TIDMKMK
RNS Number : 5082U
Kromek Group PLC
30 July 2015
30 July 2015
Kromek Group plc
("Kromek" or the "Company")
Final Results for the Year ended 30 April 2015
Kromek (AIM: KMK), a radiation detection technology company
focusing on the medical, security and nuclear markets, announces
its final audited results for the year ended 30 April 2015.
Financial Highlights
-- Revenue increased 36% to GBP8.1m (2013/14: GBP6.0m)
-- Gross margin(*) was 69% (2013/14: 65%)
-- Adjusted EBITDA**-breakeven/positive for the second half of
the year, resulting in an adjusted EBITDA improvement to GBP1.6m
loss (2013/14: GBP3.0m loss)
-- Loss before tax was reduced to GBP3.1m (2013/14: GBP4.3m loss)
-- Loss per share was 2p (2013/14: 5p loss)
-- Cash and cash equivalents at 30 April 2015 were GBP1.2m (31
October 2014 were GBP2.9m; 30 April 2014: GBP6.6m)
-- GBP3.0m revolving credit facility announced in April 2015
-- The Company entered into an agreement to raise GBP9m through
a Firm Placing and up to a further GBP2m through an Open Offer
*As with prior periods, gross margin is calculated before labour
and overhead recovery.
**Adjusted EBITDA eliminates non-recurring other income and
share-based payment expenses. See the Financial Review below for a
reconciliation of adjusted EBITDA.
Operational Highlights
-- Achieved growth through winning significant contracts across
all three target segments and in multiple geographies
-- Nuclear Detection segment experienced significant growth and
represented the largest segment by revenues
o Key contract won from U.S. Department of Defense agency, the
Defense Advanced Research Projects Agency ("DARPA")
o Other significant contracts in US and UK with U.S. Defense
Threat Reduction Agency ("DTRA") and Innovate UK
-- Medical Imaging segment represented the second largest
contributor to revenues as it strengthened its relationship with
OEMs globally
o Exclusive development programme in medical Computerised
Tomography ("CT") extended to a second year
o Secured multiple orders from leading OEMs, both new and
existing customers, for dual energy x-ray bone mineral densitometry
(DEXA BMD) applications
o Post period, launched eVance(TM), a new generation of Single
Photon Emission Computed Tomography ("SPECT") cameras based on
cadmium zinc telluride ("CZT")
-- Significant progress made in providing products and
components for Security Screening at airports
o Increased sales of bottle scanners, including first contract
in Asia - now deployed in 46 airports across 10 countries (2013/14:
six airports in four countries)
o Commenced supplying OEM components for baggage screening
-- Doubled CZT manufacturing capacity by expanding in the UK.
Demonstrated ability to rapidly scale up production by successfully
replicating the manufacturing process which was previously being
conducted only in the US
-- 23 new patents were granted and 18 new patent applications were filed
Dr Arnab Basu, CEO of Kromek, said: "Kromek achieved another
year of strong revenue growth. We were adjusted EBITDA positive in
the second half reflecting excellent operational progress and
increased sales across all our key target markets. Our investment
in additional sales and marketing resources is bearing fruit as our
products gain traction worldwide with strong demand from current
and new customers.
"The Company is also pleased to simultaneously announce at the
same time as these results a firm placing and an open offer to
raise up to GBP11.0m from both existing and new investors. The cash
raised from this transaction will assist with the execution of our
growth strategy and to leverage our established position and strong
partnerships with global OEMs and government agencies. With
contracted revenues for the year ahead currently totalling 60% of
the Directors' expectations for the year, a clear path to capturing
revenue opportunities and a stable cost base, the Board is
confident in the prospects of the business and delivering
significant shareholder value."
A copy of the full audited annual report and accounts is
available at www.kromek.com and will be posted to shareholders
shortly.
Enquiries
Kromek Group plc
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Arnab Basu, CEO +44 (0)1740 626
Derek Bulmer, CFO 060
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Cenkos Securities plc
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Bobbie Hilliam (NOMAD) +44 (0)20 7397
Julian Morse (Sales) 8900
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Luther Pendragon Ltd
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Harry Chathli, Claire Norbury, Alexis +44 (0)20 7618
Gore 9100
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About Kromek Group plc
Kromek Group plc is a UK technology company (global HQ in County
Durham) and a leading developer of high performance radiation
detection products based on cadmium zinc telluride ("CZT"). Using
its core CZT technology, Kromek designs develops and produces x-ray
and gamma ray imaging and radiation detection products for the
medical, security screening and nuclear markets.
The Group's products provide high resolution information on
material composition and structure and are used in multiple
applications, ranging from the identification of cancerous tissues
to hazardous materials, such as explosives, and the analysis of
radioactive materials.
The Group's business model provides a vertically integrated
technology offering to customers, from the growth of CZT crystals
to finished products or detectors, including software, electronics
and application specific integrated circuits ("ASICs").
The Group has operations in the UK, Germany and US (California
and Pennsylvania), and is selling internationally through a
combination of distributors and direct OEM sales.
Currently, the Group has over a hundred full time employees
across its global operations. Further information on Kromek Group
is available at www.kromek.com.
Overview
Kromek is pleased to report another period of revenue growth.
For the full year 2014/15, revenue increased by 36% to GBP8.1m (FY
2013/14: GBP6.0m) as the Company continued to establish its
position as a key supplier of CZT detection systems both to
commercial and government customers globally, winning contracts
across all three of its target segments and in multiple
geographies. From H1 2014/15 to H2 2014/15, revenues increased by
56% through expansion in the number and scope of customer-funded
development projects as well as direct sales of both end-user and
component-level products for OEMs. At the same time, tight control
was maintained over the cost base with administration expenses
(including operational expenses) growing by only 4% despite the 36%
increase in revenue. This, combined with improved gross margin,
resulted in EBITDA loss falling to GBP1.6m compared with GBP3.0m
loss for the prior year.
Kromek made significant progress during the year in advancing
its strategy of targeting OEMs in the three markets that it has
identified as offering the largest growth opportunities: CT and
SPECT in medical imaging and advanced portable networked nuclear
detection. The most notable achievement of the Company in this area
was the success with the U.S. Department of Defense in being
awarded multiple contracts with DARPA and DTRA. This continued to
be supported by sustained growth in sales of the Company's
portfolio of end-user branded products.
During the year Kromek undertook significant steps to strengthen
its manufacturing capabilities. The key development was replicating
in the UK the manufacturing process that had previously only been
utilised in the US, which enabled a doubling of the Company's
production capacity. In addition, the efficiencies achieved in the
manufacturing and engineering processes resulted in significant
yield improvements and, consequently, a reduction in the cost of
production of detector materials.
Operational Review
Medical Imaging
The Company made good progress this year with its mutually
exclusive contract with a top four global OEM in the CT market for
developing and supplying CZT-based multispectral (colour) detectors
for producing high resolution colour x-ray images by CT scanners.
In September 2014, based on sustained progress towards meeting the
aims of the development programme, the OEM confirmed its decision
to progress to the second year of the programme and awarded Kromek
a $1m exclusivity payment for this next stage.
Kromek gained further traction during the year in the SPECT
segment where it has been demonstrated that use of CZT provides
more specificity due to higher resolution, which enhances detection
capabilities. Kromek also commenced initial supply of CZT-based
modules to an established SME manufacturer of x-ray diagnostics and
analysis equipment in China, under a long-term contract that it
signed in the prior year, for application in China and Chinese
territories. Post period end, the Company launched eVance(TM), a
new generation of CZT-based SPECT cameras that fully integrates
Kromek's eV-CZT(TM) detectors with its advanced ASICs and
microelectronics technology. This enables OEMs to integrate
turn-key CZT cameras into almost all nuclear medical imaging
systems in a short period of time and without the level of cost
associated with new technology development. The Company has begun
shipping its small field of view cameras for a thyroid application.
During this calendar year Kromek will introduce other camera sizes
to address specific SPECT imaging applications, and is currently in
discussions with OEMs for thyroid, breast, cardiac and general
purpose imaging applications.
Another significant development for the Company during the year
was the continued growth of sales attributable to the DEXA BMD
segment. DEXA BMD is the most accurate imaging technique to
diagnose the strength and health of bones, allowing clinicians to
accurately detect, monitor and treat Osteoporosis in patients.
Kromek started a new programme with a leading global healthcare and
diagnostics company for adopting the Company's detectors in the
customer's machines. In addition, the Company received further
contracts from two of its existing OEM customers for CZT-based
detector modules for DEXA BMD applications, and, in the second half
of the year, received new orders to supply radiation detectors and
integrated electronic components to a leading global OEM of DEXA
BMD systems.
During the year, Kromek received contracts worth GBP150,000 to
develop an enhanced detection system for breast imaging in
conjunction with the UK's Centre for Process Innovation. The
contracts were awarded by Innovate UK (formerly the Technology
Strategy Board), an executive non-departmental public body
sponsored by the UK Government's Department for Business,
Innovation & Skills. Following the successful collaboration on
these, and other projects, Innovate UK awarded the Company a
further contract worth approximately GBP200,000 for an 18-month
programme for the development of a novel radiation detector for the
medical and nuclear markets, which is progressing well.
Nuclear Detection
Kromek continued to grow its sales in the nuclear segment, being
awarded contracts across multiple partners in the US and worldwide
to supply innovative nuclear detection products for civil nuclear
and safeguarding applications following the increased threat of
'dirty bombs'. This included signing four new and extension
contracts, for a total value of $5.8m, with the U.S. Department of
Defense. In August 2014, Kromek was awarded up to $1.2m for a
12-month programme with DARPA to develop an advanced portable
detection system for gamma and neutron radiation that can be
combined in large networks, providing information on radiation
signatures over an extended area. This contract was extended by a
further $1.1m by DARPA in January 2015 following progress on the
first phase, which signifies the customer's confidence in Kromek as
a strong solution provider. In April 2015, DARPA further modified
the contract for volume supply of radiation network detectors,
worth another $2.02m, bringing the total value of the contract to
$4.4m. Kromek's solution is based on its 'Discreet Dual Detector' -
the D3 - a handheld hybrid gamma/neutron detector that can be
networked with other such devices. Kromek also secured a two-year
$1.5m contract with DTRA for the design, manufacture and
optimisation of high sensitivity, next generation, solid state
detectors for the homeland security radiation detection market. The
project has progressed well and the Company is delivering on all of
its target milestones.
The Company continued to work under, and successfully completed,
the first phase of a contract with a leading global security
company, which provides innovative systems, products and solutions
to government and commercial customers worldwide, to design
CZT-based detectors and ASICs for nuclear safeguard markets. This
resulted in Kromek being awarded a $1.0m contract extension to
focus on the delivery of the new ASICs and detectors as well as the
testing and characterisation of detector modules.
Security Screening
In the security screening market, Kromek was awarded a
significant contract to provide its advanced bottle scanner
technology to a number of airports in Asia. This initial contract,
worth $620,000, represents entry into a new geographical market
that the Company believes offers considerable scope for future
growth. Kromek's bottle scanner is now installed in 46 airports in
10 countries in Asia, Europe and Australia.
Kromek expanded its customer base during the year with new
contracts from additional global security technology groups for the
supply of OEM components for baggage screening products, including
a new contract worth approximately $0.3m for the supply of OEM
components for a baggage screening product for aviation security.
The Company also received a repeat order from a recognised OEM in
the US to supply its patented detection modules to enhance the
OEM's radiation detection capabilities for its security
applications. In addition, Kromek is currently in discussion with a
global OEM with a view to licensing its liquid detection technology
and developing an OEM module for baggage screening.
Doubling of Manufacturing Capacity
During the period, Kromek reached an important milestone as it
successfully replicated in the UK the CZT manufacturing processes
that had previously been utilised in the US, which enabled a
doubling of the Company's production capacity.
Specifically, 24 new CZT growth systems were installed and
qualified for production at the Sedgefield, UK manufacturing site.
Additionally, four new CZT systems were installed and qualified for
production and R&D purposes at the Company's Saxonburg, US
manufacturing site. In addition, the Company achieved significant
yield improvements in materials for SPECT detectors through a new
CZT sensor assembly technique, which has led to a lowering of the
cost of detector production. Long-term supply agreements were
negotiated with critical suppliers to secure pricing and supply of
raw materials.
In addition to improvements in the production of CZT material,
Kromek was able to further improve the fabrication process for
detectors resulting in higher fabrication yields at the Saxonburg
plant. At the Sedgefield plant, production processes were qualified
for silicon photomultiplier-based gamma and neutron detectors.
There were significant efficiencies made in the assembly and
testing for nuclear products. Multiple electronic component
subassembly suppliers were qualified in Eastern Europe and Asia to
improve costs. Advanced automated testing for nuclear detection
instruments were developed, with multiple resources trained and
qualified to carryout procedures at the Sedgefield plant. Both
manufacturing sites, at Sedgefield and Saxonburg, were re-certified
for ISO9001:2008 through ISO audits and successfully passed several
key customer audits.
Financial Review
The financial performance for the year ended 30 April 2015 was
characterised by growth in revenue whilst tight control was
maintained over the cost base. Revenue increased by 36% to GBP8.1m
(2013/14: GBP6.0m) due to significant progress on government
contracts, especially in development of products for homeland
security through the D3 product, supplemented by sales to OEMs in
the medical imaging sector and sales of bottle scanners in
Asia.
Gross margin, before labour and overhead recovery, increased to
69% (2013/14: 65%) due to the increase in government contracts,
plus yield efficiencies and product mix.
Year-on-year, administration expenses (including operational
expenses) grew by only 4% to GBP8.5m (2013/14: GBP8.2m) despite a
36% increase in revenue. The slight increase was largely due to a
full year of costs associated with being a listed entity compared
with only six months in the prior period. Additionally, employee
numbers grew to 107 (2013/14: 101), primarily due to the expansion
of the sales & marketing team, increasing employment costs
(excluding Non-Executive Director costs) by 3%.
Summary of results
As a result of increased revenue, improved margin and tight cost
control, the loss before interest, tax, depreciation and
amortisation (EBITDA), excluding non-recurring other income and
share-based payment expenses, fell to GBP1.6m compared with a loss
of GBP3.0m for the prior year. Loss before tax was reduced by 28%
to GBP3.1m (2013/14: GBP4.3m loss).
The results for the year, including reconciliation to adjusted
EBITDA (which eliminates non-recurring other income and share-based
payment expenses), are as follows:
Full Year Full Year
2014/15 2013/14
---------------------- ------------------------ -------------------------
GBP'000 GBP'000
---------------------- ------------------------ -------------------------
Revenue 8,101 5,972
---------------------- ------------------------ -------------------------
Gross margin
(%) 69% 65%
---------------------- ------------------------ -------------------------
LBT (3,135) (4,295)
---------------------- ------------------------ -------------------------
Adjustments:-
---------------------- ------------------------ -------------------------
Net interest 71 515
---------------------- ------------------------ -------------------------
Depreciation 673 737
---------------------- ------------------------ -------------------------
Amortisation 711 560
---------------------- ------------------------ -------------------------
EBITDA (1,680) (2,483)
---------------------- ------------------------ -------------------------
Share-based payments 181 125
---------------------- ------------------------ -------------------------
Other income (58) (649)
---------------------- ------------------------ -------------------------
Adjusted EBITDA (1,557) (3,007)
---------------------- ------------------------ -------------------------
Cash and cash equivalents at 30 April 2015 were GBP1.2m (31
October 2014: GBP2.9m; 30 April 2014: GBP6.6m). During the second
half of the year, the Company secured a GBP3.0m revolving credit
facility with HSBC Bank plc. The funds available will be used for
working capital to support the growth of the business, and
facilitate the Company in capitalising on the large and increasing
opportunities that it continues to develop across its target
markets. As at 30 April 2015, GBP1.0m had been drawn down under the
credit facility.
Tax
The Company benefits from the UK Research and Development Tax
Credit and recorded a credit of GBP1.0m for the year (2013/14:
GBP0.7m). In addition, the Company saw a movement in the deferred
tax provision of GBPnil (2013/14: GBP0.4m), resulting in an overall
tax credit to the income statement of GBP1.0m (2013/14:
GBP1.1m).
Earnings per share ("EPS")
EPS is recorded in the year on a basic and diluted basis
producing a loss of 2p per share (2013/14: loss of 5p per share)
and an adjusted basic and diluted loss of 2p per share (2013/14:
loss of 5p per share). Due to the Company having losses in each of
the two years, the diluted EPS for disclosure purposes is the same
as the basic EPS.
R&D
As noted above, the Company continues to invest in the
development of products and its technology platform to advance its
commercial advantage and increase margin on sales. Total
expenditure on research and development was GBP4.4m (2013/14:
GBP3.1m), comprising GBP2.6m in the UK (2013/14: GBP1.9m) and
GBP1.8m in the US (2013/14: GBP1.2m). This consists of GBP1.8m
(2013/14: GBP1.1m) attributable to near-term product development
and GBP2.6m (2013/14: GBP2.0m) reflecting investment in Kromek's
core technology, platform and manufacturing capabilities.
The expenditure on commercial near-term product development,
which has been capitalised, resulted in new and further development
of existing products. This provides further short- and medium-term
sales opportunities, and reflects Kromek's ability to draw from its
technology platform to rapidly develop bespoke and need-specific
products.
The investment in Kromek's core materials technology, platform
developments and improved manufacturing and engineering processes,
was expensed through the income statement. This provides a strong
and enhanced basis for efficiency and profitability in future
years, and strengthens the market position of Kromek's
technology.
During the period, Kromek was awarded 23 new patents and filed
18 new patent applications.
Capital expenditure
Capital expenditure for the year amounted to GBP2.6m (2013/14:
GBP0.2m), of which GBP0.8m (2013/14: GBP0.1m) was supported by
awards from the Regional Growth Fund. This increase substantially
relates to the expansion of furnace capacity in UK, which involved
an investment of GBP2.0m. This investment is an important step for
the business in demonstrating scalability and transferability of
the requisite materials growth technologies, processes and
know-how.
Outlook
The doubling in manufacturing capacity, increased customer base,
and significant progress with new OEMs and U.S. Department of
Defense, provides a strong base for growing the business over the
medium to long term. The Company believes that it has the
market-leading technology, products and personnel that will enable
it to win further contracts across the three transformational
market opportunities of CT, SPECT and portable advanced radiation
detectors.
Kromek entered the new financial year with a significantly
higher backlog than at the equivalent period last year, with
contracts signed in the previous year providing 60% visibility on
the Directors expectations for the year ahead. The Company
continues to make progress and receive increasing interest across
all three of its segments. In Security Screening, there are
numerous revenue opportunities from the sale of bottle scanners in
Europe and RoW. In Medical Imaging and Nuclear Detection, the
Company is especially excited about the increasing traction, with
both new and existing customers, that it is making in the three key
growth opportunities of CT, SPECT and portable advanced radiation
detection. In particular, the Directors expect recently-launched
eVance(TM) family of SPECT cameras and OEM units to gain traction
and be a significant contributor to revenues over the next 12-18
months. The Company is making significant progress with its
projects with the U.S. Department of Defense, and continues to
penetrate civil nuclear markets with Kromek-branded products and
through white labelling channels.
Kromek's management team is committed to maintaining tight cost
control whilst continuing to invest in sales & marketing and
targeted product development. The business has operational leverage
reflected in a rise in revenue year-on-year of 36% but a rise in
the administrative costs (including operating costs) of only 4%
year-on-year. This is further demonstrated by revenue growing by
GBP2.1m year-on-year and adjusted EBITDA improving by GBP1.4m to a
loss of GBP1.6m from a loss of GBP3.0m for the prior year. As a
result, the Board is confident in the prospects of the business and
delivering significant shareholder value.
Consolidated income statement
For the year ended 30 April 2015
2015 2014
Note GBP'000 GBP'000
Continuing operations
Revenue 5 8,101 5,972
Cost of sales (2,475) (2,101)
Gross profit 5,626 3,871
Other operating income 60 719
Distribution costs (226) (144)
Administrative expenses (including
operating expenses) (8,524) (8,226)
Operating loss (3,064) (3,780)
Finance income 31 15
Finance costs (102) (530)
Loss before tax (3,135) (4,295)
Tax 8 989 1,106
Loss for the year from continuing
operations (2,146) (3,189)
Loss per share
* basic and diluted (GBP) 10 (0.02) (0.05)
Consolidated statement of comprehensive income
For the year ended 30 April 2015
2015 2014
GBP'000 GBP'000
Loss for the year (2,146) (3,189)
Items that are or may be reclassified
to profit or loss:
Exchange differences on translation
of foreign operations 398 (641)
Total comprehensive loss for the year (1,748) (3,830)
Consolidated statement of financial position
For the year ended 30 April 2015
2015 2014
Note GBP'000 GBP'000
Non-current assets
Goodwill 11 1,275 1,275
Other intangible assets 12 8,725 6,965
Property, plant and equipment 13 4,147 2,285
14,147 10,525
Current assets
Inventories 2,103 2,389
Trade and other receivables 15 4,089 1,907
Current tax assets 1,002 696
Cash and bank balances 1,183 6,563
8,377 11,555
Total assets 22,524 22,080
Current liabilities
Trade and other payables 16 (4,143) (3,210)
Finance lease liabilities (19) -
Borrowings 17 (1,003) -
(5,165) (3,210)
Net current assets 3,212 8,345
Non-current liabilities
Finance lease liabilities (10) -
Deferred tax liabilities (1,147) (1,134)
Total liabilities (6,322) (4,344)
Net assets 16,202 17,736
Equity
Share capital 1,082 1,080
Share premium account 34,643 34,612
Capital redemption reserve 1,175 1,175
Translation reserve (84) (482)
Accumulated losses (20,614) (18,649)
Total equity 16,202 17,736
The financial statements of Kromek Group plc (registered number
8661469) were approved by the board of directors and authorised for
issue on 29 July 2015. They were signed on its behalf by:
Dr Arnab Basu MBE
Chief Executive Officer
Consolidated statement of changes in equity
For the year ended 30 April 2015
Equity attributable to equity holders of the Company
Share Premium Capital Redemption Translation Accumulated Total
Share Capital Account Reserve reserve losses Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
May 2013 1,175 22,278 - 159 (15,585) 8,027
Loss for the
year - - - - (3,189) (3,189)
Other comprehensive
income for the
year - - - (641) - (641)
Total comprehensive
losses for the
year - - - (641) (3,189) (3,830)
Issue of share
capital
net of expenses 301 13,113 - - - 13,414
Share reorganisation 779 (779) - - - -
Share buyback (1,175) - 1,175 - - -
Credit to equity
for equity-settled
share based
payments - - - - 125 125
Balance at 30
April 2014 1,080 34,612 1,175 (482) (18,649) 17,736
Loss for the
year - - - - (2,146) (2,146)
Other comprehensive
income for the
year - - - 398 - 398
Total comprehensive
losses for the
year - - - 398 (2,146) (1,748)
Issue of share
capital
net of expenses 2 31 - - - 33
Credit to equity
for equity-settled
share based
payments - - - - 181 181
Balance at 30
April 2015 1,082 34,643 1,175 (84) (20,614) 16,202
Consolidated statement of cash flows
For the year ended 30 April 2015
Year Year
ended ended
2015 2014
Note GBP'000 GBP'000
Net cash used in operating activities 18 (2,361) (2,218)
Investing activities
Interest received 31 15
Purchases of property, plant and
equipment (2,558) (187)
Purchases of patents and trademarks (368) (567)
Capitalisation of research and development
costs (1,886) (1,061)
Net cash used in investing activities (4,781) (1,800)
Financing activities
Loans paid - (2,449)
Revolving credit facility 1,000 -
Government grants 857 69
Proceeds on issue of shares 33 13,414
Payment of finance lease liabilities (12) -
Interest paid (102) (530)
Net cash from financing activities 1,776 10,504
Net (decrease)/increase in cash
and cash equivalents (5,366) 6,486
Cash and cash equivalents at beginning
of year 6,563 309
Effect of foreign exchange rate
changes (14) (232)
Cash and cash equivalents at end
of year 1,183 6,563
Notes to the consolidated financial statements
For the year ended 30 April 2015
1. General information
Kromek Group plc is a company incorporated and domiciled in the
United Kingdom under the Companies Act. These financial statements
are presented in pounds sterling because that is the currency of
the primary economic environment in which the Group operates.
Foreign operations are included in accordance with the policies set
out in note 3.
The Group's financial information has been prepared in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") and on a basis
consistent with that adopted in the previous year.
Whilst the financial information included in this Preliminary
Results Announcement has been prepared in accordance with the
recognition and measurement criteria of IFRS, this announcement
does not itself contain sufficient information to comply with
IFRS.
The Preliminary Results Announcement does not constitute the
Company's statutory accounts for the years ended 30 April 2015 and
30 April 2014 within the meaning of Section 435 of the Companies
Act 2006 but is derived from those statutory financial
statements.
The Group's statutory financial statements for the year ended 30
April 2014 have been filed with the Registrar of Companies, and
those for 2015 will be delivered following the Company's Annual
General Meeting. The Auditor has reported on the statutory accounts
for 2015 and 2014, and their reports, which included no matters to
which the Auditor drew attention by way of emphasis, were
unqualified and did not contain statements under Sections 498 (2)
or 498 (3) of the Companies Act 2006 in relation to the financial
statements.
2. Adoption of new and revised Standards
The following new standards and amendments to standards are
mandatory for the financial year beginning on 1 May 2014:
-- IFRS 13 "Impairment of Assets"
-- IFRS 10 "Consolidated Financial Statements"
-- IAS 27 "Consolidated and Separate Financial Statements",
-- IAS 36 "Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets"
-- IFRS 12 "Disclosure of Interests in Other Entities".
-- Amendments to IAS 32 "Financial Instruments: Presentation"
Amendments to IAS 36 "Impairment of Assets"
-- Amendments to IAS 39 "Financial Instruments: Recognition and Measurement"
-- IFRS 10, IFRS 11, IFRS 12 Transition Guidance
These standards and amendments to standards have not had a
material impact on the consolidated financial statements.
Standards not affecting the reported results nor the financial
position
At the date of authorisation of these financial statements, the
following Standards and Interpretations which have not been applied
in these financial statements were in issue but not yet effective
(and in some cases had not yet been adopted by the EU):
-- IFRS 9 Financial Instruments
-- IFRS 13 Fair Value Measurement
-- IFRS 15 Revenue from Contracts with Customers
-- Annual Improvements to IFRSs 2012-2014 Cycle
The Directors do not expect that the adoption of these Standards
and Interpretations in future periods will have a material impact
on the financial statements of the Group, however they are
currently considering the future impacts of IFRS 15.
3. Significant accounting policies
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union ("IFRSs") and IFRIC interpretations. Therefore the
Group financial statements comply with Article 4 of the EU IAS
Regulation.
The financial statements have been prepared on the historical
cost basis. Historical cost is generally based on the fair value of
the consideration given in exchange for the assets. The principal
accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the results
and net assets of the Group and entities controlled by the Group
(its subsidiaries) made up to 30 April each year. Control is
achieved where the Group has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits
from its activities.
The results of subsidiaries acquired during the year are
included in the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to results of
subsidiaries to bring the accounting policies used into line with
those used by the group. All intra-group transactions, balances,
income and expenses, and profits are eliminated on
consolidation.
Going concern
As at 30 April 2015, the Group had net assets of GBP16.2m (2014:
GBP17.7m) as set out in the consolidated statement of financial
position. The Directors have prepared detailed forecasts of the
Group's financial performance over the next 5 years, which includes
the GBP9.0m firm placing and open offer of up to GBP2.0m which was
raised subsequent to the financial statements being approved and
disclosed in note 19. As a result of this review, which
incorporated sensitivities and risk analysis, the Directors believe
that the Group has sufficient resources and working capital to meet
their present obligations. Accordingly, they continue to adopt the
going concern basis in preparing the Group financial
statements.
Business combinations
The Group financial statements consolidate those of the company
and its subsidiary undertakings. Subsidiaries are entities
controlled by the Group. Control exists when the Group has the
power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its
activities. In assessing control, potential voting rights that are
currently exercisable or convertible are taken into account. The
financial information of subsidiaries is included from the date
that control commences until the date that control ceases.
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial information.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
and services provided in the normal course of business, net of
discounts, VAT and other sales-related taxes and comprises:
i) Sale of goods and services
The Group's income derives from the sale of goods and from the
research and development contracts which are typically with
government agencies. Revenue on product sales is recognised when
the risk and reward of ownership pass to the customer. The terms of
sale are agreed with each customer on an individual basis, which
are generally under FCA INCOTERMS. Revenue from research and
development contracts is recognised as revenue in the accounting
period in which the milestones are achieved.
ii) Revenue from grants
Revenue from grants is recognised when the costs relating to the
project activity have been incurred, the customer is in agreement
with the expenses which are being claimed as grant revenue, and
subsequent invoices have been issued to the customers.
iii) Long-term contracts
The Group accounts for long-term contracts under IAS 11, and
reflects revenue by reference to the stage of completion of the
contract activity at the statement of financial position date.
Revenue and profits are determined by estimating the outcome of the
contract and determining the costs and profit attributable to the
stage of completion. Any expected contract loss is recognised
immediately.
iv) Exclusivity contracts
The Group reflects exclusivity payments as revenue at the point
that it contractually agrees to become exclusive. Where terms of
exclusivity require performance the Group reflects the revenue as
performance is delivered.
v) Interest revenue
Interest income is recognised when it is probable that the
economic benefits will flow to the Group and the amount of revenue
can be measured reliably. Interest income is accrued on a time
basis, by reference to the principal outstanding and at the
effective interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount on
initial recognition.
Internally-generated intangible assets - research and
development expenditure
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
An internally-generated intangible asset arising from the
group's product development is recognised only if all of the
following conditions are met:
-- the technical feasibility of completing the intangible asset
so that it will be available for use or sale;
-- its intention to complete the intangible asset and use or sell it;
-- its ability to use or sell the intangible asset; and
-- how the intangible asset will generate probable future
economic benefits. Among other things, the entity can demonstrate
the existence of a market for the output of the intangible asset or
the intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset.
Research expenditure is written off as incurred. Development
expenditure is also written off, except where the Directors are
satisfied as to the technical, commercial and financial viability
of individual projects. In such cases, the identifiable expenditure
is deferred and amortised over the period during which the Group is
expected to benefit. This period normally equates to the life of
the products the development expenditure relates to. Provision is
made for any impairment.
Amortisation of the intangible assets recognised on the
acquisitions of Nova R&D, Inc. and eV Products, Inc. are
recognised in the income statement on a straight-line basis over
their estimated useful lives of between five and fifteen years
Patents and trademarks
Patents and trademarks are measured initially at purchase cost
and are amortised on a straight-line basis over their estimated
useful lives.
Impairment of tangible and intangible assets excluding
goodwill
At each statement of financial position 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 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 CGU to which the
asset belongs. When a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to
individual CGUs, or otherwise they are allocated to the smallest
group of CGUs for which a reasonable and consistent allocation
basis can be identified.
An intangible asset with an indefinite useful life is tested for
impairment at least 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. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax 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 not been
adjusted.
If the recoverable amount of an asset (or CGU) is estimated to
be less than its carrying amount, the carrying amount of the asset
(or CGU) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss, 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 (or CGU) 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
CGU) in prior years. A reversal of an impairment loss is recognised
immediately in profit or loss, 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.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs comprise direct materials and, where applicable,
direct labour costs and those overheads that have been incurred in
bringing the inventories to their present location and condition.
Cost is calculated in the statement of financial position at
standard cost, which approximates to historical cost determined on
a first in, first out basis. Net realisable value represents the
estimated selling price less all estimated costs of completion and
costs to be incurred in marketing, selling and distribution. Work
in progress costs are taken as production costs, which include an
appropriate proportion of attributable overheads.
Provision is made for obsolete, slow moving or defective items
where appropriate. Items which have not shown activity for between
12-18 months will be provided for at a rate of 50%, and those which
have not shown activity in 18 months or longer will be provided for
at a rate of 100%. Given the nature of the products and the
gestation period of the technology, commercial rationale
necessitates that this provision is reviewed on a case by case
basis.
Financial instruments
Financial assets and financial liabilities are recognised in the
Group's statement of financial position when the Group becomes a
party to the contractual provisions of the instrument.
i) Financial assets
All financial assets are recognised and derecognised on a trade
date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial asset within
the timeframe established by the market concerned, and are
initially measured at fair value, plus
transaction costs, except for those financial assets classified
as at fair value through profit or loss, which are initially
measured at fair value.
Financial assets are classified into the following specified
category: 'loans and receivables'. The classification depends on
the nature and purpose of the financial assets and is determined at
the time of initial recognition. The Group held no fair value
through profit and loss ("FVTPL"), available for sale ("AFS") or
held-to-maturity "HTM") financial assets during the period.
ii) Loans and receivables
Trade receivables, loans, and other receivables that have fixed
or determinable payments that are not quoted in an active market
are classified as 'loans and receivables'. Loans and receivables
are measured at amortised cost using the effective interest method,
less any impairment. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
The Group interacts with other technology based companies to
obtain market penetration for its products. These arrangements
initially require funding to allow for marketing of our products,
with longer lead times for sale. As a consequence, the terms with
these customers are not always on normal payment terms (30 to 60
days), and management confirm that it could take longer before
recoverability of the cash on these sales.
iii) Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at each statement of financial position
date. Financial assets are impaired where there is objective
evidence that, as a result of one or more events that occurred
after the initial recognition of the financial asset, the estimated
future cash flows of the investment have been affected.
iv) Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If the
Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received.
v) Financial liabilities and equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
vi) Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recognised
at the proceeds received, net of direct issue costs.
vii) Financial liabilities
Financial liabilities are classified as 'other financial
liabilities'. The Group held no financial liabilities that would be
classified as FVTPL.
viii) Other financial liabilities
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs. Other financial
liabilities are subsequently measured at amortised cost using the
effective interest method, with interest expense recognised on an
effective yield basis.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where
appropriate, a shorter period, to the net carrying amount on
initial recognition.
ix) Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are
described in note 3, the directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical judgements in applying the group's accounting
policies
The following are the critical judgements that the Directors
have made in the process of applying the Group's accounting
policies and that have the most significant effect on the amounts
recognised in the financial statements.
Development costs
As described in note 3, the Group expenditure on development
activities is capitalised if it meets the criteria as per
IAS38.
These capitalised assets are amortised on a straight-line basis
over their useful lives. The useful life is determined by the
expected future cash flows anticipated to be derived from these
assets, based on management's revenue forecasts. Where no
internally-generated intangible asset can be recognised,
development expenditure is expensed in the period in which it is
incurred.
Impairment of non-financial assets
The Group assesses whether there are any indicators of
impairment as at the transition date and thereafter for all
non-financial assets at each reporting date. Goodwill is tested for
impairment annually and at other times when such indicators exist,
such as negative cash flows and operating losses of subsidiaries.
Other non-financial assets are tested for impairment when there are
indicators that the carrying amounts may not be recoverable.
When value in use calculations are undertaken, management must
estimate the expected future cash flows from the asset or cash
generating unit and choose a suitable discount rate in order to
calculate the present value of those cash flows.
Valuation of acquired intangible assets
Acquisitions may result in identifiable intangible assets such
as customer relationships, supplier relationships, licences and
technology being recognised. These are valued by professional
valuation firms, using discounted cash flow methods which require
the application of certain key judgments and estimates are required
to be made in respect of discount rates and future cash flows.
Recoverability of receivables
As disclosed in note 3, in order to obtain market penetration
through technology based customers, the Group recognises that
normal payment terms from these customers may not be adhered to
when assessing recoverability of receivables. This is as a result
of the necessary marketing support that customers may require in
promoting the products.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the statement of financial position
date, that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next
financial year, are discussed below.
i) Development costs
Development costs are capitalised in accordance with the
accounting policy noted above. Initial capitalisation of costs is
based on management's judgement that technological and economic
feasibility is confirmed, usually when a product development
project has reached a defined milestone.
ii) Impairment of goodwill
The Group determines whether goodwill is impaired on at least an
annual basis or more frequently when there are indications of
possible impairment. The impairment review requires a value in use
calculation of the cash-generating units to which the goodwill is
allocated. In estimating the value in use, management is required
to make an estimate of the expected future cash flows attributable
to the cash-generating unit and to choose an appropriate discount
rate to calculate the present value of those cash flows. The
carrying amount of goodwill at 30 April 2015 was GBP1,275k (2014:
GBP1,275k). Further details are given in note 11.
5. Revenue
An analysis of the group's revenue is as follows:
2015 2014
GBP'000 GBP'000
Continuing operations
Sales of goods and other services 5,879 4,351
Revenue from grants 913 978
Revenue from contract customers 1,309 643
Total revenue 8,101 5,972
Grant income 4 229
Other income 56 490
Total income 8,161 6,691
6. Operating segments
Products and services from which reportable segments derive
their revenues
For management purposes, the Group is organised into two
business units (USA and UK) and it is on these operating segments
that the Group is providing disclosure.
The chief operating decision maker is the Board of Directors who
assess performance of the segments using the following key
performances indicators; revenues, gross profit and operating
profit. The amounts provided to the Board with respect to assets
and liabilities are measured in a way consistent with the Financial
Statements.
The turnover, profit on ordinary activities and net assets of
the Group are attributable to one business segment, i.e. the
development of digital colour x-ray imaging enabling direct
materials identification, as well as developing a number of
detection products in the industrial and consumer markets.
Analysis by geographical area
A geographical analysis of the Group's revenue by destination is
as follows:
2015 2014
GBP'000 GBP'000
United Kingdom 387 385
North America 5,681 3,416
South America 11 -
Middle East 18 -
Asia 1,899 1,089
Europe 66 1,054
Australasia 39 28
Total revenue 8,101 5,972
A geographical analysis of the Group's revenue by origin is as
follows:
Year ended 30 April 2015
UK Operations US Operations Total for
GBP'000 GBP'000 Group
GBP'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 2,584 4,795 7,379
-Revenue from grants 218 695 913
-Revenue from contract customers 480 829 1,309
-Other revenue - 638 638
-------------- -------------- ----------
Total sales by segment 3,282 6,957 10,239
Removal of inter-segment sales (376) (1,762) (2,138)
-------------- -------------- ----------
Total external sales 2,906 5,195 8,101
============== ============== ==========
Segment result - operating
loss (2,972) (92) (3,064)
Interest received 31 - 31
Interest expense (95) (7) (102)
Loss before tax (3,036) (99) (3,135)
Tax credit 989 - 989
-------------- -------------- ----------
Loss for the year (2,047) (99) (2,146)
Reconciliation to adjusted
EBITDA:
Net interest 64 7 71
Tax (989) - (989)
Depreciation 300 373 673
Amortisation 333 378 711
Non-recurring other income - (58) (58)
Share-based payment charge 181 - 181
Adjusted EBITDA (2,158) 601 (1,557)
Other segment information
Property, plant and equipment
additions 2,021 338 2,359
Depreciation of PPE 300 373 673
Intangible asset additions 1,244 1,013 2,257
Amortisation of intangible
assets 333 378 711
-------------- -------------- ----------
Statement of financial position
Total assets 11,500 11,024 22,524
-------------- -------------- ----------
Total liabilities (2,829) (3,493) (6,322)
-------------- -------------- ----------
Year ended 30 April 2014
UK Operations US Operations Total for
GBP'000 GBP'000 Group
GBP'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 1,597 3,021 4,618
-Revenue from grants 235 743 978
-Other revenue - 643 643
-------------- -------------- ----------
Total sales by segment 1,832 4,407 6,239
Removal of inter-segment sales (10) (257) (267)
-------------- -------------- ----------
Total external sales 1,822 4,150 5,972
============== ============== ==========
Segment result - operating
loss (3,143) (637) (3,780)
Interest received 15 - 15
Interest expense (530) - (530)
Loss before tax (3,658) (637) (4,295)
Tax credit 1,106 - 1,106
-------------- -------------- ----------
Loss for the year (2,552) (637) (3,189)
Reconciliation to adjusted
EBITDA:
Net interest 515 - 515
Tax (1,106) - (1,106)
Depreciation 364 373 737
Amortisation 253 307 560
Non-recurring other income (649) - (649)
Share-based payment charge 125 - 125
Adjusted EBITDA (3,050) 43 (3,007)
============== ============== ==========
Other segment information
Property, plant and equipment
additions 98 89 187
Depreciation of PPE 364 373 737
Intangible asset additions 1,230 398 1,628
Amortisation of intangible
assets 253 307 560
-------------- -------------- ----------
Statement of financial position
Total assets 15,290 6,790 22,080
-------------- -------------- ----------
Total liabilities (3,649) (695) (4,344)
-------------- -------------- ----------
Inter-segment sales are charged on an arms-length basis.
No other additions of non-current assets have been recognised
during the year other than property, plant and equipment, and
intangible assets.
No impairment losses were recognised in respect of property,
plant and equipment and goodwill.
The accounting policies of the reportable segments are the same
as the Group's accounting policies described in note 3. Segment
loss represents the loss incurred by each segment. This is the
measure reported to the Group's Chief Executive for the purpose of
resource allocation and assessment of segment performance.
Revenues from major products and services
The Group's revenues from its major products and services were
as follows:
2015 2014
GBP'000 GBP'000
Product revenue 3,841 4,746
Research and development revenue 4,260 1,226
Consolidated revenue 8,101 5,972
Information about major customers
Included in revenues arising from USA operations are revenues of
approximately GBP1,224k (2014: GBP1,249k) which arose from sales to
the Group's largest customer. Included in revenues arising from UK
operations are revenues of approximately GBP1,203k (2014: GBPnil)
which arose from a major customer.
7. Loss for the year
Loss for the year has been arrived at after
(crediting)/charging:
2015 2014
GBP'000 GBP'000
Net foreign exchange losses/(gains) 226 (84)
Research and development costs recognised
as an expense 2,669 2,020
Depreciation of property, plant and equipment 673 737
Amortisation of internally-generated intangible
assets 711 560
Cost of inventories recognised as expense 1,266 1,911
Staff costs 5,620 5,104
=============== ===============
8. Tax
Recognised in the income statement
2015 2014
GBP'000 GBP'000
Current tax credit:
UK corporation tax on losses in the year 1,002 696
Foreign taxes paid - (1)
Total current tax 1,002 695
Deferred tax:
Origination and reversal of timing differences (13) 411
Total deferred tax (13) 411
Total tax credit in income statement 989 1,106
Corporation tax is calculated at 20.92% (2014: 22.83%) of
estimated taxable loss for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
Reconciliation of tax credit
The charge for the year can be reconciled to the profit in the
income statement as follows:
2015 2014
GBP'000 GBP'000
Loss before tax 3,135 4,295
Tax at the UK corporation tax rate of 20.92%
(2014: 22.83%) 656 981
Expenses not deductible for tax purposes (97) (57)
Effect of R&D 804 791
Rate differences effect of R&D (444) (727)
Income not taxable 146 155
Unrecognised movement on deferred tax 80 (360)
Effects of overseas tax rates (156) 323
Total tax (charge)/credit for the year 989 1,106
================= =============
There are no tax items charged to other comprehensive
income.
The Finance Act 2013 enacted a rate reduction in the main rate
of corporation tax to 21% from 1 April 2014 and to 20% from 1 April
2015. The Government has subsequently announced in the Summer
Budget, on 8 June 2015, that the rates of corporation tax will be
further reduced to 19% with effect from 1 April 2017 and 18% with
effect from 1 April 2020. As the enabling legislation has not been
substantively enacted these rates do not apply to the deferred tax
position at 30 April 2015. As there is no UK deferred tax
recognised there is no impact of the above on the tax provisions
reported in these accounts.
There is a potential deferred tax asset on excess tax deductions
arising from share based payments on exercise of share options of
GBP1,366k (2014: GBP1,147k). The asset has not been recognised as
it is not considered probable that there will be future profits
available.
9. Dividends
The directors do not recommend the payment of a dividend (2014:
GBPnil).
10. Losses per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Losses
2015 2014
GBP'000 GBP'000
Losses for the purposes of basic and diluted
losses per share being net losses attributable
to owners of the Group (2,146) (3,189)
2015 2014
Number of shares Number Number
Weighted average number of ordinary shares
for the purposes of basic losses per share 107,818,329 61,870,643
Effect of dilutive potential ordinary shares:
Share options 6,223,395 5,080,789
Weighted average number of ordinary shares
for the purposes of diluted losses per share 114,041,724 66,951,432
2015 2014
GBP GBP
Basic and diluted (0.02) (0.05)
Due to the Group having losses in each of the years, the fully
diluted loss per share for disclosure purposes, as shown in the
income statement, is the same as for the basic loss per share.
11. Goodwill
GBP'000
Cost
At 1 May 2014 1,275
At 30 April 2015 1,275
Accumulated impairment losses
At 1 May 2014 -
At 30 April 2015 -
Carrying amount
At 30 April 2015 1,275
At 30 April 2014 1,275
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash generating units (CGUs) that are expected
to benefit from that business combination. Before recognition of
impairment losses, the carrying amount of goodwill had been
allocated as follows:
2015 2014
GBP'000 GBP'000
US operations 1,275 1,275
The goodwill arose on the acquisition of Nova R&D, Inc in
2010, and represents the excess of the fair value of the
consideration given over the fair value of the identifiable assets
and liabilities acquired.
Goodwill has been allocated to Nova R&D, Inc as a cash
generating unit (CGU) and is reported in note 6 within the
segmental analysis of the US operations. Negative goodwill arose on
the acquisition of eV Products, Inc which was released to the
income statement in 2013.
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired, by comparing the net book value of the goodwill and
non-current assets for the CGU to its value in use on a discounted
cash flow basis.
The recoverable amount has been determined on a value in use
basis on each cash-generating unit using the management approved 5
year forecasts for each cash-generating unit. The base 5 year
projection is year on year growth over the next 5 years, with
overheads remaining relatively stable. The growth rate of the CGU
is expected to remain flat in Year 2 as a result of the CGU
continuing to develop its technical capabilities in the forthcoming
year. Growth is then expected to increase to 7% in Year 3, 14% in
Year 4 and remain flat thereafter in Year 5. These cash flows are
then discounted at the Company's weighted average cost of capital
of 15% (2014: 16%).
Based on the results of the current year impairment review, no
impairment charges have been recognised by the Group in the year
ended 30 April 2015 (2014: GBPnil). Management have considered
various sensitivity analyses in order to appropriately evaluate the
carrying value of goodwill.
Having assessed the anticipated future cash flows the directors
do not consider there to be any reasonably possible changes in
assumptions that would lead to such an impairment charge in the
year ended 30 April 2015. For illustrative purposes, a compound
reduction in revenue of 10% in each of years 1-5 whilst holding
overheads constant would not affect the conclusion of the
review.
The Directors have reviewed the recoverable amount of the CGU
and do not consider there to be any indication of impairment in
2015 or 2014.
12. Other intangible assets
Patents,
Development Trademarks
costs & other intangibles Total
GBP'000 GBP'000 GBP'000
Cost
At 1 May 2014 3,538 4,585 8,123
Additions 1,886 371 2,257
Exchange differences 33 237 270
At 30 April 2015 5,457 5,193 10,650
Amortisation
At 1 May 2014 56 1,102 1,158
Charge for the year 177 534 711
Exchange differences 7 49 56
At 30 April 2015 240 1,685 1,925
Carrying amount
At 30 April 2015 5,217 3,508 8,725
At 30 April 2014 3,482 3,483 6,965
The amortisation period for development costs incurred on the
group's product development is over the period during which the
company is expected to benefit and the amortisation will be based
on the number of units sold over the expected product lifetime.
Patents and trademarks are amortised over their estimated useful
lives, which is on average 10 years.
Other intangible assets with indefinite useful lives arose as
part of the acquisitions of Nova R&D, Inc. in June 2010 and eV
Products, Inc. in February 2013. The recoverable amounts of these
assets have been calculated on a value in use basis at both 30
April 2015 and 30 April 2014. These calculations use cash flow
projections based on financial forecasts and appropriate long-term
growth rates. To prepare value in use calculations, the cash flow
forecasts are discounted back to present value using a pre-tax
discount rate of 15% (2014: 16%) and a terminal value growth rate
of 2% from 2021. The Directors have reviewed the recoverable amount
of these indefinite useful life assets and do not consider there to
be any indication of impairment.
The carrying amounts of the acquired intangible assets arising
on the acquisitions of Nova R&D, Inc. and eV Products, Inc. as
at the 30 April 2015 was GBP1,858k (2014: GBP2,134k ), with
amortisation to be charged over the remaining useful lives of these
assets which is between 3 and 13 years.
The amortisation charge on intangible assets is included in
administrative expenses in the consolidated income statement.
13. Property, plant and equipment
Fixtures
Computer Plant and and
Equipment machinery fittings Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation
At 1 May 2014 586 4,426 144 5,156
Additions 34 2,306 19 2,359
Exchange differences 10 208 4 222
At 30 April 2015 630 6,940 167 7,737
Accumulated depreciation
and impairment
At 1 May 2014 398 2,389 84 2,871
Charge for the year 58 587 28 673
Exchange differences 19 23 4 46
At 30 April 2015 475 2,999 116 3,590
Carrying amount
At 30 April 2015 155 3,941 51 4,147
At 1 May 2014 188 2,037 60 2,285
Assets held under finance leases with a net book value of GBP39k
(2014: GBPnil) are included in the above table within plant and
machinery.
14. Amounts recoverable on contracts
2015 2014
GBP'000 GBP'000
Contracts in progress at the balance sheet date:
Amounts due from contract customers included in
trade and other receivables 281 214
281 214
Contract costs incurred plus recognised profits
less recognised losses to date 1,915 625
Less: progress billings (1,634) (411)
281 214
15. Trade and other receivables
2015 2014
GBP'000 GBP'000
Amount receivable for the sale of goods 3,458 1,501
Amounts recoverable on contracts (see
note 14) 281 214
Other receivables 288 90
Prepayments 62 102
-------- --------
4,089 1,907
Current tax assets 1,002 696
5,091 2,603
Trade receivables
Trade receivables disclosed above are classified as loans and
receivables and are therefore measured at amortised cost.
The average credit period taken on sales of goods is 60 days.
The Group initially recognises an allowance for doubtful debts of
100% against receivables over 120 days. However, this is subject to
management override where there is evidence of recoverability, most
notably, where specific support is being provided to strategic
partners in the marketing of new products.
Before accepting any new customer, the Group uses an external
credit scoring system to assess the potential customer's credit
quality and defines credit limits by customer.
The Group does not hold any collateral or other credit
enhancements over any of its trade receivables.
At 30 April 2015, trade receivables are shown net of an
allowance for bad debts of GBP252k (2014:GBPnil) arising from the
ordinary course of business, as follows:
2015 2014
GBP'000 GBP'000
Balance at 1 May 2014 - -
Provided during the year 252 -
Balance at 30 April 2015 252 -
The bad debt provision records impairment losses unless the
Group is satisfied that no recovery of the amount owing is
possible, at which point the amounts considered irrecoverable are
written off against the trade receivables directly.
Ageing of past due but not impaired receivables at the statement
of financial position date was:
2015 2014
GBP'000 GBP'000
31-60 days 363 70
61-90 days 56 13
91-120 days 159 207
121+ days 593 343
Total 1,171 633
In determining the recoverability of a trade receivable the
Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the
reporting date.
The directors consider that the carrying amount of trade and
other receivables is approximately equal to their fair value.
Ageing of impaired receivables at the statement of financial
position date was:
2015 2014
GBP'000 GBP'000
31-60 days - -
61-90 days - -
91-120 days - -
121+ days 466 -
Total 466 -
16. Trade and other payables
2015 2014
GBP'000 GBP'000
Trade payables and accruals 3,359 3,210
Deferred income 784 -
4,143 3,210
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 35 days. For all
suppliers no interest is charged on the trade payables. The Group
has financial risk management policies in place to ensure that all
payables are paid within the pre-agreed credit terms.
Deferred income relates to government grants received which have
been deferred until the conditions attached to the grants are
met.
The directors consider that the carrying amount of trade
payables approximates to their fair value.
17. Borrowings
2015 2014
GBP'000 GBP'000
Secured borrowing at amortised cost
Revolving credit facility 1,003 -
Finance lease liabilities 29 -
1,032 -
Total borrowings
Amount due for settlement within 12
months 1,022 -
Amount due for settlement after 12 months 10 -
US
Sterling dollars Total
GBP'000 GBP'000 GBP'000
Analysis of borrowings by currency:
30 April 2015
Revolving credit facility 1,003 - 1,003
Finance lease liabilities - 29 29
1,003 29 1,032
In February 2015 the Group agreed a 24 month facility with its
bank for a GBP3m revolving credit facility. This facility is
secured by a debenture and a composite guarantee across the Group.
The terms of the revolving credit facility are a nominal interest
rate of LIBOR+2.5% and a repayment term of 6 months from date of
drawdown.
At the year ended 30 April 2015, the total undrawn amounts
relating to the facility was GBP1m, available for the future
working capital needs of the Group.
Finance lease liabilities are secured by the assets leased. The
borrowings are at a fixed interest rate with repayment periods not
exceeding five years.
The weighted average interest rates paid during the year were as
follows:
2015 2014
% %
Revolving credit facility 3.10 -
Finance lease liabilities 0.82 -
18. Notes to the cash flow statement
2015 2014
GBP'000 GBP'000
Loss for the year (2,146) (3,189)
Adjustments for:
Finance income (31) (15)
Finance costs 102 530
Income tax credit (989) (1,106)
Government grants credit (4) -
Depreciation of property, plant and equipment 673 737
Amortisation of intangible assets 711 560
Share-based payment expense 181 125
Operating cash flows before movements in
working capital (1,503) (2,358)
Decrease/(increase) in inventories 183 (291)
Increase in receivables (2,099) (455)
Increase in payables 354 120
Cash used in operations (3,065) (2,984)
Income taxes received 704 766
Net cash used in operating activities (2,361) (2,218)
Cash and cash equivalents
2015 2014
GBP'000 GBP'000
Cash and bank balances 1,183 6,563
======== ========
Cash and cash equivalents comprise cash and short-term bank
deposits with an original maturity of three months or less, net of
outstanding bank overdrafts. The carrying amount of these assets is
approximately equal to their fair value.
19. Events after the balance sheet date
On 29 July 2015 the Group entered into a placing agreement to
raise up to GBP11.0m gross, or up to GBP10.4m net of expenses, by a
conditional non pre-emptive placing of 36,000,000 new ordinary
shares of 1p each in the ordinary share capital of the Group
("Ordinary Shares") and an open offer of up to 8,012,836 Ordinary
Shares at a price of 25p per share. The firm placing and open offer
are inter alia, upon the passing of certain resolutions by the
shareholders of the Group.
On 17 August 2015, a general meeting of the Group will be held
where the Directors expect the shareholders of the Company to
approve the firm placing and open offer. On 18 August 2015,
subject, inter alia, to shareholder approval the firm placing and
open offer shares will be admitted and dealings will commence. As a
result of the firm placing and open offer the Directors expect to
raise a minimum of GBP8.4m cash.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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