Creo Medical Limited Annual Report 2019

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FY2019 Annual Report · Creo Medical Limited

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Anything
is Possible
With the
Right Approach

Annual Report
& Accounts

2019

HIGHLIGHTS

STRATEGIC REPORT

CONTENTS

Strategic Report

Highlights

Company overview

Our applications

Investment proposition

Chairman’s statement

Chief Executive’s review

Our market opportunity

Our business model

Operational strategy execution

Chief Technology Officer’s statement

Introducing Kamaptive technology

Commercial review

Our people

Principal risks and uncertainties

Financial review

Section 172 statement

Corporate Governance

The Board

Corporate governance report

Directors’ report

Directors’ responsibilities

Directors’ remuneration report (unaudited)

Financial Statements

Independent auditor’s report

Consolidated statement of profit and loss
and other comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes to the financial statements

Parent company statement of financial position 87

Parent company statement of changes in equity 88

Notes to the parent company
financial statements

our focus.
We are focused on the development
and commercialisation of minimally invasive
electrosurgical devices, bringing advanced
energy to endoscopy.

A YEAR OF ACHIEVEMENTS

• Increased commercial momentum

– Suite of devices launched at the

with Creo’s first products, Speedboat
and the CROMA Advanced Energy
Platform:

– Successful roll-out of Creo’s Clinical
Education Programme (CEP) in the
United States (US) and completion
of the first Speedboat training
course delivered by a US clinician
trained as part of Creo’s CEP

– Procedures successfully carried
out on patients by a number of
US clinicians using Speedboat

– First commercial orders for

Speedboat and first revenue from
US hospitals

– Additional European Framework

Distribution secured across France,
Germany and Italy with first
physicians trained and delivering
procedures

– Additional Asian Framework

Distribution Agreement secured
covering India with first physicians
trained and publication of cases

United European Gastroenterology
Week Congress in October 2019

• Advanced progress made in gaining
regulatory approvals in the EU for
a further four devices optimised for
the core tissue effects of dissection,
resection, haemostasis and ablation

• Post period end 510(k) clearance

from the US Food and Drug
Administration (‘FDA’) for Creo’s HS1
Haemostasis device (‘HS1’) and on
track to gain clearance with
additional devices from the suite of
products in the USA

• Strengthened IP portfolio, with
188 granted patents and 599
pending applications (as at
31 December 2019)

• Post period end, key appointments
made including the addition of
Ivonne Cantu as an independent
Non-Executive Director

FINANCIAL HIGHLIGHTS

• Strengthened balance sheet

following the successful raise of an
additional £51.9m (before expenses)
through a placing and open offer

• Cash and cash equivalents of
£81.0m at 31 December 2019
(31 December 2018: £44.6m)

• R&D expenditure for 2019 was £8.1m
(18 months to 31 December 2018:
£7.8m) to expand the portfolio
of products

• Operating loss of £18.9m

(18 months to 31 December 2018:
£17.7m) including £1.6m share-based

payments, in line with management
expectations

• Underlying operating loss of £14.0m
(18 months to 31 December 2018:
£12.6m) is in line with the anticipated
spend profile and reflects increased
commercial activities

• Net assets of £82.7m

(31 December 2018: £47.7m)

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGOVERNANCEFINANCIAL STATEMENTSCOMPANY OVERVIEW

About us
Our CROMA Advanced Energy
Platform, combined with our range
of patented electrosurgical devices,
is designed to provide clinicians
with flexible, accurate and controlled
clinical solutions.

We believe our technology can impact the
landscape of surgery and endoscopy by
providing a safer, less-invasive and more
cost-efficient option for procedures,
enabling procedures under sedation outside
the operating theatre rather than under
general anaesthetic in the operating room.

We focus on significant markets:
f Interventional Gastroenterology for the
dissection, resection, ablation and
haemostasis of diseased GI tissue
f Soft tissue ablation (including the liver,

pancreas, kidney)

f Interventional Pulmonology for the
resection and/or ablation of pre-
cancerous and cancerous lesions.

Headquartered in Chepstow, UK,
Creo Medical was founded in 2003 by
Professor Chris Hancock, and was admitted
to the AIM market of the London Stock
Exchange on 9 December 2016.

Our portfolio
Each of our patented electrosurgical devices
is powered by our CROMA Advanced Energy Platform.

CROMA Advanced Energy Platform
The CROMA Platform delivers a
combination of bi-polar radiofrequency
and microwave energy for a range of
surgical effects through a single
accessory port. This advanced energy,
enables single use, surgical accessories
to be optimised for the dissection,
resection, haemostasis and ablation of
tissue in multiple areas of therapy.

Five patented electrosurgical devices
at or close to commercialisation
We have developed a suite of multi and
single modality, matched devices which
are optimised around the core tissue
effects of dissection, resection,
haemostasis and ablation.

Read more on page 20

Employees*

Intellectual Property*

Granted patents

188

Patents pending

599

Our rich pipeline of technologies and devices

Third party IP
and products

Conceptual IP
and products

CROMA
Platform

Our
electrosurgical
products

Read more on page 18

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

* as at 31 December 2019

Our advanced energy
platform makes it
possible to perform
eNdoSCopiC SurgerY
WiTH preCiSioN
FleXiBle instruments,
with patients sedated in
an outpatient setting
rather than in the
operation room under
general anaesthetic.

* as at 31 December 2019

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOUR APPLICATIONS

Gastrointestinal
endoscopy
Growing incidence of GI indications
f Poor diet, obesity, sedentary lifestyles and an aging
population are leading to an increased prevalence
of GI conditions.

Endoscopic accessible soft
tissue ablation
Demand for new therapies:
f The GI tract allows access to close-by organs (for example, liver, pancreas
and kidney). Cancers of these organs are among the highest causes of
cancer-related deaths and are characterised by limited effective treatments
and poor rates of survival.

Growing demand for screening
f Western governments and health organisations

continue to expand endoscopic screening
programmes, which is driving an increase in
detection of a range of conditions requiring the
resection or biopsy of tissue and the control
of bleeding.

16m

screening colonoscopies are performed per
annum in the US1

1.1m

find a lesion requiring treatment2

c.50%

of those lesions are removed surgically1

Compelling improvements vs current options
f Current treatment is open or laparoscopic surgery,
requiring up to 5-day hospital stays and with a
mortality rate of up to 6% at 30 days3.
f Advanced therapeutic endoscopy allows

procedures to be performed in outpatient clinics
and the risk of complications and mortality are
also reduced.

We are developing a range of devices to cover both
upper and lower GI procedures.

1. US surgical procedures volumes 2010, Millennium Research,

RPUS435SV10, Feb 2010.

2. Gastrointest Endosc 2014; 80-133-43.
3. Ann R Coll Surg Engi 2011; 96: 445-450.

Indications:
f Liver cancer combines high incidence and high mortality – it is the
4th biggest cause of cancer death worldwide, with 780,000 deaths
annually, and has the second highest mortality rate (93%)1.

f Pancreatic cancer has the highest mortality rate (94%) of all major

cancers1. It is expected to become the second largest cause of cancer-
related deaths around 2020 in the USA2 where it has a 5-year survival rate
of 9%3 (7% in the UK4).

f Prevalence of incidental pancreatic cysts has been shown in studies to be

c.9%5. Precancerous or cancerous potential of cysts is estimated to be 2%6.
With a European and North American population of c.1.1bn, this could imply
c.2m people with a potentially cancerous pancreatic cyst.

f Kidney cancer is increasing at one of the highest rates globally

(est. 22% growth 2014–20207) with over 400,000 incidences per year1.

780,000

deaths annually from liver cancer1

94%

mortality rate for pancreatic cancers1

Therapeutic Endoscopy using an Endoscopic Ultrasound Scan combined
with Creo’s flexible microwave ablation probe could provide an alternative way
to ablate soft tissue tumours and treat patients for whom there may be limited
options for surgical intervention.

Creo’s flexible microwave ablation probe is intended to navigate the GI tract
to access adjacent organs using a fine gauge needle antenna, managing
tumours and extending patient survival.

1. WHO, IARC Cancer Today Online Analysis 2018.
2. Lola Rahib, Benjamin D. Smith, Rhonda Aizenberg, Allison B. Rosenzweig, Julie M. Fleshman and
Lynn M. Matrisian. Projecting Cancer Incidence and Deaths to 2030: The Unexpected Burden of
Thyroid, Liver, and Pancreas Cancers in the United States. DOI: 10.1158/0008-5472.CAN-14-0155
Published June 2014.

3. American Cancer Society, Cancer Facts and Figures 2019.
4. Pancreatic Cancer UK fact sheet.
5. Oliveira PBd, Puchnick A, Szejnfeld J, Goldman SM (2015). Prevalence of Incidental Pancreatic

Cysts on 3 Tesla Magnetic Resonance. PLoS ONE 10(3): e0121317. doi:10.1371/journal.
pone.0121317.

6. https://www.roswellpark.org/cancertalk/201711/do-pancreatic-cysts-become-cancerous
7. European Association of Urology, Scientific and Policy Briefing on Kidney Cancer.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Bronchoscopic
accessible ablation
Demand for new therapies

1.8m

global cases of lung cancer each year1

85%

of patients are inoperable2, leaving
radiotherapy and chemotherapy the only
treatment options

17%

five-year survival rate3

f Therapeutic bronchoscopy allows treatment of
pre-cancerous nodules in the lung as a first-line
option, as well as treatment of patients not eligible
for surgery.

f Lung cancer is not yet routinely screened for,
however recent consolidation in the sector
indicates investment and improvements in
diagnostic accuracy.

f Population-based screening will become a part
of life in the near future, resulting in earlier stage
disease diagnosis.

f Earlier diagnosis requires less invasive and more

precise treatment options.

f These requirements ideally suit the key features of
our CROMA Advanced Energy Platform and tiny
non-cooled flexible ablation devices.

f Creo’s lung probe is intended to be able to navigate
to see and treat lesions deep in the lung, ablating
lesions safely without the complications associated
with percutaneous ablation.

1. WHO, IARC Cancer Today Online Analysis 2018.
2. US surgical procedures volumes 2010, Millennium Research,

RPUS435SV10, Feb 2010.

3. Gastrointest Endosc 2014; 80-133-43.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSINVESTMENT PROPOSITION

a strong
portfolio of ip.
Deep in-house expertise coupled
with partnerships with trusted third
parties creates a powerful combination.

CROMA Advanced Energy
Platform and patented devices
with compelling benefits
Our patented CROMA Advanced Energy
Platform delivers microwave and bipolar
radiofrequency energy through a single
accessory port, delivering precise cut,
coagulation and ablation for a range
of electrosurgical devices bringing
significant advantages in time, costs
and outcomes.

Rich product pipeline
and strong IP
We have a promising pipeline of products,
from early concept development to
in-human use, supported by an IP
portfolio of 188 granted patents
and 599 pending applications as at
31 December 2019.

Read more on page 19

Read more on page 18

Attractive market potential
Our devices are designed to enhance
existing techniques and provide effective
new therapies in high-value segments of
large and growing global markets.
Healthcare providers are expanding
screening programs, driving increasing
early stage detection rates for a range of
conditions requiring tissue management
and the control of bleeding.

Scalable business model
Our pioneering CROMA Advanced Energy
Platform is designed to be scaled via the
‘razorblade mode’ with a suite of single-
use devices that deliver superior
outcomes for physicians and patients.
Our business model – from R&D, through
manufacture and sales and distribution
– is designed to be resilient and scalable.

Read more on page 10

Read more on page 12

Experienced team
Our management team is drawn from the
surgical instrumentation and technology
market and has experience spanning
R&D, quality, regulatory approval and
commercialisation and we have strategic
relationships with respected scientific
advisers and Key Opinion Leaders.

Clear commercialisation strategy
We are pursuing a defined roadmap
towards the launch of a suite of devices,
initially focused on GI and ablation
applications. We begin by building
advocacy with Key Opinion Leaders,
driving penetration through our Clinical
Education Programme and the
subsequent breadth of usage through
stimulating increased generator utilisation
and expanding into adjacent markets.

Framework distribution agreements
with respected partners give us a route
to market in multiple countries around
the world.

Read more on page 29

Read more on page 26

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

CHAIRMAN’S STATEMENT

At IPO in December 2016,
we set out our ambitious and
challenging three-year plan.

We are therefore reporting on both the progress made
by the Company in the twelve months ended
31 December 2019, and reviewing the key milestones
achieved over those three years. Craig, Chris and Richard
provide more detail in their reports and set out our vision
and framework for Creo’s development over the next
three years.

Overview
Having achieved US FDA clearance and CE marking
ahead of plan for CROMA, our Advanced Energy
Platform, and Speedboat, the first in our suite of
patented electrosurgical devices, we have introduced our
products in key international markets. These are
delivering clinical benefits in the UK, EU, US, South Africa
and India, where we now have distributors appointed and
leading surgeons and endoscopists using our devices
daily. We are completing the regulatory clearance
process for our wider suite of GI devices which will work
alongside Speedboat, and are delighted to have received
US FDA 510(k) clearance of our HS1 Haemostasis Device
in March 2020.

We have received first commercial orders and revenue
from US hospitals, a key milestone in our evolution from
early clinical adoption to wider international
commercialisation. With proprietary products at the core
of the Company, we continue to focus on Research and
Development and thereby strengthen our extensive IP
portfolio, as detailed in Chris’s report on page 16.

Management and staff
I would like to congratulate our executive team and staff
on delivering on the three-year plan. They have made
excellent progress against milestones, in particular our
focused three-prong strategy of turning production into
manufacturing; projects into products; and trainees
into users.

Over the course of the year we welcomed twenty-two new
recruits to the Creo team in key areas including sales and
marketing, clinical training, and corporate development.
Together, this has taken the Company’s permanent
headcount to 91, more than trebling since the IPO.

Shareholders and corporate finance
None of this is possible without the enthusiasm and
support of our shareholders. A key milestone was the
equity fundraising, completed in December, which raised
£51.9 million. This follows the £48.5 million raised in
August 2018 and the £20.0 million at the IPO. Each
fundraising has been priced at a premium to previous
equity issues, both strengthening the balance sheet and
building shareholder value. These have allowed Creo to
progress energetically over the three years, and our
strong balance sheet puts us in an excellent position to
execute on the next phase of our development.

We welcome all new shareholders to the Company and
thank them, and our existing shareholders, for their
continued encouragement.

Board and governance
We welcome Ivonne Cantu to the Board as our third
independent Non-Executive Director and chair of the
Remuneration Committee and member of the Audit
Committee. Ivonne brings deep experience of corporate
finance, M&A and investor relations from her twenty-
year career in the City and subsequent executive roles in
the quoted sector.

Coronavirus (COVID-19)
We are continually monitoring the development of
COVID-19 and the impact it is having on our business.
We have a cogent plan to manage the business during
these uncertain times, in particular during the measures
announced by the UK Government. The Board want to
thank our colleagues, our customers, and our suppliers
for all their support and, of course, wish them and their
families the best of health. We will support them and the
wider medical technology community in any way we can.

Outlook
With a strong balance sheet, supportive shareholders and
further additions to our team, we are confident we can
build on this progress for the next stage of Creo’s
development. Notwithstanding delays that may arise
outside our control from COVID-19 globally, our focus
remains to complete the regulatory clearance for our suite
of GI devices, accelerate the commercial rollout of our
products in the US along with our global distribution
partners, explore potential strategic acquisition
opportunities, and continue research and development
of new devices, energy modalities and applications for
CROMA based on our extensive intellectual property.

Charles Spicer
Chairman
6 May 2020

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCHIEF EXECUTIVE’S REVIEW

encompassing radio frequency (“RF”), microwave and
other future modalities such as plasma or millimetre
(mm) wave. Creo’s talented team of developers is
continuing to work on creating pioneering devices and
energy modalities, with some exciting programmes in
the pipeline that Chris outlines from page 16.

Production to manufacturing
In anticipation of seeing significant growth in orders for
Speedboat, during the year we signed heads of
agreement with an outsource contract manufacturer to
facilitate the larger scale production of our devices and
are in the final stages of formalising that contract. We
have validated the process for Speedboat in the first
instance, and our partner is poised to initiate production
once orders reach a specified volume threshold. For
other devices, we intend to retain early production
in-house to optimise processes for newly launched
products ahead of outsourcing.

Trainees to users
In collaboration with our distribution partners, our
Clinical Education Programme (CEP) for our Speedboat
device now operates through multiple training centres
of excellence spanning the UK, US, Europe, India and
South Africa.

The year not only brought the first clinical use of
Speedboat in the US, it was also satisfying to see the first
of our trainees training other GI endoscopists who are
now keen advocates and users of Speedboat, with the
expertise now cascading through an expanding network
of training centres in this important market.

We are working with our distribution partners to launch
our range of GI and general ablation products, where
the first cases had been expected in the first half of 2020
(prior to the outbreak of COVID-19). Our additional GI
devices will be commercialised through the same
channels as Speedboat, a model that we will work with
distributors to replicate for the ablation product which
will target pulmonary/bronchoscopy applications
in particular.

To accelerate our route to market capabilities we have
identified a cadre of high-quality prospective acquisition
candidates to help us build a direct presence in the US
and be better positioned to collaborate with distribution
partners in other territories. Key appointments have
brought extensive expertise in M&A from previous roles
at Ernst & Young and Deloitte, and our strengthened
balance sheet following our recent fundraise give us the
capabilities and firepower to execute on corporate
development activity in a timely manner.

Growing the pie
Conscious that our ground-breaking products and
energy platform have valuable application in much
broader therapies than we have the resources to target,
in 2021 we intend to run the first of a series of developer
conferences. The aim is to stimulate third party device
manufacturers and innovators to develop products
powered by our full spectrum
CROMA Advanced Energy Platform (see page 22 for more
details on our Kamaptive technology). As well as
increasing the overall size of the market for devices

and the

a solid record
of achievement.
And a rich pipeline of opportunity.

We have made enormous strides since Creo was
admitted to AIM three years ago, achieving all of the
goals set out in the three-year plan we articulated at IPO.

Below I set out progress we have made against the three
pillars of our strategy.

Projects to products
I am delighted to report that 2019 saw our first
commercial orders, generating revenues for the first
time from our CROMA Advanced Energy Platform and
Speedboat product, the first of a unique range of
electrosurgical devices for GI and other applications.

Progress in gaining regulatory approvals for a further
four devices optimised around the core tissue effects of
dissection, resection, haemostasis and ablation is well
advanced. Technical files are complete and, with revised
arrangements with the Company’s Notified Body, all four
products will be CE marked in Europe simultaneously on
receipt of Creo’s new EC certificate, which is expected in
the near term. In addition, alongside the FDA clearances
received so far for the CROMA Advanced Energy Platform
and the Speedboat device, we remain on track to gain US
clearance for the remaining products with US FDA 510(k)
clearance of our HS1 Haemostasis Device being issued in
March 2020, the first device to use our unique non-stick
haemostasis technology.

Having launched the range of devices to the market at
the United European Gastroenterology Week Congress
in October 2019, plans are in place to introduce the
devices into clinical practice as we gear up for
commercialisation.

All of our existing and future devices will be powered by
CROMA’s broad spectrum, adaptive technology,

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

based on advanced energy in multiple applications and
geographies, we envisage that this open platform
approach will also be a source of royalty income for Creo.

Favourable market context
Our experience of working with clinicians and key
opinion leaders around the world indicates latent
demand for flexible endoscopic surgery devices to allow
minimally invasive procedures. We believe that the
advantages relative to more established laparoscopic or
open procedures are compelling for physicians, patients
and healthcare providers, in terms of outcomes and cost.

Detection of cancer has continued to increase as
diagnostic capability improves and screening
programmes have been extended in key markets (read
more on page 4). Growing numbers of cases are being
diagnosed at an earlier stage of progression, with smaller
tumours particularly suited to endoscopic surgery.

An entrepreneurial team
Our talented team has been enhanced by the
appointment of several high-calibre recruits to help Creo
in the next stage of its development. We boosted our
commercial team with the appointment of three former
Olympus employees with commercial leadership roles to
help drive our commercial expansion across EMEA, UK
and the US. Post period, we have appointed our first US
employee who has joined us from PENTAX Medical,
bringing extensive sales experience and knowledge.

We are also delighted to benefit from the expertise of
our new Chief Scientific Advisor, Joe Amaral, who held
leadership positions within the surgical advanced energy
division at Johnson & Johnson. Prior to this, a surgeon for
many years, Joe co-developed the harmonic scalpel as
well as becoming CEO of a major NY hospital. His
experience of running a hospital and a surgical
department are invaluable commercial and clinical
insights. Our clinical evaluation capabilities have also
been strengthened with the appointment of Professor
Paul Sibbons, one of the world’s leading
histopathologists. Paul founded and for many years led
the Northwick Park Institute of Medical Research, a
pioneering research centre recognised worldwide.

As the business has grown we have been mindful to
preserve our innovative, agile and outcome-oriented
spirit and ‘thinking out of the box’ culture, and I am
grateful and humbled by the hard work, determination
and talent we have in team Creo; we are one tribe.

COVID-19
As 2019 drew to a close we were poised to capitalise on
momentum built during the year, whilst the COVID-19
pandemic was gathering force to impact on our lives
in ways we could not have imagined just a few short
weeks later.

We went into the pandemic slow down with a full
calendar of clinical education and mentoring via centres
in all our developing markets. At the time, this was with
our first and only product cleared in the US and EU
– Speedboat. Whilst the front line clinical focus
worldwide has rightly focused on caring for patients with

COVID-19 and related conditions, procedures utilising
our products have, for the right reasons, been delayed as
routine diagnostics have been stopped to free up
resources for other use.

With our financial strength, we have been able to deploy
our staff remotely with almost all the resources they
need to continue with our technology development
unabated with a skeleton staff operating within the
production side of the business where needed. With this
clarity of focus, we hope to emerge from the lock-down
poised and ready to go with multiple devices cleared for
use in the EU and the US. We are continuing to work hard
behind the scenes to keep our clinical education and
mentoring calendar full for the next 2 quarters ahead
and utilising technology to continue with remote
mentoring, case reviews and clinical studies with our
customers who use this as much needed relief from
COVID-19 wards.

We challenged staff to find ways to be productive at
home during the lock-down, focusing on the things we
can do and not what we can’t, whether this is Creo
related work or, if their Creo work can not be done from
home, work to help in the community or the NHS. I have
been humbled by and am very proud to be part of Team
Creo, which has not only kept pace with key business
objectives, but has managed to deliver some amazing
charitable initiatives:
f We have secured over 300 ventilators to help our

local hospitals

f A disperse team have acquired over 20 3D printers
and laser cutters to set up their own production
lines printing PPE masks which they have delivered
to local care homes, hospitals, pharmacies and other
care workers

f We have delivered an initiative with 100 bicycles

donated to front line staff at local hospitals to help
with travel to shifts and between hospitals avoiding
complicated and lengthy commutes

f Our innovation team have worked day and night to
enhance our plasma sterilisation technology to
optimise it against the COVID-19 virus with testing
of rapidly produced prototypes in the coming weeks

We continue to monitor the COVID-19 situation globally
and we are poised with a range of devices ready to
relaunch into our key markets. This time is allowing us to
strengthen our approach and adapt to what will
inevitably be a different world and I am confident Creo
will re-emerge from the lock-down, stronger, and with
more game-changing products to drive through our
global CEP and through our network of distributors and
direct sales teams.

Craig gulliford
Chief Executive Officer
6 May 2020

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOUR MARKET OPPORTUNIT Y

Our solutions will enable
transformational procedures that
blur the lines between surgery
and endoscopy, addressing
unmet needs in large and
growing applications.

What is electroscopic surgery?
Electrosurgery is the application of electrical current to
biological tissue as a means to cut, coagulate and ablate.
Electrosurgical devices were first commercialised in the
1920s for use in open surgical applications. Over time,
advancing technology drove innovation into laparoscopy
(i.e. keyhole surgery), a field in which there are now a
considerable number of devices. In contrast, therapeutic
endoscopy or endoscopic surgery has comparably few
surgical tools available.

Endoscopes are effective screening and diagnostic
instruments that allow physicians to visualise the internal
structures of organs such as the gastrointestinal tract,
lungs and bladder via naturally occurring orifices.
Endoscopes are not equipped to perform a surgical
intervention in most situations. Insertion of the
endoscope is surgically non-invasive, avoiding the need
for surgical incisions, which, however small, increase the
risk to the patient and increase the cost of the procedure.

Endoscope diameter is limited by the size of the entry
orifice. For example, a colonoscope will typically be
12mm in diameter, while an orally inserted gastroscope
will typically have a diameter of 10mm. Within these
confines the endoscope must carry a video camera lens,
light source, air/water/suction channel and guide wires to
control the insertion. There is very limited space left in an
endoscope for instruments, although all endoscopes
have a working instrument channel offering
approximately 3mm of space through which devices can
be introduced. As such, and with the limited device
options currently available, while a patient can be
diagnosed endoscopically, the majority of interventions
still require a minimally invasive surgical procedure at
best, or open surgery at worse.

A minimally invasive procedure, such as laparoscopy,
improves on open surgery as it can be performed
through a few small incisions rather than a single large
one. Laparoscopic surgical procedures are versatile as
multiple instruments can be placed at the surgical site
through multiple bore insertion tubes with short lengths,
allowing fast insertion and removal of instruments. Our
technologies are designed to enable certain surgical
procedures to be effected through the insertion of
devices through the working channel of an endoscope,
circumventing the need to make abdominal incisions
with the associated general anaesthetic.

Endoscopy has been a rapidly expanding practice due to
the advent of colorectal cancer screening in most
healthcare systems. This has driven growth in equipment
and devices to enhance the ability to screen and detect
early stage and pre-cancerous lesions in the GI tract.

Why are we targeting particular segments?
There are unmet needs
Advanced therapeutic endoscopy has the potential to
reduce the risk of complications, with mortality rates
improved to negligible levels. Current mortality rates
from upper GI bleeding are up to 15%1, and traditional
colorectal surgery is associated with a 6% mortality rate
at 30 days2 because of the risks associated with partial or
complete removal of the colon when using traditional
surgical blades. In contrast to the need for a long
hospital stay, endoscopy procedures can be performed
in an outpatient clinic.

Despite the rise in incidence rates due to increases in
underlying causes and through increased screening,
the endoscopist has very few ‘tools’ to work with. Our
Horizon Group of Key Opinion Leaders quantified 76
specific unmet or underserved clinical needs in the GI
where advanced energy could be applied.

The markets we address are large
We focus on significant markets where we can bring
products to market that serve poorly met needs. Our
initial focus is in the GI tract, GI tract accessible soft
tissue (liver, pancreas, kidney) and lung interventions.

Colorectal cancer is the third most common cancer
worldwide and the second leading cause of death with
over 880,0003 related deaths. Obesity, sedentary
lifestyles, poor diet and aging populations are key
drivers, but increasing screening programmes, earlier
detection and improvements in treatment (including at
pre-cancerous stages) are reducing incidence and
mortality particularly in developed countries4.

Soft tissue cancers of the liver and pancreas, whilst lower
in terms of incidence have the two highest mortality/
incidence rates, exceeding 90% and jointly account for
some 1.3 million incidences and 1.2m causes of death3.
Both cancers are characterised by late stage detection,
thereby being mostly inoperable (for pancreatic cancer,
less than 20% of patients are candidates for surgery4)
and have very low 5-year survival rates.

Known as the silent killer, pancreatic cancer is expected
to become the second leading cause of cancer-related
death in the United States by 20205 with a current 5-year
survival rate of 9%4. During 2020, more than 57,000
Americans will be diagnosed with pancreatic cancer, and
some 47,050 are expected to die4. In the UK it is the 5th
biggest cancer killer, where the survival rate is only 7%6.
Approximately three-quarters of patients die within the
first year of diagnosis6.

1. Annals of Hepatology, Vol. 10 No.3, 2011: 287-295.
2. Ann R Coll Surg Engl 2011; 93: 445–450.
3. WHO, IARC Cancer Today Online Analysis 2018.
4. American Cancer Society, Cancer Facts and Figures 2020.
5. Lola Rahib, Benjamin D. Smith, Rhonda Aizenberg, Allison B.

Rosenzweig, Julie M. Fleshman and Lynn M. Matrisian. Projecting
Cancer Incidence and Deaths to 2030: The Unexpected Burden of
Thyroid, Liver, and Pancreas Cancers in the United States. DOI:
10.1158/0008-5472.CAN-14-0155 Published June 2014.

6. Pancreatic Cancer UK fact sheet.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

The incidence of liver cancer is increasing, driven not
only by poor lifestyles, but also as a result of Hepatitis B
(HBV) and Hepatitis C (HCV) viruses. Hepatitis is more
prevalent in developing countries, though in the US
three-quarters of the HCV-infected population are aging
baby-boomers (born 1945–65) for whom recommended
testing uptake is low (1 in 8)4.

Lung cancer is the most common cancer worldwide with
the highest incidence and mortality rates (exceeding
1.7m deaths annually)3. There were 46,700 new cases of
lung cancer in the UK in 2015, three-quarters of which
were diagnosed at later stages7. There are no nationwide
population-based screening programmes in the US or
UK, although the NELSON Study recently recommended
that routine screening be introduced for high-risk
patients. Approximately 150,000 screenings in the US
involve a pulmonary nodule8.

In cases of lung cancer, 85% of patients are currently
inoperable9 and have to rely on radiotherapy and
chemotherapy, with the 5-year survival rate only 17%10.
Surgery involves removal of large sections of the lung
and even the entire lung. Challenges with existing
treatment include difficulties with access for
interventional treatment via bronchoscope, since this is
limited by the size of the airway (<2mm in the periphery
of the lung), poor navigation, and safety considerations,
as percutaneous ablation is associated with skin burns,
pain, infection and pneumothorax. Technology is
developing fast to improve early diagnosis, with an end
goal of screening for lung cancer.

The addressable markets are large and growing. The
global market for endoscopic devices is estimated to be
worth $30bn, and growing at a compound annual
growth rate of 6.3%11. Within this, the global market for
energy systems and instruments is valued at $4.9bn1. In
the UK alone, there were 508 endoscopy units in 2017
and more than 4,000 endoscopists.

In terms of specific applications, the GI endoscopy
market, which has seen limited innovation in recent years
but a growing volume of interventional techniques, has
an addressable market of $3–4bn, and estimated annual
average growth of 4–6%13-14. For example, in the field of
colorectal cancer, 16m screening colonoscopies are
performed in the US per annum, of which 1.1m identify a
lesion requiring treatment15, of which 50% are surgically
removed16. There are moves to reduce the screening age
in the UK and US, for example, as incidence has grown
among a younger demographic.

For liver, pancreas and kidney treatment, endoscopically
delivered fine needle microwave ablation provides
minimally invasive treatment to manage tumours, and
extend and improve quality of life where limited
alternative surgical intervention options exist.

In bronchoscopy, there is demand for new therapies and
growth is driven by screening, but, as mentioned above,
no interventional options are currently available.
Worldwide, there are 1.7m3 cases of lung cancer related
deaths each year.

Longer-term opportunities include laparoscopy
applications, with an estimated addressable market
of $8bn17.

Drivers of growth in demand for minimally invasive
surgery include:
f emerging applications and technological innovations,
bringing compelling benefits that are recognised by
patients, clinicians and healthcare providers;

f aging population and incidence of life-threatening

diseases; and

f increasing patient awareness and influence over

their treatment.

Why do we believe in the market opportunity?
There is a precedent: similar paradigm shifts have
previously taken place in other fields of medicine. The
transition from open surgery to laparoscopic surgery
from the early 1990s is the obvious example. In recent
years, advances in single-port laparoscopy, robotic
surgery, natural orifice transluminal endoscopic surgery
and flexible endoluminal endoscopy have heralded a
new era of healthcare.

Thought leaders are advocating our solutions, and
promoting the ‘Anything is possible with the right
approach’ mindset to educate and engender confidence
among endoscopists, blurring the lines between these
practitioners who have typically specialised in
investigative work, and surgeons. This is revolutionary:
procedures that previously took place in the operating
room can now be undertaken in an endoscopy room, with
material advantages in cost, time and patient outcomes.

7. Cancer Research UK (https://www.cancerresearchuk.org/

health-professional/cancer-statistics/statistics-by-cancer-type/
lung-cancer#heading-Zero, accessed March 2019).

8. Hiren J. et al. The Utility of Nodule Volume in the Context of

Malignancy Prediction for Small Pulmonary Nodules. Chest 2014;
145(3)464-472.

9. Data for England and Wales – National Lung Cancer Audit annual

report 2015 (for the audit period 2014), Royal College of
Physicians, 2015.

10. American Cancer Society. Cancer Facts and Figures 2016. Atlanta:

American Cancer Society; 2016.

11. Markets and markets, Dec-15, MD 2212; Stratistics MRC, May-15,
MRS 25447; BCC research, Mar-16, HLC093C; TechNavio, Jun-15,
3280756; TMR, Jul-14, 2014 07-02; IQ4I, 2014, 8664243; Occam,
Jun-16, HME-2610516.
12. TMR, Jul-14, 2014-07-02.
13. Boston Scientific investor presentation, 2015.
14. Conmed investor presentation, August 2016.
15. Gastrointest Endosc 2014; 80-133-43.
16. US surgical procedure volumes 2010, Millennium Research,

RPUS43SV10, February 2010.

17. Medtronic investor presentation, June 2016.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOUR BUSINESS MODEL

resilient
and scalable.
We have established a resilient
and scalable model that
combines the strengths of
our pioneering products with
the reach of our strategic
partners for the benefit of
our stakeholders.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

INPUTS
We will create value through our
unique resources and relationships

Expertise and IP
Our talented team of world-class developers is drawn
from diverse related disciplines, spanning military radar
to medical devices.

Our IP portfolio comprises 188 granted patents and 599
pending applications (as at 31 December 2019), all in the
area of electrosurgical energy generation and control,
together with a range of applicator structures for
advanced tissue management.

Read more on page 18

Strategic relationships
We establish and nurture relationships with eminent
clinicians and Key Opinion Leaders practicing in our
fields of interest around the world. These relationships
help us to hone our devices, generate clinical data and
develop a network of influential advocates who help
drive adoption of our CROMA Advanced Energy Platform
and electrosurgical devices.

Our framework distribution agreements to provide
clinical training and market seeding will allow us to scale
our presence and provide a platform for the distribution
of our products – once commercialised – in key markets
around the world.

Read more on page 26

Long-term investors
During 2019 we significantly strengthened our balance
sheet following the successful raise of an additional
£51.9m (before expenses).

Sizeable shareholdings are held by key members of our
team, as well as strategic partners, and our status as a
public company gives us access to capital to achieve
our vision.

Read more on page 50

KEY DIFFERENTIATORS
We will grow value through
our resilient and scalable model

VALUE CREATION
We will share value
with our stakeholders

Patients
Improved outcomes, including lower risk
of remote burns and thermal damage to
adjacent tissue, faster recovery and less
time in hospital.

Physicians
Peace of mind from a safe, fast set-up of
a procedure that can be used in surgery
and endoscopy, with predictable tissue
effect and saving of considerable time.

Healthcare providers
Improved outcomes and lower costs
resulting from the use of endoscopy
suites rather than operating theatres
(and endoscopists rather than surgeons)
and reduced need for hospital stays
for patients.

Investors
Attractive growth prospects.

Employees
Dynamic, creative and entrepreneurial
culture, with exciting opportunities for
development.

reSilieNCe
Recurring revenues from
‘razorblade model’
The CROMA Advanced Energy Platform
has a single accessory port compatible
with the suite of single-use devices that
use microwave and RF energy for
cutting, coagulating and ablating in
various procedures.

Platform technology
The CROMA Advanced Energy Platform
has valuable application in much broader
therapies than we have the resources to
target. As we grow, we intend to stimulate
third party device manufacturers and
innovators to develop products that utilise
the adaptive technology of the CROMA
Advanced Energy Platform. As well as
increasing the overall size of the market
for devices based on advanced energy in
multiple applications and geographies,
we expect that this open platform
approach will also be a source of royalty
income for Creo.

Diversified applications
The precise cut, coagulation and
ablation capabilities of the CROMA
Advanced Energy Platform have
application in a range of electrosurgical
procedures where tissue resection with
haemostasis (control of bleeding) and/or
the ablation of tissue is required.
The ability to bring precision and
control to long, flexible devices
opens up opportunities in minimally
invasive surgery.

Our strategy is to deliver new therapies
and therapy-enhancing technologies
which have compelling health and
economic benefits for the global
healthcare system. We will initially focus
on the gastrointestinal endoscopy
market, potentially expanding to
bronchoscopy and laparoscopy over time.

SCalaBiliTY
Rich pipeline
Our pipeline of instruments is built
around our core technologies, initially
focused on applications throughout
the gastrointestinal tract, with other
devices targeting GI accessible soft
tissue ablation and bronchoscopy.

Education-led commercial strategy
We build advocacy through a network of
Key Opinion Leaders to endorse and
deliver a training programme to
endoscopists in the use of Speedboat
and the CROMA Advanced Energy
Platform. In addition, we are
accelerating the Creo Education
Programme through agreements with
world-class distributors, who will deliver
training for clinicians supported by
Creo’s clinical education team ensuring
consistently high standards.

Large and growing
addressable markets
The GI endoscopy market has an
addressable market of $3–4bn and
estimated annual average growth in
GI instruments of 4–6%. Other target
applications are soft tissue ablation,
bronchoscopy and laparoscopy markets.

Pragmatic manufacturing model
We have dedicated spaces for
innovation (Bath), design and
development (Bath/Chepstow), and
cleanroom manufacturing and assembly
(Chepstow). In the short-term we plan to
retain manufacturing largely in-house to
ensure quality control. We have initiated
the outsourcing of aspects of the
manufacturing process to increase
capacity and reduce production costs in
the medium-term.

Wide sales and distribution reach
We have framework distribution
agreements with specialist partners
in key markets around the world,
initially covering clinical education and
market seeding.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOPERATIONAL STRATEGY EXECUTION

operational
execution.
We recognise where Creo is in its evolution and
our need to focus on 3 key strategic pillars.

PROJECTS TO PRODUCTS

PRODUCTION TO MANUFACTURING

TRAINEES TO USERS

PROGRESS
We recruited a number of new employees
during the period to further bolster the
operations team. We have the ability to
double output with minimal investment.

PROGRESS
We have now trained clinicians from the USA,
India, South Africa, Japan, Australia and
Europe, and are working to convert trainees
into users by changing treatment pathways.

We are in the final stages of agreeing a third
party manufacturing contract to facilitate
larger scale production and have validated
the first batches of products from a third
party manufacturer and are confident of the
high quality and consistency of production.

We are also appraising other third party
manufacturers to ensure that we continue to
de-risk our supply chain.

PRIORITIES
We have started and will continue to develop
our initiative to partner with third party
manufacturers to outsource selected
elements to maximise efficiency
and scalability.

We have had trainees attend the Clinical
Education Programme during a weekend
and then deliver their first mentored
upper and lower GI cases in clinic on the
Monday following.

PRIORITIES
We will continue to broaden our coverage of
new geographical markets by leveraging
relationships with third party distributors,
and will look to introduce additional
products to our Clinical Education
Programme once they are available for use.
We will continue work with Key Opinion
Leaders in the US to drive advocacy.

PROGRESS
Having gained FDA clearance and CE mark
accreditation for our CROMA Advanced
Energy Platform and Speedboat device and
trained multiple clinicians, our clinical
database has continued to grow. The
majority of procedures were for lower GI
conditions, but in a small number of cases
Speedboat was also used in upper GI
applications for the first time.

We launched our suite of GI devices at the
United European Gastroenterology Week
Congress in October.

We have completed the technical files for our
suite of devices and, with revised
arrangements with the Company’s Notified
Body, all four products will be CE marked in
Europe simultaneously on receipt of the
Company’s new EC certificate.

In March 2020 we received FDA 501k
clearance for our HS1 Haemostasis Device
and we remain on track to gain clearance
with the remainder of our suite of products
in the USA.

PRIORITIES
We are focused on working with the FDA to
obtain clearance for the suite of products to
complete the pending CE Mark, to enable
their launch into EU and US markets, and in
Asia-Pacific.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

We intend to expand
into adjacent markets,
either organically,
THrougH parTNerSHip
or aCQuiSiTioN.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCHIEF TECHNOLOGY OFFICER’S STATEMENT

The flexible devices have potential not only for treating
tumours and nodules in the lungs, but also open up the
opportunity to treat in ear, nose and throat (ENT)
applications. For example, the sub 2mm diameter flexible
antenna offers potential to treat nasopharyngeal cancer
and nasal polyps, something that the business will
consider further as we progress with our
commercialisation plans.

With our new combined dual mode bipolar RF, with fixed
field and variable field bipolar RF electrode arrangement,
and microwave energy delivery miniature resector and
non-stick microwave energy-based hemostasis device,
we now have a full set of tools for treating the upper and
lower GI tract as well as performing natural orifice
transluminal endoscopic surgery (NOTES). The devices
we have developed really open up the capability of our
adaptive microwave and bipolar RF CROMA Advanced
Energy Platform.

Our Speedboat device has gone from strength to
strength this year, with trainees now converted to
trainers around the world. Speedboat has been used to
remove both cancerous and pre-cancerous lesions from
the upper and lower GI tract to provide transformative
outcomes. The device has also been used to perform per
oral endoscopic myotomies (POEMs) in cases where the
lower oesophageal junction is constricted, causing
patients difficulty with eating. Speedboat has been used
to tunnel between the submucosal and muscle layers
within the oesophagus to cut and release the muscle,
allowing the patient to eat food again!

Strong IP
In the last 12 months we have exceeded expectations in
terms of filing new inventions to protect our Advanced
Energy Platform and new devices. In total, 14 new
inventions were filed in the period between 1st January
2019 and 31st December 2019.

The instrumentation for an additional energy modality
based on nanosecond and picosecond pulses for
irreversible electroporation (IRE) was captured and filed
in 2019 – this offers another mode of therapeutic energy
delivery to treat cancer and potentially be used to treat
fine tissue structures without causing damage to the
connective tissue or the extracellular matrix.

A number of key patent applications relating to our
CROMA Advanced Energy Platform and miniature flexible
instruments were also granted during the period. In the
2019 calendar year, 55 new worldwide patents were
granted, taking Creo’s patent estate to 188 granted
patents and 599 pending applications in 15 jurisdictions
across the globe, spanning Europe, UK, US, China, Japan,
Singapore, South Korea, India, Australia, Hong Kong,
Canada, Brazil, Russia, South Africa and Israel*.

* As at 31st December 2019.

our 2019
focus.
Converting our four new game
changing prototype devices
to products that can be used
to treat patients in 2020.

A compelling portfolio ready for commercialisation
Effective team working and drive over the last 12 months
enabled us to take four new devices from the design
freeze stage to fully validated products.

We believe that each new product offers sizeable clinical
advantages in terms of focus and control of the energy
delivered into target tissue, resulting in the potential to
produce significantly better patient outcomes.

From a personal perspective, I am excited that we are
now in a position to be able to treat a range of tumours
within the body using our two new miniature flexible
ablation devices.

We are proud to have developed what we believe to be
the world’s smallest flexible focused microwave antenna,
capable of delivering energy into target tissue at one of
the highest microwave frequencies ever used in
electrosurgery to enable the necessary focus and
overcome perfusion. We also believe we have the world’s
smallest diameter needle antenna, designed to be the
same diameter as the small fine needle aspiration
devices used to take small tissue biopsies to limit any
disruption to the operation of the organ. To have devices
such as these in our armoury to combat cancer makes
the extreme dedication from the engineering teams
all worthwhile.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Innovation in our IP
ip management
We take IP management very seriously. For a company of
our size we have an extensive suite of patents, including
an array of foreground and background patents to
protect our core innovations. Our IP portfolio is centred
on our CROMA Advanced Energy Platform and
instruments that can be used to deliver microwave and
RF energy into tissue to perform bronchoscopic,
endoscopic (including endoscopic ultrasound),
laparoscopic and open procedures.

From 1 January 2019 to 31 December 2019 Creo was
granted or allowed 55 new patents. We also filed 14 new
inventions during this period to protect future medical
device ideas and to enhance the protection we have on
our technology.

ip estate
The Creo IP estate has developed not only through new
innovative inventions protected by the constant filing of
new GB applications and existing patent applications
reaching the International and National Phases, but
through key applications being granted in the UK and all
over the world.

medium-term product roadmap
Beyond the immediate roadmap of flexible advanced
energy devices, Creo has a large IP estate with a wide
range of potential clinical applications, all powered by the
CROMA Advanced Energy Platform.

The CROMA Advanced Energy Platform will benefit from
a roadmap of improving capability based on the current
and broadening IP portfolio and technological advances
in microwave and RF power devices, signal processing,
electromagnetic modelling tools and rapid prototyping
equipment. Our research projects will bring additional
modalities to the CROMA Advanced Energy Platform and
a continuing versioning roadmap of software will deliver
intuitively operated devices to the clinical community.

A significant portion of the Creo IP estate protects our
non-thermal plasma technology for use in several
applications, including wound care, urinary tract
infections, hospital associated infections and endoscope
sterilisation. This technology has been validated through
work with microbiologists at UCL Hospital and the
University of West of England where we have
demonstrated that our non-thermal plasma produces a
significant log reduction of microorganisms, as specified
by the FDA. We also now have a project running with
UWE to investigate the effect of our non-thermal plasma
on biofilms.

A second family of devices on our medium-term
roadmap is a family of laparoscopic devices, where a
number of our flexible endoscopic devices, such as
Speedboat and resector products, can be refactored to
deliver microwave and RF energy at the end of a rigid
300mm-long catheter. The Creo IP families already in
place to protect the Speedboat blade and a range of
scissor structures and jaw arrangements that deliver
both microwave energy for coagulating tissue and
bipolar RF energy for cutting tissue cover both rigid and
flexible laparoscopic devices.

Creo had further success in 2019 as the commercial
partner in the HORIZON 2020 SUMCASTEC project.
With responsibility for the cell neutralisation aspect of
the work, in 2019 we developed both new high-voltage
picosecond and low-power millimetre wave generators.
These novel generator modules are delivering
‘non-thermal’ effects that are being analysed with regard
to their impact on medulloblastoma, glioblastoma and
other cells in fluid cultures. We are also about to embark
on a study to apply irreversible electroporation (IRE)
pulses to bulk tissue in the colon, pancreas and lungs to
see if it is possible to destroy unhealthy or cancerous
cells without causing any damage to connective tissue.
Two new patent applications on nanosecond and
picosecond electroporation generators were filed in
2019. This research programme has potential to enhance
the CROMA Advanced Energy Platform with the inclusion
of non-thermal capability to complement RF, microwave
and non-thermal plasma modalities.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCHIEF TECHNOLOGY OFFICER’S STATEMENT CONTINUED

188 granted
188 granted
patents
patents.
599 patents pending

599 patents pending

Overview of Creo Medical Families

PLATFORM

SPEEDBOAT & ENDO

FLUID & PLASMA

SPEEDBOAT

patents

applications

HAEMOSTAT

patent

applications

PLATFORM GENERATOR &
INTERFACE ELEMENTS

patents

212

applications

PLASMA
STERILISATION

patents

applications

ABC/APC

patents

applications

LIPOTUNNELLER

patents

applications

CYST
TREATMENT

patents

applications

GRASPERS

patents

RADIATING
SNARE

applications

patents

applications

RESECTOR

patents

COLD SNARE

END ABLATOR

patents

applications

DUODENAL
ABLATION

SCOPE-CONVEYED
FLEXIBLE ABLATOR

patents

LIGAMENT
TIGHTENING

patents

119

applications

Lorem ipsum

applications

patents

applications

RESECTOR & GRASPER

ABLATION

*Graphical representation of patent families.

As of 31 December 2019, we had 188 granted patents
and 599 pending applications around the world.

*Graphical representation of patent families.

Jurisdictions: US, CN, JP, CA, IN, SG, AU, HK, KR, IL,
ZA, BR, RU, EP (AT, BE, CH, CZ, DK, DE, ES, FR, GB,
GR, IE, IT, NL, NO, PT, SW)

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Our unique Advanced Energy Platform is built
upon Creo’s patented technology to allow the
delivery of focused high-frequency microwave and
bipolar radio frequency energy through a single
accessory port.

Immediate Product Roadmap
CROMA Advanced Energy Platform
Our unique CROMA Advanced Energy Platform is built
upon Creo’s patented technology to allow the delivery of
focused high-frequency microwave and bipolar radio
frequency energy through a single accessory port,
enabling the use of a range of novel miniature
endoscopic devices with precise and highly controllable
cutting, coagulation and ablation capabilities. The
precise closed loop control on both the RF and
microwave channel enables the quantum of energy
delivered into patient tissue to be dynamically controlled
to ensure optimal tissue effects are achieved.

Pending patents

Granted patents

599

188

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCHIEF TECHNOLOGY OFFICER’S STATEMENT CONTINUED

Creo medical
devices
CROMA’s GI Suite
powered by Kamaptive

Resector (‘RG-1’) is believed to be the only bipolar
flexible RF and MW scissor device in the world with dual
action RF energy delivery. Building on the Speedboat
blade technology, RG-1 enables the clinician to grasp, cut
and coagulate highly perfused tissue (such as in the
colon, stomach, liver or spleen). The ability to alternate
between cutting and coagulating using RF and MW
energy across the ‘jaws’ of the RG-1 gives the clinician
significantly more control and is a strong differentiator.
The device provides a gliding cut using a fixed bipolar RF
field as well as a conventional bipolar RF cutting between
two jaws at opposite polarities, and offers great utility to
bloodlessly resect/dissect and coagulate in a wide range
of organs within the human body by sequentially
applying the microwave field followed by the RF field to
coagulate and then cut.

[SHOW DEVICE]

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Speedboat (‘RS-2’) is our multimodality bipolar RF
and focused microwave energy blade antenna, with
integrated needle injection capability, superior rotation
and a physical shape that provides underlying tissue
protection. Speedboat has now been used in multiple
applications all over the world for dissection of
pre-cancerous and cancerous lesions in the lower
GI tract and upper GI as well as other procedures such
as Peroral Endoscopic Myotomies (POEMs). Speedboat
enables the endoscopist to (i) lift tissue with viscous fluid
injection via a retractable needle, (ii) cut tissue precisely
using bipolar RF energy delivered along the edge of the
instrument for localised energy transfer, allowing for a
lower energy requirement reducing the risks associated
with monopolar tissue resection (where the current
passes through the delicate tissue structure, and
returning via a large dispersive pad), and (iii) deliver
high frequency controlled and focused microwave
coagulation, all within a single instrument. The
Speedboat device was CE marked for lower GI tract use
gained FDA clearance for upper and lower GI tract use in
2017 and was commercially launched in October 2019.

Needle Probe tissue ablation device (‘NP-1’) is
believed to be the smallest diameter MW ablation needle
antenna in the world. With a diameter of less than 1mm,
the NP-1 device can be used in a variety of ablation
procedures such as open, laparoscopic and flexible
endoscopic procedures. Designed to be the same form
and dimensions as a standard biopsy needle, NP-1 is
designed for the ablation of a wide range of tissue types
(such as liver, kidney, lung, muscle and pancreas). Due to
the small diameter of the device, it can be used to ablate
tumours in highly perfused organs without the risk of
bleeding prior to energy delivery due to the sub-mm
insertion tract. The device also has potential to treat
certain brain tumours.

Haemostasis probe (‘HS-1’) is thought to be the only
non-stick, MW haemostasis device in the world for the
treatment of upper and lower GI bleeds, such as stomach
ulcers or bleeding polyps. While the market is dominated
by RF energy devices, the HS-1 offers clinicians a MW
energy option. Importantly, unlike traditional RF
electrodes that require direct electrode contact for the
current to flow, MW energy does not require a current
path or direct tissue contact, allowing the device to have
a non-stick coating applied. This non-stick coating allows
the device to be removed without sticking to the
coagulated tissue, thus overcoming a key disadvantage
of traditional RF ‘sticky’ devices that can cause the bleed
to restart, adding risk to the patient. Furthermore, with
traditional RF devices energy is sometimes applied for
longer than is necessary, which can result in tissue
charring, which is extremely undesirable.

Flexible Ablation Device (‘AB-1’) is a new soft tissue
ablation device, designed with the aim of being able to
ablate nodules and tumours in the lungs, in particular
the airways, using the highest frequency MW energy
used for tumour ablation. This device also has potential
to be used to treat a number of other conditions, where a
small diameter flexible device enables access into
otherwise inaccessible regions of the body. The device
could be particularly useful to treat a range of ENT
indications, including nasopharyngeal cancer and nasal
polyps. Due to its small size and flexibility, the AB-1 has
the potential to reach deep into the lung where, once in
position, the device can be inserted through a catheter
and into the tumour.

professor Christopher Hancock
Chief Technology Officer
6 May 2020

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE

FINANCIAL SSTATEMENTS

INTRODUCING

Figure 1: Global market for Endoscopic Devices

Global endoscopic market by segment ($bn)1

Laparoscopy

GI
endoscopy

Urology
endoscopy

Arthroscopy

Bronchoscopy
and ENT

Gynaecology
endoscopy

Other

$12.0

$10.0

$8.0

$6.0

$4.0

$2.0

1 GI Endoscopy
• Limited innovation in

2 Bronchoscopy
• Growth driven by

recent years

screening

• No interventional
options available

• Demand for new

therapies

• Growing volume of

interventional
techniques

• Upper and lower GI
either within the
gastrointestinal tract or
accessing close-by
organs

• $3–4bn addressable
instrument market2,3
• 4–6% annual growth2

Long-term
opportunities
• Other endoscopic

markets

• Laparoscopy $8bn

addressable
instrument market 4

• Non-thermal plasma

• Endoscopic sterilisation

• Wound care

Data presented is total segment value – including imaging and devices;
“Endoscopy Devices: Applications And Global Markets” (HLC093A), BCC Research, 2011.

2. Boston Scientific investor presentation, 2015.
3. Conmed investor presentation, August 2016.
4. Medtronic investor presentation, June 2016.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORT GOVERNANCE

FINANCIAL SSTATEMENTS

The long-term roadmap – open approach to innovation

Our ambition is for our CROMA Advanced Energy
Platform and instruments to be used in all hospitals all
over the world to treat as many clinical conditions as
possible via endoscopic, bronchoscopic, laparoscopic
and open surgical procedures, including wound
treatment and tumour ablation.

We have a very open approach to innovation, both within
Creo and beyond, ensuring that we work closely with
diverse clinicians throughout the world and factor their
feedback into our new products. Within the business,
we hold regular innovation workshops. We also have a
long history of collaborating externally with various
academic institutions such as Bangor University,
University College London (UCL) and University of West
of England (UWE). A recently awarded Royal Academy of
Engineering Visiting Professorship at UCL has enabled
even closer links between Creo, UCL School of
Engineering and UCL Hospital.

Long term, as the CROMA Advanced Energy Platform
capability develops, we intend to explore opportunities
to collaborate, partner with or license to device
manufacturers and innovators, large and small, in
multiple markets worldwide, where the device
engineering capability exists. We are now working with a
number of design houses that could potentially develop
new devices compatible with Creo’s CROMA Platform.

Any innovative partnering and engineering agreements
we enter to stimulate wider IP creation will include crucial
control steps to maintain the core values of intuitive,
self-provisioning and safe to use advanced energy
devices powered by the CROMA Advanced Energy
Platform, to change the life of patients throughout the
world, where we can offer improved patient outcomes.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSWhat is Kamaptive technology?

Creo’s CROMA Advanced Energy Platform is powered
by Kamaptive full spectrum adaptive technology.
Kamaptive technology is the seamless, intuitive integration
of multi-modal energy sources, optimised without
compromise to adapt to the tissue effect required for
different procedures. Kamaptive intuitively adapts to the
different devices in use, self-provisioning and adapting
the settings of the CROMA Platform for the purpose of the
device being used. Kamaptive utilises all modes available
to make the clinical experience as simple and intuitive for
the user as possible, combined with real-time adaptive
feedback to optimise the clinical effect allowing the
clinician to focus entirely on the patient and the procedure.
Utilising the full spectrum of energy modalities available
to it, Kamaptive creates a simple, intuitive and safe
environment for the user and the patient.

Kamaptive & our products

Kamaptive technology’s architecture allows
multiple Creo Development teams to design,
test and build innovative devices
independently whilst functioning with the
CROMA Platform without complex software
changes or menu options for users. This plug
and play architecture allows Creo’s designers
and engineers to focus on patient safety and
the required clinical effect.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Investing / partnering opportunities

The architecture developed and capability within the
CROMA Platform has multiple surgical applications.
Powered by Kamaptive, joint development with key
partners has the potential to become an integrated
reality. Creo is developing collaborative development
relationships with a number of potential key partners
in areas such as Robotics and Laparoscopy where new
technology could be developed carrying the ‘powered
by Kamaptive’ seal.

Developer conference

During the development of CROMA, Speedboat and
other devices, Creo has been approached many times
by device developers from all over the world to explore
developing their own devices for which they need an
advanced energy source. CROMA is an integrated
platform with multiple surgical modalities. These
modalities are continuously being expanded to
include higher frequency millimetre-wave sources,
electroporation capability as well as thermal and
non-thermal plasma control. Powered by Kamaptive
technology, Creo will be stimulating worldwide
developer conferences to allow third party device
manufacturers to develop their own devices to be
powered by Kamaptive.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCOMMERCIAL REVIEW

2019 has seen some significant
steps forward for the business
across all areas of the
commercial operation.

Building on the achievements in 2018, the primary goal
during the reporting period focused on preparing to
leverage the planned completion of the wider suite of GI
devices to allow us to build on the great clinical results
we continue to generate from the Speedboat device.
Highlights for the period include:
f Validating the Creo’s Clinical Education Programme’s
first training centre up and running in the USA with
doctors through the program and getting great
results in their patients

f Extending our distribution reach with additional

framework agreements signed up in Germany, Italy,
France and India

f Launching the entire suite of GI devices and CROMA
powered by our Kamaptive full spectrum adaptive
technology at UEGW in November

f Rolling out the Clinical Education Programme (CEP)
for the first time in the US, Germany, Italy, France
and India, with patients treated by several doctors
in each territory

f Processing initial purchase orders for products for

Speedboat as expected

f Holding multiple live Speedboat cases in Spain, UK,

USA, Greece and India broadcast live to large
audiences of physicians including cases broadcast live
via Facebook

f Quadrupling our clinical nurse advisory resources as
part of a program of increasing resources to support
our direct and distributor led mentoring programs to
strengthen our education and patient outcome
focussed programme

f Ramp up of clinical cases in the US and UK
f Establishment of further COEs in the US and UK
f Attracting significant industry leadership to lead the
commercialisation drive, bringing over 100 years’ of
surgical device sales and marketing experience into
the team in the last 12 months

f Post period, securing senior leadership talent to lead

the direct market development team in the USA

Education led market development strategy
The evolution of Creo’s CEP during the reporting period
has been extremely successful, resulting in a consistent,
repeatable programme with predictable results. Our
strategy of investing heavily in a novel, immersive
peer-to-peer CEP continues to develop. Most pleasing of
all is that on multiple occasions we have had trainees
attending the programme during a weekend to then
deliver their first mentored upper and lower GI cases in
clinic on the Monday morning and with others utilising
Creo’s technology on their patients within a week of
completing the course. This has taken place in the US,
Australia, India and the EU. This is validating our program
and investment in this area, which we are continually
strengthening with the extension of our clinical
mentoring and customer support resources irrespective
of a distribution or direct sales approach.

As we now embark on the launch of a full suite of GI
devices, leveraging the existing estate of CROMA
installations, it is very satisfying to continually gain
feedback from our doctors regarding the performance of
our technology and Speedboat with the coagulation
performance described with phrases such as “wow!” and
“amazing!”. With the recent FDA 510(k) clearance of our
first non-stick haemostasis technology adding to the
suite, we are now working hard to line up initial use of
each of the wider suite of new products to treat patients
in our current markets as soon as the COVID-19
restrictions are lifted.

In short, in 2019 we have validated our CEP with our own
trainers enabling new doctors to use the technology with
their patients. After a number of their own cases, these
doctors have gone on to operate the same programme
successfully, enabling the next wave of doctors to treat
their patients within the year. This validates how we can
scale the program around Speedboat, our challenge in
the years to come is to enhance the CEP to include the
new devices with similar results. We continue to receive
routine feedback from our customers who tell us this is
the best executed, most immersive programme they
have experienced.

Expanding our distribution network
As in previous years, demand from potential distribution
partners remains strong and we have selected and
appointed additional distribution partners in Europe and
Asia. We have taken a deliberate approach to
introductory framework contracts to remain agile and
adaptive to build the business. The product marketing
and CEP is heavily supported by Creo with on the ground
logistical support from our distribution partners. We
have selected different types of distribution partners in
different markets and as we fully roll-out the suite of
products we will be in a position to maximise which
approach and business fit our model. Some of our
partners are large corporate entities, some are smaller,
focused, family run distributors, each with strengths and
weaknesses. They are all united in a passion and desire
to build Creo, CROMA and our devices powered by
Kamaptive technology into their businesses. As our
experience grows, this will inform the continuing
expansion of our distribution into additional markets in
the EMEA, APAC and South American markets.

Equally satisfying, as above, we have quickly rolled out
the CEP in these new territories, enabling doctors to use
the technology to care for their patients within a much
shorter time frame than during our early commercialisation.
Prior to the COVID-19 lock down we had a full CEP
booked in for the first 4 months of the year at multiple
Clinical Centres of Excellence and multiple trainers. With
the recent progress made with the GI suite of devices, we
also look forward to working with our Horizon network of
worldwide key opinion leaders to integrate these new
devices into the CEP and launching these into treating
patients in many areas over the next few months.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

We have recently hired Marketing and Communications
leadership to lead the challenge of customer, distributor
marketing and communications, securing the brand
identity with an expanding web, social media and more
importantly a range of digital, on-line, remote and
on-site material support for the CEP and our ambition to
launch an expansive and immersive remote mentoring,
peer-to-peer support, review and publishing framework.

COVID-19 and the medium-term outlook
The COVID-19 crisis has clearly impacted the commercial
operations to a greater extent than the rest of the
business. While the development, research and
regulatory sides of the business can continue to produce
almost unhindered, the front line CEP has been stalled
completely, with most of our users redeployed to
COVID-19 related care as routine diagnostics have been
completely stalled. However, the lock-down has given us
the opportunity to accelerate our remote mentoring and
peer-to-peer review program. In the spirit of focusing
on what we can do not what we can’t do, with the
cancellation of our biggest conference of the year at
DDW in Chicago, we will be operating a remote version
of DDW with remote workshops and case reviews with
groups of on-line physicians who would otherwise have
attended the hands-on learning zone we had planned to
host at DDW.

Planning for the introduction of the new products into
first human use has stalled, but we expect this to pick
straight up where we left off once the lock-downs are
lifted and hospitals get back to more normal operation.
Our expectation is a lifting of restrictions starting at the
end of Q2-2020, but we do not expect CEP to be kick-
started again until towards the end of Q3-2020 along
with more routine endoscopy procedures. Overall, we
expect a short-term surge in screening endoscopy to
catch up on 6 months of stalled service. Sadly, our
working assumption is a shift to later stage of diagnosis
for a period of time due to the gap in screening which
our devices may well be able to help with.

Building the commercial foundations of the future
The soft launch Speedboat and CROMA Advanced Energy
Platform in the last 18 months has given us the kernel of
infrastructure we need ahead of launching the wider
suite of devices. Now, with a global network of initial
distribution partners and the beginnings of a direct
market presence in the US we have been working hard to
extend the resources within the team in tandem with
securing the financial resources which may assist with
M&A to strategically acquire growth in direct sales and
clinical support presence. We continue to build the
clinical support resources to support both direct and
indirect markets where we will always target a direct
local clinical presence in our markets as our range of
game changing devices extends in the coming years.

The clinical support team has quadrupled in size during
the period, with highly experienced nurse endoscopists
joining the business and spending time every week on
the road with our clinicians in the endoscopy unit while
patients benefit from our technology. In addition, we
have built on the team with senior leadership to oversee
our commercial operations in the UK, EMEA, APAC and
the USA. This leadership team is driving the expansion of
our sales, marketing, service and logistics operations.
Our goal is always to stay ahead of the curve, striving to
be recognised as an industry leading, patient focused,
sales, service and clinical support organisation to
complement our CEP and challenging our distributors to
step up with us.

Expanding the brand
With the initial launch of the suite of GI products in
October, we worked hard to step up the branding of the
business, the platform, our devices and our full spectrum
multi-modality advanced energy platform. We launched
a fresh brand for the CROMA Advanced Energy Platform
and began rolling out the Kamaptive brand with an
integrated brand hierarchy enabling us to maintain
brand identity from the corporate branding, through
CROMA, our devices and to Kamaptive. The Kamaptive
brand will become an increasingly important dimension
as this powers third party devices developed and
powered by Kamaptive technology.

During 2019, we increased our commercial presence,
attending four major international conferences in three
continents, in particular at UEGW in the final quarter
where we launched the GI suite into our first distributor
conference. In addition, we have supported several
distributors and Key Opinion Leaders at live endoscopy
events with live Speedboat cases broadcast to
auditoriums of visiting physicians as well as live via social
media. These events again were spread across the key
markets of the EU, US and APAC.

As the portfolio develops our conference attendance in
the next few years will develop across broader GI
conferences as well as conferences representing other
clinical associations including interventional radiology,
pancreobolliary and pulmonary.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS

Our vision is to improve
patient outcomes through
the development and
commercialisation of a
suite of electrosurgical
devices, each powered
by our Croma
adVaNCed eNergY
plaTForm.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

OUR PEOPLE

exceptional leaders
and partners.
Our talented team at Creo is complemented
by our network of key opinion leaders and
distribution partners.

The Creo Medical team
We are a broad church. Led by our founder and CTO
Chris Hancock, our development team includes
specialists from multiple sectors. We think laterally and
fish from a broad pool when it comes to recruiting the
best talent.

Our backgrounds may be diverse, but our enquiring
minds, hunger for solutions and relentless drive mean
we work as a cohesive team. We love nothing more than
bouncing ideas around and get very excited when
concepts from our different fields come together. Our
monthly innovation workshops are open to all colleagues.

In addition to two Professors, Team Creo is an
amazingly well-qualified team with:

>10% Phd
>20% post graduate
>60% degree qualified

Wider Creo family
We don’t limit ourselves to our recruited talent. Our ever
growing network enables Creo to utilise a wide range of
consulting talent with extensive experience drawn from
product design, microwave engineering, software
development and medical devices.

Our culture is fundamental to the way we
work, and we have distilled this into five
core values:

Collaborative
f Collaboration makes being disruptive positive,

beneficial and effective.

f Collaboration with our colleagues and business
partners enables us to turn our creative ideas
and inventions into real innovations.

Creative
f Our diverse team means that we create original
and therefore more effective approaches to
medical device challenges.

f This approach is born from being inquisitive,
always learning, and being passionate about
turning ideas into reality.

Life changing
f Our aim is for medical devices to be simpler and
safer to enable better patient outcomes that are
less invasive.

f Our innovations and the clinicians who use them

change lives for the better.

f We have an uncompromising adherence to

ethical excellence.

Can-do
f We believe that our ‘can-do’ approach, the energy
to take action and our hunger for solutions mean
that we can succeed in our goals.

f We face challenges with the kind of courage that
comes from a personal belief in not only what we
are doing, but why we are doing it and what it
means for the wider world.

Disruptive
f We challenge assumptions and the status quo.
f Our goals are nothing less than a paradigm shift
in the medical device market and to deliver life
changing products.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPRINCIPAL RISKS AND UNCERTAINTIES

approach to
managing risk.
The Audit Committee formally reviews the
effectiveness of the Group’s risk management
processes and internal control systems on behalf
of the Board. The Board has overall responsibility
for risk management and internal controls.
Our risk management process is designed to
identify, evaluate and mitigate significant risks
to the business.

Although we believe that our risk management
procedures are adequate, the methods used to
manage risk may not identify current or future
risks or the extent of future exposures.

Commercial, operational, regulatory and legal risks

risk

description

mitigation

market acceptance
of current and
new products

There can be no assurance that our
technology will prove to be an attractive
addition or alternative to existing surgical
devices. Conversely, the business needs to
be able to scale up in the event of rapid
adoption of our products.

The development of a market for our
products (and the timing of this) is affected
by many factors, including: (i) the emergence
of newer, more competitive technologies and
products; (ii) the cost of our products; (iii)
regulatory requirements; (iv) customer
perceptions of the efficacy and reliability of
our products; and (v) customer reluctance to
buy a new product.

f We engage with Key Opinion Leaders and
clinicians on the development of our
products, gathering feedback in order to
develop products that meet their needs.

f Our Clinical Education Programme is

designed to educate clinicians on the safe
and effective use of our products.
f We continue to develop our product

portfolio beyond the initial suite of products
to give depth and breadth to the business.

f We have designed the business to be

scalable, for example with the
management structure, facilities and our
approach to training clinicians.

f Our strategy to work through multiple
channels to market will share some risk
with third party distributors.

product development

Much of our future revenues will depend on
our ability to continue to develop new
products. These products may take longer
to develop than planned, require more
resources or may pose technical challenges
that we cannot solve.

f New product development is

complementary to work already being
undertaken by the business. We are
therefore able to leverage existing skills
and knowledge.

f The Creo team have a depth of knowledge
and experience in the devices that they
are developing.

f We plan to allow select third parties to

develop devices that are compatible with
Creo’s CROMA Advanced Energy Platform.
In doing so, product development risks
are passed to third parties whilst
increasing the end user’s ability to exploit
the benefits of Creo’s platform
technology.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

risk

description

mitigation

regulatory risk

risks relating to ip,
proprietary rights
and confidential
information

iT security

Our products are regulated by national
and regional medical device regulations;
there can be no assurance that we will
receive regulatory approvals on a timely
basis, or at all. There may also be
regulatory changes that could require
additional studies and a need to resubmit
products to the regulatory authorities.

We also need to comply with ongoing
regulatory requirements, such as to
maintain a quality system, for which we are
subject to periodic inspections (scheduled
and unscheduled), restrictions in relation to
promotional materials and post-market
safety surveillance programmes.

Reimbursement of medical devices in Europe
is determined on a country-by-country basis,
at a national level or, in some cases, by
regional authorities within countries. Securing
reimbursement may require us to collect and
disseminate further data to demonstrate the
clinical value and cost-effectiveness of our
products, and there can be no assurance that
the reimbursement process will be successful.

On Brexit, the UK may require alternative
standards to the prevailing CE standards
requiring additional regulatory approval of
our products before they can be offered for
sale in the UK.

f We have CE marking and FDA clearance for

our Speedboat device and CROMA Platform.
Post period end we received FDA clearance
for our HS1 device. As at 31 December 2019,
our suite of devices are in varying stages of
the regulatory clearance process.

f Our QMA team is focused on the regulatory

needs for product development and develops
quality documentation to support all
regulatory applications.

f We are ISO: 13485 accredited and are

subject to regular audits from bodies such
as ISO and BSi.

f All documentation is stored and available

should any resubmission be necessary, and
our quality systems are designed to be
sufficiently robust to withstand any
necessary scrutiny.

f We are working with local distribution
partners to mitigate exposure to
reimbursement risk. Local distributors will
identify the pricing locally to establish whether
a particular market is worth pursuing.

f We have taken steps to ensure that our CE

registrations remain valid within the EU post
Brexit, by novating our notified body to BSi
in the Netherlands.

f We continue to monitor the UK’s exit from
the EU and will take necessary actions
to register products in any alternative
UK-based system as and when required.

We rely primarily on a combination of
patents and proprietary knowledge,
as well as confidentiality procedures and
contractual restrictions to establish and
protect our proprietary IP rights.

There can be no assurance of obtaining new
patents, or that existing patents will provide
us with sufficient protection in the case of
an infringement of our technology or that
others will not independently develop
comparable or superior technology.
We may inadvertently infringe a third party’s
patent, which could lead to litigation, the
requirement to obtain a licence, or the need
to cease development or commercialisation
of the infringing technology or product.

f We have a long-standing track record of

IP generation and successful applications,
and have a long-standing relationship
with our patent agent who has a deep
understanding of our technology and
the medical device sector and who
advises us on the application and
execution of patents.

f We undertake freedom to operate

searches at the early development stages
of a new device and seek to ensure all
devices are covered by strong IP
coverage.

f There is an ongoing review of terms and
conditions with third parties to ensure
that IPR is retained and protected
wherever possible.

The risk of industrial hacking for sensitive
information and/or with the intention of
deliberate malice.

In the event of a data breach the Group is
liable to be fined for a breach of GDPR
legislation.

f Strong IT security measures have been

implemented and are reviewed to ensure
that we are adequately protected.

f The Company holds limited personal and
sensitive data and policies are in place
that are designed to ensure compliance
with GDPR.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

Commercial, operational, regulatory and legal risks continued

risk

description

mitigation

product liability
or other legal risks

dependence on key
executives and personnel

dependence on
distributors in certain
geographical areas

Criminal or civil proceedings might be filed
against Creo Medical by study subjects,
patients, the regulatory authorities, other
companies and any other third party using
or marketing our products.

If we cannot successfully defend ourselves
against product liability claims, we may incur
substantial liabilities or be required to limit
commercialisation of our products if
approved. Successful defence of any such
claims could require significant financial and
management resources.

f A number of our products have obtained
approvals/clearance from third party
regulatory bodies in the EU and United
States.

f Our design process seeks to mitigate

issues by including pre-clinical and clinical
trials in the development of our products.
f We invite input from Key Opinion Leaders
on product development and their needs.

f Our QMS system is designed to comply

with ISO 13485.

f We review our insurance coverage annually.
f Our Clinical Education Programme is

designed to educate clinicians on the safe
and effective use of our products.

The future success of the Group will depend
in part upon the expertise and continued
service of certain key executives and
technical personnel. In particular, Professor
Chris Hancock has been, and remains,
essential to the development of the Group.

Our ability to successfully develop
commercial products will also depend on
our ability to attract and retain suitable
personnel.

Sales of our products depend, in part, on the
financial resources, expertise and clients of
our distributors, agents and other channel
partners.

In 2016 we entered into a distribution
agreement with HOYA Group, PENTAX
Medical to distribute our products, once
commercialised, in key Asia-Pacific markets.
We do not currently have a distribution
partner in the USA.

We cannot ensure that we will be able to
retain our distributors, renew existing
distribution agreements on commercially
favourable terms, enter into new distribution
agreements for target geographical markets
or that distribution partners will dedicate the
resources necessary for the commercial
success of our products.

f We have implemented a share option
scheme to retain key employees and
enter into contracts that contain limited
non-competition provisions with key
personnel.

f We have taken great steps over the last
12 months to continue to recruit more
people across the whole business.
f Our HR team are focused on obtaining,
developing and managing talent within
the business.

f By capturing IPR through patent

applications, we are able to ensure
ownership of knowledge and create
foundations for our product pipeline.

f HOYA Group, PENTAX Medical is a

significant shareholder, therefore our
success is their success, and we are
involved in ongoing discussions to ensure
that the distribution agreement we have
together meets the needs of all parties.
f We have recruited employees with direct
and relevant experience in sales in the
medical device sector. They are
responsible for establishing distribution
partners in key territories as well as
developing a direct sales team.

f In the last 12 months we have entered
into additional framework agreements
with distribution partners, including India
and key markets in Europe.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

risk

description

mitigation

dependence on key
suppliers and internal
resource to manufacture
products

Political risks

risk

The uK’s exit from
the european union

The manufacture of our products involves a
number of parts, some of which may only be
available from a limited number of third
parties and/or rely on key internal processes
within the business.

Failure by a third party to deliver
components or a third party ceasing to
manufacture components could result in
delays in the manufacture of products or the
need to redesign certain elements.

f Wherever possible we seek to have a

number of suppliers for components.
As we move to manufacturing, we are
seeking to ensure that all critical
components have at least two sources.

f We have engaged with outsourcing
partners to assist with part or all of
certain manufacturing processes.
f We have designed our manufacturing
to be scalable and have a number of
operatives trained in all aspects of
manufacturing.

f Our procurement teams are working to
identify alternative and complementary
suppliers to ensure that our supply chain
is robust.

description

mitigation

We face risks in relation to the political and
economic instability associated with the UK
leaving the European Union, as well as
potential changes to the legal framework
applicable to our business.

f Our strategy is not to focus solely on
EU markets. Alongside the EU, we will
focus on the UK and the US along with
other markets.

f We monitor developments on an ongoing
basis to allow the business to react when
necessary.

f Employees that are not UK citizens

currently have the right to work, and our
HR team will seek to manage processes to
ensure that this will continue to be the
case post Brexit.

f We have established a presence in Ireland
to give us an entry point to the EU market
if required.

events taking place
in other jurisdictions
may adversely impact
on Creo’s ability to
market products

We face certain geopolitical risks in relation
to countries seeking to on-shore or pursuing
a ‘buying local’ policy which could fetter
international sales of products
manufactured outside of such countries.

f We have established a US subsidiary to

assist with product exploitation in the US.

f Local distributors are engaged to seed

local markets and generate initial demand
of products therefore giving us a local
presence with established persons.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

Pandemics, natural disasters and property loss

risk

CoVid-19

description

mitigation

There is significant uncertainty worldwide in
relation to the social and economic impact
from the spread of Coronavirus (COVID-19)
and the various national responses.

National travel restrictions and social
distancing measures will prevent Creo
personnel from visiting countries where
restrictions are in place and will limit potential
users of our products from attending training
and/or trainers from providing training on the
safe use of our products.

Medical resources at national and local levels
will be focused on mitigating the impact of
COVID-19 rather than undertaking non-
urgent or elective procedures that would
otherwise be able to utilise our products.

There are restrictions on the ability of sales
representatives to attend customer sites.

Should personnel become infected or show
symptoms, they will be required to self isolate
and/or take extended time off work.

National social distancing responses require
alternative working methods (i.e.
homeworking) which may not be suitable for
all employees.

f The business is continually monitoring the

development of COVID-19 and the
possible impact it could have on our
business. We are seeking to comply with
and, where possible, go beyond
government guidance as issued from
time to time.

f Guidance has been provided to all

employees on the steps that they need to
undertake to mitigate the risk of
Coronavirus spreading between
employees. We are seeking to comply
with and, where possible, go beyond
government guidance to do all that we
can to protect employees and partners.

f Employees are required to work from
home where possible and, until social
distancing measures are lifted are only
permitted to travel on business when it is
absolutely necessary.

f All employees have access to conference
call and videoconference facilities and
have been provided with IT equipment to
allow them to work from home.
f For the foreseeable future we will

continue to minimise the number of in
person meetings that are taking place.
f Our H&S employees are monitoring the

development of events on a daily basis to
ensure that all appropriate steps are
being taken.

f We are in regular communication with

supply chain partners to ensure that we
can adequately plan for disruption to the
supply of raw materials and components.
f We are actively working with professional
advisors to ascertain what government
support can be provided to Creo to limit
the financial impact arising from
COVID-19 and social distancing measures.

events beyond the control
of the management of the
Company may have
adverse effects on
the business

The possible threat of natural disasters
affecting the ability to trade and
manufacture.

f The Company property is well secured
and we have taken reasonable steps to
protect the contents.

f A disaster recovery plan has been

developed.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Financial risks

risk

availability and terms
of additional financing
required

Foreign exchange
rate fluctuations

description

mitigation

Our financing requirements depend on
numerous factors, including the rate of
market acceptance of our technologies and
our ability to attract customers. We may be
unable to obtain adequate financing on
acceptable terms, if at all, which could cause
us to delay, reduce or abandon research and
development programmes or hinder
commercialisation of some or all of
our products.

We record transactions and prepare our
financial statements in Sterling, but a
substantial proportion of our income is
expected to be received in US Dollars and
Euros. We also incur some expenditure in US
Dollars and other currencies. To the extent
that the Group’s foreign currency assets and
liabilities are not matched, fluctuations in
exchange rates may result in realised or
unrealised exchange gains and losses on
translation of the underlying currency
into Sterling.

f The 2019 fund raise added significant

strength to the balance to allow Creo to
achieve its near-term objectives.
f We work closely with a number of

agencies and bodies to maximise the
amount of grant funding that is available
to assist with our technological
development while minimising our spend.
f A significant amount of our development

spend is subject to research and
development tax relief.

f We also have in place controls and

procedures to manage expenditure in line
with budgets.

f We enter into various derivative financial
instruments to manage our exposure to
foreign exchange risks, including forward
exchange contracts and cross currency
swaps as are required from time to time.
f The majority of our contracts are based in

Sterling therefore mitigating our
exposure to direct FOREX risk.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSFINANCIAL REVIEW

I am pleased to announce our third report and
accounts following our admission to AIM in
December 2016. The £51.9m raised in December of
2019 was further confirmation of the continued investor
confidence in Creo as it commercialises its products.
These funds will further provide Creo with the long-
term platform to enable us to further develop multiple
products through to commercialisation and provide
the Company with the platform for future development
including potential M&A activities.

Revenue and other income
2019 saw some major milestones for the Company.
During the period we received the first commercial
orders for Speedboat from the USA, continued
shipments of our CROMA Advanced Energy Platform
and Speedboat devices pursuant to the framework
agreements entered into with our distribution partners,
as well as commercially launching the Speedboat device
to the market. Revenues billed in the period totalled
£0.2m of which £13k has been recognised as revenue
with the balance accounted for below the line in
administrative expenses.

Other operating income of £0.1m in the 12-month period to
31 December 2019 (18-months to December 2018: £0.3m)
relates to research grants.

Operating loss
Loss before Income tax
Total comprehensive loss for the period

Underlying operating loss adjustments:
Share-based payments
Depreciation and amortisation
R&D expenditure recovered via tax credit scheme1

Operating loss
The operating loss for the period increased to £18.9m
(18 months to December 2018: £17.7m), reflecting the
increased operating expenses in relation to clinical and
development activities together with further investment
in headcount and business infrastructure to support the
business and enable it to continue to develop and
commercialise its technology. This continued investment
in the business will support anticipated growth and
development in the coming periods.

The underlying operating loss (also referred to as
adjusted EBITDA) for the period was £14.0m (18 months
to December 2018: £12.6m).

Whilst EBITDA is not a statutory measure, the Board
believes it is helpful to investors to include as an
additional metric to help provide a meaningful
understanding of the financial information as this
measure provides an approximation of the ongoing cash
requirements of the business as it continues to pursue
its future development and begins to commercialise its
approved products. The Adjusted EBITDA position
excludes share-based payment expenses which are
non-cash and incorporates the recovery of research and
development expenditure from which the Group is able
to benefit through R&D Tax credit schemes.

12 months to
31 December 2019
£

18 months to
31 December 2018
£

(18,875,378)
(18,615,381)
(15,911,150)

(17,663,786)
(17,576,187)
(14,808,608)

1,554,845
641,725
2,710,239

1,804,820
497,421
2,786,181

Underlying operating loss, also referred to as adjusted EBITDA (non-statutory measure)

(13,968,569)

(12,575,364)

1. R&D expenditure includes a £6,008 claimed under the large company (‘RDEC’) scheme in relation to monies received from Research Grants.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Expenses arising from share issue
Following a share placing of 28,835,173 ordinary shares
which raised £51.9m before expenses in December 2019,
the expensed costs incurred in the period were £nil
(18 months to December 2018: £nil), with capitalised costs in
the period of £2.8m (18 months to December 2018: £2.6m).

Accounting policies
The Group’s financial statements have been prepared
in accordance with International Financial Reporting
Standards. The Group’s accounting policies have been
applied consistently throughout the period and are
described on pages 66 to 73.

Principal risks and uncertainties
The principal risks and uncertainties facing the Group
are set out on pages 30 to 35.

Directors
Details of the Directors who served during the period
ending 31 December 2019 are set out on pages 42 to 43.
All six of the Directors serving on the Board at the year
end were male. Post period and with effect from
1 February 2020 Ivonne Cantu was appointed in the role
of independent Non-Executive Director.

Conflicts of interest
To address the provisions of Section 175 of the
Companies Act 2006 relating to conflicts of interest,
the Company’s Articles of Association allow the Board to
authorise situations in which a Director has, or may have,
a conflict of interest. Directors are required to give notice
of any potential situation or transactional conflict that
are to be considered at the next Board meeting and,
if considered appropriate, conflicts are authorised.
Directors are not permitted to participate in such
considerations or to vote regarding their own conflicts.

richard rees
Chief Financial Officer
6 May 2020

Tax
The tax credits recognised in the current and previous
fiscal year relate solely to R&D tax credit claims.
A deferred tax asset has yet to be recognised due to
the uncertainty over the timing of future recoverability.

Expenses
Administrative expenses comprising R&D, operational
support, sales and marketing, and finance and
administration costs totalled £19.0m (18 months to
December 2018: £17.9m). Adjusting for share-based
payments, depreciation, amortisation and tax income
as shown in the table below, underlying administrative
expenses are £14.0m (18 months to December
2018: £12.6m).

This annualised increase of £7.1m reflects the
continued investment made by the Group in clinical and
development activities and the move from small discrete
production batches into full-scale manufacturing.
Personnel costs continue to be the largest expense and
represent approximately 60% of the Group’s underlying
administrative expenses.

Loss per share
Loss per share was 13 pence (18 months to December
2018: 16 pence).

Dividend
No dividend has been proposed for the period to
31 December 2019 (18 months to 31 December 2018: £nil).

Cash flow and balance sheet
Net cash used in operating activities was £11.9m
(18 months to December 2018: £14.3m), driven by the
continued investment in research and development
of new devices during the period and the further
strengthening of our IP portfolio. Net cash generated
from the share issue in December 2019 was £49.3m
(18 months to December 2018: £46.1m), strengthening
the balance sheet and enabling us to further develop
multiple products through to commercialisation, whilst
also providing the platform for future development
including potential M&A activities.

Total assets at the end of the period increased to £88.3m
(31 December 2018: £49.7m), a 77% increase, reflecting
the increase in cash arising from the issue of new ordinary
shares, offset by the operating cash outflow for the
period. Cash and cash equivalents at 31 December 2019
was £81.0m (31 December 2018: £44.6m). Net assets were
£82.7m (31 December 2018: £47.7m), a 73% increase.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSECTION 172(1) STATEMENT

The Board of Directors’ Statement on s172(1)
In accordance with the duties set out in s172(1) of the
Companies Act 2006, Creo’s Board of Directors act in a
way that they consider, in good faith, would be most
likely to promote the success of the Company for the
benefit of its members as a whole, underpinning the
Board’s ultimate objective of designing the business for
long-term growth and success. Key decisions and
matters that are of strategic importance to the Company
are appropriately considered in light of the requirements
of s172(1), the Board having regard (amongst other
matters) to:

(a) the likely consequences of any decision in the

long-term;

(b) the interests of the Company’s employees;
(c) fostering business relationships with suppliers,

customers and others;

(d) the impact of the Company’s operations on the

community and the environment;

(e) maintaining a reputation for high standards of

business conduct; and

(f) the need to act fairly between members of the

Company,

(The ‘172(1) Matters’).
The Board’s overarching strategy is to (a) develop
technology and products for which there is a long-term
clinical need supported by sizable addressable markets
(see page 10); (b) ensure that the business has the
appropriate infrastructure in place to support the
development and commercialisation of such products; (c)
when releasing products to the market to do so in a
measured and controlled manner to minimise the risk of
misuse and to ensure that the products are customer
sponsored for the long term (i.e. through clinical
education and peer support by KOLs); and (d) deploy
capital appropriately in support of (a), (b) and (c).

The size and nature of our business enables regular,
direct and indirect, feedback from relevant stakeholders.
Through an open and transparent dialogue with key
stakeholders, we have been able to develop a clear
understanding of their needs, assess their perspectives
and monitor their impact on our strategic ambition and
culture, thus ensuring that we are designing Creo’s
business for long-term growth and success. The Board
considers the potential impact of decisions on relevant
stakeholders during its decision-making process whilst
also having regard to a number of broader factors,
including the impact of the Company’s operations on the
community and environment, responsible business
practices and the likely consequences of decisions in the
long term.

Set out below is a summary of how we communicate with
the relevant stakeholders and how we take into account
s172(1) Matters.

Employees
The complex and innovative nature of the products that
Creo is developing requires many committed and
talented employees. Page 29 sets out more details about
our team.

The relatively small size of the business allows the
executive team to engage directly with all employees on
a daily basis. The Company holds regular ‘all employee’
meetings to discuss progress of product development
against current business plans. Our engagement with
employees provides immediate and direct feedback on
individual and collective needs and the impact on them
of actions taken by the business. This includes feedback
on areas that need greater support and resource for
which the Company may need to plan.

We strive to empower all employees to take control of
their career development, not least to support the
longer-term growth of Creo. During the last twelve
months we have put in place a number of measures to
support the health and well-being of all employees, from
on-site well-being services to discretionary time off after
long periods of intensive work.

All employees have the ability to raise grievances and to
escalate concerns through our whistleblowing
procedures.

We continue to develop our performance management
and to promote a culture of continuous improvement
throughout the business.

In making decisions, the Board always takes into account
the relevant impact on our employees (whether positive
or negative). For example, the 2019 Fundraising allowed
the Board to give employees some certainty around the
business’s cashflow and their continued employment,
thus enhancing the long-term opportunities that we can
offer all employees.

Customers, business partners and suppliers
Customers
Our customers will drive the long-term growth of Creo’s
business. Creo engages with key opinion leaders (KOLs)
around the world, starting well before any prototype
devices are made to ensure we develop products for
which customers have an identified need and will
ultimately use.

Throughout the product development process, KOLs and
other clinicians provide feedback on our devices, through
the design process, usability studies and pre-clinical
testing and analysis. This input allows the Board to make
strategic decisions to ensure we deploy capital on
concepts and products that could make the most impact
for our customers and our business.

Creo’s Clinical Education Programme provides immediate
feedback from the initial use of our devices including any
specific needs that they may have.

Business partners and suppliers
We interact in an ethical and equitable manner with all
business partners and suppliers. We strive to have an
open, constructive and effective relationship through
regular meetings and dialogue, recognising that such
communication is beneficial for the whole supply chain.
Over the last twelve months we have recruited additional
employees into our procurement team who have prior
experience of managing long-term partnering supply
chain relationships.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Further detail around compliance is set out below in
respect of conduct of business.

Community and the environment
We are a small business committed to making a positive
contribution to the communities in which we operate.
This extends beyond the immediate locality of our offices
into the wider clinical community, for example through
our Clinical Education Programme.

Our head office is located in Chepstow in Wales. From
here, we employ a large number of local individuals,
providing employment opportunities which may
otherwise be lost to a larger conurbation in the region or,
indeed, further away. With the support of the local
government networks, Creo and the Board remain
committed to making a positive economic impact on the
region and take this into account when making decisions.

Where possible, we try to source locally to support our
community, from buying milk for our kitchen from the
local farm shop to engaging with industrial contractors
and suppliers within the area.

Many of our community agendas are led by our
employees, from collecting for the local foodbank to
offering employee donations to specific campaigns.

We have a number of environmental initiatives within the
business and are conscious of our carbon footprint. In
the last twelve months, the business has increased the
recycling of waste materials and encourages all
employees to do the same.

Whilst some of our technologies are by necessity single
use, we strive to ensure that as many materials as
possible can be recycled and/or sourced sustainably.

Shareholders
We are committed to active and regular communication with
all shareholders, not least to ensure that they understand
our strategy and business model and that we can
understand any concerns they may have. The Board believes
that such active engagement should secure the Company a
stable long-term shareholder base.

The Annual General Meeting (‘AGM’) offers an opportunity
for shareholders to meet and have direct discussions with
the Board. In addition, we hold investor roadshows following
the release of half and full year results and have held an
investor ‘open afternoon’ in Chepstow and an investor
briefing following our full year results.

The Directors and employees also attend a number of
investor and sector specific conferences that allow
interested parties to speak with us in person.

As an early stage business, the Board is conscious of the
need to balance the desire to establish immediate revenue
and a break-even position against building long-term
profitability, capital growth and income generation for
our shareholders. Discussions with our shareholders
suggest that the latter is the preferred position.

shareholders whilst attracting existing and new
institutional capital to bolster the Company’s
shareholder register and to provide substantial funding.
The structure of the 2019 Fundraising, through a placing
and an open offer, allowed all shareholders to participate
in the 2019 Fundraising whilst giving some certainty to
the transaction to warrant proceeding with it. The Board
is now working to deploy the capital raised against its
overall strategy.

Regulators and conduct of business
Ethical values and behaviours are at the heart of what we
do and the Board seeks to enshrine such ethical values
and behaviours within all of Creo’s business activities.
Our values are set out in our policies, our working
practices, and our systems.

Our products are designed to improve lives through
improved patient outcomes and reduced costs and time
of procedures for healthcare providers. We are required
to have a robust quality management system which is
third party audited to ISO: 13485 standards. This is
essential for our products to be adopted in our targeted
markets. This system is regularly audited by independent
third parties with whom we engage on a frank and
open basis.

The Company is not required to report annually on
Modern Slavery Act compliance. However, we have
adopted an Anti-Slavery and Human Trafficking policy
and continue to seek to ensure that all suppliers and
business partners adopt and adhere to similar policies.

The Company has adopted an Anti-Bribery and
Corruption policy which is communicated to all
employees. We emphasise to our employees the need to
undertake business in an appropriate and transparent
way. We include provisions in our agreements with third
parties to ensure that bribery and corruption does not
form part of either any business undertaken by or on
behalf of the Company or any of our supply chains.

As we expand into new territories, we seek to ensure that
we comply with local requirements that are analogous
to the UK legislation (i.e. the USA’s Foreign Corrupt
Practices Act).

During the last twelve months, the business has added
internal resource to ensure that compliance remains
front and centre of the business. We have a dedicated
employee dealing with Health and Safety compliance.
Our supply chain team is working with our suppliers to
ensure that compliance flows throughout our supply
chain (see above). In addition, we are taking initial steps
to investigate the benefit of gaining ISO 14001:2015
accreditation.

The Strategic Report was approved by the Board of
Directors on 6 May 2020 and was signed on its behalf by:

In undertaking the 2019 Fundraising the Board were
conscious of the need to mitigate any dilution on smaller

richard rees
Chief Financial Officer
6 May 2020

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
The directors
recognise the
importance of
sound corporate
governance
and are committed to maintaining high
standards of corporate governance.

CORPORATE
GOVERNANCE

The Board

Corporate governance report

Directors’ report

Directors’ responsibilities

Directors’ remuneration report (unaudited)

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORTFINANCIAL STATEMENTSTHE BOARD

Charles Spicer
Chairman
Charles is an experienced
director of public and private
companies, primarily in the
MedTech sector. Charles is
chairman of IXICO plc and MJ
Hudson Group plc. In addition,
Charles is Chair of the UK
Department of Health’s
Invention for Innovation (i4i)
Funding Panel.

Charles was a Director of Aircraft
Medical (acquired by Medtronic
Inc. in December 2015) and
Stanmore Implants (acquired by
Stryker Inc. April 2016). Charles
was also previously Chief
Executive of MDY Healthcare plc,
a strategic healthcare investor
and, prior to that, head of
healthcare corporate finance
at both Numis Securities and
Nomura International.

Craig Gulliford
Chief Executive Officer
Craig is a founding angel
investor in Creo Medical and
joined the company as CEO in
2012. Craig qualified with an MSc
in Electronic Engineering from
the University College of North
Wales and has over 20 years’
experience in building
international businesses
from early stage through
to significant scale. Craig’s
early career developed in the
Middle East working with large
corporates delivering complex
commercial projects.

In January 1999, Craig joined a
start-up software and hardware
business where, as COO, he was
part of a small team that grew
the company both organically
and through acquisition, from
a loss-making start-up to a
profitable business delivering
significant shareholder returns
and an exit in 2007.

Richard Rees
Chief Finance Officer
Richard joined Creo Medical as
CFO in July 2016. Prior to joining
Creo, Richard was CFO of SPTS
Technologies, a UK-based, global
manufacturer of semiconductor
capital equipment. In 2011,
Richard was part of a
management team at SPTS
Technologies that, together with
Bridgepoint Capital, acquired
SPTS Technologies for $200
million from Sumitomo Precision
Products. In 2014, SPTS
Technologies was acquired by
Orbotech Ltd for more than $350
million. Prior to joining SPTS
Technologies, Richard spent 7
years at KPMG in audit.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

David Woods
Non-Executive Director
David is an industry veteran
within the med-tech sector. His
experience in the medical device
market encompasses general
and orthopaedic surgery,
gastroenterology, pulmonology
and ENT. David is currently the
President and CEO of PENTAX
Americas and M&A Director of
HOYA Group PENTAX Medical.
David was awarded the ASGE
Presidents award in 2010
recognising exceptional
contributions to the society and
its mission.

John Bradshaw
Independent Non-Executive
Director
John is a chartered accountant
with more than 20 years’
experience as a Chief Financial
Officer with venture capital
backed and listed companies.
John is the Chief Financial
Officer of Syncona Investment
Management Limited, the
Investment Manager of Syncona
Limited a FTSE250 listed life
sciences investment company.
John is a Non-Executive Director
and audit committee chair of
AIM listed IXICO plc.

John is the chair of the
Company’s Audit Committee and
is a member of the Company’s
Remuneration Committee.

Professor Christopher
Hancock
Chief Technology Officer
Chris is the founder of Creo
Medical with over 20 years’
experience in medical device
development including four
years at Gyrus Group plc in his
role as Senior Engineer.

Chris holds a personal Chair in
the Medical Microwave Systems
Research Group at Bangor
University. Chris is a Fellow
of the Institute of Physics, a
Chartered Physicist, Fellow of
the Institute of Engineering
and Technology, a Chartered
Engineer and a Senior Member
of the IEEE. Chris is also a
Royal Academy of Engineering
Visiting Professor at UCL and
was awarded Katherine Burr
Blodgett Gold Medal and Prize in
2018 for work on Creo’s CROMA
Advanced Energy Platform
technology. Chris is a named
inventor and lead author on over
800 granted patents, patent
applications and international
journal publications.

Ivonne Cantu
Independent Non-Executive
Director
Ivonne joined Creo’s board
on 1 February 2020. Ivonne
has extensive experience in
corporate finance acting as
corporate finance adviser to UK
and international companies for
more than 20 years at Cenkos
Securities plc and previously at
Merrill Lynch.

Ivonne is currently Director of
Investor Relations and Corporate
Development at Benchmark
Holdings plc, an AIM listed
aquaculture technology
company. Ivonne is also
a trustee of La Vida, a UK
charity established to help
disadvantaged people residing
permanently in Latin America,
in particular, by preserving and
protecting health, relieving
sickness, relieving poverty and
advancing education.

Ivonne holds a BSc in
Engineering from Universidad
Panamericana in Mexico and an
MBA from the Wharton School
of Business. Ivonne will become
Chair of the Company’s
Remuneration Committee and a
member of the Company’s Audit
Committee.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCECORPORATE GOVERNANCE REPORT

The Directors recognise
the importance of sound
corporate governance
and are committed
to maintaining high
standards of corporate
governance.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

introduction
Creo Medical Group plc is traded on the
AIM market of the London Stock
Exchange (LSE:CREO). The Directors
recognise the importance of sound
corporate governance and are
committed to maintaining high
standards of corporate governance.
As a company whose shares are
admitted to AIM, the Board has
adopted and complies with the Quoted
Companies Alliance’s Corporate
Governance Code (‘the Code’).

The Board is of the unanimous opinion that the Company complies
with the Code but any divergence from the Code (details of which are
set out below) are, in the circumstances, reasonable, appropriate and
in the best interests of shareholders of the Company as a whole.

At the heart of Creo is one very simple principle: to improve lives.
This principle resonates throughout the business:
f with patients, by bringing advanced energy to flexible medical
devices for surgical endoscopy to improve patient outcomes;
f with customers, by seeking to develop products that reduce

procedure times and costs;

f with business partners, by interacting in an ethical and

equitable manner;

f with employees, by offering rewarding careers with support and
encouragement to allow everyone to fulfil their potential; and
f with shareholders, by deploying capital against a well thought
through and measured business plan to achieve long-term,
sustainable growth.

It is the role of the Board to ensure that Creo is managed for the
long-term benefit of all its shareholders. Our corporate governance
processes are designed to ensure control, reduce risk and enhance
long-term value generation, underpinning Creo’s long-term
objectives.

The Quoted Companies Alliance Corporate Governance Code
In accordance with AIM Rules, the Company publishes an annual
summary setting out how the Company complies with the Code.
The 2019 summary is available on the Company’s website.

The Code is constructed around 10 principles, taking key elements of
good governance and applying them in a manner which is workable
for the needs of a growing company in pursuit of medium to
long-term value creation for shareholders. Each principle is set out
below, together with a commentary of Creo’s compliance. To the
extent that an explanation of Creo’s compliance set out against
one principle is equally as relevant against another principle, the
explanation is deemed to apply to all relevant principles.

Deliver growth
1. Establish a strategy and business model which promote
long-term value for shareholders
Creo is a medical device company focused on the development and
commercialisation of minimally invasive medical devices, by bringing
advanced energy to endoscopy. Creo’s mission is to improve patient
outcomes by applying microwave and radiofrequency (‘RF’) energy
to surgical endoscopy. Creo has developed CROMA, an
electrosurgical advanced energy platform, that delivers both bipolar
RF for precise localised cutting and microwave energy for controlled
coagulation through a single accessory port. This technology
provides clinicians with flexible, accurate and controlled surgical
solutions, initially in the field of gastrointestinal ‘GI’) therapeutic
endoscopy and later bronchoscopy.

Our strategy is to bring our CROMA Advanced Energy Platform
(‘CROMA’) to market through a suite of medical devices, which we
have designed, initially for the emerging field of GI therapeutic
endoscopy, an area with high unmet needs. CROMA has been
designed around the ‘razorblade model’, with a single accessory port
that is compatible with a suite of single-use devices that aim to deliver
superior outcomes for physicians and patients. CROMA will be
developed further for bronchoscopy, endoscopic ultrasound and
laparoscopy procedures. We believe our technology can impact the
landscape of surgery and endoscopy by providing a safer, less-invasive
and more cost-efficient option for treatment.

To achieve our goal, we:
f invest in developing and protecting our strong intellectual

property portfolio, comprising, in total, 188 granted patents and
599 pending applications;

f recruit staff with a strong pedigree from the MedTech and other
relevant sectors; with depth of expertise spanning R&D, quality,
regulatory approval and commercialisation;

f invest in the development of our people by supporting ongoing
academic qualifications and promote an entrepreneurial and
collegiate working environment;

f nurture long-term strategic relationships with: eminent clinicians
and key opinion leaders practicing in our fields of interest around
the world;

f distribution partners to give us scalable geographical reach into

key markets; and

f shareholders to ensure that we have access to the support and

capital that we need to achieve our goal.

As with other businesses in our sector, we face a number of key
challenges in the execution of our strategy. These challenges include:
f uncertainty that the technology under development will be an

attractive addition or an alternative to existing surgical devices.
This is mitigated by engaging with key opinion leaders to ensure
that we gather relevant feedback to develop products to meet
clinical needs and by ensuring that we provide education to
clinicians on the safe use of our products through our Clinical
Education Programme; and

f uncertainty that we can obtain regulatory clearances for products
in a timely manner (if at all). To mitigate this, we employ a dedicated
team focused on the regulatory requirements of products and who
provide the necessary regulatory documentation to support our
regulatory applications.

Further detail on the principal risks and uncertainties that may affect
the business are set out on pages 30 to 35.

2. Seek to understand and meet shareholder needs
and expectations
We are committed to and encourage active communication with all
shareholders not only to ensure that our strategy and business
model is understood by our shareholders but so that we can
understand any concerns that shareholders may have. The Board
believes that active engagement provides the Company with a stable
shareholder base for the long term.

Our active dialogue with shareholders means that the Board receives
regular updates on the views of shareholders.

The Annual General Meeting (‘AGM’) offers an opportunity for all
shareholders to meet and have direct and meaningful discussions
with the Board. In addition to our AGM, we seek to hold investor
roadshows following the release of half and full year results. We have
also held an investor open afternoon in Chepstow and an investor
results briefing post our full year results. Both events give our
retail shareholders the opportunity to have direct access to the
management of the Company and to understand the steps we are
taking towards our commercial goals.

In addition to Creo specific events, our Directors and employees
attend a number of investor and sector specific conferences to allow
interested parties the opportunity to speak with us directly.

Our Chairman and senior independent Non-Executive Director
regularly engage with institutional shareholders to gain feedback
and discuss any areas of concern to ensure that they can be
addressed at an executive level.

3. Take into account wider stakeholder and social
responsibilities and their implications for long-term success
Whilst we are growing as a business, we are still able to receive
regular direct feedback from all relevant stakeholders. This allows
the Board, and thus the Company, to ensure that it is designing
the business for long-term growth and success. Together with our
shareholders and the ultimate users and beneficiaries of the
products that we are developing, our employees, business partners
and suppliers are our key stakeholder groups. How we seek to
engage with them and ascertain their feedback is set out below.

employees
The Company holds regular ‘all employee’ meetings to discuss
progress of product development against current business plans.
These meetings allow us to focus on areas that need greater support
and also consider what resource the Company may need going
forwards. This collegiate approach is taken into the workplace on a
day to day basis.

To reflect our growing employee base, we have created multiple fully
resourced product development teams (one for each product family).
This allows faster feedback and greater teamwork within the business.

We continue to employ graduates and encourage continuous
development and education for all employees.

Business partners and suppliers
Notwithstanding the early stage of development of the business,
we believe that the achievement of long-term success requires us to
forge good and equitable relationships with our business partners
and suppliers. We seek to pay suppliers within agreed credit times
and, as we move to the next phase of our development, will introduce
further audit checks on our supply chain to encourage all suppliers
and business partners to meet and adhere to the high ethical
standards that we seek to achieve.

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FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCECORPORATE GOVERNANCE REPORT CONTINUED

During the last 12 months we bolstered our procurement team with
several key hires to ensure that supplier relationships, and the
management thereof, are core to our supply chain processes.

modern slavery
The Company is not required to annually report on Modern Slavery
Act compliance. However, in line with our underlying principle to
improve lives, the Company has adopted an Anti-Slavery and Human
Trafficking policy and we continue to seek to ensure that all suppliers
and business partners adopt and adhere to similar policies (to the
extent that they are not already in place).

anti-bribery and corruption
The Company has adopted an Anti-Bribery and Corruption policy
which is communicated to all employees along with other policies.
Many of our employees have previously worked for large established
businesses and are therefore well versed in the need to undertake
business in an appropriate and transparent way. We do not simply
rely on this, however. We seek to include provisions in our
agreements with third parties to ensure that bribery and corruption
does not form part of any business undertaken by or on behalf of the
Company and is not within our supply chains.

As we expand into new territories, we seek to ensure that we comply
with local requirements that are analogous to the UK legislation (i.e.
the USA’s Foreign Corrupt Practices Act).

Compliance
During the last 12 months the business has added to its internal
resource to ensure that compliance remains front and centre of the
business. We have a dedicated employee dealing with Health and
Safety compliance and our supply chain team are working with our
suppliers to ensure that compliance flows through our supply chain
(see above). In addition, we are taking initial steps to investigate the
benefit of gaining ISO 14001:2015 accreditation for the business.

4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation
internal controls
The Board is responsible for maintaining a sound system of internal
financial and operational control and the ongoing review of their
effectiveness. The Board’s measures are designed to manage, not
eliminate, risk and, as such, provide reasonable but not absolute
assurance against material misstatement or loss. Some key features
of the internal control system are:
f Management accounts information, budgets, forecasts and business

risk information which are regularly reviewed by the Board;
f Due to the nature of the products being developed by the

Company, we have a rigorous quality management system that is
compliant with ISO: 13485 and which is regularly audited by
independent third parties;

f Operational, accounting and employment policies are in place and

regularly reviewed and updated when appropriate;

f Clearly defined organisational structure within the Company; and
f Established financial reporting and control systems within

the Company.

The Company reviews its internal controls regularly to ensure that
they give the Company the flexibility that is necessary to allow it to
grow and deliver long-term value to shareholders while having the
correct checks and balances in place.

During the last 12 months we have invested in a new Enterprise
Resource Planning (ERP) system, IFS Applications. The ERP system
enforces compliance and rigour around internal processes and controls.

risk register
The Company maintains a risk register which is reviewed regularly.
This register allows the Board to appraise external and internal threats to
the business and to plan and mitigate accordingly. Principal risks and
uncertainties that may affect the business are set out on pages 30 to 35.

legal
The Company’s General Counsel assists the management team and
advises on all legal aspects of the business. The General Counsel
manages external legal support where necessary and takes an active
role in the management of the business to ensure that compliance is
at the core of all that we do.

intellectual property
The Company has a close working relationship with its patent agent,
Mewburn Ellis, with whom we have worked since 2003. Our Patent
Agent advises on the application for patents and the execution of our
portfolio. Further, they offer strategic advice and support to assist in
the identification of areas where the business may want to consider
further development or registration to support existing applications
and/or protection.

Code of conduct
The Company has adopted a Code of Conduct which sets out the
standards that it expects all employees and representatives of the
Company to meet to ensure that we maintain the high standards that we
set ourselves. It is the Board’s view that by encouraging high working
standards we will mitigate against risks arising in our day to day activities.

insurance
In the last 12 months Creo has undertaken a strategic review of its
insurance requirements and determined that it would engage AON
to act as its broker for insurances. The markets in which we seek to
operate have unique risks which, if they materialise, could significantly
impact on the business and its stakeholders. Accordingly, under
the advice and guidance of AON, we have sought to put in place a
scheme of insurance which reflects both the current and medium-
term needs of the business. We monitor our insurance needs
through periodic reviews with our advisors and our underwriters.

Maintain a dynamic management framework
5. Maintain the Board as a well-functioning, balanced team led
by the chair
The Board
Creo has a strong and effective leadership team. Creo’s Board comprises
an Independent Non-Executive Chairman, three Executive Directors, and
two further Non-Executive Directors, one of which acts as Creo’s senior
independent Non-Executive Director. Post period, an additional
independent Non-Executive Director has been appointed to the Board.
The Board is made up of the following individuals:

Executive Board Members
Craig Gulliford, Chief Executive Officer
Richard Rees, Chief Finance Officer
Prof. Christopher Hancock, Chief Technology Officer

Non-Executive Board Members
Charles Spicer, Independent Non-Executive Chairman
John Bradshaw, Senior Independent Non-Executive Director
David Woods, Non-Executive Director
Ivonne Cantu, Independent Non-Executive Director
(from 1 February 2020)

Brief biographies for each Board member together with their
respective Board Committee memberships are set out on
pages 42 to 43.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

The Company’s articles of association require one third of its Directors
to stand for re-election at each AGM. Charles Spicer and Craig Gulliford
stood for re-election at the last AGM, with both being duly re-elected.

Charles Spicer acts as Creo’s Independent Non-Executive Chairman.
Charles has a limited shareholding in the Company and a limited
interest in the Company’s share option scheme. Given Charles’
limited participation, the Board does not consider his share and
option holdings to be significant and therefore consider him to be
an independent Non-Executive Director.

6. Ensure that between them the Directors have the
necessary up-to-date experience, skills and capabilities
The Board considers that it contains an appropriate range of skills,
experience and knowledge and is mindful of the need to
continuously review the needs of the business to ensure that this
remains true. The Board members are of sufficient calibre to bring
independent judgment of issues of strategy, performance, resources,
and standards of conduct, which are vital to the future growth and
success of the Group. The Board believes that it operates in an open
and constructive manner, working effectively as a team.

John Bradshaw acts as Creo’s senior independent Non-Executive
Director. John has a limited interest in the Company’s share option
scheme. Given John’s participation in the share option scheme is
limited, the Board does not consider his share option holding to be
significant and therefore consider him to be an independent
Non-Executive Director.

David Woods is the President and CEO of Pentax Americas, a division
of Hoya Group. David brings extensive market knowledge that is
invaluable to the Board and its decision-making process. Hoya Group
is one of the Company’s significant shareholders. Other divisions
within the Hoya Group of companies have agreements with Creo in
respect of the distribution of Creo’s products. To prevent conflicts of
interest, David Woods does not participate in or attend discussions
with regards to matters which may give rise to a conflict of interests.
David has a limited personal shareholding in the Company. The
Board does not consider David’s shareholding to be significant.

The Board feels that it has an appropriate balance between
independence, knowledge of the Company’s technology, sector
experience and professional standing to allow it to discharge its
duties and responsibilities well. All Directors are encouraged to
debate and use independent judgement based on their respective
knowledge and experience on all matters affecting the business.

The time commitment expected of the Directors is commensurate
with the size and complexity of a quoted company and as necessary
to properly perform their duties.

During the 12 months ending 3 December 2019, the following
meetings were held:

Name of director

Charles Spicer
John Bradshaw
David Woods
Craig Gulliford
Richard Rees
Christopher Hancock

Scheduled
Board
Meetings

Ad hoc
meetings*

Audit
Committee

Remuneration
Committee

2/2
2/2

1/1
1/1

5/5
5/5
5/5
5/5
5/5
5/5

9/9
8/9
6/7
7/7
9/9
7/7

(i.e. update calls, sub-committee meetings, or meetings where only a quorum
is required)

Conflicts of interest
To address the provisions of Section 175 of the Companies Act 2006
relating to conflicts of interest, the Company’s Articles of Association
allow the Board to authorise situations in which a Director has, or
may have, a conflict of interest. Directors are required to give notice
of any potential situation or transactional conflict that are to be
considered at the next Board meeting and, if considered appropriate,
conflicts are authorised or Directors do not attend or participate in
such discussions. Directors are not permitted to participate in such
considerations or to vote regarding their own conflicts.

Each Director is aware of the importance of keeping their skills and
capabilities up to date. The Board are kept up to date on changes
to the AIM rules via annual briefings by the Company’s nominated
adviser, as well as other regulatory and market matters on an
ad hoc basis.

The Board is supported by a number of professionals both
internal and external, including the Company’s General Counsel,
the CFO (who is a chartered accountant), the Senior Independent
Non-Executive Director (who is a chartered accountant) and external
advisors (details of which are set out on pages 42 to 43).

The Company engages with a number of healthcare professionals
around the world. To support the Board, Creo has established its
Horizon Group which consists of key opinion leaders and physicians
who serve the important advisory function of assisting Creo to
identify and assess unmet market opportunities in gastrointestinal
endoscopy that could contribute to the improvement of patient
outcomes but also to provide Creo with important perspectives on
market dynamics.

7. Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement
The Board seeks to improve the ways in which it interacts and the
manner in which information is presented to it. The processes that
have been put in place allow for a consistent approach to reporting,
thus aiding analysis by the Board of all matters at hand.

While the Company does not currently have any formal appraisal
processes or evaluation criteria for Board members, the Chairman
and Senior Independent Non-Executive Director regularly meet and
discuss performance with members of the executive team, which
in the Board’s opinion is currently sufficient for the Company’s
purposes. This will be kept under review and the Board will consider
whether formal evaluations are appropriate in the future.

8. Promote a corporate culture that is based on ethical values
and behaviours
Our core principle is clear: to improve lives. As such, ethical values
and behaviours are at the heart of what we do. The Board seeks to
enshrine such ethical values and behaviours throughout the conduct
of all of Creo’s activities. Our values are set out in our policies, our
working practices and our systems.

For our products to be adopted by our targeted markets, and thus
enabling Creo to improve lives through, amongst other things,
improved patient outcomes and reduced costs and time of
procedures for healthcare providers, we are required to have a
robust quality management system which is third party audited
to ISO: 13485 standards. Underpinning this quality management
system are processes to ensure that necessary safeguards are in
place to ensure the integrity of this system and accordingly the
quality of the products under development.

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FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCECORPORATE GOVERNANCE REPORT CONTINUED

The Board leads by example. The Board seeks to treat all persons
fairly and equitably, through clearly defined parameters of operation.
This includes full compliance with safe working practices but also
maintaining and protecting a positive and supportive working
environment.

9. Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board
The Chairman provides leadership to the Board and is responsible
for agreeing the agenda for Board meetings, ensuring (with the
Company Secretary) that the Directors receive the information that
they need to participate in Board meetings, and that the Board has
sufficient time to discuss issues on the agenda, especially those
relating to strategy and governance.

The Chief Executive Officer is responsible for the day to day
leadership of Creo, the management team and its employees.
The Chief Executive Officer is responsible, in conjunction with senior
management, for the execution of the Company’s strategy approved
by the Board and the implementation of Board decisions.

The Board is collectively responsible for the long-term success of
the Company. Its principal role is to provide leadership within a
framework of prudent and effective controls, which enables risk to
be assessed and managed. The Board considers the management
team’s strategic proposals and, following a rigorous review,
determines strategy and ensures that the necessary resources are
in place for the management team to execute against that strategy.

Board meetings
The Board seeks to meet regularly, but in any event to hold Board
meetings on a quarterly basis, together with meeting for an annual
strategy event. In addition to the scheduled meetings, informal
discussions with both Executive Directors and senior operational
managers of the Company in relation to strategic business development
and other topics important to the Company’s progress are held by
members of the Board regularly. Further, Board calls are held when
needed to allow the executives to update the Board on specific matters
and/to or approve specific actions for which Board approval is required.

The Board and its Committees are provided with information ahead of
meetings to give time for review and analysis. For each Board meeting
an agenda is prepared and approved by the Chairman and followed.
The Board maintains an ongoing list of matters arising from the Board
meetings which are then followed up at subsequent meetings to ensure
that matters and decisions are being implemented.

reserved matters
The Board has adopted a schedule of specific matters reserved for
the Board to consider and, if thought appropriate, decide upon. These
reserved matters relate to:
f strategy and oversight, including the approval of annual budgets;
f changes to the capital structure of the Company and the

corporate structure of the Group;

f approval of financial statements and reports and any capital

spend above agreed limits;

f approval of contracts outside of the ordinary course of

the business;

f changes to Board and Committee membership;
f remuneration of Executive Directors and issues relating to

share options;

f any delegation of authorities;
f governance; and
f approval of policies.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Board Committees
The Board delegates certain duties to Board Committees, all of
which operate within clearly defined terms of reference and, where
applicable, in accordance with the Code.

audit Committee
The Audit Committee is chaired by John Bradshaw and its other
members are Charles Spicer and Ivonne Cantu, each of whom are
independent Non-Executive Directors. The Audit Committee seeks to
ensure that the financial performance of the Company is properly
reported on and reviewed. Its role includes monitoring the integrity
of the financial statements of the Company (including annual and
interim accounts and results announcements), reviewing internal
control and risk management systems, reviewing any changes to
accounting policies, reviewing and monitoring the extent of the
non-audit services undertaken by external auditors and advising on
their appointment.

The Board considers that the members of the Audit Committee have
sufficient competence to understand, analyse and when necessary
challenge the management accounts and public financial statements
of the Company. The Company’s Auditor has unrestricted access to
the Chairman of the Audit Committee. The Chief Financial Officer and
a representative of the Auditor of the Company are normally invited
to attend meetings of the Audit Committee.

remuneration Committee
The Remuneration Committee is chaired by Charles Spicer and its
other member is John Bradshaw. Post period Ivonne Cantu has
replaced Charles Spicer as the chair of the Remuneration Committee.
The Remuneration Committee ensures that the Company’s
remuneration policy and practice promotes, encourages and drives
the long-term growth of shareholder value in an effective manner
and in accordance with the Board’s strategy and policies. More
particularly, the Remuneration Committee determines, within
the agreed terms of reference, the Company’s policy on the
remuneration packages of the Company’s Chief Executive, Chairman,
the Executive Directors, the Company Secretary, senior managers
and such other members of the executive management as it is
designated to consider. The Remuneration Committee also has
responsibility for determining (within the terms of the Company’s
policy and in consultation with the Chairman and/or the Chief
Executive Officer) the total individual remuneration package for each
Executive Director, the Company Secretary and other designated
senior executives (including bonuses, incentive payments and share
options or other share awards). The remuneration of Non-Executive
Directors will be a matter for the Chairman and Executive Directors
of the Board. No Director or manager is allowed to partake in any
discussions as to their own remuneration.

Further details of the Remuneration Committee’s activities and
recommendations are set out on pages 53 to 55.

Build trust
10. Communicate how the Company is governed and is
performing by maintaining a dialogue with shareholders and
other relevant stakeholders
We seek to maintain dialogue with shareholders and other relevant
stakeholders through a number of channels. Our Annual Report and
accounts, full year and half year announcements are the primary
sources of information for shareholders. These are supplemented by
regular and appropriate RNS and RNS Reach announcements.

The above, together with other relevant information on the Company,
can be obtained from our website.

The Company’s collegiate and open working environment means that
all employees are able to relay concerns to the executive team on a
daily basis. The Company has a whistleblowing policy to allow and
encourage all employees to bring matters which cause them concern
to the attention of certain persons within the Company and,
ultimately, to the attention of the Chairman.

The Company has engaged Walbrook PR to advise on its
communications strategy and to assist in the drafting and distribution
of regular news and regulatory announcements. If shareholders or
interested parties would like to contact Walbrook regarding any
communications they can be contacted at creo@walbrookpr.com.

Going concern
The Board is required to assess whether the Group has adequate
resources to continue operations for the foreseeable future. After
making enquiries, the Directors have a reasonable expectation that
the Company and the Group will continue in operational existence for
the foreseeable future (being a period of at least 12 months from the
date of this report). For this reason, they continue to adopt the going
concern basis for preparing the financial statements.

By order of the Board

richard rees
Director
Creo House
Unit 2, Beaufort Park
Beaufort Park Way
Chepstow
Wales
NP16 5UH
6 May 2020

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEDIRECTORS’ REPORT

The Directors present their report
together with the audited consolidated
financial statements for the 12 months
to 31 December 2019. These will be laid
before the shareholders of the Company
at the next Annual General Meeting
(AGM).

Creo Medical Group plc (admitted to the AIM market of the London
Stock Exchange (LSE:CREO)) is incorporated in England and Wales,
registration number 10371794. The Company’s registered office is
at Creo House, Unit 2, Beaufort Park, Beaufort Park Way, Chepstow,
Wales, United Kingdom NP16 5UH.

Principal activity
The principal activity of the Group during the period continued to be
that of research and development and the manufacture and sale of
medical devices and instruments. The principal activity of the
Company is that of a holding company.

Results and dividends
The results of the Group for the 12 months to 31 December 2019 are
set out in the Consolidated Statement of Profit or Loss and Other
Comprehensive Income on page 62.

The Directors do not recommend the payment of a dividend.

Review of the period
A summary of the Group’s progress and development is set out in
the Chairman’s Statement, the Chief Executive’s Statement, The Chief
Technology Officer’s Statement and the Financial Review, which form
part of the Strategic Report on pages 7, 8, 16 and 36 respectively.
This analysis includes comments on the position of the Group at the
end of the period, an indication of likely future developments in the
business of the Group and details of the Group’s activities in the field
of research and development and the steps taken to commercialise
its technology.

Directors
The Directors who held office during the year and up to the date of
approval of the financial statements were as follows:
f Professor Christopher Paul Hancock
f Craig Jonathan Gulliford
f Richard John Rees
f David Gerard Woods
f Charles Alexander Evan Spicer
f John Bradshaw
f Ivonne Maria Gloria Cantu (appointed 1 February 2020)

Directors’ interests and indemnity arrangements
The Directors’ interests in the shares of the Company are
disclosed in the Remuneration Report on pages 53 to 55.

In accordance with Section 234 of the Companies Act 2006 and
as permitted by the Articles of Association of the Company,
the Company maintained insurance throughout the year for its
Directors and officers against the consequences of actions
brought against them in relation to the execution of their duties
for the Company.

No Director had, during or at the end of year, a material interest
in any contract which was significant in relation to the Group’s
business except in respect of service agreements and share
options and as disclosed in the Directors’ Remuneration Report
on pages 53 to 55. It is noted that David Woods is President and
CEO of PENTAX Americas and M&A Director of HOYA Group
PENTAX Medical, a significant shareholder of Creo Medical Group
plc and with whom the Company has entered an agreement for
the distribution of its products in key markets in the Asia-Pacific
region and Germany, France and Italy.

The Company has not granted any indemnities to any of its
Directors against liability in respect of proceedings brought by
third parties.

Share capital
Details of the Company’s issued share capital are shown in Note
21 to the consolidated financial statements.

The share capital comprises one class of ordinary shares and
these are admitted on the AIM market of the London Stock
Exchange. As at 31 December 2019 there were 150,378,758 fully
paid ordinary shares in issue. All shares are freely transferable
and rank pari passu for voting and dividend rights.

Substantial holdings
As at 31 December 2019, shareholders holding more than 3% of
the share capital of Creo Medical Group plc were as follows:

Name of shareholder1

Canaccord Genuity
Baillie Gifford
Finance Wales Investments
M&G Investments
Tellworth Investments
AXA
Hoya Corporation
FIL Investment International

Number of
shares

% of voting
rights

28,024,770
13,309,909
12,776,727
8,333,000
5,025,635
4,816,646
4,799,880
4,655,344

18.6
8.9
8.5
5.5
3.3
3.2
3.2
3.1

Information taken from 31 December Equniti Analysis – note 2 differences
from the Jan 20 published numbers.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Save as referred to above, the Directors are not aware of any persons
as at 31 December 2019 who were interested in 3% or more of the
voting rights of the Company or could directly or indirectly, jointly or
severally, exercise control over the Company.

Financial risk management objectives and policies
The Company’s financial risk management objectives and policies are
shown in Note 1 to the consolidated financial statements. The main
risks arising from the Company’s financial instruments are interest
rate risk, exchange rate risk, credit risk, and liquidity risk, which are
continuously monitored by the Board.

Political contributions
The Company made no political donations or incurred any political
expenditure during the year.

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

Other information
An indication of likely future developments in the business and
particulars of significant events which have occurred since the end
of the financial year have been included in the Strategic Report on
page 26.

Auditor
KPMG LLP were reappointed as auditor during the period. In
accordance with Section 489 of the Companies Act 2006, a resolution
for the reappointment of KPMG LLP as auditor of the Company is to be
proposed at the forthcoming AGM.

By order of the Board

richard rees
Director
Creo House
Unit 2, Beaufort Park
Beaufort Park Way
Chepstow
Wales
NP16 5UH
6 May 2020

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEThe 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 are responsible for such internal
control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error, and 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 and a Directors’
Report that comply with that law and those regulations.

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

DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for
preparing the Annual Report 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 the
AIM Rules for Companies they are required to prepare the Group
financial statements in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRSs as
adopted by the EU) and applicable law and they have elected to
prepare the Parent Company financial statements in accordance
with UK accounting standards and applicable law (UK Generally
Accepted Accounting Practice), including FRS 101 Reduced
Disclosure Framework.

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:
f select suitable accounting policies and then apply them

consistently;

f make judgements and estimates that are reasonable, relevant,

reliable and prudent;

f for the Group financial statements, state whether they have been

prepared in accordance with IFRSs as adopted by the EU;
f for the Parent Company financial statements, state whether

applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the
financial statements;

f assess the Group and Parent Company’s ability to continue as a

going concern, disclosing, as applicable, matters related to going
concern; and

f use the going concern basis of accounting unless they either

intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

DIRECTORS’ REMUNERATION REPORT (UNAUDITED)

Remuneration Committee
The responsibilities of the Remuneration
Committee are to advise upon and make
recommendations to the Board on the
Group’s remuneration policies and,
within the framework established by the
Board, to recommend the remuneration
of the Executive Directors.

The CEO and CFO are invited to attend meetings to discuss
remuneration packages and bonus schemes for senior executives
within the Group, as well as the awarding of share options to such
persons under any share scheme adopted by the Group.

Charles Spicer chaired the Committee and John Bradshaw served on
the Committee during the period. Post period Ivonne Cantu assumes
responsibility as chair of the Remuneration Committee.

The Remuneration Committee assesses the performance of the
Executive Directors and other senior managers in the context of
recommending their annual remuneration, bonus awards and share
option grants to the Board for final determination. The remuneration
of the Non-Executive Directors is recommended by the Executive
Directors and takes account of the time spent on Board and
Committee matters. The Board will make the final determination
although no Director will participate in any discussion about his own
remuneration.

An important objective of the Committee is to ensure that a
competitive and appropriate base salary is paid to Directors and
senior managers, together with incentive arrangements that are:
f aligned with shareholders’ interests and with long-term

business strategies;

f measured against challenging and well-defined financial targets

(which are set in advance); and

f transparent and without ‘soft’ non-financial targets which could
otherwise allow undue discretion to award bonuses that do not
reflect actual financial performance of the Group.

Remuneration policy
The main elements of the remuneration package for Executive
Directors and senior management are:

Base annual salary
The base salary may be reviewed annually by the Remuneration
Committee. In determining the base annual salary the
Remuneration Committee takes into account several factors,
including the current position and development of the Group,
individual contribution, and market salaries for comparable
organisations.

discretionary annual and transaction bonus arrangements
All Executive Directors are eligible for a discretionary annual
bonus which is paid in accordance with a bonus scheme
developed by the Remuneration Committee. This takes into
account performance against defined personal objectives and
the financial performance of the Group. In certain circumstances,
the Remuneration Committee may award a separate, specific
transaction related bonus.

Share incentive schemes
The Group operates certain share option plans (further details of
which are set out in Note 8 Share based payments), under which
certain Directors, employees and certain contractors have been
granted options to subscribe for ordinary shares. All options are
equity settled. The options are subject to service conditions and
have varying vesting periods and exercise prices (depending on
the time of grant). The Group has no legal or constructive
obligation to repurchase or settle the options in cash.

remuneration policy for Non-executive directors
Non-Executive Directors are employed on letters of appointment
which have an initial term of one year and then which may be
terminated at any time by either party with three months’ notice.

Remuneration for Non-Executive Directors is set by the Executive
Directors of the Board. Non-Executive Directors do not
participate in bonus schemes. Charles Spicer and John Bradshaw
have been awarded share options.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEDIRECTORS’ REMUNERATION REPORT (UNAUDITED) CONTINUED

Directors’ remuneration
The remuneration of the Board of Directors of Creo Medical Group plc during the 12-month period was:

(All figures £)

Executive:
Professor Christopher Hancock
Craig Gulliford
Richard Rees

Total executive

Non-executive:
Charles Spicer
John Bradshaw
David Woods

Total non-executive

Salary
and taxable
benefits

562,244
674,947
532,782

Pension

5,000
20,000
20,500

Share-based
payments

12 months to
31 December
2019

18 months to
31 December
2018

261,831
342,017
264,083

829,075
1,036,964
817,365

963,181
1,243,762
927,199

1,769,973

45,500

867,931

2,683,404

3,134,142

93,000
63,000
–

156,000

–
–
–

–

17,835
11,890
–

110,835
74,890
–

125,995
71,496
–

29,725

185,725

197,491

Total Directors' remuneration

1,925,973

45,500

897,656

2,869,129

3,331,633

Pension contributions include payments contributed on a salary sacrifice basis during the year and are shown in the salary and taxable
benefits line. Salary and taxable benefits during the 12 month period include an annual bonus for 2019 plus the 12 month element of the
2018 transaction bonus. The transaction related bonus relating to the £48.1m share placing in 2018 is being accrued over a two year period
commencing September 2018. The share-based payment charge relates to share options issued by the Group. The charge for the year of
£897,656 for Directors compares to the charge incurred by the Group in total for all employees and suppliers of £1,554,845.

directors’ shareholdings
The interests of the Directors holding office at 31 December 2019 in the shares of the Company, including family interests, were:

(All figures £)

Executive:
Professor Christopher Hancock
Craig Gulliford

Total executive

Non-executive:
Charles Spicer
John Bradshaw
David Woods

Total non-executive

Total Directors' shareholdings

31 December
2019
Number

31 December
2019
%

4,400,098
609,886

5,009,984

93,810
–
25,000

118,810

5,128,794

2.93%
0.41%

3.34%

0.06%
–
0.02%

0.08%

3.42%

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

directors’ interests in share options
Directors’ interests in share options, granted under either the Creo Medical Group plc Enterprise Management Incentive Share Option
Scheme or the Creo Medical Group plc Unapproved Share Option Scheme, to acquire ordinary shares of £0.001 pence each in the Company at
31 December 2019 were:

(All figures £)

Executive:
Professor Christopher Hancock
Professor Christopher Hancock
Professor Christopher Hancock
Professor Christopher Hancock
Professor Christopher Hancock
Professor Christopher Hancock

Craig Gulliford
Craig Gulliford
Craig Gulliford
Craig Gulliford
Craig Gulliford
Craig Gulliford

Richard Rees
Richard Rees
Richard Rees
Richard Rees
Richard Rees

Total executive

Non-executive:
Charles Spicer
John Bradshaw
John Bradshaw

David Woods

Total non-executive

31 December
2018
Number

417,240
72,000
1,184,210
107,914
268,293
–

2,049,657
540,000
936,000
1,578,948
143,885
325,203
–

3,524,036
288,000
1,184,210
118,705
268,293
–

Granted
during
year

–
–
–
–
–
114,035

114,035
–
–
–
–
–
143,275

143,275
–
–
–
–
114,035

1,859,208
7,432,901

114,035
371,345

118,421
27,000
78,947

–

224,368

–
–
–

–

Total Directors' shareholdings

7,657,269

371,345

Exercised
during
year

31 December
2019
Number

Vested
but
unexercised

–
–
–
–
–
–

–
–
–
–
–
–
–

–
–
–
–
–
–

–
–

–
–
–

–

417,240
72,000
1,184,210
107,914
268,293
114,035

2,163,692
540,000
936,000
1,578,948
143,885
325,203
143,275

3,667,311
288,000
1,184,210
118,705
268,293
114,035

417,240
72,000
1,184,210
–
–
–

1,673,450
540,000
936,000
1,578,948
–
–
–

3,054,948
288,000
1,184,210
–
–
–

1,973,243
7,804,246

1,472,210
6,200,608

118,421
27,000
78,947

–

–
27,000
–

–

224,368

27,000

8,028,614

6,227,608

Exercise
price

16.67p
16.67p
76.00p
113.00p
153.75p
171.00p

–
16.67p
16.67p
76.00p
113.00p
153.75p
171.00p

–
16.67p
76.00p
113.00p
153.75p
171.00p

–

76.00p
21.39p
76.00p

–

All share options are subject to employment conditions, those issued on or post admission at 76p, 113p, 153.75p and 171p are also subject to
performance conditions.

Other transactions that occurred with Directors during the year are detailed in note 23 to the financial statements under Related Party
Transactions.

Charles Spicer
Chairman of the Remuneration Committee
Creo House
Unit 2, Beaufort Park
Beaufort Park Way
Chepstow
Wales
NP16 5UH
6 May 2020

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCE

a year of
achievements.
We made pleasing progress
against our commercial
strategy in 2019.

FINANCIAL
STATEMENTS

Independent auditor’s report

Consolidated statement of profit and loss
and other comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes to the financial statements

Parent company statement of financial position 87

Parent company statement of changes in equity 88

Notes to the parent company
financial statements

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

STRATEGIC REPORT

GOVERNANCE

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTINDEPENDENT AUDITOR’S REPORT

1. Our opinion is unmodified
We have audited the financial statements of Creo Medical Group plc
(‘the Company’) for the year ended 31 December 2019 which
comprise the Consolidated statement of profit and loss and other
comprehensive income, Consolidated statement of financial position,
Consolidated statement of changes in equity, Consolidated
statement of cash flows, Parent Company statement of financial
position, Parent Company statement of changes in equity, and the
related notes, including the accounting policies in note 1.

in our opinion:
f 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 December 2019 and of the Group’s loss for the year
then ended;

f the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union;

f the Parent Company financial statements have been properly

prepared in accordance with UK accounting standards, including
FRS 101 Reduced Disclosure Framework; and

f the financial statements have been prepared in accordance with

the requirements of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
are described below. We have fulfilled our ethical responsibilities
under, and are independent of the Group in accordance with, UK
ethical requirements including the FRC Ethical Standard as applied to
listed entities. We believe that the audit evidence we have obtained is
a sufficient and appropriate basis for our opinion.

overview

Materiality:
group financial
statements as a whole

£140,000 (2018:£120,000)

0.73% (2018: 0.67%) of total expenses

Coverage

100% (2018:100%) of group loss before tax

Key audit matters vs 2018

Recurring risks

The impact of uncertainties due to the
UK exiting the European Union on our
audit

Treatment of development costs

Recoverability of parent company’s
investment in subsidiary and debt due
from subsidiary







2. Key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters, were as follows (unchanged
from 2018):

The risk

Our response

The impact of uncertainties
due to the UK exiting the
European Union on our audit

Refer to page 33 (principal risks
and uncertainties)

Unprecedented levels of
uncertainty:
All audits assess and challenge the
reasonableness of estimates, in
particular as described in treatment of
development costs below, and related
disclosures and the appropriateness of
the going concern basis of preparation
of the financial statements. All of these
depend on assessments of the future
economic environment and the Group’s
future prospects and performance.

Brexit is one of the most significant
economic events for the UK and its
effects are subject to unprecedented
levels of uncertainty of consequences,
with the full range of possible effects
unknown.

We developed a standardised firm-wide approach to the
consideration of the uncertainties arising from Brexit in planning
and performing our audits. Our procedures included:
f Our Brexit knowledge: We considered the Directors’

assessment of Brexit-related sources of risk for the Group’s
business and financial resources compared with our own
understanding of the risks. We considered the Directors’ plans
to take action to mitigate the risks.

f Sensitivity analysis: When addressing the treatment of

development costs and other areas that depend on forecasts,
we compared the Directors’ analysis to our assessment of the
full range of reasonably possible scenarios resulting from
Brexit uncertainty and, where forecast cash flows are required
to be discounted, considered adjustments to discount rates
for the level of remaining uncertainty.

f Assessing transparency: As well as assessing individual
disclosures as part of our procedures on the treatment of
development costs we considered all of the Brexit related
disclosures together, including those in the Strategic Report,
comparing the overall picture against our understanding of
the risks.

However, no audit should be expected to predict the unknowable
factors or all possible future implications for a company and this
is particularly the case in relation to Brexit.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

The risk

Our response

Treatment of
development costs

(£500,000 capitalised and
£3,025,000 expensed; 2018:
£150,000 capitalised and
£3,794,000 expensed)

Accounting treatment:
The Group aims to develop cutting-
edge surgical endoscopy products and
devices. Development costs are
capitalised in accordance with the
relevant accounting standards when
specific criteria are met.

Refer to page 69 and 73
(accounting policies) and Note
12 page 79 (financial disclosures)

Recoverability of Parent
Company’s investment in
subsidiary and debt due
from subsidiary

(Investment in subsidiary £1.3m,
2018: £0.6m; amount owed by
subsidiary undertaking £40
million, 2018: £21.6 million)

Refer to pages 89 to 91
(accounting policies and
financial disclosures)

The application of accounting standards
to determine whether the criteria for
capitalisation have been met is inherently
subjective as this involves an assessment
of the technical feasibility and commercial
viability of the project concerned.

As the number of development projects
being undertaken by the Group has
increased in the year, the risk associated
with the application of the correct
accounting treatment for development
costs has also increased.

Low risk, high value
The investment in subsidiary and
amounts owed by the subsidiary
undertaking is significant and
represents 35% (2018: 34%) of the
Company’s total assets.

The carrying value of an investment in a
subsidiary undertaking is assessed for
impairment and expected credit losses
(‘ECLs’) are calculated on the amounts
owed by the subsidiary. The application
of accounting standards to determine
any impairment or ECLs is inherently
subjective as this involves judgements
to be made in relation to the future
performance of the subsidiary and
possible default events over the
expected life of the loan.

Whilst the overall risk is assessed as low,
we determined that due to their
materiality in the context of the Parent
Company financial statements, the
impairment assessment and calculation
of ECLs are considered to be the areas
that had the greatest effect on our
Parent Company audit.

Our procedures included:
f Accounting analysis: Critically assessed the Group’s
accounting policy for determining whether or not costs
incurred on a project should be capitalised against the criteria
of the relevant accounting standard and our understanding of
the progress of the projects.

f Test of detail: Obtained evidence and documentation to
assess and challenge the status of the projects including
assessing the technical feasibility and commercial viability by
reviewing regulatory approval submissions, results of clinical
trials and procedures undertaken, market analysis and
customer correspondence.

f Test of detail: Agreed a sample of costs allocated to

development projects to supporting documentation, primarily
timesheets and payroll records for relevant employees in
relation to labour costs and purchase invoices for other costs.

f Challenged amortisation: Challenged the timing of the

commencement of amortisation of capitalised development
assets by determining the point at which the asset is available
for use, being when the related product is physically ready to
be distributed to a customer.

f Assessing transparency: Evaluated the adequacy of the
disclosures of the judgements involved, compared with the
requirements of the accounting standards and our
understanding of the business.

Our procedures included:
f Accounting policies: Assessing the relevant accounting

policies, especially those requiring the exercise of judgement
such as the definition of default for an on demand loan.
f Control reperformance: We tested the controls over the

expected credit loss estimation process, including the annual
approval and challenge of those estimates by the Directors.
f Qualitative indicators: In relation to the amounts owed by

the subsidiary, assessing the Company’s conclusions on
whether default has occurred with reference to indicators
such as relevant clinical and regulatory data.

f Benchmarking assumptions: Assess the carrying value of
the investment in subsidiary by challenging assumptions used
in the cash flows included in the budgets based on our
knowledge of the Group and the markets in which the
subsidiary operates.

f Historical comparisons: Assessing the historical accuracy

of the previous forecasts by comparing to actual costs
incurred.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTINDEPENDENT AUDITOR’S REPORT CONTINUED

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 £140,000 (2018: £120,000), determined with reference to a
benchmark of Group total expenditure, of which it represents 0.73%
(2018: Group total expenditure, of which it represents 0.67%). We
consider total expenditure to be the most appropriate benchmark
as the entity is still within the start-up phase of the business cycle.

Materiality for the Parent Company financial statements as a whole
was set at £84,000 (2018: £108,000). This is lower than the materiality
we would otherwise have determined by reference to total assets,
and represents 0.07% of the Company’s total assets (2018: 0.2%).

Total expenditure expenses
£19m (2018: £17.9m)

Group materiality
£140,000 (2018: £120,000)

£140,000
Whole financial
statements materiality
(2018: £120,000)

£126,000
Range of materiality at
two components
(£84,000-£126,000)
(2018: £100,000-£108,000)

£7,000
Misstatements reported
to the Audit Committee
(2018: £6,000)

We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £7,000 (2018: £6,000),
in addition to other identified misstatements that warranted
reporting on qualitative grounds.

Total expenses
Group materiality

Group revenue

Group profit before tax

0
0

100%

(2018: 100%)

100
100

Group total assets

0
0

100%

(2018: 100%)

100
100

0
0

100%

(2018: 100%)

100
100

Full scope for Group audit purpose 2019
Full scope for Group audit purpose 2018
Residual components

Of the Group’s five (2018: four) reporting components, which include
the Parent Company, we subjected two (2018: two) to full scope
audits for group reporting purposes.

The components within the scope of our work accounted for the
following percentages of the Group’s results. The Group team
approved the component materialities, which ranged from £84,000
to £126,000, having regard to the mix of size and risk profile of the
Group across the components.

For the residual three components, which are currently dormant,
we performed analysis at an aggregated Group level to re-examine
our assessment that there were no significant risks of material
misstatement within these.

The work on both components, including the audit of the Parent
Company, was performed at the Company’s head office in Chepstow
by the Group team.

4. We have nothing to report on going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Company or the
Group or to cease their operations, and as they have concluded that
the Company’s and the Group’s financial position means that this is
realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the financial statements (‘the going concern period’).

Our responsibility is to conclude on the appropriateness of the
Directors’ conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in this
auditor’s report is not a guarantee that the Group or the Company
will continue in operation.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

In our evaluation of the Directors’ conclusions, we considered the
inherent risks to the Group’s and Company’s business model and
analysed how those risks might affect the Group’s and Company’s
financial resources or ability to continue operations over the going
concern period. The risks that we considered most likely to adversely
affect the Group’s and Company’s available financial resources over
this period were:
f availability of cash resources.
f achievement of regulatory approvals and commercialisation of the

company’s products.
f achievement of forecasts.

As these were risks that could potentially cast significant doubt
on the Group’s and the Company’s ability to continue as a going
concern, we considered sensitivities over the level of available
financial resources indicated by the Group’s financial forecasts taking
account of reasonably possible (but not unrealistic) adverse effects
that could arise from these risks individually and collectively and
evaluated the achievability of the actions the Directors consider they
would take to improve the position should the risks materialise. We
also considered less predictable but realistic second order impacts,
such as the impact of Brexit and the erosion of customer or supplier
confidence, which could result in a rapid reduction of available
financial resources.

Based on this work, we are required to report to you if we have
concluded that the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty that
may cast significant doubt over the use of that basis for a period of at
least a year from the date of approval of the financial statements.

We have nothing to report in these respects, and we did not identify
going concern as a key audit matter.

5. We have nothing to report on the other information in the
Annual Report
The Directors are responsible for the other information presented
in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance
conclusion thereon.

Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent with
the financial statements or our audit knowledge. Based solely on
that work we have not identified material misstatements in the other
information.

Strategic report and directors’ report
Based solely on our work on the other information:
f we have not identified material misstatements in the Strategic

Report and the Directors’ Report;

f in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
f in our opinion those reports have been prepared in accordance

with the Companies Act 2006.

6. We have nothing to report on the other matters on which we
are required to report by exception
Under the Companies Act 2006, we are required to report to you if,
in our opinion:
f 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

f the Parent Company financial statements are not in agreement

with the accounting records and returns; or

f certain disclosures of Directors’ remuneration specified by law are

not made; or

f we have not received all the information and explanations we

require for our audit.

We have nothing to report in these respects.

7. Respective responsibilities
directors’ responsibilities
As explained more fully in their statement set out on page 52,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group
and, Parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and using
the going concern basis of accounting unless they either intend to
liquidate the Group or the Parent Company or to cease operations, or
have no realistic alternative but to do so.

auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a high level
of assurance, but does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.

8. The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as a body, for
our audit work, for this report, or for the opinions we have formed.

Jeremy Thomas (Senior Statutory auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
3 Assembly Square
Britannia Quay,
Cardiff,
CF10 4AX
7 May 2020

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCECONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

(All figures £)

Revenue
Cost of sales

Gross Profit

Other operating income
Administrative expenses

Operating loss

Finance expenses
Finance income

Loss before tax

Taxation

Loss for the year/period

Other comprehensive income
Total comprehensive loss for the year/period

Loss per share
Basic and diluted

The Notes on pages 66 to 91 form part of the financial statements.

12 months to
31 December
2019

18 months to
31 December
2018

13,473
(8,522)

4,951

–
–

–

126,719
(19,007,048)

279,959
(17,943,745)

(18,875,378)

(17,663,786)

(51,291)
311,288

(16,744)
104,343

(18,615,381)

(17,576,187)

Note

9
9

2,704,231

2,767,579

(15,911,150)

(14,808,608)

–
(15,911,150)

–
(14,808,608)

(0.13)

(0.16)

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(All figures £)

Assets
Non-current assets
Intangible assets
Property, plant and equipment
Other financial assets
Other non-current receivables

Current assets
Inventories
Trade and other receivables
Tax receivable
Cash and cash equivalents

Total assets

Shareholder equity
Called up share capital
Share premium
Merger reserve
Share option reserve
Retained earnings

Liabilities
Non-current liabilities
Interest bearing liabilities

Current liabilities
Trade and other payables
Interest bearing liabilities

Total liabilities

Total equity and liabilities

12 months to
31 December
2019

18 months to
31 December
2018

Note

12
13
18
15

14
15
16

17
19

865,241
1,295,818
–
8,400

307,814
906,256
10,857
8,400

2,169,459

1,233,327

727,158
1,616,319
2,702,198
81,048,448

302,472
1,052,766
2,569,631
44,588,722

86,094,123

48,513,591

88,263,582

49,746,918

150,378
115,111,506
13,602,735
4,647,915
(50,849,190)

120,495
65,835,555
13,602,735
3,093,070
(34,938,040)

82,663,344

47,713,815

543,892

392,892

4,883,153
173,193

1,599,620
40,591

5,056,346

1,640,211

5,600,238

2,033,103

88,263,582

49,746,918

These financial statements were approved by the Board of Directors on 6 April 2020 and were signed on its behalf by:

richard rees
Director

Company registered number: 10371794

The Notes on pages 66 to 91 form part of the financial statements.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(All figures £)

Balance at 30 June 2017

Total comprehensive income for the
period
Profit or loss

Total comprehensive income

Transactions with owners, recorded
directly in equity
Issue of share capital
Equity settled share-based payment
transactions

Total comprehensive income for the
period
Profit or loss

Total comprehensive income

Transactions with owners, recorded
directly in equity
Issue of share capital
Equity settled share-based payment
transactions

Called up
share
capital

Note

Retained
earnings

Share
premium

Merger
reserve

Share
option
reserve

Total
equity

80,712

(20,129,432)

19,810,393

13,602,735 1,288,250

14,652,658

–

(14,808,608)

–

(14,808,608)

–

46,064,945

39,783

–

46,025,162

–

– 1,804,820

1,804,820

–

(15,911,150)

–

(15,911,150)

–

49,305,834

29,883

–

49,275,951

–

– 1,554,845

1,554,845

Balance at 31 December 2018

120,495

(34,938,040)

65,835,555

13,602,735 3,093,070

47,713,815

Balance at 31 December 2019

150,378

(50,849,190) 115,111,506

13,602,735 4,647,915

82,663,344

The Notes on pages 66 to 91 form part of the financial statements.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

CONSOLIDATED STATEMENT OF CASH FLOWS

(All figures £)

Cash flows from operating activities
Total comprehensive loss for the period
Depreciation/amortisation charges
Increase in share option reserve
Fair value adjustment to derivatives
Finance expenses
Finance income
R&D expenditure credit
Taxation
Loss on disposal of property, plant and equipment

Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables

Interest paid
Tax received

Net cash from operating activities

Cash flows from investing activities
Purchase of intangible fixed assets
Purchase of tangible fixed assets
Interest received

Net cash from investing activities

Cash flows from financing activities
Capital received in respect of lease liabilities
Capital repaid in respect of lease liabilities
Capital received in respect of long-term borrowings
Share issue

Net cash from financing activities

Increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

The Notes on pages 66 to 91 form part of the financial statements.

12 months to
31 December
2019

18 months to
31 December
2018

Note

10
13

12
13

(15,911,150)
641,725
1,554,845
27,894
23,397
(311,288)
(5,362)
(2,704,231)
–

(14,808,608)
497,421
1,804,820
(10,857)
16,744
(93,486)
(18,602)
(2,767,579)
12,278

(16,684,170)

(15,367,869)

(424,686)
(552,696)
3,283,533

(211,139)
(514,256)
143,746

(14,378,019)

(15,949,518)

(51,291)
2,577,026

(16,744)
1,666,525

(11,852,284)

(14,299,737)

(633,795)
(484,006)
311,288

(304,462)
(1,083,391)
104,343

(806,513)

(1,283,510)

–
(187,310)
–
49,305,833

121,595
(45,333)
342,000
46,064,945

49,118,523

46,483,207

36,459,726

30,899,960

44,588,722

13,688,762

81,048,448

44,588,722

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE
NOTES TO THE FINANCIAL STATEMENTS

1. Accounting policies
general information
Creo Medical Group plc is a public company, limited by shares, registered and domiciled in England and Wales in the UK. The Company’s
registered number is 10371794 and the registered office is Creo House, Unit 2, Beaufort Park, Beaufort Park Way, Chepstow, Wales NP16 5UH.

The Group financial statements consolidate those of the Parent Company and its subsidiaries (together referred to as the ‘Group’). The Parent
Company financial statements present information about Creo Medical Group plc as a separate entity and not about its Group.

The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting
Standards as adopted by the European Union (‘adopted IFRSs'). The Company has elected to prepare its Parent Company financial statements
in accordance with FRS 101. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods
presented in these Group financial statements.

Basis of preparation
This is the third annual financial report of the Company since the incorporation of Creo Medical Group plc on 12 September 2016 and the
subsequent acquisition of Creo Medical Limited via a share for share exchange on 9 November 2016. The financial statements are presented
in Sterling and rounded to the nearest pound.

This financial report for the 12-month period ended 31 December 2019 (including comparatives for the 18 months ended 31 December 2018)
was approved by the Board of Directors on 6 May 2020. The accounting period in the prior year was extended by 6 months to 31 December
2018 to align the accounting reference date to annual calendar and our annual budgeting process.

Changes in accounting policy and disclosures
New standards, amendments and interpretations
The following new standards, amendments and interpretations have been adopted by the Group for the first time for the financial year
beginning on 1 January 2019:
f Annual improvements 2015 – 2017 cycle.
f Amendment to IFRS 2, ‘Share-based payments’ which clarifies the classification and measurement of certain share-based payment

transactions.
f IFRS 16 ‘Leases’.
f Amendments to IFRS 9 ‘Financial Instruments’ which clarifies the accounting for prepayment features with negative compensation.
f Amendment to IAS 28 ‘Investments in associates and joint ventures’ which clarifies the accounting for long-term interests in an associate
or joint venture, which in substance form part of the net investment in the associate or joint venture, but to which equity accounting is
not applied.

f Interpretation 23 ‘Uncertainty over Income Tax Treatments’ which explains how to recognise and measure deferred and current income

tax assets and liabilities where there is uncertainty over a tax treatment.

f Amendments to IAS 19 ‘Employee Benefits’ which clarifies the accounting for defined benefit plan amendments, curtailments and

settlements.

With the exception of IFRS 16 noted below, the adoption of these standards, amendments and interpretations has not had a material impact
on the financial statements of the Group or Parent Company.

New standards, amendments and interpretations issued but not effective and not adopted early
The following new standards, amendments to standards and interpretations have been issued but are not yet effective and therefore have
not been applied in preparing these consolidate financial statements.
f Amendments References to Conceptual Framework in IFRS Standards. Effective for periods beginning on or after 1 January 2020.
f Amendments to IFRS 3 ‘Definition of a business’. Effective for periods beginning on or after 1 January 2020.
f Amendments to IAS 1 and IAS 8 ‘Definition of Material’. Effective for periods beginning on or after 1 January 2020.
f Amendments to IFRS 7, IFRS 9 and IAS 39 ‘Financial reporting in the period leading up to IBOR reform’. Effective for periods beginning on

or after 1 January 2020.

The Directors anticipate that none of the new standards, amendments to standards and interpretations is expected to have a significant
effect on the financial statements of the Group or Parent Company.

IFRS 16 Leases
The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated
and continues to be reported under IAS 17 and IFRIC 4. The details of accounting policies under IAS 17 and IFRIC 4 are disclosed separately.

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract
conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16.

This policy is applied to contracts entered into, on or after 1 January 2019. The Group has taken the practical expedient not to reassess
whether contracts at the date of initial application constituted a lease.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract
to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to
separate non-lease components and account for the lease and non-lease components as a single lease component.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at
cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date,
plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset
or the site on which it is located, less any lease incentives received. On transition, the right of use assets were recognised at an amount equal
to the lease liability, adjusted by the amount of prepaid lease payments relating to that lease recognised in the statement of financial position
immediately before the date of initial application.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term,
unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset
reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the
underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally,
the Group uses its incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain
adjustments to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:
f fixed payments, including in-substance fixed payments;
f variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
f amounts expected to be payable under a residual value guarantee; and
f the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period

if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is
reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease
payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a
residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is
a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is
recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in ‘property, plant and equipment’ and lease
liabilities in ‘interest bearing liabilities’ in the statement of financial position.

Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including
IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the
lease term.

Impact on transition
On transition to IFRS 16, the Group recognised additional right-of-use assets and additional lease liabilities. The impact on transition is
summarised below.

Right-of-use assets
Lease Liabilities

£470,913
£430,663

When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its
incremental borrowing rate at 1 January 2019. The weighted-average rate applied is 3%.

Operating lease commitments at 31 December 2018 as disclosed under IAS 17 in the Group’s consolidated financial statements
Recognition exemption of for leases of low-value assets
Recognition exemption for leases with less than 12 months of lease term at transition
Lease liabilities discounted using the incremental borrowing rate at 1 January 2019
Prepaid lease payments at 31 December 2018
Right-of-use asset recognised at 1 January 2019

All figures
£

510,915
–
(16,438)
430,663
40,250
470,913

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

1. Accounting policies continued
leases previously recognised under iaS 17
Operating lease payments
Payments made under operating leases in the period are recognised in the income statement on a straight-line basis over the term of the
lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.

Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is
allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

measurement convention
The financial statements are prepared on the historical cost basis except that derivative financial instruments are stated at their fair value.

Business combinations and basis of consolidation
On 9 November 2016 Creo Medical Group plc offered a share for share exchange to the shareholders of Creo Medical Limited. As a result of
this transaction, Creo Medical Group plc became the parent of Creo Medical Limited.

On the basis that there was no change in control following the share for share exchange, this is considered a common control transaction.

Therefore, within the parent Company accounts the acquisition of Creo Medical Limited, the new parent measured cost at the carrying
amount of its share of the equity items shown in the separate financial statements of the original parent at the date of the reorganisation.
Within the consolidated financial statements, the acquisition of Creo Medical Limited is considered to be a company reorganisation among
entities under common control and as such IFRS 3 is not considered to apply, therefore book value accounting was applied to the acquisition.
The Directors chose to restate the comparatives for the Company prior to the acquisition date to show the combination as though it has
occurred prior to the start of the earliest period presented. This was deemed to provide the user with a truer view of the Company’s
performance through the period.

Accounting policies adopted are consistent across the Group. All Intra-Group balances and transactions, including unrealised income and
expenses arising from intra-Group transactions, are eliminated on consolidation.

going concern
The Group reported a loss for the period of £15.9m (18-months to 31 December 2018: loss £14.8m). Net assets as at 31 December 2019 were
£82.6m (31 December 2018: £47.7m) and include cash and cash equivalents of £81.0m (31 December 2018: £44.6m).

The Board has considered the applicability of the going concern basis in the preparation of the financial statements. This included the review
of internal budgets and financial results and a review of cash flow forecasts for the 12-month period following the date of signing the
financial statements.

The Group completed a £51.9m share placing on AIM on 23 December 2019 and has prepared detailed forecasts and projections taking into
account the available funding and its planned activities for the five-year period to 31 December 2024. Based on the current business plan the
Group is forecasting to be cash generative (and profitable) within this period and its cash resources will extend beyond the year ending
31 December 2024.

The Group has strategic collaboration agreements in place with distributors in a number of geographies and has been delivering product for
training and market penetration purposes throughout the period. In addition, the group received its first commercial orders for Speedboat
and its first revenue from US hospitals in the period and is now expecting a period of ramp up as market penetration activities are drive
physical sales being realised. However, the roll out of the Clinical Education Programme has been impacted by the ongoing travel restrictions
and social distancing policies put in place by governments across the world to limit the spread of COVID-19. Training and mentoring events
across the Company’s clinical education programme in the US, EU and the UK have been cancelled or postponed. It is also expected that the
undertaking of new procedures and elective cases will be reduced worldwide which will impact the volume of expected Speedboat cases in
the short term. Whilst the Company has been able to offer online training and remote mentoring via video link, the number of Endoscopists
trained on the Speedboat device, will be lower than expected for this year and as a result initial revenues from the early uptake of Speedboat
are likely to be lower in the short term.

The cash flow forecasts prepared include the current estimated impact of the COVID-19 coronavirus. Whilst initial revenues from the early
uptake of Speedboat are likely to be lower in the short term, EBITDA and cash is likely to be better than expected due to savings as a result of
the slow-down.

Additionally, given the unprecedented situation, the directors have modelled further severe but plausible downside scenarios involving the
cessation of sales for a period from April to December 2020. Even in this scenario, the 5 year forecast indicates that the Group will have
sufficient funds to meet its liabilities as they fall due throughout the forecast period. The Directors consider the above scenario to be unlikely.
However, if even more severe scenarios were to be realised, the Group would take mitigating actions and the Directors are confident,
following the Company’s £51.9 million fundraising in December 2019, cash reserves at the end of March were £77.5 million and are more than
sufficient to secure the business activities and staff through the current situation and beyond.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

The Board believes that the outlook for the medium and long term remains very much unchanged, and will not be impacted by a short term
slowdown in the early market development. As the world begins to emerge from the COVID-19 restrictions the business is expected to have
multiple devices regulatory cleared for multiple markets across the EU and US. This will allow the Company to introduce these devices into
clinical practice once COVID-19 related restrictions are eased and to ultimately commercialise the full product range with four devices
optimised around the core tissue effects of dissection, resection, haemostasis and ablation, as well as the already cleared Speedboat device.

Based on these factors, including the current level of cash resources, the Directors are satisfied that the Group will have adequate resources
to continue in operational existence for the foreseeable future and for a period of not less than 12 months from the date of signing the
financial statements. Thus, they continue to adopt the going concern basis of accounting in preparing the annual report.

intangible assets
Intangible assets include the capitalisation of development costs and software for the period ending 31 December 2019.

Software which is not an integral part of hardware assets are stated at historic cost, including expenditure that is directly attributable to the
acquired item, less accumulated amortisation and impairment losses.

Expenditure on research activities is recognised as an expense in the year in which it is incurred. Costs are classified as research expenditure
rather than development unless all of the below criteria are met, in which case these costs are capitalised on the balance sheet.

Development criteria:
a. completion of the intangible asset is technically feasible so that it will be available for use or sale;
b. the Company intends to complete the intangible asset and use or sell it;
c. the Company has the ability to use or sell the intangible asset and the intangible asset will generate probable future economic benefits

over and above cost;

d. there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
e. the expenditure attributable to the intangible asset during its development can be measured reliably.

Amortisation commences when the project is available for sale or use within the business.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use.

Amortisation is charged so as to write off the costs of intangible assets over their estimated useful lives, on the following basis:

Software
Development costs

– 3 years straight line
– 5 years straight line

property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment losses. Cost includes the original purchase
price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as PPE. Where land
and buildings are held under leases the accounting treatment of the land is considered separately from that of the buildings. Leased assets
acquired are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of
the lease, less accumulated depreciation and less accumulated impairment losses. Lease payments are accounted for as described below.

Depreciation is charged so as to write off the costs of assets over their estimated useful lives, on the following basis:

Leasehold property improvements
Office equipment
Fixtures and fittings
Motor vehicles
Plant and machinery
Right of Use assets

– 3 years straight line
– 2, 3 or 4 years straight line
– 3 or 4 years straight line
– 4 years straight line
– 3 years straight line or 4 years reducing balance
– based on length of lease agreement

The gain or loss arising on the disposal of an asset is determined as the difference between sales proceeds and the carrying amount of the
asset and is recognised in income on the transfer of the risks and rewards of ownership.

The Company has no class of tangible fixed asset that has been revalued. On transition to IFRS the net book values recorded at 1 March 2013
have been applied and these are based on historic cost at the date of acquisition.

inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on First In, First Out (FIFO) principle using standard costing
techniques and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them
to their existing location and condition.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCENOTES TO THE FINANCIAL STATEMENTS CONTINUED

1. Accounting policies continued
Financial instruments
The Company predominantly enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities
like trade and other accounts receivable and payable, loans from other third parties, loans to related parties and investments in non-puttable
financial instruments. Any transactions relating to share options issued by the entity are disclosed in the share-based payment accounting
policy and note. The Company is also able to enter into a variety of derivative financial instruments to manage its exposure to foreign
exchange risk, including foreign exchange forward contracts and cross currency swaps.

Impairment
The Group recognises loss allowances for expected credit losses (ECLs) on financial assets measured at amortised cost, debt investments
measured at FVOCI and contract assets (as defined in IFRS 15).

The Group measures loss allowances at an amount equal to lifetime ECL, except for other debt securities and bank balances for which credit
risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition,
which are measured as 12-month ECL.

Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL,
the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on the company’s historical experience and informed credit assessment and
including forward-looking information.

The Group considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Group in full,
when demanded.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a
shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

measurement of eCls
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the
difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.

Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-
impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of
the financial asset have occurred.

Write-offs
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect
of recovery.

Provisions under IFRS 9 may still be made to account for the probability of such default events however such a provision being made is not
indicative that an actual default event will occur.

Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using
the effective interest method, less any impairment losses.

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 Company’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the
effective interest method.

interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.

derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately in
profit or loss. The Group has not applied hedge accounting in the current or comparative periods.

Foreign currencies
The functional currency of the Group is pounds Sterling. Transactions entered into by Group entities in a currency other than the reporting
currency are recorded at the rates ruling when the transaction occurred. Foreign currency monetary assets and liabilities are translated into
Sterling at the rates ruling at the statement of financial position date. Exchange differences arising on the retranslation of the unsettled
monetary assets and liabilities are similarly recognised in the income statement.

Current and deferred tax
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates
enacted or substantially enacted by the statement of financial position date.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the
initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences
relating to investments in subsidiaries to the extent that they will probably 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 amount 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 temporary difference can be utilised.

The Company incurs research and development expenditure which qualifies for Research and Development (R&D) tax relief and as such,
prepares and submits an R&D claim to HMRC in relation to each accounting period. The claims are made on the basis that the Company and
its activities meet the necessary conditions.

As the Company is currently loss making, there is no corporation tax liability arising, therefore it has chosen to convert the tax relief into
payable tax credits instead of carrying forward a loss. This results in the credit being paid in cash directly to the Company following the
submission of a valid claim.

The Company is claiming R&D tax relief predominately under the small or medium sized enterprises (‘SME’) scheme, therefore the credit is
accounted for as tax in accordance with IAS 12 ‘Income Taxes’. However, where the R&D expenditure is related to monies received from
research grants, the Company is claiming an R&D expenditure credit (‘RDEC’) under the Large Company Scheme and as such the related
credit is accounted for ‘above the line’ in accordance with IAS 20 ‘Accounting for Government Grants’, specifically as a reduction from the
related expenditure in the statement of comprehensive income.

employee benefits
Bonus
As with wages, salaries, paid annual leave, bonuses and non-monetary benefits are accrued in the period in which the associated services are
rendered by employees of the Group.

Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a separate entity and
will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are
recognised as an expense in the income statement in the periods during which services are rendered by employees.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCENOTES TO THE FINANCIAL STATEMENTS CONTINUED

1. Accounting policies continued
Share-based payments
Equity-settled share options are granted to certain Directors, employees and certain contractors which have been granted options to
subscribe for ordinary shares. Each tranche in an award is considered a separate award with its own vesting period and grant date fair value.
Fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model or where they are based on market
based performance conditions the Monte Carlo model. Compensation expense is recognised over the tranche’s vesting period based on the
number of awards expected to vest, through an increase to equity. The number of awards expected to vest is reviewed over the vesting
period, with any forfeitures recognised immediately.

Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are
accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group.

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding
increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense
is adjusted to reflect the actual number of awards for which the related service, market and non-market vesting conditions are expected to be
met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service, market
and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date
fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and
actual outcomes. The social security element of these equity instruments is treated as cash settled with the liability recognised in other
taxation and social security within trade and other payables in the consolidated balance sheet.

Share-based payment transactions in which the Group receives goods or services by incurring a liability to transfer cash or other assets that
is based on the price of the Group’s equity instruments are accounted for as cash-settled share-based payments. The fair value of the amount
payable to employees is recognised as an expense, with a corresponding increase in liabilities, over the period in which the employees
become unconditionally entitled to payment. The liability is remeasured at each balance sheet date and at settlement date. Any changes in
the fair value of the liability are recognised as personnel expense in profit or loss. Where the Company grants options over its own shares to
the employees of its subsidiaries it recognises, in its individual financial statements, an increase in the cost of investment in its subsidiaries
equivalent to the equity-settled share-based payment charge recognised in its consolidated financial statements with the corresponding
credit being recognised directly in equity. Amounts recharged to the subsidiary are recognised as a reduction in the cost of investment in
subsidiary. Where costs recharged match those incurred there is no net impact on the investment in subsidiary.

Financing income and expenses
Financing expenses comprise interest payable, finance charges on shares classified as liabilities and leases recognised in profit or loss using
the effective interest method, unwinding of the discount on provisions, and net foreign exchange losses that are recognised in the income
statement (see foreign currency accounting policy). Financing income comprises interest receivable on funds invested, dividend income, and
net foreign exchange gains.

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, that
can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current
best estimate. If it is no longer probable that an outflow of economic benefit will be required to settle the obligation, the provision is reversed.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

Critical accounting judgements and key sources of estimation uncertainty
The application of the Group’s accounting policies requires judgments in certain areas and to make estimates and assumptions concerning
the future. These estimates and judgments are based on historical experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual
results. The following are those areas that are deemed to involve judgments and/or estimation about matters that have the most significant
effect on the amounts recognised in the financial statements.

a. Critical accounting judgements in applying the Group’s accounting policies
Capitalisation of development costs
Capitalisation of development costs requires analysis of the technical feasibility and commercial viability of the project concerned.

Capitalisation of the costs will only be made where there is clear demonstration that future economic benefit will flow to the Company.

FDA clearance for the Speedboat device and the CROMA Advanced Energy Platform was obtained in prior periods, following which the
Company was able to train a number of physicians and undertake successful treatments in patients. Having then entered into strategic
collaboration agreements with distributors, it was determined that both the technical and commercial feasibility of the asset had been
established. The subsequent costs associated with progressing the devices to a Minimal Viable Product (‘MVP'), of £150,000 were therefore
capitalised as judged to have met the criteria. Amortisation of this development asset commenced during the year as it become available
for use as commercially available for sale to customers.

In the current period, further development of CROMA and Speedboat has been undertaken relating to the modularisation of the CROMA
Platform to allow a range of other devices to be used and thus future-proofing the platform. In addition to this, development of the
Speedboat includes enhancements that remove complexity built into the first generation device, such as heat shrink and reduction of the
profile allowing greater flexibility in use.

This activity represents significant enhancements to be incorporated as new and critical features into a subsequent version and is
therefore determined to be development meeting the definition of an intangible asset. It has been determined that these enhancements
meet technical and commercial feasibility and that the associated costs meet the general recognition criteria for intangible assets and as
such, costs of £500,000 have been capitalised in the period. As these enhancements were not completed as at the balance sheet date the
asset was not yet available for use and therefore remains as an asset under construction.

The Group determines an asset to be available for use from the point at which it is physically ready to be distributed to a customer. At this
point it will have gone through additional testing and quality assurance required to be able to be sold by the Company. Once this has been
achieved, the development costs are amortised over its useful life.

The Group’s internal budgets demonstrate that the products will generate probable future economic benefits supporting its judgement to
capitalise the relevant development costs.

Other development activities have continued in the period, primarily relating to a further four single-use devices to be used with the

CROMA Advanced Energy Platform relating to dissection, resection, haemostasis and ablation. These devices are advancing through the
regulatory approval process although this had not been achieved as at the balance sheet date. On the basis that obtaining regulatory
approval is a key part of establishing technical and commercial feasibility of an asset and therefore demonstrating future economic
benefits, the costs associated with this development activity are not deemed to have yet met the general recognition criteria for intangible
assets and as such costs of £3,024,595 have been expensed in the period.

b. Recognition of deferred tax asset
Management judgement is required whether the Group should recognise any deferred tax assets for losses. A deferred tax asset is

recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be
utilised. Given the nature and stage of development of the Group there are significant losses accumulated to date. To determine whether a
deferred tax asset should be recognised in relation to the future tax deduction that these losses represent, the Directors have considered
the estimated profits over a medium-term forecast. These forecasts continue to show tax losses for the medium term (3 – 4 years) as the
Group continues to develop and commercialise its product base. Thus there is considered to be insufficient certainty over the timing and
amount of loss recoverability for an asset to be recognised.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

2. Revenue and other operating income
revenue from contracts with customers
Revenue is recognised when substantially all of the risk and reward of ownership of the goods are transferred to the customer in accordance
with the sales terms, and thus has the ability to direct the use and obtain the benefits from the goods. Revenue is recognised net of any sales tax.

Collaborative arrangements
The Group has entered into a number of collaboration agreements with distributors in order to develop and penetrate geographical markets
for the Group’s initial products (Speedboat device and the CROMA Advanced Energy Platform) and to establish a working relationship in
readiness for the Groups’ suite of products.

The agreements represent the transfer of goods to the distributor for cash and the receipt of services in the form of marketing, promotion
and setting up training and qualifying centres.

In respect of these agreements, the distributor is not deemed to be a ‘customer’ of the entity as defined in IFRS 15. Instead they are a
provider of services relating to the Group’s commercialisation and market penetration activities and as such no revenue is recognised in
respect of these agreements. As such, the overall arrangement represents a cost to the Group.

The overall cost of the services is determined at inception and spread over the period of the agreement. The assumptions upon which the
estimates are made are periodically updated. Any impact on profit or loss is recognised in the period in which the updates are made.

other operating income
Other operating income relates to research grants. Income is recognised necessary to match it with the related costs in the profit or loss on a
systematic basis over the periods in which the entity recognises expenses for the related costs for which the grants are intended to
compensate. Furthermore, income is recognised only when there is reasonable assurance that the Company will comply with any conditions
attached to the grant and the grant will be received.

Segmental reporting
Operating segments are identified on the basis of internal reporting and decision making. The Board regularly reviews the Company’s
performance and balance sheet position for its operations and receives financial information for the Company. As a result, the Company has
one reportable segment, which is being the research and development of electrosurgical medical devices relating to the field of surgical
endoscopy. As there is only one reportable segment whole profit, expenses, assets, liabilities and cash flows are measured and reported on a
basis consistent with the financial statements, no additional disclosures are necessary.

3. Loss before tax
The loss before income tax is stated after charging/(crediting):

(All figures £)

Depreciation – owned assets
Depreciation – assets on hire purchase contracts
Depreciation – right of use assets
Amortisation
Loss on disposal of property, plant and equipment
Operating leases – land and buildings
Operating leases – other
Research and development expenditure
Foreign exchange differences

12 months to
31 December
2019

18 months to
31 December
2018

369,382
41,545
154,429
76,368
–
–
–
8,146,338
(16,155)

471,745
18,132
–
7,544
12,278
249,602
83,538
7,846,144
18,411

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

4. Audit and non-audit fees
An analysis of auditors’ remuneration is as follows:

(All figures £)

Audit fees

Audit-related assurance services
Tax compliance services
Corporate finance services
All other services

Non-audit fees

Corporate finance services in the prior year were associated with the Directors’ remuneration review.

5. Staff numbers and costs
The cost of employees (including Directors) during the period was made up as follows:

(All figures £)

Wages and salaries
Social security costs
Pension
Share-based payments

Total remuneration

The average monthly number of employees during the period was as follows:

(All figures £)

Research and development
Administration

Pension costs incurred in the year relate to all employees. The staging date for auto-enrolment was 1 July 2017.

6. Directors remuneration

(All figures £)

Directors' remuneration
Pension
Share-based payments expensed

Total directors' remuneration

12 months to
31 December
2019

18 months to
31 December
2018

106,383

108,280

10,000
8,500
–
2,000

20,500

17,000
5,500
6,500
2,000

31,000

12 months to
31 December
2019

5,749,776
660,709
395,675
1,554,845

18 months to
31 December
2018

5,329,362
661,393
546,393
1,804,820

8,361,005

8,341,968

12 months to
31 December
2019

18 months to
31 December
2018

54
17

38
11

12 months to
31 December
2019

1,925,973
45,500
897,656

18 months to
31 December
2018

2,123,584
48,882
1,159,167

2,869,129

3,331,633

Directors’ emoluments disclosed above, including the fair value for share-based payment expenses, paid to the highest paid Director in
the period was £1,036,964 (period to December 2018: £1,243,762), there were Company pension contributions of £45,500 made to defined
contribution schemes during the current period (31 December 2018: £48,882), no shares were received or receivable for any Director in
respect of long-term incentive schemes. The share options exercised in the period by the highest paid Director was £nil (31 December
2018: £nil).

Executive average salary and other pay related benefits in the year are below the median range for AIM listed companies of a similar market
capitalisation. See Directors’ remuneration report for emoluments and compensation, share options and contributions to the pension
scheme split by Director which form part of these audited financial statements.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE
NOTES TO THE FINANCIAL STATEMENTS CONTINUED

7. Research and development expenditure
During the current and comparative years, the principle activity of the entity was research and development. Expenditure on research
activities is recognised in the statement of profit or loss as incurred.

8. Share-based payments

1
2
3
4
5
6
7
8
9

11
12
13

Grant date

options Vesting conditions

Number of

04 January 2012
06 December 2013
14 July 2015
14 July 2015
03 August 2015
04 August 2015
29 September 2016
09 December 2016
04 April 2018

2,003,760 Continual service of employment over 3 years
243,720 Continual service of employment over 3 years
1,121,400 Continual service of employment over 3 years
670,680 Continual service of employment over 3 years
1,242,000 Continual service of employment over 3 years
216,000 Continual service of employment over 3 years
1,944,000 Continual service of employment over 3 years
5,907,896 Continual service of employment over 3 years

875,902 Continual service of employment and

29 August 2018

18 October 2018
02 July 2018
17 October 2019

market-based performance conditions
1,746,718 Continual service of employment over 3 years and

non-market-based performance conditions

749,209 Non-market-based performance conditions
1,000,000 Non-market-based performance conditions

371,345 Non-market and market-based performance conditions

18,092,630

Share option activity for the period ended 31 December 2019 is presented below:

Exercise
price

0.16 to 0.22
0.21
0.17
0.17
0.17
0.17
0.17
0.76
1.13

Fair
value

Contractual
life of
options

0.08 to 0.10
0.09
0.11
0.11
0.12
0.12
0.11
0.48
0.58

10 years
10 years
10 years
10 years
10 years
10 years
10 years
10 years
10 years

1.54

0.76
1.26
1.71

0.84

10 years

1.60
0.67
0.86

10 years
10 years
10 years

Outstanding at start of period
Converted from old scheme
Granted during the period
Forfeited during the period
Exercised during the period

Outstanding at end of period
Exercisable at end of period

Weighted average remaining contractual life (in years)

of options outstanding at the period end

31 December
2019
Number of
options

14,015,546
–
371,345
(1,591,045)
(1,048,200)

11,747,646
8,371,832

31 December
2019
Weighted
average
exercise price

£0.72
–
£1.71
£1.22
£0.16

£0.75
£0.53

31 December
2018
Number of
options

11,942,936
–
4,371,829
(1,315,579)
(983,640)

14,015,546
4,367,400

31 December
2018
Weighted
average
exercise price

£0.46
–
£1.26
£0.45
£0.16

£0.72
£0.17

–

7.1

–

7.9

The estimated fair value of the share options was calculated by applying a Black-Scholes model for shares with no market-based performance
conditions and a Monte Carlo model for those with a market-based performance condition. The model inputs for the current period option
grants were as follows:

12 months to
31 December
2019

18 months to
31 December
2018

Exercise price
Share price at date of grant
Risk-free interest rate
Expected volatility
Dividend yield
Contractual life of option (years)

Share-based payment expense

Expense arising from share-based payment transactions

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

1.71 £0.76 to £1.54
1.71 £1.16 to £2.09
0.75% 0.5% to 0.75%
41% to 51%
0%
10

41%
0%
10

12 months to
31 December
2019

18 months to
31 December
2018

1,554,845

1,804,820

8. Share-based payment expense continued
The following amounts for share-based payments are reflected in the above Consolidated statement of profit and loss and other
comprehensive income in relation to Directors:

(All figures £)

Professor Christopher Hancock
Craig Gulliford
Richard Rees
Charles Spicer
John Bradshaw

9. Finance income and costs

(All figures £)

Finance income:
Bank interest
Fair value adjustment for derivatives
Total finance income

Finance costs:
Bank interest
Interest expense on leases liabilities
Fair value adjustment for derivatives
Unwind of the discount on lease liabilities

Total finance costs

10. Taxation
recognised in the income statement

(All figures £)

Current tax:
Current year
Adjustments for prior years

Current tax credit

Deferred tax:
Origination and reversal of temporary timing differences

Total tax credit

reconciliation of effective tax rate

(All figures £)

Loss for the period
Total credit

Loss excluding taxation

Tax using the UK corporation tax rate of 19% (2018: 19.75%)
Research and development
Movement in deferred tax not provided
Difference arising due to tax rate changes
Non-deductible expenses
Prior year adjustment

Total tax credit

12 months to
31 December
2019

261,831
342,017
264,083
17,835
11,890

18 months to
31 December
2018

334,003
441,736
335,937
28,495
18,996

897,656

1,159,167

12 months to
31 December
2019

18 months to
31 December
2018

311,288
–
311,288

93,486
10,857
104,343

3,831
10,235
27,894
9,331

51,291

3,673
13,071
–
–

16,744

12 months to
31 December
2019

18 months to
31 December
2018

Note

(2,696,190)
(8,041)

(2,551,029)
(216,550)

(2,704,231)

(2,767,579)

–

(2,704,231)

(2,767,579)

12 months to
31 December
2019

18 months to
31 December
2018

(15,911,150)
(2,704,231)

(14,808,608)
(2,767,579)

(18,615,381)

(17,576,187)

(3,536,922)
(1,160,130)
1,949,141
66,642
(14,921)
(8,041)

(3,339,476)
(1,097,669)
1,140,593
368,112
377,411
(216,550)

(2,704,231)

(2,767,579)

The tax credit of £2,704,231 (2018: £2,767,579) relates to R&D tax relief claims submitted by the Group under the small or medium sized
enterprises (‘SME’) scheme and therefore is accounted for as a tax credit in accordance with IAS12 ‘Incomes Taxes’. In addition, the Group has
also submitted R&D claims under the large company (‘RDEC’) scheme in relation to monies received from Research Grants. In accordance with
IAS 20 ‘Accounting for Government Grants’, an amount of £6,008 (2018: £18,602) has been accounted for ‘above the line’ as a reduction from
the related expenditure in the statement of comprehensive income.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

11. Earnings per share

(All figures £)

(Loss)
(Loss) attributable to equity holders of the Company (basic)

Shares (number)
Weighted average number of ordinary shares in issue during the period

Earnings per share
Basic and diluted

Ordinary shares start of year
Issued in year
Issue 1 – Ordinary
Issued with months remaining
Issue 2 – Ordinary
Issued with months remaining
Issue 3 – Ordinary
Issued with months remaining
Issue 4 – Ordinary
Issued with months remaining
Issue 5 – Ordinary
Issued with months remaining
Issue 6 – Ordinary
Issued with months remaining
Issue 7 – Ordinary
Issued with months remaining
Closing ordinary shares
Average ordinary shares

Basic EPS

12 months to
31 December
2019

18 months to
31 December
2018

(15,911,150)

(14,808,608)

121,343,612

90,390,078

(0.13)

(0.16)

120,495,385

80,711,745

770,840
10
277,360
9
28,835,173
–
–
–
–
–
–
–
–
–
150,378,758
121,343,612

115,000
12
276,320
11
20,000
8
38,800,000
4
63,880
1
336,000
1
172,440
1
120,495,385
90,390,078

(0.13)

(0.16)

Earnings per share has been calculated in accordance with IAS 33 ‘Earnings Per Share’ using the loss for the period after tax, divided by the
weighted average number of shares in issue.

(Loss)
(Loss) attributable to equity holders of the Company (basic)
Expenses of the initial public offering (non-recurring)

Adjusted operating loss

Shares (number)
Weighted average number of ordinary shares in issue during the period

Earnings per share adjusted
Basic and diluted

12 months to
31 December
2019

18 months to
31 December
2018

(15,911,150)
–

(14,808,608)
–

(15,911,150)

(14,808,608)

121,343,612

90,390,078

(0.13)

(0.16)

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

12. Intangible assets

(All figures £)

Cost:
At 1 July 2017
Additions

At 31 December 2018

Amortisation:
At 1 July 2017
Charge for period

At 31 December 2018

Net book value at 31 December 2018

Cost:
At 1 January 2019
Additions
Transferred

At 31 December 2019

Amortisation:
At 1 January 2019
Charge for period
At 31 December 2019

Development
costs
capitalisation

Computer
software

Assets under
construction

–
–

–

–
–

–

–
–
150,000

150,000

–
30,000
30,000

14,509
1,300

15,809

3,613
7,544

11,157

4,652

15,809
62,181
153,162

231,152

11,157
46,368
57,525

Total

14,509
304,462

318,971

3,613
7,544

11,157

–
303,162

303,162

–
–

–

303,162

307,814

303,162
571,614
(303,162)

571,614

–
–
–

318,971
633,795
–

952,766

11,157
76,368
87,525

Net book value at 31 December 2019

120,000

173,626

571,614

865,241

Assets under construction in the year include the capitalisation of research and development costs of £500,000, additions to the Enterprise
Resource Planning (ERP) system of £112,735 (31 December 2018 £153,162) and CAD software additions of £21,060.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE
NOTES TO THE FINANCIAL STATEMENTS CONTINUED

13. Property, plant and equipment

(All figures £)

Cost:
At 1 July 2017
Additions
Eliminated on disposal
Transferred

At 31 December 2018

Depreciation:
At 1 July 2017
Charge for period
Eliminated on disposal
Transferred

At 31 December 2018

Net book value at

31 December 2018

Cost:
At 1 January 2019
Additions
Transferred

Leasehold
property

Office
equipment

Fixture
and
fittings

Motor
vehicles

Plant and
machinery

Assets under
construction

Right of use
asset leases

Total

16,664
414,838
–
55,214

486,716

10,469
125,403
–
–

135,872

403,568
83,840
(37,594)
–

70,661
–
–
–

449,814

70,661

210,915
139,182
(25,316)
–

65,005
4,783

–

324,781

69,788

10,000
–
–
–

10,000

10,000
–
–
–

10,000

244,499
566,376
–
1,084

811,959

180,282
220,509
–
–

400,791

56,298
18,338
–
(56,298)

18,338

–
–
–
–

–

350,844

125,033

873

–

411,168

18,338

–
–
–
–

–

–
–
–
–

–

801,690
1,083,392
(37,594)
–

1,847,488

476,671
489,877
(25,316)
–

941,232

906,256

486,716
82,165
–

449,814
99,913
70,661

70,661
–
(70,661)

At 31 December 2019

568,881

620,388

–

Depreciation:
At 1 January 2019
Charge for period
Transferred

At 31 December 2019

Net book value at

31 December 2019

135,872
107,472
–

324,781
89,154
69,788

69,788
–
(69,788)

243,344

483,723

325,537

136,665

–

10,000
–
–

10,000

10,000
–
–

10,000

811,959
60,891
18,338

891,188

400,791
214,302
–

615,093

18,338
241,037
(18,338)

470,913
–
–

2,318,401
484,006
–

241,037

470,913

2,802,407

–
–
–

–

–
154,429
–

941,232
565,357
–

154,429

1,506,589

–

276,095

241,037

316,484

1,295,818

The Group leases production equipment which secures lease obligations. At 31 December 2019, the net carrying amount of leased equipment
was £27,023 (2018: £68,569).

During 2019, the Group acquired equipment with a carrying amount of £nil (2018: £121,595) under a lease agreement.

Assets under construction for the year of £241,037 relate to the creation and fitting out of our cell culture lab.

14. Inventories

(All figures £)

Raw materials and consumables
Finished goods

Total inventories

31 December
2019

31 December
2018

639,109
88,049

727,158

247,766
54,706

302,472

These carrying values are stated net of impairment provisions of £380,955 (2018: £22,193). Inventories of £146,624 (2018: £45,160) were
written down during the period and the expense recognised in the income statement. The Directors are of the opinion that the replacement
values of inventories are not materially different to the carrying values stated above.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

15. Trade and other receivables

(All figures £)

Current:
Accrued other income
Other debtors
Prepayments
VAT

Total current

Non-current:
Other debtors

Total trade and other receivables

31 December
2019

31 December
2018

61,403
686,927
240,547
627,442

164,059
109,456
305,590
473,661

1,616,319

1,052,766

8,400

1,624,719

1,061,166

An expected credit loss provision was calculated for the other debtors balance and was deemed immaterial and therefore not recognised.

16. Deferred tax and other tax receivables
Deferred tax assets and liabilities are offset where the Company has a legally enforceable right to do so. The following is the analysis of the
deferred tax balances (after offset) for financial reporting purposes:

The accelerated capital allowances deferred tax liability set out below is expected to reverse over the life of the related fixed assets. Deferred
tax has been calculated at a rate of 19%.

(All figures £)

Balances:
Accelerated capital allowances
Tax losses offset (see below)

31 December
2019

31 December
2018

117,907
(117,907)

–

63,252
(63,252)

–

There are unused trading losses at 31 December 2019 of £29,784,004 (31 December 2018: £18,185,117). A deferred tax asset of £5,006,054
(31 December 2018: £3,056,913) has not been recognised in respect of these tax losses due to uncertainty in respect of its recoverability.

A reduction in the UK corporation tax rate from 19% to 17% (effective from 1 April 2020) was substantively enacted on 6 September 2016, and
the unrecognised UK deferred tax asset as at 31 December 2019 has been calculated based on this rate. In the 11 March 2020 Budget, it was
announced that the UK tax rate will remain at the current 19% and not reduce to 17% from 1 April 2020. This will have a consequential effect
on the Group’s future tax charge. If this rate change had been substantively enacted at the current balance sheet date the unrecognised
deferred tax asset would have increased by £588,948.

Tax receivables at 31 December 2019 of £2,702,198 (31 December 2018: £2,569,631) relate solely to R&D Tax credits. The Company has
submitted R&D tax credit claims for the periods presented in relation to its qualifying research and development expenditure and has taken
the option of surrendering the resulting losses and claiming an R&D tax credit in the form of immediate cash payments from HMRC.

17. Trade and other payables

(All figures £)

Current:
Trade payables
Social security and other taxes
Other payables
Deferred income
Accrued expenses
Derivative liability

Total trade and other payables

31 December
2019

31 December
2018

923,318
713,134
24,636
–
3,205,028
17,037

739,015
114,595
16,074
79,647
650,289
–

4,883,153

1,599,620

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE
NOTES TO THE FINANCIAL STATEMENTS CONTINUED

18. Financial instruments
Carrying amount of financial instruments.

The amounts for all financial assets and liabilities carried at fair value are as follows:

(All figures £)

Foreign currency forward contracts:
Assets
Liabilities

Reconciliation to cashflow movements

(All figures £)

Gross loan
Lease liabilities

reconciliation of lease interest
Equipment leases (previously finance leases)
Bank loan interest
Lease liability interest
Unwind of discount on lease liabilities

Total interest

31 December
2019

31 December
2018

–
17,037

10,857
–

01 January
2019

349,661
549,647

Cashflows
principal

–
(187,310)

Cashflows
interest

–
(11,905)

Non-cash
changes interest

31 December
2019

7,661
9,331

357,322
359,763

9
9

2,574
7,661
10,235
9,331

19,566

Financial instruments measured at fair value
The fair value of forward exchange contracts is estimated by discounting the difference between the contractual forward price and the
current forward price for the residual maturity of the contract using a risk-free interest rate.

Financial risk management
The main purpose of the Company’s financial instruments is to finance the Company’s operations. The financial instruments comprise leases,
foreign currency forward contracts, cash and liquid resources and various items arising directly from its operations, such as trade receivables
and trade payables. The main risks arising from the Company’s finance instruments are exchange rate risk and liquidity risk.
The Company’s policies on the management of liquidity and foreign currency risks are set out below.

Fair values of financial instruments
All financial assets and liabilities are held at amortised cost apart from forward exchange contracts, which are held at fair value, with changes
going through the Statement of profit or loss. The Company has not disclosed the fair values for financial instruments such as short-term
trade receivables, payables and long-term financial liabilities, because their carrying amounts are a reasonable approximation of fair values.
The Company measured the fair value of instruments which are categorised as level 2 in the fair value hierarchy, being forward exchange
contracts, by using the forward change rates at the measurement date with the resulting value discounted back to present values.

liquidity
The Company’s policy is to ensure that it has sufficient cash resources to cover its future trading requirements which is predominately
sourced from its shareholders and investors. Short-term flexibility is available through current investor support via funding rounds held
when required.

Credit risk
The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the Consolidated statement of
financial position.

Foreign exchange risk
The Company currently purchases certain materials throughout the world in connection with Research and Developments of its primary
product. The consequence of this is that the Company is exposed to movement in foreign currency rates. Forward foreign exchange contracts
are used to manage the net foreign exchange exposure where appropriate.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

19. Interest-bearing liabilities

(All figures £)

Current:
Lease liabilities

Non-current:
Lease liabilities
Bank borrowings

Lease liabilities are payable as follows:
Less than 1 year
Between 1 and 5 years
More than 5 years

Bank borrowings are payable as follows:
Less than 1 year
Between 1 and 5 years
More than 5 years

31 December
2019

31 December
2018

173,193

40,591

186,570
357,322

717,085

173,193
186,570
–

359,763

–
357,322
–

357,322

717,085

43,231
349,661

433,483

–
43,231
–

43,231

–
349,661
–

349,661

392,892

Bank borrowings relates to a loan from Barclays Bank Plc for the principal of £342,000 repayable in full in January 2021 being 3 years after the
first drawdown. Interest is being accrued at a fixed rate of 2.24%.

20. Provisions

(All figures £)

Non-current:
Lease dilapidations provision

31 December
2019

31 December
2018

157,500

19,500

The dilapidations provision relates to potential rectification costs expected should the Group vacate its head office at Chepstow and its R&D
facility based at Bath.

The movement in dilapidations is summarised below:

(All figures £)

At beginning of period
Released through profit and loss
Provisions made in period

At end of period

31 December
2019

31 December
2018

19,500
–
138,000

157,500

23,735
(23,735)
19,500

19,500

Provisions for dilapidations are inherently uncertain in terms of quantum and timing, not least because they involve negotiations with
landlords at future dates. The figures provided in the financial statements represent management’s best estimate of the likely outflows to
the Group.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

21. Share capital and reserves

(All figures £)

Balance at start of period

Issue of share capital
Number of shares
Price per share (£)
Share value (£)

Balance at 31 December 2019

31 December
2019

31 December
2018

120,495

80,712

29,883,373
0.001
29,883

39,783,640
0.001
39,784

150,378

120,495

On 23 December 2019 28,835,173 £0.001 ordinary shares were issued. During the period 1,048,200 share options were exercised. The total
number of issues in the period was 29,883,373 £0.001 ordinary shares. The Group has a single class of share, ordinary shares £0.001.

Share capital
Share capital is the amount of nominal value of shares held by shareholders. At 31 December 2019 150,378,758 shares have been issued, each
with the nominal value of £0.001 equalling a share capital for the Company of £150,378. All ordinary shares rank as pari passu with regards to
voting, dividends and rights on winding up.

Share premium
The share premium reserve comprises the difference between the nominal value and the value received on share issue offset by the costs
directly associated with obtaining the capital funding e.g. legal fees.

merger reserve
The merger reserve reflects the difference between the existing share capital and premium of Creo Medical Limited prior to share for share
exchange and the nominal value of shares issued. Refer to Note 1 Business combinations and basis of consolidation.

Share option reserve
The share option reserve reflects the cost to the Group of share options granted but not yet exercised. Refer to Note 8 Share-based payments.

retained earnings
Retained earnings including profit or loss for the year comprises the earned profit of the Parent Company and its subsidiary.

22. Cash from share issue

(All figures £)

Share issue:
Share options exercised
Advanced share subscription AIM admission 9 December 2016
Share subscription AIM admission 9 December 2016
Transaction costs AIM admission 9 December 2016
Share placing AIM 30 August 2018
Transaction costs AIM 30 August 2018
Share placing AIM 23 December 2019
Transaction costs AIM 23 December 2019

31 December
2019

31 December
2018

168,503
–
–
–
–
–
51,903,311
(2,765,981)

155,529
–
–
–
48,500,000
(2,590,584)
–
–

49,305,833

46,064,945

remuneration of directors
As at 31 December 2019 the Directors of the Company control 3.42 per cent of the voting shares of the Company.

The remuneration of the Directors’ of the Company are disclosed in the Directors’ remuneration report and Note 6 above.

Share options held by Directors are detailed in the Directors’ remuneration report.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

23. Related party disclosures
interests and related party transactions are disclosed below
David Woods is President and CEO of PENTAX Americas and M&A Director of HOYA Group, PENTAX Medical. During the period the Group
entered into an addendum to the distribution agreement entered into with Hoya Group, PENTAX Medical in August 2016. Pursuant to the
addendum, PENTAX agreed to remove India from the agreement during the period. All agreements with PENTAX have been made at an
arms-length basis and David Woods receives no renumeration from his role as Non-executive Director.

During the period the Group also entered into a distribution agreement with PENTAX Europe GmbH (‘PENTAX Europe’) a subsidiary of HOYA
Group, PENTAX Medical. The net cost of transactions in the period recorded in the accounts with PENTAX Medical was: £39,839 (18 months to
31 December 2018 £nil).

Christopher Hancock holds a Professorship with Bangor University and is the common-law spouse of Ling Chen. The fees paid in the period to
Bangor University totalled £nil (18 months to 31 December 2018 £17,749), with the balance payable at 31 December 2019 being £nil. The fees
paid in the period to Ling Chen totalled £30,379 (18 months to 31 December 2018 £53,200) for consultation on the research and development
projects throughout the year, with the balance payble at 31 December 2019 being £4,500.

The Company has passed on the employers’ national insurance contribution liability, arising from the share options granted, to the employees.
As we still have a legal liability this has been recognised in the balance sheet under social security and other taxes. A corresponding asset has
been recorded under sundry debtors for the right to pass this cost onto the employees.

Aggregate remuneration for the period for all key management totalled £1,971,473 (18 months to 31 December 2018 £2,172,466).

(All figures £)

Salary and taxable benefits:
Professor Christopher Hancock
Craig Gulliford
Richard Rees
Charles Spicer
John Bradshaw

12 months to
31 December
2019

18 months to
31 December
2018

567,244
694,947
553,282
93,000
63,000

629,178
802,026
591,262
97,500
52,500

1,971,473

2,172,466

24. Ultimate controlling party
By virtue of the shareholding structure, there is no sole ultimate controlling party.

25. Leases
The accounting policy for Leases under IFRS 16 has been explained in Note 1.

leases as lessee (iFrS 16)
The Group leases building facilities in Bath and Chepstow. The leases typically run for a period of 5 years, with an option to renew the lease
after that date. Lease payments are renegotiated every 5 years to reflect market rentals. Some leases provide for additional rent payments
that are based on changes in local price indices. For certain leases, the Group is restricted from entering into any sub-lease arrangements.
The building leases were entered into many years ago as combined leases of land and buildings. Previously, these leases were classified as
operating leases under IAS 17.

The Group leases equipment under a number of leases, which were classified as finance leases under IAS 17.

The Group leases other equipment with contract terms of 1 to 5 years. These leases are short-term and/or leases of low-value items.
The Group has elected not to recognise right-of-use assets and lease liabilities for these leases.

Information about leases for which the Group is a lessee is presented below.

i. right-of-use assets
Right-of-use assets related to leased properties that do not meet the definition of investment property are presented as property, plant and
equipment.

2019

(All figures £)

Balance at 1 January
Depreciation Charge

Balance at 31 December

Land and
buildings

460,424
152,003

308,421

Plant and
machinery

10,489
2,426

8,063

Total

470,913
154,429

316,484

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE
NOTES TO THE FINANCIAL STATEMENTS CONTINUED

25. Leases continued
leases as lessee (iFrS 16) continued
ii. lease liabilities

(All figures £)

Maturity Analysis – contractual undiscounted cash flows
Less than 1 year
1 to 5 years
More than 5 years

Total undiscounted lease liabilities at 31 December

Lease liabilities included in the statement of financial position at 31 December

Current
Non-current

iii. amounts recognised in profit or loss

2019 – Leases under IFRS 16
(All figures £)
Depreciation on right-of-use asset
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low-value assets

2018 – Operating leases under IAS 17
(All figures £)
Lease expense

Total cash outflow for leases

142,760
194,857

337,617

316,484

134,034
182,450

154,429
9,331
28,980
–

333,140

154,428

iv. extension options
Some property leases contain extension options exercisable by the Group up to 1 year before the end of the non-cancellable contract period.
Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options held
are exercisable only by the Group and not by the lessors. The Group assesses at lease commencement date whether it is reasonably certain
to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant event
or significant changes in circumstances within its control. The Group does not consider any extension of the leases to be likely as at
31 December 2019.

26. Capital commitments
The amounts contracted for but not provided for as at 31 December 2019 in relation to Software and the Group’s new Enterprise Resource
Planning (ERP) system are £nil (31 December 2018 £153,162).

27. Subsequent events
With effect from 1 February 2020 Ivonne Cantu was appointed in the role of independent Non-Executive Director and chair of the
Remuneration Committee.

The business is continually monitoring the development of COVID-19 and the current and future impacts it will have on our business. The
actions to mitigate these risks have been noted in Principal risks and uncertainties section of the Annual Report. Cash reserves at the end of
March 2020 were £75.5m which are more than sufficient to secure the business activities and staff through the current situation and beyond.

The Group has received 510(k) clearance from the US Food and Drug Administration (‘FDA’) for its HS1 Haemostasis device (‘HS1’). This is the
second device to gain FDA regulatory clearance within Creo’s wider portfolio of flexible endoscopy devices for the gastrointestinal (‘GI’) and
pulmonary markets.

There have been no other material events subsequent to the period end and up to the 6 May 2020, the date of approval of the financial
statements by the Board.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

PARENT COMPANY STATEMENT OF FINANCIAL POSITION

(All figures £)

Assets
Non-current assets
Investments in subsidiaries

Current assets
Trade and other receivables
Cash and cash equivalents

Non-current assets
Trade and other receivables

Total assets

Liabilities
Current liabilities
Trade and other payables

Total liabilities

Shareholder equity
Called up share capital
Share premium
Share option reserve
Retained earnings

Total equity and liabilities

12 months to
31 December
2019

Note

18 months to
31 December
2018
Restated*

1,301,089

643,900

559,369
75,875,830

67,992
43,675,948

76,435,199

43,743,940

40,000,614

21,572,591

116,435,813

65,316,531

117,736,902

65,960,431

802,860

–

150,378
115,111,506
3,888,864
(2,216,707)

120,495
65,835,555
2,334,019
(2,329,638)

116,934,041

65,960,431

117,736,902

65,960,431

* The impact of 2018 restatement is described in Note 29 Prior period adjustments

These financial statements were approved by the Board of Directors on 6 May 2020 and were signed on its behalf by:

richard rees
Director

Company registered number: 10371794

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

(All figures £)

Balance at 30 Jun 2017 as previously reported
Impact of restatement

Balance at 30 Jun 2017 as restated

Total comprehensive income
Profit or loss (as previously reported)
Impact of restatement
Profit or loss as restated
Other comprehensive income

Total comprehensive income as restated

Transactions with owners, recorded directly
in equity
Issue of share capital
Equity settled share-based payment transactions

Balance at 31 December 2018

Total comprehensive income for the period
Profit or loss
Other comprehensive income

Total comprehensive income

Transactions with owners, recorded directly
in equity
Issue of share capital
Equity settled share-based payment transactions

Note

Called up
share capital

Retained
earnings
Restated*

Share
premium

Share option
reserve

Total
equity

80,712
–

80,712

(909,761)
(529,199)

19,810,393
–

529,199
–

19,510,543
–

(1,438,960)

19,810,393

529,199

18,981,344

–
–
–
–

–

271,697
(1,162,375)
(890,678)
–

(890,678)

–
–
–
–

–

–
–
–
–

–

271,697
(1,162,375)
(890,678)
–

(890,678)

39,783

–
–

46,025,162
–

–
1,804,820

46,064,945
1,804,820

120,495

(2,329,638)

65,835,555

2,334,019

65,960,431

–
–

–

112,931
–

112,931

–
–

–

–
–

–

112,931
–

112,931

29,883

–
–

49,275,951
–

–
1,554,845

49,305,834
1,554,845

Balance at 31 December 2019

150,378

(2,216,707) 115,111,506

3,888,864 116,934,041

* The impact of 2018 restatement is described in Note 29 Prior period adjustments

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

28. Parent Company financial statements
As permitted by section 408(3) of the Companies Act 2006, a separate Statement of Comprehensive Income, dealing with the results of the
Parent Company, has not been presented. The Parent Company profit for the period ended 31 December 2019 is £112,931 (31 December 2018
restated: loss £890,678).

29. Parent Company accounting policies
To the extent that an accounting policy is relevant to both the Group and Company financial statements, refer to the Group financial
statements for disclosure of the accounting policy.

Basis of preparation
These financial statements were prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (‘FRS 101').
The amendments to FRS 101 (2014/15 Cycle) issued in July 2015 have been applied. In preparing these financial statements, the Company
applies the recognition, measurement and disclosure requirements of International Financial Reporting Standards as adopted by the EU
(‘Adopted IFRSs'), but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where
advantage of the FRS 101 disclosure exemptions has been taken.

In these financial statements the Parent Company has taken advantage of the following disclosure exemptions under FRS 101:
f A cash flow statement and related notes;
f Comparative period reconciliations for share capital;
f Disclosures in respect of transactions with wholly owned subsidiaries;
f The effects of new but not yet effective IFRSs;
f Disclosures in respect of the compensation of Key Management Personnel;
f Disclosures of transactions with a management entity that provides key management personnel services to the Company; and
f Certain disclosures required by IFRS 7 ‘Financial Instrument Disclosures’.

As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101
available in respect of the following disclosures:
f IFRS 2 ‘Share-Based Payments’ in respect of Group equity-settled share-based payments;
f Certain disclosures required by IAS 36 ‘Impairment of assets’ in respect of the impairment of goodwill and indefinite life intangible assets;
f Certain disclosures required by IFRS 3 ‘Business Combinations’ in respect of business combinations undertaken by the Company.

The accounting policies set out above have, unless otherwise stated, been applied consistently to all periods presented in these
financial statements.

Judgments made by the Directors, in the application of these accounting policies that have significant effect on the financial statements and
estimates with a significant risk of material adjustment in the next year are discussed in Note 1 Critical accounting judgments and
policy update.

Investments in subsidiaries are carried at cost less impairment.

prior period adjustments
A prior year adjustment has been made in the Creo Medical Group plc Company financial statements in relation to Group equity-settled
share-based payment arrangements, where the expense had previously been recognised in full by the subsidiary, Creo Medical Limited,
with the charge recorded as an intercompany receivable by Creo Medical Group plc. It was established in 2019 that arrangements which
commenced in 2016 should have been recorded as a share-based payment charge in Creo Medical Group plc, rather than in the Creo Medical
Limited financial statements, as the employees to which the arrangements relate are contracted by Creo Medical Group plc. Further to this,
arrangements which commenced in 2017 were made to both Creo Medical Group plc and Creo Medical Limited employees and therefore the
charge relating to employees of the Company should have been recognised as an expense, with the charge relating to employees of Creo
Medical Limited recorded as an increase in the cost of investment in the subsidiary.

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCENOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED

29. Parent Company accounting policies continued
The adjustment has resulted in the following impact on the 2018 Parent Company numbers presented as follows:

Investment in subsidiaries
Intercompany receivable
Net assets
Retained earnings
Net (loss)

30. Investments

(All figures £)

Cost:
As at 31 December 2017
Capital contribution

As at 31 December 2018
Capital contribution

As at 31 December 2019

01 July 2017
(as previously
reported)

1,455
5,984,639
19,510,544
(909,761)
(909,761)

31 December
2018
(as previously
reported)

1,455
23,906,610
67,652,005
(638,064)
271,697

Adjustment

–
(529,199)
(529,199)
(529,199)
(529,199)

Adjustment

642,445
(2,334,019)
(1,691,574)
(1,691,574)
(1,162,375)

01 July 2017
(as restated)

1455
5,455,440
18,981,345
(1,438,960)
(1,438,960)

31 December
2018
(as restated)

643,900
21,572,591
65,960,431
(2,329,638)
(890,678)

Investment
in subsidiary
company
(as restated)

1,455
642,445

643,900
657,189

1,301,089

The Company has the following investment in subsidiary companies:

(All figures £)

Cost:
Creo Medical Limited

Aggregate
of capital
and reserves

Profit or
loss for the
period

Registered
Office
address

Class of
shares
held

Ownership
2017

(36,335,346)

(15,760,544)

Creo House,
Unit 2 Beaufort Park,
Beaufort Park Way,
Chepstow,
Wales
NP16 5UH

Ordinary

100%

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

The following Group companies held by Creo Medical Limited were non-trading at the period end:

(All figures £)

Cost:
Creo Medical, Inc.

Creo Medical Innovations Limited

Creo Medical (Ireland) Limited

Aggregate
of capital
and reserves

Profit or
loss for the
period

Registered
Office
address

Class of
shares
held

Ownership
2017

–

Ordinary

100%

Ordinary

100%

251 Little Falls Drive
Wilmington
Delaware
DE 19808
USA

Creo House,
Unit 2 Beaufort Park,
Beaufort Park Way,
Chepstow,
Wales
NP16 5UH

70 Sir John Rogerson’s Quay
Dublin 2
D02 R296
Ireland

Ordinary

100%

The following Group companies held by Creo Medical Limited were non-trading at the period end:
f Creo Medical, Inc (US);
f Creo Medical Innovations Limited; and
f Creo Medical (Ireland) Limited.

31. Parent Company trade and other receivables

(All figures £)

Current:
Other debtors
VAT

Total current

Non-current:
Amount owed by subsidiary undertaking

Total non-current

12 months to
31 December
2019

18 months to
31 December
2018
Restated*

528,573
30,796

559,369

67,992
–

67,992

40,000,614

21,572,591

40,000,614

21,572,591

Amounts owed by subsidiary undertakings are unsecured and repayable on demand. An expected credit loss provision was calculated for the
other debtors and amounts owed by subsidiary balances, both were deemed immaterial and therefore not recognised.

32. Parent Company trade and payables

(All figures £)

Current:
Social security and other taxes
Other creditors

Total current

*The impact of 2018 restatement is described in te 29 Prior period adjustments

12 months to
31 December
2019

18 months to
31 December
2018

528,573
274,287

802,860

–
–

–

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCENOTES

Creo mediCal group plC AnnuAl RepoRt And Accounts 2019

CREO MEDICAL GROUP PLC
CREO HOUSE, UNIT 2,
BEAUFORT PARK, BEAUFORT PARK WAY,
CHEPSTOW, WALES NP16 5UH
UNITED KINGDOM

TEL: +44 (0) 1291 606005
EMAIL: INFO@CREOMEDICAL.COM