit services:
2019 2018
GBP'000 GBP'000
Audit Services
Statutory audit of parent and consolidated
financial statements 30 28
Other Services
Audit of subsidiaries where such
services are provided by Mazars
LLP and their associates 25 6
Other services 1 2
---------------- ------------------
56 36
3 PARTICULARS OF EMPLOYEES
The average number of staff employed by the Group, including
Executive Directors, during the financial period amounted to:
2019 2018
No. No.
Executive Directors 2 2
Research and development 7 8
Administration 7 5
Sales 12 3
---------------- ------------------
28 18
The aggregate payroll costs for the Group, including Directors'
emoluments, of the above were:
2019 2018
GBP'000 GBP'000
Wages and salaries 1,346 854
Social security costs 153 97
Other pension costs 34 19
---------------- ----------------
1,533 970
Only the Directors are employed by the Company and the payroll
costs are disclosed within the Directors remuneration report.
4 DIRECTORS' EMOLUMENTS
The Directors' aggregate emoluments in respect of qualifying
services were:
2019 2018
GBP'000 GBP'000
Emoluments receivable 303 266
---------------- ----------------
Total emoluments 303 266
The emoluments of the highest paid director were:
2019 2018
GBP'000 GBP'000
Emoluments receivable 134 118
---------------- ----------------
134 118
2019 2018
Number Number
Number of Directors accruing benefits under - -
money purchase scheme
5 FINANCE (EXPENSE) / INCOME
2019 2018
GBP'000 GBP'000
Other interest payable 13 24
Finance charge on liabilities relating
to contingent consideration 178 -
---------------- ----------------
Total finance expense 191 24
Finance income arising from unwinding of
discounting of non-current contract assets 20 -
Bank interest receivable 21 3
---------------- ----------------
Total finance income 41 3
6 TAXATION
2019 2018
GBP GBP
Corporation tax at 19% (2018: 19%) 13 -
Research and development tax credits received - -
---------------- ------------------
Total current tax 13 -
Deferred tax credit (24) -
---------------- ------------------
(11) -
The current tax charge arises on post-acquisition profits of
Medimark only. There is no other current charge due to utilisation
of unrecognised trading losses during the year (refer to critical
judgements re continuing non-recognition of deferred tax assets on
page 47). At 31 March 2019 the Group had an unrecognised deferred
tax asset relating to unutilised trading losses and other temporary
differences of GBP3,033,000 (2018: GBP3,253,000).
Deferred tax
The movements in recognised deferred income tax assets during
the year were as follows:
Trading losses Total
GBP'000 GBP'000
At 1 April 2018 - -
Recognised on business combinations 13 13
Utilised against current tax charge (13) (13)
---------------- ----------------
At 31 March 2019 - -
The deferred income tax assets have only been recognised to the
extent that it is considered probable that they can be recovered
against future taxable profits based on profit forecasts for the
foreseeable future.
The movements in deferred income tax liabilities during the year
were as follows:
Intangibles Total
GBP'000 GBP'000
At 1 April 2018 - -
Recognised on business combinations 465 465
Recognised in profit or loss (24) (24)
________ _________
At 31 March 2019 441 441
Legislation to reduce the main rate of UK corporation tax from
19% to 17% from 1 April 2020 has been enacted. The deferred tax
balances within these financial statements have been assessed to
reflect these rates within the period that any related timing
difference is expected to reverse.
The charge for the year can be reconciled to the profit / (loss)
per the Consolidated Statement of Comprehensive Income as
follows:
2019 2018
GBP'000 GBP'000
Profit / (Loss) for the year 230 (1,565)
---------------- ------------------
Profit / (Loss) on ordinary activities
before tax 230 (1,565)
Tax at the UK corporation tax rate of
19% (2018: 19%) 43 (297)
Expenses not deductible for tax purposes 8 3
Tax losses utilised (53) -
Unrecognised, unrelieved tax losses - 294
---------------- ------------------
Total tax - -
7 EARNINGS PER SHARE
Statutory earnings per share
The calculation of basic and diluted EPS is based on the
following data:
2019 2018
GBP'000 GBP'000
Earnings
Earnings for the purposes of basic and
diluted earnings per share being net
profit attributable to equity holders
of the parent 230 (1,565)
Number of shares
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 430,885,271 345,229,785
Effect of dilutive potential ordinary
shares: 2,050,000 -
- in-the-money share options
________ ________
Weighted average number of ordinary
shares for the purposes of diluted earnings
per share 432,935,271 345,229,785
Earnings / (Loss) per ordinary share
- basic 0.05p (0.45)p
Earnings / (Loss) per ordinary share
- fully diluted 0.05p (0.45)p
The Group has one category of potentially dilutive ordinary
share, being those share options granted to employees where the
exercise price (plus the remaining expected charge to profit under
IFRS 2) is less than the average price of the Company's ordinary
shares during the period. The weighted average number of shares for
the calculation of diluted earnings per share is computed using the
treasury share method.
Adjusted earnings per share
Adjusted EPS is calculated as follows:
2019 2018
GBP'000 GBP'000
Earnings
Earnings for the purposes of basic and
diluted earnings per share being net
profit attributable to equity holders
of the parent 230 (1,565)
Adjusting items:
- costs directly attributable to acquisition
of subsidiary 118 -
- amortisation of acquisition-related
intangibles 179
- share-based payments 60 67
- finance charge on liabilities relating
to contingent consideration 178 -
- expense on amendment of convertible
loan note terms - 26
- R&D tax credits (124) (129)
Adjusted earnings 641 (1,601)
Number of shares
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 430,885,291 345,229,785
Effect of dilutive potential ordinary
shares: 2,050,000 -
- in-the-money share options
________ ________
Weighted average number of ordinary
shares for the purposes of diluted earnings
per share 432,935,291 345,229,785
Adjusted earnings / (Loss) per ordinary
share - basic 0.15p (0.46)p
Adjusted earnings / (Loss) per ordinary
share - fully diluted 0.15p (0.46)p
The criteria for inclusion of adjusting items in the calculation
of adjusted EPS is income or expenditure that is material and
arises either from an irregular and significant event or for which
the income/expenditure is recognised in a pattern that is unrelated
to the underlying operational performance. Materiality is defined
as an amount which, to a user, would be expected to influence the
decision making and understandability of the financial statements.
Acquisition costs include legal and other professional costs
incurred directly related to the acquisition of businesses.
Adjustments for share based payment charges occurs because (a) once
the cost has been calculated, the Directors cannot influence the
share based payment charge incurred in subsequent years and (b) the
value of the share option to the employee differs considerably in
value and timing from the actual cash cost to the Group. Finance
charges on liabilities relating to contingent consideration are
non-cash costs reflecting the time value of money in arriving at
the fair value of such liabilities and the effluxion of time over
the period for which they are outstanding. Amortisation of
acquisition-related intangibles relates to the amortisation of
intangible assets in respect of customer relationships and brands
which are recognised on a business combination and are non-cash in
nature.
8 PROPERTY, PLANT & EQUIPMENT
Group Computer Plant and
equipment Machinery Total
GBP'000 GBP'000 GBP'000
Cost
At 1 April 2018 52 94 146
Additions 3 20 23
Acquired as part of business
combination 14 - 14
---------------- ---------------- ----------------
At 31 March 2019 69 114 183
Depreciation
At 1 April 2018 28 73 101
Charge for the year 16 8 24
---------------- ---------------- ----------------
At 31 March 2019 44 81 125
Net Book Value
At 31 March 2019 25 33 58
Group Computer Plant and
equipment Machinery Total
GBP'000 GBP'000 GBP'000
Cost
At 1 April 2017 75 81 156
Additions 6 13 19
Disposal (29) - (29)
---------------- ---------------- ----------------
At 31 March 2018 52 94 146
Depreciation
At 1 April 2017 44 68 112
Charge for the year 14 5 19
On disposal (29) - (29)
---------------- ---------------- ----------------
At 31 March 2018 29 73 102
Net Book Value
At 31 March 2018 23 21 44
9 INTANGIBLE ASSETS
Group Goodwill Other Total
Intangible
Assets
GBP'000 GBP'000 GBP'000
Cost
At 1 April
2018 - 1,318 1,318
Additions - 283 283
Created as
part of a business
combination 391 - 391
Acquired as
part of a combination - 2,929 2,929
Disposal - (296) (296)
------------ ------------ ------------
At 31 March
2019 391 4,234 4,625
Amortisation
At 1 April
2018 - 632 632
Acquired as - - -
part of a business
combination
Charge for
the year - 538 538
Disposal - (296) (296)
------------ ------------ ------------
At 31 March
2019 - 874 874
Net Book Value
At 31 March
2019 391 3,360 3,751
Other Intangible Assets
Group Framework Customer Brands Development Patents Total
Access relationships costs and licences
Rights
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April
2018 114 - - 378 826 1,318
Additions - - - 226 57 283
Created as - - - - - -
part of a business
combination
Acquired as
part of a combination - 1,861 567 501 - 2,929
Disposal - - - (147) (149) (296)
------------ ------------ ------------ ------------ ------------ ------------
At 31 March
2019 114 1,861 567 958 734 4,234
Amortisation
At 1 April
2018 56 - - 79 497 632
Acquired as - - - - - -
part of a business
combination
Charge for
the year 58 113 34 177 156 538
Disposal - - - (147) (149) (296)
------------ ------------ ------------ ------------ ------------ ------------
At 31 March
2019 114 113 34 109 504 874
Net Book Value
At 31 March
2019 - 1,748 533 849 230 3,360
The amortisation charge for the year includes accelerated
amortisation of GBP99,000 on patents and GBP100,000 on development
costs linked to the period over which the revenue performance
obligation on a major contract was satisfied.
Goodwill
Goodwill acquired in a business combination is allocated, at
acquisition, to the CGUs that are expected to benefit from that
business combination. The Group's CGUs are defined as its
subsidiaries, because they represent the smallest identifiable
group of assets that generate cash flows. The only subsidiary to
which goodwill has been allocated is Medimark. The Medimark CGU
comprises the brands, contracts and customer relationships acquired
as part of the Medimark Acquisition, as well as certain IP and the
related workforce. Given the opportunity to leverage this expertise
across Byotrol's existing business and the ability to exploit the
Group's thus enlarged customer base, the fair value of the net
assets acquired by way of the Acquisition was deemed to be greater
than the assessed book value of the net assets as recognised in the
financial statements of Medimark, thus leading to the recognition
of an amount of goodwill at the date of acquisition.
The Group tests goodwill annually for impairment, or more
frequently if there are indications that goodwill might be
impaired. The recoverable amount of goodwill is determined from
value-in-use calculations which require the use of assumptions as
follows:
(i) The operating cash flows for this business for the year to
31 March 2020 are taken from the budget approved by the Board which
is closely linked with recent historical performance and current
expected levels of activity. The operating cash flows for the years
to 31 March 2021 and 2022 are taken from longer-term planning
projections also approved by the Board. Operating cash flows for
2023 and 2024 are projected based on the 2022 figures assuming nil
real sales growth and a slight reduction in marketing expenditure
concomitant with this revenue growth rate. The operating cash flow
budget is most sensitive to sales of products containing Medimark's
HLD formulation (which accounts for some 2/3 of projected sales in
2020);
(ii) Growth has been assumed in operating cash flows for the
remainder of the value in use in line with short term expectations
as well as longer-term growth expectations for the cleaning
products in the market. Revenue growth after 5 years is forecast at
nil in real terms (2% nominal); and
(iii) A pre-tax discount rate of 10.6% has been used (being the
weighted average cost of capital of Medimark)
Cash flow projections beyond the 5-year period are extrapolated
and incorporate a terminal value; this is considered appropriate as
the Group has an increasing revenue base and the Group continues to
invest in the development of the products via this CGU.
The key assumptions for the value in use calculations are those
regarding growth rates, discount rates and expected changes to
selling prices and direct costs during the period. Changes in
selling prices and direct costs, if any, are based on expectations
of future changes in the market.
Management estimates the discount rates using pre-tax rates that
reflect current market assessments of the time value of money.
Sensitivity to changes in assumptions
The Group has conducted a sensitivity analysis on the impairment
test of the goodwill's carrying value which reflects the risk
profile of the Medimark CGU. The Group believes that there are no
reasonably possible changes to the key assumptions in the next year
which would result in the carrying amount of goodwill exceeding the
recoverable amount. This view is based upon inherently judgemental
assumptions, however, it takes account of the headroom in the value
in use calculation versus the current carrying value.
Conclusion
The Directors have concluded that, based on the above,
recoverable value exceeds the carrying value of the goodwill at 31
March 2019.
Group Development Patents Framework
costs and licences access rights Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2017 353 743 70 1,166
Additions 25 83 44 152
Disposal - - - -
---------------- ---------------- ---------------- ----------------
At 31 March 2018 378 826 114 1,318
Amortisation
At 1 April 2017 44 431 - 475
Charge for the year 35 66 56 157
Disposal - - - -
---------------- ---------------- ---------------- ----------------
At 31 March 2018 79 497 56 632
Net Book Value
At 31 March 2018 299 329 58 686
Company 2019 2018
Patents and Patents and
Licences Licences
GBP'000 GBP'000
Cost
At 1 April 826 743
Additions 57 83
Disposal (149) -
---------------- ----------------
At 31 March 734 826
Amortisation
At 1 April 497 431
Charge for the
year 156 66
Impairment - -
Disposal (149) -
---------------- ----------------
At 31 March 504 497
Net Book Value
At 31 March 230 329
The intangible assets relate to the development of patents and
also to the acquisition of the Byofresh licence.
All patent and licences of the Group are developed
internally.
10 INVESTMENTS IN SUBSIDIARIES
COMPANY Shares in Shares in
Subsidiary Subsidiary
Undertakings Undertakings
2019 2018
GBP'000 GBP'000
At 1 April 2,674 2,597
Additions
Additions in relation to the acquisition
of subsidiary: 44
Initial cash consideration 974 -
Initial equity consideration 884 -
Contingent purchase consideration estimated
to be paid in cash (at fair value on
acquisition) 378 -
Contingent purchase consideration expected
to be settled in equity (at fair value
on acquisition) 261 -
-
Additions relating to share options
issued to subsidiary employees 48 33
---------------- ----------------
At 31 March 5,219 2,674
The amount disclosed above of GBP0.97m in respect of the initial
cash consideration in relation to the acquisition of a subsidiary
differs from the amount disclosed in Note 21 principally due to an
amount settled directly by Medimark in respect of directors' loan
accounts which is included in the overall cost of the acquisition
to the Group.
Details of all subsidiary undertakings included in the
consolidated financial statements are as follows:
Country Holding Proportion Nature of business Address
of incorporation of voting
rights
and shares
held
Byotrol Technology England Ord 100% Anti-microbial Address is same as Byotrol
Limited SC products PLC
Byotrol Inc United Ord 100% Anti-microbial PO Box 18514, GA, 30326,
States SC products USA
Byotrol Consumer England Ord 100% Anti-microbial Thornton Science Park,
Products SC products Ince, CH2 4NU
Winchpharma England Ord 100% Anti-microbial Thornton Science Park,
(Consumer Healthcare) SC products Ince, CH2 4NU
Medimark Scientific England Ord 100% Anti-microbial Lords Court, Basildon,
Limited SC products SS13 1SS
Ebiox Limited England Ord 100% Anti-microbial Lords Court, Basildon,
SC products SS13 1SS
11 INVENTORIES
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Raw materials and
consumables 22 42 - -
Finished goods and
goods for resale 394 143 - -
---------------- ---------------- ---------------- ----------------
416 185 - -
Included above are inventories of GBP Nil (2018: GBPnil) carried
at net realisable value.
Inventories recognised as an expense during the year ended 31
March 2019 amounted to GBP1,726,000 (2018: GBP956,000). These were
included in cost of sales in the Consolidated Statement of
Comprehensive Income.
Write-downs of inventories to net realisable value amounted to
GBP7,000 (2018: GBP38,000). These were recognised as an expense
during the year ended 31 March 2019 and included in cost of sales
in the Consolidated Statement of Comprehensive Income.
No earlier write downs were reversed during the current or
preceding period.
12 TRADE AND OTHER RECEIVABLES AND CONTRACT ASSETS
Group Group Group Group Group
2019 2019 2019 2018 2018
Current Non- Current TOTAL Current TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 932 - 932 382 382
Other tax repayable 15 - 15 92 92
Other receivables 293 - 293 254 254
---------------- ---------------- ---------------- ---------------- ----------------
Total trade
and other receivables 1,240 - 1,240 728 728
Contract assets 275 176 451 - -
Prepayments 281 - 280 204 204
---------------- ---------------- ---------------- ---------------- ----------------
1,796 176 1,971 932 932
Company Company Company Company Company
2019 2019 2019 2018 2018
Current Non- Current TOTAL Current TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 83 - 83 - -
Other tax repayable 17 - 17 55 55
Amount owed
by group undertakings 2,058 - 2,058 438 438
Other receivables - - - 7 7
---------------- ---------------- ---------------- ---------------- ----------------
Total trade
and other receivables 2,158 - 2,158 500 500
Contract assets 275 176 451 - -
Prepayments 54 - 54 22 22
---------------- ---------------- ---------------- ---------------- ----------------
2,487 176 2,663 522 522
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value. The Group had 54
days of revenue outstanding in trade receivables as at 31 March
2019 (2018: 43 days). Included within trade receivables is
GBP180,000 (2018: GBP126,000) denominated in US dollars and GBPnil
(2018: GBPnil) denominated in Euros.
The Group's maximum exposure to credit risk equates to the
carrying value of cash held on deposit and trade and other
receivables and contract assets.
The Group's credit risk is primarily attributable to trade
receivables and contract assets. All trade receivables and contract
assets have been reviewed for impairment. Unless specific agreement
has been reached with individual customers, sales invoices are due
for payment either 30 or 60 days after the date of the invoice.
Where customers delay making payment, an assessment of the
potential loss of customer goodwill arising from the enforcement of
contractual payment terms may take place when considering actions
to be taken to secure payment. Trade receivables include amounts
that are past due at the reporting date for which no allowance for
doubtful debts has been recognised because these amounts are still
considered to be recoverable. The Group does not hold any
collateral or other credit enhancements over its trade receivable
balances.
The Group has concentration of credit risk with exposure to
three major customers whose year end balances totalled GBP427,000
(2018: GBP1,193,000).
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Impairment brought
forward 86 4 12,059 12,059
Amounts written off (2) - - -
Amounts recovered (25) - - -
Specific impairment
charge 16 82 - -
Additional expected 25 - - -
credit loss provision
---------------- ---------------- ---------------- ----------------
Impairment carried
forward 100 86 12,059 12,059
In line with the accounting policy stated on impairment, the
Directors have considered the carrying value of assets. They have
determined that there is reasonable evidence to suggest certain
trade receivables will not be recovered in full and have therefore
reflected an impairment in the value of trade receivables in the
Group financial statements. They have also determined that, due to
the trading losses incurred by the subsidiaries of the Company in
previous periods, it is reasonable to continue to reflect an
impairment in the value of short-term loans and trading advance
made to its subsidiaries by the Company, with no change to
impairment in the current year. This impairment has been reflected
in the financial statements of the Company. The Company continues
to reflect an impairment of historic group undertaking amounts
totalling GBP12,059,000 (2018: GBP12,059,000). Amounts owed by
group undertakings have been reviewed and no further impairment is
required.
Contract assets represent amounts relating to revenue recognised
at the date of the statement of financial position but not yet due
or invoiceable under the terms of the contract. These arise most
typically for the Group in sales or licenses of IP and/or know-how
where the consideration is structured as an upfront payment
followed by a series of additional payments, which may comprise
fixed sums or sums relating to some measure of (for example) sales
made by the purchaser of the IP using the relevant products and/or
in the relevant geography. Such payments may extend over several
years. Under IFRS 15, if the contract is a "right to use" contract,
then the upfront and fixed payments are recognised on transfer of
the license or IP at their aggregate present value using an imputed
cost of funds. Longer term contracts which give rise to contract
assets may contain continuing obligations on the part of Byotrol
(for example, to provide updates or improvements to the IP
transferred to the extent achieved) but such obligations are
typically immaterial to the contract overall.
No impairments have been made in respect of contract assets
recognised as at the balance sheet date.
The Group applies the simplified approach to provide for
expected credit losses prescribed by IFRS 9, which permits the use
of a provision matrix to measure the lifetime expected losses.
To measure the expected credit losses, trade receivables have
been grouped on shared credit risk characteristics and the days
past due. The expected loss rates are based on representative
historical credit losses. The historical loss rates are adjusted to
reflect current and forward-looking information affecting the
ability of the customers to settle the receivables.
The aging analysis of the trade receivables and related specific
provisions for impairment as at 31 March 2019 and as at 31 March
2018 were as follows:
Debt age - "days overdue"
2019 Current 0-30 31-60 61-90 91-120 Over 120 Total
Days Days Days days Days
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross 630 157 38 50 27 130 1,032
Specific
impairment - - - - - (75) (75)
_____________ _____________ _____________ _____________ _____________ _____________ _____________
Carrying
value
before
additional
expected
credit
loss
provision 630 157 38 50 27 55 957
Additional
expected
credit
trade loss
provision - (1) (2) (5) (7) (10) (25)
_____________ _____________ _____________ _____________ _____________ _____________ _____________
Trade
receivables
Value (GBP) 630 156 36 45 20 45 932
============= ============= ============= ============= ============= ============= =============
% of total 66 16 4 5 3 6 100
============= ============= ============= ============= ============= ============= =============
2018 Current 0-30 31-60 61-90 91-120 Over 120 Total
Days Days Days days Days
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross 1,250 73 37 41 50 111 1,562
Specific
impairment - - - - (16) (70) (86)
_____________ _____________ _____________ _____________ _____________ _____________ _____________
Trade
receivables
Value (GBP) 1,250 73 37 41 34 41 1,476
============= ============= ============= ============= ============= ============= =============
% of total 85 5 2 3 2 3 100
============= ============= ============= ============= ============= ============= =============
The additional expected credit loss provision for trade
receivables as at 31 March 2019 is determined as follows:
In GBP'000 Expected Carrying amount Additional
loss rate after specific expected
(%) provision credit loss
========================= =========== ================ =============
Not past due 0.3% 630 2
----------- ---------------- -------------
Past due up to 30 days 0.7% 157 1
----------- ---------------- -------------
Past due between 30 and
60 days 3% 38 1
----------- ---------------- -------------
Past due between 61 and
90 days 6% 50 3
----------- ---------------- -------------
Past due between 91 and
120 days 7% 27 2
----------- ---------------- -------------
Past due after 120 days 18% 55 10
----------- ---------------- -------------
26% 957 25
----------- ---------------- -------------
The application of the expected credit risk model under IFRS 9
did not result in an equity impact at 1 April 2018. The ageing
analysis for the trade receivables and related specific provisions
for impairment as at 31 March 2019 (before incremental expected
credit loss provision) and as at 31 March 2018 were as follows:
As at 31 March 2019, GBP285,000 (2018: GBPNil) of trade
receivables had been sold to a provider of invoice discounting and
debt factoring services. The Group is committed to underwrite any
of the debts transferred and therefore continues to recognise the
debts sold within trade receivables until the debtors repay or
default. The proceeds from transferring the debtors of GBP245,000
(2018: GBPNil) are included in other financial liabilities until
the debts are collected.
13 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash held by the Group and
Company. The carrying amount of the asset approximates the fair
value.
Cash held by the Group is with UK-based banks GBP2,797,000
(2018: GBP3,845,000) and a limited amount GBP28,000 (2018:
GBP10,000) with one US bank. All amounts held by the Company
totalling GBP1,556,000 (2018: GBP3,517,000) are with UK-based
banks.
14 TRADE AND OTHER PAYABLES
Group Group Company Company
2019 2018 2019 2018
Current: GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 842 335 125 57
Other taxes & social
security taxes 45 31 11 10
Accruals and deferred
income 303 184 66 105
Other payables 248 44 - 44
---------------- ---------------- ---------------- ----------------
1,438 594 202 216
In both the Group and Company, the carrying amount of trade and
other payables approximates to their fair values. Included in trade
payables is GBP80,000 (2018: GBP27,000) denominated in US dollars
and GBP 20,000 (2018: GBP9,000) denominated in Euros.
The age profile of the net trade and other payables for the
Group at the year end was as follows:
Payables age - "days past due" at balance sheet date
2019 Current 0-30 31-60 61-90 91-120 Over 120 Total
Days Days Days days Days
Trade GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
payables
522 205 95 1 10 9 842
============= ============= ============= ============= ============= ============= =============
% 62 24 11 0 1 1 100
============= ============= ============= ============= ============= ============= =============
2018 Current 0-30 31-60 61-90 91-120 Over 120 Total
Days Days Days days Days
Trade GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
payables
210 75 14 - 36 - 335
============= ============= ============= ============= ============= ============= =============
% 63 22 4 0 11 - 100
============= ============= ============= ============= ============= ============= =============
15 FINANCIAL INSTRUMENTS
Details of the methods adopted for the categorisation and
measurement of financial assets and liabilities are set out in the
accounting policies.
Foreign currency risk
The Group operates in a number of markets across the world and
is exposed to foreign exchange risk arising from various currency
exposures in particular, with respect to the US dollar. The Group
is exposed to foreign currency risk arising from recognised assets
and liabilities as well as commitments arising from future trading
transactions. Although the countries that the Group trades with
have relatively stable economies, management has set up a policy
which requires Group companies to manage their foreign exchange
risk against their functional currency by closely monitoring spot
rate to balance inflows and outflows. A sensitivity analysis of the
Group's foreign exchange exposure is not presented as the risk is
considered to be insignificant.
Interest rate risk
The Group is exposed to minimal interest rate risk arising on
cash and cash equivalent balances and bank loans and overdrafts in
the prior year. The Group does not consider that it is
significantly exposed to interest rate risk, either in the current
or prior year, and therefore an interest rate sensitivity analysis
is not presented.
Fair values of financial liabilities and financial assets
The fair values based upon the market value or discounted cash
flows of financial liabilities and financial assets, held in the
Group was not materially different from their book values.
Liquidity risk
All of the Group's financial instruments, apart from the
deferred consideration payable over one year, have been classified
as current. The Group's ability and approach to manage its
liquidity position is set out in its going concern accounting
policy.
Credit risk
The Group's principal financial assets comprise cash and cash
equivalents and trade and other receivables. As these instruments
are conventional risks, they are managed on the simple basis of
credit terms, credit worthiness and cash collection or settlement.
Further details on trade receivables, including analysis of bad
debts and ageing, are given in note 12.
In order to manage credit risk, the Group sets limits for
customers based on a combination of payment history and third-party
credit references. Credit limits are reviewed on a regular basis in
conjunction with debt ageing and collection history. Balances that
are beyond agreed terms, are actively followed up to ensure
collection.
16 COMMITMENTS UNDER OPERATING LEASES
The minimum lease payments under non-cancellable operating lease
rentals are in aggregate as follows:
Group Group Company Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Amounts due:
- within one year 24 35 - 35
- in second to fifth
years inclusive 32 1 - 1
- in more than five - - - -
years
---------------- ---------------- ---------------- ----------------
56 36 - 36
IFRS 16 Leases (effective for the year ending 31 March 2020),
which supersedes IAS 17 Leases and related interpretations, will
require all leases to be recognised on the balance sheet,
eliminating the distinction between operating and finance leases.
The Group has one operating lease arrangement which would require
recognition under IFRS 16, the impact of which, if adopted as at 1
April 2019, would be to recognise lease liabilities of
approximately GBP55,000 and a corresponding Right-to-Use asset of
approximately GBP54,000.
In applying the standard retrospectively, the Group intends to
take advantage of the practical expedient available in IFRS 16
C5(b) and not restate comparatives; accordingly any difference
between the carrying value of the assets created and the
corresponding liabilities will be applied as an adjustment to
opening equity at the date of initial application.
17 SHARE BASED PAYMENTS
The Company has granted equity-settled share options to certain
directors and employees. The exercise price is equal to or more
than market value of the shares at the date of grant. If the
options remain unexercised after a period of ten years from the
date of grant the options expire.
Details of the share options and warrants outstanding during the
year are as follows:
2019 2018
Number Weighted Number Weighted
of share average of share average
options exercise options exercise
price price
(in p) (in p)
Outstanding at beginning
of year 39,339,250 5.19 33,532,500 5.40
Share options granted during
the year 5,000,000 2.10 14,516,750 4.00
Share options lapsed during
the year (2,891,000) 3.77 (8,710,000) 4.02
---------------- ---------------- ---------------- ----------------
Outstanding at the end
of the year 41,448,250 4.10 39,339,250 5.19
The number of options exercisable at 31 March 2019 is 7,200,000
(2018: 7,200,000).
The Group recognised the following expenses related to share
based payments:
2019 2018
GBP'000 GBP'000
Charged to Consolidated Statement of Comprehensive
Income 60 67
Of this amount, GBP48,000 (2018: GBP33,000) relates to costs of
share options issued to subsidiary employees.
The fair value of options granted under the employee option
schemes is measured using the Black-Scholes model.
New Grants
EMI Scheme Executive
28 December Scheme
2018 28 January
Grant date 2019
Share price at grant date 1.67p 1.98p
Exercise price 2.00p 2.10p
Number of employees 2 1
Share options granted 3,000,000 2,000,000
Vesting period (years) 1 1
Expected volatility 44.8% 46.1%
Option life (years) 10 10
Expected life (years) 5.5 5.5
Risk free rate 0.71 0.71
Expected dividends expressed - -
as a dividend yield
Fair value per option 0.60p 0.80p
The options outstanding at 31 March 2019 had a weighted average
exercise price of 4.1p (2018: 5.19p) and a weighted average
remaining contractual life of 4.1 years (2018: 5.1 years).
The aggregate of the estimated fair values of the options
granted in the year is GBP0.10m (2018: GBP0.58m).
At 31 March 2019 there were options outstanding over 41,448,250
(2018: 39,339,250) ordinary shares of 0.25p each which are
exercisable at prices in the range from 2.0p to 13p under the
company's various share option schemes exercisable at various times
until 14 April 2025.
Expected volatility was based upon the historical volatility
over the expected life of the schemes. The expected life is based
upon historical data and has been adjusted based on management's
best estimates for the effects of non-transferability, exercise
restrictions and behavioural considerations.
18 RELATED PARTY TRANSACTIONS
Directors
Fees for Directors' services are set out in the Directors'
Remuneration Report and in Note 4 to the financial statements.
Fees for Dr Medinger are paid to Medinger Associates and
amounted to GBP24,000 (2018: GBP24,000).
Fees for Sean Gogarty are paid to Grove Strategic Advisors and
amounted to GBP5,667 (2018: GBPnil).
Key management personnel
The Board is of the opinion that the key management personnel
are the Executive Directors & Non-Executive Directors. In
addition to their salaries the Group also provides certain non-cash
benefits to the Executive Directors. The total compensation
comprised:
2019 2018
GBP'000 GBP'000
Short term benefits 303 266
Share based payments 13 35
---------------- ----------------
Total 316 301
19 OTHER PAYABLES - CONTINGENT CONSIDERATION
Group Group Company Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Contingent consideration
on the acquisition of
Medimark
- estimate of amount
due within one year 520 - 520 -
- estimate of amount
due after one year 297 - 297 -
---------------- ---------------- ---------------- ----------------
817 - 817 -
Part of the consideration for the Medimark Acquisition in August
2018 was contingent on the achievement of certain EBITDA targets in
the two years following the acquisition. The contingent amount
payable under these arrangements was between GBPnil and GBP1.8m; at
the balance sheet date the further consideration payable in respect
of the first year earn out is expected to be a nominal
(undiscounted) amount of at least GBP0.62m (and potentially more),
leaving a balance of GBP1.18m potentially payable. The amounts
disclosed above are fair value estimates based on a
probability-weighted analysis of the potential outturns for the
EBITDA for the relevant years which determines the amount paid.
The Directors provisionally assessed the fair value at the date
of acquisition of the contingent consideration on a similar basis
at an aggregate of GBP1.27m; the difference arising during the
measurement period has been credited to goodwill.
20 SHARE CAPITAL
2019 2018
Authorised:
537,115,321 (2018: 537,115,321) Ordinary
shares of 0.25p each 1,342,788 1,342,788
The Ordinary Shares have full equal voting rights, equal
participation in dividends, equal participation in distribution on
winding up with no redemption rights.
No. GBP'000
Issued and fully paid Ordinary Shares (par
value 0.25 pence):
At 1 April 2018 402,836,471 1,007
Shares issued 28,048,800 70
---------------- ----------------
At 31 March 2019 430,885,271 1,077
Shares issued comprise 28,048,780 shares issued as part
consideration for the Medimark acquisition.
Capital management
The Group's main objective when managing capital is to protect
returns to shareholders by ensuring the Group will continue to
trade in the foreseeable future. The Group also aims to maximise
its capital structure of debt and equity so as to minimise its cost
of capital.
The Group considers its capital to include share capital, share
premium, merger reserve and the retained deficit. The Group has no
external debt.
The Group has no long-term gearing ratio target as it believes
that it currently does not have sufficient assets to secure
meaningful levels of funding.
Reserves
The nature and purpose of each of the reserves included within
equity is as follows:
-- Share capital represents the nominal value of ordinary shares issued and fully paid.
-- Share premium represents the excess of funds raised from the
placing of equity shares over the nominal value of the shares after
deducting directly attributable placing costs.
-- The merger reserve was established in respect of previous
acquisitions, which qualify for Section 131 merger relief.
-- The convertible loan note reserve represented the equity
component for the former convertible loan notes issued by the
Group
-- Retained deficit represent accumulated losses to date.
21 BUSINESS COMBINATIONS
Byotrol acquired the entire issued voting capital of Medimark
Scientific Limited ("Medimark") on 23 August 2018 (the
"Acquisition"). Medimark is a leading provider of biocide-based
infection control products and is a profitable and growing business
with a broad sales, marketing and distribution expertise.
Medimark's infection control products are used on surfaces,
instruments and hands for the Animal Health, Human Health,
Laboratory, Environment and Retails markets. The company is based
in Sevenoaks, Kent and is ISO9001 quality registered with
supporting registration under the Medical Device Directive.
Consideration of up to GBP4.50m is payable in respect of the
Acquisition including certain debt assumed by Byotrol (including an
invoice discount facility and directors' loan accounts). Initial
consideration valued at a nominal GBP2.30m was paid on completion,
being GBP1.15m in cash and GBP1.15m settled by the issue of
28,048,780 new ordinary shares (subject to working capital
adjustments and other retentions). An additional GBP1.80m of
consideration is payable subject to Medimark achieving EBITDA
targets of GBP500,000 and GBP650,000 respectively (subject to
certain adjustments if the first year target is missed or exceeded)
in the years to 31 March 2019 and 31 March 2020.
This contingent consideration payable half in cash and half in
new ordinary shares to be issued at a price determined by reference
to an average market price over 15 days.
The amounts recognised in respect of identifiable assets and
liabilities acquired is set out in the table below.
Book value Adjustment Fair value
GBP'000 GBP'000 GBP'000
------------- ------------- -------------
Intangible non-current assets
------------- ------------- -------------
- customer relationships - 1,861 1,861
------------- ------------- -------------
- brands - 567 567
------------- ------------- -------------
- capitalised development
costs 194 307 501
------------- ------------- -------------
Tangible non-current assets 13 - 13
------------- ------------- -------------
Other investments 15 (15) -
------------- ------------- -------------
Stock 160 - 160
------------- ------------- -------------
Trade Receivables 366 - 366
------------- ------------- -------------
Other debtors 47 - 47
------------- ------------- -------------
Deferred tax (note 6) - 13 13
------------- ------------- -------------
------------ ------------ ------------
------------- ------------- -------------
Total identifiable assets
acquired 795 2,733 3,528
------------- ------------- -------------
Trade payables (381) - (381)
------------- ------------- -------------
Other payables - current (25) (8) (33)
------------- ------------- -------------
Other payables - non-current (134) 24 (110)
------------- ------------- -------------
Deferred tax liability - (465) (465)
------------- ------------- -------------
------------ ------------ ------------
------------- ------------- -------------
Total identifiable liabilities
acquired (540) (449) (989)
------------- ------------- -------------
Net assets/(liabilities)
acquired 255 2,284 2,539
------------- ------------- -------------
Goodwill on acquisition 391
------------- ------------- -------------
Fair value of assets acquired 2,930
------------- ------------- -------------
Initial cash consideration
paid net of GBP47,000 cash
acquired 1,178
------------- ------------- -------------
Debt assumed on acquisition 229
------------- ------------- -------------
Initial equity consideration 884
------------- ------------- -------------
Contingent purchase consideration
estimated to be paid in cash
(at fair value on acquisition) 378
------------- ------------- -------------
Contingent purchase consideration
expected to be settled in
equity (at fair value on
acquisition) 261
------------- ------------- -------------
Fair value of total consideration
payable 2,930
------------- ------------- -------------
In addition to the initial cash consideration of GBP1.18m shown
above, Medimark also settled during the year an amount due to the
vendors of its wholly-owned subsidiary Ebiox Limited in respect of
deferred consideration liabilities - these are shown in the table
above as "other payables - non current" at their fair value of
GBP0.11m and the amount paid included in the "Cash (outflow) on
acquisition of businesses net of cash acquired" line in the
Consolidated Statement of Cash Flows.
The goodwill recognised above is attributable to intangible
assets in Medimark that cannot be individually separated and
reliably measured due to their nature. These items include:
-- the technical expertise of the acquired workforce
-- the opportunity to leverage this expertise across Byotrol's existing business; and
-- the ability to exploit the Group's enlarged customer base
The fair value at acquisition of contingent consideration
payable in cash of GBP674,000 was provisionally estimated based on
the Board's expectations at the time of the future trading
performance of Medimark and how this would be accounted for as
EBITDA under the terms of the SPA; the resulting nominal value was
discounted at the Group's notional cost of borrowing over the
earn-out period.
The fair value at acquisition of contingent consideration to be
settled by the issue of equity of GBP595,000 was estimated
similarly; as the fair value also takes into account the value of
the equity expected to be issued to settle the liability, the
estimate is based also on expected share prices for the Company's
ordinary shares. The resulting nominal value was discounted at the
Group's cost of equity over the earn-out period, and treated as a
financial liability (rather than equity) as it represents a
liability that will be settled in a variable number of the
Company's ordinary shares.
Medimark contributed approximately GBP1.8m of revenue and
GBP311,000 of profit after tax for the year ended 31 March 2019. If
the acquisition had been made at the beginning of the financial
year, it would have contributed approximately GBP3.0m of revenue
and GBP391k of profit after tax.
In relation to the acquisition, costs of GBP118,000 have been
expensed in the statement of comprehensive income.
22 IMPACT OF APPLICATION OF NEW ACCOUNTING STANDARD
The following tables present the impact of changes relating to
the application of IFRS 15.
GROUP
2018 Impact 2018
of
IFRS 15 restated
GBP'000 GBP'000 GBP'000
REVENUE 3,140 (1,320) 1,820
Cost of sales (1,129) - (1,129)
---------------- ---------------- ----------------
GROSS PROFIT 2,011 (1,320) 691
Sales and marketing costs (549) - (549)
Research and development costs (451) - (451)
Other administrative costs (1,095) - (1,095)
Share based compensation (67) - (67)
---------------- ---------------- ----------------
EARNINGS BEFORE INTEREST, TAX,
DEPRECIATION AND AMORTISATION (EBITDA) (151) (1,320) (1,471)
Expense on amendment of convertible
loan note terms (26) - (26)
Depreciation (19) - (19)
Amortisation (157) - (157)
---------------- ---------------- ----------------
OPERATING (LOSS) (353) (1,320) (1,673)
Finance income 3 - 3
Finance costs (24) - (24)
Research and development (R & D)
tax credits 129 - 129
---------------- ---------------- ----------------
LOSS BEFORE TAX (245) (1,320) (1,565)
Taxation - - -
---------------- ---------------- ----------------
LOSS FOR THE FINANCIAL YEAR (245) (1,320) (1,565)
---------------- ---------------- ----------------
OTHER COMPREHENSIVE INCOME, NET
OF TAX
Other comprehensive income which
may be reclassified to profit or
loss in subsequent periods:
Exchange differences on translation
of foreign operations 3 - 3
---------------- ---------------- ----------------
Other comprehensive income 3 - 3
---------------- ---------------- ----------------
TOTAL COMPREHENSIVE LOSS FOR THE
YEAR (242) (1,320) (1,562)
Basic and fully diluted loss per
share - pence (0.07)p (0.38)p (0.45)p
2018 Impact 2018
of
IFRS 15
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 44 - 44
Intangible assets 487 199 686
Trade and other receivables 425 (425) -
---------------- ---------------- ----------------
956 (226) 730
Current assets
Inventories 185 - 185
Trade and other receivables 2,026 (1,094) 932
Cash and cash equivalents 3,853 - 3,853
---------------- ---------------- ----------------
6,064 (1,094) 4,970
---------------- ---------------- ----------------
7,020 (1,320) 5,700
LIABILITIES
Current liabilities
Trade and other payables 594 - 594
---------------- ---------------- ----------------
594 - 594
---------------- ---------------- ----------------
Equity
Share capital 1,007 - 1,007
Share premium 27,468 - 27,468
Merger reserve 1,065 - 1,065
Retained earnings reserve (23,114) (1,320) (24,434)
---------------- ---------------- ----------------
TOTAL EQUITY 6,426 (1,320) 5,106
---------------- ---------------- ----------------
TOTAL EQUITY AND LIABILITIES 7,020 (1,320) 5,700
The application of IFRS15 has given rise to a GBP199k
reinstatement to patents and development costs included within
other intangible assets. Whilst legal title was no longer held at
31 March 2018, the sale of intellectual property was not capable of
being distinct from the subsequent know-how transfer and as such
the disposal previously recognised at 31 March 2018 has been
reversed.
The GBP1,320,000 impact on retained earnings reserve wholly
pertained to the result for the year ended 31 March 2018 with a
restatement of the parent company result from a profit of
GBP412,000 to a loss of GBP908,000
COMPANY
2018 Impact 2018
of
IFRS 15
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Other intangible assets 230 99 329
Investments in subsidiaries 2,674 - 2,674
Trade and other receivables 425 (425) -
---------------- ---------------- ----------------
3,329 (326) 3,003
Current assets
Trade and other receivables 1,516 (994) 522
Cash and cash equivalents 3,517 - 3,517
---------------- ---------------- ----------------
5,033 (994) 4,039
---------------- ---------------- ----------------
8,362 (1,320) 7,042
LIABILITIES
Current liabilities
Trade and other payables 216 - 216
---------------- ---------------- ----------------
216 - 216
---------------- ---------------- ----------------
Equity
Share capital 1,007 - 1,007
Share premium account 27,468 - 27,468
Merger reserve 1,065 - 1,065
Retained deficit (21,394) (1,320) (22,714)
---------------- ---------------- ----------------
TOTAL EQUITY 8,146 (1,320) 6,826
---------------- ---------------- ----------------
TOTAL EQUITY AND LIABILITIES 8,362 (1,320) 7,042
The application of IFRS15 has given rise to a GBP99k
reinstatement to patents and development costs included within
other intangible assets. Whilst legal title was no longer held at
31 March 2018, the sale of intellectual property was not capable of
being distinct from the subsequent know-how transfer and as such
the disposal previously recognised at 31 March 2018 has been
reversed.
23 ULTIMATE CONTROLLING PARTY
The Company is admitted to trading on AIM. It has no ultimate
controlling party.
24 POST BALANCE SHEET EVENTS
There were no significant events after the end of the reporting
period.
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 FMGFLGGNGLZM
(END) Dow Jones Newswires
September 30, 2019 07:00 ET (11:00 GMT)
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