AorTech
annual
report
AorTech International plc
Annual Report & Accounts
For the year to
31 March 2011
A O R T E C H I N T E R N A T I O N A L P L C
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and
AorTech’s POLYMER HEART VALVE
has demonstrated
TECHNOLOGY
durability
hemodynamic
performance equivalent or better to
that of the current gold standard
replacement heart valves.
Additionally we believe that this
technology could bring significant
benefits
traditional and
the
minimally invasive valve markets.
to
One of the difficulties experienced in
MEDICAL DEVICE CONSTRUCTION is creating
a good bond between silicone rubbers
and other materials. AorTech has
developed technology which creates a
bond between the Elast-Eon™ and
silicone rubbers that is very strong i.e.,
the silicone rubber fails mechanically
before the Elast-Eon™ delaminates.
ENGINEERS AND DESIGNERS SELECT
ELAST-EON™ BIOMATERIALS to improve
medical device performance, reduce
costs and
improve component
performance. The AorTech team
assist medical device manufacturers
exploit greater design freedom to
create differentiated medical devices.
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January 2011_AorTech Enters Orthopaedic Market
with Polymer Licence and Manufacturing Deal;
December 17 2010_AorTech Polymers Significantly
Improve Reliability Performance for Pacemaker
Products; December 13 2010_AorTech Announces
Commencement of Human Use of its Header and
Lead Insulation Technology in a Neurostimulation
Implant; August 19 2010_AorTech Chief Scientific
Officer presents Lecture at Medical Grade Polymers
Conference; May 24 2010_AorTech Announces
Technology and License Agreement for its Elast-Eon™
polymers as an integral part of a drug delivery
platform for urological catheters;
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04 Chairman’s Statement
09 Board of Directors
and Advisors
10 Report of the Directors
15 Statement of
Directors’ Responsibilities
16 Corporate Governance
17 Accountability and Audit
18 Report of the
Remuneration Committee
21 Independent Auditor’s
Report
23 Consolidated Income
Statement
24 Consolidated Statement of
Comprehensive Income
25 Consolidated Balance Sheet
26 Consolidated Cash Flow
Statement
27 Consolidated Statement of
Changes in Equity
28 Notes to the
Financial Statements
47 Independent Auditor’s
Report on the Parent
Company Financial
Statements
49 Parent Company
Balance Sheet
50 Notes to the
Parent Company
Financial Statements
53 Notice of the
Annual General Meeting
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Financial Review
I am pleased to
report to you that
the year ended
31 March 2011 was
another period of
advancement for
the Group.
Results and Key
Performance Indicators
Group revenue for the year to 31 March
2011 was £1.6m, thereby reflecting an
increase from the £1.4m recorded in the
twelve months to 31 March 2010.
Licensing fees, royalties, bulk material
and components are reflected in this
year’s reported revenues. Operating
expenses increased by £757,000 from
£3,727,000 in the corresponding period
last year to £4,484,000, reflecting an
impairment charge of
exceptional
£455,000
considerable
and
strengthening of the Australian Dollar,
being the currency of the manufacturing
cost base, against both the Pound
Sterling currency of the financial results
reporting and the sales revenues in US
Dollars. This exceptional impairment
charge relates to the residual assets in
Australia with no further use following
the
relocation of manufacturing
operations to the USA referred to
below. As a consequence, the loss
before taxation was increased from
£1.9m in the previous year to £2.5m.
the
The cash position as at 31 March 2011
was £1.4m, being some £1.5m less than
on the corresponding day in 2010. I
would emphasise, however, that our
cash position is expected to improve
during the course of this year as a
result
completed
recently
restructuring of certain customer
licences which will result in additional
licence revenue of US$4.2m in the
financial year to 31 March 2012.
of
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Operational Review
The Group has
experienced a very
dynamic, but on the
whole, positive recent
history in the events
that lead up to this
Statement.
During the first half of 2011, it became
increasingly clear that the business was
losing out on commercial opportunities
with existing and potential customers
based in the US because of its distant
factory location in Australia. This was a
significant factor impacting the medium to
long term business outlook of the Group:
our customers had indicated this to us
directly. Additionally, as a consequence
of the significant 2-year fall of the US
Dollar against the Australian Dollar and the
resultant loss of certain new business
opportunities, subsequent to the year end
in 2011 the Group decided to put into action
a strategic plan developed during the
previous year. In the 5 years since the
commencement of the commercial phase
of the business on July 24 of 2006 with
the first human implant of a device
constructed from Elast-Eon™ polymer, the
pro rata expense of running the Australian
factory had doubled against the US Dollar,
the primary currency of the Group’s sales
receipts.
In mid-2010, Management had developed a
two-stage plan for the relocation of the
Group’s factory from Melbourne, Australia
to the Minneapolis / St. Paul area in the
United States.
As stated above, the two primary factors
driving this strategy were the significant
appreciation of the Australian Dollar
against the US Dollar and the proximity of
the business to our customers.
The original plan was to first move the
location-sensitive component business and
follow this up at a later date with a
cost-driven consolidation of the polymer
business in the same location. After careful
consideration of these factors earlier this
year, subsequent to the year end the
Group executed its plan in one step and
moved expediently to restructure certain
licences to produce the funds necessary to
move the majority of factory operations
from Australia to the US. One-time,
non-dilutive
this
revenues
restructuring amounted to US$4.2m of
which US$1.8m was used to finance the
move of
factory and certain
employees. This process is ongoing but as
of the time of writing it is on schedule and
on budget. The Group plans to produce its
first batch of polymer in the new US
factory during the final quarter of 2011.
from
the
initiatives
that have
New business
commenced since the announcement of the
move to the USA provide a strong
indication that this analysis was correct
and that the move will bring tangible
benefits in the short to medium term.
The customer reaction to this move has
been universally positive. New licences in
Blood Glucose monitoring and Plastic
Surgery (breast implants) have been
accelerated by this move. Additionally
existing accounts are being further
developed from basic polymer supply
agreements into added value component
business. Many of our customers prefer
that AorTech produces their components
but in the past the engineering intensity
of these component business development
programmes and the logistics associated
with the requirement for frequent and
recurring routine delivery of products
precluded our ability to effectively
develop
from
Australia.
opportunities
these
reduction
With the acceleration of the polymer and
component businesses and an anticipated
significant
operating
in
the new
expenses associated with
Minnesota factory, Management projects
that 2012 will be a year of cash
generation, and thereafter, the highly
leverageable characteristics of our
business, coupled with new accounts,
should result in a stable business capable
of generating returns for shareholders.
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In addition to
the aortic
percutaneous
heart valve
(‘PHV’), our
mitral repairs
licensee
continues to
make progress
and is projecting
human use of this
royalty-bearing
application before
the end of
calendar year
2012.
this
technology,
In the past, I have spoken of the
commercial development of the Group’s
heart valve technology portfolio. While we
remain optimistic regarding the potential
the continued
for
improvement of biological heart valve
clinical outcomes alongside the rapidly
growing market for trans-catheter heart
valves is causing us to reconsider our
strategy in this space. We expect our
technology to continue to move ahead into
the commercial phase but it is increasingly
likely that the trans-catheter application
and the surgical manifestation of this
technology will target different markets.
In addition to the aortic percutaneous heart
valve (‘PHV’), our mitral repairs licensee
continues to make progress and is
projecting
this
royalty-bearing application before the end
of calendar year 2012.
human
use
of
Our device portfolio now also includes a
peripheral vascular graft project Joint
Venture in the negotiation stage and breast
implant project with four definable phases.
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our new US presence, we will be in a
significantly better position to exploit our
manufacturing process know-how in
conjunction with our polymer technology
for both low and high volume catheters,
catheter over-moulding, a variety of
header components and anywhere a
biostable polymer needs to be effectively
implant
to commonly used
bonded
materials, including metals, ceramics and
other engineered polymers.
Outlook
The physical move from Melbourne to
Minneapolis has been most positively
welcomed by our essential US customer
base. Indeed, we can already point to
additional business
the move has
secured, and it is expected that this will
result in more business wins; the prime
goal of the decision to relocate to the
US. Once our move to the USA is
completed we will consider whether it
may be more appropriate to move our
listing to a US market, also depending
on economic conditions and Group
performance at that point.
The new and supplementary products and
commercial opportunities covered in this
Statement are realistically expected to
come to fruition during the current
financial year. Thanks to the dedication
and skill of our management and staff in
the USA and Australia the first vital step
is nearing completion. This paves the way
for future far-reaching structural advance.
Your Board therefore anticipates the future
with enthusiasm and confidence.
Jon Pither
Chairman
Growth of the
Polymer Business
Elast-Eon™, now with 5 years of clinical
experience and millions of implants, is a
proven material and useful for many
applications. Our ECSiL™ polymer, essentially
a super silicone, is in late stage evaluations
for a number of demanding long-term
implant applications. We expect to see the
first human implantation of ECSil™ before
the second half of 2012.
In general,
the Elast-Eon™ clinical
experience continues to be completely
trouble free. Each of our licences requires
notification of an adverse clinical event.
There have been none. More specifically,
our polymers are providing advantages for
our customers’ products; namely cardiac
cannulae that are free from thrombus;
pacemaker leads that are the most reliable
in the industry; implantable sensors that
can be injected without damage; urology
catheters that carry anti-bacterial and
anti-inflammatory agents, and biliary and
prostatic stents that remain free from
blockage.
Components
Our ability to provide a high strength, low
profile header for neurostimulation use will
provide direct financial returns in addition
to attracting attention of companies in the
much larger cardiac rhythm management
sector. This first use of our polymers with
our proprietary small part reaction
injection moulding process is now moving
ahead into early stage trials with a novel
orthopaedic device. We believe that with
The new and supplementary products
and commercial opportunities covered
in this Statement are realistically
expected to come to fruition during
the current financial year.
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A O R T E C H I N T E R N A T I O N A L P L C
board of
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Directors
Jon Pither non-Executive Chairman
Frank Maguire Chief Executive
Eddie McDaid non-Executive Director
Dr Stuart Rollason non-Executive Director
Gordon Wright non-Executive Director
Company Secretary
David Parsons ACIS
Registered Office
C/o Brodies LLP
2 Blythswood Square
Glasgow G2 4AD
Head Office
Level Two
Springfield House
23 Oatlands Drive
Weybridge
Surrey KT13 9LZ
web: www.aortech.com
email: info@aortech.com
Nominated Adviser and Broker
Evolution Securities Limited
100 Wood Street
London EC2V 7AN
Registrars
Equiniti Registrars Scotland
1st Floor
34 South Gyle Crescent
South Gyle Business Park
Edinburgh EH12 9EB
Independent Auditor
Grant Thornton UK LLP
Statutory Auditor
Chartered Accountants
Regent House
80 Regent Road
Leicester LE1 7NH
Registered in Scotland, Company No.170071
Financial statements will be circulated to
Shareholders and copies of the announcement
will be made available from the Company’s
registered office. Dealings permitted on
Alternative Investment Market (AIM) of the
London Stock Exchange.
report of
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The Directors present their report and the audited
financial statements for the year ended 31 March 2011.
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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 and medical devices.
Review of Business & Future Developments
During the financial year under review the Group continued to achieve key operational milestones in the use of its core product
Elast-Eon™ polymer, and to develop its new super silicone polymer product ECSil™. These milestones included the development
and refinement of the materials for the medical community with the aim of providing a wide range of high performance polymers
in a variety of application specific formulations and densities for use in medical devices. Looking forward, the business is
increasingly utilising the co-development of Elast-Eon™ components and the manufacture of these components to drive top line
revenue. The Group’s specific advantage is an ability to process Elast-Eon™ and ECSil™ polymers in ways that are unique and
of high value to numerous customer-based product development programmes.
During the year costs of £1,333,000 (2010: £1,121,000) were charged to the Income Statement as development expenditure. The
consolidated Income Statement is set out on page 23 indicating the Group’s loss for the financial year of £2,501,000 (2010:
£1,923,000) which will be added to the deficit on reserves.
On a Group basis the business review and future prospects are contained within the Chairman's Statement. The Directors consider
the Group financial key performance indicators to be revenue growth, control of operating expenses and the pre tax result. These
are summarised within the financial review section of the Chairman's Statement. In addition the Directors consider the Group non
financial key performance indicators to be the development of new application areas for its polymer products including components
and devices, trials and human use of the polymer heart valve and the signing of new licence agreements. These are summarised
in the operational highlights section of the Chairman's Statement.
On 16 June 2011 the Group announced the relocation of the Group's primary manufacturing operations from Melbourne, Australia
to the Minneapolis/St Paul area in the USA. The total cost of this strategically important move is expected to be US$1.8m, which
will be fully funded from payments that the Group will receive following the restructuring of certain customer licences (amounting
to US$4.2m) and the sale of certain highly depreciated capital assets (amounting to US$0.3m). The surplus funds will enable
production to be commenced at the US facility, provide cash for working capital purposes and provide a solid base upon which
to grow the component business, with the emphasis on accelerating a number of pacemaker, header and other reaction injection
moulding projects. Given the main market for the Group’s products is the USA, the relocating during 2011 of the manufacturing
operation from Melbourne, Australia to Rogers, Minnesota is expected to result both in significant cost savings and increased
market awareness and penetration.
The Directors consider the principal risks and uncertainties facing the Group at this stage of its development to be as follows:
small customer base generating revenues; retention of key management and personnel; reliability of products in the event of
undetected faults after shipment; any adverse results which may arise during development phases; product liability risks;
competitive markets with changing technology and evolving industry standards, foreign currency movements and delays in
commencing production in the new US facility. All of the above risks and uncertainties are considered fundamental to the
achievement of the Group's strategy and are being actively managed at Board level, along with the internal control environment
detailed on page 17 below.
No dividends have been paid or proposed for the years ended 31 March 2011 and 31 March 2010.
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Directors & Their Interests
At 31 March 2011 the Chairman of the Company was J Pither; the Executive Director was F Maguire and the non-Executive
Directors were E McDaid, Dr S Rollason and G Wright. No other Director served during the year ended 31 March 2011.
At each Annual General Meeting one third of the Directors shall be subject to retirement by rotation. E McDaid retires
from the Board at the Annual General Meeting and, being eligible, offers himself for re-election.
The interests of the Directors at 31 March 2011 and 31 March 2010 in the ordinary share capital of the Company (all
beneficially held) were as follows:
31 March 2011 31 March 2010
Number of shares Number of shares
J Pither 15,050 15,050
F Maguire 81,050 81,050
E McDaid 363,383 333,383
S Rollason 11,825 11,825
G Wright 335,107 305,107
Substantial Shareholders
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 1 July 2011 exceeded 3% of the Company’s issued share
capital:
Number of shares %
Chase Nominees Limited* 1,064,435 22.03%
Mr Edward McDaid 363,383 7.52%
Credit Agricole Cheuvreux International Limited 3439 347,500 7.19%
Caricature Investments Limited** 335,107 6.93%
The Bank of New York (Nominees) Limited DBV303 270,987 5.61%
Mr Roy Mitchell and Mrs P Mitchell 260,963 5.40%
The Bank of New York (Nominees) Limited 585665 157,000 3.25%
* the holding of Chase Nominees Limited includes 891,861 shares held by Bluehone Investors LLP as fund manager of
Active Capital Trust plc which accounts for 18.45% of the Company’s issued share capital. Dr S Rollason is also a
Director of Bluehone Investors LLP. Dr S Rollason owned 11,825 shares in the Company at 1 July 2011.
**Caricature Investments Limited is a company wholly owned by Mr G Wright, a Director of the Company.
The percentage of shares not in public hands (as defined in the AIM rules) at 1 July 2011 was 35.0%.
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 opportunities are given to all employees regardless of their gender, colour, race, religion or ethnic origin.
Applications for employment from disabled persons are always considered fully 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
training, career development and promotion of disabled persons should, as far as possible, be identical with that of
other employees.
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Market Risk
Market risk encompasses two types of risk, being currency risk and fair value interest rate risk. The Group’s policies
for managing fair value interest rate risk are considered along with those for managing cash flow interest rate risk
and are set out in the sub-section entitled “interest rate risk” below.
Currency Risk
The Group is exposed to translation and transaction foreign exchange risk. The majority of the Group’s sales are to
customers in the United States. These sales are priced and invoiced in US dollars. The Group policy is to try and
match the timing of the settling of these sales and purchase invoices so as to eliminate, as far as possible, currency
exposures. The move of operations from Australia to the United States since the year end will assist in managing
this risk.
The tables below show the extent to which the Group has residual financial assets and liabilities. Foreign exchange
differences on retranslation of these assets and liabilities are taken to profit or loss of the Group, other than in
respect of the retranslation of foreign subsidiary balances arising on consolidation which are recognised in other
comprehensive income and accumulated in the foreign exchange reserve.
Net foreign currency monetary assets
Australian dollar Euro US dollar Total
£000 £000 £000 £000
2011
Sterling 1,290 11 58 1,359
2010
Sterling 2,794 11 32 2,837
Liquidity Risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and
by investing cash assets safely and profitably.
Interest Rate Risk
The Group finances its operations through retained cash reserves.
The interest rate exposure of the financial assets and liabilities of the Group as at 31 March 2011 is shown in the table
below. The table includes trade receivables and payables as these do not attract interest and are therefore subject to
fair value interest rate risk.
Fixed Floating Zero Total
£000 £000 £000 £000
Financial assets
Cash 1,138 156 87 1,381
Trade receivables - - 834 834
1,138 156 921 2,215
Interest rate
Financial liabilities
Trade payables - - 160 160
- - 160 160
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Credit Risk
The Group’s principal financial assets are cash and trade receivables. The credit risk associated with the cash is limited
as the counterparties have high credit ratings assigned by international credit-rating agencies. The principal credit risk
arises therefore from trade receivables.
Capital Management Objectives
The Directors’ capital management objectives are to ensure the Group’s ability to continue as a going concern and to provide
an adequate return to shareholders. The parent and subsidiary companies’ Boards meet regularly to review performance
and discuss future opportunities and threats with the aim of optimising sustainable returns and minimising risk.
Payables Payment Policy
The Group’s current policy concerning the payment of the majority of its trade payables is to follow the ‘Better Payment
Practice Code’ issued by the Better Payment Practice Group. For other suppliers, the Group 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 payables 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 Company’s average payables payment period at 31 March 2011 was
13 days (2010: 30 days).
Charitable & Political Donations
During the year the Group made no charitable or political donations (2010: nil).
Annual General Meeting
The notice convening the Annual General Meeting for 2:00pm on Thursday, 8 September 2011 in the Mansfield Suite of
the Renaissance London Chancery Court Hotel, 252 High Holborn, London, WC1V 7EN is set out on page 53. 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 approval of the Company's financial statements for the year ended 31 March 2011.
Resolution 2 provides for approval of the Report of the Remuneration Committee for the year ended 31 March 2011.
The vote is advisory and the Directors entitlement to remuneration is not conditional on the resolution being passed.
Resolution 3 deals with the re-appointment of the Director required by the Company's Articles of Association to retire
this year.
Resolution 4 deals with the re-appointment of Grant Thornton UK LLP as the Company's auditor. Following assessment
by the Audit Committee the Board considers the auditor to be effective and independent in their role.
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Resolution 5 provides under the Companies Act 2006 (Section 551) the directors of a company may only allot shares if
authorised to do so. Passing this Resolution will continue the Directors’ flexibility to act in the best interests of
shareholders when opportunities arise by issuing new shares. In Resolution 5 the Company is seeking authority to allot
shares with a nominal value of up to £4,027,315 which represents one third of the Company’s issued ordinary share
capital. The Directors intend to use this authority, which will lapse at the conclusion of the next Annual General Meeting
of the Company, for general corporate purposes.
Resolution 6 provides if shares are to be alloted for cash, the Companies Act 2006 requires that those shares are offered
first to the existing shareholders in proportion to the number of shares they hold at the time of the offer. However, it
may sometimes be in the interests of the Company for the Directors to allot shares other than to shareholders in
proportion to their existing holdings. At last year’s Annual General Meeting shareholders authorised the Board, subject
to specified limits:
• to allot shares in connection with a rights issue, defined in summary as, an offer of equity securities to
shareholders which is open for a period decided by the Board subject to any limits or restrictions which the
Board thinks are necessary or appropriate.
• to allot shares not in connection with a rights issue up to a specific amount so that the pre-emption requirement
does not apply to the allotments of shares for cash up to that amount.
This authority is required to be renewed annually. The Directors will be empowered by Resolution 6 to allot equity
securities (within the meaning of Section 560 of the Companies Act 2006) for cash without complying with the statutory
pre-emption rights of shareholders under section 561 of the Companies Act 2006, up to a maximum nominal amount of
approximately £604,097. This disapplication is limited to allotments made to ordinary shareholders and holders of any
other class of equity security in proportion (as nearly as may be) to their holdings and, otherwise, to allotments up to
a maximum of 5% of the Company’s issued ordinary share capital.
There are no current plans to allot shares except in connection with the employee share schemes.
Resolutions 1 to 4 are termed ordinary business. Resolutions 5 and 6 are termed special business.
J C D Parsons
Company Secretary
AorTech International plc
Company number SCO170071
Weybridge
28 July 2011
RECOMMENDATION:
An explanation of the resolutions to be proposed is set out on pages 13 and 14 of this document. The Directors consider
that all the resolutions to be put to the meeting are in the best interests of the Company and its shareholders as a
whole. Your Board will be voting in favour of them and unanimously recommends that you do so as well.
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The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and Applicable Laws) and the Group financial statements in
accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs). Under company
law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view
of the state of affairs and profit or loss of the company and group for that period.. In preparing these financial statements,
the Directors are required to:
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select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards and IFRSs have been followed, subject to any material
departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
In so far as the Directors are aware:
•
•
there is no relevant audit information of which the Company's auditor is unaware; and
the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant
audit information and to establish that the auditor is aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on
the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Auditor
Grant Thornton UK LLP have expressed their willingness to continue in office as auditor and a resolution to reappoint
them will be proposed at the Annual General Meeting.
By Order of the board:
J C D Parsons
Company Secretary
Weybridge
28 July 2011
corporate
(cid:78)(cid:86)(cid:93)(cid:76)(cid:89)(cid:85)(cid:72)(cid:85)(cid:74)(cid:76)
The Group currently has a reduced Corporate Governance structure, reflecting the present stage of development, the
size of the business and the Directors’ assessment of the cost / benefit balance of full Corporate Governance. The
situation will, however, continue to be kept under review in the light of ongoing corporate developments and scaling up
of activities.
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Directors
The Company is controlled by the Board of Directors which, at 31 March 2011, comprised one Executive and three
non-Executive Directors and a non-Executive Chairman. All Directors are able to take independent advice in furtherance
of their duties if necessary.
A O R T E C H I N T E R N A T I O N A L P L C
accountability
(cid:13)(cid:3)(cid:72)(cid:92)(cid:75)(cid:80)(cid:91)
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The Board includes a detailed review of the performance of the Group in the Chairman’s Statement on pages 4 to 8.
Reading this alongside the Report of the Directors on pages 10 to 14 the Board seeks to present a balanced and
understandable assessment of the Group’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 risk factors facing the Group 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 financial controls. However, it should be recognised that
such a system can provide only reasonable and not absolute assurance against material misstatement or loss.
The principal elements of the system include:
•
•
•
•
A clearly defined structure which delegates authority, responsibility and accountability.
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.
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 and chaired by E McDaid, meets at least twice per year
and overviews the monitoring of the Group’s internal controls, accounting policies, financial reporting and provides a
forum through which the external auditor reports, as well as ensuring the auditor remains independent of the Company.
It meets at least once a year with the external auditor without Executive Board members present.
Audit independence
Under the Ethical Standards issued by the Auditing Practices Board, an audit engagement partner responsible for the
audit of a listed company normally serves in that role for a period of no more than five years. However, there is scope
for Audit Committees to decide that a degree of flexibility over the timing of rotation is necessary to safeguard the
quality of the audit.
The Audit Committee has determined that, due to the substantial changes occurring in respect of the nature and structure
of the Group’s business, and in particular the relocation of the primary manufacturing operations of the Group from
Melbourne, Australia to the Minneapolis / St Paul area in the United States, it would be in the interests of audit quality
that the current audit engagement partner should continue in his role for the audits of the 2011 and 2012 accounts. The
Audit Committee is satisfied that by the application of safeguards, the extension does not undermine the objectivity and
independence of the auditor.
Grant Thornton UK LLP has agreed to these extensions, which will bring the total period served by the audit engagement
partner to seven years, as permitted by Ethical Standards.
Going Concern
After considering the year end cash position, making appropriate enquiries and reviewing budgets, profit and cash flow
forecasts and business plans, including the costs and impact of relocating the Group's manufacturing operations from
Australia to the USA, for a period of at least 12 months from the date of signing these financial statements, the Directors
have formed a judgement at the time of approving the financial statements that there is a reasonable expectation that the
Group has more than sufficient 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 financial statements is
appropriate.
report of the
(cid:89)(cid:76)(cid:84)(cid:92)(cid:85)(cid:76)(cid:89)(cid:72)(cid:91)(cid:80)(cid:86)(cid:85)(cid:3)(cid:74)(cid:86)(cid:84)(cid:84)(cid:80)(cid:91)(cid:91)(cid:76)(cid:76)
This report has been prepared largely in accordance with Schedule 8 of the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008, which introduced new statutory requirements for the disclosure of
Directors’ remuneration in respect of periods commencing on or after 6 April 2008. The report also meets the relevant
requirements of the AIM Rules and describes how the Board has applied the Principles of Good Governance relating to
Directors’ remuneration. In accordance with best practice, notwithstanding that these regulations do not apply to AIM
companies, 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:
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Dr S Rollason (Chairman)
E McDaid
J Pither
G Wright
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 Group’s staff,
including incentive arrangements for bonus payments and grants of share options.
The constitution and operation of the Committee is in compliance with the provisions of the Combined Code 2008 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:
•
•
•
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
Group 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.
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 Director
The Executive Director has a service contract, which can be terminated on one year’s notice by either party. The
Remuneration Committee will review each case of early termination individually in order to ensure compensation
settlements are made which are appropriate to the circumstances, taking care to ensure that poor performance is not
rewarded. The most recent executed contract for the Executive Director was for F Maguire on 6 December 2002. 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.
A O R T E C H I N T E R N A T I O N A L P L C
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Salaries and Benefits
The Remuneration Committee meets twice each year to consider and set the annual salaries and benefits for the Executive
Director, having regard to personal performance and independent advice concerning comparable organisations.
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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.
Share Options
The Company operates an Approved 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 HM Revenue and Customs 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 and
after the elapse of three years from the date of grant of the option.
Pensions
The Group made contributions to a personal pension plan for F Maguire at the rate of 10% of pensionable salary.
Directors’ Emoluments - audited
Details of individual Director’s emoluments for the year are as follows:
2011 2010
Salary Benefits Pension
& fees in kind contributions Total Total
£ £ £ £ £
Executive
F Maguire 191,311 7,200 15,000 213,511 255,016
Non-executive
J Pither (Chairman) 30,000 - - 30,000 30,000
Dr S Rollason 21,000 - - 21,000 18,000
E McDaid 30,000 - - 30,000 22,000
G Wright 18,000 - - 18,000 18,000
290,311 7,200 15,000 312,511 343,016
Benefits in kind include the provision of a company car and medical insurance.
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 those services.
Dr S Rollason is employed by Bluehone Investors LLP (‘Bluehone’) in the provision of services to the Company. All of the
emoluments of Dr S Rollason above are represented by payments made by the Company to Bluehone in respect of these services.
Directors’ Interests In Shares
The interests of Directors in shares of the Company are included in the Report of the Directors on page 11.
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Directors’ Interests In Share Options
The details of options held by Directors are set out below:
Number of options
At 1 Granted/ At 31 Date
April (expired) March Exercise from which Expiry
2010 during year 2011 price exercisable date
(i) Approved Share Option Scheme
F Maguire 12,000 - 12,000 £2.50 11/07/2005 11/07/2012
(ii) Unapproved Share Option Scheme
F Maguire 7,000 - 7,000 £2.50 11/07/2005 10/07/2012
19,000 - 19,000 £2.80 08/08/2005 07/08/2012
25,000 - 25,000 £2.50 14/07/2006 13/07/2013
200,000 - 200,000 £2.50 30/06/2007 29/06/2014
J Pither 20,000 - 20,000 £3.25 01/09/2009 01/09/2016
J Pither - 5,000 5,000 £2.50 16/06/2013 15/06/2020
Dr S Rollason 13,000 - 13,000 £3.25 01/09/2009 01/09/2016
Dr S Rollason - 5,000 5,000 £2.50 16/06/2013 15/06/2020
The range in the mid market price of the Company’s shares during the year ended 31 March 2011 was from £2.20
to £1.355. The mid market price on 31 March 2011 was £1.94.
On behalf of the Board,
Dr Stuart Rollason
Chairman of the Remuneration Committee
28 July 2011
A O R T E C H I N T E R N A T I O N A L P L C
independent
(cid:72)(cid:92)(cid:75)(cid:80)(cid:91)(cid:86)(cid:89)(cid:187)(cid:90)(cid:3)(cid:89)(cid:76)(cid:87)(cid:86)(cid:89)(cid:91)(cid:3)
To the Members of
AorTech International plc
1
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We have audited the Group financial statements of AorTech International Plc for the year ended 31 March 2011 which
comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated
balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and the related
notes. The financial reporting framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 15, the Directors are responsible
for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
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Opinion on financial statements
In our opinion the Group financial statements:
•
•
•
give a true and fair view of the state of the Group's affairs as at 31 March 2011 and of its loss for the year
then ended;
have been properly prepared in accordance with IFRS as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Report of the Directors for the financial year for which the Group financial
statements are prepared is consistent with the Group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to
you if, in our opinion:
•
•
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the Parent Company financial statements of AorTech International Plc for the year ended
31 March 2011.
John Bowler
Senior Statutory Auditor
For and on behalf of
GRANT THORNTON UK LLP
STATUTORY AUDITOR, CHARTERED ACCOUNTANTS
East Midlands
28 July 2011
A O R T E C H I N T E R N A T I O N A L P L C
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consolidated
(cid:80)(cid:85)(cid:74)(cid:86)(cid:84)(cid:76)(cid:3)(cid:90)(cid:91)(cid:72)(cid:91)(cid:76)(cid:84)(cid:76)(cid:85)(cid:91)
Year ended Year ended
31 March 31 March
2011 2010
Notes £000 £000
Revenue 3 1,570 1,362
Other income - grants received 328 306
Cost of sales (357) (382)
Administrative expenses (2,187) (2,082)
(1,121)
Other expenses - development expenditure (1,333)
Other expenses - impairment of property, plant and equipment 11 (455)
-
(142)
Other expenses - amortisation of intangible assets 10 (152)
(2,059)
Operating loss 3 (2,586)
Finance income 7 85 136
(1,923)
Loss before taxation 5 (2,501)
Taxation 8 - -
Loss attributable to equity holders of the parent company (2,501)
(1,923)
Loss per share
(39.79)
Basic and diluted – (pence per share) 9 (51.75)
consolidated
(cid:90)(cid:91)(cid:72)(cid:91)(cid:76)(cid:84)(cid:76)(cid:85)(cid:91)(cid:3)(cid:86)(cid:77)(cid:3)(cid:74)(cid:86)(cid:84)(cid:87)(cid:89)(cid:76)(cid:79)(cid:76)(cid:85)(cid:90)(cid:80)(cid:93)(cid:76)(cid:3)(cid:80)(cid:85)(cid:74)(cid:86)(cid:84)(cid:76)
Year Year
ended ended
31 March 31 March
2011 2010
Loss for the year (2,501) (1,923)
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Other comprehensive income:
1,204
Exchange differences on translating foreign operations
-
Income tax relating to other comprehensive income
-
210
Other comprehensive income for the year, net of tax
210
1,204
Total comprehensive income for the year, attributable
(719)
to equity holders of the parent (2,291)
A O R T E C H I N T E R N A T I O N A L P L C
consolidated
(cid:73)(cid:72)(cid:83)(cid:72)(cid:85)(cid:74)(cid:76)(cid:3)(cid:90)(cid:79)(cid:76)(cid:76)(cid:91)
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31 March 31 March
2011 2010
Notes £000 £000
Assets
Non current assets
Intangible assets 10 1,365 1,424
Property, plant and equipment 11 216 718
Total non current assets 1,581 2,142
Current assets
Inventories 12 146 150
Trade and other receivables 14 674 859
Cash and cash equivalents 15 1,381 2,885
Total current assets 2,201 3,894
Total assets 3,782 6,036
Liabilities
Current liabilities
Trade and other payables 16 (660) (623)
Total current liabilities (660) (623)
Total liabilities (660) (623)
Net assets
3,122
5,413
Equity
12,082
Issued capital 19 12,082
Share premium 19
2,340
2,340
Other reserve (2,003) (2,003)
Foreign exchange reserve
1,862
Profit and loss account (11,369) (8,868)
2,072
Total equity attributable to equity holders of the parent
3,122
5,413
The Group financial statements were approved by the Board on 28 July 2011 and were signed on its behalf by
J Pither, Chairman
E McDaid, Director
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consolidated
(cid:74)(cid:72)(cid:90)(cid:79)(cid:3)(cid:77)(cid:83)(cid:86)(cid:94)(cid:3)(cid:90)(cid:91)(cid:72)(cid:91)(cid:76)(cid:84)(cid:76)(cid:85)(cid:91)
Year ended Year ended
31 March 31 March
2011 2010
£000 £000
Cash flows from operating activities
Group loss after tax (2,501) (1,923)
Adjustments for:
258
Depreciation of property, plant and equipment 226
Impairment of property, plant and equipment 455
-
Amortisation of intangible assets 152 142
Interest income (85) (136)
Deferred income released - (79)
Decrease in trade and other receivables 185 (423)
-
Decrease in inventories 4
111
Increase in trade and other payables 37
Net cash flow from operating activities (1,527)
Cash flows from investing activities
Purchase of property, plant and equipment (132) (102)
85 136
Interest received
Net cash flow from investing activities
(47) 34
Net decrease in cash and cash equivalents
(1,574)
Foreign exchange movements on cash held in foreign currencies 70
Cash and cash equivalents at beginning of year 2,885
(2,016)
723
4,178
Cash and cash equivalents at end of year 1,381
2,885
A O R T E C H I N T E R N A T I O N A L P L C
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consolidated
(cid:90)(cid:91)(cid:72)(cid:91)(cid:76)(cid:84)(cid:76)(cid:85)(cid:91)(cid:3)(cid:86)(cid:77)(cid:3)(cid:74)(cid:79)(cid:72)(cid:85)(cid:78)(cid:76)(cid:90)(cid:3)(cid:80)(cid:85)(cid:3)(cid:76)(cid:88)(cid:92)(cid:80)(cid:91)(cid:96)
Share Foreign Profit
Share premium Other exchange and loss Total
capital account reserve reserve account equity
£000 £000 £000 £000 £000 £000
Balance at 31 March 2009 12,082 2,340 (2,003) 658 (6,945) 6,132
Transactions with owners - - - - - -
Loss for the year - - - - (1,923) (1,923)
Other comprehensive income
Exchange difference on translating
foreign operations - - - 1,204 - 1,204
Income tax relating to components
of other comprehensive income - - - - - -
Total comprehensive income for the year - - - 1,204 (1,923) (719)
Balance at 31 March 2010 12,082 2,340 (2,003) 1,862 (8,868) 5,413
Transactions with owners - - - - - -
Loss for the year - - - - (2,501) (2,501)
Other comprehensive income
Exchange difference on translating
foreign operations - - - 210 - 210
Income tax relating to components
of other comprehensive income - - - - - -
Total comprehensive income for the year - - - 210 (2,501) (2,291)
Balance at 31 March 2011 12,082 2,340 (2,003) 2,072 (11,369) 3,122
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notes
(cid:91)(cid:86)(cid:3)(cid:91)(cid:79)(cid:76)(cid:3)(cid:77)(cid:80)(cid:85)(cid:72)(cid:85)(cid:74)(cid:80)(cid:72)(cid:83)(cid:3)(cid:90)(cid:91)(cid:72)(cid:91)(cid:76)(cid:84)(cid:76)(cid:85)(cid:91)(cid:90)
1
Basis of preparation
The Group financial statements are for the year ended 31 March 2011. They have been prepared in compliance with
International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) interpretations as adopted
by the European Union as at 31 March 2011.
The Group financial statements have been prepared under the historical cost convention.
After considering the year end cash position, making appropriate enquiries and reviewing budgets, profit and cash flow
forecasts and business plans, including the costs and impact of relocating the Group's manufacturing operations from
Australia to the USA, for a period of at least 12 months from the date of signing these financial statements, the Directors
have formed a judgement at the time of approving the financial statements that there is a reasonable expectation that
the Group has more than sufficient 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 financial statements
is appropriate.
The accounting policies remain unchanged from the previous year except for the adoption of IFRS 3 and IAS 27 (both
Revised 2008).
The Group has adopted IFRS 3 Business Combinations (Revised 2008) in its consolidated financial statements, and it has
been applied prospectively. The new standard has introduced changes to the accounting requirements for business
combinations, but still requires use of the purchase method. In particular, transaction costs must be expensed in the
Income Statement rather than previously when these were capitalised and dealt with as part of the acquisition accounting.
IFRS 3 Revised will be applied prospectively to business combinations for which the acquisition date is on or after 1 April
2010.
The Group has also adopted IAS 27 Consolidated and Separate Financial Statements (Revised 2008) in its consolidated
financial statements, and this has been applied prospectively, in accordance with the transitional provisions. The revised
standard introduces changes to the accounting requirements for the loss of control of a subsidiary and for changes in
the Group's interest in subsidiaries. There is no immediate effect on the Group's financial statements.
Standards, amendments and interpretations to existing standards that are not yet effective and have not been early
adopted by the Group in the 31 March 2011 financial statements.
At the date of authorisation of these consolidated financial statements, certain new standards, amendments and
interpretations to existing standards have been published but are not yet effective, and have not been adopted early by
the Group.
Management anticipates that all of the pronouncements will be adopted in the Group's accounting policies for the first period
beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that
are expected to be relevant to the Group’s financial statements is provided below. Certain other new standards and
interpretations have been issued but are not expected to have a material impact on the Group's financial statements.
A O R T E C H I N T E R N A T I O N A L P L C
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IAS 24 (Revised 2009) Related Party Disclosures (effective 1 January 2011).
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2010).
Disclosures - Transfers of Financial Assets - Amendments to IFRS 7 (effective 1 July 2011).
Deferred Tax: Recovery of Underlying Assets - Amendments to IAS 12 Income Taxes (effective 1 January 2012).
2
Principal accounting policies
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its subsidiary undertakings. Subsidiaries are
entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from
its activities. The Group obtains and exercises control through voting rights.
Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the
financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies
adopted by the Group.
Revenue
Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods
supplied and services provided, excluding VAT, sales between Group companies and trade discounts, as follows:
(a) Supply of materials, services and finished goods: Revenue from the supply of materials and finished goods is
recognised when the significant risks and benefits of ownership of the product have transferred to the buyer,
which may be on shipment, receipt of the goods by the customer or upon completion of the product and the
product being ready for delivery, based on the specific contract terms. Revenue from the supply of services is
recognised upon stage of completion of the service, based on the specific contract terms.
(b)
Licence fees: Upfront payments in respect of licence revenues for access by third parties to the Group’s
technology are recognised as revenue once a third party has a binding contractual obligation to the Group based
on the specific contract terms and the Group has no remaining obligations to perform.
(c)
Milestone payments: Milestone payments are recognised once the Group’s obligations for each milestone have
been met and the Group has achieved a right to be paid in return for their contractual performance.
(d)
Royalty revenues: Royalty revenues are recognised as earned in accordance with third parties’ sales of the
underlying products.
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Government grants / assistance
Government grants in respect of capital expenditure are credited to a deferred income account and are released to the
income statement on a diminishing value basis over the expected useful lives of the relevant assets. As such, a proportion
of deferred income is shown on the balance sheet as a non current liability. Government grants which are income in
nature are credited to the income statement in the same period as the related expenditure so as to match them with the
related costs which they are intended to compensate, on a systematic basis.
Interest
Interest income is the interest earned on cash or cash equivalents held with the Group’s bankers and recognised within
the period earned, accrued on a time basis by reference to the principal outstanding and at the effective rate applicable.
Employee benefits
Defined contribution pension scheme: The pension costs charged against profits are the contributions payable to the
scheme in respect of the accounting period.
Intangible assets
(a) Patents and trademarks (intellectual property):
Patents and trademarks (intellectual property) are included at cost less estimated residual amount and are amortised on
a straight line basis over their useful economic lives of 20 years, which corresponds to the lives of the individual patents.
(b) Research and development:
Research costs are expensed as incurred. An intangible asset arising from development expenditure on an individual
project is recognised only when the Group can demonstrate all of the following:
• the technical feasibility of the intangible asset so that it will be available for use or sale. In practice this will
be when the Group is satisfied that the appropriate regulatory hurdles have been or will be achieved.
• its intention to complete and its ability to use or sell the asset.
• how the asset will generate future economic benefits.
• the availability of economic resources to complete the asset.
• the ability to measure the expenditure during development.
The Group does not currently have any such internal or external development costs that qualify for capitalisation as
intangible assets.
Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be
carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins
when development is complete and the asset is available for use. It is amortised over the period of expected future
sales. Assets are tested for impairment when an impairment trigger occurs.
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Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs
have been met. This is necessary as the economic success of any product development is uncertain and may be subject
to future technical problems at the time of recognition. Judgements are based on the information available at each balance
sheet date.
Property, plant and equipment
Property, plant and equipment is stated at cost, including any incidental costs of acquisition, net of accumulated depreciation
and any accumulated provision for impairment. No depreciation is charged until the asset is brought into use.
Disposal of assets
The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and
the carrying amount of the asset and is recognised in profit or loss. The gain or loss arising from the sale or revaluation
of held for sale assets is included in "other income" or "other expense" in the income statement. Any revaluation surplus
remaining in equity on disposal of the asset is transferred to the profit and loss reserve.
Depreciation
Depreciation is calculated to write off the cost of all property, plant and equipment less estimated residual value by the
reducing balance method where it reflects the basis of consumption of the assets over their estimated useful economic
lives. The periods generally applicable are:
Leasehold property improvements: Period of lease
Plant and equipment 2½ years
Fixtures and fittings 2½ - 5 years
Material residual value estimates are updated as required, but at least annually.
Impairment testing of intangible assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating units). As a result some assets are tested individually for impairment and some are tested
at a cash-generating unit level.
Individual assets or cash-generating units that include intangible assets with an indefinite useful life, and those intangible
assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating
units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable.
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to
sell, and value in use based on an internal discounted cash flow evaluation.All assets are subsequently reassessed for
indications that an impairment loss previously recognised may no longer exist.
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Leased assets
The Group has a property lease on its facility in Melbourne and an equipment lease on a photocopier/fax printer. Both
leases are regarded as operating leases and the payments made under them are charged to profit or loss on a straight
line basis over the lease term.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of ordinarily interchangeable items are assigned
using the first in, first out cost formula. Cost includes materials, direct labour and an attributable proportion of
manufacturing overheads based on normal levels of activity. Net realisable value is based on estimated selling prices
less any further costs expected to be incurred to completion and disposal.
Financial assets
Financial assets fall into the following category: Loans and receivables.
All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument.
Financial assets are recognised at fair value plus transaction costs.
Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. Trade and other receivables are measured subsequent to initial recognition at amortised cost using
the effective interest method, less provision for impairment. Any change in their value through impairment or reversal
of impairment is recognised in profit or loss.
Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect
all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is
determined as the difference between the asset's carrying amount and the present value of estimated future cash flows
discounted at the original effective interest rate. An assessment for impairment is undertaken at least at each balance
sheet date.
Cash and cash equivalents comprise cash on hand and demand deposits together with other short-term, highly liquid
investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of
changes in value.
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Financial liabilities
Financial liabilities fall into the following category: Financial liabilities at amortised cost
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a
party to the contractual provisions of the instrument. All financial liabilities are recorded initially at fair value, net of
direct issue costs.
All financial liabilities are subsequently recorded at amortised cost using the effective interest method, with interest
related charges recognised as an expense in finance cost in the income statement. Finance charges, including premiums
payable on settlement or redemption and direct issue costs, are charged to the income statement on an accruals basis
using the effective interest method and are added to the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged
or cancelled or expires.
Taxation
Current tax is the tax currently payable based on taxable profit for the accounting period.
Deferred taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on
the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not
provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related
transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated
with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and
it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward
as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it
is probable that the underlying deductible temporary differences will be able to be offset against future taxable income.
Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective
period of realisation, provided they are enacted or substantively enacted at the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss, except where
they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged
or credited directly to equity. Tax which relates to items recognised in other comprehensive income is recognised in
other comprehensive income.
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Equity
Equity comprises the following:
• “Share capital” represents the nominal value of equity shares.
• "Share premium" represents the excess over nominal value of the fair value of cash consideration received for
equity shares, net of expenses of the share issue.
• "Other reserve" represents the difference arising on consolidation between the nominal value of AorTech
International Plc shares issued (£3,206,884) and the nominal value of AorTech Biomaterials Limited (formerly
AorTech Europe Limited) shares acquired (£1,001,884) and the associated share premium account (£201,857) in
the company. This acquisition was prior to the transition to IFRS.
• "Foreign exchange reserve" represents the differences arising from translation of net investments in overseas
subsidiaries.
• "Profit and loss account" represents retained profits.
Share based employee compensation
The Group operates equity settled share based compensation plans for the remuneration of its employees.
All employee services received in exchange for the grant of any share based compensation are measured at their fair
values. These are indirectly determined by reference to the fair value of the share option awarded. Their value is
appraised at the grant date and excludes the impact of any non-market vesting conditions (e.g. profitability or sales
growth targets).
All share based compensation, where material, is ultimately recognised as an expense in the income statement with a
corresponding credit to the other reserve, net of deferred tax where applicable. If vesting periods or other vesting
conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number
of shares options expected to vest. Non market vesting conditions are included in assumptions about the number of
options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the
number of share options expected to vest differs from previous estimates. No adjustment to expense recognised in prior
periods is made if fewer share options ultimately are exercised than originally estimated.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, up to the
nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium. At
this time, the appropriate balance in the other reserve relating to the share options exercised is transferred to retained
earnings by way of a transfer within reserves.
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Foreign currencies
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the functional currency). The Company’s functional currency and
the Group’s presentational currency is Sterling.
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date.
Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the
date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value was determined.
Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different
from those at which they were initially recorded are recognised in profit or loss in the period in which they arise.
Exchange differences on non-monetary items are recognised in other comprehensive income to the extent that they relate
to a gain or loss on that non-monetary item taken to other comprehensive income, otherwise such gains and losses are
recognised in the profit or loss.
The assets and liabilities in the financial statements of foreign subsidiaries are translated at the rate of exchange ruling
at the balance sheet date. Income and expenses are translated at the average of exchange rates in force at the end of
each month of the reporting period. All resulting exchange differences are recognised in other comprehensive income
and accumulated in a separate component of equity. On disposal of a foreign operation the cumulative translation
differences (including, if applicable, gains and losses on related hedges) are reclassified from equity to profit or loss as
a reclassification adjustment as part of the gain or loss on disposal.
The Group has taken advantage of the exemption in IFRS 1 and has deemed cumulative translation differences for all
foreign operations to be nil at the date of transition to IFRS. The gain or loss on disposal of these operations excludes
translation differences that arose before the date of transition to IFRS and includes later translation differences.
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Use of accounting estimates and judgements
Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These
judgements and estimates are based on management’s best knowledge of the relevant facts and circumstances, having
regard to prior experience, but actual results may differ from the amounts included in the financial statements.
Information about such judgements and estimation is contained in the accounting policies and/or the notes to the financial
statements and the key areas are summarised below:
Judgements in applying accounting policies:
(a)
(b)
Capitalisation of development costs requires detailed analysis of the technical feasibility and commercial viability
of the project. To date the Group has written off all such development costs because the specific criteria for
capitalisation have not been met, although the Board regularly reviews this judgement in respect of specific
development projects.
The Directors must judge whether future profitability is likely in making the decision whether or not to create
a deferred tax asset. At this stage the timing of future profits is insufficiently certain to warrant inclusion of a
deferred tax asset.
(c)
Identification of functional currencies requires analysis of the economic environments of the subsidiaries of the
Group and the selection of the presentational currency must reflect the requirements of the users of those
statements.
(d)
Revenue recognition requires the Directors to assess the terms of contracts and to determine whether specific
obligations have been met before recognising revenue in relation to licence fees and milestone payments, as
well as assessing whether any provision for impairment is necessary through the estimation of future cash
flows.
Sources of estimation uncertainty:
(a)
Estimates are required as to intangible asset carrying values and impairment charges.
(b)
Estimates of future profitability are required for the decision whether or not to create a deferred tax asset.
(c)
Depreciation rates are based on estimates of the useful lives and residual values of the assets involved.
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Segmental reporting
The principal activity of the AorTech International Plc Group currently is the development and exploitation of a range of
innovative biomaterials and medical devices. This forms the Group’s only operating segment.
The Group’s reporting segments are based on geographical location of operations.
2011 2010
Analysis of revenue by destination by
products and services and by geographical area £000 £000
United Kingdom
29
Supply of materials and finished goods 4
Australia
2
Supply of materials and finished goods 1
USA
Supply of materials and finished goods 929 738
Milestone payments - services 628 12
Licence fees - services 6 574
Royalty revenue 2 7
1,570 1,362
During the year ended 31 March 2011, 61.0% of the Group’s revenues depended upon a single customer (2010: 77.8%)
2011 2010
Analysis of result - operating loss £000 £000
United Kingdom (409) (356)
Australia (1,675) (1,234)
USA (502) (469)
(2,586) (2,059)
Analysis of non-current assets by location
United Kingdom - -
Australia 1,581 2,142
-
USA -
1,581 2,142
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Remuneration of Directors and key management personnel
Key management personnel 2011 2010
£000 £000
Emoluments – short-term employee benefits 678 743
Pension costs – post-employment benefits 52 53
730 796
The key management personnel whose remuneration is included in the table above are a Director / Company Secretary
of AorTech Biomaterials Pty Limited; two Directors, AorTech Biomaterials Pty Limited; the Vice President of Research &
Development, AorTech Medical Devices (USA), Inc; the Chief Operating Officer and the five Directors of the parent company.
Please see the Report of the Remuneration Committee on pages 18 to 20 for full details of Directors’ emoluments.
Included in the aggregate emoluments for the year ended 31 March 2011 are payments of £51,000 (2010: £48,000) made
by the Company to third parties. The highest paid Director received total emoluments of £213,511 including pension
contributions of £15,000 (2010: total emoluments of £255,016 including pension contributions of £15,000).
5
Loss before taxation
2011 2010
Loss before taxation has been arrived at after charging/(crediting): £000 £000
Foreign exchange differences (16) 42
Depreciation and amortisation:
Depreciation of property, plant and equipment 226 258
Impairment of property, plant and equipment 455 -
Amortisation of intangible assets 152 142
Employee benefits expense:
Employee costs (Note 6) 1,614 1,540
Land and buildings held under operating leases:
Other operating leases 211 163
Audit and non-audit services:
Fees payable to the Company’s auditor for the audit of the
Group financial statements 30 25
Fees payable to the Company’s auditor and its associates
for other services:
The audit of the company’s subsidiaries pursuant to legislation 18 16
Tax services 3 3
Other services 1 1
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Employees
2011 2010
£000 £000
Employee costs (including Directors):
Wages and salaries 1,491 1,430
Pension costs 123 110
1,614 1,540
The average number of employees (including Directors) during the year was made up as follows:
Numbers Numbers
Production 5 4
Sales 1 1
Development and quality control 14 11
Administration 12 12
32 28
Finance income
2011 2010
£000 £000
Bank interest receivable 85 136
Income tax expense
No current tax or deferred tax expense arises on the loss for the year.
The tax assessed for the year differs from the standard rate of corporation tax as applied in the respective trading
domains where the Group operates. The differences are explained below:
2011 2010
£000 £000
Loss for the year before tax (2,501) (1,923)
Loss for year multiplied by the respective standard rate of
corporation tax applicable in each domain (average 28%) (700) (538)
Effects of:
Depreciation for the year differs from capital allowances and other
temporary differences (11) (14)
261
Expenses not deductible for tax purposes and other tax differences
81
Losses not utilised 605
Losses utilised (155) -
471
Tax on loss for the year - -
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Unrelieved tax losses remain available to offset against future taxable profits. These losses have not been recognised as
deferred tax assets within the financial statements as they do not meet the conditions required in accordance with IAS 12.
Losses carried forward in the UK total £3,985,000 – tax effect is £1,036,000 (2010: £4,539,000 – tax effect £1,271,000).
Losses carried forward in Australia total £7,622,000 – tax effect £1,982,000 (2010: £6,457,000 – tax effect £1,808,000).
Losses in the USA total £1,434,000 – tax effect £373,000 (2010: £931,000 - tax effect £261,000).
On 1 April 2010 the standard UK rate of corporation tax was 28%.
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Loss per share
2011
£000
2010
£000
Loss for the year attributable to equity shareholders (2,501) (1,923)
Loss per share
Basic and diluted (pence per share) (51.75) (39.79)
Shares Shares
Issued ordinary shares at start of the year 4,832,778 4,832,778
Ordinary shares issued in the year - -
Issued ordinary shares at end of the year 4,832,778 4,832,778
Weighted average number of shares in issue for the year 4,832,778 4,832,778
The diluted loss per share does not differ from the basic loss per share as the exercise of share options
would have the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33.
10
Intangible assets
Intellectual property
£000
Valuation
At 1 April 2009
Exchange differences
At 31 March 2010
Exchange differences
At 31 March 2011
Amortisation
At 1 April 2009
Exchange differences
Charge for the year
At 31 March 2010
Exchange differences
Charge for the year
At 31 March 2011
Net book value
At 1 April 2009
At 31 March 2010
At 31 March 2011
2,286
562
2,848
186
3,034
1,029
253
142
1,424
93
152
1,669
1,257
1,424
1,365
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Property, plant and equipment
Property Plant Fixtures
improvements & equipment & fittings Total
£000 £000 £000 £000
Cost
At 1 April 2009 635 940 187 1,762
Additions 28 55 19 102
Exchange differences 156 231 46 433
At 31 March 2010 819 1,226 252 2,297
Additions 18 108 6 132
Exchange differences 54 80 16 150
At 31 March 2011 891 1,414 274 2,579
Depreciation
At 1 April 2009 206 719 135 1,060
Charge for the year 108 128 22 258
Exchange differences 51 177 33 261
At 31 March 2010 365 1,024 190 1,579
Charge for the year 99 107 20 226
Impairment charge 403 - 52 455
Exchange differences 24 67 12 103
At 31 March 2011 891 1,198 274 2,363
Net book value
At 1 April 2009 429 221 52 702
At 31 March 2010 454 202 62 718
At 31 March 2011 - 216 - 216
The property improvements and fixtures & fittings in Australia have been fully impaired as a result of the post year
end transfer of manufacturing operations to the USA.
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Inventories
2011 2010
£000 £000
Raw materials 98 117
Finished goods 48 33
146 150
In 2011 a total of £263,000 of inventories was included in the income statement as an expense (2010: £344,000). There
was no amount resulting from writedowns of inventories in either 2011 or 2010. There were no reversals of previous
writedowns that were recognised in the income statement in either 2011 or 2010.
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Financial instruments
Risk management
The Group’s financial instruments comprise cash and cash equivalents, trade and other receivables and trade and other
payables. These arise directly from the Group’s operations and it is the Group’s policy that no trading in financial
instruments shall be undertaken.
The Board reviews and agrees policies to manage risk to ensure that the entities within the Group will be able to continue
as a going concern whilst maximising the return to stakeholders through the effective management of liquid resources
raised through share issues.
Categories of financial instrument
Financial assets – loans and receivables
Cash and cash equivalents
Trade and other receivables
2011
£000
1,381
606
1,987
2010
£000
2,885
813
3,698
Financial liabilities
Liabilities at amortised cost (653) (531)
(653) (531)
All amounts are short-term (all payable within six months) and their carrying values are considered reasonable
approximations of fair value.
Foreign currency risk
The Group has an Australian subsidiary whose functional currency is the Australian dollar and a US subsidiary whose
functional currency is the US dollar. As noted in the Report of the Directors, the Board has taken steps to minimise
foreign currency risk by the relocation of manufactuing operations to the USA from Australia.
Cash balances are carried within the Group in interest earning accounts, which comprise the following currency holdings:
2011 2010
£000 £000
Sterling 22 48
US dollars 59 32
Australian dollars 151 163
Euros 11 11
243 254
In addition to cash holdings the following short term deposits are placed for up to 7 months depending on the Group’s
funding requirements:
2011 2010
£000 £000
Australian dollars 1,138 2,631
1,138 2,631
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Interest rate risk
The Group finances its operations through equity fundraising and does not currently carry any borrowings. The cash
balances and short term deposits are held at both fixed and floating rates as follows:
Interest rate 2011 Interest rate 2010
% £000 % £000
Cash 0% 87 0% 218
0.5% 36 0.50% 36
4.75% 120
Short term deposits 6.05% 103 5.80% 1,002
6.0% 38 4.75% 1,509
5.5% 193 3.70% 120
4.82% 129
4.75% 161
4.63% 193
4.57% 321
1,138 2,885
Sensitivity analysis
If, for example, there had been a rise or fall of interest rates over the year of 1%, this would have resulted in an
increase/decrease in profit and equity of £21,000 (2010: £34,000), all other variables remaining constant.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group. In order to minimise this risk the Group endeavours only to deal with companies which are demonstrably
creditworthy and this, together with the aggregate financial exposure, is continuously monitored. The maximum exposure
to credit risk in the case of both the cash and short term deposits is the value of the outstanding amount.
The Group has trade receivables resulting from sales and other receivables from provision of other services which the
management consider to be of low risk. The management do not consider that there is any concentration of risk within
either trade or other receivables.
Liquidity risk
The Group currently holds cash balances and short term deposits in Sterling, US dollars and Australian dollars. These
balances provide funding for the Group’s trading activities.
There is no material difference between the fair values and the book values of these financial instruments.
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Trade and other receivables
2011 2010
£000 £000
Current assets
Trade receivables 585 776
Other receivables 21 37
Prepayments 68 46
674 859
Trade receivables are shown net of a provision of £250,000 to reflect uncertainty over the timing of receipt. In addition,
£513,000 of net receivables were past due for payment but not impaired at 31 March 2011.
15
Cash and cash equivalents
2011 2010
£000 £000
Cash at bank and in hand 243 254
Short term deposits 1,138 2,631
1,381 2,885
16
Trade and other payables
2011 2010
£000 £000
Current liabilities
Trade payables 160 99
Other payables 270 212
Deferred income (government grants) 7 92
Accruals 223 220
660 623
Government grants received towards capital expenditure are released to the income statement on a diminishing value basis
over a period equal to the useful economic life of the assets to which they relate. On average this period is five years.
17
Operating lease commitments
The Group had the following total commitments under non-cancellable operating leases in Australia at 31 March:
2011 2010
£000 £000
The following payments are due to be made on operating lease commitments:
Within one year 196 192
Two to five years 19 16
215 208
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Share based payments
The Group has an approved share option plan for the benefit of employees resident in the UK and Executive Directors.
Options in issue Exercise
Price (£)
12,000 2.50 10 July 2012
600 2.95 25 July 2012
Exercise period on or before:
Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the year are
as follows:
2011 WAEP 2010 WAEP
Number £ Number £
Outstanding at the beginning of the year 12,600 £2.52 12,600 £2.52
Outstanding at the year end 12,600 £2.52 12,600 £2.52
Exercisable at the year end 12,600 £2.52 12,600 £2.52
The Group has an unapproved share option plan for the benefit of other employees.
Options in issue Exercise Exercise period on or before:
Price (£)
750 41.75 28 May 2011
7,000 2.50 10 July 2012
19,000 2.80 7 August 2012
25,000 2.50 13 July 2013
4,000 2.50 29 June 2014
200,000 2.50 29 June 2014
20,000 2.50 21 November 2014
68,000 3.25 1 September 2016
40,000 4.28 21 January 2018
7,500 2.50 23 September 2018
51,000 2.50 15 June 2020
Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the year are
as follows:
2011 WAEP 2010 WAEP
Number £ Number £
Outstanding at the beginning of the year 402,000 £4.32 414,500 £4.68
Granted during the year 58,500 £2.50 - -
Forfeited during the year (11,200) £7.30 (10,500) £7.12
Expired during the year (7,050) £78.08 (2,000) £56.25
Outstanding at the year end 442,250 £2.82 402,000 £4.32
Exercisable at the year end 442,250 £2.82 402,000 £4.32
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 and
after the elapse of three years from date of Option Grant.
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The fair value of options granted after 7 November 2002 but not vested at 1 April 2006 has been arrived at using an
appropriate model. The assumptions inherent in the use of this model are as follows:
• The option life is assumed to be at the end of the allowed period
• There are no vesting conditions
• No variables change during the life of the option (e.g. dividend yield)
• Volatility has been calculated over the three years prior to the balance sheet date.
Date of Vesting Date of Exercise Risk-free Share price Volatility Fair value Number
grant Period vesting Price Rate at grant of Share (£000) outstanding
(years) (£) (£) price
14.07.03 3 14.07.06 2.50 3.83% 1.32 63% 12 25,000
30.06.04 3 30.06.07 2.50 5.04% 1.62 63% 24 8,000
30.06.04 3 30.06.07 2.50 5.04% 1.62 63% 132 200,000
22.11.04 3 22.11.07 2.50 4.56% 1.89 63% 18 20,000
01.09.06 3 01.09.09 3.25 4.61% 3.18 63% 118 78,000
21.01.08 3 21.01.11 4.28 4.21% 4.02 45% 44 45,000
16.06.10 3 16.06.13 2.50 4.00% 1.88 36% 32 51,000
The Group has not recognised any expense related to equity-settled share based payment transactions during the year
(2010: nil), on the grounds that the charge is not material. The Directors have also concluded that the cumulative position
to date is also not material.
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Share capital
Shares Nominal Premium Total
Number Value (£2.50) net of costs
£000 £000 £000
In issue at 1 April 2010 4,832,778 12,082 2,340 14,422
31 March 2010 and 31 March 2011 4,832,778 12,082 2,340 14,422
At an EGM of Members held on 20 August 2007, the Company’s authorised share capital was increased from £14,000,000
comprising 5,600,000 Ordinary shares of £2.50 each to £17,500,000, comprising 7,000,000 shares of £2.50 each.
Capital management objectives are set out in the Report of the Directors on page 13.
20
Contingent liabilities
There were no contingent liabilities at 31 March 2011 or at 31 March 2010.
21
Post Balance Sheet event
On 16 June 2011 the Group announced the relocation of the Group's primary manufacturing operations from Melbourne,
Australia to the Minneapolis/St Paul area in the USA. The total cost of this strategically important move is expected to
be US$1.8m, which will be fully funded from payments that the Group will receive following the restructuring of certain
customer licences (amounting to US$4.2m) and the sale of certain highly depreciated capital assets (amounting to
US$0.3m). The surplus funds will enable production to be commenced at the US facility, provide cash for working capital
purposes and provide a solid base upon which to grow the component business, with the emphasis on accelerating a
number of pacemaker, header and other reaction injection moulding projects.
A O R T E C H I N T E R N A T I O N A L P L C
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independent
(cid:72)(cid:92)(cid:75)(cid:80)(cid:91)(cid:86)(cid:89)(cid:187)(cid:90)(cid:3)(cid:89)(cid:76)(cid:87)(cid:86)(cid:89)(cid:91)(cid:3)
To the Members of
AorTech International plc
We have audited the Parent Company financial statements of AorTech International Plc for the year ended 31 March 2011
which comprise the parent company balance sheet and the related notes. The financial reporting framework that has
been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 15, the Directors are responsible
for the preparation of the Parent Company financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the Parent Company financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion the Parent Company financial statements:
• give a true and fair view of the state of the Company’s affairs as at 31 March 2011
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Report of the Directors for the financial year for which the financial statements
are prepared is consistent with the Parent Company financial statements.
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Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit
have not been received from branches not visited by us; or
• the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the Group financial statements of AorTech International Plc for the year ended
31 March 2011.
John Bowler
Senior Statutory Auditor
For and on behalf of
GRANT THORNTON UK LLP
STATUTORY AUDITOR, CHARTERED ACCOUNTANTS
East Midlands
28 July 2011
A O R T E C H I N T E R N A T I O N A L P L C
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parent company
(cid:73)(cid:72)(cid:83)(cid:72)(cid:85)(cid:74)(cid:76)(cid:3)(cid:90)(cid:79)(cid:76)(cid:76)(cid:91)
31 March 31 March
2011 2010
Notes £000 £000
Fixed assets
Investment in subsidiary undertakings 3 - -
Current assets
Debtors – amounts falling due within one year 4 10 22
Debtors – amounts falling due after one year 4 13,051 17,129
Cash at bank 20 46
13,081 17,197
Creditors: amounts falling due within one year 5 (193)
(194)
Net assets 12,888 17,003
Capital and reserves
Called up share capital 6 12,082 12,082
2,340
Share premium account 8 2,340
2,581
Profit and loss account 8 (1,534)
Equity shareholders' funds 8 12,888 17,003
The parent company financial statements were approved by the Board on 28 July 2011 and were signed on its behalf by
J Pither, Chairman
E McDaid, Director
notes to the
(cid:87)(cid:72)(cid:89)(cid:76)(cid:85)(cid:91)(cid:3)(cid:74)(cid:86)(cid:84)(cid:87)(cid:72)(cid:85)(cid:96)(cid:3)(cid:77)(cid:80)(cid:85)(cid:72)(cid:85)(cid:74)(cid:80)(cid:72)(cid:83)(cid:3)(cid:90)(cid:91)(cid:72)(cid:91)(cid:76)(cid:84)(cid:76)(cid:85)(cid:91)(cid:90)
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Accounting policies
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Accounting convention
The parent company financial statements are prepared under the historical cost convention and in accordance with
applicable United Kingdom accounting standards (United Kingdom Generally Accepted Accounting Practice) A summary
of the material accounting policies, which have been applied consistently, is set out below. The principal accounting
policies represent the most appropriate in accordance with FRS 18.
Going concern
After considering the year end cash position, 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 Company has more than sufficient 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 Company’s financial statements is appropriate.
Investments
Investments held as fixed assets are stated at the lower of cost and net realisable value, less provision for any impairment.
In the opinion of the Directors the value of such investments is not less than that shown at the balance sheet date.
Deferred tax
Deferred tax is recognised (on an undiscounted basis) on all timing differences where the transactions or events that
give the Company an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by
the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered.
Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance sheet date.
Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance
sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of
transaction. Exchange differences are taken into account in arriving at the operating result.
Share based payments
All share based payment arrangements granted after 7 November 2002 that had not vested prior to 1 April 2006 are
recognised in the financial statements. All goods and services received in exchange for the grant of any share based
payment are measured at their fair values. Where employees are rewarded using share based payments the fair values
of their services are determined indirectly by reference to the fair value of the instrument granted to the employee. This
fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (e.g. profitability and
sales growth targets).
All equity settled share based payments are ultimately recognised as an expense in the profit and loss account with a
corresponding credit to ‘other reserves’.
Upon exercise of share options the proceeds received, net of attributable transaction costs, are credited to share capital
and, where appropriate, share premium.
Debtors
The amounts owed by Group undertakings are in respect of long term loans and have been treated as part of the net
investment in the foreign entities, and included within debtors due in greater than one year. These balances have been
treated as monetary assets and retranslated at the rate of exchange ruling at the balance sheet date. Exchange differences
arising on these loans are taken into account in arriving at the operating result.
A O R T E C H I N T E R N A T I O N A L P L C
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Company Profit and Loss Account
The parent company has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit
and loss account in these financial statements. The parent company’s loss for the year ended 31 March 2011 was £5,079,000
(2010: £355,000) after an impairment charge of £4,670,000 in respect of amounts owed by group undertakings but before
foreign exchange credits of £964,000 (2010: £3,168,000).
Fixed Asset Investments
31 March 31 March
2011 2010
£000 £000
Investment in subsidiary undertakings
Cost
23,159
Historical cost 23,159
Provision for impairment
(23,159) (23,159)
Net book value at 31 March - -
Interest in subsidiary undertakings Proportion
Country of Description of nominal
registration of value of
Name of undertaking or incorporation shares held shares held
%
(i) AorTech Biomaterials Limited Scotland Ordinary £1 100
(ii) AorTech Critical Care Limited Scotland Ordinary £1 92
(iii) AorTech Biomaterials Pty Limited Australia Ordinary Aus. $1 100
(iv) AorTech Medical Devices (USA), Inc USA Common US $1 100
The principal business activities and country of operations of the above undertakings are:
(i) A non-trading company in the UK
(ii) A dormant company in the UK
(iii) The development of new biostable polyurethanes operating principally in Australia
(iv) Marketing in the Americas
4
Debtors
2011 2010
£000 £000
Amounts falling due within one year
Other debtors 9 15
Prepayments 1 7
10 22
Amounts falling due after more than one year
13,051 17,129
Amounts owed by Group undertakings*
13,061 17,151
* AorTech International Plc has agreed not to seek repayment of the amount owing by its subsidiary AorTech Biomaterials
Pty Limited within 12 months of the balance sheet date. An impairment charge of £4,670,000 has been made against the
amount outstanding.
5
Creditors: Amounts falling due within one year
2011 2010
£000 £000
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Trade creditors - 6
Accruals 193 188
193 194
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Share Capital
See Note 19 in the Group financial statements.
Share based payments
See Note 18 in the Group financial statements.
Statement of movement in Shareholders’ Funds
Total
Share Share Profit and shareholders’
capital premium loss account funds
£000 £000 £000 £000
1 April 2009 12,082 2,340 (232)
Profit for the year - -
2,813
At 31 March 2010 12,082 2,340 2,581
Loss for the year - - (4,115)
14,190
2,813
17,003
(4,115)
At 31 March 2011 12,082 2,340 (1,534)
12,888
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Directors and Employees
The Directors are the only employees of the parent company. Disclosure of their emoluments is given in the Report of
the Remuneration Committee on pages 18 to 20.
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Related Party Transactions
In accordance with FRS 8, “Related Party Disclosures”, AorTech International Plc has taken advantage of the exemption for
wholly owned subsidiaries not to disclose any transactions or balances between wholly owned group entities including those
that have been eliminated on consolidation.
Post Balance Sheet Event
On 16 June 2011 the Group announced the relocation of the Group's primary manufacturing operations from Melbourne,
Australia to the Minneapolis/St Paul area in the USA. The total cost of this strategically important move is expected to be
US$1.8m, which will be fully funded from payments that the Group will receive following the restructuring of certain cus-
tomer licences (amounting to US$4.2m) and the sale of certain highly depreciated capital assets (amounting to US$0.3m).
The surplus funds will enable production to be commenced at the US facility, provide cash for working capital purposes
and provide a solid base upon which to grow the component business, with the emphasis on accelerating a number of
pacemaker, header and other reaction injection moulding projects.
A O R T E C H I N T E R N A T I O N A L P L C
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notice of the
(cid:72)(cid:85)(cid:85)(cid:92)(cid:72)(cid:83)(cid:3)(cid:78)(cid:76)(cid:85)(cid:76)(cid:89)(cid:72)(cid:83)(cid:3)(cid:84)(cid:76)(cid:76)(cid:91)(cid:80)(cid:85)(cid:78)
Notice is hereby given that the fourteenth Annual General Meeting of AorTech International Plc will be held in the
Mansfield Suite of the Renaissance London Chancery Court Hotel, 252 High Holborn, London, WC1V 7EN on Thursday,
8 September 2011 at 2:00 pm for the following purposes:
AS ORDINARY BUSINESS
1. To receive and adopt the financial statements of the Company for the year ended 31 March 2011 together with the
Reports of the Directors and Auditor thereon.
2. To approve the Report of the Remuneration Committee for the year ended 31 March 2011.
3. To re-elect Mr Edward McDaid, who is retiring by rotation.
4. To re-appoint Grant Thornton UK LLP as auditor 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:
5. That the Directors be hereby generally and unconditionally authorised for the purpose of section 551 of the Companies
Act 2006 (“the Act”) to exercise all the powers of the Company to allot relevant securities (within the meaning of said
Section 551) up to an aggregate nominal amount of £4,027,315 which authority will expire at the conclusion of the next
Annual General Meeting of the Company save that the Company may, before such expiry, make an offer or agreement
which would, or might, require relevant securities to be allotted after such expiry and the Directors may allot such
securities in pursuance of such offer or agreement as if the authority so conferred had not expired.
To consider, and if thought fit, pass the following resolution as a Special Resolution:
6. That subject to the passing of Resolution 5 above as an Ordinary Resolution, in substitution for any existing power
under Section 571 of the Act, the Directors be and are hereby empowered until the conclusion of the next Annual General
Meeting of the Company (“the period of the Section 571 power”), pursuant to Section 571 of the Act to allot equity
securities (as defined by Section 560 of the Act) pursuant to the authority granted by Resolution 5 above in accordance
with Section 551 of the Act as if Section 561(1) of the Act did not apply to such allotment, provided that this power shall
be limited to:
(a) the allotment of equity securities in connection with or pursuant to an offer by way of rights issue, open offer or any
other pre-emptive offer in favour of ordinary shareholders and in favour of holders of any other class of equity security
in accordance with the rights attached to such class where the equity securities respectively attributable to the interests
of such persons on a fixed record date are proportionate (as nearly as may be) to the respective numbers of equity
securities held by them or are otherwise allotted in accordance with the rights attaching to such equity securities subject
to such exclusions or arrangements as the Directors may deem necessary or expedient to deal with fractional entitlements
or legal or practical problems under the laws of any territories or requirements of any recognized regulatory body or
stock exchange in any territory; and
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(b) the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities consisting of or related to
Ordinary shares up to an aggregate nominal amount of £604,097, or if less, five percent of the issued Ordinary share
capital of the Company from time to time but so that this power shall allow the Company to make an offer or enter into
an agreement before the expiry of the period of the Section 571 power which would, or might, require equity securities
to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement
as if the power conferred thereby had not expired.
By order of the Board,
J C D Parsons
Company Secretary
Oatlands Drive,
Weybridge
Surrey KT13 9LZ
28 July 2011
1. Members will only be entitled to attend and vote at the meeting if they are registered on the Company’s register of
members at 6.00 pm on 6 September 2011 or by 6.00 pm two days prior to the date of any adjournment of the meeting.
Changes to entries on the Register of Members after that time shall be disregarded in determining the rights of any
person to attend and vote at the meeting.
2. 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, speak and vote on their behalf. To be valid,
Forms of Proxy must be lodged with the Company's Registrars, Equiniti Limited, P O Box 4630, Aspect House, Spencer
Road, Lancing, West Sussex, BN99 6QQ 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. Details
of how to appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out in
the notes to the proxy form.
3. Completing and returning a Form of Proxy will not prevent any member from attending the meeting in person and
voting should they so wish.
4. A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf,
all its powers as a member provided that no more than one corporate representative exercises powers over the same share.
5. As at noon on 1 July 2011 the Company’s issued share capital comprised 4,832,778 ordinary shares of £2.50 each.
Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number
of voting rights in the Company as at noon on 1 July 2011 is 4,832,778.
6. 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) A copy of the service agreements for the Executive Directors.
(b) A copy of the letters of appointment for the Non-Executive Directors.
(c) 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.
By order of the Board,
J C D Parsons
Company Secretary
Oatlands Drive
Weybridge
Surrey KT13 9LZ
28 July 2011
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AorTech International plc
Head Office:
Level Two, Springfield House, 23 Oatlands Drive,
Weybridge, Surrey UK, KT13 9LZ
Tel: +44(0)1932 252 123
Fax: +44(0)1932 251 113
E-mail: info@aortech.com
Web: www.aortech.com
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