BTG plc
Annual Report and Accounts
2017
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See more.
Reach further.
Treat smarter.
What we do
At BTG, we are focused
on bringing to market
innovative products in
specialist areas of medicine
to better serve doctors
and patients.
Our growing portfolio of image-guided minimally
invasive Interventional Medicine products is designed
to advance the treatment of cancer, severe blood clots,
varicose veins and severe emphysema.
We also provide Specialty Pharmaceuticals
that counteract certain snake venoms and
toxicities associated with some heart and
cancer medications.
Contents
Overview
IFC What we do
Strategic Report
06 Chairman’s introduction
08 CEO’s Strategic report
10 Industry overview
12 Our business model
14 Our strategic priorities
16 Performance
30 Group financial review
Governance
40 Corporate Governance report
40 Letter from the Chairman
42 Board of Directors
45 Leadership
54 Effectiveness
57
Accountability
(including Audit Committee
report and risk)
71 Relations with shareholders
72 Remuneration
98 Directors’ report
102 Statement of directors’
responsibilities in respect
of the Annual Report 2017
and the financial statements
Financials
104 Independent auditor’s report to
the members of BTG plc only
110 Consolidated income statement
111 Consolidated statement
of comprehensive income
112 Consolidated statement
of financial position
113 Consolidated statement
of cash flows
114 Consolidated statement
of changes in equity
115 Notes to the consolidated
financial statements
152 Company financial statements
Statement of financial position
153 Statement of cash flows
153 Statement of changes in equity
154 Notes to the Company
financial statements
157 Five-year financial record
159 Shareholder information
Front cover story: At BTG, everything starts with the
customer. We work in partnership with physicians to
deliver products that will make a meaningful difference
to the treatment of their patients.
Understanding our
investment case
01
The
context
1
How do we meet
society’s demands
for improved
healthcare in an
affordable way?
US health expenditure1
(as a percentage of GDP)
5% 17%
1960
2014
1. Source: www.cms.gov
BTG plc Annual Report and Accounts 2017OverviewOverviewStrategic ReportGovernanceFinancials 02
Our
solution
2
Provide minimally
invasive image guided
therapies that can
improve patient
outcomes and have
the potential to ease
cost pressures on
healthcare systems
Efficiency savings which result from interventional
treatments relate to decreased in-hospital stays,
reduced occupancy of operating theatres, avoidance
of general anaesthesia and a shift to more day-case
procedures. In turn, these offer significant reductions
in morbidity and mortality in comparison to
conventional surgery
(Royal College of Radiologists)
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Overview 03
BTG
today
3
A fast-growing
global business
with an expanding
Interventional
Medicine (IM)
portfolio targeting
cancer, vascular
disease and
emphysema
8
IM sales forces
50%
IM product sales
CAGR 2012-2017
6
innovative IM
product families
BTG plc Annual Report and Accounts 2017OverviewOverview 04
Our
vision
4
BTG is well positioned
to be a global leader in
providing innovative IM
therapies, enabling us to
deliver sustained value
for all our stakeholders
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Overview 05
Financial and
business highlights
Revenue
£570.5m
+27% (+11% CER1)
Adjusted operating profit2
£129.6m
+39% (+13% CER)
IFRS operating profit
£57.5m
+2%
Adjusted basic EPS2
23.1p
+5%
IFRS basic EPS
8.7p
-45%
Free cash flow2
£64.7m
-27%
Net cash flow from operating activities
£74.2m
-22%
May 2016
Agreement to acquire Galil Medical,
a leader in interventional oncology
cryoablation technology
June 2016
BTG joins the Global Liver
Institute’s Partnership Network
as a founding member
October 2016
First patient in Malaysia
receives TheraSphere®
radioembolisation therapy
December 2016
PneumRx® Coils included in Global
Initiative for Chronic Obstructive Lung
Disease (GOLD) 2017 guidelines
January 2017
First pulmonary embolism (PE)
patients in Hong Kong treated with
the EKOS® system
February 2017
Formed a collaboration with the Society
of Interventional Oncology to explore the
role of interventional oncology alongside
immuno-oncology
U.S. Food and Drug Administration (FDA)
510(k) clearance granted to the EKOS®
Control Unit 4.0
March 2017
CE Mark approval for DC Bead LUMI™
in Europe
PneumRx® Coil Premarket Approval
(PMA) accepted for review by the US FDA
1. Constant exchange rate (“CER”) growth is computed by restating 2016/17 results using 2015/16 foreign exchange rates for the relevant period.
2. Adjusted operating profit, Free cash flow and Adjusted basic EPS are not prepared in accordance with IFRS. For definition see page 36.
BTG plc Annual Report and Accounts 2017OverviewOverview 06
BTG has achieved a number of significant
milestones this year and I am confident that our
strategy will continue to deliver success
Chairman’s
introduction
Garry Watts
Chairman
Where is
BTG going?
BTG is building leading positions in
the fast-growing area of Interventional
Medicine therapies. We have the strategy,
resources and capabilities to achieve
our vision.
I am pleased to introduce this year’s Annual Report, in
what has been a year of significant strategic progress
for our business. BTG is now recognised as a leading
provider of innovative, image-guided minimally invasive
technologies by specialist physicians who are striving to
improve patient outcomes.
A strategy for success
Demand for cost-effective treatments, supported by
advances in imaging and device technology, continues
to fuel the development and application of minimally
invasive procedures. BTG is well positioned to take
advantage of these macro trends in healthcare. We
specialise in areas of therapy where physicians and their
patients are poorly served by existing treatments, and
where we can develop market-leading positions by
delivering differentiated products that demonstrate
clinical and commercial value.
People and culture
BTG is a dynamic business, composed of talented
individuals who are dedicated to delivering important
products that make a real difference to our customers
and their patients. I would like to thank our employees
for their professionalism and hard work. We will
continue to invest in enhancing our capabilities and
systems to meet the needs of our stakeholders in a
sustainable and responsible way.
Outlook
BTG has an exciting future ahead of it. I am optimistic
about the opportunities in Interventional Medicine
and confident that our strategy will enable us to
become leaders in the field. As a financially strong
business, we have the ability to invest in multiple
growth drivers that will create long-term, sustained
value for all our stakeholders.
Garry Watts
Chairman
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 07
Purpose
Bring to market innovative
products in specialist areas
of healthcare to better serve
doctors and their patients.
Vision
Be a global leader in
providing interventional
medicine therapies.
Aim
Deliver sustained value
creation for all our
stakeholders.
Good governance
is an essential part
of our strategy
Strategy
While we continue to develop and embed a strong
governance framework in the culture of our organisation,
we also take a proportionate approach to ensure that our
processes are efficient and support our growth strategy.
Pages 8 to 15, to read more
Business performance
Regular board meetings monitor our operating
performance and, through an annual strategy review, we
concentrate on forward planning to support long-term
sustainable growth.
Pages 16 to 25, to read more
Leadership & people
We invest in the development of our people to ensure we
have the capabilities to succeed. Our business standards
and ways of working are guided by our Code of Conduct
and embodied in the day-to-day behaviours that we call
the BTG “DNA”.
Pages 26 to 29, to read more
Internal control & risk
The Group’s risk management framework is based
on the UK Corporate Governance Code. Our internal
processes and controls provide us with a clear
understanding of the principal risks inherent in
our business operations and strategy, and give
us confidence in the appropriateness of our
mitigating actions.
Page 66, to read more
Stakeholder engagement
Ensuring good communication with our shareholders
and employees is important to us. We meet with
shareholders throughout the year, and we engage
with and seek input from our employees.
Page 71, to read more
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 08
A year of
strong progress
BTG has executed its strategy effectively
this year, achieved significant milestones
and delivered another strong financial
performance.
The healthcare environment continues to evolve, as
society seeks to balance demands for access to medical
innovation against the increasing costs of delivering
better care. BTG is well placed to respond to this
challenge. Over the past six years we have built a
portfolio of image-guided minimally invasive therapies
that have the potential to improve patient outcomes and
experiences while reducing overall healthcare
expenditure.
How this links to our strategy
There are few companies operating in the world of
interventional medicine like BTG. We focus on providing
novel technologies that can transform the way certain
diseases are treated. Since entering this space in 2011,
we have built the capabilities and the entrepreneurial
culture that we believe will enable us to succeed in the
innovation-led markets where we operate.
Our products are often administered in a dedicated
procedure by specialist physician customers who we
serve through small, highly skilled sales and medical
teams. With the cash we generate, we invest in product
innovation and clinical trials, enabling us to maintain
technology leadership and to demonstrate patient
benefits and cost effectiveness. This ensures we can
achieve regulatory approvals, market adoption, payer
coverage and the appropriate value for our products. We
are also expanding our geographic reach and optimising
our commercial activities in all territories.
These investments are designed to deliver sustainable
double-digit product sales growth and increasing
operating margins over time. We also have the financial
flexibility to accelerate and de-risk our growth strategy
by continuing to explore opportunities to expand our
portfolio and pipeline through acquisition and in-
licensing activities.
CEO’s
Strategic
report
Dame Louise Makin
Chief Executive Officer
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 09
By focusing on the needs of our customers and their
patients, and delivering innovative solutions to their
complex medical problems, we will achieve our vision
and become a global leader in the field of interventional
medicine therapies.
Building positive momentum
We have made strong progress during the year in
implementing our growth strategy, achieving key
objectives in geographic expansion, product innovation,
clinical studies and portfolio growth.
We continued to enhance our presence in selected
markets in Asia, where we see significant long-term
growth opportunities, with the launch of TheraSphere®
in South Korea and Malaysia. We gained EU and
Canadian approval for the first visible chemoembolising
bead for liver cancer. In the US and EU our new EKOS
control unit received regulatory clearance.
Our Interventional Oncology portfolio expanded
through the acquisition of Galil Medical, a leader in
cryoablation technology. This deal was completed in
June 2016 and growth through acquisition remains a
key part of our strategy, as we continue to monitor
opportunities of potential interest.
The earlier stage Interventional Medicine businesses
achieved important milestones. A Premarket Approval
application was submitted in the US for our PneumRx®
Coils, which are for treating severe emphysema. In the
EU, positive assessments in Germany and France are
expected to support national coverage in both countries.
Varithena®, the treatment for varicose veins, made
progress towards receiving dedicated reimbursement
codes in the US, which we anticipate will be
implemented in January 2018.
The cash we generate in our Specialty Pharmaceuticals
and Licensing businesses enables us to make
investments and build leadership positions in
Interventional Medicine. Licensing is no longer an active
part of our strategy, whereas Specialty Pharmaceuticals,
through which we provide potentially life-saving antidote
treatments, remains a core part of BTG’s business. We
remain open to expanding this portfolio through
acquisition or in-licensing.
Dame Louise Makin
Chief Executive Officer
By focusing on the
needs of our customers
and their patients and
delivering innovative
solutions to their complex
medical problems, we will
become a global leader in
the field of Interventional
Medicine therapies
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 10
Pricing and reimbursement
As the healthcare industry faces increased pricing
pressures, we look to mitigate this by investing in
innovative, differentiated products that advance
the treatment of patient populations that are currently
underserved. Demonstrating the value of our products
helps us to gain market acceptance and appropriate
reimbursement coverage and pricing.
Markets and competition
Companies compete to attract and retain technical and
commercial talent, to develop and acquire products, and
to gain share in their chosen markets and geographies.
We focus on medical areas where we can develop
market-leading positions through our capability and
resources to undertake product innovation, clinical
development and commercial expansion.
A detailed description of the market opportunity and
competition is provided in the performance reviews on
pages 16 to 38.
Industry
overview
The context for
our business
Global healthcare markets are expected
to grow over the coming years, fuelled
by population growth, increasing
longevity, technological advances,
consumer empowerment and economic
expansion. To benefit from these trends,
BTG’s strategy is to invest in innovation
and development and demonstrate
value for money to physicians, patients
and payers.
Regulation
The healthcare industry is highly regulated by
governments, with strict rules overseeing research,
clinical development, manufacturing and commercial
activity. At BTG we have developed extensive quality,
pharmacovigilance and compliance systems and
procedures. We also recruit highly skilled and
experienced employees and provide regular training to
ensure that we comply with all relevant regulatory
standards. We pay close attention to the future regulatory
landscape and the potential impact of healthcare
reforms. This is of particular importance when reviewing
product development or acquisition opportunities.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 11
Risk management
Rigorous governance, along with our consistent risk
management systems and processes enable us to
identify, assess, manage and mitigate the key existing
and newly emerging risks facing the business. The
Board of Directors is responsible for the Group’s risk
management and internal control systems and for
regularly and robustly assessing these systems.
We believe the most significant risks that could
materially affect the Group’s ability to achieve its
financial goals and its operating and strategic objectives
are: ensuring continuity of product supplies; securing
acceptable product reimbursement; obtaining/
maintaining product regulatory approvals; Intellectual
Property (IP)/legal challenges; competition; and
healthcare law compliance.
BTG’s risk management governance and processes, and
the principal risks listed above, are described in detail on
pages 66 to 70.
$500bn+
Worldwide medtech
sales forecast
(by 2022)
5%+
Compound annual growth
rate of the global medtech
industry forecast
(by 2022)
(Source: EvaluateMedTech®
World Preview 2016)
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 12
Our business model
How BTG
creates value
BTG
Healthcare
needs
1. Identifying
opportunities
2. Product
development
2. Acquisitions
1. Identifying opportunities
We focus on addressing unmet healthcare needs, by
providing innovative products in specialist areas of
medicine to better serve doctors and their patients.
We provide training and ongoing support to the
specialist physicians who use our products, ranging
from safe use to reimbursement guidance. We also invite
proposals for funding to explore the use of our products
in different patient populations. These interactions give
us valuable insights into our customers and the way
they treat their patients, helping to inform our innovation
strategy and identify new product opportunities.
2. Product development and acquisitions
Having identified appropriate market opportunities and
target product profiles, we build our portfolio through
organic development and through acquisition and
in-licensing activities. To exploit the full value of our
products, we invest in lifecycle management, which
includes product innovation and clinical studies to
support new regulatory approvals. We also invest in
commercial expansion and our development and
acquisition strategy is focused on opportunities that
complement our current product portfolio. Through this
strategy we seek to balance late-stage development and
marketed product opportunities with efforts to build an
early-stage pipeline that will ensure long-term
sustainable business growth.
3. Manufacturing
We manufacture a number of products in-house
including the Bead products, the EKOS Endovascular
System, Varithena®, the PneumRx® Coil, the GALIL™
Cryoablation Solutions, and the polyclonal antibodies
CroFab® and DigiFab®. We use third-party contractors
to manufacture TheraSphere® and to supply certain key
materials and services. We have robust quality systems,
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 13
We generate value by acquiring, developing,
manufacturing and commercialising specialist medical
products that meet the needs of our customers and
advance the treatment of their patients
Reinvest
3. Manufacturing
4. Commercialise
Income
Products
Stakeholders
Customers
Patients
policies, and procedures in place to ensure we meet our
legal and compliance obligations. We put patient safety
first in meeting the expectations of our customers and
regulatory authorities. We continue to invest in upgrading
our manufacturing operations and capabilities to ensure
we meet all relevant standards as they evolve and to
provide further capacity as the business grows.
4. Commercialise
We have dedicated product sales teams in the US,
Europe and Asia and we use distributors for some
of our products where it makes economic sense.
Our sales teams are supported by marketing and brand
specialists and we have experienced professionals
working in regulatory affairs and market access who
ensure that BTG adheres to all relevant regulations and
that our products receive the appropriate coverage
and reimbursement.
Aligning our business model with
our strategy
BTG is an agile, responsive organisation. Our strategy is
to become commercial and technical leaders in our
chosen therapy areas through our ability to deliver
high-value, innovative products. By staying close to the
medical community and forming strong relationships
with the key opinion leaders in our therapy areas, we
gain valuable insights into their needs. This informs our
product development and acquisition strategy which we
can then bring to the market using our manufacturing
and commercial skills.
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 14
Our strategic
priorities
Objective
Progress against objectives set for 2016/17
Priorities for 2017/18
Strategy risk summary
1
Delivering products
for our customers
and their patients
Our specialist physician customers and their patients
are at the heart of everything we do. We deliver
innovative, differentiated products that provide these
physicians with new treatment options that address
unmet patient needs. We make our products as widely
available as we can, through regulatory and commercial
activities that support geographic expansion, market
adoption and appropriate reimbursement
2
Investing
for growth
We are investing in expanding our product portfolio
and building our pipeline to generate long-term value
for our stakeholders
Interventional Oncology: LC Bead LUMI™ launched in the US;
DC Bead LUMI™ approved in Canada and CE Mark certification
received in the EU; TheraSphere® introduced in several new
geographies and Simplicit90Y™ dosimetry software launched in Europe
Not achieved: decision taken not to progress current biodegradable bead;
vandetanib bead study delayed
Interventional Vascular: New EKOS control unit received 510(k) clearance
in the US
Varithena® US reimbursement coverage expanded; progress made towards
establishing dedicated CPT reimbursement codes in the US; launched
in Canada
Not achieved: development of alternative indications for Varithena® stopped
Interventional Pulmonology: PneumRx® Coils included in new GOLD
global clinical guidelines; progress made towards national reimbursement
in Germany and France; PMA submitted in the US
Specialty Pharmaceuticals: CroFab® Copperhead bite study successfully
concluded; Vistogard® granted New Technology Add-on Payment status
Galil Medical acquired and integrated
Expanded Investigator Initiated Studies (IIS) programme, taking total IIS
funded to over 40
Collaboration with Society of Interventional Oncologists established to
explore combining interventional and immuno-oncology treatments
Continued recruitment into TheraSphere® Phase III trials
Recruitment completed into OPTALYSE and ACCESS PTS studies
Acquisition of majority stake in OncoVerse, a digital healthcare platform
Successful Copperhead study, evaluating the use of CroFab® to treat
Copperhead snake envenomation
3
People and
practices
New R&D structure designed to support and accelerate delivery of projects
Evolve Learning & Development agenda to increase focus on talent
Without the right capabilities and capacity, BTG’s growth plans
Learning & Development programme expanded to support the business
objectives throughout the year. Agenda attendance was on target and
further progress made in our Management Development and Critical
Thinking programmes.
development to build capabilities for now and the future
may not be achieved
Ensure our organisational structure, systems and processes are
Without appropriate but efficient systems BTG would fail
efficient and fit for purpose for now and the future
to meet regulatory obligations or not be nimble enough to
respond to, and capture, market opportunities
As a fast-growing business, we strive to ensure that
our organisational structure, capabilities and systems
are scalable and can support our growth strategy
Pages 26 to 29, for more details
4
Financial
management
We report on four KPIs that demonstrate progress
towards our long-term goals
Pages 30 to 38, for more details
see the Financial Review
Revenue
(£million)
£570.5m
(2015/16: £447.5m)
Adjusted operating profit1
(£million)
£129.6m
(2015/16: £93.0m)
Adjusted EPS1
(pence)
23.1p
(2015/16: 21.9p)
Free cash flow
(£million)
£64.7m
(2015/16: £88.1m)
1. For information on our adjusted earnings policy, and those items excluded from our adjusted financial metrics, see pages 36 to 38.
2. For a full disclosure of risks, see pages 66 to 70.
The following could adversely impact product adoption and
— Failure or significant delay in gaining regulatory approvals
— Failure to secure timely or adequate levels of reimbursement
revenue growth
to market products
for products
— Increased competition
Innovation and Development: Deliver existing clinical trial
Failure to deliver pipeline programmes or to expand the
milestones including TheraSphere® Phase III trials, completion
portfolio, whether by R&D or M&A, would limit BTG’s
of EKOS OPTALYSE and ACCESS PTS studies and completion
long-term growth potential
Interventional Oncology: Execute regional business
plans to deliver mid-teens product sales growth; expand
into new geographies; optimise distribution channels;
launch DC Bead LUMI™ in the EU
Interventional Vascular: Execute regional business plans to
deliver 20%+ product sales growth; build US PE/DVT business;
launch new control unit; continue to execute RoW expansion plans
Continue Varithena® US market access programme and execute
activities to take advantage of new CPT codes anticipated in 2018
Interventional Pulmonology: Secure national coverage/
reimbursement in Germany and France and implement
commercialisation plans; establish further European studies/
registries; progress PMA application in the US and prepare for
commercial launch
Specialty Pharmaceuticals: Continue to implement CroFab®
leadership strategy; optimise oncology sales force to build
Vistogard® and Voraxaze® awareness/sales
of GALIL™ lung and bone metastases studies
Deliver lifecycle management projects; identify early-stage pipeline
opportunities
Identify and execute Business Development opportunities in
Interventional Medicine and Specialty Pharmaceuticals
Lead capability and capacity needs across business units; deliver
against succession and hiring plans
Provide opportunities for stretch, development and
career progression
We expect to deliver further growth in 2017/18, specifically:
A number of risks relate to numerous objectives. These include:
— Interventional Medicine, mid-to-high teens % growth
— Specialty Pharmaceuticals, low-to-mid single digit % growth
— Licensing, high teens % decline
failure to execute business plans, increased competition,
supply chain disruption, legal or intellectual property disputes;
failing to meet the Group’s legal, regulation and compliance
obligations, failure to secure adequate levels of reimbursement
or regulatory approvals, or failure to attract, retain and develop
staff with the requisite skills and expertise to deliver the
strategy or higher than expected cost of sales or overheads,
could materially adversely impact revenue growth
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report
15
We monitor our performance against four strategic priorities: delivering products that
meet the needs of our customers and their patients; investing for growth; ensuring our
people have the right capabilities and our practices are fit for purpose and scalable; and
financial key performance indicators (KPIs). These objectives may span several years
Objective
Progress against objectives set for 2016/17
Priorities for 2017/18
Strategy risk summary
Interventional Oncology: LC Bead LUMI™ launched in the US;
DC Bead LUMI™ approved in Canada and CE Mark certification
received in the EU; TheraSphere® introduced in several new
geographies and Simplicit90Y™ dosimetry software launched in Europe
Not achieved: decision taken not to progress current biodegradable bead;
vandetanib bead study delayed
Interventional Vascular: New EKOS control unit received 510(k) clearance
in the US
in Canada
Varithena® US reimbursement coverage expanded; progress made towards
establishing dedicated CPT reimbursement codes in the US; launched
Not achieved: development of alternative indications for Varithena® stopped
Interventional Pulmonology: PneumRx® Coils included in new GOLD
global clinical guidelines; progress made towards national reimbursement
in Germany and France; PMA submitted in the US
Specialty Pharmaceuticals: CroFab® Copperhead bite study successfully
concluded; Vistogard® granted New Technology Add-on Payment status
Galil Medical acquired and integrated
Expanded Investigator Initiated Studies (IIS) programme, taking total IIS
funded to over 40
Collaboration with Society of Interventional Oncologists established to
explore combining interventional and immuno-oncology treatments
Continued recruitment into TheraSphere® Phase III trials
Recruitment completed into OPTALYSE and ACCESS PTS studies
Acquisition of majority stake in OncoVerse, a digital healthcare platform
Successful Copperhead study, evaluating the use of CroFab® to treat
Copperhead snake envenomation
New R&D structure designed to support and accelerate delivery of projects
Learning & Development programme expanded to support the business
objectives throughout the year. Agenda attendance was on target and
further progress made in our Management Development and Critical
Thinking programmes.
Delivering products
for our customers
and their patients
Our specialist physician customers and their patients
are at the heart of everything we do. We deliver
innovative, differentiated products that provide these
physicians with new treatment options that address
unmet patient needs. We make our products as widely
available as we can, through regulatory and commercial
activities that support geographic expansion, market
adoption and appropriate reimbursement
Investing
for growth
We are investing in expanding our product portfolio
and building our pipeline to generate long-term value
for our stakeholders
People and
practices
As a fast-growing business, we strive to ensure that
our organisational structure, capabilities and systems
are scalable and can support our growth strategy
Pages 26 to 29, for more details
Financial
management
We report on four KPIs that demonstrate progress
towards our long-term goals
Pages 30 to 38, for more details
see the Financial Review
1. For information on our adjusted earnings policy, and those items excluded from our adjusted financial metrics, see pages 36 to 38.
2. For a full disclosure of risks, see pages 66 to 70.
Interventional Oncology: Execute regional business
plans to deliver mid-teens product sales growth; expand
into new geographies; optimise distribution channels;
launch DC Bead LUMI™ in the EU
Interventional Vascular: Execute regional business plans to
deliver 20%+ product sales growth; build US PE/DVT business;
launch new control unit; continue to execute RoW expansion plans
Continue Varithena® US market access programme and execute
activities to take advantage of new CPT codes anticipated in 2018
Interventional Pulmonology: Secure national coverage/
reimbursement in Germany and France and implement
commercialisation plans; establish further European studies/
registries; progress PMA application in the US and prepare for
commercial launch
Specialty Pharmaceuticals: Continue to implement CroFab®
leadership strategy; optimise oncology sales force to build
Vistogard® and Voraxaze® awareness/sales
Innovation and Development: Deliver existing clinical trial
milestones including TheraSphere® Phase III trials, completion
of EKOS OPTALYSE and ACCESS PTS studies and completion
of GALIL™ lung and bone metastases studies
Deliver lifecycle management projects; identify early-stage pipeline
opportunities
Identify and execute Business Development opportunities in
Interventional Medicine and Specialty Pharmaceuticals
The following could adversely impact product adoption and
revenue growth
— Failure or significant delay in gaining regulatory approvals
to market products
— Failure to secure timely or adequate levels of reimbursement
for products
— Increased competition
Failure to deliver pipeline programmes or to expand the
portfolio, whether by R&D or M&A, would limit BTG’s
long-term growth potential
Evolve Learning & Development agenda to increase focus on talent
development to build capabilities for now and the future
Without the right capabilities and capacity, BTG’s growth plans
may not be achieved
Ensure our organisational structure, systems and processes are
efficient and fit for purpose for now and the future
Lead capability and capacity needs across business units; deliver
against succession and hiring plans
Provide opportunities for stretch, development and
career progression
Without appropriate but efficient systems BTG would fail
to meet regulatory obligations or not be nimble enough to
respond to, and capture, market opportunities
We expect to deliver further growth in 2017/18, specifically:
— Interventional Medicine, mid-to-high teens % growth
— Specialty Pharmaceuticals, low-to-mid single digit % growth
— Licensing, high teens % decline
A number of risks relate to numerous objectives. These include:
failure to execute business plans, increased competition,
supply chain disruption, legal or intellectual property disputes;
failing to meet the Group’s legal, regulation and compliance
obligations, failure to secure adequate levels of reimbursement
or regulatory approvals, or failure to attract, retain and develop
staff with the requisite skills and expertise to deliver the
strategy or higher than expected cost of sales or overheads,
could materially adversely impact revenue growth
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report
16
Performance
BTG has continued to perform
well during the year – delivering
strongly against our financial
and strategic objectives
Our four key
objectives
Delivering products for our
customers and their patients
We deliver innovative, differentiated
products that provide specialist physicians
with new treatment options to address
unmet patient needs.
Investing for growth
We invest to expand our product portfolio
and pipeline to generate long-term value.
People and practices
We strive to ensure that our organisational
structure, capabilities and systems are
scalable and fit for purpose.
Financial management
We report on four financial KPIs
that demonstrate progress towards our
long-term goals.
1
2
3
4
Business
segments
Products
Interventional Medicine
Oncology
Page 17, to read more
Vascular
Page 20, to read more
Pulmonology
Page 22, to read more
Specialty
Pharmaceuticals
Page 24, to read more
Licensing
Page 25, to read more
Beads
TheraSphere®
GALIL™
EKOS®
Varithena®
PneumRx®
Coils
CroFab®
DigiFab®
Voraxaze®
Vistogard®
Various
royalties
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report
17
1&2
Delivering products and
investing for growth
Oncology
Our Interventional Oncology franchise comprises the liver cancer
treatments TheraSphere®, glass microspheres that deliver internal
radiation therapy, and LC Bead® and DC Bead®, our embolisation and
chemoembolisation polymer beads. During the year we acquired Galil
Medical, a leader in interventional oncology cryoablation technology.
DC Bead LUMI™
Beads and
TheraSphere®
About liver cancer
Primary liver cancer, including the most common form
hepatocellular carcinoma (HCC), occurs when tumours
grow in the liver. Secondary liver cancer occurs when
tumours from other organs spread to the liver. Common
causes of HCC include high levels of alcohol
consumption or chronic infections of hepatitis B or C,
which damage the liver and can lead to cirrhosis. It is
estimated that 50%-60% of patients with colorectal
cancer will develop metastases during the course of
their disease, one of the most common being metastatic
colorectal cancer (mCRC) in the liver.
When diagnosed early, liver tumours can be removed
and some patients are suitable for a transplant. However,
if diagnosed when symptomatic, surgical resection is
usually no longer an option. For unresectable tumours,
locoregional treatments including embolisation,
chemoembolisation, internal radiation therapy and
ablation may be used to shrink the tumours and delay
the progression of the disease.
Market opportunity in liver cancer
We estimate that globally the combined annual
incidence of HCC and mCRC is approximately 1.2
million people, of whom around 147,000 patients
annually would be amenable to locoregional treatments
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 18
Performance
continued
2. The drug loaded embolic beads
are inserted into an artery through
a catheter which is then advanced
into a tumour feeding vessel.
1. DC Bead® containing
negatively charged sites are
bound with a positively charged
cancer drug. Water is displaced
as the cancer drug is absorbed
throughout the beads.
3. The beads are guided to the
tumour site and there they block
the blood flow within the vessels,
depriving the tumour of oxygen.
4. DC Bead® start a controlled
release of a chemotherapeutic
drug over time which results in
ishchemia and tumour cell death.
Beads and
TheraSphere®
continued
based on their disease progression and taking into
account access to treatment and affordability in different
countries. This represents a global opportunity of
approximately $1.3 billion.
We are exploring ways to expand the use of our products
in treating cancer and in non-hepatic indications which,
if successful, could increase the market opportunity for
our product. Our target is to deliver sustainable mid-
teens annual product sales growth.
Competition
Embolisation and transarterial chemoembolisation
(TACE) have become established treatments for
unresectable, intermediate-stage HCC around the world.
Conventional TACE (cTACE) involves the administration
of a compounded oil and drug solution emulsion
followed by an embolising material. LC Bead® competes
with a small number of commercially available beads
while DC Bead® competes with cTACE and a small
number of other beads that are capable of being loaded
with chemotherapeutic drugs. BTG has a leading
position in the US and the EU, and we are building our
presence in Asia. TheraSphere® is one of only two
commercially available selective internal radiation
Y90 products used to treat liver tumours.
Growth strategy and progress
To sustain our mid-teens average annual product sales
growth target we are investing in commercial and
geographic expansion, focusing on product innovation
and generating clinical data to support new indications
and expanded use of our products.
TheraSphere® was approved during the year in Mexico,
South Korea, Malaysia and a number of other territories
in Asia, and we made progress with plans to seek
regulatory approval in China. We received CE Mark
certification in the EU and approval in Canada for
Simplicit90Y™ dosimetry software, designed to optimise
the planning of TheraSphere® and facilitate personalised
treatment for patients with liver cancer. The novel visible
bead DC Bead LUMI™, received a CE mark in the EU
and was approved in Canada.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 19
Recruitment into the STOP-HCC and EPOCH trials of
TheraSphere® in primary liver cancer and mCRC has
accelerated as planned.
We formed a collaboration with the Society of
Interventional Oncologists to explore the role of
localised treatments alongside immuno-oncology
and have provided funding for several new investigator
initiated studies to explore potential new uses of the
Beads and TheraSphere®.
GALIL
Cryoablation
Galil Medical provides cryoablation technology for use
in oncology and other indications. It has a leading
market position in the cryoablation of kidney cancer,
where there is one other provider of cryoablation
technology.
Globally, kidney cancer is the twelfth most common
cancer with an annual incidence of approximately
340,0001 new cases. Causes include smoking, though
there are other risk factors including being overweight,
hypertension and having polycystic kidney disease.
Treatment choices depend upon the stage of the cancer
when diagnosed and include surgery, ablation, radiation
therapy and biologic and chemotherapies. Cryoablation
is generally used on early-stage kidney tumours that are
less than 4cm across, and Galil Medical’s cryoablation
technology is growing strongly.
Galil’s growth strategy is to expand its use in US
hospitals and to continue to expand its global presence.
During the period the first patients were treated in
Argentina. Two studies progressed well which, if
successful, would support adoption in treating
metastatic lung and bone tumours.
TheraSphere®
1. To freeze the cancer, special
ultra-thin probes called
cryoablation needles are inserted
through the skin into the tumour.
3. Argon gas is delivered under
pressure into a small chamber
inside the tip of the needle where
it expands and cools, reaching a
temperature well below -100°C.
2. The needles are inserted under
guidance of CT, ultrasound
imaging or MRI.
4. This produces an iceball of
predictable size and shape around
the needles. The iceball is visible
under imaging, allowing the
physician to ensure the iceball
fully engulfs the tumour, killing
the cancerous cells.
5. The body temperature gradually
melts the iceball, resulting in
ablated tissue.
1. Source: www.cancerresearch.co.uk
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 20
Performance
continued
1&2
Vascular
We have two products within our Interventional Vascular portfolio.
The EKOS® System is an ultrasonic catheter drug delivery device used
in the treatment of blood clots. Varithena® is a proprietary engineered
microfoam used in the treatment of varicose veins.
1. When blood clots form in the
body they can cause chronic pain
and swelling. The clot might also
break free and travel through your
blood stream to major organs,
such as your lungs resulting
in a life-threatening pulmonary
embolism (PE).
3. A unique ultrasonic core,
containing numerous ultrasound
transducers, is then inserted
inside the infusion catheter.
5. Blood flow is then restored
within the vessel.
2. An infusion catheter is inserted
within the blood vessel through
the clot.
4. The ultrasonic core then
delivers acoustic pulses that
loosen the fibrin strands that
enmesh the blood clot. This
acoustic action combined with the
direct placement of a thrombolytic
drug results in faster and more
complete clot dissolution.
EKOS®
About blood clots
Every year, thousands of people die as a result of
some form of blood clot. The collective term is venous
thromboembolism (VTE) and this includes deep vein
thrombosis (DVT), which is a blood clot in one of the
deep veins in the body, and pulmonary embolism (PE),
a blood clot in the vessel that carries blood from the
heart to the lungs.
A growing market opportunity
The incidence of VTE has increased markedly, driven in
part by an aging population and rising levels of obesity.
Each year in the US, approximately 1 million people
suffer a severe clot and, of those, we estimate about 70%
are amenable to interventional treatment. The annual
number of interventional procedures in the US has
grown from about 95,000 in 2013 to over 150,000 today.
We expect the growth in this market to continue as
healthcare professionals recognise the increasing
importance of treating severe VTEs early.
Strategic progress
We continue to expand hospital penetration in the US
where we have been working closely with hospital staff to
establish new patient referral programmes and treatment
protocols. During the year a new control unit that is
optimised for treating PEs received 510(k) approval in
the US. We also made good progress in our commercial
expansion plans outside of the US with our first
treatments carried out in Taiwan and Hong Kong.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 21
Drivers of future growth
Adding to the clinical data already generated by EKOS
will enable us to build on our leadership position in the
treatment of VTE. Patient enrolment into the OPTALYSE
and ACCESS PTS studies is now complete, and the
results from both are expected during 2017. We are
strengthening our presence in Europe and making good
progress on our plans to take the EKOS® System into
other geographies.
Varithena®
Transforming the treatment
of varicose veins
Varithena® is a uniform, low-nitrogen, engineered
microfoam, that is dispensed from a proprietary canister
device. Treatment is a non-surgical procedure and
usually takes less than one hour after which patients
may resume light activities.
Market opportunity
It is estimated that there are approximately 30 million
Americans with varicose veins, of whom about 2.5
million develop symptoms each year that qualify them
to receive reimbursed treatment by their healthcare
provider. Varicose veins are a progressive disease and,
if left untreated, can result in more serious and painful
leg ulcers.
Competition in the
US reimbursed sector
Approximately 70% of reimbursed procedures are
conducted in private vein clinics, with the remainder
primarily conducted in hospitals. Since 2005, most
symptomatic varicose vein treatments involve a
combination of heat ablation of the great saphenous vein
(GSV), stab phlebectomy of the visible varicosities and
sclerotherapy of the visible veins.
Growth strategy and progress
Varithena® has broad application across the spectrum of
varicose veins. We continue to expand insurance policy
coverage and, during the year, we made progress
towards establishing new reimbursement codes that will
specifically cover the use of Varithena®. These are
expected to be implemented in January 2018.
2. The doctor administers a small
amount of Varithena® through a
catheter or by direct injection into
the malfunctioning vein with the
help of ultrasound imaging.
1. Tiny valves help the leg veins
work against gravity to push
the blood back to the heart.
Varicose veins are formed when
the valves weaken and blood
leaks backwards where it pools,
resulting in swelling, pain,
throbbing and itching of the veins.
3. The uniform density, size
and stability of the microfoam
allows it to fill the vein lumen
and displace stagnant blood.
4. The diseased vein collapses
and the microfoam is deactivated.
When the malfunctioning vein
collapses, blood flow shifts to
healthier veins nearby.
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 22
Performance
continued
1&2
Pulmonology
In January 2015, Interventional Pulmonology became
a new focus area for BTG with the acquisition of PneumRx,
which makes implantable coils that are used in the
treatment of severe emphysema.
Emphysema
and the
PneumRx® Coil
Emphysema is a debilitating lung disease, most
commonly caused by cigarette smoking, which affects
millions of people globally. It is characterised by damage
to the elasticity and function of the lung tissue, leading
to shortness of breath and significant disability.
Treatments to alleviate symptoms include
pharmacotherapy, pulmonary rehabilitation and oxygen
therapy as needed. A very small number of patients may
qualify for lung transplants or lung volume reduction
surgery. Interventional treatments including implantable
coils and valves, which are currently cleared for use only
in Europe and select other countries, are relatively new,
minimally invasive treatment options.
The PneumRx® Coils are made of a shape-memory
material called nitinol, pre-programmed in a double-loop
shape. After being straightened for insertion into the
lung via a bronchoscope, they gather up and compress
the diseased lung tissue surrounding them, re-
tensioning the airway network, as they recover their
original shape. The coils are designed to improve lung
function by enabling more efficient contraction during
the breathing cycle, and by tethering open small airways,
preventing airway collapse during exhalation.
1. The coils are small, shape-
memory nitinol implants,
designed to gather and compress
diseased tissue, re-tension the
diseased airway network and
mechanically increase the elastic
recoil in the emphysematous lung.
2. Coils are inserted into the
diseased part of the lung during a
bronchoscopy procedure.
3. When in place, the coils
are designed to gently regain
their shape, gathering and
compressing damaged lung
tissue and holding open
surrounding airways.
4. Several coils are placed in a
single lung to tighten the entire
airway network. The procedure
typically takes 35-45 minutes.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 23
PneumRx® Coil
Market opportunity
The PneumRx® Coil, which received CE mark clearance
in Europe in 2010, has been shown in clinical studies to
improve lung function, exercise capacity and quality of
life in a broad range of patients with severe emphysema.
This includes patients in stages III and IV as defined in
the GOLD (Global initiative for chronic Obstructive Lung
Disease) classification system. It is estimated that there
are over 5 million people in the US and Europe with
GOLD stage III and IV emphysema.
Growth strategy and progress
Interventional Pulmonology is an emerging medical field
and the PneumRx® Coil is at an early stage in its
commercial development. Our growth strategy
comprises medical development and expanding
commercial activities. We intend to build on the clinical
data available from the three randomised studies that
have been conducted to date to refine the criteria that will
enable physicians to select patients that are most likely
to respond to treatment, and to support development of
clinical practice guidelines and referral pathways for
appropriate patients to receive treatment.
In Europe, we are focused on ensuring growth resumes
in Germany, our largest market. We expect that national
payment coverage will be confirmed by the German
government during the current financial year. We expect
to secure national reimbursement and coverage in
France, where there is also a government process under
way, and we will continue to build momentum in other
European territories.
Our Premarket Approval application has been accepted
for review in the US. As we interact with the US FDA
we will in parallel develop our launch and reimbursement
strategy for the US market.
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 24
Performance
continued
1&2
Specialty
Pharmaceuticals
& Licensing
Our portfolio of four acute care products offers
rescue medication to patients for whom there are
few or no other treatment options.
Total sales 2016/17
£171.1m
+29%
(+12% CER)
CroFab®
Specialty
Pharmaceuticals
We have built leading positions within our Specialty
Pharmaceuticals business. Over the years, our portfolio
has grown from two marketed products to four and we
sell these in the US through two dedicated BTG field
forces. Elsewhere in the world, where approved or
permitted on a named patient basis, we sell through our
commercial partners.
Our ongoing commitment to delivering safe and effective
treatments means that we continually invest in these
rescue medicines. This year we signed a new
partnership agreement with Clinigen Group plc to
strengthen our distribution channels. Our US oncology
sales team continues to work closely with the medical
community on raising the awareness of the toxic side
effects that can result from certain chemotherapeutic
medications.
CroFab® is currently the only marketed treatment for
North American crotalid snake envenomation. In 2016,
we completed a successful study evaluating the use of
CroFab® in the treatment of envenomations from the
Copperhead snake, giving physicians more confidence
in our product for this type of bite. Our first smartphone
app, Snakebite911™, which can aid the public and first
responders in the event of a snakebite has also proved
very popular.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 25
Vistogard®, the first and only treatment for early-onset
of severe 5-fluorouracil (5-FU) toxicity, has made a
promising start in its first full year of launch. During the
year the Centers for Medicare and Medicaid Services
approved a New Technology Add-on Payment meaning
that Medicare will pay up to 50% reimbursement of the
cost of Vistogard® within the hospital setting. This is
expected to stay in place for two years.
Our ongoing commitment to
delivering safe and effective
treatments means that we
continually invest in these
rescue medicines
Licensing
BTG continues to receive royalties relating to the sales
of products that are subject to intellectual property
licence agreements between us and various partners.
These royalties vary but usually amount to a single digit
percentage of our licensee’s sales. Within this segment,
royalties from sales of Johnson & Johnson’s prostate
cancer drug Zytiga® are the largest contributor.
Our Licensing business has been a source of strong
cash flow from which we have been able to invest in the
higher growth, higher margin opportunities in our
Interventional Medicine portfolio.
Establishing new license arrangements is not a strategic
priority. Overall royalties are expected to decline over
time as patents on existing out-licensed products expire.
Lemtrada™ royalties will expire in 2017/18 and Zytiga®
royalties may be impacted by generic competition as
early as the 2018/19 financial year.
Zytiga®
royalties
2015/16: £118.9m
LemtradaTM
royalties
2015/16: £19.8m
£123.2m
+4%
£39.0m
+97%
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 26
Performance
continued
3
People and practices
People
How does our
culture drive
value?
BTG employs more than 1,500 people
across 17 locations around the world.
We benefit from the diverse mix of
perspectives that their variety of
backgrounds and experiences bring.
Each of our employees contributes to
and shares in BTG’s success.
Our culture
We believe that our unique culture, which we call our
DNA, enables us to better serve our customers and
their patients, and to differentiate our business in the
marketplace. Our culture is defined by the behaviours
we aspire to, based on our shared values, and these
guide how we interact with our customers and each
other. By allowing us to be agile, ensuring clear
accountabilities, and encouraging openness and
communication, these behaviours translate to business
advantages and help us meet our ambitious goals.
Championing behaviours
As we grow, both organically and through acquisition,
maintaining our culture continues to be a priority.
A group of influential employees we call “Champions”
have been chosen from all parts of the business. They
are empowered to maintain and propagate our culture
through role-modelling, sharing experiences, and other
peer-to-peer interactions.
At BTG, it’s not important where
you are in the org chart or who
you work for, we’re far more interested
in who you’re working with and what
you’re working on
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 27
Continuous learning
We invest in our people through a robust agenda of
Learning & Development offerings and we provide a
range of development opportunities intended to build
the capabilities we need to meet our near-term goals
and lay the foundation for long term growth. This year
36 people were enrolled in our in-house Management
Development Programme, a bespoke course designed
and delivered by BTG to develop promising new talent
and reinforce our culture. We’ve bolstered our leadership
development by working with innovative learning
partners such as getAbstract and Challenge24. Our
mentoring programme has also paired 37 employees
with senior leaders to further develop their leadership,
management and executive presence skills. We continue
to place a strong focus on succession planning and have
improved successor readiness across the organisation.
Following the successful piloting of our apprentice and
graduate trainee programmes in 2016/17, the Company
is looking for more people across a range of business
areas to continue our focus on the next generation
of talent.
Health and well-being
Ensuring the physical well-being of our employees
is also critical to our success. This year’s lost time
accident rate is half the prior year’s rate, largely driven by
the diligence of our managers in our higher risk facilities.
We are particularly proud of our employees at our
production site in Australia, who celebrated a 365-day
period without a lost time accident. This was achieved
through fostering a culture of safety and encouraging
reporting and root cause assessments of near misses.
Month/year
End March 2017
End March 2016
Accidents per
100,000 hours
worked1
0.17
0.34
1. This figure includes accidents where people have returned to
work and were given alternative duties as they were not able
to fulfil their normal roles.
Learning &
Development
92%
of employees rate Learning &
Development offerings between
good and excellent quality
98%
feel the course met their
development needs
87%
say they used their learning
outcomes within one month
of completing a course
Listening to
our people
We regularly seek employee feedback to help
understand and respond to their needs and concerns,
and to ensure we remain an attractive employer. The
results of our 2016 employee engagement survey,
conducted by the Great Place to Work® institute,
showed that our overall “Trust Index©” score was
73% compared with 75% in our 2014 survey, and our
other scores were also broadly consistent:
76%
feel BTG is a great place
to work (78% in 2014)
86%
feel a sense of pride in what
we accomplish (89% in 2014)
82%
feel they make a difference
(81% from 2014)
We are focusing on the outcomes of the survey to
deliver programmes that will drive improvements.
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 28
Performance
continued
3
People and practices
continued
We have a culture of open and
honest communication
Practices
Our code
We do not compromise with truth, ethics, or integrity.
Every employee in every region and function is trained
annually in our Code of Conduct, and regularly reminded
of its importance. Contractors and other third parties we
work with are expected to adhere to the same standards.
The principles, policies and procedures described in the
Code ensure that our business operates in accordance
with the requirements of our highly regulated industry.
We have a culture of open and honest communication
and encourage employee incident reporting through
internal channels or via an externally managed
anonymous hotline. Our code prohibits retaliation of any
kind against anyone who reports a concern. The latest
version of our full Code of Conduct is available on the
Responsibility section of our website.
Pressure testing
Nothing is as important to us as the quality of the
products we produce. In addition to FDA, MHRA,
BSI and other regulatory agencies inspecting our
operations, this year our Quality team began
holding mock inspections at each production
site to pressure test our systems and better
understand areas of risk. We continuously look
for opportunities to improve our processes and
ensure the integrity of our products.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 29
Doing the right thing
Anti-bribery
and corruption
Ethically
priced
Our anti-bribery and corruption (ABAC) policy
prohibits BTG employees, and those acting on their
behalf, from offering anything of value as a bribe or
inducement to others to make decisions that favour
BTG’s interests. These policies are designed to
promote compliance with the UK Bribery Act, the
US Foreign Corrupt Practices Act (FCPA), and other
local law equivalents.
Each of our products is priced in accordance with
its value from the points of view of healthcare
professionals, patients and payers, and to allow
our continued investment in R&D. For some
products we offer Patient Assistance and access
programmes to ensure life-saving treatments are
available to patients who need them.
Transparency
Environmental
responsibility
We are committed to environmental responsibility
and sustainable business practices, and each
year we are finding new ways to reduce our
environmental impact. We continue to monitor
and report our annual CO2, water and electricity
use, as well as waste production (See
Environmental Data on page 99).
www.btgplc.com/
responsibility
The Responsibility section of our website
summarises our policies and positions on a range
of social, environmental and governance topics we
consider relevant to our business.
To ensure the transparency of our relationship with
healthcare providers, BTG collects, tracks, and
reports payments to healthcare professionals and
organisations in accordance with the US Physician
Payment Sunshine Act.
Respecting
international
standards
BTG has publicly committed to respecting
international standards such as the United Nations
Universal Declaration of Human Rights. The Board
approved a Human Rights Statement, available on
our website and satisfies the UK Modern Slavery
Act and the US California Transparency in Supply
Chains Act.
Donations
During this fiscal year we donated £44,000
(2015/16: £27,000) to charitable causes chosen by
our employees. The list of charities we supported is
available on our website.
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 30
Group financial review
BTG has delivered a strong financial
performance in 2016/17, reflecting the
Group’s increasing financial maturity
and progress on its strategic objective to
achieve sustained profitable growth.
This review includes financial metrics on both an IFRS
and adjusted basis. Information on the Group’s adjusted
financial information is set out on pages 36 to 38.
Financial Highlights
Revenues
— Revenues were £570.5m (2015/16: £447.5m), up
11% on a Constant Exchange Rate (“CER”) basis.
At actual exchange rates revenues were up 27%, as a
result of significant foreign exchange tailwinds from
weaker sterling in 2016/17.
— Product sales delivered 14% organic growth at
CER (19% CER growth including Galil Medical).
Interventional Medicine delivered a strong
performance, with 15% organic growth at CER
(25% CER growth including Galil Medical).
Specialty Pharmaceuticals also delivered good
growth, up 12% at CER. At actual exchange rates
product sales were up 37%.
Operating Profit
— Adjusted operating profit was £129.6m (2015/16:
£93.0m), up 13% at CER, driven by higher
revenues coupled with continued effective cost
management and targeted commercial investment
in Interventional Medicine. Adjusted operating profit
was up 39% at actual exchange rates.
— Adjusted operating margin increased by
2 percentage points to 23% (2015/16: 21%).
— On an IFRS basis, operating profit was £57.5m
(2015/16: £56.5m), up 2% at actual exchange rates,
as IFRS operating profit was impacted by the
one-time charge of £28.0m on settlement of the
US government investigation into the marketing
of LC Bead®.
CFO’s
Financial
review
Rolf Soderstrom
Chief Financial Officer
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 31
Earnings per Share (“EPS”)
— Adjusted basic EPS was 23.1p (2015/16: 21.9p), up
5% at actual exchange rates, from higher operating
profit offset by foreign exchange losses on
forward contracts.
— On an IFRS basis, basic EPS was 8.7p (2015/16:
15.8p), down 45% at actual exchange rates, due to
lower IFRS profit before tax.
Free cash flow
— Free cash flow was £64.7m (2015/16: £88.1m).
Free cash flow was down 27% due to the payment
in 2016/17 of £28.0m to settle the US government
investigation into the marketing of LC Bead®.
Excluding the effect of this settlement, free cash flow
was up 5% as the business continues to be highly
cash generative.
— On an IFRS basis, cash flow from operating
activities was £74.2m (2015/16: £95.6m), down 22%.
Financial Summary
Revenues
Interventional Oncology
Interventional Vascular
Interventional Pulmonology
Total Product Sales
Total revenue
TheraSphere®/Beads
GALIL™
Total Interventional Oncology
EKOS®
Varithena®
Total Interventional Vascular
PneumRx® Coil
Total Interventional Medicine
CroFab®
DigiFab®
Voraxaze®
Vistogard®/other
Total Specialty Pharmaceuticals
Zytiga®
Lemtrada™
Other
Total Licensing
2016/17
£m
121.8
17.2
139.0
64.0
4.1
68.1
9.1
216.2
82.4
64.1
21.1
3.5
171.1
387.3
123.2
39.0
21.0
183.2
570.5
2015/16
£m
91.4
–
91.4
45.4
1.0
46.4
12.4
150.2
67.9
47.0
16.6
1.6
133.1
283.3
118.9
19.8
25.5
164.2
447.5
Growth
%
33
n/a
52
41
310
47
(27)
44
21
36
27
119
29
37
4
97
(18)
12
27
Growth at
CER1
16
n/a
32
22
270
27
(36)
25
6
17
15
94
12
19
(10)
67
(24)
(3)
11
1. For the methodology applied to calculate CER growth, refer to page 36.
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 32
Group financial review
continued
Revenue
Revenues were £570.5m (2015/16: £447.5m), up 11% on
a CER basis. At actual exchange rates revenue were up
27%, as a result of significant foreign exchange
tailwinds from weaker sterling in 2016/17.
Product sales delivered 14% organic growth at CER
(19% CER growth including Galil Medical). At actual
exchange rates product sales were up 37%.
Interventional Medicine
Interventional Medicine revenues increased to £216.2m
(2015/16: £150.2m), delivering 15% organic growth at
CER (up 25% at CER including Galil Medical).
Interventional Medicine now represents the Group’s
largest and fastest-growing business unit.
Interventional Oncology revenues were £139.0m
(2015/16: £91.4m), up 32% at CER, including sales
from Galil Medical which was acquired in June 2016.
The TheraSphere®/Beads portfolio of products grew
16% at CER, driven by continued expansion of
TheraSphere® in the US and EU. Galil Medical revenues
delivered 20% year on year growth on a pro forma basis,
including sales for the period prior to BTG’s ownership.
Interventional Vascular revenues were £68.1m (2015/16:
£46.4m), up 27% at CER.
Sales of the EKOS® blood clot treatment device were up
22% at CER. Strong growth has been delivered through
increased penetration into US hospitals and use in the
treatment of pulmonary embolism.
Sales of the varicose veins treatment Varithena® were
£4.1m (2015/16: £1.0m), the growth reflecting targeted
marketing and market access initiatives.
Interventional Pulmonology revenues were £9.1m
(2015/16: £12.4m), down 36% at CER. Lower sales of
the PneumRx® Coil treatment for severe emphysema
were due to a lower number of procedures in Germany,
the largest market. Resumption of growth is anticipated
when appropriate patient selection criteria are
established and as reimbursement coverage expands.
Specialty Pharmaceuticals
Specialty Pharmaceuticals revenues were £171.1m
(2015/16: £133.1m) up 12% at CER. Growth was
principally driven by single-digit price increases for
the established products, strong re-orders of DigiFab®,
and volume growth for the newer oncology products.
Sales of CroFab®, the snakebite antivenin, were up 6% at
CER and the digoxin toxicity treatment DigiFab® was up
17% at CER.
Voraxaze®, for treating high-dose methotrexate toxicity,
delivered 15% CER growth. Revenues from Vistogard®
grew to £3.2m during its first full year of sales following
US launch in 2015/16.
Licensing
Licensing revenues were £183.2m (2015/16: £164.2m),
down 3% at CER.
Royalties from Zytiga® were £123.2m (2015/16:
£118.9m). Royalties from Lemtrada™ grew strongly to
£39.0m (2015/16: £19.8m). The 2016/17 financial year
represented the last full year of significant Lemtrada™
royalties, as the European patent expired in March 2017
and the US patent expires in September 2017.
Gross profit
Adjusted gross profit was £391.6m (2015/16: £308.2m),
at an adjusted gross margin of 69% (2015/16: 69%).
On an IFRS basis, gross profit was £390.6m (2015/16:
£306.7m), at a gross margin of 68% (2015/16: 69%).
Interventional Medicine gross margin remained
constant at 71% (2015/16: 71%). Interventional
Medicine gross margin reflects the fixed manufacturing
cost base for the early stage Varithena® and PneumRx®
products, and is expected to increase over time as
revenues from these products grow. Specialty
Pharmaceuticals gross margin was 90% (2015/16: 89%).
Licensing gross margin was 45% (2015/16: 50%)
reflecting increased revenues from lower margin royalty
streams in 2016/17.
SG&A
Adjusted SG&A was £178.6m (2015/16: £141.4m), up
26% at actual exchange rates, the increase in part due
to weaker sterling in 2016/17. On a CER basis adjusted
SG&A was up 14%. The increase in adjusted SG&A
reflects the inclusion of Galil Medical’s operating costs
for the first time, representing five percentage points
of the year on year increase, and continued targeted
investment in Interventional Medicine commercial
capabilities while continuing to effectively manage
the cost base.
On an IFRS basis SG&A was £206.6m (2015/16:
£141.4m). SG&A in 2016/17 included a one-time charge
of £28.0m ($36m) relating to the settlement with the US
government in relation to the investigation into the
historic marketing of LC Bead®.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 33
Taxation
Adjusted effective tax rate was 14% (2015/16:10%).
The adjusted effective rate is lower than the standard rate
of UK corporate tax due to the patent box deduction on
royalty income, the benefit of US R&D credits and the
recognition of deferred tax assets for historic US losses
and timing differences.
On an IFRS basis, there is a tax credit of £2.0m (2015/16:
credit of £3.0m). The tax credit arises from deferred tax
credits on the amortisation of acquired intangible assets
at rates above the UK tax rate and the effect of the
Department of Justice settlement which was only
partially tax deductible.
Earnings per share
Adjusted basic EPS was 23.1p (2015/16: 21.9p), up 5%
due to higher adjusted profit after tax of £88.7m (2015/16:
£83.6m). Adjusted profit after tax was higher in 2016/17
due to growth in adjusted operating profit, partly offset by
hedging losses on foreign exchange forward contracts.
IFRS basic EPS was 8.7p (2015/16: 15.8p), down 45%
due to lower IFRS profit before tax. IFRS profit before tax
was lower as the effect of hedging losses on forward
contracts more than offset slightly higher IFRS
operating profits.
Summary balance sheet
Non-current Assets
Current Assets
Non-current Liabilities
Current Liabilities
Net Assets
31 March
2017
£m
968.8
342.3
(165.7)
(165.5)
979.9
31 March
2016
£m
851.3
297.5
(176.1)
(125.0)
847.7
Research and development
Research and development was £87.8m (2015/16:
£77.2m), up 14% at actual exchange rates, and in line
with prior year on a CER basis.
2016/17 has seen good pipeline progress, including
acceptance of the PMA submission for PneumRx®
Coils in the US, and completion of enrolment for
the OPTALYSE PE and ACCESS PTS studies.
R&D investment was focused on the Interventional
Medicine business, including the recently acquired
Galil Medical programmes for lung and bone metastases
and increased patient enrolment for the EPOCH and
STOP-HCC TheraSphere® Phase III trials designed to
support PMA applications in the US.
Operating profit
Adjusted operating profit was £129.6m (2015/16:
£93.0m), up 39% at actual exchange rates. On a CER
basis, adjusted operating profit was up 13% driven by
higher revenues coupled with continued effective cost
management and targeted commercial investment in
Interventional Medicine.
Adjusted operating margin increased by 2 percentage
points to 23% (2015/16: 21%).
IFRS Operating Profit was £57.5m (2015/16: £56.5m),
up 2% at actual exchange rates. This reflects higher
acquired intangible asset amortisation of £42.0m
(2015/16: £35.0m), principally due to intangible assets
acquired with Galil Medical and the previously
announced legal settlement that resulted in a one-time
charge of £28.0m.
IFRS operating margin was 10% (2015/16: 13%).
Financial expense/income
Adjusted net financial expense/income was an expense
of £26.6m (2015/16: expense of £0.4m). Following the
significant weakening of sterling in 2016/17 hedging
losses of £25.2m (2015/16: gain of £1.2m) relating to
foreign exchange forward contracts were recognised.
These losses have offset the foreign exchange
translation benefits realised at the operating profit level.
IFRS net financial expense was an expense of £25.9m
(2015/16: net financial income of £1.0m). IFRS net
financial expense includes a net credit of £0.7m relating
to the change in fair value of contingent consideration
liabilities (2015/16: net credit of £1.4m).
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 34
Group financial review
continued
Non-current assets
Non-current assets increased to £968.8m (31 March
2016: £851.3m), due to higher intangible assets of
£678.9m (31 March 2016: £599.2m) and goodwill of
£225.6m (31 March 2016: £187.9m). Intangible assets
increased by £79.7m due to assets acquired with Galil
Medical and foreign exchange translation, offset by
intangible asset amortisation charges.
The Group’s defined benefit pension scheme net asset
decreased slightly to £17.2m (31 March 2016: net asset
of £19.3m), principally due to a reduction in the discount
rate used to value the defined benefit obligation offset by
actual returns on fund assets.
Current assets
Current assets increased to £342.3m (31 March 2016:
£297.5m). Cash and cash equivalents were slightly
higher at £155.5m (31 March 2016: £140.4m).
Inventory increased to £58.4m (31 March 2016: £46.5m)
and receivables increased to £125.7m (31 March 2016:
£106.5m) as a result of underlying business growth.
Non-current liabilities
Non-current liabilities decreased to £165.7m (31 March
2016: £176.1m). Non-current liabilities were lower at
31 March 2017 due to the reclassification of contingent
consideration liabilities relating to the PneumRx
acquisition from non-current to current liabilities
in the year. This decrease was partially offset by higher
deferred tax liabilities following the acquisition of Galil
Medical and the effects of foreign exchange translation.
Current liabilities
Current liabilities increased to £165.5m (31 March 2016:
£125.0m). Derivative financial instrument liabilities
increased to £7.9m (31 March 2016: £3.0m) due to
unrealised losses on forward foreign exchange contracts.
Trade and other payables increased to £152.5m
(31 March 2016: £116.2m) reflecting the underlying
growth of the business and the classification of
PneumRx, Inc. contingent consideration liabilities
to current liabilities from non-current liabilities.
Included within current liabilities is a contingent
consideration liability of £28.2m (31 March 2016:
non-current liability of £27.2m) relating to a $60m
milestone which may be payable to the former
shareholders of PneumRx, Inc. if FDA approval for the
PneumRx® Coils is received by 31 December 2017.
This milestone is reflected at its current fair value,
which reflects the probability of receiving FDA approval
and the anticipated timing of any such approval.
While the Group remains confident of FDA approval,
the event which would require payment of the milestone,
receipt of FDA approval by 31 December 2017, will
only be resolved in the 2017/18 year. If FDA approval is
received by 31 December 2017, the Group will record a
fair value charge of £19.8m to record the liability at its
full value of $60m. Alternatively, if FDA approval is not
received by 31 December 2017 the Group will credit the
income statement with £28.2m to release in full this
liability. Any such charge or credit will be reflected in
IFRS earnings but not adjusted earnings, in line with
the Group’s adjusted earnings policy.
Contingent liabilities
BTG is in a current dispute with Wellstat over the
commercialisation of Vistogard®. Wellstat are seeking
damages and to terminate the commercialisation
agreement under which BTG obtained rights to sell
Vistogard® in the US. A trial has been heard in the Court
of Chancery of the State of Delaware but no judgment
has yet been issued. The Group estimate the likelihood
of material financial loss or loss of rights to the asset to
be possible, not probable, and therefore no liability has
been recognised. It is currently not possible to make a
reliable estimate of any amount that may be required to
be paid in respect of the dispute.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 35
Cash flow
Cash flows for 2016/17 and 2015/16 are outlined in the following table:
Free Cash Flow
Acquisition of Galil Medical
Other investing and financing activities
Net Change in Cash
FX
Closing Cash and Deposits
The business continues to be highly cash generative,
and continues to deliver strong free cash flow.
Free cash flow was £64.7m (2015/16: £88.1m), down
27%. Free cash flow was lower in 2016/17 due to the
previously announced legal settlement of £28.0m.
Excluding the effect of this settlement, free cash flow
was up 5%.
On an IFRS basis, cash flow from operating activities
was down 22% to £74.2m (2015/16: £95.6m).
Cash and cash equivalents were £155.5m at 31 March
2017 (31 March 2016: £140.4m), as free cash flow in
2016/17 was partially used to fund the acquisition of,
and repay debt acquired with, Galil Medical.
BTG has a £100m multi-currency revolving credit facility
(“RCF”), with an option to increase the RCF by a further
£100m. The RCF has a three-year term which expires in
November 2018, although the Group has the option to
extend the RCF for an additional year. The RCF currently
remains undrawn.
Summary and outlook
BTG has performed strongly this year, with double-digit
product sales growth, robust free cash flow and
disciplined cost control. We have strengthened our
portfolio, capabilities and leadership in Interventional
Medicine, which is our fastest growing and largest
business. We have the resources and capabilities to
capitalise on the expanding opportunities we see in
Interventional Medicine, by reinvesting our strong cash
flows into further commercial expansion and pipeline
development. We continue to look for opportunities to
accelerate our product sales growth through acquisition.
2016/17
£m
64.7
(55.1)
(0.4)
9.2
5.9
155.5
2015/16
£m
88.1
–
(22.4)
65.7
–
140.4
Growth
%
(27)
n/m
n/m
(86)
–
–
Viability Statement
The activities of the Group, together with factors likely
to affect its future development and performance, its
financial position, its cash flows, liquidity position
and borrowing facilities are described in the Strategic
Report on pages 6 to 38. The Directors have carried
out a robust assessment of the principal risks facing
the Group, including those that would threaten its
business model, future performance, solvency or
liquidity. These risks and the manner in which they
are being managed and sought to be mitigated are
summarised in the risk management and principal
risks section on pages 66 to 70.
Taking account of the Group’s position and principal
risks, the Directors assess the prospects of the Group
by reviewing at least annually the annual forecast,
the three-year strategic plan and the Group’s risk
framework. The Directors review the potential impact
of each principal risk as well as the risk impact of any
major events or transactions. A three-year period is
considered appropriate for this assessment as it is
consistent with the period covered by the Group’s
business planning process.
The Group is well positioned to manage its
business risks in the event identified risks materialise.
The Group has several mature business units which
provide a strong financial underpin. The Group also
has considerable financial resources, including cash
and cash equivalents of £155.5m at 31 March 2017,
strong free cash flows and access to a £100m
revolving credit facility. Based on the result of its
analysis, the Directors believe that the Group is well
placed to manage its business risks successfully.
The Directors have a reasonable expectation that the
Group will be able to continue in operation and meet
its liabilities as they fall due over the three-year period
of their assessment.
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report 36
Group financial review
continued
— Contribution: Contribution is defined as gross
profit less SG&A, which broadly reflects the cash
generated by the Group’s reportable segments before
investment in R&D or other investing or financing
activities. Management use this metric to assess
performance for each of its reportable segments and
reviews the metric both including and excluding the
impact of certain adjustments outlined below.
Adjusted gross profit, Adjusted SG&A, Adjusted Finance
Income/Expense and Adjusted effective tax rate are
stated after excluding the effect of those items
outlined below.
Management apply a consistent policy in determining
its adjusted financial measures. In determining this
policy, outlined below, management assess the nature
and materiality of individual or groups of items, and have
deemed it appropriate to adjust for those items including
their tax effect, which (i) occur outside the normal course
of business and (ii) relate to corporate acquisitions.
These adjustments allow better comparability with
historic performance and identify year on year trends
in the underlying performance of the business.
Items excluded from adjusted financial measures in
2015/16, 2016/17 and from our guidance for 2017/18 are:
(a) Acquisition related adjustments
— The release of the fair value uplift of acquired
inventory or PP&E.
— Amortisation and impairment charges relating
to acquired intangible assets or goodwill.
— Fair value adjustments relating to contingent
consideration liabilities.
— Transaction costs incurred in relation to corporate
acquisitions.
— Reorganisation costs, including acquisition related
redundancy programmes, property costs, and asset
impairments.
(b) Net costs relating to the settlement of litigation,
disputes and government investigations.
Information on adjusted
financial information
The financial review includes financial information
prepared in accordance with International Financial
Reporting Standards and the Group’s accounting
policies, as well as financial information presented on
an adjusted basis.
Financial information on an adjusted basis excludes
certain cash and non-cash items which management
believe are not reflective of the underlying financial
performance of the business and is consistent with how
management reviews the business for the purpose of
making operating decisions.
Metrics presented on an adjusted basis includes
Constant Exchange Rate (CER) growth, Adjusted
Gross Profit, Adjusted SG&A, Contribution, Adjusted
Operating Profit, Adjusted Net Financial Income/
Expense, Adjusted Effective Tax Rate, Adjusted Basic
EPS and Free cash flow. A reconciliation between
IFRS and adjusted financial information is included
on page 37 and 38 of this report.
These metrics are further discussed below;
— CER growth: CER growth is calculated by restating
2016/17 performance using 2015/16 exchange rates
for the relevant period. CER growth allows
management to focus on underlying performance
without the impact of foreign exchange, which it
cannot control.
— Adjusted Operating Profit: Adjusted operating
profit reflects the IFRS operating profit of the Group
excluding the impact of certain adjustments, which
have been separately outlined below. Adjusted
operating profit allows management to assess
operational performance without the impact of
certain items which are not reflective of underlying
financial performance.
— Adjusted Basic EPS: Adjusted Basic EPS reflects
Basic EPS excluding the after tax impact of certain
adjustments, which have been outlined below.
Adjusted Basic EPS allows management to assess
EPS without the impact of certain items which are
not reflective of underlying financial performance.
— Free Cash Flow: Reflects the cash generated from
operating activities after recurring capital
expenditure, being a measure of cash flow available
for discretionary investing or financing activities.
The reconciliation of free cash flow to net cash flows
from operating activities is show on page 38.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 37
Reconciliation between IFRS and Adjusted financial information
– Consolidated Income Statement
For the year ended 31 March 2017
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Research and development
Other operating income
Amortisation of acquired intangible assets
Acquisition and reorganisation costs
Operating profit
Financial income
Financial expense
Profit before tax
Tax credit/(charge)
Profit after tax
Release
of the fair
value uplift
on acquired
inventory
and PPE1
£m
Amortisation
of acquired
intangible
assets2
£m
Acquisition
and
reorganisation
costs3
£m
Fair value
adjustments
to contingent
consideration
liabilities4
£m
Litigation
and other5
£m
1.0
1.0
–
–
–
–
–
1.0
–
–
1.0
(0.3)
0.7
–
–
–
–
–
42.0
–
42.0
–
–
42.0
(13.1)
28.9
–
–
–
–
–
–
1.1
1.1
–
–
1.1
–
1.1
–
–
–
–
–
–
–
–
(3.0)
2.3
(0.7)
–
(0.7)
–
–
28.0
–
–
–
–
28.0
–
–
28.0
(2.9)
25.1
IFRS
Total
£m
570.5
(179.9)
390.6
(206.6)
(87.8)
4.4
(42.0)
(1.1)
57.5
3.3
(29.2)
31.6
2.0
33.6
Weighted average number of shares – basic
Weighted average number of shares – diluted
384.4
390.0
Adjusted
Total
£m
570.5
(178.9)
391.6
(178.6)
(87.8)
4.4
–
–
129.6
0.3
(26.9)
103.0
(14.3)
88.7
384.4
390.0
Basic earnings per share
Diluted earnings per share
8.7p
8.6p
0.2p
0.2p
7.6p
7.4p
0.3p
0.3p
(0.2p)
(0.2p)
6.5p
6.4p
23.1p
22.7p
1. The release of the fair value uplift relating to inventory and property, plant and equipment (PPE) acquired with Galil Medical in June 2016
of £1.0m.
2. Amortisation charges relating to intangible assets acquired through corporate acquisitions of £42.0m.
3. Acquisition and reorganisation costs are directly attributable costs related to the acquisition of Galil Medical in June 2016, including
costs incurred with professional advisers in relation to the corporate acquisition of £1.1m.
4. Fair value adjustments to contingent consideration liabilities relating to the PneumRx acquisition (credit of £3.0m) and the Galil Medical
acquisition (charge of £2.3m).
5. Settlement with the US government in relation to the Department of Justice’s investigation of the historic marketing of LC Beads of £28.0m.
BTG plc Annual Report and Accounts 2017Strategic ReportStrategic Report
38
Group financial review
continued
For the year ended 31 March 2016
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Research and development
Other operating income
Amortisation of acquired intangible assets
Operating profit
Financial income
Financial expense
Profit before tax
Tax credit/(charge)
Profit after tax
Weighted average number of shares – basic
Weighted average number of shares – diluted
Basic earnings per share
Diluted earnings per share
Release
of the fair
value uplift
on acquired
inventory1
£m
–
1.5
1.5
–
–
–
–
1.5
–
–
1.5
(0.6)
0.9
Amortisation
of acquired
intangible
assets2
£m
–
–
–
–
–
–
35.0
35.0
–
–
35.0
(11.4)
23.6
Fair value
adjustments
to contingent
liabilities
consideration3
£m
–
–
–
–
–
–
–
–
(3.0)
1.6
(1.4)
–
(1.4)
0.2p
0.2p
6.3p
6.1p
(0.4p)
(0.4p)
IFRS
Total
£m
447.5
(140.8)
306.7
(141.4)
(77.2)
3.4
(35.0)
56.5
4.4
(3.4)
57.5
3.0
60.5
382.6
388.3
15.8p
15.6p
Adjusted
Total
£m
447.5
(139.3)
308.2
(141.4)
(77.2)
3.4
–
93.0
1.4
(1.8)
92.6
(9.0)
83.6
382.6
388.3
21.9p
21.5p
1. The release of the fair value uplift relating to inventory acquired with PneumRx in January 2015 of £1.5m.
2. Amortisation charges relating to intangible assets acquired through corporate acquisitions of £35.0m.
3. Fair value adjustments to contingent consideration; includes the change in fair value of contingent consideration liabilities relating
to the PneumRx acquisition (net credit of £3.0m), and EKOS acquisition (charge of £1.6m).
Reconciliation between IFRS and Adjusted financial information – Free Cash Flow
For the year ended
31 March 2017
For the year ended
31 March 2016
Net cash inflow from
operating activities
£m
74.2
Net cash inflow from
operating activities
£m
95.6
Purchase of
intangible assets
£m
(0.6)
Purchase of
intangible assets1
£m
(1.3)
Purchase of property,
plant and equipment
£m
(8.9)
Purchase of property,
plant and equipment
£m
(6.2)
Free cash Flow
£m
64.7
Free cash Flow
£m
88.1
1. Purchase of intangible assets for the period ended 31 March 2016 excludes the purchase of the residual financial interest of the originator
of Varithena® foam sclerotherapy technology for a one-off cash payment of £23.0m, as this does not represent recurring capital
expenditure for the Group.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Strategic Report 39
Governance
G
o
v
e
r
n
a
n
c
e
Contents
40 Corporate Governance report
40 Letter from the Chairman
42 Board of Directors
45 Leadership
54 Effectiveness
57
Accountability
(including Audit Committee
report and risk)
71 Relations with shareholders
72 Remuneration
98 Directors’ report
102 Statement of directors’
responsibilities in respect
of the Annual Report 2017
and the financial statements
BTG plc Annual Report and Accounts 2017GovernanceGovernance
40
Corporate Governance report
Letter from the Chairman
Dear
shareholder
The Board is ultimately accountable for ensuring that
high standards of governance are maintained in all we
do. We are committed to that objective, taking pride in
the way that we conduct our business and deliver our
strategy. Our governance structure is fundamental to
this and enables us to manage business risks while
developing the Group and delivering value for all
our stakeholders.
The Company’s strategy is underpinned by a strong
corporate governance framework, which together with
ethical leadership, establishes the foundation for how
we operate and is strongly embedded within the culture
of the business at all levels. The high standards of
behaviour and ways of working required by ourselves
and our employees are guided by our Code of Conduct,
which is underpinned by the BTG “DNA”, simply put,
this is about doing what is in the best interests of the
Group at all times and striving to live up to our values
in everything that we do.
Governance in 2016/17
During the year we strengthened governance by
conducting a comprehensive review of the specific
matters required to be considered by the Board and
its primary committees, as well as the major policies
underpinning business operations. There has been
continuing work to evolve and further enhance our
risk management framework and embed it in both
the operational and strategic activity of the business.
A specific example of that has been the focus on our
response to cyber security threats. As a result of this
continuing improvement, I believe we enter the new
financial year with an even stronger governance
framework overall.
Garry Watts
Chairman
The Company’s strategy is
underpinned by a strong
corporate governance
framework, which together
with ethical leadership,
establishes the foundation
for how we operate and
is strongly embedded
within the culture of the
business at all levels.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 41
Governance Framework
The Corporate Governance Report, the Directors’
Remuneration Report and the Directors’ Report have
been prepared to provide shareholders with a
comprehensive understanding of how the Board
and its committees operate and how we meet the
requirements of the UK Corporate Governance Code
(the Code) and other guidance.
Our Corporate Governance Report can be found
on pages 40 to 71 and includes our statement of
compliance with the Code and its principles on page
44. The Directors’ Remuneration Report can be found
on pages 72 to 97.
With the Board, I look forward to discussing BTG’s
progress with you at our forthcoming AGM on
13 July 2017.
Garry Watts
Chairman
As Chairman, I am responsible for ensuring the Board
operates effectively. I am supported by all the directors
but particularly by Giles Kerr, the Senior Independent
Director, who meets independently with the other
directors and is available to meet with the Company’s
major shareholders if required.
Board changes and succession planning
As reported last year, the Board undertook a process
to appoint a successor to Giles Kerr in the role of
Audit Committee Chair. As a result I was pleased to
welcome Graham Hetherington who joined as non-
executive director and Audit Committee Chair on
1 August 2016 and was subsequently appointed to the
Remuneration Committee. Further description of the
process to appoint Graham can be found on page 51.
As we wish to continually assess the appropriate
composition of the Board, an external review was
carried out during the year to consider whether the
Board contained the right balance of skills and
diversity of experience required to meet the future
strategic requirements of the business. Details of the
review can be found in the Nomination Committee’s
report on pages 51 to 53. This will remain an area
of focus for the Board for the coming year.
Reflecting on our recent internal performance
evaluation, it is pleasing to note that the Board and its
principal committees have, individually and collectively,
worked effectively to discharge their responsibilities
and support the ongoing development of the Group.
More information on the Board evaluation can be found
on pages 54 and 55.
BTG plc Annual Report and Accounts 2017GovernanceGovernance Governance
42
Corporate Governance report
Board of Directors
Garry Watts FCA, MBE
Chairman
Joined the Board as Chairman in January 2012.
He is Chairman of the Nomination Committee.
Other directorships: Garry is Chairman of
Spire Healthcare and of Foxtons Group plc
and is a non-executive director of Coca-Cola
European Partners Plc.
Expertise and experience: Garry provides
considerable commercial leadership experience
and expertise to the BTG Board. For seven
years up to December 2010, he was CEO
of SSL International plc and before that its
CFO. He was previously an executive director
of Celltech plc and of Medeva plc, and a
non-executive director of Protherics PLC and
of Stagecoach Group plc. Other roles have
included 17 years as a member of the UK
Medicines and Healthcare Products Regulatory
Agency Supervisory Board. Garry is a former
partner at KPMG.
Dame Louise Makin
MA, PhD (Cantab), MBA, DBE
Chief Executive Officer
Joined BTG as Chief Executive Officer in
October 2004.
Other directorships: Louise is a non-executive
director of Intertek Group plc and the Woodford
Patient Capital Trust. She is a Trustee of the
Outward Bound Trust and an Honorary Fellow
of St. John’s College, Cambridge.
Expertise and experience: Louise is a highly
experienced international business leader, who
brings considerable strategic and operational
expertise to the Board. Prior to joining BTG she
was from 2001, President, Biopharmaceuticals
Europe of Baxter Healthcare, with responsibility
for Europe, Africa and the Middle East. Before
Baxter, Louise was Director of Global Ceramics
at English China Clay and prior to that she held
a variety of roles during 13 years at ICI.
Rolf Soderstrom BA, ACA
Chief Financial Officer
Joined the Board as Chief Financial Officer in
December 2008.
Other directorships: Rolf currently holds no
external directorships.
Expertise and experience: Rolf provides
significant financial expertise to the Board.
Before its acquisition by BTG, Rolf was finance
director for Protherics PLC, a role he held
since August 2007. From 2004 to 2007 he was
Divisional Finance Director of Cobham plc,
with responsibility for managing a portfolio
of businesses across Europe and the USA,
prior to which, from 2000 he was a Director
of Corporate Finance at Cable & Wireless
plc. He is a Chartered accountant and after
qualifying worked in the Corporate Recovery
and Corporate Finance Department of
PricewaterhouseCoopers.
Ian Much
Non-executive director
Dr Susan Foden MA, DPhil
Non-executive director
Jim O’Shea
Non-executive director
Appointed to the Board in August 2010. He
is Chairman of the Remuneration Committee
and a member of the Audit and Nomination
Committees.
Other directorships: Ian currently holds no
other directorships.
Expertise and experience: Ian provides
substantial international business experience
to the Board. He was Chief Executive of De
La Rue plc between 1998 and 2004 and Chief
Executive of T&N plc between 1996 and 1998.
Previously he was non-executive director of
Manchester United plc, Camelot plc, Admiral
plc, and Chemring Group plc.
Appointed to the Board in March 2015. She is a
member of the Remuneration Committee.
Appointed to the Board in April 2009. He is a
member of the Nomination Committee.
Other directorships: Susan currently holds
non-executive roles with BerGenBio ASA,
Evgen Pharma plc and Vectura Group plc, and
is an advisory board member for CD3 (a joint
initiative between Leuven University and the
European Investment Fund).
Expertise and experience: Susan brings
extensive industry experience to the BTG Board
with a strong track record of having assisted
in the development of a number of businesses
in the sector. She was Investor Director with
the venture capital firm Merlin Biosciences,
was formerly CEO of the technology transfer
company, Cancer Research Campaign
Technology Ltd and was Head of Academic
Liaison at Celltech Ltd.
Other directorships: Jim serves as Chairman
of Cardiome Pharma, is a director of Trevi
Therapeutics, Inc., and Ocular Therapeutix™.
Expertise and experience: Jim provides the
Board with significant US industry experience.
He is a former Chairman of the US National
Pharmaceuticals Council. From 2007 to 2008,
he was Vice Chairman of Sepracor, Inc., where
he was also President and Chief Operating
Officer from 1999 to 2007. Previously Jim was
Senior Vice President of Sales & Marketing and
Medical Affairs for Zeneca Pharmaceuticals
(US), a business unit of Zeneca Inc. While at
Zeneca, he held several management positions
of increasing responsibility in international sales
and marketing in the US and the UK.
BTG plc Annual Report and Accounts 2017
BTG plc Annual Report and Accounts 2017
BTG plc Annual Report and Accounts 2017 Governance
43
Gender Diversity
(%)
b
Giles Kerr FCA
Non-executive director
Graham Hetherington FCMA
Non-executive director
a
Appointed to the Board in October 2007. He
is the Company’s Senior Independent Director
and a member of the Audit, Nomination and
Remuneration Committees.
Other directorships: Giles is Director of
Finance with the University of Oxford, UK. He is
also a director of Oxford University Innovation
Ltd, Senior plc, PayPoint plc, and Adaptimmune
Therapeutics plc.
Expertise and experience: Giles provides
important relevant industry and financial
experience to the BTG Board. He was
previously the Group Finance Director and
Chief Financial Officer of Amersham plc,
acquired by GE Healthcare in 2004, and
previously served as director of Victrex plc.
Prior to his role at Amersham, he was a partner
with Arthur Andersen in the UK. He was
Chairman of the Company’s Audit Committee
until the appointment of Graham Hetherington.
Appointed to the Board in August 2016. He
is Chairman of the Audit Committee and a
member of the Remuneration Committee.
Other directorships: Graham currently holds
no other directorships.
Expertise and experience: Graham brings
substantial financial and industry experience
to the Board. Prior to joining BTG he was
Chief Financial Officer of Shire plc, a role
he held from June 2008 to February 2014.
Previously he held the same positions at
Bacardi in 2007 and at Allied Domecq PLC
from 1999 to 2005. Graham has a broad
knowledge of international finance management
and planning, including M&A, audit and risk
management and is a Fellow of the Chartered
Institute of Management Accountants.
Richard Wohanka
Non-executive director
Appointed to the Board in January 2013. He is a
member of the Audit Committee.
Other directorships: Richard is a board
member of Lloyds Banking Group Insurance
(Scottish Widows), Julius Baer International
Limited and Chairman of the Nuclear Liabilities
Fund and of Old Mutual Global Investors.
Expertise and experience: Richard provides
substantial expertise to the BTG Board in the
field of business and finance, with more than 20
years’ experience in building asset management
businesses. He was CEO of Union Bancaire
Privée Asset Management between October
2009 and June 2012, and from 2001 to 2009 he
was CEO of Fortis Investment Management.
Company Secretary
Dr Paul Mussenden
General Counsel,
Head of Strategic Affairs
& Company Secretary
Appointed as Company Secretary in March
2010.
Other directorships: Paul is a non-executive
director and trustee of Medical Research Council
Technologies Ltd.
Expertise and experience: Paul supports
the Board with more than 20 years of advisory
experience in the healthcare industry. As
a member of BTG’s Leadership Team he is
accountable for management of the Legal,
Regulatory, Intellectual Property, Global Market
Access, Healthcare Compliance and Risk
Management functions. Paul is a solicitor and
has a BSc(Hons) in Biotechnology and a PhD in
molecular biology and microbial physiology.
BTG plc Annual Report and Accounts 2017
G
o
v
e
r
n
a
n
c
e
a Male 78%
b Female 22%
Balance of directors
a
b
c
a Chairman 1
b Executive directors 2
c Non-executives 6
Tenure of non-
executive directors
and Chairman
(as at 31 March 2017)
c
d
b
a
a More than 6 years 3
b 4-6 years 2
c 2-4 years 1
d 0-2 years 1
BTG plc Annual Report and Accounts 2017
44
Corporate Governance
Report
Compliance with the UK Corporate
Governance Code (the Code)
BTG’s governance structure is based on the principles
of the Code published by the Financial Reporting
Council (FRC) and available from www.frc.org.uk.
The Code contains broad principles and specific
provisions that set out standards of good practice.
Our Corporate Governance Report, which includes
reports from the Nomination and Audit Committees
and the Directors’ Remuneration Report, is structured
to report against these key areas and sets out how we
have applied the Code’s main principles and complied
with its provisions.
Statement of Compliance with
the provisions of the Code
The Board considers that the Group has complied fully
with the Code throughout the year ended 31 March
2017. With regard to provision C.3.7, the Group has
begun a process for the tender of audit services and
further details are provided on page 62 of the Audit
Committee Report. After careful consideration of the
applicable regulations regarding audit firm rotation
and the performance and independence of the
current auditor KPMG LLP, the Board recommends
their reappointment.
The Group has also sought to adopt the new provisions
of the April 2016 edition of the Code (applicable to the
Company’s 2017/18 financial year onwards) where
practicable. We have also been mindful to consider how
we comply with not only the principles of the Code but
also the spirit.
KPMG is required to review certain elements of the
corporate governance statement and to report if those
disclosures do not reflect the Company’s compliance
(and the Company has not instead explained why it
has not complied) with the provisions of the Code
specified for the auditor’s review by the Listing Rules
of the Financial Conduct Authority (FCA).
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 45
Corporate Governance report
Leadership
The role of the Board and its committees
The Board
— Responsible for the overall leadership
of the business, its culture, values
and standards.
— Has a schedule of matters reserved
specifically for its decision or approval.
— Determines governance, strategy and
risk appetite.
— Responsible for ensuring adequate
organisational capabilities and capacity.
Disclosure Committee
— Responsible for ensuring the
Company’s compliance with
applicable transparency and
disclosure obligations under
the Market Abuse Regulation
(MAR) including those
related to the management of
price sensitive information.
The Leadership Team
— Chaired by the CEO.
— Members include the CFO
and senior management
from different areas of the
business and functions.
— Responsible for the
day-to-day running of Group
operations and making
recommendations to the
Board on strategy and
subsequent implementation.
— Ensures the capabilities are
in place to deliver on strategy
and annual objectives.
— Ensures the internal controls
in place to assess and
manage risk are fully
complied with. This
includes responsibility
for maintaining a system
to ensure that the Group
is compliant with all
applicable healthcare
laws and regulations.
Audit Committee
— Assists the Board on oversight of
financial results, internal control and
management of risk and compliance
and maintaining an appropriate
relationship with the external auditor
and internal audit function.
Page 57, to read more
Remuneration Committee
— Determines executive director
remuneration and oversees that for
senior management.
— Ensures the Remuneration policy
supports the strategy by attracting,
developing, motivating and retaining
people of the appropriate calibre.
Page 72, to read more
Nomination Committee
— Considers the structure, size and
composition of the Board and its
committees to ensure inclusion of
appropriate experience, diversity
and expertise.
— Oversees talent management and
succession planning for senior roles.
Page 51, to read more
Treasury Committee
— Primary responsibility is to monitor the
Group’s treasury activities, including
cash management, foreign exchange
management and financing. The
Committee also ensures compliance
with the Group’s treasury policy.
Risk Committee
— Responsible for monitoring risks
throughout the organisation and
assessing the risk control and
mitigation measures implemented
by the Group.
— Conducting work to support the
assessment of the Viability Statement
by the Board.
— Ensuring operations are undertaken
within the risk appetite defined by
the Board.
— Assisting with the evaluation of
external macro risks that may impact
the Group.
— Assisting with the integration of
risk management and strategy
development.
Internal Audit
— Testing of the effectiveness of the
internal control systems.
— Supporting the risk management
and compliance functions with
appropriate audits.
Portfolio Review Board and R&D Leadership Team
— 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.
— Oversees the definition of activities and priorities of the R&D Leadership Team.
The R&D Leadership Team provides strategic and operational leadership of R&D activities,
harnessing our combined knowledge and resources, to deliver a balanced pipeline of innovative
therapies aligned with BTG business priorities.
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, Quality Management System effectiveness and enhancements, product delivery
on time and to required quality, safety and efficacy.
— 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 (includes business unit risk assessments).
Corporate Responsibility Committee
— Provides guidance and leadership in regards to social, environmental and governance issues
of most relevance to BTG to ensure the Group maintains appropriate standards in this area .
Business Unit Leadership Teams
— Each business segment has an established leadership team comprising commercial and
functional capabilities. They are responsible for managing the day-to-day operations of each
specific business.
BTG plc Annual Report and Accounts 2017GovernanceGovernance
46
Corporate Governance report
Leadership continued
Matters reserved for the Board
and delegated authorities
There is clear division of responsibilities between the
running of the Board and the running of the Company’s
business and the Board has certain reserved matters
for its approval. Other matters and authorities have
been delegated to its primary committees and other
management committees detailed on page 45.
A thorough review of the Board’s reserved matters and
those authorities delegated below primary committee
level was conducted during the year and amendments
were made, as appropriate, to ensure they remain
relevant, are in line with best practice and scalable going
forward as the Group grows. An example of this being
that the Treasury Committee has introduced graded
credit limits for banking counterparties to better reflect
counterparty credit and the increasing of these limits.
The matters reserved for the Board and the terms of
reference for each of the Board’s primary committees,
which are reviewed annually, can be found on the
Group’s website at www.btgplc.com.
The Board of Directors
There are standing annual agenda schedules setting out
core activities for the Board and its primary committees.
A thorough review of these schedules has been
conducted that help structure the meeting agendas
for the coming year. Additional meetings are held as
required to respond to important issues as they arise.
While, as a unitary Board, the executive and non-
executive directors are collectively responsible for
the success of the Group 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
Group, while the non-executive directors are responsible
for bringing independent and objective judgement to
Board decisions.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 47
Effective division of Board responsibilities
Chairman
Garry Watts
Chairman since joining the Board on
1 January 2012
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 based
on all appropriate information being provided to the
Board in a timely manner. Ensure clear decisions
are made, communicated and effected.
— The Board gives adequate time to the right issues,
such as its role in shaping strategy and ensuring
adequate organisational capabilities and capacity.
— The Board environment is productive and the
Board and its committees have appropriate
composition and diversity, experience and
expertise with regard to the Company’s
evolving needs.
— Board committees are properly structured.
— The Board discharges its responsibilities
with respect to risk management and
governance generally.
— Necessary relationships of mutual respect and
open communication are fostered between
executive directors and non-executive directors.
Providing support and advice while respecting
the executive responsibility.
— Effective communication with shareholders and
other stakeholders.
— Appropriate oversight of business performance.
Executive Directors
Louise Makin (CEO)
Rolf Soderstrom (CFO)
Louise Makin is primarily responsible for the
running of the Group and for executing strategy
in line with the risk appetite defined by the Board
and Company values. Louise maintains a close
working relationship with the Chairman.
Rolf Soderstrom is responsible for all financial
reporting, tax and financial control aspects of the
Group, providing support to Louise and the wider
activities of the Group as required.
In addition they are both 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
views in the executive team.
— Driving 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
In the role since July 2008
Principally to support the Chairman in his role and
to work with him and other directors to resolve
any significant issues that may arise. Other
responsibilities are:
— 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 that the normal channels have failed
to resolve or that would be inappropriate.
Independent Non-executive directors
Bring an external perspective and wide-ranging
skills and experience for the Board to draw on.
They provide independent judgement, support and
constructively challenge matters such as Company
performance, strategy and risk management.
General Counsel and
Company Secretary
Paul Mussenden
Provides advice and assistance to the Board,
particularly in relation to corporate governance
practices and development. Ensures that Board
procedures are complied with, applicable rules are
followed and good information flow exists to the
Board and its committees. He also facilitates the
induction and ongoing training of directors.
Paul provides guidance to the Board to ensure the
Group meets its legal and regulatory obligations
and that risk management discussions are
underpinned by robust process.
BTG plc Annual Report and Accounts 2017GovernanceGovernance 48
Corporate Governance report
Leadership continued
Board Activity during the year:
Strategy
— Annual strategy awayday including
presentations from each of the
business units.
— Ongoing assessment of M&A
opportunities including the acquisition
of Galil Medical.
— Ongoing assessment of R&D portfolio.
— Consideration of geopolitical
developments, including Brexit and US
healthcare impact.
Business performance
— Oversight of the financial and operational
performance of the business.
— Approved the 2017/18 budget and
three-year plan.
— Reviewed the half-year and annual
results, announcements and
analyst presentations.
— Approved the Annual Report
and Accounts.
— Approved resolution of material litigation
including settlement of the investigation
by the US Department of Justice with
respect to LC Bead®.
The Board
Governance and shareholders
— Discussed the outcome of the Board
and committees’ evaluations and set
objectives for the coming year.
— Regularly reviewed feedback from
institutional investors.
— Updated the terms of reference for the
Nomination, Audit and Remuneration
Committees and Matters Reserved for
Board approval.
— Annual General Meeting.
— Discussed the Market Abuse Regulation
(MAR) that came into force in 2016 and
approved amended Disclosure Committee
Terms of Reference and procedures in
light of MAR.
Internal control and risk
— Regular review of the risk management
system; deep dives into specific areas,
including cyber risk and third-party
distributors. Review of principal risks,
potential impact and support for the
Viability Statement. Participation of
representative Board members in the
Risk Committee meetings.
— Review of reports from the Audit
Committee (including summary of
Internal Audit and Compliance reports).
Leadership and people
— Discussed the composition of the Board
and its committees, including succession
planning. Undertaking of internal Board
and committee evaluations and an
external evaluation of Board skills
and expertise.
— Approved the appointment of Graham
Hetherington to the Board and as Chair
of the Audit Committee.
— Regular review of the capabilities
deemed necessary for the delivery
of the future strategy.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 49
Board strategy days – Wales, UK site
In September 2016, as part of the Board’s rolling programme to visit its global offices and manufacturing sites, the
Board visited the Specialty Pharmaceutical business in Wales for its annual two-day strategy meeting. During their
visit, the Board took the opportunity to meet employees and engaged with and received presentations from
representatives of the various functions present at the facility.
During the strategy days, the Board received presentations from the business units on their strategies including
potential M&A activity and the Group’s digital strategy. The Board also considered the overall strategic options of
the Group. The deliberations and challenges from the strategy day were integral to the articulation of the three-year
plan approved in the year.
Independent
Board
meetings
Committee
memberships
Nomination
Committee
3
Attendance by individual directors at Board and Committee meetings during 2016/17
Board & committee
composition & attendance
Total number of meetings held
Number of meetings attended
Executive Directors
Louise Makin (CEO)
Rolf Soderstrom (CFO)
Non-Executive Directors
Garry Watts
Susan Foden
Graham Hetherington3
Giles Kerr4
Ian Much
Jim O’Shea
Richard Wohanka
Nom2
Rem
Aud2, Rem
Aud2, Rem, Nom
Aud, Rem2, Nom
Nom
Aud
N/A1
Yes
Yes
Yes
Yes
Yes
Yes
7/7
7/7
5/5
6/7
7/7
7/7
6/7
Audit
Committee
4
3/3
–
–
1/3
2/3
3/3
–
–
–
3/3
3/4
4/4
–
3/4
None
None
7/7
6/7
No
No
7
–
–
–
–
–
–
–
5/6
4/4
5/6
6/6
–
–
Remuneration
Committee
6
1. Garry Watts is excluded from the determination of independence by virtue of his role as Chairman of the Group.
2. Committee Chairman.
3. Graham Hetherington joined the Board on 1 August 2016 and became Audit Chairman from that date. He became a member of the
Remuneration Committee with effect from 29 September 2016.
4. Giles Kerr stood down as Chairman of the Audit Committee with effect from 1 August 2016.
Notes
Rolf Soderstrom was unable to attend the December Board meeting due to illness. Susan Foden was unable to attend the November
Remuneration Committee meeting due to travel issues. Giles Kerr was unable to attend the March meetings due to illness.
Richard Wohanka was unable to attend the Audit Committee meeting in May 2016 and the Board meeting in March 2017 due to
unavoidable pre-arranged engagements. Directors did not attend Nomination Committee meetings where consideration of their
appointments were the sole agenda item.
The external auditor attends the Audit Committee meetings and the remuneration advisers usually attend the Remuneration
Committee meetings.
Additional specific Board sub-committee telephone meetings were held as appropriate to approve specific business activities.
There was a Board update call when there was a larger break between scheduled meetings.
Board composition, membership
and election of directors
The Board currently comprises seven non-executive
directors, including the Chairman, and two
executive directors.
The names and brief biographical details of all the
current directors are set out on pages 42 and 43.
The Group is committed to diversity, including
gender diversity at all levels, and recognises the
Board’s primary goal to continue to provide strong
leadership by appointing the strongest candidates
to the Board. Following Graham Hetherington’s
appointment in August 2016, the percentage of
women on the Board reduced from 25% to 22% so
gender diversity will be a matter of continuing focus
for the Board. The Nomination Committee reviews
Board composition on a regular basis to ensure that,
as the business evolves, the Board continues to have the
necessary skills and experience to support its strategy
now and in the future.
Details of gender diversity in the Group below Board
level can be found in the Directors’ Report on page 101.
Following the formal internal evaluation process, the
Chairman is satisfied that each of the directors continues
to perform effectively and demonstrates commitment to
their role, including time for Board and committee
meetings and their other duties, and can dedicate
sufficient time to deliver what is expected of them.
BTG plc Annual Report and Accounts 2017GovernanceGovernance 50
Corporate Governance report
Leadership continued
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
57 to 65 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.
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, risk or reputational impact
for the Group to be approved by the Board.
Market abuse regulation
During the year, the Group operated a Disclosure
Committee, as required by the Market Abuse Regulation
(MAR). The Committee comprises the CEO, CFO,
Vice President of Corporate and Investor Relations
and the General Counsel 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 lists recording both those
employed within the Group and externally who may
have access to price sensitive information on the Group.
Whenever individuals are placed on or removed from
those lists they are notified accordingly and advised
of their responsibilities. Systems and procedures for
maintaining compliance with MAR were updated last
July to meet the requirements of the new regulation.
Independence
The Board applies a rigorous process to satisfy itself
that its non-executive directors remain independent.
The Board reviews this question every year, using its
own judgement 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 judgement. Giles Kerr
has been a member of the Board for more than nine
years and following his review, the Board is satisfied
that he continues to demonstrate the attributes of an
independent non-executive director, with no evidence
that his length of tenure has impacted this. 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.
Non-executive Board appointments are for three-year
terms, subject to re-election at each year’s AGM.
When a non-executive has served on the Board for more
than six years, their term of reappointment reduces
to one-year, in line with best practice. Giles Kerr,
Jim O’Shea and Ian Much have each served on the
Board for more than six years.
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 segment.
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.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance Following Graham’s appointment, we considered the
composition of each of the Board’s primary committees,
which resulted in Graham also being appointed to the
Remuneration Committee on 29 September 2016.
The ongoing need to ensure the composition of the
Board and its capabilities match the longer-term
strategic plans of the Group was highlighted in the
Committee’s evaluation last year. In response, the
Committee has conducted a review of contingency
and succession plans for key people and instigated an
external assessment of those skills and competencies
the Board will need in support of its strategic
objectives. Calibro were engaged to make that
assessment, conducting interviews with current
Board members and senior management and
developing a profile of future Board members and their
requisite expertise. The results of this assessment is
being used as the basis to continue to evolve the
composition of the Board.
The Committee will continue its work into 2017/18 to
ensure the Company retains and attracts the necessary
talent at all levels to support the delivery of its strategy.
Garry Watts
Nomination Committee Chairman
51
Nomination Committee report
Garry Watts
Nomination Committee Chairman
Dear Shareholder
I am pleased to present the report of the Nomination
Committee of the Board for the year ended 31 March
2017. In my letter to shareholders on page 40, I noted
that succession planning for the current and future
needs of the Group has been a key area of focus this
year and this Committee has spent much of its time
discussing the experience and skills required for
specific roles at Board level and below, taking into
account changes in the Group’s business, strategy
and operating environment.
As reported last year, it was agreed that the Board
would seek a replacement for Giles Kerr as Audit Chair.
To this end, the Committee engaged JCA Group
Limited to assist in the search for a suitable candidate.
Criteria of the necessary skills and experience
required for the role was developed which included,
in particular, recent CFO and healthcare industry
experience together with experience of operating in a
rapidly growing and large group (FTSE 100 or similar).
JCA, who have no other connection to the Group,
proposed a long list of 14 candidates with a range of
experience and which was diverse in other respects
(including gender). Following meetings with a short
list of the candidates, the Committee’s clear preference
was Graham Hetherington, who brings with him
substantial recent relevant industry experience as well
as other relevant facets.
BTG plc Annual Report and Accounts 2017GovernanceGovernance 52
Corporate Governance report
Leadership continued
The Nomination Committee and its membership
The Committee’s full terms of reference, reviewed and updated during the year, are available on the Group’s website
www.btgplc.com, or from the Company Secretary on request.
Committee members
Garry Watts (Committee Chairman)
Giles Kerr
Ian Much
Jim O’Shea
Date of appointment to the Committee
1 January 2012
16 July 2008
1 January 2012
13 May 2009
Time spent by the
Committee during the year
a Composition and balance including diversity 30%
b Governance/effectiveness 16%
c Succession planning and reappointment of directors 32%
d Non-executive search 22%
d
a
c
b
Composition of the Committee
As at the year end the Committee comprised three
non-executive directors and the Chairman.
Directors’ biographies
See pages 42 and 43.
Meeting attendees:
Only members of the Nomination Committee have
the right to attend meetings, however, Louise Makin
(CEO) and the other directors may attend meetings by
invitation as may employees or external advisers when
appropriate and necessary. Paul Mussenden (General
Counsel and Company Secretary) serves as secretary
to the Committee.
Scheduled meetings during the year
Committee meetings are typically held before scheduled
meetings of the Board and additional meetings
convened when required. There were four meetings
of the Committee during the year. Details of attendance
can be found on page 49.
The key responsibilities of the Committee
Board has delegated responsibility for the following to
the Committee:
— Keep under review the structure, size and
composition of the Board looking at its balance of
skills, experience, independence and knowledge as
well as its diversity and make recommendations to
the Board on any appropriate changes.
— 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.
— Plan for the orderly succession of directors to
the Board.
— Recommend to the Board the membership
and chairmanship of the Nomination, Audit and
Remuneration committees.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 53
Diversity
The benefits of diversity in its broadest form, including
gender diversity, are recognised and play an important
part in the Board’s decision-making regarding
appointments. The Board is supportive of best practice
recommendations to improve gender balance on Boards.
The Board currently comprises seven men (78%) and
two women (22%). The Board recognises the value of a
Board with diverse skills, experience and background
and those values are reflected in the recruitment policies
in effect throughout the Group.
Further details can be found in the Directors’ report on
pages 98 to 101.
Committee evaluation
The Committee’s performance was reviewed as part
of the internal annual Board evaluation process.
The assessment found that it continued to function
effectively and highlighted the need to actively ensure
the Board was the correct size with the correct skills
necessary. An internal Board skills matrix will be
developed over the course of the year to ensure the
size and experience mix remains optimal for the future.
Garry Watts
Nomination Committee Chairman
Activities
The principal activities during the year related to:
— The process to find and appoint a new non-executive
director and Chairman of the Audit Committee.
— The reappointment of non-executive directors Giles
Kerr, Ian Much and Jim O’Shea, each for a further
12 months, subject to being re-elected at the Annual
General Meeting.
— An externally facilitated review into the Board
capability, composition and balance for now and
in the future in the context of Group strategy.
— Discussing succession planning for the Group’s
Leadership Team, including the CEO and CFO and
the Group’s senior managers in key positions.
— Considering the expertise, capabilities and capacity
of the Group’s management team with regard to the
Group’s strategy and future requirements. Progress
to address perceived capability gaps is regularly
reviewed and this remains an area of focus and is
considered in the context of both organic and
acquisition growth.
Appointment process
Board appointments are made on merit and in line with
current and future needs, reflecting the UK listing and
international activities of the Group. The Committee
considers what areas of expertise the Board would
most benefit from and draws up a full description of
the role accordingly.
The Committee carry out the interview and selection
process on behalf of the Board and shortlisted
candidates are also interviewed by the other
non-executive directors and the CEO. Taking into
account their views and the Board’s requirements, the
Committee will make a recommendation to the Board.
Appointments to the Board receive a thorough induction
process, details of which can be found on page 54.
Development of Capabilities
and Succession Planning
The development of talent below Board level is
extremely important and an area of focus for the Board.
BTG continues to build an internal leadership pipeline
for senior roles, and the Head of HR updates the Board
regularly on progress. In addition to traditional
Management Development Programmes, the
Group has expanded the Learning and Development
opportunities available to prospective leaders.
By focusing on creating a pool of talent we are
increasing the probability of retaining them through
meaningful development and career opportunity and
building the internal capability needed to support the
Company’s growth.
BTG plc Annual Report and Accounts 2017GovernanceGovernance 54
Corporate Governance report
Effectiveness
Induction and training
All new non-executive directors receive a personalised
and comprehensive induction that is tailored to their
experience, background and particular area of focus.
The programme has evolved, taking into account
feedback from directors. The process includes written
information on areas such as directors’ duties and
corporate governance guidelines and best practice.
It also includes meetings with other directors and a
cross section of senior management at a Group and
business unit level, and site visits are encouraged.
New members also receive a full briefing on the financial
and operating history of the Group and details of its
strategy, risk management and compliance processes,
operating plans, budgets and forecasts for future years.
All directors, including those newly appointed, are given
the opportunity to attend external courses and refresh
their knowledge regularly through publications and
conferences and through information provided by the
Group and its advisers. Specific training during the year
has included training in connection with the new Market
Abuse Regulation and the changes to the rules
governing the disclosure and control of inside
information. At their request, a number of directors have
received internal training on the US global market
access and reimbursement process to assist in their
understanding of this area.
Support
There are robust processes in place to ensure that the
Board receives management information and reports on
strategic and operational matters for discussion on a
timely basis via a secure Board portal. The Board
calendar includes annual strategy days, and senior
management regularly attend meetings to enhance the
non-executive directors’ understanding of the business
and to present deep dive analysis of their areas of the
business. Board meetings are occasionally held at other
Group locations outside of the UK, affording non-
executive directors an additional opportunity to meet
employees and enhance their understanding of
Group businesses.
There is an agreed procedure for directors to take
independent professional advice, if necessary, at the
Group’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 and providing advice on corporate governance.
The Group provides appropriate directors’ and officers’
liability insurance. Further information on Directors’
indemnities is given in the Directors’ report on page 98.
Performance evaluation
The Board recognises that a rigorous evaluation of its
performance is important to optimise our continued
effectiveness and development.
The CEO appraises the performance of the CFO.
The Chairman and non-executive directors review the
performance of the CEO. The non-executive directors,
led by the Senior Independent Director, with input from
the executive directors, evaluate the performance of the
Chairman each year. The committees also review their
own performance and report the results to the Chairman
and the Board. During the year, the non-executive
directors held a meeting without the executive directors
in order to discuss the performance of the executive
directors and their management of the Group’s affairs.
A formal evaluation is carried out annually and is
externally facilitated every three years. This year the
Board and its committees carried out an internal review
of progress against the objectives set following last
year’s internal evaluation as well as its overall
performance during the year through a series of
comprehensive web-based questionnaires that
encourage comment and observation.
Progress on the output from the 2016 evaluation
and objectives following the 2017 evaluation are set
out on the next page.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 55
Board evaluation
Key 2016 objectives
Progress
Key 2017 objectives
Continue to focus on the
identification of key strategic
options and risks and further
integration of the risk
management process into the
process for formation and
review of strategy.
Progress on strategic focus has
continued and good progress
has been made in assessing the
risks of the business. Further
clarity on longer-term drivers of
value is being developed.
Continue the improvement of
the risk management process
and specifically the top down
risk review as well as further
definition of risk appetite; a
continued focus on the impact
of structural changes in the
healthcare industry generally
and how ex-US markets such
as EU and Asia operate.
Further review of the R&D
strategy of the Group.
Greater focus on contingency
plans for people and having
succession plans in place for
senior staff.
Risk identification and risk
reporting has significantly
improved. Further articulation
of key strategic risks in relation
to the longer-term strategy and
articulation of the Board’s risk
appetite is being developed.
R&D strategy review completed
and activities to sustain
longer-term growth through
innovation and early-stage
investments are being
developed.
Capability assessments have
been introduced. Succession
plans for the cadre of
management below Leadership
Team (LT) are being developed.
Enhanced leadership
development programmes have
been put in place.
In response to the results of
this year’s evaluation the
following Board objectives
have been set for 2017:
The risk management process
is to be further integrated into
strategic planning.
The Board will receive further
strategic updates throughout
the year as part of an iterative
discussion.
Continue to evolve the “top
down” macro risk assessment
of those external developments
that may adversely impact
the business.
Definition of key risks inherent
in the strategy and discussion
of appropriate risk appetite in
key areas.
Monitor the execution of the
R&D strategy and evaluation
of the pipeline of earlier stage
development opportunities.
Continue the varied leadership
development programmes.
Continue the consideration of
capability needs at Board level.
BTG plc Annual Report and Accounts 2017GovernanceGovernance 56
Corporate Governance report
Effectiveness continued
Under the various revenue sharing agreements,
the Group pays a share of any income it receives to
Oxford University or Oxford University 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.
As Giles 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.
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.
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.
To address the effect of Section 175 of the Companies
Act 2006, the Group’s Articles of Association enable the
Board to authorise situations that might give rise to
directors’ conflicts of interest. Directors declare interests
in other businesses on appointment to the Board, as
they arise and also complete an annual self-certification.
Board members are regularly reminded to disclose any
conflicts should they arise and 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.
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.
At the March 2017 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 are believed to have arisen.
Giles Kerr, a non-executive director of the Board, is also
Director of Finance for Oxford University and a director
of Oxford University Innovations Limited, a subsidiary
of Oxford University. Wholly owned subsidiaries of the
Group 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.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 57
Corporate Governance report
Accountability
Audit Committee Report
As in previous years the Committee has considered
the integrity of BTG’s internal controls, its financial
reporting and the way risks are identified, evaluated,
mitigated and reported. A significant amount of the
Committee’s time and attention was devoted to these
matters in 2016/17. It is essential that compliance
processes remain fit for purpose, particularly in light
of the growth in size, complexity and international
reach of the Group in recent years. Consequently,
the Committee also sought to enhance processes
and controls around distributor due diligence,
selection, compliance, training, monitoring and
audit programmes, particularly those relating to
anti-bribery and anti-corruption.
Following on from a review conducted last year,
we have focused on strengthening the financial
processes and capabilities required to meet the
ever-increasing needs of a growing business. To this
end, 2016/17 has seen a revised finance organisation
put in place, together with external hires to bolster
finance capabilities. As part of this continued
evolution, the Group has focused on financial process,
controls and system optimisation to meet the Group’s
needs now and in the future.
The Committee has additionally directed a review of
the Company’s general governance framework during
the year and a number of policies, including Matters
Reserved for the Board (approval), Delegation of
Authorities and Treasury Policy, have been revised
to ensure that they best serve the business.
There have been several other important changes to
BTG’s financial reporting during the year, including
changes to the format of the income statement, the
focus of the KPIs and adoption of new guidelines in
respect of the reporting of Alternative Performance
Measures (“APMs”).
Graham Hetherington
Audit Committee Chairman
Dear Shareholder
As Chairman of the Audit Committee, I am pleased to
present our report for the year ended 31 March 2017.
This is my first report since joining the Board and
taking the role as Chair of the Committee last August.
I would like to thank my predecessor, Giles Kerr, for his
hard work as Chair over the past nine years, and I am
grateful for his continuing support as a member of the
Audit Committee.
This report sets out the activities of the Committee
over the past year and how it has discharged its
responsibilities to provide effective governance over
the Group’s financial and other activities. In submitting
the report we have considered the Financial Reporting
Council (FRC) Guidance on Audit Committees
published during 2016.
The report also provides an overview of the
Committee’s focus areas, including oversight in relation
to financial reporting, internal controls, compliance
and risk management, as well as the relationship with
the external and internal auditors. Throughout the year
the Committee has also monitored the broader risks
and challenges relevant to the Group, as well as
growing threats such as cyber security.
BTG plc Annual Report and Accounts 2017GovernanceGovernance 58
Corporate Governance report
Accountability continued
Turning to external audit, KPMG LLP has served as
the Company’s external auditor since 1995, with
the current audit partner having served since his
appointment in 2013. In accordance with EU and
national regulations and the UK corporate Governance
Code, and having considered the transitional
arrangements necessary to effect an external audit
rotation, it is the Committee’s intention to put the
external audit out to tender during 2017 with a view
to the appointment of a new external auditor for the
financial year ended March 2019. Until such time and
following the review of KPMG’s continued performance
and independence, the Committee have recommended
to the Board the reappointment of KPMG as external
auditor for the 2017/18 financial year.
Graham Hetherington
Audit Committee Chairman
During the year the Company settled the investigation
with the US Department of Justice (DOJ) in relation
to the historic marketing of LC Bead®. The resolution
was facilitated by the Company’s existing extensive
compliance programme, which we continue to keep
under review and evolve as appropriate. As a result, the
settlement did not involve the imposition by the DOJ of
a Corporate Integrity Agreement containing additional
compliance requirements over and above our existing
compliance programme.
In addition to the work ensuring that the processes and
procedures of the Group are suitable for the next stage
of its journey, the Committee has continued its ongoing
focus on the approach to risk management, driving the
process further into the operations of the business
units and consideration of risks external to BTG, in
the general healthcare industry and at a more macro-
economic level. Further detail of this work by the
Committee can be found on page 66 of this report.
The Company’s second Viability Statement can be
found on page 35 of this report. The Committee once
again scrutinised in detail the elements of the statement
as well as reflecting on the impact of the previous 12
months on the statement. The Committee considered
the FRC guidance and concluded that the approach and
the internal work undertaken to support the viability
statement is robust and the three year period covered
by the statement was appropriate.
This report provides the Committee’s opinion as to
whether the Annual Report taken as a whole, is fair,
balanced and understandable. The Board, after
taking advice from the Committee, has confirmed that
to be the case and that it provides the information
necessary for shareholders to assess the Group’s
position and performance, business model
and strategy.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 59
The Audit 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 are available on the Group’s website, or from the Company
Secretary on request.
Graham Hetherington as Chairman is designated as the Committee member with recent and relevant financial
experience. The other members of the Committee are deemed to have the necessary accounting or related financial
management experience and ability to discharge the responsibilities of the Committee. Members have experience and
competence relevant to the sector in which the Group operates. More information on the experience and expertise of
Committee members can be found in the directors’ biographies on pages 42 and 43.
Committee members
Graham Hetherington (Committee Chairman)
Giles Kerr (Committee Chairman until 1 August 2016)
Ian Much
Richard Wohanka
Date of appointment to the Committee
1 August 2016
6 November 2007
1 November 2010
1 January 2013
Composition of the Committee
As at the year end the Committee comprised four
non-executive directors.
Directors’ biographies
See pages 42 and 43.
Meeting attendees:
Only members of the Audit Committee are entitled to
participate in meetings, however, there is a standing
invitation for other non-executive directors to attend
meetings of the Committee as observers. The Group
CEO, CFO, other senior business, compliance and
finance team members, representatives from the
external auditor KPMG LLP and the internal auditor
are invited to attend meetings at the request of the
Committee. The Group Company Secretary serves
as secretary to the Committee.
Scheduled meetings during the year
The Committee has a standing agenda aligned with the
Company’s financial calendar and within the annual
audit cycle for consideration at each of its meetings.
Four meetings were held in the year and details of
attendance can be found on page 49.
During the year, immediately following a Committee
meeting, private meetings were held with the external
and internal auditor to allow them the opportunity to
discuss matters without management being present.
Time spent by the
Committee during the year
a Internal Audit 15%
b External auditor (inc. non-audit services) 16%
c Financial reporting 21%
d Tax 9%
e Risk Management and compliance (inc. whistle-blowing) 17%
f Governance/Policy/other 22%
f
e
d
b
a
c
BTG plc Annual Report and Accounts 2017GovernanceGovernance 60
Corporate Governance report
Accountability continued
Activities
During the year, in discharging its responsibilities, the Committee received and considered reports across a number of
areas as summarised below:
Area of review
Activities undertaken
Financial reporting
— Review of the Group’s half-year and full-year results.
— Consideration of whether the Annual Report and Accounts 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 table.
— Review of prospective changes in accounting standards and their potential impact.
— Review of trading updates issued by the Group.
— 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.
— Review of, and advise the Board on, the Viability Statement.
— Review of the adoption of new guidelines in respect of reporting APMs.
External auditor
— Review of the performance and objectivity of the external auditor, including the
Risk management
and internal control
independence of the external auditor.
— Review of the strategy, scope and results of the half-year review and full-year audit.
— Review and approval of external auditor remuneration.
— Review of use of the external auditor for non-audit work.
— Review of the Audit Quality Review findings for their review of the 2015/16
external audit.
— Review of risk management systems, internal controls and fraud, anti-bribery and
anti-corruption procedures.
— Review of compliance systems and policies.
— Review by internal and external auditors of internal controls and processes.
— Review of the Group’s whistle-blowing policy and any allegations arising from it.
— Review of the results of internal compliance monitoring and auditing.
— Review of the Group’s tax affairs.
Tax
— Review of tax strategy.
Internal audit
Committee
governance
— Review of the internal auditor’s work plan.
— Review of internal audit reports produced throughout the year.
— Review of the performance of PwC who lead the internal audit function.
— Review of Committee terms of reference.
— Completion of effectiveness review.
— Review of revised Non-Audit Services Policy.
— Review of revised Delegation of Authorities and Treasury Policy.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 61
Significant accounting matters
The Committee considered the following key accounting issues, significant judgements, areas of estimation and
disclosures during the course of the year:
Significant issues considered
How the issue was addressed
Carrying value
of Goodwill and
Intangibles Assets
The Committee critically reviewed a report from management setting out the
Company’s risk-based approach to reviewing the recoverability of Goodwill and
Intangible Assets in accordance with IAS 36.
The Committee also critically reviewed the Company’s assessment of the
recoverability of goodwill and certain intangible assets, including developed
technology and In-process R&D assets. This review particularly focused on the
forecast assumptions and valuation methodology which underpinned the valuation
of these assets, as further disclosed in Note 11. Key assumptions reviewed included
discount rates, assumed growth rates, peak sales and sensitivity analysis for the
relevant assets.
Recognition of
Deferred Tax Assets
and Liabilities
The Committee reviewed the appropriateness of deferred tax assets recognised and
unrecognised and the movements on deferred tax assets and liabilities during the year.
The Committee also reviewed the recognition of deferred tax assets and liabilities in
respect of the Group’s acquisition of Galil Medical.
Investigation and
contingent liabilities
The Committee received and critically assessed the progress of, including the
probability of any outflow, from the ongoing Wellstat litigation and the DOJ
investigation that was settled during the year.
Contingent
consideration
liabilities
The Committee reviewed the key assumptions, including the probability of technical
success and likelihood of FDA approval of the PMA for the PneumRx® Coils by
31 December 2017, relating to the Company’s determination of fair value of the
contingent consideration liability for the $60m milestone, which may be payable to
former shareholders of PneumRx, Inc. as part of the deferred acquisition cost.
Presentation format
of Consolidated
Income Statement
The Committee considered and approved a change to the format of the Consolidated
Income Statement to a single column format and the removal of certain immaterial
line items from the face of the income statement.
Alternative
Performance
Measures
Other matters
The Committee considered the Company’s selection, presentation and appropriateness
of the disclosure of APMs in its financial reports, in accordance with regulations which
became applicable for the Company during the year.
During the course of the year, the Committee received updates from management on
the presentation currency of the consolidated financial statements, foreign exchange
hedging, the presentation of derivative gains and losses, tax strategy and the adoption
of new accounting standards.
BTG plc Annual Report and Accounts 2017GovernanceGovernance 62
Corporate Governance report
Accountability continued
External auditor
Appointment
— The Committee reviews and makes recommendations to the Board with regard to the reappointment of the external auditor, taking into account its
overall performance, independence and audit partner rotation. At its AGM in July 2016, KPMG was reappointed as auditor of the Company.
Evaluation
— Each year the Committee reviews the performance of and considers the independence of the external auditor. During the year the Committee and senior
members of the finance team evaluated the external auditor performance reviewing the strength of the audit team, its expertise and experience, the
completion of the approved audit plan, communication, interaction with Internal Audit and reporting. In considering the independence of the external
auditor, the committee received a statement of independence, a report describing their arrangements for identifying and managing conflicts of interest
and confirmation that the provision of non-audit services would not impair its independence or objectivity. After the annual review, the performance of
the external auditor was deemed satisfactory.
Audit scope
— For the year under review, the external auditor presented their proposed audit plan to the Committee for consideration and approval. The Committee
agreed the approach and scope of the audit plan which had been discussed with management to align with business focus. The Committee agreed
the terms of engagement and fees for the audit work to be undertaken. Details of the amounts paid to the external auditor for the audit services are
provided in Note 5 to the accounts.
Non-audit work
— 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. A review of the non-audit services
policy was conducted during the year, and this revised policy was approved by the Committee. The external auditor is precluded from engaging in
non-audit services that would compromise their independence or violate any laws or regulations affecting their appointment as external auditor.
During the year, no approval was granted for any non-audit services not in full accordance with these standards.
— 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
Pre-approval required:
Task
Taxation compliance services
Other compliance related services
Fees
£’000
424
60
Audit tender
— The Committee reviews annually whether it is an appropriate time to put the external audit to tender, taking into account the complexity of the business,
the services offered by incumbent auditor and their independence. As detailed in my opening letter, during the year the Committee determined it
appropriate to now put the external audit out to tender.
— A tender for external audit services has been scheduled to coincide with the rotation of KPMG’s audit partner at the end of the 2017/18 financial year.
An evaluation of potential audit firms to be invited to tender was conducted with consideration given to experience in the Group’s sector, audit quality
findings from FRC audit quality reviews, and a review of non-audit services currently being provided to the Group. The shortlisted firms will be invited to
engage in the tender process later in the 2017 calendar year with a successful candidate being identified ahead of the 2017/18 year end.
— A plan for the transition of audit services will be agreed, including inviting the chosen firm to shadow KPMG during their audit of the 2017/18 year end.
The appointment of the new audit firm would be put to shareholders for their approval at the Company’s AGM in July 2018.
Reappointment
— The Audit Committee has recommended to the Board that KPMG be proposed for reappointment by shareholders as its external auditor at the July 2017
AGM and the Board has authorised the Audit Committee to determine the auditor’s remuneration.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 63
Risk management and internal control committee considerations
Approach to risk
management
— Ensuring the effectiveness of the Group’s risk management and internal control
systems is the responsibility of the Board. Additional details of our approach to
risk management and the specific principal risks that may affect the business
are given on page 15 in the Strategic Report and on pages 68 to 70 following
this report.
Audit Committee
interaction with
Group Risk
Management process
— The Committee oversees, on behalf of the Board, the risk management process
and the effectiveness of internal controls and reports to the Board on its findings
biannually and also via more specific “deep dive” reviews in selected areas. The
goal is to ensure the Company is able to identify, assess and effectively manage or
mitigate existing and newly emerging risks.
— The overall risk assessment structure 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 Group operates a Risk Committee that is chaired by the CFO, Rolf Soderstrom
and comprises senior members of staff representing relevant parts of the business
and key functions. The output from the Risk Committee is formally reported,
biannually, to the Leadership Team and Audit Committee. This Group Risk
report is also shared and discussed with the Board and individual risks may be
considered by the Board as they arise throughout the year. Leading indicators
of material changes in principal risks are monitored six monthly by the Board via
the Audit Committee.
— 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 while ensuring that risks are properly identified and managed and
the Group’s legal, regulatory and other obligations are met.
— To strengthen the control framework of the business, the Group has an Internal
Audit group supported externally by PwC.
Areas of focus
— The Committee discharges these duties using a combination of reports from
management, Internal Audit and the external auditor reviews. 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.
— The Committee’s review focuses on a wide range of areas including financial,
operational, anti-bribery, regulatory and healthcare law compliance risks and
controls, for the year under review and up to the date of this Report. This year
the Committee also specifically considered the key risks that could impact the
business model and strategy over the longer term, such as the changing healthcare
landscape in the US.
Use of Internal Audit
— The Company has engaged PwC to perform the role of the Company’s Internal
Audit function that operates under the direction of the Audit Committee.
The Committee monitored and reviewed the work of internal audit throughout the
year. During the year, internal audit reviews of the risk management programme,
cyber security, HR processes, local site finance processes, EU healthcare law
compliance and R&D programme management were undertaken, as well as third-
party distributor audits (focusing primarily on the robustness of their programmes
to prevent bribery and corruption). 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.
— During the year the Committee evaluated the performance of the internal auditor
using the same methodology applied to the external auditor. In general,
performance of the Internal Audit group was deemed satisfactory.
BTG plc Annual Report and Accounts 2017GovernanceGovernance 64
Corporate Governance report
Accountability continued
Assessment
of fair, balanced
and understandable
Corporate
policies, values
and compliance
— Communications with shareholders, such as results announcements, interim
reports, annual reports and 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
Group’s progress and prospects.
— A key role of the Committee includes a review of the significant financial reporting
judgements contained in the Annual Report with the aim of ensuring that they
present a fair and balanced view of the Group 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 judgements and issues contained within those reports. Following this
discussion the Chairman of the Committee reports the results of its review to the
full Board. The Committee has assessed and recommended to the Board that,
taken as a whole, the Company’s 2017 Annual Report is fair, balanced and
understandable.
— The statement of directors’ responsibilities in relation to the preparation of the
financial statements is set out on page 102 and the auditor’s statement on the
respective responsibilities of directors and the auditor is included within its report
set out on pages 104 to 109.
— The Company places great emphasis on the embedded behaviours and values
that define the BTG DNA, which we believe have been integral in building the
organisation to date and we believe them to be key for continuing success.
These are underpinned by the Code of Conduct, which 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.
— A Companywide meeting is held each month where all sites join via video
conference. The CEO updates employees on different aspects of the business and
presentations are given by employees from all areas of the business.
Whistle-blowing
— An “open door” policy is used across the Group and in line with best practice,
the Group supports an independent and confidential whistle-blowing procedure.
The Leadership Team 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 and
various employee trainings are details of the Group’s whistle-blowing and non-
retaliation policy.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 65
Anti-bribery and
anti-corruption policy
— The Group has continued to operate its anti-bribery and anti-corruption (ABAC)
Policy introduced in 2010. The ABAC programme reflects the Group’s
commitment to ethical business practices and is in response to various country
and international laws, including the UK Bribery Act 2010. This has included the
conduct of due diligence on existing and new key business partners who may act
on behalf of the Group in higher risk areas of business.
— Further enhancements were completed during the year to develop a “tool kit”
of simple policies and procedures for third parties with whom the Company
contracts. We will provide training on the tool kit with the aim of ensuring third
parties are able to operate in accordance with our policies in practice, including
those relating to bribery and corruption.
Committee evaluation and action plan for 2017/18
The review of the Committee and its effectiveness was considered as part of the overall Board evaluation. At its
meeting in March 2017, the Committee considered the contents of the internally facilitated review, and the results
and recommendations for development were reported to the Board. The review found that the Committee continued
to function efficiently and effectively, providing a healthy balance between in-depth assessment and analysis and
a clear practical approach. As part of the evaluation, it was agreed that in 2017 the Committee would, as well as
monitoring changes in EU and UK regulation, continue to focus on improving the content and strategic focus of
Board information, the composition and succession planning for Committee members and contributors, developing a
high-level risk map integrated with strategy, developing the role and impact of the Internal Audit function in the context
of a growing group and providing guidance and oversight on financial systems strategy and capabilities. These items
have been incorporated into the Committee’s planned activities for the coming financial year.
Graham Hetherington
Audit Committee Chairman
BTG plc Annual Report and Accounts 2017GovernanceGovernance 66
Corporate Governance report
Accountability continued
Risk Management and Principal Risks
Accountability for oversight of risk
The goal of the Board is to ensure the Company is able
to identify, assess and effectively manage or mitigate
existing and newly emerging risks. That includes
oversight of the progress of agreed risk mitigation
strategies and any changes to the materiality of key
risks. The Board also assess the likelihood and potential
impact of plausible concurrent risks and seeks to ensure
that the overall risk profile of the Group is appropriate in
light of its strategy.
With direct support from the Audit Committee, the Board
believes it has taken all reasonable steps to satisfy itself
that the risk management process is effective and fit for
purpose. Nevertheless, as with all risk management
processes, there remains a degree of uncertainty and
planned mitigations may not be effective and unpredicted
risks may arise. As a consequence there cannot be
any guarantee that all risks to the business will be
successfully identified, controlled or mitigated. Risk is
inherent in a number of aspects of the Company’s growth
strategy, such as investments in product development,
M&A and geographic expansion.
The specific risks considered by senior management
and the Board are those that are believed could cause the
Group’s future results, financial condition and prospects
to differ materially from current expectations, including
the ability to meet the objectives outlined in the Strategic
Report. The Board believes it has taken all material and
plausible risks into account and, based on that analysis,
have confirmed the viability of the Company over the
next three years as set out in the Viability Statement
required by the UK Corporate Governance Code (see
page 35, the Viability Statement).
Risk review process
BTG has a three-year financial plan that is updated
annually. Performance against that plan is monitored on
a monthly basis.
The corporate goals have been built into the risk
management process and, as such, form one of the bases
on which business risks are measured. Individuals in
the business managing discrete risks on a day-to-day
basis produce and update their business unit specific
risk registers monthly. These registers are consolidated
into a Group Risk Register which is reviewed at least
twice-yearly by the Risk Committee before being
reported to the Audit Committee and Board.
Further detail of the work of the Group Risk Committee
can be found on page 45.
Where appropriate the Audit Committee will undertake a
deep dive assessment of a key risk to better understand
its nature and to consider available mitigation options
that could be deployed to better manage that risk,
together with the costs, timelines and likelihood of
success of those options. In 2016, the Audit Committee
commissioned PwC to undertake an analysis of the BTG
risk management process. This exercise recommended
a number of enhancements, which the Board and
Leadership Team are evaluating for implementation
in 2017.
The Board utilises information from the risk
management process to define the appropriate risk
appetite for the Viability Statement. The Board also
considers new material risks in a timely fashion as
they arise.
Governance and risk
management systems
An integral part of the risk management framework is the
operation of a number of compliance and governance
systems, each of which comprises a framework of
policies, processes and procedures used to ensure that
BTG fulfils all tasks required to achieve the desired
corporate governance objectives. Examples include the
corporate functions such as Internal Audit, Compliance,
Finance, Legal, Regulatory, Research & Development,
Pharma/Device vigilance, Quality, Environmental,
Health & Safety and other assurance groups. These are
integrated to ensure an overall robust risk management
and assurance framework.
A number of these systems are required by legislation
or by authorities governing our industry e.g. in the
pharmaceutical industry, product quality is governed by
the principles of Good Manufacturing Practice (GMP),
enforced by the Food and Drug Administration (FDA)
in the US and Medicines and Healthcare Products
Regulatory Agency (MHRA) in the UK and other
equivalent agencies in other territories.
These BTG governance systems each have a series
of Key Performance Indicators (KPIs), reviewed by
the Leadership Team at set intervals and fed into
the business unit and Group Risk Registers.
Non-conformances are investigated and corrective
actions defined and tracked to completion.
These systems aim to ensure that risks arising
from internal activities or those conducted via third
parties with whom we work do not become material.
The principal systems are outlined in the following table.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 67
Outline of BTG Governance & Risk Management Systems
Functional Area
Summary of KPIs Measured
Product quality control and assurance:
— Ensuring all products placed on a market meet applicable release criteria
Ensuring all products:
— meet applicable specifications, GMP and other regulatory requirements.
— deliver expected efficacy and safety.
— are supported by necessary manufacturing and marketing licences in
relevant markets.
Healthcare law compliance:
Ensuring:
— compliance by BTG Group and its principal commercial partners with
applicable laws and regulations relating to the conduct of business
including, for example, the UK Bribery Act, US False Claims Act, US
Anti-Kickback Statute and the US Foreign Corrupt Practices Act and
other applicable regulations to prevent improper conduct, inaccurate
regulatory submissions, misleading or off-label marketing of products,
or the submission of false claims for reimbursement of products.
Finance:
Ensuring:
— the ongoing viability of BTG’s business and adequate financial resources
to meet our operational and strategic objectives.
— all BTG employees abide by internal and external transaction and
reporting standards.
— BTG is not subject to serious fraud or misappropriation of Company assets.
Supply chain:
Ensuring:
— products are delivered on time and orders completed.
— continuity of supply.
— maintenance and management of supply chains such that all internal and
regulatory standards are met.
Environment, Health & Safety (EHS):
Ensuring:
— BTG operations are safe for employees, visitors and the public who interact
with our business.
— we appropriately manage our impact on the environment.
— compliance with internal and external regulatory standards.
Research & Development (R&D):
Ensuring:
— we protect the safety and data privacy of patients participating in our
clinical studies and meet all applicable laws and regulations with respect to
conduct of R&D (for example, the requirements of Good Clinical Practice
and Good Laboratory Practice).
— we generate adequate data to support regulatory submissions and product
approvals for intended uses.
— we define appropriate development plans to meet our strategic goals.
— we meet project specific and portfolio budgets and timelines.
for the market for which they are intended.
— Assessment against internal operating standards and procedures.
— Testing the effectiveness of training.
— FDA/MHRA/Internal Audit findings and delivery on remediation plans.
— Monitoring customer complaints, for example, product failures or adverse
events (via a comprehensive device/pharmacovigilance system).
— Monitoring completion of corrective actions for all measures reported.
— Collection of internal monitoring data and assessment against
operational targets.
— Internal audit findings, auditing of commercial partners and delivery on
remediation plans.
— Monitoring of complaints/queries/allegations. Conduct of investigations
where required.
— Testing the effectiveness of training of BTG employees and commercial
partners.
— Internal and external audit findings at BTG businesses and
commercial partners.
— Adherence to budget, delegated authorities and other internal financial
controls and assurance procedures.
— Monitoring of financial transactions.
— Monitoring completion of corrective actions for all measures reported.
— Collection of internal monitoring data and assessment against
operational targets.
— Maintaining adequate inventories (based on risk assessments) of raw
materials, intermediates and finished goods.
— Implementation of process and facility improvement plans.
— Rigorous monitoring of third-party suppliers; dual sourcing implemented
or being investigated where practicable.
— Investigation of lost time accidents (minimum one day lost) and all first
aid incidents.
— Waste produced.
— Carbon footprint.
— Water consumption.
— Internal audits and site assessments monitoring training and completion
of corrective actions for all measures reported.
— Assessment against internal operating standards and procedures
and ongoing review of the scope and content of the policy framework
and procedures.
— Testing of the effectiveness of training.
— FDA/MHRA/Internal Audit findings and delivery on remediation plans.
Active monitoring of clinical studies and other activities.
— Detailed review of project progress against agreed stage gate milestones
for further funding.
— Ongoing review of the portfolio as a whole against wider strategic needs.
Skills and capabilities:
Ensuring:
— the business attracts, retains and develops talented individuals of the
calibre and with the capabilities needed to deliver on the Group’s
operations and strategy.
— Assessment processes to define the future capability or development
needs of the Group in light of strategy.
— Reviewing the competitiveness of Company reward programmes and
employee benefits.
— Ensuring key individuals have adequate ongoing development as well
as succession plans in place.
— Enhancing overall leadership development programmes.
BTG plc Annual Report and Accounts 2017GovernanceGovernance 68
Corporate Governance report
Accountability continued
Principal risks
Although not exhaustive, we describe in the following
table what we believe to be the most significant risks
that could materially affect the Group’s ability to achieve
its financial goals, operating and strategic objectives.
While other risks are deemed less material at this time,
given the nature of the Company’s business, risks
continually change. Notably the macroeconomic risks in
both the US and UK changed markedly in 2016, with the
new administration in the US seeking to undertake
healthcare reform, and the UK decision to exit the EU.
Both of these events introduce significant uncertainty.
BTG are monitoring all possibilities and will produce
mitigation and control strategies as the situation
becomes clearer. At this point apart from the effect of the
devaluation of Sterling, there are no immediate effects on
the BTG trading position.
As a general risk, the existing and future products
launched by the Company may not be a commercial
success depending on a number of complex and
inter-related factors including: the receipt, maintenance
and the scope of the applicable required marketing
approvals and clearances (and the time and investment
required to obtain approvals); product acceptance by
physicians and patients; commercially viable levels of
product reimbursement being established; safety and
efficacy continuing to be demonstrated; maintaining
continuity of supply; the impact of competition and the
successful enforcement of the Group’s intellectual
property or defence against third-party intellectual
property rights.
The pharmaceutical and medical device industries are
highly competitive and require substantial ongoing
product investment, innovation and development
to sustain a continuing competitive advantage.
The Group’s success will continue to depend on its
ability to in-license, acquire or develop new products
and businesses and to realise the expected benefit from
such activities by the application of resources and
effectively integrating acquired opportunities into the
Group. As BTG operates in such a highly specialised
industry, in order to deliver against our strategic
objectives we require highly skilled and experienced
employees who are highly sought after by our
competitors. Challenges in attracting, retaining and
motivating such employees may impact our ability to
maintain performance levels and to deliver against our
strategic growth objectives.
Risk
General
mitigation strategy
Change in 2016/17
Market Access: Securing adequate
reimbursement for BTG’s products
BTG may not be able to sell its products profitably if
reimbursement by third-party payers, including government
and private health insurers, is limited or unavailable.
The Group may be subject to price limits on reimbursement
of products that are outside of its control, reducing sales
volume or prices, negatively impacting Group revenues.
This is particularly the case in the US where a significant
proportion of the Group’s revenues are derived, and in light
of the potential US healthcare reforms, which may reduce
the number of insured patients and require increased
rebates or discounts to be provided. Third-party payers
are increasingly attempting to contain healthcare costs
through measures that are likely to impact the products
that BTG is developing.
Ensuring effective advocacy with payers
based on accurate data and analysis
to inform reimbursement decisions.
Ensuring accurate and complete
submissions. BTG is seeking to utilise its
expanding expertise across the portfolio,
both within and outside the US. R&D
plans increasingly seek to create the data
likely to be required to secure the desired
level of reimbursement for the applicable
products after commercial launch.
The Company continues to strengthen
its global market access (reimbursement)
capabilities. While adequate levels of
reimbursement for Varithena® can be
secured, inadequate coverage and/or
slow payment has slowed adoption and
adversely impacted revenue growth.
Progress continues with the expectation
CPT Codes for Varithena® will be secured
from January 2018. A residual risk is
the uncertainty regarding the value that
will be set for these codes which will be
determined during 2017/18 financial year.
Acceptable progress continues to secure
appropriate reimbursement for other
products across the portfolio.
A future focus will be on supporting
appropriate reimbursement levels for the
PneumRx® Coil both in EU and in US
following approval.
Notwithstanding progress to date, in
light of the ongoing specific challenges
relating to Varithena® and the generally
challenging external environment in the
industry, the overall risk is assessed to
have remained the same as last year.
Key
Increased risk
Unchanged risk
Decreased risk
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance
69
Risk
General
mitigation strategy
Change in 2016/17
Obtaining/Maintaining product regulatory approvals
The pharmaceutical and device industries are highly
regulated in relation to the development, approval,
manufacturing and sale of products. The development of
healthcare products has a high level of inherent risk and
a high failure rate. An inability to meet existing or new
regulations or regulatory guidance may result in delays or
failures in bringing products to market, additional material
costs of development or the imposition of restrictions on
approval or the sale of a product or its manufacture or
distribution, including the possible withdrawal of a product
from the market.
Such events may adversely impact the Group’s revenues
and prospects.
The Company has expert internal teams
dedicated to ensuring compliance in
each of these areas, defining regulatory
strategies and supporting product
approvals and maintenance of existing
product licences.
The process is supported by the
governance systems defined above and
monthly monitoring of performance
against goals and of changes in the
regulatory landscape.
IP/Legal challenges
BTG may be subject to challenges relating to the validity
of contracts or its patents or alleging infringement by BTG
of intellectual property (IP) rights of others, which might
result in cessation of BTG product sales, litigation and/or
settlement costs and/or loss of earnings. BTG might elect
to sue third parties for their infringement of BTG’s IP in
order to protect current or future product revenue streams.
Litigation involves significant costs and uncertainties.
BTG may not be able to secure or maintain the necessary
IP in relation to products sold, acquired or in development,
limiting the potential to generate value from these products
and investments. Patent expiries can adversely impact the
Group’s revenues due to a resultant increase in competition
and price erosion.
Maintenance of the IP and legal functions
as core capabilities of the Group,
supplemented by external expertise,
which monitors third-party patent
portfolios and patent applications and IP
rights. Monitoring of BTG’s satisfaction
of its obligations under key contracts.
Development and implementation
of BTG patent filing, defence and
enforcement strategies, pursuing
litigation or settlement strategies where
appropriate. Robust processes are in place
to automate patent renewals; internal
controls established to avoid disclosure of
patentable material prior to filing patent
applications and to protect valuable
know-how.
BTG focuses on select opportunities
addressing specialist segments where
there are relatively high barriers to entry,
for example, relating to the development
and manufacturing processes, or the
need to generate significant supportive
clinical data to gain approval and
commercial acceptance. We seek
adequate reimbursement to differentiate
our products by demonstrating, in
clinical trials, safety and efficacy benefits,
cost effectiveness or greater patient
acceptance.
Competition
BTG’s products may face competition from products that
have superior attributes, including better efficacy or side
effect profiles, cost less to produce or be offered at a lower
price than BTG’s products.
There are currently no competitive products to CroFab®,
DigiFab®, Voraxaze® or Vistogard® but Instituto Bioclon
may launch a competitor product to CroFab® around
October 2018.
TheraSphere® competes with a product from Sirtex
Medical Limited and LC Bead© and DC Bead® compete
with products from Boston Scientific Corporation, Terumo
and Merit Medical. Varithena® competes with other
treatment modalities including heat ablation, vein stripping
and physician-compounded sclerosing foam.
EKOS competes with other interventional clot treatment
products from US companies like Boston Scientific.
There is a competitor to PneumRx in the form of the
Pulmonx, Inc. valve. In Licensing, Zytiga® competes
with a number of other treatments for prostate cancer
including Xtandi® (enzalutamide) and is at risk of
generic competition.
In 2016 DC Bead® was successfully
reclassified in the EU. A similar
application has been made for DC Bead
LUMI™, the outcome of which is awaited.
This follows the successful launch of the
sister product LC Bead LUMI™ in the US
last year.
The PMA submission to seek US
approval of the PneumRx® Coil, was
made in February 2017.
The overall level of risk is deemed to
have modestly reduced during the
year. The regulatory affairs and clinical
development teams were reorganised and
strengthened during the year. The R&D
team continues to be developed. The use
of external resources such as contract
clinical research organisations (CROs) are
now also being more effectively leveraged.
Zytiga® produces significant licensed
revenues for BTG, and is subject to
multiple challenges by manufacturers of
generic versions in the US. The position
has not changed since last year’s Annual
Report. Generic competition may enter the
market as early as the 2018/19 financial
year in the US and 2020/21 financial year
in the EU when the ten-year post-approval
data exclusivity period ends. In each case
generic competition would substantially
reduce the value of Zytiga® and the level
of royalties received by BTG.
BTG is in a current dispute with Wellstat
over the commercialisation of Vistogard®.
Wellstat are seeking damages and
to terminate the commercialisation
agreement under which BTG obtained
rights to sell Vistogard in the US.
A trial has been heard in the Court of
Chancery of the State of Delaware but
no judgement has yet been issued. The
Group estimate the likelihood of material
outflow of funds or loss of rights to the
asset to be possible, not probable, and
therefore no liability has been recognised.
It is currently not possible to make a
reliable estimate of any amount that
may be required to be paid in respect of
the dispute.
The overall risk is assessed as unchanged
compared with last year.
The competitive environment remains
a challenge particularly within the
Interventional Oncology business but
overall the level of risk is unchanged
from last year. A key strategic goal for
Interventional Oncology is to offer a
wider range of products within the
portfolio. The Galil Medical acquisition
and launch of LUMI™ beads are key
pillars of this strategy, which it is hoped
will maintain BTG’s lead position in the
Interventional Oncology space. Zytiga®
is at risk of further competition as noted.
It should be noted that Brexit and evolving
healthcare policies in the US may have
an effect on competition in the future,
however, at this stage it is too early to
predict any effects with any meaningful
accuracy.
Overall, the risk is assessed as
unchanged compared with last year.
BTG plc Annual Report and Accounts 2017GovernanceGovernance 70
Corporate Governance report
Accountability continued
Risk
General
mitigation strategy
Change in 2016/17
Healthcare law compliance
Extensive laws and regulations relate to how BTG markets
its products and interacts with its customers and payers.
Failure to meet applicable requirements may result in
criminal or civil proceedings against the Group, exclusion
of sale of products in certain territories and material
financial penalties or other sanctions against the
Group (or their commercial partners, or their respective
employees or directors).
Defending actual or alleged violations may require
significant management time and financial commitment,
even if not proven.
A comprehensive compliance programme
is in place as referred to above. Ongoing
monitoring and auditing is undertaken to
seek to ensure any material failures are
identified where possible and remediated.
The programme is continually reviewed
and improved to reflect ongoing learnings
and changes to the external environment.
The BTG compliance programme is a
Company standard which is introduced
to all acquisitions. The programme has
been fully implemented by the latest
additions to the BTG Group, PneumRx
and Galil Medical.
Supply chain/continuity of supply
There are inherent risks to the BTG supply chain as the
Company’s products are typically high value, low volume
manufacture. Diversifying the supply chain of such
products (for example by establishing dual sources of
supply) is not cost effective. BTG therefore relies
on the following single sources of supply.
Wales for supply of manufactured antibodies and a single
site in Farnham, UK, for the manufacture of the Beads
and Varithena®. Consequently there is the possibility of
disruption to, or loss of supplies resulting from, technical
issues, contamination or regulatory actions. BTG polyclonal
antibody products rely on serum produced from our sheep
flocks in Australia, which could be subject to disease
outbreaks or fire.
BTG manufactures its EKOS products at a single site
in Seattle, Washington, USA and the PneumRx® Coil
at a single site in Santa Clara, California, USA, with
the consequent possibilities from disruption to or loss
of supply.
Galil Medical consumable items are manufactured at a
site in Israel, with the control units manufactured at a site
located in Arden Hills, Minnesota, USA.
For other products, namely Voraxaze® and TheraSphere®,
we continue to rely on third-party contractors for the supply
of many key materials and services. These processes
inherently carry risks of failure and loss of product are risks
over which the Company has a lower degree of control.
BTG has extensive quality, risk and
business continuity management systems
to ensure resilience of the supply chain.
These management systems are applied
equally to both the internal and external
elements of supply chain.
Each supply chain is thoroughly
assessed and stocks of raw materials, in
process materials and finished products
are maintained as a result of that risk
assessment. Risk assessments are
reviewed annually or when business
predictions change. Adherence
to the agreed stock levels are reviewed
monthly through regular business
review meetings.
The final mitigation is business
interruption insurance, which is
maintained at a level for each business to
cover at least two years loss of business
as result of catastrophic loss of supply.
During 2016 BTG reached agreement
with the US Department of Justice (DOJ)
regarding actions by Biocompatibles
and their associated distributors prior
to acquisition dating back to 2003.
The successful resolution of this action
without the imposition by the DOJ of
additional compliance controls is seen
as evidence of the appropriateness of
the BTG compliance programme. As a
result the risk in this area has decreased
somewhat.
Compliance however remains a key area
of vigilance for BTG and complacency is
not tolerated. Monitoring continues and
all issues are thoroughly investigated
and corrective actions tracked through
to completion.
There can be no guarantee however that
other investigations will not be instigated
by the DOJ or other agencies in future. It
is expected that legislative burdens in this
area will increase in most jurisdictions
and therefore programmes will need to
be continually improved.
BTG sites and supply chain partners
underwent seventeen inspections by
external bodies such as FDA, MHRA
and BSI within the 2017 financial year.
No major or critical findings were
received and corrective actions for all
observations were completed or are
on track to the timetables agreed with
the authorities.
BTG changed its business interruption
insurance provider in October 2016,
as a result all key sites received an audit
from the new provider. All corrective
actions have been mutually agreed with
the insurance provider, and are being
implemented.
As a result of the acquisition of the
Galil Medical business in June 2016,
BTG purchased additional war and
terrorism business interruption insurance
specifically for the Israel site.
Standard business interruption insurance
remains at two years for most key sites
and business but has been maintained
at three years for the Wales and
Farnham sites.
Overall, the supply chain risk is
considered to remain unchanged in
comparison with last year.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Governance 71
Corporate Governance report
Relations with shareholders
The Board recognises its responsibility to deliver a
programme of engagement with shareholders and
communication with investors is given a high priority.
The Group is committed to regular and open dialogue
with all current and potential shareholders and analysts,
led by the CEO, the CFO and the Group’s Investor
Relations (IR) department. Meetings with investors
are principally to communicate the Group’s strategy,
performance and policies and their views are regularly
shared with the Board.
The Board believes that appropriate steps have been
taken during the year to ensure that all members of the
Board develop an understanding of the views of the
major shareholders. The Investor Relations department
acts as the day-to-day contact point for investors and
analysts and provide a report at each Board meeting,
giving information on material changes in shareholdings
and any feedback from the Group’s brokers and investors
enabling the Board to further develop an understanding
of any issues and concerns of major shareholders.
There is a period of concentrated activity following the
announcement of the half-year and full-year results,
when the CEO and CFO present these results to the
Group’s institutional shareholders, analysts and
the media.
The Group also participates in UK and overseas
investor roadshows and conferences throughout the
year. In addition, the Chairman is available to meet
institutional investors and the Senior Independent
Director and other non-executive directors are available
to meet with major shareholders on request. No such
meetings were requested during the year.
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/investors) and individuals can
also register to receive electronic copies of all
announcements on the day they are issued.
Investor contact by management type
(%)
a CEO 27%
b CFO 21%
c IR 52%
c
a
b
Annual General Meeting (AGM)
At the AGM, shareholders will hear directly about the
Group’s performance and strategy with a presentation
by the CEO, and the Board will have the opportunity to
communicate with, and answer questions from, private
and institutional shareholders. The forthcoming AGM
will be held on 13 July 2017 and the Chairs of the Audit,
Nomination and Remuneration Committees will be
available to answer questions.
All resolutions are voted on by way of a poll and results
of voting will be published in a market announcement
and on BTG’s website following the meeting.
Further details of the 2017 AGM can be found on
page 101.
BTG plc Annual Report and Accounts 2017GovernanceGovernance 72
Remuneration
Ian Much
Annual Statement from the
Remuneration Committee Chairman
Dear Shareholder
I am pleased to present the Directors’ Remuneration
Report for the year ended 31 March 2017. I am grateful
for the continued support and engagement of our
shareholders and their representative bodies,
especially during the Directors’ Remuneration Policy
(the Policy) consultation process, which I outlined in
last year’s statement.
To help shareholders understand our remuneration
structure and its link to the Company’s strategy and
performance we have set out our “remuneration at a
glance” on page 76. This is followed by the Annual
Report on Remuneration on pages 77 to 89 and by an
outline of the Policy that was approved last year on
pages 90 to 97.
Highlights from 2016/17
As described in detail in the Strategic Report, the
Group has delivered a strong set of overall results. The
strategic focus on Interventional Medicine therapies is
driving growth and is aligned with developing macro
healthcare trends, which include strong physician
interest in less invasive therapy options. Interventional
Medicine is now our largest business segment
by revenue and growing at a double-digit pace.
Together with the licensing income and growing
revenue from the Specialty Pharmaceuticals business,
it provides capacity for material investments in further
R&D and M&A to support sustainable growth over the
longer term.
Following significant engagement with our stakeholders
and an extensive review of the Policy last year, we were
delighted to receive strong levels of shareholder support
at the 2016 AGM, with 99% of shareholders voting in
favour. The Policy introduced a number of key changes
as follows:
— Simplification of the long-term incentive
arrangements, with the previous three-year Core
award and five-year Multiplier award structure
replaced with a simpler less geared three-year
PSP award structure.
— Enhanced bonus deferral arrangements under which
any bonus in excess of 75% of salary is deferred in
shares for three years.
— Introduction of a number of additional best practice
features including a two-year post-vesting holding
period on PSP awards granted from 2016 and
enhanced share ownership guidelines and recovery
and withholding provisions.
The Policy has been applied during the year and has
elements that link to both the short-term delivery and
longer-term value creation goals of the Group. We are
confident that it remains appropriate for the business
and is aligned with shareholders’ interests. Our KPIs
and how they link to our strategy and to remuneration
are set on pages 14 and 15 in the Strategic Report.
The Committee believes that the alignment of the
Policy with our strategic objectives continues to
incentivise and drive sustainable value creation for our
shareholders. The focus is on rewarding performance
and to that end the majority of executive remuneration
(approximately 75% at maximum) is variable and
only payable if demanding performance targets are
met. We will continue to review our approach to
remuneration to ensure this remains the case.
During the year the Company focused the financial
metrics used to communicate its performance on
Revenues, Adjusted Operating Profit, Adjusted EPS and
free cash flow. The Committee is confident that these
metrics were no less demanding than those previously
applied to the annual bonus awards and would offer
stakeholders a greater degree of clarity when equating
performance targets with the financial results.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 73
The targets for 2017/18 bonus awards will be set using
these new metrics. In the case of Revenues, given the
increasing dependency on the sale of our own products
to drive future growth, this will comprise BTG product
Revenues (excluding Licensing income, which will
however, continue to be included in the other metrics).
Further detail on the metrics can be found on page 87.
The metrics used to set LTI awards remain unchanged.
In August 2016, Graham Hetherington joined the Board
as non-executive director and Chair of the Audit
Committee, joining the Remuneration Committee
in September 2016.
Review of 2016/17 outcomes
Following on from the one-off realignment of the CEO’s
salary that took place in 2016, the CEO’s salary was
increased by 3% from £650,000 to £669,500. The CFO’s
salary was also increased by 3%. Both of these increases
are in line with the average increase for BTG employees
of 3%.
The Group has continued its strategy of both organic
and acquisitive growth and achieved a number of
significant milestones during the year, as outlined in
the Strategic Report on page 5.
The overall review of the year supported the assessment
that the Group and executive directors each met a
substantial part of their financial and operational bonus
criteria (70% of which related to corporate financial
performance and 30% of which related to individual
non-financial objectives), which will result in a 82.4%
bonus payout for the executive directors of which an
amount equivalent to 75% of salary will be paid in cash,
with the remainder of the bonus deferred in shares for
three years.
However, despite good performance by the Group’s
Interventional Oncology, Specialty Pharmaceuticals
and EKOS businesses, and the strong overall financial
position of the Company, the Company’s share price
has not increased to an equivalent extent, adversely
impacting the Total Shareholder Return (“TSR”)
element of the Core and Multiplier awards vesting this
year as explained below.
2012 PSP awards
Awards under the old PSP consisted of Core awards
vesting over three years which could be put at risk by
the executive directors (i.e. deferred for a further two
years) in exchange for an additional equivalent
Multiplier award. In that case both the deferred Core
award and potential Multiplier award would vest
at five years based on the Company’s relative TSR
performance over that period.
This year’s single figure for remuneration includes
the 2012 PSP awards that will vest later in 2017 based
on performance over five years to 31 March 2017.
These comprise the Core award granted in 2012
and a matching Multiplier award. Over the five-year
performance period, BTG’s TSR is below that of the
FTSE 250. As a result, the number of rolled-over Core
awards that will vest has been reduced in comparison
with the number that would have vested in 2015 if the
executive directors had not decided to roll them over
and put them at risk. In addition none of the Multiplier
awards will vest.
The table below summarises the impact that the decision to roll-over of the Core awards in return for the Multiplier
award has had on the value of the awards vesting:
Core award value at 31 March 2015
Core and Multiplier award value at 31 March 2017
% of Core
award
eligible
to vest1
100%
Number of
Core award
shares
eligible
to vest
124,042
91,974
Average
three-
month
share
price to
31 March
2015
782.84p
Market
value
£971,050
£720,009
% of Core
award
vesting2
% of
Multiplier
award
vesting2
86.87%
0%
Number of
Core award
shares
vesting
107,755
79,897
Average
three-
month
share
price to
31 March
2017
573p
Market
value
Impact of
rollover on
value of
awards
£617,436 £(353,614)
£457,810 £(262,199)
Louise Makin
Rolf Soderstrom
Notes
1. Three year cumulative normalised trading profit period of £198.1m vs Stretch of £177.4m and TSR of 130.4% vs upper
quartile of 110.5%.
2. TSR of 68.67% (equivalent to median minus 8.76%).
GovernanceGovernanceBTG plc Annual Report and Accounts 2017
74
Remuneration
continued
This outcome highlights the very challenging nature
of the Core and Multiplier mechanism, which requires
sustained above-market TSR performance over a
period of five years, aligning the interests of the
executive directors with the creation of long-term value
for shareholders. As the outstanding performance over
the original three-year performance period has not
been maintained, the awards to the executive directors
have been scaled back, both in terms of the number of
shares vesting but also in terms of total value, which
has reduced in proportion to the reduction in share price.
Going forward, the two-year post-vesting holding period
that applies to awards made from 2016 under the new
PSP will create similar alignment retaining sensitivity
to changes in share price after the end of the
performance period.
2013 PSP awards
This year’s remuneration single figure will also include the value of the 2013 Core awards that vested in July 2016
(i.e. not rolled over). The table below summarises the value of these awards.
Louise Makin
Rolf Soderstrom
Core award value at 17 July 2016
% of Core
award
eligible
to vest1
100%
Number of
Core award
shares
eligible
to vest
208,807
136,864
Percentage
Rolled over
Shares
vesting
50% 104,404
0% 136,864
Closing share
price on
17 July
2016
671p
Market
value of
shares
vesting
£700,551
£918,357
Note
1. Three-year growth in adjusted EPS of 101% and TSR of 82.1% (i.e. above the upper quartile) over three years.
The CEO elected to roll-over 50% of the shares that
would otherwise have vested in 2016 in order to receive
an equivalent Multiplier award, putting 50% of her Core
award at risk for a further two years. Vesting of those
2013 Core, rolled over and the associated Multiplier
awards, will be assessed in 2018 based on relative TSR
performance over the full five-year period from grant of
the original Core award. Having already rolled over the
2012 awards, the CFO did not elect to roll-over any part
of his 2013 Core award which vested in full in July
2016. His 2013 Core award and the 50% of the CEO’s
Core award that was not rolled over will be included in
this year’s single figure calculation.
2014 PSP awards
As a result of BTG’s financial performance and
sustained growth over the past three years, this year
46% of the 2014 Core awards will be capable of
vesting, subject to the decision to be made by each
executive director whether or not to roll-over 50% or
100% of those awards, in order to receive an equivalent
Multiplier award. If no such election is made, vesting
will occur in June 2017. Vesting will occur in June 2019
in relation to any part of the award for which an election
is made.
2016 PSP awards
In July 2016, awards were granted under the new
PSP established as part of the new Policy. These will be
capable of vesting in July 2019 subject to adjusted EPS
and TSR performance conditions measured over three
financial years. The Multiplier award concept no longer
applies but on vesting, these awards will then be subject
to a two-year holding period during which the shares
may not be sold other than to settle any tax or NICs due.
Pay for Performance (P4P) Assessment
In considering the bonus payment for the current year
and PSP awards vesting in 2017, the Committee
is satisfied that these show an appropriate alignment
between the reward and performance. The Committee
is aware, however, that if a formulaic assessment of the
relationship between pay and performance is applied
to our 2016/17 Single Figure, based solely on TSR
over a three year period, such as that used in ISS’s
P4P methodology, it could produce misleading results.
This is a consequence of the way in which performance
for the Core and Multiplier awards is measured and the
fact that both the 2012 and 2013 awards will be reported
in the same year’s single figure.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017
75
— Two-year post-vesting holding periods on PSP
awards granted since 2016.
— Deferral of any bonus in excess of 75% of salary
(being 50% of the maximum bonus opportunity).
— Share ownership guidelines that are at or above the
median of the FTSE 250.
— Recovery and withholding provisions that are
in-line with current best practice.
We continue to be committed to maintaining an
open dialogue with shareholders and welcome
further feedback. We hope for the continued support
of shareholders at the AGM on 13 July 2017 where
you will be invited to vote on the 2017 Annual
Remuneration Report (and this Annual Statement).
Ian Much
Remuneration Committee Chairman
15 May 2017
To help demonstrate this, the chart below illustrates the
TSR growth of the Company over six financial years, the
corresponding remuneration single figure for the CEO
and an alternative single figure assuming that the Core
awards were not rolled over after each three-year period,
but instead vested at the prevailing share price at the
time. The alternative analysis shows clearly how the
pay of the CEO has aligned with the TSR growth of the
Company, but even under the actual structure it shows
considerable alignment. The relative increase in pay in
FY16 and 17 is as a result of the prior stronger share
price performance and the decision to put the Core
awards at risk for a further two years in return for the
chance to receive a Multiplier award.
Aligning with Shareholder Interests
It is also worth noting that the Policy contains a number
of elements that reflect best practice and strengthen
shareholder alignment. These include:
— A remuneration policy that we feel is appropriate
in the market and sufficiently retentive and
motivating for executives.
— The use of bonus and LTI measures that are
closely aligned with our key KPIs and strategy.
— Standards of disclosure of targets that we feel
were strengthened last year to meet evolving best
practice and which we intend to continue to review.
CEO remuneration vs. TSR
)
s
n
o
i
l
l
i
m
P
B
G
n
i
(
y
a
P
O
E
C
£4.5
£4.0
£3.5
£3.0
£2.5
£2.0
£1.5
£1.0
£0.5
£0.0
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
CEO Remuneration
CEO Remuneration (if Core awards valued at date of three-year vesting)
Indexed TSR
Impact of multiplier
£250
£200
£150
£100
£50
£0
0
0
1
P
B
G
f
o
t
n
e
m
t
s
e
v
n
I
GovernanceGovernanceBTG plc Annual Report and Accounts 2017
76
Remuneration
continued
Remuneration at-a-glance section
Performance and remuneration outcomes in 2016
2016 adjusted
financial
performance
For reconciliation of adjusted
financial performance (for
remuneration purposes)
to their IFRS equivalents,
see page 79.
Annual bonus outcome
vs maximum targets
Revenue
Trading Profit
Cash flow
vs target of
£485.5m
£487.0m
vs target of
£111.8m
£90.7m
vs target of
£83.6m
£66.3m
82.4%
Adjusted EPS (p)*
Total shareholder return
25
20
15
10
5
0
FY 2014
FY 2015
FY 2016
FY 2017
*adjusted EPS as disclosed
300
200
100
0
Apr
12
Apr
13
Apr
14
Apr
15
Apr
16
Apr
17
LTIP outcome vs
maximum targets
2012 Core
awards
2012 Multiplier
awards
2013 Core awards
86.87%
0%
100%
2017 salary (effective 1 April 2017)
2016 salary (effective 1 April 2016)
Pension, benefits and Sharesave
Annual bonus
Long-term incentives
Total remuneration
Share ownership guidelines
Louise Makin
£669,500
£650,000
£161,000
£803,000
£1,318,000
£2,932,000
Guideline: 250% of salary
Actual: 635% of salary
Rolf Soderstrom
£407,714
£396,000
£96,000
£489,000
£1,376,000
£2,357,000
Guideline: 200% of salary
Actual: 426% of salary
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 77
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 “Annual Report on Remuneration” which provides shareholders with details of the
major decisions made by the Committee and the remuneration actually delivered to the Group’s directors during the
2016/17 financial year; and (iii) the “Directors’ Remuneration Policy Report”.
Annual 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) Regulations 2008 (as amended). The Annual Remuneration Report
will be put to an advisory shareholder vote at the 2017 AGM. The information on pages 72 to 85 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 Group’s
website or from the Company Secretary on request.
Members
Committee member
Ian Much (Chairman)
Giles Kerr
Susan Foden
Graham Hetherington
Date of appointment to the Committee
28 September 2010
3 November 2009
1 March 2015
29 September 2016
Details of attendance at meetings are shown in the table on page 49.
Other attendees
at Remuneration
Committee meetings
The Chairman (Garry Watts), CEO (Louise Makin), CFO (Rolf Soderstrom), Head
of HR and Director HR Shared Services and Reward may attend meetings
by invitation, other than when their own remuneration is being considered.
The Company Secretary (Paul Mussenden) 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, with good
oversight, engagement and debate of issues. The emphasis will remain on
ensuring a strong link between remuneration and performance and strategy, and
alignment with shareholder interests.
The Committee appoints its own advisers as it sees fit and has appointed NBS
(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 Group with
advice on matters specific to the US employment market. The Group also uses
Willis Towers Watson and PwC to advise on remuneration issues.
The fees paid to the Committee’s advisers (NBS) in 2016/17 were: £103,078
(2015/16: £172,816). NBS fees were charged predominately on the basis of an
hourly rate.
GovernanceGovernanceBTG plc Annual Report and Accounts 2017 78
Remuneration
continued
Single figure for total remuneration (audited)
Salary/fees1
£’000
Benefits2
£’000
Expenses
incurred from
performance
of duties7
£’000
Bonus paid
in cash1
£’000
Bonus paid
in shares3
£’000
Long–term
incentives4
£’000
Pension5
£’000
Other6
£’000
Total
remuneration
£’000
Executive Directors
Louise Makin
Rolf Soderstrom
2017
2016
2017
2016
Non–executive Directors
Garry Watts
Giles Kerr9
Ian Much
James O’Shea
Richard Wohanka
Susan Foden
Graham
Hetherington8
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
650
586
396
384
235
235
60
65
62
60
52
50
52
50
52
50
41
–
1
1
1
1
–
–
–
–
–
–
–
–
–
–
–
–
5
–
6
–
1
–
2
–
5
–
4
–
1
–
6
–
4
–
487
439
297
287
316
–
192
–
1,318
2,603
1,376
1,805
151
127
79
77
4
3
10
–
2,932
3,759
2,357
2,554
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
236
235
62
65
67
60
56
50
53
50
58
50
45
–
1. All directors’ fees, salaries and bonuses are subject to UK income tax.
2. Benefits shown above for Louise Makin and Rolf Soderstrom relate principally to the provision of medical benefits.
3. Element of bonus deferred into the DSBP.
4. Awards are included in the financial year in which the performance conditions end. The share price used is the three-month average
share price to the end of the financial year.
– For 2017 this figure does not include the 2014 Core PSP award as the Core and Multiplier awards are treated as a single award and
the Core award will be shown in 2018 if no election is made and both Core and Multiplier in 2019 if an election is made.
– If 50% of a 2014 Core award is rolled over into a Multiplier award, 50% of the Core award will be shown in 2018 and the remainder
with the Multiplier award in 2019.
– The LTIP figure for 2017 relates to the 1 June 2012 Core awards, the related 1 June 2015 Multiplier awards plus the element of the
2013 Core awards that was not rolled over in 2016. (In the case of Louise Makin, 50% of the 2013 Core awards was subject to an
election to be rolled over in 2016).
Share price appreciation over the five year period to 31 March 2017 contributed materially to the total remuneration figure for 2017.
Details can be found in the table on page 81.
The 2016 figure has been restated to reflect the actual share price on the date that the 2011 awards were released.
5. 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 £51,198 (2016: £39,674), representing the value of the increase in the year of her pension entitlement in the
defined benefit BTG Pension Fund.
6. Other shows the value of vested Sharesave options.
7. Certain expenses relating to the performance of a director’s duties, such as travel to and from Company meetings and related
accommodation, are classified as taxable. In such cases, the Company will ensure that the director is not out of pocket by settling the
related tax via the PSA. In line with current regulations, these taxable benefits have been disclosed and are shown in the Expenses
incurred arising from performance of duties column. The figures shown are the cost of the taxable benefit. 2017 is the first year such
costs have been reported and as such there is no comparative data for the prior year.
8. Fees paid to Graham Hetherington in 2016 were for the period from his appointment to the Board on 1 August 2016.
9. Fees paid to Giles Kerr were adjusted with effect from 1 August 2016 to reflect his stepping down as Chairman of the Audit Committee
on the appointment of Graham Hetherington.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017
79
Annual bonus for the year to 31 March 2017 (audited)
For the year ended 31 March 2017, bonuses were subject to a maximum of 150% 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 targets for revenue growth, trading profit, cash generation and individual KPIs intended to drive future
growth in the business. The Committee set threshold and stretch as well as intermediate targets. The bonus is
calculated on base salary, with a percentage pay out (against the maximum of 150%) of between 25% at threshold, 50%
at on-target and 100% of the maximum at stretch.
The trading profit measure is a normalised measure relating to earnings before amortisation of intangibles,
restructuring and acquisition costs, Group foreign exchange movements and movements in the fair value of derivatives.
The cash flow measure adjusts for restructuring and acquisition related costs only. The Committee may adjust the final
outcome upwards or downwards in the event that an exceptional event occurs, which, in the Committee’s opinion,
materially and unreasonably affected the bonus out-turn.
During 2016/17, the Committee assessed that adjustments should be made for each of the following:
(i)
exclusion of the impact of the Galil Medical acquisition that occurred during the year, as its performance was not
included in the original bonus targets.
(ii)
exclusion of the positive impact from foreign exchange translation as a result of the weakening GBP against USD;
(iii) exclusion of realised losses on derivative forward foreign exchange contracts, consistent to the principle of
excluding the positive impact from foreign exchange translation that these contracts hedge;
(iv) exclusion of the charge of £28m in relation to the settlement of the US Department of Justice investigation into the
historic marketing of LC Bead®; and
(v) exclusion of the above budget performance from the Group’s licensing income.
For the financial year to 31 March 2017 revenue, trading profit and cash flow are calculated as follows:
Revenue/profit before tax/net cash flow
Adjustments:
Fair value of derivatives and Group foreign exchange movement
Amortisation of acquired intangible assets
Fair value changes of contingent consideration liabilities
Fair value changes for acquired Galil Medical inventory
Acquisition and re-organisation costs
Acquisition of Galil Medical
Remuneration Committee adjustments:
Exclude Galil Medical, not included in original targets
Translational foreign exchange impacts
Realised losses on derivatives
Settlement of US government investigation into LC Bead®
Royalties above budget
The performance achieved against the bonus targets are summarised as follows:
Revenue
£m
570.5
Trading profit
£m
31.6
Free Cash Flow
£m
9.2
–
–
–
–
–
–
570.5
(17.2)
(53.7)
–
–
(14.1)
485.5
13.7
42.0
(0.7)
1.0
1.1
–
88.7
0.6
(17.6)
17.1
28.0
(5.0)
111.8
–
–
–
–
–
55.0
64.2
–
–
–
24.4
(5.0)
83.6
As a
percentage
of maximum
bonus
opportunity
23 1/3%
23 1/3%
23 1/3%
Measure
Corporate Financial Targets
Revenue
Trading profit
Operating cash flow
Individual Corporate Objectives
Total
Performance required
Louise Makin Rolf Soderstrom
Threshold
(£m)
Target
(£m)
Stretch
(£m)
Actual
(£m)
% of
maximum
% of
maximum
475.0
86.1
61.8
487.0
90.7
66.3
503.0
95.1
70.8
485.5
111.8
83.6
30% See narrative on the following page
100%
10.8
23.3
23.3
25
82.4
10.8
23.3
23.3
25
82.4
GovernanceGovernanceBTG plc Annual Report and Accounts 2017 80
Remuneration
continued
Key achievements against the objectives included:
— Board approval for an updated Varithena® business plan through January 2019.
— Board approval of the PneumRx® business plan. Progress made with near term execution and development of mid
to long-term strategy. PMA submitted and accepted by FDA. Progress with French and German reimbursement.
— R&D organisation realigned with the BU’s to support short-term deliverables. Appropriate R&D investments
identified to support 2021/22 revenue goals and develop an earlier stage pipeline to deliver longer-term growth.
— Progress with the external communication of the importance and growth of Interventional Oncology.
— Continued leadership development (with the Leadership Team and senior management group) and putting in
place robust succession plans. Specific focus on enhancing commercial capability across BTG.
— Effective transition between Audit Committee Chairs. Continued improvement in the control environment and
broader Finance function.
— Cost control activities implemented across R&D, Manufacturing, Quality and G&A Functions.
The table below summarises the targets applicable to each executive director.
Varithena®
PneumRx®
R&D strategy
Interventional oncology
Organisational capability
CFO objectives
Proportion of maximum achieved
Louise Makin
✓
✓
✓
✓
✓
25%
Rolf Soderstrom
✓
✓
✓
✓
✓
25%
Under the remuneration policy approved at the 2016 AGM, the first 75% of salary of any bonus will be paid in cash,
with any bonus paid in excess of 75% of salary compulsorily deferred into shares for three years. This is irrespective
of whether an applicable shareholding guideline has been met.
Vesting of LTIP Awards (Audited)
Core awards granted on 1 June 2012 together with the associated Multiplier awards granted on 1 June 2015 and
Core awards granted on 9 June 2014 under the Performance Share Plan will vest in June 2017 based on performance
to the year ended 31 March 2017 (subject to a decision by the executive directors to roll over 50% or 100% of the 2014
Core awards).
The performance conditions and estimated vesting outcomes for these awards are as follows:
2012 LTIP – Core and Multiplier (included in the single figure for total remuneration)
The Core awards granted in June 2012 were subject to 50% cumulative trading profit and 50% TSR targets over the
three years to 31 March 2015. At that time, full vesting was achieved on both elements due to performance of £198.1m
trading profit compared to a stretch target of £177.4m, and TSR performance of 130.4% compared to an upper quartile
target of 110.5%. Vesting of all Core awards were deferred by each executive director and put at risk in 2015 and in
return each director was eligible to receive Multiplier awards, with both elements capable of vesting in June 2017,
subject to TSR performance over the five years to 31 March 2017, as detailed in the tables below:
Metric
TSR – 2012
Core and
Multiplier
Condition
Five-year
comparison
with index
Threshold Target
0% vesting
Target 100%
vesting – Core
0% vesting –
Multiplier
Stretch Target
100% vesting –
Core and Multiplier
Median
Actual BTG
% Vesting
Median minus
66.66%
Median
Median plus
100%
77.43%
68.67%
86.87% Core
0% Multiplier
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 81
TSR has been calculated for the Committee by NBS.
Louise Makin
1 June 2012 Core award
1 June 2015
Multiplier award
Rolf Soderstrom 1 June 2012 Core award
1 June 2015
Multiplier award
Number of
shares at grant
124,042
Vesting
outcome
86.87%
Number of
shares to vest
107,755
Estimated
value*
£617,436
Value at grant
of core award**
£410,051
Value
attributable
to share price
appreciation**
£207,385
186,063
91,974
0%
86.87%
0
79,897
£0
£457,810
N/A
£304,040
N/A
£153,770
137,961
0%
0
£0
N/A
N/A
* Value estimated as not fully vested until 1 June 2017 and is based on the three-month average share price to 31 March 2017 of 573p
per share.
** Estimated value based on the share price at the date of grant, 1 June 2012, of 380.54p (calculated using the previous five-day average
share price), compared to the estimated realised value at date of vesting due to share price appreciation.
2013 LTIP – Core awards elected for roll over in 2016
(included in the single figure for total remuneration)
As disclosed in the Directors’ Remuneration Report last year, 100% of the 2013 Core awards were eligible to vest in
July 2016. These awards are subject to the multiplier mechanism approved by shareholders at the 2013 AGM. As a
result, the number of shares that were capable of vesting in 2016 as a Core award was 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. This election had to be made before the shares vested in July 2016.
Louise Makin elected to roll over 50% of the awards before the vesting date, therefore the remaining 50% of the awards
vested in the year. Any Multiplier award will not vest until the period of five years from grant of the original Core award.
Rolf Soderstrom did not elect to roll over any of his Core award and therefore his associated Multiplier awards lapsed on
17 July 2016.
17 July 2013 PSP
Louise Makin
Rolf Soderstrom 17 July 2013 PSP
Number
of shares
at grant
208,807
136,864
Vesting
outcome
100%
100%
Proportion***
of awards
elected for
roll over
50%
0%
Number
of shares
vesting in
July 2016
104,404
136,864
Value at
vesting*
£700,551
£918,357
Value at
grant of
Core awards
vesting in
2016**
£412,500
£540,750
Value
attributable
to share price
appreciation**
£288,051
£377,607
*
**
Value based on the share price at date of vesting 17 July 2016 of 671p per share.
Estimated value based on the share price at the date of grant, 17 July 2013, of 395.1p, compared to the estimated realised value at date
of vesting due to share price appreciation.
*** Louise Makin now has the deferred Core awards plus the associated Multiplier awards (total 208,806 awards) subject to a five year
TSR condition. Rolf Soderstrom did not roll over any of his 2013 Core awards and therefore does not have any outstanding awards from
2013 subject to a five-year TSR condition.
2014 LTIP (not included in the single figure for total remuneration)
Metric
EPS (50%)
Threshold target
20.3p
Condition
Adjusted EPS in the financial year to
31 March 2017
Stretch target
28.4p
TSR (50%)* Three-year comparison with FTSE 250
Index between median and upper quartile
Median
(TSR: 22.4%)
Upper
Quartile
(TSR: 51.8%)
Total vesting
Actual**
27.5p
% Vesting
91%
TSR: (2.4)%
0%
46%
* TSR has been calculated for the Committee by NBS.
** In accordance with the performance condition, in determining the outcome against the adjusted EPS performance targets the Committee
took into account the impact of acquisitions completed since the date of grant of the awards. Adjusted EPS has been increased to reflect
the impact of acquisitions that, at the time, were expected to be dilutive by 2017.
Adjusted EPS
PneumRx®
Galil Medical
Revised EPS used for the purposes
of determining vesting
p
23.1
4.3
0.1
27.5
GovernanceGovernanceBTG plc Annual Report and Accounts 2017 82
Remuneration
continued
Louise Makin
9 June 2014 PSP
Rolf Soderstrom 9 June 2014 PSP
Number
of shares
at grant
141,370
92,661
Vesting
outcome
46%
46%
Number
of shares
vesting***
65,030
42,624
Estimated
value*
£372,622
£244,236
Value at
grant of
Core awards**
£392,781
£257,449
Value
attributable
to share price
appreciation**
£(20,159)
£(13,213)
*
**
Value estimated as not fully vested until 9 June 2017 and is based on the three-month average share price to 31 March 2017 of 573p
per share.
Estimated value based on the share price at the date of grant, 9 June 2014, of 604p (calculated using the previous five-day average share
price), compared to the estimated realised value at date of vesting due to share price appreciation.
*** If Core awards are deferred in June 2017, each director will have the Core awards plus the associated Multiplier awards
(Louise Makin 130,060 awards and Rolf Soderstrom 85,248 awards) subject to a five-year TSR condition.
The number of shares that are capable of vesting under the 2014 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. This election must be made before the shares vest in June
2017. The Core awards will not vest until 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.
LTIP awards made during the year (audited)
On 15 July 2016, the following PSP awards were granted to executive directors.
Type of award
Louise Makin
2016 PSP
Rolf Soderstrom 2016 PSP
Basis of
award granted
225% of salary
225% of salary
Share price at
date of grant
704.7p
704.7p
Number of
shares over
which award
was granted*
207,535
126,385
Face value
of award
£1,462,499
£890,635
Performance
period
Vesting date
1 April 2016 –
31 March 2019
15 July 2019
* The number of shares awarded under the PSP were calculated by reference to the average share price for the five days prior to the date
of grant on 15 July 2016 of 704.7p per share.
The number of awards under the 2016 PSP that will vest will be determined according to the satisfaction of the
following performance conditions (each performance condition applies to 50% of an award).
Percentage of vesting of
that portion of an award*
0%
25%
100%
Adjusted EPS in the financial year
to 31 March 2019
< 25.2p (below threshold)
25.2p (threshold)
32.8p (stretch)
Relative TSR ranking against the constituents
of the FTSE 250 Index (as at 1 April 2016)
for the period from 1 April 2016 to 31 March 2019
Below median
Median
Upper quartile
* Vesting on a straight line basis in between threshold and stretch (EPS) or median and upper quartile (TSR)
Executive directors will be required to hold vested shares, net of tax, for an additional two-year holding period to
15 July 2021.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 83
Outstanding 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).
Louise Makin
Date of grant/award
Share options
31 July 2009
Exercise price
(p)/market
price on date
of award (p)
At
1 April
2016
179.25
187,179
13 July 2010
201.30
199,253
6 July 2011
1 June 2012
Sharesave
19 July 2013
298.90
153,320
386.00
122,288
289.49
1,243
22 July 2014
498.67
2,165
23 July 2015
19 July 2016
504.40
520.53
713
–
Total option awards
Performance
share awards
6 July 20111
1 June 20122
17 July 20133
9 June 2014
6 July 20141
1 June 20152
8 June 2015
15 July 20164
Total other awards
Total awards
286.60
380.54
395.10
395.10
604.00
604.00
657.50
709.50
699.50
699.50
704.70
149,831
124,042
208,807
208,807
141,370
141,370
224,746
186,063
125,731
125,731
–
Granted
in year
Exercised/
vested
Lapsed
–
–
–
–
–
–
–
691
–
–
–
–
–
–
–
–
–
–
207,535
–
–
–
–
1,243
–
–
–
–
–
–
–
–
–
–
–
At
31 March
2017
187,179
199,253
153,320
122,288
Exercise period/
vesting date
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 September 2016
to 1 March 2017
2,165 1 September 2017
to 1 March 2018
1 October 2018
to 1 April 2019
691 1 September 2019
to 1 March 2020
713
149,831
–
104,404
–
–
–
224,746
–
–
–
–
–
–
–
104,403
–
–
–
–
–
–
–
665,609
–
124,042
104,403
104,403
141,370
141,370
–
186,063
125,731
125,731
207,535
1,260,648
1,926,257
6 July 2016
1 June 2017
17 July 2018
17 July 2018
9 June 2017
9 June 2019
6 July 2016
1 June 2017
8 June 2018
8 June 2020
15 July 2019
Share
price on
exercise/
vesting (p)
600.00
694.88
671.00
694.88
1. In 2014, 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. In 2015, Louise elected to receive a Multiplier award as an alternative to the vesting of the 2012 PSP as a Core award and on 1 June 2015
a Multiplier award of 186,063 was granted.
3. In 2016, Louise elected to roll over 50% of her 2013 PSP Core award. Therefore 50% of the award vested and 50% will be subject to
a five-year TSR condition. 50% of the 2013 PSP Multiplier award lapsed and 50% remains and will also be subject to the five-year
TSR condition.
4. PSP awards from 2016 onwards are granted under the 2016 PSP Plan and executive directors will be required to hold vested shares,
net of tax, for an additional two-year holding period. The award granted in 2016 will have a holding period to 15 July 2021.
GovernanceGovernanceBTG plc Annual Report and Accounts 2017 84
Remuneration
continued
Granted
in year
Exercised/
vested
Lapsed
–
–
–
–
–
–
–
–
–
–
3,108
–
–
–
–
–
–
–
–
–
Rolf Soderstrom
Date of grant/award
Share options
31 July 2009
Exercise price
(p)/market
price on date
of award (p)
At
1 April
2016
179.25
102,649
13 July 2010
201.30
129,514
6 July 2011
1 June 2012
Sharesave
19 July 2013
298.90
99,658
386.00
90,673
289.49
3,108
23 July 2015
504.40
1,784
19 July 2016
520.53
–
1,729
Total option awards
Performance
share awards
6 July 20111
1 June 20122
17 July 20133
9 June 2014
6 July 20141
1 June 20152
8 June 2015
15 July 20164
Total other awards
Total awards
286.60
380.54
395.10
395.10
604.00
604.00
657.50
709.50
699.50
699.50
704.70
103,913
91,974
136,864
136,864
92,661
92,661
155,869
137,961
82,411
82,411
–
–
–
–
–
–
–
–
–
–
–
126,385
103,913
–
136,864
–
–
–
155,869
–
–
–
–
–
–
–
136,864
–
–
–
–
–
–
–
Share
price on
exercise/
vesting (p)
600.00
694.88
671.00
694.88
At
31 March
2017
102,649
129,514
99,658
90,673
Exercise period/
vesting date
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
1,784
– 1 September 2016
to 1 March 2017
1 October 2018
to 1 April 2019
1,729 1 September 2019
to 1 March 2020
426,007
–
91,974
–
–
92,661
92,661
–
137,961
82,411
82,411
126,385
706,464
1,132,471
6 July 2016
1 June 2015
17 July 2016
17 July 2018
9 June 2017
9 June 2019
6 July 2016
1 June 2017
8 June 2018
8 June 2020
15 July 2019
1. In 2014, Rolf 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. In 2015, Rolf elected to receive a Multiplier award as an alternative to the vesting of the 2012 PSP as a Core award and on 1 June 2015
a Multiplier award of 137,961 was granted.
3. In 2016, Rolf did not elect to roll over any of his 2013 PSP Core award. Therefore all of his 2013 PSP Multiplier award lapsed and none of
his 2013 PSP awards will be subject to the five-year TSR condition.
4. PSP awards from 2016 onwards are granted under the 2016 PSP Plan and executive directors will be required to hold vested shares,
net of tax, for an additional two-year holding period. The award granted in 2016 will have a holding period to 15 July 2021.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 85
Share options and performance shares were granted for nil consideration. The price used for calculating the number of
shares awarded under the PSP 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 are normally satisfied using new issue shares. The Group’s share plans comply with recommended guidelines
on dilution limits and the Group has always operated within these limits. Assuming none of the extant options lapse
and will be exercised and, having included all exercised options, the Group has utilised 3.7% of the 10% in ten years and
3.2% of the 5% in ten years in accordance with the Association of British Insurers (ABI) guidance on dilution limits.
Directors’ 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 (or at the discretion of the pension fund trustees and subject to certain conditions being
met, a partner who is not a spouse) 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 £10,542 (2016: £10,458) to the Fund, representing 7% of her salary up to the
earnings cap and the Group contributed £59,111 (2016: £52,141).
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)
Executive Directors are required to build and maintain a holding of Group shares worth at least 250% of salary in the
case of the CEO and 200% of salary in the case of the CFO. As at the date of this report they have already met such
requirements.
Vested unexercised
market value options
Subject to
performance conditions
Guideline met?
Yes
Yes
Options
662,040
422,494
PSP
1,260,648
706,464
Options
–
–
Directors
Louise Makin
Rolf Soderstrom
Garry Watts
Giles Kerr
Ian Much
James O’Shea
Richard Wohanka
Susan Foden
Graham Hetherington
Beneficially owned at 31 March 2017
and at the date of this report
704,127
287,336
10,000
–
–
–
26,500
–
–
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.
GovernanceGovernanceBTG plc Annual Report and Accounts 2017 86
Remuneration
continued
Percentage increase in the remuneration of the Chief Executive Officer
CEO
– Salary
– Benefits
– Bonus
Average per UK employee1
– Salary
– Benefits
– Bonus2
% change from
2016 to 2017
10.9
(6.2)
82.9
4.6
(5.8)
1.1
1. 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.
2. UK employee bonus based on estimated average payout for 31 March 2017.
Total shareholder return
The performance of the Group’s ordinary shares compared with the FTSE 250 (the Index) for the eight-year period
ended on 31 March 2017 is shown in the graph below.
Source: Datastream (Thomson Reuters)
)
d
e
s
a
b
e
r
(
)
£
(
e
u
l
a
V
700
600
500
400
300
200
100
31 March
2009
31 March
2010
31 March
2011
31 March
2012
31 March
2013
31 March
2014
31 March
2015
31 March
2016
31 March
2017
BTG
FTSE 250
This graph shows the value, by 31 March 2017, of £100 invested in BTG on 31 March 2009, compared with the value of £100 invested in the
FSE 250 Index on the same date.
The other points plotted are the values at intervening financial year-ends.
The Group 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 2017 was 615.5p. During the year the share price ranged
from a low of 534.5p to a high of 728.0p.
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
1,606
89%
100%
2016
3,759
75%
100%
2017
2,932
82%
51%
The chart above shows the total remuneration for the Chief Executive Officer during each of the financial years.
The total remuneration figure includes the annual bonus and LTIP awards that 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. 2017
reflects the vesting of the 2012 Core awards, the related 2015 Multiplier awards and the 2013 Core awards that were not
rolled forward in 2016.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017
87
Relative importance of spend on pay
The table below illustrates the change in expenditure by the Group on remuneration paid to all the employees of the
Group and distributions to shareholders from the financial year ended 31 March 2016 to the financial year ended 31
March 2017.
Overall expenditure on pay
Dividend plus share buyback
2017
£m
164.0
nil
2016
£m
116.2
nil
Percentage
Change
41%
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 the acquisition of Galil Medical.
How the 2016 policy will be applied in 2017 onwards
2017 salary review
Average increases for BTG’s UK employees for 2017 were 3%. The executive directors’ salaries were reviewed in March
2017 and the following increases took effect from 1 April 2017:
Louise Makin
Rolf Soderstrom
Salary as at
1 April 2017
£669,500
£407,714
Salary as at
1 April 2016
£650,000
£395,839
Increase %
3%
3%
Performance targets for the 2017 annual bonus
The bonus opportunity for 2017 will be 150% of salary for both directors and will continue to be based on corporate
financial (70% of the total bonus) and individual non-financial metrics (30% of the total bonus) as detailed in the policy
report on page 90.
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 targets will be based on three
financial metrics, being BTG product revenues (1/3 weighting), adjusted operating profit (1/3 weighting) and free
cash flow (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 ongoing commercial sensitivity.
The first 75% of salary of any bonus will be paid in cash, with any bonus paid in excess of 75% of salary compulsorily
deferred into shares for three years.
Performance targets for the 2017 PSP awards
The Committee’s policy is to grant executive directors annual PSP awards. The Committee intends to grant awards in
June 2017 at the level of 225% of salary to each executive director.
Targets for the PSP awards made during 2017/18 will be measured in the final year of the three year period (the 2019/20
financial year) and are as follows:
Below threshold
Threshold
Between Threshold
and stretch
Stretch
Adjusted EPS in the year ending
31 March 2020
Less than 29p
29p
29p to 39.5p
39.5p or higher
TSR relative to the constituents of the
FTSE 250 over three financial years
ending 31 March 2020
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
Percentage of each
element that vests
0%
25%
25% to 100%
100%
The Committee considered these to be appropriately stretching targets having regard to the anticipated expiry of royalty
licences, ongoing investment in R&D and an increase in the Group’s medium-term effective tax rate. Targets have been
set assuming constant currency.
Executive Directors will be required to hold vested shares, net of tax, for a further two-year holding period.
GovernanceGovernanceBTG plc Annual Report and Accounts 2017 88
Remuneration
continued
Value of remuneration packages at different levels of performance
The Group’s policy results in a significant portion of remuneration received by executive directors being dependent on
Group 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.
s
0
0
0
£
’
£3,500
£3,000
£2,500
£2,000
£1,500
£1,000
£500
£0
£1,683
22%
30%
48%
£804
100%
£3,315
45%
30%
25%
£490
100%
Minimum
Target
Maximum
Minimum
£2,019
45%
30%
25%
Maximum
£1,025
22%
30%
48%
Target
Louise Makin, Chief Executive Officer
Rolf Soderstrom, Chief Financial Officer
Fixed Pay
Bonus
LTIP
Assumptions
Minimum = fixed pay only (salary + benefits + pension).
On-Target = 50% vesting of the annual bonus (75% of salary) and 25% vesting of the PSP award (56.25% of salary).
Maximum = 100% vesting of the annual bonus (150% of salary) and 100% vesting of the PSP award (225% of salary).
— Salary levels (on which other elements of the package are calculated) are based on those as at 1 April 2017.
— The value of taxable benefits is based on the cost of supplying those benefits (as disclosed) for the year ended
31 March 2017 excluding expenses incurred in their role as a director as these cannot be anticipated in advance.
— Pension levels have been estimated at 20% of base salary levels.
— 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.
— No account has been taken of share price growth or dividends on vested shares.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 89
Non-executive director 2017 remuneration
Set out in the table below are the fees paid for the year ended 31 March 2017 and proposed fees for the year ending 31
March 2018.
Director
Chairman1
Non-executive director
Senior independent director fee
Audit Committee chairmanship fee
Remuneration Committee chairmanship fee
As from
1 April 2017
£
235,000
53,560
5,000
10,000
10,000
As from
1 April 2016
£
235,000
52,000
5,000
10,000
10,000
% increase
0%
3%
0%
0%
0%
1. The fee is fixed until 31 December 2017, with no additional fee paid for his role as Chair of the Nomination Committee
Shareholder voting at the Annual General Meeting
At last year’s Annual General Meeting held on 14 July 2016, the following votes were received from shareholders:
Votes cast in favour
Votes cast against
Total votes cast
Abstentions
Votes cast in favour
Votes cast against
Total votes cast
Abstentions
Votes cast in favour
Votes cast against
Total votes cast
Abstentions
Remuneration Report (votes)
321,092,715
3,540,586
324,633,301
1,750,366
Remuneration Policy (votes)
322,172,730
3,654,672
325,827,402
543,261
Approve PSP (votes)
322,103,171
3,712,538
325,815,709
567,958
Percentage of eligible votes
98.91%
1.09%
100%
Percentage of eligible votes
98.88%
1.12%
100%
Percentage of eligible votes
98.86%
1.14%
100%
Approval
This report was approved by the Board on 15 May 2017 and signed on its behalf by
Ian Much
Chairman of the Remuneration Committee
GovernanceGovernanceBTG plc Annual Report and Accounts 2017 90
Remuneration
continued
Directors’ Remuneration Policy Report
This part of our Directors’ remuneration report sets out the remuneration policy for the Group that has been prepared
in accordance with Part 4 of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008 (as amended). This policy was approved by shareholders at the 2016 AGM and applies
from the beginning of the 2015/16 financial year until the 2019 AGM.
The Policy enables the Group to offer a package of rewards that:
— is sufficiently competitive to enable the Group to attract and retain the management talent it needs to ensure the
Group is successful;
— supports the achievement of the Group’s strategy by providing the potential to receive significant rewards linked
to the long-term performance of the Group;
— 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 Group’s changing needs as it grows and the strategy evolves.
The Committee believes that the salary, annual bonus with deferral, long-term incentives with a five-year time horizon
from grant to potential sale of vested shares, demanding share ownership guidelines, and forfeiture provisions,
together 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 specifics of the Directors’ Remuneration Policy are as follows1,3.
Element
Base salary
Benefits
Purpose and
link to strategy
Provide market
competitive fixed
remuneration that takes
account of individual
responsibilities, and
enables the Group
to recruit and retain
executives that are capable
of delivering the Group’s
strategic objectives.
Provide a competitive
package of benefits that
assists with attracting and
retaining employees.
Operation
Maximum
Performance targets
Set at a broadly mid-market
level, salaries are normally
reviewed annually with effect
from 1 April taking account
of individual responsibilities,
experience and performance.
Other than to reflect a change
in the size and complexity of
the role or Group or to reflect
experience in the role, salary
increases will normally be
no higher than the average
increases taking place across
the Group (taking into account,
where appropriate, the relevant
pay groups).
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 87.
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 Group which may vary from
year to year.
These mainly 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.
Any reasonable business-
related expenses (including tax
thereon) can be reimbursed
if determined to be a
taxable benefit.
Executive directors are
eligible for other benefits
that are introduced for the
wider workforce on broadly
similar terms.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 Element
Annual bonus
Purpose and
link to strategy
A reward that is linked
to the Group’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.
91
Operation
Maximum
Performance targets
All employees, including the
executive directors, participate.
Maximum of 150% of salary for
executive directors.
Paid as a mix of cash and
deferred shares under the
DSBP. From 2016, the first 75%
of salary of any bonus will be
paid in cash, with any bonus
paid in excess of 75% of salary
compulsorily deferred into
shares for three years.
DSBP awards are structured as
conditional awards over shares.
From 2016, both the cash and
deferred portion of bonuses
and are subject to clawback
and malus.6
Dividend equivalents may be
paid on the shares awarded as
part of the DSBP.
Long-term
incentives
Maximum award of
225% of salary.
Support the strategy
to transition the
business from an
R&D-focused specialty
pharmaceuticals 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.
Annual awards of performance
shares are made under the
PSP, vesting of which is subject
to the achievement of targets
measured over a minimum of
three financial years.2,5
Starting with the awards
granted in 2016, a two year
holding period applies upon
vesting of awards, during
which shares may not be sold
(other than to pay tax and
national insurance).
Awards of performance shares
are subject to clawback and
malus.6
Executives are entitled to
receive dividend equivalents in
respect of vested awards.
Pension
Provide competitive
retirement benefits
that reward sustained
contribution.
N/A
Defined benefit provision:
1/60ths accrual up to cap
(reviewed annually), normal
retirement age of 60.
Defined contribution or cash
allowance: Up to
25% 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.
Performance targets for the executive
directors are set annually by the
Committee and focus on Group
financial performance measures such
as revenue, trading profit, operating
cash flow (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 normally 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.
Awards prior to 2016 are subject to
conditions that are described in the
Annual Report on remuneration on
pages 77 to 89.
Awards will be granted subject to a
combination of financial and total
shareholder return measures, tested over
a period of at least three years.
The Committee may introduce or
reweight performance measures so that
they are directly aligned with the Group’s
strategic objectives for each performance
period.
No more than 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.
The Committee has the discretion in
certain circumstances to grant and/
or settle an award in cash. In practice
this will only be used in exceptional
circumstances for executive directors.
GovernanceGovernanceBTG plc Annual Report and Accounts 2017 92
Remuneration
continued
Element
All-employee
share plans
Purpose and
link to strategy
Operation
Maximum
Performance targets
Encourages employees
to acquire shares in BTG,
increasing alignment with
shareholders.
Executive directors can
participate in BTG’s save-as-
you-earn scheme, which is
open to all UK employees.
Participation limits are those set
by the relevant tax authorities
from time to time.
N/A4
A US Internal Revenue Service
423 Plan with standard terms
is operated for US employees.
Shareholding
guidelines
Provide alignment
between executives and
shareholders.
Executive directors are
required to build significant
shareholdings in the Group.7
CEO: 250% of salary.
N/A
CFO: 200% of salary.
Executive directors may sell
vesting shares to meet tax and
national insurance liabilities.
In addition, provided they have
achieved and continue to meet
the applicable shareholding
guideline level, they will be
permitted to sell shares over
and above those required to
meet their tax liabilities and
national insurance liabilities
within 30-day periods after
either (i) the announcement
of the Group’s results and
completion of the related
investor road-show or (ii) the
date of subsequent vesting
of shares with respect to the
period to which those results
relate (in either case subject to
agreement with the Chairman
and any other legal restrictions
on share dealings).
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 2006 PSP. Awards granted under the 2006 PSP consist of a Core award and a Multiplier award and executive directors are able to
roll over 0%, 50% or 100% of any Core award that would vest in return for a Multiplier award that could increase or decrease the value
of the Core award, vesting after five years from the date of grant, subject to performance conditions. The full structure of these awards
is outlined in the policy approved at the 2013 AGM.
3. A description of how the Group intends to implement the policy set out in this table for 2017 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. All awards granted post 1 July 2011 under the DSBP, PSP and ESOP are subject to clawback and malus in the event of a material
misstatement of the financial results of the Group 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. The same principle was adopted in 2015 with
respect to the annual bonus.
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.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 93
Committee discretions within Policy
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 that 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 in
limited circumstances to adjust appropriately the
measures and/or targets and alter weightings.
Outstanding share incentive awards that remain
unvested or unexercised at the date of this report, as
detailed on pages 77 to 89 of the Annual Report on
remuneration, remain eligible for vesting or exercise
based on their original award terms.
Choice of performance measures
and approach to target setting
Annual bonus arrangements for the executive directors
are normally split between corporate financial and
individual non-financial objectives, with the financial
targets normally 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 growth goals. The 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 will normally
require the Group to maintain or improve on the prior
year performance, with the stretch target requiring
significant out-performance.
For awards granted under the PSP in 2017, the metrics
are split between adjusted EPS and relative TSR
outperformance of a general market index (for the 2017
awards this will be the 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 choice of financial metric,
comparator index for TSR and weighting between
each measure for awards will remain under review.
TSR is measured independently for the Committee by
New Bridge Street.
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 the remuneration policy. During the year the
Committee considered the application of the Policy to the
wider workforce to ensure individual and regional
requirements were adequately addressed. Executive
remuneration is set having regard to that of the wider
workforce subject to a benchmarking exercise at intervals to
ensure the overall objectives of retaining and motivating the
executive directors are addressed.
BTG’s workforce includes a high proportion of highly
qualified scientists, technicians and professionals who 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 increase awarded to BTG’s general
workforce for 2016/17 was 3%. General workforce
increases, effective June 2017, will range up to 15%,
enabling differentiation for individual performance
and geography.
BTG believes it is important to help all its employees
understand the value of their pay and the impact of any
changes to these arrangements. To support this we offer
multiple opportunities for employees to comment on and
our leadership to engage in discussions about our pay
practices. Our employees obtain updates or can provide
feedback at the point of joining BTG, during their
performance and pay review discussions, at the annual
benefits enrolment window and when completing the
employee engagement survey. Our leadership reviews pay
on a routine basis during the annual budget and
compensation planning cycles.
GovernanceGovernanceBTG plc Annual Report and Accounts 2017 94
Remuneration
continued
As a growing business we constantly monitor the
external market to ensure we remain competitive and
relevant, which inevitably results in the evolution of our
pay offering. To ensure our employees remain connected
with any changes we ensure they are engaged in
consultations (where relevant), receive updates via our
Company-wide meetings or receive specific
communications about proposed and legislative
changes. Our leadership are regularly engaged in
discussions on general and specific individual
competitiveness as well as proposed changes.
Finally, where specific legislation requires broader
public disclosure, this will also be shared with our
employees i.e. Gender Pay, and at the highest level our
executive pay and broader pay approach is available for
all to review in the Annual Report.
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 Group. A lower incentive
opportunity is available below executive level, with
specific levels driven by market comparators and the
impact of the role.
As explained above, salaries for the Group’s wider
workforce are benchmarked externally against
comparable companies within the sector and wider
industry. The Group 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 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 Group 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
Group 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 (50% of
salary) required than for executive directors. In order to
encourage wider employee share ownership, the Group
operates a Sharesave Plan in the UK, with an
international section for employees in Australia,
Germany, France, Spain and Canada, and a Stock
Purchase Plan in the US. In 2017, we will explore
extending this offering into Hong Kong, Israel
and Taiwan.
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 them.
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.
In developing its proposals for the changes to the
remuneration policy approved at the 2016 AGM, the
Committee engaged with its largest shareholders and
major representative bodies regarding changes to the
executive directors’ remuneration arrangements, in
particular the changes to the long-term incentive
arrangements and the repositioning of the CEO’s salary.
Approach to recruitment and promotions
The remuneration package for a new director will be set
in accordance with the terms of the Group’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 director will be set to
reflect their skills and experience, the Group’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.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 95
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 director is adversely affected by taxation due to
their employment with the Group. Legal fees and other
costs incurred by the individual may also be met by
the Group.
The ongoing incentive opportunity offered to new
recruits will be in line with that offered to existing
directors. Different measures and targets under the
bonus plan or the PSP may be set initially taking
account of the responsibilities of the individual and the
point in the financial year at which they join. A new
employee may be granted normal annual PSP awards in
the first year of employment. In addition, the Committee
may offer additional cash and/or share-based elements
to assist with recruitment (for example to buy out
existing entitlements) when it considers these to be in
the best interests of the Group and its shareholders.
Existing arrangements will be used to the extent
possible (subject to the limits set out in the Policy),
however, the Committee retains discretion to use the
flexibility provided by the Listing Rules to make such
awards. Such awards/payments would take account of
remuneration relinquished when leaving the former
employer and would reflect (as far as possible) the value,
nature and time horizons attached to that remuneration
and the impact of any performance conditions. Awards
may be granted in cash on recruitment if the Group is in
a prohibited period at the joining date. Shareholders will
be informed of any such awards/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 timing of 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.
Legacy arrangements
For the avoidance of doubt, authority is given to the
Group 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 or subsequently agreed
in line with the approved policy in force at that time.
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 Group
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 received. Louise Makin received fees of £68,000 for
being on the Board of Intertek Group during the year to
31 March 2017 (2016: £66,333) and £27,000 for being on
the Board of Woodford Patient Capital Trust during the
year to 31 March 2017 (2016: £25,581). 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
Notice period
Termination
payment
Remuneration
entitlements
Louise Makin – 19 October 2004.
Rolf Soderstrom – 4 December 2008.
12 months from both the Group and
from the executive.
The Group may terminate the
contracts of the executive directors
with immediate effect by making a
payment in lieu of notice.
As the executive directors’ service
contracts were put in place more than
eight years ago they do 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.
Louise Makin’s contract contains
the following remuneration-related
entitlements:
— salary, membership of Group
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.
GovernanceGovernanceBTG plc Annual Report and Accounts 2017 96
Remuneration
continued
The Group’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 Group 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 Group. Provisions permitting the Group
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 Group
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 Group’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 PSP
awards will normally be to permit awards to remain
outstanding until the end of the original performance
period (although it will have discretion to allow awards
to vest on cessation), 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 prorating and the performance
conditions in certain circumstances. Multiplier awards
granted under the PSP approved in 2013 would not be
subject to prorating. 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. Unvested deferred
bonus share awards held by “good leavers” will not be
time pro-rated.
The Group can pay any statutory redundancy in
addition to contractual entitlements and the Committee
will have authority to settle legal claims against the
Group (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.
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
Graham Hetherington
Date of first appointment
1 January 2012
1 October 2007
1 August 2010
2 April 2009
1 January 2013
1 March 2015
1 August 2016
Notice period (months)
6
3
3
3
3
3
3
Date of expiry of current contract
31 December 2017
30 September 2017
31 July 2017
31 March 2018
31 December 2018
28 February 2018
31 July 2019
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 97
Non-executive directors’ and Chairman’s fees
The table below summarises the Group’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.
Performance
targets
N/A
Maximum
The
maximum
level of fees
is set in the
Articles of
Association
Additional fees may be paid where there is a material increase in
the time commitment and responsibilities 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 (other than limited
benefits relating to travel, accommodation and hospitality provided
in relation to the performance of any directors’ duties and any
tax thereon).
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 Group’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.
GovernanceGovernanceBTG plc Annual Report and Accounts 2017 98
Directors’ report
Other statutory information
The directors present their report together with the
financial statements and the independent auditor’s
report for the year ended 31 March 2017.
Principal Activity
The principal activity of the Group is the business
of healthcare: focusing on Interventional Medicine
therapies for cancer, severe emphysema, severe
bloodclots and varicose veins, and Specialty
Pharmaceuticals for acute care uses, and a
licensing business.
Strategic Report
The Group 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 Group 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 which can be found on pages
6 to 37 and incorporated into this report by reference:
— The Chairman’s Statement on page 6, the
Chief Executive’s review on pages 8 and 9 and
the Industry Overview on page 10 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 68 to 70.
— 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 26 to 29.
This information is prepared solely to assist
shareholders to assess the Group’s overall strategy,
the risks inherent in it and the potential for the strategy
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 website: www.btgplc.com. Notwithstanding the
references made in this Annual Report and Accounts
to the Group’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 and Accounts.
Results and dividends
The results for the year and the financial position at
31 March 2017 are shown in the Consolidated Income
Statement on page 110 and the Consolidated Statement
of Financial Position on page 112. The directors do not
recommend the payment of a dividend for the year
(15/16: nil). The results of the Group for the year are
explained further on pages 30 to 38.
Directors and their powers and interests
The directors of the Group at the date of this report,
together with their biographical details and dates of
appointment, are shown on pages 42 and 43.
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 (the Code), all directors of the
Company will stand for election or re-election annually.
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 72 to 97. 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 71.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 99
Environmental matters
The environmental impact data contained in the table below includes for the first time the addition of Galil Medical
locations in Minnesota, USA and Yokneam, Israel. As a Group, BTG is recycling and incinerating more of its waste
products and sending less to landfill. CO2 per production unit increased during the year due to lower production
volumes in Wales and Scope 1 emissions reduced as a milder winter resulted in a corresponding reduction in oil
consumption at that site.
Environmental Impact
Data Point
Total CO2 equivalent generated (tonnes)1-5
Total CO2 equivalent generated (tonnes), scope 11-5
Total CO2 equivalent generated (tonnes), scope 21-5
Total production units1-5
Total Kg CO2 generated per production unit1-5
Total employees8
Total Kg CO2 generated per employee1-5
Total electricity consumed (MWh)1-5
Total electricity consumed per production unit1-5
Total waste from production and research sites (tonnes)6
Waste recycled6
Hazardous waste – incinerated or other treatment6
Waste to landfill6
Total water consumed production and research sites (m3)7
16/17
6,989
1,571
5,418
276,691
25.26
1,558
4,383
9,879
0.0357
687.9
274.3
200.0
213.6
39,132
2015/16
6,349
1,627
4,722
270,436
23.48
1,370
4,634
8,155
0.0302
575
207
133
235
37,205
% Change
10
(3)
15
2
8
14
(5)
21
18
20
33
50
(9)
5
Notes
This data includes all BTG facilities including data from Galil Medical acquisition sites since June 16.
1. GHG protocol used for data. Scope 3 emissions have not been calculated.
2. Covers 100% of BTG controlled operations; third-party manufacturing has not been included in either the carbon dioxide generated or
the intensity figures.
3. Data from operational sites with more than 20 employees based on energy bills.
4. Emissions from field based staff and smaller offices estimated based on average US consumption – as this is where the majority of
employees are based, 20% of data is estimated.
5. Conversion factors used: Defra/DECC 2016 and government websites for operations in countries outside the UK.
6. Waste from our manufacturing and research sites in Australia, USA, Israel, Germany and UK.
7. Water consumption measured at our production sites in Australia, USA and UK.
8. Employee number includes all employees, plus contractors and temporary workers directly supervised by BTG employees.
GovernanceGovernanceBTG plc Annual Report and Accounts 2017
100
Directors’ report
Other statutory information continued
Share capital and shareholders
As at 31 March 2017 the issued share capital of the
Company was £38,512,753, divided into 385,127,525
shares of 10p each. During the year the share capital
increased by 2,135,948 shares due to the exercise and
vesting of share awards by employees and former
employees under the Company’s employee share
schemes. 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 15 to the financial statements
on page 135. At 31 March 2017, the Company had
8,764 shareholders (2016: 9,178). Further details of
shareholdings and Company reporting dates may be
found on page 159.
The 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.
Details of outstanding share options and awards are set
out in Note 19 to the financial statements on pages 140
to 142.
As at 2 May 2017, the Company had been notified
of the following interests held, directly or indirectly,
in 3% or more of the Group’s issued share capital.
Invesco Perpetual Asset Management 83,770,871
44,173,492
Novo A/S
40,720,021
Woodford Investment Management
21,888,138
AXA Investment Managers
17,994,765
Schroder Investment Management
15,692,906
Aviva Investors
13,922,558
Standard Life Investments
Shareholding % holding
21.75
11.47
10.57
5.68
4.67
4.07
3.62
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 are available on the Group’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 Group, 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 Group and its directors or
employees that provide for compensation for loss of
office or employment following a takeover of the Group.
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 £87.8m (2015/6: £77.2m) 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
21 to the accounts on pages 143 to 145.
Going concern
The Group’s business activities together with the
factors affecting its performance, position and future
development are set out within the Strategic Report on
pages 6 to 37.
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 Group has adequate resources to
continue to operate for the next 12 months. For this
reason they continue to adopt the going concern basis
in preparing the financial statements.
GovernanceBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017 101
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.
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
Group’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 Group’s auditor is
aware of that information.
Auditor
Resolutions will be proposed at the forthcoming AGM,
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
15 May 2017
Viability Statement
In accordance with the 2014 edition of the Code,
directors are also required to provide a broader
assessment of viability over a longer period.
This statement, assessing the viability of the Group
over the three-year period of that assessment can be
found on page 35 of the Strategic Report.
Political donations
The Group did not make any political donations during
the financial year (2015/16: nil).
Respecting Diversity
Our employees come from a variety of cultures,
experiences and backgrounds. They are valued for their
varied perspectives and judged solely by their abilities,
behaviour, performance and potential. As an Equal
Opportunity Employer, we consider employees and
applicants for employment without regard to race,
colour, religion, sex, national origin, or protected status.
And we will not discriminate on the basis of disability.
Data on gender
Number of females who are:
Employees
Senior Managers
Leadership Team Members
Board Directors
2016/17
678 (48%)
71 (34%)
4 (33%)
2 (22%)
2015/16
591 (58%)
52 (35%)
3 (25%)
2 (25%)
2017 Annual General Meeting
The AGM of the Company will be held at 10.30 am on
13 July 2017 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.
The Notice convening the meeting is distributed
separately to shareholders at least 20 working days
before the meeting. It is also available on the Group’s
website: www.btgplc.com/investors/reports-and-
presentations. The letter accompanying the AGM
Notice includes full details of the resolutions.
GovernanceGovernanceBTG plc Annual Report and Accounts 2017
102
Statement of directors’ responsibilities in respect of
the Annual Report 2017 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 Group
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 issuer 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 98 to 101,
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:
Dame Louise Makin
Chief Executive Officer
Rolf Soderstrom
Chief Financial Officer
15 May 2017
The directors are responsible for preparing the Annual
Report 2017 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 judgements 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 Group’s website. Legislation in the
UK governing the preparation and dissemination of
financial statements may differ from legislation in
other jurisdictions.
GovernanceBTG plc Annual Report and Accounts 2017 103
Financials
Contents
104 Independent auditor’s report to
the members of BTG plc only
110 Consolidated income statement
111 Consolidated statement
of comprehensive income
112 Consolidated statement
of financial position
113 Consolidated statement
of cash flows
114 Consolidated statement
of changes in equity
115 Notes to the consolidated
financial statements
152 Company financial statements
Statement of financial position
153 Statement of cash flows
153 Statement of changes in equity
154 Notes to the Company
financial statements
157 Five-year financial record
159 Shareholder information
BTG plc Annual Report and Accounts 2017FinancialsFinancials 104104
Independent 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
(‘the Group’) for the year ended 31 March 2017 set out on
pages 110 to 156. In our opinion:
Overview
Materiality:
group financial
statements as
a whole
Coverage
Risks of material
misstatement
Recurring risks
— 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 2017 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;
— 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.
£4.7m (2016: £4.0m)
0.82% (2016: 0.93%) of Revenue
95%
(2016: 88%) of Revenue
vs 2016
Recoverability of other
intangible assets and goodwill
Recognition of deferred tax assets
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 105105
2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements, the risks of material misstatement that had the
greatest effect on our audit, in decreasing order of audit significance, were as follows. We note the risk surrounding the
Department of Justice’s (DoJ) investigation included in our 2016 report is no longer relevant as this matter was agreed
and settled with the US government in the period. We also note that in the prior year the significant risk over
recoverability of intangible assets also included goodwill. Goodwill has been removed due to the significant headroom
on the prior year impairment review.
The risk
Our response
Recoverability of
intangible assets
(£678.9m; 2016: £599.2m)
Refer to page 61 (Audit
Committee Report), page
119 (accounting policy) and
page 132 (financial
disclosures).
Forecast-based valuation
The assessment of the
recoverability of intangible
assets requires significant
judgement in determining the
future prospects, results and
forecast cash flows of the cash
generating units to which other
intangible assets are allocated.
Due to the challenges in
expanding reimbursement
coverage for Varithena® and
PneumRx® Coils and the risk
in obtaining required clinical
and regulatory approval for
PneumRx® Coils in the
U.S.,these assets remain
relatively more sensitive to
impairment. In addition, the
litigation risk for the Vistogard
asset means it is also relatively
more sensitive to impairment.
There is inherent uncertainty
involved in forecasting and
discounting future cash flows,
which are the basis of the
assessment of recoverability.
The carrying values of
intangible assets for
Varithena®, PneumRx® Coils
and Vistogardat 31 March 2017
were £18.8m, £208.6m and
£6.4 m respectively.
Our procedures included:
— Our sector experience: Assess the completeness
and existence of the Group’s assessment of
potential impairment indicators and independently
perform our own assessment of these indicators
through inquiry of the business area heads,
assessment of performance in the year, and
research of publicly available information.
— Methodology choice: Evaluated the process by
which the Group prepared its cash flow forecasts
and compared them against the latest Board
approved plans and forecasts.
— Our sector experience: Using our own valuation
specialists to critically challenge the
appropriateness of the discount rates used by the
Group and benchmark them to those used by an
external peer group.
— Historical comparisons: Critically challenge the
assumed revenue projections by reference to those
achieved historically, and external market data,
where available, in terms of market size and
expectations of market share.
— Historical comparisons: Critically assess the
other assumptions used by the Group using our
own assessments and a comparison to recent
performance in relation to key inputs such as
gross margins. We specifically assessed the
probability of FDA approval of PneumRx® Coils
and the likelihood of a successful defence in the
Wellstat litigation.
— Sensitivity analysis: Apply sensitivities to the
assumptions used by the Group in impairment
calculations to evaluate the impact on the
headroom for each CGU.
— Assessing transparency: Assess whether the
Group’s disclosures about the sensitivity of the
impairment assessment to changes in key
assumptions that have a significant risk of
resulting in a material adjustment to the carrying
value of the intangible assets in the next financial
year are appropriate.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 106106
Independent auditor’s report
to the members of BTG plc only
continued
The risk
Our response
Recognition of deferred
tax assets
Refer to page 61 (Audit
Committee Report), page
121 (accounting policy) and
page 129 (financial
disclosures).
Forecast-based valuation:
The Group has significant tax
losses which have been
acquired as part of business
combinations or from past
business performance. There is
inherent uncertainty involved
in assessing both the
availability of losses for use and
in forecasting future taxable
profits, which determines the
extent to which deferred tax
assets are recognised.
Our procedures included:
— Our sector experience: Assess whether the use
of tax losses within the group is in line with
applicable tax laws, and with particular focus on
areas which directly impact the carrying value of
deferred tax assets; the likelihood of generating
sufficient future taxable profits, and the ability to
utilise tax losses.
— With the assistance of our tax specialists, in
relation to previous acquisitions, we considered
previous assessments and conclusions for the
continued appropriateness of deferred tax asset
recognition. In relation to the Galil Medical
acquisition during the period, we critically
assessed the Group’s analysis of the historic
losses acquired.
— Evaluate the appropriateness of the Group’s key
assumptions and estimates, with the assistance
of our tax specialists, in particular the likelihood
of generating sufficient future taxable profits to
support the recognition of deferred tax assets, with
reference to recent product launches, performance
trends and acquisitions.
— Assessing transparency: Assess whether the
Group’s disclosures around the judgements and
estimates involved in the recognition of deferred
tax assets are appropriate.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 107107
3. Our application of materiality and an
overview of the scope of our audit
Materiality for the Group financial statements as a whole
was set at £4.7 million (2016: £4.0 million), determined
with reference to a benchmark of Group revenue, of
which it represents 0.82% (2016: 0.93%). We consider
Group revenue to be the most appropriate benchmark as
revenue remains the key performance indicator of the
group monitored by stakeholders.
We reported to the Audit Committee any corrected
or uncorrected misstatements identified exceeding
£0.2m (2016: £0.2m), in addition to other identified
misstatements that warranted reporting on
qualitative grounds.
Of the Group’s 28 (2016: 25) reporting components, we
subjected 9 (2016:14) to audits for Group reporting
purposes and 1 (2016: 1) to specified risk-focused audit
procedures on key working capital captions. The latter
component was not individually financially significant
enough to require an audit for Group reporting purposes,
but did present specific individual risks that needed to
be addressed. In aggregate, the components within the
scope of our work accounted for the following
percentages of the group’s results: 95% (2016: 88%) of
total Group revenue; 90% (2016: 95%) of Group profit
before tax; and 96% (2016: 96%) of the Group’s
total assets.
The group team instructed component auditors as to the
significant areas to be covered and the information to be
reported back. The Group team approved the component
materialities, which ranged from £0.1m to £3.2m (2016:
£0.2m to £3.9m), having regard to the mix of size and
risk profile of the Group across the components.
The Group team performed the work on recoverability
of intangible assets and recognition of deferred tax
assets. Of the 10 components noted above, two are
based in the USA, one in Australia and five within sites
in the UK (England and Wales), these were all audited
by KPMG component teams. The remaining two
components were audited by the group team.
The group team visited three (2016: two) component
locations in the USA, England and Wales. Video or
telephone conference meetings were also held with the
component auditors including those that were not
physically visited by the group team (Australia). At these
visits and meetings, the findings reported to the Group
team were discussed in more detail, and any further
work required by the group team was then performed by
the component auditor.
Revenue
£570.5m (2016: £447.5m)
1
2
1 Revenue
2 Group materiality
Materiality
£4.7m (2016: £4.0m)
£4.7m
Whole financial
statements materiality
(2016: £4.0m)
£3.2m
Range of materiality
at 10 components
(£0.1m-£3.2m) �
(2016: £0.2m to £3.9m)
£0.2m
Misstatements reported
to the audit committee
(2016: £0.2m)
Group
Revenue
Group profit
before tax
1
1
90%
(2016: 95%)
94
89
11
1
95%
(2016: 88%)
87
84
Group
total assets
2
1
96%
(2016: 96%)
95
94
Full scope for group audit purposes 2017
Specified risk-focused audit procedures 2017
Full scope for group audit purposes 2016
Specified risk-focused audit procedures 2016
Residual components
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials
108108
Independent auditor’s report
to the members of BTG plc only
continued
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 is consistent
with the financial statements.
— Based solely on the work required to be undertaken
in the course of the audit of the financial statements
and from reading the Strategic Report and the
Directors’ Report:
— we have not identified material misstatements in
those reports; and
— in our opinion, those reports have been prepared in
accordance with the Companies Act 2006.
5. We have nothing to report on the
disclosures of principal risks
Based on the knowledge we acquired during our audit,
we have nothing material to add or draw attention to in
relation to:
— the Directors’ statement of viability on page 35,
concerning the principal risks, their management,
and, based on that, the Directors’ assessment and
expectations of the Group’s continuing in operation
over the three years to 31 March 2020; or
— the disclosures in note 1 of the financial statements
concerning the use of the going concern basis
of accounting.
6. 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 position and 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’ statements, set out on page 100 and
101, in relation to going concern and longer-term
viability; and
— the part of the Corporate Governance Statement on
page 44 relating to the company’s compliance with
the eleven provisions of the 2014 UK Corporate
Governance Code specified for our review.
We have nothing to report in respect of the above
responsibilities.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 109109
Scope and responsibilities
As explained more fully in the Directors’ Responsibilities
Statement set out on page 102, 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
Canary Wharf
London E14 5GL
15 May 2017
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 110110
Consolidated
income statement
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Research and development
Other operating income
Amortisation of acquired intangible assets
Acquisition and reorganisation costs
Operating profit
Financial income
Financial expense
Profit before tax
Tax credit
Profit for the year
Basic earnings per share
Diluted earnings per share
All activities arose from continuing operations.
Year ended
31 March
2017
£m
570.5
(179.9)
390.6
(206.6)
(87.8)
4.4
(42.0)
(1.1)
57.5
3.3
(29.2)
31.6
2.0
33.6
Year ended
31 March
2016
£m
447.5
(140.8)
306.7
(141.4)
(77.2)
3.4
(35.0)
–
56.5
4.4
(3.4)
57.5
3.0
60.5
8.7p
8.6p
15.8p
15.6p
Note
4
4
5
7
7
8
9
9
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 111111
Consolidated 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 (loss)/gain on defined benefit pension scheme
Deferred tax credit/(charge) on defined benefit pension scheme asset
Other comprehensive income for the year
Total comprehensive income for the year
The notes on pages 115 to 151 form part of these financial statements.
Note
18
Year ended
31 March
2017
£m
33.6
Year ended
31 March
2016
£m
60.5
91.7
(5.2)
4.1
90.6
124.2
18.7
3.3
(1.1)
20.9
81.4
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 112112
Consolidated statement
of financial position
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax asset
Employee benefits
Other non-current assets
Current assets
Inventories
Trade and other receivables
Other current assets
Cash and cash equivalents
Total assets
EQUITY
Share capital
Share premium
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
Current liabilities
Trade and other payables
Derivative financial instruments
Corporation tax payable
Total liabilities
Total equity and liabilities
31 March
2017
£m
31 March
2016
£m
Note
10
11
12
8
18
13
14
15
15
16
8
16
17
8
225.6
678.9
40.1
5.3
17.2
1.7
968.8
58.4
125.7
2.7
155.5
342.3
1,311.1
38.5
435.4
317.8
119.8
68.4
979.9
8.5
157.2
165.7
152.5
7.9
5.1
165.5
331.2
1,311.1
187.9
599.2
35.7
6.8
19.3
2.4
851.3
46.5
106.5
4.1
140.4
297.5
1,148.8
38.3
434.8
317.8
28.1
28.7
847.7
29.1
147.0
176.1
116.2
3.0
5.8
125.0
301.1
1,148.8
The notes on pages 115 to 151 form part of these financial statements.
The financial statements were approved by the Board on 15 May 2017 and were signed on its behalf by:
Dame Louise Makin
Chief Executive Officer
Rolf Soderstrom
Chief Financial Officer
Registered No: 2670500
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 113113
Consolidated statement
of cash flows
Profit after tax for the year
Tax credit
Financial income
Financial expense
Operating profit
Adjustments for:
Amortisation and impairment of intangible assets
Depreciation and impairment on property, plant and equipment
Share-based payments
Pension scheme funding
Other non cash items
Cash from operations before movements in working capital
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Increase in provisions
Cash from operations
Settlement of foreign exchange forward contracts
Corporation tax paid
Net cash inflow from operating activities
Investing activities
Purchases of intangible assets
Purchases of property, plant and equipment
Acquisition of business, net of cash acquired
Other investing activities
Net cash outflow from investing activities
Cash flows from financing activities
Repayment of debt acquired on business combination
Proceeds of share issues
Other financing activities
Net cash outflow from financing activities
Increase 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 115 to 151 form part of these financial statements.
Note
8
7
7
11
12
18
11
12
26
26
15
Year ended
31 March
2017
£m
33.6
(2.0)
(3.3)
29.2
57.5
Year ended
31 March
2016
£m
60.5
(3.0)
(4.4)
3.4
56.5
46.7
6.6
8.5
(2.9)
0.9
117.3
(9.3)
(8.5)
2.1
0.1
101.7
(17.1)
(10.4)
74.2
(0.6)
(8.9)
(36.2)
0.4
(45.3)
(18.9)
0.8
(1.6)
(19.7)
9.2
140.4
5.9
155.5
38.0
6.6
6.7
(2.9)
3.1
108.0
(7.6)
(14.4)
14.7
1.1
101.8
–
(6.2)
95.6
(24.3)
(6.2)
–
0.6
(29.9)
–
1.1
(1.1)
–
65.7
73.8
0.9
140.4
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials
114114
Consolidated statement
of changes in equity
At 1 April 2015
Profit for the year
Foreign exchange translation differences
Remeasurements of the net defined benefit
pension scheme asset
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 and gifted to
the Employee Share Ownership Trust
Share-based payments
At 31 March 2016
At 1 April 2016
Profit for the year
Foreign exchange translation differences
Remeasurements of the net defined benefit
pension scheme asset
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 and gifted to
the Employee Share Ownership Trust
Share-based payments
At 31 March 2017
Share
capital
£m
38.2
Share
premium
£m
433.8
Merger
reserve1
£m
317.8
Other
reserves
£m
9.4
Retained
earnings
£m
(40.6)
–
–
–
–
–
0.1
–
–
38.3
Share
capital
£m
38.3
–
–
–
–
–
0.2
–
–
38.5
–
–
–
–
–
1.0
–
–
434.8
Share
premium
£m
434.8
–
–
–
–
–
0.6
–
–
435.4
–
–
–
–
–
–
–
–
317.8
Merger
reserve
£m
317.8
–
–
–
–
–
–
–
–
317.8
–
18.7
–
–
18.7
–
–
–
28.1
–
91.7
–
–
91.7
–
–
–
119.8
Other
reserves
£m
28.1
Retained
earnings
£m
28.7
–
1.1
Total
equity
£m
758.6
60.5
18.7
3.3
(1.1)
81.4
(0.1)
6.7
847.7
Total
equity
£m
847.7
33.6
91.7
(5.2)
4.1
124.2
60.5
–
3.3
(1.1)
62.7
(0.1)
6.7
28.7
33.6
–
(5.2)
4.1
32.5
–
0.8
(1.3)
8.5
68.4
(1.3)
8.5
979.9
The notes on pages 115 to 151 form part of these financial statements.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 115115
Notes 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
2017 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 15 May 2017.
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
No standards and interpretations issued by the EU
adopted in the year had a significant impact on the Group.
Accounting standards issued but not
yet effective
IFRS 15, ‘Revenue from contracts with customers’, was
issued by the IASB in May 2014 and will be implemented
by the Group from 1 April 2018. The Standard contains a
new set of principles on when and how to recognise and
measure revenue as well as new requirements related to
disclosures. The new standard replaces IAS 18 Revenues
and related interpretations. The Group does not anticipate
that the new standard will have a material effect on the
Group’s consolidated financial statements.
IFRS 9 ‘Financial instruments’ was issued by the IASB
in July 2014, effective for accounting periods beginning
on or after 1 January 2018. The Group is currently
assessing the impact of IFRS 9 on the Group’s
consolidated financial statements.
IFRS 16 ‘Leases’ was issued by the IASB in January
2016, effective for accounting periods beginning on or
after 1 January 2019. The Group is currently assessing
the impact of IFRS 16 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 next twelve months. 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 equivalents, together with its 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 21 to the
Accounts and are discussed in the Strategic Report on
pages 6 to 38. 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:
— Many of the Group’s products are life-saving in
nature, providing some protection against an
uncertain economic outlook;
— BTG has a £100m multi-currency revolving credit
facility (RCF), with an option to extend this RCF by
a further £100m. The RCF has a three-year term,
which expires in November 2018, with an option to
extend for a further year. The RCF currently remains
undrawn; and
— The Group’s principal licensees are global industry
leaders in their respective fields and the Group’s
royalty-generating intellectual property consists of
a portfolio of licensees.
Seasonality of the business
Revenues from the Group’s marketed products are
dependent on both the timing of shipments of product to
the Group’s distributors and the underlying demand for
the products. CroFab®, in particular, demonstrates
seasonality since the main snakebite season in the US,
when the product is in highest demand, runs from
March to October.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 116116
Notes to the consolidated
financial statements
continued
2. 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,
all values are rounded to the nearest £0.1m except where
otherwise indicated, and these financial statements have
been prepared on the historical cost basis modified to
include revaluation to fair value of certain financial
instruments and the recognition of assets acquired and
liabilities and contingent liabilities assumed through
business combination assets at their fair value.
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 a significant effect on
the financial statements and estimates with a significant
risk of material adjustment in future periods are
discussed in note 3 “Critical accounting judgements
and key sources of estimation uncertainty”.
In the year ended 31 March 2017 the Group changed the
presentation of its consolidated income statement.
Under the new presentation:
a) No separate column to disclose acquisition
adjustments and reorganisation costs arising on
corporate acquisitions is presented. The results for
each period are now disclosed in a single column.
b) ‘Foreign exchange gains or losses’, ‘Profit or loss
on disposal of property, plant and equipment and
intangible assets’ and ‘Other operating expenses’
which were previously disclosed separately on the
face of the consolidated income statement are now
disclosed within ‘Other operating income’.
(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.
Acquisition accounting
The purchase method is used to account for the
acquisition of businesses 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 non-
controlling interest. Where the consideration transferred,
together with the non-controlling interest exceeds the fair
value of the net assets, liabilities and contingent liabilities
acquired, the excess is recorded as goodwill. Where
necessary, adjustments are made to the financial
statements of subsidiaries to bring accounting policies
into line with the Group’s accounting policies.
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.
Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and
losses or income and expenses arising from intra-group
transactions, are eliminated in preparing the
consolidated financial statements. Unrealised losses are
eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 117117
(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 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 at
historical cost or stated at fair value are translated using
the exchange rate ruling at the date of transaction or the
date the fair value was determined. Exchange gains/
losses on retranslation of foreign currency transactions
are recognised in the income statement within ‘Other
operating income’.
(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations 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 of foreign operations are recognised
directly in the currency translation reserve presented in
other reserves.
(e) Derivative financial instruments
Derivative financial instruments, being forward foreign
exchange contracts, are recorded in the balance sheet
at their fair value, and changes from subsequent
remeasurement to fair value at each balance sheet date
are recognised immediately in the income statement
through ‘Financial income’ (fair value gains) or
‘Financial expense’ (fair value losses) as appropriate.
The fair value of forward exchange contracts is derived
from observable inputs from active markets at the
balance sheet date.
(f) Goodwill
All business combinations are accounted for by applying
the purchase method. Goodwill represents amounts
arising on the acquisition of subsidiary undertakings.
In respect of business combinations that have occurred
since 1 April 2004, goodwill represents the excess
between the consideration paid and the fair value of the
assets acquired and liabilities and contingent
liabilities assumed.
Goodwill is stated at cost less any accumulated
impairment losses. Goodwill is deemed to have an
indefinite useful life and is allocated to groups of
cash-generating units, being the Group’s operating
segments. Goodwill is tested at least annually for
impairment (see 2(l)).
(g) Intangible assets
(i) Initial recognition
Intangible assets acquired as a result of a business
combination are initially recognised at their fair value.
Other intangible assets are initially recognised at cost.
(ii) Amortisation
Intangible assets are amortised on a straight-line basis,
over the useful economic life of the asset. In determining
the appropriate useful economic life of the asset,
consideration is given to the expected useful economic
life of the asset or remaining patent life if different.
The useful economic life of each class of asset is
determined as follows:
— Developed technology: expected useful economic
life, taking into account specific product and market
characteristics for each developed technology;
— Contractual relationships: period to expiry of the
relevant contractual relationship;
— In-process research and development: amortisation
is not charged until the asset is generating an
economic return, at which point it is amortised over
its expected useful economic 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 relevant contractual right.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 118118
Notes to the consolidated
financial statements
continued
2. Significant accounting policies
continued
The following useful economic lives are applied:
Depreciation is not charged until the asset is brought
into use. The residual value of property, plant and
equipment is reassessed annually.
Developed technology
Contractual relationships
Computer software
Patents
Purchase of contractual rights
2 to 25 years
2 to 15 years
3 years
up to 20 years
2 to 10 years
(iii) Income statement disclosure
Depreciation and impairment of property, plant and
equipment is included within Cost of sales, Selling,
general and administrative expenses or Research and
development dependent on the function to which the
related property, plant and equipment relates.
(iii) Income statement disclosure
Amortisation relating to acquired intangible assets is
presented within Amortisation of acquired intangible
assets. Other amortisation is shown within Cost of sales,
Selling, general and administrative expenses or Research
and development dependent on the function to which
the related intangible asset relates.
(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(l)).
(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(l)).
(ii) Depreciation
Depreciation is charged to the income statement on a
straight-line basis to write assets down to their residual
value over the following useful economic lives:
Buildings and improvements
10 to 20 years
Leasehold improvements
Plant and machinery
Furniture and equipment
Motor vehicles
Computer hardware
2 to 10 years
3 to 15 years
2 to 15 years
5 years
3 to 5 years
Profits/(losses) on disposals of property, plant and
equipment are determined by comparing the proceeds
with the carrying amount of the relevant property,
plant and equipment, and are included in Other
operating income.
(iv) Subsequent expenditure
Expenditure subsequent to the initial acquisition of
property, plant and equipment is capitalised only when it
is probable that the Group will realise future economic
benefits from the asset.
(v) Impairment
If property, plant and equipment 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(l)).
(i) Inventories
Inventories are valued at the lower of cost and net
realisable value, using the first in, first out method.
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 expensed to the income statement unless
the Group considers it highly probable it will 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.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 119119
(j) Trade and other receivables
Trade and other receivables do not carry interest and are
stated at amortised cost net of any provisions.
(k) 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.
(l) Impairment
All assets are reviewed for impairment when there is an
indicator of impairment.
In addition, goodwill and unamortised intangible
assets (principally IPR&D) are reviewed for impairment
at least annually.
An impairment loss is recognised whenever the carrying
amount of an asset or its cash-generating unit exceeds
its recoverable amount.
The Group reviews its assets for impairment as follows:
(i) Property, plant and equipment
Property, plant and equipment are reviewed for
impairment 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 Cost of sales,
Selling, general and administrative expenses or
Research and development dependent on the function to
which the relevant property, plant and equipment relates.
(ii) Amortised intangible assets
Amortised intangible assets are tested for impairment
whenever there are indications that their carrying value
may not be recoverable. For the purpose of impairment
testing, 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.
(m) 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 18. 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. Past service
cost is recognised immediately through the Income
Statement. Assets of the pension scheme are held
separately from the Group’s assets.
(iii) Share-based payments
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 are expected to vest.
However if share options fail to vest due to the
Company’s total shareholder’s return not achieving the
designated performance threshold for vesting, no such
adjustment takes place.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 120120
Notes to the consolidated
financial statements
continued
2. Significant accounting policies
continued
(n) Trade and other payables
Trade and other payables, except for contingent
consideration liabilities, are not interest bearing and are
stated at amortised cost
Contingent consideration liabilities are initially
recognised at their fair value. The fair value of
contingent consideration liabilities are reassessed at
each subsequent balance sheet date, with any change
in fair value being immediately reflected in the
income statement.
Trade and other payables also includes 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
discount rate that reflects current market assessments of
the time value of money and, where appropriate, the risks
specific to the relevant 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.
A contingent liability is disclosed in the notes to the
accounts, but not recognised on the statement of
financial position, if a material outflow of economic
benefits is expected to be required to settle a legal or
constructive obligation as a result of a past event, where
the probability of such an outflow is less than probable
but more than remote or the liability cannot be
reliably estimated.
(o) Revenue recognition
Revenue represents amounts received or receivable in
respect of the sale of products to customers during the
year, net of trade discounts given, rebates and
returns, and value added tax, and in respect of
royalty arrangements:
(i) Products
The Group recognises revenue for 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.
(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.
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.
(p) Cost of sales
Cost of sales includes the direct costs incurred in
manufacturing and bringing products to sale in the
market, revenue sharing costs, and amortisation of
other intangibles.
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 for the related royalties.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 121121
(q) Research and development
Research 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.
(r) 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
within property, plant and equipment 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.
(s) Financial income
Financial income comprises interest income receivable
during the year, calculated using the effective interest
rate method, fair value adjustments and gains on
settlement of foreign exchange forward contracts,
and fair value adjustments for contingent
consideration liabilities.
(t) Financial expense
Financial expense comprises interest payable during the
year, calculated using the effective interest rate method,
fair value adjustments and losses on settlement of
foreign exchange forward contracts, and fair value
adjustments on contingent consideration liabilities,
other financing costs and borrowings.
(u) 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 the related
tax effect is recognised directly 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 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.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 122122
Notes to the consolidated
financial statements
continued
2. Significant accounting policies
continued
(v) BTG Employee Share Trust
Included within the Group’s financial results are the
financial statements of the BTG Employee Share Trust,
the costs of which are expensed within the financial
statements of the Trust as incurred.
In the consolidated financial statements, the cost of BTG
plc ordinary shares held by the Trust is treated as a
deduction from shareholders’ funds.
(w) 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.
3. Critical accounting judgements and
key sources of estimation uncertainty
In preparing the financial statements, management is
required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities. As these
estimates involve judgement, actual amounts and
results could differ from those estimates. The following
are considered to be the Group’s critical accounting
judgements and key sources of estimation uncertainty:
(i) Recoverability of goodwill and other
intangible assets
The Group has significant goodwill and intangible
assets resulting from historical business combinations.
As at 31 March 2017, goodwill was £225.6m (2016:
£187.9m) and other intangible assets was £678.9m
(2016: £599.2m).
Goodwill is deemed to have an indefinite life and is
tested annually for impairment or whenever events or
changes in circumstances indicate the carrying value
of goodwill may not be recoverable. The recoverable
amount of the Group’s goodwill is assessed based on the
fair value less costs to sell of the relevant group of cash
generating units to which goodwill has been allocated.
Determining fair value less costs to sell requires the
application of significant judgement, particularly in the
estimation of forecast future cash flows and the terminal
growth rate for each relevant cash generating unit, and
the discount rate used to determine the present value of
forecast future cash flows. Further details regarding the
estimates and assumptions used in determining the
recoverable amount of cash generating units to which
goodwill has been allocated are included in note 10 to
the financial statements.
The recoverability of all other indefinite lived intangible
assets (IPR&D) and those definite lived intangible assets
for which management has determined may not be
recoverable has been assessed. The recoverable amount
of IPR&D and other intangible assets is assessed based
on the value-in-use of the relevant intangible asset.
Determining value in use requires the application of
significant judgement, particularly in estimating risk
adjusted forecast future cash flows covering the
estimated useful life of the relevant asset, and the
discount rate used to determine the present value of
forecast future cash flows. Further details of the
estimates and assumptions used in determining the
recoverable amounts of the Group’s intangible assets are
included in note 11 to the financial statements.
The estimates and assumptions on which fair value less
costs to sell and value-in-use are based are inherently
judgemental. Future events could therefore lead to
changes in assumptions used in these recoverability
assessments. It is therefore possible a change in any
such assumption could lead to future impairment
charges, which if recognised, could significantly impact
the Group’s financial results.
(ii) Contingent consideration liabilities
The fair value of the Group’s contingent liabilities as
of 31 March 2017 was £32.1m (2016: £27.2m).
Contingent consideration liabilities represent the fair
value of those future milestones, included in deferred
payment arrangements from historical business
combinations, which the Company may be required to
pay if certain development, regulatory or sales milestone
events occur. The determination of the fair value of
contingent consideration liabilities requires the
application of significant judgement, including the
probability of the relevant event triggering the milestone
occurring, the estimated timing of such relevant events
and the discount rate used to determine the present
value of the risk adjusted milestone payments.
The Group’s principal contingent consideration
liabilities relate to the acquisitions of PneumRx Inc in
2015 and Galil Medical in 2016, see note 21 for further
details. The estimates and assumptions used in
determining the fair value of these contingent
consideration liabilities are inherently judgemental.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 123123
Future events could lead to changes in assumptions
used to determine the fair value of contingent
consideration liabilities. It is therefore possible that a
change in any such assumption could lead to a material
fair value charge or credit, which if recognised could
significantly impact the Group’s financial results.
The estimates and assumptions used to determine the
fair value of acquired intangible assets are inherently
uncertain, and the adoption of different assumptions
and estimates could result in the assignment of a
different fair value for acquired intangible assets than
has been recognised by the Group.
4. Operating segments
Operating segments are reported based on the financial
information provided to the Group’s chief operating
decision-making body, being the Leadership team.
The Group is aligned behind three reportable segments,
being Interventional Medicine, Specialty
Pharmaceuticals and Licensing.
In assessing performance and making resource
allocation decisions, the Leadership Team 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. The Group’s reportable segments
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. Research and
development 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.
(iii) Deferred tax
At March 31, 2017, the Group’s deferred tax assets
amounted to £5.3m (2016: £6.8m) and the Group’s net
deferred tax liabilities amounted to £157.2m (2016:
£147.0m).
Deferred tax assets are recognised to the extent that it
is probable that future taxable profits will be available
against which the temporary differences can be utilised,
based on management’s assumptions relating both
to the amount and timing of future taxable profits.
In recognising deferred tax assets, management has
taken into account expected changes in tax rates in
each relevant jurisdiction.
Inherent uncertainties exist as management is required
to exercise judgement in determining whether it is more
likely than not that it would realise these deferred tax
assets. Where deferred tax assets are recognised
following an acquisition, management has to exercise
judgement to assess the validity of acquired tax losses
and the impact of change of control provisions. If actual
events differ from management’s estimates, or to the
extent that estimates of future taxable profits are
adjusted in the future, it is therefore possible that any
such change in assumption could lead to a material
charge or credit, which if recognised could significantly
impact the Group’s financial results.
(iv) Business combinations
In conjunction with IFRS 3 Business Combinations, the
Group has recognised intangible assets in respect of
acquired developed technology and in-process research
and development (“IPR&D”).
Significant judgement is required in determining the
unit of account at which separate intangible assets
should be recognised, and the fair values of the
identifiable intangible assets as of the acquisition date.
Determining the market participant fair value of acquired
intangible assets requires the application of significant
judgement, including estimates of risk adjusted forecast
future cash flows, the probability of regulatory approval
for IPR&D assets, determination of market participant or
buyer specific synergies, the relevant discount rate to
determine the present value of forecast future cash flows
and the tax amortisation benefit related to the individual
intangible asset.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 124124
Notes to the consolidated
financial statements
continued
4. Operating segments continued
There are no inter-segment transactions that are required to be eliminated on consolidation.
Revenue
Cost of sales1
Gross profit
Selling, general and administrative expenses2
Contribution
Research and development
Other operating income
Amortisation of acquired intangible assets
Acquisition and reorganisation costs
Operating profit
Financial income
Financial expense
Profit before tax
Tax credit
Profit for the year
Total Assets3
Year ended 31 March 2017
Interventional
Medicine
£m
216.2
(61.9)
154.3
(119.5)
34.8
Specialty
Pharmaceuticals
£m
171.1
(16.7)
154.4
(33.3)
121.1
Licensing
£m
183.2
(101.3)
81.9
(53.8)
28.1
Total
£m
570.5
(179.9)
390.6
(206.6)
184.0
(87.8)
4.4
(42.0)
(1.1)
57.5
3.3
(29.2)
31.6
2.0
33.6
1,311.1
1. 2017 cost of sales in the Interventional Medicine segment includes a £1.0m release of a fair value adjustment to inventory and PP&E
acquired with Galil Medical in June 2016. The release represents the reversal of a fair value uplift applied to inventory purchased on
acquisition recognised through the income statement as the product is sold and incremental depreciation related to acquired PP&E.
2. 2017 selling, general and administrative expenses within Licensing includes a charge of £28.0m relating to the Group’s settlement with
the US government in relation to the Department of Justice investigation into the historic marketing of LC Bead®.
3. The Group does not allocate assets to operating segments with the exception of Goodwill disclosed in note 10.
Revenue
Cost of sales1
Gross profit
Selling, general and administrative expenses
Contribution
Research and development
Other operating income
Amortisation of acquired intangible assets
Acquisition and reorganisation costs
Operating profit
Financial income
Financial expense
Profit before tax
Tax credit
Profit for the year
Total Assets2
Year ended 31 March 2016
Interventional
Medicine
£m
150.2
(43.8)
106.4
(96.2)
10.2
Specialty
Pharmaceuticals
£m
133.1
(15.1)
118.0
(25.5)
92.5
Licensing
£m
164.2
(81.9)
82.3
(19.7)
62.6
Total
£m
447.5
(140.8)
306.7
(141.4)
165.3
(77.2)
3.4
(35.0)
–
56.5
4.4
(3.4)
57.5
3.0
60.5
1,148.8
1. 2016 cost of sales in the Interventional Medicine segment includes a £1.5m release of a fair value adjustment to inventory acquired with
PneumRx, Inc. on 7 January 2015. This release represents the reversal of a fair value uplift applied to inventory purchased on acquisition
recognised through the income statement as the product is sold.
2. The Group does not allocate assets to operating segments with the exception of Goodwill disclosed in note 10.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 125125
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
Product sales
Royalties
Year ended
31 March
2017
£m
513.7
41.1
15.7
570.5
Year ended
31 March
2017
£m
387.3
183.2
570.5
Year ended
31 March
2016
£m
393.1
42.3
12.1
447.5
Year ended
31 March
2016
£m
283.3
164.2
447.5
Major customers
The Group’s 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 2017 or 31 March 2016.
Products that utilise the Group’s intellectual property rights are sold by licensees. Royalty income is derived from
over 40 licences. One licence individually generated royalty income in excess of 10% of Group revenue of £123.2m
(2016: £118.9m).
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 126126
Notes to the consolidated
financial statements
continued
5. Operating profit
Operating profit has been arrived at after charging/(crediting):
Depreciation and impairment of property, plant and equipment
Amortisation and impairment of intangible assets
Net foreign exchange gains
Research and development
Expense relating to settlement of DOJ investigation
Staff costs
Operating lease rentals payable on property
Acquisition and reorganisation costs
Note
12
11
6
Year ended
31 March
2017
£m
6.6
46.7
(4.3)
87.8
28.0
164.0
3.0
1.1
Year ended
31 March
2016
£m
6.6
38.0
(4.4)
77.2
–
116.2
2.5
–
Expense relating to the settlement of DOJ investigation
In October 2016, BTG announced its Biocompatibles, Inc. subsidiary reached a settlement with the US government in
relation to the Department of Justice’s investigation of the historic marketing of LC Bead®. The investigation focused
on the period pre-dating BTG’s acquisition of Biocompatibles in January 2011. Biocompatibles agreed to settle all
allegations and consequently paid a total penalty of US$36m. BTG was not required to enter into a Corporate Integrity
Agreement as part of the settlement. In the year to 31 March 2017, the Group recognised a charge of £28.0m relating to
this settlement within ‘Selling, general & administrative expenses’.
Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
Fees payable to the Company’s auditor for the audit of the Group and 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
Year ended
31 March
2017
£’000
200
Year ended
31 March
2016
£’000
168
345
11
60
424
290
11
54
370
For information on how auditor objectivity and independence is safeguarded when non-audit services are provided by
the auditor, see the Audit Committee Report on pages 57 to 65.
6. 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
2017
£m
135.5
12.9
6.7
0.4
8.5
164.0
Year ended
31 March
2016
£m
94.0
10.4
5.0
0.1
6.7
116.2
Key management personnel are considered to be the directors and their remuneration is disclosed within the
Remuneration Report on pages 72 to 97. 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 £2.6m
(2016: £2.6m).
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 127127
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
7. Financial income and expense
Interest receivable on money-market and bank deposits
Fair value movements from foreign exchange forward contracts
Fair value movements on contingent consideration liabilities
Financial income
Fair value movements and realised losses from foreign exchange forward contracts
Fair value movements on contingent consideration liabilities
Other financial expense
Financial expense
Year ended
31 March
2017
Number
99
703
553
1,355
Year ended
31 March
2017
£m
0.3
–
3.0
3.3
25.2
2.3
1.7
29.2
Year ended
31 March
2016
Number
99
673
410
1,182
Year ended
31 March
2016
£m
0.2
1.2
3.0
4.4
–
1.7
1.7
3.4
In the year to 31 March 2017, the Group recognised a fair value credit of £3.0m related to the contingent consideration
from the PneumRx acquisition and a fair value charge of £2.3m related to the contingent consideration from the Galil
Medical acquisition.
In the year to 31 March 2016, fair value changes on contingent consideration related to the PneumRx acquisition was a
net credit of £3.0m, being a £12.0m credit relating to the non-payment of the first revenue milestone and a £9.0m charge
relating to the US regulatory milestone, and a £1.6m charge related to the contingent consideration milestones for the
EKOS acquisition. Further information on the current fair value of the US regulatory milestone relating to the
acquisition of PneumRx, and potential future changes to this fair value, is included in Note 21 to these financial
statements.
The change in fair value and realised losses on the Group’s forward foreign exchange contracts of £25.2m for the year
to 31 March 2017 are now both recorded within financial expense. The loss of £25.2m included realised losses of
£17.1m on settlement of forward contracts and unrealised losses of £8.1m on remeasurement of the Group’s outstanding
forward contracts to their fair value.
For the year ended 31 March 2016, the Company recorded unrealised gains of £1.2m on the remeasurement of
outstanding forward contracts to their fair value in ‘Financial income’, and included realised foreign exchange gains
of £1.4m on settlement of forward contracts in ‘Other operating income’ above operating profit.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 128128
Notes to the consolidated
financial statements
continued
8. Tax
An analysis of the tax credit 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 deferred taxation
Total tax credit for the year
Year ended
31 March
2017
£m
Year ended
31 March
2016
£m
–
11.8
(1.7)
10.1
(13.0)
0.9
(12.1)
(2.0)
–
11.7
(2.2)
9.5
(13.8)
1.3
(12.5)
(3.0)
In addition to the tax credit in the income statement, a deferred tax credit of £4.1m (2016: £1.1m charge) has been
recognised in the consolidated statement of other comprehensive income relating to the deferred tax on the pension
fund surplus.
UK corporation tax is calculated at 20% (2016: 20%) 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 20% (2016: 20%)
Effect of overseas tax rates
Recognition of tax losses1
Change in unrecognised deferred tax assets
Non-deductible expenses2
Effect of UK patent box deduction
Intra-group transfer of subsidiary undertaking
Adjustment to tax rates
Adjustments in respect of prior years3
Year ended
31 March
2017
£m
31.6
6.3
1.4
(6.7)
(1.2)
4.5
(5.5)
–
0.9
(1.7)
(2.0)
Year ended
31 March
2016
£m
57.5
11.5
4.2
(15.2)
(0.4)
–
(4.4)
2.4
1.3
(2.4)
(3.0)
1. The recognition of historic UK and US tax losses arises from sustained profitability of the related underlying business.
2. The non-deductible expenses arises primarily from the settlement of US litigation.
3. The prior year adjustment arises mainly from a reassessment of prior year US tax liabilities.
An analysis of amounts included in the Consolidated statement of financial position in respect of income taxes is
shown below:
Current assets
UK corporation tax receivable
Overseas corporation tax receivable
Current liabilities
Overseas corporate tax payable
31 March
2017
£m
31 March
2016
£m
2.6
0.1
2.7
5.1
5.1
1.8
–
1.8
5.8
5.8
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 129129
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
At 1 April 2015
Adjustments in respect of prior years
Income statement credit/(charge)
Reclassification
At 31 March 2016
Adjustments in respect of prior years
Income statement credit/(charge)
Rate change
Foreign exchange differences
At 31 March 2017
Tax losses
£m
4.8
–
1.3
–
6.1
0.1
(3.4)
–
–
2.8
Short term
timing
difference
£m
0.1
–
0.1
0.5
0.7
0.1
1.9
(0.1)
(0.1)
2.5
Net deferred
tax asset
£m
4.9
–
1.4
0.5
6.8
0.2
(1.5)
(0.1)
(0.1)
5.3
The deferred tax asset relates to short term timing differences in Australia and the UK and tax losses in the UK.
The deferred tax asset has been recognised because the directors are of the opinion, based on recent and forecast
trading, that the level of profits in Australia and the UK in forthcoming years will lead to the realisation of these assets.
Deferred tax liability
At 1 April 2015
Adjustments in respect of prior years
Income statement credit/(charge)
Other comprehensive income charge
R&D tax credits
Reclassification
Foreign exchange differences
At 31 March 2016
Acquisition
Income statement credit/(charge)
Other comprehensive income credit
R&D tax credits
Rate change
Foreign exchange differences
At 31 March 2017
Liabilities
Acquired
intangibles
£m
(186.2)
0.1
11.2
–
–
–
(5.3)
(180.2)
(17.0)
12.9
–
–
–
(27.3)
(211.6)
Liabilities
Pension fund
surplus
£m
(4.6)
–
(1.0)
(1.1)
–
–
–
(6.7)
–
(0.7)
4.1
–
–
–
(3.3)
Liabilities
Short term
timing
differences
£m
(0.5)
–
0.6
–
–
–
–
0.1
–
(0.1)
–
–
–
–
–
Assets
Tax losses
£m
31.1
1.0
(1.9)
–
–
–
0.5
30.7
10.9
(2.6)
–
–
(0.8)
4.3
42.5
Assets
Short term
timing
differences
£m
7.8
0.1
1.1
–
0.2
(0.4)
0.3
9.1
–
4.8
–
0.1
–
1.2
15.2
Net deferred
tax liability
£m
(152.4)
1.2
10.0
(1.1)
0.2
(0.4)
(4.5)
(147.0)
(6.1)
14.3
4.1
0.1
(0.8)
(21.8)
(157.2)
The deferred tax liability of £157.2m (2016: £147.0m) represents the net position after taking into account the offset of
deferred tax assets against deferred tax liabilities in each jurisdiction. This amount has been calculated based on the
substantively enacted tax rates at which the timing differences are expected to unwind.
The UK tax rate will fall from 20% to 19% on 1 April 2017 and to 17% on 1 April 2020. This has been reflected in the
deferred tax assets and liabilities and deferred tax has been recognised at the rate at which timing differences and tax
losses are expected to unwind or be used.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 130130
Notes to the consolidated
financial statements
continued
8. Tax continued
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 2019.
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 will be used.
The total amount of tax losses and timing differences not recognised is shown below:
UK tax losses
US tax losses
Other Regions tax losses
Deductible temporary differences
9. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Profit for the 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
Year ended
31 March
2017
£m
50.1
23.1
23.6
31.0
127.8
Year ended
31 March
2016
£m
59.4
22.4
–
27.0
108.8
Year ended
31 March
2017
33.6
Year ended
31 March
2016
60.5
8.7
8.6
15.8
15.6
384.4
5.6
390.0
382.6
5.7
388.3
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 131131
10. Goodwill
At 1 April 2015
Foreign exchange differences
At 31 March 2016
Acquisitions
Foreign exchange differences
At 31 March 2017
Accumulated impairment losses
At 1 April 2015, 31 March 2016 and 31 March 2017
Net book value at 31 March 2017
Net book value at 31 March 2016
Net book value at 1 April 2015
Note
26
£m
183.8
4.1
187.9
16.4
21.3
225.6
–
225.6
187.9
183.8
Goodwill has been allocated to groups of cash generating units, being the Group’s operating segments (see note 4) in
proportion to the anticipated benefits of goodwill on the relevant operating segment, having regard for the assets and
liabilities acquired. The carrying value of goodwill has been allocated to Interventional Medicine £189.1m (2016:
£151.4m), to Specialty Pharmaceuticals £16.4m (2016: £16.4m), and to Licensing £20.1m (2016: £20.1m).
In the year ended 31 March 2017, the recoverable amounts of these cash generating units has been determined using
a fair value less costs to sell approach. Fair value less costs to sell is calculated using a discounted cash flow approach,
with a post-tax discount rate applied to forecast future cash flows and terminal values. In the year ended 31 March 2016,
the Group utilised a value-in-use approach to determine the recoverable amounts of its cash generating units.
Key assumptions used to estimate fair value less costs to sell relate to sales growth rates, anticipated profit margins,
estimated tax rates, terminal growth rates and discount rates. Sales growth rates are derived from internal forecasts
based on both internal and external market information, whilst anticipated profit margins reflect past experience,
adjusted for expected future changes. Projected cash flows cover a five year period, and terminal growth rates have
been applied to determine the terminal value of each group of cash generating units. These terminal growth rates, based
on management’s estimate of future long-term average growth rates, are 2.75% for Interventional Medicine, 0.5% for
Specialty Pharmaceuticals and 0% for Licensing. The discount rate of 9% is based on an estimate of the Group’s
WACC. The valuation methodology uses significant inputs which are not based on observable market data, therefore
this valuation technique is classified as level 3 in the fair value hierarchy. In each case the valuation of each cash
generating unit indicated sufficient headroom such that a reasonably possible change to key assumptions is currently
unlikely to result in an impairment to the related goodwill.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 132132
Notes to the consolidated
financial statements
continued
11. Intangible assets
Group
Cost
At 1 April 2015
Additions
Disposals
Foreign exchange differences
At 31 March 2016
Acquisitions
Additions
Disposals
Foreign exchange differences
At 31 March 2017
Amortisation
At 1 April 2015
Amortisation charged
Disposals
Foreign exchange differences
At 31 March 2016
Amortisation charged
Impairments
Disposals
Foreign exchange differences
At 31 March 2017
Net book value
At 31 March 2017
At 31 March 2016
At 1 April 2015
Developed
technology
£m
Contractual
relationships
£m
Note
In-process
research and
development
£m
Computer
software
£m
Purchase of
contractual
rights
£m
Patents
£m
577.8
–
(0.3)
15.1
592.6
47.3
–
–
78.4
718.3
91.6
34.7
(0.3)
3.3
129.3
42.0
–
–
14.9
186.2
532.1
463.3
486.2
42.1
–
(1.0)
1.0
42.1
–
–
–
5.0
47.1
41.8
0.4
(1.0)
0.9
42.1
–
–
–
5.0
47.1
–
–
0.3
105.8
–
–
3.2
109.0
–
–
–
15.5
124.5
5.8
–
–
–
5.8
–
–
–
–
5.8
118.7
103.2
100.0
1.4
0.4
–
–
1.8
0.4
0.5
–
0.2
2.9
0.7
0.3
–
–
1.0
0.8
–
–
0.1
1.9
1.0
0.8
0.7
16.6
0.9
–
0.7
18.2
–
0.2
(0.8)
–
17.6
13.4
0.3
–
1.0
14.7
0.5
0.5
(0.1)
–
15.6
2.0
3.5
3.2
8.5
23.0
–
0.2
31.7
–
–
(1.8)
0.9
30.8
1.0
2.3
–
–
3.3
2.9
–
(0.5)
–
5.7
25.1
28.4
7.5
Total
£m
752.2
24.3
(1.3)
20.2
795.4
47.7
0.7
(2.6)
100.0
941.2
154.3
38.0
(1.3)
5.2
196.2
46.2
0.5
(0.6)
20.0
262.3
678.9
599.2
597.9
Amortisation relating to intangible assets acquired through business combinations of £42.0m (2016: £35.0m) is
recorded within Amortisation of acquired intangible assets. All other intangible asset amortisation is recorded within
Cost of sales, Selling, general and administrative expenses or Research and development.
Developed technology
Developed technology represents intangible assets for products acquired through business combinations. The carrying
value of individually significant cash generating units (“CGU’s”) which contain developed technology is:
PneumRx® Coil (ROW)
EkoSonic®
TheraSphere®
CroFab®
DC Bead® and LC Bead®
Galil Medical®
DigiFab®
31 March
2017
£m
111.8
111.4
95.1
71.6
62.8
50.4
23.1
31 March
2016
£m
104.9
105.5
90.1
66.0
69.9
–
21.3
Remaining
amortisation
period at
31 March
2017
12.8 years
11.3 years
11.3 years
16.7 years
8.8 years
14.3 years
16.7 years
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 133133
In-process research and development
PneumRx® Coil (US)
Targeted Therapies Assets
31 March
2017
£m
96.8
21.2
31 March
2016
£m
84.2
18.4
Purchase of contractual rights
The carrying value of individually significant CGUs with purchase of contractual rights, which include Varithena®, are
outlined below.
Varithena®
31 March
2017
£m
18.8
31 March
2016
£m
21.0
Developed technology assets are tested for impairment when indicators of impairment arise, whilst in-process research
and development assets are tested for impairment at least annually.
The Group applies a value in use approach to determine the recoverable amount of its developed technology and IPR&D
intangible assets. The determination of value in use utilises risk-adjusted cash flow forecasts over the useful economic
lives of the relevant assets, with the present value of these forecasts calculated by use of a discount rate of 9% based on
an estimate of the Group’s post-tax WACC.
Key assumptions used to estimate value in use relate to sales growth rates, anticipated profit margins, estimated tax
rates and discount rates. Sales growth rates are derived from internal forecasts based on both internal and external
market information, whilst anticipated profit margins reflect past experience, adjusted for expected future changes.
These forecasts are inherently judgemental and are based on outputs from the Group’s planning cycle, with
assumptions based on past experience and future expectations.
The recoverability of intangible assets for marketed products (“Developed Technology”) and purchased contractual
rights is potentially at risk if pricing, reimbursement and/or market penetration are at lower levels than the Group’s
current assumptions. The recoverability of the Group’s Vistogard intangible asset (2017: £6.4m) is at risk in the event
of an unfavourable outcome to the ongoing litigation with Wellstat (see Note 20 for further details). Additionally, IPR&D
assets carry inherent development and regulatory risks, such that these assets are particularly at risk of impairment in
full if the relevant development programmes do not obtain the requisite regulatory approval or reach commercialisation,
and there is no alternative use for these assets. Given their nature, impairment charges which may be triggered by future
events that have yet to occur could significantly impact the Group’s financial results.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 134134
Notes to the consolidated
financial statements
continued
12. Property, plant and equipment
Group
Cost or valuation
At 1 April 2015
Additions
Disposals
Transfers
Foreign exchange differences
At 31 March 2016
Acquisitions
Additions
Disposals
Transfers
Foreign exchange differences
At 31 March 2017
Depreciation
At 1 April 2015
Depreciation charged
Impairment charge
Disposals
Foreign exchange differences
At 31 March 2016
Depreciation charged
Impairment charge
Disposals
Foreign exchange differences
At 31 March 2017
Net book value at 31 March 2017
Net book value at 31 March 2016
Net book value at 1 April 2015
13. Inventories
Raw materials and consumables
Work in progress
Finished goods
Leasehold
improvements
£m
Freehold land
and buildings
£m
Plant and
machinery
furniture and
equipment
£m
Assets in the
course of
construction
£m
9.9
0.1
–
0.5
–
10.5
–
1.2
(0.2)
1.8
0.6
13.9
2.1
0.7
–
–
0.1
2.9
1.4
–
(0.2)
0.2
4.3
9.6
7.6
7.8
14.2
0.2
–
1.3
0.4
16.1
–
0.1
–
0.1
1.6
17.9
2.8
0.9
–
–
–
3.7
0.5
–
–
0.5
4.7
13.2
12.4
11.4
21.2
2.4
(1.8)
2.0
0.4
24.2
1.0
3.4
(2.0)
3.8
2.5
32.9
11.8
4.7
0.3
(1.7)
0.3
15.4
4.7
–
(1.9)
3.2
21.4
11.5
8.8
9.4
7.0
3.5
–
(3.8)
0.3
7.0
–
4.2
-
(5.7)
0.4
5.9
0.1
–
–
–
–
0.1
–
–
–
–
0.1
5.8
6.9
6.9
Total
£m
52.3
6.2
(1.8)
–
1.1
57.8
1.0
8.9
(2.2)
–
5.1
70.6
16.8
6.3
0.3
(1.7)
0.4
22.1
6.6
–
(2.1)
3.9
30.5
40.1
35.7
35.5
Year ended
31 March
2017
£m
23.5
20.6
14.3
58.4
Year ended
31 March
2016
£m
16.4
14.7
15.4
46.5
Inventory to the value of £1.8m (2016: £3.4m) was written off through Cost of sales during the period.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 135135
14. Trade and other receivables
Due within one year
Trade receivables, net of provisions for bad and doubtful debts
Other receivables
Prepayments and accrued income
Year ended
31 March
2017
£m
Year ended
31 March
2016
£m
61.1
13.5
51.1
125.7
41.9
12.1
52.5
106.5
‘Trade receivables, net of provisions for bad and doubtful debts’ represents product sales sold both directly and through
distribution agreements and royalty receivables under licence agreements.
The ageing of these amounts was as follows:
Not past due
0-30 days
31-90 days
> 90 days
Total
2017
Gross
£m
49.2
7.5
2.5
2.2
61.4
2017
Provision
£m
–
–
–
(0.3)
(0.3)
2016
Gross
£m
35.0
4.4
1.5
1.7
42.6
2016
Provision
£m
–
–
–
(0.7)
(0.7)
Provisions for bad and doubtful debts of £0.3m (2016: £0.7m) write downs the value of receivables to their estimated
recoverable amounts. The charge for the year to 31 March 2017 in respect of provisions for bad and doubtful debts was
£0.2m (2016: £0.2m).
15. Equity
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
382,991,577
2,135,948
385,127,525
2017
£m
Number
38.3 381,776,703
1,214,874
38.5 382,991,577
0.2
2016
£m
38.2
0.1
38.3
The shares issued during the year ended 31 March 2017 were as a result of the exercise of share options.
Other reserves are analysed as follows:
At 31 March 2015
Total recognised income and expense
At 31 March 2016
Total recognised income and expense
At 31 March 2017
Share options
Details of outstanding share options are set out in note 19.
Translation
reserve
£m
9.3
18.7
28.0
91.7
119.7
Fair value
reserve
£m
0.1
–
0.1
–
0.1
Total other
reserves
£m
9.4
18.7
28.1
91.7
119.8
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 136136
Notes to the consolidated
financial statements
continued
16. Trade and other payables
Amounts falling due within one year
Trade payables
Accruals and deferred income
Contingent consideration liabilities
Other creditors
Provisions
Amounts falling due after more than one year
Accruals and deferred income
Contingent consideration liabilities
Provisions
17. Derivative financial instruments
Contracts in an asset position:
Forward foreign exchange contracts due within one year
Forward foreign exchange contracts due after more than one year
Derivative assets
Contracts in a liability position:
Forward foreign exchange contracts due within one year
Derivative liabilities
Note
21
21
31 March
2017
£m
31 March
2016
£m
14.2
105.1
28.2
4.5
0.5
152.5
2.0
3.9
2.6
8.5
16.0
94.8
–
4.0
1.4
116.2
0.3
27.2
1.6
29.1
31 March
2017
£m
31 March
2016
£m
0.1
–
0.1
7.9
7.9
2.3
1.0
3.3
3.0
3.0
The Group utilises foreign currency derivatives to economically hedge significant future transactions and cash flows.
The Group does not currently utilise hedge accounting for outstanding foreign exchange derivatives.
At 31 March 2017 the Group had forward contracts to sell US$169.6m in the period to March 2018 at a weighted average
rate of £1:US$1.33. The fair value of these derivative financial instruments at 31 March 2017 was a liability at £7.8m
(31 March 2016: £0.3m asset).
The unrealised loss of £8.1m (2016: £1.2m unrealised gain) for the year associated with the remeasurement of these
forward contracts to their fair value was included within Financial expense (2016: Financial income).
A 5% strengthening of the US$ against sterling as at 31 March 2017 would result in an incremental charge of £6.8m
within ‘Financial expense’ in the income statement and an increase of the derivative liability to £14.6m.
Correspondingly a 5% weakening of the US$ against sterling would result in a £6.8m credit within ‘Financial expense’
and a reduction of the derivative liability to £1.0m.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 137137
18. 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 the 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 2016 were updated to the accounting date by an
independent qualified actuary in accordance with IAS19.
The plan exposes the Group to inflation risk, interest rate risk, market investment risk 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 2017/18 is £2.8m (2016/17
actual: £2.9m).
The IAS19 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 requirement for prudence in the funding basis (compared to the IAS19
best-estimate principle), and the IAS19 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 IAS19 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
2017
3.4% p.a.
2.5% p.a.
89.0
91.8
31 March
2016
3.0% p.a.
3.4% p.a.
88.7
91.1
31 March
2015
3.1% p.a.
3.2% p.a.
88.5
91.0
Assumptions regarding future mortality experience are set based on actuarial advice and in accordance with published
statistics. The mortality tables used for 2017 year-end accounting were updated as a result of the most recent actuarial
valuation as at 31 March 2016. The mortality tables used at year-end 2017 were the S2NA 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 1.75%/1.5% for males and
females respectively. In comparison, the mortality tables used at year-end 2016 were the S1NA tables based on year of
birth, with a minimum long-term rate of improvement in longevity of 1.5%/1.25% pa for males and females respectively.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 138138
Notes to the consolidated
financial statements
continued
18. Retirement benefit schemes continued
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
2017
3.4% p.a.
3.4% p.a.
2.1% p.a.
3.4% p.a.
31 March
2016
3.0% p.a.
3.0% p.a.
2.0% p.a.
3.0% p.a.
31 March
2015
3.1% p.a.
3.1% p.a.
2.1% p.a.
3.1% 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
2017
£m
(142.1)
159.3
17.2
31 March
2016
£m
(119.0)
138.3
19.3
31 March
2015
£m
(124.9)
138.1
13.2
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 plan assets, all of which are shown in the change in defined benefit
obligation and assets tables below. The expense has been included in ‘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
2017
4%
6%
23%
8%
16%
0%
0%
43%
31 March
2016
10%
9%
31%
19%
16%
0%
0%
15%
31 March
2015
10%
11%
29%
20%
15%
0%
0%
15%
There are no direct investments in the Group’s own shares or property occupied by any member of the Group.
At 31 March 2017, all asset classes are traded in active markets, with the exception of the illiquid inflation assets which
are priced and traded on a monthly basis.
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 risks 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.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 139139
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 2017 are as follows:
Year ended 31 March 2017
Beginning of the year
Employer’s part of the current service cost
Interest income/(cost)
Administrative costs
Contributions by the employer
Contributions from plan members
Actuarial gain – experience
Actuarial loss – financial assumptions
Actuarial gain – demographic assumptions
Benefits paid
End of the Year
Obligation
£m
(119.0)
(0.4)
(4.0)
–
–
(0.1)
0.2
(24.5)
0.6
5.1
(142.1)
Plan assets
£m
138.3
–
4.7
–
2.8
0.1
18.5
–
–
(5.1)
159.3
Net asset/
(liability)
£m
19.3
(0.4)
0.7
–
2.8
–
18.7
(24.5)
0.6
–
17.2
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 2016 are as follows:
Year ended 31 March 2016
Beginning of the year
Employer’s part of the current service cost
Interest income/(cost)
Administrative costs
Contributions by the employer
Contributions from plan members
Actuarial (loss)/gain – experience
Actuarial gain – financial assumptions
Actuarial loss – demographic assumptions
Benefits paid
End of the Year
Obligation
£m
(124.9)
(0.5)
(4.0)
–
–
(0.1)
1.2
5.0
(0.7)
5.0
(119.0)
Plan assets
£m
138.1
–
4.4
–
2.9
0.1
(2.2)
–
–
(5.0)
138.3
Net asset/
(liability)
£m
13.2
(0.5)
0.4
–
2.9
–
(1.0)
5.0
(0.7)
–
19.3
The actual return on the plan’s assets over the year to 31 March 2017 was a gain of £23.2m (2016: gain of £2.2m).
The weighted average duration of the defined benefit obligation at the end of the reporting period is around 16 years
(2016: 15 years).
The administrative costs shown above are nil as they are paid directly by the Group and are expensed separately
outside IAS19.
The sensitivities regarding the principal assumptions used to measure the plan obligations are:
Discount rate
RPI inflation
Life expectancy
Change in
assumption
Decrease 0.1%
Increase 0.1%
Increase 1 year
Increase in Obligation
Increase in Plan Assets
Increase in Net Liability
31 March
2017
£m
2.4
2.1
4.7
31 March
2016
£m
1.7
1.5
3.9
31 March
2017
£m
2.4
2.0
–
31 March
2016
£m
2.2
1.9
–
31 March
2017
£m
–
0.1
4.7
31 March
2016
£m
(0.5)
(0.4)
3.9
The sensitivity information has been derived using projected cash flows valued using the relevant assumptions and
membership profile as at 31 March 2017. 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 £6.7m (2016: £5.0m).
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.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 140140
Notes to the consolidated
financial statements
continued
19. 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 service, market
and non-market 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 72 to 97.
Option pricing
For the purposes of valuing options to arrive at the share-based compensation charge, a Black-Scholes 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
2017
31 March
2016
0.1% – 0.4% 0.7% – 1.4%
Nil
28% – 30% 26% – 28%
Nil
3 years
3.37 years
2.12 years
3-5 years
3 years
296.6p
215.0p
160.6p
550.6p
673.5p
3 years
3.44 years
2.13 years
3-5 years
3 years
353.2p
222.6p
158.4p
469.6p
681.5p
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 Total Shareholder Return (“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 TSR 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 TSR in the relevant index and which incorporates into the valuation the interdependency
between TSR 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 72 to 97 for further information.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 141141
Details of options and awards under the Group’s share plans are shown in the tables below.
2017
Number of
share options
(000)
2017
Weighted
average
exercise
price (p)
2016
Number of
share options
(000)
2016
Weighted
average
exercise
price (p)
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 2017:
Share options granted in year ended 31 March
2010
2011
2012
2013
2015
2016
2017
Sharesave plan options granted in year ended 31 March
2014
2015
2016
2017
Stock purchase plan options granted in year ended 31 March
2016
2017
1,311
55
(25)
(18)
1,323
1,085
617
193
(98)
(166)
546
3
229
174
(168)
(14)
221
–
322.4
665.3
644.3
395.1
329.6
254.4
442.9
520.5
491.8
297.6
505.8
289.5
543.3
573.3
538.1
530.0
571.1
–
Number
(000)
290
329
253
213
53
131
54
1,323
3
207
173
163
546
55
166
221
1,290
145
(12)
(112)
1,311
1,085
575
221
(56)
(123)
617
–
221
93
(48)
(37)
229
–
222.3
688.5
495.0
380.5
322.4
254.4
392.5
504.4
439.5
320.2
442.9
–
489.0
567.0
503.8
332.0
543.3
–
Weighted
exercise
price (p)
Latest
exercise date
year ended
31 March
179.3
201.3
298.9
386.0
637.2
688.5
665.2
289.5
498.7
504.4
520.5
567.0
573.3
2020
2021
2022
2023
2018
2019
2020
2018
2018
2019
2020
2018
2019
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 142142
Notes to the consolidated
financial statements
continued
19. 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
2017
Number of
share awards
(000)
2016
Number of
share awards
(000)
5,639
1,560
(502)
(1,937)
4,760
–
112
51
–
–
163
–
5,146
1,711
(307)
(911)
5,639
–
–
112
–
–
112
–
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:
Outstanding at 1 April
Granted during year
Lapsed during year
Exercised during year
Outstanding at 31 March
Exercisable at 31 March
2017
Number of
share awards
(000)
259
37
–
(172)
124
–
2016
Number of
share awards
(000)
436
48
(7)
(218)
259
–
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 72 to 97.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 143143
20. Contingent liabilities
BTG is in a current dispute with Wellstat over the commercialisation of Vistogard. Wellstat are seeking damages and to
terminate the commercialisation agreement under which BTG obtained rights to sell Vistogard in US. A trial has been
heard in the Court of Chancery of the State of Delaware but no judgement has yet been issued. The Group estimate the
likelihood of material financial loss or loss of rights to the asset to be possible, not probable, and therefore no liability
has been recognised. It is currently not possible to make a reliable estimate of any amount that may be required to be
paid in respect of the dispute.
21. 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 and doubtful debts on a specific licence by licence basis.
Product revenues are generated from direct sales as well as sales to several key wholesalers and distributors.
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 substantial cash balances to fund its operations. The Group has a £100m multi-currency revolving
credit facility (‘RCF’) with an option to extend this RCF by a further £100m. The RCF has a three-year term, which
expires in November 2018, with an option to extend for a further year. The £100m revolving credit facility has not been
utilised in either the current or prior 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 either US dollars or sterling with
institutions rated as A or higher by both Moody’s and Standard & Poor’s.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 144144
Notes to the consolidated
financial statements
continued
21. Financial risk management objectives and policies continued
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’s principal foreign currency exposure is to USD, as the Group has significant USD denominated revenues
and operating costs (although a significant proportion of the Group’s operating costs remain denominated in sterling).
The Group is also exposed, albeit to a lesser extent, to the Euro, Canadian dollars 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 an appropriate level of
certainty over the value of future cash flows. Where possible, anticipated foreign currency operating expenses are
matched to foreign currency revenues. The Group economically hedges sufficient USD to cover anticipated GBP net
operating cash outflows.
Sensitivity analysis
A 5% weakening of the US$ would have resulted in the following decrease in profit before tax:
Decrease in profit before tax
31 March
2017
£m
4.4
31 March
2016
£m
5.4
Interest rate risk
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. 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.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 145145
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
2017
£m
979.9
1,311.1
74.7%
31 March
2016
£m
847.7
1,148.8
73.8%
The Group is not subject to regulatory capital adequacy requirements as known in the financial services industry.
Financial instruments
The Group’s financial instruments comprise cash, short- and medium-term deposits, foreign currency forward
contracts, contingent consideration liabilities and various items such as trade debtors and creditors which arise directly
from operations.
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 2017
Cash and cash equivalents
Forward contracts
Other investments
Trade and other receivables
Trade and other payables (excluding contingent
consideration liabilities and provisions)
Contingent consideration liabilities
31 March 2016
Cash and cash equivalents
Forward contracts
Other investments
Trade and other receivables
Trade and other payables (excluding contingent
consideration liabilities and provisions)
Contingent consideration liabilities
Designated
at fair value
£m
Forward
contracts
at fair value
£m
Amortised
Cost
£m
–
–
1.7
–
–
(32.1)
–
–
1.4
–
–
(27.2)
–
(7.8)
–
–
–
–
–
0.3
–
–
–
–
155.5
–
–
125.7
(125.8)
–
140.4
–
–
106.5
(115.1)
–
Total
carrying
value
£m
155.5
(7.8)
1.7
125.7
(125.8)
(32.1)
140.4
0.3
1.4
106.5
(115.1)
(27.2)
Fair value1
£m
–
–
1.7
–
–
(32.1)
–
–
1.4
–
–
(27.2)
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
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 146146
Notes to the consolidated
financial statements
continued
21. Financial risk management objectives and policies continued
Fair value hierarchy of financial assets and liabilities
At 31 March 2017
Financial assets recognised at fair value
Investments
Forward foreign exchange contracts
Financial liabilities recognised at fair value
Forward foreign exchange contracts
Fair value of contingent consideration liabilities
At 31 March 2016
Financial assets recognised at fair value
Investments
Forward foreign exchange contracts
Financial liabilities recognised at fair value
Forward foreign exchange contracts
Fair value of contingent consideration liabilities
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
–
–
–
1.7
0.1
(7.9)
–
1.4
3.3
(3.0)
–
Total
£m
1.7
0.1
–
–
–
(32.1)
(7.9)
(32.1)
–
–
–
(27.2)
1.4
3.3
(3.0)
(27.2)
Level 2 financial assets and liabilities represent forward foreign exchange contracts to sell US$ which are remeasured to
their fair value at each balance sheet date.
Details of the movement of Level 3 fair value financial liabilities are set out below:
At 1 April
Acquisitions
Change in fair value
Paid during the year
Foreign exchange differences
At 31 March
Note
26
7
2017
£m
(27.2)
(1.6)
0.7
–
(4.0)
(32.1)
2016
£m
(32.7)
–
1.3
4.8
(0.6)
(27.2)
Level 3 financial liabilities predominantly represent contingent consideration liabilities. The Group is party to certain
contingent consideration arrangements arising from business combinations, which include milestones which are
potentially payable on the achievement of certain development, regulatory and revenue targets. The fair values of these
contingent consideration liabilities are determined by assessing the probability of expected future payments and
discounting these risk adjusted payments to their present value.
PneumRx
The PneumRx contingent consideration liability of £28.2m (2016: £27.2m) relates to a $60m regulatory milestone which
is payable if FDA approval for PneumRx coils is received by 31 December 2017. The Group recognised a credit of £3.0m
relating to the change in the fair value of the PneumRx contingent consideration liability in the year to 31 March 2017.
This milestone is reflected at its current fair value, which reflects the probability of receiving FDA approval and the
anticipated timing of any such approval.
Whilst the Group remains confident of FDA approval, the event which would require payment of the milestone,
receipt of FDA approval by 31 December 2017, will only be resolved in the 2017/18 year. If FDA approval is received by
31 December 2017, the Group will record a fair value charge of £19.8m to record the liability at its full value of $60m.
Alternatively, if FDA approval is not received by 31 December 2017 the Group will credit the income statement with
£28.2m to release in full this liability. Any such charge or credit will be reflected in IFRS earnings but not adjusted
earnings, in line with the Group’s adjusted earnings policy.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 147147
Galil Medical
The Galil contingent consideration liability of £3.9m (2016: £nil) relates to two regulatory milestones. The Group
recognised a charge of £2.3m relating to the fair value of the Galil contingent consideration liability in the year to
31 March 2017.
The first regulatory milestone of $10m is payable to former shareholders of Galil Medical if FDA approval for lung
metastases is received by 31 December 2018. This milestone is reflected at its current fair value, which reflects the
probability of receiving FDA approval and the anticipated timing of any such approval.
The second regulatory milestone of $5m is payable to former shareholders of Galil Medical if FDA approval for bone
metastases is received by 31 December 2018. This milestone is reflected at its current fair value, which reflects the
probability of receiving FDA approval and the anticipated timing of any such approval.
Contractual maturity analysis of financial assets/(liabilities)
Forward foreign exchange contracts that mature within:
0-3 months
3-6 months
6-12 months
>12 months
Total
31 March
2017
£m
(3.5)
(1.6)
(2.7)
–
(7.8)
31 March
2016
£m
(0.9)
(1.1)
1.3
1.0
0.3
Net gains and losses on financial assets and liabilities
Foreign exchange gains of £4.3m (2016: gains of £4.4m) were recognised within operating profit.
The Group recognised a loss of £25.2m relating to forward foreign exchange contracts with financial expense in the year
to 31 March 2017. This loss compromises realised FX losses of £17.1m and unrealised losses of £8.1m.
For the year to 31 March 2016, the Group recognised a gain of £1.2m relating to fair value movements on outstanding
forward contracts within Financial Income. See note 7 for further details.
Estimation of fair values
The following summarises the methods and assumptions used in estimating the fair values of financial instruments
reflected in the table.
Trade receivables, trade payables and cash and cash equivalents
Trade payables and receivables have a remaining life of less than one year, such that carrying value is considered to be
a reasonable approximation of fair value.
Contingent consideration liabilities
Contingent consideration liabilities are re-measured to fair value at each reporting period, to reflect changes in
assumptions underlying the fair value of these liabilities, which includes the probability of technical success, any
timing risk to achieving the relevant milestones and the appropriate discount rate.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 148148
Notes to the consolidated
financial statements
continued
22. Operating leases
Total non-cancellable operating lease rentals are due in the following periods:
Within one year
Between two and five years
Greater than five years
31 March
2017
Property
£m
3.8
7.2
6.1
17.1
31 March
2016
Property
£m
3.3
6.1
–
9.4
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. 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.
23. Other financial commitments
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 £0.7m in patent litigation costs (2016: £nil).
24. Related parties
Identity of related parties
In relation to the related party relationship identified on page 56 concerning Giles Kerr, payments made by BTG to
Oxford University and Isis Innovations Ltd under the relevant licence agreements were £19,000 for the year ended
31 March 2017 (£24,000 for the year ended 31 March 2016). There are no amounts still outstanding and payable
by BTG under these agreements as at 31 March 2017 (2016: nil).
Key management personnel are considered to be the directors and their remuneration is disclosed within the
Remuneration Report on pages 72 to 97.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 149149
25. Group entities
The subsidiary undertakings of BTG plc at 31 March 2017 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.
Registered Office
Class of capital
Principal activity
5 Fleet Place, London EC4M 7RD
Ordinary
Investment in IPR management companies
BTG International
(Holdings) Ltd*
Provensis Ltd*
BTG International Ltd
5 Fleet Place, London EC4M 7RD
5 Fleet Place, London EC4M 7RD
5 Fleet Place, London EC4M 7RD
5 Fleet Place, London EC4M 7RD
Ordinary
Ordinary
Ordinary
Ordinary
Development and commercialisation of IPR
Development, management and
commercialisation of IPR
Investment and management of
group companies
Development, management and
commercialisation of IPR
BTG Management
Services Ltd
Protherics Medicines
Development Limited
BTG International Inc.
Delaware, USA
Protherics UK Limited
BTG Australasia Pty
Limited Australia
Protherics Utah Inc.
Tennessee USA
Biocompatibles
International Limited*
Biocompatibles
UK Limited
Biocompatibles Inc.
Delaware USA
BTG International
Germany GmbH Germany
BTG International
Canada Inc. Canada
EKOS Corporation
Delaware USA
PneumRx Inc.
Delaware USA
PneumRx GmbH
Germany
BTG International
Healthcare Ltd
BTG International
Healthcare LLC
Delaware USA
IO2 Limited
Five Tower Bridge, 300 Barr Harbor Drive, Suite 800,
West Conshohocken, PA 19428, United States
Common stock
Research, development and sale of
pharmaceutical products
Blaenwaun Ffostrasol, Llandysul, Ceredigion,
Wales SA44 5JT
Turretfield Research Centre, 129 Holland Road,
Rosedale SA 5350, Australia
615 Arapeen drive, Suite 105, Salt Lake City,
UT 84108, United States
Chapman House, Farnham Business Park,
Weydon Lane, Farnham, Surrey GU9 8QL
Chapman House, Farnham Business Park,
Weydon Lane, Farnham, Surrey GU9 8QL
Ordinary
Ordinary
Research, development, manufacture and sale
of pharmaceutical products
Manufacture and sale of pharmaceutical
products
Common stock
The research, development, manufacture and
sale of pharmaceutical products
Ordinary
Ordinary
Investment and management of group
companies
Development, management and
commercialisation of IPR
Five Tower Bridge, 300 Barr Harbor Drive, Suite 800,
West Conshohocken, PA 19428, United States
Common stock
Distribution of Bead products, TheraSphere®
and Varithena®
Industriestrasse 19,63755, Alzenau, Germany
No par value shares Research and development
11 Hines Road, Suite 200, Ottawa ON K2K 2X1, Canada
Common shares
BTG International Asia Ltd
Hong Kong, China
21st Floor, Edinburgh Tower, the Landmark,
15 Queen’s Road Central, Hong Kong
11911 N. Creek Parkway S., Bothell WA 98011,
United States
4255 Burton Drive, Santa Clara, CA 95054,
United States
Ordinary
Common stock
Common stock
Support of Interventional
Medicine business
Sales support for the interventional
medicine business
Manufacture and commercialisation of
therapeutic ultrasound devices
Development, manufacture and
commercialisation of the RePneu® Coil System
Prinzenallee 19, 40549, Dusseldorf, Germany
No par value shares Commercialisation and sale of the RePneu®
Coil System
5 Fleet Place, London EC4M 7RD
Ordinary
Group financing
BTG International Healthcare
Inc. Delaware USA
Five Tower Bridge, 300 Barr Harbor Drive, Suite 800,
West Conshohocken, PA 19428, United States
Common stock
Group financing
Five Tower Bridge, 300 Barr Harbor Drive, Suite 800,
West Conshohocken, PA 19428, United States
Ordinary
Group financing
5 Fleet Place, London EC4M 7RD
BTG IM Holdings Limited
Tavor Building 1, Yokneam Illit Industrial Park, PO Box 224,
Yokneam, 2069203, Israel
Galil Medical Inc.
Delaware USA
Galil Medical Limited
4364 Round Lake Road, Arden Hills MN 55112,
United States
Tavor Building 1, Yokneam Illit Industrial Park,
PO Box 224, Yokneam, 2069203, Israel
Ordinary
Ordinary
Dormant company
Investment in Galil companies
Common Stock
Manufacture, commercialisation
and sale of the Galil System
Manufacture, Commercialisation and sale
of the Galil System
Ordinary
Series A-1 Preferred
Shares
Series A-2 Preferred
Shares
Series B Preferred
Shares
Galil Medical UK Limited
5 Fleet Place, London EC4M 7RD
Ordinary
Distribution of the Galil System
*Indicates direct subsidiary of BTG plc.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 150150
Notes to the consolidated
financial statements
continued
26. Business Combinations
Acquisitions during the year ended 31 March 2017
a) Galil acquisition
On 15 June 2016 BTG completed the acquisition of 100% of Galil Medical for an aggregate consideration of $84.5m,
subject to adjustment for cash and debt assumed at acquisition. Contingent consideration of up to $25.5m may also be
payable in future periods based upon the achievement of regulatory and sales based milestones.
The total equity consideration for the acquisition of Galil Medical was £39.1m ($55.1m), representing up-front cash
consideration of £37.5m ($52.9m) and the fair value of contingent consideration of £1.6m ($2.2m). The remainder of the
aggregate consideration has been used to settle debt and other obligations assumed on acquisition.
Galil Medical’s results of operations have been consolidated from 15 June 2016, and the fair value of acquired assets
and liabilities has been determined as of that date. The final determination of these fair values will be completed as soon
as possible but no later than one year from the acquisition date.
In the US, Galil Medical’s products are indicated for the treatment and palliative care of kidney and other cancers, in
addition to a number of other uses, including in urology. Galil Medical is also conducting two clinical studies that could
lead to US regulatory clearance for use in lung metastases and bone metastases. The acquisition complements BTG’s
Interventional Medicine platform, building on the Group’s Interventional Oncology business area.
Intangible assets of £47.7m relate to developed cryoablation technology. An estimated useful life of 15 years has been
assigned to this developed technology, and associated amortisation expense will be recorded on a straight-line basis.
Goodwill arising of £16.4m, which is not deductible for tax purposes, has been assigned to the Interventional Medicine
operating segment. Goodwill represents future developments to the cryoablation technology and the value of Galil’s
workforce which have not been reflected as separate intangible assets, together with the recognition for accounting
purposes of a deferred tax liability of £17.0m relating to recognised developed technology.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 151151
ASSETS
Non-current assets
Intangible assets
Goodwill
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
LIABILITIES
Non-current liabilities
Net deferred tax liabilities
Current liabilities
Trade and other payables
Debt obligations
Book value and fair value of assets and liabilities acquired
Cash consideration
Fair value of contingent consideration
Total equity consideration
Book Value
£m
Fair Value
Adjustment
£m
Fair Value
£m
0.4
–
0.4
2.6
3.7
1.3
–
(9.4)
(18.9)
(19.9)
47.3
16.4
0.6
0.8
–
–
(6.1)
–
–
59.0
47.7
16.4
1.0
3.4
3.7
1.3
(6.1)
(9.4)
(18.9)
39.1
37.5
1.6
39.1
During the period ended 31 March 2017, Galil Medical contributed revenues of £17.2m and an operating loss (including
intangible asset amortisation of £2.9m) of £2.3m in the period since acquisition. If the acquisition had taken place on
1 April 2016, the Group’s revenue and profit before tax would have been £573.5m and £30.2m, respectively.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 152152
Company financial statements
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
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
2017
£m
31 March
2016
£m
Note
4
5
6
6
6
6
6
7
775.1
775.1
69.2
0.5
69.7
844.8
38.5
435.4
317.8
37.6
829.3
15.5
15.5
844.8
768.7
768.7
69.1
0.5
69.6
838.3
38.3
434.8
317.8
41.5
832.4
5.9
5.9
838.3
The notes on pages 154 to 156 form part of these financial statements.
The financial statements were approved by the Board on 15 May 2017 and were signed on its behalf by:
Dame Louise Makin
Chief Executive Officer
Rolf Soderstrom
Chief Financial Officer
Registered No: 2670500
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 153153
Statement of cash flows
for the year ended 31 March 2017
Loss after tax for the year
(Increase)/decrease and other receivables
Increase 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
Note
2
5
7
6
31 March
2017
£m
(11.1)
(0.1)
9.6
0.8
(0.8)
31 March
2016
£m
(8.6)
1.4
3.7
2.4
(1.1)
–
–
0.8
0.8
–
0.5
0.5
–
–
1.1
1.1
–
0.5
0.5
Statement of changes in equity
At 1 April 2016
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners:
Issue of BTG plc ordinary shares
Movement in shares held by and gifted
to the Employee Share Ownership Trust
Share-based payments
At 31 March 2017
At 1 April 2015
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners:
Issue of BTG plc ordinary shares
Movement in shares held by and gifted
to the Employee Share Ownership Trust
Share-based payments
At 31 March 2016
Share
capital
£m
38.3
–
–
–
0.2
–
–
38.5
Share
capital
£m
38.2
–
–
–
0.1
–
–
38.3
Share
premium
£m
434.8
Merger
reserve
£m
317.8
Retained
earnings
£m
41.5
–
–
–
0.6
–
–
435.4
Share
premium
£m
433.8
–
–
–
1.0
–
–
434.8
–
–
–
–
–
–
317.8
Merger
reserve
£m
317.8
–
–
–
–
–
–
317.8
(11.1)
–
(11.1)
–
(1.3)
8.5
37.6
Retained
earnings
£m
43.5
(8.6)
–
(8.6)
–
(0.1)
6.7
41.5
Total
equity
£m
832.4
(11.1)
–
(11.1)
0.8
(1.3)
8.5
829.3
Total
equity
£m
833.3
(8.6)
–
(8.6)
1.1
(0.1)
6.7
832.4
The notes on pages 154 to 156 form part of these financial statements.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 154154
Notes to the Company
financial statements
1. Accounting policies
The Company 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 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 £11.1m (2016: £8.6m).
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
2017
£’000
128
60
Year ended
31 March
2016
£’000
98
54
Disclosures of individual Director’s remuneration and associated costs required by the Companies Act 2006 and
specified by the Financial Conduct Authority are on pages 72 to 97 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 18 of the Group
financial statements.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 155155
4. Investment in subsidiary undertakings
Cost
At 1 April 2015
Increase of investments in subsidiary companies
Share based payments
At 1 April 2016
Increase of investments in subsidiary companies
Share based payments
At 31 March 2017
£m
764.6
–
4.1
768.7
–
6.4
775.1
A list of the Company’s principal subsidiary undertakings is shown in note 30 to the Group financial statements.
5. Trade and other receivables
Due within one year
Prepayments
Amounts owed by subsidiary undertakings
31 March
2017
£m
31 March
2016
£m
0.6
68.6
69.2
0.7
68.4
69.1
6. Capital and reserves
Details of Company share capital are disclosed in note 15 to the Group financial statements. Details of share options
granted by the Company are set out in note 19 to the Group financial statements. Details of shares in the Company held
by subsidiaries are shown in note 25 to the Group financial statements.
7. Trade and other payables
Due within one year
Accruals and deferred income
Amounts owed to subsidiary undertakings
The directors consider the fair value of trade and other payables to be equal to their book value.
8. Financial assets and liabilities
31 March 2016
Cash and cash equivalents
Trade and other receivables
Trade and other payables
31 March 2017
Cash and cash equivalents
Trade and other receivables
Trade and other payables
31 March
2017
£m
31 March
2016
£m
3.9
11.6
15.5
2.7
3.2
5.9
Amortised
cost
£m
0.5
69.1
(5.9)
0.5
69.2
(15.5)
Total
carrying
value
£m
0.5
69.1
(5.9)
0.5
69.2
(15.5)
The Company considers that the carrying amounts of cash and cash equivalents, trade and other receivables and trade
and other payables are a reasonable approximation of their fair value.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 156156
Notes to the Company
financial statements
continued
Credit risk
The Company’s credit risk relates to 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 cash is managed centrally within its subsidiaries. Accordingly the Company
is funded by its subsidiaries as its liabilities fall due. In November 2015, the Group signed a £100m multi-currency
revolving credit facility providing access to funds for a period of three years to November 2018 with a with the option
to extend for a further year. The £100m revolving credit facility has not been utilised in the current or prior 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 21 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. The Company has additionally
guaranteed the payment obligations of BTG International Limited in respect of its obligations in relation to the fund, up
to a maximum amount of £12m.
10. Related party transactions
The Company has a related-party relationship with its subsidiary undertakings and its directors.
In relation to the related party relationship identified on page 56 concerning Giles Kerr, payments made by BTG to
Oxford University and Isis Innovations Ltd under the relevant licence agreements were £19,000 for the year ended
31 March 2017 (£24,000 during the year ended 31 March 2016). There are no amounts still outstanding and payable
by BTG under these agreements as at 31 March 2017 (2017: nil).
Key management personnel are considered to be the directors and their remuneration is disclosed within the
Remuneration Report on pages 72 to 97.
11. Pensions
Certain employees of the Company participate in the Group’s defined benefit plan. Further information on the defined
benefit plan can be found in Note 18 of the Group financial statements.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 157157
Five-year financial record
For the year ended 31 March
Consolidated income statement
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Research and development
Other operating income
Amortisation of acquired intangible assets
Acquisition and reorganisation costs
Operating profit
Financial income
Financial expense
Profit before tax
Tax credit/(charge)
Profit after tax for the year
Earnings per share
Basic
Diluted
20171
£m
570.5
(179.9)
390.6
(206.6)
(87.8)
4.4
(42.0)
(1.1)
57.5
3.3
(29.2)
31.6
2.0
33.6
8.7p
8.6p
2016
£m
447.5
(140.8)
306.7
(141.4)
(77.2)
3.4
(35.0)
–
56.5
4.4
(3.4)
57.5
3.0
60.5
15.8p
15.6p
20152
£m
367.8
(114.7)
253.1
(124.8)
(68.3)
7.0
(28.4)
(3.7)
34.9
0.1
(8.3)
26.7
6.9
33.6
9.1p
9.0p
20143
£m
290.5
(95.0)
195.5
(84.0)
(47.2)
(3.9)
(23.3)
(9.8)
27.3
8.2
(2.2)
33.3
(9.0)
24.3
6.8p
6.7p
2013
£m
233.7
(67.2)
166.5
(58.0)
(41.2)
1.7
(43.4)
0.1
25.7
1.1
(2.7)
24.1
(7.7)
16.4
5.0p
5.0p
1. The results for the year ended 31 March 2017 include the results of Galil Medical from the date of acquisition, being 15 June 2016.
2. The results for the year ended 31 March 2015 include the results of PneumRx, Inc. from the date of acquisition, being 7 January 2015.
3. 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.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials
158158
Five-year financial record
For the year ended 31 March
continued
Consolidated statement of financial position
Goodwill
Intangible assets
Property, plant and equipment
Other investments
Deferred tax asset
Employee benefits
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
20171
£m
225.6
678.9
40.1
1.7
5.3
17.2
–
968.8
342.3
1,311.1
38.5
435.4
317.8
119.8
68.4
979.9
165.7
165.5
331.2
1,311.1
2016
£m
187.9
599.2
35.7
1.4
6.8
19.3
1.0
851.3
297.5
1,148.8
38.3
434.8
317.8
28.1
28.7
847.7
176.1
125.0
301.1
1,148.8
20152
£m
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
20143
£m
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
2013
£m
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
1. The statement of financial position for 31 March 2017 includes the assets and liabilities acquired from Galil Medical during the year.
2. The statement of financial position for 31 March 2015 includes the assets and liabilities acquired from PneumRx, Inc. during the year.
3. 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.
Consolidated cash flow statement
Net cash from 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
20171
£m
74.2
(45.3)
(19.7)
9.2
5.9
140.4
155.5
2016
£m
95.6
(29.9)
–
65.7
0.9
73.8
140.4
20152
£m
47.5
(158.9)
146.2
34.8
0.8
38.2
73.8
20143
£m
48.5
(269.4)
102.7
(118.2)
(2.3)
158.7
38.2
2013
£m
55.5
(4.5)
0.2
51.2
0.6
106.9
158.7
1. The results for the year ended 31 March 2017 include the results of Galil Medical from the date of acquisition, being 15 June 2016.
2. The results for the year ended 31 March 2015 include the results of PneumRx, Inc. from the date of acquisition, being 7 January 2015.
3. 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.
BTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017BTG plc Annual Report and Accounts 2017Financials 159159
Shareholder information
Financial calendar
Circulation of annual report for the year ended 31 March 2017
Annual General Meeting
13 June 2017
13 July 2017
Announcement of interim results for the six months ended 30 September 2017
November 2017
Preliminary announcement of annual results for the year ended 31 March 2018
May 2018
Shareholders
At 31 March 2017 there were 8,764 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
8,014
510
52
101
87
8,764
Percentage
Number of
of total number
ordinary shares
of shareholders
5,223,299
91.4
8,155,536
5.8
3,722,128
0.6
1.2
25,038,986
1.0 342,987,576
100.0 385,127,525
Percentage of
ordinary shares
1.3
2.1
1.0
6.5
89.1
100.0
Number of
shareholders
960
7,633
48
1
122
8,764
Percentage
of total number
of shareholders
Number of
ordinary shares
11.0 374,790,955
9,349,586
87.1
480,970
0.5
32,098
–
473,916
1.4
100.0 385,127,525
Percentage of
ordinary shares
97.3
2.5
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 0371 664 0445 (telephone dealing – calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom are charged at the applicable international rate. Lines are open between
8 am – 4.30 pm, Monday to Friday excluding public holidays in England and Wales). 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.
BTG plc Annual Report and Accounts 2017FinancialsFinancialsBTG plc Annual Report and Accounts 2017Financials 160160
Shareholder information
continued
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
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 68 to 70 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.
Advisers
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
Auditor
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 0871 664 0300
(please note that calls cost 12p per minute, plus network
extras. Lines are open from, Monday to Friday 9:00am –
5:30pm GMT, excluding public holidays in England
and Wales.)
Callers from outside the UK:
Tel +44 (0) 37 1664 0300
BTG plc Annual Report and Accounts 2017FinancialsBTG plc Annual Report and Accounts 2017Financials This report is printed on Revive 50 Silk which is produced using 50% recycled
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BTG plc
5 Fleet Place
London EC4M 7RD
UK
Tel: +44 (0)20 7575 0000
Fax: +44 (0)20 7575 0010
btgplc.com