Notes
Chairman’s
Statement
Results
The Company had turnover in the year ended 31 March 2005 of £136,958 (2004 £360,185),
whilst operating expenses for the year were £2,189,908, some 13% less than in the preceding
year. These expenses included development expenditure of £653,896 and amortization of
intangible fixed assets of £94,589. The Loss on Ordinary Activities Before Tax was £1,867,390
– some £417,833 more than in 2004 during which year the Company benefited from £552,856
of gains on exceptional items.
Loss After Tax for the year was £1,867,390. This compares with a Profit After Tax of £527,260
during the year ended 31 March 2004 following receipt of £1,976,817 in tax credits in respect of
development work during earlier years.
The cash position as at 31 March 2005 was £4,015,126 – some £1,953,074 less than on the
corresponding day in 2004.
In line with the resolution passed at the last Annual General Meeting, the Share Premium Account
has been cancelled, and this is reflected in the statutory Accounts included in this Annual Report.
AORTECH INTERNATIONAL PLC 0 1
Business review and activities
The progress made at AorTech in Financial Year 2005 is a story that began with the vigorous
turnaround of FY 2003 and the foundation building in the year of 2004. The turnaround was
comprised of a number of key strategic actions, including:
•
•
•
•
•
•
•
•
•
The appointment of new management
Termination of £30 million Becton Dickinson acquisition
Sale of the loss making heart valve business
Voluntary withdrawal of TruCCOMs from market
Sale of TruCCOMs intellectual property
Termination of in-house development of Tri-leaflet heart valve
Start up of Biomaterial licensing and supply business
A reduction in cash burn from £10m in FY 2003 to under £1m in 2004
Biomaterial technology licenses and supply agreements executed June 2003
Having accomplished these critical changes, management set out to develop
a strategy for the new business and to put a number of foundation elements
in place.
During the foundation year of 2004, the business:
•
•
•
•
•
•
•
•
•
generated 17 new materials evaluation programmes reflecting the expansion of
Elast-Eon platform into new areas
progressed 2 step-out projects through to advanced stages of product development
increased its scientific profile through World Biomaterials Congress presentations
provided support for key client relationships, resulting from dramatic improvements in
quality of materials achieved through process optimisation to facilitate higher yields in
device production
submitted its first master file to FDA
developed a supplier management programme and the expansion of the supplier base
successfully completed research programmes on drug-eluting stents and spinal discs
achieved advances in breast implant potential
succeeded in developing the Melbourne manufacturing and technology centre into a key
strategic asset
Frank Maguire and I would like to acknowledge the contributions made by Laurie Rostron,
Chairman of the Company until May 2005, to the turnaround and foundation phases of this
reincarnated business. His guidance and steady hand were instrumental in setting this new
business off in a positive direction.
The accomplishments of the past year reflect the beginnings of
commercial as well as strategic, regulatory and technical progress.
Milestones of note include:
•
•
•
•
•
•
•
•
•
•
•
Expansion of the Elast-Eon Master technology data base
Maintenance of high quality and stable supply of Elast-Eon
Development of new abrasion resistant, low creep grades for orthopaedic
applications, in particular the rapidly growing spinal disc segment
Major internal developments in next generation breast implants that address
material selection and preliminary toxicity and biostability results
Validation of superiority of Elast-Eon for breast implant shell, particularly
in comparison with silicone
Completion of sterilization feasibility for the Elast-Eon breast implant
Meeting with the FDA to assess the use of Elast-Eon in breast implants
Development of specific Elast-Eon formulations suitable for minimally invasive
devices, injectable in situ cure and progress in defining the regulatory road map for
the ultimate approval of this product
Development of form-stable, metal-free and ultra-low extractable gels
Successful bench testing of formulations for spinal disc applications
Support for client manufacturing as part of first human use project
0 2
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 0 3
Outlook
The Company believes that first human
use of Elast-Eon and the generation of the first
royalty income for the business will occur within
one year.
The effect that this event will have on the biomaterial licensing and supply business will be positive and
manifest itself along with steadily growing revenue streams - in terms of an increasing number of
licensing deals and projects and the individual value of these projects to AorTech.
It will be the result of the consistent diligent and expert work by all of our valued employees.
It will be the point in time where the work of the past 3 years can be acknowledged and the ‘new’
AorTech can be considered officially on its way. In light of these considerations and after considering the
feedback from the investment community and a number of key shareholders, the Board has reached a
decision to re-name the company AorTech Biomaterials plc.
I am delighted at the progress we have made with the both our “generation 5”, safer surgical type breast
implant and the breakthroughs we are experiencing with the development of a true minimally invasive
breast implant technology.
The AorTech Board is looking forward to increasingly positive commercial results in the coming year with
a number of new application developments, new licensees and the expansion of clinical use of Elast-Eon
for a number of long-term implants where there is a high demand for extraordinary fatigue performance,
abrasion resistance, blood compatibility and general physical strength.
Board
Changes
We announced at the end of October 2004 that Ian Cameron was stepping down from his
position as Finance Director but would remain as a Non Executive Director and Company
Secretary in the short term. Ian retired from the Board with effect from 20th December 2004 to
concentrate on his role as Finance Director at i-mate plc., having contributed substantially to
AorTech during his six years with the Company. He has been succeeded as Company Secretary
by David Parsons.
In May 2005, my predecessor as Chairman, Laurie Rostron, and Peter Gibson, Non-Executive
Director of the Company, stepped down as a consequence of the restructuring of the business.
Earlier in this Statement I have acknowledged the contribution made by Laurie Rostron, but I
would also take this opportunity to express my warm thanks to both gentlemen for their
considerable efforts and input during what was a difficult, transitional period for the Company.
As part of the restructuring process, we also announced the appointment of Dr Stuart Rollason
as a Non-Executive Director in May 2005. Dr Rollason brings a wealth of experience, both
medical and corporate, to the Board and it has become clear that his input will prove of much
value in the months ahead.
Auditors
The Company’s current auditors, PricewaterhouseCoopers LLP, have resigned with effect from
the forthcoming Annual General Meeting. PricewaterhouseCoopers LLP have confirmed to us
that there are no circumstances connected with their resignation that they consider should be
brought to the attention of members. Grant Thornton UK LLP have confirmed that they would
be pleased to accept appointment as the Company’s auditors.
I am grateful to the partners and staff of PricewaterhouseCoopers LLP for the professionalism
and services they have provided during their tenure.
Conclusion
The task ahead remains challenging, but I believe that the credibility attained from the
successful completion of the long, arduous process of qualifying Elast-Eon for human use will
provide a substantive boost for our heart valve and breast implant projects with investors,
regulators and potential industry partners.
My sincere thanks go to Frank Maguire, and his highly skilled team, for their considerable
achievements, efforts and support during the past year.
Jon Pither
Chairman
0 4
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 0 5
Board of Directors
& Advisors
Directors
Jon Pither Chairman (non-Executive Director; appointed Chairman 12 May 2005)
Laurie Rostron Chairman (resigned 12 May 2005)
Frank Maguire Chief Executive
Ian Cameron Finance Director (resigned 20 December 2004)
Peter Gibson non-Executive Director (resigned 12 May 2005)
Dr Stuart Rollason non-Executive Director (appointed 13 May 2005)
Company Secretary
Ian Cameron (resigned 1 December 2004)
David Parsons (appointed 1 December 2004)
Registered Office
Dalmore House, 310 St Vincent Street, Glasgow G2 5QR
Head Office
Prestige Travel Suite, Barclays Bank House, 81-83 Victoria Road, Surbiton, Surrey, KT6 4NS, England
Registered Auditors
PricewaterhouseCoopers LLP, Kintyre House, 209 West George Street, Glasgow G2 2LW
Brokers
Bell Lawrie White (a division of Brewin Dolphin Securities Ltd), 48 St Vincent Street, Glasgow G2 5TS
Solicitors
Biggart Baillie, Dalmore House, 310 St. Vincent Street, Glasgow G2 5QR
Beachcroft Wansbroughs, 100 Fetter Lane, London, EC4A 1BN
Bankers
Bank of Scotland, 123 St. Vincent Street, Glasgow G2 5EA
Registrars
Lloyds TSB Registrars Scotland, PO Box 28448, Finance House, Orchard Brae, Edinburgh EH4 1WQ
Shareholder helpline: 0870 6015366,
Shareholder website: www.shareview.co.uk
Report of
the Directors
The directors present their report and the audited financial statements for the year ended 31 March 2005.
Principal activities
The Company is the holding company of a Group whose principal activities are the development and exploitation of a range of innovative biomaterials.
Review of business and future developments
A review of the results for the year and of future developments in the business is given in the Chairman’s Statement.
During the financial year, the Company continued to develop and exploit its biomaterial products, with discussions taking place with a number of interested parties.
The Company’s offices in Scotland were vacated at the end of 2004, with the UK administrative activities being transferred to its current address in Surrey, England.
During the year, costs of £653,896 (2004: £559,032) were charged to the Profit and Loss Account as development expenditure. The consolidated profit and loss
account is set out on page 16, indicating the Group’s loss for the financial year of £1,867,390 (2004: profit of £527,260) which will be deducted from reserves.
No dividends have been paid or proposed for the years ended 31 March 2005 and 2004.
Fixed assets
Details of the fixed assets of the Company and the Group are set out in notes 12 to 14 of the financial statements.
Directors and their interests
At 31 March 2005, the Chairman of the Company was L Rostron, the Executive Director was F Maguire, and the non-Executive Directors were P Gibson and J Pither. The
other Director who served during the year was I Cameron, who resigned on 20 December 2004.
At each Annual General Meeting one third of Directors shall be subject to retirement by rotation. F Maguire retires from the Board at the Annual General
Meeting and, being eligible, offers himself for re-election. As the 2005 Annual General Meeting is the first following J Pither's 70th birthday, he is required
under the Companies Act 1985 to vacate his office, but remains eligible, and offers himself for re-election.
The interests of the Directors at 31 March 2005 in the ordinary share capital of the Company (all beneficially held) were as follows:
L. Rostron
F. Maguire
P. Gibson
J. Pither
31 March 2005
number
31 March 2004
number
-
1,200
5,500
-
-
1,200
5,500
-
During the period from the end of the financial year to 20 September 2005, no Director increased his interest in the issued ordinary share capital of the Company.
The interests of Directors in share options are disclosed in the Report of the Remuneration Committee on page 14.
0 6
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 0 7
Report of the Directors continued
Substantial shareholdings
With the exception of the following shareholdings, the Directors have not been advised of any individual interest, or group of interests held by persons acting together,
which at 20 September 2005 exceed 3% of the Company’s issued share capital:
Charitable and political donations
During the year the Group made a chartitable donation of £350 (2004 £1,059) to St Andrews Hospice.
Chase Nominees Limited
Nordea Bank Danmark A/S
Caricature Investments Limited
Melody Investments Limited
Goldman Sachs International
Mr Craig Pickup
number
%
1,035,576*
477,713**
447,107
437,107
180,000
118,636
27.2%
12.5%
11.7%
11.5%
4.7%
3.1%
*Included in the interests of Chase Nominees Limited above is the following fund whose shareholding at 20 September 2005 exceeds 3% of the Company’s issued
share capital:
Annual general meeting
The notice convening the Annual General Meeting for 12 noon on 26 October 2005 at Buchanan Communications Limited, 107 Cheapside, London EC2V 6DN is set out
on page 31. There are a number of resolutions to be passed and further information in relation to these resolutions is set out below.
Resolutions 1 to 6
Resolution 1 provides for the the approval of the Company's financial statements for the year ended 31March 2005. Resolution 2 provides for approval of the Report of
the Remuneration Committee for the year ended 31 March 2005. Resolution 3 deals with the re-appointment of the one Director required by the Company's Articles of
Association to retire this year. Resolution 4 deals with the formal appointment of Dr Stuart Rollason to the Board. Resolution 5 provides for the re-appointment of Jon Pither,
who is required under the Companies Act 1985 to vacate his office at the AGM following his 70th birthday, which does not preclude his being re-elected to the Board.
Resolution 6 deals with the acceptance of PricewaterhouseCooper’s resignation as the Company’s auditors and acceptance of Grant Thornton’s appointment as
their successors.
Resolution 7
This resolution authorizes the Directors to change the name of the Company from AorTech International plc to AorTech Biomaterials plc.
Bluehone Investors LLP
912,841
24.0%
Resolutions 1 to 6 are termed ordinary business. Resolution 7 is termed special business.
which includes the interests of Active Capital Trust of 861,861 shares (22.6%) in the Company.
**Included in the interests of Nordea Bank Danmark A/S above is the following shareholding at 20 September 2005 which exceeds 3% of the Company’s issued
share capital:
Erudite UK Limited, a company wholly owned by Mr P Gyllenhammar
427,213
11.2%
Share capital
On 1 September 2003, the Company carried out a one for ten consolidation of its share capital resulting in an issued share capital of 3,810,278 shares of £2.50 each.
Employees
The Group places considerable value on the involvement of its employees and they are regularly briefed on the Group’s activities through
consultative meetings.
Equal opportunity is given to all employees regardless of their sex, colour, race, religion or ethnic origin.
Applications for employment from disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of
members of staff becoming disabled, every effort is made to ensure that their employment within the Group continues and that appropriate training is arranged.
It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical with that of other
employees.
Creditor payment policy
The Company’s current policy concerning the payment of the majority of its trade creditors is to follow the Better Payment Practice Code issued by the Better Payment
Practice Group (copies are available from the DTI). For other suppliers, the Company’s policy is to:
(a) settle the terms of payment with those suppliers when agreeing the terms of each transaction;
(b) ensure that those suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and
(c) pay in accordance with its contractual and other legal obligations.
The payment policy applies to all payments to creditors for revenue and capital supplies of goods and services without exception.
Wherever possible UK subsidiaries follow the same policy and the overseas subsidiaries are encouraged to adopt a similar policy applying local best practice. The
Group's average creditor payment period at 31 March 2005 was 32 days (2004 : 57 days).
IFRS
The Group is in the process of a review to ensure that it will be able to meet the forthcoming requirements to prepare its financial statements under International
Financial Reporting Standards.
All members are welcome to attend and vote at the Annual General Meeting. Any member not attending should complete and return the Proxy Form enclosed in
accordance with the instructions set out in that document.
J C D Parsons
Company Secretary
Surbiton
20 September 2005
Statement of Directors’ Responsibilities
Company law requires the directors to prepare Financial Statements for each financial year that give a true and fair view of the state of the affairs of the Company
and the Group as at the end of the financial period and of the profit or loss of the Group for that period.
The directors consider that, in preparing these Financial Statements, they have used appropriate accounting policies, consistently applied and supported by
reasonable and prudent judgments and estimates and that all accounting standards that they consider to be applicable have been followed.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and
the Group and to enable them to ensure that the Financial Statements comply with the Companies Act 1985. They are 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 maintenance and integrity of all AorTech websites is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for any Financial Statements or associated information which are contained in these websites.
Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
By order of the Board
J C D Parsons
Company Secretary
Surbiton
20 September 2005
0 8
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 0 9
Corporate Governance
The Group currently has a reduced Board and Corporate Governance structure, reflecting the current development stage and size of the business and the directors’
assessment of the cost benefit balance of full Corporate Governance.
The directors intend to strengthen the Board and Corporate Governance structure as the business moves from the development into the commercial realisation of
the current intellectual property.
Directors
The Company is controlled by the Board of Directors which, at 31 March 2005, comprised one Executive and three independent non-Executive Directors. Since that
date, two non-Executive Directors have resigned and one new independent non-Executive Director has been appointed. All Directors are able to take independent
financial advice in furtherance of their duties if necessary.
The Board is responsible to shareholders for the proper management of the Group and meets formally on a monthly basis to set the overall direction and strategy of
the Group, to review trading performance and to advise on senior management appointments. Financial policy and budgets, including capital expenditure, are
approved and monitored by the Board. All key operational decisions are subject to Board approval. The Company Secretary is responsible for ensuring that Board
procedures are followed and that applicable rules and regulations are complied with.
Accountability and Audit
Financial Reporting
The Board includes a detailed review of the performance of the Company in the Chairman’s Statement on pages 1 to 5. Reading this alongside the Report of the
Directors on pages 7 to 9, the Board seeks to present a balanced and understandable assessment of the Company’s position and prospects.
Internal Control
The Board has formalised the review and reporting of the main internal controls within the business. In previous periods, the Directors commissioned a risk review exercise
in the course of which the key risks facing the Company were identified. These areas included regulatory, research and development, commercial, human resources and
information technology. The Board will continue to review the system of internal controls within the Group.
The Board of Directors is responsible for the Group’s system of internal financial controls. However, it should be recognised that such a system can provide only
reasonable and not absolute assurance against material mis-statement or loss.
The principal elements of the system include:
A clearly defined structure which delegates authority, responsibility and accountability.
Directors are subject to election by shareholders at the first opportunity after their appointment. In addition, one third of Directors are subject to retirement by rotation
at each Annual General Meeting.
A comprehensive system for reporting financial results. Actual results are measured monthly against budget which together with a commentary on variances and
other unusual items allows the Board to monitor the Group’s performance on a regular basis.
The posts of Chairman and Chief Executive are separately held. The Chairman is responsible for the running of the Board and ensures that all Directors receive
sufficient relevant information on financial, business and corporate issues prior to meetings. The Chief Executive has responsibility for running the Group’s business
and implementing Group strategy. The Board believes that this separation results in a clear division of responsibilities at the head of the Company which, with the
presence of independent non-Executive Directors, ensures a balance of power and authority, such that no one individual has unfettered powers of decision.
Except as described in the Directors’ Report and the Report of the Remuneration Committee, the non-Executive Directors have no financial or contractual interest in
the Company. The non-Executive Directors do not participate in the Share Option Schemes and their positions are non-pensionable. It is the intention of the Board
that non-Executive appointments will be reviewed regularly and re-appointments will not be automatic.
Directors’ Remuneration
The Remuneration Committee comprises the non-Executive Directors. It reviews, inter alia, the performance of the Executive Directors and senior management and
sets the scale and structure of their remuneration and the basis of their service agreements with due regard to the interests of the shareholders. The Remuneration
Committee also determines the allocation of options under the Share Option Scheme and the Unapproved Share Option Scheme and sets objective conditions
governing their exercise.
No Director has a service agreement exceeding one year.
It is a policy of the Remuneration Committee that no individual participates in discussions or decisions concerning his own remuneration.
A separate report of the Remuneration Committee is set out on pages 12 to 14.
Nomination Committee
The Nomination Committee consists of the non-Executive Directors. Its responsibilities are to assist the full Board with the selection process for the appointment of
new Directors.
Relations with shareholders
The Company encourages dialogue with both its institutional and private investors and responds promptly to all questions received verbally or in writing. Directors
regularly attend meetings with analysts and institutional shareholders throughout the year. All shareholders have at least 21 days’ notice of the Annual General Meeting.
A comprehensive annual planning and budgeting programme.
A revision of annual forecasts on a periodic basis.
There is no independent internal audit function. The Directors believe that such a function would not be cost effective given the current size of the Group but they will
continue to monitor the situation as the Group goes forward.
The Board has reviewed the effectiveness of the system of internal controls as outlined above and considers the Group has an established system which the Directors
believe to be appropriate to the business.
Audit Committee
The Audit Committee, comprising the non-Executive Directors, meets at least twice per year and overviews the monitoring of the Group’s internal controls, accounting
policies and financial reporting and provides a forum through which the external auditors report. It meets at least once a year with the external auditors without
Executive Board members present.
Going Concern
After making appropriate enquiries and reviewing budgets, profit and cash flow forecasts, and business plans, the Directors have formed a judgement at the time
of approving the financial statements that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the
foreseeable future. For this reason the Directors consider that the adoption of the going concern basis in preparing the Group’s financial statements is appropriate.
1 0
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 1 1
Report of the Remuneration Committee
This report has been prepared in accordance with the Directors' Remuneration Report Regulations 2002 which introduced new statutory requirements for the disclosure of
Directors' remuneration in respect of periods ending on or after 31 December 2002. The report also meets the relevant requirements of the Listing Rules of the Financial
Services Authority and describes how the Board has applied the Principles of Good Governance relating to Directors' remuneration. As required by the Regulations, a
resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the financial statements will be approved.
Remuneration committee
The Remuneration Committee comprises the non-Executive Directors as follows:
P Gibson (Chairman) (resigned 12 May 2005)
Dr S Rollason (Chairman) (appointed 13 May 2005)
L Rostron (resigned 12 May 2005)
J Pither
As appropriate the Committee may invite the Chief Executive to participate in some of its discussions. No Director plays a part in any discussion about his own
remuneration.
The Committee is responsible for determining the terms and conditions of employment of Executive Directors. It is also responsible for considering management
recommendations for remuneration and employment terms of the Company's staff, including incentive arrangements for bonus payments and grant of share options.
Share options
The Company operates a Share Option Scheme and an Unapproved Share Option Scheme.
Only Executive Directors and employees of the Group resident in the UK are eligible to participate in the Share Option Scheme which has been approved by the Inland
Revenue under the provisions of Schedule 9 to the Income and Corporation Taxes Act 1988.
Any person who at the date of grant is approved by the Board is entitled to participate in the Unapproved Share Option Scheme.
The award of options under both schemes is at the discretion of the Remuneration Committee.
The options issued to date under both schemes will only be exercisable if the average mid market closing price of the Company’s shares on the five business days
prior to the date of exercise exceeds the option price by 15% or more.
Pensions
The Group made contributions to a personal pension plan for F. Maguire and I. Cameron at the rate of 30% and 13% respectively.
The constitution and operation of the Committee is in compliance with the provisions of the Combined Code on Corporate Governance. When setting its remuneration
policy the Committee gives full consideration to the provisions and principles of the Combined Code. In setting the policy it considers a number of factors including:
Directors’ emoluments
Details of individual Directors’ emoluments for the year are as follows:
the basic salaries and benefits available to Executive Directors and senior management of comparable companies.
the need to attract and retain Directors and senior management of an appropriate calibre.
the need to ensure Executive Directors’ and senior management’s commitment to the future success of the Company by means of incentive schemes.
Remuneration of non-executive directors
The remuneration of the non-Executive Directors is determined by the Board with reference to the annual survey of independent directors carried out by Independent
Remuneration Solutions.
The non-Executive Directors do not receive any pension or other benefits from the Company, nor do they participate in any of the bonus schemes or the Share Option
Schemes.
The non-Executive Directors have service agreements which are reviewed by the Board annually and they are also included in the one third of Directors subject to
retirement by rotation at each Annual General Meeting.
Remuneration of executive directors
The Executive Directors have service contracts which can be terminated on one year's notice by either party. The Remuneration Committee will review each case of
the circumstances,
early
individually
for
taking care to ensure that poor performance
F. Maguire - 6 December 2002.
to ensure compensation settlements are made which are appropriate
is not rewarded. The most recent executed contracts
for the Executive Directors was
termination
in order
to
The following information has been audited.
Executive
W. Strachan (resigned 1 July 2003)
F. Maguire (appointed 1 July 2003)
I. Cameron (resigned 1 November 2004)
Non-executive
L. Rostron (resigned as Chairman 12 May 2005)
A. Gray (resigned 11 August 2003)
J. Brooks (resigned 1 March 2004)
W. Strachan (appointed 1 July 2003, resigned 1 March 2004)
P. Gibson (appointed 1 March 2004)
J. Pither (appointed as Chairman 12 May 2005)
salary
and fees
£
-
125,000
57,450
52,250
-
-
-
18,000
18,000
benefits
pension
in kind contributions
£
£
-
9,600
3,798
-
37,500
7,750
-
-
-
-
-
-
-
-
-
-
-
-
2005
total
£
-
172,100
68,998
52,250
-
-
-
18,000
18,000
2004
total
£
49,286
110,559
105,700
58,250
4,000
15,500
18,750
1,500
1,500
The Company’s remuneration policy for Executive Directors is to:
have regard to the individual’s experience and the nature and complexity of their work in order to pay a competitive salary that attracts and retains management
of the highest quality.
link individual remuneration packages to the Group’s long term performance through the award of share options and bonus schemes.
provide post retirement benefits through defined contribution pension schemes.
provide employment related benefits including the provision of a company car, life assurance, medical insurance and insurance relating to the individual’s duties.
Salaries and benefits
The Remuneration Committee meets twice each year to consider and set the annual salaries and benefits for Executive Directors, having regard to personal
performance and independent advice concerning comparable organisations.
Performance related bonuses
An annual performance related bonus scheme is operated by the Group. Under the scheme bonuses are payable to Executive Directors subject to terms laid down
by the Remuneration Committee from time to time. No performance related bonuses are payable for the year ended 31 March 2005.
270,700
13,398
45,250
329,348
365,045
Benefits in kind include the provision of a company car and medical insurance.
L. Rostron is a partner in Linn Medical. All the emoluments of L. Rostron above are represented by payments made by the Company to Linn Medical in respect of
the provision of the services of L. Rostron to the Company.
P. Gibson is employed by Ad Quo Associates Limited ("Ad Quo") in the provision of services to the Company. Included in the emoluments of P. Gibson above are
payments of £16,800 made to Ad Quo in respect of these services.
J. Pither is employed by Surrey Management Services Limited ("Surrey") in the provision of services to the Company. All of the emoluments of J. Pither above are
represented by payments made by the Company to Surrey in respect of these services.
Directors’ interests in shares
The interests of Directors in the shares of the Company are included in the Directors’ Report on page 7.
1 2
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 1 3
Report of the Remuneration Committee continued
Report of the Auditors
Directors’ interests in share options
Details of options held by Directors are set out below:
The following information has been audited.
(i) Share Option Scheme
Number of Options
at 1 april granted/(expired)
during year
2004
at 31 march
2005
exercise
price
date from which
exercisable
expiry
date
F. Maguire
I. Cameron
12,000
3,000
-
(3,000)
12,000
-
250p
875p
11/07/2005
24/06/2002
11/07/2012
01/11/2004
(ii) Unapproved Share Option Scheme
Number of Options
F. Maguire
I. Cameron
at 1 april granted/(expired)
during year
2004
at 31 march
2005
exercise
price
date from which
exercisable
expiry
date
7,000
19,000
25,000
1,000
2,500
7,500
-
-
-
-
200,000
(1,000)
(2,500)
(7,500)
50,000
7,000
19,000
25,000
200,000
-
-
-
50,000
250p
280p
165p
168p
5,625p
7,350p
3,325p
168p
11/07/2005
08/08/2005
14/07/2006
30/06/2007
10/07/2012
07/08/2012
13/07/2013
29/06/2014
17/07/2002
10/07/2003
29/06/2004
01/11/2004
01/11/2004
01/11/2004
01/11/2004
31/10/2005
The range in the mid-market price of the Company's shares during the year ended 31 March 2005 was from 147.5p to 202.5p. The mid market price on 31 March
2005 was 196p.
On behalf of the Board
Stuart Rollason
Chairman of the Remuneration Committee
20 September 2005
Independent auditors’ report to the members of AorTech International plc
We have audited the financial statements which comprise the profit and loss account, the balance sheet, the cash flow statement, the statement of total recognised
gains and losses and the related notes.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the annual report and the financial statements in accordance with applicable United Kingdom law and accounting
standards are set out in the statement of directors’ responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom auditing standards issued by
the Auditing Practices Board. This report, including the opinion, has been prepared for and only for the company’s members as a body in accordance with Section
235 of the Companies Act 1985 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985.
We also report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the company has not kept proper accounting records,
if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and
transactions is not disclosed.
We read the other information contained in the annual report and consider the implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. The other information comprises only the directors’ report, the directors’ remuneration report, and the
chairman’s statement.
Basis of audit opinion
We conducted our audit in accordance with auditing standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors
in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence
to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion
In our opinion, the financial statements give a true and fair view of the state of affairs of the company and the group at 31 March 2005 and of the loss and cash flows
of the group for the year then ended and have been properly prepared in accordance with the Companies Act 1985.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Glasgow
20 September 2005
1 4
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 1 5
Consolidated Profit and Loss Account
for the year ended 31 March 2005
Balance Sheets
as at 31 March 2005
Turnover
Cost of Sales
Gross profit
Net operating expenses
Net operating expenses include:
Development expenditure
Amortisation of intangible fixed assets
Group operating loss
Exceptional items
Loss on ordinary activities before interest
Interest receivable
Loss on ordinary activities before taxation
Taxation
(Loss) / Profit for the financial year
(Loss) / Profit per ordinary share
Basic
Diluted
There is no difference between the losses stated above and their historical cost equivalent.
All results are derived from continuing operations.
Notes
2
3
3
4
5
6
2
9
22
11
2005
£
136,958
(31,339)
105,619
2004
£
360,185
(30,649)
329,536
(2,189,908)
(2,527,045)
(653,896)
(94,589)
(559,032)
(97,863 )
(2,084,289)
(2,197,509)
-
552,856
(2,084,289)
216,899
(1,867,390)
-
(1,644,653)
195,096
(1,449,557)
1,976,817
(1,867,390)
527,260
(49.01p)
(49.01p)
13.84p
13.84p
Fixed assets
Intangible assets
Tangible assets
Investment in subsidiary undertakings
Current assets
Stocks
Debtors
Cash at bank
Creditors: amounts falling
due within one year
Net current assets
group
company
notes
2005
£
2004
£
2005
£
2004
£
12
13
14
15
16
1,449,366
189,678
-
1,565,806
235,608
-
1,639,044
1,801,414
-
-
-
-
-
-
-
-
68,852
278,948
4,015,126
48,853
185,848
5,968,200
-
6,670,758
3,726,583
-
5,240,185
5,671,857
4,362,926
6,202,901
10,397,341
10,912,042
17
(348,460)
(438,200)
(88,554)
(47,409)
4,014,466
5,764,701
10,308,787
10,864,633
Total assets less current liabilities
5,653,510
7,566,115
10,308,787
10,864,633
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserve
Profit and loss account
Equity shareholders’ funds
5,653,510
7,566,115
10,308,787
10,864,633
19
21
21
21
22
9,525,695
-
(2,003,143)
(1,869,042)
9,525,695
63,359,594
(2,003,143)
(63,316,031)
9,525,695
-
-
783,092
9,525,695
63,359,594
-
(62,020,656)
5,653,510
7,566,115
10,308,787
10,864,633
Statement of Total Recognised Gains/(Losses) for the year ended 31 March 2005
The financial statements on pages 16 to 30 were approved by the Board of Directors on 20 September 2005 and were signed on its behalf by:
(Loss)/profit for the financial year
Currency translation differences arising on consolidation
Total (losses)/gains recognised since last annual report
Notes
2005
£
(1,867,390)
(45,215)
(1,912,605)
2004
£
527,260
130,024
657,284
J Pither, Chairman
F Maguire, Chief Executive
1 6
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 1 7
Consolidated Cashflow Statement
for the year ended 31 March 2005
Notes to the Financial Statements for the year ended 31 March 2005
notes
2005
£
2004
£
The financial statements have been prepared in accordance with applicable Accounting Standards in the United Kingdom. A summary of the more important Group
accounting policies, which have been applied consistently, is set out below.
1 Principal Accounting Policies
Net cash outflow from operating activities
Net cash outflow before exceptional items
Outflow related to exceptional items
(2,139,103)
(1,898,890)
(2,139,103)
-
(1,898,890)
(1,335,862)
Net cash outflow from operating activities
23
(2,139,103)
(3,234,752)
Returns on investment and servicing of finance
Interest received
Taxation
Research and development tax credits received
Capital expenditure and financial investment
Purchase of intangible fixed assets
Purchase of tangible fixed assets
Sale of tangible fixed assets
Net cash inflow/(outflow) from capital expenditure and financial investment
Disposals
Disposal of commercial valve operations
Cash outflow before management of liquid resources and financing
Management of liquid resources
Cash released from short term deposit
Increase/(decrease) in cash in the year
24
216,899
188,359
-
2,075,716
-
(28,000)
-
(28,000)
-
(1,950,204)
1,994,364
44,160
-
(14,908)
136,440
121,532
(50,000)
(899,145)
734,983
(164,162)
Basis of accounting
The financial statements are prepared in accordance with the historical cost convention.
Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 March each year. Intra-group
sales and profits are eliminated on consolidation.
As permitted by the Companies Act 1985, a separate profit and loss account for AorTech International plc is not presented as the results of the Company are
consolidated in the Group profit and loss account.
Goodwill
Goodwill arising on consolidation represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. Goodwill
arising on the acquisition of subsidiary and associated undertakings is capitalised and amortised over its economic useful life, subject to a maximum of 20 years. A
full impairment review is performed at the end of each financial year in accordance with FRS 10 “Goodwill and Intangible Assets” and any excess of the carrying value
over the resulting recoverable amount is charged to the profit and loss account in that year.
Intellectual property
Intellectual property represents the cost of acquisition of patents, trademarks and copyrights. Amortisation is provided on intellectual property to write off the cost in
equal annual installments over its estimated economic life of up to 20 years.
Tangible fixed assets
The cost of tangible fixed assets is their purchase cost, together with any incidental costs of acquisition. Depreciation commences once an asset is brought into use
and is calculated so as to write off the cost less estimated residual value of tangible fixed assets on a straight line basis over their expected useful economic lives as
follows:
Property improvements
Plant and equipment
Fixtures and fittings
Motor vehicles
over term of lease or 10 years if less
10 years
4 - 10 years
4 years
Development expenditure
All research and development expenditure is written off as incurred.
Hire purchase and lease commitments
Hire purchase and leasing agreements which transfer to the Group substantially all the benefits and risks of ownership of an asset are treated as if the asset had been
purchased outright. The assets are included in fixed assets and the capital element of the hire purchase and leasing commitments are shown as obligations under
hire purchase contracts and finance leases.
The rentals are treated as consisting of capital and interest elements. The capital element is applied to reduce the outstanding obligations and the interest element is
charged to the profit and loss account evenly over the period of the contract. Assets held under hire purchase contracts and finance leases are depreciated over the
useful lives of equivalent owned assets.
Costs in respect of operating leases are charged to the profit and loss account on a straight line basis over the lease term.
Stocks
Stocks are valued at the lower of cost and net realisable value. In general, cost is determined on a first in first out basis. In the case of manufactured products, cost
includes all direct expenditure plus attributable overheads based on a normal level of activity. Net realisable value is based on estimated selling prices less any further
costs expected to be incurred to completion and disposal.
Foreign currencies
Assets and liabilities of subsidiaries in foreign currencies are translated into sterling at the rates of exchange ruling at the end of the financial year and the results of
foreign subsidiaries are translated at the average rates of exchange for the year. Differences on exchange arising from the retranslation of the opening net investment
in the subsidiary undertakings, and from the translation of the results of those companies at average rates, are taken to reserves and are reported in the statement
of total recognised gains and losses. All other foreign exchange differences are taken to the profit and loss account in the period in which they arise.
1 8
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 1 9
Notes continued
Turnover
Turnover excludes value added tax and sales between Group companies and is recognised as follows:
Revenue relating to the supply of material and finished goods to customers is recognised when products are shipped to customers.
License revenues, in respect of upfront payments for access by third parties to the Company's technology, and milestone payments are recognised once the
Company's obligations for each milestone have been met and the Company has achieved a right to be paid.
Royalty revenues are recognised as earned in accordance with third parties sales of the underlying products.
Deferred taxation
Full provision is made on a non-discounted basis for deferred tax liabilities arising from timing differences. Deferred tax assets are recognised to the extent that they
are regarded as recoverable.
Pensions
The Group operates defined contribution pension schemes. Contributions are charged to the profit and loss account as they become payable in accordance with
the rules of the schemes.
2 Segmental Analysis by Class of Business and Geographical Area
(a) Class of business - The Group operates one class of business.
(b) Geographical area - The analysis by geographical area of the Group's turnover, loss before tax and net assets is set out below:
(i) Turnover
Geographical segment
United Kingdom
Rest of Europe
Rest of World
(ii) Loss before taxation
Geographical segment
United Kingdom
Rest of Europe
Rest of World
Loss before interest
Net interest receivable
Loss on ordinary activities before taxation
(iii) Net assets
Geographical segment
United Kingdom
Rest of Europe
Rest of World
2005
2004
Sales by
destination
£
Sales by
origin
£
Sales by
destination
£
Sales by
origin
£
13,024
-
123,934
136,958
-
-
136,958
136,958
-
-
360,185
360,185
2005
£
-
-
360,185
360,185
2004
£
(957,192)
-
(1,127,097)
(2,084,289)
216,899
(762,991)
(29,872)
(851,790)
(1,644,653)
195,096
(1,867,390)
(1,449,557)
2005
£
2004
£
3,733,878
-
1,919,632
5,534,686
-
2,031,429
5,653,510
7,566,115
3 Turnover, Cost of Sales, Gross Profit, Selling and Marketing Costs and Administrative Expenses
Turnover
Cost of sales
Gross profit
Selling and marketing costs
Administrative expenses:
Development expenditure
Amortisation of intangible fixed assets
Other
Total administrative expenses
Net operating expenses
Group operating loss
4 Operating Loss
The operating loss is stated after charging:
Depreciation and amortisation charge for the year:
Intangible owned fixed assets
Tangible owned fixed assets
Operating lease rentals:
Other
The above results for the year relate to continuing operations.
Services provided by the Group's auditor
Audit services
Statutory Audit
Audit related regulatory reporting
Tax services
Compliance services
Advisory services
Other services
2005
£
2004
£
136,958
360,185
(31,339)
(30,649)
105,619
329,536
(185,384)
(296,492)
(653,896)
(94,589)
(1,256,039)
(559,032)
(97,863)
(1,573,658)
(2,004,524)
(2,230,553)
(2,189,908)
(2,527,045)
(2,084,289)
(2,197,509)
2005
£
2004
£
96,625
70,948
97,863
96,049
138,689
204,596
2005
£
51,000
-
16,590
9,050
-
76,640
2004
£
48,080
3,000
12,235
111,704
2,400
177,419
Included in the analysis above are Group audit fees paid to the Group's auditors of £51,000 (2004: £48,080), of which £32,500 (2004: £20,000) was paid in
respect of the parent company.
2 0
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 2 1
Notes continued
5 Exceptional Items
Gain on termination of truCCOMS operations
Gain on disposal of commercial valve operations
Fundamental restructuring costs
Cash consideration
held in Escrow for 12 months
Gain on disposal
The gain during the year ended 31 March 2004 for fundamental restructuring costs arose from the overprovision of estimated costs at 31 March 2003.
6 Interest Receivable
Bank interest
Other interest
7 Directors' Emoluments
2005
£
216,899
-
216,899
2004
£
307,660
111,581
133,615
552,856
87,660
220,000
307,660
307,660
2004
£
184,221
10,875
195,096
Detailed disclosures of Directors' individual remuneration and share options are given in the report of the Remuneration Committee on pages 13 and 14.
Aggregate emoluments
Company pension contributions to money purchase schemes
2005
£
2004
£
284,098
356,420
45,250
8,625
Included in aggregate emoluments for the year ended 31 March 2005 are payments of £87,050 (2004: £61,150) made by the Company to third parties.
8 Employee Information
The average monthly number of persons (including Executive Directors) employed by the Group during the year was:
By activity
Production
Sales
Development
Administration
Staff costs (for the above persons):
Wages and salaries
Social security costs
Other pension costs
Staff costs incurred include redundancy payments of £27,282 (2004: £396,315)
2005
number
2004
number
3
1
9
4
17
1
1
3
16
21
£
702,519
75,543
66,362
£
1,301,060
113,069
36,648
844,424
1,450,777
9 Taxation
Analysis of charge/(credit) in period
Current tax:
UK corporation tax on profits of the year at 30% (2004:30%)
Adjustments in respect of prior years
Total current tax
Deferred tax:
Origination and reversal of timing differences
Tax on loss on ordinary activities
The tax for the period is different than the standard rate of corporation tax in the UK (30%). The differences are explained below:
Loss on ordinary activities before tax
Profit on ordinary activities multiplied by standard rate in the UK 30% (30%)
Effects of:
Depreciation for the period in excess of capital allowances and other timing differences
Expenses not deductible for tax purposes and other permanent tax differences
Losses utilised
Losses not utilised
Adjustment to tax charge in respect of previous year
Current tax credit for the year
2005
£
2004
£
-
-
-
-
-
-
(1,976,817)
(1,976,817)
-
(1,976,817)
(1,867,390)
(1,449,557)
(560,217)
(434,867)
-
3,755
(8,464)
564,926
-
(47,991)
-
-
482,858
(1,976,817)
-
(1,976,817)
The adjustment to the 2004 tax charge in respect of previous periods relates to Research and Development tax credits received by the company for prior periods.
10 Loss for the Financial Year
As permitted by section 230 of the Companies Act 1985, the Parent Company's profit and loss account has not been included in these financial statements.
The Parent Company's loss for the financial year was £493,820 (2004 : £11,939,536).
11 (Loss)/Profit on Ordinary Share
The basic (loss) per ordinary share is calculated on the loss of the Group of £1,867,390 (2004 : profit of £527,260) and on 3,810,278 (2004 : 3,810,278) equity shares,
being the weighted average number of shares deemed to be in issue. The exercise of share options would not have been dilutive and accordingly the basic and diluted
(loss)/profit per share are the same.
12 Intangible Fixed Assets
Group:
Cost
At 1 April 2004
Exchange differences
At 31 March 2005
Amortisation
At 1 April 2004
Exchange differences
Charge for year
At 31 March 2005
Net book value
At 31 March 2005
Net book value
At 31 March 2004
intellectual
property
£
goodwill
£
total
£
1,957,257
(24,769)
19,501,141
-
21,458,398
(24,769)
1,932,488
19,501,141
21,433,629
391,451
(4,954
96,625
)
19,501,141
-
-
19,892,592
(4,954
96,625
)
483,124
19,501,141
19,984,263
1,449,366
1,565,806
-
-
1,449,366
1,565,806
2 2
AORTECH INTERNATIONAL PLC
2 3
AORTECH INTERNATIONAL PLC 2 3
Notes continued
13 Tangible Fixed Assets
Group
Cost
At 1 April 2004
Exchange differences
Additions
At 31 March 2005
Depreciation
At 1 April 2004
Exchange differences
Charge for year
At 31 March 2005
Net book value
At 31 March 2005
Net book value
At 31 March 2004
property
improvements
£
2,253
(29)
-
plant &
equipment
£
900,979
(4,742)
22,861
fixtures
& fittings
£
293,389
(3,713)
5,139
motor
vehicles
£
25,634
-
-
total
£
1,222,255
(8,484)
28,000
2,224
919,098
294,815
25,634
1,241,771
930
(12)
261
803,284
(3,505)
42,409
156,799
(1,985)
28,278
25,634
-
-
986,647
(5,502)
70,948
1,179
842,188
183,092
25,634
1,052,093
1,045
76,910
111,723
1,323
97,695
136,590
-
-
189,678
235,608
No assets were held under hire purchase contracts at 31 March 2005 and 31 March 2004.
14 Fixed Asset Investments
(a) Investment in subsidiary undertakings
Cost as at 31 March 2005 and 1 April 2005
(b) interests in subsidiary undertakings
name of
undertaking
(i)
(ii)
(iii)
(iv)
(v)
(vi)
AorTech Europe Limited
AorTech Critical Care Limited
AorTech Biomaterials Pty Limited
Surgical Accessories Limited
AorTech Limited
AorTech Critical Care International Limited
group
company
2005
£
-
2004
£
-
2005
£
-
2004
£
-
country of
registration or
incorporation
description
of shares held
proportion of nominal
value of shares held by:
company
%
group
%
Scotland
Scotland
Australia
Scotland
Scotland
Scotland
ordinary £1
ordinary £1
ordinary Aus. $1
ordinary £1
ordinary £1
ordinary £1
100
92
100
76
100
100
100
92
100
76
100
100
14 Fixed Asset Investments (continued)
The principal business activities and country of operation of the above operations are:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Ownership of tri-leaflet heart valve intellectual property.
A dormant company.
The development of new biostable polyurethanes, operating principally in Australia.
A dormant company.
A dormant company.
A dormant company.
15 Stocks
All stocks at 31 March 2005 and 31 March 2004 comprise raw materials.
16 Debtors
Amounts falling due within one year
Trade debtors
Other debtors
Prepayments
Amounts falling due after more than one year
Amounts owed by Group undertakings
2005
£
34,501
30,996
213,451
278,948
group
company
2004
£
34,188
23,120
128,540
2005
£
-
28,049
164,478
2004
£
-
4,681
8,750
185,848
192,527
13,431
-
-
6,478,231
5,226,754
Total debtors
278,948
185,848
6,670,758
5,240,185
17 Creditors: Amounts Falling Due Within One Year
Trade creditors
Other taxes and social security
Other creditors
Accruals
Corporation tax
18 Financial Instruments
group
company
2005
£
54,276
(169)
63,731
131,723
98,899
2004
£
121,402
4,303
35,325
178,271
98,899
348,460
438,200
2005
£
-
(169)
-
88,723
-
88,554
2004
£
21,609
-
-
25,800
-
47,409
The Group's financial instruments comprise cash and liquid resources and various items, such as trade debtors and trade creditors, that arise directly from its operations.
The main purpose of these financial instruments is to finance the Group's operations.
The Board reviews and agrees policies for managing each of the risks associated with interest rates, liquidity and foreign currency although to date the Group's exposure
to these risks has not been significant. It is, and has been throughout the year under review, the Group's policy that no trading in financial instruments shall be undertaken.
Interest rate risk
The Group’s current policy is to finance its operations through equity, although in prior years both bank borrowings and hire purchase finance have been used to a
lesser extent.
2 4
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 2 5
Notes continued
18 Financial Instruments (continued)
19 Called Up Share Capital
Liquidity risk
As at 31 March 2005, the Group had no borrowings. Liquidity has been maintained through equity financing.
Foreign currency risk
The Board considers that the Group’s current exposure to foreign currency risk is not material and therefore, is of the opinion that no steps to minimise this exposure
require to be taken for the time being.
The Group has an Australian subsidiary whose costs are denominated in Australian Dollars. The Board will continue to review the situation as activities in this subsidiary
increases.
Short term debtors and creditors
Short term debtors and creditors have been excluded from all of the disclosures in this note, other than the currency risk disclosures.
Interest rate profile of financial liabilities
The Group had no financial liabilities at 31 March 2005 and 31 March 2004.
Profile of financial assets
The profile of the Group's cash and deposits at 31 March 2005 and 2004 was:
Currency:
Sterling
US Dollars
Australian Dollars
Euros
At 31 March 2005
cash at bank and in hand
2004
£
2005
£
short term deposits
2004
£
2005
£
23,345
91,621
71,364
7,744
(4,711)
93,658
167,589
7,830
3,709,470
-
111,582
-
5,703,834
-
-
-
2005
£
3,732,815
91,621
182,946
7,744
total
2004
£
5,699,123
93,658
167,589
7,830
194,074
264,366
3,821,052
5,703,834
4,015,126
5,968,200
Cash at bank is held in interest bearing current accounts. The short term deposits are placed with banks for periods of up to 12 months according to funding
requirements. The weighted average rate of interest earned during the year ended 31 March 2005 was 4.40%. (2004 : 3.02%).
Maturity profile of financial liabilities
The Group had no financial liabilities at 31 March 2005 and 31 March 2004.
Borrowing facilities
As at 31 March 2005, the Group had no undrawn committed borrowing facilities.
2005
£
2004
£
14,000,000
14,000,000
9,525,695
9,525,695
Authorised
5,600,000 (2004 : 5,600,000) Ordinary shares of 250p each
Issued
3,810,278 (2004 : 3,810,278) Ordinary shares of 250p each allotted,
called up and fully paid
20 Options in Shares of AorTech International plc
At 31 March 2005, options were exercisable over the following 250p Ordinary shares:
(i) approved share option scheme
number of shares
subscription price per share
100
200
2,000
12,000
600
7,425p
3,325p
167p
250p
295p
period of option
Between 11 July 2003 and 31 December 2005
Between 29 June 2004 and 31 December 2005
Between 1 January 2005 and 31 December 2005
Between 11 July 2005 and 10 July 2012
Between 26 July 2005 and 25 July 2012
Only Executive Directors and employees resident in the UK are eligible to participate in this scheme. No options were exercised during the year to 31 March 2005.
(ii) unapproved share option scheme
number of shares
subscription price per share
9,600
1,000
2,000
5,000
1,500
1,600
1,050
7,000
19,000
25,000
50,000
1,300
240,500
50,000
1,250p
1,025p
5,625p
7,425p
8,100p
4,175p
9,035p
250p
280p
165p
168p
1725p
168p
196p
period of option
Between 5 February 2000 and 4 February 2007
Between 9 January 2001 and 8 January 2008
Between 17 December 2002 and 16 December 2009
Between 11 July 2003 and 10 July 2010
Between 16 June 2003 and 15 June 2010
Between 29 May 2004 and 28 May 2011
Between 18 December 2003 and 17 December 2010
Between 11 July 2005 and 10 July 2012
Between 8 August 2005 and 7 August 2012
Between 14 July 2006 and 14 July 2013
Between 1 November 2004 and 31 October 2005
Between 18 December 2004 and 17 December 2011
Between 30 June 2007 and 29 June 2014
Between 22 November 2007 and 21 November 2014
Fair values of financial assets and financial liabilities
The fair value of all the Group’s financial assets and financial liabilities is equivalent to the carrying values reported in the balance sheet.
Hedges
The Group’s policy is not to hedge against exposure to interest rate or currency risks, except to the extent that forward purchase contracts may be used when
considered appropriate.
Any person who at the date of grant of the option is approved by the Board of Directors is eligible to participate in this scheme.
No options were exercised during the year to 31 March 2005.
(iii) other
The range in the mid market price of the Company's shares during the year ended 31 March 2005 was from 147.5p to 202.5p.
The mid market price on 31 March 2005 was 196p.
2 6
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 2 7
Notes continued
21 Share Premium Account and Reserves
Group
At 1 April 2004
Loss for the year
Exchange differences arising on consolidation
Reduction in share premium
At 31 March 2005
Company
At 1 April 2004
Loss for the year
Exchange differences arising on consolidation
Reduction in share premium
At 31 March 2005
share
premium
account
£
63,359,594
-
-
(63,359,594)
other
reserve
£
profit
and loss
reserve
£
(2,003,143)
-
-
-
(63,316,031)
(1,867,390)
(45,215)
63,359,594
-
(2,003,143)
(1,869,042)
share
premium
account
£
profit
and loss
reserve
£
63,359,594
(63,359,594)
(62,020,656)
(493,820)
(62,026)
63,359,594
-
783,092
On 4 March 2005, the Court of Session approved a reduction in the Company's share premium account of £63.3 million, as approved by the Company's shareholders at
the Annual General Meeting held on 1 October 2004.
22 Reconciliation of Movements in Group Shareholders' Funds
Opening shareholders’ funds
(Loss)/Profit for the financial year
Exchange differences arising on consolidation
Closing shareholders' funds
2005
£
2004
£
7,566,115
6,908,831
(1,867,390)
(45,215)
527,260
130,024
5,653,510
7,566,115
23 Reconciliation of Operating Loss to Net Cash Flow from Operating Activities
Group operating loss
Amortisation of intangible fixed assets
Depreciation of tangible fixed assets
Increase in stocks
(Increase) / decrease in trade debtors
(Increase) / decrease in prepayments
(Increase) / decrease in other debtors
Decrease in trade creditors
Decrease in taxes and social security
Increase in other creditors
Decrease in accruals
Net cash outflow from operating activities
2005
Continuing
£
(2,084,289)
96,625
70,948
(19,999)
(684)
(85,300)
(7,992)
(86,317)
(4,472)
28,763
(46,386)
(2,139,103)
Net cash outflow from operating activities for the year to 31 March 2004 included expenditure of £636,518 which was not incurred in the current year.
24 Reconciliation of Net Cash Flow to Movement in Net Funds
2004
Continuing
£
(2,197,509)
97,863
96,049
(48,853)
204,016
69,702
82,911
(2,885)
(43,076)
2,386
(159,494)
(1,898,890)
2004
£
(164,162)
(734,983)
(899,145)
16,002
(883,143)
6,851,343
5,968,200
2005
£
44,160
(1,994,364)
(1,950,204)
(2,870)
(1,953,074)
5,968,200
4,015,126
1 april
2004
£
cash
flow
£
exchange
differences
£
31 march
2005
£
5,968,200
(5,703,834)
(1,950,204)
1,994,364
264,366
44,160
(2,870)
-
(2,870)
4,015,126
(3,709,470)
305,656
5,703,834
(1,994,364)
-
3,709,470
5,968,200
(1,950,204)
(2,870)
4,015,126
Increase / (decrease) in cash in the year
Cash outflow from decrease in liquid resources
Change in net debt resulting from cash flows
Other non-cash items:
Currency translation differences arising on consolidation
Movement in net funds in the year
Net funds at 1 April 2004
Net funds at 31 March 2005
25 Analysis of Net Funds
Net cash:
Cash at bank and in hand
Deposits treated as liquid resources
Liquid resources:
Deposits included in cash
Net funds
2 8
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 2 9
Notes continued
Notice of Annual General Meeting
26 Pension and Similar Obligations
Notice is hereby given that the eighth Annual General Meeting of AorTech International plc will be held at Buchanan Communications Limited, 107 Cheapside,
London EC2V 6DN on 26 October 2005 at 12 noon for the following purposes:
The Group operates defined contribution pension schemes for employees. The assets of the schemes are held separately from those of the Group in independently
administered funds. Contributions payable by the Group amounted to £66,362 (2004 : £36,648).
As Ordinary Business
27 Capital Commitments
The Group had no capital commitments at 31 March 2004 and 31 March 2005.
28 Financial Commitments
At 31 March 2005 the Group had annual commitments under non-cancellable operating leases as follows:
Expiring within one year
Expiring between one and two years
Expiring between two and five years
Expiring over five years
29 Related Party Transactions
land and
buildings
£
102,657
15,833
-
-
118,490
2005
2004
other
£
-
-
-
-
-
land and
buildings
£
37,254
-
-
32,324
69,578
other
£
-
-
13,932
-
13,932
In accordance with FRS 8, “Related Party Disclosures”, AorTech International plc has taken advantage of the exemption for over 90% owned subsidiaries not to disclose
any transactions or balances between group entities including those that have been eliminated on consolidation.
30 Contingent Liability
The legal action against Artech srl and their counterclaim, reported in the 2004 Annual Report, has been settled by the agreement of each party to withdraw their
respective claims.
1
2
3
4
5
6
To receive and adopt the financial statements of the Company for the year ended 31 March 2005 together
with the Reports of the Directors and Auditors thereon.
To approve the Report of the Remuneration Committee for the year ended 31 March 2005.
To re-elect as a Director Frank Maguire, who is retiring by rotation.
To elect as a Director Dr Stuart Bernard Rollason, who was appointed a Director on 13 May 2005.
To elect as a director Jon Peter Pither, notwithstanding that he has attained the age of 70.
To appoint Grant Thornton UK LLP as auditors of the Company and to authorise the Directors
to fix their remuneration.
As Special Business
To consider; and if thought fit, pass the following resolution as an Ordinary Resolution.
7
That the name of the Company be changed to AorTech Biomaterials plc.
By order of the Board,
J C D Parsons
Company Secretary
9 September 2005
Victoria Road
Surbiton
Surrey KT6 4NS
1
2
3
4
5
Any member of the Company who is entitled to attend and vote at the Annual General Meeting may appoint another person or persons
(whether a member or not) as their proxy to attend and, on a poll, to vote on their behalf.
To be valid, Forms of Proxy must be lodged with the Company's Registrars, Lloyds TSB Registrars, The Causeway, Worthing, BN99 6ZR
not later than 48 hours before the time appointed for the holding of the meeting or any adjourned meeting together with any
documentation required.
In the case of a corporation, the Form of Proxy should be executed under its common seal or signed by a duly authorised officer or attorney of
the corporation.
Completing and returning a Form of Proxy will not prevent any member from attending the meeting in person and voting should they so wish.
The following documents will be available at the registered office of the Company on any weekday (except Saturday) during normal business hours
from the date of this notice until the date of the Annual General Meeting:
(a)
(b)
(c)
(d)
A copy of the service agreements for the Executive Directors.
A copy of the letters of appointment for the non-Executive Directors.
The register of interests of the Company's Directors in the shares of the Company which is maintained under
Section 325 of the Companies Act 1985.
The Memorandum and Articles of Association of the Company.
These documents will also be available for inspection during the Annual General Meeting and for at least fifteen minutes before it begins.
3 0
AORTECH INTERNATIONAL PLC
AORTECH INTERNATIONAL PLC 3 1