TIDMAGY
RNS Number : 0324S
Allergy Therapeutics PLC
28 September 2017
Manuel Llobet, Chief Executive Officer, and Nick Wykeman,
Finance Director, will host a meeting and call for analysts to
provide an update on the Group, followed by a Q&A session, at
0930 BST today. Dial-in details are: +44 (0) 1452 555566.
Conference ID: 86318311.
Allergy Therapeutics plc
("Allergy Therapeutics" or the "Group")
Preliminary Results
28 September 2017 Allergy Therapeutics plc (AIM:AGY), the fully
integrated specialty pharmaceutical group specialising in allergy
vaccines, today announces preliminary results for the year ended 30
June 2017.
Financial highlights
-- 72% increase in operating profit (pre-R&D) to GBP7.4m (2016: GBP4.3m)
-- 32% revenue growth increase in actual terms to GBP64.1m (2016: GBP48.5m)
-- 15%* revenue growth at constant currency to GBP55.5m (2016: GBP48.5m)
-- 10% compound annual growth in net sales over 18 years
-- Market share in the Group's main European markets increased to 13% (2016: 12%)
-- Cash at 30 June GBP22.1m (2016: GBP23.4m)
Operational highlights
-- Commencement of recruitment for pivotal Phase III Pollinex Quattro Birch trial
-- US Grass MATA programme proceeding well; safety study successfully completed
-- First patient recruited for Acarovac MPL Phase I trial in Spain
-- Positive pre-clinical proof of concept trial data announced for Polyvac Peanut
Manuel Llobet, Chief Executive Officer of Allergy Therapeutics,
commented: "This has been another strong year of growth with
constant currency growth of 15%* increasing our market share and,
together with a favourable sterling/euro exchange rate, boosting
operating profit pre R&D by GBP3.1m. Our continuing growth and
progress on our pipeline reflects the quality of the products and
the committed team that works at Allergy Therapeutics. We expect
further good progress in the coming year."
This announcement contains insider information for the purposes
of Article 7 of Regulatory (EU) No596/2014.
* percentage based on figures in thousands (2017: GBP55.545m,
2016: GBP48.509m)
-S -
For further information, please contact:
Allergy Therapeutics
+44 (0) 1903 845 820
Manuel Llobet, Chief Executive Officer
Nick Wykeman, Finance Director
Panmure Gordon
+44 (0) 20 7886 2500
Freddy Crossley / Duncan Monteith, Corporate Finance
Tom Salvesen, Corporate Broking
Consilium Strategic Communications
+44 20 3709 5700
Mary-Jane Elliott / Ivar Milligan / Philippa Gardner
allergytherapeutics@consilium-comms.com
Notes for editors:
About Allergy Therapeutics
Allergy Therapeutics is an international specialty
pharmaceutical group focussed on the treatment and diagnosis of
allergic disorders, including immunotherapy vaccines, that have the
potential to cure disease. The Group sells proprietary and third
party products from its subsidiaries in nine major European
countries and via distribution agreements in an additional ten
countries. Its broad pipeline of products in clinical development
include vaccines for grass, tree and house dust mite, and peanut
allergy vaccine in pre-clinical development. Adjuvant systems to
boost performance of vaccines outside allergy are also in
development.
Formed in 1999 out of Smith Kline Beecham, Allergy Therapeutics
is headquartered in Worthing, UK with more than 11,000m(2) of
state-of-the-art MHRA-approved manufacturing facilities and
laboratories. The Group, which has achieved double digit compound
annual growth since formation, employs c.500 employees and is
listed on the London Stock Exchange (AIM:AGY). For more
information, please see www.allergytherapeutics.com.
CHAIRMAN'S STATEMENT
Overview
I am pleased to introduce the Group's Annual Report &
Accounts for the year ended 30 June 2017. It has been another year
of strong and consistent performance across all areas of the Group.
The key areas for value creation remain profitable growth in
European markets, pipeline advancements and paving the way to the
significant US market.
Performance
In our European business, sales grew by 15%* in constant
currency and we continued to achieve market share gains, with our
market share in markets where we operate up to 13 % (2016: 12%).
This shows an increasing adoption in the market for our convenient
and patient-friendly treatments compared to other products.
In addition, there has been good progress in the R&D
pipeline this year, facilitated by investment from our growing
revenue stream. In March, we announced that we had recruited the
first patient in our pivotal Phase III PQ Birch trial and, in May,
the first patient was recruited for our Acarovac MPL (house dust
mite) study. We announced exciting pre-clinical data from the
Polyvac Peanut project in February and we are pleased that all of
the products that the Group has submitted for the German
Therapieallergen-Verordung (TAV) process are continuing to progress
well.
We are also making progress with our US commercial strategy. The
Grass MATA MPL product completed the safety study relating to its
higher dose and the Phase II Grass trial is due to commence before
the end of 2017.
Financially, the Group remains in a robust position with a
strong cash balance due to strong sales growth, aided additionally
by the weakening of sterling against the euro.
Board Changes
There were a number of changes to the Board during the year. In
February, we welcomed US-based Jeff Barton who succeeded Jean-Yves
Pavee as Abbott Laboratories' nominated director and, in June,
Thomas Lander our Board member with extensive R&D experience,
retired from the Board and Tunde Otulana was appointed as a new
independent Non-Executive Director. I thank Jean-Yves and Thomas
for their significant contributions to the Board during their
tenures.
Jeff Barton, who is based at Abbott headquarters in Chicago and
is VP Licensing and Acquisitions, brings extensive commercial
experience, especially in the US, which will prove vital as the
Group continues to execute its global strategy. Tunde is also based
in the US and brings a wealth of global experience in clinical and
regulatory work, particularly with the US Food and Drug
Administration (FDA), with whom he worked for six years earlier in
his career. I am delighted to welcome Jeff and Tunde to the
Board.
Governance
The Group endeavours to adopt best practice, above normal levels
for a company of its size and sector across the business and it is
overseen by an effective and knowledgeable Board. We are pleased
that a regular and transparent dialogue is maintained with our key
stakeholders throughout the year.
* Percentage based on figures in thousands (2017: GBP55.545m,
2016: GBP48.509m)
Looking ahead
Allergy Therapeutics' strategy remains clear and focused and it
is expected that the business will continue to grow and its
portfolio of products expand in 2018 and beyond. The Group benefits
from a committed, experienced and enthusiastic management team and
the Board and I are confident that we shall continue our successful
record of growth and deliver long-term value creation for
shareholders.
On behalf of the Board, I would like to thank all Allergy
Therapeutics' employees for their commitment and hard work during
the year.
Peter Jensen
Chairman
27 September 2017
CHIEF EXECUTIVE OFFICER'S REVIEW
Delivering on our strategy - three areas for growth
Strong advances have been made this year across all three major
strategic objectives. These are focused around three key pillars of
growth: profitably expanding the existing European business;
developing a strong product pipeline, and; preparing for product
entry into the US market.
European business - milestone CAGR of 10% reached over past 18
years
The Group reached a significant milestone this year with
compound annual growth over the past 18 years of 10%. This reflects
continued delivery of our focused growth strategy, innovative
products and a robust business model that is resilient to major
economic downturns and significant regulatory changes. The business
achieved net sales of GBP64.1m, up 15%* at constant currency on the
2016 performance and up 32% in actual terms.
Following on from the 16% underlying constant rate growth last
year, this illustrates the strength of the Group's portfolio of
convenient, patient-friendly, technically advanced products and the
skilled sales and marketing teams in the business. Whilst operating
in a highly fragmented European allergy market, Allergy
Therapeutics continues to benefit from its innovative approach
within this marketplace and will look to build value for
shareholders via suitable corporate development opportunities. The
Group has also continued to invest in its infrastructure, further
strengthening its supply chain and regulatory functions in
anticipation of an increasingly regulated framework for allergy
treatment across the EU and the US. The changes in the regulatory
environment and a drive towards evidence-based products will be to
the Group's advantage.
Increasing market share
During the period, the Group continued to increase its market
share in the markets in which we operate, driving this to 13%
(2016: 12%) against a broadly flat market backdrop. In the product
portfolio, Pollinex Quattro continues to grow well as patients and
allergists increasingly seek the benefits of our ultra-short course
treatment programs. Venomil, driven by raw material supply issues
in the market also grew strongly. Acarovac Plus and Probiotics
continued to gain market share with the former being the fastest
growing component of the Spanish portfolio.
Scaling up the business
A key aim of the management team is to leverage its current
infrastructure and this is demonstrated by the strong increases in
revenue and pre-R&D operating profit this year in comparison
with the prior year.
Pipeline - Phase III trial underway with broad programmes
running
During the year, the scientific team has been actively managing
and preparing for a number of significant clinical trials. The
Pollinex Quattro Birch Phase III trial received clinical trial
application (CTA) approval and recruitment is now well under way,
with treatment of patients ongoing and read out expected in H2
2018. The Grass MATA MPL development is discussed in more detail
below. If the Grass trials are successful, they will form part of
both the German and US regulatory submissions.
*Percentage based on figures in thousands (2017: GBP55.545m,
2016: GBP48.509m)
The products in the German TAV process continue to progress well
with plans for the start of trials on the oral products and the
injectable house dust mite product in a staggered process starting
during the 2018 financial year. The German TAV process has the
potential to boost sales of these products through additional
clinical data as well as reducing the number of competing products
in the market.
The Acarovac MPL product for house dust mite allergy has started
Phase I trials in Spain using the Pollinex Quattro platform
technology. This product, if successful through the trial
programme, could become a global best-in-class product with the
first short course subcutaneous treatment in a global market worth
an estimated $3-4bn [Datamonitor Epidemiology 2011].
The Polyvac Peanut product completed a positive pre-clinical
trial showing impressive protective immunity with a single
vaccination and no anaphylaxis. This product uses the virus like
particle (VLP) technology that the business acquired to create a
subcutaneous product that could offer long lasting protective
immunity for subjects with peanut allergy, rather than just
increasing tolerability in the case of accidental exposure.
Team - expanding the scientific excellence
In order to facilitate continued success in the clinical
development programme, the Group is strengthening the organisation
with expansion of the clinical team led by Murray Skinner, Chief
Scientific Officer at the Group's UK headquarters in Worthing. The
Group has underlined its commitment to clinical excellence by
appointing Pieter-Jan de Kam as Clinical Director in mid-September.
Pieter-Jan de Kam joined the Group from HAL Allergy in the
Netherlands where he was responsible for clinical development with
recent successes including European and US studies for pollen and
house dust mites.
In addition to the appointment of Pieter-Jan, the Group has
recruited Simon Piggott as Head of Clinical Science. Simon will be
responsible for the delivery of a robust clinical strategy bridging
the gap between the Groups' existing product development teams and
clinical departments. Simon has significant experience in
successful development programs from time spent at Novartis, GSK
and most recently at Quintiles. Tim Higenbottam has been appointed
to the role of Senior Pharmaceutical Physician and will focus on
the US regulatory process.
The Group is continuing to invest in the R&D function to
drive the key pipeline trials. The overall headcount in the
research and development function within the Group has doubled in
the last two years.
Publication of data - validating the Bencard Adjuvant Systems
division
During the year, two papers were published in peer-reviewed
journals reporting on new pre-clinical studies from the Group's
Bencard Adjuvant Systems (BAS) division. The two papers report that
the novel depot adjuvant behind the Pollinex platform,
micro-crystalline tyrosine (MCT), both alone and in an adjuvant
system, have broad applications and elicit high, sustained antibody
levels demonstrating enhanced protective efficacy compared to
conventional adjuvants including aluminium. MCT has now been
granted manufacturing patents in the US, Europe and Japan.
US market - changing environment will drive market share towards
Allergy Therapeutics
The US market for allergic rhinitis, which is estimated to be
worth $2bn [internal estimate], continues to evolve. The regulatory
pressures in the US that the Group acknowledged last year are
becoming stronger as the FDA and the US Pharmacopeial Convention
(USP) set strict guidelines for compounding and dispensing of
allergy products. These guidelines, if fully implemented, will
drive the market towards pharmaceutical grade, centrally
manufactured products that should benefit businesses like Allergy
Therapeutics with GMP, MHRA-approved facilities. Given the
widespread adoption of subcutaneous immunotherapy (SCIT) treatments
in the US, the oral products that are currently in the US market
have so far not achieved a significant share leaving the market
open for new entrants, such as Allergy Therapeutics, with the right
products, manufacturing capability and commercial approach. The
Group continues to prepare its portfolio of products for capturing
the significant US market opportunity.
The Grass MATA MPL product, which is in development, has
completed a safety study relating to a new higher dose and the
Phase II trial is expected to start in the autumn. Following
completion of this trial, meetings with the regulatory authorities
in the US and Germany will be necessary before it progresses to a
Phase III trial.
Outlook - confidence across the business
Allergy Therapeutics' management team expects 2018 to be a
pivotal year with significant results due across a number of key
programs. Revenue for 2018 is again set to show continued growth at
constant currency, driven by further penetration of the market by
the Group's convenient ultra-short course treatment. Gross margins
are likely to improve slightly as volumes grow. Overheads will rise
less in 2018 than they did in 2017 as investment slows, based on
constant currency rates. However, as previously disclosed, we
anticipate research and development expenditure is likely to almost
double as the Group commences the PQ Birch Phase III and Grass MATA
MPL Phase II studies and continues to invest in new product
development.
The Group expects the results of both the PQ Birch Phase III
trial, the first pivotal Phase III trial for a Pollinex Quattro
product in Europe, and the results of the Grass Mata MPL Phase II
trial in H2 2018.
The Board and the executive team remains confident about the
Group's future growth potential and remains focused on generating
significant value for shareholders given its continued sales
momentum, the robust research pipeline progress driven by the
strengthened research and development team and the potential of the
US product portfolio as we prepare the ground for the future.
Manuel Llobet
CEO
27 September 2017
Financial Review
The following section should be read in conjunction with the
financial statements and related notes below.
Overview
The results for the twelve months to 30 June 2017 demonstrate
continuing growing profitability of the core business before
R&D expense, with an operating profit excluding R&D of
GBP7.4 million (2016: GBP4.3 million). Including R&D expense of
GBP9.3 million (2016: GBP16.2 million), the Group reported an
operating loss of GBP1.9 million (2016: loss GBP12.0 million). The
operating loss includes a non-cash credit of GBP0.8 million (2016:
charge of GBP2.0 million) in relation to the fair valuation of
forward exchange contracts. The reduction in research and
development activity was due to the timing of trials related to the
US programme and the European Birch Dosing Study. The net loss
after tax for the period was GBP2.5 million (2016: loss of GBP13.1
million).
Revenue
Helped by a stronger weighted average euro exchange rate against
sterling during the year compared to the prior year, revenue
increased by 32% to GBP64.1 million (2016: GBP48.5 million). The
weighted average euro exchange rate in the year was EUR1.16 to GBP1
compared to EUR1.36 in the previous year; the impact of the
stronger euro on revenue was GBP8.6 million. Although the vaccine
markets in Europe did not grow significantly, revenue at constant
currency* was 14.5% higher at GBP55.545 million (2016: GBP48.509
million) as shown in the table below:
2017 2017 2017 2016 2016 2016
Germany Other Total Germany Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 37.8 26.3 64.1 28.5 20.0 48.5
Add rebates 5.8 - 5.8 3.9 - 3.9
Gross revenue 43.6 26.3 69.9 32.4 20.0 52.4
Adjustment to retranslate
at prior year foreign
exchange rate (6.3) (3.1) (9.4)
Gross revenue at
constant currency* 37.3 23.2 60.5 32.4 20.0 52.4
--------------------------- -------- -------- -------- -------- ------ ------
Revenue 37.8 26.3 64.1 28.5 20.0 48.5
Adjustment to retranslate
at prior year foreign
exchange rate (5.5) (3.1) (8.6)
-------- -------- -------- -------- ------ ------
Revenue at constant
currency* 32.3 23.2 55.5 28.5 20.0 48.5
* Constant currency uses prior year weighted average
exchange rates to translate current year foreign
currency denominated revenue to give a year on year
comparison excluding the effects of foreign exchange
movements.
-----------------------------------------------------------------------------------
Revenue from Germany was 59% (2016: 59%) of total reported
revenue although the Group continues to develop new and existing
markets to reduce reliance on the German market. The key flagship
product Pollinex Quattro, which accounts for 44% of total sales
(2016: 45%), grew strongly in the year at a double digit constant
currency growth rate. In addition to the sale of allergy vaccines,
the Group has continued to look to increase its revenue from other
products, including Synbiotics. Total sales from other products
contributed GBP4.4 million for the year ended 30 June 2017 (2016:
GBP3.6 million).
Revenue in Germany grew well in the year with revenue at
constant currency increasing to GBP32.3 million (2016: GBP28.5
million); an increase of 13%.
All the main European markets (except for Italy) exhibited
double digit sales growth at constant currency with Spain showing
13%; The Netherlands 29%; Austria 27% and Germany 13%.
Gross Profit
With the increased sales, cost of sales rose to GBP16.8 million
(2016: GBP14.1 million). The gross margin was 74% (2016: 71%),
leading to a gross profit of GBP47.4 million (2016: GBP34.4
million).
Operating Expenses
Total overheads are GBP3.5 million higher against the prior year
at GBP50.0 million (2016: GBP46.5 million). Within this total is a
reduction in R&D expenditure which fell by GBP6.9 million to
GBP9.3 million (2016: GBP16.2 million) due to the reduced clinical
study activity during the year.
Sales, marketing and distribution costs which were mainly
continental European increased by GBP6.7 million to GBP26.9 million
(2016: GBP20.2 million). About half of the increase was due to the
strong euro against sterling while the Group also continued to
invest in improving its marketing and sales infrastructure.
Administration expenses increased by GBP3.7 million to GBP13.8
million (2016: GBP10.1 million) with the major driver behind this
increase being foreign exchange. In the previous year the Group
booked a non-cash gain of GBP2.4m on its US dollar cash deposits
due to the weakening pound. In the current year, the Group held
minimal US currency holdings. The remainder of the increase was
mostly due to the weakening of sterling against the euro.
Other income in the year of GBP0.7 million (2016: GBP0.1
million) was all due to R&D tax credits in the UK.
Tax
The current year tax charge is predominately made up of
provisions for tax in the Italian and German subsidiaries (as in
the previous year).
Balance Sheet
Property, plant and equipment were in line with last year at
GBP9.7 million with the depreciation charge for the period
equalling new investment in new manufacturing plant and office
refurbishment. Goodwill increased to GBP3.4 million due solely to
the stronger euro exchange rate at the balance sheet date (2016:
GBP3.3 million), whilst other intangible assets have not changed,
with an increase due to foreign exchange changes offsetting the
amortisation charge for the year.
Total current assets, excluding cash, have increased by GBP1.1
million to GBP15.3 million (2016: GBP14.2 million). Inventory
deceased by GBP0.2 million as the Group carefully managed its
production planning. Trade debtors have decreased (mainly in UK and
Italy) reflecting the Group's management of debtors despite
increased sales. Cash and cash at hand decreased to GBP22.1 million
from GBP23.4 million in 2016.
The fair value of derivative financial instruments was a
liability of GBP0.4m in 2017 (2016: GBP1.2 million).
Retirement benefit obligations, which relate solely to the
German pension scheme, decreased to GBP9.6 million (2016: GBP10.2
million). The decrease in the liability was mainly driven by an
increase in the discount rate.
The Group achieved a net cash surplus of GBP0.2 million in the
year (2016: GBP11.8 million cash used) primarily due to the
increased sales and reduction in spend in the year on the R&D
programme.
Currency
The Group uses forward exchange contracts to mitigate exposure
to the effects of exchange rates. The current policy of the Group
is to cover, on average, about 70% of the net euro exposure for a
year on a declining basis.
Financing
The Group's debt on its balance sheet relates to activities in
Spain and consists of the loans acquired as a result of the
Alerpharma acquisition (GBP1.7 million) and further loans (GBP1.7
million) arranged to fund development of products in the Spanish
market. The overdraft facility was unused at 30 June 2017 but has
been renewed for a further 12 months to cover seasonal funding
requirements.
The Directors believe that the Group will have adequate
facilities for the foreseeable future and accordingly they continue
to adopt the going concern basis in preparing the full year
results.
Legal
On 23 February 2015, the Company received notification that The
Federal Office for Economics and Export ("BAFA") had made a
decision to reverse their preliminary exemption to the increased
manufacturers rebate in Germany for the period July to December
2012. The Company was granted a preliminary exemption to the
increased rebate for this period by BAFA in 2013. The Company
recognised revenue of EUR1.4 million (GBP1.1 million at that time)
against this exemption in the year ended 30 June 2013. All other
preliminary exemptions (granted for periods up to 30 June 2012)
have previously been ratified as final by BAFA. After taking legal
advice, the Company has lodged an appeal against this decision and
is confident that the exemption will be re-instated. Therefore, as
at 30 June 2017, no provision has been recognised for the repayment
of the rebate refund of EUR1.4 million (GBP1.2 million). This
position will be kept under review.
The Group is in discussion with one of its suppliers and their
lawyers over potential cost overruns on one of its clinical trials
which may lead to additional expense for the Group.
Nicolas Wykeman
Finance Director
27 September 2017
Consolidated Income
Statement
for the year ended 30
June 2017
Year Year Year Year
to to to to
30 30 30 June 30 June
June June
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
Note
-------------------------------- ----- --------- --------- --------- ----------
Revenue 3 64,138 48,509
Cost of sales (16,771) (14,070)
-------------------------------- ----- --------- --------- --------- ----------
Gross profit 47,367 34,439
Sales, marketing and
distribution costs (26,888) (20,223)
Administration expenses
- other (13,778) (10,094)
Research and development
costs (9,296) (16,223)
-------------------------------- ----- --------- --------- --------- ----------
Administration expenses (23,074) (26,317)
Other income 5 699 150
-------------------------------- ----- --------- --------- --------- ----------
Operating loss (1,896) (11,951)
Finance income 7 151 180
Finance expense 6 (225) (293)
-------------------------------- ----- --------- --------- --------- ----------
Loss before tax (1,970) (12,064)
Income tax (511) (1,008)
-------------------------------- ----- --------- --------- --------- ----------
Loss for the period (2,481) (13,072)
-------------------------------- ----- --------- --------- --------- ----------
Loss per share 8
Basic (pence per share) (0.42p) (2.29p)
Diluted (pence per share) (0.42p) (2.29p)
Consolidated Statement
of Comprehensive Income
for the year ended 30
June 2017
Year Year
to to
30 30 June
June
2017 2016
GBP'000 GBP'000
Note
-------------------------------- ----- --------- --------- --------- ------------
Loss for the period (2,481) (13,072)
Items that will not be
reclassified subsequently
to profit or loss:
Remeasurement of net
defined benefit liability 1,500 (1,688)
Remeasurement of investments
- retirement benefit
assets (91) (16)
Deferred tax- freehold
land and buildings - (43)
Revaluation gains - freehold
land and buildings - 119
Items that may be reclassified
subsequently to profit
or loss:
Exchange differences
on translation of foreign
operations (23) (744)
Total comprehensive loss (1,095) (15,444)
================================ ===== ========= ========= ========= ============
Consolidated Balance Sheet 30 June 30 June
2017 2016
Note GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 9,673 9,667
Intangible assets - goodwill 3,390 3,271
Intangible assets - other 2,069 2,084
Investments - retirement
benefit asset 4,592 4,045
Total non-current assets 19,724 19,067
Current assets
Inventories 9 7,484 7,692
Trade and other receivables 7,853 6,514
Cash and cash equivalents 22,122 23,406
Total current assets 37,459 37,612
--------------------------------------- ----- ---------- ----------
Total assets 57,183 56,679
--------------------------------------- ----- ---------- ----------
Liabilities
Current liabilities
Trade and other payables (13,225) (11,045)
Current borrowings 10 (391) (295)
Derivative financial instruments (404) (1,180)
Total current liabilities (14,020) (12,520)
Net current assets 23,439 25,092
--------------------------------------- ----- ---------- ----------
Non-current liabilities
Retirement benefit obligations (9,619) (10,174)
Deferred taxation liability (352) (334)
Non-current provisions (291) (257)
Long term borrowings 10 (2,936) (3,070)
--------------------------------------- -----
Total non-current liabilities (13,198) (13,835)
--------------------------------------- ----- ---------- ----------
Total liabilities (27,218) (26,355)
--------------------------------------- -----
Net assets 29,965 30,324
======================================= ===== ========== ==========
Equity
Capital and reserves
Issued share capital 11 604 599
Share premium 102,420 102,392
Merger reserve - shares
issued by subsidiary 40,128 40,128
Reserve - share based payments 900 741
Revaluation reserve 1,254 1,254
Foreign exchange reserve (907) (884)
Retained earnings (114,434) (113,906)
--------------------------------------- ----- ---------- ----------
Total equity 29,965 30,324
======================================= ===== ========== ==========
These financial statements were approved by the Board of
Directors and authorised for issue on 27 September 2017 and signed
on its behalf by
Manuel Llobet Nicolas Wykeman
Chief Executive Officer Finance Director
Registered number: 05141592
Consolidated Statement of Changes in Equity
Issued Share Merger Reserve Reserve Foreign Retained Total
Capital premium reserve - - share Revaluation exchange earnings equity
- shares shares based reserve reserve
issued held payment
by in
subsidiary EBT
------------ -------- ----------- -------- -------- ------------- --------- ---------- ---------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June
2015 556 91,463 40,128 67 591 1,178 (140) (99,374) 34,469
Exchange
differences
on
translation
of foreign
operations - - - - - - (744) - (744)
Remeasurement
of net
defined
benefit
liability - - - - - - - (1,688) (1,688)
Deferred
tax (Land
and
buildings) - - - - - (43) - - (43)
Valuation
gain taken
to equity
(Land and
Buildings)
Remeasurement
of - - - - - 119 - - 119
investments
- retirement
benefit
assets - - - - - - - (16) (16)
Total other
comprehensive
income - - - - - 76 (744) (1,704) (2,372)
Loss for
the period
after tax - - - - - - - (13,072) (13,072)
------------ -------- ----------- -------- -------- ------------- --------- ---------- ---------
Total
comprehensive
income - - - - - 76 (744) (14,776) (15,444)
Share based
payments - - - - 327 - - - 327
Shares issued 43 11,441 - - - - - - 11,484
Share issue
costs - (512) - - - - - (512)
Transfer
of lapsed
options
to retained
earnings - - - - (177) - - 177 -
Transfer
of EBT
reserve
to retained
earnings - - - (67) - - - 67 -
------------ -------- ----------- -------- -------- ------------- --------- ---------- ---------
At 30 June
2016 599 102,392 40,128 - 741 1,254 (884) (113,906) 30,324
Exchange
differences
on
translation
of foreign
operations - - - - - - (23) - (23)
Remeasurement
of net
defined
benefit
liability - - - - - - - 1,500 1,500
Remeasurement
of
investments-
Retirement
benefit
assets - - - - - - - (91) (91)
Total other
comprehensive
loss - - - - - - (23) 1,409 1,386
Loss for
the period
after tax - - - - - - - (2,481) (2,481)
------------ -------- ----------- -------- -------- ------------- --------- ---------- ---------
Total
comprehensive
loss - - - - - - (23) (1,072) (1,095)
Share based
payments - - - - 703 - - - 703
Shares issued 5 28 - - - - - - 33
Transfer
of lapsed
options
to retained
earnings - - - - (544) - - 544 -
At 30 June
2017 604 102,420 40,128 - 900 1,254 (907) (114,434) 29,965
============ ======== =========== ======== ======== ============= ========= ========== =========
Consolidated Cash Flow Statement
Year Year
to to
30 June 30 June
2017 2016
GBP'000 GBP'000
Note
------------------------------------------ --- ----- --------- ---------
Cash flows from operating activities
Loss before tax (1,970) (12,064)
Adjustments for:
Finance income 7 (151) (180)
Finance expense 6 225 293
Non cash movements on defined
benefit pension plan 322 295
Depreciation and amortisation 1,936 1,666
Impairment of intangible assets 69 -
Loss on disposal of fixed assets 42 -
Net monetary value of above
the line R&D tax credit 5 (699) (85)
Charge for share based payments 703 327
Movement in fair valuation of
derivative financial instruments (776) 1,963
Foreign exchange revaluation
on US dollar cash deposits (361) (2,394)
Increase/(decrease) in trade
and other receivables 1,004 (368)
Decrease/(increase) in inventories 334 (585)
Increase/(decrease) in trade
and other payables 823 (412)
----------------------------------------------- ----- --------- ---------
Net cash generated/(used) by
operations 1,501 (11,544)
Bank loan fees and interest
paid (222) (388)
Income tax (1,101) 93
----------------------------------------------- -----
Net cash generated/(used) by
operating activities 178 (11,839)
Cash flows from investing activities
Interest received 41 -
Payments for retirement benefit
investments (258) (260)
Payments for intangible assets (226) -
Payments for property plant
and equipment (1,500) (1,232)
Net cash used in investing activities (1,943) (1,492)
Cash flows from financing activities
Share issue (options exercised)/proceeds
from issue of equity shares
(net of issue costs) 33 10,972
Repayment of borrowings (297) (86)
Proceeds from borrowings 76 1,653
Net cash (used)/ generated by
financing activities (188) 12,539
----------------------------------------------- ----- --------- ---------
Net decrease in cash and cash
equivalents (1,953) (792)
Effects of exchange rates on
cash and cash equivalents 669 2,999
Cash and cash equivalents at
the start of the period 23,406 21,199
----------------------------------------------- ----- --------- ---------
Cash and cash equivalents at
the end of the period 22,122 23,406
=============================================== ===== ========= =========
Cash at bank and in hand 22,122 23,406
Bank overdraft - -
----------------------------- ------- -------
Cash and cash equivalents
at the end of the period 22,122 23,406
----------------------------- ------- -------
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined in
Section 435 of the Companies Act 2006.
Whist the financial information included in this announcement
has been prepared in accordance with EU adopted IFRS, this
announcement itself does not contain sufficient information to
comply with EU adopted IFRS. Statutory accounts for the year ended
30 June 2016 have been delivered to the Registrar of Companies and
those for the year to 30 June 2017 will be delivered following the
Company's annual general meeting. The auditors have reported on
those accounts. Their reports were unqualified and did not draw
attention to any matters by way of emphasis without qualifying
their report and did not contain statements under section 498(2) or
(2) Companies Act 2006 or equivalent preceding legislation.
Allergy Therapeutics is a specialty pharmaceutical Group focused
on allergy vaccination.
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
in issue as adopted by the European Union ('EU') and with those
parts of the Companies Act 2006 that are relevant to the Group
preparing its accounts in accordance with EU adopted IFRS.
Allergy Therapeutics plc is the Group's parent company. The
Company is a limited liability company incorporated and domiciled
in England. The address of Allergy Therapeutics plc's registered
office and its principal place of business is Dominion Way,
Worthing, West Sussex and its shares are listed on the Alternative
Investment Market (AIM).
The consolidated financial statements for the year ended 30 June
2017 (including comparatives) have been prepared under the
historical cost convention except for land and buildings and
derivative financial instruments which have been measured at fair
value. They were approved and authorised for issue by the Board of
Directors on 27 September 2017.
New standards adopted
There are no IFRS or IAS interpretations that are effective for
the first time in this financial period that have had a material
impact on the Group.
Standards, amendments and interpretations to existing standards
that are not yet effective and have not been early adopted by the
Group in the 30 June 2017 financial statements
At the date of authorisation of these financial statements,
certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective. Not all of
these have yet been adopted by the EU. The Group has not adopted
any of these pronouncements early. The new standards, amendments
and interpretations that are expected to be relevant to the Group's
financial statements are as follows:
IFRS 9 Financial Instruments (effective 1 January 2018)
This IFRS replaces IAS 39 and addresses the usefulness for users
of financial statements by simplifying the classification and
measurement requirements for financial instruments. Management are
currently assessing the detailed impact on the Group's financial
statements.
IFRS 15 Revenue from Contracts with Customers (issued in May
2014 and effective 1 January 2018)
IFRS 15 supersedes current revenue recognition guidance
including IAS 18, Revenue, and specifies how and when entities
recognise revenue as well as requiring such entities to provide
users of financial statements with more informative, relevant
disclosures. The standard provides a single, principles based
five-step model to be applied to all contracts with customers.
Management are currently assessing the detailed impact on the
Group's financial statements.
IFRS 16 Leases (effective 1 January 2019)
IFRS 16 removes the current distinction between an operating and
finance lease, introducing consistent requirements for all leases
similar to the current finance lease accounting.
Management anticipate that the above pronouncements will be
adopted in the Group's financial statements in line with the
effective dates stated above. Management are currently assessing
their detailed impact on the Group's financial statements.
Other new standards and interpretations have been issued but are
not expected to have a material impact on the Group's financial
statements.
Going concern
Operating loss in the period was GBP1.9m (2016:GBP12.0 million
loss); net cash inflow from operations was GBP1.5 million (2016:
GBP11.5 million net cash outflow). The inflow was due to the strong
trading offset by further R&D expenditure. Excluding the
R&D expenditure, the Group would have reported an operating
profit of GBP7.4 million (2016:GBP4.3 million). The Directors do
not consider the current operating loss to be a cause for
concern.
Detailed budgets have been prepared, including cash flow
projections for the periods ending 30 June 2018 and 30 June 2019.
These projections include assumptions on the trading performance of
the operating business and the continued availability of the
existing bank facilities. The Group had a cash balance of GBP22.1m
at 30 June 2017 and the overdraft facility was renewed in April
2017. After making appropriate enquiries, which included a review
of the annual budget and latest forecast, by considering the cash
flow requirements for the foreseeable future and the effects of
sales and other sensitivities on the Group's funding plans, the
Directors continue to believe that the Group will have adequate
resources to continue in operational existence for the foreseeable
future and accordingly have applied the going concern principle in
preparing these financial statements.
2. ACCOUNTING POLICIES (extract)
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all years presented unless otherwise
stated.
Consolidation
The Group's financial statements consolidate those of the parent
company and all of its subsidiaries drawn up to 30 June 2017. The
parent controls a subsidiary if it is exposed, or has rights, to
variable returns from its involvement with the subsidiary and has
the ability to affect those returns through its power over the
subsidiary.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated on the
date control ceases.
Inter-company transactions, balances and unrealised gains and
losses on transactions between Group companies are eliminated
except for unrealised losses if they show evidence of
impairment.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring accounting policies used into
line with those used in the Group.
The Group applies the acquisition method in accounting for
business combinations. The consideration transferred by the Group
to obtain control of a subsidiary is calculated as the sum of the
acquisition-date fair values of assets transferred, liabilities
incurred and the equity interests issued by the Group, which
includes the fair value of any liability arising from a contingent
consideration arrangement. Acquisition costs are expensed as
incurred.
The Group recognises identifiable assets acquired and
liabilities assumed in a business combination regardless of whether
they have been previously recognised in the acquiree's financial
statements prior to the acquisition. Assets acquired and
liabilities assumed are measured at their acquisition-date fair
values.
Goodwill is stated after separate recognition of identifiable
intangible assets. It is calculated as the excess of the sum of a)
fair value of consideration transferred, b) the recognised amount
of any non-controlling interest in the acquiree and c)
acquisition-date fair value of any existing equity interest in the
acquiree, over the acquisition-date fair values of identifiable net
assets. If the fair values of identifiable net assets exceed the
sum calculated above, the excess amount (i.e. gain on a bargain
purchase) is recognised in profit or loss immediately.
Goodwill
Goodwill arising from business combinations is the difference
between the fair value of the consideration paid and the fair value
of the assets and liabilities and contingent liabilities acquired.
It is initially recognised as an intangible asset at cost and is
subject to impairment testing on an annual basis or more frequently
if circumstances indicate that the asset may have been impaired.
Details of impairment testing are described in the accounting
policies.
Intangible assets acquired as part of a business combination
Intangible assets acquired in a business combination are
identified and recognised separately from goodwill where they
satisfy the definition of an asset and be identifiable. The cost of
such intangible assets is their fair value at the acquisition
date.
Subsequent to initial recognition, intangible assets acquired in
a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses. Intangible assets
are amortised over their useful economic life as follows
Trade names 15 years
Customer relationships 5 years
Know-how and patents 10 years
Distribution agreements 15 years/ period of
contract
Externally acquired intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation and
any accumulated impairment losses.
Intangible assets are amortised over their useful economic life
as below and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for intangible
assets is reviewed at least at each financial year end.
Computer software 7 years
Other intangibles 15 years
Changes in the expected useful life or the expected pattern of
consumption of future economic benefits embodied in the asset is
accounted for by changing the amortisation period or method, as
appropriate, and are treated as changes in accounting estimates.
The amortisation expense on intangible assets is recognised in the
consolidated income statement in the expense category consistent
with the function of the intangible asset in either administration
costs or marketing and distribution costs.
Internally generated intangible assets
An internally generated intangible asset arising from
development (or the development phase) of an internal project is
recognised if, and only if, all of the following have been
demonstrated:
-- the technical feasibility of completing the intangible asset
so that it will be available for use or sale
-- the intention to complete the intangible asset and use or sell it
-- the ability to use or sell the intangible asset
-- how the intangible asset will generate probable future economic benefits
-- the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset
-- the ability to measure reliably the expenditure attributable
to the intangible asset during its development
The amount initially recognised for internally generated
intangible assets is the sum of the expenditure incurred from the
date when the intangible asset first meets the recognition criteria
listed above. Where no internally generated intangible asset can be
recognised, research and development expenditure is charged to the
consolidated income statement in the period in which it is
incurred.
Subsequent to initial recognition, internally generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses. Amortisation shall
begin when the asset is available for use, i.e. when it is in the
location and condition necessary for it to be capable of operating
in the manner intended by management.
Amortisation of all intangible assets is calculated on a
straight line basis over the useful economic life using the
following annual rates:
Manufacturing know-how 15 years
Non-competing know-how 4 years
Other intangibles 15 years
These periods were selected to reflect the assets' useful
economic lives to the Group.
The cost of amortising intangible assets is included within
administration expenses in the consolidated income statement.
Segmental reporting
The Group's operating segments are market based and are reported
in a manner consistent with the internal reporting provided to the
Group's Chief Operating Decision Maker (CODM) who has been
identified as the Executive Directors. The CODM is responsible for
allocating resources and assessing the performance of the operating
segments.
In identifying its operating segments, management follow the
Group's revenue lines which represent the main geographical markets
within which the Group operates. These operating segments are
managed separately as each requires different local expertise,
regulatory knowledge and a specialised marketing approach. Each
market based operating segment is engaged in production, marketing
and selling within a particular economic environment that is
different from that in segments operating in other economic
environments. All inter-segment transfers are carried out at arm's
length prices.
Revenue recognition
Revenue is measured by reference to the fair value of
consideration received or receivable by the Group for goods
supplied and services provided, net of statutory rebates paid in
Germany and excluding value added tax. Revenue is recognised upon
the performance of services or transfer of risk to the
customer.
Sale of goods
Revenue from the sale of goods is recognised when all the
following conditions have been satisfied:
-- the Group has transferred to the buyer the significant risks
and rewards of ownership of the goods, which is generally when the
customer has physically received the goods.
-- the Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the goods sold which is again when the customer has
physically received the goods.
-- the amount of revenue can be measured reliably.
-- it is probable that the economic benefits associated with the
transaction will flow to the Group, and
-- the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
Where the Group provides services to new distributors, which
mainly include marketing and customer information, in exchange for
an up-front lump sum fee, revenue is recognised in line with these
services being delivered. Services are fair valued and pro-rated to
agree to the total fee receivable. Where there is an on-going
responsibility to provide services, the balance relating to those
services is recognised in future periods as the service is
performed.
Part of the Group's overseas sales are made through distributors
and agents.
Arrangements for sales through distributors
For all distributor arrangements, the distributor is invoiced at
the time of delivery and title to the product passes upon full and
final settlement of the invoice to which the delivery relates. The
distributor has full discretion over the setting of the final
selling price to the end customer and is responsible for all
customer returns of product.
It is considered that the significant risks and rewards of
ownership of the product are transferred to the distributor at the
point of delivery and therefore revenue is recognised at this point
in accordance with IAS 18.
Where the Group sells to distributors at an initially low margin
and there is further consideration receivable by the Group, this
deferred consideration forms part of the fair valuation of
consideration receivable by the Group for goods supplied. In these
instances, the deferred consideration is accrued at a discounted
value at the point of delivery.
Arrangements for sales through agents
For all agreements with agents, the agent places orders with the
Group and goods are then shipped to them. The Group however, holds
title to these products until they are sold on to a third party.
The selling price to the end user is set by the relevant Government
body and the agent receives a fixed percentage of this selling
price. The agent notifies the Group monthly on stock levels and
this is reconciled to a statement which generates an invoice for
payment by the agent. The Group is responsible for any customer
returns of product.
It is considered that the significant risks and rewards of
ownership of the product are not transferred from the Group until
the agent has sold the product to a third party and therefore
revenue on these sales is recognised only at this point by the
Group in accordance with IAS 18.16.
Statutory Rebates
In Germany, pharmaceutical companies are required to pay a
manufacturer's rebate to the government as a contribution to the
cost of medicines paid for by the State and private health funds.
This is similar to a sales tax and the rebate is therefore treated
as a deduction from revenue in accordance with IAS18.8.
Rebates have been in the region of 6% (inclusive of VAT).
However, in 2010 the German government increased the rate to 16%.
In certain circumstances, companies could apply for an exemption
from the rebate increase, for limited periods at a time. If the
application for the exemption is successful, a preliminary
exemption is normally granted to be converted to a final exemption
at a later date when audited financial statements are
available.
Allergy Therapeutics plc has been successful in obtaining
preliminary exemptions up to 30 June 2012, which have been
subsequently confirmed as final.
Revenue is recognised initially net of the full rebate, as at
that stage it is not considered probable that any refund of the
rebate will be received. When the preliminary exemption is granted,
it is considered probable, based on our past experience, that the
rebate refund will be received. Therefore, as it is probable that
the economic benefits will flow to Allergy Therapeutics Plc, in
accordance with IAS 18.14(d), revenue is adjusted at that time.
As of April 2014, the current rebate in force has been set at
7%. The rebate is subject to a price moratorium and this applies to
certain products in Germany.
Inventories
Inventory is carried at the lower of cost or net realisable
value. The costs of raw materials, consumables, work in progress
and finished goods are measured by means of weighted average cost
using standard costing techniques. The cost of finished goods and
work in progress comprises direct production costs such as raw
materials, consumables, utilities and labour, and production
overheads such as employee costs, depreciation, maintenance and
indirect factory costs. Standard costs are reviewed regularly in
order to ensure relevant measures of utilisation, production lead
time and appropriate levels of manufacturing expense are reflected
in the standards.
Net realisable value is calculated based on the selling price in
the normal course of business less any costs to sell.
Research & Development Investment Credits
Investment credits are directly related to the Group's
qualifying research and development expenditure and have a monetary
value that is independent of the Group's tax liability. Such
investment credits are dealt with in other income in the
consolidated income statement.
Use of accounting estimates and judgements
Many of the amounts included in the financial statements involve
the use of judgement and/or estimation. These judgements and
estimates are based on management's best knowledge of the relevant
facts and circumstances, having regard to prior experience, but
actual results may differ from the amounts included in the
financial statements. Information about such judgements and
estimation is contained in the accounting policies and/or the Notes
to the financial statements and the key areas are summarised
below:
Judgements in applying accounting policies
a) Capitalisation of development costs requires analysis of the
technical feasibility and commercial viability of the project
concerned. Capitalisation of the costs will be made only where
there is evidence that an economic benefit will accrue to the
Group. To date no development costs have been capitalised and all
costs have been expensed in the income statement as research and
development costs. Costs expensed in the year amounted to GBP9.3
million (2016: GBP16.2 million).
b) Where the Group sells to distributors at initially low margin
and there is further consideration receivable by the Group, this
deferred consideration forms part of the fair valuation of
consideration receivable by the Group for goods supplied. In these
instances, the deferred consideration is accrued at a discounted
value at the point of delivery.
The Directors considered the following points in applying this
accounting treatment:
Although a significant portion of the sales price is received
upon a further sale to an end customer, substantially all the risks
and rewards of ownership are passed to the distributor when the
goods are shipped, and the distributor is acting as principal (not
merely as agent) when arranging to resell the goods. The Directors
have reached this conclusion because;
i. The Group does not have any continued managerial involvement
in the distributor's onward sale of goods;
ii. The distributor does not have the right to return any goods.
More information on the reasoning behind the treatment of sales
to distributors can be found in the 'Sale of goods' accounting
policy description.
c) Land and buildings are carried at valuation and are re-valued
with sufficient regularity so that the carrying amount and the fair
value are not materially different. The Italian freehold property
was revalued in June 2016 by independent valuers. The Italian
freehold property was revalued to fair value at that reporting date
based on this valuation. The freehold property in Spain was
revalued in June 2015. The Directors do not consider an impairment
provision to be required in respect of the freehold property in
Spain.
d) The Group had been awarded a provisional exemption to the
increased statutory rebate charge in Germany for the period July to
December 2012 by BAFA. Revenue of GBP1.1 million (equivalent of
EUR1.4 million) was recognised in the year ended 30 June 2013 in
relation to this exemption and the refund from the German
authorities was subsequently collected. In February 2015, the
provisional exemption was withdrawn by BAFA. The Group has lodged
an appeal and, following legal advice, believe that the exemption
will be re-instated. While the Group is confident that the
exemption will be confirmed, there is a possibility that this will
not happen. If the exemption is not confirmed, then the Group will
ultimately have to repay EUR1.4 million (GBP1.2 million) with a
corresponding impact on net income and net assets.
Sources of estimation uncertainty
a) Depreciation rates are based on estimates of the useful lives
and residual values of the assets involved. There is inherent
uncertainty in the useful lives of assets, which means that they
are constantly reviewed by management.
b) Estimates of future profitability are required for the
decision whether or not to carry forward a deferred tax asset.
c) Determining whether goodwill is impaired requires an
estimation of the value in use of the cash generating unit to which
the goodwill has been allocated. This value in use calculation
requires an estimation of the future cash flows expected to arise
from the cash generating unit and a suitable discount rate in order
to calculate the present value.
d) Inventory standard costs are reviewed regularly in order to
ensure relevant measures of utilisation, production lead time and
appropriate levels of manufacturing expense are reflected in the
standards.
e) In relation to the accrued additional revenue due from
distributors referred to in the Judgements section (point (b)
above); there is some uncertainty that the additional revenue will
crystallise as it is dependent on a further sale by the
distributor. The Directors consider that the additional
consideration can be measured reliably because it is based on a
fixed list price and our past experience indicates that the
distributor will sell the vaccines.
The Directors have assessed that the accrued consideration of
GBP0.1 million is recoverable and will crystallise in future
periods and has been carried forward in prepayments and accrued
income (2016: GBP0.1m).
f) The Group operates equity-settled share based compensation
plans for remuneration of its employees comprising Long Term
Incentive Plan (LTIP) schemes. Employee services received in
exchange for the grant of any share based compensation are measured
at their fair values and expensed over the vesting period. The fair
value of this compensation is dependent on whether the provisional
share awards will ultimately vest, which in turn is dependent on
future events which are uncertain. The Directors use their judgment
and experience of previous awards to estimate the probability that
the awards will vest, which impacts the fair valuation of the
compensation.
g) Where the Group is in negotiation with third party
contractors around final account payments in relation to contracts,
there is always an element of uncertainty as to the exact amount
that will become payable. The Group accounts for its liabilities
based on best estimates of the most likely outcome and gives extra
disclosure where the range of likely outcomes could be materially
different from the estimate accounted for.
3. REVENUE
An analysis of revenue by category is set out in the table
below:
2017 2016
GBP'000 GBP'000
Sale of goods 64,113 48,468
Rendering of services 25 41
64,138 48,509
======== ========
Rendering of services relates to the supply of services to a new
distributor to assist them in setting up operations in their
territory.
4. SEGMENTAL REPORTING
The Group's operating segments are reported based on the
financial information provided to the Executive Directors, who are
defined as the Chief Operating Decision-Maker (CODM), to enable
them to allocate resources and make strategic decisions.
The CODM reviews information based on geographical market
sectors and assesses performance at an EBITDA (operating profit
before interest, tax, depreciation and amortisation) and operating
profit level. Management have identified that the reportable
segments are Central Europe (which includes the following operating
segments; Germany, Austria, Switzerland and the Netherlands),
Southern Europe (Italy, Spain and Portugal), the UK and Rest of
World.
For all material regions that have been aggregated, management
consider that they share similar economic characteristics. They are
also similar in respect of the products sold, types of customer,
distribution channels and regulatory environments.
Revenue by segment
Revenue Inter Total Revenue Inter Total
from External Segment Segment from Segment Segment
Customers Revenue Revenue External Revenue Revenue
Customers
2017 2017 2017 2016 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Central
Europe
Germany 38,200 38,200 28,484 28,484
Other 9,386 9,386 6,688 6,688
--------------- --------- --------- ----------- --------- ---------
47,586 47,586 35,172 35,172
--------------- --------- --------- ----------- --------- ---------
Southern
Europe
Italy 5,535 5,535 4,741 4,741
Spain 6,075 6,075 4,590 4,590
Other 498 498 229 229
--------------- --------- --------- ----------- --------- ---------
12,108 12,108 9,560 9,560
--------------- --------- --------- ----------- --------- ---------
UK 1,868 25,787 27,655 1,856 17,862 19,718
Rest of
World 2,576 2,576 1,921 1,921
--------------- --------- --------- ----------- --------- ---------
64,138 25,787 89,925 48,509 17,862 66,371
=============== ========= ========= =========== ========= =========
Revenues from external customers in all segments are derived
principally from the sale of a range of pharmaceutical products
designed for the immunological treatment of the allergic
condition.
Rest of World revenues include sales through distributors and
agents in several markets including Czech and Slovak Republics,
Canada and South Korea. These include rendering of services
revenues (Note 3). Inter-segment revenues represent sales of
product from the UK to the operating subsidiaries. The price is set
on an arms-length basis which is eliminated on consolidation.
The CODM also reviews revenue by segment on a budgeted constant
currency basis, to provide relevant year on year comparisons.
The following revenue table is based on a budget currency rate
of EUR 1.28: GBP1.00 which was the rate used in the 2017
budget.
Revenue Revenue
from from
External External
Customers Customers
2017 2016
GBP'000 GBP'000
Central Europe
Germany 34,754 27,699
Other 8,220 6,439
------------ ------------
42,974 34,138
Southern Europe 11,062 9,302
UK 1,869 1,851
Other 2,589 1,921
------------ ------------
58,494 47,212
============ ============
The Group has no customers which individually account for 10% or
more of the Group's revenue.
Depreciation and amortisation by segment
2017 2016
GBP'000 GBP'000
Central Europe 230 167
Southern Europe 488 404
UK 1,218 1,095
-------- --------
1,936 1,666
======== ========
EBITDA by segment
2017 2016
Allocated EBITDA GBP'000 GBP'000
Central Europe 380 407
Southern Europe 89 (325)
UK (429) (10,367)
-------- ---------
Allocated EBITDA 40 (10,285)
Depreciation and amortisation (1,936) (1,666)
-------- ---------
Operating loss (1,896) (11,951)
Finance income 151 180
Finance expense (225) (293)
-------- ---------
Loss before tax (1,970) (12,064)
======== =========
Total assets by segment
2017 2016
GBP'000 GBP'000
Central Europe 14,577 12,119
Southern Europe 7,154 7,627
UK 61,666 59,585
----------- -----------
83,397 79,331
Inter-segment assets (4,586) (2,432)
Inter-segment investments (21,628) (20,220)
----------- -----------
Total assets per Balance Sheet 57,183 56,679
=========== ===========
Included within Central Europe are non-current assets to the
value of GBP2,594,000 (2016: GBP2,523,000) relating to Goodwill and
within Southern Europe assets to the value of GBP2,840,000 (2016:
GBP2,942,000) relating to freehold land and buildings. There were
no material additions (excluding foreign exchange differences) to
non-current assets in any country except the UK where non-current
asset additions totalled GBP1,485,000 (2016:GBP1,433,000).
Total liabilities by segment
2017 2016
GBP'000 GBP'000
Central Europe (14,964) (14,956)
Southern Europe (6,163) (6,658)
UK (10,677) (7,119)
--------- ---------
(31,804) (28,733)
Inter-segment liabilities 4,586 2,378
--------- ---------
Total liabilities per Balance Sheet (27,218) (26,355)
========= =========
5. OTHER INCOME
2017 2016
GBP'000 GBP'000
Net monetary value of above the line
R&D tax credit 699 150
======== ========
6. FINANCE EXPENSE
2017 2016
GBP'000 GBP'000
Interest on borrowing facility 70 57
Net interest expenses on defined benefit
liability 154 171
Other interest and charges 1 65
-------- --------
225 293
======== ========
7. FINANCE INCOME
2017 2016
GBP'000 GBP'000
Bank interest 45 90
Interest on investment assets 89 50
Other finance income 17 40
----------- -----------
151 180
=========== ===========
Other finance income relates to the unwinding of the discount on
accrued revenue.
8. EARNINGS PER SHARE
2017 2016
GBP'000 GBP'000
Loss after tax attributable to
equity shareholders (2,481) (13,072)
---------- ----------
Shares Shares
'000 '000
Issued ordinary shares at start
of the period 589,159 545,848
Ordinary shares issued in the period
Issued ordinary shares at end of
the period 4,959 43,311
---------- ----------
594,118 589,159
---------- ----------
Weighted average number of ordinary
shares for the period 592,192 570,344
Potentially dilutive share options - -
---------- ----------
Weighted average number of ordinary
shares for diluted earnings per
share 592,192 570,344
Basic earnings per ordinary share/(loss)
(pence) (0.42p) (2.29p)
Diluted earnings per ordinary share/(loss)
(pence) (0.42p) (2.29p)
========== ==========
The diluted loss per share does not differ from the basic loss
per share as the exercise of share options would have the effect of
reducing the loss per share and is therefore not dilutive under the
terms of IAS 33.
2017 2016
Number Number
Of Shares Of Shares
'000 '000
Weighted average number of ordinary
shares in issue 592,192 570,344
Potentially dilutive share options 22,893 18,885
---------- ----------
Weighted average number of diluted
ordinary shares 615,085 589,229
---------- ----------
9. INVENTORIES
2017 2016
GBP'000 GBP'000
Raw materials and consumables 1,648 1,604
Work in progress 2,774 3,142
Finished goods 3,062 2,946
-------- --------
7,484 7,692
======== ========
The value of inventories measured at fair value less cost to
sell was GBP305,000 (2016: GBP425,000).
The movement in the value of inventories measured at fair value
less cost to sell during the year gave rise to a credit of
GBP120,000 which was dealt with in the consolidated income
statement.
10. BORROWINGS
2017 2016
GBP'000 GBP'000
Due within one year
Bank Loans 391 295
391 295
-------- --------
2017 2016
GBP'000 GBP'000
Due in more than one year
Bank Loans 2,936 3,070
2,936 3,070
-------- --------
There is an overdraft facility provided by The Royal Bank of
Scotland Plc which has a variable limit during the year up to a
maximum of GBP5 million. Interest on the overdraft is at the bank's
base rate plus a fixed margin of 2.50%. The facility is secured in
favour of The Royal Bank of Scotland Plc by means of debentures
granted by the Company and its principal subsidiaries and share
pledge agreements relating to Bencard Allergie GmbH, Allergy
Therapeutics Italia SRL and Allergy Therapeutics Iberica SL. The
overdraft facility is due for renewal in May 2018. The overdraft
was unused at 30 June 2017 (2016: Nil).
As part of the acquisition of Alerpharma SA, the Group acquired
loans totalling EUR2,386,000 (GBP1,684,000). The loans are secured
by way of a charge on land and buildings owned by Alerpharma Group
SA.
Capital Repayments Due
Interest rate <1Year 1-5 Years >5 Years
GBP'000 GBP'000 GBP'000
Bank Inter
(1) 3 month Euribor + 0.55% 125 347 -
Bank Inter
(2) 1 month Euribor + 5.0% 33 133 199
Santander 12 month Euribor +
(1) 2.5% 124 377 -
Tecnoalcala Interest Free 26 102 26
Santander
(2) Fixed rate of 2.5% 83 1,034 640
CDTI Interest Free - 10 68
-------- ---------- ---------
391 2,003 933
-------- ---------- ---------
During the year, Allergy Therapeutics Iberica SL took out a new
loan with The Centre for the Development of Industrial Technology
(CDTI) for EUR0.4m to fund research and development specifically
for Acarovac MPL. The initial drawdown during the year was 25% of
the loan amount. Further drawdowns are based on achieving
milestones. The loan is provided on an interest free basis for a
term of 10 years with a 4-year capital repayment delay. No warranty
with regard to this new loan was provided by Allergy Therapeutics
plc.
11. ISSUED SHARE CAPITAL
2017 2017 2016 2016
Shares GBP'000 Shares GBP'000
Authorised share
capital
Ordinary shares
of 0.10p each
1 July and 30 June 790,151,667 790 790,151,667 790
Deferred shares
of 0.10p each
1 July and 30 June 9,848,333 10 9,848,333 10
Issued and fully
paid
Ordinary shares
of 0.10p
At 1 July 589,158,508 589 545,847,919 546
Issued during the
year:
Share options exercised 4,959,260 5 2,305,089 2
Share placing - - 41,005,500 41
At 30 June 594,117,768 594 589,158,508 589
============ ======== ============ ========
Issued and fully
paid
Deferred shares
of 0.10p
At 1 July 9,848,333 10 9,848,333 10
Issued during the - - - -
year
At 30 June 9,848,333 10 9,848,333 10
============ ======== ============ ========
Issued share capital 603,966,101 604 599,006,841 599
============ ======== ============ ========
The deferred shares have no voting rights, dividend rights or
value attached to them.
Share options were exercised in the year with proceeds of
GBP33,000 (2016: GBP2,000).
On 17 November 2015, 41,005,500 new ordinary shares of 0.1 pence
each were placed with institutional and other investors at a fixed
price of 28p per share, raising GBP11 million net for the purpose
of investing in new product development.
12. CONTINGENT LIABILITIES
Allergy Therapeutics (UK) Ltd, a subsidiary of Allergy
Therapeutics plc, has given a guarantee in lieu of deposits for
leases on cars and rented office space of Bencard Allergie GmbH.
The amount as at 30 June 2017 was EUR107,426; GBP94,391 (2016:
EUR107,426; GBP89,099).
A cross-guarantee exists between Allergy Therapeutics (Holdings)
Ltd, Allergy Therapeutics (UK) Ltd, Bencard Allergie GmbH, Allergy
Therapeutics Italia srl. and Allergy Therapeutics Iberica SL. in
which the liabilities of each entity to the Royal Bank of Scotland
Plc are guaranteed by all the others.
On 23 February 2015, the Company received notification that The
Federal Office for Economics and Export ("BAFA") had made a
decision to reverse their preliminary exemption to the increased
manufacturers rebate in Germany for the period July to December
2012. The Company was granted a preliminary exemption to the
increased rebate for this period by BAFA in 2013. The Company
recognised revenue of EUR1.4m (GBP1.1m at that time, now GBP1.2m)
against this exemption in the year ended 30 June 2013. All other
preliminary exemptions (granted for periods up to 30 June 2012)
have previously been ratified as final by BAFA. After taking legal
advice, the Company has lodged an appeal against this decision and
is confident that the exemption will be re-instated. Therefore, as
at 30 June 2017, no provision has been recognised for the repayment
of the rebate refund. This position will be kept under review.
The European Commission has concluded its investigation into
whether the exemption of pharmaceutical manufacturers from the
increase in rebates in Germany constitutes state aid. The European
Commission has determined that the exemptions do not constitute
state aid. Subsequent to this announcement, the Group has been
advised that an appeal has been lodged at the EU Court against this
decision. If successful, and the exemptions are determined to be
illegal state aid, then the exemption refunds may have to be
repaid. The maximum sum to be repaid would be approximately GBP5m
(including the GBP1.2m referred to above); however, the Group
considers this to be an unlikely outcome and consequently has not
recognised any provision as a result.
13. ULTIMATE CONTROL
There is no overall ultimate controlling party.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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September 28, 2017 02:01 ET (06:01 GMT)
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