FINANCIAL STATEMENTS
FOR THE YEAR
TO 30 JUNE 2013
FOR
ALLERGY THERAPEUTICS PLC
Contents
Our Business
Who We Are and Highlights
Chairman’s Statement
Chief Executive Officer’s Review
Our Markets
Our Products
Research and Development Report
Financial Review
Board of Directors
Financial Statements
Directors’ Report
Directors’ Remuneration Report
Nominations Committee Report
Independent Auditor’s Report to the Members of Allergy Therapeutics plc (Group)
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Independent Auditor’s Report to the Members of Allergy Therapeutics plc (Company)
Company Balance Sheet
Notes to the Company Balance Sheet
Shareholder Information
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© Allergy Therapeutics plc
www.allergytherapeutics.com
01
Who We Are
Highlights
Allergy Therapeutics is a European-based speciality
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Improved market share in Germany and other
pharmaceutical company focused on the treatment and
European markets
prevention of allergy with aluminium free products.
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At constant currency* gross revenue (excludes rebate
Mission Statement
and sales discount) increased 1% to £44.5 million
(2012: £44.2 million)
– Revenue £39.3 million (2012: £41.3 million) impacted
To create a sustainable, fast-growing and profitable global
principally by foreign exchange movements
speciality pharmaceutical business with a substantial
– Revenue outside of Germany increased 4% at
franchise in the allergy sector by developing innovative,
constant currency to £16.6 million (2012: £15.9 million)
patented, registered therapies for both the treatment and
– Decline in gross revenues (before rebate) in Germany
prevention of allergy-related conditions.
of 2% at constant currency to £27.3 million
Strategy
The Company’s strategy is based on the principles of growth,
diversification and careful cost management.
(2012 £27.9 million)
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Launch of probiotic product range in a number of
European countries
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Net profit after tax £0.5 million (2012 £0.8 million)
FDA clinical hold lifted in August 2012 on Company’s
grass pollen allergy vaccine (Grass MATA MPL/ Pollinex®
Specifically, it is the Directors’ intention to focus on the
Quattro Grass 0.5ml)
following strategies:
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Pollinex® Ragweed distribution agreement signed with
Paladin Labs in December 2012, replacing the existing
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Accelerating organic growth by building and leveraging
distributor in Canada
the current infrastructure to accelerate penetration
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US Patent approved for sublingual administration of MPL
of products in current markets and enter into new
adjuvant and vaccine antigens
emerging markets
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Strengthen the Company’s existing product portfolio by
* Constant currency uses prior year weighted average
developing and acquiring new products and/or entering
exchange rates to translate current year foreign currency
into further licensing agreements
denominated revenue to give a year on year comparison
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Exploiting the potential for growth in the United States
excluding the effects of foreign exchange movements.
(US) market by registering and launching the Pollinex
See table in the Financial Review for an analysis of revenue.
Quattro franchise in the US market.
In addition, the Company will continue to develop improved
allergy vaccines with novel adjuvants, improved dosing
regimens in order to improve patient compliance and new
delivery formulations to augment the Group’s portfolio of
patent-protected, registered pharmaceutical products.
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© Allergy Therapeutics plcwww.allergytherapeutics.com Chairman’s Statement
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Chairman’s Statement
During the year Allergy Therapeutics has focused on
Although certain market conditions in Europe remain
diversifying the Group’s product portfolio whilst evaluating
challenging, the Group is pleased to report an operating
potential partnering opportunities to commercialise our
profit of £0.7 million (2012: £1.1 million), the fourth year in
Pollinex® Quattro product in the US.
succession an operating profit has been reported, coupled
with continued investment in increasing the Group’s markets
At the beginning of the financial year we were pleased to
and research and development. Encouragingly, the Group’s
report that the clinical hold on the Group’s development
sales in Germany have shown signs of improvement over the
program for Pollinex® Quattro in the United States had been
last 6 months in addition to increasing its market share and
formally lifted by the US FDA (Food and Drug Administration).
the Group as a whole is confident of its prospects, based on
The Group is focussed on securing a suitable partner with
expected news and its strategy to expand the business into
whom it intends to complete late stage clinical development,
new and existing markets.
submit a BLA (Biologics License Application) to the FDA, and
launch Pollinex® Quattro in the important US market. The
Group has continued to work with the FDA to support the
protocol for the Pollinex Grass 304 study and will update the
market in due course with any developments.
In the absence of a registered subcutaneous vaccine in the
US for grass-related allergic rhinitis, commercialisation of
Pollinex® Quattro could revolutionise treatment in the US by
providing effective, fast-acting treatment to allergy sufferers.
Peter Jensen
Pollinex® Quattro involves four pre-seasonal allergy vaccine
Chairman
injections administered over a month, making it an attractive
13 September 2013
alternative to the prolonged course of weekly to monthly
injections over three years that is currently available with the
allergen extract vaccines used in the US.
Outside of the US, the Group anticipates regulatory news
in Germany, where it submitted a Marketing Authorisation
Application (MAA) for Pollinex® Quattro Grass 0.5 ml to the
Paul Ehrlich Institute (PEI). PEI has not disclosed when an
update on the review process can be expected owing to
the significant increase in its workload as a result of the
introduction of Therapeutic Allergen Regulation (TAV).
I am pleased to report that the Group has made good
progress with its strategy to diversify the business, enter
new markets and expand its product portfolio, resulting
in reduced reliance on the historically important German
market. The Group is progressing the registration process
for products in Italy and Portugal and continues to invest
prudently in promising R&D programmes. In addition, the
Group has introduced three probiotics products – Kallergen-
Th, ATI-Prob and Pollagen, which have been well received in
Italy and are expected to be launched in other markets later
this year. The Group also launched Acarovac Plus in Spain,
a modified-allergen product developed for the treatment of
perennial mite allergy.
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© Allergy Therapeutics plcwww.allergytherapeutics.com
CEO’s Review
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Chief Executive Officer’s Review
The lifting of the FDA’s clinical hold on the Group’s Pollinex®
Measures implemented over the last two years to improve
Quattro vaccine in the US at the beginning of the financial
our competitive position in Europe are beginning to show
year was a major achievement for the Group. Elsewhere in
positive results. Market data, which is available for the 12
the business the Group continued to focus on expanding into
months to June 2013 showed a positive performance against
new markets and to diversify its product portfolio.
the market across our main European markets. Germany was
Allergy Therapeutics has continued to grow its revenues
by value improvements above the market were recorded as
in markets outside Germany, the Group’s largest market,
follows: Austria 12, Italy 15 and the Netherlands 17 points.
seven points above the market when measured by volume;
as part of its broader strategy to reduce its reliance on
revenues from this territory. The Group reported revenue
The partnering process for Pollinex® Quattro in the US,
in Germany of £23.6 million, accounting for 60% of the
although it has not entirely completed, has not generated
Group’s revenue compared with 73% reported in 2009.
a suitable partner to date for the company and as a
During the last six months of the year, the Group’s sales in
consequence work is underway to explore alternatives to
Germany have shown signs of improvement, outperforming
develop the US opportunity; an update will be provided on
the market by 13 points in volume during the period. The
developments in due course. In Europe, a response to the
European Commission has recently opened an investigation
MAA for Pollinex® Quattro Grass 0.5ml submitted to the PEI
into whether the exemption from the increase in rebates in
is still awaited. The PEI has not disclosed when an update on
Germany constitutes state aid. If it is eventually concluded
the review can be expected.
that the exemptions constitute state aid, then all unlawful aid
may have to be repaid.
During the year the Group has made good progress on
its strategy to diversify its portfolio, expand into new
In other markets, sales in Italy and Austria increased by 3%
geographical markets and identify new in-licensing
and 8% respectively at constant currency. UK sales were
opportunities. To this end the Group introduced three new
down owing to the termination of the Anapen distribution
probiotics products during the year: Kallergen-Th, ATI Prob
agreement as announced in December 2012, but before
and Pollagen, each targeting different forms of allergic
Anapen sales were positive. Sales in the Spanish market have
disease. The Group also made progress with another product,
shown signs of recovery due to improvements implemented
Acarovac Plus, which has been launched in Spain. Acarovac
by management, after a decline over a number of years,
Plus is a novel tyrosine-adsorbed, modified-allergen product
resulting in a turnaround of the subsidiary.
developed for treatment of perennial mite allergy.
In December 2012 the Group signed a new distribution
Research and Development costs during the financial year
agreement for Pollinex® Ragweed, replacing the existing
have increased to £2.5 million (2012: £2.1 million) to reflect
distributor with Paladin Labs, one of Canada’s leading
the Group’s focus on diversifying the business. Registrations
specialty pharmaceutical companies with extensive
have been undertaken in Peru and Venezuela for mite allergy
experience marketing in-licensed products. I am pleased to
products. Under the Therapeutic Allergen Regulation in
report this is going well with sales increasing by 8% against
Germany, progress has been made with the Pollinex Quattro
the previous year.
Birch dose ranging study: clinical trial and ethics applications
have been submitted in Germany, Austria and Poland and the
Although we are beginning to see an improvement in certain
dosing of patients starts in September 2013. The registration
markets, sales across the Group’s principal geographical
of various allergy vaccines in Portugal will be concluded in
markets continue to reflect the impact of challenging market
September 2013.
conditions, governmental austerity measures and the
weakening average Euro against sterling. As a consequence
the Group’s operating profit for the year was £0.7 million
(2012: £1.1 million).
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© Allergy Therapeutics plcwww.allergytherapeutics.com Outlook
The lifting of the clinical hold by the FDA in August 2012
has allowed the Group to resume its Pollinex® Quattro
development programme in the US, where the search for
a suitable development and commercialisation partner
continues. In Europe we are also moving forward,
implementing efficiencies and strengthening our position by
winning market share and diversifying our revenue base. With
these developments alongside expected news from PEI, we
remain confident of the future prospects of the Company.
Manuel Llobet
Chief Executive Officer
13 September 2013
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© Allergy Therapeutics plcwww.allergytherapeutics.com Our Markets
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Our Markets
We have a particular focus in Europe with our own
United Kingdom
established operations in important markets including
The UK is an important market due to its potential for
Germany, Italy, Spain, Austria and the United Kingdom. Our
future growth for the Group and the fact that it is an area of
newer operations in Switzerland and the Netherlands are
scientific development. Whilst there is limited use of allergy
developing as anticipated. The only major European market in
vaccines in the UK, this has the potential to change and the
which we are not yet present is France.
Company has been focused on marketing to the medical
community, promoting greater awareness of current and
In markets where we do not have a direct presence, we
more suitable treatment options.
often make our products available through partners. The most
important distributor markets for the Company are Canada,
Austria
the Czech and Slovak Republics and South Korea.
Austria is an established market with total market sales of
approximately €18 million per year and our own operation is
Germany is the Group’s main market generating
performing well and growing faster than the market.
approximately 60% of the Group’s revenue in the 12 months
ending 30 June 2013, followed by Italy (11%), Switzerland
The Netherlands
(5%), Austria (5%), Spain (4%), Czech Republic and Slovakia
The total market size in The Netherlands is around €40 million
(4% combined), Canada (4%), The Netherlands (3%) and the
a year. Like other European countries, new regulations require
UK (2%).
Germany
that only registered products can be sold. This should be to
our advantage as we already have registrations in this market
for our Pollinex products. Allergy Therapeutics is the only
Germany is the largest allergy immunotherapy market in the
company showing growth in the market.
world by value, with annual sales of over €320 million. Since
2010 the market has been affected by the austerity measures
Switzerland
the German government put into place in 2010 and by the
The allergy vaccine market in Switzerland is well established,
new regulatory environment for allergen therapies. Germany
and is worth approximately €12 million per annum. The
remains a key focus for the Group and improvements
acquisition (in the year ended 30 June 2011) of Teomed AG,
continue to be made in a number of key business areas
the Swiss subsidiary, is providing an opportunity to improve
to strengthen the Company’s approach to marketing the
earnings, and provides an established infrastructure from
which to launch Pollinex Quattro in the future.
products.
Italy
The total Italian allergy immunotherapy market is estimated to
be worth €50 million in sales per year; although patients have
been impacted by adverse economic conditions affecting their
ability to pay for vaccines. The Italian immunotherapy market
is dominated by sublingual products. However, despite these
challenges, we continue to support our local organisation, and
believe there remains a significant opportunity to continue to
grow our business in this important market.
Spain
Total market sales in Spain are estimated to be €60 million
per annum, with low single-digit growth during the past year.
Growth in this market has been impacted by the country’s
economic slowdown; however, it still remains a large market
in terms of volume, with approximately 150,000 patients
a year estimated to receive immunotherapy. Injectable
immunotherapy products continue to be the treatment of
choice for Spanish physicians in this treatment category.
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© Allergy Therapeutics plcwww.allergytherapeutics.com Emerging Markets
In 2012 we launched our products in Argentina, Venezuela,
Colombia and Chile, and set up a new marketing operation
in Argentina. Regulatory hurdles have caused slow sales in
these Latin American markets this year; however it is still
seen as a promising potential market.
For the purposes of the segmental reporting analysis
Central Europe represents the markets of Germany,
Austria, Netherlands and Switzerland, and Southern Europe
represents Spain and Italy. The Other segment represents the
distributor and licensee revenues through other worldwide
markets including Canada, Czech and Slovak Republics, South
Korea and Latin America.
Revenue by Country
Germany – 60%
Italy – 11%
Switzerland – 5%
Austria – 5%
Spain – 4%
Czech Republic & Slovakia – 4%
Canada – 4%
The Netherlands – 3%
UK & Export market – 2%
South Korea – 1%
Other – 1%
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© Allergy Therapeutics plcwww.allergytherapeutics.com Our Products
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Our Products
The Group sells a wide range of aluminium free allergy
containing MPL, a hepatitis B vaccine and an HPV vaccine
vaccines and diagnostics. The majority of sales are allergy
to protect against cervical cancer - Fendrix and Cervarix
vaccines and we sell both injectable vaccines and sublingual
respectively - have received broad approval in Europe, the US,
vaccines. Our vaccines and diagnostics trade under various
Japan and Canada. These modern, successful vaccines are
brand names, however, under each brand name is a product
already widely used.
that is produced in many different forms depending upon
the specific allergy needs of the patient, as determined by
The adjuvant effect of MPL in specific immunotherapy (SIT)
the doctor. The majority of our sales are for the treatment of
has been documented in numerous studies and is seen in its
pollen-related allergies, particularly for allergies to grasses
essential role of promoting the switch from a TH2-directed
and trees.
immune response (with IgE induction) to a TH1-directed
According to the current opinion of expert immunologists, IgE
immune response.
mediated allergies (type one allergies) are due to deregulation
Our sublingual product is Oralvac Compact. Its dosing schedule
of the T helper lymphocyte (TH) cell. Whereas healthy
allows for a more rapid and simpler escalation of dosage
people develop tolerance to allergens, allergy sufferers have
making treatment more convenient for patients and doctors.
a TH2-dominated immune response with increased IgE
and corresponding clinical symptoms. This deregulation of
Probiotics
the immune system can be counteracted efficiently using
Since June 2012, we have launched three new Probiotic
specific immunotherapy (SIT). By administering high doses
products (Kallergen-Th, ATI Prob and Pollagen) across Spain,
of allergen, the balance between TH1 and TH2 response
Italy and Portugal. The products contain specific combinations
to the allergen can be restored. Since SIT was first carried
of Lactobacilli and Bifidobacteria.
out successfully by Leonard Noon in 1911, it has become
established as the only therapy addressing the cause of type
Acarovac Plus
one allergies.
Acarovac Plus was launched in Spain in March 2013 and is a
novel tyrosine-adsorbed, modified-allergen product developed
Short course injectable vaccines form the largest segment of
for treatment of perennial mite allergy. The product has been
our vaccines portfolio and are comprised of one key product,
standardised to meet a dose regime consistent with “one
Pollinex Quattro, which is our largest product range, as
bottle” convenience. Clinical evaluation and immunogenicity
well as various other longer course products. These other
studies demonstrate excellent patient tolerability and serological
products trade under different names in different markets and
analyses consistent with a favourable shift in Th1/Th2 balance
include Pollinex, TA Mix top and Venomil.
compared with an unmodified version of the product.
Pollinex Quattro, launched in 1999, heralded a transformation
Licensed Products
in immunotherapy by introducing allergy vaccination with
DAP is a product for exclusive use in the diagnosis of type I
only four injections per course. The short treatment period
or immediate hypersensitivity to benzylpenicillin and related
is due to the use of L-tyrosine absorbed allergoids, an
antibiotics (betalactams) by means of cutaneous tests (prick
improved extract allergen that has been modified in order
and intradermal). Allergic reactions to betalactams are the
to lower its allergenicity while keeping its immunogenicity,
most common cause of severe adverse drug reactions and
and the innovative adjuvant monophosphoryl-lipid A (MPL).
there is an increasing prevalence in the population (up to 10%
An adjuvant is a substance which improves the immune
of the German population reports an allergy to penicillin). DAP
response to an antigen or allergen. MPL is derived from a
was launched in Italy in May 2011 and in the UK in July 2011.
lipopolysaccharide (LPS) which is obtained from the cell wall
of Salmonella Minnesota R595 using a process of extraction,
purification and detoxification.
As a vaccine adjuvant, MPL has been used for many years.
Vaccines with systems containing MPL have been evaluated
in various indications such as cervical cancer and malaria
at GlaxoSmithKline. Two vaccines with an adjuvant system
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© Allergy Therapeutics plcwww.allergytherapeutics.com 19
© Allergy Therapeutics plcwww.allergytherapeutics.com Research & Development
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Research & Development
This has been an important year for the Group during which
clinical information will be required on some of these
several key strategic development goals were achieved.
products over the next few years to 2017, and the Group has
therefore begun preparations for clinical trials.
Following the submission of a Complete Response the FDA
lifted the clinical hold on Pollinex® Quattro Grass IND on 3
Over the last year the Group has continued to develop
August 2012. The Group has gained approval from the FDA
additional potential markets in Latin America, Asia and
to progress its grass clinical development programme in
Europe. Great strides have been made in understanding the
the US in an Environmental Exposure Chamber (EEC) and
medical & regulatory requirements in these markets and
discussions with Health Canada (BGTD) are now planned to
to adapt the portfolio accordingly to supply the appropriate
enable the pivotal chamber study to be performed.
products and supporting information.
In June 2011 the Group received feedback from the PEI’s
review of the Group’s Grass MATA MPL 0.5ml application
for the MAA, which was submitted in March 2009. The PEI
raised a number of questions on the MAA and requested
further clarification on several points. The Group prepared
comprehensive responses which it believes have addressed
the points that were raised. The responses were submitted to
the PEI in November 2011 and the Group is awaiting feedback.
As previously announced, the Therapeutic Allergen Regulation
(introduced by the PEI, the Regulatory Authority for biological
products in Germany) has changed the regulatory landscape.
The Group submitted Marketing Authorisation Applications
(MAAs) for our key products in December 2010. The Group
has yet to receive feedback from the PEI, however, additional
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© Allergy Therapeutics plcwww.allergytherapeutics.com 23
© Allergy Therapeutics plcwww.allergytherapeutics.com Financial Review
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Financial Review
The following section should be read in conjunction with the
financial statements and related notes on pages 36 to 100.
Overview
The results for the twelve months to 30 June 2013
demonstrate continuing profitability, despite difficult market
conditions, with a Group operating profit of £0.7 million (2012:
£1.1 million); the Group has now generated an operating profit
for the fourth year in a row.
Revenue
Despite weak allergy vaccine markets in Europe, revenue
at constant currency, excluding the impact of rebates and
discounts, was marginally better at £44.5 million (2012: £44.2
million). This can be seen in the table below:
2013
Germany
£m
2013
Other
£m
2013
Total
£m
2012
Germany
£m
2012
Other
£m
2012
Total
£m
Revenue
23.6
15.7
39.3
25.4
15.9
41.3
Add rebates and discounts
1.7
0.5
2.2
2.5
0.4
2.9
Gross revenue
25.3
16.2
41.5
27.9
16.3
44.2
Adjustment to retranslate at prior year foreign
exchange rate
2.0
1.0
3.0
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Gross revenue at constant currency
27.3
17.2
44.5
27.9
16.3
44.2
Revenue
23.6
15.7
39.3
25.4
15.9
41.3
Adjustment to retranslate at prior year foreign
exchange rate
1.9
0.9
2.8
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Revenue at constant currency
25.5
16.6
42.1
25.4
15.9
41.3
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© Allergy Therapeutics plcwww.allergytherapeutics.com The Group recognised revenue of £1.0 million (out of a total
to £12.0 million (2012: £13.7 million). Consequently, the gross
receipt of £1.25 million) in relation to signing a new distributor
profit percentage improved by 2.7% points, to 69.6%, leading
for Canada.
to a gross margin of £27.3 million (2012: £27.6 million).
With a weaker EUR:GBP average exchange rate during the
Operating Expenses
year compared to the prior year, revenue decreased by 5%
Total overheads are slightly higher against the prior year at
to £39.3 million (2012: £41.3 million). The average EUR:GBP
£26.7 million (2012: £26.5 million). The weaker Euro helped
exchange rate in the period was 1.24 compared to 1.15 in
reduce distribution costs, which are mainly European sales
the previous period; the weakening Euro adversely impacted
and marketing costs, to £16.3 million (2012: £17.9 million).
revenue by £2.8 million. The Group has continued to grow its
Administration expenses include a cost of the fair valuation
revenue in markets outside Germany, and to reduce its reliance
of foreign exchange hedges, generating a liability at the year
on the German market, with 60% of revenue originating in the
end of £0.3 million. At the prior year end the fair valuation
territory compared with 73% in 2009. In addition to the sale of
generated an asset; together these created a loss in the year
allergy vaccines, the Group has continued to look to increase
of £0.8 million (2012: gain £1.3 million). The initiation of the
its revenue from in-licensed products; although revenue was
dose ranging study for Pollinex Quattro Birch started during
impacted in the year by the loss of Anapen sales due to the
the year and was the main factor behind the increase in R&D
termination of the agreement with Lincoln, the supplier of
costs to £2.5 million (2012: £2.1 million).
Anapen, following issues with the device. Total sales from
in-licensed products contributed £0.7 million this year (2012:
The Euro denominated loan was repaid in April 2012, which
£1.5 million). However, the key product is still Pollinex® Quattro,
means there is no retranslation difference on the loan in this
which accounts for 49% of sales.
period (2012: £1.0 million credit). The finance expense reflects
Germany experienced various austerity measures and gross
being the interest on the overdraft and German pension fund
sales at constant currency in Germany fell slightly to £27.3
finance cost. The overdraft was repaid at 31 December 2012
million (2012: £27.9 million). During the period the Group was
but drawn against at the year- end as expected due to the
subject to a preliminary exemption from the full rebate charge
seasonality of the Group’s business.
the absence of the loan, with the expense in the period
in Germany for the first half of the financial year, although
for the second half the full rebate was charged. The Group
Tax
also benefited from an exemption to the increase in the
The tax credit of £0.1 million during the year relates mainly
German rebate for the period January 2012 to June 2012. The
to the recognition of a deferred tax asset in respect of
European Commission has recently opened an investigation
accumulated UK trading losses generated by the Group’s
into whether the exemption from the increase in rebates in
investment in R&D in previous years. This asset has been
Germany constitutes state aid. If it is eventually concluded
recognised following several years of taxable profits and
that the exemptions constitute state aid, then all unlawful aid
expected future profits. An R&D tax credit was recognised
may have to be repaid (please refer to Note 28).
during the prior year. In both years these credits offset tax
charges in some of the overseas subsidiaries.
Italy’s sales at constant currency increased by 3%, which
was a strong result given the weak market during the year.
Balance Sheet
Similarly, Austria showed strong growth in sales of 8% in the
With the major capital investment programme now complete
year. By contrast the Group’s sales in Spain and the Czech
and a lower maintenance level of spend now required,
and Slovak Republics declined marginally during the year.
property, plant and equipment has fallen from £7.6 million to
Sales in the Latin American market were disappointing for the
£7.3 million as the depreciation charge for the period is higher
year owing to a number of registration delays.
than new equipment purchases. Goodwill remains broadly
Gross Profit
similar at £2.6 million, whilst other intangible assets have fallen
by £0.8 million mainly due to the cancellation of the agreement
Tight discipline on costs in all areas helped drive
with Lincoln Medical Limited for the Anapen device.
manufacturing overheads lower against the prior year by
£0.4 million. This lower cost base combined with lower costs
attributable to Anapen sales helped reduce the cost of goods
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© Allergy Therapeutics plcwww.allergytherapeutics.com Total current assets excluding cash have increased by £1.1
million to £13.2 million (2012: £12.1 million) primarily due to
an increase in debtors related to the preliminary exemption to
the rebate increase in Germany.
Retirement benefit obligations, which relate solely to the
German pension scheme, increased to £6.2 million (2012:
£4.7 million). The increase in the liability was driven by a
fall in German bond yields at the year end compared to the
previous year.
Net cash generated by operations remained positive, with a
reported inflow of £3.0 million (2012: £2.9 million).
Financing
The fundraising that took place in April 2012 raised £12.6
million through a combination of convertible debt (£4.0 million)
and equity (£9.3 million) with CFR Pharmaceuticals acting as
the cornerstone investor. The funds raised have enabled the
Group to reduce its financing costs by repaying the bank loan
facility and replacing it with a seasonal overdraft facility.
The Directors believe that the Group will have adequate
facilities for the future and accordingly they continue to adopt
the going concern basis in preparing the full year results.
Ian Postlethwaite
Finance Director
13 September 2013
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© Allergy Therapeutics plcwww.allergytherapeutics.com 29
© Allergy Therapeutics plcwww.allergytherapeutics.com Board of Directors
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Peter Jensen
Non-Executive Chairman (62)
Manuel Llobet
Chief Executive Officer (49)
Appointed to the Board in October 2010 and appointed Non-
Manuel Llobet joined the Group in July 2009 following the
Executive Chairman on 1 January 2011.
successful refinancing in which Azure Ventures Limited was
As Non-Executive Chairman, Peter is responsible for
the main investor.
leadership of the Board by ensuring clear company strategy,
Prior to this appointment, Manuel was the Principal
board effectiveness, good corporate governance and effective
Consultant for Biohealth LLC and CEO of International
communication with shareholders.
Operations of the Weinstein family’s group of companies.
Peter held a number of senior roles in his 21 years with
Weinstein family’s group of pharmaceutical companies in 20
Manuel was responsible for international development of the
SmithKline-Beecham. Between 1994 and 1998 he was
countries.
Chairman of Consumer Healthcare Europe and between 1998
and 2001 he held the position of President of Worldwide
Mr Llobet has over ten years’ experience working in the
Supply Operations, based in Philadelphia.
pharmaceutical industry, primarily in South America, and
has served as Executive Director of Corporación Drokasa
Since leaving SmithKline-Beecham at the time of the merger
where he was responsible for a US$25 million AAA-rated
with Glaxo, Peter has held a number of non-executive director
bond issue to finance the group’s expansion plans; CEO of
and chairman roles for various public and private companies.
Laboratorios Andrómaco, where he led the group to an IPO
These include Domino Printing Sciences plc, Glenmorangie
on the Santiago Stock Exchange; and Business Development
plc, Genetix Group plc, Celsis International plc and Victoria plc.
Manager for Laboratorio Chile. Manuel participated in the
Executive Program at the Graduate Business School of
In addition to his role at Allergy Therapeutics, Peter is
Stanford University and has an MBA from IESE, Universidad
currently Chairman of Nottingham Racecourse, Screendragon
de Navarra in Barcelona. Manuel also has degrees in Industrial
Limited, The Home of Horseracing Trust Limited and The
Business Management and Chemical Engineering from
British Sporting Art Trust and is a director of The Osborne
Universitat Ramon Llull in Barcelona.
Studio Gallery Limited.
Peter chairs the Nomination Committee and is also a member
executive management of Group operations, investor
of the Audit Committee.
relations, and implementation of the Board’s collective
As Chief Executive Officer, Manuel is responsible for the
decisions overseeing all operational aspects of the Group and
directing the long-term strategy.
32
© Allergy Therapeutics plcwww.allergytherapeutics.com Ian Postlethwaite
Finance Director (50)
Stephen Smith
Non-Executive Director (60)
Ian Postlethwaite joined Allergy Therapeutics in April 2002
Stephen Smith is a Chartered Management Accountant,
as Finance Director. Prior to this he worked for Ellerman
Fellow of the Association of Corporate Treasurers and
Investments (1997 - 2002), a UK private equity house,
Member of the Institute for Turnaround. Since 1995, he has
undertaking the roles of Chief Executive Officer with AFS,
operated as an independent executive, Non-Executive Director
one of the largest independent finance houses in the UK,
and interim manager (CRO/CEO/COO/FD) on an international
and Finance Director with a number of successful start-up
basis. Up to 1995 Stephen held various senior financial
technology companies. Previously he held senior finance
positions in UK based international public companies including
positions with Ericsson, from 1994 - 1997, and Philips
6 years as Group Treasurer of The Rank Organisation and 3
Electronics from 1989-1994. He is a Fellow of the Chartered
years as Group Finance Director of a quoted hotel company.
Association of Certified Accountants and is a non-executive
director of Shoreham Port Trust.
Stephen chairs the Audit and Remuneration Committees, is a
member of the Nomination Committee which he chaired until
As Finance Director, Ian is responsible for Group financial
1 January 2011 and is the Senior Non-Executive Director.
reporting and control, tax, finance systems and internal audit.
Ian is also the Company Secretary, a position he has held
since 2004.
33
© Allergy Therapeutics plcwww.allergytherapeutics.com Alejandro Weinstein Jr
Non-Executive Director (55)
Thomas Lander, M.D.
Non-Executive Director (61)
Alejandro Weinstein Jr. is CEO of CFR Pharmaceuticals,
Dr. Thomas Lander, M.D. is board certified in internal
Chile. CFR Pharmaceuticals was listed on the Santiago Stock
medicine and diabetology and, moreover, has a strong
Exchange in 2010, with a presence currently in 17 countries
scientific background in oncology and immunology with
concentrated in South America. He is responsible for the
a special emphasis on immunotherapy. He trained at the
entire Weinstein family group of pharmaceutical companies,
Technical University and the Institute for Immunology,
whose origins can be traced back to 1922.
Munich, Germany. He has spent more than 25 years in senior
Alejandro has been active in developing and managing several
including Boehringer Ingelheim, Novo Nordisk, Bristol-Myers-
businesses and start-ups in the pharmaceutical industry and
Squibb and GlaxoWellcome (GlaxoSmithKline) before joining
the healthcare sector, including Genomika Foundation, a stem
Merck KGaA (Merck Serono) as Executive Vice President,
cell research organisation; Biomedical Research Consortium,
Global Clinical R&D and Chief Medical Officer in 2003.
executive positions in R&D with the pharmaceutical industry
a joint venture between a biotech R&D Company and a
university; Vidacel and Banco de Vida, public and private stem
In 2006 he made a move to the biotech industry as managing
cell banks in Chile; and several other joint ventures with local
director of CureVac GmbH, Tuebingen. Since 2009, Dr. Lander
and foreign R&D companies. Alejandro has a BA, is a Certified
has been working as a strategic consultant and also a non-
Public Accountant and participated in the Owner/President
executive director for several European pharmaceutical and
Management Program (OPM) at Harvard Business School.
biotech companies.
Alejandro sits on the Nomination Committee.
Thomas sits on the Remuneration Committee.
34
© Allergy Therapeutics plcwww.allergytherapeutics.com Directors’ Report
D
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Director’s Report
The Directors present their annual report and the audited financial
The operating profit was £0.7 million (2012: £1.1 million),
statements for the 12 months ended 30 June 2013. The financial
the decrease being a consequence of the fall in revenue
statements are for Allergy Therapeutics plc (the “Company”) and
(although this was limited by effective cost control measures).
its subsidiary companies (together, the “Group”).
Net cash generated by operations for the year was an inflow
Principal activities
of £3.0 million (2012: £2.9 million).
The Group is engaged in the development, manufacture,
marketing and sale of a range of pharmaceutical vaccine
Staff turnover, including redundancies and temporary staff, in
products designed for the immunological treatment of the
the UK during the year was 19.1% (2012: 20.3%), compared
allergic condition and also licenses in related products.
to an average UK staff turnover rate of 12.5% (2012: 12.4%),
Vaccinations take the form of allergen-specific, named-
(data supplied by the Chartered Institute of Personnel and
patient-specific and standard products in injectable and
Development). Excluding redundancies and temporary staff,
sublingual presentations. The business is headquartered
the turnover rate was 12.4% (2012: 9.7%).
in Worthing, West Sussex, where development and
manufacturing is based, with sales and marketing subsidiaries
Description of the principal risks and
in Germany, Austria, Italy, Spain, The Netherlands, Switzerland
uncertainties facing the Group
and Argentina and representative offices in Poland and the
In common with many pharmaceutical companies the Group
Slovak Republic.
Results
faces a number of risks and uncertainties. Internal controls
are in place to help identify, manage and mitigate these risks.
The main risks have been identified as follows:
The profit for the year after taxation was £0.5 million (2012:
£0.8 million). The results for the year are set out on page 51
Risk that the Group is unable to provide effective
and are dealt with in more detail in the Financial Review.
commercially successful products
Business review
Continued development of viable new products and their
successful registration and marketing is key to the success of
The purpose of this business review is to inform members of
the Group and is a costly and lengthy process. Rationale for
the Group and help them to assess the Group’s performance
new product development may indicate potential; however
during the year, through financial and non-financial activities,
following significant investment there is no guarantee that a
outlining the trends and factors which are likely to influence
product will be successful.
future developments. A review of development and
performance of the Group, including important events,
Two key opportunities for the Group are developing and
progress during the year, the financial performance during
commercialising Pollinex Grass in the US and the PEI market
the year and likely future developments, can be found in the
authorisation for Pollinex Quattro Grass 0.5ml in Germany.
Chairman’s Statement on pages 4 to 6, the Chief Executive
Officer’s Review on pages 8 to 11 and the Financial Review on
Product liability risk
pages 24 to 28 and are incorporated in this report by reference.
Despite extensive product testing prior to market launch,
products may produce unanticipated adverse side effects
Review of the Group’s business and Key
that may hinder their marketability. The Group may be
Performance Indicators
insufficiently covered for any potential litigation which in
The management consider the Key Performance Indicators
some cases can potentially be open-ended. The Group’s
(KPIs) of the business to be revenue, operating profit, net
manufacturing facilities and those of some of its suppliers
cash generated and staff turnover.
are subject to regulatory requirements and there is a risk
Revenue in the year was £39.3 million compared to £41.3
The Group maintains product liability insurance and ensures
million in the previous year, a reduction of less than 5%,
systems and processes relating to the manufacture of its
impacted primarily by foreign exchange.
products are compliant and regularly reviewed. It has a
that such facilities may not comply with such requirements.
pharmacovigilance team in place to monitor and address any
safety issues arising.
38
© Allergy Therapeutics plcwww.allergytherapeutics.com Intellectual property risk
A majority of the Group’s sales are denominated in Euros
Group patents may be challenged at any time and any
whilst the manufacturing and most corporate administration
unsuccessful defence may cause the Group to lose protection
costs are in the UK and therefore the Group is exposed to
for its products and subsequently affect further development
volatility in exchange rate fluctuations. The Group monitors
and sales. The Group is reliant on some intellectual property
exchange rates regularly and implements hedges to mitigate
owned by external stakeholders that, if lost, could hinder
such risks.
the commercialisation of some of it products. The Group has
internal and external patent experts. Internal controls are in
Clinical and regulatory
place to avoid disclosure of patentable material and to protect
The Group operates in a highly regulated environment
existing patents. Arrangements are also in place to notify the
for the testing, manufacture and supply of its products.
Group of any infringements of our intellectual property which
Compliance with clinical and regulatory requirements within
it would defend robustly.
Economic risks
the EU affects not only the cost of product development
and resource use, but also the time required to comply.
Increased regulation may require products to be amended
A high level of risk is attached to the research, development
to comply with regulations and/or products have to be
and commercialisation of innovative drugs. The Group
withdrawn, reducing revenues and/or increasing costs.
ensures that business cases are scrutinised before Board
Regulatory authorities such as the FDA are increasingly
approval and that any increases in costs are justified. Key
focussed on the benefit/risk of pharmaceutical products and
suppliers may be unable to execute contractual requirements
safety data making it more onerous to obtain regulatory
that hamper product development and/or the route to
approval. Compliance systems are in place to ensure all
markets, but the Group maintains appropriate measures to
clinical, manufacturing and marketing activities comply
protect its supply chains. The Group may be unable to attract
with regulations in the EU and other territories. Standard
partners or licensees on favourable terms or recruit the right
operating procedures are maintained to ensure compliance
staff to help develop and market its products. Approximately
with good manufacturing practice. The Group strictly monitors
60% (2012:64%) of Group sales are made in Germany and
new industry regulations and engages with key Regulatory
therefore Group results are sensitive to German legislation
Authorities to inform the Group’s strategic direction and
and government policies, and performance of the German
identify factors likely to affect the future development,
market. To mitigate this risk, the Group intends to expand its
performance and position of the Group’s business.
revenue outside Germany.
Financial risk management objectives and policies
Pharmaceutical products are subject to far greater controls
Note 23 in the Notes to the Financial Statements gives
on price in certain markets than other products in the
details of the Group’s objectives and policies for risk
marketplace. Some governments intervene directly in setting
management of financial instruments.
price levels and rebates paid into public sick funds, especially
with an increasing aged population in developed countries.
Position of the Group’s business at the end of the year
The Group cannot accurately predict when, where and how
The implementation of commercial and marketing initiatives
such controls and restrictions may be altered, either to its
across all territories has helped to maintain and strengthen the
benefit or detriment, but it does conduct regular reviews
Group in conjunction with the development of new products.
of pricing and reimbursement levels and assessments of
healthcare reforms on pricing.
Main trends and factors likely to affect the future
development, performance and position of the Group’s
Financial risks
business
Adequate funding may not be available to the Group, either
Allergy remains a market with largely unmet medical needs
through reserves or external partners for the advancement of
in many countries. The allergy “epidemic” continues to
clinical trials, manufacturing and marketing. Failure to obtain
grow and it is increasingly recognised that, for many people,
further funding may lead to postponement or cancellation
hay-fever is far from a trivial matter. There are currently few
of programmes. The Board actively reviews the financial
competitors in the niche market in which the Group operates.
requirements of the Group on a regular basis in order to
ensure that adequate funding is available.
39
© Allergy Therapeutics plcwww.allergytherapeutics.com Environmental matters
Employment policies
The Board is committed to minimising the Group’s impact on
the environment and ensuring compliance with environmental
Equal opportunities
legislation. The Board considers that its activities have a low
The Group is committed to providing equal opportunities
environmental impact. The Group strives to ensure that all
in employment irrespective of background, age, sexual
emissions including the disposal of gaseous, liquid and solid
orientation, religion, gender, nationality, marital status or
waste products are controlled in accordance with applicable
disability. Our aim is to attract the best people in the industry
legislation and regulations. Disposal of hazardous waste is
and we believe in maximising every employee’s potential. The
handled by specialist agencies.
Group does not tolerate any harassment or discrimination.
Employees
Disabled people
The Group employed 376 people at the year-end and
The Group, in considering applications for employment from
is committed to achieving equality of opportunity in all
disabled people, seeks to ensure that fair consideration is
employment practices. A thorough review of all employees
given to the abilities and aptitudes of the applicant while
is performed annually to identify and promote areas that
having regard to the requirements of the job for which he or
require development and growth; feedback is encouraged and
she has applied. Employees who become unable to carry
sought. Staff are motivated by performance related incentives,
out the requirements of the job for which they have been
which help to attract and retain the right people, and are
employed are given individual consideration and, depending
encouraged to achieve business targets through market-rate
on the nature, severity and duration of the disability may be
pay, discretionary performance based bonuses and long term
considered for alternative work.
incentive programmes. The Board is committed to retaining
staff as a high priority for the Group and implementing well
Communication
balanced, challenging incentives makes this possible. Training
The Group has an open communication policy with its
and development appropriate to individual and business needs
employees. Regular communication on the strategy, plans
is offered and remuneration for professional development is
and performance of the Group is undertaken and reinforced
considered on a case by case basis.
by site meetings of staff as well as briefings by Directors
The Group places considerable value on the involvement of
to Group information on the intranet. Information about the
its employees and has continued to keep them informed
Group is also available on the internet at
on matters affecting them as employees and on the various
www.allergytherapeutics.com
and line management. In the UK, employees have access
factors affecting the performance of the Group. This is
achieved through formal and informal meetings and email
Health & Safety
updates. Family friendly employment policies conform to
The Group is committed to providing a safe environment
statutory requirements and flexible working practices are
for its employees and others who are engaged in or may be
adopted where viable.
impacted by the Group’s operations and considers health &
safety a priority. Policies relating to Health & Safety are set
The Group implements equality of opportunity in all of its
out on the Group’s Intranet and Staff Handbook. Procedures
employment practices, policies and procedures. Employees
are monitored and improvements identified through periodic
are highly valued and their rights and dignity are respected.
audits and safety inspections. The Group’s Health and Safety
The Group practices equal treatment of all staff and potential
Committee meets regularly to discuss issues and promote
staff irrespective of their race, creed, colour, sexual orientation,
good practice with Health & Safety Officers promoting and
nationality, ethnic origin, religion, disability, age, gender or
monitoring safe working conditions. The Directors review the
marital status. The equal opportunities section of the Staff
Health & Safety report at the monthly board meetings.
Handbook covers all permanent and temporary employees, job
applicants, agency staff, consultants and contractors.
Corporate social responsibility
The Directors recognise the increasing importance of
corporate social responsibility and endeavour to take into
account the interests of the Group’s stakeholders, including
its investors, employees, customers, suppliers and business
partners when operating its business.
40
© Allergy Therapeutics plcwww.allergytherapeutics.com Directors and Directors’ interests
The Directors who held office during the period
were as follows:
Manuel Llobet
Ian Postlethwaite
Peter Jensen
Thomas Lander
Stephen Smith
Chief Executive Officer
Finance Director
Non-Executive Chairman
Non-Executive Director
Date of appointment
1 July 2009
1 July 2004
1 October 2010
2 May 2012
Non-Executive Director
8 September 2004
Alejandro Weinstein
Non-Executive Director
1 July 2009
The dates of appointment above refer to appointment as
Directors of Allergy Therapeutics plc.
The Directors who held office at the end of the financial
year had the following interests in the ordinary shares of the
Company:
At beginning of year:
At end of year:
Name
Ordinary Shares
Options & LTIPs
Ordinary Shares
Options & LTIPs
Manuel Llobet1
Ian Postlethwaite
Peter Jensen
Thomas Lander
Stephen Smith
3,125,000
493,000
120,000
-
776,513
2,190,000
2,983,500
-
-
150,000
3,125,000
1,360,000
120,000
-
776,513
Alejandro Weinstein2
201,986,132
-
201,986,132
3,065,000
1,696,000
-
-
150,000
-
1 Has an interest in shares pursuant to his interests in Wild Indigo.
Structure of the Company’s capital
2 Has an interest in shares pursuant to his interests in Yissum Holding
The Company’s share capital which is traded on the AIM
Limited, Azure Ventures & CFR International.
market of the London Stock Exchange comprises a single
Directors’ indemnity
class of ordinary shares of 0.1 pence each, which each carry
one voting right and all rank equally with each other. At 30
The Directors and officers of the Company are insured against
June 2013, 409,866,831 shares were allotted and fully paid.
any claims arising against them for any wrongful act in their
Details of movements in the Company’s share capital during
capacity as a Director, officer or employee of the Group,
the period are shown in Note 26 to the financial statements.
subject to the terms and conditions of the policy.
Details of employee share schemes are set out in Note 27
to the financial statements. Participants in employee share
schemes have no voting or other rights in respect of the
shares subject to their awards until the options are exercised
or conditional shares fully vest, at which time the shares rank
pari passu in all respects with shares already in issue.
41
© Allergy Therapeutics plcwww.allergytherapeutics.com
Substantial shareholders
At 10 September 2013 the Company had been notified of the
following major interests, each representing 3% or more of
the existing issued ordinary share capital:
Shareholder
Ordinary shares
CFR International SPA & Associated Holdings
201,986,132
Southern Fox Investments
Invesco Perpetual
92,603,671
14,548,209
% held
49%
23%
4%
Changes to interest in own shares
Neither the Company nor any Employee Benefit Trust holds
any shares in the Company.
The Board
Members
Manuel Llobet
Ian Postlethwaite
Peter Jensen
Thomas Lander
Stephen Smith
Alejandro Weinstein
Director since
Attendance at meetings 2012-13
July 2009
July 2004
October 2010
May 2012
September 2004
July 2009
15/15
15/15
15/15
15/15
15/15
7/15
The Board is led by the Chairman, who is non-executive, and
The Board has a formal schedule of matters specifically
comprises the Chief Executive Officer, the Finance Director,
reserved to it for decision at Board meetings. This covers
and three other Non-Executive Directors. Biographical details
strategy and management, financial reporting and controls,
of all Board members are shown on pages 32 to 34. The
internal controls, major contracts, external communications
roles of Chairman and Chief Executive Officer are separate.
with investors, executive committee appointments and
The Directors feel that given the current size of the Group,
remuneration, appropriate delegation of authority, corporate
the roles of Company Secretary and Finance Director are not
governance matters and appropriate policies for key areas
deemed necessary to be separated. All Directors have direct
including health and safety, corporate social responsibility and
access to the services and advice of the Company Secretary
the environment.
and to external independent professional advice at the
expense of the Group.
The Board delegates certain other responsibilities to
committees, details of which are set out below.
Board Committees
The Group has an Audit Committee, a Remuneration
Committee and a Nominations Committee, all with written
terms of reference including formally delegated duties and
responsibilities. The Chairman of each committee reports
directly to the Board.
42
© Allergy Therapeutics plcwww.allergytherapeutics.com The Audit Committee comprised Stephen Smith (Chairman)
Director make regular presentations to shareholders and
and Peter Jensen. The Audit Committee meets at least twice
discuss any areas of concern and meet regularly with analysts
each year and is responsible for ensuring that the financial
and major shareholders to provide information about the
performance of the Group is properly reported and monitored,
Group. Press releases, general information on the Group,
meeting with the Auditor, reviewing the reports from the
shareholder presentations and investor information are
Auditor relating to the financial statements and monitoring
available to be accessed via the Group’s website, www.
the internal control function.
allergytherapeutics.com.
The Remuneration Committee comprised Stephen Smith
Annual General Meeting
(Chairman), and Thomas Lander. The Remuneration
The notice convening and giving details of the Annual General
Committee reviews the compensation policy and strategy
Meeting of the Group accompanies this report.
for the Group as a whole and the scale and structure of the
executive Directors’ remuneration packages including the
Engagement of auditor for the supply of non-audit services
terms of their service contracts. No Director takes part in the
It is the Group’s policy that it will only engage the Group’s
discussion of his own remuneration. This committee is also
auditor to supply other professional services to the Group
responsible for the grant of shares under the Group’s Long
and its subsidiary undertakings if it is satisfied that all the
Term Incentive Plan.
usual conditions of engagement and benchmarks are met.
Any agreement to purchase services costing more than
The Nomination Committee comprised Peter Jensen
£10,000 per engagement must have the prior approval of the
(Chairman), Stephen Smith and Alejandro Weinstein during
Audit Committee.
the year. The Committee held one meeting during the past
financial year. The Nominations Committee’s principal purpose
In determining the policy, the Audit Committee has taken into
is to consider and proffer proposals for the composition
account relevant ethical guidance regarding the provision of
and size of the Board and its Committees as well as Board
non-audit services by the external audit firm and does not
refreshment and succession planning.
agree to the auditor providing a service if, having regard to the
Full details of Directors’ remuneration and a statement of
own work, the external auditor makes management decisions
the Group’s remuneration policy are set out in the Directors’
for the Group, a mutuality of interest is created or the external
Remuneration Report on pages 46 to 48.
auditor is put in the role of advocate for the Group.
ethical guidance, the result is that the external auditor audits its
Internal control
Research and development
The Board has ultimate responsibility for the system of
The Group will continue its policy of investment in research
internal control maintained by the Group. The system is
and development, with the focus being in Germany where
designed to manage rather than eliminate risk. It can provide
major allergy vaccines, if not already registered, require
only reasonable and not absolute assurance against material
further clinical evidence. In accordance with International
misstatement or loss and includes the safeguarding of
Financial Reporting Standards (IFRS), during the year the
assets, the maintenance of proper accounting records, the
Group expensed to the income statement £2.5m (2012:
reliability of financial information, compliance with appropriate
£2.1m) on research and development. Further details on the
legislation, regulation and best practice and the identification
Group’s research and development are included in the Chief
and management of business risk. The Group has an internal
Executive’s Review on pages 8 to 11.
audit function, reporting directly to the Audit Committee,
which carries out periodic reviews of the Group’s subsidiaries.
Going concern
The Group also has a budgeting and reporting system in
The Group’s business activities, together with the factors
place, with results compared to annual budgets and quarterly
likely to affect its future development, performance and
forecasts using variance analysis.
position are set out in the Chairman’s Statement on pages
4 to 6, the Chief Executive Officer’s Review on pages 8 to
Shareholder relations
11 and the Financial Review on pages 24 to 28. The financial
The Group maintains a policy of open dialogue with all
position of the Group, its cash flows, liquidity position
shareholders to ensure that the objectives of the Group are
and borrowing facilities are also described in the Finance
understood. The Chief Executive Officer and the Finance
Director’s Financial Review on pages 24 to 28.
43
© Allergy Therapeutics plcwww.allergytherapeutics.com In addition, Note 23 to the financial statements includes the
Statement of Directors’ responsibilities – Group
Group’s objectives, policies and processes for managing its
Financial Statements
capital, its financial risk management objectives, details of its
The Directors are responsible for preparing the Annual Report
financial instruments and its exposures to foreign currency
and the financial statements in accordance with applicable
risk, interest rate risk and liquidity risk.
law and regulations.
After making appropriate enquiries, which included a review
Company law requires the Directors to prepare financial
of the annual budget, considering the cash flow requirements
statements for each financial year. Under that law the
for the foreseeable future, noting the new bank facility,
directors have to prepare the financial statements in
and the effects of sales and foreign exchange sensitivities
accordance with International Financial Reporting Standards
on the Group’s funding plans, the Directors continue to
(IFRS) as adopted by the European Union. Under company
believe that the Group will have adequate resources to
law the directors must not approve the financial statements
continue in operational existence for the foreseeable future
unless they are satisfied that they give a true and fair view
and accordingly have applied the going concern principle in
of the state of affairs and profit or loss of the Group for that
drawing up the financial statements. In reaching this view,
period. In preparing these financial statements, the directors
the Directors have considered and prioritised the actions
are required to:
that could be taken to offset the impact of any shortfall in
operating performance.
•
Select suitable accounting policies and then apply
them consistently;
Market value of land and buildings
• Make judgments and accounting estimates that are
All freehold properties are stated at market value. The Group’s
reasonable and prudent;
policy is that a full revaluation is carried out every five years
•
State whether applicable IFRSs have been followed,
with an interim valuation carried out in the third year after
subject to any material departures disclosed and
each full valuation. In the intervening years the directors
explained in the financial statements;
review the carrying values of the freehold land and buildings
•
Prepare the financial statements on the going
to ensure that there have been no material variations.
concern basis unless it is inappropriate to presume
that the Group will continue in business.
Creditors’ payment policy and practice
The Group agrees payment terms with suppliers when it
The Directors are responsible for keeping adequate accounting
enters into contracts for the purchase of goods or services
records that are sufficient to show and explain the Group’s
and generally seeks to abide by those terms when it is
transactions and disclose with reasonable accuracy at any time
satisfied that the supplier has provided the goods or services
the financial position of the Group and enable them to ensure
in accordance with the agreed terms and conditions. Whilst
that the financial statements comply with the Companies Act.
the Company had no trade creditors, the number of trade
They are also responsible for safeguarding the assets of the
creditor days for the Group at 30 June 2013 was 55 days
Group and hence for taking reasonable steps for the prevention
(2012: 42 days).
Dividend
and detection of fraud and other irregularities.
The Directors confirm that in so far as each Director is aware:
Given the amount invested in research and development in
the prior years the Group has negative distributable reserves
•
there is no relevant audit information of which the
and is unable to declare a dividend.
Group’s auditor is unaware; and
Charitable and political contributions
to have taken as Directors in order to make themselves
The Group made no political or charitable contributions during
aware of any relevant audit information and to establish
the year.
that the auditor are aware of that information.
•
the Directors have taken all the steps that they ought
44
© Allergy Therapeutics plcwww.allergytherapeutics.com
The Directors are responsible for the maintenance and
The Directors confirm that in so far as each Director is aware:
integrity of the corporate and financial information included
on the Group’s website. Legislation in the United Kingdom
•
There is no relevant audit information of which the
governing the preparation and dissemination of financial
Company’s auditors are unaware; and
statements may differ from legislation in other jurisdictions.
•
The Directors have taken all the steps that they ought
Statement of Directors’ responsibilities – Company
aware of any relevant audit information and to establish
Financial Statements
that the auditor are aware of that information.
to have taken as Directors in order to make themselves
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
law and regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
Company law requires the Directors to prepare financial
on the Company’s website. Legislation in the United Kingdom
statements for each financial year. Under that law the directors
governing the preparation and dissemination of financial
have elected to prepare the financial statements in accordance
statements may differ from legislation in other jurisdictions.
with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable laws).
Auditor
Under company law the directors must not approve the
Grant Thornton UK LLP offer themselves for reappointment as
financial statements unless they are satisfied that they give
Auditor in accordance with section 489 of the Companies Act
a true and fair view of the state of affairs and profit or loss
2006. A resolution for their reappointment is to be proposed
of the Company for that period. In preparing these financial
at the forthcoming Annual General Meeting.
statements, the directors are required to:
By order of the Board on 13 September 2013
•
Select suitable accounting policies and then apply them
consistently;
Ian Postlethwaite
• Make judgments and accounting estimates that are
Company Secretary
reasonable and prudent;
•
State whether applicable UK Accounting Standards
have been followed, subject to any material departures
disclosed and explained in the financial statements;
•
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.
45
© Allergy Therapeutics plcwww.allergytherapeutics.com Directors’ Remuneration Report
The Remuneration Committee
The Remuneration Committee comprised Stephen Smith
(Chairman) and Thomas Lander during the financial year.
The principal purpose of the Committee is to determine and
agree the directors’ salary increases, annual bonuses, scope
of pension arrangements and any changes in benefits.
In addition, the Committee also agrees the share-related
compensation for the Directors and other executive
management and other executive compensation matters.
Members
Stephen Smith
Thomas Lander
Member since
November 2004
May 2012
Attendance at meetings 2012-2013
4/4
4/4
Remuneration policy
(iv) Long Term Incentive Plan
The Committee’s policy is to set remuneration packages for
During the year ended 30 June 2013 provisional shares
Executive Directors that are competitive with the market,
were awarded to directors and senior management under the
allowing the Group to attract, motivate and retain executives
Allergy Therapeutics plc 2005 Long Term Incentive Plan and the
of the highest calibre. Remuneration packages are designed
2013 Long Term Incentive Plan. The major shareholders were
to reward executives for performance via annual bonus
consulted on the new plan which was approved by the Board
payments and awards of share-related compensation, which
on 20 March 2013. The new plan is aligned with the Group’s
together constitute a potentially significant proportion of the
performance rather than on the performance compared to a
total remuneration opportunity.
group of other companies. The distribution of shares under
the Plans is conditional on the Group’s performance over the
The remuneration of Executive Directors comprises the
3-year Plan cycle. The number of provisional shares awarded to
following elements:
Executive Directors under the Plan is shown in the Directors’
(i) Basic salary
Basic salary is reviewed annually as at 1 October, taking into
(v) Bonus
share option table.
account personal performance, and benchmarked against a
In the case of the executive team, the Group operates a
comparator group.
performance-related cash bonus based upon individual
performance and achievement of personal and corporate
(ii) Taxable benefits
objectives. Annual bonus payments are capped under service
Taxable benefits represent the provision of a car allowance
contracts at 40% for Manuel Llobet and 30% for other
and private medical insurance.
Executive Directors. The bonus is determined and agreed by
the Remuneration Committee in September each year for the
(iii) Share options
preceding financial year.
No share options were granted in the year. The share options
granted to individual Executive Directors to date are disclosed
(vi) Pension arrangements
later in this report and comprise grants made in prior years
The UK Company operates a defined-contribution Personal
under previous approved and unapproved option schemes.
Pension scheme and currently makes pension contributions
Share options previously granted by Allergy Therapeutics
equal to 10% of salary for Executive Directors, with the
(Holdings) Limited were surrendered on 5 October 2004 for
exception of Manuel Llobet for whom the Group contributes
share options in Allergy Therapeutics plc, on substantially the
15% of salary.
same terms.
46
© Allergy Therapeutics plcwww.allergytherapeutics.com
Service contracts
Executive Directors
Date of contract
Date of Amendment
Notice period
Manuel Llobet
Ian Postlethwaite
11 June 2009
7 May 2002
21 June 2012
-
12 months
12 months
Non-Executive Directors
Date of contract
Date of Amendment
Notice period
Peter Jensen
Thomas Lander
1 October 2010
2 May 2012
Stephen Smith
5 October 2004
Alejandro Weinstein
1 July 2009
30 June 2012
25 June 2013
1 April 2012
-
6 months
3 months
3 months
3 months
Thomas Lander’s Deed of Appointment was altered on
25 June 2013 to add a clause regarding fees payable for
additional work in exceptional circumstances above his
contractual two days per month.
Directors’ remuneration (audited information)
Details of remuneration of those who served as directors
during the year are set out below.
Basic
Salary
Bonus
for the
year
Taxable
benefits
£
£
£
Manuel Llobet
199,109
18,857
10,909
Ian Postlethwaite2
156,734
(16,080)
10,625
Peter Jensen
Thomas Lander
Stephen Smith1
65,000
36,000
-
Alejandro Weinstein
36,000
-
-
-
-
-
-
-
-
Fees
Total
Pension
Total
Pension
Year ended 30 June 2012
£
£
£
£
228,875
29,872
253,546
27,690
151,279
44,821
202,484
15,254
65,000
36,000
46,000
46,000
-
36,000
-
-
-
-
65,000
6,000
36,000
36,000
-
-
-
-
£
-
-
-
-
Totals
492,843
2,777
21,534
46,000
563,154
74,693
599,030
42,944
1 Mr Smith’s fees are paid to SRS Business Enterprises Limited.
2 Mr Postlethwaite received an extra pension contribution in lieu of
his accrued bonus from the prior year.
47
© Allergy Therapeutics plcwww.allergytherapeutics.com
Directors’ share options and LTIPs
Options
held at
1 July 2012
Options
granted in
the year
Options
exercised in
the year
Options
lapsed in
the year
Options
held at 30
June 2013
Subscription
price
(pence)
Exercise
date from
Expiry
date
Executive Directors
Manuel Llobet
2,190,0001
1,625,0001
-
(750,000)
3,065,000
-
-
-
Ian Postlethwaite
1,500,000
163,500
-
-
1,320,0001
812,5001
Non-Executive Directors
Stephen Smith
150,000
-
(1,500,000)
-
-
-
-
-
-
5.0 17/12/2002 17/12/2012
163,500
18.5 18/10/2009 18/10/2019
(600,000)
1,532,500
-
-
-
-
150,000
45.0 26/02/2004 26/02/2014
Totals
5,323,500
2,437,500
(1,500,000)
(1,350,000)
4,911,000
1Long Term Incentive Plan
The aggregate amount of gains made by Directors upon the
exercise of share options in the year ended 30 June 2013 was
£112,500 (2012: £nil).
At 30 June 2013 the London Stock Exchange market value of
shares was 9.88p per share. The range of values during the
period from 1 July 2012 to 30 June 2013 was 7.5p to 13.75p
per share.
Stephen Smith
Chairman, Remuneration Committee
48
© Allergy Therapeutics plcwww.allergytherapeutics.com Nominations Committee Report
The Nominations Committee during the year comprised Peter
Jensen (Chairman), Stephen Smith and Alejandro Weinstein.
The Nominations Committee was established in September
2009 and held once during the past financial year. Its
principal purpose is to consider and proffer proposals for the
composition and size of the Board and its Committees as well
as Board refreshment and succession planning.
Members
Peter Jensen
Stephen Smith
Member since
October 2010
September 2009
Alejandro Weinstein
September 2009
Attendance at meetings 2012-13
1/1
1/1
1/1
When proposing appointments of directors, the Committee
The review considered all the Non-Executive Directors and
considers the skills, knowledge and experience that a
in particular Mr Stephen Smith’s position; his independence
candidate possesses compared to the skill sets and experience
was discussed regarding his share options granted in 2004, as
of the Board as it currently stands. Selection of candidates also
detailed on page 48, and his term of office, this being slightly
takes into consideration the breadth of knowledge that the
over 9 years at the Company’s forthcoming Annual General
Board has and that it may require to provide a well-balanced
Meeting in November, both being contrary to the UK Corporate
environment which encourages scrutiny and appropriate
Governance Code. The Committee judged that his contribution
challenge of the Executive management.
in the capacity as Chairman of the Audit Committee, and his
experience, integrity and strength of character outweigh any
The Group considers the independence of non-executive
potential conflict of interest that might arise from these to
directors of paramount importance, being a cornerstone
impede his independence and accordingly recommended
of good corporate governance; as a result the Committee
this to the Board who endorsed his continued appointment.
periodically reviews the independence of its Non-Executive
Mr Stephen Smith is therefore regarded as an independent
Directors. Its review is based on independence defined in
Non-Executive Director, with Mr Thomas Lander as the other
the UK Corporate Governance Code against the practicalities
independent Non-Executive Director.
for an AIM Company. The Group follows the UK Corporate
Governance Code wherever practical to do so, but the code is
The Board now consists of four Non-Executive Directors, with
not binding on AIM listed companies.
three being independent and two Executive Directors.
Peter Jensen
Chairman, Nominations Committee
49
© Allergy Therapeutics plcwww.allergytherapeutics.com Independent Auditor’s Report to the Members of Allergy Therapeutics plc (Group)
We have audited the Group financial statements of
Opinion on other matter prescribed by the Companies
Allergy Therapeutics plc for the year ended 30 June 2013
Act 2006
which comprise the consolidated income statement, the
In our opinion the information given in the Directors’ Report for
consolidated statement of comprehensive income, the
the financial year for which the Group financial statements are
consolidated balance sheet, the consolidated statement of
prepared is consistent with the Group financial statements.
changes in equity, the consolidated cash flow statement
and the related notes. The financial reporting framework
Matters on which we are required to report by exception
that has been applied in their preparation is applicable law
We have nothing to report in respect of the following:
and International Financial Reporting Standards (IFRSs) as
Under the Companies Act 2006 we are required to report to
adopted by the European Union.
you if, in our opinion:
This report is made solely to the Company’s members,
•
Certain disclosures of Directors’ remuneration specified
as a body, in accordance with Chapter 3 of Part 16 of the
by law are not made; or
Companies Act 2006. Our audit work has been undertaken
• We have not received all the information and
so that we might state to the Company’s members those
explanations we require for our audit.
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by
Other matter
law, we do not accept or assume responsibility to anyone
We have reported separately on the parent company financial
other than the Company and the Company’s members as a
statements of Allergy Therapeutics plc for the year ended
body, for our audit work, for this report, or for the opinions we
30 June 2013.
have formed.
Christian Heeger
Respective responsibilities of directors and auditor
Senior Statutory Auditor
As explained more fully in the Directors’ Responsibilities
for and on behalf of Grant Thornton UK LLP
Statement set out on pages 44 to 45, the Directors are
Statutory Auditor, Chartered Accountants
responsible for the preparation of the Group financial
Gatwick
statements and for being satisfied that they give a true and fair
13 September 2013
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
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 30 June 2013 and of its profit for the year
then ended;
•
Have been properly prepared in accordance with IFRSs
as adopted by the European Union; and
•
Have been prepared in accordance with the
requirements of the Companies Act 2006.
50
© Allergy Therapeutics plcwww.allergytherapeutics.com Consolidated Income Statement
for the year ended 30 June 2013
Year to 30 June
Year to 30 June
Year to 30 June
Year to 30 June
Revenue
Cost of sales
Gross profit
Distribution costs
Administration expenses – other
Research and development costs
Administration expenses
Operating profit
Finance income
Finance expense
Profit before tax
Income tax
Profit for the period
Profit/ Earnings per share
Basic (pence per share)
Diluted (pence per share)
2013
£’000
(7,845)
(2,535)
Note
3
9
8
5
10
12
2013
£’000
39,279
(11,953)
27,326
(16,278)
(10,380)
668
19
(255)
432
104
536
0.13p
0.13p
2012
£’000
(6,542)
(2,095)
2012
£’000
41,280
(13,670)
27,610
(17,881)
(8,637)
1,092
5
(457)
640
183
823
0.25p
0.24p
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2013
Year to 30 June
Year to 30 June
Note
25
Profit for the period
Items that will not be reclassified
subsequently to profit or loss:
Actuarial loss on defined
benefit pension scheme
Revaluation gains -
freehold land & buildings
Items that will be reclassified
subsequently to profit or loss:
Exchange differences on
translation of foreign operations
Revaluation (losses)/gains on
investments – retirement benefit assets
Total comprehensive loss
2013
£’000
536
(865)
17
77
(17)
(252)
2012
£’000
823
(734)
-
(431)
50
(292)
51
© Allergy Therapeutics plcwww.allergytherapeutics.com
Consolidated Balance Sheet
Note
30 June 2013
£’000
30 June 2012
£’000
7,337
2,560
1,350
3,059
200
14,506
7,185
6,014
1,257
2
14,458
28,964
(7,006)
(288)
(326)
(7,620)
6,838
(6,214)
-
-
(159)
(300)
(6,673)
(14,293)
14,671
420
67,716
40,128
67
679
3,652
1,297
170
(99,458)
14,671
7,555
2,489
2,107
2,569
-
14,720
4,997
6,651
903
483
13,034
27,754
(6,312)
(1,426)
(9)
(7,747)
5,287
(4,717)
(97)
(162)
(165)
(274)
(5,415)
(13,162)
14,592
417
67,571
40,128
67
1,496
3,652
1,297
93
(100,129)
14,592
Assets
Non-current assets
Property, plant and equipment
Intangible assets – goodwill
Intangible assets – other
Investments – retirement benefit asset
Deferred taxation asset
Total non-current assets
Current assets
Trade and other receivables
Inventories
Cash and cash in hand
Derivative financial instruments
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Current borrowings
Derivative financial instruments
Total current liabilities
Net current assets
Non current liabilities
Retirement benefit obligations
Non current borrowings
Derivative financial instruments
Deferred taxation liability
Non current provisions
Total non current liabilities
Total liabilities
Net assets
Equity
Capital and reserves
Issued share capital
Share premium
15
13
14
16
11
18
17
19
23
20
21
23
25
21
23
11
22
26
Merger reserve – shares issued by subsidiary
Reserve – shares held by EBT
Reserve – share based payments
Reserve – convertible loan notes
Revaluation reserve
Foreign exchange reserve
Retained earnings
Total equity
These financial statements were approved by the Board of Directors
on 13 September 2013 and were signed on its behalf by
Manuel Llobet
Ian Postlethwaite
Chief Executive Officer
Finance Director
Registered number: 05141592
52
© Allergy Therapeutics plcwww.allergytherapeutics.com
Consolidated Statement of Changes in Equity
Issued
Share
Merger
Reserve –
Reserve –
Reserve –
Revaluation
Foreign
Retained
Total
Capital
premium
reserve –
shares
share
convertible
reserve
exchange
earnings
equity
shares
held in
based
loan note
reserve
issued by
subsidiary
EBT
payment
At 30 June 2011
321
58,705
40,128
67
1,398
-
1,287
524
(100,291)
2,139
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Exchange differences on
translation of foreign operations
Actuarial loss
Valuation gains taken to equity
(Investments)
Total other comprehensive
income
Profit for the period after tax
Total comprehensive income
Transactions with owners
Share based payments
Shares issued
96
8,866
Transfer of lapsed options to
retained earnings
Transfer of depreciation on
revalued property
(431)
(431)
(734)
(734)
50
50
50
(431)
(734)
(1,115)
823
823
50
(431)
89
(292)
131
(33)
3,652
131
12,614
-
-
33
(40)
40
At 30 June 2012
417
67,571
40,128
67
1,496
3,652
1,297
93
(100,129) 14,592
Exchange differences on
translation of foreign operations
Actuarial loss
Valuation gain taken to equity
(Land and Buildings)
Valuation loss taken to equity
(Investments)
Total other comprehensive
income
Profit for the period after tax
Total comprehensive income
Transactions with owners
Share based payments
Shares issued
3
145
Transfer of lapsed options to
retained earnings
17
(17)
-
-
77
77
(865)
(865)
17
(17)
77
(865)
(788)
536
536
77
(329)
(252)
183
148
1,000
-
183
(1,000)
At 30 June 2013
420
67,716
40,128
67
679
3,652
1,297
170
(99,458) 14,671
53
© Allergy Therapeutics plcwww.allergytherapeutics.com
Consolidated Cash Flow Statement
Year to 30 June 2013
Year to 30 June 2012
Note
£’000
Cash flows from operating activities
Profit before tax
Adjustments for:
Finance income
Finance expense
Revaluation loss on loan
9
8
8
Non cash movements on defined benefit pension plan
Depreciation and amortisation
14, 15
Charge for share based payments
Derivative financial instruments
Disposal of intangible assets and property, plant and equipment
(Increase)/decrease in trade and other receivables
Decrease in inventories
Increase/(decrease) in trade and other payables
Net cash generated by operations
Interest paid
Income tax (paid)/ refunded
Net cash generated by operating activities
Cash flows from investing activities
Interest received
Investments
Payments for intangible assets
Payments for property plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of equity shares and convertible loan notes
Repayment of borrowings
Proceeds from borrowings
Bank loan fees and interest paid
Net cash generated by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Effects of exchange rates on cash and cash equivalents
Cash and cash equivalents at the start of the period
Cash and cash equivalents at the end of the period
Cash at bank and in hand
Bank overdraft
Cash and cash equivalents at the end of the period
54
432
(19)
255
-
79
1,342
183
787
607
(2,164)
767
746
3,015
(211)
(372)
2,432
19
(355)
(157)
(664)
(1,157)
148
-
-
-
148
1,423
50
(409)
1,064
1,257
(193)
1,064
£’000
640
(5)
1,456
(999)
164
1,892
131
(1,280)
8
1,287
272
(642)
2,924
(51)
7
2,880
5
(311)
(829)
(432)
(1,567)
12,614
(22,623)
7,680
(406)
(2,735)
(1,422)
(35)
1,048
(409)
903
(1,312)
(409)
© Allergy Therapeutics plcwww.allergytherapeutics.com Notes to the Financial Statements
1. Basis of Preparation
IFRS 9 Financial Instruments (effective 1 January 2015)
This IFRS replaces IAS39 and addresses the usefulness for
The Group’s financial statements have been prepared in
users of financial statements by simplifying the classification
accordance with International Financial Reporting Standards
and measurement requirements for financial instruments.
(IFRS) in issue as adopted by the European Union (‘EU’).
Management are currently assessing the detailed impact on
the Group’s financial statements.
Allergy Therapeutics plc is the Group’s ultimate parent
company. The Company is a limited liability company
IFRS 10 Consolidated Financial Statements (effective 1
incorporated and domiciled in England. The address of Allergy
January 2013)
Therapeutics plc’s registered office and its principal place of
This IFRS establishes principles for the presentation and
business is Dominion Way, Worthing, West Sussex and its
preparation of consolidated financial statements when an
shares are listed on the Alternative Investment Market (AIM).
entity controls one or more other entities.
The consolidated financial statements for the year ended 30
IFRS 12 Disclosure of Interests in Other Entities (effective
June 2013 (including comparatives) have been prepared under
1 January 2013)
the historical cost convention except for land and buildings
This IFRS looks at the disclosure of information that enables
and derivative financial instruments which have been
users of financial statements to evaluate the nature of, and
measured at fair value. They were approved and authorised
risks associated with, its interests in other entities, and the
for issue by the Board of Directors on 13 September 2013.
effects of those interests on its financial position, financial
performance and cash flows.
New standards adopted
There are no IFRS or IAS interpretations that are effective for
IFRS 13 Fair Value Measurement (effective 1 January 2013)
the first time in this financial period that have had a material
IFRS 13 seeks to increase consistency and comparability in
impact on the Group.
fair value measurements and related disclosures through a
Amendments to IAS 1 Presentation of Other
‘fair value hierarchy’.
Comprehensive Income (effective 1 July 2012)
IAS 19 (Revised June 2011) Employee Benefits (effective 1
This IAS amendment revises the way the statement
January 2013)
of other comprehensive income should be presented
IAS 19 reviews the treatment of employee benefits with a view
requiring separate subtotals for those elements which may
to recognising the cost in the period in which the benefit is
be ‘recycled’ (e.g. cash-flow hedging, foreign currency
earned by the employee, rather than when it is paid or payable.
translation), and those elements that will not.
IAS 27 (Revised) Separate Financial Statements (effective
Standards, amendments and interpretations to existing
1 January 2013)
standards that are not yet effective and have not
IAS 27 is concerned with the preparation and presentation of
been early adopted by the Group in the 30 June 2013
consolidated financial statements for a group of entities under
financial statements
the control of a parent, and in accounting for investments in
At the date of authorisation of these financial statements,
subsidiaries, jointly controlled entities and associates when
certain new standards, amendments and interpretations
an entity elects, or is required by local regulations, to present
to existing standards have been published but are not yet
separate (non-consolidated) financial statements.
effective. Not all of these have yet been adopted by the EU.
The Group has not adopted any of these pronouncements
Management anticipate that the above pronouncements
early. The new standards, amendments and interpretations
will be adopted in the Group’s financial statements in line
that are expected to be relevant to the Group’s financial
with the effective dates stated above. Management are
statements are as follows:
currently assessing their detailed impact on the Group’s
financial statements.
Other new standards and Interpretations have been issued
but are not expected to have a material impact on the Group’s
financial statements.
55
© Allergy Therapeutics plcwww.allergytherapeutics.com Going concern
that meet the conditions for recognition under IFRS 3 Revised
For the year ended 2013, and for the fourth year in
Business Combinations, are recognised at their fair values
succession, the Group has reported an operating profit and an
at the acquisition date. The excess of the cost of acquisition
operating cash inflow. Operating profit in the period was £0.7
over the fair value of the Group’s share of the identifiable net
million (2012: £1.1 million); operating cash inflow was £3.0
assets acquired is recorded as goodwill. If the cost of the
million (2012: £2.9 million).
acquisition is less than the fair value of the net assets of the
subsidiary acquired the difference is recognised directly in the
The Group has prepared detailed budgets, including cash
profit or loss.
flow projections, for the periods ending 30 June 2014 and
30 June 2015. These projections include assumptions on
Inter-company transactions, balances and unrealised gains
the trading performance of the operating business and the
and losses on transactions between Group companies are
continued availability of the existing overdraft facilities. After
eliminated except for unrealised losses if they show evidence
making appropriate enquiries, which included a review of the
of impairment.
annual budget, by considering the cash flow requirements
for the foreseeable future and the effects of sales and other
Where necessary, adjustments are made to the financial
sensitivities on the Company’s funding plans, the Directors
statements of subsidiaries to bring accounting policies used
continue to believe that the Group will have adequate
into line with those used in the Group.
resources to continue in operational existence for the
foreseeable future and accordingly have applied the going
Goodwill
concern principle in drawing up the financial statements.
Goodwill arising from business combinations is the difference
In reaching this view, the Directors have considered and
between the fair value of the consideration paid and the fair
prioritised the actions that could be taken to offset the impact
value of the assets and liabilities and contingent liabilities
of any shortfall in operating performance.
acquired. It is initially recognised as an intangible asset at
cost and is subject to impairment testing on an annual basis
2. Accounting Policies
or more frequently if circumstances indicate that the asset
The principal accounting policies adopted in the preparation of
may have been impaired. Details of impairment testing are
these financial statements are set out below. These policies
described in the accounting policies.
have been consistently applied to all years presented unless
otherwise stated.
Consolidation
Intangible assets acquired as part of
a business combination
Intangible assets acquired in a business combination are
The Group’s financial statements consolidate those of the
identified and recognised separately from goodwill where
parent company and all of its subsidiaries drawn up to 30
they satisfy the definition of an intangible asset and their fair
June 2013. Subsidiaries are all entities over which the Group
values can be measured reliably. The cost of such intangible
has the power to govern the financial and operating policies,
assets is their fair value at the acquisition date.
generally accompanying a shareholding of over one half
of the voting rights. The existence and effect of potential
Subsequent to initial recognition, intangible assets acquired in
voting rights that are currently exercisable or convertible are
a business combination are reported at cost less accumulated
considered when assessing whether the Group controls
amortisation and accumulated impairment losses.
another entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are
deconsolidated on the date control ceases.
The Group uses the acquisition method of accounting for
the acquisition of a subsidiary. The cost of an acquisition
is measured by the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at the
date of exchange. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination
56
© Allergy Therapeutics plcwww.allergytherapeutics.com Internally generated intangible assets
The cost of amortising intangible assets is included within
An internally generated intangible asset arising from
administration costs in the consolidated income statement.
development (or the development phase) of an internal
project is recognised if, and only if, all of the following have
Segmental reporting
been demonstrated:
In identifying its operating segments, management follow the
Group’s revenue lines which represent the main geographical
•
The technical feasibility of completing the intangible
markets within which the Group operates. These operating
asset so that it will be available for use or sale
segments are managed separately as each requires different
•
The intention to complete the intangible asset and use
local expertise, regulatory knowledge and a specialised
or sell it
marketing approach. Each market based operating segment
•
•
The ability to use or sell the intangible asset
is engaged in production, marketing and selling within a
How the intangible asset will generate probable future
particular economic environment that is different from that
economic benefits
in segments operating in other economic environments. All
•
The availability of adequate technical, financial and other
inter-segment transfers are carried out at arm’s length prices.
resources to complete the development and to use or
sell the intangible asset
The Group’s operating segments are market based and are
•
The ability to measure reliably the expenditure
reported in a manner consistent with the internal reporting
attributable to the intangible asset during its
provided to the Group’s Chief Operating Decision Maker
development.
(CODM) who has been identified as the Executive Directors.
The CODM is responsible for allocating resources and
The amount initially recognised for internally generated
assessing the performance of the operating segments.
intangible assets is the sum of the expenditure incurred from
the date when the intangible asset first meets the recognition
Foreign currency translation
criteria listed above. Where no internally generated intangible
Functional and presentational currency
asset can be recognised, research and development
Items included in the financial statements of each of the
expenditure is charged to profit or loss in the period in which
Group’s entities are measured using the currency of the
it is incurred.
primary economic environment in which the entity operates
(the functional currency). The Group’s presentational currency
Subsequent to initial recognition, internally generated
is Sterling, which is also the functional currency of the
intangible assets are reported at cost less accumulated
Group’s parent.
amortisation and accumulated impairment losses.
Amortisation shall begin when the asset is available for use,
Transactions and balances
i.e. when it is in the location and condition necessary for it to be
Foreign currency transactions are translated into the functional
capable of operating in the manner intended by management.
currency using the exchange rates prevailing at the dates of the
Amortisation of all intangible assets is calculated on a straight
the settlement of such transactions and from the translation, at
line basis over the useful economic life using the following
reporting period end exchange rates, of monetary assets and
transactions. Foreign exchange gains and losses resulting from
annual rates:
Manufacturing know-how
15 years
liabilities denominated in foreign currencies, are recognised in
the profit and loss. Non-monetary items are carried at historical
cost or translated using the exchange rate at the date of the
transaction or an average rate as an approximation where this
Non-competing know-how
4 years
is not materially different.
Other intangibles
Computer software
15 years/
period of contract
7 years
These periods were selected to reflect the various assets’
useful economic lives to the Group.
57
© Allergy Therapeutics plcwww.allergytherapeutics.com Group companies
A small proportion of the Group’s overseas sales are made
The results and financial position of all Group entities that have
through licensees and distributors.
a functional currency different from the presentational currency
are translated into the presentational currency as follows:
For all licensee arrangements, the licensee is invoiced at the
time of delivery and title to the product passes upon full and
•
Assets and liabilities for each balance sheet presented
final settlement of the invoice to which the delivery relates.
are translated at the closing rate at the date of the
The licensee has full discretion over the setting of the final
balance sheet with all resulting exchange differences
selling price to the end customer and pays a fixed percentage
being recognised in other comprehensive income and
of the final selling price back to the Group as ‘royalties’ as and
accumulated in a separate component of equity.
when those sales are made. The licensee is responsible for all
•
Income and expenses for each income statement
customer returns of product.
item are translated at exchange rates at the date
of the transaction or using an average rate as an
It is considered that the significant risks and rewards of
approximation where this is not materially different,
ownership of the product are transferred to the licensee at
with resulting exchange differences recognised in other
the point of delivery and therefore revenue is recognised at
comprehensive income and accumulated in a separate
this point in accordance with IAS 18. Royalties are recognised
component of equity.
on an accruals basis as the licensee books the sale to the end
customer in accordance with IAS 18 paragraph 30 (b).
The Group has taken advantage of the exemption in
IFRS 1 which allows all foreign exchange differences on
Where the Group sells to licensees at low margin and
consolidation to be set at zero at transition and the foreign
the royalty payment receivable actually represents the
exchange reserve therefore only shows post transition
Group’s normal margin on the product sale, the “royalty” is
foreign exchange differences.
considered to be deferred consideration and forms part of
the fair valuation of consideration receivable by the Group for
Revenue recognition
goods supplied. In these instances the expected royalty is
Revenue is measured by reference to the fair value of
accrued at a discounted value at the point of delivery.
consideration received or receivable by the Group for goods
supplied and services provided, net of statutory rebates
For all distributor agreements, the distributor places orders
paid in Germany and excluding value added tax. Revenue is
with the Group, at which point goods are shipped to them.
recognised upon the performance of services or transfer of
The Group however, holds title to these products until they
risk to the customer.
are sold on to a third party with the distributor effectively
Sale of goods
acting as an agent. The selling price to the end user is set by
the relevant Government body and the distributor receives a
Revenue from the sale of goods is recognised when all the
fixed percentage of this selling price. The distributor notifies
following conditions have been satisfied:
the Group monthly on stock levels and this is reconciled to a
statement which generates an invoice for payment by the
•
the Group has transferred to the buyer the significant
distributor. The Group is responsible for any customer returns
risks and rewards of ownership of the goods, which is
of product.
generally when the customer has physically received
the goods.
It is considered that the significant risks and rewards of
•
the Group retains neither continuing managerial
ownership of the product are not transferred from the Group
involvement to the degree usually associated with
until the distributor has sold the product to a third party and
ownership nor effective control over the goods sold
therefore revenue on these sales is recognised at this point
which is again when the customer has physically
by the Group in accordance with IAS 18 appendix 2 (c).
received the goods.
•
•
the amount of revenue can be measured reliably.
Where the Group provides services to new distributors,
it is probable that the economic benefits associated with
which mainly include marketing and customer information, in
the transaction will flow to the Group, and
exchange for an up-front lump sum fee, revenue is recognised
•
the costs incurred or to be incurred in respect of the
in line with these services being delivered. These services are
transaction can be measured reliably.
58
© Allergy Therapeutics plcwww.allergytherapeutics.com
fair valued and pro-rated to agree to the total fee receivable.
Provision for depreciation of all tangible assets of the Group
Where there is an on-going responsibility to provide services
(except land) is made over their estimated useful lives, on a
in the future, the balance relating to those services is
straight line basis principally using the following annual rates:
recognised in future periods as the service is performed.
Expenditure recognition
Operating expenses are recognised in the income statement
Freehold buildings
Computer equipment
upon utilisation of the service or at the date of their origin.
Motor vehicles
Borrowing costs
Fixtures and fittings
Borrowing costs primarily comprise interest on the Group’s
Plant and equipment
borrowings. Borrowing costs directly attributable to the
33 years
3 – 7 years
4 years
5 – 15 years
5 – 15 years
acquisition, construction or production of a qualifying asset
Asset residual values and useful lives are reviewed annually
are capitalised during the period of time that is necessary to
and amended as necessary. Assets are reviewed for
complete and prepare the asset for its intended use or sale.
impairment whenever events or changes in circumstances
Other borrowing costs are expensed in the period in which
indicate that the carrying amount of the fixed asset may not
they are incurred and reported in ‘finance costs’
be recoverable. An asset’s carrying amount is written down
Property, plant and equipment
amount exceeds the higher of the asset’s fair value less costs
immediately to its recoverable amount if the asset’s carrying
The Group policy is that all freehold properties will be subject
to sell or value in use.
to a full revaluation at least every five years with an interim
valuation carried out in accordance with IAS 16 in the third
During the year the asset lives of ‘Fixtures and fittings’ and
year after each valuation.
‘Plant and equipment’ were extended up to a maximum of 15
years (previous maximum useful life was 10 years). The effect
Revaluations are performed by independent qualified and
of this change is described in Note 15.
experienced valuers who have adequate local knowledge
in the country in which the property is situated. In the
Depreciation charges are included when arriving at operating
intervening years between independent revaluations, the
profit in the income statement.
directors review the carrying values of the freehold land and
buildings and adjustments are made if the carrying values
Impairment
differ significantly from their respective fair values. Increases
The Group’s goodwill, other intangible assets, freehold
in the carrying value from revaluations are recognised in other
land and buildings and plant & equipment are subject to
comprehensive income and accumulated in equity under
impairment testing.
the heading of revaluation reserve unless this reverses a
revaluation decrease on some asset previously recognised
For the purposes of assessing impairment, assets are
in profit and loss, in which case it is first credited to profit
grouped at the lowest levels for which there are separately
and loss to that extent. When an item of property, plant and
identifiable cash flows (cash generating units). Goodwill is
equipment is revalued, any accumulated depreciation at the
allocated to those cash generating units that are expected to
date of the revaluation is restated proportionately with the
benefit from synergies of the related business combination
change in the gross carrying amount of the asset. The amount
and represent the lowest level within the Group at which
of the adjustment arising on the restatement or elimination
management controls the related cash flows.
of accumulated depreciation forms part of the increase or
decrease in carrying amount. Decreases in the carrying
Individual assets or cash generating units that include
values arising from revaluations are first offset against
goodwill with an indefinite useful life or those not yet
increases from earlier revaluations in respect of the same
available for use are tested for impairment at least annually.
assets and are thereafter charged to profit or loss.
All other individual assets or cash generating units are tested
Plant and equipment are stated at historical cost less
indicate that the carrying amount may not be recoverable.
accumulated depreciation and accumulated impairment losses.
for impairment whenever events or changes in circumstances
59
© Allergy Therapeutics plcwww.allergytherapeutics.com An impairment loss is recognised for the amount by which
through profit and loss’ and subsequently at amortised
the assets or cash generating units carrying amount exceeds
cost, with any changes going through profit or loss. Where
its recoverable amount. The recoverable amount is the higher
securities are designated as ‘fair value through profit and
of fair value, reflecting market conditions less costs to sell
loss’ gains and losses arising from changes in fair value are
and value in use, based on an internal discounted cash flow
included in net profit or loss for the period.
evaluation. Impairment losses recognised for cash generating
units, to which goodwill has been allocated, are credited
Derecognition of financial assets occurs when the rights
initially to the carrying amount of goodwill. Any remaining
to receive cash flows from the investments expire or are
impairment loss is charged pro rata to the other assets in
transferred and substantially all of the risks and rewards
the cash generating unit. With the exception of goodwill, all
of ownership have been transferred. An assessment for
assets are subsequently reassessed for indications that an
impairment is undertaken at least at each balance sheet date
impairment loss previously recognised may no longer exist.
whether or not there is objective evidence that a financial
asset or a group of financial assets is impaired.
Inventories
Inventory is carried at the lower of cost or net realisable
Financial liabilities
value. The costs of raw materials, consumables, work in
The Group’s financial liabilities include bank loans, trade and
progress and finished goods are measured by means of
other payables and derivative financial instruments.
weighted average cost using standard costing techniques.
Cost of finished goods comprises direct production costs
Financial liabilities are recognised when the Group becomes
such as raw materials, consumables, utilities and labour, and
a party to the contractual agreements of the instrument. All
production overheads such as employee costs, depreciation,
interest related charges are recognised as an expense in
maintenance and indirect factory costs. Standard costs are
‘Finance costs’ in the income statement.
reviewed regularly in order to ensure relevant measures of
utilisation, production lead time and appropriate levels of
Trade and other payables are recognised initially at their fair
manufacturing expense are reflected in the standards.
value and subsequently measured at amortised cost using
the effective interest method.
Net realisable value is calculated based on the revenue from
sale in the normal course of business less any costs to sell.
Borrowings comprise secured bank borrowings, and are
Leases
initially recognised at the fair value of the consideration
received net of issue costs associated with the borrowings.
Operating lease rentals are charged to the income statement
After initial recognition, interest-bearing loans and borrowings
over the term of the lease. There are no finance leases.
are subsequently measured at amortised cost using the
effective interest rate method.
Financial assets
Financial assets consist of cash, trade and other receivables
Convertible loan notes
and derivative financial instruments. Financial assets are
Convertible loan notes are regarded as compound
assigned to their different categories by management on initial
instruments consisting of a liability component and an
recognition, depending on the contractual arrangements.
equity component. At the date of issue the fair value of the
liability component is estimated using a discount rate for
Cash and cash equivalents comprise cash on hand, demand
an equivalent liability without the conversion feature. The
deposits and overdrafts, together with other short-term,
difference between the proceeds of issue of the convertible
highly liquid investments that are readily convertible into
loan note and the fair value assigned to liability component,
known amounts of cash and which are subject to an
representing the embedded option to convert the liability into
insignificant risk of changes in value.
equity of the Group, is included in equity.
All financial assets are recognised when the Group becomes
a party to the contractual provisions of the instrument and
loans and receivables are initially recognised at fair value,
including transaction costs, with the exception of ‘fair value
60
© Allergy Therapeutics plcwww.allergytherapeutics.com Derivative financial instruments
Income taxes
The Group uses interest rate swaps, Canadian Dollar forward
Current income tax assets and liabilities comprise those
contracts, Euro forward contracts and Euro exchange
obligations to fiscal authorities in the countries in which the
swaps to manage the exposure to changes in interest and
Group carries out its operations. They are calculated according
translation rates and these are classified as derivative financial
to the tax rates and tax laws applicable to the fiscal period
instruments. All derivative financial instruments are initially
and the country to which they relate. All changes to current
measured at fair value on acquisition and are subsequently
tax liabilities are recognised as a component of tax expense
restated to fair value at each reporting date. Any change in
in the income statement.
the fair value of the instruments is recognised in profit and
loss.
Equity
Deferred income taxes are calculated using the liability
method on temporary differences. Deferred tax is generally
provided on the difference between the carrying amounts of
Equity comprises the following:
assets and liabilities and their tax bases. However, deferred
tax is neither provided on the initial recognition of goodwill
•
“Issued capital” represents the nominal value of equity
nor on the initial recognition of an asset or liability unless the
shares that have been issued.
related transaction is a business combination or affects tax
•
“Share premium” represents the excess over nominal
or accounting profit. Deferred tax on temporary differences
value of the fair value of consideration received for
associated with shares in subsidiaries is not provided if
equity shares, net of expenses of the share issue.
reversal of these temporary differences can be controlled
•
“Merger reserve” represents the excess over nominal
by the Group and it is probable that reversal will not occur
value of the fair value of consideration received for
in the foreseeable future. In addition, tax losses available to
equity shares issued on acquisition of subsidiaries, net
be carried forward as well as other income tax credits to the
of expenses of the share issue.
Group are assessed for recognition as deferred tax assets.
•
“Reserve - Shares held in EBT” represents the
shares acquired by a trust set up for the benefit of the
Deferred tax liabilities are provided in full, with no
Group’s employees. These shares are deducted from
discounting. Deferred tax assets are recognised to the extent
shareholders funds at the cost that the shares were
that it is probable that the underlying deductible temporary
acquired. The net proceeds received from the issue of
differences will be able to be offset against future taxable
these shares through the exercise of options are also
income. Current and deferred tax assets and liabilities are
recognised through this reserve.
calculated at tax rates that are expected to apply to their
•
“Reserve - share based payments” represents equity-
respective period of realisation, provided they are enacted or
settled share-based employee remuneration until such
substantively enacted at the balance sheet date.
share options are exercised.
•
“Reserve - convertible loan notes” represents the equity
Changes in deferred tax assets or liabilities are recognised
component of consideration received for convertible loan
as a component of tax expense in the income statement,
notes, net of expenses.
except where they relate to items that are charged or
•
“Revaluation reserve” represents the revaluations of
credited directly to other comprehensive income (such as the
investment assets and land and buildings.
revaluation of land and buildings) in which case the related
•
“Foreign exchange reserve” represents the foreign
deferred tax is also charged or credited directly to other
currency translation differences that have occurred since
comprehensive income.
the transition date. Exchange differences prior to this
date are included within retained earnings.
Defined benefit pension scheme
•
“Retained earnings” represents retained profits and
Scheme assets are measured at fair values. Scheme liabilities
losses.
are measured on an actuarial basis using the projected
unit credit method and are discounted at appropriate high
Equity is any contract which evidences a residual interest in
quality corporate bond rates that have terms to maturity
the assets of the Group after deducting all its liabilities.
approximating to the terms of the related liability. Appropriate
adjustments are made for past service costs. Past service
cost is recognised as an expense on a straight-line basis over
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© Allergy Therapeutics plcwww.allergytherapeutics.com the average period until the benefits become vested. To the
Share based employee compensation
extent that benefits are already vested the Group recognises
The Group operates equity-settled share based compensation
past service cost immediately.
plans for remuneration of its employees including Long Term
Incentive Plan (LTIP) schemes.
Actuarial gains and losses are recognised immediately in
other comprehensive income. The net surplus or deficit
All employee services received in exchange for the grant of
is presented with other net assets on the balance sheet.
any share based compensation are measured at their fair
The related deferred tax is shown with other deferred tax
values. These are indirectly determined by reference to the
balances. A surplus is recognised only to the extent that it is
share option or shares awarded. Their value is appraised at
recoverable by the Group.
the grant date and excludes the impact of any non-market
vesting conditions (e.g. profitability or sales growth targets).
The current service cost, past service cost and costs
The fair value of LTIP shares, which have market conditions
from settlements and curtailments are charged against
attached, includes an adjustment based on the probability of
administrative expenses in the income statement. Interest
the shares vesting at the end of the vesting period.
on the scheme liabilities and the expected return on scheme
assets are included in other finance costs.
Details of the LTIP schemes and the conditions applying to
each scheme are fully disclosed in Note 27 (Share Based
Short-term employee benefits, including holiday entitlement
Payments) on pages 89 to 91.
are included in current pension and other employee
obligations at the undiscounted amount that the Group
All share based compensation is ultimately recognised as
expects to pay as a result of the unused entitlement.
an expense in the consolidated income statement with a
Investments
corresponding credit to the share based payments reserve,
net of deferred tax where applicable. If vesting periods or
Investments relate to long-term insurance policies. In
other vesting conditions apply, the expense is allocated over
accordance with IAS19 these cannot be directly deducted
the vesting period, based on the best available estimate of
from the German pension obligation. These are recognised as
the number of share options expected to vest. Non market
a separate asset, rather than as a deduction in determining
vesting conditions are included in assumptions about the
the defined benefit liability. They are held at fair value with
number of options that are expected to become exercisable.
any gains or losses on valuation charged or credited to other
Estimates are subsequently revised if there is any indication
comprehensive income.
that the number of share options expected to vest differs
Provisions
from previous estimates. No adjustment to expense
recognised in prior periods is made if fewer share options
Provisions are recognised when the present obligations
ultimately are exercised than estimated.
arising from legal or constructive obligations resulting from
past events, will probably lead to an outflow of economic
Upon exercise of share options, the proceeds received, net of
resources from the Group which can be estimated reliably.
any directly attributable transaction costs, up to the nominal
value of the shares issued are allocated to share capital with
Provisions are measured at the present value of the
any excess being recorded as share premium.
estimated expenditure required to settle the present
obligation, based on the most reliable evidence available at
Employee benefit trust
the balance sheet date.
The financial statements include the assets and liabilities of a
All provisions are reviewed at each balance sheet date and
The employee benefit trust has acquired shares in the
adjusted to reflect the current best estimates.
Company and these are deducted from the shareholders’
trust set up for the benefit of the Group’s employees.
funds on the balance sheet at the cost of acquisition less
proceeds on disposal.
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© Allergy Therapeutics plcwww.allergytherapeutics.com Use of accounting estimates and judgements
b)
Estimates of future profitability are required for the
Many of the amounts included in the financial statements
decision whether or not to create a deferred tax
involve the use of judgement and/or estimation. These
asset. A deferred tax asset of £0.2m has been
judgements and estimates are based on management’s best
recognised in this period (Note 11).
knowledge of the relevant facts and circumstances, having
c)
Determining whether goodwill is impaired requires
regard to prior experience, but actual results may differ from
an estimation of the value in use of the cash
the amounts included in the financial statements. Information
generating unit to which the goodwill has been
about such judgements and estimation is contained in
allocated. This value in use calculation requires an
the accounting policies and/or the notes to the financial
estimation of the future cash flows expected to arise
statements and the key areas are summarised below:
from the cash generating unit and a suitable discount
rate in order to calculate the present value.
Judgements in applying accounting policies
d)
The Group has been awarded a provisional exemption
a)
Capitalisation of development costs requires analysis
to the increased rebate charge in Germany for the
of the technical feasibility and commercial viability
period July to December 2012. Revenue of £1.1m has
of the project concerned. Capitalisation of the costs
been accrued in relation to this exemption. While
will be made only where there is evidence that
the Group is confident that the exemption will be
an economic benefit will accrue to the Group. To date
confirmed, there is a possibility that this will not happen.
no development costs have been capitalised and
all costs have been expensed in the Income
3. Revenue
statement as research and development expenditure,
£2.5m (2012: £2.1m)
An analysis of revenue by category is set out in the table below:
b)
The Directors assume that the loan note will be
repayable in April 2014 rather than any earlier date
nominated by the note holder. Repayment of
the principal has been treated as not substantive as
2013
£’000
2012
£’000
the repayment of principal and reinvestment in equity
Sale of goods
38,467
40,317
are viewed as occurring at the same time in
contemplation of one another.
Royalties
c)
As part of setting up a new distributor in a particular
Rendering of services
-
812
963
-
39,279
41,280
territory, the Group received a payment of £1.25m in
exchange for services rendered. These services
have been fair valued and the total fee apportioned
across the services in proportion to these valuations.
Of this value £0.47m has been matched to a
related payable and recognised in full; £0.51m
valuation has been supported by an independent
valuer; and the remaining £0.27m has been
apportioned by management. Of the £1.25m, £0.27m
is judged to relate to services to be performed in
future periods and has been carried forward in
deferred revenue.
Sources of estimation uncertainty
a)
Depreciation rates are based on estimates of the
useful lives and residual values of the assets
involved. There is inherent uncertainty in the useful
lives of assets, which means that they are constantly
reviewed by management (Accounting policies note
(page 59) and Note 15).
As noted in the accounting policy for revenue recognition for
sale of goods, royalties that are deemed to part of the fair
valuation of supply of goods are included in sale of goods.
Rendering of services relates to the supply of services to
a new distributor to assist them in setting up operations in
their territory.
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4. Segmental Reporting
The Group’s operating segments are reported based on the financial information provided to the Executive Directors, who are
defined as the Chief Operating Decision-Maker (CODM), to enable them to allocate resources and make strategic decisions.
The CODM reviews information based on geographical market sectors and assesses performance at an EBITDA (operating profit
before interest, tax, depreciation and amortisation) and operating profit level. Management have identified that the reportable
segments are Central Europe (which includes the following operating segments; Germany, Austria, Switzerland and the
Netherlands), Southern Europe (Italy and Spain), the UK (including Latin America) and Other.
Revenue by segment
Central Europe
Germany
Other
Southern Europe
UK
Other
Revenue
from External
Customers
Inter
Segment
Revenue
Total
Segment
Revenue
Revenue
from External
Customers
Inter
Segment
Revenue
Total
Segment
Revenue
2013
£’000
23,613
5,143
28,756
5,774
2013
£’000
2013
£’000
2012
£’000
2012
£’000
23,613
25,407
5,143
5,617
28,756
31,024
2012
£’000
25,407
5,617
31,024
6,180
5,774
881
32,081
32,962
3,868
3,868
6,180
1,509
2,567
33,861
35,370
2,567
39,279
32,081
71,360
41,280
33,861
75,141
Revenues from external customers in all segments are derived principally from the sale of a range of pharmaceutical products
designed for the immunological treatment of the allergic condition.
Other revenues include licensee and distributor sales and royalties through several markets including Czech and Slovak Republics,
Canada and South Korea.
Inter-segment revenues represent sales of product from the UK to the operating subsidiaries. The price is set on an arms-length basis
which is eliminated on consolidation
64
© Allergy Therapeutics plcwww.allergytherapeutics.com The CODM also reviews revenue by segment on a constant currency basis to provide relevant year on year comparisons.
The following revenue table is based on a constant currency rate of € 1.20: £1.00 which was the rate used in the 2013 budget.
Revenue from
External Customers
Revenue from
External Customers
Central Europe
Germany
Other
Southern Europe
UK
Other
2013
£’000
24,442
5,157
29,599
5,977
881
3,866
40,323
The Group has no customers which individually account for more than 10% of the Group’s revenue.
Depreciation and amortisation by segment
Central Europe
Southern Europe
UK
2013
£’000
199
86
1,057
1,342
2012
£’000
24,331
5,180
29,511
5,814
1,509
2,686
39,520
2012
£’000
119
89
1,684
1,892
65
© Allergy Therapeutics plcwww.allergytherapeutics.com EBITDA by segment
Allocated EBITDA
Central Europe
Southern Europe
UK
Allocated EBITDA
Depreciation and amortisation
Operating profit
Finance income
Finance expense
Profit before tax
Total assets by segment
Central Europe
Southern Europe
UK
Inter-segment assets
Inter-segment investments
Total assets per Balance Sheet
2013
£’000
(791)
(323)
3,124
2,010
(1,342)
668
19
(255)
432
2013
£’000
9,306
4,117
37,038
50,461
(3,126)
(18,371)
28,964
2012
£’000
(1,029)
372
3,641
2,984
(1,892)
1,092
5
(457)
640
2012
£’000
8,386
3,963
35,220
47,569
(1,958)
(17,857)
27,754
Included within Central Europe are non-current assets to the value of £2,560,000 relating to Goodwill and within Southern Europe
assets to the value of £1,207,000 relating to freehold land and buildings.
66
© Allergy Therapeutics plcwww.allergytherapeutics.com Total liabilities by segment
Central Europe
Southern Europe
UK
Inter-segment liabilities
Total liabilities per Balance Sheet
5. Profit Before Tax
Profit for the period has been arrived at after charging:
Foreign exchange loss
Depreciation and amortisation:
Depreciation of property plant and equipment (note 15 )
Amortisation of intangible assets (note 14 )
Research and development
Land and buildings held under operating leases
Other operating leases
Audit and non-audit services:
Fees payable to the Company’s auditor for the audit of the Group accounts
Fees payable to the Company’s auditor and its associates for other services:
The audit of the Company’s subsidiaries pursuant to legislation
Tax services
Other services pursuant to legislation
2013
£’000
(10,070)
(2,518)
(4,831)
(17,419)
3,126
(14,293)
2013
£’000
350
968
374
2,535
422
521
22
69
20
23
2012
£’000
(8,227)
(2,150)
(4,743)
(15,120)
1,958
(13,162)
2012
£’000
808
1,506
386
2,095
439
533
21
67
9
99
Share based payment expense (note 27 )
183
131
67
© Allergy Therapeutics plcwww.allergytherapeutics.com 6. Remuneration of Key Management Personnel
Salaries and short-term employee benefits
Social security costs
Post employment benefits – defined
contribution plans
Under/ (Over) accrual of bonuses
Share based payment
2013
£’000
597
66
75
738
(35)
29
732
2012
£’000
677
70
43
790
(6)
58
842
Key management personnel are considered to be the Directors and full details of their remuneration are set out in the audited
information included in the Director’s Remuneration Report on pages 46 to 48 and forms part of the financial statements.
7. Employees (including Directors)
Wages and salaries
Social security costs
Share based payments
Pension costs – defined benefit plans
Pension costs – defined contribution plans
2013
£’000
14,292
2,110
158
243
267
17,070
The average number of employees during the period (including executive directors) was made up as follows:
R & D, marketing and administration
Sales
Production
2013
113
91
147
351
2012
£’000
15,423
2,366
131
240
234
18,394
2012
120
87
151
358
68
© Allergy Therapeutics plcwww.allergytherapeutics.com 8. Finance Expense
Interest on borrowing facility
Change in fair value of derivative financial instrument
Employee defined benefit scheme interest expense
Other interest and charges
Retranslation profit on Euro denominated borrowing facilities
2013
£’000
167
(149)
193
44
255
-
255
2012
£’000
1,368
(214)
212
90
1,456
(999)
457
The retranslation profit represents the translation difference on the Group’s Euro based borrowing facility caused by the movement
of the Euro against Sterling throughout the previous year. The borrowing facility was repaid in April 2012.
9. Finance Income
Bank interest
10. Income Tax Expense
Current Tax:
Prior period tax
Overseas tax
Deferred tax – current year
Tax credit for the period
2013
£’000
19
2013
£’000
(57)
166
109
(213)
(104)
2012
£’000
5
2012
£’000
(440)
270
(170)
(13)
(183)
69
© Allergy Therapeutics plcwww.allergytherapeutics.com The tax credit assessed for the period is higher than the standard rate of corporation tax as applied in the respective trading domains
where the Group operates. The differences are explained below:
Profit for the period before tax
Profit for period multiplied by the respective standard rate of corporation tax
applicable in each domain (average 23.75%, 2012: 25.5%).
Effects of:
Disallowable adjustments
Capital allowances in excess of depreciation
Other temporary differences on property plant and equipment, adjustments and
movements
Tax losses utilised
Allowances for R&D expenditure
Tax losses not utilised
Adjustment of taxes for prior periods
Adjustment for different tax rates
R&D tax credit received in the period
Relief for shares acquired by employees and Directors
Deferred tax release
Tax credit for the period
11. Deferred Tax
Recognised deferred tax liability
2013
£’000
432
103
429
(34)
20
(479)
(48)
216
(57)
(14)
-
(27)
109
(213)
(104)
2012
£’000
640
163
125
74
14
(263)
(46)
312
213
(108)
(654)
-
(170)
(13)
(183)
2013
2013
2013
Tax
value of
carried
forward
losses
Tax
value of
accelerated
capital
allowances
Acquisition
of Teomed
AG
2013
Total
2012
2012
2012
Tax value
of carried
forward
losses
Tax value of
accelerated
capital
allowances
Acquisition
of Teomed
AG
2012
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
At 1 July
Amount credited to
the income statement
Exchange differences
At 30 June
-
671
-
671
-
(165)
(165)
(471)
-
13
(7)
213
(7)
(471)
(159)
(41)
-
-
-
-
-
-
-
-
(201)
(201)
13
23
13
23
(165)
(165)
70
© Allergy Therapeutics plcwww.allergytherapeutics.com Deferred tax is provided under the balance sheet liability method using the local tax rate for the overseas difference. Deferred tax
assets and deferred tax liabilities are offset where the Group has a legally enforceable right to do so and when the deferred tax assets
and liabilities relate to tax levied by the same tax authority and where there is an intention to settle the balances on a net basis.
The following is the analysis of the deferred tax balances after offset for financial reporting purposes:
Deferred tax assets
Deferred tax liabilities
Unrecognised deferred tax
Non Current Assets
Property, plant and equipment
Derivative financial instruments
Current Assets
Stock
Current Liabilities
Derivative financial instruments
Non Current Liabilities
Pension and other employee
obligations
Derivative financial instruments
Share options
Unused tax losses
Offset
Total
2013
£’000
200
(159)
41
2012
£’000
-
(165)
(165)
2013
Deferred
tax assets
£’000
2013
Deferred
tax liabilities
£’000
2012
Deferred
tax assets
£’000
2012
Deferred
tax liabilities
£’000
-
-
402
72
1,040
3
131
15,023
16,671
-
16,671
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
708
39
91
16,523
17,363
(620)
16,743
(504)
(116)
-
-
-
-
-
-
(620)
620
-
71
© Allergy Therapeutics plcwww.allergytherapeutics.com As at 30 June 2013 the Group had approximately £69m of unutilised tax losses (2012: approximately £69m) available for offset
against future profits. A deferred tax asset has been recognised in respect of £2.9m (2012 £nil) of such losses, the recovery of
which is supported by the expected level of future profits of the Group. Substantially all the tax losses have no fixed expiry date.
The main UK corporation tax rate is to change from 23% to 21% with effect from 1 April 2014. The recognised and unrecognised deferred
tax assets have been calculated at 23%, being the rate enacted at 30 June 2013. The estimated impact of the reduction in the tax rate to
the net deferred tax asset is a reduction of £17,000 and on the unrecognised net deferred tax asset and liabilities is a net reduction in the
asset of £1.3m.
12. Earnings Per Share
Profit after tax attributable to equity shareholders
Issued ordinary shares at start of the period
Ordinary shares issued in the period
Issued ordinary shares at end of the period
Weighted average number of shares in issue for the period
Potentially dilutive share options under Group’s share option scheme
Weighted average number of shares for diluted earnings per share
Basic earnings per share (pence)
Diluted earnings per share (pence)
2013
£’000
536
Shares
‘000
406,913
2,954
409,867
408,388
18,635
427,023
0.13p
0.13p
2012
£’000
823
Shares
‘000
310,772
96,141
406,913
326,795
13,256
340,051
0.25p
0.24p
72
© Allergy Therapeutics plcwww.allergytherapeutics.com 13. Goodwill
At 1 July
Exchange difference
At 30 June
2013
£’000
2,489
71
2,560
For the purposes of impairment testing of goodwill, the Directors recognise the Group’s Cash Generating Units (“CGU”)
to be the following:
Germany
2013
£’000
2,560
2012
£’000
2,624
(135)
2,489
2012
£’000
2,489
The recoverable amount for the CGU above was determined based on a value-in-use calculation, covering a detailed three-year
forecast of future cash flows using budgeted projections assuming a 12% discount rate which the Group has estimated to be the
weighted average cost of capital adjusted for risks specific to the CGU.
Management’s key assumptions include sales growth (at an average of 4% for the three year period), which has been determined
based on past experience in this market. The Group’s management believes that this is the best available input for forecasting this
mature market.
Apart from the considerations described in determining the value in use of the CGU described above, the Group’s management is
not currently aware of any other probable changes that would necessitate changes in its key estimates. There are no reasonable
possible changes in the assumptions that could lead to an impairment being recorded.
73
© Allergy Therapeutics plcwww.allergytherapeutics.com Manufacturing
know-how
Non-competing
know-how
Other intangibles
Computer
software
Total
£’000
£’000
£’000
£’000
£’000
1,000
3,810
2,153
1,824
8,787
14. Intangible Assets
Cost
At 1 July 2011
Additions
Asset reclassification
Foreign exchange
At 30 June 2012
Additions
Asset reclassification
Disposals
Foreign exchange
-
-
1,000
-
-
-
-
-
(343)
3,467
-
-
-
183
3,650
At 30 June 2013
1,000
867
3,810
-
66
-
933
-
67
-
1,000
133
67
-
-
-
(343)
3,467
-
183
3,650
-
-
-
Amortisation
At 1 July 2011
Asset reclassification
Charge for the year
Foreign exchange
At 30 June 2012
Disposals
Charge for the year
Foreign exchange
At 30 June 2013
Net book value
At 1 July 2011
At 30 June 2012
At 30 June 2013
74
727
-
(147)
2,733
-
-
(684)
56
2,105
987
-
172
(37)
97
28
824
28
(65)
(555)
1,884
9,084
157
11
42
157
11
(684)
281
2,094
8,849
1,342
7,006
25
148
(60)
25
386
(440)
1,122
1,455
6,977
(84)
173
15
-
134
34
(84)
374
232
1,226
1,623
7,499
1,166
1,611
879
482
429
471
1,781
2,107
1,350
© Allergy Therapeutics plcwww.allergytherapeutics.com 15. Property, Plant and Equipment
Plant &
machinery
Fixtures &
fittings
Motor
vehicles
Computer
equipment
Freehold land
& buildings
Total
£’000
£’000
£’000
£’000
£’000
£’000
Cost or valuation
At 1 July 2011
7,503
4,745
36
2,811
1,403
16,498
Additions
Asset reclassification*
Foreign exchange
Disposals
200
(16)
(20)
(21)
109
-
(70)
(2)
-
-
-
-
118
(12)
(64)
(7)
At 30 June 2012
7,646
4,782
36
2,846
Revaluation
Additions
Asset reclassification*
Foreign exchange
Disposals
-
343
-
10
-
-
177
-
38
(8)
At 30 June 2013
7,999
4,989
Depreciation
At 1 July 2011
Charge for the year
Asset reclassification*
Foreign exchange
Disposals
At 30 June 2012
Charge for the year
Revaluation
Asset reclassification*
Foreign exchange
Disposals
3,170
2,710
633
-
(9)
(14)
3,780
425
-
-
7
-
566
-
(59)
(2)
3,215
224
-
-
31
(2)
-
-
-
-
-
36
29
5
-
-
-
34
2
-
-
-
-
-
144
(11)
32
(2)
1,713
265
(25)
(60)
(6)
1,887
275
-
-
25
-
At 30 June 2013
4,212
3,468
36
2,187
Net book value
At 1 July 2011
At 30 June 2012
At 30 June 2013
* Assets reclassified to intangibles.
4,333
3,866
3,787
2,035
1,567
1,521
7
2
-
1,098
959
822
3,009
1,207
17,240
-
-
(145)
-
1,258
(128)
-
-
77
-
427
(28)
(299)
(30)
16,568
(128)
664
(11)
157
(10)
67
37
-
(7)
-
97
42
(145)
-
6
-
-
1,336
1,161
1,207
7,689
1,506
(25)
(135)
(22)
9,013
968
(145)
-
69
(2)
9,903
8,809
7,555
7,337
75
© Allergy Therapeutics plcwww.allergytherapeutics.com Note 21 provides details of the assets secured against the Group’s bank borrowings.
The Group’s land and buildings were revalued in July 2009 by independent valuers. The land and buildings were previously valued
using the cost model and had a carrying value of £1. Fair values were estimated based on recent market transactions, which were
then adjusted for specific conditions relating to the land and buildings.
An interim valuation of the Land and Buildings was carried out in April 2013 by independent valuers. Land and buildings were
revalued to fair value at the reporting date based on this valuation as management determined that the effect of changes in market
prices between the date of valuation and reporting dates were immaterial.
If the cost basis was used, the carrying amounts of the revalued land and buildings would be £1. The revalued amounts include a
revaluation surplus of £1,298,000 before tax (of which £476,000 writes back the accumulated depreciation) which is not available for
distribution to the shareholders of the Group.
During the year, following a review of the useful lives of all assets within the classes ‘Plant and machinery’ and ‘Fixtures and
fittings’, certain asset lives were extended by varying amounts, up to a maximum total useful life of 15 years. This had the effect of
reducing the depreciation charge for the current year by £480,000.
16. Investments
The Group carries an insurance policy which is designed to contribute towards the obligation in respect of the defined benefit
pension scheme (see note 25). It is valued at fair value (market price) by the Group’s actuaries each year.
At 1 July
Additions
(Loss)/Profit on the investment
Gain/(Loss) on foreign exchange
17. Inventories
Raw materials and consumables
Work in progress
Finished goods
2013
£’000
2,569
355
(17)
152
3,059
2013
£’000
1,895
2,273
1,846
6,014
2012
£’000
2,493
311
50
(285)
2,569
2012
£’000
2,018
2,823
1,810
6,651
The cost of inventories recognised as an expense in cost of sales during the year was £11.0m (2012: £12.6m) including write-downs
in the year amounting to £1.2m (2012: £1.3m).
The value of inventories measured at fair value less cost to sell was £77,000 (2012: £75,000).
76
© Allergy Therapeutics plcwww.allergytherapeutics.com 18. Trade and Other Receivables
Trade receivables
Other receivables
VAT
Prepayments
2013
£’000
3,129
2,158
117
1,781
7,185
2012
£’000
3,107
542
112
1,236
4,997
All amounts due as shown above are short-term. The carrying value of trade receivables is considered a reasonable approximation
of fair value. All trade and other receivables have been reviewed for indicators of impairment. During the year, £152,000 of trade
receivables was found to be impaired and £105,000 of the provision utilised. The impaired trade receivables are mostly due from
private customers in the Italian market who are experiencing financial difficulties.
Bad and doubtful debt provision
Balance b/f
Foreign exchange adjustments
Charge for the year
Utilised
Balance c/f
2013
£’000
54
8
152
(105)
109
2012
£’000
79
(15)
(10)
-
54
In addition, some of the unimpaired trade receivables are past due as at the reporting date. The Directors consider that the
carrying amount of trade and other receivables approximates their fair value. The age of financial assets past due but not impaired
is as follows:
The financial assets which were overdue but not
provided for were:
Trade receivables
Not more than 3 months
More than 3 months but not more than 6 months
More than 6 months but not more than 1 year
More than one year
2013
£’000
640
456
200
99
1,395
2012
£’000
551
465
112
158
1,286
77
© Allergy Therapeutics plcwww.allergytherapeutics.com
19. Cash and Cash in Hand
Cash at bank and in hand
20. Trade and Other Payables
Trade payables
Social security and other taxes
Other creditors
Accrued expenses and deferred income
21. Borrowings
Due within one year
Convertible loan note
Overdraft
Due after more than one year
Convertible loan note
2013
£’000
1,257
2013
£’000
3,050
536
717
2,703
7,006
2013
£’000
95
193
288
-
-
2012
£’000
903
2012
£’000
2,553
682
136
2,941
6,312
2012
£’000
114
1,312
1,426
97
97
The overdraft facility is provided by The Royal Bank of Scotland Plc and has a variable limit during the year up to a maximum of
£6 million. The interest on the overdraft is at the bank’s base rate plus a fixed margin of 3.35%. The facility is secured in favour of
The Royal Bank of Scotland Plc by means of debentures granted by the Company and its principal subsidiaries and share pledge
agreements relating to Bencard Allergie GmbH, Allergy Therapeutics Italia SRL and Allergy Therapeutics Iberica SL.
The Convertible loan notes were issued in April 2012 (Note 26). The liability relates to the interest payable over the next year.
78
© Allergy Therapeutics plcwww.allergytherapeutics.com 22. Provisions
The provision refers to a leaving indemnity reserve in Allergy Therapeutics Italia srl. Under Italian law, alongside each monthly salary
payment an amount is paid into this reserve for each employee. When the employee leaves the company the accrued amount is
paid to him in the form of a deferred salary payment.
2013
£’000
274
26
(19)
19
300
2012
£’000
283
42
(20)
(31)
274
At 1 July
Additions
Utilisation
Foreign exchange movement
At 30 June
23. Financial instruments
Risk management
The Group manages its capital to ensure that entities within the Group will be able to continue as a going concern whilst
maximising the return to shareholders through the effective management of liquid resources raised through share issues and loan
arrangements. Capital management objectives are met through regular reviews of cash flows, debtor/creditor balances, budgets
and forecasts.
Total equity
Cash and cash equivalents
Capital
Total equity
Borrowings
Overall financing
Capital-to-overall financing ratio
The Directors are satisfied with the ratio above.
2013
£’000
14,671
(1,257)
13,414
14,671
288
14,959
0.90
2012
£’000
14,592
(903)
13,689
14,592
1,523
16,115
0.85
79
© Allergy Therapeutics plcwww.allergytherapeutics.com The IAS 39 categories of financial assets and liabilities included in the balance sheet and the headings under which they are shown
are as follows:
Categories of financial instrument
Financial assets
Current
Loans and receivables (including cash and cash equivalents)
Fair value through profit and loss – held for trading
Non financial current assets
Financial liabilities
Current
At amortised cost (including borrowings and payables)
Fair value through profit and loss – held for trading
Non financial current liabilities
Non current
At amortised cost (including borrowings and payables)
Fair value through profit and loss – held for trading
Non financial non current liabilities
2013
£’000
6,661
2
1,781
8,444
(3,918)
(326)
(3,376)
(300)
-
(159)
(8,079)
2012
£’000
4,664
483
1,236
6,383
(4,293)
(9)
(3,445)
(372)
(162)
(165)
(8,446)
Derivative financial instruments
The Group uses derivative financial instruments to mitigate the effects of exchange rate exposure through the use of forward
exchange contracts and interest rate volatility through the use of interest rate swap arrangements.
The fair value is calculated by reference to market rates and supported by counterparty confirmation.
Interest rate swap
These were arranged to convert 60% of the Company’s loan borrowings from floating to fixed rates. The loan was fully repaid in
April 2012 and the swaps will come to an end in September 2013. Within the fair value hierarchy, this financial derivative is classified
as level 2.
Canadian Dollar forward contracts
The Group has Canadian Dollar forward contracts with its bank that are arranged for the purchase of CAD 150,000 to sell GBP at a
rate of 1.60 in July 2013. Within the fair value hierarchy, this financial derivative is classified as level 2.
Euro forward contracts
The Group has Euro forward contracts with its bank that are arranged for the sale of €14,396,000 to purchase GBP at an average
blended rate of 1.1967 at future dates from August 2013 to April 2014. Within the fair value hierarchy, this financial derivative is
classified as level 2.
80
© Allergy Therapeutics plcwww.allergytherapeutics.com Analysis of derivative financial instruments
(Charge) / Credit to the Income Statement
Euro exchange swap - held for trading
Euro exchange swap – matured in the period
Euro forward contacts - held for trading
Euro forward contracts - matured in the period
Interest rate swap - held for trading
Interest rate swap – charges in the period
2013
£’000
10
11
(797)
506
(270)
149
(167)
(18)
2012
£’000
(3)
1
1,282
51
1,331
214
(278)
(64)
Forward exchange contracts are considered by management to be part of economic hedge arrangements but have not been
formally designated as such and hence hedge accounting is not used.
Derivative financial instruments
Current Assets
Derivative financial instruments
- Euro forward contracts - held for trading
- Euro exchange swap - held for trading
Current liabilities
Derivative financial instruments
- Euro exchange swap - held for trading
- Euro forward contracts - held for trading
- Interest rate swap – held for trading
Non current liabilities
Derivative financial instruments
- Interest rate swap – held for trading
2013
£’000
-
2
2
-
313
13
326
-
-
The net loss at fair value of financial instruments through the profit and loss is £637,000 (2012 gain: £1,493,000).
2012
£’000
483
-
483
9
-
-
9
162
162
81
© Allergy Therapeutics plcwww.allergytherapeutics.com Foreign currency risk
The Group conducts most of its day to day financial activities in either the Euro (which is the functional currency of the active
subsidiaries in Germany, Italy, Spain, Austria and The Netherlands), Sterling (which is the functional currency of the UK parent entity),
Swiss Francs (which is the functional currency of the Swiss subsidiary) or Argentinean Pesos (which is the functional currency of the
Argentine subsidiary). Some costs are denominated in US dollars and some income is denominated in Canadian dollars.
The Group carries bank balances in the following currencies:
Sterling
Euro
US dollars
Canadian dollars
Swiss franc
Polish zloty
Argentinean peso
2013
£’000
(178)
863
6
259
113
-
1
2012
£’000
(1,263)
716
33
-
80
-
25
Foreign currency denominated financial assets and liabilities, translated into Sterling at closing rates, are as follows:
1,064
(409)
2013
Other
Sterling
£’000
344
Euro
£’000
3,935
(2,709)
(1,305)
(2,365)
2,630
-
(97)
(97)
-
(437)
(437)
£’000
981
(605)
376
-
-
-
2012
Other
£’000
867
(288)
579
-
-
-
Financial assets
Sterling
£’000
480
Euro
£’000
5,202
Financial liabilities
(2,202)
(1,437)
Short term exposure
(1,722)
3,765
Financial assets
Financial liabilities
Long term exposure
-
-
-
-
(300)
(300)
82
© Allergy Therapeutics plcwww.allergytherapeutics.com
The following table illustrates the sensitivity of the net result for the year and the equity of the Group with regard to its financial assets
and liabilities and the Euro to Sterling exchange rate. Foreign exchange movements over the last two years have been considered and
an average taken, and on this basis a 10% movement is considered to be a reasonable benchmark. For 2013, a 10% movement was
also used.
If Sterling had strengthened against the Euro by
Net results for the year
Other comprehensive income
If Sterling had weakened against the Euro by
Net results for the year
Other comprehensive income
2013
£’000
10%
2,051
(430)
1,621
10%
(2,509)
525
(1,984)
2012
£’000
10%
1,674
(419)
1,255
10%
(1,796)
512
(1,284)
Interest rate risk
The Group finances its operations through equity fundraising and overdraft facilities. Interest is charged at a floating rate on the
overdraft facility. The overdraft facility is tailored in such a way as to give flexibility to the Group. This allows the Group to utilise a higher
proportion of the facility in the low sales season and pay down the debt in the high sales season. The following table illustrates the
sensitivity of the net result for the year and equity to possible changes in interest rates of + 1% with effect from the beginning of the
year on the remaining element of borrowings. Due to the current low interest rates it is unfeasible to illustrate the results were the
interest rates to fall by 1%. The changes are considered to be reasonable given the current market conditions and the calculations are
based on the financial instruments held at each balance sheet date, all other variables being held constant.
Movement in net results for the year
Equity
2013
£’000
+ 1%
34
-
34
2013
£’000
- 1%
n/a
n/a
n/a
2012
£’000
+ 1%
(43)
-
(43)
2012
£’000
- 1%
n/a
n/a
n/a
83
© Allergy Therapeutics plcwww.allergytherapeutics.com 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 regularly monitored. The maximum exposure to credit risk is the value of the
outstanding amount.
Credit risk on cash and cash equivalents is considered to be small as the counterparties are all substantial banks with high credit
ratings. The maximum exposure is the amount of the deposit.
Liquidity risk
The Group’s capital management objectives are to ensure the Group’s ability to continue as a going concern, and to provide
adequate funding for its day to day operations. Management has access to funding through a bank facility and continues to have
the option to raise funds from the issue of equity shares to ensure the Group remains able to meet its commitments as they fall
due. The Group’s bank facility (Note 21) is due for renewal in May 2014. As at 30 June 2013 the Group’s contractual maturities are
summarised as follows:
Current liabilities
Borrowing facility - principal
Borrowing facility - interest and other charges
Convertible loan note - interest and other charges
Trade payables
Other short term liabilities
Derivatives
2013
£’000
Within 6
months
2013
£’000
6 to 12
months
193
-
-
3,630
3,376
7,199
292
7,491
-
-
95
-
-
95
34
129
2012
£’000
Within 6
months
1,312
2
-
2,867
3,445
7,626
9
7,635
2012
£’000
6 to 12
months
-
-
114
-
-
114
-
114
Non-current liabilities
2013
2013
2012
2012
Borrowing facility - principal
Borrowing facility - interest and other charges
Convertible loan note - interest and other charges
Other long term liabilities
Derivatives
£’000
1 to 5 years
£’000
Later than
5 years
£’000
1 to 5 years
£’000
Later than
5 years
-
-
-
300
300
-
300
-
-
-
-
-
-
-
-
-
97
275
372
162
534
-
-
-
-
-
-
-
There is no material difference between the fair values and the carrying values of these financial instruments.
84
© Allergy Therapeutics plcwww.allergytherapeutics.com
24. Operating Lease Commitments
The following payments are due to be made on operating lease commitments:
Within one year
Two to five years
Over five years
Land & buildings
2013
£’000
701
2,187
1,655
4,543
2012
£’000
454
1,354
411
2,219
Other
2012
£’000
400
587
-
987
2013
£’000
367
427
-
794
2013
£’000
1,068
2,614
1,655
5,337
Total
2012
£’000
854
1,941
411
3,206
Of the operating lease commitments for the land and buildings of £4,543,000 (2012: £2,219,000), £3,758,000 relates to the UK
premises (2012: £1,114,000). The production facility accounts for £3,307,000 (2012: £599,000) of this commitment and expires in
December 2023. Premises in Spain account for £187,000 (2012: £207,000) expiring in 2020 and in Germany for £491,000 (2012:
£648,000) expiring in December 2015.
Of the other commitments, £588,000 (2012: £782,000) relates to leased vehicles all expiring within 5 years.
25. Retirement Benefit Obligations
Defined contribution scheme
The Group operates a defined contribution pension scheme for certain employees in the UK. The assets of the scheme are held
separately from those of the Group in an independently administered fund. The amount charged against the profits represents the
contributions payable under the scheme in respect of the accounting period totalling £267,000 (2012: £234,000).
85
© Allergy Therapeutics plcwww.allergytherapeutics.com Defined benefit scheme
The Group operates a partly funded non-contributory defined benefit pension scheme for certain employees in Germany.
The actuarial valuation was carried out by Swiss Life Pensions Management GmbH at 30 June 2013. The major assumptions used
were as follows:
2013
% pa
1.5
3.0
1.5
4.0
3.35
3.35
3.0
Years
19.2
23.3
38.9
44.0
2013
£’000
1,414
(7,628)
(6,214)
18
(191)
2012
% pa
1.5
3.0
1.5
5.0
4.0
3.5
3.0
Years
18.6
22.7
38.8
43.9
2012
£’000
1,196
(5,913)
(4,717)
(4)
(88)
Retail price inflation
Salary increase rate
Rate of pension increase
Discount rate at the beginning of the year
Discount rate at the end of the year
Expected return on assets
Increase of social security contribution ceiling
Average life expectancies
Male, 65 years of age at the balance sheet date
Female, 65 years of age at the balance sheet date
Male, 45 years of age at the balance sheet date
Female, 45 years of age at the balance sheet date
The assets in the scheme and the expected rates
of return were as follows:
Fair value of plan assets
Present value of scheme liabilities
Deficit in the scheme
Experience gains/(losses) on plan assets
Experience losses on plan liabilities
86
© Allergy Therapeutics plcwww.allergytherapeutics.com The plan assets consist of long-term insurance policies held to cover the German pension obligation. The value of the plan assets is
deducted from the value of the pension liability to give a net liability of £6,214,000 (2012: £4,717,000). The basis used to determine
the overall expected rate of return is the expected market return as determined by Swiss Life Pensions Management GmbH using
the projected unit credit method. The actual return on plan assets for the year is £60,000 (2012: £44,000). The pension charge
generates an unrecognised deferred tax asset of £1,040,000 (2012: £708,000), however this is unrecognised in the Group accounts
as there is uncertainty over the recoverability.
Long term insurance policies that do not qualify as plan assets are recognised as separate investment assets at fair value and
represent a re-imbursement right as defined by IAS 19. Management have assumed that there will be no expected return on these
assets as was the case in the previous year. See note 16 for further details of these investment assets.
Amounts charged to operating profit
Current service costs
Amounts included in other finance expenses
Expected return on pension scheme assets
Interest on pension scheme liabilities
Net charge
Amounts recognised in other comprehensive income
Actual return less expected return on pension scheme assets
Experience losses arising on scheme liabilities
Changes in assumptions underlying the present value of scheme liabilities
Total amount relating to year
Opening cumulative losses
Actuarial loss recognised
Net movement recognised
Movement in assets during the year
Balance as at 1 July
Foreign currency differences
Expected return
Actuarial gain/ (losses)
Contributions from employer
Assets transferred to finance benefits paid
Balance as at 30 June
2013
£’000
243
(42)
235
193
18
(191)
(692)
(865)
(1,645)
(2,510)
(2,510)
2013
£’000
1,196
97
42
18
121
(60)
1,414
2012
£’000
240
(48)
259
211
(4)
(88)
(642)
(734)
(911)
(1,645)
(1,645)
2012
£’000
1,275
(136)
48
(4)
57
(44)
1,196
87
© Allergy Therapeutics plcwww.allergytherapeutics.com Movement in liabilities in the year
Balance as at 1 July
Foreign currency differences
Current service costs
Interest cost
Actuarial losses
Benefits paid by employer
Benefits paid from assets
Balance as at 30 June
2013
£’000
(5,913)
(455)
(243)
(235)
(885)
43
60
2012
£’000
(5,389)
644
(240)
(259)
(730)
17
44
(7,628)
(5,913)
The expected contributions over the forthcoming year are £57,000.
History of retirement benefit obligation
Fair value of plan assets
2013
£’000
1,414
2012
£’000
1,196
2011
£’000
1,275
2010
£’000
1,076
2009
£’000
1,104
Present value of scheme liabilities
(7,628)
(5,913)
(5,389)
(4,649)
(3,925)
Scheme deficit
(6,214)
(4,717)
(4,114)
(3,573)
(2,821)
History of experience gains and losses
2013
2013
2012
2012
2011
2011
2010
2010
2009
2009
% £’000
% £’000
% £’000
% £’000
% £’000
(1.4)
18
(0.3)
(4)
(0.5)
(6)
(0.7)
(9)
(0.9)
(10)
Scheme assets
Difference between the
expected and actual return
Scheme liabilities
Experience gains and (losses)
(2.7)
(191)
(1.4)
(88)
4.7
254
(2.1)
(108)
-
Changes in assumptions
underlying present value
(692)
(642)
-
(495)
1
-
Total amount recognised
(12.0)
(865)
(11.5)
(734)
4.6
248
(12.1)
(612)
(0.2)
(9)
88
© Allergy Therapeutics plcwww.allergytherapeutics.com 26. Issued Share Capital
Authorised share capital
Ordinary shares of 0.10p each
2013
Shares
2013
£’000
2012
Shares
2012
£’000
1 July and 30 June
790,151,667
790
790,151,667
Deferred shares of 0.10p each
1 July and 30 June
9,848,333
10
9,848,333
Issued and fully paid
Ordinary shares of 0.10p
At 1 July
Issued during the year
At 30 June
Issued and fully paid
Deferred shares of 0.10p
406,912,981
2,953,850
409,866,831
407
3
410
310,771,614
96,141,367
406,912,981
At 1 July
9,848,333
10
9,848,333
Issued during the year
At 30 June
Issued share capital
9,848,333
419,715,164
10
420
-
9,848,333
416,761,314
The deferred shares have no voting rights, dividend rights or value attached to them.
Share options were exercised in the year with proceeds of £148,000.
790
10
311
96
407
10
10
417
Convertible Loan Notes to the value of £4,042,000 were issued on 20 April 2012 following approval by shareholders. Interest is
payable at a rate of 3% per annum during the term of the notes. On redemption, the Convertible Loan Notes will be converted into
41,674,938 ordinary shares at a price of 9.7p per share.
27. Share Based Payments
The Group has a Long Term Incentive Plan (‘LTIP’) under which Executive Directors and senior employees may receive an annual
provisional award of performing vesting shares.
The Group has two plans: the initial 2005 Plan and the 2013 Plan. The 2013 LTIP was adopted by the Board on 20 March 2013, the
board having consulted major shareholders. Awards were made under the initial 2005 plan and the new plan during the year.
Under the 2005 plan the number of shares that vest depends on the Group’s performance during the Plan cycle in terms of total
shareholder return (TSR) compared to the TSR performance of the companies in the Plan’s peer group. If the Group’s position in
the peer group at the end of the Plan cycle is at or above the 75th percentile, 100% of the shares provisionally awarded may vest;
between the 75th and 50th percentile the percentage of shares that may vest will be calculated on a straight-line basis between
100% and 33.33%; below the 50th percentile no shares will vest. Each Plan cycle will comprise not less than three consecutive
financial years. Awards are forfeited if the employee leaves the Group before the shares vest.
89
© Allergy Therapeutics plcwww.allergytherapeutics.com For the 2013 plan implemented during the year, performance criteria for each award under the plan will be set by the remuneration
committee. The 2013 award is based on the annual compound shareholder growth calculated as a percentage of a formula, the
TSR Growth. An award shall vest to a 100% if at the end of a plan cycle the maximum annual compound growth has been satisfied
being 25% of TSR Growth. If the TSR Growth is less than 10% only 25% shares shall be awarded. If the TSR Growth is between
100% and 25% an award based on a straight line basis will be vested. Performance criteria for subsequent awards under this plan
may vary. Each plan cycle will comprise a period of three years. An award will be forfeited if the employee leaves the Group before
the shares vest.
Share options were granted to employees and Directors under earlier schemes. The vesting periods are usually from one to three
years. The vesting of some options is dependent on the Group’s TSR performance as for the LTIP detailed above. The options are
settled in equity once exercised. If the options remain unexercised after a period of 10 years from the date of the grant, the options
expire. Options are forfeited if the employee leaves the Group before the options vest.
During the year two new LTIP grants were provisionally awarded. The first of these grants was awarded under the initial 2005 Plan.
The latest grant, in May 2013, was awarded under the 2013 Plan.
For the following outstanding share options disclosure, LTIP awards (which have a nil exercise price) have been disclosed separately to
avoid distorting the weighted average exercise price (WAEP):
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited during the year
Cancelled during the year
Outstanding at the year end
Exercisable at the year end
2013 WAEP
2012 WAEP
Number
Price (£)
Number
Price (£)
2,468,490
2,050,000
(2,953,850)
(412,057)
-
1,152,583
1,152,583
0.16
0.07
0.05
0.33
-
0.23
0.23
4,650,730
0.16
-
-
-
-
(2,182,240)
0.17
-
2,468,490
2,362,304
0.16
0.16
Options exercised during the year had a weighted average share price at the date of exercise of 12p (2012: None).
The share options outstanding at the end of the year detailed above have a weighted average remaining contractual life of 4.3 years
(2012: 1.6 years) and have the following range of exercise prices:
30 June 2013
30 June 2012
Number
-
1,124,017
28,566
1,152,583
Number
1,614,700
825,224
28,566
2,468,490
Exercise price (p)
0.1-5
6-45
46-120
90
© Allergy Therapeutics plcwww.allergytherapeutics.com Outstanding shares provisionally awarded under the Long Term Incentive Plan, with a nil exercise price, are as follows:
Outstanding at the beginning of the year
Awarded during the year
Forfeited during the year
Cancelled during the year
30 June 2013
30 June 2012
Number
10,787,000
10,802,500
(4,107,000)
-
Number
7,944,000
4,725,000
(1,882,000)
-
Outstanding at the year end
17,482,500
10,787,000
The fair value of the Long Term Incentive Plan shares has been arrived at using the share price at the date of grant and applying a
vesting probability for the market performance conditions. The assumptions made to value shares awarded were as follows:
Date of
grant
Vesting
period
(yrs)
Date of
vesting
Expected life
(yrs)
Exercise
price
(£)
Share
price at
grant (£)
Vesting
probability
(%)
Fair
value
(£)
Number
outstanding
10/05/13
20/12/12
14/12/11
07/12/10
20/07/09
3
3
3
3
3
10/05/16
20/12/15
14/12/14
07/12/13
20/07/12
3
3
3
3
3
0.0000
0.0000
0.0000
0.0000
0.0000
0.101
0.118
0.106
0.091
0.148
36.8
36.8
41.5
41.5
41.5
0.042
6,367,500
0.049
4,230,000
0.044
3,825,000
0.038
3,060,000
0.061
-
The share-based payment charge assumes an employee attrition rate of 5% per annum. In addition to the above employee related
awards, the Group also awarded options for 650,000 shares with an exercise price of £0.124 as payment to a third party advisor.
The Group recognised total expenses of £183,000 (2012: £131,000) related to equity-settled share based payment transactions
during the year.
28. Contingent Liabilities
Allergy Therapeutics (UK) Ltd, a subsidiary of Allergy Therapeutics plc, has guaranteed the deposits required for leases on cars and
rented office space of Bencard Allergie GmbH. The amount as at 30 June 2013 was €107,426; £91,833 (2012: €107,426; £86,508).
A cross-guarantee exists between Allergy Therapeutics (Holdings) Ltd, Allergy Therapeutics (UK) Ltd, Bencard Allergie GmbH,
Allergy Therapeutics Italia srl. and Allergy Therapeutics Iberica SL. inwhich the liabilities of each entity to the Royal Bank of Scotland
Plc are guaranteed by all the others.
The European Commission has recently opened an investigation into whether the exemption of pharmaceutical manufacturers from
the increase in rebates in Germany constitutes state aid. If it is eventually concluded that the exemptions constitute state aid, then all
unlawful aid may have to be repaid. On the balance of probabilities, the Group does not consider that it will have to repay any rebate
exemptions. However, should a repayment be required, then the maximum amount to be repaid would be approximately £5 million.
Included in other receivables is an amount of £1.4 million in respect of exempted rebates which the Group continues to collect.
91
© Allergy Therapeutics plcwww.allergytherapeutics.com 29. Capital Commitments
The Group’s capital commitments at the end of the financial period, for which no provision has been made, are as follows:
Capital commitments
30 June 2013
30 June 2012
£’000
459
£’000
148
Included in the above is £22,000 for ongoing factory refurbishments in the UK (2012: £nil); £156,000 for new plant and machinery
(2012: £142,000) and £281,000 for IT equipment and systems upgrades (2012: £6,000).
30. Related Party Transactions
Allergy Therapeutics plc’s related parties include its subsidiary companies and its key management. Key management personnel are
the Company’s Directors, and as such full disclosure of their remuneration can be found in the Directors’ Remuneration report on
pages 46 to 48.
At 30 June 2013, the Company’s subsidiary undertakings were:
Subsidiary undertaking
Country of
incorporation
Principal activity
Percentage of
shares held
Class of shares
held
Allergy Therapeutics (Holdings) Ltd
Allergy Therapeutics (UK) Ltd
UK
UK
Holding Company
Manufacture and sale of
pharmaceutical products
Bencard Allergie GmbH
Germany
Sale of pharmaceutical products
Bencard Allergie (Austria) GmbH
Austria
Sale of pharmaceutical products
Allergy Therapeutics Italia s.r.l.
Italy
Sale of pharmaceutical products
Allergy Therapeutics Iberica S.L.
Spain
Sale of pharmaceutical products
Teomed A.G.
Switzerland
Sale of pharmaceutical products
Allergy Therapeutics Netherlands BV
Netherlands
Sale of pharmaceutical products
Allergy Therapeutics Argentina S.A.
Argentina
Marketing of pharmaceutical
products
100
100
100
100
100
100
100
100
100
Ordinary and
deferred
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
92
© Allergy Therapeutics plcwww.allergytherapeutics.com During the year, Group companies entered into the following transactions with related parties that are not members of the Group:
Related Party
Sales of goods
Amounts owed by/(to) related parties
Laboratorios Synthesis S.A.S.
Gynopharm de Venezuela C.A.
Laboratorio Internacional Argentino S.A.
Total
2013
£’000
2012
£’000
13
28
9
50
29
6
24
59
2013
£’000
(33)
(4)
3
(34)
2012
£’000
4
6
27
37
Laboratorios Synthesis S.A.S., Gynopharm de Venezuela C.A. and Laboratorio Internacional Argentino S.A. are wholly-owned
subsidiaries of CFR Pharmaceuticals SA. CFR Pharmaceuticals SA is a major investor in Allergy Therapeutics plc.
Sales of goods to related parties were made at the Group’s usual list prices on the Group’s normal trading terms.
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have
been made for doubtful debts in respect of the amounts owed by related parties.
93
© Allergy Therapeutics plcwww.allergytherapeutics.com Independant Auditor’s Report to the Members of Allergy Therapeutics plc (Company)
We have audited the parent company financial statements
Opinion on other matter prescribed by
of Allergy Therapeutics plc for the year ended 30 June 2013
the Companies Act 2006
which comprise the parent company balance sheet and the
In our opinion the information given in the Directors’ Report for
related notes. The financial reporting framework that has
the financial year for which the financial statements are prepared
been applied in their preparation is applicable law and United
is consistent with the parent company financial statements.
Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
This report is made solely to the company’s members,
where the Companies Act 2006 requires us to report to you
as a body, in accordance with Chapter 3 of Part 16 of the
if, in our opinion:
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members those
•
Adequate accounting records have not been kept by the
matters we are required to state to them in an auditor’s
parent company, or returns adequate for our audit have
report and for no other purpose. To the fullest extent
not been received from branches not visited by us; or
permitted by law, we do not accept or assume responsibility
•
The parent company financial statements are not in
to anyone other than the company and the company’s
agreement with the accounting records and returns; or
members as a body, for our audit work, for this report, or for
•
Certain disclosures of directors’ remuneration specified
the opinions we have formed.
by law are not made; or
• We have not received all the information and
Respective responsibilities of directors and auditor
explanations we require for our audit.
As explained more fully in the Directors’ Responsibilities
Statement set out on page 45, the directors are responsible
Other matter
for the preparation of the parent company financial
We have reported separately on the Group financial
statements and for being satisfied that they give a true and
statements of Allergy Therapeutics plc for the year ended
fair view. Our responsibility is to audit and express an opinion
30 June 2013.
on the parent company financial statements in accordance
with applicable law and International Standards on Auditing
Christian Heeger
(UK and Ireland). Those standards require us to comply with
Senior Statutory Auditor
the Auditing Practices Board’s (APB’s) Ethical Standards for
for and on behalf of Grant Thornton UK LLP
Auditors.
Statutory Auditor, Chartered Accountants
Scope of the audit of the financial statements
13 September 2013
Gatwick
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 30 June 2013;
•
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.
94
© Allergy Therapeutics plcwww.allergytherapeutics.com Company Balance Sheet
Fixed assets
Investments
Current assets
Debtors: amounts falling due within one year
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserves – Convertible loan note
Other reserves – shares held by EBT
Other reserves – share based payments
Profit and loss account
Total equity
Note
3
4
5
6
7
8
8
8
8
8
30 June
2013
£’000
1,300
305
(134)
171
1,471
-
1,471
420
67,716
3,652
67
679
(71,063)
1,471
30 June
2012
£’000
1,276
332
(114)
218
1,494
(97)
1,397
417
67,571
3,652
67
1,496
(71,806)
1,397
These financial statements were approved by the Board of Directors on 13 September 2013 and were signed on its behalf by
Manuel Llobet
Chief Executive Officer
Registered number: 05141592
Ian Postlethwaite
Finance Director
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© Allergy Therapeutics plcwww.allergytherapeutics.com
Notes to Company Balance Sheet
1. Acounting Policies
date where transactions or events have occurred at that date
that will result in an obligation to pay more, or a right to pay
Basis of preparation
less or to receive more, tax.
The separate financial statements of the Company are
presented as required by the Companies Act 2006. As
Deferred tax assets are recognised only to the extent that the
permitted by that Act, the separate financial statements have
directors consider that it is more likely than not that there will
been prepared in accordance with applicable United Kingdom
be suitable taxable profits from which the future reversal of
accounting standards and under the historical cost convention.
the underlying timing differences can be deducted.
Going Concern
Deferred tax is measured on an undiscounted basis at the tax
For the fourth year running, the Group has reported an
rates that are expected to apply in the periods in which timing
operating profit, however for the financial years ended 2007 to
differences reverse, based on tax rates and laws enacted or
2009 primarily as a consequence of its investment in research
substantively enacted at the balance sheet date.
and development activities, it reported losses. These losses
have been funded by equity issues, debt facilities and cash
Employee Benefit Trust (EBT)
generated by the operating business
The financial statements include the assets and liabilities of a
trust, set up for the benefit of the Company’s employees.
The Group has prepared detailed budgets, including cash
flow projections, for the periods ending 30 June 2014 and
The Employee Benefit Trust has acquired shares in the
30 June 2015. These projections include assumptions on
Company and these are deducted from shareholders funds on
the trading performance of the operating business and the
the balance sheet within ‘Other reserves’ initially at the cost
continued availability of the existing debt facilities. After
that the shares were acquired. The net proceeds received
making appropriate enquiries, which included a review of the
from the issue of these shares through the exercise of options
annual budget, by considering the cash flow requirements
are recognised through this reserve. There are no shares
for the foreseeable future and the effects of sales and other
remaining in the EBT.
sensitivities on the Group’s funding plans, the Directors
continue to believe that the Group and Company will have
Share based payments
adequate resources to continue in operational existence for
The Company has adopted the amendment to FRS 20
the foreseeable future and accordingly have applied the going
(Group cash-settled share based payment transactions).
concern principle in drawing up the financial statements.
The Company has equity-settled share based payments
In reaching this view, the Directors have considered and
but no cash-settled share based payments. All share based
prioritised the actions that could be taken to offset the impact
payment awards granted after 7 November 2002 which had
of any shortfall in operating performance.
not vested prior to 1 July 2006 are recognised in the financial
Investments
statements of the subsidiary which receives the goods or
service from the supplier (including employees), however
Investments in shares in subsidiary undertakings are included
the share based payment reserve remains in the Company’s
at cost less amounts written off.
financial statements. Share based payments made in respect
Foreign currencies
of the Company’s shares to employees of its subsidiaries
are reported as an increase in investment. All goods and
Transactions in foreign currencies are recorded using the rate
services received in exchange for the grant of any share-based
of exchange ruling at the preceding month-end. Monetary
payment are measured at their fair values. Where employees
assets and liabilities denominated in foreign currencies are
are rewarded using share-based payments, the fair values of
translated using the rate of exchange ruling at the balance
employees’ services are determined indirectly by reference
sheet date and the gains or losses on translation are included
to the fair value of the instrument granted to the employee.
in the profit and loss account.
This fair value is appraised at the grant date and excludes
the impact of non-market vesting conditions (for example,
Deferred taxation
profitability and sales growth targets).
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet
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If vesting periods or non-market based vesting conditions apply, the expense is allocated over the vesting period, based on the
best available estimate of share options expected to vest. Estimates are revised subsequently if there is any indication that the
number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised
in the current period.
If market based vesting conditions apply, the expense is allocated over the relevant period, usually the period over which
performance is measured. Vesting assumptions and resulting expenses are fixed at the date of grant, regardless of whether market
conditions are actually met. Any adjustment for options which lapse prior to vesting is recognised in the current period.
2. Loss for the Financial Period
The Company has taken advantage of s.408 of the Companies Act 2006 and has not included its own profit and loss account in these
financial statements. The Company’s loss for the period was £257,000 loss (2012: £13.5 million loss).
3. Investments
Cost
Investment brought forward
Additions
Diminution in value
Investment carried forward
Shares in subsidiary undertaking
£’000
1,276
184
(160)
1,300
At 30 June 2013 the Company’s subsidiary undertakings were:
Subsidiary undertaking
Country of
incorporation
Principal activity
Percentage of
shares held
Class of
shares held
Allergy Therapeutics (Holdings) Ltd
Allergy Therapeutics (UK) Ltd
UK
UK
Holding Company
Manufacture and sale of
pharmaceutical products
Bencard Allergie GmbH
Germany
Sale of pharmaceutical products
Bencard Allergie (Austria) GmbH
Austria
Sale of pharmaceutical products
Allergy Therapeutics Italia s.r.l.
Italy
Sale of pharmaceutical products
Allergy Therapeutics Iberica S.L.
Spain
Sale of pharmaceutical products
Teomed A.G.
Switzerland
Sale of pharmaceutical products
Allergy Therapeutics Netherlands BV
Netherlands
Sale of pharmaceutical products
Allergy Therapeutics Argentina S.A.
Argentina Marketing of pharmaceutical products
100
100
100
100
100
100
100
100
100
Ordinary and
deferred
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Allergy Therapeutics (Holdings) Ltd is fully owned by Allergy Therapeutics plc. All other subsidiary undertakings except Bencard
Allergie (Austria) GmbH and Allergy Therapeutics S.A. are fully owned by Allergy Therapeutics (Holdings) Ltd. Bencard Allergie
(Austria) GmbH is fully owned by Bencard Allergie GmbH.
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© Allergy Therapeutics plcwww.allergytherapeutics.com
4. Debtors
Amounts falling due within one year
Amount owed by subsidiary undertakings
Prepayments
30 June 2013
30 June 2012
£’000
£’000
298
7
305
318
14
332
The amount owed by subsidiary undertakings is stated net of provisions of £71,139,000 (2012: £70,740,000).
5. Creditors – amounts falling due within one year
Convertible loan note interest
Accruals
Taxation and social security
6. Creditors – amounts falling due after one year
Convertible loan note interest
7. Called up share capital
30 June 2013
30 June 2012
£’000
95
38
1
134
£’000
114
-
-
114
30 June 2013
30 June 2012
£’000
-
£’000
97
Full details of the Company’s share capital are set out in Note 26 of the consolidated financial statements.
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© Allergy Therapeutics plcwww.allergytherapeutics.com
8. Reserves
At 30 June 2012
Loss for the year
Lapsed share based payments transferred to retained losses
At 30 June 2013
At 30 June 2012
Shares issued in the year
Share issue costs in the year
At 30 June 2013
At 30 June 2012
Provision in year for share based payments
Lapsed share based payments transferred from retained losses
At 30 June 2013
At 30 June 2012 and 2013
At 30 June 2012 and 2013
Profit and loss account
£’000
(71,806)
(257)
1,000
(71,063)
Share premium account
£’000
67,571
145
-
67,716
Other reserve – share based payments
£’000
1,496
183
(1,000)
679
Other reserve – EBT
£’000
67
Other reserve – Convertible Loan Note
£’000
3,652
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© Allergy Therapeutics plcwww.allergytherapeutics.com 9. Share Based Payments
Full details of the Company’s share based payments are set out in Note 27 of the consolidated financial statements.
10. Directors’ emoluments
Full details of the Company’s directors’ emoluments are set out in the Directors’ Remuneration Report on pages 46 to 48.
11. Reconciliation of movement in shareholders’ funds
Loss for the financial year
Issue of shares from EBT
Share based payments
Shares Issued
Convertible loan note issued
Net addition/(reduction) to
shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
12. Contingent Liabilities
Year to
30 June 2013
£’000
(257)
-
183
148
-
74
1,397
1,471
Year to
30 June 2012
£’000
(13,523)
-
131
8,962
3,652
(778)
2,175
1,397
Full details of the Company’s contingent liabilities are set out in Note 28 of the consolidated financial statements.
13. Related Party Transactions
In accordance with FRS 8 on Related Party transactions, details of transactions with the Company’s subsidiaries are not disclosed
as they are included in the consolidated financial statements. The consolidated financial statements include the results of the
Company. Details of the related party transactions can be found in Note 30 to the consolidated financial statements.
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© Allergy Therapeutics plcwww.allergytherapeutics.com Shareholder information
Registered office
Dominion Way
Worthing
West Sussex
BN14 8SA
Advisers
Peel Hunt LLP
Moor House
120 London Wall
London
EC2Y 5ET
Auditor
Grant Thornton UK LLP
The Explorer Building
Fleming Way
Manor Royal
Crawley West Sussex
RH10 9GT
Lawyers
Reed Smith
The Broadgate Tower
20 Primrose Street
London
EC2A 2RS
Covington and Burling LLP
265 Strand
London
WC2R 1BH
Actuary
Swiss Life Pensions Management GmbH
Swiss Life Gruppe
Berliner Strasse 85
80805 München
Germany
Registrars
Capita IRG plc
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Bankers
The Royal Bank of Scotland plc
South East Corporate Centre
Turnpike House
123 High Street
Crawley West Sussex
RH10 1DQ
Public Relations Advisers
FTI Consulting
Holborn Gate
26 Southampton Buildings
London
WC2A 1PB
Patent Attorneys
D Young & Co
120 Holborn
London
EC1N 2DY
Trademark Attorneys
Hoffman Eitle
Sardinia House
Sardinia Street
52 Lincoln’s Inn Fields
London
WC2A 3LZ
Arabellastrasse 4
D-81925 München
Germany
© Allergy Therapeutics plc
www.allergytherapeutics.com
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