TIDMVLG
RNS Number : 3725K
Venture Life Group PLC
21 September 2016
VENTURE LIFE GROUP PLC
("Venture Life" or the "Group")
Unaudited interim results for the six months ended 30 June
2016
Venture Life (AIM: VLG), the international consumer self-care
group focused on developing, manufacturing and commercialising
products for the ageing population, presents its unaudited interim
results for the six months ended 30 June 2016.
Financial highlights:
-- Revenue increased 40% to GBP6.1 million (H1 2015: GBP4.4 million)
-- Gross profit increased 47% to GBP2.3 million (H1 2015: GBP1.5
million), giving a gross margin of 37%
(H1 2015: 35%)
-- Adjusted EBITDA profit of GBP0.1 million (H1 2015: loss of GBP0.4 million)
-- Loss before tax, amortisation and exceptional items of GBP0.3
million (H1 2015: loss of GBP0.4 million)
-- Cash at period end of GBP1.6 million (31 December 2015: GBP2.9 million)
Commercial highlights:
-- Acquisition of the UltraDEX oral care products brand with
Periproducts Limited in March 2016 for GBP5.7 million, funded in
part by a GBP1.7 million placing and the issue of a convertible
bond raising GBP1.9 million
-- Nine new long term exclusive distribution agreements signed, including:
- UltraDEX in Spain, Malaysia and China
- Benecol once-a-day liquid sachet in Turkey and Jordan
Post-period end highlights:
-- Three exclusive distribution agreements signed for Procto-eze
(Greece and Taiwan) and Vonalei (Greece)
-- Full Lubatti skin-care range now stocked and on sale through
Gialen Group Co. Ltd, the Group's partner in China
-- A number of major UK retailers to increase store distribution
and product listings for UltraDEX in Q4 2016
Commenting on the results, Jerry Randall, Chief Executive
Officer of Venture Life, said: "The Group made good progress in the
first half of 2016. The strong revenue growth compared with the
same period in 2015, and moving into positive EBITDA for the first
time, are testament not only to the hard work and determination of
every single employee of Venture Life, but also to the strategy
pursued by the Board to utilise our significant operational
leverage to drive revenue and profitability. The acquisition of
UltraDEX has brought a step change to our Brands business and we
are already realising the anticipated synergies, thereby validating
our original assessment that the acquisition could bring
significant upside to the Group. This is now the second successful
acquisition we have undertaken in two years, and I expect us to
continue to explore M&A opportunities to complement our core
organic growth, and drive sustainable profitability for the Group
over the long term."
Venture Life Group PLC +44 (0) 1344 742870
Jerry Randall, Chief Executive Officer
James Hunter, Chief Financial Officer
Panmure Gordon (UK) Limited (Nominated Adviser
and Broker) +44 (0) 20 7886 2500
Freddy Crossley/Peter Steel/Duncan Monteith
(Corporate Finance)
Tom Salvesen (Corporate Broking)
Turner Pope Investments (TPI) Ltd (Joint
Broker) +44 (0) 20 3621 4120
James Pope/Ben Turner
Walbrook PR venturelife@walbrookpr.com or +44 (0)
20 7933 8780
Paul McManus / Anna Dunphy +44 (0) 7980 541 994 / +44 (0) 7876 741
001
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 (MAR)
Non-Executive Chair's and Chief Executive Officer's
Statement
Overview
The first half of 2016 has seen Venture Life make significant
progress against its strategic objectives. The acquisition of
Periproducts Limited on 4 March 2016 was a major milestone in the
development of the Group, bringing the well-established UltraDEX
oral care products brand into our portfolio. The revenue from this
acquisition combined with good organic growth across the rest of
the business has seen total revenue for the first half of 2016
climb 40% to GBP6.1 million (H1 2015: GBP4.4 million). The Group
has also achieved an adjusted EBITDA profit for the first time in
its history.
In addition, we have concluded our first international
partnering deals on the Benecol once-a-day liquid sachet and the
UltraDEX brand, both key assets in our portfolio. Our full range of
14 Lubatti skin-care products has, since the end of July, been
stocked in almost all of Gialen's 1,300 stores, and we now expect
to see an acceleration of the development of this brand in the
Chinese market.
In the Group's Manufacturing business, revenues continued to
grow steadily both through organic growth and manufacturing new
products for existing and new customers. We have also signed a new
agreement to develop and manufacture a number of products for the
Italian pharmaceutical company, Menarini Farmaceutica
Internazionale Srl ("Menarini").
We operate under two divisions: (1) Brands - where we own, or
have developed under licence, branded products that are
manufactured at our facility in Italy (Biokosmes), or externally
for us, and (2) Development & Manufacturing - which offers new
product development services and outsourced manufacturing services
to third parties, as well as supporting in-house product
development opportunities for eventual commercialisation through
the Brands division.
Commercial review - Brands
Revenue for the Brands business grew to GBP1.2 million in the
first half of 2016 (H1 2015: GBP0.1 million), and now represents
approximately 20% of the Group's total revenue. A significant part
of this growth has come from the revenue acquired with the
Periproducts business, contributing revenue of GBP0.9 million in
the four months since acquisition. However, there was also strong
organic growth of the Brands segment of over 100% to GBP0.3 million
(H1 2015: GBP0.14 million). The Directors believe that this
business division has the greater growth potential within the Group
and we expect to see Brands account for approaching 50% of Group
revenues by 2019.
Periproducts revenue derives from sales of the UltraDEX fresh
breath brand range, which includes daily oral rinses, toothpastes,
an oral spray, and accessories including inter-dental brushes. The
revenue is almost entirely generated in the UK, through major
retailers including Boots, Tesco, Sainsbury's, Waitrose, Superdrug,
Amazon and Ocado. Following a period of slow decline in sales in
the years prior to the acquisition, we believe there is significant
opportunity to revitalise the UltraDEX brand in the UK, as well as
expand into international markets. Already we have signed three
long term international distribution agreements for this brand, in
Spain, Malaysia and China. Revenue expected in 2016 from the
agreement in Spain alone will be substantially ahead of the
GBP60,000 of total international sales of UltraDEX made in the
whole of 2015, the year prior to acquisition. The product already
had an existing registration for Spain and as it has recently
received registration in Malaysia we are expecting UltraDEX revenue
from Malaysia as well as Spain in 2016. However, because the
registration process in China is lengthier, registration is not
likely until late 2017 at the earliest. We continue to see good
international interest in the UltraDEX range and expect to sign
further long term distribution agreements in key territories around
the world.
During the 2016 year to date the Group has been allowed patents
in the USA, New Zealand, South Africa and Mexico for its
multicomponent oral care composition used in the UltraDEX
Recalcifying and Whitening Daily Oral Rinse, a product for fresh
breath for consumers with sensitive teeth. These add to the
pre-existing patents in the UK and USA.
The integration of the Periproducts business into the Group is
progressing well, and validation of the processes for manufacturing
UltraDEX product in our facility in Italy is well-advanced. The
first order for the new Spanish partner will be largely produced at
our facility.
The second set of seven Lubatti skin-care products was shipped
into China in Q1 2016 and the full range has been listed in almost
all of the Gialen stores in China since the end of July. We look
forward to monitoring sell-through progress in H2 2016 now that the
full range is in store and promotion of the product range has
started. The arrival of the full range in store has been
accompanied by extensive training from our marketing team, and the
range is also currently being supported by an incentive programme
for Gialen sales staff.
The new Benecol once-a-day liquid sachet has now been partnered
in two territories with long term distribution agreements, the most
significant of which is for Turkey. The process for registering the
sachet is underway in these territories, and will be launched into
the respective markets once complete. We continue to receive good
interest in this product and expect to complete more long term
distribution agreements in due course.
In addition to UltraDEX, Benecol and Lubatti, we continue to
focus on the international exploitation of key brands within the
portfolio, including NeuroAge, through exclusive distribution
agreements. Furthermore, our retail presence in the UK now with
UltraDEX gives us the opportunity to look at commercialising more
of our brands in the UK market.
In the six months to June 2016 we concluded a total of nine
international distribution agreements covering six products, and we
concluded a further three agreements post period end.
Commercial review - Development & Manufacturing
Good progress continues to be made at Biokosmes, with revenues
for this part of our business (excluding the manufacture of the
Group's own brands reported above) increasing by 15% in the first
half of 2016 to GBP4.9 million (H1 2015: GBP4.2 million). This has
been achieved through a combination of organic growth of existing
products, and the development and manufacture of new products for
new and existing customers. There continues to be considerable
capacity at our facility and we remain focused on driving
additional revenues through this fixed cost base which will
accelerate the contribution of incremental profit and enhance our
operating profit margins.
This strong growth looks set to be maintained through the second
half of 2016 with the order book for Biokosmes at 30 June 2016
significantly ahead of the same point last year, giving us strong
visibility for the remainder of the year. We have continued to
attract more new customer projects, and during the period we signed
an agreement to develop and then manufacture on a long term basis a
number of products for the Italian pharmaceutical company,
Menarini. This is a significant new partnership for us.
In addition, and following a successful inspection by the
Brazilian regulatory authority, Anvisa, we began the manufacturing
of our first product to be shipped into Brazil for one of our major
customers. This provides good validation of our strategy to partner
and grow with our customers in new territories and we remain
optimistic as to our ability to continue to generate similar
opportunities in the future.
We have continued to invest in the facility to support the
Group's overall revenue growth, including specific additions to our
existing filling and warehousing capabilities for the manufacture
of the UltraDEX line. We are now ready to manufacture the first
UltraDEX products, less than six months after acquiring the brand,
and the first order for our new Spanish partner this autumn will be
largely manufactured at Biokosmes. Over time, we expect to deliver
improved profitability for the product as we reduce the cost of
manufacture and achieve greater scale.
Progress continues on the development of further products
through our development team at Biokosmes:
-- two new products for hot flushes in the Vonalei women's
health range have been developed and submitted for CE mark
approval;
-- development of a new anti-fungal product and a new product
for inflammatory skin conditions will both complete in 2016 with
the products expected to be available for partnering in Q1
2017.
For many years, including prior to its acquisition by Venture
Life in 2014, Biokosmes has been developing a novel topical product
for the relief of photo-sensitivity of the skin, a condition which
regularly affects patients using certain drug treatments. Drugs
that can cause photo-sensitivity include anti-infectives,
anti-inflammatories, anti-tumorals, psychotropic, and cardiology
drugs, and it is estimated that photosensitivity accounts for some
3% of all drug eruptions treated by dermatologists. This condition
is currently poorly treated and we believe our product represents
the first product specifically designed for such patients. A patent
has recently been granted in Italy over this product, and we expect
to register this patent in other major territories and begin
commercialisation in 2017.
Financial review
During the period under review, the Group completed the
acquisition of Periproducts Limited for total consideration of
GBP5.7 million. The acquisition was funded through the issue of new
equity for cash raising GBP1.5 million (net of expenses), the issue
of a convertible bond raising GBP1.7 million (net of expenses),
deferred consideration of GBP0.4 million, and using some of the
Group's existing cash resources. The details of this acquisition
are shown in Note 12 to the unaudited interim financial statements.
The revenue from Periproducts is reported within the Group's Brands
segment.
Statement of comprehensive income
Group revenue for the six month period was GBP6.1 million, an
increase of 40% on the GBP4.4 million reported for the same period
in 2015. H1 2016 revenue includes the consolidation of Periproducts
revenue from 4 March 2016, the date of acquisition. With the
acquisition of Periproducts and strong organic growth, the Brands
segment now accounts for nearly 20% of Group revenue, compared with
12% for the full year 2015 and we expect this proportion to
continue to increase.
The Group generated gross profit of GBP2.3 million (H1 2015:
GBP1.5 million), at a gross margin of 37%. This is an increase in
gross profit of 47% compared with H1 2015 and an improvement in
gross margin from the average 35% achieved in H1 2015 and 33%
achieved in the full year 2015. The increase is primarily due to
the sales of higher-margin UltraDEX product.
Administrative expenses increased during the period, albeit at a
lower rate than the revenue and gross profit increase, as we begin
to see the benefits of our operational gearing. Expenses totalled
GBP2.7 million (H1 2015: GBP2.4 million) and this increase of
GBP0.3 million is accounted for entirely by the additional
administrative costs incurred at Periproducts since its
acquisition. Whilst we expect some of the administrative costs at
Periproducts to begin to reduce in H2 2016 as we continue to
integrate the business, advertising and promotional costs will be
higher in H2 2016 as we invest in above the line advertising to
build the UltraDEX brand and support our key retail accounts in the
UK. Expenses represented 44% of income in H1 2016 compared to 50%
for the full year 2015 and 55% in H1 2015, and we expect this
metric to continue to improve.
For the first time the Group has generated a positive adjusted
EBITDA, with earnings before interest, tax, depreciation,
amortisation, share based payments and exceptional items of GBP0.1
million (H1 2015: loss of GBP0.4 million). On an enlarged Group pro
forma basis, adjusted EBITDA was GBP0.2 million on revenue of
GBP6.6 million, compared with a loss of GBP0.3 million on revenue
of GBP5.8 million in H1 2015.
Pro-forma* six Six months to Six months to
months to
30 June 2016 30 June 2016 30 June 2015
(Unaudited) (Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
Loss before tax (776) (854) (755)
Adjusted for:
Finance costs/(income) 317 321 (88)
Depreciation 84 84 75
Amortisation 418 409 338
Share based payments 14 14 33
Exceptional items 142 142 -
EBITDA 199 116 (397)
* Pro forma - stated as if Periproducts had been acquired on
1 January 2016, the beginning of the reporting period
The Group recorded a loss before tax, amortisation and
exceptional items for the period of GBP0.3 million, compared with a
loss of GBP0.4 million recorded in H1 2015.
Finance costs increased to GBP0.3 million in H1 2016 from a net
finance income of GBP0.1 million in H1 2015. The increase was in
part due to increased interest charges arising from the issue of
the convertible bond in connection with the acquisition of
Periproducts, as well as the impact of a strengthening euro on the
Group's euro denominated debt.
Loss per share was 2.8p (H1 2015: loss of 2.7p).
Statement of financial position and cash flow
Cash and cash equivalents stood at GBP1.6 million as at 30 June
2016 (31 December 2015: GBP2.9 million). Total debt stood at GBP6.3
million (30 June 2015: GBP3.2 million, 31 December 2015: GBP3.3
million). The increase of GBP3.0 million in debt since 31 December
2015 is explained as follows:
- issue of convertible bonds in connection with the acquisition
of Periproducts - GBP1.7 million (valued on 'amortised cost'
basis)
- deferred consideration payable to the vendors of Periproducts - GBP0.4 million
- short-term working capital facilities - GBP0.5 million
- increase in sterling value of EUR2.5 million of interest
bearing loans of Biokosmes - GBP0.2 million
- increase in sterling value of EUR2m vendor loan note issued in
connection with the acquisition of Biokosmes - GBP0.2 million
Net cash outflows totalled GBP1.3 million (H1 2015: net cash
outflow of GBP1.6 million). The principal components of the net
cash outflows are as follows:
- cash used in operations - GBP0.58 million (six months to 30 June 2015: GBP1.1 million used)
- acquisition of Periproducts (net of cash acquired) - GBP4.3
million (six months to 30 June 2015: GBPnil)
- proceeds from issue of new shares (net of expenses) - GBP1.5
million (six months to 30 June 2015: GBPnil)
- proceeds from issue of convertible bond (net of expenses) -
GBP1.75 million (six months to 30 June 2015: GBPnil)
- draw down of short-term working capital facilities - GBP0.5
million (six months to 30 June 2015: repayment of GBP0.4
million)
- investment in tangible and intangible assets - GBP0.2 million
(six months to 30 June 2015: investment of GBP0.3 million)
Summary and outlook
The outlook for the Group continues to improve, and the recent
acquisition of Periproducts has helped us to record a positive
EBITDA for the first time. We believe our Brands business offers a
significant opportunity to deliver shareholder value through
further organic growth as more of our products reach
commercialisation and as we revitalise the UltraDEX brand. The
growing order book for our Development & Manufacturing services
is encouraging and we are well positioned for these additional
revenues to translate to improved profitability as they flow
through our fixed manufacturing cost base.
The strong revenue growth in the first half is set to continue
through the second half, and with a strong order book in hand, we
expect to see the momentum continuing to build in the business, and
we remain optimistic about the future prospects for the Group.
Lynn Drummond - Non-Executive Chair
Jerry Randall - Chief Executive Officer
Unaudited Interim Condensed Consolidated Statement of
Comprehensive Income
For the six months ended 30 June 2016
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2015
Note 2016 2015
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Revenue 4 6,121 4,372 9,077
Cost of sales (3,868) (2,841) (6,073)
------------ ----------------------- -------------
Gross profit 2,253 1,531 3,004
Operating expenses (2,263) (2,063) (3,853)
Amortisation of intangible assets 5 (409) (338) (658)
------------ ----------------------- -------------
Total administrative expenses (2,672) (2,401) (4,511)
Other income 28 27 59
Operating loss before exceptional
items (391) (843) (1,448)
------------ ----------------------- -------------
Exceptional items 6 (142) - (246)
Operating loss (533) (843) (1,694)
------------ ----------------------- -------------
Finance income 7 - 136 152
Finance costs 7 (321) (48) (95)
Loss before tax (854) (755) (1,637)
------------ ----------------------- -------------
Tax 8 (155) (170) (124)
Loss for the period attributable
to the equity shareholders of
the parent (1,009) (925) (1,761)
------------ ----------------------- -------------
Other comprehensive income/(expense)
which may be subsequently reclassified
to the income statement 9 293 (169) (119)
Total comprehensive loss for
the period attributable to equity
shareholders of the parent (716) (1,094) (1,880)
------------ ----------------------- -------------
Basic and diluted loss per share
(pence) attributable to equity
shareholders of the parent 10 (2.81) (2.69) (5.12)
Unaudited Interim Condensed Consolidated Statement of Financial
Position
As at 30 June 2016
Note 30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
ASSETS GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 13 16,500 12,689 12,527
Property, plant and equipment 1,229 979 1,120
17,729 13,668 13,647
------------ ------------ ------------
Current assets
Inventories 3,352 2,043 2,235
Trade and other receivables 4,448 3,357 3,173
Taxation - - 5
Cash and cash equivalents 1,583 3,253 2,857
------------ ------------ ------------
9,383 8,653 8,270
------------ ------------ ------------
TOTAL ASSETS 27,112 22,321 21,917
------------ ------------ ------------
EQUITY & LIABILITIES
Capital and reserves
Share capital 14 110 103 103
Share premium account 14 13,289 11,826 11,826
Merger reserve 7,656 7,656 7,656
Convertible bond reserve 15 109 - -
Foreign currency translation
reserve 89 (254) (204)
Share-based payment reserve 381 351 367
Retained earnings (6,969) (5,110) (5,946)
------------ ------------
Total equity attributable
to equity holders of the
parent 14,665 14,572 13,802
------------ ------------ ------------
Liabilities
Current liabilities
Trade and other payables 4,570 3,351 3,718
Taxation 275 122 -
Interest bearing borrowings 615 201 38
Convertible bond 15 171 - -
Vendor loan notes 50 42 43
------------ ------------ ------------
5,681 3,716 3,799
------------ ------------ ------------
Non-current liabilities
Interest bearing borrowings 2,399 1,555 1,806
Convertible bond 15 1,506 - -
Vendor loan notes 1,562 1,365 1,373
Statutory employment provision 677 490 586
Deferred tax liability 622 623 551
------------ ------------ ------------
6,766 4,033 4,316
------------ ------------ ------------
Total liabilities 12,447 7,749 8,115
------------ ------------ ------------
TOTAL EQUITY & LIABILITIES 27,112 22,321 21,917
------------ ------------ ------------
Unaudited Interim Condensed Consolidated Statement of Changes in
Equity attributable to the equity shareholders of the parent
As at 30 June 2016
Foreign
Share Convertible currency Share-based
Share premium Merger bond translation payment Retained Total
capital account reserve reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- ------- ------- ----------- ----------- ----------- -------- --------
Balance at 1
January 2015
(Audited) 103 11,826 7,656 - (85) 318 (4,171) 15,647
Loss for the
period - - - - - - (925) (925)
Other
comprehensive
expense - - - - (169) - - (169)
------- ------- ------- ----------- ----------- ----------- -------- --------
Total
comprehensive
expense - - - - (169) - (925) (1,094)
Share options
charge - - - - - 33 - 33
Dividends - - - - - - (14) (14)
Balance at 30
June 2015
(Unaudited) 103 11,826 7,656 - (254) 351 (5,110) 14,572
------- ------- ------- ----------- ----------- ----------- -------- --------
Loss for the
period - - - - - - (836) (836)
Other
comprehensive
income - - - - 50 - - 50
------- ------- ------- ----------- ----------- ----------- -------- --------
Total
comprehensive
income/(expense) - - - - 50 - (836) (786)
Transactions with
shareholders:
Share options
charge - - - - - 16 - 16
------- ------- ------- ----------- ----------- ----------- -------- --------
Balance at 31
December 2015
(Audited) 103 11,826 7,656 - (204) 367 (5,946) 13,802
------- ------- ------- ----------- ----------- ----------- -------- --------
Loss for the
period - - - - - - (1,009) (1,009)
Other
comprehensive
expense - - - - 293 - - 293
------- ------- ------- ----------- ----------- ----------- -------- --------
Total
comprehensive
expense - - - - 293 - (1,009) (716)
Transactions with
shareholders:
Issue of share
capital 7 1,463 - - - - - 1,470
Issue of
convertible bond - - - 109 - - - 109
Share options
charge - - - - - 14 - 14
Dividends - - - - - - (14) (14)
------- ------- ------- ----------- ----------- ----------- -------- --------
Balance at 30
June 2016
(Unaudited) 110 13,289 7,656 109 89 381 (6,969) 14,665
------- ------- ------- ----------- ----------- ----------- -------- --------
Six months Six months Year ended
ended ended 31 December
2015
30 June 30 June (Audited)
2016 2015
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
Cash flow from operating activities:
Loss before tax (854) (755) (1,637)
Finance income - (136) (152)
Finance cost 321 48 95
Operating loss (533) (843) (1,694)
Adjustments for:
- Depreciation of property, plant
and equipment 83 75 171
- Amortisation of intangible assets 409 338 658
- Finance costs (87) (48) (80)
- Share-based payment expense 14 33 49
------------- ------------- -------------
Operating cash flow before movements
in working capital (114) (445) (896)
Taxation received/(paid) 42 (23) (231)
Increase in inventories (518) (423) (492)
Increase in trade and other receivables (99) (409) (125)
Increase in trade and other payables 107 243 635
------------- ------------- -------------
Net cash used in operating activities (582) (1,057) (1,109)
------------- ------------- -------------
Cash flow from investing activities:
Finance income - 136 5
Acquisition of subsidiary - net cash
acquired 948 - -
Acquisition of subsidiary - net cash
payment (5,206) - -
Purchases of property, plant and
equipment (79) (114) (303)
Development expenditure in respect
of intangible assets (139) (171) (289)
Proceeds on disposal of tangible
assets 7 16 16
------------- -------------
Net cash used by investing activities (4,469) (133) (571)
------------- ------------- -------------
Cash flow from financing activities:
Proceeds from issue of ordinary shares 1,700 - -
Transaction costs of issue of shares (230) - -
Proceeds from issue of convertible
bond 1,900 - -
Transaction costs of issue of convertible
bond (150) - -
Movements in interest-bearing borrowings 505 (383) (313)
Dividends paid (14) (14) (14)
------------- -------------
Net cash from financing activities 3,711 (397) (327)
------------- ------------- -------------
Net decrease in cash and cash equivalents (1,340) (1,587) (2,007)
Net foreign exchange difference 66 (93) (69)
Cash and cash equivalents at beginning
of period 2,857 4,933 4,933
------------- ------------- -------------
Cash and cash equivalents at end
of period 1,583 3,253 2,857
------------- ------------- -------------
Unaudited Interim Condensed Consolidated Statement of Cash
Flows
For the six months ended 30 June 2016
Notes to the Unaudited Interim Condensed Consolidated Financial
Statements for the six months ended 30 June 2016
1. Corporate information
The Interim Condensed Consolidated Financial Statements of
Venture Life Group plc and its subsidiaries (collectively, the
Group) for the six months ended 30 June 2016 ("the Interim
Financial Statements") were approved and authorised for issue in
accordance with a resolution of the directors on 20 September
2016.
Venture Life Group plc ("the Company") is domiciled and
incorporated in the United Kingdom, and is a public company whose
shares are publicly traded. The Group's principal activities are
the development, manufacture and distribution of healthcare and
dermatology products.
2. Basis of preparation
The Interim Financial Statements have been prepared in
accordance with IAS 34, 'Interim financial reporting' as adopted by
the European Union. The Interim Financial Statements do not include
all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the
Group's Consolidated Financial Statements for the year ended 31
December 2015 ("the 2015 Consolidated Financial Statements") which
have been prepared in accordance with IFRS as adopted by the
European Union.
The financial information contained in the Interim Financial
Statements, which are unaudited, does not constitute statutory
accounts in accordance with the Companies Act 2006. The financial
information for the year ended 31 December 2015 is extracted from
the statutory accounts for that year which have been delivered to
the Registrar of Companies and on which the auditor issued an
unqualified opinion that did not include an emphasis of matter
reference or statement made under section 498(2) or (3) of the
Companies Act 2006.
3. Accounting policies
The accounting policies adopted in the preparation of the
Interim Financial Statements are consistent with those followed in
the preparation of the 2015 Consolidated Financial Statements.
Foreign currencies
The assets and liabilities of foreign operations are translated
into sterling at exchange rates ruling at the balance sheet date.
Revenues generated and expenses incurred in currencies other than
sterling are translated into sterling at rates approximating to the
exchange rates ruling at the dates of the transactions. Foreign
exchange differences arising on retranslation of assets and
liabilities of foreign operations are recognised directly in the
foreign currency translation reserve.
The sterling/euro exchange rates used in the Interim Financial
Statements and prior reporting periods are as follows:
Six months Six months Year ended
ended ended 31 December
Sterling/euro exchange rates 30 June 2016 30 June 2015 2015
Average exchange rate for
the period 1.301 1.356 1.376
Exchange rate at the period
end 1.209 1.416 1.357
4. Segmental Information
Management has determined the operating segments based on the
reports reviewed by the Group Board of Directors (Chief Operating
Decision Maker) that are used to make strategic decisions. The
Board considers the business from a line-of-service perspective and
uses operating profit/(loss) as its profit measure. The operating
profit/(loss) of operating segments is prepared on the same basis
as the Group's accounting operating profit/(loss).
In the 2015 Consolidated Financial Statements, the operations of
the Group were segmented as Brands, which includes sales of
healthcare and skin care products under distribution agreements and
direct to UK retailers, and Manufacturing. In these Interim
Financial Statements, the Manufacturing segment has been renamed as
Development & Manufacturing to reflect more accurately the
nature of operations at the Group's facility in Italy (Biokosmes).
The Periproducts business which was acquired during the period is
included within the Brands reporting segment.
4.1 Segment Revenue and Results
The following is an analysis of the Group's revenue and results
by reportable segment.
Development Consolidated
Brands & Manufacturing Eliminations Group
GBP'000 GBP'000 GBP'000 GBP'000
Six months to 30 June 2016
Revenue
External sales 1,234 4,887 - 6,121
Inter-segment sales - 192 (192) -
-------- ----------------- ------------- -------------
Total revenue 1,234 5,079 (192) 6,121
-------- ----------------- ------------- -------------
Results
Operating (loss)/profit
before exceptional items
and excluding central administrative
costs (106) 679 - 573
-------- ----------------- ------------- -------------
Development Consolidated
Brands & Manufacturing Eliminations Group
GBP'000 GBP'000 GBP'000 GBP'000
Six months to 30 June 2015
Revenue
External sales 138 4,234 - 4,372
Inter-segment sales - 110 (110) -
-------- ----------------- ------------- -------------
Total revenue 138 4,344 (110) 4,372
-------- ----------------- ------------- -------------
Results
Operating (loss)/profit
before exceptional items
and excluding central administrative
costs (610) 720 - 110
-------- ----------------- ------------- -------------
Development Consolidated
Brands & Manufacturing Eliminations Group
Year to 31 December 2015 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External sales 1,067 8,010 - 9,077
Inter-segment sales - 603 (603) -
-------- ----------------- ------------- -------------
Total revenue 1,067 8,613 (603) 9,077
-------- ----------------- ------------- -------------
Results
Operating (loss)/profit
before exceptional items
and excluding central administrative
costs (826) 1,090 - 264
-------- ----------------- ------------- -------------
The reconciliation of segmental operating loss to the Group's
operating loss before exceptional items excluding central
administrative costs is as follows:
Six months Six months Year ended
ended
30 June ended 31 December
2016
(Unaudited) 30 June 2015
2015
(Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Operating profit before exceptional items
and excluding central administrative costs 573 110 264
Central administrative costs (964) (953) (1,712)
Exceptional expenses (142) - (246)
Operating loss (533) (843) (1,694)
Net finance (cost)/income (321) 88 57
------------ ------------ -------------
Loss before tax (854) (755) (1,637)
------------ ------------ -------------
5. Amortisation of intangible assets
Six months Six months Year ended
ended
30 June ended 31 December
2016
(Unaudited) 30 June 2015
2015
(Unaudited) (Audited)
Amortisation of: GBP'000 GBP'000 GBP'000
Acquired intangible assets (a) (284) (284) (568)
Acquired intangible assets (b) (53) - -
Patents, trademarks and other intangible
assets (37) (36) (62)
Capitalised development costs (35) (18) (28)
------------ ------------ -------------
(409) (338) (658)
------------ ------------ -------------
(a) Customer relationship and product formulation intangible
assets acquired as part of the acquisition of Biokosmes Srl in
March 2014. These intangible assets are being amortised over five
years to 31 March 2019.
(b) Customer relationships, patents and trademark intangible
assets acquired as part of the acquisition of Periproducts Limited
in March 2016. The customer relationships and trademark intangible
assets are being amortised over five years to 28 February 2021. The
patent intangible assets are being amortised over ten years to 28
February 2026.
6. Exceptional items
Six months Six months Year ended
ended
30 June ended 31 December
2016
(Unaudited) 30 June 2015
2015
(Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Restructuring costs (9) - -
Costs incurred in acquisitions (133) - (246)
Total exceptional items (142) - (246)
------------ ------------ -------------
There were no exceptional items in the six months to 30 June
2015.
7. Finance income and costs
Six months Six months Year ended
ended
30 June ended 31 December
2016
(Unaudited) 30 June 2015
2015
(Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Finance income
Foreign exchange gains on vendor
loan notes (a) - 153 92
Foreign exchange gains on other assets
and liabilities (a) - (17) -
Mark to market gain on vendor loan
notes - - 60
------------------- ------------ -------------
Total finance income - 136 152
Finance costs
Foreign exchange losses on vendor
loan notes (a) (179) - -
Foreign exchange losses on other
assets and liabilities (a) 4 - -
Interest charge on interest bearing
borrowings (23) (20) (38)
Finance cost of vendor loan notes (43) (28) (57)
Finance cost of convertible bond
(b) (80) - -
Total finance costs (321) (48) (95)
------------------- ------------ -------------
(a) Foreign exchange gains and losses include the revaluation of
balance sheet assets and liabilities held in currencies other than
the reporting currency of the underlying entity. At the end of each
month, the Group's EUR2 million vendor loan note is revalued using
the period end sterling/euro foreign exchange rate and accounts for
most of the foreign exchange gains and losses of the Group. The
sterling/euro foreign exchange rate at 31 December 2015 was 1.3551
and 1.2085 at 30 June 2016. This movement in exchange rate
generated a foreign exchange loss of GBP179,000 in the period. This
compares to a gain in the six month period to 30 June 2015 of
GBP153,000 and a gain of GBP92,000 in the year to 31 December 2015.
Other smaller foreign exchange gains and losses relate to the
revaluation of the Group's other assets and liabilities that are
not held in the reporting currency of the Group's subsidiaries and
foreign exchange differences that arise on the settlement of
foreign currency transactions with customers and vendors of the
Group.
(b) Under IAS 39, the liability element of the convertible bond
is measured at amortised cost. This is detailed further in note 15.
The amortised cost calculation creates a monthly charge which is
recognised in finance costs and equates to approximately GBP20,000
per month.
8. Taxation
The Group calculates the income tax expense for the period using
the tax rate that would be applicable to the expected total annual
earnings. The major components of income tax expense in the Interim
Condensed Statement of Comprehensive Income are as follows:
Six months Six months Year ended
ended ended 31 December
30 June 2016 30 June 2015
2015
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Current income tax 222 216 266
Adjustment in respect of earlier
periods - - 11
Deferred income tax expense related
to origination and reversal of
timing differences (67) (46) (153)
-------------- ------------ -------------
Income tax expense recognised
in statement of comprehensive
income 155 170 124
-------------- ------------ -------------
The current income tax expense is based on the profits of the
Development & Manufacturing business based in Italy. The UK
based businesses on a combined basis are currently loss making and
so there are no UK income tax charges due in respect of trading for
the first six months to 30 June 2016.
The Group has not recognised the deferred tax asset on losses
made by the UK based businesses on a combined basis as although
management are expecting the UK based businesses on a combined
basis to become profitable, it is not currently certain when there
will be sufficient taxable profits against which to offset such
losses.
At the period end the estimated tax losses amounted to
GBP6,690,000 (30 June 2015: GBP4,559,000; 31 December 2015:
GBP5,328,000).
9. Other comprehensive income/(expense)
Other comprehensive income/(expense) represents the foreign
exchange difference on the translation of the assets, liabilities
and reserves of Biokosmes which has a functional currency of Euros.
The movement is shown in the foreign currency translation reserve
between the date of acquisition of Biokosmes, when the GBP/EUR rate
was 1.193 and the balance sheet date rate at 30 June 2016 of 1.209
(at 31 December 2015 of 1.357 and at 30 June 2015 of 1.416), and is
an amount that may subsequently be reclassified to profit and
loss.
10. Loss per share
Six months Six months Year ended
ended ended 30 December
30 June 2016 30 June 2015
2015
(Unaudited) (Unaudited) (Audited)
Weighted average number of ordinary
shares in issue 35,968,571 34,403,534 34,403,534
Loss attributable to equity holders
of
the Company (GBP'000) (1,009) (925) (1,761)
Basic and diluted loss per share
(pence) (2.81) (2.69) (5.12)
The loss attributable to ordinary shareholders and weighted
average number of ordinary shares for the purpose of calculating
the diluted earnings per ordinary share are identical to those used
for basic earnings per share. This is because the exercise of share
options would have the effect of reducing the loss per ordinary
share and is therefore not dilutive under the terms of IAS 33.
11. Dividends
Amounts recognised as distributions to equity holders in the
period:
Six months Six months Year ended
ended ended 31 December
2015
30 June 2016 30 June 2015 (Audited)
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
Final dividend 14 14 14
-------------- ------------- -------------
12. Business combinations
On 4 March 2016 the Company completed the acquisition of 100% of
the share capital of Periproducts Ltd ("Periproducts"), a UK based
oral healthcare products company. The acquisition consideration
paid was GBP5.7 million, comprising GBP4 million plus the value at
the date of completion of current net assets of Periproducts of
some GBP1.7 million. The acquisition was funded through the
Company's own resources and by way of a Placing of new ordinary
shares raising GBP1.7 million (gross) and the issue of a 3 year 9%
Convertible Bond raising GBP1.9 million.
The Group acquired Periproducts because it expands its existing
product portfolio into an attractive area of the consumer
healthcare market. The Group also expects to generate a number of
synergies from the acquisition to improve the profitability of the
acquired entity and the Group as a whole. The acquisition has been
accounted for using the acquisition method. The Interim Condensed
Consolidated Financial Statements include the results of
Periproducts for the period from 4 March 2016 to 30 June 2016.
The fair values of the identifiable assets and liabilities of
Periproducts as at the date of acquisition were:
Fair Value
GBP'm
ASSETS
Non-current assets:
Customer relationships* 0.6
Patents and trademarks* 0.3
Current assets:
Inventories 0.3
Trade and other receivables 0.8
Cash and cash equivalents 0.9
Total assets 2.9
-----------
LIABILITIES
Current liabilities:
Trade and other payables (0.3)
Non-current liabilities:
Deferred tax liabilities (0.2)
Total liabilities (0.5)
-----------
Net assets acquired 2.4
Goodwill 3.3
-----------
Total consideration 5.7
Satisfied by:
Cash paid on completion 5.2
Deferred consideration in the form of
a loan from the Vendors 0.4
Cash payment due on finalisation of
completion accounts 0.1
Total consideration 5.7
===========
Cash flows from business combination
during the period
Cash and cash equivalents included in
undertaking acquired 0.9
Cash paid on completion (5.2)
-----------
Net cash outflow arising on acquisition
and in cash flow statement (4.3)
===========
*Intangible assets identified as part of the Periproducts
acquisition. See note 5(b) for further details.
The Company is currently still in the process of agreeing the
completion accounts with the vendors of Periproducts and expects to
reach agreement shortly. Depending on the outcome of these
discussions, there may be small changes to the final consideration
paid and goodwill acquired, as shown above and in note 13.
Revenue and profit impact of the acquisition
Periproducts contributed revenues of GBP0.9 million and
operating profit before exceptional expenses of GBP0.2 million in
the period from 4 March 2016 (the date of acquisition) to 30 June
2016.
If the acquisition had taken place on 1 January 2016, the first
day of the reporting period under review, total Group revenue and
operational loss before exceptional items for the period would have
been GBP6.6 million and (GBP0.3 million) respectively.
13. Intangible assets
Development Patents Other intangible
costs and trademarks Goodwill assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation:
At 1 January 2015 1,322 544 9,796 1,995 13,657
Additions 151 20 - - 171
Disposals (10) (110) - - (120)
Foreign exchange (83) - - - (83)
------------ ---------------- --------- ----------------- ------------------
At 30 June 2015 1,380 454 9,796 1,995 13,625
Additions 116 2 - - 118
Foreign exchange 42 - - - 42
At 31 December
2015 1,538 456 9,796 1,995 13,785
Additions 139 - - - 139
Acquisition - 307 3,298 546 4,151
Foreign exchange 95 - - - 95
------------ ---------------- --------- ----------------- ------------------
At 30 June 2016 1,772 763 13,094 2,541 18,170
------------ ---------------- --------- ----------------- ------------------
Amortisation:
At 1 January 2015 141 235 - 299 675
Charge for the
period 104 35 - 199 338
Disposals - (45) - - (45)
Foreign exchange (32) - - - (32)
------------ ---------------- --------- ----------------- ------------------
At 30 June 2015 213 225 - 498 936
Charge for the
period 90 30 - 200 320
Foreign exchange 2 - - - 2
------------ ---------------- --------- ----------------- ------------------
At 31 December
2015 305 255 - 698 1,258
Charge for the
period 127 44 - 238 409
Foreign exchange 3 - - - 3
------------ ---------------- --------- ----------------- ------------------
At 30 June 2016 435 299 - 936 1,670
------------ ---------------- --------- ----------------- ------------------
Carrying value:
At 30 June 2015 1,167 229 9,796 1,497 12,689
------------ ---------------- --------- ----------------- ------------------
At 31 December
2015 1,233 201 9,796 1,297 12,527
------------ ---------------- --------- ----------------- ------------------
At 30 June 2016 1,337 464 13,094 1,605 16,500
------------ ---------------- --------- ----------------- ------------------
There were no impairment charges recorded in the current or
prior periods.
14. Share capital and share premium
Ordinary Ordinary Share Merger
shares of Shares premium reserve
0.3p each
No. GBP'000 GBP'000 GBP'000
Audited at 1 January 2014 16,961,424 51 2,668 50
Share issue 12,942,110 39 5,113 7,606
---------- -------- -------- --------
Unaudited at 30 June 2014 29,903,534 90 7,781 7,656
Share issue 4,500,000 13 4,045 -
---------- -------- -------- --------
At 31 December 2014 and 31 December
2015 34,403,534 103 11,826 7,656
Share issue 2,428,572 7 1,463 -
---------- -------- -------- --------
Unaudited at 30 June 2016 36,832,106 110 13,289 7,656
---------- -------- -------- --------
There were no movements in share capital or share premium
between 31 December 2014 and 31 December 2015.
On 4 March 2016 2,428,572 new ordinary 0.3p shares of Venture
Life Group plc were issued as part of the fund raising for the
acquisition of Periproducts Ltd. The share issue raised GBP1.7
million gross, (GBP1.5 million net of expenses).
In connection with the placing in March 2016 to raise new equity
to acquire Periproducts, the Company entered into an agreement to
issue warrants to one of the Group's appointed brokers. The
warrants will give the warrant holders the right to be issued with
up to 262,053 new ordinary 0.3p shares in the Company at a
subscription price of 94.5p (being a 35% premium to the Placing
Price of 70p) before 3 March 2019. As at 30 June 2016 the warrants
had not been issued and it has therefore not been possible to
determine accurately the related expense. Consequently no
accounting entry has been made in the Interim Financial Statements.
It is expected, however, that the warrants will be issued before 31
December 2016 and, if so, will be reported in the Group's 2016
Report & Accounts.
15. Convertible bond
During the period a convertible bond with a principal value of
GBP1.9 million was issued as part of the funding for the
Periproducts acquisition. The bond carries a 9% coupon with
interest payable quarterly over a three year term with full
repayment of the convertible bond due on 3 March 2019. Bondholders
have the right to convert their bonds to shares in the Group at a
conversion price of 87.5p per Venture Life share (87.5p
representing a 25% premium to the 70 pence placing price of the new
equity at the time of the acquisition) which can be exercised at
any point before 3 March 2019.
Under IAS 32, this convertible bond is accounted for as a
compound financial instrument. The fair value of the convertible
bond is determined using a discounted cash flow method. The
difference between the GBP1.9 million principal value of the bond
and the present value of the future fixed interest payments and
capital repayment is recorded in equity as a convertible bond
reserve, representing the value of the convertible element of the
bond.
Bond issue fees incurred have been allocated between liabilities
and equity as a proportion of the value of each element. The fees
held against the liability element are released to the Income
Statement over the three year life of the bond.
The value of the liability and associated costs are held on the
balance sheet at amortised cost. The initial amortised cost
valuation gave a carrying value, net of fees, of GBP1.6 million
which was recorded as a liability at 4 March 2016. This will
increase to its principal value of GBP1.9 million over the life of
the bond to 3 March 2019, with interest costs being taken to the
Income Statement on a monthly basis. The resulting equity value is
GBP0.1 million which is recorded as a convertible bond reserve.
16. Related party transactions
The following transactions with related parties are considered
by the Directors to be significant for the interpretation of the
Interim Condensed Financial Statements for the six month period to
30 June 2016 and the balances with related parties at 30 June 2016
and 31 December 2015:
In March 2014 the Company issued 3% convertible loan notes with
a nominal amount of EUR2,000,000 to the vendors of Biokosmes
including Gianluca Braguti, a Director of the Company. Mr Braguti's
interest in the convertible loan notes amounted to EUR1,980,000.
Interest is accrued on the loan notes at 3% per year and is paid in
October and April each year.
Under the terms of the Share Purchase Agreement dated 28
November 2013 and signed between the Company and the vendors of
Biokosmes, one of whom was Gianluca Braguti, the vendors agreed to
indemnify the Company in full for any net liability arising from
certain litigation cases which had not settled at the time of
completion of the acquisition on 27 March 2014. At the period end
the amount due to the Company under the indemnity totalled
EUR250,935, of which Gianluca Braguti's liability is EUR248,426.
Settlement of this liability will be made when the final
outstanding case is concluded.
In March 2016 the Company issued a 9% convertible bond for
GBP1.9m. The bond was issued to a number of bondholders including
Jerry Randall and Gianluca Braguti, both Directors of the Company.
Both Directors subscribed to GBP200,000 of the issued bond.
Interest is accrued on the bond at 9% and is paid in March, June,
September and December each year.
Key transactions with other related parties
Biokosmes Immobiliare Srl, a company 100% owned by Gianluca
Braguti, a director and shareholder of the Group provided property
lease services to Biokosmes Srl, the Group's Italian subsidiary,
totalling EUR230,000 in the six months to 30 June 2016 (EUR245,968
in the six months to 30 June 2015). At 30 June 2016, the Group owed
Biokosmes Immobiliare Srl EUR782,150 (EUR882,459 at 31 December
2015).
17. Financial instruments
Set out below is an overview of financial instruments held by
the Group as at:
30 June 2016 30 June 2015 31 December 2015
----------------------------- -----------------------------
Loans and Total financial Loans and Total financial Loans and Total financial
receivables assets receivables assets receivables assets
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets:
Trade and other
receivables
(a) 4,290 4,290 3,279 3,279 3,030 3,030
Cash and cash
equivalents 1,583 1,583 3,253 3,253 2,857 2,857
Total 5,873 5,873 6,532 6,532 5,887 5,887
------------ --------------- ------------ --------------- ------------ ---------------
30 June 2016 30 June 2015 31 December 2015
--------------------------- --------------------------- ---------------------------
Liabilities Total Liabilities Total Liabilities Total
(amortised financial (amortised financial (amortised financial
cost) liabilities cost) liabilities cost) liabilities
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial
liabilities:
Trade and other
payables (b) 3,105 3,105 1,868 1,868 2,430 2,430
Convertible
bond 1,677 1,677 - - - -
Vendor loan
note 1,612 1,612 1,407 1,407 1,416 1,416
Interest
bearing
debt 3,014 3,014 1,756 1,756 1,844 1,844
----------- -------------- ----------- -------------- ----------- --------------
Total 9,408 9,408 5,031 5,031 5,690 5,690
----------- -------------- ----------- -------------- ----------- --------------
(a) Trade and other receivables excludes prepayments
(b) Trade and other payables excludes accruals and deferred
revenue
During the period, the treatment of the Vendor loan notes was
reviewed and as a result the classification has been revised to
reflect it as a financial instrument at amortised cost rather than
fair value through profit or loss.
18. Post balance sheet events
There were no post balance sheet events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFIRASIIFIR
(END) Dow Jones Newswires
September 21, 2016 02:00 ET (06:00 GMT)
Venture Life (LSE:VLG)
Historical Stock Chart
From Apr 2024 to May 2024
Venture Life (LSE:VLG)
Historical Stock Chart
From May 2023 to May 2024