Baltic Classifieds Group Annual Report 2015

FY2015 Annual Report · Baltic Classifieds Group

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Building
a leading
healthcare
business

BTG plc Annual Report
and Accounts 2015

About BTG

At BTG we are focused on
bringing to market innovative
products in specialist areas
of medicine to serve doctors
and patients better.

Our growing portfolio of Interventional Medicine products is designed
to advance the treatment of liver tumours, advanced emphysema,
severe blood clots and varicose veins, while our Specialty Pharmaceuticals
portfolio offers antidotes that alleviate toxicity and treat rare conditions.

Healthcare is constantly evolving – so BTG never stands still.
Inspired by a deep understanding of our customers’ needs, we’re
working to meaningfully improve the lives of patients and their
healthcare experience.

Our competitive advantage is our dedication to finding smart,
often unconventional solutions to complex medical problems.
Many of our products combine medicines, device technology
and new techniques in order to deliver more targeted treatments.
We also invest in the clinical evidence that helps demonstrate the
value of our products to doctors, patients and healthcare systems.

Whether developed in our own labs or in partnership with
clinicians, academics and other companies, we believe passionately
that medical innovation has the power to improve human health.

Imagine where we can go.

BTG plc Annual Report and Accounts 2015Contents

02–36

37–78

Strategic Report
At a glance
Business model
Chairman’s statement
Chief Executive Officer’s review
Delivering our growth strategy: Geographic expansion
Delivering our growth strategy: Indication expansion
Delivering our growth strategy: Product innovation
Delivering our growth strategy: Expanding our business: PneumRx
Our objectives
Group financial review
Market overview
Our business model
Corporate responsibility
Risk management and principal risks

Governance
Board of Directors
Corporate governance report
Audit Committee report
Nomination Committee report
Directors’ remuneration report
Directors’ report
Statement of directors’ responsibilities

Financials
Independent auditor’s report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Company statement of financial position
Company statement of cash flows
Company statement of changes in equity
Notes to the Company financial statements
Five year financial record
Shareholder information
Cautionary note regarding forward looking statements

79–132

Strategic
Report

Governance

Financials

02
03
04
06
08
10
12
14
16
20
24
26
30
33

38
40
50
54
56
76
78

80
83
84
85
86
87
88
124
125
125
126
129
131
132

BTG plc Annual Report and Accounts 2015BTG at a glance

Strategic
Report

We are a fast growing specialist healthcare
company, headquartered in London and
employing over 1,100 people worldwide.

We operate in three discrete business segments:
Interventional Medicine (IM) (oncology, vascular and
pulmonology products), Specialty Pharmaceuticals
(antidote products) and Licensing (royalties from
licensed assets).

Business segments

Medical discipline

Product

Medical use

Interventional Medicine

Oncology

Beads

Read more on page 54

Portfolio Review Board
Ensures BTG is investing in its assets efficiently and in relation to opportunities with well-
targeted business cases where the value to the customer and to BTG is clearly understood and
articulated. Oversees the definition of activities and priorities of the Innovation Leadership
Team and Development Leadership Team.

Innovation Leadership Team
Investigates the opportunity to develop new products, product line extensions and new
indications to address identified unmet medical needs, providing strategic and operational
leadership of innovation activities up to proof of principle in man.

Development Leadership Team
Evaluates and is intimately involved in the definition and execution of development activities,
beyond proof of principle in man, to support the Company’s commercial strategies.

Operational Leadership Team
Responsible for ensuring that the manufacturing and supply chain are tightly controlled and their
operations are optimised, as far as practicable, meeting all applicable regulatory requirements.

Global Quality Leadership Team
Reviews progress with overall Quality Strategy and objectives, this includes inspection
readiness, QMS effectiveness and enhancements, product delivery on time and to required
quality, safety and efficiency. Ensures continued regulatory compliance.

Performance Management Review
Monthly meeting of the Leadership Team and senior staff to review progress against business
plans and targets, both financial and operational.

Corporate Responsibility Committee
Ensures the Group maintains high standards in this area.

BTG plc Annual Report and Accounts 201543

Governance

The Board of Directors
A Board and Committees meeting programme is set
annually for core activities which forms the basic structure
of Board operation.

While, as a unitary board, the executive and non-executive
directors are collectively responsible for the success of the
Company and have fiduciary duties to shareholders, their
roles are strictly delineated. The roles of the Chairman and
Chief Executive are separate and distinct and the division of
their responsibilities is clear. The executive directors have
direct responsibility for the business operations of the
Company, while the non-executive directors are responsible
for bringing independent and objective judgment to Board
decisions and the Chairman’s primary responsibility is for the
effective running of the Board. The non-executive directors’
duties include helping to develop the Company’s strategy,
shaping proposals on succession planning and constructively
challenging the executive directors where they consider
it appropriate.

Matters reserved specifically
for the Board include:
1. Reviewing the overall strategic development of the

Company and setting its objectives, direction and policies,
whilst ensuring the necessary financial and human
resources are in place to support strategy. Determining
the significant risks that the Company is willing to take
to achieve its strategic aims and ensuring effective risk
management controls are in place.

2. Setting budgets and long-term plans. Approving major
investments, acquisitions and disposals, major capital
expenditure and dividend policy.

3. Monitoring and reviewing Company and management

performance and making key risk decisions.

4. Executive remuneration and appointments. Appointment

or removal of any director or the Company Secretary.

5. Approval of the Annual Report and Accounts, preliminary
and interim financial and management statements, and
major public announcements.

6. Succession planning, health, safety and environmental

performance and standards of ethical and social behaviour.

7. Developing robust corporate governance, legal,

compliance, quality and risk management procedures
aimed at safeguarding the Company’s reputation and
assets, staff and patients and meeting its legal, regulatory
and other obligations and ensuring the integrity of its
financial information and business conduct. Agreeing and
overseeing the application of an appropriate corporate
governance framework.

8. Ensuring the proper discharge of the Company’s statutory
and other legal, regulatory and ethical responsibilities.

Effective division of responsibilities

The Chairman
Garry Watts joined the Board on 1 January 2012 and has been
Chairman since that date. He is responsible for leading the Board,
creating conditions for overall Board and individual director
effectiveness, promoting constructive debate and for ensuring:

• A robust decision making process is in place by ensuring the
appropriate information is made available to the Board in a
timely manner and that clear decisions are made, communicated
and effected.

• That the Board devotes adequate time to the right issues,
such as its role in shaping strategy and managing risk.

• That the Board environment is productive and the composition
and diversity, experience and expertise of the Board and its
Committees is appropriate having regard to the Company’s needs.

• The Board discharges its responsibilities with respect to

risk management.

• Board Committees are properly structured with appropriate
terms of reference, membership and collective experience.

• Necessary relationships of mutual respect and open
communication are fostered between directors, with
non-executive directors providing support and advice while
respecting the executive responsibility.

• Effective communication with shareholders and other stakeholders.

Executive directors
Louise Makin, CEO, is primarily responsible for the running of the
Group and for executing the Group strategy in line with the risk appetite
defined by the Board and the Company values. Rolf Soderstrom, CFO,
is responsible for all financial reporting, tax and financial control
aspects of the Group, providing support to the CEO and the wider
business activities of the Group as required. In addition the executive
directors are also responsible for:

• Communicating to the Board their views on business issues to

improve the standard of Board discussion and, prior to final decision
on an issue, explaining in a balanced way any divergence of view in
the executive team.

• Providing input to the strategy formulation process to enable an

effective and evidence based approach and to ensure that the Board
is well informed about all aspects of the business and its operation
which bear on its strategy.

• Delivering high quality information to the Board to enable it to
monitor the performance of the whole business including the
management of risk, and to make critical decisions.

The Senior Independent Director (SID)
Giles Kerr has been the Company’s SID since July 2008 and as such
his principal role is to support the Chairman in his role and to work
with him and other directors to resolve any significant issues that
may arise. He is also responsible for:

• Supporting the Chairman’s delivery of objectives, and leading

his evaluation.

• Leading the non-executive directors in the oversight of the Chairman
and ensuring there is a clear division of responsibility between the
Chairman and CEO.

• Being available to shareholders to express concerns which
the normal channels have failed to resolve or which would
be inappropriate.

Non-executive directors
The non-executive directors bring wide-ranging skills and experience
for the Board to draw on. They provide independent judgment and
constructively challenge matters such as Company performance,
strategy and risk management.

BTG plc Annual Report and Accounts 2015Corporate governance report continued

PneumRx acquisition
Following the acquisition of PneumRx, in addition to
seeking to grow the RePneu® coil business, there has
been a focus on integrating PneumRx into the BTG Group
governance framework covering aspects such as financial
controls, healthcare compliance, quality, environmental
health & safety, and risk management.

Risk management process
We recognise that whilst risk is inherent in our business,
it is critical that we define and operate an effective risk
management process. As such we have continued to evolve
our approach to ensure risk management is embedded
in each of the business units. We have enhanced the risk
management function to better support the work of the
Risk Committee and increased tracking and reporting of
key risks and progress with mitigations to the Leadership
Team and the Board.

The enhanced framework is intended to ensure risk is
both managed effectively on a day-to-day basis within the
business units but also that key risks are transparent to
the Board and integral to our strategy discussions.

Governance

Board activity during the year:
Activity over the year encompassed a number of typical
cyclical items, such as approval of the 2015/16 budget,
preliminary results announcement, 2015 Annual Report
and Accounts and the 2014 interim financial statements
and announcement. Other matters included:
• Regular reviews of risk management.
• A Strategy Review day to allow the Board to

oversee progress

• Commercial launch of Varithena® in the US
• The progression and ultimate approval of the

acquisition of PneumRx

• Go-direct in Europe launch plan for DC Bead®
and the establishment of direct sales in Taiwan

• Bioclon litigation
• Acquisition of manufacturing facility in the UK
• Analysts’ review
• Pension investment strategy
• Expansion of Camberley site
• Feedback from investors

Governance matters included review of the Board
and committee evaluations and recommendations from
the Board committees, such as proposed amendments
to the terms of reference for each of the Nomination,
Audit and Remuneration Committees.

Strategy day
Having transitioned the Company from being a licensing
and development vehicle, following the launch of Varithena®
in 2014 the Company had evolved to become a specialist
healthcare business focusing in the areas of interventional
vascular (Varithena® and EKOS) and interventional oncology
(Therasphere and Beads).

The Company continued to consider other developing areas
of interventional medicine represented by unmet patient
needs and market opportunities.

The strategy review highlighted interest in the area of
interventional pulmonology following which the acquisition
of PneumRx during the year has established the Company
as a leading business in this area.

BTG plc Annual Report and Accounts 201545

Governance

Attendance by individual directors at Board
and Committee meetings since the last Annual Report

Board and committee
composition and attendance

Committee
memberships

Independent

Board
meetings

Nomination
Committee

Audit
Committee

Remuneration
Committee

No
No

7/7
7/7

n/a
n/a

None
None

Total number of meetings held
Number of meetings attended
Executive directors
Louise Makin (CEO)
Rolf Soderstrom (CFO)
Non-executive directors
Nom2
Garry Watts
Aud2, Rem, Nom
Giles Kerr
Melanie Lee5
Rem
Aud, Rem2, Nom
Ian Much
James O’Shea3
Nom, Rem
Aud
Richard Wohanka
Susan Foden4
Rem
1 Garry Watts is excluded from the determination of independence by virtue of his role as Chairman of the Company.
2 Committee Chairman.
3 James O’Shea was only a member of the Remuneration Committee from 25 September 2014 to 1 March 2015 and attended all applicable meetings.
4 Susan Foden joined the Board on 1 March 2015.
5 Melanie Lee resigned as director and member of the Remuneration Committee on 25 September 2014.
Notes
Richard Wohanka was unable to attend the July Board meeting (and AGM) due to a standing engagement in place prior to his appointment to the Board. Giles Kerr did not attend one
Nomination Committee meeting where his reappointment was discussed and one Remuneration Committee meeting due to a late change of venue. James O’Shea did not attend one
Nomination Committee meeting where his reappointment was being discussed and one Board meeting due to a pre-arranged engagement.
The external auditor usually attends the Audit Committee meetings and the remuneration advisers usually attend the Remuneration Committee meetings.
The table shows, for each director, number of meetings attended/number of meetings eligible to attend.
Additional specific Board sub-committee telephone meetings were held as appropriate to approve specific business activities such as the acquisition of PneumRx.
There were Board update calls when there was a larger break between scheduled meetings.

7/7
7/7
1/2
7/7
6/7
6/7
2/2

No1
Yes
Yes
Yes
Yes
Yes
Yes

3/3
2/3
n/a
3/3
2/3
n/a
n/a

n/a
3/3
n/a
3/3
n/a
3/3
n/a

n/a
n/a

n/a
4/5
1/1
5/5
2/2
n/a
2/2

Board composition, membership
and election of directors
The Board currently comprises six non-executive directors,
including the Chairman, and two executive directors. On 25
September 2014, having served as a non-executive director
since 2010, Melanie Lee resigned from the Board to take up
the position of Chief Scientific Officer for the Company.
Following an extensive recruitment process, Susan Foden
joined the Board as non-executive director on 1 March 2015.
Susan has a strong background in the field of Biotech and
Healthcare and her significant industry experience offers a
great benefit to the Company as growth plans are implemented.
The names and brief biographical details of all the current
directors are set out on pages 38 and 39. The Company
recognises the importance of diversity, including gender
diversity, and, following the changes, 25% of the members of
the Board are women. Details of gender diversity in the Group
below Board level can be found in the corporate responsibility
area of the strategic report on pages 30 to 32.

The change of directors during the year did not affect the
gender balance of the Board. As reported in the Nomination
Committee report on page 54, the Committee reviews the
composition of the Board on a regular basis to ensure that,
as the business evolves, the Board continues to have the
necessary skills to support the development of the business.

All non-executive Board appointments are for three-year
terms, subject to re-election at each year’s AGM, apart from
Giles Kerr and James O’Shea, who were each reappointed
for a one-year term, having both served on the Board for more
than six years. Following the formal evaluation process, the
Chairman is satisfied that each of the directors continues to

Board by gender

Male
Female

75%
25%

Balance of directors

Chairman
Executive directors
Non-executive directors

Tenure of non-executive directors and Chairman

More than 6 years
4-6 years
2-4 years
0-2 years

1
2
5

2
1
2
1

BTG plc Annual Report and Accounts 2015Corporate governance report continued

Governance

perform effectively and demonstrates commitment to their
role, including time for Board and Committee meetings and
their other duties.

Independence
The Board applies a rigorous process in order to satisfy
itself that its non-executive directors remain independent.
The Board reviews the independence of the non-executive
directors every year, using its own judgment when applying
the criteria in the Code. Having undertaken this review, the
Board confirms that all the non-executive directors are
considered to be independent in character and judgment.
In line with the recommendations of the Code, at least half
the Board, excluding the Chairman, are independent non-
executive directors. Garry Watts was considered to be
independent at the time of his appointment although,
in accordance with the Code, he is excluded from the
determination of whether at least half the Board are
independent non-executive directors thereafter.

Conflicts of interest
To address the effect of Section 175 of the Companies Act
2006, the Company’s Articles of Association enable the
Board to authorise situations that might give rise to directors’
conflicts of interest. Directors complete a declaration form
in order to determine whether any actual or potential
conflicts need authorisation. The forms are reviewed annually
to ensure that the information provided is up to date and
includes any disclosures made during the past year.

At the March 2015 Board meeting all directors were asked to
review and make any necessary amendments to their existing
declarations. The Company Secretary has reviewed the latest
declarations and has confirmed that no conflicts have arisen.
Board members are regularly reminded to disclose any
conflicts should they arise. Any such notifications are kept in a
conflicts register maintained by the Company Secretary. Any
director who considers they may have a potential conflict of
interest is required to report this to the Chairman in the first
instance, who may consult the Nomination Committee and
report its findings to the Board.

Effectiveness
Information, training and support
In advance of each meeting the directors receive an agenda
and a full set of papers for each item to be discussed via a
secure Board portal, accessible on an electronic device.
Directors receive sufficiently detailed strategic and
operational reports. The Board calendar includes an annual
strategy day and senior executives regularly attend meetings
to enhance the non-executive directors’ understanding of
the business and current issues and to make presentations
on the results and strategies in their areas of responsibility.
Board meetings are occasionally held at different office
locations in the UK and US enabling non-executive directors
an additional opportunity to visit other Company sites.

When they join the Company, each director receives a
comprehensive induction package. The induction process
includes written information and is tailored to their experience.
Sue Foden joined the Company in March and met with
appropriate members of staff and visited different
Company sites.

The time commitment of the non-executive directors
depends on the number of committees that they are a
member of but the expectation is that they would normally
work approximately two days per month, subject to any
increased demand driven by business activity.

All directors refresh their knowledge regularly through
publications and conferences and through information
provided by the Company and its advisers. Specific training
during the year has included updates on social, environmental
and ethical matters.

There is an agreed procedure for directors to take independent
professional advice, if necessary, at the Company’s expense.
They also have direct access to the advice and services of
the Company Secretary who is responsible for ensuring that
Board procedures are followed. The Company also provides
appropriate directors’ and officers’ liability insurance.

Performance evaluation
The Board recognises that a review of its own performance
is beneficial in ensuring its continued effectiveness and
development.

The CEO is responsible for appraising the performance of
the CFO. The Chairman and non-executive directors review
the performance of the CEO. The non-executive directors led
by the SID and following input from the executive directors,
evaluate the performance of the Chairman each year.
The Committees also review their performance and report
the results to the Chairman and the Board as a whole.
The non-executive directors meet at least once a year
without the executive directors in order to discuss the
performance of the executive directors and any concerns
over their management of the Company’s affairs.

The Corporate Governance Code (the Code) requires that
the evaluation be carried out by external consultants at
least every three years. For the last two years the evaluation
had been carried out internally via a series of web-based
comprehensive questionnaires. This year, SCT consultants,
who had carried out the evaluation three years ago, were
again asked to facilitate the evaluation.

The review was based on a number of things, including
observation, a questionnaire, analysis of documentation and
interviews, both with the Board and the Leadership Team.

The process confirmed that the Board provided effective
leadership to the Group, being well structured with a broad
range of skills and the right expertise. It is well chaired and
works in a robust, evidence-based and decisive way.

BTG plc Annual Report and Accounts 201547

Governance

Progress had been made against the objectives set for
last year:
• To respond to the growing complexity of the business as well
as pace of activity leading to the requirement for increased
communication, additional Board calls were set up.
• To continue to improve the monitoring of progress on
delivering the strategy and its component parts and
understanding the long-term sustainability of the business
model.

• To continue to focus on people and leadership development
and succession planning ensuring the Group has adequate
capability and capacity in terms of people and resources to
meet its diversifying objectives.

Following the evaluation by SCT consultants this year,
the Board objectives are to:
• Continue evolution of the development of the approach
to risk management including ‘deep dives’ on key risks
and ‘top down’ risk reviews, integrating the risk and
strategy discussions.

• Enhance the annual strategy review with additional interim
discussions regarding specific elements of the strategy.
• Continue progression with enhancing the capabilities of the
Group, including those of the Board and having in place
succession plans for senior staff and Board members,
taking into account its evolving strategy.

• Continue to enhance the induction programme for new

directors, tailored for individual needs and understanding.

Accountability
Financing reporting and internal control
The statement of directors’ responsibilities in relation to the
preparation of the financial statements is set out on page 78
and the auditor’s statement on the respective responsibilities
of directors and the auditor is included within its report set out
on pages 80 to 82.

Communications with shareholders, such as results
announcements, interim reports, annual reports or AGM and
trading updates, are reviewed carefully and approved by the
Board, or a sub-committee of the Board, to ensure they are
accurate, transparent, balanced and understandable in the
view they give of the Company’s progress and prospects.

The Board has overall responsibility for ensuring that the
Group maintains an adequate system of internal control and
risk management and for reviewing its effectiveness. The
Audit Committee, on behalf of the Board, undertakes the
detailed monitoring of the controls, at least annually, and
reports to the Board on its findings. The Board has reviewed
the system of internal controls including financial controls for
the year under review and up to the date of approval of this
Annual Report and Accounts. Such a system is designed to
manage rather than eliminate the risk of failure to achieve
business objectives, and can only provide reasonable and not
absolute assurance against material misstatement or loss.

The criteria applied by the directors, in judging the effectiveness
of these controls, are that they allow the maximisation of
shareholder value by exploiting business opportunities whilst
ensuring that risks are properly identified and managed and
the Group’s legal, regulatory and other obligations are met.
The controls are regularly reviewed to ensure that they
enable the proper management of business risks.

To strengthen the control framework of the business, the
Group has established an Internal Audit group supported
externally by PricewaterhouseCoopers (PwC). Further
information can be found in the Audit Committee report on
pages 50 to 53.

Structure and reporting
The Group has a well-defined management structure with
clear lines of responsibility and accountability. The Board
is responsible for setting the overall strategy and reviewing
the performance of the Group.

The Leadership Team generally meets weekly and more
formally on a monthly basis to review business performance
measured against annual budgets, longer-term plans, an
agreed set of objectives and performance criteria for each
business unit. In addition, it will assess and respond to issues
arising across the Group. Forecasts are monitored monthly
on the basis of detailed reviews of progress and prospects.
Reporting to the Board is based on the information provided
to and reviewed by the Leadership Team as well as their
assessment and recommendations regarding how to deliver
the Group’s objectives. The reports include non-financial as
well as financial information and a review of progress within
the development portfolio.

Compliance and the review of risk and risk management are
embedded throughout the Group. The Audit Committee has
reviewed the detailed reports on Risk, Internal Audit and
Compliance and reported its findings to the Board (see the
Audit Committee report on pages 50 to 53 for more detail).
The Board has reviewed the risk management process and
confirms that ongoing processes and systems ensure that
the Group continues to be compliant with the guidance on
internal control issued by the Code.

The Group has a system and key experts responsible for
supporting the protection and maintenance of patents and
other intellectual property rights on the products in which
BTG has an interest. The Group also actively monitors its
royalty revenue streams and from time-to-time will audit its
major licensees to ensure compliance with the terms of the
relevant agreements.

Delegated authority structures ensure that decisions are
taken at an appropriate level, with an appropriate level of
input by internal and external expert advisers. The delegated
authority structure prescribes financial limits of approval at
each level and requires decisions with significant financial,
legal risk or reputational impact for the Group to be approved
by the Board.

BTG plc Annual Report and Accounts 2015Corporate governance report continued

Governance

Corporate policies, values and compliance
All employees receive periodic training on the key
requirements of BTG’s Code of Conduct. It covers all aspects of
ethics, business practices and compliance, including a
whistle-blowing policy, an anti-bribery and anti-corruption
policy and policies related to the ethical conduct of research
and development and interactions with doctors and other
healthcare professionals. Relevant employees meet regularly
to discuss external changes in the regulatory, legal and
financial environments in which the Group operates to ensure
it remains fully compliant with new legislation and best
practice. Periodic ‘lunch and learn’ sessions are run updating
staff on key issues affecting the business and online tools are
utilised for training.

The Board, through the Audit Committee, has reviewed
the effectiveness of the internal controls of the Group.
The controls described above operate and are embedded
within the day-to-day business. There is an ongoing process
for identifying, evaluating and managing significant risks
faced by the Group. A reporting structure has been in place
throughout the year up to the date of approval of the financial
statements and is regularly reviewed by the directors and is in
accordance with the Code. Further information is given in the
Audit Committee report on pages 50 to 53.

BTG places great emphasis on the embedded behaviours
and values that define the Company and have been integral
in building the Company that it is today and believe them to be
key for continuing success. A Companywide meeting is held
each month where all sites join via videoconference. Louise
Makin updates employees on different aspects of the
business and presentations are given by employees from
all areas of the business.

Related parties and conflicts of interest
The Group maintains robust procedures to ensure that related
party transactions and potential conflicts of interest are
identified, disclosed and managed. Directors declare interests
in other businesses on appointment to the Board, as they arise
and also complete an annual self-certification. Where it is
identified that a related party relationship exists, the Board
agrees specific additional procedures to ensure the effective
management of potential conflicts of interest.

Giles Kerr, a non-executive director of the Board, is also the
Director of Finance for Oxford University and a director of
Isis Innovations Limited, a wholly-owned subsidiary of
Oxford University. Wholly-owned subsidiaries of the
Company entered into technology commercialisation
and revenue sharing agreements with these organisations
prior to Giles Kerr joining the Board. The Group has licensed
the intellectual property rights covered by these agreements
to independent third-party companies that are developing
and/or selling the licensed products. Under these licence
agreements, the Group is entitled to receive milestone
payments and/or royalties on sales of the products sold
by the third-party licensees.

Under the various revenue sharing agreements, the Group
pays a share of any income it receives to Oxford University
or Isis Innovations, depending on the specific technology
that generated the income. As the revenue sharing
agreements do not permit these organisations to have any
input over the commercialisation of the licensed products
or the amount payable under the relevant revenue sharing
agreement, Giles Kerr is not able to influence the amounts
received in his position outside the Group. Because he has
no influence over any aspect of these agreements in his
role outside the Group, the Company considers that his
independence in relation to the Group is not compromised.

Within the Group, to avoid any possible conflict of interest,
it has been agreed that Giles Kerr will not participate in any
discussions or decisions concerning the relevant agreements
either within the Board or in any other discussions or meetings
with the executives of its subsidiaries.

The Board has considered, and is satisfied with, the separation
of duties and safeguards.

On 4 December 2014 the Company completed a placing of
18,867,925 new ordinary shares at a price of £7.95 per share,
raising a total of approximately £150m (before expenses).
The purpose of the placing was to fund the completion of the
acquisition of PneumRx which was announced on 4 December
2014 and completed on 8 January 2015. As part of that
placing, Invesco Asset Management (who immediately prior to
the undertaking of the placing held 22.95% of the issued share
capital of the Company) subscribed for 3,255,000 ordinary
shares at the placing price representing a total consideration
at the placing price of £25.9m, representing 0.896% of the
market capitalisation of the Company as at the close of
business on 4 December 2014. The completion of the placing
resulted in Invesco holding a total of 23.85% of the issued
share capital of the Company as at 5 December 2014. Invesco
participated in the placing on the same terms as other
subscribers and no commission was payable to them in
respect of that participation. As Invesco held greater than 10%
of the issued share capital of the Company immediately prior
to the placing they were deemed a ‘related party’ for the
purposes of the Listing Rules.

See note 29 on page 119 for additional related party
disclosures.

Market abuse directive
The Company has a Disclosure Committee, as required by
the Market Abuse Directive, comprising the CEO, CFO, Vice
President of Corporate and Investor Relations and Company
Secretary. The Committee reviews all significant items of
business within the Group regularly, and on an ad hoc basis if
required, and maintains an Insider List recording both those
employed within the Group and at external advisers who may
have access to inside information. Whenever individuals are
placed on or removed from the List they are notified
accordingly and advised of their responsibilities.

BTG plc Annual Report and Accounts 201549

Governance

This enables the Board to develop an understanding of the
issues and concerns of major shareholders.

Extensive information, including annual and interim reports
and all press releases, is published in the Investor Relations
area on the Group’s website (www.btgplc.com) for access by
all shareholders. In addition, through the website, individuals
can register to receive electronic copies of all Company
announcements on the day they are issued.

Annual General Meeting
The AGM gives private shareholders the opportunity to meet
and discuss the Group’s business with the Board and other
senior management. A full business presentation is given and
there is an open question and answer session during which
shareholders may ask questions both about the resolutions
being proposed and the business in general. The Chairmen of
the Audit, Remuneration and Nomination Committees will be
present at the AGM to answer shareholders’ questions and
the Board is available after the meeting for an informal
discussion with shareholders.

The AGM will be held at 10.30 am on Wednesday 15 July 2015,
at the offices of Stephenson Harwood LLP, 1 Finsbury Circus,
London EC2M 7SH. The Notice convening the meeting is
distributed separately to shareholders at least 20 working
days before the meeting. It is also available on the Company’s
website: www.btgplc.com/investors/reports-and-presentations.
The letter accompanying the AGM Notice includes details of
the resolutions and explanatory notes thereon.

Members of the Company unable to attend the meeting
may elect to vote electronically or using the proxy form
accompanying the Notice. In order to vote electronically,
members should log on to Capita Asset Services’ (BTG’s
registrars) website (www.capitashareportal.com) and follow
the instructions on the screen. Crest members may send their
proxy votes to the Company’s registrars electronically.

In line with best practice, the Company has decided to
introduce mandatory poll voting this year on all resolutions
put to the AGM. The results of the voting on all resolutions
will be disclosed and subsequently published in a market
announcement and on the Company’s website following
the meeting.

Remuneration
The Remuneration Committee has responsibility for agreeing
remuneration policy and the individual remuneration of all
executive and non-executive directors and members of the
Leadership Team. The Remuneration Committee is formed
exclusively of non-executive directors and its report can be
found on pages 56 to 75.

Relations with shareholders
The Group maintains good communications with
shareholders through formal and informal dialogue.
The Company formally reports its results twice a year
with full year results announced in May and interim
results in November, and Close Period and AGM statements.
The CEO and CFO give presentations of these results to the
Company’s institutional shareholders, analysts and the media.
The presentations are broadcast live on the internet for the
information of all shareholders.

During the year the Company hosted two site visits at our
facility in Camberley, Surrey for analysts and investors.
Both visits were based around our Interventional Medicine
business and visitors received presentations from the
commercial leaders responsible for Varithena®, EKOS and
Interventional Oncology. A tour of the laboratories was given
as well as demonstrations of the products.

As part of our ongoing efforts to broaden our investor base,
we launched a Level 1 sponsored ADR programme in February
2015. This offers US investors a platform on which to invest in
our Company and aims to raise our profile with a large pool of
potential investors.

The CEO and CFO meet regularly with institutional investors
with support from the Investor Relations department.
The Chairman, Senior Independent Director and other
directors are available to meet with major shareholders on
request. As part of his role as the Senior Independent Director,
Giles Kerr is available to shareholders when contact with the
executive directors or the Chairman may not be appropriate.
No other requests were received from major shareholders to
meet with the Chairman, Senior Independent Director or other
non-executive directors during the year. The Investor Relations
department acts as a contact point for investors throughout
the year.

The directors receive a report from the Investor Relations
department at each Board meeting giving information on
material changes in shareholdings and any feedback from the
Company’s brokers and investors. Following the twice-yearly
results announcements and any subsequent shareholder
meetings held by management, detailed feedback from
external advisers and brokers is provided to the Board,
outlining the views and reactions of investors and analysts.

BTG plc Annual Report and Accounts 2015Audit Committee report

The Committee and its membership
The Committee, established by the Board, is responsible for
monitoring all aspects of financial reporting and management
of risk. The Committee’s full terms of reference, reviewed and
updated during the year, are available on the Company’s
website, or from the Company Secretary on request.

Committee members

Member since

Giles Kerr (Committee Chairman)
Ian Much
Richard Wohanka
There were three Committee meetings during the year. Details
of attendance can be found on page 45.

6 November 2007
1 November 2010
1 January 2013

Committee members’ qualifications
The Committee’s composition was reviewed during the year
and the Board is satisfied that the current members have
the breadth of knowledge and experience necessary to
effectively fulfil the Committee’s responsibilities. Giles Kerr
has a strong financial background, he is a Fellow of the
Institute of Chartered Accountants and Director of Finance
at Oxford University. As required by the Code, he is considered
to have the necessary significant recent and relevant financial
experience to qualify him to be the Chairman of the Committee.
He receives additional remuneration to compensate him for
his additional responsibilities, as set out on page 75. Other
members bring substantial experience in international
business areas as well as financial expertise to the deliberations
of the Committee. In particular Richard Wohanka has more
than 20 years’ experience in the finance and asset management
industry. More information is given in the directors’ biographies
on pages 38 and 39.

Committee meetings
Only members of the Audit Committee are entitled to attend
meetings, however the CEO, CFO, Group Financial Controller,
Internal Auditor and Corporate Risk and Compliance Officer
also normally attend meetings. The external auditor always
attends Committee meetings. The Company Secretary or his
deputy serves as secretary to the Committee.

Time spent by the Committee during the year

Internal audit
External audit
(inc. non-audit services)
Financial reporting
Tax
Risk management
and compliance
(inc. whistleblowing)
Governance/policy/other

13%

19%
21%
10%

26%
11%

Governance

Dear Shareholder,
The Audit Committee’s key objectives are to provide
effective governance over the Group’s financial
activities. It reviews and enhances integrity of the
Group’s internal controls, its financial reporting and
the way the Group assesses, manages and reports
risk and compliance as well as the performance
of both the internal and external audit functions.
A significant part of the Committee’s time is spent on
these areas, and the highly regulated environment
in which the Company operates only enhances the
need to ensure our processes remain fit for purpose.

The 2014 version of the Corporate Governance
Code (the Code) which will apply to next year’s
annual report, will further strengthen the role of
the Committee. The Committee already puts focus
on areas subject to change in the Code, such as
the robust assessment of principal risks and how
these are managed and mitigated as well as internal
control systems.

During the year we have spent more time building
on our understanding of the risk management
processes and reviewing the risks. The whole
risk management process has been thoroughly
reviewed and there have been changes in the Risk
Management Committee following this review.

The Board, after taking advice from the Audit
Committee, confirmed that the Annual Report
and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Group’s
position and performance, business model
and strategy.

The following report sets out the activities of the
Committee over the past year and how it has
discharged its responsibilities.

Giles Kerr
Chairman of the Audit Committee

BTG plc Annual Report and Accounts 2015Activities
A summary of matters considered at the Committee meetings since the last Annual Report is shown. Each area of review is
explained in further detail within this report:

Area of review

Financial reporting

Activities undertaken

Review of the Group’s half year and full year results

Consideration of whether the Annual Report is fair, balanced and understandable

Review of external auditor reports on the half year and full year results

Consideration of significant accounting issues as detailed on the following page

Review of prospective changes in accounting standards and their potential impact

Review of trading updates issued by the Group and amendments thereto

Assessment of the going concern basis of preparation for the financial statements
and considering whether there were any material uncertainties to the Group’s ability
to continue to adopt this basis over a period of at least 12 months from the date of
approval of the financial statements

Governance

External auditor

Current and deferred tax
Review of External Auditor independence

Review of the scope, nature and resource planning for half year and full year audits

Approval of external auditor fees

Risk management and internal control Review of risk management systems, internal controls and fraud, anti-bribery and

Review (and approval where required) of use of Auditors for non-audit work

anti-corruption procedures

Review of enhanced compliance systems and policies

Review of the results of internal compliance monitoring and auditing

Review of the Group’s whistle-blowing policy

Review of the Group’s tax affairs

Internal audit

Review of internal investigations and Internal Investigations Policy
Review of the integration of the acquisition made in 2015 so far as it relates to key controls

Committee governance

Review of the Internal Auditor’s work plan

Review of Internal Audit reports produced throughout the year

Review of structure and resources of the Internal Audit group
Review and amendment of Committee terms of reference

Externally facilitated effectiveness review

Financial reporting
The detailed monitoring of the integrity of the annual and
half year results is a key role of the Committee and includes
a review of the significant financial reporting judgments
contained in them with the aim of ensuring that they present
a fair and balanced view of the Company and comply fully
with the relevant statutes and accounting standards. Where
requested by the Board, the Committee will advise on whether,
taken as a whole, the Annual Report and Accounts is fair,

balanced and understandable. As part of this review it
discusses the audit findings and Auditor’s Report with
management and the External Auditor and considers
significant judgments and issues contained in them as
set out below. Following this discussion the Chairman of the
Committee reports the results of its review to the full Board.
The External Auditor meets with the non-executive directors
in the absence of management at least twice a year, when
the half and full year results are discussed.

BTG plc Annual Report and Accounts 2015Audit Committee report continued

Governance

Significant accounting matters
The Committee considered the following key accounting
issues, judgments and disclosures during the course of
the year:
• Carrying value of Goodwill and Intangible Assets:

The Committee received and critically reviewed a report
from management setting out the approach to and results
of impairment testing in accordance with IAS 36. The report
covered all asset classes, with a particular focus on goodwill
and intangible assets as further disclosed in note 12 and
the valuation methodology including discount rates,
assumed growth rates across and sensitivity analysis
for these asset classes

• Recognition of Deferred Tax Assets and Liabilities:

The Committee reviewed the appropriateness of deferred
tax asset recognition and the movements on deferred tax
assets and liabilities during the year. This included the
movements arising from the Group’s acquisition and the
assumptions made in setting up the deferred tax liability
on acquired intangibles

• Acquisition accounting: The Group completed the acquisition
of PneumRx during the year. The Committee discussed the
key assumptions and judgments applied by management
in satisfying the requirements of IFRS 3 and reviewed
valuation reports prepared by an independent third party
including valuation of the contingent consideration. Note 32
contains further details of acquisition accounting

• Presentation format of Consolidated Income Statement:
The Group’s Consolidated Income Statement on page 83
has, for a number of years, been prepared using a three
column format for each financial year. The Committee
reviews the appropriateness of this disclosure on an annual
basis and did so once again this year

• Other matters: During the course of the year, the Committee
received updates from management on Group corporate
structure, tax strategy, the adoption of new accounting
standards and the potential impact of future accounting
standards. In particular, the Committee discussed the
potential impacts of IFRS 15 ‘Revenue from Contracts
with Customers’.

Review of external auditor effectiveness,
independence and appointment
The Committee reviews the overall performance of the
auditor annually and approves its terms of engagement
and remuneration. The Committee discussed and agreed
the auditor’s proposed work plan prior to the commencement
of the audit of the results for the year to 31 March 2015
and also reviews the non-audit work carried out by the auditor
to ensure that such services do not impair its independence
or objectivity. The external auditor provided a report
demonstrating how their independence and objectivity
is maintained when providing non-audit services.

The Committee has a formal policy for approving the use
of the auditor for non-audit work detailing areas where the
auditors may not be used, areas where they may be used
subject to the agreement of the Committee and areas where
prior approval is not required. Areas where prior approval is not
required include audit-related services as specified in the APB
Ethical Standards for Auditors and other services, that are
routine in nature, where the fee is not significant in the context
of the audit fee and where the conduct of such services will
not adversely impact auditor independence or objectivity.

The Committee receives a written annual report from
management summarising the fees paid to the auditors for
non-audit work and whether such services were pre-approved
or specifically approved by the Committee. Details of the
amounts paid to the external auditor for non-audit services
are set out below.

Audit Committee approval

Task

Pre-approval required:
No

US tax compliance services
Others

Fees
£’000

256
–

Total fees paid to the Company’s auditor, KPMG, are shown
in note 6 on page 99. The Committee believes that the use of
KPMG was appropriate and efficient in the circumstances
and that independence was preserved as a partner other
than the audit partner was responsible for the work and the
fees paid were insignificant in the context of the size of KPMG
as a whole.

Each year, the Committee considers the reappointment of
the external auditor and makes a recommendation to the
Board. As part of this process, the Committee also looks at
the need for the rotation of the audit partner and assesses
the auditor’s independence. Richard Broadbelt has been audit
engagement partner as from the year ended 31 March 2014.
KPMG have been the Group’s sole external auditors since the
Company listed in 1995 and the audit contract has not been
put out to tender since their appointment. The Committee
reviews annually whether it is an appropriate time to
undertake an external audit tender and this year, taking into
account the complexity of the business, the speed that
changes continue to take place and the services offered by
KPMG and their independence, as well as guidance issued
by the Financial Reporting Council (FRC), the Committee
concluded that it would not be in the Company’s interests
to commence a tender process. Following this review, which
included considering auditor performance and independence,
the Board recommends the reappointment of KPMG as
external auditor, and to authorise the directors to determine
the auditor’s remuneration.

Having regard to the transitional arrangements under the new
EU Audit reform framework and the Competition & Markets
Authority’s Order, the Company still intends to consider
external audit tender, at the latest, nearer the time of the
next audit partner rotation, currently scheduled for 2018. The
Company may however put the audit out for tender at any time
before this date. The Committee will continue to monitor the

BTG plc Annual Report and Accounts 201553

Governance

consultations regarding how the EU Regulation will be
implemented in the UK, and will comply with any new
applicable requirements.

Risk management and internal control
The Board has overall responsibility for ensuring that the
Group maintains an adequate system of internal control
and risk management and for reviewing its effectiveness.
The Committee, on behalf of the Board, undertakes the
detailed monitoring of the risk management process and
internal control effectiveness and reports to the Board on
its findings twice-yearly. In particular, the Committee’s review
focuses on financial, operational, healthcare law compliance
and risk management controls for the year under review and
up to the date of approval of this Annual Report and Accounts.
Such a system is designed to manage appropriately rather
than eliminate the risk of failure to achieve business objectives,
and can only provide reasonable and not absolute assurance
against material misstatement or loss.

The Committee discharges its risk management duties
using a combination of reports from management, Internal
Audit and the external auditor. A risk management reporting
structure has been in place throughout the year and up
to the date of approval of the financial statements and
is regularly reviewed by the directors in accordance with
the Code. During the year, a thorough review of the risk
management reporting structure took place and changes
made to enhance the process.

The Risk Committee, chaired by the CFO and including
employees from the appropriate sections of the business,
reviews risk throughout the business. The membership of
the Committee was considered as part of the review and
some changes made. The Risk Committee maintains a risk
management plan that is designed to identify risks, assess
the probability of those risks occurring, the impact should
they occur, how such risks are being appropriately mitigated
and monitored and the actions and individuals responsible
for delivering the mitigations. In depth analysis of key risks
is undertaken periodically to ensure a degree of independent
assessment of the operational application of the risk
management process and to seek to identify opportunities
to apply alternative or enhanced risk mitigation strategies.
The Committee continues to monitor this process including
a consideration of what comprises an acceptable level of
risk in key areas and the optimal mitigation strategy, having
regard to the costs, timelines and likelihood of success of
the mitigation options. The Committee reports its findings
twice-yearly to the Board.

Historically, the Group had a Compliance Steering Committee,
which was responsible for maintaining and overseeing a
system to ensure that the Group is fully compliant with all
applicable laws (including US Federal and State requirements)
that relate to the commercial operations of the Group,
including its US sales and marketing teams. Given the
importance of compliance, a change was made during the
year to move this responsibility to the Leadership Team to

provide direct oversight. The Leadership Team, therefore, sets
policy and oversees any investigations required with respect
to any alleged failures. It also assists in the definition and
assessment and response to compliance monitoring and
auditing and the results are reported to the Audit Committee
alongside the risk management report.

Additional details of risk management and principal risks
that may affect the business are given on pages 33 to 36 in
the strategic report.

Whistle-blowing
In line with best practice, the Group supports an independent
and confidential whistle-blowing procedure and the
Committee is responsible for ensuring that arrangements
under which employees may raise concerns about possible
improprieties in matters of financial performance or other
matters are operating effectively and that appropriate
follow-up action takes place. Included within the Employee
Code of Conduct are details of the Group’s whistle-blowing
policy and displays at each site give details of what employees
should do if they have concerns regarding any aspect of the
business. Employees are encouraged to report any concerns
without fear of recrimination and an independent telephone
line is available should staff wish to use it. The arrangements
were reviewed by the Committee during the year and were
found to be operating effectively.

UK Bribery Act
The Group has continued to operate its anti-bribery and
anti-corruption policy introduced in 2010 in response to
the UK Bribery Act 2010. This has included the conduct of
due diligence on new key business partners who may act
on behalf of the Group in higher risk areas of business.
Enhancements were made to the review process during
the year to further strengthen our approach.

Internal audit
The Committee monitored and reviewed the work of Internal
Audit throughout the year. The annual internal audit plan was
approved by the Committee at the start of the year and any
subsequent changes to that plan have also been approved
by the Committee. The internal audit plan focuses on financial
controls and compliance with healthcare law. The work
carried out by Internal Audit did not identify any material
weaknesses in internal controls but included proposals
to enhance control procedures. The Committee monitors
management’s responses to ensure that control improvements
are instigated on a timely basis. The internal audit function is
supported by PwC under the direction of the Audit Committee.

Committee evaluation
As part of corporate governance, the review of the Committee
and its effectiveness was externally facilitated this year. The
results and recommendations for improvement were reported
to the Board. The Committee was found to be functioning well,
with an effective reporting relationship with the Board and
providing a good balance between in-depth assessment,
diagnosis and analysis and a clear practical approach.

BTG plc Annual Report and Accounts 2015Nomination Committee report

Governance

Dear Shareholder,
The Committee is responsible for appointments
and reviewing the structure of the Board and its
Committees. The key objective of the Committee is
to ensure the Board has the balance of individuals
who have the appropriate mix of skills, experience,
knowledge and expertise to lead the Company.

Having regard for the key capabilities required for
the Company to deliver its strategy, I was pleased
to be able to announce the move of Melanie Lee
from the Board to join the Leadership Team as
Chief Scientific Officer.

As a consequence, we took the opportunity to
further diversify the breadth of experience on
the Board with the appointment of Susan Foden,
someone with rich experience in our sector, in
March this year.

Garry Watts
Chairman of the Nomination Committee

The Committee and its membership
The Committee’s full terms of reference, reviewed and
updated during the year, are available on the Company’s
website, or from the Company Secretary on request.

Committee members

Member since

Garry Watts (Committee Chairman)
Giles Kerr
Ian Much
James O’Shea
There were three Committee meetings during the year. Details
of attendance can be found on page 45.

1 January 2012
16 July 2008
1 January 2012
13 May 2009

Other attendees at Nomination
Committee meetings
• The Chief Executive Officer may attend meetings

by invitation.

• The Company Secretary or his deputy serves as secretary

to the Committee

The key responsibilities of the Committee are:
• To regularly review the structure, size and composition
of the Board looking at its balance of skills, experience,
independence and knowledge as well as its diversity
(including gender diversity) and make recommendations
to the Board on any appropriate changes.

• To identify, via a rigorous and transparent procedure,

and nominate, for the Board’s approval, suitable candidates
to fill any vacancies for non-executive directors and,
with the assistance of the CEO, executive directors.

• To plan for the orderly succession of directors to the Board.
• To recommend to the Board the membership and

chairmanship of the Audit and Remuneration committees.

Time spent by the Committee during the year

Diversity matters
Non-executive search
Succession planning and
reappointment of directors
Governance/other

8%
42%

42%
8%

BTG plc Annual Report and Accounts 201555

Governance

Activities
The principal activities during the year related to:
• The appointment of Susan Foden as a

non-executive director

• The reappointment of the Chairman and non-executive
directors Giles Kerr and James O’Shea. James and Giles
were each reappointed for 12 months, subject to being
re-elected at the Annual General Meeting as they each
had served on the Board for more than six years. It is the
expectation that any non-executive director reappointment
beyond six years would be made on an annual basis

• Discussing succession planning for the Group’s

Leadership team, including the CEO and CFO and the
Group’s senior managers

• Considering the expertise and capabilities as well as the
capacity required of the Group’s management team and
wider employee group having regard to the Group’s strategy
and changing needs. This remains an area of focus in light
of the continued rapid growth of the Group

Appointment process
Following the resignation of Melanie Lee as a non-executive
director to become the Group’s Chief Scientific Officer,
Susan Foden was appointed to the Board as an independent
non-executive director.

When considering Board appointments, the Committee
considers what areas of expertise would the Board most
benefit from and draws up a full description of the role,
desired skills and capabilities accordingly. Gender diversity
was an important part of the process, as was diversity in
background. Russell Reynold Associates was appointed to
support the appointment process, given their experience of
fulfilling such roles and have not provided any other
recruitment services to the Company.

The Committee carried out a rigorous interview and
selection process and shortlisted candidates were also
interviewed by the other non-executive directors and the
CEO. The Committee, taking into account the views of the
other directors and the Board’s requirements recommended
to the Board that Susan Foden be appointed as a non-
executive director and also as a member of the Remuneration
Committee, given her experience on other Boards. Following
a discussion, the Board accepted the recommendation and
Susan Foden was appointed to the Board and as a member of
the Remuneration Committee with effect from 1 March 2015.

Following Susan’s appointment, and that of any new non-
executive director, the Committee ensures that they receive
a comprehensive induction programme. As part of the
induction process each new director is given a full briefing on
the financial and operating history of the Company and details
of its strategy, operating plans, budgets and forecasts for

future years. Arrangements are also made for each new
director to meet with the heads of the various business units
for a briefing on the areas of business in which the Company
is involved. A review is undertaken of the content of recent
Board and Committee discussions including risk management
reports, minutes and historical actions. A briefing on corporate
governance and directors’ responsibilities may also be
given and the opportunity to attend external courses is
also available.

Succession planning
The development of talent below Board level is seen as
extremely important and an area of focus for the Board.
BTG continues to build an internal leadership pipeline
for senior roles and the director of HR updates the Board
regularly on progress. In addition to traditional Management
Development Programmes, the Group has expanded the
learning and development opportunities for leaders of people
across the business, allowing a pool of talented leaders to
be created and increasing the probability of retaining them
through meaningful development and career opportunity.

The Committee also reviews succession plans and plans
for emergency cover of key managers on a regular basis.

Diversity
The benefits of diversity across all areas of the Group are
recognised by the Board. The Company had two female
directors on the Board and following the appointment of
Susan Foden and the stepping down of Melanie Lee, the
Board retains its 25% female Board representation. This is
a percentage which the Company would like to retain in the
future. It is of the utmost importance to maintain strong
leadership and we will therefore continue to appoint only
the most appropriate candidates to the Board.

The policy on diversity applies across all levels of the Group
and further details can be found in the corporate responsibility
section on pages 30 to 32.

Committee evaluation
As part of the externally facilitated Board evaluation process,
a review of the Committee was carried out and was found to be
functioning effectively, with clear and well-focused processes.

Garry Watts
Chairman of the Nomination Committee

BTG plc Annual Report and Accounts 2015Directors’ remuneration report

Governance

Dear Shareholder
I am pleased to present the directors’ remuneration
report for the year ended 31 March 2015.

Overall it has been a positive year for the Company
and I have taken the opportunity to describe below
some of the major developments which set the
context within which remuneration decisions have
been made.

As previously communicated, the Committee
undertook a strategic review of the approach
to remuneration in 2013 to ensure it was aligned
with the Company’s goal of sustainable profitable
growth and the creation of long-term value for our
shareholders. The revised remuneration policy was
put to a shareholder vote at the 2014 Annual General
Meeting and was approved by 95.1% of shareholders.
There is no requirement to vote on the policy again
this year as no changes are being proposed at this
time. The Performance Share Plan (PSP) Multiplier
award structure introduced in 2013 will be reviewed
by the Committee this year and the overall policy will
be required to be put to a binding shareholder vote
again in 2017. In the interim the Annual Report on
Remuneration will continue to be subject to the
advisory shareholder vote at the AGM. The 2014
Annual Report on Remuneration was approved by
99.3% of shareholders at the 2014 AGM.

Structure of the report
The report is divided into three parts: (i) the ‘Annual
Statement’ summarising the business context in
which the Committee has operated; (ii) the ‘Directors’
Remuneration Policy Report’; and (iii) the ‘Annual Report
on Remuneration’ which provides shareholders with
details of the major decisions made by the Committee
and the remuneration actually delivered to the
Company’s directors during the 2014/15 financial year.

The full Policy Report has been included again this year
for information only. The chart showing remuneration
scenarios on page 62 has however been updated to
reflect proposed 2015 remuneration levels. Additional
information has been included to assist with
comprehension.

2015 Annual Statement
The Committee reviews the Company’s remuneration
strategy at least annually. In light of the significant
changes to the policy approved by shareholders in
2014 no changes have been made during the year.

We believe executive directors should be incentivised
to promote the long-term success of the Company and
rewarded based on performance and by reference to
transparent and demanding performance targets,
reflecting best practice. In June 2014, awards were
granted under the PSP. The Core award element of the
awards will be capable of vesting in June 2017 subject
to EPS and relative Total Shareholder Return (TSR)
performance conditions measured over three financial
years. In line with our Policy, the executive directors will
then have the opportunity to roll-over these awards so
that they are at risk and in return receive a Multiplier
award that can reduce or enhance the awards based
on TSR performance measured over five years to
31 March 2019. In addition, as a result of a successful
period of sustained growth, 100% of the shares
subject to the 2011 PSP were due to vest in 2014.
However, both of the executive directors instead
elected to roll-over 100% of the shares that would
otherwise have vested, in order to receive an
equivalent Multiplier award, putting their entire
awards at risk for a further two years. Vesting of the
2011 Core and Multiplier awards will be assessed in
2016 based on relative TSR performance over the
full five-year period from grant. This election to
roll-over vesting, at risk, demonstrates the executive
directors’ commitment to the long-term success
of the Company.

BTG plc Annual Report and Accounts 201557

Governance

Shareholding guidelines for the executive directors
were increased two years ago (to 250% of salary for
Louise Makin and 150% of salary for Rolf Soderstrom)
and both currently have shareholdings significantly in
excess of these guidelines, aligning their interests with
those of shareholders.

Progress during the year:

The Company has continued its strategy of both organic
and acquisitive growth and realised a number of
significant milestones during the year. These include:

• The commercial launch of Varithena® in the United
States, which represents a significant development
for the Company’s Interventional Medicine business

• EKOS Corporation securing FDA approval for the
use of the EkoSonic® device in a new indication
(pulmonary embolism) and delivering 67%
revenue growth from prior year reported revenues

• Establishment of direct sales activities in Europe
by the Interventional Oncology business, with that
business unit achieving revenue growth of 30% overall
from prior year reported revenues

• Opening of offices in Taiwan and Hong Kong as
part of the Group’s Asia strategy and approval
of DC Bead® in China where the Company has
partnered with SciClone Pharmaceuticals, Inc.

• The acquisition of PneumRx completed in January,

providing the Company with a presence
in the new area of Interventional Pulmonology

• Settlement of the patent dispute in the US

relating to use of snake antivenoms, securing the
Company’s leadership in the area, with the Specialty
Pharmaceutical business achieving 18% revenue
growth from prior year reported revenues

As a result, there has been a significant increase in
shareholder value over the course of the year, with
the share price increasing from 545.5p on 1 April
2014 to 715.0p on 31 March 2015. The above events
contributed to the assessment that the Company and
executive directors each met substantially all of their
financial and operations bonus criteria, which will
result in an 89% bonus payout for the executive
directors (70% of which related to Company objectives
and 30% of which related to personal performance).

The personal and corporate objectives are targets
that are linked to the longer-term development of the
business. They are therefore commercially sensitive
as they relate to the measures that will drive
developments over the next three to five years.

Whilst the financial targets are being fully
disclosed the Committee is only able to provide
a high level summary of the personal and
corporate non-financial targets.

The Group has seen revenues grow 87% over the
last three years, an approximate 98% increase in
the number of employees and an increase in market
capitalisation of approximately 150% over the same
period. As a result of this financial performance and
sustained growth, there will be 100% vesting under
the 2012 Option and PSP awards, subject to the
decision to be made by each director whether to
roll-over 50% or 100% of the PSP amounts that
would otherwise vest, in order to receive an equivalent
Multiplier award that can increase or decrease the
actual level of awards vesting based on relative TSR
performance up to the end of year five after grant.
With respect to the 2012 PSPs, the actual amount
vesting will depend on whether the executive directors
elect to roll-over an award from a Core award to a
Multiplier award. If no such election is made, vesting
will occur in June 2015. Vesting will occur in June 2017
in relation to any part of the Award for which an
election is made.

The 2015 salary increases for both the executive
directors were 3%, compared to an average of those
to be awarded to the wider workforce at 3.9% (with
the full range of increases across the Company being
0 to 15%). This change resulted in salaries for the year
starting 1 April 2015 of £586,327 for Louise Makin
and £384,310 for Rolf Soderstrom.

At the time of his reappointment on 1 January 2015,
the annual fee for the Chairman, Garry Watts (which
had been fixed for his initial three-year term) was
increased from £175,000 to £235,000 (10% p.a.) and
again fixed for a further three years.

We continue to be committed to maintaining an open
dialogue with shareholders and welcome feedback.
We hope for the continued support of shareholders at
the AGM on 15 July 2015 where you will be invited to
vote on the 2015 Annual Remuneration Report.

Ian Much
Remuneration Committee Chairman

18 May 2015

BTG plc Annual Report and Accounts 2015

Directors’ remuneration report continued

Directors’ Remuneration Policy Report
(restated from the 2014 Annual Report)
The present Policy was approved by binding shareholder vote
at the AGM on 16 July 2014 and became formally effective
from that date.

The Policy enables the Company to offer a package of
rewards that:
• is sufficiently competitive to enable the Company to attract
and retain the management talent it needs to ensure the
Group is successful;

• supports the achievement of the Company’s strategy by

providing the potential to receive significant rewards linked
to the long-term performance of the Company;

• aligns executives with shareholders and helps to retain
them by delivering a significant element of remuneration
in shares; and

• is flexible enough to cope with the Company’s changing

needs as it grows and the strategy evolves.

The Committee believes that the salary and bonus structure
and forfeiture provisions, together with the shareholding
guidelines and participation in long-term incentive plans with
performance measured over three to five years from grant,
provide a balanced market-competitive package for the
executive team which is aligned with shareholder interests.
The Committee will, however, keep the approach under
review in order to ensure it remains appropriate.

The Committee’s specific policy for each element of
remuneration is as follows.1,3

Governance

Element

Base salary

Purpose and
link to strategy

Provides market
competitive fixed
remuneration that takes
account of individual
responsibilities, and
enables the Company
to recruit and retain
executives that are
capable of delivering
the Group’s strategic
objectives.

Benefits

Provide a competitive
package of benefits that
assists with attracting
and retaining employees.

Operation

Maximum

Performance targets

None, although overall individual and
corporate performance is a factor
considered when reviewing salaries.

Details of the salary review in the period
are set out on page 74.

Other than to reflect
a change in the size
and complexity of the
role or Company or to
reflect experience in the
role, salary increases
will normally be no
higher than the average
increases taking place
across the Company
(taking into account,
where appropriate, the
relevant pay groups).

N/A

The quantum of benefits
will be in line with local
market practice. The
value of each benefit is
based on the cost to the
Company which may
vary from year to year.

Set at a broadly
mid-market level and
normally reviewed
annually taking
account of individual
responsibilities,
experience and
performance.

Benchmarked using
data for a general
industry group selected
on the basis of market
capitalisation and a
sector group of UK-
listed pharmaceutical,
device and biotechnology
companies.

The main benefits
currently provided
comprise medical
benefits and permanent
health insurance, but
the components will
have regard to the
market practice in the
location of any future
appointment. This
could include relocation
allowances or other
appropriate benefits.

BTG plc Annual Report and Accounts 2015Element

Purpose and
link to strategy

Annual bonus A reward that is linked
to the Company’s short-
term aims and value
creation objectives.

Deferral of part of the
bonus under the Deferred
Share Bonus Plan (DSBP)
provides an element of
lock-in and alignment
with shareholders.

Operation

Maximum

Performance targets

Maximum of 100% of
salary for executive
directors.

Governance

Performance targets for the executive
directors are set annually by the
Committee and focus on Company
financial performance measures such
as revenue, trading profit, operating
cash (although the Committee has
discretion to select other measures)
and performance against a number
of corporate and individual objectives
intended to stimulate future growth.

Financial objectives account for the
majority of the bonus.

Targets are set annually on a sliding scale
with 50% of maximum bonus potential
payable for on-target performance and
up to 25% of maximum bonus potential
payable for performance at threshold.

The Committee has discretion to adjust
the bonus pay-out if in its opinion,
the pay-out would not otherwise
appropriately reflect the performance
achieved. In addition, the Committee
must be satisfied that a minimum level
of financial performance has been
achieved before any bonus is paid.

If, in exceptional circumstances, it was
decided to apply upward discretion,
it would first be discussed with major
shareholders and the reasons fully
disclosed in the annual report on
remuneration for the relevant year.

All employees, including
the executive directors,
participate (except
PneumRx employees
who joined during the
year and who will be
integrated into current
arrangements for the
next fiscal year).

May be paid as a mix of
cash and deferred shares
under the DSBP.

DSBP awards are
structured as conditional
awards over shares to be
held for three years and
are subject to clawback.6

The level of deferral is
linked to the achievement
of the individual’s
applicable shareholding
guidelines as follows:

–Holding less than 50%
of guideline – 50% of
any bonus deferred.

–Holding equal to 50%

of guideline – all bonus
in excess of 50% of the
maximum deferred.

–Holding between 50%
and 100% of guideline
– defer all bonus in
excess of percentage
of guideline achieved
(i.e. if achieved 75% of
guideline, only bonus
in excess of 75% of
maximum deferred).

–When the shareholding
guideline is reached
no part of the bonus
would be required to
be deferred.

BTG plc Annual Report and Accounts 2015Directors’ remuneration report continued

Element

Long-term
incentives

Purpose and
link to strategy

Support the strategy
to transition the
business from an
R&D-focused specialty
pharma company to
an earnings-driven
international specialist
healthcare company.

Ensure remuneration
includes a strong
emphasis on the
delivery of growth,
sustained financial
performance and
superior shareholder
returns.

Governance

Operation

Maximum

Performance targets

Maximum Core award
of 150% of salary
(200% in exceptional
circumstances). Award
can be increased to up to
300% of salary (subject
to further performance
measures) if executive
directors elect to forego
vesting of the Core
award at year three in
exchange for a Multiplier
award. They may elect
to roll over 50 or 100%
of a Core award vesting
right to secure the
opportunity to receive
a Multiplier award.

Annual awards of
performance shares
(Core awards) are made
under the PSP, vesting
of which is subject
to the achievement
of targets measured
over a minimum of
three years.2,5

Awards of performance
shares are subject to
clawback.6

Executives are offered
the opportunity to
rollover 50% or 100%
of any PSP awards
(representing up to 150%
of salary) vesting in year
three in return for a
Multiplier award, vesting
of which is subject to TSR
performance measured
over five years from
the date of grant of the
original Core award.

Executives are entitled
to receive the value
of dividend payments
that would otherwise
have been paid on
vested awards.

Awards prior to 2013 are subject to
conditions which are described in the
annual report on remuneration on
pages 71 and 72 .

Core awards granted from 2013 are
subject to relative TSR and EPS growth
performance conditions. TSR is
measured relative to companies in the
FTSE 250 index and EPS is measured as
growth in adjusted EPS in the final year
of the three year performance period.

25% of each element vests at median/
threshold performance, rising to full
vesting at upper quartile/stretch
performance. Details of the targets for
these awards are provided in the Annual
Report on Remuneration.

For the 2013 and 2014 awards EPS and
TSR conditions have equal weightings. In
future years the weighting between EPS
and TSR conditions would be decided by
the Remuneration Committee prior to
each grant.

Multiplier awards are measured by
reference to TSR performance only over
a five-year period.

Multiplier awards – 2013 PSP awards
onwards: Each 1% outperformance/
underperformance of the FTSE 250
index at the end of five years increases
or decreases the total number of shares
that would have vested under the PSP
by 1% i.e. rolled over awards could be
increased or decreased by ±100% (so
that the number of shares the subject
of the award could be doubled or be
reduced to zero).

Multiplier awards – 2011 and 2012 PSP
awards only: Each 1% outperformance/
underperformance of the FTSE 250
index at the end of five years increases
or decreases the total number of shares
that would have vested under the PSP
by 1.5% i.e. rolled over awards could
be increased by +150% or reduced by
-100% (down to zero).

BTG plc Annual Report and Accounts 201561

Governance

Element

Pension

Purpose and
link to strategy

Provides competitive
retirement benefits
that reward sustained
contribution.

All-employee
share plans

Encourages employees
to acquire shares in BTG,
increasing alignment
with shareholders.

Shareholding
guidelines

Provide alignment
between Executives and
shareholders.

Operation

Maximum

Performance targets

N/A

Defined benefit
provision: 1/60ths
accrual up to cap
(reviewed annually),
normal retirement
age of 60.

Defined contribution
or cash allowance:
25% of salary.

Participation limits are
those set by the relevant
tax authorities from
time to time.

N/A4

CEO: 250% of salary.

N/A

CFO: 150% of salary.

For longer serving
employees: participation
in contributory defined
benefit pension
arrangements up to a
scheme specific cap or
HMRC defined limits.

For more recent hires
and provision above the
cap: defined contribution
pension provision and/or
cash allowances.

Executive directors can
participate in BTG’s
HMRC-approved save-
as-you-earn scheme
which is open to all UK
employees.

A US Internal Revenue
Service 423 Plan
with standard terms
is operated for
US employees.

Executive directors
are required to build
significant shareholdings
in the Company.7

Executive directors may
sell vesting shares to
meet tax liabilities. In
addition, provided that
executive directors have
achieved and continue to
maintain the guideline
level, they will be
permitted to sell shares in
addition to those required
to meet their tax liabilities
within a 30 day period
from the announcement
of the Company’s results
and completion of
investor road-shows
for any period.

Footnotes
1 In line with the Investment Association’s Guidelines on Responsible Investment Disclosure, the Committee will ensure that the incentive structure for executive directors and

senior management will not raise environmental, social or governance (ESG) risks by inadvertently motivating irresponsible behaviour. More generally, the Committee will ensure
that the overall remuneration policy does not encourage inappropriate operational risk-taking.

2 Prior to 2013, awards consisted of a mix of market value share options granted under the ESOP and performance shares granted under the PSP.
3 A description of how the Company intends to implement the policy set out in this table for 2015 can be found in the Annual Remuneration Report.
4 All employee share plans do not have performance conditions. Executive directors are eligible to participate in the UK Sharesave Plan on the same terms as other employees.
5 Copies of the PSP and DSBP plan rules are available on request from the Company Secretary.
6 For all awards granted post 1 July 2011 under the DSBP, PSP and ESOP are subject to clawback in the event of a material misstatement of the financial results of the Company

for the financial year to which an award relates being discovered, an error in the calculation of performance for an award or individual misconduct resulting in dismissal.
7 Under the shareholding guidelines the executive directors are not permitted to hold their shares in hedging arrangements or as collateral for loans without the express

permission of the Board.

BTG plc Annual Report and Accounts 2015Directors’ remuneration report continued

Governance

Committee discretions
The Committee operates the Group’s variable incentive plans
according to their respective rules and in accordance with
HMRC rules where relevant. To ensure the efficient
administration of these plans, the Committee will apply
certain operational discretions. These include the following:
• Selecting the participants in the plans on an annual basis;
• Determining the timing of grants of awards and/or payment;
• Determining the quantum of awards and/or payments
(within the limits set out in the policy table above);

• Determining the extent of vesting based on the assessment

of performance;

• Making the appropriate adjustments required in certain
circumstances (e.g. change of control, rights issues,
corporate restructuring events, and special dividends);

• Determining ‘good leaver’ status for incentive plan purposes

and applying the appropriate treatment; and

• Undertaking the annual review of weighting of performance
measures, and setting targets for the annual bonus plan
and PSP from year to year.

If an event occurs which results in the annual bonus plan or
PSP performance conditions and/or targets being deemed no
longer appropriate (e.g. a material acquisition or divestment)
the Committee will have the ability to adjust appropriately the
measures and/or targets and alter weightings, provided that
the revised conditions or targets are not materially less
difficult to satisfy.

Outstanding share incentive awards that remain unvested or
unexercised at the date of this report, as detailed on pages 71
and 72 of the annual report on remuneration, remain eligible
for vesting or exercise based on their original award terms.

Remuneration at a glance
The Company’s policy results in a significant portion of
remuneration received by executive directors being dependent
on Company performance. The chart below illustrates how the
total pay opportunities for the executive directors vary under
three different performance scenarios: minimum, target and
maximum. These charts are indicative only, as share price
movement and dividend accrual have been excluded.
All assumptions made are noted below the chart.

Value of remuneration packages at different levels
of performance

£’000
3,500

3,000

2,500

2,000

1,500

1,000

500

£3,049,000

58%

19%

£1,218,000
18%
24%

£705,000

100%

58%

23%

£1,999,000

58%

19%

23%

£463,000

£799,000
18%
24%

100%

58%

Minimum On-target

Maximum

Minimum On-target

Maximum

Louise Makin, Chief Executive Officer

Rolf Soderstrom, Chief Financial Officer

Basic salary, benefits and pension

Bonus

LTIP award

Assumptions
Minimum = fixed pay only (salary + benefits + pension).

On-Target = 50% vesting of the annual bonus and 25%
vesting of the core LTIP award (37.5% of salary).

Maximum = 100% vesting of the annual bonus and 100%
vesting of the core Long Term Incentive Plan (LTIP) award
plus 100% application of the multiplier (300% of salary).
• Salary levels (on which other elements of the package
are calculated) are based on those as at 1 April 2015.
• The value of taxable benefits is based on the cost of
supplying those benefits (as disclosed) for the year
ending on 31 March 2015.

• Pension levels have been estimated at 20% of base

salary levels.

• The maximum vesting for the LTIP award includes both

Core and Multiplier awards. The normal level of maximum
LTIP vesting is 150% of salary for a Core award and 300%
if an executive director elects for a Multiplier award. It is
assumed that the full Core award is rolled over into a
Multiplier award.

• The executive directors can participate in all employee
share schemes on the same basis as other employees.
The value that may be received under these schemes is
subject to tax approved limits. For simplicity, the value
that may be received from participating in these schemes
has been excluded from the above charts.

• Amounts have been rounded to the nearest £1,000.

BTG plc Annual Report and Accounts 201563

Governance

Choice of performance measures
and approach to target setting
Annual bonus arrangements for the executive directors
are split between individual, corporate financial and
non-financial objectives with the financial targets
currently accounting for the majority of the bonus.
Financial performance targets are based on the budget
and corporate measures and are linked to the achievement
of annual objectives that are consistent with BTG’s longer-
term goals. The Remuneration Committee reviews these
KPIs each year and varies them as appropriate (including
the weighting of financial and non-financial targets) to
reflect the priorities for the business in the year ahead.
A sliding scale of targets is set for each KPI to encourage
continuous improvement and challenge the delivery of
stretch performance. For each metric, the threshold target
requires the Company to maintain or improve on the prior
year performance with the stretch target requiring
significant out performance above plan.

For current and future awards under the PSP, the metrics
are split between adjusted EPS and relative TSR
outperformance of a general market index (FTSE 250), which
ensures focus on sustainable growth and superior returns
to shareholders (with the weighting between TSR and EPS
determined by the Committee annually). The comparator
index for TSR and weighting between each measure for
Core awards will remain under review. In order to incentivise
the achievement of sustained outstanding returns to
shareholders over the longer term and assist with retention,
at the end of the normal three-year performance period
executives are able to elect to roll over some or all of the
performance shares that would otherwise vest in return for
the opportunity to receive an enhanced (or reduced) award at
the end of five years, subject to outperformance of the FTSE
250 Index over that five year period. This multiplier is intended
to further align the interests of the executive directors with
shareholders whilst rewarding performance which
demonstrably delivers value to shareholders over the longer
term. Performance over a five-year period both recognises
and takes into account the Company’s strategic goals
and its ongoing evolution and increasing maturity as
an organisation. TSR is measured independently for
the Committee by New Bridge Street (NBS).

How employees’ pay is taken into
account in setting the remuneration
of the executive directors
The Committee considers the base salaries for the Leadership
Team and, although it does not directly consult with employees
regarding remuneration policy, it receives information on general
pay levels to ensure that the Committee has due regard to salary
levels across the Group in applying its remuneration policy.

BTG’s workforce includes a high proportion of highly
qualified scientists, technicians and professionals whose
skills are highly sought after by competitors. Ensuring
that levels of remuneration for the general workforce are
competitive to support staff retention, development in
expanded roles and motivation is important to BTG’s ongoing
success and this is reflected in the level and range of salary
increases awarded to employees. As a result BTG is required
to benchmark and rebase salaries from time-to-time. The
average salary increases awarded to BTG’s general workforce
for 2014/15 were 3.9%. General workforce increases, effective
June 2015, will range between 0% and 15%.

How executive directors’ remuneration
policy relates to the wider Group
The remuneration policy described above provides an
overview of the structure that operates for the most senior
executives in the Company. A lower incentive opportunity
is available below executive level, with specific levels driven
by market comparatives and the impact of the role.

As explained above, salaries for the Company’s wider
workforce are benchmarked externally against comparable
companies within the sector and wider industry. The Company
aims to ensure that all employees’ salaries are positioned
around a mid-market level for the role taking account of
performance and individual responsibility.

Employees are provided with a competitive local package
of benefits that includes participation in the Group’s
pension arrangements.

All employees (except PneumRx employees who joined during
the year and will be integrated into current arrangements
for the next fiscal year) are eligible to participate in the
bonus arrangements with targets aligned to the financial
performance of the Group and their individual performance
within their specific area of responsibility.

The Company believes that broad-based employee
participation in share schemes is an important alignment
tool helping to focus employees on delivering value for
shareholders. Other senior staff who are considered to have
the greatest potential to influence Company performance are
also able to receive awards of long-term incentives at a lower
maximum percentage of salary than the executive directors.
In addition, share ownership guidelines apply to members of
BTG’s Leadership Team with lower levels of holding required
(50% of salary) than for executive directors. In order to
encourage wider employee share ownership, the Company
operates a Sharesave Plan in the UK, with an international
section for employees in Australia, Germany and Canada, and
a Stock Purchase Plan in the US. These are described in more
detail below.

BTG plc Annual Report and Accounts 2015Directors’ remuneration report continued

Governance

How shareholders’ views are taken into account
When shaping remuneration policy the Remuneration
Committee considers shareholder feedback received
in relation to the Annual General Meeting each year
and guidance from shareholder representative bodies
more generally.

The Remuneration Committee engages proactively with
shareholders, and takes seriously their views. When any
material changes are made to the remuneration policy,
the Remuneration Committee Chairman will inform major
shareholders of these in advance, and will offer a meeting
to discuss these.

Details of votes cast for and against the resolution to approve
last year’s directors’ remuneration report and matters discussed
with shareholders during the year are provided in the Annual
Report on Remuneration.

Prior to the approval of this remuneration policy, the Committee
engaged with its largest shareholders regarding changes to
the executive directors’ remuneration arrangements, in
particular the changes which were made to the PSP. These
were approved at BTG’s AGM in July 2013. As a result of this
engagement, the Committee decided to extend the operation
of share ownership guidelines to members of BTG’s Leadership
Team who are not members of the Board and to clarify that the
policy formally prohibits the hedging and pledging of shares by
directors or the Leadership Team.

All employee share plans
The Company operates other share plans as follows:
• an HMRC-approved save-as-you-earn scheme, open to

all eligible employees (including executive directors), with a
36 month savings period enabling UK employees to acquire
shares at a price not less than 80% of the market value of
the shares at the date of grant. The Scheme provides an
international section to allow for the participation of
Australian, German and Canadian employees;

• a US Internal Revenue Service 423 Plan with a 24 month
savings period under which its US employees are able to
acquire shares at not less than 85% of the market value
of the shares at the date of grant; and

• the non-shareholder approved Senior Management

Performance Share Plan enables awards over market
purchased shares to be granted to certain senior
employees below Board level where it is not appropriate
to make awards under the PSP. Awards under this plan
can be made over market purchase shares only and are
normally subject to different performance criteria to
awards made under the PSP.

Approach to recruitment and promotions
The remuneration package for a new director will be set
in accordance with the terms of the Company’s approved
remuneration policy in force at the time of appointment but
focusing on the objective of appointing the most appropriate
incumbent in the right geography.

The salary for a new executive will be set to reflect their skills
and experience, the Company’s target pay positioning and
the market rate for the role in the relevant location, subject
to the overall goal of attracting the right candidate. Where it
is appropriate to do so, salaries may be set below the normal
market rate, with phased increases over the first few years
as the executive gains experience in their new role.

Benefits and pensions will be in line with those offered to
other executive directors, taking account of local market
practice with relocation expenses provided if necessary.
Tax equalisation may also be considered if an executive
is adversely affected by taxation due to their employment
with the Company. Legal fees and other costs incurred by
the individual may also be met by the Company.

It is not anticipated that the aggregate ongoing incentive
opportunity offered to new recruits will be higher than that
offered to existing directors. Different measures and targets
under the bonus plan may be set initially taking account of the
responsibilities of the individual and the point in the financial
year at which they join. Any increases in quantum offered
above the policy limit would be contingent on the Company
receiving shareholder approval to its approved policy at its
next general meeting.

The Committee may offer additional cash and/or share-based
elements to assist with recruitment (for example to buyout
existing entitlements) when it considers these to be in the
best interests of the Company and its shareholders. Existing
arrangements will be used to the extent possible (subject to
the higher limits in exceptional circumstances set out in the
policy) however, the Committee retains discretion to use the
flexibility provided by the Listing Rules to make such awards.
Such payments would take account of remuneration
relinquished when leaving the former employer and would
reflect (as far as possible) the nature and time horizons
attached to that remuneration and the impact of any
performance conditions. Shareholders will be informed
of any such payments at the time of appointment.

For an internal executive appointment, any variable pay
element awarded in respect of the prior role will be allowed
to pay out according to its terms, adjusted as relevant to take
into account the appointment. In addition, any other ongoing
remuneration obligations existing prior to appointment may
continue, provided that they are put to shareholders for
approval at the earliest opportunity.

For the appointment of a new Chairman or non-executive
director, the fee arrangement would be set in accordance
with the approved remuneration policy in force at that time.

BTG plc Annual Report and Accounts 201565

Governance

Legacy arrangements
For the avoidance of doubt, authority is given to the Company
to honour any commitments entered into with current or
former directors (such as the payment of a pension or the
unwind of legacy share schemes) that have been disclosed
to shareholders in this or any previous remuneration reports.
Details of any payments to former directors will be set out in
the Annual Remuneration Report as they arise.

External appointments
The Board believes that it may be beneficial to the Company
for executives to hold non-executive directorships outside the
Group. Any such appointments are subject to approval by the
Board and the director may retain any fees payable. Louise
Makin received fees of £65,500 for being on the Board of
Intertek Group during the year to 31 March 2015 (2014:
£65,500). Rolf Soderstrom does not currently hold any
outside directorships.

Service contracts and payments for loss of office
Executive directors have rolling service contracts, details of
which are summarised in the table below:

Provision

Detailed terms

Contract dates

Louise Makin – 19 October 2004

Notice period

Termination
payment

Rolf Soderstrom – 4 December 2008

Twelve months from both the Company and
from the executive

The Company may terminate the contracts of
the executive directors with immediate effect
by making a payment in lieu of notice.

With respect to Rolf Soderstrom, any
payments made would be determined by
reference to normal contractual principles
with mitigation being applied wherever
relevant or appropriate. As Louise Makin’s
contract was established approximately
11 years ago, it does not provide for mitigation.

Other than as specifically provided for in the
policy with respect to ‘good leavers’ (where
for example existing Multiplier awards
elected for are retained) the directors’
contracts do not provide for automatic
entitlement to bonus or share-based
payments.

Remuneration
entitlements

Louise Makin’s contract contains the
following remuneration related entitlements:

–salary, membership of Company pension

scheme or contribution to a personal
pension, medical benefits and permanent
health insurance

Rolf Soderstrom’s contract contains the
following remuneration related entitlements:

–salary, contribution to a personal pension,
medical benefits and permanent health
insurance

The Company’s policy on new directors’ service contracts
is that, in line with the best practice provisions of the Code,
they should be terminable by the Company on a maximum
of one year’s notice and contracts should not provide for
predetermined compensation in the event of termination or
provision for enhanced payments in the event of a takeover
of the Company. Provisions permitting the Company to make
any termination payments by instalments, and requiring
directors to mitigate their loss in such circumstances, will
be included in new contracts. The Remuneration Committee
will exercise discretion in determining whether termination
payments should be paid by instalments, taking account of
the reason for the departure of the director and their prior
performance. Other than in gross misconduct situations,
the Company would expect to honour the contractual
entitlements of terminated directors.

Other than in certain ‘good leaver’ circumstances
(including, but not limited to, redundancy, ill-health or
retirement) no bonus would be payable unless the individual
remains employed and is not under notice at the payment
date. Any bonuses paid to a ‘good leaver’ would be based
on an assessment of their individual and the Company’s
performance over the period, and pro-rated for the proportion
of the bonus year worked.

With regards to long-term incentive awards, the PSP rules
provide that other than in certain ‘good leaver’ circumstances,
awards lapse on cessation of employment. Where an individual
is a ‘good leaver’, the Remuneration Committee’s policy for
future core PSP awards will be to permit awards to remain
outstanding until the end of the original performance period,
when a pro rata reduction will be made to take account of the
proportion of the vesting period that lapsed prior to termination
of employment, although the Committee has discretion to
partly or completely disapply pro-rating and the performance
conditions in certain circumstances. Multiplier awards would
not be subject to pro-rating. The Remuneration Committee has
discretion to deem an individual to be a ‘good leaver’. In doing
so, it will take account of the reason for their departure and the
performance of the individual.

Deferred bonus share awards will also normally lapse on
cessation of employment, unless the executive director
is deemed to be a ‘good leaver’ by the Remuneration
Committee, as referred to above.

The Committee will have authority to settle legal
claims against the Company (e.g. for unfair dismissal,
discrimination or whistle blowing) that arise on termination.
The Committee may also authorise the provision of
outplacement services and pay reasonable legal
expenses associated with the termination.

BTG plc Annual Report and Accounts 2015Directors’ remuneration report continued

Governance

The non-executive directors do not have service contracts, but have letters of appointment for an initial period of three years,
which may be renewed by mutual agreement, normally for a further three-year term. The terms of appointment provide for a
notice period in the event of early termination of six months for the Chairman and three months for other non-executive
directors, other than if they are not re-elected at an AGM.

Details of contracts and letters of appointment, for directors serving at the date of this report, are as set out below.

Non-executive

Garry Watts
Giles Kerr
Ian Much
James O’Shea
Richard Wohanka
Susan Foden

Date of first appointment

Notice period (months)

Date of expiry of current contract

1 January 2012
1 October 2007
1 August 2010
2 April 2009
1 January 2013
1 March 2015

6
3
3
3
3
3

31 December 2017
30 September 2015
31 July 2016
31 March 2016
31 December 2015
28 February 2018

Maximum

Performance targets

N/A

Non-executive directors’ and Chairman’s fees
The table below summarises the Company’s policy in relation to the fees of non-executive directors.

Purpose and link to strategy

Operation

Takes account of recognised
practice and set at a level
that is sufficient to attract
and retain high-calibre non-
executives.

Non-executive directors receive fees paid monthly in cash and
consist of an annual basic fee plus additional fees for additional
responsibilities such as a Committee Chairmanship and the role
of Senior Independent Director.
When reviewing fee levels, account is taken of market
movements in non-executive director fees, Board committee
responsibilities, ongoing time commitments and the general
economic environment.
In exceptional circumstances additional fees may be paid where
there is a substantial increase in the time commitment required
of non-executive directors.
Fee increases, if applicable, are normally effective from 1 April
each year.
Non-executives do not participate in any pension, bonus or share
incentive plans and do not receive any benefits.*

The Chairman, in consultation with the executive directors, is responsible for proposing changes to the non-executive
directors’ fees. The Senior Independent Director, in consultation with the executive directors, is responsible for proposing
changes to the Chairman’s fees. In each case this follows advice on market fee levels supplied by NBS. In proposing such fees,
account is also taken of the time commitments of the Company’s non-executive directors. The decision on fee changes is
taken by the Board as a whole. Individual non-executive directors do not take part in discussions on their remuneration.

Note
* Limited benefits relating to travel, accommodation and hospitality are provided in relation to the performance of any director’s duties.

BTG plc Annual Report and Accounts 2015Annual report on remuneration
This part of the report has been prepared in accordance with Part 3 of Schedule 8 to the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment) Regulations 2013. The Annual Remuneration Report will be put to an advisory
shareholder vote at the 2015 AGM. The information on pages 56 to 73 has been audited.

About the Remuneration Committee and its advisers
The Remuneration Committee has been established by the Board and is responsible for executive remuneration.

During the year the Committee reviewed and updated its terms of reference, which are available in full on the Company’s
website or from the Company on request.

Members

Committee member

Member since

Ian Much (Chairman)
Giles Kerr
Melanie Lee*
James O’Shea
Susan Foden
Details of attendance at meetings are shown in the table on page 45.
* Melanie Lee resigned as a director of the Company and member of the Remuneration Committee to join

28 September 2010
3 November 2009
23 March 2011 to 25 September 2014
25 September 2014 to 1 March 2015
1 March 2015

the Company’s Leadership Team.

Governance

Other attendees at
Remuneration Committee
meetings

The Chairman (Garry Watts), Chief Executive Officer (Louise Makin), Chief Financial Officer (Rolf
Soderstrom) and HR Director (Yvonne Rogers) may attend meetings by invitation, other than when their
own remuneration is being considered.

The Company Secretary (Paul Mussenden) or his deputy serves as secretary to the Committee.

Committee evaluation

Committee advisers

During the year, the Committee carried out a review of its effectiveness and the results, along with
recommendations for improvement were reported to the Board. The Committee was found to be operating
effectively and it was agreed that there would be continued emphasis to ensuring a strong link was
maintained between remuneration and performance and strategy and aligned with shareholder interests.
Remuneration risks, whilst not significant, would continue to be carefully managed.

The Committee appoints its own advisers as it sees fit and has appointed NBS (a trading name of Aon
Hewitt Limited, part of Aon plc) to act as advisers to the Committee and a representative usually attends
the meetings. NBS is a signatory to the Remuneration Consultant Group’s Code of Conduct which sets
out guidelines to ensure that its advice is independent and free from undue influence. NBS advises the
Committee on all remuneration issues including the vesting of long-term incentive arrangements. The
Committee reviews the performance and independence of NBS on an annual basis, and is satisfied that
it remains independent.

The Group continues to use NBS to advise on other matters including remuneration matters in
general. NBS also assists with the total shareholder return (TSR) performance measurement and the
implementation of employee share schemes and, through Aon plc’s Radford brand, provides the Company
with advice on matters specific to the US employment market. The Group also uses Mercer Ltd and
PricewaterhouseCoopers to advise on remuneration issues, particularly in relation to pension schemes.

The fees paid to the Committee’s advisers in 2014/15 were: New Bridge Street £105,521 (2013/14: £165,343).

BTG plc Annual Report and Accounts 2015Directors’ remuneration report continued

Single figure for total remuneration (audited)

Salary/fees4

£’000

Benefits5
£’000

Bonus paid
in cash4
£’000

Bonus paid
in shares1
£’000

Long-term
incentives2

£’000

Pension3
£’000

Other6
£’000

Total
remuneration
£’000

Executive directors
Louise Makin

Rolf Soderstrom

2015
2014
2015
2014

Non-executive directors
Garry Watts

Governance

Giles Kerr

Melanie Lee7

Ian Much

James O’Shea

Richard Wohanka

Susan Foden8

569
550
373
361

190
175
60
50
22
41
55
47
45
41
45
41
4
0

2
1
2
1

–
–
–
–
–
–
–
–
–
–
–
–

–

509
453
334
297

–
–
–
–
–
–
–
–
–
–
–
–

–

–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
–

–

402
622
298
357

127
125
75
72

–
–
–
–
–
–
–
–
–
–
–
–

–

–
–
–
–
–
–
–
–
–
–
–
–

–

4
6
–
–

–
–
–
–
–
–
–
–
–
–
–
–

–

1,613
1,757
1,082
1,088

190
175
60
50
22
41
55
47
45
41
45
41
4
0

2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014

1 Element of bonus deferred into the DSBP.
2 Awards are included in the financial year in which the performance conditions end. The share price used is the closing share price on the date on which performance criteria are met, i.e.
the final business day of the financial year. For 2015 this figure does not include the Core PSP award as the Core and Multiplier awards are treated as a single award and the Core award
will be shown in 2016 if no election is made and both Core and Multiplier in 2017 if an election is made. If 50% of a Core award is rolled over into a Multiplier award 50% of the Core award
will be shown in 2016 and the remainder is part of the Multiplier award in 2017. The 2014 figure has been restated to reflect the actual share price of vesting of the 2011 share options
(6 July 2014: 657.5p)

3 Pension consists of a cash supplement in lieu of employer pension contributions following the changes to pension legislation. In addition, for Louise Makin, it includes £42,108

(2014: £43,694), representing the value of the increase in the year of her pension entitlement in the defined benefit BTG Pension Fund.

4 All directors’ fees, salaries and bonuses are subject to UK income tax.
5 Benefits shown above for Louise Makin and Rolf Soderstrom relate principally to the provision of life assurance and medical benefits. In addition, all directors receive limited benefits

relating to travel, accommodation and hospitality in relation to the performance of their directors’ duties.

6 Other shows the value of vested Sharesave options.
7 Fees paid to Melanie Lee in 2015 were for the period to her resignation on 25 September 2014.
8 Fees paid to Susan Foden in 2015 were for the period from her appointment to the Board on 1 March 2015.

Annual bonus for the year to 31 March 2015 (audited)
For the year ended 31 March 2015 bonuses were subject to a maximum of 100% of base salary for executive directors and up
to 75% for other senior staff.

Bonus targets were set at the start of the financial year for both Louise Makin and Rolf Soderstrom based on the achievement
of certain objectives. These were the achievement of targets for revenue growth, a trading profit measure, cash generation and
individual KPIs intended to drive future growth in the business. The Committee set threshold and stretch as well as intermediate
target levels for the various targets. The bonus is calculated on base salary with a percentage pay out of between 25% at
threshold, 50% at on-target and 100% at maximum.

The trading profit measure, used for both bonuses and the 2012 long-term incentive awards, is a normalised measure relating
to earnings before amortisation of intangibles, restructuring and acquisition costs, group foreign exchange movements and
movements in derivatives. The cash flow measure adjusts for restructuring and acquisition costs only.

Following the acquisition of PneumRx in January 2015, the Remuneration Committee did not adjust the original bonus targets
to reflect the budgeted impact of the Board-approved acquisition plans due to the proximity to year end. Consequently, the
actual metrics for the 2014/15 bonus have been adjusted to exclude the impact of the acquisition.

BTG plc Annual Report and Accounts 2015The Remuneration Committee has the discretion to adjust the final outcome upwards or downwards in the event that an
exceptional event outside of the directors’ control occurs which, in the Committee’s opinion, materially affected the bonus
out-turn. During 2014/15 the Committee assessed that incremental amounts associated with the settlement of an International
Trade Commission (ITC) filing against Instituto Bioclon of Mexico and Rare Disease Therapeutics, Inc. (RDT) of Tennessee, could
be adjusted.

For the financial year to 31 March 2015 they are calculated as follows:

Revenue/profit before tax/operating cash flow
Adjustments:
Derivatives and group foreign exchange movements
Amortisation and impairment of business combination intangibles
Proceeds from fundraising
Payments in relation to PneumRx
Restructuring and acquisition costs
ITC settlement
PneumRx
Revenue/trading profit/operating cash flow for bonus purposes

Revenue
£m

367.8

–
–
–
–
–
–
(2.3)
365.5

Trading profit
£m

26.7

10.7
28.4
–
–
5.5
6.2
2.7
80.2

Cash flow
£m

35.6

–
–
(145.8)
147.1
3.7
6.2
1.5
48.3

Governance

The performance achieved against the bonus targets is summarised as follows:

Measure

Corporate financial targets
Revenue
Trading profit
Operating cashflow
Individual corporate
objectives1
Total

As a percentage
of maximum
bonus
opportunity

231⁄3%
231⁄3%
231⁄3%

30%
100%

Performance required

Threshold
(£m)

Target
(£m)

Stretch
(£m)

Actual
(£m)

340.0
75.5
46.4

345.0
76.4
47.3

360.0
79.6
50.5

365.5
80.2
48.3

Louise Makin

Rolf Soderstrom

Pay out – Cash

% of salary

23%
23%
18%

25%
89%

23%
23%
18%

25%
89%

Note:
1 Covering execution across the business segments including relating to R&D and Innovation and supply chain; developing the organisational and leadership; and progression of the

Interventional Medicine strategy including considering appropriate acquisitions.

The table above shows the financial targets set for the threshold, target and stretch levels.
Deferred share bonus plan awards are structured as conditional awards over shares, to be held for three years.

The level of deferral is linked to the achievement of the Company’s shareholding guidelines and is described in the Policy Report.
Provided that the guidelines have been fully achieved bonuses are paid entirely in cash. As Louise Makin and Rolf Soderstrom
have already met their shareholding guidelines, the entirety of the 2015 bonus earned is to be paid in cash.

Vesting of LTIP awards
Awards granted on 1 June 2012 under both the Executive Share Option Scheme and the Performance Share Plan are based on
performance to the year ending 31 March 2015. The Performance conditions for these awards are as follows:

2012 LTIP

Metric

Condition

Threshold
target

Stretch
target

Actual

% Vesting

Cumulative trading
profit (50%)
TSR (50%)

Three year normalised trading profit period

£133.4m

£177.4m

£198.1m

Three year comparison with index between
median and upper quartile

TSR: 130.4%
Rank: 19

Median
(TSR: 41.4%)
(Rank 65)

Upper
Quartile
(TSR: 110.5%)
(Rank 33)
Total Vesting

50%

100%

TSR has been calculated for the Committee by NBS.
Share options and performance share awards in 2012 were subject to a cumulative trading profit and a relative TSR condition against the FTSE 250 (both of equal weighting). The cumulative
trading profit condition required a three year normalised trading profit between a threshold and stretch target, range £133.4m to £177.4m. Both of these figures have been increased by
£12.4m compared to the original approved targets to reflect the expected contribution to trading profit of the acquisitions made in July 2013. The relative TSR target required a threshold
performance of a median position and a stretch performance of finishing at or above upper quartile (with straight line vesting in between these points).

BTG plc Annual Report and Accounts 2015Directors’ remuneration report continued

2012 Option vesting details (audited)

Louise Makin
Rolf Soderstrom

Options
Options

Number of
shares at grant

Number of
shares to vest

Number of
shares to lapse

Total

Estimated
Value*

122,288
90,673

–
–

122,288
90,673

£402,328
£298,314

* Value estimated as not fully vested until 1 June 2015 and is based on the closing share price on 31 March 2015 of 715.0p per share less the exercise price of 386.0p per share.

The 2012 performance share awards are subject to the optional multiplier mechanism approved by shareholders at the 2013
AGM. As a result the number of shares that will actually vest under the 2012 PSP this year as a Core award are subject to an
election by either executive director to forego vesting of 50% or 100% of that award and roll over the award in return for the
entitlement to receive a Multiplier award which may increase or decrease the number of shares vesting at year five based on
relative TSR performance up to the end of that period. The Core awards will not vest until the earlier of the expiry of the period
within which directors are able to elect to roll over their awards without a valid election having been made. Any Multiplier award
will not vest until the period of five years from grant of the original Core award. Matching awards in respect of the 2012 PSP will
not be granted until a valid election has been made.

LTIP awards made during the year (audited)
On 6 June 2014 and 9 June 2014, the following PSP awards were granted to executive directors.

Governance

Louise Makin

Type of award

Core and
Multiplier
award

Basis of
award
granted

300% of
salary of
£569,250**

Share price
at date
of grant

604.0p

Louise Makin

Rolf Soderstrom Core and
Multiplier
award
2011
Multiplier
award
Rolf Soderstrom 2011

Multiplier
award

300% of
salary of
£373,117**
150% of
2011 conditional
award
150% of 2011
conditional
award

Number of shares
over which award
was granted

% of shares
granted that
vest at threshold
performance

Face value
of award
(£`000)*

Vesting determined by
performance over

282,740

12.5%***

£1,707,750 Core award: three
financial years to
31 March 2017
Multiplier award:
five financial
years to
31 March 2019

£1,119,345

604.0p

185,322

12.5%***

657.5p

224,746

0%****

£1,477,704 Five financial

657.5p

155,869

0%****

£1,024,838

years from
1 April 2011 to
31 March 2016

*
**

Percentage of Core and Multiplier award.
The 300% conditional award assumes performance that would result in full vesting of the Core Award and an election by the executive directors to roll over 100% of the Core award in
order to receive the Multiplier award and that the full Multiplier award ultimately vests.

*** 25% of Core awards vest at threshold.
**** These awards have been attached to the 2011 Core Award that would otherwise have vested in July 2014. This gives effect to the Multiplier mechanism approved by shareholders at

the 2013 AGM, which provides executive directors with an opportunity to place their 2011 Core Awards at risk in return for a matching Multiplier Award. Depending on performance
against the Multiplier performance condition the Core Award could be reduced, potentially to zero, as described in the Policy Table.

The number of awards under the 2014 Core award that will
vest will be determined according to the satisfaction of the
following performance conditions (each performance
condition applies to 50% of a Core award).

Percentage of vesting of
that portion of an award*

EPS in the financial year
to 31 March 2017

Relative TSR ranking
against the FTSE 250
Index (as at 1 April 2014)
for the period
from 1 April 2014
to 31 March 2017

50% of the
Core award
Below median

50% of the
Core award
< 20.3p (below
threshold)
20.3p (threshold)

Median
28.3p (stretch) Upper quartile

25%
100%

* Vesting on a straight line basis in between threshold and stretch (EPS) or median and

upper quartile (TSR)

If a participant elects to roll over 50% or 100% of their vested
Core awards, participants will receive matching Multiplier
awards on a one-for-one basis which, together with the vested
deferred Core awards, will be subject to a further performance
condition. Under the Multiplier performance condition, for each
1% of TSR underperformance of the median TSR, the shares
that vest under the deferred Core award will decrease by 1%, for
each 1% of TSR outperformance of the median TSR, the shares
that vest under the Multiplier award will increase by 1%.

Underperformance/outperformance
of the constituents of the FTSE 250 Index
(as at 1 April 2014) for the period from
1 April 2014 to 31 March 2019

Underperformance
of 100% or more
Equal to the median
Outperformance of 100% or more

Number of Core and
Multiplier awards that will vest*

50%
100%

* Vesting on a straight line basis from 0% to 100%, as set out below.

BTG plc Annual Report and Accounts 2015Outstanding share awards (audited)
The table below sets out details of executive directors’ outstanding share awards (which will vest in future years subject
to performance and/or continued service).

Exercise price
(p)/market
price on date
of award (p)

At 1 April
2014

Granted
in year

Exercised

Lapsed

Exercise period/
vesting date

Share price
on exercise
(p)

Louise Makin

Date of grant/award

Share options
31 July 2009

179.25

187,179

13 July 2010

201.30

199,253

6 July 20111

298.90

163,356

1 June 20123

386.00

122,288

Sharesave
4 July 2011

219.52

822

20 July 2012

320.16

1,124

19 July 2013

289.49

1,243

–

22 July 2014

498.67

–

2,165

Total option awards
Performance share
awards
6 July 20111
6 July 20112
1 June 20123
17 July 2013

9 June 2014

6 July 20141
Deferred share
awards
22 July 2011
1 June 2012
Total other awards
Total awards

286.60
286.60
380.54
395.10
395.10
604.00
604.00
657.50

149,831
10,036
124,042
208,807
208,807
–
–
–

–
–
–
–
–
141,370
141,370
224,746

286.60
380.54

53,288
54,192

–
–

53,288
–

–

10,036

–

822

–

–
4,562
–
–
–
–
–
–

At 31 March
2015

187,179

199,253

153,320

122,288

31 July 2012 to
30 July 2019
13 July 2013 to
12 July 2020
6 July 2014 to
5 July 2021
1 June 2015 to
31 May 2022

1,124

– 1 September 2014 to
1 March 2015
1 October 2015 to
1 April 2016
1,243 1 September 2016 to
1 March 2017
2,165 1 September 2017 to
1 March 2018

–

666,572

149,831
–
124,042
208,807
208,807
141,370
141,370
224,746

–
5,474
–
–
–
–
–
–

–
–

–
54,192
1,253,165
1,919,737

6 July 2016
6 July 2014
1 June 2015
17 July 2016
17 July 2018
9 June 2017
9 June 2019
6 July 2016

22 July 2014
1 June 2015

619.9

648.0

Governance

659.5

1 Share options and performance shares awarded in 2011 were subject to a cumulative trading profit and a relative TSR condition against the FTSE 250 (both of equal weighting).
The cumulative trading profit condition required a three year normalised trading profit between a threshold and stretch target; range £61.7m to £101.7m. The relative TSR target
required a threshold performance of a median position and a stretch performance of finishing at or above upper quartile (with a straight line vesting in between these points).
Following the measurement of the TSR performance condition by NBS (which was measured at 164.2% against the comparators) and the measurement of the performance against
the profit measure, the Committee approved the vesting of 163,356 shares to Louise Makin under the 2011 ESOP award and 149,831 shares under the 2011 PSP award. The 163,356
shares awarded under the 2011 ESOP award comprises an HMRC approved option over 10,036 shares and an unapproved option over 153,320 shares. Louise elected to receive a
Multiplier award as an alternative to the vesting of the 2011 PSP shares as a Core award and on 6 July 2014 a Multiplier award of 224,746 was granted.

2 On 6 July 2011 Louise was granted an HMRC tax approved market value option over 10,036 shares at an option price of 289.9 pence per share (the CSOP) and a separate conditional
free share award under the PSP over shares worth (on vesting) a maximum of approximately £30,000 (the PSP award). The CSOP and PSP award were designed so that when taken
together they deliver the same aggregate gross gain as a free share award under the PSP over 10,036 shares, but in a more tax efficient manner. In relation to the PSP award, the
maximum gain that can be realised is approximately £30,000; accordingly, if the market value of a share on the vesting of the PSP award is above 298.9p the number of shares deliverable
under the PSP award will reduce so that their value remains equal to approximately £30,000. The market value on 4 July 2014 (the dealing day immediately prior to vesting) was 657.5p
and Louise received 4,562 shares worth £29,995.15 under the PSP and realised a gross gain (i.e. before tax and after payment of the total option excercise costs of £29,997.60) of
approximately £35,036 on the exercise of the CSOP (share price of exercise being 648p), giving rise to an aggregate gain under the PSP award and the CSOP of £64,598 (the gross gain
on 10,036 free share awards of 648p being £65,033).

3 Share options and performance shares awarded in 2012 were subject to a cumulative trading profit and a relative TSR condition against the FTSE 250 (both of equal weighting).

Unless otherwise stated the Company’s TSR will be compared with that of a peer group comprising FTSE 250 companies. In relation to awards granted before 2013 the relevant index
comprises FTSE 250 companies excluding investment trusts, companies in the financial services sector (banks, life & non-life insurance, equity & non-equity investment trusts, financial
services, real estate investment & services and real estate investment trusts etc.) and companies in the consumer discretionary sector (general retailers, media, travel & leisure, and
leisure goods) with opening and closing TSR values averaged over three months prior to the start and end of the performance period.

BTG plc Annual Report and Accounts 2015Directors’ remuneration report continued

Rolf Soderstrom

Date of grant/award

Share option awards
31 July 2009

Exercise price
(p)/market
price on date
of award (p)

At 1 April
2014

Granted
in year

Exercised

Lapsed

179.25

102,649

13 July 2010

201.30

129,514

6 July 2011

298.90

99,658

1 June 2012

386.00

90,673

–

Governance

Sharesave
19 July 2013

289.49

–

3,108

Total option awards
Performance share
awards
6 July 20111
1 June 20122
17 July 2013

9 June 2014

6 July 20141
Deferred share
awards
22 July 2011
1 June 2012
Total other awards
Total awards

286.60
380.54
395.10

604.00
604.00
657.50

103,913
91,974
136,864
136,864
–
–
–

–
–
–
–
92,661
92,661
155,869

286.60
380.54

34,637
35,225

–
–

34,637
–

–

–
–
–
–
–
–
–

At 31 March
2015

102,649

129,514

99,658

90,673

Exercise period/
vesting date

Share price
on exercise
(p)

31 July 2012 to
30 July 2019
13 July 2013 to
12 July 2020
6 July 2014 to
5 July 2021
1 June 2015 to
31 May 2022

3,108 1 September 2016 to
1 March 2017

425,602

103,913
91,974
136,864
136,864
92,661
92,661
155,869

–
35,225
846,031
1,271,633

6 July 2016
1 June 2015
17 July 2016
17 July 2018
9 June 2017
9 June 2019
6 July 2016

22 July 2014
1 June 2015

619.9

–

–
–
–
–
–
–
–

–
–

1 Share options and performance shares awarded in 2011 were subject to a cumulative trading profit and a relative TSR condition against the FTSE 250 (both of equal weighting).

The cumulative trading profit condition required a three year normalised trading profit between a threshold and stretch target; range £61.7m to £101.7m. The relative TSR target required
a threshold performance of a median position and a stretch performance of finishing at or above upper quartile (with a straight line vesting in between these points). Following the
measurement of the TSR performance condition by NBS (which was measured at 164.2% against the comparators) and the measurement of the performance against the profit measure,
the Committee approved the vesting of 99,658 shares to Rolf Soderstrom under the 2011 ESOP award and 103,913 shares under the 2011 PSP award. Rolf has elected to receive a
Multiplier award as an alternative to the vesting of the 2011 PSP shares as a Core award and on 6 July 2014 a Multiplier award of 155,869 was granted.

2 Share options and performance shares awarded in 2012 were subject to a cumulative trading profit and a relative TSR condition against the FTSE 250 (both of equal weighting).

The cumulative trading profit condition required a three year normalised trading profit between a threshold and stretch target; range £133.4m to £177.4m. Both of these figures have
been increased by £12.4m compared to the original approved targets to reflect the expected contribution to trading profit of the acquisitions made in July 2013. The relative TSR target
required a threshold performance of a median position and a stretch performance of finishing at or above upper quartile (with straight line vesting in between these points).
Unless otherwise stated the Company’s TSR will be compared with that of a peer group comprising FTSE 250 companies. In relation to awards granted before 2013 the relevant index
comprises FTSE 250 companies excluding investment trusts, companies in the financial services sector (banks, life & non-life insurance, equity & non-equity investment trusts, financial
services, real estate investment & services and real estate investment trusts etc.) and companies in the consumer discretionary sector (general retailers, media, travel & leisure, and
leisure goods) with opening and closing TSR values averaged over three months prior to the start and end of the performance period.

Share options and performance shares were granted for nil consideration. The price used for calculating the number of shares
awarded under the PSP and DSBP was based on the average of the closing share prices over the five days immediately prior to
the award date. Share options are awarded using the closing mid-market price on the date before grant. Sharesave options
were granted on the condition that participants agreed to enter into a monthly savings contract.

Awards other than DSBP awards are normally satisfied using new issue shares. The Company’s share plans comply with
recommended guidelines on dilution limits and the Company has always operated within these limits. Assuming none
of the extant options lapse and will be exercised and, having included all exercised options, the Company has utilised
3.1% of the 10% in ten years and 2.7% of the 5% in ten years in accordance with the Association of British Insurers (ABI)
guidance on dilution limits.

BTG plc Annual Report and Accounts 2015Directors’ pensions (audited)
Louise Makin is a member of the BTG Pension Fund. The Fund is a contracted-out defined benefit arrangement which
provides a pension based on an accrual rate of either one sixtieth or one eightieth of basic salary (up to the HMRC Earnings
Cap), depending on the level of contributions paid by members of 7% or 5% respectively. Members are able to retire at any
time from age 60 without any actuarial reduction to the pension payable (for Louise Makin this is 2020). Under current legislation,
if members continue to work beyond age 60, they may continue to pay contributions and enhance their pension entitlement,
subject to a maximum of 40 years pensionable service. Pension payments post retirement are increased annually by inflation
for pensionable service earned up to 5 April 2006 and inflation subject to a ceiling of 2.5% for pensionable service earned
after that date. Members may take early retirement, once they have reached 55 years of age, although any pension paid will
be subject to an actuarial reduction. Ill-health retirements may be permitted from an earlier age subject to meeting certain
medical conditions. In the event of the death of a member, the Fund provides for a spouse’s pension to be payable equal to
two-thirds of the deceased member’s pension (including any pension exchanged for a retirement lump sum). For current
active members, a lump sum death benefit equal to four times basic salary (up to the earnings cap) plus refund of the
member’s contributions is also payable.

During the year Louise Makin contributed £10,206 (2014: £9,870) to the Fund, representing 7% of her salary up to the
earnings cap and the Company contributed £46,364 (2014: £31,725).

Louise Makin receives a cash payment in lieu of pension to the value of 20% of base salary over the earnings cap.
Rolf Soderstrom receives a cash payment in lieu of pension contributions to the aggregate value of 20% of base salary.
These pension allowances are not subject to bonus or other benefits and are paid less such deductions as are required
by law.

Directors’ shareholding and share interests (audited)
To align the interests of the executive directors with shareholders, they are required to build and maintain a holding of Company
shares worth at least 250% of salary in the case of the CEO and 150% of salary in the case of the CFO.

Governance

Beneficially
owned at
31 March 2015
and at the date
of this report

514,732
184,252

10,000
–
–
–
26,500
–

Executive directors

Louise Makin
Rolf Soderstrom

Non-executive directors
Garry Watts
Giles Kerr
Ian Much
James O’Shea
Richard Wohanka
Susan Foden

Vested unexercised nil cost options

DSBP

–
–

PSP

–
–

N/A

Vested
unexercised
market value
options

Subject to performance conditions

Options

PSP

Options

DSBP

Guideline
met?

Yes
Yes

539,752
331,821

1,198,973
810,806

122,288
90,673

54,192
35,225

Vested unexercised nil cost options count towards the guidelines on the basis of their net of tax value. Market value options
do not count until such time as they have been exercised.

The directors are not permitted to hold their shares in hedging arrangements or as collateral for loans without the express
permission of the Board. None of the directors currently holds or has held their shares in such an arrangement.

Percentage increase in the remuneration of the Chief Executive Officer

CEO
• Salary1
• Benefits
• Bonus
Average per UK employee2
• Salary
• Benefits
• Bonus
1 BTG employs a high proportion of highly-qualified scientists, technicians and professionals whose skills are highly sought after and whose retention is important to BTG’s success. BTG

3.9%
18.0%
9.9%

3.5%
6%
0.4%

keeps salaries under review. General workforce salary increases in 2014 ranged between 2% and 15%.

% change from
2014 to 2015

2 We have an international workforce, however, as Louise Makin is a UK employee, the Committee considers UK employees to be the most relevant comparator group.

BTG plc Annual Report and Accounts 2015Directors’ remuneration report continued

Total shareholder return
The performance of the Company’s ordinary shares compared with the FTSE 250 (excluding Investment Trusts) (the Index)
for the six-year period ended on 31 March 2015 is shown in the graph below.

700

400

100

Governance

Mar-09

BTG

Mar-10
FTSE 250 Index

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Source: Thomson Reuters

The Company has chosen the Index as a comparator as it believes that it gives shareholders a reasonable comparison with the
TSR of other equity investments in companies of a broadly similar size across all sectors. The TSR performance has been
measured by NBS.

The middle market price of an ordinary share on 31 March 2015 was 715.0p. During the year the share price ranged from a low
of 496.5p to a high of 830.0p.
Total remuneration for the Chief Executive Officer over time

Total Remuneration (£’000)
Bonus outturn (%)
LTIP vesting (%)

2010

1,351
79%
100%

2011

1,489
70%
89%

2012

1,944
95%
80%

2013

2,073
100%
92%

2014

1,757
82%
100%

2015

1,613
89%
100%

The chart above shows the total remuneration for the Chief Executive during each of the financial years. The total remuneration
figure includes the annual bonus and LTIP awards which vested based on performance in those years. The annual bonus and
LTIP percentages show the payout for each year as a percentage of the maximum.

Relative importance of spend on pay
The table below illustrates the change in expenditure by the Company on remuneration paid to all the employees of the Group
and distributions to shareholders from the financial year ending 31 March 2014 to the financial year ending 31 March 2015.

Overall expenditure on pay
Dividend plus share buyback

2015
£m

100.2
nil

2014
£m

63.7
nil

Percentage
change

+57%
n/a

These matters were selected to be shown as they represent key distributions by the Group to its stakeholders. The increase in
expenditure on pay is largely linked to the increase in headcount of the Group in the year through both organic growth and the
impact of current and prior year acquisitions.

How the 2014 policy will be applied in 2015 onwards
2015 salary review
The executive directors’ salaries were reviewed in March 2015 and a 3% increase took effect from 1 April 2015 (this is equal to the
average salary increase provided to UK employees).

The current salaries as at 1 April 2015 are as follows:

Louise Makin
Rolf Soderstrom

Salary as at
1 April 2015

Salary as at
1 April 2014

Increase
%

£586,327
£384,310

£569,250
£373,117

3%
3%

BTG plc Annual Report and Accounts 2015Performance targets for the annual bonus and LTIP awards to be granted
For the year 2015/16, the annual bonus will continue to be based on financial (70% of the total bonus) and individual and
corporate metrics (30% of the total bonus) as detailed in the policy report on page 59.

The Committee has chosen not to disclose, in advance, the performance targets for the forthcoming year as these include
items which the Committee considers commercially sensitive. However, the financial metrics will continue to be based on
three financial metrics, being revenue (1/3 weighting), trading profit (1/3 weighting) and operating cash (1/3 weighting).
Full retrospective disclosure of the financial targets and performance against them will be seen in next year’s Annual
Remuneration Report. The individual and corporate metrics will also be disclosed to the extent possible given their
commercial sensitivity.

The measures for the Core awards made under the PSP will be as disclosed in the policy table on page 60.

Targets for the Core awards made during 2015/16 will be measured in the final year of the three year period (the 2017/18 financial
year) and are as follows:

Below threshold
Threshold
Between threshold and stretch

Stretch

EPS in the year ending
31 March 2018

Less than 23.0p
23.0p
23.0p to 30.3p

30.3p or higher

TSR relative to FTSE 250
over 3 financial years ending
31 March 2018

Percentage of each
element that vests

Less than median
Median
Between median and
upper quartile
Upper quartile or higher
Payouts for performance between Threshold and Stretch
calculated on a straight line basis

0%
25%
25% to 100% on a straight
line basis
100%

Targets for the Multiplier awards are as disclosed in the policy report.

Non-executive director 2015 remuneration
Set out in the table below are the fees paid for the year ended 31 March 2015 and proposed fees for the year ended
31 March 2016.

Governance

Director

Chairman1
Non-executive director
Senior independent director fee
Audit Committee chairmanship fee
Remuneration Committee chairmanship fee

As from
1 April 2015
£

235,000
50,000
5,000
10,000
10,000

As from
1 April 2014
£

175,000
45,000
5,000
10,000
10,000

%
increase

34%
11%
0%
0%
0%

1 The fee is fixed until 31 December 2017.
Note:
Last year a benchmarking exercise was carried out by NBS in relation to non-executive director fees which found that fees were below median against similar sized companies and also
the sector comparator taking account of the time commitments of the current non-executive directors. As a result, the fees were adjusted in two phases, the second phase taking place
this year.

Shareholder voting at the Annual General Meeting
At last year’s Annual General Meeting held on 16 July 2014, the following votes were received from shareholders:

Votes cast in favour
Votes cast against
Total votes cast
Abstentions

Remuneration Report

Remuneration Policy

281,900,881
2,030,989
283,931,870
2,976,181

99.28%
0.72%
100%

271,700,032
14,049,824
285,749,856
1,158,195

95.08
4.92
100%

Approval
This report was approved by the Board on 18 May 2015 and signed on its behalf by

Ian Much
Chairman of the Remuneration Committee

BTG plc Annual Report and Accounts 2015Directors’ report

Governance

The directors present their report together with the financial
statements and the independent auditor’s report for the year
ended 31 March 2015.

Strategic report
The strategic report can be found on pages 2 to 36 and
incorporates the Group’s business model, growth strategy,
business objectives, financial review, market overview, a
description of risk management and principal risks facing the
business and corporate responsibility. The principal activity
of the Group is the business of an international specialist
healthcare company, developing innovative products in
specialist areas where current treatment options are limited.
The results of the Group are set out in detail on pages 83 to 87
and the accompanying notes.

The Company is required by the Companies Act 2006 to set
out a fair and balanced review of the business, including the
performance and development of the Company during the year
and at the year end and a description of the principal risks it
faces. This information is contained within the strategic report
on pages 2 to 36 and incorporated into this report by reference:
• The Chairman’s Statement on pages 4 and 5, the
Chief Executive’s review on pages 6 and 7 and the
‘At a glance’ section on page 2 provide details
of the Group’s principal activities and strategy, its
performance during the year and its prospects for
future development opportunities

• Details of the principal risks facing the Group are set

out on pages 33 to 36

• Information relating to the environment, employees and
stakeholders, health and safety, ethical considerations,
charitable donations and policies regarding its employees
is set out on pages 30 to 32

This information is prepared solely to assist shareholders
to assess the Company’s strategies, the risks inherent in
them and the potential for those strategies to succeed.
The directors’ report should not be relied on by any other
person or for any other purpose. Forward-looking statements
contained in this report have been made by the directors in
good faith based on the information available to them up to
the time of their approval of this report and such statements
should be treated with caution due to the uncertainties,
including economic and business risk factors inherent in them.

Further information on the Group is available on the
Company’s website: www.btgplc.com. Notwithstanding the
references made in this Annual Report to the Company’s
website, none of the information made available on the
website constitutes part of, or should be deemed to be
incorporated by reference into, this Annual Report.

Results and dividends
The results for the year and the financial position at 31 March
2015 are shown in the Consolidated Income Statement on
page 83 and the Consolidated Statement of Financial Position
on page 85. The directors do not recommend the payment of
a dividend for the year (2013/14: nil). The results of the Group
for the year are explained further on pages 20 to 23.

Directors and their powers and interests
The directors of the Company at the date of this report,
together with their biographical details and dates of
appointment, are shown on pages 38 and 39.

The Board confirms that each of the directors who served
during the year has been formally appraised during the period.
All the directors continue to demonstrate commitment to the
Group, the Board and to their role. In accordance with the UK
Corporate Governance Code, all directors of the Company
will stand for election or re-election annually. The Board is
proposing the election of Susan Foden, who has been appointed
since the last AGM, and the re-election of all the other directors.

In accordance with the Company’s articles of association,
throughout the year the Company has maintained insurance
cover for its directors and officers and those of its subsidiary
companies under a directors’ and officers’ liability policy as
permitted by sections 232 to 235 of the Companies Act 2006.
The Company has also, to the extent permitted by law, entered
into separate Deeds of Indemnity in favour of each of its
directors to provide them with appropriate protection with
respect to potential liabilities arising from the discharge of
their duties. Neither the insurance policy nor the indemnities
provide cover where the relevant director or officer is found to
have acted fraudulently or intentionally breached the law.

Information on directors’ remuneration, contracts, options and
their beneficial interests, including those of their immediate
families, in the shares of the Company are shown in the
directors’ remuneration report on pages 56 to 75. None of
the directors had an interest in any contract of significance to
which the Company or any of its subsidiaries was party during
the year.

Corporate governance
A report on corporate governance may be found on pages
40 to 49.

Environmental matters
Our greenhouse gas emissions have been calculated as
carbon dioxide equivalents, these are disclosed in the
corporate responsibility section of the strategic report on
pages 30 to 32.

Share capital and shareholders
As at 31 March 2015 the issued share capital of the Company
was £38,177,670.30, divided into 381,776,703 shares of 10p
each. During the year the share capital increased by
20,190,169 shares due to the exercise and vesting of share
awards by employees and former employees under the
Company’s employee share schemes and a share placing for
a total of 18,867,925 new ordinary shares in December 2014.
The Company has only one class of shares and there are
no restrictions on voting rights or on the holding or transfer
of these securities.

Details of the movements in the Company’s share capital are
shown in note 19 to the financial statements on page 108.
At 31 March 2015, the Company had 9,361 shareholders
(2014: 9,766). Further details of shareholdings and Company
reporting dates may be found on page 131.

BTG plc Annual Report and Accounts 2015The BTG Employee Share Trust holds shares in the Company
which may be used for the benefit of employees. The shares
held by the Trust have the same rights as those held by all
other shareholders. Further details of the Trust are set out
in note 24 to the financial statements on page 114.

Details of outstanding share options and awards are set
out in note 23 to the financial statements on pages 112 to 114.

As at 15 May 2015, the Company had been notified of the
following interests held, directly or indirectly, in 3% or more
of the Company’s issued share capital.

Shareholding

% holding

Invesco Asset Management
80,901,054
M&G Investment Management Ltd 25,843,710
Woodford Investment
Management
AXA Investment Management
Aviva Investors
Old Mutual Plc
BlackRock Investment
Management Ltd
Standard Life Investments Ltd
Schroders Plc
Legal & General Investment
Management Ltd

25,137,550
22,812,414
19,535,392
18,053,383

15,402,488
15,212,886
14,274,133

11,612,837

21.19
6.76

6.58
5.98
5.12
4.72

4.03
3.98
3.74

3.04

Articles of association
The Board may exercise all the powers of the Company,
subject to the provisions of relevant statutes, the Company’s
articles of association (the Articles) and any directions given
by a special resolution of the shareholders. The Articles, for
instance, contain certain specific provisions and restrictions
regarding the Company’s power to borrow money. Powers
relating to the issuing and buying back of shares are included
in the Articles and are subject to such authorities being
approved annually by shareholders at the Annual General
Meeting (AGM). There is no current intention of requesting the
authority to buy back shares of the Company. The rules for the
election and re-election of directors are set out in the Articles
however, as reported in the corporate governance report,
the directors will stand for annual re-election at the AGM,
in accordance with the UK Corporate Governance Code.
The articles are available on the Company’s website at
www.btgplc.com/responsibility/corporate-governance/.

Change of control
There are a number of agreements with third parties with
terms that take effect after, or terminate upon, a change of
control of the Company, such as commercial contracts, bank
facility agreements, guarantees, property agreements and
employee share plans. None of these are considered to be
significant in terms of their likely impact on the business of the
Group as a whole. Furthermore, the directors are not aware of
any agreements between the Company and its directors or
employees that provide for compensation for loss of office or
employment following a takeover of the Company.

Governance

Research and development
Research and development (R&D) is an important part of
the Group’s activities focusing in the areas of Interventional
Medicine and Specialty Pharmaceuticals. The Group spent
£68.3m (2013/14: £47.2m) on R&D during the year.

Treasury management
The Group’s policy on the use of financial instruments and
the management of financial risks is set out in note 26 to the
accounts on pages 115 to 119.
Going concern
The Group’s business activities and the factors affecting
its performance, position and future development are set
out within the strategic report on pages 2 to 36.

The directors have reviewed the current and projected
financial position of the Group, making reasonable
assumptions about future performance and taking into
account the Group’s cash balances and available financial
facilities. On the basis of this review, and after making due
enquiries, the directors have a reasonable expectation that
the Company and the Group have adequate resources to
continue to operate for the foreseeable future. For this reason
they continue to adopt the going concern basis in preparing
the financial statements.

Political donations
The Company did not make any political donations during
the financial year (2014: nil).

Annual General Meeting
The AGM of the Company will be held at 10.30 am on 15 July
2015 at the offices of Stephenson Harwood LLP, 1 Finsbury
Circus, London EC2M 7SH. Matters to be considered at the
meeting include resolutions to receive the Annual Report and
Accounts, to reappoint the auditor and re-elect the directors.

Disclosure of information to the auditor
The directors who held office at the date of approval of this
Report confirm that, so far as they are each aware, there is no
relevant audit information of which the Company’s auditor is
unaware; and each director has taken all the steps that they
ought to have taken as a director to make themselves aware
of any relevant audit information and to establish that the
Company’s auditor is aware of that information.

Auditor
Resolutions will be proposed at the forthcoming Annual
General Meeting, to reappoint KPMG LLP as auditor and
to authorise the directors to determine its remuneration.

By order of the Board

Dr Paul Mussenden
Company Secretary

18 May 2015

BTG plc Annual Report and Accounts 2015
Statement of directors’ responsibilities
in respect of the annual report and accounts 2015
and the financial statements

Responsibility statement of the directors in
respect of the annual financial report
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole; and

• the strategic report includes a fair review of the

development and performance of the business and the
position of the Company and the undertakings included
in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties
that they face.

We consider the annual report and accounts, taken as
a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess
the Group’s position and performance, business model
and strategy.

The directors’ report comprising pages 76 to 77, and including
the sections of the Annual Report and Accounts referred to
in these pages, has been approved by the Board and signed
on its behalf by:

Dr Louise Makin
Chief Executive Officer

Rolf Soderstrom
Chief Financial Officer

18 May 2015

Governance

The directors are responsible for preparing the Annual
Report and Accounts, 2015 and the Group and parent
company financial statements in accordance with
applicable law and regulations.

Company law requires the directors to prepare Group and
parent company financial statements for each financial year.
Under that law they are required to prepare the Group
financial statements in accordance with IFRSs as adopted
by the EU and applicable law and have elected to prepare the
parent company financial statements on the same basis.

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 of the Group and
parent company and of their profit or loss for that period.
In preparing each of the Group and parent company financial
statements, the directors are required to:
• select suitable accounting policies and then apply

them consistently;

• make judgments and estimates that are reasonable

and prudent;

• state whether they have been prepared in accordance

with IFRSs as adopted by the EU; and

• prepare the financial statements on the going concern

basis unless it is inappropriate to presume that the Group
and the parent company will continue in business.

The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable
accuracy at any time the financial position of the parent
company and enable them to ensure that its financial
statements comply with the Companies Act 2006. They have
general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also
responsible for preparing a strategic report, directors’ report,
directors’ remuneration report and corporate governance
statement that complies with that law and those regulations.

The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.

BTG plc Annual Report and Accounts 2015Financials

Financial statements,
notes and other key data.

Financials

Independent auditor’s report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Company statement of financial position
Company statement of cash flows
Company statement of changes in equity
Notes to the Company financial statements
Five year financial record
Shareholder information
Cautionary note regarding forward looking statements

80
83
84
85
86
87
88
124
125
125
126
129
131
132

BTG plc Annual Report and Accounts 2015Independent auditor’s report
to the members of BTG plc only

Opinions and conclusions arising from our audit
1. Our opinion on the financial statements is unmodified
We have audited the financial statements of BTG plc for the year ended 31 March 2015 set out on pages 83 to 128. In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March

2015 and of the Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards

as adopted by the European Union (IFRSs as adopted by the EU);

• the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as

applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards

the Group financial statements, Article 4 of the IAS Regulation.

2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the Group financial statements the risks of material misstatement that had the greatest
effect on our Group audit were as follows:

Recoverability of goodwill (£183.8m) and other intangible assets (£597.9m)
Refer to page 52 (Audit Committee statement), page 90 (accounting policy) and page 104 (financial disclosures).

The risk:

Our response:

The assessment of the recoverability of goodwill and
other intangible assets requires significant judgment in
determining the forecast future performance of the cash
generating units to which goodwill is allocated.

Due to the inherent uncertainty involved in forecasting
and discounting future cash flows, which are the basis
of the assessment of recoverability, this is one of the key
judgmental areas that our audit is concentrated on.

In this area our audit procedures included the following:
• We considered the Group’s impairment analysis, understood
and challenged the key judgments and sensitivities and
assessed the impact that each of these have in determining
whether an impairment exists.

• In particular, we challenged management’s assessment of
the revenue projections; by reference to those achieved
historically and external market data where available in terms
of market size and expectations of market share; and
assessed the discount rate.

• We compared the sum of the discounted future cash flows

to the Group’s market capitalisation to assess the
reasonableness of those cash flows.

• We also assessed whether the Group’s disclosures about the
sensitivity of the outcome of the impairment assessment to
reasonably possible changes in key assumptions reflected
the risks inherent in the valuation of goodwill.

Recognition of deferred tax assets
Refer to page 52 (Audit Committee statement), page 96 (accounting policy) and page 100 (financial disclosures).

The risk:

Our response:

The Group has significant tax losses which have been
acquired as part of the business combinations or from past
business performance. There is inherent uncertainty involved
assessing both the availability of losses and in forecasting
future taxable profits, which determines the extent to which
deferred tax assets are or are not recognised. This is one of
the key judgmental areas that our audit is concentrated on.

Our audit procedures included using our own tax specialists to
assist us in the following:
• We considered the appropriateness of management’s

assumptions and estimates in determining the level of losses
to recognise. We have assessed management’s view of the
likelihood of generating sufficient future taxable profits to
support the recognition of deferred tax assets, in particular
with regard to recent product launches, performance trends
and acquisitions.

• We assessed management’s analysis of the historic losses
acquired on the EKOS acquisition and which of those were
impacted by a change of control clause.

• We assessed whether the Group’s disclosures about the
sensitivity of the recognition of deferred tax assets to
reasonably possible changes in key assumptions reflected
the associated inherent risks.

• We also considered any offset of liabilities and assets to

assess if this is appropriate.

Financials

BTG plc Annual Report and Accounts 20153. Our application of materiality and an overview of the scope of our audit
The materiality for the Group financial statements as a whole was set at £6.0m, determined with reference to a benchmark
of Group revenue of which it represents 1.6%. We consider Group revenue to be the most appropriate benchmark as revenue
remains a key performance indicator of the Group monitored by stakeholders.

We agreed with the Audit Committee to report to it all corrected and uncorrected misstatements we identified through our audit
with a value in excess of £0.3m, in addition to other identified misstatements below that threshold that we believe warranted
reporting on qualitative grounds.

Of the Group’s 25 reporting components, we subjected 14 to audits for group reporting purposes and 2 to specified risk-focused
audit procedures . The latter 2 were not individually financially significant enough to require an audit for Group reporting
purposes, but did present specific individual audit risks that needed to be addressed. In aggregate our audit procedures covered
99% of total Group revenue; 96% of Group profit before taxation; and 99% of total Group assets.

The Group audit team instructed component auditors as to the significant areas to be covered, including the relevant risks
detailed above and the information to be reported back. Component materialities were all set, or approved, by the Group audit
team, and ranged from £0.1m to £5.9m, having regard to the mix of size and risk profile of the Group across the components. The
work on three of the 16 components, in the USA and Australia, was performed by component auditors and the rest by the Group
audit team.

The Group audit team visited 13 component locations in the USA and UK. Telephone conference meetings were also held with all
component auditors including the three that were not physically visited by the Group audit team. At these visits and meetings,
the findings reported to the Group audit team were discussed in more detail, and any further work required by the Group audit
team was then performed by the component auditor.

4. Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion:
• the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act

2006; and

• the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements

are prepared is consistent with the financial statements.

5. We have nothing to report in respect of the matters on which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have
identified other information in the Annual Report that contains a material inconsistency with either that knowledge or the
financial statements, a material misstatement of fact, or that is otherwise misleading.

In particular, we are required to report to you if:
• we have identified material inconsistencies between the knowledge we acquired during our audit and the directors’ statement
that they consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Group’s performance, business model and strategy; or

• the Audit Committee report does not appropriately address matters communicated by us to the Audit Committee.

Under the Companies Act 2006 we are required 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 and the part of the Directors’ remuneration report to be audited 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.

Under the Listing Rules we are required to review:
• the Directors’ Statement, set out on page 77, in relation to going concern; and
• the part of the Corporate governance statement on pages 40 to 49 relating to the Company’s compliance with the ten

provisions of the 2012 UK Corporate Governance Code specified for our review.

We have nothing to report in respect of the above responsibilities.

Financials

BTG plc Annual Report and Accounts 2015Independent auditor’s report
to the members of BTG plc only (continued)

Scope and responsibilities
As explained more fully in the Directors’ responsibilities statement set out on page 78, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. 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/auditscopeukprivate.
This report is made solely to the Company’s members as a body and is subject to important explanations and disclaimers
regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated
into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we have
undertaken and the basis of our opinions.

Richard Broadbelt (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants
15 Canada Square
London
E14 5GL

18 May 2015

Financials

BTG plc Annual Report and Accounts 2015Consolidated income statement

Revenue
Cost of sales
Gross profit
Operating expenses:
Amortisation of acquired
intangible assets
Foreign exchange gains/(losses)
Selling, general and
administrative expenses
Operating expenses: total
Research and development
Profit on disposal of property, plant
and equipment and intangible assets
Acquisition and reorganisation costs
Operating profit
Financial income
Financial expense
Profit before tax
Tax credit/(charge)
Profit for the year

Basic earnings per share
Diluted earnings per share

Note

5
6
8
9

11
11

Year ended 31 March 2015

Year ended 31 March 2014

Results before
acquisition
adjustments and
reorganisation
costs
£m

Acquisition
adjustments and
reorganisation
costs
£m

367.8
(113.8)
254.0

–
6.7

(124.8)
(118.1)
(68.3)

0.3
–
67.9
0.1
(7.3)
60.7

–
(0.9)
(0.9)

(28.4)
–

–
(28.4)
–

–
(3.7)
(33.0)
–
(1.0)
(34.0)

Results before
acquisition
adjustments and
reorganisation
costs
£m

Acquisition
adjustments and
reorganisation
costs
£m

290.5
(93.1)
197.4

–
(5.0)

(84.0)
(89.0)
(47.2)

1.1
–
62.3
8.2
(0.8)
69.7

–
(1.9)
(1.9)

(23.3)
–

–
(23.3)
–

–
(9.8)
(35.0)
–
(1.4)
(36.4)

Total
£m

367.8
(114.7)
253.1

(28.4)
6.7

(124.8)
(146.5)
(68.3)

0.3
(3.7)
34.9
0.1
(8.3)
26.7
6.9
33.6

9.1p
9.0p

Total
£m

290.5
(95.0)
195.5

(23.3)
(5.0)

(84.0)
(112.3)
(47.2)

1.1
(9.8)
27.3
8.2
(2.2)
33.3
(9.0)
24.3

6.8p
6.7p

All activity arose from continuing operations.

The notes on pages 88 to 123 form part of these financial statements.

Financials

BTG plc Annual Report and Accounts 2015Consolidated statement of comprehensive income

Profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences
Items that will not be reclassified subsequently to profit or loss
Actuarial gain/(loss) on defined benefit pensions scheme
Deferred tax on defined benefit pension scheme asset
Other comprehensive income for the year
Total comprehensive income for the year

The notes on pages 88 to 123 form part of these financial statements.

Note

Year ended
31 March
2015
£m

33.6

Year ended
31 March
2014
£m

24.3

41.6

2.2
(1.8)
42.0
75.6

(32.4)

(6.0)
0.8
(37.6)
(13.3)

Financials

BTG plc Annual Report and Accounts 2015Consolidated statement of financial position

Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Other investments
Deferred tax asset
Employee benefits
Derivative financial instruments

Current assets
Inventories
Trade and other receivables
Corporation tax receivable
Derivative financial instruments
Cash and cash equivalents

Total assets
Equity
Share capital
Share premium account
Merger reserve
Other reserves
Retained earnings
Total equity attributable to equity holders of the parent
Liabilities
Non-current liabilities
Trade and other payables
Deferred tax liabilities
Provisions

Current liabilities
Trade and other payables
Derivative instruments
Corporation tax payable
Provisions

Total liabilities
Total equity and liabilities

Year ended
31 March
2015
£m

Year ended
31 March
2014
£m

Note

12
13
14
15
10
22
21

16
17
10
21
18

19
19

20
10
25

20
21
10
25

183.8
597.9
35.5
3.0
4.9
13.2
–
838.3

40.5
91.9
1.4
–
73.8
207.6
1,045.9

38.2
433.8
317.8
9.4
(40.6)
758.6

17.9
152.4
1.4
171.7

111.0
0.9
3.2
0.5
115.6
287.3
1,045.9

123.6
397.9
31.3
3.0
0.8
8.0
0.9
565.5

27.0
75.1
1.5
4.4
38.2
146.2
711.7

36.1
288.7
317.8
(32.2)
(80.0)
530.4

2.6
90.4
0.5
93.5

79.9
–
7.4
0.5
87.8
181.3
711.7

The notes on pages 88 to 123 form part of these financial statements.

The financial statements were approved by the Board on 18 May 2015 and were signed on its behalf by:

Dame Louise Makin
Chief Executive Officer

Registered No: 2670500

Rolf Soderstrom
Chief Financial Officer

Financials

BTG plc Annual Report and Accounts 2015Consolidated statement of cash flows

Profit after tax for the year
Tax
Financial income
Financial expense
Operating profit

Adjustments for:
Profit on disposal of property, plant and equipment and intangible assets
Amortisation of intangible assets
Depreciation on property, plant and equipment
Share-based payments
Pension scheme funding
Fair value adjustments
Cash from operations before movements in working capital

Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Increase/(decrease) in provisions
Cash from operations

Corporation tax paid
Net cash inflow from operating activities

Investing activities
Interest (paid)/received
Purchases of intangible assets
Purchases of property, plant and equipment
Acquisition of businesses net of cash acquired
Net proceeds from disposal of property, plant and equipment
and intangible assets
Net cash outflow from investing activities

Cash flows from financing activities
Proceeds of share issues
Other financing activities
Net cash inflow from financing activities

Financials

Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of year

The notes on pages 88 to 123 form part of these financial statements.

Year ended
31 March
2015
£m

Year ended
31 March
2014
£m

33.6
(6.9)
(0.1)
8.3
34.9

(0.3)
29.5
5.5
5.6
(2.9)
0.9
73.2

(11.4)
(14.9)
14.8
1.0
62.7

(15.2)
47.5

(0.1)
(1.4)
(9.8)
(147.7)

0.1
(158.9)

147.2
(1.0)
146.2

34.8
38.2
0.8
73.8

24.3
9.0
(8.2)
2.2
27.3

(1.1)
24.3
3.4
5.3
(3.3)
1.9
57.8

(0.5)
(12.6)
10.9
(0.1)
55.5

(7.0)
48.5

0.2
(0.9)
(11.6)
(260.3)

3.2
(269.4)

103.4
(0.7)
102.7

(118.2)
158.7
(2.3)
38.2

Note

10
8
9

13
14

9
13
14
32

BTG plc Annual Report and Accounts 2015Consolidated statement of changes in equity

At 1 April 2013

Profit for the year
Foreign exchange translation differences
Actuarial loss on defined benefit pension
scheme
Deferred tax on defined benefit pension
scheme asset
Total comprehensive income for the year

Transactions with owners:
Issue of BTG plc ordinary shares
Movement in shares held by the Trust
Share-based payments
At 31 March 2014

At 1 April 2014

Profit for the year
Foreign exchange translation differences
Actuarial gain on defined benefit pension
scheme
Deferred tax on defined benefit pension
scheme asset
Total comprehensive income for the year

Transactions with owners:
Issue of BTG plc ordinary shares
Movement in shares held by the Trust
Share-based payments
At 31 March 2015

Share
capital
£m

32.8

Share
premium
£m

188.6

Merger
reserve1
£m

317.8

–
–

–

–
–

3.3
–
–
36.1

Share
capital
£m

36.1

–
–

–

–
–

2.1
–
–
38.2

–
–

–

–
–

100.1
–
–
288.7

Share
premium
£m

288.7

–
–

–

–
–

–

–
–

–
–
–
317.8

Merger
reserve1
£m

317.8

–
–

–

–
–

145.1
–
–
433.8

–
–
–
317.8

Other
reserves
£m

0.2

–
(32.4)

–

–
(32.4)

–
–
–
(32.2)

Other
reserves
£m

(32.2)

–
41.6

–

–
41.6

–
–
–
9.4

Retained
earnings
£m

(104.8)

24.3
–

(6.0)

0.8
19.1

–
0.4
5.3
(80.0)

Retained
earnings
£m

(80.0)

33.6
–

2.2

(1.8)
34.0

–
(0.2)
5.6
(40.6)

Total
equity
£m

434.6

24.3
(32.4)

(6.0)

0.8
(13.3)

103.4
0.4
5.3
530.4

Total
equity
£m

530.4

33.6
41.6

2.2

(1.8)
75.6

147.2
(0.2)
5.6
758.6

1 For further details on the merger reserve see note 19.
The notes on pages 88 to 123 form part of these financial statements.

Financials

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements

1. General information
BTG plc (the ‘Company’) is a company incorporated and domiciled in the United Kingdom and listed on the London Stock
Exchange. The consolidated financial statements of the Company for the year ended 31 March 2015 comprise the results of the
Company and its subsidiary undertakings (together referred to as the ‘Group’) and the Group’s interest in associates.

The financial statements were approved for issue by the Board on 18 May 2015.

The financial statements have been prepared in accordance with the Group’s accounting policies as approved by the Board and
described below.

Accounting standards adopted in the year
IFRS 10 ‘Consolidated Financial Statements’, IFRS 12 ‘Disclosure of Interests in Other Entities’ and other standards adopted by
the EU do not have a significant impact on the Group.

Accounting standards issued but not yet effective
No standards and interpretations issued by the EU but not yet effective are expected to have a significant impact on the Group.

IFRS 15 ‘Revenue from Contracts with Customers’ was issued by the IASB in May 2014, effective for accounting periods
beginning on or after 1 January 2017. It has not yet been endorsed by the EU. The Group is currently assessing the impact, if any,
of IFRS 15 on the Group’s consolidated financial statements.

Going concern basis
After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in
preparing the Annual Report and Accounts.

This conclusion has been reached having considered the effect of liquidity risk on the Group’s ability to operate effectively.
Currently, liquidity risk is not considered a significant business risk to the Group given its level of net cash and cash flow
projections. The Group does not currently require significant levels of debt financing to operate its business. Further details
of the Group’s policies and objectives around liquidity risk are given in note 26 to the Accounts and are discussed in the Strategic
report on pages 2 to 36. The key liquidity risks faced by the Group are considered to be the failure of banks where funds are
deposited and the failure of key licensees, distribution partners, wholesalers or insurers.

In addition to the liquidity risks considered above, the directors have also considered the following factors when reaching the
conclusion to continue to adopt the going concern basis:
• The Group’s principal licensees are global industry leaders in their respective fields and the Group’s royalty-generating

intellectual property consists of a broad portfolio of licensees;

• Many of the Group’s sales are life-saving in nature, providing some protection against an uncertain economic outlook; and
• In April 2013, the Group signed a £60m multi-currency revolving credit facility providing access to funds for a period of three

years to April 2016. This facility remains undrawn.

Acquisition adjustments and reorganisation costs
The consolidated income statement includes a separate column to disclose acquisition adjustments and reorganisation costs
arising on corporate acquisitions. Significant adjustments relate to the acquisitions of:
• PneumRx Inc. in January 2015;
• EKOS Corporation in July 2013;
• Targeted Therapies Division of Nordion Inc. in July 2013;
• Biocompatibles International Plc in January 2011; and
• Protherics PLC in December 2008.

Financials

The costs relate to the following:
• Amortisation and impairment arising on intangible assets acquired;
• Transaction costs incurred with professional advisers in relation to the completion of the corporate acquisitions;
• The release of the fair value uplift of inventory acquired;
• Reorganisation costs predominantly comprising acquisition related redundancy programmes, property costs, and asset

impairments; and

• Fair value adjustments to contingent consideration on corporate acquisitions.

BTG plc Annual Report and Accounts 20152. Significant 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.

(a) Basis of accounting and preparation of financial statements
The Group financial statements have been prepared and approved by the directors in accordance with International Financial
Reporting Standards as adopted by the EU (‘Adopted IFRSs’).

The Group financial statements are presented in sterling and all values are rounded to the nearest £0.1m except where
otherwise indicated and have been prepared on the historical cost basis modified to include revaluation to fair value of certain
financial instruments and business combination assets as set out below.

The preparation of the financial statements in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates. Judgements made by the directors in the application of these accounting policies that have significant effect
on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 3.

(b) Basis of consolidation
Subsidiary undertakings
Subsidiary undertakings are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The financial statements of subsidiary undertakings are included in the consolidated financial statements from the date that
control commences until the date that control ceases.

Associates
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating
policies. The consolidated financial statements include the Group’s proportionate share of the total recognised gains and
losses of associates on an equity-accounted basis, from the date that significant influence commences until the date that
significant influence ceases. When the Group’s share of losses exceeds the carrying value of its interest in an associate, the
Group’s carrying amount is reduced to nil and no further losses are recognised except to the extent that the Group has incurred
legal or constructive obligations or made payments on behalf of an associate.

Acquisition accounting
The purchase method is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured
as 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 are measured initially at their fair values on the
date of acquisition, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value
of the Group’s share of identifiable net assets, including intangible assets acquired, is recorded as goodwill. If the cost of
acquisition is less than the fair value of the Group’s share of net assets of the subsidiary acquired, the difference is recognised
directly in the income statement.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line
with those used by the Group.

Merger reserve
A merger reserve is used where more than 90% of the shares in a subsidiary are acquired and the consideration includes
the issue of new shares by the Company, thereby attracting merger relief under s612 and s613 of the Companies Act 2006.

Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements
of foreign operations.

Financials

Fair value reserve
The fair value reserve includes the cumulative net change in the fair value of available-for-sale investments. If an investment
suffers impairment due to a prolonged or significant decline in the fair value below acquisition cost, its share of the reserve is
recycled to the income statement and any further declines in fair value of that investment are no longer charged to the reserve
but immediately taken to the income statement.

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

2. Significant accounting policies continued
Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are
eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are
eliminated to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of impairment.

(c) Operating segments
An operating segment is defined as a component of the Group (i) that engages in business activities from which it may earn
revenues and incur expenses; (ii) whose operating results are regularly reviewed by the Group’s chief operating decision maker
(the Leadership Team) to make resource allocation decisions and monitor its performance; and (iii) for which discrete financial
information is available.

(d) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate
ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary
assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate
at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair
value are translated at foreign exchange rates ruling at the dates the fair value was determined. Exchange gains/losses on
retranslation of foreign currency transactions and balances within trading intercompany balances are recognised in the
income statement within ‘Operating expenses’.

(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are
translated into sterling at exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are
translated into sterling at rates approximating to the exchange rates ruling at the dates of the transactions. Foreign exchange
differences arising on retranslation are recognised directly in the translation reserve.

(iii) Net investment in foreign operations
Exchange differences arising from the translation of the net investment in foreign operations are taken to the translation
reserve. They are released into the income statement upon disposal of the investment.

(e) Derivative financial instruments
Derivative financial instruments are recognised at fair value and are designated as being measured at fair value through
the income statement on inception. The gain or loss on remeasurement to fair value is recognised immediately in the income
statement through ‘Financial income’ or ‘Financial expense’ as appropriate.

The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value
of the quoted forward price.

(f) Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on
the acquisition of subsidiary undertakings and associates. In respect of business combinations that have occurred since
1 April 2004, goodwill represents the difference between the cost of the acquisition and the fair value of the identifiable
assets, including intangible assets, liabilities and contingent liabilities acquired.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested
annually for impairment (see 2(m)). In respect of associates, the carrying value of goodwill is included in the carrying value of the
investment in the associate.

Financials

BTG plc Annual Report and Accounts 2015(g) Intangible assets
(i) Initial recognition
Intangible assets acquired as a result of a business combination are initially recognised at their fair value in accordance with
IFRS 3 – ‘Business Combinations’.

Other intangible assets are initially recognised at cost. Cost includes the cost of obtaining patent protection for intellectual
property rights, the cost of acquisition of patents and the costs of the internal patent attorney specific to obtaining the initial
grant of a patent. Income from patents is derived through licensing and other agreements.

(ii) Amortisation
Intangible assets are amortised in a manner calculated to write off the cost, on a straight-line basis, over the effective life of the
asset. In determining the appropriate life of the asset, consideration is given to the expected cash generating life of the asset or
remaining patent life if different.

The effective life of each class of asset is determined as follows:
• Developed technology: expected cash generating life, taking into account specific product and market characteristics for

each developed technology;

• Contractual relationships: period to expiry of the contract;
• In-process research and development: amortisation is not charged until the asset is generating an economic return, at which

point the effective life is assessed by reference to the remaining patent life;

• Computer software: the shorter of the licence period and three years;
• Patents: period to patent expiry; and
• Purchase of contractual rights: period to expiry of the contract.

In the event that an intangible asset is no longer used or a patent is abandoned, the balance of unamortised expenditure is
written off immediately.

The following useful economic lives are applied:

Developed technology

Contractual relationships

In-process research and development

Computer software

Patents

Purchase of contractual rights

2 to 25 years

2 to 15 years

12 to 25 years

3 years

20 years

2 to 10 years

(iii) Income statement disclosure
Amortisation and impairment of intangible assets is included within Operating expenses in the income statement.

(iv) Subsequent expenditure
Expenditure subsequent to the initial acquisition of intangible assets is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

(v) Impairment
If an intangible asset is considered to have suffered impairment in value it is written down to its estimated recoverable amount in
accordance with the Group’s policy on impairment (see note 2(m)).

Financials

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

2. Significant accounting policies continued
(h) Property, plant and equipment
(i) Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see note 2(m)).

(ii) Depreciation
Depreciation is charged to the income statement on a straight-line basis to write assets down to their residual value using the
following useful economics lives:

Buildings and improvements

Leasehold improvements

Plant and machinery

Furniture and equipment

Motor vehicles

Computer hardware

10 to 20 years

2 to 10 years

3 to 15 years

2 to 15 years

5 years

3 to 5 years

Depreciation is not charged until the asset is brought into use. The residual value is reassessed annually.

(iii) Income statement disclosure
Depreciation and impairment of tangible fixed assets is included within Operating expenses in the income statement.

Profits and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in profit/
loss on sale of tangible assets in the income statement.

(iv) Subsequent expenditure
Expenditure subsequent to the initial acquisition of a tangible fixed asset is capitalised only when it is probable that the Group
will realise future economic benefits from the asset.

(v) Impairment
If a tangible asset is considered to have suffered impairment in value it is written down to its estimated recoverable amount
in accordance with the Group’s policy on impairment (see note 2(m)).

(i) Investments
Investments in debt and equity securities held by the Group, classified as being available-for-sale, are stated at fair value, with
any resultant gain or loss being recognised directly in equity, except for impairment losses and, in the case of monetary items
such as debt securities, foreign exchange gains and losses which are taken to the income statement. When these investments
are no longer recognised as assets, the cumulative gain or loss previously recognised directly in equity is recognised in the
income statement. Where these investments are interest-bearing, interest calculated using the effective interest method is
recognised in the income statement.

(j) Inventories
Inventories are valued at the lower of cost and net realisable value. The first in, first out method of valuation is used. Cost
comprises materials, direct labour and a share of production overheads appropriate to the relevant stage of production.
Provision is made for obsolete, slow-moving or defective items where appropriate. Net realisable value is determined at the
balance sheet date on commercially saleable products based on estimated selling price less all further costs to completion
and all relevant marketing, selling and distribution costs.

Inventories relating to research and development projects are fully written down in the income statement unless the Group
considers it probable to realise economic value from their sale or use. If the circumstances that previously caused these
inventories to be written down below cost subsequently change and there is clear evidence of an increase in realisable value,
the write down is reversed.

(k) Trade and other receivables
Trade and other receivables do not carry interest and are stated at amortised cost less impairment losses (see 2(m)).

(l) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and
form an integral part of the Group’s cash management and for which the Group has a legal right of set-off are included as a
component of cash and cash equivalents for the purpose of the statement of cash flows.

Cash deposits with a maturity of greater than three months are classified as held to maturity financial assets.

Financials

BTG plc Annual Report and Accounts 2015(m) Impairment
Impairment testing is performed for all assets when there is an indicator of impairment.

In addition, for goodwill and unamortised intangible assets, impairment testing is performed both in the year of acquisition
and annually at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount.

Other specific categories of asset are treated as follows:

(i) Equity investments
Impairment is deemed to arise when there is a significant or prolonged decline in the fair value of the equity instrument.
Impairment losses are recognised in the income statement.

(ii) Property, plant and equipment
Property, plant and equipment are subject to impairment testing at each balance sheet date and whenever there are events
that indicate that an impairment may have occurred. An impairment loss is recognised if an asset’s carrying amount exceeds
the greater of its value in use and fair value less costs to sell. Impairment losses are recognised within Operating expenses
in the income statement.

(iii) Amortised intangible assets
Amortised intangible assets are also tested for impairment whenever there are indications that the carrying value may
not be recoverable. Intangible assets are grouped at the lowest levels for which there are separately identifiable cash flows.
Any impairment losses are recognised immediately in the income statement. When assessing the recoverable amount
of an intangible asset the Group uses a risk adjusted discounted cash flow model.

(iv) Available-for-sale assets
When a decline in the fair value of an available-for-sale asset has been recognised directly in equity and there is objective
evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in the income
statement. The amount of the cumulative loss that is recognised in the income statement is the difference between the
acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in the income
statement.

An impairment loss in respect of an investment in an equity instrument classified as available-for-sale is not reversed through
the income statement. If the fair value of a debt instrument classified as available-for-sale increases and the increase can be
objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment
loss shall be reversed, with the amount of the reversal recognised in the income statement.

(n) Government grants
Government grants towards staff retraining costs are recognised as income over the periods in which the related costs are
incurred and are deducted in reporting the related expense.

Government grants relating to property, plant and equipment are treated as deferred income and released to the income
statement over the useful lives of the assets concerned.

(o) Employee benefits
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement
as incurred. Payments made to state-managed retirement benefit schemes are dealt with in the same manner as payments
to defined contribution plans where the Group’s obligations under the plans are equivalent to a defined contribution retirement
benefit plan. The funds of the schemes are independent of the Group’s finances.

(ii) Defined benefit plan
For the Group’s defined benefit pension plan, the cost of providing benefits is determined using the projected unit credit method,
with actuarial valuations being carried out at each balance sheet date. The assumptions used to determine the valuation are
shown in note 22. Actuarial gains and losses are recognised in full in the period in which they occur. Actuarial gains and losses
are recognised outside the income statement and presented in the consolidated statement of comprehensive income.

Administrative costs of running the scheme are expensed directly in the Income Statement.

Financials

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

2. Significant accounting policies continued
Past service cost is recognised immediately to the extent that the benefits have already vested, and otherwise is amortised
on a straight-line basis over the average period until the benefits become vested.

Assets of the pension scheme are held separately from the Group’s assets.

(iii) Share-based payments
In accordance with the transition provisions of IFRS 1 (First-time Adoption of International Financial Reporting Standards), IFRS 2
(Share-based Payment) has been applied to all share-based grants made to employees after 7 November 2002 that had not
vested as of 1 January 2005.

The share option programme allows Group employees to acquire shares of the Company, subject to certain criteria. The fair value
of options granted is recognised as an expense of employment in the income statement with a corresponding increase in equity.
The fair value is measured at the date of grant and spread over the period during which the employees become unconditionally
entitled to the options. The fair value of the options granted is measured using a Black-Scholes model, taking into account the
terms and conditions upon which the options were granted. The amount recognised as an expense in any year is adjusted to
reflect the actual number of share options that vest. However, if share options fail to vest due to share prices not achieving the
designated performance threshold for vesting, no such adjustment takes place.

(p) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past
event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material,
provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are
lower than the unavoidable cost of meeting its obligations under the contract.

A charge for reorganisation costs is taken to the income statement when the Group has approved a detailed and formal
reorganisation plan, and the reorganisation has either commenced or the Group has a constructive obligation, for example
having made an announcement publicly to the employee or the Group as a whole.

(q) Trade and other payables
Trade and other payables are not interest bearing and are stated at amortised cost except for the contingent considerations
which are recognised at fair value. Fair value adjustments to contingent considerations are reassessed at subsequent reporting
periods and adjustments are taken when changes to the assumptions are required.

(r) Revenue recognition
Revenue represents amounts received or receivable in respect of the sale of marketed products to customers during the year,
net of trade discounts given and value added tax, and in respect of royalty arrangements.

A description of the various elements of revenue and the associated accounting policies is given below:

(i) Marketed products
The Group recognises revenue for marketed product sales when each condition of IAS 18, paragraph 14 is wholly-satisfied.
Where sales arrangements specify a second element of revenue contingent upon a specified event, this revenue is not
recognised until this event has occurred and it is certain that the economic benefit triggered by this event will flow to the Group.
In cases where product is sold to a customer with a right of replacement, the Group views the transaction as a multi-element
arrangement and a portion of the value from the sale is deferred and allocated to the replacement right based on the fair value
of the replacement right. Revenue is recognised net of any trade discounts that may be given from time-to-time.

(ii) Royalties
Revenues from the Group’s licensed programmes are generated following the grant of a licence to a third party to undertake
additional development and commercialisation of a research and development programme or other intellectual property rights.

In addition to an upfront payment, BTG may be entitled to additional revenues such as milestone payments or royalties on
revenues generated by the licensee. Revenues associated with royalty arrangements may in turn be linked to additional
obligations on BTG. These revenues are accounted for in line with IAS 18 as follows:

Upfront and milestone payments
Non-refundable upfront and milestone payments are recognised as the earnings process is completed. This may result in full
recognition in the year in which the income is received. However, where the Group has ongoing performance obligations such
as the delivery of products or services, upfront payments are deferred over the period in which these obligations are satisfied.
Associated costs of performance obligations are expensed in the period to which they relate. In determining the performance
obligations under the contract, consideration is given as to whether elements of the obligations meet the criteria for separate
accounting. The Group applies the substantive milestone method in accounting for subsequent milestone payments. Milestone
payments that are considered substantive are recognised into income in the year in which they are received. Milestones that do
not satisfy the criteria to be considered as substantive are amortised over the remaining period in which the Group expects to
fulfil its performance obligations under the agreement. The Group considers the following when assessing whether a milestone
is considered substantive:

Financials

BTG plc Annual Report and Accounts 20151. Are the milestone payments non-refundable?
2. Does the achievement of the milestone involve a degree of risk that was not reasonably assured at the inception

of the arrangement?

3. Is substantive effort involved in achieving the milestone?
4. Is the amount of the milestone payment reasonable in relation to the effort expended or the risk associated with

the achievement of the milestone?

5. How does the time that passes between the payments compare to the effort required to reach the milestone?

Outlicensed product royalties
Royalty income is generated by sales of products incorporating the Group’s proprietary technology. Royalty revenues are
recognised once the amounts due can be reliably estimated based on the sale of underlying products and recoverability is
assured. Where there is insufficient historical data on sales and returns to fulfil these requirements, for example in the case
of a new product, the royalty revenue will not be recognised until the Group can reliably estimate the underlying sales.

(iii) Sales/assignments of Intellectual Property Rights (IPR)
Outright sales or assignments of IPR are treated as disposals of non-current assets.

(iv) Revenues received in relation to development programmes
Revenue received in relation to development programmes is recognised based on the percentage of completion of the
programme. Where payments may be earned in such programmes based on the achievement of uncertain milestones, revenue
is restricted to the cumulative cash receivable for the programme.

(s) Research and development
Research and development expenditure is charged to the income statement in the period in which it is incurred. Expenditure
incurred on development projects (relating to the design and testing of new or improved products) is recognised as intangible
assets when it is probable that the project will generate future economic benefit, considering factors including its commercial
and technological feasibility, status of regulatory approval, and the ability to measure costs reliably. Other development
expenditures are recognised as an expense as incurred. Development expenditure previously recognised as an expense is
not recognised as an asset in a subsequent period. Development expenditure that has a finite useful life and which has been
capitalised is amortised from the commencement of the commercial production of the product on a straight-line basis over
the period of its expected benefit.

No development expenditure has been capitalised in either the current or prior year.

Property, plant and equipment used for research and development is depreciated in accordance with the Group’s policy and
the cost is included within ‘Research and development’ in the income statement.

(t) Cost of sales
Cost of sales includes the direct costs incurred in manufacturing and bringing products to sale in the market and revenue
sharing costs.

Revenue sharing costs represent amounts due under royalty arrangements to licensors or assignees of technology and similar
directly attributable items. Amounts are recognised upon recognition by the Group of amounts due from a licensee. They are
recognised on an accruals basis in accordance with the individual agreements relating to the relevant technology, in line with
revenue recognition.

(u) Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognised as assets of the Group at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor
is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and
reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance
charges are charged directly against income. Such assets are depreciated over the shorter of their estimated useful lives or the
length of the lease. Assets purchased under hire purchase agreements are accounted for similarly, except that these assets are
depreciated over their estimated useful lives.

Rentals under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease
within the appropriate functional expenditure heading.

(v) Financial income
Financial income comprises interest income receivable during the year, calculated using the effective interest rate method,
and fair value adjustments relating to foreign exchange forward contracts, contingent considerations payable upon corporate
and non-corporate acquisitions.

(w) Financial expense
Financial expense comprises interest payable during the year, calculated using the effective interest rate method, and
fair value adjustments relating to foreign exchange forward contracts, contingent considerations payable upon corporate
and non-corporate acquisitions, other financing costs and borrowings.

Financials

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

2. Significant accounting policies continued
(x) Tax
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying
value of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: where the deferred tax liability arises from the initial recognition of goodwill or of
an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and in respect of taxable temporary differences associated with investments in
subsidiaries and associates, where it is probable that the temporary differences will not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying value of assets
and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised.

(y) BTG Employee Share Trust
Included within the Group’s financial results are those of the BTG Employee Share Trust, the costs of which are expensed within
the financial statements of the Trust as incurred.

In the Company accounts the cost of BTG shares held by the Trust is deducted from shareholders’ funds.

(z) Financial guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within
its Group, the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the
Company treats the guarantee contracts as a contingent liability until such time as it becomes probable that the Company
will be required to make a payment under the guarantee.

(aa) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the
statement of comprehensive income over the period of the borrowings using the effective interest rate.

3. Critical accounting judgments and key sources of estimation uncertainty
Critical accounting judgements
In the process of applying the Group’s accounting policies, described in note 2, management and the Audit Committee discussed
and agreed the selection, application and disclosure of the Group’s critical accounting policies and the estimates used in the
preparation of the accounts.

Acquisitions
Judgments have been made in respect of the identification of intangible assets made on acquisitions based on pre-acquisition
forecasts, analysis and negotiations. In addition to the judgments and estimates made in establishing the intangible assets
acquired and their value, in certain instances these assets are in development and are only amortised once the development
phase has been completed, although these assets are subjected to impairment review in accordance with the accounting policy
described in note 2(m).

Financials

In addition to significant fair value adjustments in relation to intangible assets, the Group has recognised other fair value
adjustments on assets and liabilities acquired. Each adjustment has been calculated in line with the requirements of IFRS 3
(revised). The most significant of these relate to:
• Deferred tax; where estimates of deferred tax liabilities arising on acquired intangible assets have been recognised. Where
appropriate an associated deferred tax asset, representing management’s estimation of the value of tax losses that would
be available to the Group to offset the deferred tax liability (see below), has also been recognised;

• Contingent consideration; where the present value of future performance and other milestones are estimated using

acquisition date trading assumptions and forecasts to assess the likelihood of payments to be made; and

• Inventory; where inventory acquired has been uplifted in value to be held at estimated selling price less costs to complete,

costs of disposal and a reasonable profit allowance.

Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year, are discussed below.

BTG plc Annual Report and Accounts 2015Impairment of goodwill and other intangibles
Determining whether goodwill and other intangibles are impaired requires an estimation of the value in use of the cash-
generating units to which goodwill or other intangible assets have been allocated. The value in use calculation requires
estimation of future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate
present value. There is a risk of a material adverse impact on the income statement should an impairment adjustment be
required to be reflected in the financial statements. See note 2(m) for further details.

Deferred tax
The Group has significant deferred tax assets principally in relation to tax losses. The assets have been recognised on the basis
that management estimates demonstrate that it is more likely than not that future taxable profit will arise in the jurisdictions in
which the losses are available. If actual events differ from management’s estimates or the estimates are changed in the future
this could have a significant effect on the balance sheet net asset position of the Group. In recognising deferred tax assets and
liabilities, management has taken into account expected changes in tax rates in each relevant jurisdiction.

Pension assumptions
Note 22 details the key actuarial assumptions used to establish the pension funding position. These represent management’s
best estimates and are chosen based on historic experience and future expectations. Should the discount rate used to establish
scheme liabilities or the long-term expected rate of return on investment vary significantly then the pension fund valuation
would be impacted.

4. Operating segments
The Group is aligned behind three reportable segments, being Interventional Medicine, Specialty Pharmaceuticals
and Licensing.

The acquisition of PneumRx Inc. on 7 January 2015 is included within the Interventional Medicine operating segment.
The acquisitions of EKOS Corporation on 5 July 2013 and the Targeted Therapies division of Nordion Inc. on 13 July 2013
are included within the Interventional Medicine operating segment.

In assessing performance and making resource allocation decisions, the Leadership Team (which is BTG’s chief operating
decision-making body) reviews contribution by segment. Contribution is defined as being gross profit less directly attributable
selling, general and administrative costs (SG&A). The Licensing operating segment includes SG&A relating to the Group’s
centrally managed support functions and corporate overheads. This reflects the management structure and stewardship of the
business. No allocation of central overheads is made across the Specialty Pharmaceuticals or Interventional Medicine operating
segments. Research and development continues to be managed on a global basis, with investment decisions being made by the
Leadership Team as a whole. It is not managed by reference to the Group’s operating segments, though each programme within
the pipeline would ultimately provide revenues for one of the operating segments if successful.

There are no inter-segment transactions that are required to be eliminated on consolidation.

Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Contribution
Amortisation and impairment of acquired intangibles assets
Foreign exchange gains
Research and development
Profit on disposal of property, plant and equipment and intangible assets
Acquisition and reorganisation costs
Operating profit
Financial income
Financial expense
Profit before tax
Tax credit
Profit for the year
Unallocated assets

Year ended 31 March 2015

Interventional
Medicine1
£m

Specialty
Pharmaceuticals
£m

112.7
(33.5)
79.2
(70.1)
9.1

121.1
(17.1)
104.0
(24.9)
79.1

Licensing
£m

134.0
(64.1)
69.9
(29.8)
40.1

Financials

Total
£m

367.8
(114.7)
253.1
(124.8)
128.3
(28.4)
6.7
(68.3)
0.3
(3.7)
34.9
0.1
(8.3)
26.7
6.9
33.6
1,045.9

1 2015 Cost of Sales includes a £0.9m release of a fair value adjustment to inventory purchased on the acquisition of PneumRx Inc. on 7 January 2015 within the Interventional Medicine

segment. This represents the release of a fair value uplift applied to inventory purchased on acquisition recognised through the income statement as the product is sold.

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

Year ended 31 March 2014

Interventional
Medicine2
£m

Specialty
Pharmaceuticals
£m

79.1
(22.5)
56.6
(42.8)
13.8

102.3
(20.9)
81.4
(22.7)
58.7

Licensing
£m

109.1
(51.6)
57.5
(18.5)
39.0

4. Operating segments continued

Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Contribution
Amortisation and impairment of acquired intangibles assets
Foreign exchange losses
Research and development
Profit on disposal of property, plant and equipment and intangible assets
Acquisition and reorganisation costs
Operating profit
Financial income
Financial expense
Profit before tax
Tax charge
Profit for the year
Unallocated assets

Total
£m

290.5
(95.0)
195.5
(84.0)
111.5
(23.3)
(5.0)
(47.2)
1.1
(9.8)
27.3
8.2
(2.2)
33.6
(9.0)
24.3
711.7

2 2014 Cost of Sales includes a £1.9m release of a fair value adjustment to inventory purchased on the acquisition of EKOS on 5 July 2013 within the Interventional Medicine segment. This

release represents the release of a fair value uplift applied to inventory purchased on acquisition recognised through the income statement as the product is sold.

Revenue analysis
Analysis of revenue, based on the geographical location of customers and the source of revenue is provided below:

Geographical analysis

USA
Europe
Other regions

Revenue from major products and services

Financials

Product sales
Royalties

Year ended
31 March
2015
£m

327.1
31.1
9.6
367.8

Year ended
31 March
2015
£m

233.8
134.0
367.8

Year ended
31 March
2014
£m

256.1
26.5
7.9
290.5

Year ended
31 March
2014
£m

180.1
110.4
290.5

BTG plc Annual Report and Accounts 2015Major customers
Products that utilise the Group’s intellectual property rights are sold by licensees. Royalty income is derived from over 60
licences. One licence individually generated royalty income in excess of 10% of Group revenue of £105.2m (2014: One licence
generated £83.8m).

The Group’s marketed products are sold both directly and through distribution agreements in the USA, Europe and Asia Pacific
region. No individual customer generated income in excess of 10% of the Group revenue during the year ended 31 March 2015
or 31 March 2014.

5. Acquisition and reorganisation costs

PneumRx Inc. acquisition costs
EKOS Corporation acquisition costs
Targeted Therapies division of Nordion Inc. acquisition costs
Other
Total charge for the year

Year ended
31 March
2015
£m

Year ended
31 March
2014
£m

(2.8)
–
–
(0.9)
(3.7)

–
(4.1)
(5.7)
–
(9.8)

The Group considers ‘acquisition and reorganisation costs’ to include transaction costs of completing the acquisition and
those costs resulting directly from decisions to rationalise both operating sites and business operations (see accounting
policies in note 1).

6. Operating profit
Operating profit has been arrived at after charging/(crediting):

Depreciation of property, plant and equipment
Amortisation and impairment of intangible assets
Net foreign exchange (gains)/losses
Research and development expenses
Staff costs
Operating lease rentals payable on property
Acquisition adjustments and reorganisation costs

The analysis of the auditor’s remuneration is as follows:

Note

14
13

Year ended
31 March
2015
£m

Year ended
31March
2014
£m

5.5
29.5
(6.7)
68.3
100.2
2.5
3.7

3.4
24.3
5.0
47.2
63.7
2.3
9.8

Year ended
31 March
2015
£’000

Year ended
31 March
2014
£’000

Fees payable to the Company’s auditor for the audit of the Company’s annual accounts:
Fees payable to the Company’s auditor and its associates for other services:
Audit of the Company’s subsidiaries pursuant to legislation
Audit of Pension scheme trust
Other audit-related assurance services
Taxation compliance services
All taxation advisory services not covered above
All assurance services not covered above

170

300
11
54
256
–
–

Financials

165

295
11
54
48
53
5

A description of the work of the Audit Committee is set out in the corporate governance statement on pages 50 to 53 and
includes an explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided
by the auditor.

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

7. Staff costs
Staff costs (including directors’ emoluments and reorganisation costs) are as follows:

Salaries
Social security costs
Defined contribution pension costs
Defined benefit pension costs
Equity-settled transactions

Year ended
31 March
2015
£m

Year ended
31 March
2014
£m

81.3
8.8
4.1
0.4
5.6
100.2

48.0
6.9
2.9
0.6
5.3
63.7

Key management personnel are considered to be the directors and their remuneration is disclosed within the Remuneration
report on pages 56 to 75. In addition to the disclosures in the Remuneration report, the charge to income in respect of
equity-settled transactions of key management personnel, in accordance with IFRS 2, was £1.9m (2014: £1.2m).

The average number of persons employed by the Group during the year (including executive directors), analysed by category,
was as follows:

Management
Research and production
Sales, administration and business support

8. Financial income

Interest receivable on money-market and bank deposits
Fair value changes of foreign exchange forward contracts
Other
Financial income

9. Financial expense

100

Financials

Fair value changes of foreign exchange forward contracts
Fair value changes on contingent consideration
Others
Financial expense

Year ended
31 March
2015

Year ended
31 March
2014

102
518
366
986

68
396
312
776

Year ended
31 March
2015
£m

Year ended
31 March
2014
£m

0.1
–
–
0.1

0.2
7.5
0.5
8.2

Year ended
31 March
2015
£m

Year ended
31 March
2014
£m

6.2
1.0
1.1
8.3

–
1.4
0.8
2.2

10. Tax
An analysis of the tax (credit)/charge in the income statement for the year, all relating to current operations, is as follows:

Current tax
UK corporation tax charge
Overseas corporate tax charge
Adjustments in respect of prior years
Total current taxation

Deferred taxation
Deferred tax credit
Adjustment to tax rates
Total tax (credit)/charge for the year

Year ended
31 March
2015
£m

Year ended
31 March
2014
£m

–
12.2
(1.2)
11.0

(17.9)
–
(6.9)

–
14.5
(0.8)
13.7

(5.0)
0.3
9.0

BTG plc Annual Report and Accounts 2015In addition to the tax (credit)/charge in the income statement, a deferred tax credit of £1.8m (2014: £0.8m credit) has been
recognised in the consolidated statement of other comprehensive income.

UK corporation tax is calculated at 21% (2014: 23%) of the estimated taxable profit for the year. Taxation for other jurisdictions
is calculated at the rates prevailing in the respective jurisdictions.

Reconciliation of the effective tax rate:

Profit before tax
Tax using UK corporation tax rate of 21% (2014: 23%)
Effect of overseas tax rates
Change in unrecognised deferred tax assets
Non-deductible expenses
Effect of UK patent box deduction
Adjustment to tax rates
Adjustments in respect of prior years

Year ended
31 March
2015
£m

Year ended
31 March
2014
£m

26.7
5.6
2.2
(11.6)
1.4
(3.7)
–
(0.8)
(6.9)

33.3
7.6
4.3
(3.1)
4.9
(2.8)
0.3
(2.2)
9.0

An analysis of amounts included in the consolidated statement of financial position in respect of income taxes is shown below:

Year ended
31 March
2015
£m

Year ended
31 March
2014
£m

Current assets
UK corporation tax receivable
Overseas corporate tax receivable

Current liabilities
Overseas corporate tax payable

1.4
–
1.4

3.2
3.2

Deferred taxation
The movements in the deferred tax asset and liabilities (prior to the offsetting of balances within the same jurisdiction as
permitted by IAS 12, Income Taxes) during the year are as shown below. The deferred tax asset and liabilities are only offset
where there is a legally enforceable right of offset and there is an intention to settle the balance net.

Deferred tax asset

Deferred tax asset recognised at 1 April
Income statement credit
Currency movements
Deferred tax asset recognised at 31 March

2015
£m

0.8
4.2
(0.1)
4.9

0.9
0.6
1.5

7.4
7.4

2014
£m

0.9
–
(0.1)
0.8

101

Financials

The deferred tax asset relates to tax losses in the UK and short term timing differences in Australia. The UK losses have been
recognised using a tax rate of 20% (2014: no UK losses recognised) and the short-term timing differences in Australia have been
recognised using a tax rate of 30% (2014: 30%). The directors are of the opinion, based on recent and forecast trading, that the
level of profits in the UK and Australia in the forthcoming years will lead to the realisation of the respective assets.

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

10. Tax continued
Deferred tax liability
The deferred tax liability of £152.4m (2014: £90.4m) represents the net position after taking into account the offset of deferred
tax assets against deferred tax liabilities in each jurisdiction. Deferred tax liabilities predominantly arise on intangible assets
recognised on acquisitions (£186.2m) and pension surplus (£4.6m). Deferred tax assets relate to brought forward trading losses
and short-term timing differences. The table below summarises the gross and net position at each balance sheet date:

At 1 April 2013
Adjustments re prior years
Acquisitions
Income statement (debit)/credit
Other comprehensive income (credit)
Offset against current tax payable
Currency movements
At 1 April 2014
Adjustments re prior years
Acquisitions
Income statement (debit)/credit
Other comprehensive income (credit)
R&D tax credits
Reclassification
Currency movements
At 31 March 2015

Deferred tax
assets
£m

Deferred tax
liabilities
£m

Net deferred tax
liability
£m

22.3
1.5
7.0
(6.2)
–
(1.1)
(1.0)
22.5
(0.5)
11.0
3.6
–
0.3
0.5
1.5
38.9

(66.1)
–
(66.2)
9.4
0.8
–
9.2
(112.9)
0.1
(74.0)
10.4
(1.8)
–
(0.5)
(12.6)
(191.3)

(43.8)
1.5
(59.2)
3.2
0.8
(1.1)
8.2
(90.4)
(0.4)
(63.0)
14.0
(1.8)
0.3
–
(11.1)
(152.4)

A reduction in the rate of UK corporation tax to 20% from 1 April 2015 was substantively enacted on 17 July 2013. The rate of 20%
from 1 April 2016 was substantively enacted on 25 March 2015. The UK deferred tax assets and liabilities at 31 March 2015 have
been calculated based on the rate of 20%.

Unrecognised tax losses
In addition to the losses on which a deferred tax asset has been recognised, the Group has additional tax losses and other timing
differences which have arisen principally as a result of the research and development incurred during the start up of the Group’s
activities. These losses and timing differences are shown below. UK tax losses can be carried forward indefinitely.

The US tax losses can be carried forward for 20 years and the first year in which they expire is 2018.

A deferred tax asset has not been recognised in respect of the losses and timing differences shown below as there is uncertainty
as to whether such losses and timing differences can be used.

The total amount of tax losses and timing differences not recognised is shown below:

102

Financials

Tax losses
Deductible temporary differences

Year ended
31 March
2015
£m

121.4
21.6
143.0

Year ended
31 March
2014
£m

142.4
14.8
157.2

BTG plc Annual Report and Accounts 201511. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:

Profit for the financial year (£m)

Profit per share (p)
Basic
Diluted

Number of shares (m)

Weighted average number of shares – basic
Effect of share options on issue
Weighted average number of shares – diluted

The basic and diluted earnings per share from underlying earnings are based on the following data:

Profit for the financial year (£m)

Add back:
Fair value adjustment on acquired inventory(a)
Amortisation of acquired intangible fixed assets(b)
Acquisition and reorganisation costs(c)
Fair values changes on contingent consideration(d)
Underlying earnings

Underlying profit per share (p)
Basic
Diluted

Year ended
31 March
2015

33.6

Year ended
31 March
2014

24.3

9.1
9.0

6.8
6.7

367.9
5.4
373.3

355.2
4.6
359.8

Year ended
31 March
2015

33.6

Year ended
31 March
2014

24.3

0.6
19.5
3.1
1.0
57.8

15.7
15.4

1.2
15.3
9.3
1.4
51.5

14.5
14.3

Adjustments to profit are shown after taking into account the tax effect of such adjustments on the results as shown in the
consolidated income statement as follows:

a. In the year ended 31 March 2015 there was £0.3m tax impact (2014: £0.7m) on fair value adjustment of inventory acquired

of £0.9m (2014: £1.9m).

b. The release of deferred tax liability of £8.9m (2014: £8.0m) has been deducted from the amortisation and impairment

of acquired intangible assets of £28.4m (2014: £23.3m) as shown in the consolidated income statement.

c. In the year ended 31 March 2015 there was a £0.6m tax impact on reorganisation costs of £3.7m. In the year ended

31 March 2014 there was £0.5m tax impact on reorganisation costs of £9.8m.

d. No tax adjustments (2014: nil) were required on the fair value changes on the contingent consideration of £1.0m (2014: £1.4m). 103

Financials

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

12. Goodwill

At 1 April 2013
Acquisitions
Exchange differences
At 1 April 2014
Acquisitions
Exchange differences
At 31 March 2015
Accumulated impairment losses
At 1 April 2013, 1 April 2014 and 31 March 2015
Net book value at 31 March 2015
Net book value at 1 April 2014
Net book value at 1 April 2013

Note

£m

59.2
71.1
(6.7)
123.6
51.6
8.6
183.8

–
183.8
123.6
59.2

During the year ended 31 March 2015 additions to Interventional Medicine goodwill of £51.6m related to the acquisition
of PneumRx Inc. (see note 32).

During the year ended 31 March 2014 additions to Interventional Medicine goodwill of £71.1m related to the acquisitions of EKOS
Corporation and the Targeted Therapies Division of Nordion Inc. (see note 32).

Impairment review – goodwill and intangible assets
An impairment review of the carrying value of goodwill and unamortised intangible assets was conducted as at 31 March 2015.

Goodwill arose on the acquisitions of Protherics PLC and Biocompatibles International plc, EKOS Corporation, the Targeted
Therapies Division of Nordion Inc. and PneumRx Inc. This has been allocated across the Group’s cash generating units, being
its operating segments (see note 4). Goodwill recognised on acquisitions has been allocated across operating segments in
proportion to the anticipated benefits of that goodwill on the operating segment, having regard for the assets and liabilities
acquired. The carrying value of goodwill has been allocated as relating to Interventional Medicine £147.3m (2014: £87.1m)
as relating to Specialty Pharmaceuticals £16.4m (2014: £16.4m), and in relation to Licensing, £20.1m (2014: £20.1m).

The impairment review required the estimation of the recoverable amount based on the value in use of the underlying cash
generating unit. Near-term projections are based on the Group’s approved three-year plan. Longer-term projections through
to the end of an asset’s estimated useful economic life are included due to the long-term nature of pharmaceutical product
development and product life cycles.

The main assumptions on which the forecast cash flows were based include market share and gross margin for the marketed
products, individual probability-adjusted cash flow models for all in-process research and development and an assessment
of the net present value of future net royalty income for licensed patents.

Cash flow projections for all assets were included for a period equal to the estimated useful economic life of the assets.
No terminal values were applied. All cash flows were discounted back to present value using a pre-tax discount rate of between
7% (2014: 7%) to 26% (2014: 23%) representing the range of asset classes being tested including established royalty streams,
launched marketed products and in-process research and development projects and which takes into account the individual
risk characteristics of each particular asset and related income stream.

For developed technology, the Group uses its approved three-year budget for near term sales projections, adjusting for expected
changes in future conditions, including those anticipated as a result of our knowledge of competitor activity and our assessment
of future changes in the pharmaceutical industry for long-term projections.

For contractual relationships, the Group uses the same basic methodology as for developed technology but limits the projection
period to the appropriate useful economic life of the contractual relationship.

For in-process research and development the key assumptions are the chance of product launch, market share and overall
market size. Industry average statistics are used to assess the chance of product launch, taking into account the stage of
development of the asset, the therapeutic area targeted and any known specific characteristics of the asset. Market share
and overall market size are assessed by reference to independent industry market reports.

In assessing whether there has been an impairment the net present value of future cash flows is compared to the carrying
value in the accounts.

The Group do not consider that there are any reasonable possible sensitivities that could result in an impairment charge.
The Group have considered the following specific individual sensitivities:
• a 1% increase in the discount rates used would not trigger an impairment;
• a 5% reduction in operating cashflows would not trigger an impairment.

104

Financials

BTG plc Annual Report and Accounts 2015Note

13. Intangible assets

Group

Cost
At 1 April 2013
Acquisitions
Additions
Disposals
Currency movements
At 1 April 2014
Acquisitions
Additions
Disposals
Currency movements
At 31 March 2015
Amortisation
At 1 April 2013
Provided during the year
Write back on disposals
Currency movements
At 1 April 2014
Provided during the year
Write back on disposals
Currency movements
At 31 March 2015
Net book value
At 31 March 2015
At 1 April 2014
At 1 April 2013

Developed
technology
£m

Contractual
relationships
£m

In-process
research and
development
£m

Computer
software
£m

Patents
£m

Purchase of
contractual
rights
£m

235.1
227.8
–
(2.0)
(32.4)
428.5
109.2
–
–
40.1
577.8

37.6
22.8
(0.5)
(2.5)
57.4
28.4
–
5.8
91.6

486.2
371.1
197.5

41.5
–
–
–
(2.9)
38.6
–
–
–
3.5
42.1

40.6
0.5
–
(2.8)
38.3
–
–
3.5
41.8

0.3
0.3
0.9

5.8
17.6
0.5
–
(1.6)
22.3
80.4
–
–
3.1
105.8

5.8
–
–
–
5.8
–
–
–
5.8

100.0
16.5
–

0.8
0.1
0.2
–
–
1.1
–
0.2
–
0.1
1.4

0.2
0.2
–
–
0.4
0.3
–
–
0.7

0.7
0.7
0.6

14.5
–
0.2
–
(1.6)
13.1
0.3
1.2
–
2.0
16.6

12.1
0.4
–
(1.7)
10.8
0.6
–
2.0
13.4

3.2
2.3
2.4

18.4
–
–
–
(1.4)
17.0
–
–
(9.5)
1.0
8.5

10.6
0.4
–
(1.0)
10.0
0.2
(9.5)
0.3
1.0

7.5
7.0
7.8

Total
£m

316.1
245.5
0.9
(2.0)
(39.9)
520.6
189.9
1.4
(9.5)
49.8
752.2

106.9
24.3
(0.5)
(8.0)
122.7
29.5
(9.5)
11.6
154.3

597.9
397.9
209.2

Amortisation relating to acquired intangibles is shown on the face of the income statement within ‘Amortisation of
acquired intangibles’. All other amortisation and impairment is shown within ‘Selling, general and administrative expenses’
in ‘Operating expenses’.

Developed technology
Developed technology includes the RePneu® Coil System (Europe) acquired in PneumRx Inc., EkoSonic® acquired in EKOS
Corporation (see note 32), TheraSphere® acquired in the Targeted Therapies Division of Nordion Inc. (see note 32), the antidote
assets acquired in Protherics PLC comprising principally of the rights to CroFab® and DigiFab® and the bead assets acquired in
Biocompatibles International plc comprising principally of the rights to the DC Bead® and LC Bead®. The carrying value of
individually significant assets within developed technology is:

RePneu® (Europe)
EkoSonic®
TheraSphere®
CroFab®
DigiFab®
DC Bead® and LC Bead®

105

Financials

31 March
2015
£m

108.9
110.5
94.4
67.5
21.8
77.0

Remaining
amortisation
period at
31 March
2015

14.8 years
13.3 years
13.3 years
18.7 years
18.7 years
10.8 years

31 March
2014
£m

–
105.8
90.3
63.3
20.5
84.1

In-process research and development
Additions to in-process research and development includes the RePneu® Coil System (US) acquired in PneumRx Inc. in the year
ended 31 March 2015 and the Targeted Therapies assets acquired in the Targeted Therapies Division of Nordion Inc. in the year
ended 31 March 2014 (see note 32).

RePneu® (US)
Targeted Therapies assets

31 March
2015
£m

81.5
17.8

31 March
2014
£m

–
15.9

Remaining
amortisation
period at
31 March
2015

–
–

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

14. Property, plant and equipment

Group

Cost or valuation
At 1 April 2013
Acquisitions
Additions
Disposals
Currency movements
At 1 April 2014
Acquisitions
Additions
Disposals
Transfers
Currency movements
At 31 March 2015
Depreciation
At 1 April 2013
Provided during the year
Disposals
Currency movements
At 1 April 2014
Provided during the year
Disposals
Currency movements
At 31 March 2015
Net book value at 31 March 2015
Net book value at 1 April 2014
Net book value at 1 April 2013

15. Other investments

At 1 April
Additions
Impairment charge
At 31 March

Note

Leasehold
improvements
£m

Freehold land
and buildings
£m

Plant and
machinery,
furniture and
equipment
£m

Assets in
the course of
construction
£m

1.7
0.4
3.0
–
(0.1)
5.0
–
0.9
–
3.9
0.1
9.9

0.5
0.5
–
–
1.0
1.1
–
–
2.1
7.8
4.0
1.2

17.4
–
0.3
–
(2.8)
14.9
–
0.2
–
–
(0.9)
14.2

2.9
0.4
–
(0.6)
2.7
0.3
–
(0.2)
2.8
11.4
12.2
14.5

17.7
1.0
4.9
(5.3)
(1.3)
17.0
0.3
3.3
(2.4)
3.0
–
21.2

13.5
2.5
(4.9)
(0.8)
10.3
4.1
(2.5)
(0.1)
11.8
9.4
6.7
4.2

5.6
–
3.5
(0.4)
(0.2)
8.5
–
5.9
(0.1)
(6.9)
(0.4)
7.0

0.1
–
–
–
0.1
–
–
–
0.1
6.9
8.4
5.5

2015
£m

3.0
–
–
3.0

Total
£m

42.4
1.4
11.7
(5.7)
(4.4)
45.4
0.3
10.3
(2.5)
–
(1.2)
52.3

17.0
3.4
(4.9)
(1.4)
14.1
5.5
(2.5)
(0.3)
16.8
35.5
31.3
25.4

2014
£m

3.0
–
–
3.0

106

Financials

Other investments comprise non-current equity investments which are available-for-sale that are recorded at fair value
at each balance sheet date. The fair value of unlisted investments is estimated to be the valuation following the latest round
of equity funding. In the absence of specific market data the Group determines that cost is equal to fair value.

Where the fair value of an available-for-sale asset is impaired, the impairment charge is recognised in the income statement,
together with any amounts recycled from the fair value reserve (see note 19). These impairments initially arise from the
prolonged or significant decline in the fair value of the equity investments below acquisition cost, subsequent to which
any further decline in fair value is immediately taken to the income statement.

BTG plc Annual Report and Accounts 201516. Inventories

Raw materials and consumables
Work in progress
Finished goods

31 March
2015
£m

14.9
10.2
15.4
40.5

31 March
2014
£m

12.0
11.5
3.5
27.0

In the year ended 31 March 2015 a fair value adjustment of £0.9m was recognised through cost of sales (see note 4) leaving
£1.5m fair value uplift recognised on the acquisition of PneumRx Inc. remaining (see note 32).

In the year ended 31 March 2014 a fair value adjustment of £1.9m was recognised through cost of sales (see note 4) leaving
nil fair value uplift recognised on the acquisition of EKOS Corporation remaining (see note 32).

Inventory to the value of £3.4m (2014: £1.8m) was written off through cost of sales.

17. Trade and other receivables

Due within one year
Revenues receivable, net of provisions
Other debtors
Prepayments and accrued income

31 March
2015
£m

31 March
2014
£m

38.7
10.6
42.6
91.9

28.8
9.0
37.3
75.1

Managing credit risk:
‘Revenues receivable, net of provisions’ represents marketed product sales sold both directly and through distribution
agreements for the year to 31 March 2015 and certain other amounts receivable under licence agreements.

The ageing of these amounts was as follows:

Not past due
0-30 days
31-90 days
> 90 days
Total

2015
Gross
£m

31.0
4.7
1.3
2.6
39.6

2015
Provision
£m

–
–
(0.2)
(0.7)
(0.9)

2014
Gross
£m

24.8
2.7
0.9
0.9
29.3

2014
Provision
£m

–
–
–
(0.5)
(0.5)

Provisions for bad debts of £0.9m (2014: £0.5m) have been made to write down the value of doubtful receivables to
estimated recoverable amounts. The charge for the year to 31 March 2015 in respect of provisions for bad debts was
£0.4m (2014: £0.2m credit).

18. Cash and cash equivalents

Bank balances
Cash and cash equivalents in statement of cash flows

107

Financials

31 March
2015
£m

73.8
73.8

31 March
2014
£m

38.2
38.2

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

19. Equity
Other reserves are analysed as follows:

At 1 April 2013
Total recognised income and expense
At 1 April 2014
Total recognised income and expense
At 31 March 2015

Translation
reserve
£m

Fair value
reserve
£m

Total other
reserves
£m

0.1
(32.4)
(32.3)
41.6
9.3

0.1
–
0.1
–
0.1

0.2
(32.4)
(32.2)
41.6
9.4

The merger reserve is used where more than 90% of the shares in a subsidiary are acquired and the consideration includes
the issue of new shares by the Company, thereby attracting merger relief under s612 and s613 of the Companies Act 2006.
The balance on the merger reserve has arisen through the acquisitions of Biocompatibles International plc on 27 January 2011
and Protherics PLC on 4 December 2008 and includes directly attributable costs of issuing shares of £1.1m relating to the
acquisition of Biocompatibles International plc.

The issued and fully paid share capital of the Company is shown below:

Ordinary shares of 10p each

At 1 April
Issued for cash
At 31 March

Number

361,586,534
20,190,169
381,776,703

2015
£m

Number

36.1 328,276,871
33,309,663
38.2 361,586,534

2.1

2014
£m

32.8
3.3
36.1

In December 2014, BTG completed a share placing for a total of 18,867,925 new ordinary shares at a price of 795p per placing
share, raising proceeds of £150.0m being £145.7m net of expenses.

In May 2013, BTG completed a share placing for a total of 32,208,030 new ordinary shares at a price of 330p per placing share,
raising proceeds of £106.3m being £103.1m net of expenses.

The remainder of shares issued in the current and prior year were as a result of the exercise of share options.

Share options
Details of outstanding share options are set out in note 23.

20. Trade and other payables

108

Financials

Amounts falling due within one year
Trade payables
Accruals and deferred income
Contingent consideration
Other creditors

Amounts falling due after more than one year
Accruals and deferred income
Contingent consideration
Other creditors

31 March
2015
£m

31 March
2014
£m

10.8
81.6
15.1
3.5
111.0

0.3
17.6
–
17.9

14.0
59.3
3.4
3.2
79.9

0.3
2.1
0.2
2.6

BTG plc Annual Report and Accounts 201521. Derivative financial instruments

Contracts with positive fair values:
Forward foreign exchange contracts due within one year
Forward foreign exchange contracts due after more than one year
Derivative instrument assets

Contracts with negative fair values:
Forward foreign exchange contracts due within one year
Derivative instrument liabilities

31 March
2015
£m

31 March
2014
£m

–
–
–

0.9
0.9

4.4
0.9
5.3

–
–

The Group utilises foreign currency derivatives to hedge significant future transactions and cash flows.

At 31 March 2015 the Group had forward contracts to sell US$237m in the period to March 2016 at rates in the range
£1:US$1.49 - £1:US$1.51. The fair value of these derivative financial instruments was marked to market at 31 March 2015
as a liability at £0.9m.

At 31 March 2014 the Group had forward contracts to sell US$144m in the period to June 2015 at rates in the range
£1:US$1.51 - £1:US$1.65. The fair value of these derivative financial instruments was marked to market at 31 March 2014
as an asset at £5.3m.

The fair value gain/loss for the year associated with these forward contracts was included within ‘Financial income/expense’.

A 5% strengthening of the US$ as at 31 March 2015, all other variables being unchanged, would result in an increase of £8.3m
within ‘Financial expense’ in the income statement and a fair value liability of £9.2m within ‘Derivative instruments’ within assets.
A 5% weakening of the US$ would result in a £7.7m decrease in ‘Financial expense’ and a fair value asset of £6.8m within
‘Derivative instruments’ within assets.

22. Retirement benefit schemes
Defined benefit scheme
For eligible UK employees the Group operates a funded pension plan providing benefits based on final pensionable emoluments.
The plan was closed to new entrants as of 1 June 2004. The plan is a registered scheme under the provisions of Schedule 36 of
the Finance Act 2004 and assets are held in a legally separate, trustee-administered fund. The trustees are required by law to
act in the best interest of the plan participants and are responsible for setting the plan’s investment and governance policies.

The results of the formal valuation of the plan as at 31 March 2013 were updated to the accounting date by an independent
qualified actuary in accordance with IAS 19.

The plan exposes the Group to inflation risk, interest rate risk, market investment and longevity risk. The Group is not exposed
to any unusual, entity specific or plan specific risks. The plan has a history of granting increases to pensions in line with price
inflation, and these increases are reflected in the measurement of the obligation.

In July 2010, the government announced its intention that future statutory minimum pension indexation would be measured by
the Consumer Prices Index, rather than the Retail Prices Index (‘RPI’). The Group continues to value its pension fund liability on
the basis of RPI.

The estimated amount of total employer contributions expected to be paid to the plan during 2015/16 is £2.9m (2014/15
actual: £2.9m).

The IAS 19 position of the plan is generally expected to be different to the triennial funding valuation assessment. The two
main drivers of this difference are the requirements for prudence in the funding basis (compared to the IAS 19 best-estimate
principle), and the IAS 19 requirements to use a discount rate based on high quality corporate bonds (compared to a prudent
expectation of actual asset returns for funding). This can sometimes lead to a situation where the IAS 19 measure shows a
surplus while the funding measure shows a deficit, with associated deficit recovery contributions payable by the Group.

The Group has taken professional advice and concluded that it has no requirement to adjust the balance sheet in respect of
either a current surplus or a minimum funding requirement under IFRIC14. This is on the basis that the Group has an
unconditional right to a refund of a current or projected future surplus at some point in the future.

The following table sets out the key IAS 19 assumptions used for the plan:

Retail price inflation
Discount rate
Life expectancy at age 60 of a male age 60 at the accounting date
Life expectancy at age 60 of a male age 40 at the accounting date

31 March
2015

31 March
2014

31 March
2013

3.1% p.a.
3.2% p.a.
88.5
91.0

3.6% p.a.
4.4% p.a.
88.4
90.8

3.6% p.a.
4.4% p.a.
87.5
89.1

109

Financials

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

22. Retirement benefit schemes continued
Assumptions regarding future mortality experience are set based on actuarial advice and in accordance with published
statistics. The mortality tables used at both year-ends 2015 and 2014 are S1NA tables based on year of birth, with a
multiplicative adjustment factor to reflect the Group’s assessment of the average current mortality rates of the plan members
relative to the tables. Amongst the UK population, there is a continuing trend for a generation to live longer than the preceding
generation, and this has been reflected in the longevity assumption by adopting CMI core projections and also incorporating
a minimum long-term rate of improvement in longevity of 1.5%/1.25% p.a. for males and females respectively in 2015
(2014: 1.5%/1.25% p.a. for males and females respectively).

The following table sets out related IAS 19 assumptions used:

Pension increases in deferment – RPI inflation
Pension increases in payment – RPI inflation
Pension increases in payment – inflation capped at 2.5%
General salary increases

31 March
2015

31 March
2014

31 March
2013

3.1% p.a.
3.1% p.a.
2.1% p.a.
3.1% p.a.

3.6% p.a.
3.6% p.a.
2.3% p.a.
3.6% p.a.

The amount included in the statement of financial position arising from the Group’s obligations in respect of the plan
is as follows:

Present value of defined benefit obligation
Fair value of scheme assets
Net asset recognised in the statement of financial position

31 March
2015
£m

(124.9)
138.1
13.2

31 March
2014
£m

(110.9)
118.9
8.0

31 March
2013
£m

(110.7)
121.0
10.3

A net asset is presented in the statement of financial position within non-current assets.

The IAS 19 expense is made up of the current service cost, plan administrative expenses, interest cost on the defined benefit
obligation and interest income on plans assets, all of which are shown in the change in defined benefit obligation and assets
tables below. The expense has been included in ‘Operating expenses: Selling, general and administrative expenses’.

The allocation of the plan’s assets is as follows:

Equity instruments
Diversified growth funds
Liability driven investment
Absolute return bonds
Illiquid inflation assets
Inflation linked bonds
Corporate bonds
Cash/net current assets

31 March
2015

31 March
2014

31 March
2013

10%
11%
29%
20%
15%
0%
0%
15%

16%
14%
0%
0%
0%
55%
14%
1%

15%
14%
0%
0%
0%
56%
14%
1%

There are no direct investments in the Group’s own shares or property occupied by any member of the Group.

At 31 March 2015, all asset classes have quoted prices in active markets, with the exception of the illiquid inflation assets which
are priced and traded on a monthly basis.

At 31 March 2014, all asset classes had quoted prices in active markets, with the exception of one of the two diversified
growth funds (around 7% of the overall portfolio). Diversified growth funds invest in a range of underlying asset classes and
derivatives: typically equities, bonds (including high yield and emerging market debt), hedge funds, commodities, infrastructure
and property, and vary their allocations to these markets tactically. They aim to achieve long term returns that are broadly in
line with the long-term equity returns, but with lower volatility and an element of capital preservation.

In setting the investment strategy, the trustees considered the views of the Group, their assessment of the Group’s covenant
supporting the actuarial risks faced by the plan, the risk and rewards of a number of possible asset allocation options, the
suitability of a wide range of asset classes within each strategy across and within asset classes, and the need for appropriate
diversification amongst different asset classes.

110

Financials

BTG plc Annual Report and Accounts 2015Changes in the present value of the defined benefit obligation, the fair value of the plan assets and the net asset/(liability) over
the year ended 31 March 2015 are as follows:

Year ended 31 March 2015

Beginning of the year
Employer’s part of the current service cost
Interest (cost)/income
Contributions by the employer
Contributions from plan members
Actuarial gain – experience
Actuarial loss – financial assumptions
Benefits paid
End of the year

Obligation
£m

Plan Assets
£m

(110.9)
(0.3)
(4.8)
–
(0.1)
0.7
(14.0)
4.5
(124.9)

118.9
–
5.2
2.9
0.1
15.5
–
(4.5)
138.1

Net asset/
(liability)
£m

8.0
(0.3)
0.4
2.9
–
16.2
(14.0)
–
13.2

Changes in the present value of the defined benefit obligation, the fair value of the plan assets and the net asset/(liability) over
the year ended 31 March 2014 are as follows:

Year ended 31 March 2014

Beginning of the year
Employer’s part of the current service cost
Interest (cost)/income
Contributions by the employer
Contributions from plan members
Actuarial gain/(loss) – experience
Actuarial loss – demographic assumptions
Benefits paid
End of the year

Obligation
£m

Plan Assets
£m

Net asset/
(liability)
£m

(110.7)
(0.4)
(4.8)
–
(0.1)
2.1
(1.8)
4.8
(110.9)

121.0
–
5.3
3.6
0.1
(6.3)
–
(4.8)
118.9

10.3
(0.4)
0.5
3.6
–
(4.2)
(1.8)
–
8.0

The actual return on the plan assets over 2015 was a gain of £20.7m (2014: loss of £1.0m).

The weighted average duration of the defined benefit obligation at the end of the reporting period is 15 years (2014: 16 years).

The administrative costs shown above are nil as they paid directly by the Group and are expensed separately outside IAS 19.

The sensitivities regarding the principal assumptions used to measure the plan obligations are:

Increase in Obligation

Increase in Plan Assets

Increase in Net Liability

Change in assumption

Decrease 0.1%
Increase 0.1%
Increase 1 year

31 March
2015
£m

31 March
2014
£m

31 March
2015
£m

31 March
2014
£m

1.9
1.7
4.1

1.7
1.4
3.7

2.2
1.8
–

1.5
1.4
–

31 March
2015
£m

(0.3)
(0.1)
4.1

31 March
2014
£m

0.2
–
3.7

Discount Rate
RPI inflation
Life expectancy

The sensitivity information has been derived using projected cash flows valued using the relevant assumptions and membership
profile as at 31 March 2015. The sensitivity methodology has not changed from prior years. Extrapolation of these results beyond
the sensitivity figures shown may not be appropriate.

Defined contribution schemes
The Group offers defined contribution pension schemes for its employees. The total income statement charge in relation
to these schemes was £4.1m (2014: £2.9m).

The Group’s defined contribution schemes are operated by external providers. The only obligation of the Group with respect
to these schemes is to make the specified contributions.

111

Financials

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

23. Share based payments
Share options
The Group makes awards under an equity-settled share option plan that entitles employees to purchase shares in the
Company. In accordance with the rules of the plan, options are granted at the market price of the shares on the date of grant
with a vesting period of generally three years. They may only be exercised upon the attainment of certain performance criteria.
If the performance criteria are not met by the date specified at the time of grant, the options do not vest and will lapse. If the
options remain unexercised after a period of ten years from the date of grant, the options expire. Furthermore, options are
forfeited if the employee leaves the Group before the options vest unless the conditions under which they leave are such that
they are considered to be a ‘good leaver’. In this case their options remain exercisable for a limited period of time. For further
details of current awards, see the Remuneration report on pages 56 to 75.

Option pricing
For the purposes of valuing options to arrive at the share-based compensation charge, a binomial lattice option pricing model
has been used. The assumptions used in the model are as follows:

Risk-free interest rate
Dividend yield
Volatility
Expected lives of options and awards granted under:
• Share option plan
• Sharesave plan
• Stock purchase plan
• Performance share plan
• Deferred share bonus plan
Weighted average fair value for share option plan grants in the year
Weighted average fair value for sharesave grants in the year
Weighted average fair value for stock purchase plan grants in the year
Weighted average fair value for performance share awards in the year
Weighted average fair value for deferred share bonus awards in the year

31 March
2015

31 March
2014

0.5% – 1.3% 0.4% – 1.0%
Nil
25% – 30% 29% – 31%

Nil

3 years
3 years
3.37 years
3.37 years
2.13 years
2.13 years
3 – 5 years 3 – 5 years
3 years
161.7p
136.3p
96.0p
323.4p
368.0p

3 years
389.7p
202.3p
153.5p
504.2p
599.0p

The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the
share options, restricted or performance shares), adjusted for any expected changes to future volatility due to publicly-
available information.

Share options are granted under a service condition, a non-market condition and a market condition. Service and non-market
conditions are not taken into account in calculating the fair value measurement of the services received.

Performance shares are awarded under a service condition, a non-market condition and a market condition. Service and
non-market conditions are not taken into account in calculating the fair value measurement of the services received.

Awards of share options and performance share awards made in 2009 and later years have a market condition based on a
TSR measure using the FTSE 250 companies excluding investment trusts, companies in the financial services sector (banks,
life & non-life insurance, equity & non-equity investment trusts, financial services, real estate investment & services and real
estate investment trusts etc.) and companies in the consumer discretionary sector (general retailers, media, travel & leisure,
and leisure goods). Earlier share options and performance shares used the FTSE SmallCap (excluding Investment Trusts) index.
If the Company’s share price at least matches the performance of the relevant index over the vesting period, the market-based
performance condition will be considered to have been achieved. The fair value of an award of shares under the share option
and performance share plans have been adjusted to take into account this market-based performance condition using a
pricing model based on expectations about volatility and the correlation of share price returns in the relevant index and which
incorporates into the valuation the interdependency between share price and index performance. This adjustment increases the
fair value relative to the share price at the date of grant. See the Remuneration report on pages 56 to 75 for further information.

112

Financials

BTG plc Annual Report and Accounts 2015Details of options and awards under the Group’s share plans are shown in the tables below.

Share options
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March
Sharesave plan
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March
Stock purchase plan
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March

Options outstanding at 31 March 2015

Share options granted in year ended 31 March
2010
2011
2012
2013
2014
2015

Sharesave plan options granted in year ended 31 March
2013
2014
2015

Stock purchase plan options granted in year ended 31 March
2014
2015

2015
Number
of share
options
(000)

1,565
66
–
(341)
1,290
872

510
268
(33)
(170)
575
–

93
181
(18)
(35)
221
–

2015
Weighted
average
exercise
price (p)

269.6
631.6
–
271.9
287.7
222.3

274.0
498.7
310.2
220.4
392.5
–

339.9
530.0
402.7
349.5
489.0
–

Number
(000)

290
329
253
333
19
66
1,290

126
184
265
575

46
175
221

2014
Number
of share
options
(000)

1,682
26
(54)
(89)
1,565
676

459
208
(62)
(95)
510
–

95
62
(24)
(40)
93
–

2014
Weighted
average
exercise
price (p)

262.3
395.1
273.2
117.2
269.6
186.8

245.2
289.5
272.7
161.2
274.0
–

305.3
332.0
340.0
248.8
339.9
–

Weighted
exercise
price (p)

Latest exercise
date year ended
31 March

179.3
201.3
298.9
384.1
395.1
631.6

320.2
289.5
498.7

332.0
530.0

2020
2021
2022
2023
2017
2018

2016
2017
2018

2016
2017

113

Financials

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

23. Share based payments continued
Performance share awards
Following approval of the Performance Share Plan by shareholders at the 2006 AGM, the Company has made awards to the
executive directors and other employees with a vesting period of three years. In 2013, amendments to the rules of the Plan
and the terms of new performance conditions were approved at the AGM. These included the opportunity for executive directors
only to voluntarily elect to carry-forward and put at risk for a further two years shares that would have vested under the core
award after three years into a multiplier award.

A Senior Management Performance Share Plan was approved by the Board in 2012 in order to award shares to certain senior
employees below Board level. The shares will vest on the second anniversary of the grant date.

Movement in the number of performance share awards is as follows:

Performance share awards
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March

Senior Management Performance Share Plan
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March

2015
Number of
share
awards
(000)

2014
Number of
share
awards
(000)

4,142
1,891
(112)
(775)
5,146
–

123
–
(25)
(98)
–
–

3,361
2,000
(350)
(869)
4,142
–

142
–
(19)
–
123
–

Deferred share bonus plan
The Company established a deferred share bonus plan. The executive directors, members of the leadership team and certain
other senior staff have part of their bonus awarded in shares. The shares will vest on the third anniversary of the grant date.

Movement in the number of deferred bonus shares awarded is as follows:

114

Financials

Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March

2015
Number of
share
awards
(000)

2014
Number of
share
awards
(000)

570
41
(3)
(172)
436
–

757
192
(37)
(342)
570
–

For the performance share awards and the deferred share bonus plan awards are forfeited if the director or other employee
leaves the Group before the awards vest, unless the conditions under which they leave are such that they are considered to
be a ‘good leaver’; in which case their award is released following their departure. If the Remuneration Committee decide that
a departing beneficiary of an award is a ‘good leaver’, so their award may be released early, the award will only be released
subject to the achievement of the performance conditions set out at the time of the granting of the award and may be subject
to proration for time, at the discretion of the Committee. For further details see the Remuneration report on pages 56 to 75.

24. BTG Employee Share Trust
The Group includes an employee share trust, the BTG Employee Share Trust (the ‘Trust’), which was established in Guernsey
in 1992. It holds shares for the general benefit of all employees who may eventually become legally entitled to them. At 31 March
2015 the Trust held 321,341 (31 March 2014: 720,699) shares in BTG plc and a further 12,596 (31 March 2014: 12,596) shares in
Torotrak plc. The Trust may distribute these shares to employees of the Group on the recommendation of the Company.
These distributions may be as a result of awards under the Performance Share Plan, the Deferred Share Bonus Plan or the
Senior Management Performance Share Plan.

BTG plc Annual Report and Accounts 201525. Provisions

At 1 April
Provisions utilised during year
Provisions made during year
Provisions released during the period
Difference on exchange
At 31 March

Balance due within one year
Balance due after more than one year

2015

2014

Leases
£m

0.9
–
0.9
–
–
1.8

0.4
1.4
1.8

Other
£m

0.1
–
–
–
–
0.1

0.1
–
0.1

Total
£m

1.0
–
0.9
–
–
1.9

0.5
1.4
1.9

Leases
£m

0.8
–
0.2
(0.1)
–
0.9

0.4
0.5
0.9

Other
£m

0.2
–
–
(0.1)
–
0.1

0.1
–
0.1

Total
£m

1.0
–
0.2
(0.2)
–
1.0

0.5
0.5
1.0

Lease provisions relate to dilapidation provisions and represent the estimated cost of restoring sites to their original state.

26. Financial risk management objectives and policies
Overview
The Group has exposure to credit, liquidity and market risks from its use of financial instruments. This note sets out the Group’s
key policies and processes for managing these risks.

Credit risk
Credit risk is the risk of financial loss to the Group if a licensee fails to meet its contractual obligations or a customer fails
to pay for goods received. The Group’s primary objective with respect to credit risk is to minimise the risk of default by licensees
or customers.

A substantial element of the Group’s revenue is derived from royalties which are only payable if a licensee is generating income
from sales of licensed products. In such instances the Group’s exposure to credit risk is considered to be inherently relatively low,
although is influenced by the unique characteristics of individual licensees. The Group’s policy is to provide against bad debts on
a specific licence by licence basis.

Following transitions from distribution agreements to direct sales during prior years, the majority of the marketed product
revenues are currently generated from sales to several key wholesalers in the U.S. Management maintains regular
communication with the customers and monitors both sales to and payments from customers to minimise the credit
risk exposure.

Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities as they fall due,
under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group has limited debt facilities in the form of assets held under finance leases. The Group has substantial cash balances to
fund its operations. In April 2013, the Group signed a £60m multi-currency revolving credit facility providing access to funds for a
period of three years to April 2016. This has not been utilised in the period.

The Group’s policy is to place surplus cash resources on short and medium term fixed interest deposits, to the extent that cash
flow can be reasonably predicted. Term deposits are denominated in UK sterling with institutions rated as A or higher by both
Moody’s and Standard & Poor’s.

Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect
the Group’s income or the value of its holdings in financial instruments. The Group has little exposure to interest rate risk other
than that returns on short-term fixed interest deposits will vary with movements in underlying bank interest rates. The Group’s
principal market risk exposure is to movements in foreign exchange rates.

Foreign currency risk
The Group has several overseas subsidiary undertakings, the majority of revenues and the expenses of which are denominated
in local currencies being US dollars, Canadian dollars, euros and Australian dollars. As a result the Group’s sterling income
statement, balance sheet and cash flows may be affected by movements in sterling exchange rates with these currencies.
The Group’s primary objective with respect to managing foreign exchange risk is to provide certainty over the value of future
cash flows.

115

Financials

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

26. Financial risk management objectives and policies continued
A significant element of the Group’s revenue is denominated in US dollars with the remainder split between sterling, euros and
other currencies. The majority of the Group’s operating expenses are in sterling and US dollars with smaller elements in euros,
Canadian dollars and Australian dollars. Where possible, anticipated foreign currency operating expenses are matched to
foreign currency revenues. The excess exposure over and above this natural hedge, to the extent that cash flows are predictable,
is managed using forward contracts (see note 21).

Sensitivity analysis
A 5% weakening of the US$ at 31 March 2015 would have resulted in the following decrease in profit:

Decrease in Profit

31 March
2015
£m

3.6

31 March
2014
£m

2.0

Interest rate risk
The Group seeks to mitigate partially against increased interest rates whilst maintaining a degree of flexibility to benefit
from decreasing rates of interest by holding a mix of fixed and floating rate financial liabilities. The Group seeks to maximise
the amount of interest income from its cash balances by using a variety of short-term, fixed high-interest deposit and money-
market accounts. The Group does not consider the impact of interest rate risk to be material to its results or operations and
accordingly no sensitivity analysis is shown.

Market price risk
It is, on occasion, deemed appropriate to take equity stakes in early-stage companies utilising the Group’s technology as part
of the overall licensing arrangement and small loans may be granted to these companies to further technology development.
These investments will be realised at an appropriate time in the development cycle. Regular reports are made to the Board
on the status of investments. These investments form part of the Group’s overall technology portfolio and do not materially
affect liquidity.

Capital management
The Group defines the capital that it manages as the Group’s total equity. The Group’s objectives when managing capital are:
• To safeguard the Group’s ability to continue as a going concern;
• To provide an adequate return to investors based on the level of risk undertaken;
• To have available the necessary financial resources to allow the Group to invest in areas that may deliver future benefits

for inventive sources and returns to investors; and

• To maintain sufficient financial resources to mitigate against risks and unforeseen events.

The Group believes it has sufficient ongoing cash and cash equivalents to meet its stated capital management objectives.
The Group’s capital and equity ratio are shown in the table below.

Total equity – capital and reserves attributable to BTG shareholders
Total assets
Equity ratio

31 March
2015
£m

758.6
1,045.9
72.5%

31 March
2014
£m

530.4
711.7
74.5%

The Group is not subject to regulatory capital adequacy requirements as known in the financial services industry.

116

Financials

BTG plc Annual Report and Accounts 2015Financial instruments
The Group’s financial instruments comprise cash, short- and medium-term deposits, foreign currency forward contracts,
contingent considerations and various items such as trade debtors and creditors which arise directly from operations.
In addition, a number of debt and equity investments, both quoted and unquoted, are held in technology-based companies
along with borrowings including obligations under finance leases.

Fair values
The fair values of the Group’s financial assets and liabilities, together with the carrying values shown in the statement
of financial position, are as follows:

31 March 2014
Cash and cash equivalents
Forward contracts
Other investments
Trade and other receivables
Trade and other payables
(excluding contingent consideration)
Contingent consideration
31 March 2015
Cash and cash equivalents
Forward contracts
Other investments
Trade and other receivables
Trade and other payables
(excluding contingent consideration)
Contingent consideration

Designated
at fair value
£m

Forward
contracts
at fair value
£m

Available
for sale
£m

Amortised
cost
£m

–
–
3.0
–

–
(5.5)

–
–
3.0
–

–
(32.7)

–
5.3
–
–

–
–

–
(0.9)
–
–

–
–

–
–
–
–

–
–

–
–
–
–

–
–

38.2
–
–
75.1

(77.0)
–

73.8
–
–
91.1

(96.2)
–

Total
carrying
value
£m

38.2
5.3
3.0
75.1

(77.0)
(5.5)

73.8
(0.9)
3.0
91.1

(96.2)
(32.7)

Fair
value1
£m

–
5.3
3.0
–

–
(5.5)

–
–
3.0
91.1

–
(32.7)

1 The Group has not disclosed the fair values for financial instruments such as trade receivables and trade payables because their carrying amounts are a reasonable approximation of

their fair value.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair
value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

Level 1 – quoted prices in active markets for identical assets and liabilities

Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3 – unobservable inputs

117

Financials

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

26. Financial risk management objectives and policies continued
Fair value hierarchy of financial assets and liabilities

At 31 March 2014

Financial assets recognised at fair value
Forward contracts
Investments
Financial liabilities recognised at fair value
Fair value of other contingent consideration

At 31 March 2015

Financial assets recognised at fair value
Investments
Financial liabilities recognised at fair value
Forward contracts
Fair value of other contingent consideration

Level 1
£m

Level 2
£m

Level 3
£m

Total
£m

5.3
3.0

–
–

(5.5)

–

3.0

–
(32.7)

(0.9)
(32.7)

–
–

–

–
–

5.3
3.0

–

3.0

(0.9)
–

Level 2 financial assets and liabilities represent forward foreign exchange contracts to sell US$ which are marked-to-market
at each balance sheet date and other investments held at fair value as disclosed in note 15.

Level 3 financial liabilities predominantly represent:
• contingent consideration payable on achievement of revenue targets and product approval by PneumRx following the

acquisition of PneumRx Inc. in January 2014 (see note 32(a) for valuation methodology);

• contingent consideration payable on achievement of revenue targets by EKOS following the acquisition of EKOS Corporation in

July 2013 (see note 32(c) for valuation methodology);

• contingent consideration payable upon the purchase of the US commercial rights of product candidate uridine triacetate

representing contingent milestone payments upon NDA acceptance and approval of the product candidate.

The movement in these Level 3 financial liabilities is shown below.

At 1 April
Acquisitions
Movements in Fair Value
Paid during the year
Currency movements
At 31 March

Contractual maturity analysis of financial assets/(liabilities)

118

Financials

Forward foreign exchange contracts that mature within:

0 – 3 months
3 – 6 months
6 – 12 months
>12 months
Total

2015
£m

(5.5)
(28.7)
(1.0)
3.5
(1.0)
(32.7)

2014
£m

(0.8)
(17.5)
(0.9)
11.9
1.8
(5.5)

31 March
2015
£m

31 March
2014
£m

(0.3)
(0.2)
(0.4)
–
(0.9)

1.3
1.1
2.0
0.9
5.3

Net gains and losses on financial assets and liabilities
Foreign exchange gains of £6.7m (2014: losses of £5.0m) were recognised within Operating profit in relation to settlement
of trade receivables and payables.

The Group recognised a fair value loss of £6.2m (2014: gain of £7.5m) relating to forward foreign exchange contracts within
‘Financial expense’ (2014: ‘Financial income’).

Estimation of fair values
The following summarises the methods and assumptions used in estimating the fair values of financial instruments reflected
in the table.

Other investments
These comprise both listed and unlisted investments, available-for-sale. The figure recorded in the statement of financial
position (note 15) is the best estimate of fair value.

BTG plc Annual Report and Accounts 2015Finance leases
The fair values of such balances are estimated by discounting the future cash flows at the market rate.

Trade receivables, trade payables and cash and cash equivalents
Trade payables and receivables have a remaining life of less than one year so their value recorded in the statement of financial
position is considered to be a fair approximation of fair value. Other contingent considerations are fair valued at each reporting
period recognising any changes between fair value at initial recognition and fair value at year-end to reflect a change in factors,
including time.

27. Operating leases
Total non-cancellable operating lease rentals are due in the following periods:

Within one year
Between two and five years

31 March
2015
Property
£m

2.8
7.3
10.1

31 March
2014
Property
£m

2.5
6.5
9.0

Operating lease payments represent rentals payable for certain of its office properties under non-cancellable operating
lease agreements.

The Group leases a number of offices and facilities primarily in the UK, the US, Canada, Germany, Asia-Pacific and Australia.
These leases have terms of up to five years.

The leases contain options to extend for further periods. In the event of renewal, the lease contracts contain market
review clauses. None of the property leases provide the Group with an option to purchase the leased asset at the expiry
of the lease period.

28. Other financial commitments
The Group has entered into agreements with a number of early-stage companies and venture capital funds. At 31 March 2015
the Group is committed to invest nil under these agreements (2014: nil).

As with any business whose core assets are intellectual property, the Group will from time to time resort to litigation or threats
of litigation, or other legal processes, to defend its rights. Litigation costs are regarded as a cost of doing business and will vary
from year to year. In the current year the Group incurred £7.5m in litigation costs (2014: £1.5m) predominantly relating to the
settlement of a patent dispute with Instituto Bioclon.

The Company has entered into an agreement to guarantee payments under the lease of a US subsidiary undertaking.

The Company has provided a Guarantee to certain subsidiary undertakings in respect of the BTG Pension Scheme up to
a maximum amount equal to the lowest non-negative amount which, when added to the assets of the Scheme, would
result in the scheme being at least 105% funded on the date on which any liability arose, calculated on the basis set out
in section 179 of the Pensions Act 2004, were a valuation to be conducted as at that date.

29. Related parties
Identity of related parties
The Group has a related-party relationship with its subsidiary undertakings (see note 2(b)), its associates (see note 2(b))
and its directors.

119

Financials

In relation to the related party relationship identified on page 48 concerning Giles Kerr, payments made by BTG to Oxford
University and Isis Innovations Ltd under the relevant licence agreements were £5,000 for the year ended 31 March 2015
(nil during the year ended 31 March 2014). There are no amounts still outstanding and payable by BTG under these
agreements as at 31 March 2015 (2014: nil).

Key management personnel are considered to be the directors and their remuneration is disclosed within the Remuneration
report on pages 56 to 75.

30. Disposal of Brachytherapy business
In September 2013, BTG announced the sale of its Brachytherapy business to Eckert & Ziegler Group, based in Berlin, Germany
for a payment of $5.0m on closing plus a 30% share of revenues from the transferring products for a period of 12 months
commencing either with the start of production by Eckert & Ziegler or on January 2014, whichever is first. The deal completed
on 1 November 2013. The profit on disposal of the Brachytherapy business of £0.4m was included within the profit on disposal
of property, plant and equipment and intangible assets of £1.1m in the Income Statement. The net proceeds of the disposal
were included within Net proceeds from disposal of property and equipment and intangible assets in the cash flow statement.

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

31. Group entities
The subsidiary undertakings of BTG plc at 31 March 2015 are all wholly owned, incorporated in the United Kingdom and
registered in England and Wales, unless shown otherwise. All subsidiary undertakings operate in their country of incorporation
and are consolidated in the Group’s financial statements.

Class of capital

Principal activity

BTG International (Holdings) Ltd*
Provensis Ltd*
BTG International Ltd

BTG Employee Share Schemes Ltd
Guernsey
BTG Management Services Ltd

Ordinary
Ordinary
Ordinary

Ordinary

Protherics Medicines Development Ltd

Ordinary

Investment in IPR management companies
Development and commercialisation of IPR
Development, management and
commercialisation of IPR
Trustee company

Investment and management
of Group companies
Development, management and
commercialisation of IPR
Research, development, and sale
of pharmaceutical products
Research, development, manufacture
and sale of pharmaceutical products
Manufacture and sale of
pharmaceutical products
Research, development, manufacture
and sale of pharmaceutical products
Investment and management
of group companies
Development, management and
commercialisation of IPR
Dormant company

Distribution of Bead products,
TheraSphere® and Varithena®
Research and development

Common stock

Ordinary

Common stock

Ordinary

Common stock

No par value shares

Common stock

Dormant company

Common shares

Support of Interventional Medicine business

Ordinary

Common stock

No par value shares

Ordinary
Common stock

Sales support for the interventional
medicine business
Manufacture and commercialisation of
therapeutic ultrasound devices

Development, manufacture and
commercialisation of the RePneu® Coil System
Commercialisation and sale of the RePneu®
Coil System
Group financing
Group financing

Ordinary

Group financing

BTG International Inc.
Delaware, USA
Protherics UK Ltd

BTG Australasia Pty Ltd
Australia
Protherics Utah Inc.
Tennessee, USA
Biocompatibles International Ltd*

Biocompatibles UK Ltd

Biopolymerix Inc.
Delaware, USA
Biocompatibles Inc.
Delaware, USA
BTG International Germany GmbH
Germany
Provensis Inc.
Delaware, USA
BTG International Canada Inc.
Canada
BTG International Asia Ltd
Hong Kong, China
EKOS Corporation
Delaware, USA
PneumRx, Inc.
Delaware, USA
PneumRx GmbH
Germany
BTG International Healthcare Ltd
BTG International Healthcare Inc.
Delaware, USA
BTG International Healthcare LLC
Delaware, USA

* Indicates direct subsidiary of BTG plc.

120

Financials

BTG plc Annual Report and Accounts 201532. Business combinations
Acquisitions during the year ended 31 March 2015
a) PneumRx acquisition

BTG completed the acquisition of 100% of PneumRx on 7 January 2015 for an initial cash consideration of £153.4m ($231.0m)
and up to $245m in contingent consideration based upon performance related future milestones. The contingent consideration
had a carrying value equal to its fair value of £28.8m using acquisition date trading assumptions and probability adjusted
forecasts to assess the likelihood of revenue and FDA approval milestone payments to be made. The final determination of these
fair values will be completed as soon as possible but no later than one year from the acquisition date.
PneumRx owns, manufactures and distributes RePneu® Coil System (RePneu®), a minimally invasive treatment for advanced
emphysema, which seeks to enhance patients’ quality of life by improving lung function and exercise capacity. At the date of
acquisition, RePneu® was in 11 European countries and had a fully recruited US pivotal clinical trial under way. A decision on US
approval is anticipated during 2016. The acquisition complements BTG’s Interventional Medicine platform, expanding it into the
emerging area of Interventional Pulmonology.
At acquisition, intangible assets principally comprised £109.2m relating to RePneu® (Europe) developed technology and £80.4m
relating to RePneu® (US) in-process research and development assets. The estimated useful life of the developed technology is
15 years, and amortisation expense is recorded on a straight-line basis. Goodwill arising of £51.6m, which is not deductible for
tax purposes, was assigned to the Interventional Medicine operating segment. Goodwill includes the values of tax impacts,
assembled workforce and future potential indications for RePneu® which at the time of acquisition did not meet the criteria for
recognition as separate intangible assets.

Under the terms of the acquisition agreement, BTG may be due to make further contingent consideration payments dependent
upon PneumRx achieving certain revenue targets and US FDA approval.

The contingent consideration payments include up to $20m payable if PneumRx meets a global revenue target in calendar year
2015 of US$35m and US$60m payable if US FDA approval is received before 31 December 2017. During the year, no contingent
consideration payments were made and £0.9m of discount unwind was recognised in the income statement. The remaining
contingent consideration payments on the Statement of Financial Position are considered by management to be a Level 3
financial instrument (note 26).

Assets
Non-current assets:
Intangible assets
Property, plant & equipment
Current assets:
Inventories
Trade and other receivables
Cash and cash equivalent
Liabilities
Current liabilities:
Trade and other payables
Non-current liabilities:
Net deferred tax liabilities
Assets acquired
Goodwill
Total assets acquired
Cash consideration paid
Contingent consideration
Total Consideration
Cash and cash equivalents included in undertaking acquired
Cash consideration paid
Net cash outflow arising on acquisition and in cash flow statement

Book Value
£m

Fair Value
Adjustment
£m

Fair Value
£m

0.3
0.3

0.9
2.6
6.2

(8.8)

–
1.5

189.6
–

2.4
–
–

189.9
0.3

3.3
2.6
6.2

–

(8.8)

(62.9)
129.1

(62.9)
130.6
51.6
182.2
153.4
28.8
182.2
6.2
(153.4)
(147.2)

121

Financials

b) Other acquisitions
On 6 August 2014, the Group acquired the site and certain assets and processes associated with PEM manufacture from its
existing contract manufacturing organisation, SCM Pharma Limited, for a consideration of approximately £0.5m plus transaction
fees. The Company expects to increase throughput through these assets to support the growth of the recently approved and
launched Varithena®.

BTG plc Annual Report and Accounts 2015Notes to the consolidated financial statements continued

32. Business Combinations continued
Acquisitions during the year ended 31 March 2014
In July 2013, BTG completed the acquisitions of EKOS Corporation (EKOS) and the Targeted Therapies division of Nordion Inc.

c) EKOS Corporation (EKOS)
BTG completed the acquisition of 100% of EKOS on 5 July 2013 for an initial cash consideration of £118.7m ($178.8m) and up
to $40m in contingent consideration based upon future performance milestones. The contingent consideration had a carrying
value equal to its fair value of £17.5m using acquisition date trading assumptions and forecasts to assess the likelihood of
payments to be made. The purchase price allocation is deemed final and there have been no adjustments to the preliminary
assessment of the fair values of assets acquired and liabilities assumed.
EKOS owns, manufactures and distributes the EkoSonic® Endovascular System (EkoSonic®), a differentiated interventional
medicine product using a locoregional approach in the treatment of severe blood clots. EkoSonic® is cleared for use in the
US and the EU. The acquisition is a complementary transaction in line with BTG’s existing strategy of growing its Interventional
Medicine business, following its acquisition of Biocompatibles International plc in 2011.
At acquisition, intangible assets principally comprised £123.2m relating to EkoSonic® developed technology. The fair value
of this asset was estimated using an income approach, using the excess earnings method. The estimated useful life of the
technology was 15 years, and amortisation expense is recorded on a straight-line basis. Goodwill arising of £47.8m, which
is not deductible for tax purposes, was assigned to the Interventional Medicine operating segment. Goodwill includes the
values of tax impacts, assembled workforce and future potential indications for EkoSonic® which at the time of acquisition
did not meet the criteria for recognition as separate intangible assets.

Under the terms of the acquisition agreement, BTG may be due to make further contingent payments dependent upon EKOS
achieving certain revenue targets. These comprise up to $20m payable in respect of 2013 and up to $20m payable in respect
of 2014 and 2015 in aggregate. Total contingent payments will not exceed $40m. During the year BTG paid the contingent
payment in respect of 2014 of $5.4m (£3.5m) (2014: in respect of 2013 $20.0m, £11.9m). The remaining contingent payment
on the Statement of Financial Position is considered by management to be a Level 3 financial instrument (note 26).

Assets
Non-current assets:
Intangible assets
Property, plant & equipment
Current assets:
Inventories
Trade and other receivables
Cash and cash equivalents
Liabilities
Current liabilities:
Trade and other payables
Non-current liabilities:
Trade and other payables
Deferred tax liabilities
Assets acquired
Goodwill
Total assets acquired
Cash consideration paid
Contingent consideration
Total Consideration
Cash and cash equivalents included in undertaking acquired
Cash consideration paid
Net cash outflow arising on acquisition and in cash flow statement

122

Financials

Book Value
£m

Fair Value
Adjustment
£m

Fair Value
£m

0.1
1.4

2.7
3.0
3.1

(4.8)

(0.4)
–
5.1

123.2
–

1.9
–
–

–

–
(41.8)
83.3

123.3
1.4

4.6
3.0
3.1

(4.8)

(0.4)
(41.8)
88.4
47.8
136.2
118.7
17.5
136.2
3.1
(118.7)
(115.6)

d) Targeted Therapies division of Nordion Inc.
On the 13 July 2013, BTG completed the acquisition of the Targeted Therapies division of Nordion Inc. for a total cash
consideration of £132.8m ($200.8m). The purchase price allocation is deemed final and there have been no adjustments
to the preliminary assessment of the fair values of assets acquired and liabilities assumed.
Targeted Therapies is a high growth business that is focused in utilising TheraSphere® for targeted interventional treatment
of liver cancer. TheraSphere® is a product comprising radioactive glass beads which target the tumour from within the body
with a high concentration of radiation, thereby limiting both damage to surrounding healthy tissue and side effects for the
patient in comparison to externally delivered radiation. The acquisition is a complementary transaction in line with BTG’s
existing strategy of growing its Interventional Medicine business, following its acquisition of Biocompatibles International plc
in 2011.

BTG plc Annual Report and Accounts 2015At acquisition, intangible assets comprised £104.6m relating to Targeted Therapies developed technology and £17.6m relating
to in-process research and development assets. The fair value of these assets was estimated using an income approach, using
the excess earnings method. The estimated useful life of the technology was 15 years, and amortisation expense is recorded on
a straight-line basis. Goodwill arising of £23.3m, which is not deductible for tax purposes, was assigned to the Interventional
Medicine operating segment. Goodwill includes the values of tax impacts and assembled workforce.

Assets
Non-current assets:
Intangible assets
Current assets:
Inventories
Trade and other receivables
Liabilities
Current liabilities:
Trade and other payables
Non-current liabilities:
Deferred tax liabilities
Assets acquired
Goodwill
Total consideration
Cash paid
Net cash outflow arising on acquisition and in cash flow statement

Book Value
£m

Fair Value
Adjustment
£m

Fair Value
£m

–

0.6
5.8

(1.7)

–
4.7

122.2

–
–

–

(17.4)
104.8

0.6
5.8

(1.7)

(17.4)
109.5
23.3
132.8
(132.8)
(132.8)

Revenue and Profit Impact of acquisitions
During the year ended 31 March 2015, PneumRx Inc. contributed revenues of £2.3m and an operating loss before acquisition
adjustments and reorganisation costs of £2.7m in the period since acquisition. If the acquisition had taken place on 1 April 2014,
the first day of the reporting period under review, revenue and profit before tax and before acquisition adjustments and
reorganisation costs of the combined group would have been £379.1m and £64.2m respectively.

During the year ended 31 March 2014, EKOS contributed revenues of £20.3m and operating profit before acquisition
adjustments and reorganisation costs of £2.3m in the period since acquisition. The Targeted Therapies division of Nordion Inc.
contributed revenues of £24.7m and operating profit before acquisition adjustments and reorganisation costs of £7.3m in the
period since acquisition. If both acquisitions had taken place on 1 April 2013, the first day of the reporting period under review,
revenue and profit before tax and before acquisition adjustments and reorganisation costs of the combined group would have
been £306.7m and £73.3m respectively.

33. Post balance sheets events
In May 2015, BTG purchased the residual financial interest of the originator of the Varithena® foam sclerotherapy technology for
a one-off cash payment of £23m, ensuring that the business retains 100% of the future value of Varithena®.

123

Financials

BTG plc Annual Report and Accounts 2015Company statement of financial position

Assets
Non-current assets
Investment in subsidiaries

Current assets
Trade and other receivables
Cash and cash equivalents

Total assets
Equity
Share capital
Share premium account
Merger reserve
Retained earnings
Total equity attributable to equity holders of the parent
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities

31 March
2015
£m

31 March
2014
£m

Note

6
6
6
6
6

764.6
764.6

70.6
0.5
71.1
835.7

38.2
433.8
317.8
43.5
833.3

2.4
2.4
835.7

617.5
617.5

72.0
–
72.0
689.5

36.1
288.7
317.8
44.2
686.8

2.7
2.7
689.5

The notes on pages 126 to 128 form part of these financial statements.

The financial statements were approved by the Board on 18 May 2015 and were signed on its behalf by:

Dame Louise Makin
Chief Executive Officer

Registered No: 2670500

Rolf Soderstrom
Chief Financial Officer

124

Financials

BTG plc Annual Report and Accounts 2015Company statement of cash flows

Loss after tax for the year
Decrease/(increase) in trade and other receivables
Decrease in trade and other payables
Other
Net cash outflow from operating activities
Investing activities
Increase of investment in subsidiary companies
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds of share issue
Net cash inflow from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year

Company statement of changes in equity

At 1 April 2013

Loss for the year
Other comprehensive income
Total comprehensive income for the year

Transactions with owners:
Issue of BTG plc ordinary shares
Movement in shares held by the Trust
Share-based payments
At 31 March 2014

At 1 April 2014

Loss for the year
Other comprehensive income
Total comprehensive income for the year

Transactions with owners:
Issue of BTG plc ordinary shares
Movement in shares held by the Trust
Share-based payments
At 31 March 2015

Share
capital
£m

32.8

–
–
–

3.3
–
–
36.1

Share
capital
£m

36.1

–
–
–

2.1
–
–
38.2

Share
premium
£m

188.6

–
–
–

100.1
–
–
288.7

Share
premium
£m

288.7

–
–
–

145.1
–
–
433.8

The notes on pages 126 to 128 form part of these financial statements.

Year ended
31 March
2015
£m

(6.1)
1.4
(0.3)
1.7
3.3

(143.4)
(143.4)

147.2
147.2
0.5
–
0.5

Year ended
31 March
2014
£m

(4.6)
(99.8)
–
1.0
(103.4)

–
–

103.4
103.4
–
–
–

Retained
earnings
£m

43.1

(4.6)
–
(4.6)

–
0.4
5.3
44.2

Retained
earnings
£m

44.2

(6.1)
–
(6.1)

–
(0.2)
5.6
43.5

Total
equity
£m

582.3

(4.6)
–
(4.6)

103.4
0.4
5.3
686.8

Total
equity
£m

686.8

(6.1)
–
(6.1)

147.2
(0.2)
5.6
833.3

125

Financials

Note

2
5
7

Merger
reserve
£m

317.8

–
–
–

–
–
–
317.8

Merger
reserve
£m

317.8

–
–
–

–
–
–
317.8

BTG plc Annual Report and Accounts 2015Notes to the company financial statements

1. Accounting policies
The accounting policies adopted in the preparation of these Company financial statements are the same as those set out
in note 2 to the Group financial statements with the addition of the following:

Investments
Investments in subsidiaries are stated at cost less provision for impairment.

Accounting for transactions under common control
Where the Company acquires or disposes of shares in another Group company either in a share for share exchange or
as an acquisition or disposal of part of the business, the cost or proceeds are determined by reference to the fair value
of the consideration received (i.e. the fair value of the company in which shares have been received) at the date of transfer.

If the Company receives shares following the sale of its subsidiary or part of its business, any gain or loss is credited
or charged to the income statement. Where the Company issues shares following the acquisition of a subsidiary or part
of another business, any gain or loss is credited or charged to reserves.

Share-based payments
The Company has elected to apply IFRS 2 to all share-based awards and options granted post 7 November 2002 that had not
vested by 1 January 2005. The carrying amount of an investment in a subsidiary is increased to the extent that share-based
payments relate to employees of that subsidiary. Share-based payment expenses relating to employees of the Company
are expensed within the income statement.

These policies have been applied consistently to the periods presented.

The functional currency of the Company is sterling and all values are rounded to the nearest £0.1m except where
otherwise indicated.

2. Loss for the year
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own income statement
for the year. The loss after tax of the Company amounted to £6.1m (2014: £4.6m).

The analysis of the auditor’s remuneration is as follows:

The auditing of accounts of the Company
Audit related assurance services

3. Staff costs
The employees are based in the United Kingdom.

Year ended
31 March
2015
£’000

96
56

Year ended
31 March
2014
£’000

94
54

Disclosures of individual director’s remuneration and associated costs required by the Companies Act 2006 and specified by
the Financial Services Authority are on pages 56 to 75 within the Remuneration report and form part of these audited accounts.

The employees of the Company are members of the Group pension schemes as detailed in note 22 of the Group financial
statements. The Company receives a charge based upon the employer contribution to the Group’s defined benefit pension
scheme. No additional contributions are paid by the Company.

4. Investment in subsidiary undertakings

Cost
At 1 April 2013
Transfers of investments to subsidiary companies
Share based payments
At 1 April 2014
Increase of investment in subsidiary companies
Share based payments
At 31 March 2015

£m

369.3
244.1
4.1
617.5
143.4
3.7
764.6

During the year ended 31 March 2015, BTG plc increased its investment in BTG International (Holdings) Ltd by £143.4m.

During the year ended 31 March 2014, BTG plc, in conjunction with the broader Group, undertook the transfer of several
investments within the Group structure. There was no share-for-share consideration offered as part of these non-cash
settled transactions.

A list of the Company’s principal subsidiary undertakings is shown in note 31 to the Group financial statements.

126

Financials

BTG plc Annual Report and Accounts 20155. Trade and other receivables

Due within one year
Prepayments
Amounts owed by subsidiary undertakings

6. Capital and reserves

Company
At 1 April 2013
Loss for financial year
Total recognised loss for the year
Movement in shares held by Trust
Other share capital issued
Share-based payments
At 1 April 2014
Loss for financial year
Total recognised loss for the year
Movement in shares held by Trust
Other share capital issued
Share-based payments
At 31 March 2015

31 March
2015
£m

31 March
2014
£m

0.7
69.9
70.6

0.8
71.2
72.0

Share
capital
£m

Share
premium
£m

Merger
reserve
£m

Retained
earnings
£m

32.8
–
–
–
3.3
–
36.1
–
–
–
2.1
–
38.2

188.6
–
–
–
100.1
–
288.7
–
–
–
145.1
–
433.8

317.8
–
–
–
–
–
317.8
–
–
–
–
–
317.8

43.1
(4.6)
(4.6)
0.4
–
5.3
44.2
(6.1)
(6.1)
0.2
–
5.6
43.5

Total
£m

582.3
(4.6)
(4.6)
0.4
103.4
5.3
686.8
(6.1)
(6.1)
0.2
147.2
5.6
833.3

1. The acquisition of Protherics PLC on 4 December 2008 and includes directly attributable costs of issuing the shares of £0.4m.
2. The acquisition of Biocompatibles plc on 27 January 2011 and includes directly attributable costs of issuing of shares of £1.1m.

Details of Company share capital are disclosed in note 19 to the Group financial statements. Details of share options granted
by the Company are set out in note 23 to the Group financial statements. Details of shares in the Company held by subsidiaries
are shown in note 24 to the Group financial statements.

In December 2014, BTG completed a share placing for a total of 18,867,925 new ordinary shares at a price of 795p per placing
share, raising proceeds of £150.0m being £145.7m net of expenses.

In May 2013, BTG completed a share placing for a total of 32,208,030 new ordinary shares at a price of 330p per placing share,
raising proceeds of £106.3m being £103.1m net of expenses.

7. Trade and other payables

Amounts falling due within one year
Accruals and deferred income

The directors consider the fair value to be equal to the book value.

127

Financials

31 March
2015
£m

31 March
2014
£m

2.4

2.7

BTG plc Annual Report and Accounts 2015Notes to the company financial statements continued

8. Financial assets and liabilities

31 March 2014
Cash and cash equivalents
Trade and other receivables
Trade and other payables
31 March 2015
Cash and cash equivalents
Trade and other receivables
Trade and other payables

Designated
at fair value
£m

Amortised
cost
£m

–
–
–

–
72.0
(2.7)

0.5
70.6
(2.4)

Total
carrying
value
£m

–
72.0
(2.7)

0.5
70.6
(2.4)

The Company has not disclosed the fair values for financial instruments such as trade receivables and trade payables because
their carrying amounts are a reasonable approximation of their fair value

Credit risk
The Company’s credit risk is the risk that one of its subsidiaries is unable to repay intercompany amounts owing. The recoverability
of the Company’s intercompany receivable is considered at each balance sheet date.

Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company
does not hold significant cash balances as Group cash is managed centrally within its subsidiaries. Accordingly the
Company is funded by its subsidiaries as its liabilities fall due. In April 2013, the Group signed a £60m multi-currency revolving
credit facility providing access to funds for a period of three years to April 2016. This has not been utilised in the period.

Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will
affect the Group’s income or the value of its holdings in financial instruments. As the holding company of the BTG Group,
the Company does not have significant exposure to movements in market prices and accordingly no additional disclosure
is provided. There are no foreign currency balances within the Company’s statement of financial position.

Capital Management
Details of the Company’s objectives with respect to managing capital are disclosed in note 26 to the Group financial statements.

9. Guarantees and contingent liabilities
The Company has entered into an agreement to guarantee payments under the lease of its US subsidiary undertaking.

The Company has provided a Guarantee to certain subsidiary undertakings in respect of the BTG Pension Fund up to a maximum
amount equal to the lowest non-negative amount which, when added to the assets of the Fund, would result in the Fund being
at least 105% funded on the date on which any liability arose, calculated on the basis set out in section 179 of the Pensions Act
2004, were a valuation to be conducted as at that date.

128

Financials

10. Related party transactions
The Company has a related-party relationship with its subsidiary undertakings and its directors.

Key management personnel are considered to be the directors and their remuneration is disclosed within the Remuneration
report on pages 56 to 75.

BTG plc Annual Report and Accounts 2015Five year financial record
For the years ended 31 March

Consolidated Income statement

Revenue
Cost of sales
Gross profit

Selling, general and administrative expenses
Contribution

Amortisation and impairment of acquired intangible assets
Amortisation of repurchase of contractual rights
Foreign exchange gains/(losses)
Research and development
Profit on disposal of assets and investments
Amounts written off property, plant and equipment
Amounts written off associates and investments
Acquisition and reorganisation costs
Operating profit/(loss)
Net financial (expense)/income
Profit/(loss) before tax
Tax credit/(charge)
Profit/(loss) after tax for the year
Earnings per share

20151, 4
£m

367.8
(114.7)
253.1

(124.8)
128.3

(28.4)
–
6.7
(68.3)
0.3
–
–
(3.7)
34.9
(8.2)
26.7
6.9
33.6

20142, 4
£m

290.5
(95.0)
195.5

(84.0)
111.5

(23.3)
–
(5.0)
(47.2)
1.1
–
–
(9.8)
27.3
6.0
33.3
(9.0)
24.3

20134
£m

233.7
(67.2)
166.5

(58.0)
108.5

(43.4)
–
3.1
(41.2)
0.4
(1.8)
–
0.1
25.7
(1.6)
24.1
(7.7)
16.4

2012
£m

197.0
(56.3)
140.7

(48.9)
91.8

(30.7)
–
2.6
(39.7)
0.2
(3.0)
(0.2)
(1.1)
19.9
3.1
23.0
(8.4)
14.6

20113
£m

111.4
(34.1)
77.3

(33.7)
43.6

(10.0)
(9.6)
(2.0)
(32.1)
1.5
–
(1.4)
(3.8)
(13.8)
3.0
(10.8)
20.0
9.2

Basic
Diluted

9.1p
9.0p

6.8p
6.7p

5.0p
5.0p

4.5p
4.4p

3.4p
3.4p

1 The results for the year ended 31 March 2015 include the results of PneumRx Inc. from the date of acquisition, being 7 January 2015.
2 The results for the year ended 31 March 2014 include the results of EKOS Corporation and the Targeted Therapies division of Nordion Inc. from the date of acquisition,

being 5 July 2013 and 13 July 2013 respectively.

3 The results for the year ended 31 March 2011 include the results of Biocompatibles International plc from the date of acquisition, being 27 January 2011.
4 Only financial years 2015, 2014 and 2013 reflect IAS 19 revised.

129

Financials

BTG plc Annual Report and Accounts 2015Five year financial record continued
For the years ended 31 March

Consolidated statement of financial position

20151, 4
£m

20142, 4
£m

20134
£m

Goodwill
Intangible assets
Property, plant and equipment
Other investments
Deferred tax asset
Employee benefits
Biological assets
Derivative financial instruments
Total non-current assets
Current assets
Total assets

Equity
Share capital
Share premium account
Merger reserve
Reserves
Retained earnings
Total equity
Total non-current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities

183.8
597.9
35.5
3.0
4.9
13.2
–
–
838.3
207.6
1,045.9

38.2
433.8
317.8
9.4
(40.6)
758.6
171.7
115.6
287.3
1,045.9

123.6
397.9
31.3
3.0
0.8
8.0
–
0.9
565.5
146.2
711.7

36.1
288.7
317.8
(32.2)
(80.0)
530.4
93.5
87.8
181.3
711.7

59.2
209.2
25.4
3.0
0.9
10.3
–
–
308.0
236.9
544.9

32.8
188.6
317.8
0.2
(104.8)
434.6
44.7
65.6
110.3
544.9

2012
£m

59.2
246.0
22.0
3.0
1.0
–
0.3
–
331.5
174.3
505.8

32.7
188.3
317.8
(4.0)
(128.6)
406.2
41.3
58.3
99.6
505.8

1 The statement of financial position for 31 March 2015 includes the assets and liabilities acquired from PneumRx Inc. during the year.
2 The statement of financial position for 31 March 2014 includes the assets and liabilities acquired from EKOS Corporation and the Targeted Therapies division of Nordion Inc.

during the year.

3 The statement of financial position for 31 March 2011 includes the assets and liabilities acquired from Biocompatibles International plc during the year.
4 Only financial years 2015, 2014 and 2013 reflect IAS 19 revised.

Consolidated cash flow statement

Net cash from/(used in) operating activities
Net cash used in investing activities
Net cash from/(used in) financing activities
Increase/(decrease) in cash and cash equivalents
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year

2015(1)(4)
£m

2014(2)(4)
£m

47.5
(158.9)
146.2
34.8
0.8
38.2
73.8

48.5
(269.4)
102.7
(118.2)
(2.3)
158.7
38.2

2013(4)
£m

55.5
(4.5)
0.2
51.2
0.6
106.9
158.7

2012
£m

47.2
(3.9)
(0.2)
43.1
0.1
63.7
106.9

20113
£m

59.2
271.0
24.8
2.7
0.9
–
0.3
–
358.9
129.6
488.5

32.7
188.2
317.8
(3.7)
(142.7)
392.3
43.9
52.3
96.2
488.5

2011(3)
£m

(12.0)
(5.5)
(0.6)
(18.1)
(0.8)
82.6
63.7

130

Financials

and 13 July 2013 respectively.

BTG plc Annual Report and Accounts 2015
Shareholder information

Financial calendar
Circulation of Annual Report for the year ended 31 March 2015
Annual General Meeting
Announcement of interim results for the six months ended 30 September 2015
Preliminary announcement of annual results for the year ended 31 March 2016

12 June 2015
15 July 2015
November 2015
May 2016

Shareholders
At 31 March 2015 there were 9,361 holders of ordinary shares in the Company. Their shareholdings are analysed as follows:

Size of shareholding

1 – 5,000
5,001 – 50,000
50,001 – 100,000
100,001 – 500,000
Over 500,000
Total

Shareholders are further analysed as follows:

Type of owner

Bank and nominee companies
Private shareholders
Limited companies
BTG Employee Share Trust
Insurance companies and pension funds

Number of
shareholders

Percentage of
total number of
shareholders

Number of
ordinary shares

Percentage of
ordinary shares

8,581
510
70
111
89
9,361

91.7
5.4
0.7
1.2
1.0

5,751,097
7,845,609
4,919,503
25,467,777
337,792,717
100.0 381,776,703

1.5
2.0
1.3
6.7
88.5
100.0

Number of
shareholders

Percentage of
total number of
shareholders

Number of
ordinary shares

Percentage of
ordinary shares

1,059
8,126
58
1
117
9,361

11.3 370,316,414
10,148,882
86.8
410,271
0.6
321,341
–
579,795
1.3
100.0 381,776,703

97.0
2.7
0.1
0.1
0.1
100.0

Mutual funds and other institutions, and private shareholders holding their shares within PEPs and ISAs, are included within
‘Bank and nominee companies’.

Capita share dealing services
A quick and easy share dealing service is available from Capita Asset Services, to either buy or sell more shares. An online
and telephone dealing facility is available providing shareholders with an easy-to-access and simple-to-use service. For further
information on this service, or to buy and sell shares, please contact: www.capitadeal.com (online dealing) or +44 (0) 871 664
0446 (telephone dealing – calls cost 10p per minute plus network extras. Lines are open from 8 am to 4.30 pm, Monday to Friday)
If calling from outside the UK: +44 (0) 20 3367 2686. Full terms, conditions and risks apply and are available on request or by
visiting www.capitadeal.com.

This is not a recommendation to buy or sell shares. The price of shares can go down as well as up, and you are not guaranteed
to get back the amount that you originally invested.

Shareholder change of address
The Company offers the facility, in conjunction with Capita Asset Services, our Registrars, to conduct a number of routine
matters via the web including the ability to notify any change of address. If you are a shareholder and are either unable or would
prefer not to use this facility, please do not send the notification to the Company’s registered office. Please write direct to Capita,
at their address shown below, where the register is held.

131

Financials

Registered office and head office
BTG plc
5 Fleet Place
London
EC4M 7RD
Telephone: +44 (0)20 7575 0000
Facsimile: +44 (0)20 7575 0010
Email: info@btgplc.com
Website: www.btgplc.com
Registered number 2670500

BTG plc Annual Report and Accounts 2015Advisers
Stockbrokers
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Tel +44 (0)20 7742 4000
Fax +44 (0)20 3493 0684

Deutsche Bank AG London
Winchester House
1 Great Winchester Street
London EC2N 2DB
Tel +44 (0)20 3142 8700
Fax +44 (0)20 3142 8735

Auditors
KPMG LLP
15 Canada Square
London E14 5GL
Tel +44 (0)20 7311 1000
Fax +44 (0)20 7311 3311

Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU

Callers from the UK:
Tel +44 (0)871 664 0300
(please note that calls cost 10p per minute, plus network
extras. Lines are open from 9 am to 5.30 pm, Monday to
Friday.)

Callers from outside the UK:
Tel +44 (0)20 8639 3399

Shareholder information

Cautionary note regarding
forward looking statements
This Annual Report and Accounts contains certain
forward-looking statements with respect to BTG’s business,
performance and prospects. Statements and other
information included in this report that are not historical facts
are forward-looking statements. Words such as ‘expects’,
‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’
and ‘potential’, variations of these words and similar
expressions are intended to identify forward-looking
statements. These statements are based on current
expectations and involve risk and uncertainty because
they relate to events and depend upon circumstances which
may or may not occur in the future. There are a number of
factors which could cause actual results or developments
to differ materially from those expressed or implied by these
forward-looking statements. Current principal risks and
uncertainties are described on pages 33 to 36 of this report.
Any of the assumptions underlying these forward-looking
statements could prove inaccurate or incorrect and therefore
any results contemplated in the forward-looking statements
may not actually be achieved. BTG undertakes no obligation
to update publicly any forward-looking statement, whether
as a result of new information, future events or otherwise.

Trademarks
BTG and the BTG roundel logo are registered trademarks of
BTG International Ltd.

The following is a non-exhaustive list of trademarks of the
BTG International group of companies mentioned in this Report:

Bead Block®
CroFab®
DC Bead®
DC BeadM1®
DigiFab®
EkoSonic®
LC Bead®
LC BeadM1®
RePneu® Coil
TheraSphere®
Varithena®
Voraxaze®
Zytiga®

132

Financials

CroFab and DigiFab are registered trademarks of BTG International Inc.
Voraxaze is a registered trademark of Protherics Medicines Development Ltd.
LC Bead, LC BeadM1, DC Bead, DC BeadM1, and Bead Block are registered
trademarks of Biocompatibles UK Ltd. TheraSphere is a registered trademark
of Theragenics Corporation used under licence by Biocompatibles UK Ltd.
EKOS and EkoSonic are registered trademarks of EKOS Corporation.
Varithena is a registered trademark of Provensis Ltd. RePneu is a registered
trademark of PneumRx, Inc. Protherics Medicines Development Ltd,
Biocompatibles UK Ltd, EKOS Corporation, Provensis Ltd, and PneumRx, Inc.
are all BTG International group companies. Zytiga is a trademark of Johnson &
Johnson; Lemtrada is a trademark of Genzyme Corporation.

BTG plc Annual Report and Accounts 2015Printed on Amadeus 50 Silk which is produced using 50% recycled post-consumer waste and 50% wood fibre from fully sustainable
forests with FSC® certification. All pulps used are Elemental Chlorine Free (ECF). Printed in the UK by Pureprint using their alcofree
and pureprint environmental printing technology and vegetable inks were used throughout. Pureprint is a Carbon Neutral company.
Both the manufacturing mill and the printer are registered to the Environmental Management System ISO14001 and are Forest
Stewardship Council (FSC) chain-of-custody certified.
Designed and produced by MerchantCantos
www.merchantcantos.com
Printed by Pureprint Group UK

BTG International Ltd
5 Fleet Place
London EC4M 7RD
UK
Tel: +44 (0)20 7575 0000
Fax: +44 (0)20 7575 0010

btgplc.com