TIDMSKIN
RNS Number : 5384D
Integumen PLC
27 June 2019
AIM share code: SKIN
27 June 2019
Integumen PLC
("Integumen" or "Company")
FINAL RESULTS
Integumen today announces its final results for the year ended
31 December 2018.
Highlights:
-- Total revenue GBP501k (including discontinued operations)
increased 111% (FY 2017: GBP238k);
-- Revenue from continued operations GBP274k increased 294% (FY
2017: GBP93k) following Labskin test kit sales move to full
skincare product test services;
-- EBITDA losses before exceptional items reduced by 13% to
GBP1,221,000 (FY 2017: (GBP1,398,000);
-- Operating loss reduced to GBP2,082,000 (2017: GBP5,397,000) after providing for:
o Depreciation of GBP22,000 (2017: GBP37,000);
o Amortisation of GBP172,000 (2017: GBP439,000);
o Impairment to intangible assets of GBP423,000 (2017:
GBP3,238,000); and,
o Exceptional costs of GBP244,000 (2017: GBP285,000) were
one-off transaction costs relating to the disposal of
non-performing assets;
-- Disposal of TSPro GmbH saving GBP1.19m in short and long-term liabilities;
-- The Company acquired 9.35% of Cellulac plc in exchange for shares in Integumen;
-- STOER For Men skin care range at monthly break-even by year-end 2018.
Post Year-End 2018 Events
-- Transformational GBP3m all-share Acquisition of Rinocloud
Limited enabling scale-up of the business as it moves from a
physical laboratory to an automated, real-time, real-world digital
data platform;
-- Successful fundraising of GBP2.75m (gross); of which,
o GBP232k was Vendor sale to allow 100% of Rinocloud to be
acquired;
-- Additional strategic reduction of the indebtedness of the business:
o Disposal of Visible Youth Group - saving GBP245k of future
contractual liabilities;
o Debt conversions - Venn GBP421k carried over since April 2017
IPO;
o Cellulac debt conversion - GBP400k for hi-tech laboratory
equipment;
o Litigation issues settled - saving GBP250k of future
liabilities.
Ross Andrews, Chairman of Integumen, said:
"2018 was a pivotal year for Integumen. In August, with a
reduced board of directors and new management the Company set about
converting the business model from the high volume, low-margin sale
of consumer personal and healthcare products, to low-volume, high
margin test services for manufacturers of skincare consumer
products. The results to year-end were transformational. The
increase in revenue per client and the current level of pipeline
activity significantly higher than the Company has experienced in
the past, provides the Board confidence that the accelerated
growth, seen in 2018, will continue throughout the rest of
2019."
Contacts
Integumen plc Gerard Brandon, CEO +44 (0) 7340 055 643
SPARK Advisory Partners
Limited Neil Baldwin/Andrew
(Nominated Adviser) Emmott +44 (0) 113 370 8974
--------------------- ---------------------
Turner Pope Investments
(TPI) Limited (Broker) Andy Thacker +44 (0) 20 3621 4120
--------------------- ---------------------
Copies of the audited Annual Report and Accounts for the year
ended 31 December 2018 will be posted to shareholders shortly and
will also be available on the Company's website
www.integumen.com/investors/
Chairman's Statement
For the year ended 31 December 2018
Dear Fellow Shareholder,
I was appointed as Chairman on 21 May 2019 and have pleasure
presenting the Company's report and results for the year ended 31
December 2018.
Our Business
Integumen Plc ("Integumen", "Group" or "the Company") was
incorporated and registered in England and Wales on 28 May 2016 and
was admitted to trading on the AIM market of London Stock Exchange
plc on 5 April 2017. Integumen has completed a number of strategic
acquisitions and disposed of non-performing assets over the last 12
months. These include the commercial technology licensing from
Cellulac of a solvent free extraction process for oils specifically
intended for skincare products and nutritional food supplements and
within the Company's core physical skincare testing business, the
addition of a digital platform which has created Labskin AI. This
cloud-based eco-system validates skincare products and ingredients,
remotely for clients, and has been the focus of the strategic
change in the Company business model since August 2018.
This physical laboratory-grown 3D human skin equivalent,
developed specifically to host bacteria, virus and fungi on human
skin in our test laboratories, incorporates a digital artificial
intelligence to enhance clinical research, medical device and life
science testing in physical real-world and virtual digital
simulated form. Labskin allows our clients in skincare, healthcare,
pharmaceutical manufacturers and the cosmetic industry to test and
validate their product claims on human-like skin in a real-world
environment with full access to multiple state-of-the-art partner
technologies.
Results
This has been a transformational year for Integumen attributable
to a change of management, change of business model, better than
expected growth in sales from higher revenues per client, lower
management overhead from disposal of non-performing assets and
increased employees in the core Labskin subsidiary
laboratories.
Highlights:
-- Total revenue GBP501k (including discontinued operations)
increased 111% (FY 2017: GBP238k);
-- Revenue from continued operations GBP274k increased 294% (FY
2017: GBP93k) following Labskin test kit sales move to full
skincare product test services;
-- EBITDA losses before exceptional items reduced by 13% to
GBP1,221,000 (FY 2017: (GBP1,398,000);
-- Operating loss reduced to GBP2,082,000 (2017: GBP5,397,000) after providing for:
o Depreciation of GBP22,000 (2017: GBP37,000);
o Amortisation of GBP172,000 (2017: GBP439,000);
o Impairment to intangible assets of GBP423,000 (2017:
GBP3,238,000); and,
o Exceptional costs of GBP244,000 (2017: GBP285,000) were
one-off transaction costs relating to the disposal of
non-performing assets;
-- Disposal of TSPro GmbH saving GBP1.19m in short and long-term liabilities;
-- The Company acquired 9.35% of Cellulac plc in exchange for shares in Integumen;
-- STOER For Men skin care range at monthly break-even by year-end 2018.
Post Year-End 2018 Events
-- Transformational GBP3m all-share Acquisition of Rinocloud
Limited enabling scale-up of the business as it moves from a
physical laboratory to an automated, real-time, real-world digital
data platform;
-- Successful fundraising of GBP2.75m (gross); of which,
o GBP232k was Vendor sale to allow 100% of Rinocloud to be
acquired;
-- Additional strategic reduction of the indebtedness of the business:
o Disposal of Visible Youth Group - saving GBP245k of future
contractual liabilities;
o Debt conversions - Venn GBP421k carried over since April 2017
IPO;
o Cellulac debt conversion - GBP400k for hi-tech laboratory
equipment;
o Litigation issues settled - saving GBP250k of future
liabilities.
Further information on our products and technologies can be
found in the Chief Executive's Report.
Corporate governance
I believe that good corporate governance is important to support
our future growth and the Board, which has extensive experience in
publicly listed companies and running companies in the personal
healthcare sector, is committed to the highest standards.
Outlook
The current level of pipeline activity is significantly higher
than the Company has experienced in the past. Having acquired
Rinocloud and integrated the data analytics and AI systems into the
Labskin AI eco-system, the Board is satisfied that it is meeting
its objective of increasing the average revenue per client as the
Company continues to evolve into a clinical trial and medical
device support services company for skin related diseases,
treatments and therapies.
Ross Andrews
Chairman
26 June 2019
Chief Executive's Statement
For the year ended 31 December 2018
Dear Fellow Shareholder,
I present the Company's results for the year ended 31 December
2018.
Labskin (Innovenn)
The Labskin business unit has demonstrated its ability to move
away from selling single animal-free laboratory grown human skin
test kits, to a fully-fledged service provider for skincare,
healthcare, personal-hygiene, pharmaceutical manufacturers and the
cosmetic industry companies. While revenue for Labskin in H1 2018
amounted to a total of GBP49k, by year end this had increased by
327% to GBP209k. Invoices for clinical tests for clients were
reaching up to 25 times the average price of selling single test
kits by year end. The network of the new management team has opened
an exciting expansion and collaboration partnership plan.
By the end of the 3rd quarter Labskin needed automation to deal
with the expected demand and so a collaboration agreement with
Rinocloud was put in place for a shared revenue model with
Rinocloud investment and development that had been ongoing for 2
years, to deliver a digital virtual laboratory in the form of an
artificial intelligence platform for skin-care clients. By year-end
the test platform had been partially integrated into skincare test
equipment to allow remote viewing of test results in real-time.
Post year-end Rinocloud had completed the integration and
revenues had begun in Q1 2019, and in May 2019 Rinocloud was
acquired by Integumen for GBP3m in an all-share transaction. This
is now contributing to revenues that continue to accelerate into H2
2019 on top of the growth in physical services of the Labskin
laboratories.
Life Science Hub
Having Labskin in the group with such accumulated knowledge and
expertise allows us to identify markers on the skin (microbiome)
for many skin related conditions. Laboratory analysis allows the
Labskin team to see, for example, what happens on the skin with too
much sun damage or what biomarkers trigger acne, eczema, psoriasis,
ageing, dandruff and, in the case of "WoundPhase", wound
healing.
Labskin and WoundPhase are combining technologies to identify
biology (triggers) and chemistry that allows changes in wound
dressing colour depending on what is happening to the skin. In
addition, consumers will be able to match skincare products to
their skin types based on the Labskin dressing as well as health
applications that include visually monitoring of body temperature,
without electronic devices or attaching monitors on infants or
elderly patients.
STOER Skincare
This award-winning men's skincare brand was acquired in November
2017. STOER was a winner of the best Facial Cleanser/Exfoliators at
Shortlist Men's Grooming Awards 2018. On the back of the award and
additional media coverage small quantities of sales occurred from
retailers have begun. However, new management, who have had
experience in consumer sales of skin care products across multiple
continents negotiated higher volumes for the STOER range of
products that increased sales in H2 2018 that resulted in
breakeven. The greatest benefit of STOER products are the use as a
control range of skin care products that offer Labskin clients'
proof of concept for their products to be tested. The most notable
result was completion of test protocols for the inclusion of
Cannabinoid ("CBD") in client products, which resulted in bringing
in our first CBD client in May 2019.
Disposals of non-performing assets
The Board undertook the task of disposing of under-performing
assets. This resulted in an impairment of GBP500k in 2018 as
provided for in the Interims published in August. In December 2018,
we completed the disposal of TSPro GmbH and eliminated GBP1.19m of
short and long-term liabilities to the Company. In the Post
year-end the Company disposed of the Visible Youth Group which
saved GBP245,000 of future contractual liabilities.
Disruptive Business Model
Integumen has advanced its core business model with Labskin AI
platform to create a fundamental change in topical skin related
clinical and medical device trial costs. Changes go far beyond
incremental savings resulting in:
-- Human volunteer numbers are reduced by 50%;
-- Swab of test subject's skin is taken and applied to Labskin,
instantly creating twin test subject;
-- Recruitment time is shorter;
-- Project management and supervision time and personnel are reduced in half;
-- AI integration delivers comparative analytical data plus human test response data;
-- Reduces error - highlighting test subjects who are not sticking to test regime;
-- Increases accuracy from combined twin tests;
-- Clients win, Clinical Research Organisation wins and Labskin wins extra revenues
3-Step Strategic Plan
1. Grow Profits Across Related Markets
We will continue to leverage existing blue-chip clients and
collaboration partner relationships to secure additional high value
product test service contracts with additional sales resources. We
are building more client relationships across skincare, healthcare,
wound care, personal hygiene and pharmaceuticals industries.
2. Product & Service Investment
Roll-out of physical and digital cloud-based reporting services
to keep our Labskin AI offering competitive and relevant to our
clients is key to delivering more value to our clients and
increasing revenue per client in return. We maintain this approach
by extending our technical resources to enhance product and service
development. The addition and continued development of AI data
analytics capabilities from our recent Rinocloud acquisition, and
the increase in revenue because of that, shows we are on the right
track.
3. Collaboration & Acquisition
We actively pursue a broader portfolio of services through
revenue shared collaboration and acquisition options. These areas
have been previously mentioned in RNS announcements and include,
but are not limited to, data analytics, software and biophysics
integration services. All of these lead to extending our Labskin AI
eco-system. As mentioned above the key criteria in our
collaboration and partner targets are to increase revenue per
client and earnings from repurposed assets to enhance shareholder
value.
We look forward to updating you on the progress of this strategy
as we go forward.
Gerry Brandon
Chief Executive Officer
26 June 2019
The Board
Ross Andrews, Non-Executive Chairman
Ross was appointed Chairman on 21 May 2019, having been a
non-executive director since April 2017. He is a corporate
financier with over 30 years' experience, has a strong
understanding of corporate governance regimes and is chairman and
non-executive director of several UK listed companies. In 2018, he
established Guild Financial Advisory, a corporate finance boutique
focused on ambitious and fast-growing companies.
Gerry Brandon (Chief Executive Officer)
Gerard was appointed Director and CEO of Integumen in August
2018. Previously, he joined Cellulac Limited (Ireland) as its Chief
Executive Officer in May 2012 and assumed the same role for
Cellulac plc in October 2013. In 1996 he became founder and CEO of
Alltracel Pharmaceuticals PLC, where he built a team that oversaw
numerous patents granted on refined cellulose. Alltracel was
admitted to trading on AIM in 2001. In 2004, he was appointed as a
Managing Partner for Farmabrand Private Equity. In 2009, he was
appointed as an Executive Consultant to Eplixo Limited. He is a
Fellow of the Ryan Academy of Entrepreneurs in Dublin.
Camillus Glover (Chief Financial Officer and Chief Operating
Officer)
Camillus was appointed Director and COO of Integumen in August
2018. on the 29th of August he took over as Chief Financial
Officer. Previously, he joined Cellulac Limited (Ireland) as Chief
Financial Officer in May 2012 and assumed the same role for
Cellulac plc in October 2013. He is a member of the Institute of
Chartered Accountants Ireland. In 2003, he joined Alltracel as
Commercial Director and was appointed Chief Operations Officer in
2005 until it was acquired in 2008 by Hemcon Medical Technologies
("Hemcon"). Between 2009 and 2012, he was VP of Global Business
Development for Hemcon prior to joining Cellulac.
Fionan (Fin) Murray, Group Sales Director
Fionan is the founder of Rinocloud Limited. He is a seasoned
sales executive with more than 30 years' experience in worldwide
distribution deals, selling complex software solutions into the
multi-national corporate sectors in financial services, biotech,
utilities and government departments. He is former CEO of LeT
Systems Ltd and a senior executive at KBC Bank and Kindle Banking
systems.
Strategic Report
For the year ended 31 December 2018
Review of the business
A comprehensive review of the year is given in the Chairman's
and Chief Executive's Statements on pages 2 to 6.
Principal risks and uncertainties
The Directors continually identify, monitor and manage the risks
and uncertainties of the Group. Risk is inherent in all businesses.
Set out below are certain risk factors which could have an impact
on the Group's long-term performance and mitigating factors adopted
to alleviate these risks. This list does not purport to be an
exhaustive summary of the risks affecting the Group.
Management and employees
The Group's future success will be dependent on key employees
and their on-going relationships with customers. The Group
encourages customer contacts to be maintained by more than one
individual. Key employees are incentivised through a mixture of
competitive remuneration and sales commission. Main Board Directors
are incentivised as detailed in the Directors' Remuneration
Report.
Early stage of operations
Integumen is an early stage company, having been incorporated in
2016. Recently, the Group has experienced increased pipeline
activity significantly higher than the Company has been used to in
the past. This is still a relatively short-term track record of
product sales and new service offerings. Therefore, for now, it is
difficult to predict with accuracy the rate of market adoption and
so forecasting of sales is likely to prove challenging for some
time.
Delay in product launches
The Group has a number of identified product development
projects to take products to market, some of which may require
specific funding to proceed. There is no guarantee that these
projects will be completed within anticipated timescales, or that
they will result in viable products. The Group's strategy involves,
inter alia, running clinical studies on its products to create
verifiable data which can be used in marketing campaigns to
differentiate the Group's products from competitors. If these
clinical studies take longer than expected, or fail to establish
these credentials, this could be damaging to the Group's
prospects.
Potential funding requirement for further development
Any future collaboration, partnership, joint venture expansion,
activity, acquisitions and/or business development may require
additional capital and the Group may seek to raise additional funds
through equity or debt financings or from other sources. There can
be no guarantee that the necessary funds will be available on a
timely basis, on favourable terms, or at all, or that such funds if
raised, would be sufficient.
Competition risk
The Group's current and future potential competitors include,
amongst others, major multinational pharmaceutical and healthcare
companies with substantially greater resources than those of the
Group. There can be no assurance that competitors will not succeed
in developing systems and products that are more effective or
economic than any of those developed by the Group, which would
render the Group's products obsolete or otherwise non-competitive.
The Group seeks to reduce this risk by ensuring that a professional
and high standard product and service is provided to its customers,
maintaining confidentiality agreements and selecting leading
businesses in their respective fields as collaboration and joint
development partners capable of addressing significant competition,
should it arise.
Currency exchange risk
The Company's financial statements are denominated in pounds
sterling, its functional currency. The Company plans to increase
its sales and activities in the USA and the EU which may be
impacted by exchange rate fluctuations in future.
Financial risk management
The Group has instigated certain financial risk management
policies and procedures which are set out in note 3 to the
financial statements.
Outlook
The current level of pipeline activity is significantly higher
than the Company has experienced in the past. Having acquired
Rinocloud and integrated the data analytics and AI systems into the
Labskin AI eco-system, the Board is satisfied that it is meeting
its objective of increasing the average revenue per client as the
Company continues to evolve into a clinical trial and medical
device support services company for skin related diseases,
treatments and therapies.
Key Performance Indicators (KPIs)
The key performance indicators currently used by the Group are
revenue, adjusted EBITDA and cash resources. The Group intends to
establish other key performance indicators in due course once the
Group has matured sufficiently. The Group does not use and does not
at present intend to use non-financial key performance
indicators.
Review of strategy and business model
Integumen Plc has completed a number of strategic acquisitions
and disposed of non-performing assets over the last 12 months.
These include the commercial technology licensing from Cellulac of
a solvent free extraction process for oils specifically intended
for skincare products and nutritional food supplements and within
the Company's core physical skincare testing business, the addition
of a digital platform which has created Labskin AI. This
cloud-based eco-system validates skincare products and ingredients,
remotely for clients, and has been the focus of the change in the
Company business model since August 2018.
This physical laboratory-grown 3D human skin equivalent,
developed specifically to host bacteria, virus and fungi on human
skin in our test laboratories, incorporates a digital artificial
intelligence to enhance clinical research, medical device and life
science testing in physical real-world and virtual digital
simulated form. Labskin allows our clients in skincare, healthcare,
pharmaceutical manufacturers and the cosmetic industry to test and
validate their product claims on human-like skin in a real-world
environment with full access to multiple state-of-the-art partner
technologies.
Because of the changes to the business model the Company is
seeing an improved pipeline of activity. The Rinocloud acquisition
and its development team has integrated well, as much of the work
in collaboration had commenced prior to completion of the
transaction. Moving to a higher value service offering and entering
the clinical and medical device trial sector is both exciting and
challenging. With an increased order pipeline, the Company requires
additional infrastructure and expertise. The announcement on 20
June 2019 of increased laboratory space and personnel has secured
immediate organic growth. The Labskin Human Volunteer skin cloning
capabilities opens opportunities to explore options of
collaboration, partnership and acquisitive growth to achieve
Company goals of meeting increased demands from our clients,
regulatory compliance and enhance shareholder value.
Environment
The Directors consider that the nature of the Group's activities
is not inherently detrimental to the environment.
Employees
The Group places value on the involvement of its employees and
they are regularly briefed on the Group's activities. The Group
closely monitors staff attrition rates which it seeks to maintain
at current low levels and aims to structure staff compensation
levels at competitive rates in order to attract and retain high
calibre personnel.
Disabled employees
Applications for employment by disabled persons are always fully
considered, bearing in mind the specific aptitudes of the applicant
involved. It is the policy of the Group that the training, career
development and promotion of disabled persons, as far as possible,
be identical with that of other employees.
Social, community, and human rights
The Board recognises that the Group has a duty to be a good
corporate citizen and to respect the laws, and where appropriate
the customs and culture of the territories in which it operates. It
contributes as far as is practicable to the local communities in
which it operates and takes a responsible and positive approach to
employment practices.
The Strategic Report was approved by the Board on 26 June 2018
and signed on its behalf by:
Gerry Brandon
Chief Executive Officer
Report of the Directors
For the year ended 31 December 2018
The Directors have pleasure in submitting this report together
with the audited financial statements of Integumen Plc for the year
ended 31 December 2018.
2017 Financial Accounts Restated
On 21 December 2018, the Company disposed of its 100% holding of
TSpro GmbH for a consideration of EUR1. The 2017 financial accounts
have been restated to reflect the discontinued operation.
Corporate details
Integumen Plc is incorporated in England and Wales with
registration number 10205396. The registered office is Sand Hutton
Applied Innovation Campus, Sand Hutton, York, North Yorkshire, YO41
1LZ.
Directors
The Directors who held office during the year and as at the date
of signing the financial statements were as follows:
Gerard Brandon (Appointed on 6 August 2018)
Camillus Glover (Appointed on 6 August 2018)
Ross Andrews (Appointed Chairman on 21 May 2019)
Fionan Murray (Appointed on 2 May 2019)
Declan Service (Resigned on 5 April 2018)
Chris Bell (Resigned on 29 August 2018)
Donald Nicholson (Resigned on 29 August 2018)
Helmut Schlieper (Resigned on 6 August 2018)
Paul Kennedy (Resigned on 6 August 2018)
Tony Richardson (Resigned on 21 May 2019)
Principal activities
The principal activity of the Group is that of developing
technologies in the skin industry. The Group has a presence in the
UK and Ireland.
Dividends
There were no dividends paid or proposed by the Company during
the period.
Going concern
The Directors have considered the applicability of the going
concern basis in the preparation of these financial statements.
On 2 May 2019, the Company raised GBP2,519,000 by issuing new
shares. Following the settlement of certain liabilities, the
Company has allocated the remaining funds to sales and marketing
investment and general working capital purposes.
Also, on 2 May 2019, the Company successfully converted
GBP1,182,000 of liabilities to ordinary shares, of which GBP752,000
was payable as at 31 December 2018
The Directors have prepared cash flow projections to determine
funding requirements of the Group. After making enquiries, the
Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt a going concern basis
in preparing the annual report and consolidated financial
statements.
Creditors' payment policy
It is the policy of the Group to agree appropriate terms and
conditions for its transactions with suppliers (ranging from
standard written terms to individual negotiated contracts) and for
payment to be made in accordance with these terms provided the
supplier has complied with its obligations.
Directors' interests
The interests of the Directors who served during the year,
previous year and as at the date of signing of these financial
statements, all of which are beneficial, in the share capital of
the Company were as follows:
Ordinary Shares of 0.01p each
Tony Richardson 2,850,414
Gerard Brandon 49,114,501
Camillus Glover 41,422,194
Ross Andrews 2,238,462
Fionan Murray 86,783,068
Declan Service 1,301,952
Chris Bell 200,000
Paul Kennedy 700,000
Substantial shareholdings
At the date of signing of these financial statements, the
following interests in 3% or more of the issued Ordinary Share
capital had been notified to the Company:
Percentage
Number of issued
Shareholder of shares share capital
Helium Rising Stars Fund 72,333,723 7.46%
Cellulac plc(1) 38,205,127 3.94%
Enhance Skin Products Inc.(2) 37,927,216 3.91%
Venn Life Sciences Limited(3) 30,205,127 3.10%
(1) Gerard Brandon and Camillus Glover are directors and
shareholders of Cellulac plc. (2) Donald Nicholson is a director
and a shareholder of Enhance. (3) Tony Richardson is a director of
Venn.
Post balance sheet events
The following events have taken place since the year end:
Ordinary shares issued
- On 8 March 2019, Hybridan LLP exercised warrants over
1,846,154 ordinary shares of 0.01p each at an exercise price of
0.65p per ordinary share of 0.01p raising a total of GBP12,000 for
the Company.
- On 22 March 2019, share option holders exercised options over
17,777,776 ordinary shares of 0.01p each at an exercise price of
0.01p per ordinary share of 0.01p raising a total of GBP1,778.
- On 26 March 2019, placing subscribers exercised warrants over
2,000,000 ordinary shares of 0.01p each at an exercise price of
0.65p per ordinary share of 0.01p raising a total of GBP30,000.
- On 2 May 2019, the Company issued the 476,722,882 ordinary
shares of 0.01p each at the following placing prices per ordinary
share:
Description No. of Price Purpose
shares
------------------- ------------ ------ -----------------------------------------------
Placing and
Subscription
shares 179,918,788 1.4p Raised GBP2,519,000 in cash
Consideration 214,285,714 1.4p Consideration for the acquisition of Rinocloud
shares Ltd for GBP3,000,000
Settlement of GBP331,000 of liabilities
Settlement shares 23,637,429 1.4p as part of Visible Youth disposal
Loan Note Conv. Issued as repayment of a Loan Note due
shares 26,666,666 1.5p to Cellulac Ltd of GBP400,000
Issued as a loan repayment to Venn Life
Venn Debt shares 30,071,428 1.4p Sciences Holdings Plc of GBP421,000
Fee shares 2,142,857 1.4p Issued to settle certain professional
fees associated with the above of GBP30,000
------------------- ------------ ------ -----------------------------------------------
Total shares
issued 476,722,882
------------
- On 31 May 2019, placing subscribers exercised warrants over
1,000,000 ordinary shares of 0.01p each at an exercise price of
1.5p per ordinary share of 0.01p raising a total of GBP15,000.
- On 14 June 2019, share option holders exercised options over
1,111,111 ordinary shares of 0.01p each at an exercise price of
0.01p per ordinary share of 0.01p raising a total of GBP177.
- On 14 June 2019, placing subscribers exercised warrants over
5,000,000 ordinary shares of 0.01p each at an exercise price of
1.5p per ordinary share of 0.01p raising a total of GBP75,000.
- On 25 June 2019, placing subscribers exercised warrants over
2,500,000 ordinary shares of 0.01p each at an exercise price of
1.5p per ordinary share of 0.01p raising a total of GBP37,500.
- On 26 June 2019, placing subscribers exercised warrants over
6,766,667 ordinary shares of 0.01p each at an exercise price of
1.5p per ordinary share of 0.01p raising a total of GBP101,500.
As at date of signing of these financial statements, the Company
had an issued share capital of 969,551,462 ordinary shares of 0.01p
each and 223,685,232 deferred shares of 0.99p each.
Share warrants issued
- On 2 May 2019, the Company granted warrants over:
- 98,2142,85 ordinary shares of 0.01p each to placing
subscribers which are exercisable at 2p per ordinary share of 0.01p
at any time until 2 May 2021.
- 8,142,857 ordinary shares of 0.01p each to Turner Pope
Investments (TPI) Ltd which are exercisable at 1.4p per ordinary
share of 0.01p at any time until 2 May 2022.
Business combinations
On 2 May 2019, the Company acquired 100% of Rinocloud Ltd in an
all share transaction for GBP3,000,000, The purchase consideration
was paid by the Company by issuing 214,285,714 ordinary shares of
0.01p each at a price of 1.4p per share. Rinocloud Ltd is a company
registered in Ireland providing specialised data management
services to a global scientific and lab testing sector. Following
the acquisition, Fionan Murray, became a director of the
Company.
Discontinued operations
On 2 May 2019, the Company disposed of its subsidiary Visible
Youth Ltd. to Enhance Skin Products Inc. for zero consideration.
The sale includes the two subsidiaries of Visible Youth Ltd,
Visible Youth Ireland Ltd and Integumen Inc. The Visible Youth
companies own the rights to a range of female cosmetic products. As
part of the sale, the Company agree to settle certain Visible Youth
liabilities of GBP569,000 by:
- arranging cash payments of GBP238,000 and
- issuing 23,637,429 ordinary shares of 0.01p each at a placing
price of 1.4p totalling GBP331,000.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
have prepared the Group and Parent Company financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union. Under Company law the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Group and the Parent Company and of the profit or loss of the Group
and the Parent Company for that period. In preparing these
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs as adopted by the European
Union have been followed, subject to any material departures
disclosed and explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and the
Parent Company's transactions and disclose with reasonable accuracy
at any time the financial position of the Group and the Parent
Company and enable them to ensure that the financial statements
comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities
The Directors are responsible for the maintenance and integrity
of the Parent Company's website (www.integumen.com). Legislation in
the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
The Directors are responsible for the maintenance and integrity
of the Parent Company's website (www.integumen.com). Legislation in
the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
The Directors consider that the annual report and the accounts,
taken as a whole are fair, balanced and understandable and provide
the information necessary for shareholders to assess the Group and
the Parent Company's performance, business model and strategy.
Each of the Directors, whose names and functions are listed in
the Report of the Directors confirm that, to the best of their
knowledge:
-- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
loss of the Parent Company;
-- the Parent Company financial statements, which have been
prepared in accordance with IFRSs as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial
position and loss of the Parent Company; and
-- the Chairman's Statement and Chief Executive's Statement
include a fair review of the development of the business and the
position of the Group and the Parent Company, together with a
description of the principal risks and uncertainties that it
faces.
Directors' liability insurance
The Company maintains Directors and Officers liability
insurance, which is reviewed annually and is considered to be
adequate by the Company and its insurance advisers.
Independent auditors
Jeffreys Henry LLP were appointed during the year and have
expressed their willingness to continue in office as auditors and a
resolution to reappoint them will be proposed at the forthcoming
Annual General Meeting.
Disclosure of information to the Auditors
The Directors who hold office at the date of approval of this
report confirm that so far as they are each aware, there is no
relevant audit information of which the Company's auditors are
unaware, and each Director has taken all the steps that he ought to
have taken as a Director in order to make him aware of any relevant
audit information and to establish that the Company's auditors are
aware of that information.
Annual General Meeting
A copy of the notice convening the Annual General Meeting will
be sent out shortly under separate cover.
The Directors' report was approved by the Board on 26 June 2019
and signed on its behalf by:
Gerry Brandon
Chief Executive Officer
Corporate Governance Statement
For the year ended 31 December 2018
Compliance
The Directors recognise the value of the principles of the
Corporate Governance Code for Small and Mid-Size Quoted Companies
issued by the Quoted Companies Alliance (QCA).
The following statement describes how the Group seeks to address
the principles underlying the Code where practicable and
appropriate for a company of this size.
Board composition and responsibility
The Board currently comprises a non-executive Chairman, three
executive Directors. The Board has determined that Ross Andrews is
independent in character and judgement and that there are no
relationships or circumstances which could materially affect or
interfere with the exercise of their independent judgement. The
Board is satisfied with the balance between executive and
non-executive Directors which allows it to exercise objectivity in
decision making and proper control of the Group's business. The
Board considers this composition is appropriate in view of the size
and requirements of the Group's business and the need to maintain a
practical balance between executives and non-executives. The Board
will seek to appoint a further independent non-executive Director
in due course.
All Directors are subject to election by shareholders at the
first Annual General Meeting after their appointment and are
subject to re-election at least every three years. The Board does
not automatically re-nominate non-executive Directors for election
by shareholders. The terms of appointment of the non-executive
Directors can be obtained by request to the Company Secretary.
The Board's primary objective is to focus on adding value to the
assets of the Group by identifying and assessing business
opportunities and ensuring that potential risks are identified,
monitored and controlled. Matters reserved for Board decisions
include strategic long-term objectives and capital structure of
major transactions. There is a division of responsibilities between
the Non-Executive Chairman, who is responsible for the overall
strategy of the Group, and the CEO, who is responsible for
implementing the strategy and day to day running of the Group. He
is assisted by the CFO.
Board meetings
15 Board meetings were held during the period. The Director's
attendance record during the period is as follows:
Tony Richardson (Resigned 21 May 2019) 13
Gerard Brandon (Appointed on 6 August 2018) 7
Camillus Glover (Appointed on 6 August 2018) 7
Ross Andrews 12
Declan Service (Resigned on 5 April 2018) -
Chris Bell (Resigned on 29 August 2018) 8
Donald Nicholson (Resigned on 29 August 2018) 7
Helmut Schlieper (Resigned on 6 August 2018) 6
Paul Kennedy (Resigned on 6 August 2018) 6
Audit and Risk Committee
This comprises Ross Andrews as Chairman and Fin Murray as the
other member of the committee. Ross Andrews is the Company Chairman
and sits on the board of a number of listed plc's. The principal
duties of the committee are to review the half-yearly and annual
financial statements before their submission to the Board and to
consider any matters raised by the auditors. The Committee also
reviews the independence and objectivity of the auditors. The terms
of reference of the Committee reflect current best practice,
including authority to:
-- Recommend the appointment, re-appointment and removal of the external auditors;
-- Ensure the objectivity and independence of the auditors
including occasions when non-audit services are provided; and
-- Ensure appropriate 'whistle-blowing' arrangements are in place.
The Chairman may seek information from any employee of the Group
and obtain external professional advice at the expense of the
Company if considered necessary. Due to the relatively low number
of personnel employed within the Group, the nature of the business
and the current control and review systems in place, the Board has
decided not to establish a separate internal audit department.
Remuneration Committee
The Company has established a formal and transparent procedure
for developing policy on executive remuneration and for fixing the
remuneration packages of individual Directors. No Director is
involved in deciding his own remuneration.
This committee comprises Ross Andrews as Chairman and Fin Murray
as the other member of the committee. The committee considers the
employment and performance of individual executive Directors and
determine their terms of service and remuneration. It also has
authority to grant options under the Company's Executive Share
Option Scheme. The Committee intends to meet at least twice a
year.
Board appointments
The Nomination Committee comprises Ross Andrews as Chairman and
Fin Murray as the other member of the committee. It identifies and
nominates for the approval of the Board, candidates to fill Board
vacancies as and when they arise. The Nomination Committee intends
to meet at least twice a year.
Internal control
The Directors are responsible for ensuring that the Group
maintains a system of internal control to provide them with
reasonable assurance regarding the reliability of financial
information used within the business and for publication and that
the assets are safeguarded. There are inherent limitations in any
system of internal control and accordingly even the most effective
system can provide only reasonable, but not absolute, assurance
with respect to the preparation of financial reporting and the
safeguarding of assets.
The Group, in administering its business has put in place strict
authorisation, approval and control levels within which senior
management operates. These controls reflect the Group's
organisational structure and business objectives. The control
system includes clear lines of accountability and covers all areas
of the organisation. The Board operates procedures which include an
appropriate control environment through the definition of the above
organisation structure and authority levels and the identification
of the major business risks.
Internal financial reporting
The Directors are responsible for establishing and maintaining
the Group's system of internal reporting and as such have put in
place a framework of controls to ensure that the on-going financial
performance is measured in a timely and correct manner and that
risks are identified as early as is practicably possible. There is
a comprehensive budgeting system and monthly management accounts
are prepared which compare actual results against both the budget
and the previous year. They are reviewed and approved by the Board,
and revised forecasts are prepared on a regular basis.
Relations with shareholders
The Company reports to shareholders twice a year. The Company
dispatches the notice of its Annual General Meeting, together with
a description of the items of special business, at least 21 days
before the meeting. Each substantially separate issue is the
subject of a separate resolution and all shareholders have the
opportunity to put questions to the Board at the Annual General
Meeting. The Chairman of the Audit and Remuneration Committees
normally attend the Annual General Meeting and will answer
questions which may be relevant to their work. The Chairman advises
the meeting of the details of proxy votes cast on each of the
individual resolutions after they have been voted on in the
meeting.
The Chairman and the non-executive Directors intend to maintain
a good and continuing understanding of the objectives and views of
the shareholders.
Corporate social responsibility
The Board recognises that it has a duty to be a good corporate
citizen and is conscious that its business processes minimise harm
to the environment, contributes as far as is practicable to the
local communities in which it operates and takes a responsible and
positive approach to employment practices.
With effect from the financial period to 31 December 2016, the
Group became subject to the requirements of the Modern Slavery Act
2015. The Group will publish the required statement on its website
in due course.
Report of the Remuneration Committee
For the year ended 31 December 2018
Statement of compliance
This report does not constitute a Directors Remuneration Report
in accordance with the Directors Remuneration Regulations 2007
which do not apply to the Company as it is not fully listed. This
report sets out the Group policy on Directors' remuneration,
including emoluments, benefits and other share-based awards made to
each Director.
Policy on Executive Directors' remuneration
Remuneration packages are designed to motivate and retain
executive Directors to ensure the continued development of the
Company and to reward them for enhancing value to shareholders. The
main elements of the remuneration package for executive Directors
are basic salary or fees, performance related bonuses, benefits and
share option incentives.
Directors' remuneration
The remuneration of the Directors of the Company for the year
ended 31 December 2018 and 2017 is shown below:
2018 2017
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Non-Executive Directors
Tony Richardson (resigned 21 May 2019) 17 13
Ross Andrews (appointed on 5 April 2017) 47 28
Paul Kennedy (appointed on 5 April 2017, resigned
on 6 August 2018) 25 28
89 69
------------------------------------------------------- -------- --------
Executive Directors
Declan Service (resigned on 5 April 2018) 72 198
Chris Bell (resigned on 29 August 2018) 111 181
Donald Nicholson (appointed on 5 April 2017, resigned
on 29 August 2018) 8 9
Helmut Schlieper (appointed on 5 April 2017, resigned
on 6 August 2018) 6 9
Gerry Brandon (appointed on 6 August 2018) (1) 46 -
Camillus Glover (appointed on 6 August 2018) (1) 42 -
285 397
------------------------------------------------------- -------- --------
Total fees and emoluments 374 466
------------------------------------------------------- -------- --------
(1) The salary of Gerry Brandon and Camillus Glover is for
non-cash consideration and these Directors may elect to have
accrued salary settled by the allotment of new ordinary shares
subject to certain conditions.
Directors' share options
In 2017, the Company awarded options to key management over
6,720,000 ordinary shares of 1p each. These options were
exercisable after two years provided that the holder of the options
is still an employee of the Company. Of these, 3,360,000 have an
exercise price of 5p and 3,360,000 have an exercise price of 6p
each.
During the year, options over 5,118,000 ordinary shares of 1p
each lapsed when option holders left the employment of the
Company.
Following the subdivision of ordinary shares on 2 August 2018,
when each ordinary existing share of 1p was sub-divided into one
deferred share of 0.99p and one ordinary share of 0.01p, the
outstanding options granted were as follows at 31 December
2018:
No. of ordinary
shares under Exercise
Director Date granted option price Exercise period
From 5 April 2017 to 5
Ross Andrews 5 April 2017 638,400 5p-6p April 2027
(1) 50% of the shares will vest at an exercise price of 5p and
50% at an exercise price of 6p
Independent Auditor's Report to the Members of Integumen Plc
For the year ended 31 December 2018
Opinion
We have audited the financial statements of Integumen Plc (the
'parent company') and its subsidiaries (the 'group') for the year
ended 31 December 2018 which comprise the consolidated income
statement, the consolidated statement of comprehensive income, the
consolidated and company statements of financial position, the
consolidated and company statements of cash flows, the consolidated
and company statements of changes in equity and notes to the
financial statements, including a summary of significant accounting
policies.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union and, as regards the parent company financial
statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and of the parent company's affairs as at 31
December 2018 and of the group's loss for the year then ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to SME listed entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Company's ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for
issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters. This is not a
complete list of all risks identified by our audit.
Key audit matter How our audit addressed the
key audit matter
Impairment of intangible assets
and investments
We considered the profitability
During the year the group carried of the components of the group
intangible assets of GBP718,000 and whether they have the ability
(2017: GBP1,979,000) relating to trade successfully in the
to intellectual property and future.
development costs and long-term
investments of GBP729,000 (2017: We reviewed the assumptions
GBP1,479,000). underlying management's impairment
review for investments, which
EBITDA, which is considered used a discounted cash flow
by management to be a key metric forecasts.
and is included as a KPI in
the strategic report, is directly
impacted by the amount of costs We reviewed the latest management
capitalised. accounts and cash flow forecasts
to gauge how trading was progressing
The directors have assessed in 2019.
intangible assets and investments
in subsidiaries for any indicators
of impairment. Based on their
analysis, a further impairment
of GBP923k above amortisation
recognized in the period. This
includes GBP500k amortisation
of intangibles disposed of with
TSpro Gmbh.
----------------------------------------
Recoverability of amounts due
by subsidiaries
We evaluated the inter-group
The company had amounts owed transactions that occurred during
by subsidiary undertakings of the year to gain an understanding
GBP1,404,000 (2017: GBP1,854,000) of their purpose.
at the year end.
We reviewed management's assumption
The directors have assessed that the loans are recoverable
the recoverability of intercompany and repayable on demand, by
balances and have concluded assessment of managements' forecasts,
that they are recoverable. and comparison of the net asset
position of the subsidiaries
to the value of the asset held
by the parent.
----------------------------------------
Our application of materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgment, we determined materiality
for the financial statements as a whole as follows:
Group financial statements Company financial
statements
Overall materiality GBP158,000 (2017: GBP46,000 (2017: GBP69,600).
GBP112,000).
------------------------------ ------------------------------
How we determined Based on 5% net loss Based on 5% net loss
it before tax (2017: before tax and impairments
average of 3% of revenue, (2017: average of
10% of net profit 3% of revenue, 10%
and 2% of gross assets). of net profit and
1% of gross assets).
------------------------------ ------------------------------
Rationale for We believe that profit We believe that profit
benchmark applied before tax is a primary before tax is a primary
measure used by shareholders measure used by shareholders
in assessing the performance in assessing the performance
of the group and is of the group and is
a generally accepted a generally accepted
auditing benchmark. auditing benchmark.
------------------------------ ------------------------------
For each component in the scope of our Group audit, we allocated
a materiality that is less than our overall Group materiality. The
range of materiality allocated across components was between GBP106
and GBP196,000.
We agreed with the Audit and Risk Committee that we would report
to them misstatements identified during our audit above GBP7,900
(Group audit) (2017: GBP5,600 and GBP2,300 (Company audit) (2017:
GBP3,500) as well as misstatements below those amounts that, in our
view, warranted reporting for qualitative reasons.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made
subjective judgments, for example in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all
of our audits we also addressed the risk of management override of
internal controls, including evaluating whether there was evidence
of bias by the directors that represented a risk of material
misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
Group and the Company, the accounting processes and controls, and
the industry in which they operate.
The Group financial statements are a consolidation of ten
reporting units, comprising the Group's operating businesses and
holding companies.
We performed audits of the complete financial information
Integumen Plc, Innovenn UK Limited, Integumen Ireland Limited,
Lifesciencehub UK Limited, Lifesciencehub Ireland Limited, and
Stoer Ireland Limited, reporting units, which were individually
financially significant and accounted for 55% of the Group's
revenue and 90% of the Group's absolute loss before tax (i.e. the
sum of the numerical values without regard to whether they were
profits or losses for the relevant reporting units). We also
performed specified audit procedures over goodwill and other
intangible assets, as well as certain account balances and
transaction classes that we regarded as material to the Group at
one further reporting unit, based in The United Stated of
America.
The Group engagement team performed all audit procedures, with
the exception of the audits of Lifesciencehub UK Limited and
Lifesciencehub Ireland Limited which were performed by a component
auditor in The Republic of Ireland.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
strategic report or the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement set out on page 10, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group's and parent company's ability
to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor's report.
Other matters which we are required to address
We were appointed by the company at the Annual General Meeting
on 9 August 2018 to audit the financial statements for the period
ending 31 December 2018. Our total uninterrupted period of
engagement is 3 years, covering the periods ending 31 December 2016
to 31 December 2018.
The non-audit services prohibited by the FRC's Ethical Standard
were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our
audit.
Our audit opinion is consistent with the additional report to
the audit committee.
Use of this report
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Sanjay Parmar (Senior Statutory Auditor)
For and on behalf of Jeffreys Henry LLP, Statutory Auditor
Finsgate
5-7 Cranwood Street
London EC1V 9EE
26 June 2019
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2018
2018 2017 (restated)*
Notes GBP'000 GBP'000
------------------------------------------------ ------ -------- -----------------
Continuing operations
Revenue 5 274 93
Costs of sales (126) (45)
------------------------------------------------ ------ -------- -----------------
Gross profit 148 48
Administrative Costs 6,9 (2,230) (5,445)
Operating loss (2,082) (5,397)
------------------------------------------------ ------ -------- -----------------
Depreciation 6,16 22 37
Amortisation 6,15 172 439
Impairment of intangible assets 6,15 423 3,238
Exceptional items 7 244 285
EBITDA before exceptional items (1,221) (1,398)
------------------------------------------------ ------ -------- -----------------
Finance income 11 - 7
Finance costs 11 (38) (63)
Loss before income tax (2,120) (5,453)
Income tax credit 12 55 210
------------------------------------------------ ------ -------- -----------------
Loss for the year from continuing operations (2,065) (5,243)
Loss for the year from discontinued operations 35 (637) (3,397)
------------------------------------------------ ------ -------- -----------------
Loss for the year (2,702) (8,640)
------------------------------------------------ ------ -------- -----------------
Other comprehensive income
------------------------------------------------ ------ -------- -----------------
Currency translation differences (12) (218)
------------------------------------------------ ------ -------- -----------------
Total comprehensive loss for the year (2,714) (8,858)
------------------------------------------------ ------ -------- -----------------
Loss per share from continuing and discontinued
operations attributable to owners of the
parent during the year Pence Pence
Basic and diluted loss per ordinary share
From continuing operations 13 0.8p 3.5p
From discontinued operations 13 0.2p 2.3p
------------------------------------------------- --- ------ ------
From loss for the year 13 1.0p 5.8p
------------------------------------------------- --- ------ ------
*2017 restated to reflect discontinued operations
The notes on pages 26 to 61 are an integral part of these
consolidated financial statements.
The Company has elected to take the exemption under section 408
of the Companies Act 2006 not to present the parent Company income
statement account.
The loss for the parent Company for the year was GBP3,913,000
(2017: GBP9,899,000).
Consolidated and Company's Statement of Financial Position
As at 31 December 2018
Group Group Company Company
2018 2017 2018 2017
Notes GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------- --------- --------- --------- --------
Assets
Non-current assets
Intangible assets 15 718 1,979 75 -
Property, plant and equipment 16 32 241 - -
Investments in subsidiaries 17 - - 729 1,479
Loan to subsidiary undertaking 17 - - - 500
Other investments 17 708 - 708 -
Total non-current assets 1,458 2,220 1,512 1,979
-------------------------------- ------- --------- --------- --------- --------
Current assets
Inventories 19 135 174 - -
Trade and other receivables 20 185 140 1,473 1,920
Cash and cash equivalents 21 26 40 21 33
-------------------------------- ------- --------- --------- --------- --------
Total current assets 346 354 1,494 1,953
-------------------------------- ------- --------- --------- --------- --------
Total assets 1,804 2,574 3,006 3,932
-------------------------------- ------- --------- --------- --------- --------
Equity attributable to owners
Share capital 25 2,260 1,904 2,260 1,904
Share premium account 27 3,662 2,075 3,662 2,075
Retained loss 26 (13,221) (10,553) (13,778) (9,899)
Foreign currency reserve 27 (251) (239) - -
Reverse acquisition reserve 27 (2,843) (2,843) - -
Capital redemption reserve 27 9,519 9,519 9,519 9,519
Share based equity reserve 27 90 24 90 24
Total equity (784) (113) 1,753 3,623
-------------------------------- ------- --------- --------- --------- --------
Liabilities
Non-current liabilities
Deferred tax liabilities 23 80 212 - -
Borrowings 24 334 509 - -
Total non-current liabilities 414 721 - -
-------------------------------- ------- --------- --------- --------- --------
Current liabilities
Trade and other payables 22 1,979 1,751 1,253 309
Deferred tax liabilities 23 10 26 - -
Borrowings 24 185 189 - -
Total current liabilities 2,174 1,966 1,253 309
-------------------------------- ------- --------- --------- --------- --------
Total liabilities 2,588 2,687 1,253 309
-------------------------------- ------- --------- --------- --------- --------
Total equity and liabilities 1,804 2,574 3,006 3,932
-------------------------------- ------- --------- --------- --------- --------
The notes on pages 26 to 61 are an integral part of these
financial statements.
The financial statements were approved and authorised for issue
by the Board on 26 June 2019.
Camillus Glover Integumen Plc
Chief Financial Officer Registered no: 10205396
Consolidated and Company's Statement of Cash Flows
For the year ended 31 December 2018
Group Group Company Company
2018 2017 2018 2017
(restated)
Notes GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------ -------- -------- ------------ -------- --------
Cash Flow from operating activities
------------------------------------------------------------ -------- -------- ------------ -------- --------
Cash used in operations 28 (957) (1,977) (1,167) (2,241)
Taxation 12 45 126 - -
Net Interest (paid)/received 11 (38) (56) 5 5
Net cash used in operating activities (950) (1,907) (1,162) (2,236)
------------------------------------------------------------ -------- -------- ------------ -------- --------
Cash flow from investing activities
Acquisition of investments 17 (708) (63) (708) -
Disposal of investments in subsidiaries 35 41 - - -
Payments to acquire intangibles 15 (75) (179) (75) -
Purchase of property, plant and equipment 16 (1) (2) - -
Net cash used in investing activities (743) (244) (783) -
------------------------------------------------------------ -------- -------- ------------ -------- --------
Cash flow from financing activities
Proceeds from issuance of ordinary shares 1,943 2,269 1,943 2,269
Capital element of finance lease (14) (24)
Repayments on borrowings (165) (136) - -
Net cash generated by financing activities 1,764 2,109 1,943 2,269
------------------------------------------------------------ -------- -------- ------------ -------- --------
Net increase/ (decrease) in cash and cash equivalents 71 (42) (12) 33
Cash and cash equivalents at beginning of year (45) 30 33 -
Effects of exchange rate changes on cash and cash
equivalents - (33) - -
Cash and cash equivalents at end of year 21 26 (45) 21 33
------------------------------------------------------------ -------- -------- ------------ -------- --------
Consolidated Statement of Changes in Shareholders' Equity
Capital Share
Group Foreign Reverse redemption based
Share Share Retained currency acquisition reserve equity
capital premium earnings reserve reserve reserve Total
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
At 1 January
2017 7,365 - (1,913) (21) (2,843) - - 2,588
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
Changes in
equity for the
year
ended 31
December 2017
Loss for the
year - - (8,640) - - - - (8,640)
Currency
translation
differences - - - (218) - - - (218)
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
Total
comprehensive
loss
for the year - - (8,640) (218) - - - (8,858)
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
Transactions
with the
owners
Shares issued
during the
year 4,058 2,187 - - - - - 6,245
Costs of Share
issue - (112) - - - - - (112)
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
Cancelled
Shares (9,519) - - - - 9,519 - -
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
Share
option-based
charge - - - - - - 24 24
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
Total
contributions
by and
distributions
to owners (5,461) 2,075 - - - 9,519 24 6,157
At 31 December
2017 1,904 2,075 (10,553) (239) (2,843) 9,519 24 (113)
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
Changes in
equity for the
year
ended 31
December 2018
Loss for the
year - - (2,702) - - - - (2,702
Currency
translation
differences - - - (12) - - - (12)
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
Total
comprehensive
loss
for the year - - (2,702) (12) - - - (2,714)
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
Transactions
with the
owners
Shares issued
during the
year 356 1,634 - - - - - 1,990
Costs of Share
issue - (47) - - - - - (47)
Share
option-based
charge - - - - - - 100 100
Transferred
from Share
based equity
reserve - - 34 - - - (34) -
--------------- --------- -------------------- ---------- --------- ------------ ----------- -------- --------
Total
contributions
by and
distributions
to owners 356 1,587 34 - - - 66 2,043
At 31 December
2018 2,260 3,662 (13,221) (251) (2,843) 9,519 90 (784)
Capital Share based
Company Share Retained redemption equity reserve
Share capital premium earnings reserve Total
---------------- --------------- -------------------- ----------- --------------- --------------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------------- -------------------- ----------- --------------- --------------- --------
At 31 December
2016 7,365 - - - - 7,365
------------------ --------------- -------------------- ----------- --------------- --------------- --------
Changes in
equity for the
year
ended 31
December 2017
Loss for the year - - (9,899) - - (9,899)
Total
comprehensive
loss
for the year - - (9,899) - - (9,899)
------------------ --------------- -------------------- ----------- --------------- --------------- --------
Transactions
with the owners
Shares issued
during the year 4,058 2,187 - - - 6,245
Costs of Share
issue - (112) - - - (112)
Cancelled Shares (9,519) - - 9,519 - -
Share
option-based
charge - - - - 24 24
------------------ --------------- -------------------- ----------- --------------- --------------- --------
Total
contributions by
and
distributions to
owners (5,461) 2,075 - 9,519 24 6,157
------------------ --------------- -------------------- ----------- --------------- --------------- --------
At 31 December
2017 1,904 2,075 (9,899) 9,519 24 3,623
------------------ --------------- -------------------- ----------- --------------- --------------- --------
Changes in
equity for the
year
ended 31
December 2018
Loss for the year - - (3,913) - - (3,913)
------------------ --------------- -------------------- ----------- --------------- --------------- --------
Total
comprehensive
loss
for the year - - (3,913)) - - (3,913)
------------------ --------------- -------------------- ----------- --------------- --------------- --------
Shares issued
during the year 356 1,634 - - - 1,990
Costs of Share
issue - (47) - - - (47)
Share
option-based
charge - - - - 100 100
Transferred from
Share based
equity reserve 34 (34) -
------------------ --------------- -------------------- ----------- --------------- --------------- --------
Total
contributions by
and
distributions to
owners 356 1,587 - - 66 2,019
------------------ --------------- -------------------- ----------- --------------- --------------- --------
At 31 December
2018 2,260 3,662 (13,778) 9,519 90 1,753
------------------ --------------- -------------------- ----------- --------------- --------------- --------
Notes to the Financial Statements
For the year ended 31 December 2018
1. General information
Integumen Plc is a company incorporated in England and Wales.
The Company is a public limited company admitted to trading on the
AIM market of the London Stock Exchange since 5 April 2017. The
address of the registered office is Sand Hutton Applied Innovation
Campus, Sand Hutton, York, North Yorkshire, YO41 1LZ.
The principal activity of the Group is that of providing
laboratory testing services and collaborating with the Labskin
technology platform with customers in artificial intelligence,
clinical research, medical device and life science. The Group has a
presence in the UK and Ireland.
The financial statements are presented in pounds sterling, the
currency of the primary economic environment in which the Group's
trading companies operate. The Group comprises Integumen Plc and
its subsidiary companies as set out in note 17.
The registered number of the Company is 10205396.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. The
policies have been consistently applied throughout the year, unless
otherwise stated.
Basis of preparation
The consolidated financial statements of Integumen Plc have been
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs), IFRIC
interpretations and the Companies Act 2006 applicable to companies
reporting under IFRS. Practice is continuing to evolve on the
application and interpretations of IFRS.
The consolidated financial statements have been prepared under
the historical cost convention.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 4.
Changes in accounting policies and disclosures
The Group has adopted any applicable new standards, amendments
to standards and interpretations that are mandatory for the
financial year beginning 1 January 2018 including IFRS 9 and IFRS
15. However, none of them has had a material impact on the Group's
Consolidated Financial Statements.
IFRS 9 'Financial Instruments'
IFRS 9 replaced the classification and measurement models for
financial instruments contained in IAS 39 Financial Instruments:
Recognition and Measurement.
Impact of IFRS 9 - Classification of financial assets and
liabilities
Classification and measurement of debt assets will be driven by
the entity's business model for managing the financial assets and
the contractual cash flow characteristics of those financial
assets.
There are three principal classification categories for
financial assets: (i) amortised cost, (ii) fair value through other
comprehensive income (FVOCI) and (iii) fair value through profit
and loss (FVTPL). IFRS 9 classification is generally based on the
business model in which a financial asset is manged and its
contractual cash flows. The standard eliminates the previous IAS 39
categories of held-to-maturity, loans and receivables and
available-for-sale.
For an explanation of how the Group classifies financial assets
and liabilities under IFRS 9, See Note 2
Impact of IFRS 9 - Impairment
IFRS 9 also introduces a new expected credit loss impairment
model, as opposed to the incurred credit loss model implemented
under IAS 39 in previous years. This requires entities to account
for expected credit losses at initial recognition and changes to
expected credit losses at each reporting date to reflect changes in
credit risk since initial recognition.
In applying IFRS 9 both in the current period and
retrospectively in previous periods, there were no
reclassifications in the measurement category. As a result, there
has been no financial adjustment in transitioning to IFRS 9 with
respect to adopting the revised measurement categories.
IFRS 15 'Revenue from contracts with customers'
Revenue is recognised in according with the requirements of IFRS
15 'Revenue from Contracts with Customers'. The Company recognises
revenue to depict the transfer of promised goods and services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. This core principle is delivered in a five-step model
framework:
1. Identify the contract(s) with the customer;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations
in the contract; and
5. Recognise revenue when (or as) the entity satisfy a
performance obligation.
Revenue is recognised when control of the products have been
transferred to the customer. Control is considered to have
transferred once products have been received by the customer unless
shipping terms dictate any different. Revenues exclude intra-group
sales and value added taxes and represent net invoice value less
estimated rebates, returns and settlement discounts. The net
invoice value is measured by reference to the fair value of
consideration received or receivable by the Group for goods
supplied.
New, amended standards, interpretations not adopted by the
Group
The following Adopted IFRSs have been issued but have not been
applied by the Group in these Financial Statements. The full impact
of their adoption has not yet been fully assessed; however,
management do not expect the changes to have a material effect on
the Financial Statements unless otherwise indicated:
Annual Improvements to IFRSs - 2015-2017 Cycle (1 January
2019)
Amendments to IAS 1 and IAS 8 - on definition of materiality (1
January 2019)
Amendments to IAS 19 - employees benefits plan amendments,
curtailments or settlements
Amendments to IAS 28 on long term interests in associates and
joint ventures
Amendments to IFRS 3 "Business combinations" on definition of a
business
Amendments to IFRS 9, financial instruments on prepayment
features with negative compensation
IFRIC Interpretation 22 Foreign Currency Transactions and
Advance Consideration (effective date to be confirmed)
Amendments to IAS 40 Investment Property (effective date to be
confirmed)
IFRIC 23 Uncertainty over Income Tax Treatments (1 January
2019)
Amendments to IAS 28 Investments in Associates and Joint
Ventures (effective date to be confirmed)
IFRS 16 Leases (1 January 2019)
IFRS 17 Insurance contracts (1 January 2021).
Going concern
The Directors have considered the applicability of the going
concern basis in the preparation of these financial statements.
The financial statements have been prepared on the assumption
that the company is a going concern. When assessing the foreseeable
future, the Directors have looked at the forecast for the next 12
months from the date of this report, expected growth in revenues,
the cash at bank available and existing liabilities as at the date
of approval of this report and are satisfied that the Group should
be able to cover its working capital requirements.
The Directors have considered the applicability of the going
concern basis in the preparation of these financial statements.
On 2 May 2019, the Company raised GBP2,519,000 by issuing new
shares. Following the settlement of certain liabilities, the
Company has allocated the remaining funds to sales and marketing
investment and general working capital purposes.
Also, on 2 May 2019, the Company successfully converted
GBP1,182,000 of liabilities to ordinary shares, of which GBP752,000
was payable as at 31 December 2018
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt a going concern basis in preparing the annual
report and consolidated financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiary and associated
undertakings. Subsidiaries are all entities over which the Group
has the power to govern their financial and operating policies
generally accompanying a shareholding of more than fifty per cent
of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered
when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are de-consolidated from the date
that control ceases.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the
policies adopted by the Group.
The Group's share of post-acquisition profit or loss is
recognised in the income statement, and its share of
post-acquisition movements in other comprehensive income is
recognised in the comprehensive income with a corresponding
adjustment in the carrying amount of the investment.
(a) Acquisition accounting
The Group uses the acquisition method of accounting to account
for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred, and the equity interests
issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent
consideration agreement. Acquisition related costs are expensed as
incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date. On
an acquisition by acquisition basis, the Group recognises any
non-controlling interest in the acquiree either at fair value or at
the non-controlling interest's proportionate share of the
acquiree's net assets.
The excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition date
fair value of any previous equity interest in the acquiree over the
fair value of the Group's share of the identifiable net assets
acquired is recorded as goodwill. If this is less than the fair
value of the net assets of the subsidiary acquired in the case of a
bargain purchase, the difference is recognised directly in the
income statement.
Investments in subsidiaries are accounted for at cost less
impairment. Cost is adjusted to reflect changes in consideration
arising from contingent consideration amendments.
(b) Reverse acquisition accounting
The acquisition of Innovenn UK Limited and its subsidiary by
Integumen Plc on 17 November 2016 has been accounted using the
principles of reverse acquisition accounting. Although the Group
financial statements have been prepared in the name of the legal
parent, Integumen Plc, they are in substance a continuation of the
consolidated financial statements of the legal subsidiary, Innovenn
UK Limited. The following accounting treatment has been applied in
respect of the reverse accounting:
The assets and liabilities of the legal subsidiary, Innovenn UK
Limited are recognised and measured in the Group financial
statements at the pre-combination carrying amounts, without
restatement of fair value. The retained earnings and other equity
balances recognised in the Group financial statements reflect the
retained earnings and other equity balances of Innovenn UK Limited
immediately before the business combination and the results of the
period from 1 January 2014 to the date of the business combination
are those of Innovenn UK Limited. However, the equity structure
appearing in the Group financial statements reflects the equity
structure of the legal parent, Integumen Plc, including the equity
instruments issued in order to affect the business combination.
Foreign currency translation
(a) Functional and presentational currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the functional
currency). The consolidated financial statements are presented in
sterling, which is the functional and presentational currency of
the main operating entities.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions where items are re-measured. Foreign exchange gains
and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in
the income statement within 'administrative expenses', except when
deferred in other comprehensive income as qualifying cash flow
hedges and qualifying net investment hedges.
(c) Group companies
The results and financial position of all the Group entities
(none of which has the currency of a hyper-inflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentational currency as
follows:
-- assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
-- income and expenses for each income statement are translated at average exchange rates; and
-- all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the
translation of the net investment in foreign operations are taken
to other comprehensive income. When a foreign operation is
partially disposed of or sold, exchange differences that were
recorded in equity are recognised in the income statement as part
of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Executive Directors who make
strategic decisions.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less
accumulated depreciation and any provision for impairment.
Historical cost includes expenditure that is directly attributable
to the acquisition of the asset and bringing the asset to its
working condition for its intended use.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only where it is
probable that future economic benefits associated with the asset
will flow to the Group and the cost of the asset can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Any borrowing costs associated with qualifying property plant and
equipment are capitalised and depreciated at the rate applicable to
that asset category.
Depreciation on assets is calculated using the straight-line
method or reducing balances method to allocate their cost to its
residual values over their estimated useful lives, as follows:
Fixtures and fittings 20% - 33%
Plant and machinery 16% - 20%
The assets' residual values and useful economic lives are
reviewed regularly, and adjusted if appropriate, at the end of each
reporting period.
An asset's carrying value is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Gains and losses on the disposal of assets are determined by
comparing the proceeds with the carrying amount and are recognised
in administration expenses in the income statement.
Intangible assets
Intellectual property rights
Intellectual property rights relate to patents acquired by the
Group. Amortisation is calculated using the straight-line method
over the expected life of 10 years and is charged to administrative
expenses in the income statement.
Development costs
Development costs that are directly attributable to the design
and testing of identifiable and unique products controlled by the
group are recognised as intangible assets when the following
criteria are met:
-- it is technically feasible to complete the product so that it
will be available for use
-- management intends to complete the product and use or sell
it
-- there is an ability to use or sell the project
-- it can be demonstrated how the products will generate
probable future economic benefits
-- adequate technical, financial and other resources to complete
the development and to use or sell the product are available
and
-- the expenditure attributable to the product during its
development can be reliably measured. Directly attributable costs
that are capitalised as part of the product include employee costs
and an appropriate portion of relevant overheads.
Capitalised development costs are recorded as intangible assets
and amortised from the point at which the asset is ready for
use.
Impairment of non-financial assets
Assets that have an indefinite life such as goodwill are not
subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the carrying amount exceeds its
recoverable amount.
The recoverable amount is the higher of an asset's 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 the money and the risks specific
to the asset which the estimates of future cash flows have not been
adjusted.
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows. Impairment losses recognised for cash-generating units, to
which goodwill has been allocated, are credited initially to the
carrying amount of goodwill. Any remaining impairment loss is
charged pro rata to the other assets in the cash-generating
unit.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in the prior period. A
reversal of an impairment loss is recognised in the income
statement immediately. If goodwill is impaired however, no reversal
of the impairment is recognised in the financial statements.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is based on the first-in first-out method and includes
expenditure incurred in acquiring the inventories and bringing them
to their existing location and condition. Net realisable value
is
based on estimated selling price in the ordinary course of
business, less further costs expected to be incurred to completion
and disposal. Provision is made for obsolete, slow-moving or
defective items where appropriate.
Financial instruments
i. Recognition and initial measurement
Financial assets and financial liabilities are initially
classified as measured at amortised cost, fair value through other
comprehensive income, or fair value through profit and loss when
the group becomes a party to the contractual provisions of the
instrument.
Financial assets at amortised cost
The group's financial assets at amortised cost comprise trade
and other receivables. These represent debt instruments with fixed
or determinable payments that represent principal or interest and
where the intention is to hold to collect these contractual cash
flows.
They are initially recognised at fair value, included in current
and non-current assets, depending on the nature of the transaction,
and are subsequently measured at amortised cost using the effective
interest method less any provision for impairment.
Financial liabilities at amortised cost
Financial liabilities at amortised cost comprise trade and other
payables, and borrowings. They are classified as current and
non-current liabilities depending on the nature of the transaction,
are subsequently measured at amortised cost using the effective
interest method.
Financial assets at fair value through other comprehensive
income (FVOCI)
Financial assets at fair value through other comprehensive
income are comprised of the investment in Cellulac plc. The
election has been made to designate this asset as FVOCI. FVOCI
assets are recognised and measured at fair value with gains and
losses recognised in OCI.
The fair value measurement of the group's financial and non-
financial assets and liabilities utilises market observable inputs
and data as far as possible. Inputs used in determining fair value
measurements are categorised into different levels based on how
observable the inputs used in the valuation technique utilised are
(the 'fair value hierarchy').
Level 1 - Quoted prices in active markets
Level 2 - Observable direct or indirect inputs other than Level
1 inputs
Level 3 - Inputs that are not based on observable market
data
The group measures financial instruments relating to other
investments at fair value using Level 3, as the investment is not
listed, and has no readily available market price.
ii. Derecognition
The Group derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire, or when
it transfers the rights to receive the contractual cash flows in a
transaction in which substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which the
Group neither transfers nor retains substantially all of the risks
and rewards of ownership and it does not retain control of the
financial asset.
The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled or expire.
iii. Impairment
In accordance with IFRS 9 an expected loss provisioning model is
used to calculate an impairment provision. We have implemented the
IFRS 9 simplified approach to measuring expected credit losses
('ECL') arising from trade and other receivables, being a
lifetime
expected credit loss. In the previous year the incurred loss
model is used to calculate the impairment provision.
Research and development
Research expenditure is written off to the statement of
comprehensive income in the year in which it is incurred.
Development expenditure is written off in the same way unless the
Directors are satisfied as to the technical, commercial and
financial viability of individual projects. In this situation, the
expenditure is deferred and amortised over the period during which
the company is expected to benefit.
Trade and other receivables
Trade receivables are initially recognised at fair value, being
the original invoice amount, and subsequently measured at amortised
cost less provision for impairment. A provision for impairment is
established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original
terms of the receivable. Trade receivables that are less than three
months past due date are not considered impaired unless there are
specific financial or commercial reasons that lead management to
conclude that the customer will default. Older debts are considered
to be impaired unless there is sufficient evidence to the contrary
that they will be settled. The amount of the provision is the
difference between the asset's carrying value and the present value
of the estimated future cash flows. The carrying amount of the
asset is reduced through the use of an allowance account, and the
amount of the loss is recognised in the income statement within
administrative expenses. When a trade receivable is uncollectible
it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited against
administrative expenses in the income statement.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash
at bank and in hand and short-term deposits with an original
maturity of less than three months, reduced by overdrafts to the
extent that there is a right of offset against other cash
balances.
For the purposes of the consolidated cash flow statement, cash
and cash equivalents consist of cash and short-term deposits as
defined above net of outstanding bank overdrafts.
Share capital
Ordinary Shares and Deferred shares are classified as equity.
Proceeds in excess of the nominal value of shares issued are
allocated to the share premium account and are also classified as
equity. Incremental costs directly attributable to the issue of new
Ordinary Shares or options are deducted from the share premium
account.
Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are
presented as non-current liabilities. Trade payables are recognised
initially at fair value and subsequently measured at amortised cost
using the effective interest method.
Borrowings
Borrowings are recognised initially at the fair value of
proceeds received, net of transaction costs incurred. Borrowings
are subsequently carried at amortised cost. Borrowings are
classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at
least 12 months after the balance sheet date.
Borrowing costs are expensed in the consolidated Group income
statement under the heading 'finance costs'. Arrangement and
facility fees together with bank charges are charged to the income
statement under the heading 'administrative costs'.
Current and deferred income tax
The tax expense comprises current and deferred tax. Tax is
recognised in the income statement, except to the extent that it
relates to items recognised in other comprehensive income where the
associated tax is also recognised in other comprehensive
income.
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the balance sheet date
in the countries where the Company and its subsidiaries operate and
generate taxable income. Management evaluates positions taken in
tax returns with respect to situations in which applicable tax
regulation is subject to interpretation and establishes provisions
where appropriate on the basis of amounts expected to be paid to
the tax authorities.
Deferred tax is recognised, using the liability method, on all
temporary differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts for
financial reporting purposes. Deferred tax liabilities are
recognised in respect of all temporary differences except where the
deferred tax liability arises from the initial recognition of
goodwill in business combinations.
Deferred tax assets are recognised for all deductible temporary
differences, carry-forward of unused tax assets and tax losses, to
the extent that they are regarded as recoverable. They are regarded
as recoverable where, on the basis of available evidence, there
will be sufficient taxable profits against which the future
reversal of the underlying temporary differences can be
deducted.
The carrying value of the amount of deferred tax assets is
reviewed at each balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be
available to allow all, or part, of the tax asset to be
utilised.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on the tax rates (and
tax laws) that have been substantively enacted at the balance sheet
date.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and
liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Exceptional items
These are items of an unusual or non-recurring nature incurred
by the Group and include transactional costs and one-off items
relating to business combinations, such as acquisition
expenses.
Leases
Leases which transfer substantially all the risks and rewards of
ownership of an asset are treated as a finance lease. Assets held
under finance leases are capitalised at their fair value at the
inception of the lease and depreciated over the estimated useful
economic life of the asset or lease term if shorter. The finance
charges are allocated to the income statement in proportion to the
capital amount outstanding.
All other leases are classified as operating leases. Operating
lease rentals are charged to the income statement in equal annual
amounts over the lease term.
Employee benefits
Pension obligations
Group companies operate a pension scheme with defined
contribution plans. A defined contribution plan is a pension plan
under which the Group pays fixed contributions into a separate
entity with the pension cost charged to the income statement as
incurred. The Group has no further obligations once the
contributions have been paid.
Revenue recognition
(a) Revenue from sale of goods
Revenue represents the fair value of consideration received or
receivable for goods delivered to customers in the normal course of
business, net of trade discounts and VAT
(b) Revenue from services to customers
Revenue is recognised to the extent that it is probable that
economic benefits will flow to the Company and the revenue can be
reliably measured. Revenue represents the fees and commissions, net
of discounts, derived from services provided to and invoiced to
customers. Revenue is recognised in the period in which the service
is performed, in accordance with contractual arrangements. Income
billed in advance of the performance of service is deferred and
income in respect of work carried out but not billed at the period
end is accrued. In these cases, revenue is recognised by reference
to the stage of completion which is measured by reference to labour
hours incurred to the period end as a percentage of the total
estimated labour hours for the contract. Where the contract outcome
cannot be measured reliably, revenue is recognised to the extent of
the expenses recognised that are recoverable.
(c) Interest income
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.
(d) Royalty and licence income
Royalty and licence income is recognised on an accruals basis in
accordance with the substance of the relevant agreements.
Dividend distribution
Dividend distributions to the Company's shareholders are
recognised as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's
shareholders. Interim dividends are recognised when paid.
3. Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (foreign exchange risk and cash flow interest
rate risk), credit risk, liquidity risk, capital risk and fair
value risk. The Group's overall risk management programme focuses
on the unpredictability of the financial markets and seeks to
minimise the potential adverse effects on the Group's financial
performance. The Group does not use derivative financial
instruments to hedge risk exposures.
Risk management is carried out by the head office finance team.
It evaluates and mitigates financial risks in close co-operation
with the Group's operating units. The Board provides principles for
overall risk management whilst the head office finance team
provides specific policy guidance for the operating units in terms
of managing foreign exchange risk, credit risk and cash and
liquidity management.
(a) Market risk
(i) Foreign exchange - cash flow risk
The Group's presentational currency is sterling although it
operates internationally and is exposed to foreign exchange risk
arising from various currency exposures, primarily between Euro,
USD and the GBP such that the Group's cash flows are affected by
fluctuations in the rate of exchange between sterling and the
aforementioned foreign currencies.
Management do not use derivative financial instruments to
mitigate the impact of any residual foreign currency exposure not
mitigated by the natural hedge within the business model. The Group
does not speculate in foreign currencies and no operating Company
is permitted to take unmatched positions in any foreign
currency.
(ii) Foreign exchange - Fair value risk
Translation exposures that arise on converting the results of
overseas subsidiaries are not hedged. Net assets held in foreign
currencies are hedged wherever practical by matching borrowings in
the same currency. The principal exchange rates used by the Group
in translating overseas profits and net assets into Euro are set
out in the table below.
Compared to Sterling Average rate Year end rate Average rate
Year end rate 2018 2018 2017 2017
Euro 0.89 0.90 0.88 0.89
US Dollar 0.75 0.79 0.78 0.74
A 5% strengthening of the foreign exchange rates as at 31
December 2018, and for the year then ended, would have increased
the net liabilities by c.GBP220k. A 5% weakening would have had an
equal and opposite reaction.
(iii) Cash flow and fair value interest rate risk
The Group has assets in the form of cash and cash equivalents
and limited interest-bearing liabilities which relate to long-term
borrowing. Interest rates on cash and cash equivalents are
currently zero whilst interest rates on bank borrowings are 4.25%
over the banks Cost of Funds Rate and therefore expose the Group to
fair value interest rate risk. The Group does not speculate on
future changes in interest rates.
Where overseas acquisitions are made, it is the Group's policy
to arrange any borrowings required in local currency.
It is the Group's policy not to trade in derivative financial
instruments. The Group does not use interest rate swaps.
(b) Credit risk
Credit risk is managed on a Group basis, except for credit risk
relating to accounts receivable balances. Each local subsidiary and
operating business unit is responsible for managing and analysing
the credit risk for each of their new customers before standard
payment and delivery terms and conditions are offered. Credit risk
is managed at the operating business unit level and monitored at
the Group level to ensure adherence to Group policies. If there is
no independent rating, local management assesses the credit quality
of the customer, taking into account its financial position, past
experience and other factors. Individual risk limits are set based
on internal or external ratings in accordance with limits set by
the board. The utilisation of credit limits is regularly
monitored.
Credit risk also arises from cash and cash equivalents,
derivative financial instruments and deposits with banks and
financial institutions, as well as credit exposures to
customers.
(c) Liquidity risk
Cash flow forecasting is performed in the individual operating
entities of the Group and is aggregated by Group finance. Group
finance monitors cash and cash flow forecasts and it is the Group's
liquidity risk management policy to maintain sufficient cash and
available funding through an adequate amount of cash and cash
equivalents and committed credit facilities from its bankers. Due
to the dynamic nature of the underlying businesses, the head office
finance team aims to maintain flexibility in funding by keeping
sufficient cash and cash equivalents available to fund the
requirements of the Group.
The Group's policy in relation to the finance of its overseas
operations requires that sufficient liquid funds be maintained in
each of its subsidiaries to support short and medium-term
operational plans. Where necessary, short-term funding is provided
by the parent Company. Typically, excess funds are placed as
short-term deposits, to provide a balance between interest earnings
and flexibility.
The table below analyses the Group's non-derivative financial
liabilities into relevant maturity groupings based on the remaining
period at the balance sheet date to the contractual maturity date.
The amounts disclosed in the table are the contractual undiscounted
cash flows.
Less than Between Between More than
Notes one year 1 and 2 years 2 and 5 years 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2018:
Borrowings 24 185 193 141 - 519
Trade and other payables 22 1,979 - - - 1,979
At 31 December 2017:
Borrowings 24 189 182 327 - 698
Trade and other payables 22 1,751 - - - 1,751
(d) Capital risk management
The Group's objectives when managing capital are to safeguard
the ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of
capital.
The Group monitors capital on the basis of the gearing ratio.
This ratio is calculated as net debt divided by total capital. Net
debt is calculated as total borrowings (including "current and
non-current borrowings" as shown in the consolidated balance sheet)
less cash and cash equivalents. Total capital is the sum of net
debt plus equity.
4. Critical accounting estimates and judgements
In the process of applying the Group's accounting policies,
management has made accounting judgements in the determination of
the carrying value of certain assets and liabilities. Due to the
inherent uncertainty involved in making assumptions and estimates,
actual outcomes will differ from those assumptions and estimates.
The following judgements have the most significant effect on the
amounts recognised in the financial statements.
(a) Business combinations
The recognition of business combinations requires the excess of
the purchase price of acquisitions over the net book value of
assets
acquired to be allocated to the assets and liabilities of the
acquired entity. The Group makes judgements and estimates in
relation to the fair value allocation of the purchase price. If any
unallocated portion is positive it is recognised as goodwill.
(b) Impairment of goodwill and cost of investments
The Group tests annually whether goodwill has suffered any
impairment, in accordance with the accounting policy stated in note
2. The recoverable amounts of cash-generating units have been
determined based on value-in-use calculations. These calculations
require the use of estimates as set out in note 15. In addition,
the Group has also considered the impairment of the investments in
the subsidiary undertakings.
(c) Impairment of receivables
Trade and other receivables are carried at the contractual
amount due less any estimated provision for non-recovery. Provision
is made based on a number of factors including the age of the
receivable, previous collection experience and the financial
circumstances of the counterparty.
(d) Intangible assets
The Group amortises intangible assets over their estimated
useful life. The useful lives of Goodwill and Intellectual Property
Rights have been estimated by the Group as stated in note 2. The
Group tests annually whether there is any indication that
Intangible assets have been impaired.
5. Segmental reporting
Management has determined the Group's operating segments based
on the monthly management reports presented to the Chief Operating
Decision Marker ('CODM'). The CODM is the Executive Directors and
the monthly management reports are used by the Group to make
strategic decisions and allocate resources. At the year-end, no
separate segments are being reported by the Executive Directors. In
the future, separate segments will be established as the Group's
operations develop.
Currently the key operating performance measures used by the
CODM are revenue, adjusted EBITDA and cash resources. Disclosure of
group revenue by geographical location is follows:
2018 2017 (restated)
GBP'000 GBP'000
-------------------------- -------- ----------------
United Kingdom 52 5
Europe 187 76
United States of America 12 12
Rest of World 23 -
Total revenue 274 93
-------------------------- -------- ----------------
Revenues of GBP109,000 (2017: GBP137,000) are derived from 2
(2017: 2) customers each representing more than 10% of the group
revenue.
6. Expenses - analysis by nature
2018 2017
(restated)
GBP'000 GBP'000
----------------------------------------------------- -------- ------------
Employee benefit expense (note 9) 602 734
Depreciation (note 16) 22 37
Amortisation (note 15) 172 439
Impairment of intangible assets (note 15) 423 3,238
Exceptional items (note 7) 244 285
Auditors remuneration - audit of the parent company
and consolidation 15 15
Auditors remuneration - other services 30 30
Foreign exchange differences (26) 70
Operating lease payments 55 50
Share option-based charge 100 24
Other expenses 593 523
----------------------------------------------------- -------- ------------
Total administrative costs 2,230 5,445
----------------------------------------------------- -------- ------------
7. Exceptional items
Included within administrative expenses are exceptional items as
shown below:
2018 2017
(restated)
GBP'000 GBP'000
------------------------------------------------- ---- -------- ------------
Exceptional items include:
- Transaction costs relating to AIM listing and
business acquisitions 244 285
Total exceptional items 244 335
------------------------------------------------------- -------- ------------
8. Directors' remuneration
The remuneration of the Directors in Integumen Plc who held
office during the year ended 31 December 2018 was as follows:
2018 2017
(restated)
GBP'000 GBP'000
----------------------------------------------------- -------- ------------
Aggregate emoluments 330 399
Contribution to defined contribution pension scheme 21 43
Share option-based charge 23 24
----------------------------------------------------- -------- ------------
Total Directors' remuneration 374 466
----------------------------------------------------- -------- ------------
Aggregate contributions paid or payable during the year as noted
above were in respect of 1 director (2017: 2 directors) to defined
contribution schemes.
A breakdown of Directors' remuneration has been provided on page
16.
9. Employee benefit expense
2018 2017
(restated)
GBP'000 GBP'000
-------------------------------- -------- ------------
Wages and salaries 521 693
Social security costs 50 85
Pension costs 31 47
-------------------------------- -------- ------------
Total employee benefit expense 602 825
-------------------------------- -------- ------------
Included in staff costs is GBPNil that was capitalised during
the year to intangible assets (2017: GBP91,000). The net employee
benefit expense therefore charged to the Statement of Comprehensive
Income for the year was GBP602,000 (2017: GBP734,000).
10. Average number of people employed
2018 2017
No No
---------------------------------------------------------- ----- -----
Average number of people (including Executive Directors)
employed was:
Administration 3 3
Operations and research 6 6
Sales and marketing 1 1
---------------------------------------------------------- ----- -----
Total average number of people employed 10 10
---------------------------------------------------------- ----- -----
The total number of employees at 31 December 2018 was 11 (2017:
11)
11. Finance income and costs
2018 2017
(restated)
GBP'000 GBP'000
----------------------------------------------------- -------- ------------
Interest expense:
- Bank borrowings (30) (38)
- Interest on finance leases (3) (5)
- Other interest (5) (20)
----------------------------------------------------- -------- ------------
Finance costs (38) (63)
----------------------------------------------------- -------- ------------
Finance income:
- Interest income on loan to subsidiary undertaking
pre-acquisition - 7
Finance income - 7
----------------------------------------------------- -------- ------------
Net finance income/(expense) (38) (56)
----------------------------------------------------- -------- ------------
12. Income tax expense
2018 2017
(restated)
Group GBP'000 GBP'000
--------------------------------------------------- -------- ------------
Current tax:
Current tax for the year - -
Research and development tax credit (45) (126)
--------------------------------------------------- -------- ------------
Total current tax (credit)/charge (45) (126)
--------------------------------------------------- -------- ------------
Deferred tax (note 23):
Origination and reversal of temporary differences (10) (84)
--------------------------------------------------- -------- ------------
Total deferred tax (10) (84)
--------------------------------------------------- -------- ------------
Income tax (credit)/charge (55) (210)
--------------------------------------------------- -------- ------------
The Finance Act 2015 which was substantially enacted in 2015
included legislation to reduce the main rate of UK corporation tax
to 19% from 1 April 2019 and the Finance Act 2016 which was
substantially enacted in 2016 included legislation to reduce the
main rate of UK Corporation tax to 17% from 1 April 2020.
The tax on the Group's results before tax differs from the
theoretical amount that would arise using the standard tax rate
applicable to the profits of the consolidated entities as
follows:
2018 2017
(restated)
GBP'000 GBP'000
------------------------------------------------------- -------- ------------
Loss before tax (2,120) (5,454)
------------------------------------------------------- -------- ------------
Tax calculated at domestic tax rates applicable to UK
standard rate of tax of 19% (2017 - 19%) (403) (1,036)
Tax effects of:
- Impact of actual tax rates 4 (608)
- Expenses not deductible for tax purposes 121 1,212
- Research and development tax credit (45) (126)
- Losses carried forward 268 348
Tax (credit)/charge (55) (210)
------------------------------------------------------- -------- ------------
There are no tax effects on the items in the statement of
comprehensive income. The effect of losses is discussed in note
23.
13. Loss per share
(a) Basic
Basic loss per share is calculated by dividing the loss
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year.
2018 2017
Loss from continuing operations GBP2,065,000 GBP5,243,000
Loss from discontinued operations GBP637,000 GBP3,397,000
----------------------------------------------------- ------------- -------------
Loss attributable to owners of the parent GBP2,702,000 GBP8,640,000
----------------------------------------------------- ------------- -------------
Weighted average number of Ordinary Shares in issue 258,730,165 148,000,464
Basic loss per ordinary share
----------------------------------------------------- ------------- -------------
From continuing operations 0.8p 3.5p
From discontinued operations 0.2p 2.3p
----------------------------------------------------- ------------- -------------
From loss for the year 1.0p 5.8p
----------------------------------------------------- ------------- -------------
(b) Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. The options
and warrants are anti-dilutive in view of the losses in the year.
Details of warrants outstanding are given in note 25.
14. Dividends
There were no dividends paid or proposed by the Company in
either year.
15. Intangible fixed assets
Group Development Costs and Intellectual Property Rights Total
GBP'000 GBP'000
------------------------------------------------------ --------------------------------------------------- ---------
Cost
At 1 January 2017 4,689 4,689
On acquisition of subsidiary (note 34) 5,044 5,044
Additions(1) 179 179
Exchange differences (277) (277)
At 31 December 2017 9,635 9,635
------------------------------------------------------ --------------------------------------------------- ---------
Amortisation
At 1 January 2017 131 131
On acquisition of subsidiary (note 34) 11 11
Charge for the year - continuing operations 439 439
Charge for the year - discontinued operations (note
35) 349 349
Impairment - continuing operations 3,238 3,238
Impairment - discontinued operations (note 35) 3,502 3,502
Exchange differences (14) (14)
------------------------------------------------------ --------------------------------------------------- ---------
At 31 December 2017 7,656 7,656
------------------------------------------------------ --------------------------------------------------- ---------
Net book value
At 31 December 2017 1,979 1,979
------------------------------------------------------ --------------------------------------------------- ---------
Cost
At 1 January 2018 9,635 9,635
On disposal of subsidiary (note 35) (4,614) (4,614)
Additions(1) 75 75
Exchange differences 191 191
At 31 December 2018 5,287 5,287
------------------------------------------------------ --------------------------------------------------- ---------
Amortisation
At 1 January 2018 7,656 7,656
On disposal of subsidiary (note 35) (4,451) (4,451)
Charge for the year - continuing operations 172 172
Charge for the year - discontinued operations (note
35) 87 87
Impairment - continuing operations 423 423
Impairment - discontinued operations (note 35) 500 500
Exchange differences 182 182
At 31 December 2018 4,569 4,569
------------------------------------------------------ --------------------------------------------------- ---------
Net book value
At 31 December 2018 718 179
------------------------------------------------------ --------------------------------------------------- ---------
(1) Additions are development costs capitalised during the
period
At 31 December 2018, the Group had intangible assets arising
from intellectual property recognised on acquisitions and
development costs on certain research and development projects
relating to skincare testing.
Management performed an impairment analysis to determine the
fair value of the intangible assets. In assessing fair value, the
estimated future cash flows of each underlying business unit were
discounted to their present value that reflects management's
current market assessments of the time value of the money and were
adjusted for risks specific to each business.
As a result of the impairment analysis, the Directors have
decided to impair the value of intangible assets by charging
GBP923,000 to the income statement (GBP500,000 relates to
discontinued operations, see Note 15).
The Company had no intangible assets.
16. Property, plant and equipment
Group Fixtures and fittings Plant and machinery Total
GBP'000 GBP'000 GBP'000
--------------------------------------------------------- ---------------------- -------------------- ---------
Cost
At 1 January 2017 145 - 145
Additions 2 - 2
On acquisition of subsidiary (note 34) - 296 296
Exchange differences - 11 11
At 31 December 2017 149 307 456
--------------------------------------------------------- ---------------------- -------------------- ---------
Amortisation
At 1 January 2017 57 - 57
On acquisition of subsidiary (note 34) - 77 77
Charge for the year - continuing operations 37 - 37
Charge for the year - discontinued operations (note 35) - 39 39
Exchange differences 1 4 5
--------------------------------------------------------- ---------------------- -------------------- ---------
At 31 December 2017 95 120 215
--------------------------------------------------------- ---------------------- -------------------- ---------
Net book value
At 31 December 2017 54 187 241
--------------------------------------------------------- ---------------------- -------------------- ---------
Cost
At 1 January 2018 149 307 456
Additions 1 - 1
On disposal of subsidiary (note 35) - (311) (311)
Exchange differences (1) 4 3
At 31 December 2018 149 - 149
--------------------------------------------------------- ---------------------- -------------------- ---------
Amortisation
At 1 January 2018 95 120 215
On disposal of subsidiary (note 35) - (173) (173)
Charge for the year - continuing operations 22 - 22
Charge for the year - discontinued operations (note 35) - 52 52
Exchange differences - 1 1
At 31 December 2018 117 - 117
--------------------------------------------------------- ---------------------- -------------------- ---------
Net book value
At 31 December 2018 32 - 32
--------------------------------------------------------- ---------------------- -------------------- ---------
Fixtures and fittings include the following amounts where the
group is a lessee under a finance lease (note 24):
2018 2017
GBP'000 GBP'000
-------------------------- --------- --------
Cost - 92
Accumulated depreciation - 44
Net book value - 48
-------------------------- --------- --------
Bank borrowings as detailed in note 24 are secured with a
floating charge against the assets of Innovenn UK Limited, which
include the above fixtures and fittings.
The Company had no property, plant and equipment.
17. Investments
(a) Investments in subsidiaries
Investments Loan to Subsidiary
Company 2018 2018
Carrying amount: GBP'000 GBP'000
At 1 January 1,479 500
Disposals during the year (note 35) (750) -
Impairment provision - (500)
------------------------------------- ------------ -------------------
End of the year 729 -
------------------------------------- ------------ -------------------
Investments in subsidiaries are recorded at cost, which is the
fair value of the consideration paid, less impairments.
On 21 December 2018, the Company disposed of its shares in TSpro
GmbH (note 35).
At 31 December 2018, the Group had Investments in and loans to
subsidiaries with a book value of GBP1,229,000 arising from
acquisitions.
Management performed an impairment analysis to determine the
fair value of the investments in and loans to subsidiaries. In
assessing fair value, the estimated future cash flows of each
investment were discounted to their present value that reflects
management's current market assessments of the time value of the
money and were adjusted for risks specific to each investment.
The result of the impairment analysis showed a fair value of
GBP729,000 for the Company's Investments in and loans to
subsidiaries at 31 December 2018. As a result, the Directors have
decided to impair the value of the Investments in subsidiaries by
charging GBP500,000 to the income statement of the Company.
The subsidiaries of Integumen Plc are as follows:
Name of Company Proportion Held Class of
Shareholding Country of Incorporation
Innovenn UK Limited 100% (direct) Ordinary United Kingdom
Integumen Ireland Limited 100% (indirect) Ordinary Ireland
Lifesciencehub UK Limited 100% (direct) Ordinary United
Kingdom
Lifesciencehub Ireland Limited 100% (indirect) Ordinary
Ireland
Integumen Inc. 100% (indirect) Ordinary United States of
America
Visible Youth Limited 100% (direct) Ordinary United Kingdom
Visible Youth Ireland Limited 100% (indirect) Ordinary
Ireland
STOER Ireland Limited 100% (direct) Ordinary Ireland
All the subsidiaries are included in the consolidation. The
proportions of voting shares held by the parent Company do not
differ from the proportion of Ordinary Shares held.
The loan to Integumen Inc. arises on the acquisition of the
trade, assets and certain liabilities of Enhance Skin Products Inc.
in exchange for the issue of shares of the Company.
(b) Other investments
Company 2018 2017
Carrying amount: GBP'000 GBP'000
At 1 January - -
Additions during the year 708 -
-------------------------- -------- --------
End of the year 708 -
-------------------------- -------- --------
During the year, the Company acquired 9.35% of the ordinary
shares of Cellulac plc for a consideration of GBP708,000 through
the issue of 82,844,388 ordinary shares of 0.01p each (note 25)
Other investments are held at fair value through other
comprehensive income. The Directors view carrying value as a
reasonable approximation of fair value due to the recency of the
acquisition, and lack of significant change in operation.
18. Financial instruments by category
(a) Assets
Group Group Company Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- -------- -------- -------- --------
31 December
Assets as per balance sheet
Trade and other receivables excluding prepayments
and corporation tax 143 75 1,447 1,889
Cash and cash equivalents 26 40 21 33
Total 169 115 1,468 1,922
--------------------------------------------------- -------- -------- -------- --------
(b) Liabilities
Group Group Company Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- --------
31 December
Liabilities as per balance sheet
Borrowings 519 698 - -
Trade and other payables 1,979 1,751 1,254 309
Total 2,498 2,449 1,254 309
---------------------------------- -------- -------- -------- --------
Liabilities in the analysis above are all categorised as 'other
financial liabilities at amortised cost' for the Group and
Company.
(c) Credit quality of financial assets
The Group is exposed to credit risk from its operating
activities (primarily for trade receivables and other receivables)
and from its financing activities, including deposits with banks
and financial institutions, foreign exchange transactions and other
financial instruments.
The Group's maximum exposure to credit risk, due to the failure
of counter parties to perform their obligations as at 31 December
2016, in relation to each class of recognised financial assets, is
the carrying amount of those assets as indicated in the
accompanying balance sheets.
Trade receivables
The credit quality of trade receivables that are neither past
due date nor impaired have been assessed based on historical
information about the counterparty default rate. The Group does not
hold any other receivable balances with customers, whose past
default has resulted in the non-recovery of the receivables
balances.
Cash at bank
The credit quality of cash has been assessed by reference to
external credit ratings, based on reputable credit agencies'
long-term issuer ratings:
2018 2017
Rating GBP'000 GBP'000
--------- -------- --------
A - AAA 26 40
Total 26 40
--------- -------- --------
19. Inventories
Group Group
2018 2017
GBP'000 GBP'000
---------------------------------- -------- --------
Raw materials and finished goods 135 174
Inventory 135 174
---------------------------------- -------- --------
There are no inventories in the Company. The Directors consider
that the carrying amount of inventory approximates to their fair
value.
20. Trade and other receivables
Group Group Company Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- -------- -------- -------- --------
Trade receivables 85 18 - -
Less: provision for impairment of - - - -
trade receivables
----------------------------------------- -------- -------- -------- --------
Trade receivables - net 85 18 - -
Prepayments and accrued income 42 65 26 31
Amounts owed by subsidiary undertakings - - 1,404 1,854
Taxation 45 42 30 20
Other receivables 13 15 13 15
185 140 1,473 1,920
----------------------------------------- -------- -------- -------- --------
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
The carrying amounts of the Group's trade and other receivables
denominated in foreign currencies were as follows:
Group Group Company Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
---------- -------- -------- -------- --------
Sterling 185 99 1,473 1,472
Euro - 41 - 448
185 140 1,473 1,920
---------- -------- -------- -------- --------
21. Cash and cash equivalents
Group Group Company Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- -------- -------- -------- --------
Cash at bank and on hand 26 40 21 33
Cash and cash equivalents (excluding
bank overdrafts) 26 40 21 33
-------------------------------------- -------- -------- -------- --------
The Group's cash and cash equivalents are held in
non-interest-bearing accounts. The Directors consider that the
carrying amount of cash and cash equivalents approximates to their
fair value.
i. Reconciliation to cash flow statement
Group Group Company Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Balances as above 26 40 21 33
Bank overdrafts (see - (85) - -
note 22 below)
Balances per statement
of cash flows 26 (45) 21 33
-------- -------- -------- --------
22. Trade and other payables
Group Group Company Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- -------- -------- -------- --------
Bank overdraft - 85 - -
Trade payables 365 249 250 116
Amounts due to group companies (note
29) - - 557 20
Amounts due to connected parties
(note 29) 550 610 76 -
Social security and other taxes 63 42 1 6
Accrued expenses and deferred income 438 262 370 167
Assets/liabilities held for sale 563 - - -
(note 37)
Other creditors - 503 - -
1,979 1,751 1,254 309
-------------------------------------- -------- -------- -------- --------
23. Deferred income tax
Deferred tax liabilities
Deferred tax balances were as follows: Group Group
2018 2017
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Deferred tax liability to be recovered after more
than one year 80 212
Deferred tax liability to be recovered within one
year 10 26
90 238
--------------------------------------------------- -------- --------
Deferred tax liabilities were made up as follows:
Accelerated tax depreciation 90 238
90 238
--------------------------------------------------- -------- --------
The movement on the deferred tax income tax account Group Group
is as follows:
2018 2017
GBP'000 GBP'000
----------------------------------------------------- -------- --------
At 1 January 238 103
On acquisition of subsidiary - 950
Income statement movement - continuing operations
(note 12) (10) (84)
Income statement movement - discontinued operation
(note 35) (138) (731)
90 238
----------------------------------------------------- -------- --------
There were no deferred tax liabilities in the Company
Deferred tax assets
Deferred income tax assets are recognised to the extent that the
realisation of the related tax benefit through future taxable
profits is probable. The Group did not recognise deferred income
tax assets of approximately GBP885,000 (2017: GBP782,000) mainly in
respect of tax losses amounting to approximately GBP4,944,000
(2017: GBP3,865,000) that can be carried forward against future
taxable income. An average tax rate of 18% (2017: 20%) has been
used.
There was no deferred tax asset recognised for the Company.
24. Borrowings
Group Group
2018 2017
GBP'000 GBP'000
----------------- -------- --------
Non-current
Bank borrowings 334 509
334 509
----------------- -------- --------
Current
Bank borrowings 185 175
Finance leases - 14
185 189
----------------- -------- --------
The Company has no borrowings.
The maturity profile of bank borrowings was as follows:
Group Group
2018 2017
GBP'000 GBP'000
----------------------- -------- --------
Amounts falling due
Within 1 year 185 175
Between 1 and 2 years 193 182
Between 2 and 5 years 141 327
Total bank borrowings 519 684
----------------------- -------- --------
Bank borrowings
Bank borrowings mature in 2021 and bear a fixed coupon of 4.33%
annually over the bank's cost of funds.
Bank borrowings are secured with a floating charge against the
assets of Innovenn UK Limited. Venn Life Sciences Holdings plc has
also provided guarantees against those bank borrowings.
The Company has been compliant with its banking covenants
throughout the year.
The bank borrowings are repayable by monthly instalments. The
Company is not exposed to interest rate changes or contractual
re-pricing dates at the end of the reporting period, as the
borrowings are fixed in nature.
The fair value of both current and non-current borrowings equals
their carrying amount, as the impact of discounting is not
significant.
The Group's bank borrowings are denominated in Euro.
Finance leases
Lease liabilities are effectively secured as the rights to the
leased asset revert to the lessor in the event of default.
2018 2017
GBP'000 GBP'000
Gross finance lease liabilities - minimum payments
No later than 1 year - 17
Later than 1 and no later than 5 years - -
----------------------------------------------------- --------- --------
- 17
Future finance charges on finance leases - (3)
----------------------------------------------------- ---------- --------
Present value of finance lease liabilities - 14
----------------------------------------------------- ---------- --------
Present value of finance lease liabilities is
as follows:
No later than 1 year - 14
Later than 1 and no later than 5 years - -
----------------------------------------------------- --------- --------
- 14
---------- --------------------------------------------------- --------
25. Share capital
Group Group Company Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------- -------- ---------------- --------
454,826,872 (2017: 190,351,899) Ordinary
shares of 0.01p
(2017: 1p) 46 1,904 46 1,904
223,685,232 (2017: Nil) Deferred shares
of 0.99p 2,214 - 2,214 -
------------------------------------------ -------- -------- ---------------- --------
Total 2,260 1,904 2,260 1,904
------------------------------------------ -------- -------- ---------------- --------
During the year, the following ordinary shares were issued:
- On 5 January 2018, the Company issued 21,666,668 ordinary
shares of 1p each at a placing price of 1.5p per ordinary share
raising a total of GBP325,000.
- On 11 January 2018, the Company issued 3,333,333 ordinary
shares of 1p each at a placing price of 1.5p per ordinary share
raising a total of GBP50,000.
- On 17 January 2018, the Company issued 8,333,332 ordinary
shares of 1p each at a placing price of 1.5p per ordinary share
raising a total of GBP125,000.
As at 2 August 2018, the Company had an issued share capital of
223,685,232 ordinary shares of 1p each.
On 2 August 2018, each ordinary existing share of 1p was
sub-divided into one deferred share of 0.99p and one ordinary share
of 0.01p. As a result, the Company had an issued share capital of
223,685,232 ordinary shares of 0.01p each and 223,685,232 deferred
shares of 0.99p
Furthermore,
- On 3 August 2018, the Company issued 39,923,095 ordinary
shares of 0.01p each at a placing price of 0.65p per ordinary share
raising a total of GBP141,000.
- On 31 October 2018, the Company issued 21,692,307 ordinary
shares of 0.01p each at a placing price of 0.65p per ordinary share
raising a total of GBP259,500.
- On 31 October 2018, the Company issued 82,844,388 ordinary
shares of 0.01p each to acquire 9.35% of the shares in Cellulac plc
for a consideration of GBP708,320 implying a price of 0.85p per
ordinary share (note 17)
- On 12 December 2018, the Company issued 56,000,050 ordinary
shares of 0.01p each at a placing price of 0.44p per ordinary share
raising a total of GBP246,400.
- On 18 December 2018, the Company issued 30,681,800 ordinary
shares of 0.01p each at a placing price of 0.44p per ordinary share
raising a total of GBP135,000.
As at 31 December 2018, the Company had an issued share capital
of 454,826,872 ordinary shares of 0.01p each and 223,685,232
deferred shares of 0.99p each
Share Warrants
As at 1 January 2018, the Company had granted warrants over:
- 22,500,000 ordinary shares of 1p to subscribers in the Placing
which are exercisable at 7.5p per ordinary share of 1p at any time
until 5 April 2019.
- 1,800,000 ordinary shares of 1p each to Turner Pope
Investments (TPI) Ltd which are exercisable at 6.25p per ordinary
share of 1p at any time until 5 April 2022.
- 1,650,602 ordinary shares of 1p each to SPARK Advisory
Partners Limited which are exercisable at 5p per ordinary share of
1p at any time until 5 April 2022.
On 5 January 2018, the Company granted further warrants
over:
- 33,333,333 ordinary shares of 1p to subscribers in the Placing
which are exercisable at 1.5p per ordinary share of 1p at any time
until 5 January 2023.
- 1,000,000 ordinary shares of 1p each to Hybridan LLP which are
exercisable at 1.5p per ordinary share of 1p at any time until 5
January 2023.
- 300,000 ordinary shares of 1p each to Turner Pope Investments
(TPI) Ltd which are exercisable at 1.5p per ordinary share of 1p at
any time until 5 January 2023.
Following the subdivision of ordinary shares on 2 August 2018,
the following warrants were outstanding:
Warrant holder Date granted Number of Ordinary Exercise price Expiry date
shares of 0.01p
each
Placing subscribers 5 April 2017 22,500,000 7.5p 5 April 2019
Turner Pope
Investments
(TPI) Ltd 5 April 2017 1,800,000 6.25p 5 April 2022
SPARK Advisory
Partners Limited 5 April 2017 1,650,602 5.0p 5 April 2022
Placing subscribers 5 January 2018 33,333,333 1.5p 5 January 2023
Hybridan LLP 5 January 2018 1,000,000 1.5p 5 January 2023
Turner Pope
Investments
(TPI) Ltd 5 January 2018 300,000 1.5p 5 January 2023
On 30 October 2018, the Company granted further warrants
over:
- 1,846,154 ordinary shares of 0.01p each to Hybridan LLP which
are exercisable at 0.65p per ordinary share of 0.01p at any time
until 30 October 2023.
- 5,846,154 ordinary shares of 0.01p each to SPARK Advisory
Partners Limited which are exercisable at 0.65p per ordinary share
of 0.01p at any time until 30 October 2023.
26. Retained earnings
Group Company
GBP'000 GBP'000
------------------------------------ --------- ---------------------
At 1 January 2017 (1,913) -
Loss for the year (8,640) (9,899)
------------------------------------ --------- ---------------------
At 31 December 2017 (10,553) (9,899)
------------------------------------ --------- ---------------------
At 1 January 2018 (10,553) -
Loss for the year (2,702) (3,913)
Transfer from Share Option reserve 34 34
------------------------------------ --------- ---------------------
At 31 December 2018 (13,221) (13,778)
------------------------------------ --------- ---------------------
27. Other reserves
Group
Share
Foreign Reverse Capital based
Share currency acquisition Redemption equity
premium reserve reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2017 - (21) (2,843) - -
----------------------------------- --------- ---------- ------------- ------------ ---------
Issue of ordinary shares (note 2,187 - - - -
25)
Costs of Share issue (112) - - - -
Currency translation differences - (218) - - -
Cancelled Deferred Shares (note - - - 9,519 -
25)
Share option-based charge (note
33) - - - - 24
At 31 December 2017 2,075 (239) (2,843) 9,519 24
----------------------------------- --------- ---------- ------------- ------------ ---------
At 1 January 2018 2075 (239) (2,843) 9,519 24
Issue of ordinary shares (note 1,634 - - - -
25)
Costs of Share issue (47) - - - -
Currency translation differences - (12) - - -
Transfer to retained earnings
(note 33) - - - - (34)
Share option-based charge (note
33) - - - - 100
At 31 December 2018 3,662 (251) (2,843) 9,519 90
----------------------------------- --------- ---------- ------------- ------------ ---------
The reverse acquisition reserve arose as result of the reverse
acquisition of Innovenn UK Limited and its subsidiary by Integumen
Plc.
Currency translation differences arose from the translation of
the net investment in foreign subsidiaries.
Company
Share
Capital based
Redemption equity
Share premium reserve reserve
GBP'000 GBP'000 GBP'000
At 1 January 2017 - - -
Issue of ordinary shares 2,187 - -
(note 25)
Costs of Share issue (112) - -
Cancelled Deferred Shares - 9,519 -
(note 25)
Share option-based charge
(note 33) - - 24
At 31 December 2017 2,075 9,519 24
--------------------------------- -------------- ------------ ---------
At 1 January 2018 2,075 9,519 24
--------------------------------- -------------- ------------ ---------
Issue of ordinary shares 1,634 -
(note 25) -
Costs of Share issue (47) - -
Transfer to retained earnings
(note 33) - - (34)
Share option-based charge
(note 33) - - 100
--------------------------------- -------------- ------------ ---------
At 31 December 2018 3,662 9,519 90
--------------------------------- -------------- ------------ ---------
28. Cash used in operations
Group Group Company Company
2018 2017 2018 2017
(restated)
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- -------- ------------ -------- --------
Loss for the year from continuing
activities (2,065) (5,243) (3,913) (9,899)
Continuing operations
Adjustments for:
- Depreciation and amortisation 617 3,715 2,994 -
- Foreign currency translation
of net assets (71) 38 - -
- Impairment of investments - - - 9,204
- Exceptional Item on reverse acquisition - - - -
accounting
- Net finance costs 38 56 5 (5)
- Taxation (55) (210) - -
- Share option-based charge 100 24 100 24
Changes in working capital
- Inventories 39 (2) - -
- Trade and other receivables (86) (44) (740) (1,581)
- Trade and other payables 602 23 387 16
Net cash used in discontinued operations
(note 35) (76) (334) - -
-------------------------------------------- -------- ------------ -------- --------
Net cash used in operations (957) (1,977) (1,167) (2,241)
-------------------------------------------- -------- ------------ -------- --------
29. Related Party Disclosures
Amounts due to connected parties
Group Group Company Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -------- --------
Charles Service's estate - 13 - -
Coolford Limited 33 33 - -
Venn Life Sciences Holdings plc and subsidiaries 441 421 - -
MediNova AG - 38 - -
Cellulac Ltd 76 - 76 -
550 505 76 -
-------------------------------------------------- -------- -------- -------- --------
Charles Service was related to Declan Service. Declan Service
was a director of the Company during the year.
Tony Richardson is a director of Coolford Limited, a company
registered in the Republic of Ireland.
Tony Richardson is a director of Venn Life Sciences Holdings
plc. Venn Life Sciences Limited, a subsidiary of Venn Life Sciences
Holdings plc, is a shareholder in the Company.
During the year, Venn Life Sciences Holdings plc and its
subsidiaries charged management charges of GBP26,000 (2017:
GBP6,000) to the Company and its subsidiaries.
During the year, MediNova AG charged management charges of
GBP319,000 (2017: GBP237,000) to TSpro GmbH (discontinued
operations). MediNova AG is a shareholder in the Company.
The Company owns 9.35% of Cellulac plc (note 17)
The Company
Amounts due from group companies
Company Company
2018 2017
GBP'000 GBP'000
---------------- --------------------------------------------------------------------------------------------------------------------------------------------- --------
Innovenn UK
Limited 1,020 909
Lifesciencehub
UK Limited 169 156
TSpro GmbH - 448
Integumen 169 -
Ireland Limited
STOER Ireland 46 -
Limited
Integumen Inc. - 341
---------------- --------------------------------------------------------------------------------------------------------------------------------------------- --------
1,404 1,854
---------------- --------------------------------------------------------------------------------------------------------------------------------------------- --------
Amounts due to group companies
Company Company
2018 2017
GBP'000 GBP'000
--------------------------- ------------------------------------- --------
Integumen Ireland Limited - 20
Integumen Inc. 557 -
557 20
--------------------------- ------------------------------------- --------
During the year, the Company charged management charges of
GBP130,000 (2017: GBP212,000) to Innovenn UK Limited and GBPNil
(2017: GBP50,000) to Lifesciencehub UK Limited.
During the year, the Company was recharged costs by Innovenn
Limited of GBP103,000 (2017: GBP397,000).
30. Capital commitments
The Group had no capital commitments at 31 December 2018.
31. Financial commitments
Operating Leases
The future aggregate minimum lease payments under
non-cancellable operating leases are as follows:
Group Minimum Operating
Lease Payments
2018 2017
GBP'000 GBP'000
----------------------- --- --------- ---------------------
Within one year 25 50
Between 1 and 2 years - 25
25 75
--------------------------- --------- ---------------------
33. Share options
On 5 November 2018, the Company awarded options to key employees
over 18,888,887 ordinary shares with a nominal value of 0.01p each
at an exercise price of 0.01p per share. The options are
exercisable for up to three years provided that the holder of the
options is still an employee of the Company. These options were all
outstanding at 31 December 2018:
The estimated fair value of these options issued during the year
was calculated by applying the Black-Scholes option pricing model.
The assumptions used in the calculation were as follows:
Date options granted
Options in issue 31 December 2018 18,888,887
Exercise price 0.01p
Expected volatility 44.4%
Expected dividend 0%
Expected life of options 3 years
Risk free rate 0.5%
Estimate fair value of each option 0.0041p
In 2017, the Company had awarded options to key management over
6,720,000 ordinary shares of 1p each. These options were
exercisable after two years provided that the holder of the options
is still an employee of the Company. Of these, 3,360,000 have an
exercise price of 5p and 3,360,000 have an exercise price of 6p
each.
During the year, options over 5,118,000 ordinary shares of 1p
each lapsed when option holders left the employment of the Company.
An amount of GBP34,000 was transferred from the share option-based
reserve to retained earnings with respect to these lapsed
options.
Following the subdivision of ordinary shares on 2 August 2018,
when each ordinary existing share of 1p was sub-divided into one
deferred share of 0.99p and one ordinary share of 0.01p, the
outstanding options granted were as follows at 31 December
2018:
No. of ordinary
shares under Exercise
Director Date granted option price Exercise period
Ross Andrews 5 April 2017 638,400 5.0p-6.0p From 5 April 2017 to 5
April 2027
The share option-based charge with respect to all share options
for the year was GBP100,000 (2017: GBP24,000)
34. Business combinations
There were no business combinations during the year.
Prior-year Business combinations
On 24 March 2017, 3,354,325 fully paid ordinary shares of GBP1
each were issued by the Company as consideration for the
acquisition of 100% of the share capital of TSpro GmbH.
On 22 November 2017, 20,818,182 fully paid ordinary shares of 1p
each were issued by the Company as consideration for the
acquisition of 100% of the share capital of STOER Ireland
Limited.
The Company's strategy is to acquire unique, complementary and
undervalued brands at an early stage of commercialisation. The
acquisition of TSpro GmbH enables the Company to enter the oral
hygiene market while the acquisition of STOER Ireland Limited
enables the Company to enter the large and growing male grooming
market. Management believes that the acquisitions should provide
significant economies of scale as the Company builds its
infrastructure.
The following table summarises the consideration paid, and the
amounts of the assets acquired, and liabilities assumed at the
acquisition date of TSpro GmbH and STOER Ireland Limited:
TSPro STOER
GmbH Ireland Ltd
GBP'000 GBP'000
----------------------------------------------------------------------------- --------- -------------
Fair value consideration
Deemed consideration of acquisition of share capital 3,185 510
Deemed consideration of acquisition of loans 169 -
Total fair value consideration 3,354 510
----------------------------------------------------------------------------- --------- -------------
Recognised amounts of identifiable assets acquired, and liabilities assumed
Intellectual Property (note 15) 4,601 432
Plant, Property and Equipment 219 -
Trade and other receivables 11 -
Inventory 5 160
Trade and other payables (122) -
Bank overdraft (63) -
Amounts due to Group Companies (255) -
Other creditors (174) -
Deferred tax liabilities (note 23) (868) (82)
Total fair value of identifiable net assets 3,354 510
----------------------------------------------------------------------------- --------- -------------
Excess of net assets over consideration - -
----------------------------------------------------------------------------- --------- -------------
The book value of the assets acquired is the same as their fair
value other than Intellectual Property, the value of which was
ascribed on acquisition.
The fair value of acquired trade receivables is GBP11,000. The
gross contractual amount for trade receivables due is GBP11,000,
all of which is expected to be collectible.
TSpro GmbH contributed revenues of GBP145,000 and net losses of
GBP252,000 to the Group for the period from 24 March to 31 December
2017. If the acquisition had occurred on 1 January 2017,
consolidated pro-forma revenue and losses for the year ended 31
December 2017 would have been GBP278,000 and GBP10,323,000
respectively.
STOER Ireland Ltd contributed revenues of GBP2,000 and net
losses of GBP29,000 to the Group for the period from 22 November to
31 December 2017. As STOER Ireland Ltd was a newly formed entity,
if the acquisition had occurred on 1 January 2017, consolidated
pro-forma revenue and losses for the year ended 31 December 2017
would have been the same as reported in the Group's Consolidated
Statement of Comprehensive Income.
35. Discontinued operations
Disposal of TSpro GmbH
On 21 December 2018, the Company disposed of its 100% holding of
TSpro GmbH for a consideration of EUR1. Financial information
relating to the discontinued operation for the period to the date
of the disposal is set out below.
The Company acquired its 100% holding of TSpro on 24 March
2017.
The financial performance and cash flow information presented
for the current year are for the period 1 January 2018 to 21
December 2018 and the prior year for the period 24 March 2017 to 31
December 2017
Discontinued Operations 2018 2017
Statement of Comprehensive Income Notes GBP'000 GBP'000
------------------------------------------------- ------ -------- --------
Revenue 227 145
Costs of sales (39) (17)
------------------------------------------------- ------ -------- --------
Gross profit 188 128
Administrative Costs (947) (4,248)
Operating loss (759) (4,120)
------------------------------------------------- ------ -------- --------
Depreciation 16 52 38
Amortisation 15 87 349
Impairment of intangible assets 15 500 3,502
Exceptional items (91) 50
EBITDA before exceptional items (211) (181)
------------------------------------------------- ------ -------- --------
Finance costs (16) (8)
Loss before income tax (775) (4,128)
Income tax credit 23 138 731
------------------------------------------------- ------ -------- --------
Loss for the year from discontinuing operations (637) (3,397)
------------------------------------------------- ------ -------- --------
Discontinued operations exceptional items
Included within administrative expenses are exceptional 2018 2017
items as shown below:
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
- Transaction costs on the disposal and acquisition
of subsidiary 65 50
- Gain on disposal of subsidiary (156) -
Total exceptional (gain)/loss (91) 50
---------------------------------------------------------- -------- --------
Details of the gain on disposal of the subsidiary are as
follows:
GBP'000
-------------------------------------------------------------------- --------
Total fair value consideration -
-------------------------------------------------------------------- --------
Recognised amounts of identifiable assets and liabilities disposed
Intellectual Property (note 15) 163
Plant, Property and Equipment (note 16) 138
Trade and other receivables 75
Inventory 3
Trade and other payables (328)
Bank overdraft (41)
Other creditors (166)
Total fair value of identifiable net liabilities (156)
-------------------------------------------------------------------- --------
Excess of net liabilities over consideration (gain on disposal) (156)
-------------------------------------------------------------------- --------
Discontinued Operations 2018 2017
Statement of Cash Flows GBP'000 GBP'000
------------------------------------------------- -------- --------
Loss for the year from discontinuing operations (637) (3,397)
Adjustments for:
- Depreciation and amortisation 639 3,889
- Net finance costs 16 14
- Taxation (138) (731)
- Gain on disposal of subsidiary (156) -
Changes in working capital
- Inventories (2) 4
- Trade and other receivables (33) (29)
- Trade and other payables 251 (70)
-------------------------------------------------- -------- --------
Cash Flow from operating activities (60) (320)
Interest paid (16) (14)
-------------------------------------------------- -------- --------
Net cash used in operating activities (76) (334)
-------------------------------------------------- -------- --------
Cash flow from financing activities
Loan from parent company 120 312
-------------------------------------------------- -------- --------
Net cash generated by financing activities 120 312
-------------------------------------------------- -------- --------
Net increase/ (decrease) in cash and cash
equivalents 44 (22)
Cash and cash equivalents at the beginning
of period (85) (63)
Cash and cash equivalents at the end of
the period (41) (85)
-------------------------------------------------- -------- --------
36. Ultimate controlling party
There is no one controlling party.
37. Post balance sheet events
The following events have taken place since the year end:
Ordinary shares issued
- On 8 March 2019, Hybridan LLP exercised warrants over
1,846,154 ordinary shares of 0.01p each at an exercise price of
0.65p per ordinary share of 0.01p raising a total of GBP12,000 for
the Company.
- On 22 March 2019, share option holders exercised options over
17,777,776 ordinary shares of 0.01p each at an exercise price of
0.01p per ordinary share of 0.01p raising a total of GBP1,778. (see
note 33)
- On 26 March 2019, placing subscribers exercised warrants over
2,000,000 ordinary shares of 0.01p each at an exercise price of
0.65p per ordinary share of 0.01p raising a total of GBP30,000.
- On 2 May 2019, the Company issued the 476,722,882 ordinary
shares of 0.01p each at the following placing prices per ordinary
share:
Description No. of Price Purpose
shares
------------------- ------------ ------ -----------------------------------------------
Placing and
Subscription
shares 179,918,788 1.4p Raised GBP2,519,000 in cash
Consideration 214,285,714 1.4p Consideration for the acquisition of Rinocloud
shares Ltd for GBP3,000,000
Settlement of GBP331,000 of liabilities
Settlement shares 23,637,429 1.4p as part of Visible Youth disposal
Loan Note Conv. Issued as repayment of a Loan Note due
shares 26,666,666 1.5p to Cellulac Ltd of GBP400,000
Issued as a loan repayment to Venn Life
Venn Debt shares 30,071,428 1.4p Sciences Holdings Plc of GBP421,000
Fee shares 2,142,857 1.4p Issued to settle certain professional
fees associated with the above of GBP30,000
------------------- ------------ ------ -----------------------------------------------
Total issued 476,722,882
------------
- On 31 May 2019, placing subscribers exercised warrants over
1,000,000 ordinary shares of 0.01p each at an exercise price of
1.5p per ordinary share of 0.01p raising a total of GBP15,000.
- On 14 June 2019, share option holders exercised options over
1,111,111 ordinary shares of 0.01p each at an exercise price of
0.01p per ordinary share of 0.01p raising a total of GBP177. (see
note 33)
- On 14 June 2019, placing subscribers exercised warrants over
5,000,000 ordinary shares of 0.01p each at an exercise price of
1.5p per ordinary share of 0.01p raising a total of GBP75,000.
- On 25 June 2019, placing subscribers exercised warrants over
2,500,000 ordinary shares of 0.01p each at an exercise price of
1.5p per ordinary share of 0.01p raising a total of GBP37,500.
- On 26 June 2019, placing subscribers exercised warrants over
6,766,667 ordinary shares of 0.01p each at an exercise price of
1.5p per ordinary share of 0.01p raising a total of GBP101,500.
As at date of signing of these financial statements, the Company
had an issued share capital of 969,551,462 ordinary shares of 0.01p
each and 223,685,232 deferred shares of 0.99p each.
Share warrants issued
- On 2 May 2019, the Company granted warrants over:
- 98,214,285 ordinary shares of 0.01p each to placing
subscribers which are exercisable at 2p per ordinary share of 0.01p
at any time until 2 May 2021.
- 8,142,857 ordinary shares of 0.01p each to Turner Pope
Investments (TPI) Ltd which are exercisable at 1.4p per ordinary
share of 0.01p at any time until 2 May 2022.
Business combinations
On 2 May 2019, the Company acquired 100% of Rinocloud Ltd in an
all share transaction for GBP3,000,000, The purchase consideration
was paid by the Company by issuing 214,285,714 ordinary shares of
0.01p each at a price of 1.4p per share. Rinocloud Ltd is a company
registered in Ireland providing specialised data management
services to a global scientific and lab testing sector. Following
the acquisition, Fionan Murray, became a director of the
Company,
Discontinued operations
On 2 May 2019, the Company disposed of its subsidiary Visible
Youth Ltd. to Enhance Skin Products Inc. for zero consideration.
The sale includes the two subsidiaries of Visible Youth Ltd,
Visible Youth Ireland Ltd and Integumen Inc. The Visible Youth
companies own the rights to a range of female cosmetic products. As
part of the sale, the Company agree to settle certain Visible Youth
liabilities of GBP557,000 by:
- arranging cash payments of GBP226,000 and
- issuing 23,637,429 ordinary shares of 0.01p each at an issue
price of 1.4p totalling GBP331,000.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FMGZVFVRGLZM
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June 27, 2019 02:00 ET (06:00 GMT)
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