Allergy Therapeutics plc
Annual Report
& Accounts
2014
www.allergytherapeutics.com
www.pollinex.com
Contents
Mission Statement
Strategic Report
Our Business
2014 Highlights
Chairman’s Statement
Current Market Overview
Our Products
Our Performance
Chief Executive Officer’s Review
Key Performance Indicators
Research & Development Report
Financial Review
Principal Risks and Uncertainties
Our Governance
Board of Directors
Corporate Governance
Report of the Directors
Directors’ Remuneration Report
Nominations Committee Report
Financial Statements
Independent Auditor’s Report to the Members of Allergy Therapeutics plc (Group)
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
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
Company Information
Shareholder Information
Advisers
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© Allergy Therapeutics plc
www.allergytherapeutics.com
01
Allergy Therapeutics PLC
Strategic Report
Allergy Therapeutics is an AIM listed speciality
2014 Highlights
pharmaceutical company.
Allergy Therapeutics is European-based and focused on
discounts) to £46.8m (2013: £41.5m)
the treatment and prevention of allergy with aluminium
•
7% increase in gross revenue (excluding rebate and
free products.
discounts) at constant currency* to £44.3m (2013: £41.5m)
•
13% increase in gross revenue (excluding rebate and
Mission Statement
•
•
•
7% increase in revenue to £42.0m (2013: £39.3m)
Gross profit increased 10% to £30.0m (2013: £27.3m)
Increased investment in clinical studies to £1.5m
(2013: £0.3m)
To create a sustainable, fast-growing and profitable global
• Operating profit increased 71% to £1.2m (2013: £0.7m)
speciality pharmaceutical business with a substantial
franchise in the allergy sector by developing innovative,
patented, registered therapies for both the treatment and
prevention of allergy-related conditions.
•
•
•
•
Cash balance improved to £2.0m (2013: £1.3m)
Competitive position in our key European markets
strengthened with average market share increasing by 9%
European roll out of probiotic products
Appointment of Professor Tim Higenbottam as Research
and Development Director
•
Canadian Health Authority approved the submission
of the Clinical Trial Application (CTA) for environmental
challenge chamber study
* Constant currency uses prior year weighted average
exchange rates to translate current year foreign currency
denominated revenue to give a year on year comparison
excluding the effects of foreign exchange movements.
See table in the Financial Review for an analysis of revenue
on page 30.
04
© Allergy Therapeutics plcwww.allergytherapeutics.com Chairman’s Statement
Chairman’s Statement
I am pleased to report that this is the fifth consecutive year the Company has reported an operating profit, with a 71% increase
to £1.2 million (2013: £0.7 million). Furthermore, the Company’s gross revenue increased by 13%, excluding the impact of
rebates and discounts, to £46.8 million (2013: £41.5 million) in markets that have shown improvement over the year, but remain
challenging (see revenue table on page 30). The Company’s competitive position in European markets continued to strengthen
with market share increasing by 9% with consistent improvements across our key European market.
In addition to the strong financial results, this year has seen the Company maintaining its positive momentum across all its
activities. Professor Tim Higenbottam has joined the Company as Research and Development Director and is strengthening our
team of pharmaceutical experts to enable the Company to continue to meet the challenges of modern medicine development. The
Research and Development expenditure increased during the year to support the completion of the Phase II clinical study for the
Pollinex Quattro® Birch under the TAV regulatory framework in Germany. Regulatory progress in the US is still on going and the
positive changes seen in the US immunotherapy market confirm our confidence to continue to explore a range of options to exploit
this commercial opportunity.
We have successfully launched Acarovac, a modified-allergen product developed for the treatment of perennial mite allergy in
Spain and added Syngut to our probiotic range of products. Our scientific development department published an important paper
detailing the results of short course immunotherapy efficacy, using Tyrosine plus MPL, in reducing ragweed pollen allergy in The
Journal of Allergy and Clinical Immunology. The manufacturing, clinical and pharmacovigilance departments successfully passed
three stringent health authority inspections in the UK, Austria and Germany, respectively, which clearly demonstrates that the
Company works to high regulatory standards.
I would like to thank all our employees for their important contribution to a successful year that continues to demonstrate the
Company’s potential based on sound financial and business activity continuing to deliver shareholder value.
Peter Jensen
Chairman
19 September 2014
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© Allergy Therapeutics plcwww.allergytherapeutics.com
Current Market Overview
Current Market Overview
We have a strong presence in Europe with our own established operations in important markets including Germany, Italy, Spain,
Austria, Switzerland, Netherlands and the United Kingdom.
In markets where we do not have a direct presence, we often make our products available through partners. The most important
distributor markets for the Group are Canada, the Czech and Slovak Republics, South Korea and more recently, Greece and the Baltics.
Germany is the Group’s main market, generating approximately 61% of the Group’s revenue in the 12 months ending 30 June 2014.
The percentage of revenue derived from each country is detailed below:
Germany (61%)
Germany is the largest allergy immunotherapy market in Europe, with annual sales of over €320 million. In recent years, the
market has been affected by the austerity measures introduced by the German government in 2010 and by the new regulatory
environment for allergen therapies. Germany remains a key focus for the Group and we continue to strengthen the Group’s
approach to marketing its products which has been instrumental to an increase in our market share.
Italy (11%)
The total Italian allergy immunotherapy market is estimated to be worth €50 million in sales per year. The market is falling because
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 believe that there remains a significant
opportunity to continue to grow our business in this important market.
Austria (6%)
Austria is an established market with total market sales of approximately €18 million per year and our own operation is performing
well by outgrowing the market.
Switzerland (5%)
The allergy vaccine market in Switzerland is well established, and is worth approximately €14 million per annum. Further alignment
to EU regulations for specific immunotherapy (SIT) products and diagnostics has the potential to generate new opportunities.
Spain (5%)
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 continues to be a large valuable
market, with approximately 150,000 patients a year estimated to receive immunotherapy. Injectable immunotherapy products
of modified allergen remain the treatment of choice for Spanish physicians in this treatment category.
United Kingdom (3%)
The UK is an important market due to its potential for future growth for the Group. Whilst currently, there is limited use of allergy
vaccines in the UK, there is potential for this to change and the Group has focused on marketing to the medical community to
promote greater awareness of more suitable treatment options. Pollinex is the only pollen SCIT (subcutaneous immunotherapy)
product currently registered in the UK.
The Netherlands (3%)
The total market size in The Netherlands is around €30 million a year. Insurance companies decided in January 2014 that they will
reimburse only registered products. This new policy will take effect from January 2015 and is going to impact approximately 50%
of the products currently in the market. This does not impact our products as we already have Pollinex registrations in this market.
Allergy Therapeutics is the only allergy company showing growth in the Dutch market with year on year growth in revenue of 21%.
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© Allergy Therapeutics plcwww.allergytherapeutics.com Emerging Markets
In 2012, we set up a new marketing operation in Argentina and launched our first products in Argentina, Venezuela, Colombia and
Chile. Sales have been slow to date due to regulatory hurdles in these Latin American markets. However, this region is still seen as
having promising potential.
Recent Developments in US Market
Over the last financial year a significant new potential market opportunity has arisen in the US for allergy vaccine products. In
December 2013 and January 2014, the Food and Drug Administration (FDA) held two Allergenic Products Advisory Committee
(APAC) review meetings where three new sublingual immunotherapy (SLIT) products were recommended for licence approval in
the US. All three products were subsequently licensed in 2014. These are the first allergy vaccine products to be formally approved
by the FDA in the US, opening the door for subcutaneous immunotherapy (SCIT) products (e.g. AT’s Pollinex Quattro product) to
be licensed. SCIT products offer a number of advantages over the recently licensed SLIT products and are more aligned to current
allergist immunotherapy practice in the US. Allergy affects 15-40% of the US population (i.e. circa 50m), so the total market size for
allergy vaccine products is potentially large. We continue to review and make progress towards registration for our products in this
important market, the detail of which is covered within the Chief Executive Officer’s Review on pages 18-19.
For the purposes of the segmental reporting analysis, Central Europe represents the markets of Germany, Austria, Netherlands and
Switzerland, and Southern Europe represents Spain Italy and Portugal. The Other segment represents revenues through distributors
and agents in other worldwide markets including Canada, Czech and Slovak Republics, South Korea and Latin America.
Revenue by Country
Germany – 61%
Italy – 11%
Switzerland – 5%
Austria – 6%
Spain – 5%
Czech Republic & Slovakia – 3%
Canada – 1%
The Netherlands – 3%
UK & Export market – 3%
South Korea – 1%
Other – 1%
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© Allergy Therapeutics plcwww.allergytherapeutics.com Our Products
Our Products
The Group sells a wide range of aluminium free allergy vaccines and diagnostics. The majority of our revenue arises from sales
of allergy vaccines. We sell both injectable and sublingual formats. The most commonly prescribed are those for the treatment
of pollen-related allergies, particularly for allergies to grasses, weeds and trees. Our vaccines trade under various brand names
depending on the market, e.g. Pollinex Quattro, Polligoid, TA Gräser Top. Our extensive range of well characterised diagnostics
include 94 diagnostics in Germany with marketing authorisations and specialised allergens for other markets like Blomia
tropicalis for Latin America.
According to the current opinion of expert immunologists, IgE mediated allergies (type one allergies) are due to deregulation of
the T helper lymphocyte (TH) cell. Whereas healthy people develop tolerance to allergens, allergy sufferers have a TH2-dominated
immune response with increased IgE and corresponding clinical symptoms. This deregulation of the immune system can be
counteracted efficiently using specific immunotherapy (SIT). By administering high doses of allergen in a controlled fashion, the
balance between TH1 and TH2 response to the allergen can be restored. Since SIT was first carried out successfully by Leonard
Noon in 1911, it has become established as the only therapy addressing the cause of type one allergies.
Pollinex Quattro, launched in 1999, heralded a transformation in immunotherapy by introducing allergy vaccination with only
four injections per course. The short treatment period is due to the use of L-tyrosine absorbed allergoids, an improved extract
allergen that has been modified in order to lower its allergenicity while keeping its immunogenicity, and the innovative adjuvant
monophosphoryl-lipid A (MPL). An adjuvant is a substance which improves the immune response to an antigen or allergen.
MPL is derived from a 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 containing MPL
have been evaluated in various indications such as cervical cancer and malaria at GlaxoSmithKline. Two vaccines with an adjuvant
system containing MPL - Fendrix, a hepatitis B vaccine and Cervarix, a HPV vaccine to protect against cervical cancer - have
received broad approval in Europe, the US, Japan and Canada. These modern, successful vaccines are already widely used.
The adjuvant effect of MPL in specific immunotherapy (SIT) has been documented in numerous studies and is seen in its essential
role of promoting the switch from a TH2-directed immune response (with IgE induction) to a TH1-directed immune response.
Our sublingual product is Oralvac Compact. Its dosing schedule allows for a more rapid and simple escalation of dosage making
treatment more convenient for patients and doctors. The treatment can be taken by the patient in their own homes and is raspberry
flavoured for improved patient compliance.
Wasp and Bee treatment is provided by our freeze dried Venomil product which can be used following a ‘Rush’ dosing regimen.
Probiotics
In June 2012, we launched three new Probiotic products (Kallergen-Th, ATI Prob and Pollagen) across Spain, Portugal and Italy.
Since then we have included Austria and Germany. The products contain specific combinations of Lactobacilli and Bifidobacteria.
Acarovac Plus
Acarovac Plus was launched in Spain in March 2013 and is a novel tyrosine-adsorbed, modified-allergen product developed for
treatment of perennial mite allergy. The product has been standardised to meet a dose regime consistent with “one bottle”
convenience. We have completed clinical evaluation to demonstrate excellent patient tolerability and serological analyses consistent
with a favourable shift in Th1/Th2 balance compared with an unmodified version of the product.
Penicillin Diagnostics
DAP is a product for exclusive use in the diagnosis of type I, or immediate hypersensitivity to benzylpenicillin and related antibiotics
(betalactams) by means of cutaneous tests (prick and intradermal). Allergic reactions to betalactams are the most common cause of
severe adverse drug reactions and there is an increasing prevalence in the population. DAP is supplied to Italy, UK and The Netherlands.
16
© Allergy Therapeutics plcwww.allergytherapeutics.com 17
© Allergy Therapeutics plcwww.allergytherapeutics.com CEO’s Review
Chief Executive Officer’s Review
The core business of the Company, being mainly concentrated in the European Community, continued to show improvement in
market penetration and revenue during the year resulting in an increase of 13% (7% at a constant currency basis*), excluding the
impact of rebates and discounts, to £46.8 million (2013: £41.5 million). This increase in sales strengthens the Company’s ability to
build its market share, which increased by 9% in the territories in which we operate. The Company continues to be one of the top
performers in its market segment in Europe. Bencard Allergy, our German subsidiary, is now continually outperforming the market
with an increase of 11% in gross sales at constant currency to £28.0 million (2013: £25.3 million). Sales in the rest of central Europe
showed strong growth with an increase of 7% at constant currency in the year. Southern Europe, despite a declining market, grew by
10% at constant currency. In contrast, Latin America is still experiencing regulatory hurdles and sales were minimal during the year.
This is the fifth year of reporting an operating profit which grew to £1.2 million (2013: £0.7 million) in spite of a significant investment
in clinical studies during the year.
Overall, it has been a busy year with continued positive momentum. In the early part of the year we launched a new allergoid
vaccine for mites in Spain, Acarovac, which has been well received. The registration of dossiers continues to be very active. The
clinical trials the Company has undertaken recently have been completed and there has been continued progress on the other side
of the Atlantic with the FDA and the Canadian Health authorities.
The Company’s team of pharmaceutical experts has been strengthened during the year with the recruitment of a new Director
of Research and Development, an International Medical Director, a pharmacovigilance expert, an additional qualified person and
a new regulatory manager. These appointments over the year greatly strengthen the Company’s ability to meet the challenges of
modern medicine development.
The positive recommendations of the Food and Drug Administration (FDA) for several sublingual vaccines have resulted in three
products being rolled out to the market. This change to the market reinforces our confidence in the North American opportunity.
Our discussions over the year with the FDA and the Canadian Health authorities have been positive. We are planning a G304
phase III study involving two clinical sites, one in the USA and one in Canada, involving 600 patients, who will use multiple
environmental exposure chambers allowing for a controlled allergen exposure to study the response to the MATA MPL, Grass
MATA and a placebo.
The Phase II clinical study for Pollinex Quattro Birch under the Therapieallergene-Verordnung (TAV) regulatory framework to
compare the difference between four individual regimes has been completed. The study was conducted in Germany, Austria and
Poland and met its primary end point, demonstrating a dose response and remarkable freedom from side effects. The Company
is now using the results of the study to plan its remaining studies under the TAV ordinance.
The probiotic range was increased during the year with the addition of Syngut, a probiotic specifically designed for food intolerance
launched in September 2013 in Italy and Spain and rolled out to Austria, Germany and Portugal earlier this year.
The Company currently holds licences in a number of European countries for diagnostic tests, with 96 tests registered in Germany
and sees opportunities to increase the number of markets it globally supplies.
This has been a prolific year for our scientific development department, with three peer reviewed scientific papers published, and 12
posters accepted at the EAACI congress in Denmark in early June. One published paper highlighted the advantages of L-Tyrosine as an
alternative naturally occurring biodegradable alternative to aluminium1. The other papers focused on Probiotics2 and Acarovac plus3.
20
© Allergy Therapeutics plcwww.allergytherapeutics.com Outlook
The European allergy market continues to face a number of challenges, but with the continued momentum across the Company’s
activities, the outlook is positive and we expect to continue to improve our market share into the next year whilst also showing
continued momentum in the other areas that I have reported upon. The Company expects to continue to consolidate its position in
the European markets as well as progressing its clinical development program within the TAV framework in Germany.
Finally, we are very excited by the opportunity in the US market, and in making the transformational opportunity happen by
developing an agreed roadmap to registering MATA MPL Grass in the US and we continue to explore a range of options to exploit
this commercial opportunity.
Manuel Llobet
CEO
19 September 2014
1. Aluminium in allergen-specific subcutaneous immunotherapy- a German
perspective. Kramer MF, Heath MD. Vaccine. 2014 Jul 16;32(33):4140-8.
2. Probiotics in the treatment of chronic rhinoconjunctivitis and chronic
rhinosinusitis. Kramer MF, Heath MD. J Allergy (Cairo). 2014;2014:983635.
* Constant currency uses prior year weighted average exchange rates to translate
3. A novel and well tolerated mite allergoid subcutaneous immunotherapy:
current year foreign currency denominated revenue to give a year on year
evidence of clinical and immunologic efficacy. Roger, A; Depreux, M; Jurgens,
comparison excluding the effects of foreign exchange movements. See
Y; Heath, MD; Garcia, G and Skinner MA. Immunity, Inflammation and Disease,
table in the Financial Review for an analysis of revenue on page 30.
Volume 2, Issue 2, pages 92–98, August 2014.
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© Allergy Therapeutics plcwww.allergytherapeutics.com Key Performance Indicators
Key Performance Indicators
Strategic objective
Maximise revenue
KPI
Revenue at constant exchange rate
Definition
Total revenue measured at a constant
foreign exchange rate
Strategic objective
Maximise funds available from operational
activities for investment in R&D and other
value adding projects
KPI
EBITDA excluding R&D
Definition
Profit before interest, tax, depreciation,
amortisation and research and
development expenditure
Strategic objective
Maximise the number of countries into
which we sell our products
KPI
Number of countries in which
we operate
Definition
Countries in which we have a distributor,
agent or direct sales force
24
£m
41.0
40.5
40.0
39.5
39.0
38.5
£m
6
5
4
3
2
1
0
s
e
i
r
t
n
u
o
c
f
o
.
o
N
20
15
10
Revenue at Constant Exchange Rate
2012
2013
2014
*GBP: EUR exchange rate 1.20
EBITDA Excluding R & D
2012
2013
2014
Number of Countries in Which We Operate
2012
2013
2014
© Allergy Therapeutics plcwww.allergytherapeutics.com
25
© Allergy Therapeutics plcwww.allergytherapeutics.com Research and Development Report
Research and Development Report
This year development activities have been focussed on our highly popular European Pollinex Quattro Vaccines and the MATA
MPL Grass Vaccine for the US. These vaccines offer the patient both an ultra-short course of subcutaneous injections (4 in 3
weeks) and reduction in use of symptomatic therapy.
European Clinical Development of Subcutaneous Immunotherapies (SCIT)
In September, the Pollinex Quattro Birch dose ranging study was started using a conjunctival provocation test (CPT) to determine a
dose response for four different doses of vaccine including our current commercial dose. The study design had been approved by
the Paul Ehrlich Institute (PEI), the agency responsible for authorising biological products in Germany.
The Phase II clinical study for the Pollinex Quattro Birch under the Therapieallergene-Verordnung (TAV) regulatory framework to
compare the difference between four individual regimes has been completed (The TAV is the process by which immunotherapy,
currently supplied as named patient prescription medication, will be licenced). The study was conducted in Germany, Austria and
Poland with 35 patients per treatment arm and met its primary end point, demonstrating a dose response and remarkable freedom
from side effects. The group is now using the results of the study to plan its remaining studies under the TAV ordinance.
The US Clinical Development of SCIT
In June 2014, a submission to the FDA’s Center for Biologics Evaluation and Research (CBER) was made to support the MATA
MPL 0.5ml vaccine for Grass allergy. This product has the same allergen constituents and strength as Pollinex Quattro.
Plans are being made for a trial involving patients with Grass allergy who will be recruited out of season and will be studied for their
sensitivity to grass pollen before and after treatment. The proposal is to study over 600 patients in three separate locations in US
and Canada. The study protocol has been submitted to the CBER along with the statistical analysis plan.
28
© Allergy Therapeutics plcwww.allergytherapeutics.com 29
© Allergy Therapeutics plcwww.allergytherapeutics.com Financial Review
Financial Review
The following section should be read in conjunction with the financial statements and related notes on pages 64 to 115.
Overview
The results for the twelve months to 30 June 2014 demonstrate not just continuing profitability, but an improvement in performance
despite difficult market conditions and an increased investment in clinical studies, with an operating profit of £1.2 million (2013:
£0.7 million). Operating profit includes a credit of £0.7 million relating to the fair valuation of forward currency exchange contracts
(2013: charge £0.8 million) and a credit of £0.5 million in relation to changes in inventory standard costs. However, during the year
investment in clinical studies increased to £1.5 million (2013: £0.3 million); operating profit before this investment has increased to
£2.7 million from £1.0 million for 2013.
Revenue
Despite weak allergy vaccine markets in Europe, revenue at constant currency*, excluding the impact of rebates and discounts,
was 7% better at £44.3 million (2013: £41.5 million). This can be seen in the table below:
2014
Germany
£m
25.8
3.8
29.6
(1.6)
28.0
25.8
(1.5)
24.3
2014
Other
£m
16.2
1.0
17.2
(0.9)
16.3
16.2
(0.7)
15.5
2014
Total
£m
42.0
4.8
46.8
(2.5)
44.3
42.0
(2.2)
39.8
2013
Germany
£m
23.6
1.7
25.3
2013
Other
£m
15.7
0.5
16.2
2013
Total
£m
39.3
2.2
41.5
25.3
16.2
41.5
23.6
15.7
39.3
23.6
15.7
39.3
Revenue
Add rebates and discounts
Gross revenue
Adjustment to retranslate at prior
year foreign exchange rate
Gross revenue at constant currency
Revenue
Adjustment to retranslate at prior
year foreign exchange rate
Revenue at constant currency
* Constant currency uses prior year weighted average exchange rates to translate current year foreign currency denominated revenue to give a year on year comparison
excluding the effects of foreign exchange movements.
With a stronger EUR:GBP average exchange rate during the year compared to the prior year, revenue increased by 7% to £42.0 million
(2013: £39.3 million). The average EUR:GBP exchange rate in the year was 1.17 compared to 1.24 in the previous year; the stronger Euro
positively impacted revenue by £2.2 million. The Group has continued to grow its revenue in markets outside Germany, and to reduce its
reliance on the German market, with 61% of revenue in Germany this year compared to 73% in 2009. The key flagship product Pollinex
Quattro, which accounts for 51% of sales, grew very well in the year at a constant currency growth rate of 11.3%. In addition to the
sale of allergy vaccines, the Group has continued to look to increase its revenue from other products. Total sales from other products
contributed £0.7 million for the year ended 30 June 2014 (2013: £0.7 million); the prior year included £0.2 million sales of Anapen until the
product was withdrawn from the market during 2013.
Revenue in Germany grew well in the year with gross revenue (before rebates and discounts) at constant currency increasing to £28.0
million (2013: £25.3 million); an increase of 11%. During the year, the Group was subject to the full rebate charge in Germany, whereas for
the first half of the prior financial year, the group benefited from an exemption to the increased rate.
32
© Allergy Therapeutics plcwww.allergytherapeutics.com The European Commission investigation into whether the exemption from the increase in rebates in Germany constitutes state aid is
on-going. If it is eventually concluded that the exemptions constitute state aid, then all unlawful aid may have to be repaid (please refer to
Note 29). The full rebate charge in H1 was 16% of sales, reducing to 6% in January 2014, before finally being agreed at a new on-going
level of 7% in April 2014.
In Spain and Italy, sales at constant currency increased by 10%, which was a strong result given the weak market during the year.
Similarly, Austria showed strong growth in sales of 21% in the year at constant currency. Sales in the Latin American market were lower
than planned for the year owing to a number of registration delays.
Gross Profit
Despite the increased sales, tight management of manufacturing overheads plus the benefit of changing the method of
allocating overheads to intermediate products (generating a gain through cost of goods of £0.5 million), helped maintain cost
of sales at the prior year’s level of £12.0 million (2013: £12.0 million). This, together with the revenue increase of £2.7 million
increased the gross profit percentage by 1.9% points, to 71.5%, leading to a gross margin of £30.0 million (2013: £27.3 million).
For a full explanation of the change to standard costs refer to page 82 (sources of estimation uncertainty (e)).
Operating Expenses
Total overheads are £2.2 million higher against the prior year at £28.9 million (2013: £26.7 million). Investments in supporting
the sales and marketing infrastructure and the stronger Euro increased distribution costs, which are mainly European sales and
marketing costs, to £17.9 million (2013: £16.3 million). Administration expenses include a credit relating to the fair valuation of
foreign exchange hedges, generating an asset at the year end of £0.3 million. At the prior year end the fair valuation generated a
liability; together these created a gain in the year of £0.7 million (2013: loss £0.8 million). The dose ranging study for Pollinex Quattro
Birch continued during the year and was the main factor behind the increase in R&D costs to £3.0 million (2013: £2.5 million).
Tax
The tax charge in the year relates mainly to the Italian subsidiary. The recognition of a deferred tax asset in the prior year generated
the tax credit of £0.1 million. This credit offset tax charges in some of the overseas subsidiaries.
Balance Sheet
With the major capital investment programme now complete and a lower maintenance level of spend now required, property, plant
and equipment has fallen from £7.3 million to £7.0 million as the depreciation charge for the period is higher than new equipment
purchases. In the prior year a review of the expected useful lives of all assets was conducted, resulting in an extension of some asset
lives, generating a reduction in the charge to the income statement of £0.5 million in that period compared to the preceding year.
Goodwill has reduced to £2.5 million (2013: £2.6 million) as a result of small foreign exchange rate movements, whilst other intangible
assets have fallen by £0.1 million as a result of amortisation.
Total current assets excluding cash have decreased by £1.0 million to £12.2 million (2013: £13.2 million). This is mainly due to a
decrease in debtors as a result of the collection of rebate refunds in Germany, improved cash collection in Italy and the collection of
the second milestone payment from the appointment of a new distributor in the prior year in Canada.
Retirement benefit obligations, which relate solely to the German pension scheme, increased to £6.4 million (2013: £6.2 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 £2.3 million (2013: £3.0 million).
33
© Allergy Therapeutics plcwww.allergytherapeutics.com Financing
The Group had no debt on its balance sheet at the close of the financial year other than the convertible loan liability of £49,000. The
annual overdraft had been fully repaid in November 2013 and has been renewed for a further 12 months to cover the seasonal funding
requirements over the summer of 2014.
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
19 September 2014
Principal Risks and Uncertainties
Principal Risks and Uncertainties
The Board has overall responsibility for the Group’s system of risk management.
In common with many pharmaceutical companies the Group 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:
Commercially successful products risk
Continued development of viable new products and their successful registration and marketing is key to the success of the Group
and is a costly and lengthy process. Rationale for new product development may indicate potential; however following significant
investment there is no guarantee that a product will be successful.
Two key opportunities for the Group are developing and commercialising Pollinex Grass in the US and the PEI market authorisation
for Pollinex Quattro Grass in Germany.
Product liability risk
Despite extensive product testing prior to market launch, products may produce unanticipated adverse side effects that may hinder
their marketability. The Group may be insufficiently covered for any potential litigation which in some cases can potentially be open-
ended. The Group’s manufacturing facilities and those of some of its suppliers are subject to regulatory requirements and there is a
risk that such facilities may not comply with such requirements. The Group maintains product liability insurance and ensures systems
and processes relating to the manufacture of its products are compliant and regularly reviewed. It has a Pharmacovigilance team in
place to monitor and address any safety issues arising.
Intellectual property risk
Group patents may be challenged at any time and any unsuccessful defence may cause the Group to lose protection for its
products and subsequently affect further development and sales. The Group is reliant on some intellectual property owned
by external stakeholders that, if lost, could hinder the commercialisation of some of it products. The Group has internal and
external patent experts. Internal controls are in place to avoid disclosure of patentable material and to protect existing patents.
Arrangements are also in place to notify the Group of any infringements of our intellectual property which it would defend robustly.
Economic risks
A high level of risk is attached to the research, development and commercialisation of innovative drugs. The Group ensures that business
cases are scrutinised before Board approval and that any increases in costs are justified. Key suppliers may be unable to execute
contractual requirements that hamper product development and/or the route to markets, but the Group maintains appropriate measures
to protect its supply chains. The Group may be unable to attract partners or licensees on favourable terms or recruit the right staff to help
develop and market its products. Approximately 61% (2013: 60%) of Group sales are made in Germany and therefore Group results are
sensitive to German legislation and government policies, and performance of the German market. To mitigate this risk, the Group intends
to expand its revenue outside Germany.
Pharmaceutical products are subject to far greater controls on price in certain markets than other products in the marketplace. Some
governments intervene directly in setting price levels and rebates paid into public sick funds, especially with an increasing aged population
in developed countries. The Group cannot accurately predict when, where and how such controls and restrictions may be altered, either
to its benefit or detriment, but it does conduct regular reviews of pricing and reimbursement levels and assessments of healthcare
reforms on pricing.
Financial risks
Adequate funding may not be available to the Group, either through reserves or external partners for the advancement of
clinical trials, manufacturing and marketing. Failure to obtain further funding may lead to postponement or cancellation of
programmes. The Board actively reviews the financial requirements of the Group on a regular basis in order to ensure that
adequate funding is available.
36
© Allergy Therapeutics plcwww.allergytherapeutics.com A majority of the Group’s sales are denominated in Euros whilst the manufacturing and most corporate administration costs are in the
UK and therefore the Group is exposed to volatility in exchange rate fluctuations. The Group monitors exchange rates regularly and
implements hedges to mitigate such risks.
Note 24 in the Notes to the Financial Statements gives details of the Group’s objectives and policies for risk management of
financial instruments.
Clinical and regulatory risk
The Group operates in a highly regulated environment for the testing, manufacture and supply of its products. Compliance with clinical
and regulatory requirements within 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 to comply with regulations and/or products have to be
withdrawn, reducing revenues and/or increasing costs. Regulatory authorities such as the FDA are increasingly focussed on the benefit/
risk of pharmaceutical products and safety data making it more onerous to obtain regulatory approval. Compliance systems are in place
to ensure all clinical, manufacturing and marketing activities comply with regulations in the EU and other territories. Standard operating
procedures are maintained to ensure compliance with good manufacturing practice. The Group strictly monitors new industry regulations
and engages with key Regulatory Authorities to inform the Group’s strategic direction and identify factors likely to affect the future
development, performance and position of the Group’s business.
Internal controls
The system is designed to manage rather than eliminate risk. It can provide only reasonable and not absolute assurance against
material misstatement or loss and includes the safeguarding of assets, the maintenance of proper accounting records, the reliability
of financial information, compliance with appropriate legislation, regulation and best practice and the identification and management
of business risk. The Group has an internal audit function, reporting directly to the Audit Committee, which carries out periodic
reviews of the Group’s subsidiaries. The Group also has a budgeting and reporting system in place, with results compared to annual
budgets and quarterly forecasts using variance analysis.
The Strategic Report, as set out on pages 2 to 35 has been approved by the Board
On behalf of the Board
Ian Postlethwaite
Company Secretary
37
© Allergy Therapeutics plcwww.allergytherapeutics.com Board of Directors
Board of Directors
Peter Jensen
Non-Executive Chairman (63)
Manuel Llobet
Chief Executive Officer (50)
Appointed to the Board in October 2010 and appointed Non-
Manuel 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 Consultant
board effectiveness, good corporate governance and effective
for Biohealth LLC and CEO of International Operations of
communication with shareholders.
the Weinstein family’s group of companies. Manuel was
Peter held a number of senior roles in his 21 years with
family’s group of pharmaceutical companies in 20 countries.
responsible for international development of the Weinstein
SmithKline-Beecham. Between 1992 and 1998 he was
Chairman of Consumer Healthcare Europe and between 1998
Mr Llobet has over ten years’ experience working in the
and 2001 he held the position of President of Worldwide
pharmaceutical industry, primarily in South America, and
Supply Operations, based in Philadelphia.
has served as Executive Director of Corporación Drokasa
where he was responsible for a US$25 million AAA-rated
Since leaving SmithKline-Beecham at the time of the merger
bond issue to finance the group’s expansion plans; CEO of
with Glaxo, Peter has held a number of non-executive director
Laboratorios Andrómaco, where he led the group to an IPO
and chairman roles for various public and private companies.
on the Santiago Stock Exchange; and Business Development
These include Domino Printing Sciences plc, Newmarket
Manager for Laboratorio Chile. Manuel participated in the
Racecourses Limited, Glenmorangie plc, Genetix Group plc
Executive Program at the Graduate Business School of
and Celsis International plc.
Stanford University and has an MBA from IESE, Universidad
de Navarra in Barcelona. Manuel also has degrees in Industrial
In addition to his role at Allergy Therapeutics, Peter is
Business Management and Chemical Engineering from
currently Chairman of Nottingham Racecourse Limited,
Universitat Ramon Llull in Barcelona.
Screendragon Limited, The Home of Horseracing Trust
Limited and The British Sporting Art Trust and is a director of
As Chief Executive Officer, Manuel is responsible for the
The Osborne Studio Gallery Limited.
executive management of Group operations, investor
relations, and implementation of the Board’s collective
Peter chairs the Nomination Committee and is also a member
decisions overseeing all operational aspects of the Group and
of the Audit Committee.
directing the long-term strategy.
40
© Allergy Therapeutics plcwww.allergytherapeutics.com Ian Postlethwaite
Finance Director (51)
Stephen Smith
Non-Executive Director (61)
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
undertaking the roles of Chief Executive Officer with AFS,
has operated as an independent executive, Non-Executive
one of the largest independent finance houses in the UK,
Director and interim manager (CRO/CEO/COO/FD) on
and Finance Director with a number of successful start-up
an international basis. Up to 1995 Stephen held various
technology companies. Previously he held senior finance
senior financial positions in UK based international public
positions with Ericsson, from 1994 - 1997, and Philips
companies including 6 years as Group Treasurer of The Rank
Electronics from 1989 - 1994. At AFS he raised £379 million
Organisation and 3 years as Group Finance Director of a
of funding for the business through a syndicated bank line,
quoted hotel company.
the issuance of commercial paper and a securitisation of
finance assets. He is a Fellow of the Chartered Association
Stephen chairs the Audit and Remuneration Committees, is a
of Certified Accountants and is a non-executive director and
member of the Nomination Committee which he chaired until
Chairman of the Audit Committee of Shoreham Trust Port.
1 January 2011 and is the Senior Non-Executive Director.
As Finance Director, Ian is responsible for Group financial
reporting and control, tax, finance systems and internal audit.
Ian is also the Company Secretary, a position he has held
since 2004.
41
© Allergy Therapeutics plcwww.allergytherapeutics.com Alejandro Weinstein Jr
Non-Executive Director (56)
Thomas Lander, M.D.
Non-Executive Director (62)
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.
42
© Allergy Therapeutics plcwww.allergytherapeutics.com i
F
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a
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43
© Allergy Therapeutics plcwww.allergytherapeutics.com
Corporate Governance
Corporate Governance
The Board
The Board is led by the Chairman, who is non-executive, and comprises the Chief Executive Officer, the Finance Director, and three
other Non-Executive Directors. Biographical details of all Board members are shown on pages 38 to 40. The roles of Chairman and
Chief Executive Officer are separate. The Directors feel that given the current size of the Group, the roles of Company Secretary
and Finance Director are not deemed necessary to be separated. All Directors have direct access to the services and advice of the
Company Secretary and to external independent professional advice at the expense of the Group.
Directors
Date of Appointment
Attendance at meetings 2013-14
Peter Jensen
Chairman
Alejandro Weinstein
Non-Executive Director
Stephen Smith
Non-Executive Director and
Senior Independent Director
Thomas Lander
Non-Executive Director
Manuel Llobet
Chief Executive Officer
Ian Postlethwaite
Finance Director
October 2010
July 2009
September 2004
May 2012
July 2009
July 2004
The dates of appointment above refer to appointment as Directors of Allergy Therapeutics plc.
14/14
1/14
14/14
13/14
14/14
14/14
We do not comply with the UK Corporate Governance Code. However, we have reported on our Corporate Governance
arrangements by drawing upon best practice available, including those aspects of the UK Corporate Governance Code we consider
to be relevant to the Group and best practice. The Group is subject to the city code on Takeover and Mergers.
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.
The Audit Committee comprised Stephen Smith (Chairman) and Peter Jensen. The Audit Committee meets at least twice each year
and is responsible for ensuring that the financial performance of the Group is properly reported and monitored, meeting with the
Auditor, reviewing the reports from the Auditor relating to the financial statements and monitoring the internal control function.
The Remuneration Committee comprised Stephen Smith (Chairman) and Thomas Lander. The Remuneration Committee
reviews the compensation policy and strategy for the Group as a whole and the scale and structure of the executive Directors’
remuneration packages including the terms of their service contracts. No Director takes part in the discussion of his own
remuneration. This committee is also responsible for the grant of shares under the Group’s Long Term Incentive Plan.
The Nomination Committee comprised Peter Jensen (Chairman), Stephen Smith and Alejandro Weinstein. The Committee held two
meetings during the past financial year. The Nominations Committee’s principal purpose is to consider the composition and size of
the Board and its Committees as well as Board refreshment and board and senior management succession planning.
Full details of Directors’ remuneration and a statement of the Group’s remuneration policy are set out in the Directors’
Remuneration Report on pages 54 to 56.
Shareholder relations
The Group maintains a policy of open dialogue with all shareholders to ensure that the objectives of the Group are understood.
The Chief Executive Officer and the Finance Director make regular presentations to shareholders and discuss any areas of concern
and meet regularly with analysts and major shareholders to provide information about the Group. The Chief Executive Officer and
Finance Director had a number of meetings with shareholders and analysts during the financial year.
46
© Allergy Therapeutics plcwww.allergytherapeutics.com Press releases, general information on the Group, shareholder presentations and investor information are available to be accessed
via the Group’s website, www.allergytherapeutics.com.
Engagement of auditor for the supply of non-audit services
It is the Group’s policy that it will only engage the Group’s auditor to supply other professional services to the Group and its
subsidiary undertakings if it is satisfied that all the usual conditions of engagement and benchmarks are met. Any agreement to
purchase services costing more than £10,000 per engagement must have the prior approval of the Audit Committee.
In determining the policy, the Audit Committee has taken into account relevant ethical guidance regarding the provision of non-
audit services by the external audit firm and does not agree to the auditor providing a service if, having regard to the ethical
guidance, the result is that the external auditor audits its own work, the external auditor makes management decisions for the
Group, a mutuality of interest is created or the external auditor is put in the role of advocate for the Group.
47
© Allergy Therapeutics plcwww.allergytherapeutics.com Report of the Directors
Report of the Directors
The Strategic Report
The strategic report is on pages 2 to 35. The Directors consider that the Annual Report and Accounts, taken as a whole are fair, balanced
and understandable. In reaching this conclusion the Board discussed the Strategic Report at their September 2014 Board meeting. The
Board meets at least 11 times a year and the Directors are sufficiently well informed to be able to make such a judgement.
Key Performance Indicators
Key performance indicators are outlined in the Strategic Report on page 22.
Corporate Governance
Details of the Company’s Corporate Governance can be found on pages 38 to 45.
Risk Management
The Group’s exposure to Risk is set out on page 34 and 35, (principal risks and uncertainties and Note: 24 Financial
Risk Management).
Results & Dividend
The profit for the year after taxation was £0.7 million (2013: £0.6 million). The results for the year are set out on page 65 and are
dealt with in more detail in the Financial Review.
Given the amount invested in research and development in the prior years the Group has negative distributable reserves and is
unable to declare a dividend (2013: nil).
Directors
The current Directors of the Company and their biographical details are given on pages 38 to 40. The details of the Directors service
contracts and their interests in the share capital of the Company at 30 June 2014 are disclosed in the Director’s Remuneration
Report on pages 54 to 56. All the directors have served for the whole of the financial year.
Directors’ indemnity
The Directors and officers of the Company are insured against any claims arising against them for any wrongful act in their capacity
as a Director, officer or employee of the Group, subject to the terms and conditions of the policy.
Substantial shareholders
At 10 September 2014 the Company had been notified of the following major interests, each representing 3% or more of the
existing issued ordinary share capital:
Shareholder
CFR International SPA & Associated Holdings
Southern Fox Investments
Invesco Perpetual
Annual General Meeting
Ordinary shares
201,986,132
108,997,784
15,016,209
% held
49%
27%
3%
The notice convening and giving details of the Annual General Meeting of the Group accompanies this report.
Employees
The Group employed 345 people at the year-end and is committed to achieving equality of opportunity in all employment practices. A
thorough review of all employees is performed annually to identify and promote areas that require development and growth; feedback
50
© Allergy Therapeutics plcwww.allergytherapeutics.com
is encouraged and sought. Staff are motivated by performance related incentives, which help to attract and retain the right people,
and are encouraged to achieve business targets through market-rate pay, discretionary performance based bonuses and long term
incentive programmes. The Board is committed to retaining staff as a high priority for the Group and implementing well balanced,
challenging incentives makes this possible. Training and development appropriate to individual and business needs is offered and
remuneration for professional development is considered on a case by case basis.
The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting
them as employees and on the various factors affecting the performance of the Group. This is achieved through formal and informal
meetings and email updates. Family friendly employment policies conform to statutory requirements and flexible working practices are
adopted where viable.
Employment policies
The Group implements equality of opportunity in all of its employment practices, policies and procedures. Employees are highly valued
and their rights and dignity are respected. The Group practices equal treatment of all staff and potential staff irrespective of their race,
creed, colour, sexual orientation, nationality, ethnic origin, religion, disability, age, gender or marital status. The equal opportunities section
of the Staff Handbook covers all permanent and temporary employees, job applicants, agency staff, consultants and contractors.
Equal opportunities
The Group is committed to providing equal opportunities in employment irrespective of background, age, sexual orientation, religion,
gender, nationality, marital status or disability. Our aim is to attract the best people in the industry and we believe in maximising
every employee’s potential. The Group does not tolerate any harassment or discrimination.
Disabled people
The Group, in considering applications for employment from disabled people, seeks to ensure that fair consideration is given to
the abilities and aptitudes of the applicant while having regard to the requirements of the job for which he or she has applied.
Employees who become unable to carry out the requirements of the job for which they have been employed are given individual
consideration and, depending on the nature, severity and duration of the disability may be considered for alternative work.
Research and development
The Group will continue its policy of investment in research and development, with the focus being in Germany where major allergy
vaccines, if not already registered, require further clinical evidence. In accordance with International Financial Reporting Standards
(IFRS), during the year the Group expensed to the income statement £3m (2013: £2.5m) on research and development. Further
details on the Group’s research and development are included in the Strategic Report Review on pages 2 to 35.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set
out in the Strategic Report on pages 2 to 35. The financial position of the Group, its cash flows, liquidity position and borrowing
facilities are also described in the Finance Director’s Financial Review on pages 30 to 31.
In addition, Note 24 to the financial statements includes the Group’s objectives, policies and processes for managing its capital, its
financial risk management objectives, details of its financial instruments and its exposures to foreign currency risk, interest rate risk
and liquidity risk.
After making appropriate enquiries, which included a review of the annual budget, considering the cash flow requirements for the
foreseeable future, noting the new bank facility, and the effects of sales and foreign exchange sensitivities on the Group’s funding
plans, the Directors continue to believe that the Group will have adequate resources to continue in operational existence for the
foreseeable future and accordingly have applied the going concern principle in drawing up the financial statements. In reaching this view,
the Directors have considered and prioritised the actions that could be taken to offset the impact of any shortfall in operating performance.
51
© Allergy Therapeutics plcwww.allergytherapeutics.com Market value of land and buildings
All freehold properties are stated at market value. The Group’s policy is that a full revaluation is carried out every five years with
an interim valuation carried out in the third year after each full valuation. In the intervening years the directors review the carrying
values of the freehold land and buildings to ensure that there have been no material variations.
Strategic report
The strategic report on pages 2 to 35 contains information on future developments and post balance sheet events.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Strategic Report and the Director’s Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required
to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). Under company law the directors must not
approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the
company and group for that period. In preparing these financial statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
•
state whether applicable IFRSs and 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.
The Directors confirm that in so far as each Director is aware:
•
•
there is no relevant audit information of which the Group’s auditor is unaware; and
the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the auditor are aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Auditor
Grant Thornton UK LLP offer themselves for reappointment as Auditor in accordance with section 489 of the Companies Act 2006.
A resolution for their reappointment is to be proposed at the forthcoming Annual General Meeting.
By order of the Board on 19 September 2014
Ian Postlethwaite
Company Secretary
52
© Allergy Therapeutics plcwww.allergytherapeutics.com 53
© Allergy Therapeutics plcwww.allergytherapeutics.com Directors’ Remuneration Report
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
Member since
Stephen Smith
November 2004
Thomas Lander
May 2012
Remuneration policy
Attendance at meetings 2013-2014
4/4
4/4
The Committee’s policy is to set remuneration packages for Executive Directors that are competitive with the market, allowing the
Group to attract, motivate and retain executives of the highest calibre. Remuneration packages are designed to reward executives
for performance via annual bonus payments and awards of share-related compensation, which together constitute a potentially
significant proportion of the total remuneration opportunity.
The remuneration of Executive Directors comprises the following elements:
(i) Basic salary
Basic salary is reviewed annually as at 1 October, taking into account personal performance, and benchmarked against a
comparator group.
(ii) Taxable benefits
Taxable benefits represent the provision of a car allowance and private medical insurance.
(iii) Share options
No share options were granted in the year. The share options granted to individual Executive Directors to date are disclosed later
in this report and comprise grants made in prior years under previous approved and unapproved option schemes. Share options
previously granted by Allergy Therapeutics (Holdings) Limited were surrendered on 5 October 2004 for share options in Allergy
Therapeutics plc, on substantially the same terms.
(iv) Long Term Incentive Plan
During the year ended 30 June 2014 provisional shares were awarded to directors and senior management under the Allergy
Therapeutics plc 2013 Long Term Incentive Plan. Major shareholders were consulted on the new plan which was approved by the
Board on 20 March 2013. The new plan is aligned with the Group’s performance (share price and profitability) rather than solely on
share price performance compared to a group of other companies. The distribution of shares under the 2013 Plan is conditional
on the Group’s performance over the 3-year Plan cycle for each award. The number of provisional shares awarded to Executive
Directors under the Plans is shown in the Directors’ LTIP and share options table.
(v) Bonus
The Group operates a performance-related cash bonus scheme for executive directors based upon individual performance and
achievement of personal and corporate objectives. Annual bonus payments are capped under service contracts at 60% for Manuel
Llobet and 30% for Ian Postlethwaite. The bonuses are determined and agreed by the Remuneration Committee in September each
year for the preceding financial year.
(vi) Pension arrangements
The UK Company operates a defined-contribution personal pension scheme and currently makes pension contributions in respect of
all executive directors.
56
© Allergy Therapeutics plcwww.allergytherapeutics.com
Service Contracts
Executive Directors
Manuel Llobet
Ian Postlethwaite
Non-Executive Directors
Peter Jensen
Thomas Lander
Stephen Smith
Alejandro Weinstein
Date of contract
11 June 2009
7 May 2002
Date of contract
1 October 2010
2 May 2012
5 October 2004
1 July 2009
Notice period
12 months
12 months
Notice period
6 months
3 months
3 months
3 months
The service contracts for the Chief Executive Officer and Finance Director were reviewed during January 2014 with
the assistance of board remuneration advisers. The Committee concluded that the Finance Director’s level of remuneration was in
line with market levels. The Committee determined that the Chief Executive Officer’s remuneration was not in line with the market
and his salary should be increased to £250,000 from £207,093 per annum and his maximum bonus be increased from 40% to 60%
of salary.
The remuneration of the Chairman and the Non-Executive Directors was also reviewed in June 2014 with external advice, as the
fee had not been reviewed since 2009. As a result of the review the Chairman’s annual remuneration was increased by £10,000 to
£75,000 and the Non-Executive Directors by £2,000 to £38,000 each.
The review also resulted in an annual fee of £4,500 being awarded to the Chairman of the Audit Committee for this additional
responsibility as commonly occurs amongst regulated companies.
A Special Resolution is being proposed at the forthcoming Annual General Meeting to amend the Articles of Association of the
Company to increase the quantum of the annual fees available to Non-Executive Directors which has remained at £200,000 since
2004. The proposal is to increase the quantum to £250,000.
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
227,038
64,000
10,909
Ian Postlethwaite
161,832
31,000
10,625
Peter Jensen
Thomas Lander
Stephen Smith1
Alejandro Weinstein
65,833
36,167
14,067
36,167
-
-
-
-
-
-
-
-
Year ended 30 June 2013
Fees
Total
Pension
Total
Pension
£
-
-
-
-
£
£
£
£
301,947
34,026
228,875
29,872
203,457
16,183
151,279
44,821
65,833
36,167
22,475
36,542
-
36,167
-
-
-
-
65,000
36,000
46,000
36,000
-
-
-
-
Totals
541,104
95,000
21,534
22,475
680,113
50,209
563,154
74,693
1. Mr Smith’s fees payments are split between SRS
Business Enterprises Limited and himself
57
© Allergy Therapeutics plcwww.allergytherapeutics.com
Directors’ LTIPs and share options
LTIPs held at
1 July 2013
LTIPs
granted in
the year
LTIP share
distributions
in the year
LTIPs
lapsed in
the year
LTIPs held
at 30 June
2014
Subscription
price (pence)
Exercise
date from
Expiry
date
Executive
Directors
Manuel Llobet
3,065,000
845,000
Ian Postlethwaite
163,5001
-
1,532, 500
422,500
Non-Executive
Directors
Stephen Smith
150,0001
-
Totals
4,911,000
1,267,500
1. Share options
-
-
-
-
-
(720,000)
3,190,000
-
-
-
-
163,5001
18.5
18/10/2009
18/10/2019
(360,000)
1,595,000
(150,000)1
-
45.0
26/02/2004 26/02/2014
(1,230,000)
4,948,500
At 30 June 2014 the London Stock Exchange mid-market value of shares was 15 pence per share. The range of mid-market values
during the period from 1 July 2013 to 30 June 2014 was 6.75 pence to 30.75 pence per share.
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
1,360,000
120,000
-
776,513
3,065,000
1,532,500
-
-
150,000
3,125,000
1,360,000
120,000
-
776,513
Alejandro Weinstein2
201,986,132
-
201,986,132
3,190,000
1,595,000
-
-
-
-
1. Has an interest in shares pursuant to his interests in Wild Indigo
2. Has an interest in shares pursuant to his interests in Yissum Holding Limited, Azure Ventures & CFR International
Stephen Smith
Chairman, Remuneration Committee
58
© Allergy Therapeutics plcwww.allergytherapeutics.com
59
© Allergy Therapeutics plcwww.allergytherapeutics.com Nominations Committee Report
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 twice during the past financial year. Its principal purpose
is to consider and review proposals for the composition and size of the Board, its Committees and Senior Executives as well as
refreshment and succession planning.
Members
Peter Jensen
Stephen Smith
Alejandro Weinstein
Member since
October 2010
September 2009
September 2009
Attendance at meetings 2013-14
2/2
2/2
0/2
When proposing appointments of directors, the Committee considers the skills, knowledge and experience that a candidate
possesses compared to the skill sets and experience of the Board as it currently stands.
The Group considers the independence of Non-Executive Directors of paramount importance, being a cornerstone of good
corporate governance; as a result the Committee periodically reviews the independence of its Non-Executive Directors. Its
review is based on independence as defined in the UK Corporate Governance Code which is not binding on an AIM listed
company against the practicalities for an AIM Company. The Group draws upon best practice available, including those aspects
of the UK Corporate Governance Code it is considered to be relevant to the Group and best practice.
Last year the Committee undertook a review of the Independence of the Board. The review considered all the Non-Executive
Directors and in particular Mr Stephen Smith’s position. The review noted that his term of office being over 9 years is contrary to
the UK Corporate Governance Code and his contribution in the capacity as Chairman of the Audit Committee, and his experience,
integrity and strength of character continues to make a major contribution to the Board. Mr Stephen Smith now no longer holds
any share options, which lapsed in February 2014. He is therefore regarded as an independent Non-Executive Director, with Mr
Thomas Lander as the other independent Non-Executive Director.
The Board now consists of four Non-Executive Directors, with three (including the Chairman) being independent and two
Executive Directors.
Peter Jensen
Chairman, Nominations Committee
62
© Allergy Therapeutics plcwww.allergytherapeutics.com 63
© Allergy Therapeutics plcwww.allergytherapeutics.com Financial Statements
Independent Auditor’s Report to the Members of Allergy Therapeutics plc (Group)
We have audited the group financial statements of Allergy Therapeutics plc for the year ended 30 June 2014 which comprise
the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the
consolidated statement of changes in equity, the consolidated cash flow statement and the related notes. The financial reporting
framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 50, the directors are responsible for the
preparation of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit
and express an opinion on the group financial statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s 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 Financial Reporting Council’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 2014 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.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the group financial
statements are prepared is consistent with the group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in
our opinion:
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the parent company financial statements of Allergy Therapeutics plc for the year ended 30 June 2014.
Christian Heeger
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Gatwick
19 September 2014
66
© Allergy Therapeutics plcwww.allergytherapeutics.com
Consolidated Income Statement for the year ended 30 June 2014
Revenue
Cost of sales
Gross profit
Distribution costs
Administration expenses – other
Research and development costs
Administration expenses
Other income
Operating profit
Finance income
Finance expense
Profit before tax
Income tax
Profit for the period
Earnings per share
Basic (pence per share)
Diluted (pence per share)
Note
3
8
10
9
5
11
13
Year to
30 June
2014
Year to
30 June
2014
£’000
£’000
Year to
30 June
2013
As restated
£’000
Year to
30 June
2013
As restated
£’000
41,955
(11,951)
30,004
(17,922)
39,279
(11,953)
27,326
(16,278)
(7,986)
(2,963)
(7,845)
(2,535)
(10,949)
(10,380)
76
1,209
170
(295)
1,084
(343)
741
0.16p
0.16p
-
668
110
(249)
529
104
633
0.14p
0.13p
67
© Allergy Therapeutics plcwww.allergytherapeutics.com Consolidated Statement of Comprehensive Income for the year ended 30 June 2014
Note
26
17
Profit for the period
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement of net defined benefit liability
Revaluation gains - freehold land & buildings
Remeasurement of investments – retirement
benefit assets
Items that will be reclassified subsequently to
profit or loss:
Exchange differences on translation of foreign
operations
Total comprehensive profit/(loss)
Year to
30 June
2014
£’000
741
(271)
-
(10)
(191)
269
Year to
30 June
2013
As restated
£’000
633
(871)
17
(108)
77
(252)
68
© Allergy Therapeutics plcwww.allergytherapeutics.com Consolidated Balance Sheet
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
Deferred taxation liability
Non current provisions
Other non current liabilities
Total non current liabilities
Total liabilities
Net assets
Equity
Capital and reserves
Issued share capital
Share premium
Merger reserve – shares issued by subsidiary
Reserve – EBT
Reserve – share based payments
Reserve – convertible loan notes
Revaluation reserve
Foreign exchange reserve
Retained earnings
Total equity
Note
16
14
15
17
12
19
18
20
24
21
22
24
26
12
23
21
27
30 June
2014
£’000
30 June
2013
As restated
£’000
7,030
2,480
1,291
3,212
174
14,187
5,368
6,469
2,029
345
14,211
28,398
(6,425)
(49)
-
(6,474)
7,737
(6,418)
(136)
(222)
(73)
(6,849)
(13,323)
15,075
420
67,716
40,128
67
465
3,652
1,178
(21)
(98,530)
15,075
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
1,178
170
(99,339)
14,671
These financial statements were approved by the Board of Directors on 19 September 2014 and were signed on its behalf by
Manuel Llobet
Chief Executive Officer
Ian Postlethwaite
Finance Director
Registered number: 05141592
69
© Allergy Therapeutics plcwww.allergytherapeutics.com
Consolidated Statement of Changes in Equity
Issued
Capital
Share
premium
Merger reserve –
shares issued
by subsidiary
Reserve - shares
held in EBT
Reserve - share
based payment
Reserve –
convertible
loan note
Revaluation
Foreign exchange
Retained earnings
Total equity
reserve
reserve
As restated
As restated
As restated
£’000
417
£’000
67,571
£’000
40,128
£’000
67
£’000
1,496
£’000
3,652
£’000
1,161
-
-
-
-
-
-
-
-
3
-
-
-
-
-
-
-
-
-
145
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 30 June 2012
Exchange differences on translation of foreign operations
Remeasurement of net defined benefit liability
Valuation gain taken to equity (Land and Buildings)
Remeasurement of investments – retirement benefit assets
Total other comprehensive income
Profit for the period after tax
Total comprehensive income
Transactions with owners
Share based payments
Shares issued
Transfer of lapsed options to retained earnings
At 30 June 2013
420
67,716
40,128
67
679
3,652
1,178
(99,339)
14,671
Exchange differences on translation of foreign operations
Remeasurement of net defined benefit liability
Remeasurement of investments – retirement benefit assets
Total other comprehensive income
Profit for the period after tax
Total comprehensive income
Transactions with owners
Distribution to shareholder-Convertible loan note
Share based payments
Shares issued
Transfer of lapsed options to retained earnings
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 30 June 2014
420
67,716
40,128
67
465
3,652
1,178
(21)
(98,530)
15,075
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
183
(1,000)
184
(398)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17
17
17
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
£’000
93
77
77
77
170
(191)
(191)
(191)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(346)
(252)
£’000
(99,993)
(871)
(108)
(979)
633
-
-
-
-
1,000
-
(271)
(10)
(281)
741
460
(49)
-
-
398
£’000
14,592
77
(871)
17
(108)
(885)
633
183
148
-
(191)
(271)
(10)
(472)
741
269
(49)
184
-
-
70
© Allergy Therapeutics plcwww.allergytherapeutics.com Issued
Capital
premium
Share
Merger reserve –
Reserve - shares
shares issued
by subsidiary
held in EBT
Reserve - share
based payment
Reserve –
convertible
loan note
Revaluation
reserve
Foreign exchange
reserve
Retained earnings
Total equity
As restated
As restated
As restated
£’000
417
£’000
67,571
£’000
40,128
£’000
67
£’000
1,496
£’000
3,652
£’000
1,161
-
-
-
-
-
-
-
183
-
(1,000)
-
-
-
-
-
-
-
-
-
-
-
-
17
-
17
-
17
-
-
-
At 30 June 2013
420
67,716
40,128
67
679
3,652
1,178
-
-
-
-
-
-
-
184
-
(398)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 30 June 2012
Exchange differences on translation of foreign operations
Remeasurement of net defined benefit liability
Valuation gain taken to equity (Land and Buildings)
Remeasurement of investments – retirement benefit assets
Total other comprehensive income
Profit for the period after tax
Total comprehensive income
Transactions with owners
Share based payments
Shares issued
Transfer of lapsed options to retained earnings
Exchange differences on translation of foreign operations
Remeasurement of net defined benefit liability
Remeasurement of investments – retirement benefit assets
Total other comprehensive income
Profit for the period after tax
Total comprehensive income
Transactions with owners
Distribution to shareholder-Convertible loan note
Share based payments
Shares issued
Transfer of lapsed options to retained earnings
-
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
145
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
£’000
93
77
-
-
-
77
-
77
-
-
-
170
(191)
-
-
(191)
-
(191)
-
-
-
-
£’000
(99,993)
-
(871)
-
(108)
(979)
633
£’000
14,592
77
(871)
17
(108)
(885)
633
(346)
(252)
-
-
1,000
183
148
-
(99,339)
14,671
-
(271)
(10)
(281)
741
460
(49)
-
-
398
(191)
(271)
(10)
(472)
741
269
(49)
184
-
-
At 30 June 2014
420
67,716
40,128
67
465
3,652
1,178
(21)
(98,530)
15,075
71
© Allergy Therapeutics plcwww.allergytherapeutics.com Consolidated Cash Flow Statement
Cash flows from operating activities
Profit before tax
Adjustments for:
Finance income
Finance expense
Non cash movements on defined benefit pension plan
Depreciation and amortisation
Charge for share based payments
Derivative financial instruments
Disposal of intangible assets and property, plant and equipment
Decrease/(increase) in trade and other receivables
(Increase)/decrease in inventories
(Decrease)/increase in trade and other payables
Net cash generated by operations
Interest paid
Income tax
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
Net cash generated by financing activities
Net increase 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
72
Note
10
9
15,16
Year to 30 June
2014
£’000
Year to 30 June
2013
As restated
£’000
1,084
529
(170)
295
160
1,287
184
(669)
1
1,689
(625)
(911)
2,325
(102)
(50)
2,173
71
(281)
(22)
(898)
(110)
249
79
1,342
183
787
607
(2,164)
767
746
3,015
(211)
(372)
2,432
19
(355)
(157)
(664)
(1,130)
(1,157)
-
-
1,043
(78)
1,064
2,029
2,029
-
2,029
148
148
1,423
50
(409)
1,064
1,257
(193)
1,064
© Allergy Therapeutics plcwww.allergytherapeutics.com Notes to the Financial Statements
1. BASIS OF PREPARATION
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) in issue
as adopted by the European Union (‘EU’).
Allergy Therapeutics plc is the Group’s parent company. The Company is a limited liability company incorporated and domiciled in
England. The address of Allergy Therapeutics plc’s registered office and its principal place of business is Dominion Way, Worthing,
West Sussex and its shares are listed on the Alternative Investment Market (AIM).
The consolidated financial statements for the year ended 30 June 2014 (including comparatives) have been prepared under the
historical cost convention except for land and buildings and derivative financial instruments which have been measured at fair value.
They were approved and authorised for issue by the Board of Directors on 19 September 2014.
New standards adopted
There are no IFRS or IAS interpretations that are effective for the first time in this financial period that have had a material impact on
the Group.
In preparing the consolidated accounts the Group has adopted the following new IFRS and IAS interpretations.
IFRS 10 Consolidated Financial Statements (effective 1 January 2014 – adopted early)
This IFRS establishes principles for the presentation and preparation of consolidated financial statements when an entity controls
one or more other entities.
IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2014 – adopted early)
This IFRS looks at the disclosure of information that enables users of financial statements to evaluate the nature of, and risks
associated with, the Group’s interests in other entities, and the effects of those interests on its financial position, financial
performance and cash flows.
IFRS 13 Fair Value Measurement (effective 1 January 2013)
IFRS 13 seeks to increase consistency and comparability in fair value measurements and related disclosures through a ‘fair
value hierarchy’.
IFRS 13 clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements.
It does not affect which items are required to be fair valued.
Amendments to IAS 19 (Revised June 2011) Employee Benefits (effective 1 January 2013)
IAS 19 reviews the treatment of employee benefits with a view to recognising the cost in the period in which the benefit is earned
by the employee, rather than when it is paid or payable.
The revised version of IAS 19 ‘Employee Benefits’ (IAS19R) (as of 1 January 2013) makes a number of changes to the accounting for
employee benefits, the most significant relating to defined benefit plans. IAS 19R:
•
eliminates the ‘corridor method’ and requires the recognition of remeasurements (including actuarial gains and losses) arising
in the reporting period in other comprehensive income
•
changes the measurement and presentation of certain components of the defined benefit cost. The net amount in profit or
loss is affected by the removal of the expected return on plan assets and interest cost components and their replacement by a
net interest cost based on the net defined benefit asset or liability
•
enhances disclosures, including more information about the characteristics of defined benefit plans and related risks
73
© Allergy Therapeutics plcwww.allergytherapeutics.com IAS 19R has been applied retrospectively in accordance with its transitional provisions. Consequently, the Group has restated its
reported results throughout the comparative periods presented. There was no adjustment to total equity.
The effects on the income statement and the statement of comprehensive income for the current year and the prior year are:
12 months to 30 June 2014
12 months to 30 June 2013
Increase in finance income
Decrease in finance expense
Increase in Profit
Other comprehensive income:
Remeasurement of investments – retirement benefit assets
Increase in loss on remeasurement of net defined benefit liability
Decrease in other comprehensive income
Change in total comprehensive income
Change in earnings per share (basic and diluted)
£000
99
15
114
(99)
(15)
(114)
-
+2p
£000
91
6
97
(91)
(6)
(97)
-
+2p
Following the adoption of IAS 19R remeasurement of investments related to the retirement benefit plan that had previously been
passed through the revaluation reserve have been reclassified to retained earnings. As at 1st of July 2012 the revaluation reserve
was reduced by £136,000 from £1,297,000 to £1,161,000 with a corresponding credit to retained earnings.
The application of IAS 19R did not have an effect on the statement of cash flows for the year ended 30 June 2014 and the prior year.
IAS 27 (Revised) Separate Financial Statements (effective 1 January 2013)
IAS 27 is concerned with the preparation and presentation of consolidated financial statements for a group of entities under the
control of a parent, and in accounting for investments in subsidiaries, jointly controlled entities and associates when an entity
elects, or is required by local regulations, to present separate (non-consolidated) financial statements.
Standards, amendments and interpretations to existing standards that are not yet effective and have not been early
adopted by the Group in the 30 June 2014 financial statements
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective. Not all of these have yet been adopted by the EU. The Group has not
adopted any of these pronouncements early. The new standards, amendments and interpretations that are expected to be relevant
to the Group’s financial statements are as follows:
IFRS 9 Financial Instruments (effective 1 January 2015)
This IFRS replaces IAS39 and addresses the usefulness for users of financial statements by simplifying the classification and
measurement requirements for financial instruments. Management are currently assessing the detailed impact on the Group’s
financial statements.
IFRS 15 Revenue from Contracts with Customers (issued in May 2014 and effective 1 January 2017)
IFRS 15 supersedes current revenue recognition guidance including IAS 18, Revenue, and specifies how and when entities
recognise revenue as well as requiring such entities to provide users of financial statements with more informative, relevant
disclosures. The standard provides a single, principles based five-step model to be applied to all contracts with customers.
74
© Allergy Therapeutics plcwww.allergytherapeutics.com Management anticipate that the above pronouncements will be adopted in the Group’s financial statements in line with the
effective dates stated above. Management are 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.
Going concern
For the year ended 30 June 2014, and for the fifth year in succession, the Group has reported an operating profit and an operating
cash inflow. Operating profit in the period was £1.2 million (2013: £0.7 million); net cash from operations was £2.3 million (2013:
£3.0 million).
The Group has prepared detailed budgets, including cash flow projections, for the periods ending 30 June 2015 and 30 June 2016.
These projections include assumptions on the trading performance of the operating business and the continued availability of the
existing overdraft facilities. After making appropriate enquiries, which included a review of the annual budget, by considering the cash
flow requirements for the foreseeable future and the effects of sales and other sensitivities on the Group’s funding plans, the Directors
continue to believe that the Group will have adequate resources to continue in operational existence for the foreseeable future and
accordingly have applied the going concern principle in drawing up the financial statements. In reaching this view, the Directors have
considered and prioritised the actions that could be taken to offset the impact of any shortfall in operating performance.
2. ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have
been consistently applied to all years presented unless otherwise stated.
Consolidation
The Group’s financial statements consolidate those of the parent company and all of its subsidiaries drawn up to 30 June 2014. The
parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the
ability to affect those returns through its power over the subsidiary.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated on the date
control ceases.
Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated
except for unrealised losses if they show evidence of impairment.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with
those used in the Group.
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 that meet the conditions for recognition under IFRS
3 (Revised) Business Combinations, are recognised at their fair values at the acquisition date. The excess of the cost of acquisition over
the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is less
than the fair value of the net assets of the subsidiary acquired the difference is recognised directly in the profit or loss.
Goodwill
Goodwill arising from business combinations is the difference between the fair value of the consideration paid and the fair value of
the assets and liabilities and contingent liabilities acquired. It is initially recognised as an intangible asset at cost and is subject to
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© Allergy Therapeutics plcwww.allergytherapeutics.com impairment testing on an annual basis or more frequently if circumstances indicate that the asset may have been impaired. Details
of impairment testing are described in the accounting policies.
Intangible assets acquired as part of a business combination
Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the
definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at
the acquisition date.
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses.
Internally generated intangible assets
An internally generated intangible asset arising from development (or the development phase) of an internal project is recognised if,
and only if, all of the following have been demonstrated:
•
•
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale
the intention to complete the intangible asset and use or sell it
the ability to use or sell the intangible asset
how the intangible asset will generate probable future economic benefits
the availability of adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset
•
the ability to measure reliably the expenditure attributable to the intangible asset during its development
The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date
when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be
recognised, research and development expenditure is charged to profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and
accumulated impairment losses. Amortisation shall begin when the asset is available for use, i.e. when it is in the location and
condition necessary for it to be capable of operating in the manner intended by management.
Amortisation of all intangible assets is calculated on a straight line basis over the useful economic life using the following annual rates:
Manufacturing know-how
Non-competing know-how
15 years
4 years
Other intangibles/distribution agreements
15 years / period of contract
Computer software
7 years
These periods were selected to reflect the assets’ useful economic lives to the Group.
The cost of amortising intangible assets is included within administration costs in the consolidated income statement.
Segmental reporting
The Group’s operating segments are market based and are reported in a manner consistent with the internal reporting provided to
the Group’s Chief Operating Decision Maker (CODM) who has been identified as the Executive Directors. The CODM is responsible
for allocating resources and assessing the performance of the operating segments.
In identifying its operating segments, management follow the Group’s revenue lines which represent the main geographical
markets within which the Group operates. These operating segments are managed separately as each requires different local
expertise, regulatory knowledge and a specialised marketing approach. Each market based operating segment is engaged in
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© Allergy Therapeutics plcwww.allergytherapeutics.com production, marketing and selling within a particular economic environment that is different from that in segments operating in
other economic environments. All inter-segment transfers are carried out at arm’s length prices.
Foreign currency translation
Functional and presentational currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). The Group’s presentational currency is Sterling, which is also the
functional currency of the Group’s parent.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation, at
reporting period end exchange rates, of monetary assets and liabilities denominated in foreign currencies, are recognised in the
income statement. 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 is not materially different.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than
Sterling are translated into Sterling upon consolidation. The functional currency of the entities in the Group has remained unchanged
during the reporting period.
On consolidation, assets and liabilities have been translated into Sterling at the closing rate at the reporting date. Goodwill and fair
value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and
translated into Sterling at the closing rate. Income and expenses have been translated into Sterling at the average rate over the
reporting period. Exchange differences are charged or credited to other comprehensive income and recognised in the currency
translation reserve in equity.
Revenue recognition
Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied and
services provided, net of statutory rebates paid in Germany and excluding value added tax. Revenue is recognised upon the
performance of services or transfer of risk to the customer.
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions have been satisfied:
•
the Group has transferred to the buyer the significant risks and rewards of ownership of the goods, which is generally when the
customer has physically received the goods.
•
the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective
control over the goods sold which is again when the customer has physically received the goods.
the amount of revenue can be measured reliably.
it is probable that the economic benefits associated with the transaction will flow to the Group, and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
•
•
•
Where the Group provides services to new distributors, which mainly include marketing and customer information, in exchange for
an up-front lump sum fee, revenue is recognised in line with these services being delivered. Services are fair valued and pro-rated
to agree to the total fee receivable. Where there is an on-going responsibility to provide services, the balance relating to those
services is recognised in future periods as the service is performed.
A small proportion of the Group’s overseas sales are made through distributors and agents.
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© Allergy Therapeutics plcwww.allergytherapeutics.com Arrangements for sales through distributors
For all distributor arrangements, the distributor is invoiced at the time of delivery and title to the product passes upon full and final
settlement of the invoice to which the delivery relates. The distributor has full discretion over the setting of the final selling price to
the end customer and is responsible for all customer returns of product.
It is considered that the significant risks and rewards of ownership of the product are transferred to the distributor at the point of
delivery and therefore revenue is recognised at this point in accordance with IAS 18.
Where the Group sells to distributors at initially low margin and there is further consideration receivable by the group, this deferred
consideration forms part of the fair valuation of consideration receivable by the Group for goods supplied. In these instances the
deferred consideration is accrued at a discounted value at the point of delivery.
Arrangements for sales through agents
For all agreements with agents, the agent places orders with the Group, and goods are then shipped to them. The Group
however, holds title to these products until they are sold on to a third party. The selling price to the end user is set by the relevant
Government body and the agent receives a fixed percentage of this selling price. The agent notifies the Group monthly on stock
levels and this is reconciled to a statement which generates an invoice for payment by the agent. The Group is responsible for any
customer returns of product.
It is considered that the significant risks and rewards of ownership of the product are not transferred from the Group until the
agent has sold the product to a third party and therefore revenue on these sales is recognised only at this point by the Group in
accordance with IAS 18 appendix 2 (c).
Statutory Rebates
In Germany, Pharmaceutical companies are required to pay a manufacturer’s rebate to the government as a contribution to the cost
of medicines paid for by the State and private health funds. This is similar to a sales tax and the rebate is therefore treated as a
deduction from revenue in accordance with IAS18.8.
Rebates have been in the region of 6% (inclusive of VAT). However, in 2010 the German government increased the rate to 16%.
In certain circumstances, companies could apply for an exemption from the rebate increase, for limited periods at a time. If the
application for the exemption is successful, a preliminary exemption is normally granted to be converted to a final exemption at a
later date when audited financial statements are available.
Allergy Therapeutics plc has been successful in obtaining preliminary exemptions up to 30 June 2012, which have been
subsequently confirmed as final.
Revenue is recognised initially net of the 16% rebate, as at that stage it is not considered probable that any refund of the rebate will
be received. When the preliminary exemption is granted, it is considered probable, based on our past experience, that the rebate
refund will be received. Therefore, as it is probable that the economic benefits will flow to Allergy Therapeutics Plc, in accordance
with IAS 18.14(d), revenue is adjusted at that time.
Expenditure recognition
Operating expenses are recognised in the income statement upon utilisation of the service or at the date of their origin.
Property, plant and equipment
The Group policy is that all freehold properties will be subject to a full revaluation at least every five years with an interim valuation
carried out in accordance with IAS 16 in the third year after each valuation.
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© Allergy Therapeutics plcwww.allergytherapeutics.com Revaluations are performed by independent qualified and experienced valuers who have adequate local knowledge in the country
in which the property is situated. In the intervening years between independent revaluations, the directors review the carrying
values of the freehold land and buildings and adjustments are made if the carrying values differ significantly from their respective
fair values. Increases in the carrying value from revaluations are recognised in other comprehensive income and accumulated in
equity under the heading of revaluation reserve unless this reverses a revaluation decrease on some asset previously recognised
in profit and loss, in which case it is first credited to profit and loss to that extent. When an item of property, plant and equipment
is revalued, any accumulated depreciation at the date of the revaluation is restated proportionately with the change in the gross
carrying amount of the asset. The amount of the adjustment arising on the restatement or elimination of accumulated depreciation
forms part of the increase or decrease in carrying amount. Decreases in the carrying values arising from revaluations are first offset
against increases from earlier revaluations in respect of the same assets and are thereafter charged to profit or loss.
Plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Provision
for depreciation of all tangible assets of the Group (except land) is made over their estimated useful lives, on a straight line basis
principally using the following annual rates:
Freehold buildings
Computer equipment
Motor vehicles
Fixtures and fittings
Plant and equipment
33 years
3 – 7 years
4 years
5 – 15 years
5 – 15 years
Asset residual values and useful lives are reviewed annually and amended as necessary. Assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of the fixed asset may not be recoverable. An
asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount exceeds the higher of
the asset’s fair value less costs to sell or value in use.
During the prior year the asset lives of ‘Fixtures and fittings’ and ‘Plant and equipment’ were extended up to a maximum of 15 years
(previous maximum useful life was 10 years). The effect of this change is described in Note 16.
Depreciation charges are included when arriving at operating profit in the income statement.
Impairment
The Group’s goodwill, other intangible assets, freehold land and buildings and plant & equipment are subject to impairment testing.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows (cash generating units). Goodwill is allocated to those cash generating units that are expected to benefit from synergies of the
related business combination and represent the lowest level within the Group at which management controls the related cash flows.
Individual assets or cash generating units that include goodwill with an indefinite useful life or those not yet available for use are
tested for impairment at least annually. All other individual assets or cash generating units are tested for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the assets or cash generating units carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell and value
in use, based on an internal discounted cash flow evaluation. Impairment losses recognised for cash generating units, to which
goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged
pro rata to the other assets in the cash generating unit. With the exception of goodwill, all assets are subsequently reassessed for
indications that an impairment loss previously recognised may no longer exist.
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© Allergy Therapeutics plcwww.allergytherapeutics.com Inventories
Inventory is carried at the lower of cost or net realisable value. The costs of raw materials, consumables, work in progress and
finished goods are measured by means of weighted average cost using standard costing techniques. Cost of finished goods
and work in progress comprises direct production costs such as raw materials, consumables, utilities and labour, and production
overheads such as employee costs, depreciation, maintenance and indirect factory costs. Standard costs are reviewed regularly in
order to ensure relevant measures of utilisation, production lead time and appropriate levels of manufacturing expense are reflected
in the standards.
As part of the continuous refinement of standard costs, in July 2013 a new cost set was applied in which an increased proportion
of manufacturing cost was absorbed by intermediate processes (rather than finishing processes) as this more accurately reflects
the conversion cost of inventory. This resulted in an increased value of inventory at 30 June 2014 of £486,000. If this allocation
method had been used in the prior year, inventory would have increased by approximately £500,000.
Net realisable value is calculated based on the revenue from sale in the normal course of business less any costs to sell.
Research & Development investment credits
Investment credits are directly related to the Group’s qualifying research and development expenditure and have a monetary value
that is independent of the Group’s tax liability. Such investment credits are dealt with in other income in the income statement.
Leases
Operating lease rentals are charged to the income statement over the term of the lease. There are no finance leases.
Financial assets
Financial assets consist of cash, trade and other receivables and derivative financial instruments. Financial assets are assigned
to their different categories by management on initial recognition, depending on the contractual arrangements.
Cash and cash equivalents comprise cash on hand, demand deposits and overdrafts, together with other short-term, highly
liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of
changes in value.
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 through profit and loss’
and subsequently at amortised cost, with any changes going through profit or loss. Where securities are designated as ‘fair value
through profit and loss’ gains and losses arising from changes in fair value are included in net profit or loss for the period.
Derecognition of financial assets occurs when the rights to receive cash flows from the investments expire or are transferred
and substantially all of the risks and rewards of ownership have been transferred. An assessment for impairment is
undertaken at least at each balance sheet date whether or not there is objective evidence that a financial asset or a group of
financial assets is impaired.
Financial liabilities
The Group’s financial liabilities include bank loans, trade and other payables and derivative financial instruments.
Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest
related charges are recognised as an expense in ‘Finance costs’ in the income statement.
Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost using the effective
interest method.
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© Allergy Therapeutics plcwww.allergytherapeutics.com Borrowings comprise secured bank borrowings, and are initially recognised at the fair value of the consideration received net
of issue costs associated with the borrowings. After initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest rate method.
Convertible loan notes
Convertible loan notes are regarded as compound instruments consisting of a liability component and an equity component. At
the date of issue the fair value of the liability component is estimated using a discount rate for an equivalent liability without the
conversion feature. The difference between the proceeds of issue of the convertible loan note and the fair value assigned to liability
component, representing the embedded option to convert the liability into equity of the Group, is included in equity.
Derivative financial instruments
The Group uses interest rate swaps, Canadian Dollar forward contracts, Euro forward contracts and Euro exchange swaps to manage the
exposure to changes in interest and translation rates and these are classified as derivative financial instruments. All derivative financial
instruments are initially measured at fair value on acquisition and are subsequently restated to fair value at each reporting date. Any
change in the fair value of the instruments is recognised in either administration expenses or finance expenses in the income statement.
Equity
Equity comprises the following:
•
•
“Issued capital” represents the nominal value of equity shares that have been issued.
“Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of
expenses of the share issue.
•
“Merger reserve” represents the excess over nominal value of the fair value of consideration received for equity shares issued
on acquisition of subsidiaries, net of expenses of the share issue.
•
“Reserve - Shares held in EBT” represents the shares acquired by a trust set up for the benefit of the Group’s employees.
These shares are deducted from shareholders funds at the cost that the shares were acquired. The net proceeds received
from the issue of these shares through the exercise of options are also recognised through this reserve.
•
“Reserve - share based payments” represents equity-settled share-based employee remuneration until such share options
are exercised.
•
“Reserve - convertible loan notes” represents the equity component of consideration received for convertible loan notes, net
of expenses.
•
•
“Revaluation reserve” represents the revaluations of investment assets and land and buildings.
“Foreign exchange reserve” represents the foreign currency translation differences that have occurred since the transition
date. Exchange differences prior to this date are included within retained earnings.
•
“Retained earnings” represents retained profits and losses.
Equity is any contract which evidences a residual interest in the assets of the Group after deducting all its liabilities.
Income taxes
Current income tax assets and liabilities comprise those obligations to fiscal authorities in the countries in which the Group carries
out its operations. They are calculated according to the tax rates and tax laws applicable to the fiscal period and the country to
which they relate. All changes to current tax liabilities are recognised as a component of tax expense in the income statement.
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 assets and liabilities and their tax bases. However, deferred tax is neither provided
on the initial recognition of goodwill nor on the initial recognition of an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not
provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in
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© Allergy Therapeutics plcwww.allergytherapeutics.com the foreseeable future. Tax losses available to be carried forward as well as other income tax credits to the Group are assessed for
recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable
that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred
tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they
are enacted or substantively enacted at the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where
they relate to items that are charged or credited directly to other comprehensive income (such as the revaluation of land and
buildings) in which case the related deferred tax is also charged or credited directly to other comprehensive income.
Defined benefit pension scheme
Scheme assets are measured at fair values. Scheme liabilities are measured on an actuarial basis using the projected unit credit
method and are discounted at appropriate high quality corporate bond rates that have terms to maturity approximating to the terms
of the related liability. Interest expense or income is calculated on the net defined benefit liability (asset) by applying the discount
rate to the net defined benefit liability (asset). Past service cost is recognised in the income statement in the period when the plan
is amended.
Remeasurements are recognised in the balance sheet immediately with a charge or credit to other comprehensive income in the
periods in which they occur. The related deferred tax is shown with other deferred tax balances. A surplus is recognised only to the
extent that it is recoverable by the Group.
The current service cost, past service cost and costs from settlements and curtailments are charged against administrative
expenses in the income statement. Interest on the scheme liabilities and the expected return on scheme assets are included in
other finance costs.
Short-term employee benefits, including holiday entitlement are included in current pension and other employee obligations at the
undiscounted amount that the Group expects to pay as a result of the unused entitlement.
Investments
Investments relate to long-term insurance policies. In accordance with IAS19 these cannot be directly deducted from the German
pension obligation. These are recognised as a separate asset, rather than as a deduction in determining the defined benefit liability.
Interest income is recognised though the income statement. They are held at fair value with any gains or losses on remeasurement
charged or credited to other comprehensive income.
Provisions
Provisions are recognised when the present obligations arising from legal or constructive obligations resulting from past events, will
probably lead to an outflow of economic resources from the Group which can be estimated reliably.
Provisions are measured at the present value of the estimated expenditure required to settle the present obligation, based on the
most reliable evidence available at the balance sheet date.
All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Share based employee compensation
The Group operates equity-settled share based compensation plans for remuneration of its employees comprising Long Term
Incentive Plan (LTIP) schemes.
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© Allergy Therapeutics plcwww.allergytherapeutics.com All employee services received in exchange for the grant of any share based compensation are measured at their fair values. These
are indirectly determined by reference to the share option or shares awarded. Their value is appraised at the grant date and excludes
the impact of any non-market vesting conditions (e.g. profitability or sales growth targets). The fair value of LTIP shares, which have
market conditions attached, includes an adjustment based on the probability of the shares vesting at the end of the vesting period.
Details of the LTIP schemes and the conditions applying to each scheme are disclosed in Note 28 (Share Based Payments) on page 105.
All share based compensation is ultimately recognised as an expense in the consolidated income statement with a corresponding
credit to the share based payments reserve, net of deferred tax where applicable. If vesting periods or other vesting conditions
apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options
expected to vest. Non market vesting conditions are included in assumptions about the number of options that are expected to
become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected
to vest differs from previous estimates. No adjustment to expense recognised in prior periods is made if fewer share options
ultimately are exercised than estimated.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, up to the nominal value of
the shares issued are allocated to share capital with any excess being recorded as share premium.
Employee benefit trust
The financial statements include the assets and liabilities of a trust set up for the benefit of the Group’s employees. The employee benefit
trust has acquired shares in the Company and these are deducted from the shareholders’ funds on the balance sheet at the cost of
acquisition less proceeds on disposal.
Use of accounting estimates and judgements
Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and
estimates are based on management’s best knowledge of the relevant facts and circumstances, having regard to prior experience, but
actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is
contained in the accounting policies and/or the notes to the financial statements and the key areas are summarised below:
Judgements in applying accounting policies
a) Capitalisation of development costs requires analysis of the technical feasibility and commercial viability of the project
concerned. Capitalisation of the costs will be made only where there is evidence that an economic benefit will accrue to the
Group. To date no development costs have been capitalised and all costs have been expensed in the Income statement as
research and development expenditure, £3.0m (2013: £2.5m)
b)
The Directors assume that the convertible loan note will be repayable in September 2014 rather than any earlier date nominated
by the note holder. Repayment of the principal has been treated as not substantive as the repayment of principal and
reinvestment in equity are viewed as occurring at the same time in contemplation of one another.
c) Where the Group sells to distributors at initially low margin and there is further consideration receivable by the group, this
deferred consideration forms part of the fair valuation of consideration receivable by the Group for goods supplied. In these
instances the deferred consideration is accrued at a discounted value at the point of delivery.
The directors considered the following points in applying this accounting treatment:
Although a significant portion of the sales price is received upon a further sale to an end customer, substantially all the risks and
rewards of ownership are passed to the distributor when the goods are shipped, and the distributor is acting as principal (not
merely as agent) when arranging to resell the goods. The directors have reached this conclusion because;
i. The group does not have any continued managerial involvement in the distributor’s onward sale of goods;
ii. The distributor does not have the right to return any goods.
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© Allergy Therapeutics plcwww.allergytherapeutics.com
More information on the reasoning behind the treatment of sales to distributors can be found in the ‘Sale of goods’ accounting
policy description.
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 73) and note 16).
b) Estimates of future profitability are required for the decision whether or not to carry forward a deferred tax asset. (Note 12).
c) Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating unit to which the
goodwill has been allocated. This value in use calculation requires an estimation of the future cash flows expected to arise
from the cash generating unit and a suitable discount rate in order to calculate the present value.
d)
The Group has been awarded a provisional exemption to the increased rebate charge in Germany for the period July to December
2012. Revenue of £1.1m has been accrued in relation to this exemption. During the year £0.6m has been collected with £0.5m
remaining to be collected. While the Group is confident that the exemption will be confirmed, there is a possibility that this will
not happen.
e)
Inventory standard costs are reviewed regularly in order to ensure relevant measures of utilisation, production lead time and
appropriate levels of manufacturing expense are reflected in the standards. As part of the continuous refinement of standard
costs, in July 2013 a new cost set was applied in which an increased proportion of manufacturing cost was absorbed by
intermediate processes (rather than finishing processes) as this more accurately reflects the conversion cost of inventory. This
resulted in an increased value of inventory at 30 June 2014 of £0.5m. If this allocation method had been used in the prior year,
inventory would have increased by approximately £0.5m.
f)
In relation to the accrued additional revenue due from distributors referred to in the Judgements section (point (c) above);
there is some uncertainty that the additional revenue will crystallise as it is dependent on a further sale by the distributor. The
directors consider that the additional consideration can be measured reliably because it is based on a fixed list price, and our past
experience indicates that the distributor will sell the vaccines.
The directors have assessed that the deferred consideration of £0.2m is recoverable and will crystallise in future periods and
has been carried forward in prepayments and accrued income (2013: £0.1m).
3. REVENUE
An analysis of revenue by category is set out in the table below:
Sale of goods
Rendering of services
2014
£’000
41,871
84
41,955
2013
£’000
38,295
984
39,279
Rendering of services relates to the supply of services to a new distributor in the prior year to assist them in setting up operations
in their territory.
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
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© Allergy Therapeutics plcwww.allergytherapeutics.com 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 Rest of World.
Revenue by segment
Central Europe
Germany
Other
Southern Europe
UK
Rest of World
Revenue
from External
Customers
2014
£’000
25,782
5,902
31,684
6,718
927
2,626
Inter
Segment
Revenue
2014
£’000
34,890
41,955
34,890
Total Segment
Revenue
Revenue
from External
Customers
2014
£’000
25,782
5,902
31,684
6,718
35,817
2,626
76,845
2013
£’000
23,613
5,143
28,756
5,774
881
3,868
Inter
Segment
Revenue
2013
£’000
32,081
Total Segment
Revenue
2013
£’000
23,613
5,143
28,756
5,774
32,962
3,868
71,360
39,279
32,081
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.
Rest of World revenues include sales through distributors and agents in several markets including Czech and Slovak Republics,
Canada and South Korea. These include rendering of services revenues (note 3). 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.
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 2014 budget.
Central Europe
Germany
Other
Southern Europe
UK
Other
Revenue
from External
Customers
Revenue
from External
Customers
2014
£’000
25,198
5,545
30,743
6,565
927
2,626
2013
£’000
24,442
5,157
29,599
5,977
881
3,866
40,861
40,323
The Group has no customers which individually account for more than 10% of the Group’s revenue.
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© Allergy Therapeutics plcwww.allergytherapeutics.com Depreciation and amortisation by segment
Central Europe
Southern Europe
UK
EBITDA by segment
Allocated EBITDA
Central Europe
Southern Europe
UK
Allocated EBITDA
2014
£’000
154
105
1,028
1,287
2014
£’000
(810)
(236)
3,542
2,496
2013
£’000
199
86
1,057
1,342
2013
£’000
(791)
(323)
3,124
2,010
Depreciation and amortisation
(1,287)
(1,342)
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
1,209
170
(295)
1,084
2014
£’000
8,489
3,608
37,626
49,723
(2,572)
(18,753)
28,398
668
110
(249)
529
2013
£’000
9,306
4,117
37,038
50,461
(3,126)
(18,371)
28,964
Included within Central Europe are non-current assets to the value of £2,480,000 (2013: £2,560,000) relating to Goodwill and within
Southern Europe assets to the value of £1,085,000 (2013: £1,207,000) relating to freehold land and buildings.
86
© 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 gain/(loss)
Depreciation and amortisation:
Depreciation of property plant and equipment (note 16)
Amortisation of intangible assets (note 15)
2014
£’000
(9,932)
(1,861)
(4,101)
(15,894)
2,571
2013
£’000
(10,070)
(2,518)
(4,831)
(17,419)
3,126
(13,323)
(14,293)
2014
£’000
66
1,006
281
2013
£’000
350
968
374
Research and development
2,963
2,535
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
726
584
22
74
10
9
422
521
22
69
20
23
Share based payment expense (note 28)
184
183
87
© 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
Over accrual of bonuses
Share based payment
2014
£’000
680
69
50
799
-
48
847
2013
£’000
597
66
75
738
(35)
29
732
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 54 to 56 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
2014
£’000
15,497
2,264
184
262
237
2013
£’000
14,292
2,110
158
243
267
18,444
17,070
The average number of employees during the period (including executive directors) was made up as follows:
2014
116
93
138
347
2014
£’000
76
2013
113
91
147
351
2013
£’000
-
R & D, marketing and administration
Sales
Production
8. OTHER INCOME
Net monetary value of above the line R&D tax credit
88
© Allergy Therapeutics plcwww.allergytherapeutics.com 9. FINANCE EXPENSE
Interest on borrowing facility
Change in fair value of derivative financial instrument
Net interest expenses on defined benefit liability
Other interest and charges
10. FINANCE INCOME
Bank interest
Interest on investment assets
Other finance income
Other finance income relates to the unwinding of the discount on accrued revenue.
11. INCOME TAX EXPENSE
Current Tax:
Prior period tax
Overseas tax
Deferred tax – current year
Tax charge/ (credit) for the period
2014
2013
As restated
£’000
39
(13)
206
63
295
£’000
167
(149)
187
44
249
2014
2013
As restated
£’000
£’000
5
99
66
170
2014
£’000
110
219
329
14
343
19
91
-
110
2013
£’000
(57)
166
109
(213)
(104)
89
© Allergy Therapeutics plcwww.allergytherapeutics.com The tax charge 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:
2014
2013
As restated
Profit for the period before tax
Profit for period multiplied by the respective standard rate of corporation tax applicable in each
domain (average 22.50%, 2013: 23.75%).
Effects of:
Disallowable adjustments
Movements in unrecognised deferred tax
Allowances for R&D expenditure
Adjustment of taxes for prior periods
Adjustment for different tax rates
Relief for shares acquired by employees and Directors
Gross up of R&D expenditure credit
Deferred tax - deferred tax release
- change in tax rate
Tax charge/(credit) for the period
£’000
1,084
244
200
(268)
-
110
27
-
4
317
-
26
343
The income tax credit for 2013 is re-stated so as to include movements in unrecognised deferred tax and adjustments
for the implementation of IAS19 (revised).
12. DEFERRED TAX
Recognised deferred tax liability
2014
2014
2014
2014
2013
2013
2013
Tax value
of carried
forward
losses
Tax value of
accelerated
capital
allowances
Acquisition of
Teomed AG
Total
Tax value
of carried
forward
losses
Tax value of
accelerated
capital
allowances
Acquisition of
Teomed AG
£’000
529
126
392
(276)
(48)
(57)
(14)
(27)
-
96
(200)
-
(104)
2013
Total
At 1 July
Amount credited
to the income
statement
Exchange
differences
At 30 June
£’000
671
(71)
-
600
£’000
(471)
45
-
(426)
£’000
£’000
£’000
£’000
£’000
£’000
(159)
41
-
-
(165)
(165)
12
(14)
671
(471)
11
(136)
11
38
-
671
-
(471)
(159)
(41)
13
(7)
213
(7)
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.
90
© Allergy Therapeutics plcwww.allergytherapeutics.com 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 & equipment
R&D expenditure credit
Current Assets
Stock
Derivative financial instruments
Current Liabilities
Derivative financial instruments
Non Current Liabilities
Pension and other
employee obligations
Derivative financial instruments
Share options
Unused tax losses
Total
2014
£’000
174
(136)
38
2013
£’000
200
(159)
41
2014
2014
2013
2013
Deferred tax
Deferred tax
assets
£’000
liabilities
£’000
Deferred tax
assets
Deferred tax
liabilities
£’000
£’000
51
22
418
69
-
1,057
-
72
12,778
14,467
-
-
-
-
-
-
-
-
-
-
-
-
402
-
72
1,040
3
131
15,023
16,671
-
-
-
-
-
-
-
-
-
-
As at 30 June 2014 the Group had approximately £66m of unutilised tax losses (2013: approximately £69m) available for offset
against future profits. A deferred tax asset has been recognised in respect of £3.0m (2013 £2.9m) 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 21% to 20% with effect from 1 April 2015. The recognised and unrecognised
deferred tax assets have been calculated at 20%, being the rate enacted at 30 June 2014.
91
© Allergy Therapeutics plcwww.allergytherapeutics.com 13. EARNINGS PER SHARE
2014
2013
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
Ordinary shares to be issued on conversion of loan note (Note 27)
Ordinary shares used in EPS calculation
Weighted average number of shares 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)
£’000
741
Shares
‘000
409,867
-
409,867
41,675
451,542
451,542
19,965
471,507
0.16p
0.16p
As restated
£’000
633
Shares
‘000
406,913
2,954
409,867
41,675
451,542
453,017
18,635
471,652
0.14p
0.13p
Earnings per share for 2013 is re-stated so as to include ordinary shares to be issued on conversion of the convertible loan note
(Note 27) and adjustments for the implementation of IAS19 (revised).
14. GOODWILL
At 1 July
Exchange difference
At 30 June
2014
£’000
2,560
(80)
2,480
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
2014
£’000
2,480
2013
£’000
2,560
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 12.7% discount rate (2013: 12.7%) 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.
92
© Allergy Therapeutics plcwww.allergytherapeutics.com 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.
Manufacturing
know-how
Non-competing
know-how
Distribution agreements
(Switzerland)
Other intangibles Computer
software
Total
£’000
£’000
£’000
£’000
£’000
£’000
1,000
3,467
960
1,773
1,884
9,084
15. INTANGIBLE ASSETS
Cost
At 1 July 2012
Additions
Asset reclassification
Disposals
Foreign exchange
-
-
-
-
At 30 June 2013
1,000
Additions
Disposals
Foreign exchange
-
-
-
At 30 June 2014
1,000
Amortisation
At 1 July 2012
Disposals
Charge for the year
Foreign exchange
933
-
67
-
At 30 June 2013
1,000
Disposals
Charge for the year
Foreign exchange
-
-
-
At 30 June 2014
1,000
Net book value
At 1 July 2012
At 30 June 2013
At 30 June 2014
67
-
-
-
-
-
183
3,650
-
-
(200)
3,450
3,467
-
-
183
3,650
-
-
(200)
3,450
-
-
-
-
-
-
36
996
-
-
(52)
944
128
66
5
199
-
68
(10)
257
832
797
687
-
-
(684)
20
157
11
-
42
157
11
(684)
281
1,109
2,094
8,849
16
(229)
(18)
878
994
(84)
107
10
1027
(229)
46
(17)
827
779
82
51
256
(81)
(43)
272
(310)
(313)
2,226
8,498
1,455
6,977
-
134
34
1,623
(81)
167
(36)
1,673
(84)
374
232
7,499
(310)
281
(263)
7,207
429
471
553
2,107
1,350
1,291
The class of Intangible Assets “Distribution agreements” arose from the acquisition of the Swiss Subsidiary, Teomed AG on 1 July 2010.
These distribution agreements represent the present value of the future cashflows expected to arise from the agreements and are
amortised over a period of fifteen years.
Other intangibles relate to trademarks and licences.
93
© Allergy Therapeutics plcwww.allergytherapeutics.com 16. PROPERTY, PLANT AND EQUIPMENT
Plant &
machinery
Fixtures &
fittings
Motor
vehicles
Computer
equipment
Freehold land
& buildings
Total
£’000
£’000
£’000
£’000
£’000
£’000
7,646
4,782
36
2,846
Cost or valuation
At 1 July 2012
Revaluation
Additions
Asset reclassification*
Foreign exchange
Disposals
-
343
-
10
-
-
177
-
38
(8)
At 30 June 2013
7,999
4,989
Additions
Foreign exchange
Disposals
365
(12)
(51)
238
(45)
(97)
At 30 June 2014
8,301
5,085
Depreciation
At 1 July 2012
Charge for the year
Revaluation
Foreign exchange
Disposals
3,780
425
-
7
-
3,215
224
-
31
(2)
At 30 June 2013
4,212
3,468
Charge for the year
Foreign exchange
Disposals
430
(9)
(51)
228
(32)
(97)
At 30 June 2014
4,582
3,567
Net book value
At 1 July 2012
At 30 June 2013
At 30 June 2014
3,866
3,787
3,719
1,567
1,521
1,518
* Assets reclassified to intangibles.
-
-
-
-
-
36
6
-
(4)
38
34
2
-
-
-
36
-
-
(4)
32
2
-
6
-
144
(11)
32
(2)
1,258
(128)
-
-
77
-
16,568
(128)
664
(11)
157
(10)
3,009
1,207
17,240
203
(42)
(70)
-
(77)
-
812
(176)
(222)
3,100
1,130
17,654
1,887
275
-
25
-
2,187
303
(22)
(70)
2,398
959
822
702
97
42
(145)
6
-
-
45
-
-
45
1,161
1,207
1,085
9,013
968
(145)
69
(2)
9,903
1,006
(63)
(222)
10,624
7,555
7,337
7,030
Note 22 provides details of the assets secured against the Group’s bank borrowings.
94
© Allergy Therapeutics plcwww.allergytherapeutics.com Freehold land and buildings relates to the Group’s office and warehouse building in Milan, Italy which was revalued in July 2009 by
independent valuers. This property is carried at fair value and is classified as level 3 in the hierarchy of financial assets.
The reconciliation of the carrying amounts of non-financial assets classified within level 3 is as follows:
Balance at 1 July 2013
Loss recognised in profit or loss
– depreciation of buildings
Loss recognised in other comprehensive income
– exchange differences on translating foreign operations
Balance at 30 June 2014
£’000
1,207
(45)
(77)
1,085
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 carrying value of the asset at
the point the subsidiary was first consolidated). 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 prior 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 prior year by £480,000 against the preceding year.
17. INVESTMENTS
The Group carries an insurance policy which is designed to contribute towards the obligation in respect of the German defined
benefit pension scheme (see note 26). It is valued at fair value (market price) by the Group’s actuaries each year.
At 1 July
Additions
Finance income
Remeasurement of investment
(Loss) /Gain on foreign exchange
2014
£’000
3,059
281
99
(10)
(217)
3,212
2013
£’000
2,569
355
91
(108)
152
3,059
95
© Allergy Therapeutics plcwww.allergytherapeutics.com 18. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods
2014
£’000
1,854
3,144
1,471
6,469
2013
£’000
1,895
2,273
1,846
6,014
In July 2013 a new cost set was applied in which an increased proportion of manufacturing cost was absorbed by intermediate
processes (rather than finishing processes) as this more accurately reflects the conversion cost of inventory. This resulted in an
increased value of inventory at 30 June 2014 of £0.5m. If this allocation method had been used in the prior year, inventory would have
increased by approximately £0.5m.
The cost of inventories recognised as an expense in cost of sales during the year was £11.0m (2013: £11.0m) including write-downs
in the year amounting to £0.9m (2013: £1.2m).
The value of inventories measured at fair value less cost to sell was £162,000 (2013: £77,000).
19. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
VAT
Prepayments and accrued revenue
2014
£’000
2,756
1,261
158
1,193
5,368
2013
£’000
3,129
2,158
117
1,781
7,185
Accrued revenue (£212,000) relates to deferred consideration receivable from customers (2013: £117,000)
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, £113,000 of trade
receivables was found to be impaired and £17,000 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 brought forward
Foreign exchange adjustments
Charge for the year
Utilised
Balance carried forward
96
2014
£’000
109
(11)
113
(17)
194
2013
£’000
54
8
152
(105)
109
© Allergy Therapeutics plcwww.allergytherapeutics.com In addition, some of the unimpaired trade receivables are past due as at the reporting date. 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
20. CASH AND CASH IN HAND
Cash at bank and in hand
21. TRADE AND OTHER PAYABLES
Due within one year
Trade payables
Social security and other taxes
Other creditors
Accrued expenses and deferred income
Due after more than one year
Other creditors
Total trade and other payables
22. BORROWINGS
Due within one year
Convertible loan note
Overdraft
2014
£’000
626
161
44
74
905
2014
£’000
2,029
2014
£’000
2,464
591
290
3,080
6,425
73
6,498
2014
£’000
49
-
49
2013
£’000
640
456
200
99
1,395
2013
£’000
1,257
2013
£’000
3,050
536
717
2,703
7,006
-
7,006
2013
£’000
95
193
288
97
© Allergy Therapeutics plcwww.allergytherapeutics.com 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 £4.5
million. Interest on the overdraft is at the bank’s base rate plus a fixed margin of 2.75%. 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 overdraft facility is due
for renewal in May 2015.
The Convertible loan notes were issued in April 2012 (Note 27). The liability relates to the interest payable over the next year.
23. 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 accrued into this reserve for each employee. When the employee leaves the company the accrued amount is
paid as a deferred salary payment.
At 1 July
Additions
Utilisation
Foreign exchange movement
24. FINANCIAL INSTRUMENTS
Risk management
2014
£’000
300
28
(89)
(17)
222
2013
£’000
274
26
(19)
19
300
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.
Capital
Total equity
Borrowings
Overall financing
2014
£’000
15,075
15,075
49
15,124
2013
£’000
14,671
14,671
288
14,959
Capital-to-overall financing ratio
1.00
0.98
There is no requirement by external parties to comply with any capital ratios.
98
© 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
Financial liabilities
Current
At amortised cost (including borrowings and payables)
Fair value through profit and loss – held for trading
Non current
At amortised cost (including borrowings and payables)
Derivative financial instruments
2014
£’000
6,203
345
6,548
(2,660)
-
(295)
(2,955)
2013
£’000
6,661
2
6,663
(3,918)
(326)
(300)
(4,544)
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 of these instruments is calculated by reference to observable 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 closed out in September 2013. Within the fair value hierarchy, this financial derivative is classified as level 2.
Euro forward contracts (including Euro exchange swaps)
The Group has Euro forward contracts with its bank that are arranged for the sale of €11,824,000 to purchase GBP at an average
blended rate of 1.2030 for dates from August 2014 until February 2015. Within the fair value hierarchy, this financial derivative is
classified as level 2.
99
© Allergy Therapeutics plcwww.allergytherapeutics.com Analysis of derivative financial instruments
Credit /(Charge) to the Income Statement
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
2014
£’000
656
(42)
614
13
(13)
-
2013
£’000
(787)
517
(270)
149
(167)
(18)
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
Current liabilities
Derivative financial instruments
- Euro forward contracts - held for trading
- Interest rate swap – held for trading
2014
£’000
2013
£’000
345
345
-
-
-
2
2
313
13
326
The net profit at fair value of financial instruments through the income statement is £669,000 (2013 loss: £637,000).
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
Argentinean peso
100
2014
£’000
129
1,793
11
3
93
-
2013
£’000
(178)
863
6
259
113
1
2,029
1,064
© Allergy Therapeutics plcwww.allergytherapeutics.com
Foreign currency denominated financial assets and liabilities, translated into Sterling at closing rates, are as follows:
Sterling
£’000
466
(1,494)
(1,028)
(73)
(73)
2014
Euro
£’000
5,275
(755)
4,520
(222)
(222)
Other
£’000
807
(411)
396
-
-
Sterling
£’000
480
(2,202)
(1,722)
-
-
2013
Euro
£’000
5,202
(1,437)
3,765
(300)
(300)
Other
£’000
981
(605)
376
-
-
Current
Financial assets
Financial liabilities
Short term exposure
Non- current
Financial liabilities
Long term exposure
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
Effect on net results for the year
Effect on other comprehensive income
If Sterling had weakened against the Euro by
Effect on net results for the year
Effect on other comprehensive income
Interest rate risk
2014
£’000
10%
1,882
(270)
1,612
2013
£’000
10%
2,051
(430)
1,621
10%
10%
(2,152)
(2,509)
328
525
(1,824)
(1,984)
The Group finances its operations through operating cashflow, equity fundraising and overdraft facilities. Interest is charged at a
floating rate on the overdraft facility. The overdraft facility is tailored in a way to give flexibility to the Group. This flexibility provides
the Group with a higher level of the facility in the low sales season and allows it to pay down the facility 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 not
feasible to illustrate the results were the interest rates to fall by 1%.
The sensitivities 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
2014
£’000
+ 1%
3
-
3
2014
£’000
- 1%
n/a
n/a
n/a
2013
£’000
+ 1%
34
-
34
2013
£’000
- 1%
n/a
n/a
n/a
101
© 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 carrying value of the debtor.
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 22) is due for renewal in May 2015. As at 30 June 2014 the Group’s contractual maturities are summarised as follows:
Current liabilities
Borrowing facility - principal
Convertible loan note - interest and other charges
Trade payables
Other short term liabilities
Derivatives
Non-current liabilities
Other long term liabilities
2014
£’000
2014
£’000
Within 6
months
6 to 12
months
2013
£’000
Within 6
months
2013
£’000
6 to 12
months
-
49
2,611
3,763
6,423
-
6,423
2014
£’000
-
-
-
-
-
-
-
2014
£’000
193
-
3,630
3,376
7,199
292
7,491
2013
£’000
1 to 5 years
Later than
5 years
1 to 5 years
295
295
-
-
300
300
-
95
-
-
95
34
129
2013
£’000
Later than
5 years
-
-
There is no material difference between the fair values and the carrying values of these financial instruments.
25. OPERATING LEASE COMMITMENTS
The following payments are due to be made on operating lease commitments:
Land & Buildings
Other
Total
2014
£’000
745
2,013
1,203
3,961
2013
£’000
701
2,187
1,655
4,543
2014
£’000
339
307
-
646
2013
£’000
367
427
-
794
2014
£’000
1,084
2,320
1,203
4,607
2013
£’000
1,068
2,614
1,655
5,337
Within one year
Two to five years
Over five years
102
© Allergy Therapeutics plcwww.allergytherapeutics.com Of the operating lease commitments for the land and buildings of £3,961,000 (2013: £4,543,000), £3,254,000 relates to the UK
premises (2013: £3,758,000). The production facility accounts for £2,868,000 (2013: £3,307,000) of this commitment and expires
in December 2023. Premises in Spain account for £145,000 (2013: £187,000) expiring in 2020 and in Germany for £276,000 (2013:
£491,000) expiring in December 2015.
Of the other commitments, £492,000 (2013: £588,000) relates to leased vehicles all expiring within 5 years.
26. 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 £ 237,000 (2013: £267,000).
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 2014. The major assumptions used were as follows:
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
2014
% pa
1.5
3.0
1.5
3.35
3.05
2013
% pa
1.5
3.0
1.5
4.0
3.35
Increase of social security contribution ceiling
3.0
3.0
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 on plan assets
Experience gains/(losses) on plan liabilities
Years
Years
19.4
23.4
39.1
44.2
2014
£’000
1,335
(7,753)
(6,418)
8
88
19.2
23.3
38.9
44.0
2013
£’000
1,414
(7,628)
(6,214)
12
(191)
103
© 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 £6,418,000 (2013: £6,214,000). The basis used to
determine the net interest cost is based on the net defined benefit asset or liability and the discount rate as determined by Swiss
Life Pensions Management GmbH using the projected unit credit method. The actual return on plan assets for the year is £54,000
(2013: £60,000). The pension charge generates an unrecognised deferred tax asset of £1,057,000 (2013:£1,040,000), 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. See note 17 for further details of these investment assets.
Amounts charged to operating profit
Current service costs
Amounts included in other finance expenses
Interest income on plan assets
Interest on pension scheme liabilities
Net charge
Amounts recognised in other comprehensive income
Actual return less expected return on pension scheme assets
Experience gains/ (losses) arising on scheme liabilities
Changes in assumptions underlying the present value of scheme liabilities
Total amount relating to year
Opening cumulative losses
Remeasurement of net defined liability
Net movement recognised
Movement in assets during the year
Balance as at 1 July
Foreign currency differences
Interest income on plan assets
Remeasurement of net defined liability
Contributions from employer
Assets transferred to finance benefits paid
Balance as at 30 June
104
2014
£’000
2013
As restated
£’000
262
(46)
252
206
8
88
(367)
(271)
(2,510)
(2,781)
(2,781)
2014
£’000
1,414
(97)
46
8
19
(55)
1,335
243
(48)
235
187
12
(191)
(692)
(871)
(1,645)
(2,516)
(2,516)
2013
£’000
1,196
97
48
12
121
(60)
1,414
© Allergy Therapeutics plcwww.allergytherapeutics.com Movement in liabilities in the year
Balance as at 1 July
Foreign currency differences
Current service costs
Interest cost
Remeasurement of net defined liability
Benefits paid by employer
Benefits paid from assets
Balance as at 30 June
2014
£’000
2013
£’000
(7,628)
(5,913)
522
(262)
(252)
(271)
83
55
(455)
(243)
(235)
(885)
43
60
(7,753)
(7,628)
The expected contributions over the forthcoming year are £57,000.
The significant actuarial assumptions for the determination of the defined benefit IAS 19.173(b) obligation are the discount rate,
the salary growth rate and the average life expectancy. The calculation of the net defined benefit liability is sensitive to these
assumptions. The following table summarises the effects of changes in these actuarial assumptions on the defined benefit liability
at 30 June 2014:
Changes in the significant actuarial assumptions
£’000
£’000
Discount rate
Increase to 4.05%
Decrease to 2.05%
Increase/ (decrease) in the defined benefit liability
(1,000)
1,150
Salary growth rate
Increase to 4.00%
Decrease to 2.00%
Increase/ (decrease) in the defined benefit liability
346
(317)
Average life expectancies of males
Increase of one year
Decrease of one year
Increase/ (decrease) in the defined benefit liability
221
(218)
Average life expectancies of females
Increase of one year
Decrease of one year
Increase/ (decrease) in the defined benefit liability
255
(256)
105
© Allergy Therapeutics plcwww.allergytherapeutics.com 27. ISSUED SHARE CAPITAL
Authorised share capital
Ordinary shares of 0.10p each
1 July and 30 June
Deferred shares of 0.10p each
1 July and 30 June
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
At 1 July
Issued during the year
At 30 June
Issued share capital
2014
Shares
2014
£’000
2013
Shares
2013
£’000
790,151,667
9,848,333
409,866,831
-
409,866,831
9,848,333
-
9,848,333
419,715,164
790
10
410
-
410
10
-
10
790,151,667
9,848,333
406,912,981
2,953,850
409,866,831
9,848,333
-
9,848,333
420
419,715,164
790
10
407
3
410
10
-
10
420
The deferred shares have no voting rights, dividend rights or value attached to them.
No share options were exercised in the year (2013: Share options exercised with proceeds of £148,000).
In April 2012, Allergy Therapeutics plc issued a convertible loan note to a major investor, CFR Pharmaceuticals SA (CFR). The loan
agreement stated that the loan of £4,042,469 would be repaid on 20 April 2014 or an earlier date advised by the note holder (with at
least 15 business days’ notice). On the repayment date, the loan had to be repaid and on the same date the note holder had to purchase
41,674,938 shares at a fixed price of 9.7p per share. Interest is payable at a rate of 3% per annum during the term of the notes.
The Directors concluded that the repayment of the principal and the mandatory investment were linked such that in substance this
represents the conversion of the loan into a fixed number of shares, and hence the loan note was split into a liability and an equity
component. The liability component of £222,000 represented the present value of the interest payments on the loan, with the
balance of £3,820,000 treated as equity.
In April 2014, CFR and Allergy Therapeutics plc mutually agreed to amend the agreement to defer the repayment date until 30
September 2014. The only substantive effect of this amendment was the agreement to pay further interest of £49,000 over the
remaining period of the loan. This is effectively a loss on the remeasurement of the debt. As this was incurred with an equity
shareholder, it was treated as a transaction with owners and dealt with directly in the statement of changes in equity; with Allergy
Therapeutics plc recognising a corresponding further liability of £49,000 within current liabilities.
106
© Allergy Therapeutics plcwww.allergytherapeutics.com 28. 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 performance vesting shares.
The Group has two plans: the initial 2005 Plan and the 2013 Plan. The 2013 LTIP plan was adopted by the Board on 20 March 2013,
the Board having consulted major shareholders. Awards were made under the new 2013 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.
For the 2013 Plan, performance criteria for each award are set by the remuneration committee. The 2013 award is based on the total
shareholder return (“TSR”). An award shall vest at 100% if at the end of the plan cycle the maximum TSR of 25% has been satisfied.
If the TSR is less than 10% only 25% shares shall be distributed. If the TSR is between 10% and 25% share distributions will be on a
straight line basis between 25% and 100% of the initial award. 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.
For awards under the 2013 Plan during the year, the performance criteria are based on a combination of TSR and adjusted
earnings growth.
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 Plans 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 prior year two LTIP grants were provisionally awarded. The first of these grants was awarded under the 2005 Plan and
the second under the 2013 Plan which was awarded in May 2013. The latest grant, in May 2014, 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):
2014 WAEP
2013 WAEP
Number
Price (£)
Number
Price (£)
Outstanding at the beginning of the year
1,152,583
0.23
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at the year end
Exercisable at the year end
-
-
(271,478)
881,105
881,105
-
-
0.44
0.17
0.17
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
No options were exercised during the year (2013: weighted average share price at the date of exercise was 12p).
107
© Allergy Therapeutics plcwww.allergytherapeutics.com The share options outstanding at the end of the year detailed above have a weighted average remaining contractual
life of 3.3 years (2013: 4.3 years) and have the following range of exercise prices:
Exercise price (p)
6-45
46-120
30 June 2014
30 June 2013
Number
852,539
28,566
881,105
Number
1,124,017
28,566
1,152,583
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
Outstanding at the year end
2014
Number
2013
Number
17,482,500
10,787,000
6,337,500
10,802,500
(4,707,500)
19,112,500
(4,107,000)
17,482,500
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
Plan cycle
(yrs)
End of plan
cycle
Expected life
(yrs)
Exercise
price (£)
Share price
at grant (£)
Fair value (£)
Number
outstanding
Probability
of meeting
performance
tests (%)
19/05/14
10/05/13
20/12/12
14/12/11
3
3
3
3
25/03/17*
25/03/16*
30/06/15*
30/06/14*
3
3
3
3
0.0000
0.0000
0.0000
0.0000
0.205
0.101
0.118
0.106
31.7
33.5
34.9
41.5
0.075
6,337,500
0.042
5,755,000
0.049
3,780,000
0.044
3,240,000
*Estimated release date of interim results.
The share-based payment charge assumes an employee attrition rate of 5% per annum.
In addition to the above employee related awards, in the prior year the Group also awarded options for 650,000 shares with an
exercise price of £0.124 as payment to a third party advisor which are still outstanding at 30 June 2014.
The Group recognised total expenses of £184,000 (2013: £183,000) related to equity-settled share based payment transactions
during the year.
29. 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 2014 was €107,426; £85,996 (2013: €107,426; £91,833).
108
© Allergy Therapeutics plcwww.allergytherapeutics.com 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. in which the liabilities of each entity to the Royal Bank of Scotland
Plc are guaranteed by all the others.
The European Commission is carrying out 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 £0.5 million (2013: £1.5 million) in respect of exempted rebates which the Group continues
to collect.
30. 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 2014
30 June 2013
£’000
221
£’000
459
Included in the above is £56,000 for ongoing factory refurbishments in the UK (2013: £22,000); £65,000 for new plant and
machinery (2013: £156,000) and £100,000 for IT equipment and systems upgrades (2013: £281,000).
31. RELATED PARTY TRANSACTIONS AND ULTIMATE CONTROL
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 54 to 56.
At 30 June 2014, the Company’s subsidiary undertakings were:
Subsidiary undertaking
Country of
incorporation
Principal activity
Percentage of
shares held
Allergy Therapeutics (Holdings) Ltd
Allergy Therapeutics (UK) Ltd
Pharma Contract Manufacturing
Solutions Ltd
UK
UK
UK
Holding Company
Manufacture and sale of
pharmaceutical products
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
Bencard Allergy Therapeutics
Unipessoal LDA
Portugal
Sale of pharmaceutical products
100
100
100
100
100
100
100
100
100
100
100
Class of
shares held
Ordinary and
deferred
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
109
© 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
2014
£’000
2013
£’000
11
-
43
54
13
28
9
50
2014
£’000
(67)
(60)
17
(110)
2013
£’000
(33)
(4)
3
(34)
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. As at 30 June
2014, and 30 June 2013, the Directors consider the controlling party in Allergy Therapeutics plc to be CFR Pharmaceuticals SA. The
Group’s results are not consolidated by CFR Pharmaceuticals SA.
Sales of goods to related parties were made on normal commercial 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.
110
© Allergy Therapeutics plcwww.allergytherapeutics.com Independent Auditors Report to the Members of Allergy Therapeutics PLC (Company)
We have audited the parent company financial statements of Allergy Therapeutics Plc for the year ended 30 June 2014 which
comprise the parent company balance sheet and the related notes. The financial reporting framework that has been applied in their
preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 50, the directors are responsible for the
preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’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 2014;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the parent company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in
our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
•
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the group financial statements of Allergy Therapeutics Plc for the year ended 30 June 2014.
Christian Heeger
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Gatwick
19 September 2014
111
© 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
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserves – Convertible loan note
Other reserves – EBT
Other reserves – share based payments
Profit and loss account
Total equity
30 June
30 June
2014
£’000
2013
£’000
Note
3
4
5
6
7
7
7
7
7
1,270
1,300
323
305
(78)
(134)
245
171
1,515
1,471
1,515
1,471
420
67,716
3,652
67
465
420
67,716
3,652
67
679
(70,805)
(71,063)
1,515
1,471
These financial statements were approved by the Board of Directors on 19 September 2014 and were signed on its behalf by
Manuel Llobet
Chief Executive Officer
Registered number: 05141592
Ian Postlethwaite
Finance Director
112
© Allergy Therapeutics plcwww.allergytherapeutics.com
Notes to Company Balance Sheet
1. ACCOUNTING POLICIES
Basis of preparation
The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act,
the separate financial statements have been prepared in accordance with applicable United Kingdom accounting standards and under
the historical cost convention.
Going Concern
For the fifth year running, the Group has reported an operating profit. However, for the financial years ended 2007 to 2009 primarily
as a consequence of its investment in research and development activities, it reported losses. These losses have been funded by
equity issues, debt facilities and cash generated by the operating business.
The Group has prepared detailed budgets, including cash flow projections, for the periods ending 30 June 2015 and 30 June 2016.
These projections include assumptions on the trading performance of the operating business and the continued availability of the
existing overdraft. After making appropriate enquiries, which included a review of the annual budget, by considering the cash flow
requirements for the foreseeable future and the effects of sales and other sensitivities on the Group’s funding plans, the Directors
continue to believe that the Group and Company will have adequate resources to continue in operational existence for the foreseeable
future and accordingly have applied the going concern principle in drawing up the financial statements. In reaching this view, the
Directors have considered and prioritised the actions that could be taken to offset the impact of any shortfall in operating performance.
Investments
Investments in shares in subsidiary undertakings are included at cost less amounts written off.
Foreign currencies
Transactions in foreign currencies are recorded using an average exchange rate for the period. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and the gains or losses
on translation are included in the income statement account.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where
transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less, tax.
Deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be
suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing
differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Employee Benefit Trust (EBT)
The financial statements include the assets and liabilities of a trust, set up for the benefit of the Company’s employees.
The Employee Benefit Trust has acquired shares in the Company and these are deducted from shareholders funds on the balance
sheet within ‘Other reserves’ initially at the cost that the shares were acquired. The net proceeds received from the issue of these
shares through the exercise of options are recognised through this reserve. There are no shares remaining in the EBT.
Share based payments
The Company has adopted the amendment to FRS 20 (Group cash-settled share based payment transactions).
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© Allergy Therapeutics plcwww.allergytherapeutics.com
The Company has equity-settled share based payments but no cash-settled share based payments. All share based payment
awards granted after 7 November 2002 which had not vested prior to 1 July 2006 are recognised in the financial statements of the
subsidiary which receives the goods or service from the supplier (including employees), however the share based payment reserve
remains in the Company’s financial statements. Share based payments made in respect of the Company’s shares to employees of
its subsidiaries are reported as an increase in investment.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where
employees are rewarded using share-based payments, the fair values of employees’ services are determined indirectly by reference
to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact of
non-market vesting conditions (for example, profitability and sales growth targets).
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.
Full details of the Group’s share based payments are set out in Note 28 of the consolidated financial statements.
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 income statement in these
financial statements. The Company’s loss for the period was £91,000 (2013: £257,000 loss).
3. Investments
Cost
Investment brought forward
Additions
Diminution in value
Investment carried forward
Shares in subsidiary undertaking
£’000
1,300
184
(214)
1,270
The additions relate to share based payments in respect of the Company’s shares to employees of its subsidiaries.
114
© Allergy Therapeutics plcwww.allergytherapeutics.com At 30 June 2014 the Company’s subsidiary undertakings were:
Subsidiary undertaking
Allergy Therapeutics (Holdings) Ltd
Allergy Therapeutics (UK) Ltd
Pharma Contract Manufacturing Solutions Ltd
Bencard Allergie GmbH
Bencard Allergie (Austria) GmbH
Allergy Therapeutics Italia s.r.l.
Allergy Therapeutics Iberica S.L.
Teomed A.G.
Switzerland
Allergy Therapeutics Netherlands BV
Netherlands
Allergy Therapeutics Argentina S.A.
Argentina
Bencard Allergy Therapeutics Unipessoal LDA
Portugal
Country of
incorporation
Principal activity Percentage of
shares held
Class of
shares held
UK
UK
UK
Germany
Austria
Italy
Spain
Holding Company
Manufacture and sale of
pharmaceutical products
Manufacture and sale of
pharmaceutical products
Sale of pharmaceutical
products
Sale of pharmaceutical
products
Sale of pharmaceutical
products
Sale of pharmaceutical
products
Sale of pharmaceutical
products
Sale of pharmaceutical
products
Marketing of
pharmaceutical products
Sale of pharmaceutical
products
100
100
100
100
100
100
100
100
100
100
100
Ordinary and
deferred
Ordinary
Ordinary
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.
4. Debtors
Amounts falling due within one year
Amount owed by subsidiary undertakings
Prepayments
30 June 2014
30 June 2013
£’000
£’000
316
7
323
298
7
305
The amount owed by subsidiary undertakings is stated net of provisions of £70,239,037 (2013: £71,139,000).
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© Allergy Therapeutics plcwww.allergytherapeutics.com 5. Creditors – amounts falling due within one year
Convertible loan note interest
Accruals
Taxation and social security
6. Called up share capital
30 June 2014
30 June 2013
£’000
£’000
49
25
4
78
95
38
1
134
Full details of the Company’s share capital are set out in Note 27 of the consolidated financial statements.
7. Reserves
At 30 June 2013 and 2014
At 30 June 2013 and 2014
At 30 June 2013 and 2014
At 30 June 2013
Provision in year for share based payments
Lapsed share based payments transferred from retained losses
At 30 June 2014
Share premium account
£’000
67,716
Other reserve – Convertible Loan Note
£’000
3,652
Other reserve – EBT
£’000
67
Other reserve – share based payments
£’000
679
184
(398)
465
116
© Allergy Therapeutics plcwww.allergytherapeutics.com At 30 June 2013
Loss for the year
Lapsed share based payments transferred to retained losses
Distribution to shareholder – convertible loan note
At 30 June 2014
8. Share based payments
Profit and loss account
£’000
(71,063)
(91)
398
(49)
(70,805)
Full details of the Company’s share based payments are set out in Note 28 of the consolidated financial statements.
9. Directors’ emoluments
Full details of the Company’s directors’ emoluments are set out in the Directors’ Remuneration Report on pages 54 to 56.
10. Reconciliation of movement in shareholders’ funds
Loss for the financial year
Share based payments
Shares Issued
Distribution to shareholder – convertible loan note
Net addition to shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
11. Contingent Liabilities
Year to
30 June 2014
Year to
30 June 2013
£’000
(91)
184
-
(49)
44
1,471
1,515
£’000
(257)
183
148
-
74
1,397
1,471
Full details of the Company’s contingent liabilities are set out in Note 29 of the consolidated financial statements.
12. 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 other related party transactions can be found in Note 31 to the
consolidated financial statements
117
© Allergy Therapeutics plcwww.allergytherapeutics.com 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
Shareholder Information
Registered office
Dominion Way
Worthing
West Sussex
BN14 8SA
Advisers
Nominated Adviser and Broker
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
118
© Allergy Therapeutics plcwww.allergytherapeutics.com Allergy Therapeutics plc
(Registered Company Number 05141592)
Dominion Way
Worthing
West Sussex
BN14 8SA
Tel: +44 (0)1903 844720
Fax: +44 (0)1903 844726
www.allergytherapeutics.com
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