Annual Report and Accounts 2018
Fusion Antibodies plc, 1 Springbank Road, Springbank Industrial Estate, Belfast BT17 0QL
www.fusionantibodies.com
Highlights
For the year
• Revenue growth of 41% to £2.7m
• Admitted to trading on AIM in December 2017
• Raised £5.5m before expenses
• Loss for the financial year of £699,941. Adjusted loss for the financial year of £2,309 excluding accelerated share-based
payment charges and IPO costs. Adjusted EDITDA of £132,018 for the year was achieved (2017: £288,473)
Post year end
• Facilities and technical capacity expansion is underway and will be completed by September 2018, earlier than planned and
under budget
• New affinity maturation service on time and expected to be introduced by December 2018
• Mammalian antibody library on track for delivery in 2020
Fusion Antibodies plc
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Contents
STRATEGIC REPORT
• Introduction to the company 02
• Chairman’s statement 02
• CEO’s report and operations review 04
• Principal risks and uncertainties 06
CORPORATE GOVERNANCE
• Board of directors 08
• Corporate governance statement 11
• Directors’ report 14
FINANCIAL STATEMENTS
• Independent auditors’ report to the members
of Fusion Antibodies plc 20
• Statement of comprehensive income 24
• Statement of financial position 25
• Statement of changes in equity 26
• Statement of cash flows 27
• Notes to the financial statements 28
• Company information 49
Financial Statements for the year ended 31 March 2018
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STRATEGIC REPORT
Chairman’s Statement
Introduction
Fusion Antibodies is a Contract Research
Organisation (CRO) located in Northern Ireland
that offers a range of antibody engineering
services for all stages of therapeutic and
diagnostic antibody development. Our
unrivalled experience working with antibodies
makes Fusion Antibodies a first choice partner
for the development of antibodies for both
therapeutic drug and diagnostic applications.
Our mission is to enable biopharmaceutical
and diagnostic companies to develop
innovative products in a timely and cost-
effective manner for the benefit of the global
healthcare industry.
Fusion Antibodies provides contract services
which include:
Antibody engineering and humanisation
services as a service;
Guaranteed antibody sequencing service;
Custom expression and purification of
recombinant proteins;
Stable cell line development: high yield stable
cell lines for biosimilars and recombinant
protein expression.
I am delighted to present the first
Annual Report for the company
following our successful admission to
AIM in December 2017. The year to
31 March 2018 was characterised by
the delivery of strong revenue growth
across the year, our successful
admission to AIM and the raising of
additional funds to support our on-site
expansion plans, drive further organic
sales growth, and to fund the
development of new services.
Admission to AIM, a market
operated by the London Stock
Exchange
Fusion Antibodies was established in
2001 to develop monoclonal antibodies
to be used as therapeutics in cancer
treatment and over the years it built
deep in-house expertise in antibody
development, protein engineering and
protein expression. From 2011, the
company ceased drug development
activity and focused instead on the
provision of services to third parties
using its antibody and protein related
expertise. In recent years revenues have
grown significantly to the point where
the company needed to expand its
laboratory facilities and to develop
further services. The Board concluded
that these developments would be
optimally funded by seeking a quotation
on AIM.
In December 2017, we announced the
admission of our shares to trading on
AIM and a successful placing with
institutional investors, raising a total of
£5.5m (before expenses) at a placing
price of 82p (the “Placing”). We were
pleased with the level of interest
generated from new institutional
investors and the funds raised are being
used to support the expansion of our
existing laboratory space, increase our
sales and marketing efforts, and to
develop new service lines.
Strategy & Progress
I am pleased to report that revenues in
2017/2018 grew by 41% over the
previous financial year, despite the
significant distraction in the second six
months to the senior executive team
caused by the AIM admission process
and I thank them, and all our
employees, for their hard work during
the year. The year on year growth rate
did slow in the second six months and
trading has been slower than
anticipated in the early part of the
current year.
A large part of the revenue growth came
from antibody humanisation and stable
cell line development and we continue
to believe that there is the potential for
further significant organic growth in
these areas as the use of antibodies
and the outsourcing of specific R&D
activities in the Pharmaceutical industry
continues to grow. To ensure that we
can meet this demand, we have
Fusion Antibodies plc
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STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
03
Governance Code 2018, as explained
more fully in the Governance Report.
Outlook
Although there was a slowdown in sales
growth in the second half of 2017/2018
which has extended into the first quarter
of 2018/2019, management has taken
steps to address this, including the
recruitment of more sales and
marketing staff and focussing on the
geographical expansion of our customer
base. The company is experiencing
increased competition and
consequential pricing pressures in the
current year but we continue to have a
positive outlook for the underlying
business drivers. We believe that further
growth will come from our antibody
humanisation and stable cell line
development services, supported by our
investments in expanding our facilities
and capacity and in our sales and
marketing team. The development of
the new affinity maturation service is
progressing well and should come on
line by the end of 2018. Taking these
factors together, the board considers
that modest revenue growth will be
achieved in 2018/2019.
I would like to extend my thanks to all
staff at Fusion for their hard work and to
our shareholders for their ongoing
support.
Dr Simon Douglas
Chairman
15 August 2018
undertaken a significant expansion of
our laboratory and office space. The
laboratory expansion has been
completed, six months earlier than
originally planned and within budget.
An additional key driver for revenue
growth is expected to come from new
products and service areas, and in
particular our affinity maturation service
and the production of a mammalian
antibody library for human antibody
discovery. Development continues on
both and we are on track to launch the
antibody affinity maturation service by
the end of 2018, and the mammalian
antibody library remains on track for
2020.
We are also investing in our sales and
marketing capabilities to generate
additional business and we believe that
further geographical expansion of our
customer base will be a key driver of
revenue growth.
More details on financial performance
are given in the Chief Executive Officer’s
report on page 5.
Board changes
At the time of the AIM admission, two of
the company’s long-standing non-
executive directors, Sir John Cadogan
and David Moore, stepped down from
the board and I would like to thank
them both for their service to the
company. Immediately after the IPO,
Tim Watts was appointed as a non-
executive director and became Chair of
the Audit Committee. I welcome Tim to
the board.
Corporate governance
Good governance underpins the long
term success of the business and
supports the strategy for growth and
the company has adopted the Quoted
Companies Alliance’s Corporate
Financial Statements for the year ended 31 March 2018
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STRATEGIC REPORT
CEO’s report and operations review
Introduction & Company Overview
Fusion Antibodies is an established
contract research organisation, providing
a multi-service offering, from antibody
discovery to clinical supply, to blue-chip
global pharmaceutical, biotech and
diagnostic companies looking to develop
antibody based therapeutic drugs and
diagnostics.
We provide services covering antibody
identification and discovery, lead
optimisation via antibody sequencing and
engineering, and particularly focus on
antibody humanisation, as well as offering
scale up and manufacturing services. Our
team has developed a proprietary
technology platform, the CDRx™
antibody humanisation platform, which
can rapidly design and generate
humanised antibody constructs using a
data base of over 100,000 antibody
sequences. We have completed over 100
antibody humanisation commercial
projects and have a high success rate
using this platform and, as can be seen
below, we now have two client
humanisation projects in clinical trial and
we expect more to follow. In addition, we
generate additional revenues from our
high value expert witness and technical
advisory services, having previously been
appointed by the US court of Delaware as
expert witnesses in multibillion dollar drug
cases.
In May 2018, we were pleased to be
informed that the antibody from our very
first humanisation project, performed in
2012, has now entered into clinical trials.
This will be our second client project to
move into the clinical trial stage and we
expect more to follow based on customer
feedback. Whilst this project did not
include any milestone payments, we
consider that it is a strong indicator of the
company’s capabilities.
The company is growing and derives its
revenues primarily from fee-for-service
payments. Where appropriate, milestone
Fusion Antibodies plc
or success-based fees are included in
certain contracts.
Business Review
Revenues for the year demonstrated
strong organic growth, up by 41% to
£2.69m (2017: £1.91m), continuing the
growth seen in recent years.
The main driver of revenue growth came
from antibody humanisation fees,
substantially the largest contributor to
overall sales. Sales from cell-line
development services have also grown,
albeit from a small base. We also
continued to earn fees from providing
expert witness services in the field of
antibody development.
As announced in our trading update in
March 2018, first half sales were
particularly strong, with revenues up 70%
compared to the comparable period in
the previous year. Whilst trading in the
second half was up against the previous
comparable period, growth was affected
by the significant management time
required to complete our AIM admission
and Placing in December 2017. Whilst
this impacted revenues during the period,
there was minimal impact on adjusted
EBITDA due to the sales mix of higher
margin services such as humanisation
and cell-line development.
In terms of geographical split, revenues
grew in all regions except for the UK,
which reflects the expanding global reach
of our new business development efforts
and our targeting of the large North
American market, as well as opportunities
within Asia. UK sales were down 15.4%
to £0.28m (2017: £0.31m), Europe grew
10.4% to £0.93m (2017: £0.85m) and the
US saw sales growth of 9.6% to £0.82m
(2017: £0.75m).
The biggest regional driver of growth was
from sales to Rest of the World, up
significantly from £12k in 2017 to £0.66m
for the year ended March 2018. This
growth has been achieved through the
engagement of agents and distributors
across Asia who are targeting a
pharmaceutical market that is
experiencing a big shift to monoclonal
antibodies within therapeutic drug
discovery. During the period, the
company secured agreements with new
clients in Japan and South Korea to
provide humanisation and antibody
identification services.
Whilst not a large amount, we also
received our first milestone payment
during the period. Where appropriate,
new contracts include a milestone or
success-based fees and in selected
cases the opportunity to share the risk in
future opportunities through future
royalties. The Directors believe that these
have the potential to provide meaningful
additional revenue streams from 2020.
Laboratory and office expansion
update
Building work on the expansion of our
facility in Belfast, Northern Ireland, has
continued to progress according to our
accelerated timetable. The laboratory
expansion has been completed with the
offices and meeting rooms to be
completed by September 2018 within
budget and earlier than originally planned.
Development of new services
Funds from our Placing are also being
directed to the development of new
service areas, namely our affinity
maturation services and the creation of a
mammalian antibody library for human
antibody discovery. In addition, we have
continued to invest in our CDRx™
humanisation platform to offer Antibody
Developability by Design (ADD™) service
to differentiate further our technical ability
to provide solutions to our clients’
antibodies drug candidates by enhancing
manufacturability performance.
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STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
05
Development progress on our new
antibody affinity maturation service has
been good and we are planning to launch
this service before the end of the calendar
year. Development of our mammalian
antibody library remains on track to be
available for customers in 2020.
Post-period end events
Also in May, we announced the receipt of
additional grants from Invest Northern
Ireland (“Invest NI”) to support our growth
with grants potentially totalling up to
£213,000 which can be used to create up
to 28 additional jobs and support
additional business development over the
next 24 months. £168,000 of the grants
cover payments for each employee as
they are taken on over the next 24
months. The additional 28 jobs, if they are
all filled, are expected to take our total
workforce to more than 50 people and
this is part of our investment programme
to deliver future growth. The remaining
£45,000 will support additional business
development activity to grow our
international customer base. This
announcement also followed on from
confirmation on 1 March 2018 of other
Key Performance Indicators
grants from Invest NI. We are very grateful
for the support provided by Invest NI as
we expand the business and these grants
are an important part of our strategy of
investing for growth.
In June 2018, we announced the notice
of termination of our existing collaboration
agreement with MAB Discovery GmbH
(“MAB”). The agreement specified the
terms of engagement regarding our high
throughput humanisation of antibodies
being developed by MAB, using our
CDRx™ platform. We are currently in
discussions to develop a revised
collaboration agreement. No reduction in
revenues is expected as a result.
Financial Results
The year to 2018 was a period of strong
organic revenue growth with total sales
increasing by 41% to £2.69m (2017:
£1.91m). Growth came from customer
projects in all geographic regions other than
the UK. The fastest growth was seen in the
first six months of the financial year as H2
revenue growth was impacted by the
demands of the AIM admission process.
The EBITDA loss of £641k (2017 profit:
£160k) and adjusted EBITDA profit
(adjusted for accelerated share-based
payment charges and IPO costs) £132k
(2017: £288k) was broadly in-line with
expectations. A reconciliation of adjusted
profit to adjusted EBITDA is set out in
Note 28 to the financial statements.
Performance at the EBITDA level reflects
the investment that the company has
made in future growth, with investment
into employees, facilities and research
which are expected to deliver further
significant revenue growth. The company
produced a loss before tax of £711k
(2017: profit £126k) and adjusted profit
before tax of £62k (2017: £255k). The
company generated cash of £77k from
operating activities during the year (2017:
£37k cash used in operations). Cash and
cash equivalents as at 31 March 2018
totalled £4.5m (2017: £0.3m) reflecting
the funds raised in our Placing. The
company’s full results are set out in the
financial statements included with this
report.
The key performance indicators (KPIs) regularly reviewed by the board are:
KPI
Revenue growth year on year
EBITDA
Adjusted EBITDA
Cash generated/(used in) operations
2018
2017
41%
(£641k)
£132k
29%
£160k
£288k
5% of revenues 15% of revenues
(£37k)
£77k
Outlook
Although there was a slowdown in sales
growth in the second half of 2017/18
which extended into the first quarter of
2018/19, management has taken steps
to address this, including the recruitment
of more sales and marketing staff and
focussing on the geographical
expansion of our customer base. The
company is experiencing increased
competiton and consequential pricing
pressures in the current year but we
continue to have a positive outlook for
the underlying business drivers. We
believe that further growth will come
from our antibody humanisation and
stable cell line development services,
supported by our investments in
expanding our facilities and capacity and
in our sales and marketing team. The
development of the new affinity
maturation is progressing well and
should come on line by the end of 2018.
Taking these factors together, the board
considers that modest revenue growth
will be achieved in 2018/2019.
Dr Paul Kerr
Chief Executive Officer
15 August 2018
Financial Statements for the year ended 31 March 2018
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STRATEGIC REPORT
Principal risks and uncertainties
Risk is an inherent feature of business.
The Board meets regularly to review
operations and to assess and monitor
the business risks faced by the
company. Set out below are some key
risks, together with associated
mitigating factors. This list does not
purport to be exhaustive. Financial risks
are disclosed in note 20 to the financial
statements.
Risks relating to the company
and its business
1 Dependence on agreements with
third parties
The company enters into agreements,
including partnerships and
collaborations, with third parties in
respect of development, production,
marketing, sales and distribution and
supply of materials and equipment in
order to develop and market products
and services and to enable it to reduce
the cost incurred by the company in
doing this. There are no guarantees that
the company will be able to find
suitable, commercially viable
relationships nor that any parties with
whom it enters into commercial
arrangements will meet their obligations.
This could impact upon the company’s
revenue and profitability and potentially
leave the company with a financial loss,
unable to proceed with development or
sale of the products or services and/or
needing to enter into litigation with the
partner which could have both negative
finance and reputational consequences.
2 Potential product liability
litigation, regulatory intervention,
adverse PR and business
interruption
If the company produces any products
or services which are defective, or
which are alleged to be defective, it may
face a liability claim in respect of those
Fusion Antibodies plc
products or services. Any serious quality
or safety incident may result in adverse
reporting in the media, which in turn
may damage the company's public
relations and could potentially interrupt
its business. This in turn could affect the
company's financial condition,
operational results and prospects,
including damage to the company's
reputation and/or its brands.
Third parties may assert their own
intellectual property infringement claims
against the company’s use of
technology or products and require the
company to cease the infringing activity
and/or require the company to enter
into licensing and royalty arrangements.
The third party could take legal action
against the company; if the company is
required to defend itself against charges
of patent infringement or to protect its
own proprietary rights against third
parties, substantial costs and significant
management time and effort could be
incurred regardless of whether the
company is successful. Such
proceedings are typically protracted and
there is no certainty of success. If there
is an adverse outcome, this could
subject the company to significant
liabilities to third parties, and force it to
curtail or even cease altogether the
development of products or the
provision or particular services (if
provision of those services is reliant on a
particular method which is the subject
of the proceedings), or the sale or
licensing of products. In addition, the
company may be required to develop
alternative, non-infringing solutions
which may require significant time and
substantial, unanticipated resources. It
is therefore possible that such claims
could have a material adverse effect on
the company's business, financial
condition or results.
3 Risk that services will not
achieve commercial success
The company currently offers a range of
services, namely: antibody sequencing,
antibody humanisation, stable cell line
development, antibody engineering,
monoclonal antibody production and
transient protein expression. It is also
developing new services – antibody
affinity maturation and the creation of a
mammalian antibody library. The
commercial success of each of these
services is in part based on factors
outside the company's control, including
market demand for those services. There
can be no assurance that market
demand for any of these areas will
continue to exist and/or increase, or that
the company's services will be
favourably received by the market, will be
profitable or will produce a reasonable
return, if any, on investment. If the
service is not commercially successful it
could result in a financial loss to the
company. Furthermore there can be no
assurance that the development of the
new services is successful.
Whilst the company considers it offers a
competitive pricing model, there is the
risk that it will not be able to attract
market interest in its services or to
maintain or develop that interest if
received. For example, a competitor may
undercut it with a pricing model it is
unable to match; alternatively or
additionally, a competitor with access to
superior levels of capital may be able to
inject more capital into its business and,
as a consequence, develop new systems
for delivering comparable services to
those offered by the company at lower
cost and/or more effectively. There is
therefore no guarantee that any of the
company's services will be commercially
successful in the future or that it will
continue to be competitive in the markets
in which it operates.
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4 The company relies on certain
key personnel
The company's senior management
and key research and development
personnel are experienced in different
fields of research, development,
production, marketing and corporate
management in the antibodies industry.
As such, the company's success is in
part attributable to the expertise and
experience of its senior management
and key research and development
personnel, who carry out key functions
in the operations of the company.
The company's research capability,
financial condition, operation and
prospects may be detrimentally affected
if the company loses the services of any
of its senior management and/or key
research and development personnel,
whether through illness or death, or
them moving employment. No
assurance can be given that the
company will be able to retain and
incentivise all the staff and key
personnel that it needs in order to
achieve its business objectives (a) at all
or (b) on commercially acceptable
terms. This could in turn adversely
affect its business, financial condition,
results and/or future operations.
As stated above, the company's
success is in part attributable to the
expertise and experience of its senior
management and key research and
development personnel. However, it
may need to attract and recruit
additional personnel, either in addition
to existing personnel or to replace
departing personnel, across all areas of
its business. No assurance can be given
that the company will be able to attract
and recruit all the staff and key
personnel that it needs (with the
requisite expertise and experience if
applicable) in order to achieve its
business objectives (a) at all or (b) on
commercially acceptable terms. This
could in turn adversely affect its
business, financial condition, results
and/or future operations.
5 Risks associated with reliance on
IT systems, key equipment and
laboratory space
The company is reliant upon the use of
certain IT systems, equipment and
laboratory space which is critical to its
ability to carry out its core business,
including two external web databases
for operation of the Antibody Workbench
software comprised in its CDRx™
platform. There is a risk that key IT
systems, equipment, and/or the
laboratory space itself may become
unavailable. In this event, the company's
ability to deliver its services may be
detrimentally affected, which could in
turn have an impact upon its ability to
deliver projects on time and which could
consequently adversely affect its
business, financial condition results,
and/or future prospects. There is a risk
that the company’s operations may be
affected by a fire or flood at its premises.
General risks relating to the
biotechnology and
pharmaceutical industries
1 There may be a general reduction
in the demand for antibody
services in the pharmaceutical
and biotechnology industries
As a CRO, the company's revenue is
primarily generated through contracts
with pharmaceutical and biotechnology
companies and is dependent upon
there being a demand in these
industries for its antibody services.
There is a risk that there may be a
reduction in the demand in the
pharmaceutical and biotechnology
industries for antibody services, even if
expenditure on drug development and
discovery is maintained or increased.
For example, the discovery of new
technologies may reduce altogether the
need for the antibody services provided
by the company (either currently or in
the future), or it may enable drug
development companies to meet their
requirements for antibody services
internally rather than outsourcing these
to CROs such as the company.
2 The company is subject to
regulations governing the
pharmaceutical and
biotechnology industries
The regulations governing the
biotechnology and pharmaceutical
industries in the countries in which the
company operates may be subject to
change without prior notice or
consultation. Any such changes or
amendments may significantly impact the
business of the company. For example,
at the moment it is generally easier to
both import and export goods within the
EU than to other international companies
due to the UK being part of the customs
union. However, in view of the ongoing
Brexit negotiations and the uncertainty
surrounding the effect these will have on
the free movement of goods, it is not
clear whether such rules will significantly
change and, if so, exactly how they will
differ. There may also be increased costs
to the company of complying with any
changes in the regulatory requirements of
the biotechnology and pharmaceutical
industries which could have an impact on
the financial prospects of the company.
The strategic report on pages 2 to 7
was approved by the board on
15 August 2018 and signed on its
behalf by:
Paul Kerr
Director
Financial Statements for the year ended 31 March 2018
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CORPORATE GOVERNANCE
Board of Directors
Dr Simon Douglas
Non-executive Chairman
Dr Paul Kerr
CEO
Dr Richard Buick
CTO
Paul, 46, was appointed Chief Executive
Officer in September 2011 having
worked in the company in technical and
business development roles. He is an
industry specialist with over 20 years’
experience in the biopharmaceutical
industry including former roles
developing monoclonal antibodies at
The Queen’s University of Belfast and
the Veterinary Sciences Division,
Stormont laboratory.
Richard, 41, was appointed director and
Chief Technical Officer in September
2011 having worked in the company
since 2002 where he was responsible
for overseeing contract research
services. He previously had four years’
experience discovering novel antibodies
from synthetic libraries for diagnostic
purposes. Richard has been appointed
as a legal expert witness in a number of
drug patent dispute cases.
Simon, 59, was appointed
Non-executive Chairman in September
2011 having previously been CEO. He
has over 30 years’ experience in the
biotech industry, including 10 years
working for Amersham International, ICI
and Zeneca (now AstraZeneca), in a
variety of commercial and technical
positions, and over five years with
Tepnel Life Sciences plc (now Hologic
Inc), a London Stock Exchange listed
diagnostic company where he was
Chief Executive. He is currently on the
board of venture capital backed
diagnostic company Biofortuna Ltd and
an advisor to two medical device start
up companies. Simon is not considered
to be independent as he formerly held
the position of CEO.
Fusion Antibodies plc
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FINANCIAL STATEMENTS
09
James Fair
CFO and Company Secretary
Sonya Ferguson1
Senior Independent Director
Dr Alan Mawson2
Non-executive director
James, 52, was appointed director and
Chief Financial Officer in August 2017
having been head of finance for eight
years. He qualified as a chartered
accountant with Price Waterhouse and
has held senior management positions
in internal audit, business, and
professional practice.
Sonya, 47, joined the company as a
non-executive director in 2016 and is an
experienced senior director working in
the pharmaceuticals industry. She is
currently senior director of Q2 Solutions,
a Quintiles Quest joint venture, which is
a leading global clinical trials laboratory
services organisation, having formerly
worked for Quintiles itself and Randox
Laboratories. Sonya is the senior
independent director on the board.
Alan, 76, is a venture capital fund
manager, the founder and now
non-executive chair of Clarendon Fund
Managers Limited and joined the
company as a non-executive director in
2004 as a representative of Clarendon.
Clarendon is the fund manager for
Nitech Growth Fund LP and Viridian
Growth Fund LP both of which are
shareholders in the company. Due to
Clarendon’s shareholding in the
company, Alan is not considered to be
independent under the QCA Code.
1 member of the Remuneration Committee
2 member of the Audit Committee
Financial Statements for the year ended 31 March 2018
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CORPORATE GOVERNANCE
Board of Directors continued
Colin Walsh1
Non-executive director
Tim Watts2
Non-executive director
Colin, 63, is chief executive and founder
of Crescent Capital NI Limited and has
been an active venture capital investor
in the high-tech sector for the past 28
years. He joined the company as a non-
executive director in 2007 as a
representative of Crescent Capital.
Crescent Capital is the fund manager of
Crescent Capital II LP and Crescent
Capital III LP both of which are
shareholders in the company. Due to
Crescent Capital’s shareholding in the
company, Colin is not considered to be
independent under the QCA Code.
Tim, 61, has over 25 years’ experience
in the pharmaceutical and biotech
sectors, and joined the company as a
non-executive director in December
2017. He qualified as chartered
accountant with Coopers & Lybrand
before moving to HJ Heinz, then ICI,
was appointed Finance Director of the
Zeneca Pharmaceuticals business in
1998 and became Group Financial
Controller of AztraZeneca plc in 2002.
Between 2007 and 2017 he held
positions as CFO of Archimedes
Pharma then Oxford Biomedica plc from
which he retired in September 2017. In
August 2018 Tim was appointed Interim
CFO at Shield Therapeutics. Tim is an
independent director.
1 member of the Remuneration Committee
2 member of the Audit Committee
Fusion Antibodies plc
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CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
11
CORPORATE GOVERNANCE
Corporate Governance Statement
Compliance Statement
Board composition
The Board seeks to follow best practice
in corporate governance appropriate to
the company’s size and in accordance
with the regulatory framework that
applies to AIM companies. The
company has adopted the Quoted
Companies Alliance’s Corporate
Governance Code 2018 (“QCA Code)
and sets out on its website how, with
regard to the size and the nature of the
company’s business, it applies the
principles and disclosures as set out in
the QCA Code. Given its size and the
nature of its current operations, the
company has not adopted the full UK
Corporate Governance Code. The main
features of the company’s corporate
governance arrangements are:
• The Board meets regularly and at
least nine times per year for formal
board meetings. It will consider
strategy, performance and approve
financial statements, dividends and
significant changes in accounting
practices and key commercial
matters, such as decisions on the
introduction of new services. There is
a formal schedule of matters
reserved for decision by the board in
place;
• The company has an audit
committee and remuneration
committee, further details of which
are provided below; and
• The company does not have a
nomination committee, as the Board
does not consider it appropriate to
establish one at this stage of the
company’s development. The Board
as a whole takes decisions regarding
the appointment of new directors
and this will follow a thorough
assessment of a potential
candidate’s skill and suitability for the
role.
The company is managed by a Board of
directors and they have the necessary
skills and experience to effectively
operate and control the business. There
are currently eight directors at the date
of this report being: Simon Douglas,
Paul Kerr, Richard Buick, James Fair,
Sonya Ferguson, Alan Mawson, Colin
Walsh and Tim Watts. The Board
comprises five non-executive directors,
including the chair, and three executive
directors. The composition of the board
was reviewed and the board refreshed
prior to the AIM admission in December
2017 and the board believe the split of
non-executive to executive directors is
appropriate for the current requirements
of the company. Board members are
expected to attend relevant continuing
professional development to ensure
their technical skills are kept up to date
as well as attending relevant industry
and regulatory conferences and
briefings. As the needs of the company
evolve a set of performance and skills
criteria is prepared annually by the
Chairman and one to one evaluations
are held with directors to assess how
skill sets meet the needs of the
company and identify where skills need
to be added to the existing board.
The Board considers Sonya Ferguson
and Tim Watts are independent in
character and judgement. Sonya
Ferguson was appointed as the senior
independent director on 11 December
2017. Whilst Colin Walsh and Alan
Mawson are not deemed independent
for the purposes of the QCA Code, the
Board considers that their detailed
experience and long standing
knowledge of the business are essential
in guiding the overall strategy of the
company. Simon Douglas is not
deemed independent as he is a former
CEO of the company.
As the business develops, the
composition of the Board will remain
under review to ensure that it remains
appropriate to the managerial
requirements of the company. All new
directors appointed since the previous
Annual General Meeting are required to
seek election at the next Annual General
Meeting and one third of the other
directors retire annually in accordance
with the company’s articles of
association. This enables the
shareholders to decide on the election
of the company’s board. The company
has previously availed of the exemption
available to private companies from
holding an Annual General Meeting so
all eight directors will seek election at
the next Annual General Meeting which
is the first general meeting as a public
company.
Board committees
The company has an Audit Committee
and a Remuneration Committee with
formally delegated duties and
responsibilities. The composition of
these committees may change over
time as the composition of the Board
changes. The reports of the Audit
Committee and Remuneration
Committee are included within the
Governance report and Directors’
Report rather than as separate sections
of the Annual Report.
Audit Committee
The audit committee has responsibility
for, among other things, the monitoring
of the financial integrity of the financial
statements of the company, and the
involvement of the company’s auditors
in that process. It focuses, in particular,
on compliance with the accounting
policies and ensuring that an effective
system of external audit and financial
control is maintained, including
considering the scope of the annual
Financial Statements for the year ended 31 March 2018
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12
CORPORATE GOVERNANCE
Corporate Governance Statement continued
audit and the extent of non-audit work undertaken by external auditors and advising on the appointment of external auditors.
Given the size and nature of the company the Audit Committee has recommended and the Board accepts that an internal audit
function is not appropriate for the company.
The audit committee meets at least twice a year at the appropriate times in the financial reporting and audit cycle. The audit
committee comprises two members, who are both non-executive directors: Tim Watts (chair) and Alan Mawson. David Moore
resigned as a member of the board on 11 December 2017 and was replaced as a member of the audit committee by Tim Watts
on 18 December 2017.
Since the admission to AIM, the Audit Committee has met twice, in April 2018 and June 2018. At the April meeting the main
item was to discuss and agree the audit strategy for the year ended 31 March 2018 proposed by the auditors. It was agreed
that the main areas of focus should be revenue recognition and the correct identification of exceptional costs arising from the
IPO and accounting for accelerated share-based payments. The main topic for the June meeting was to review the auditors’
work to date. The auditors were able to confirm that the audit had been satisfactory and that, in particular, they had reviewed the
above areas of focus with no issues arising. The Committee also reviewed the Company’s system of internal controls at this
meeting and concluded that they are appropriate for a company of Fusion’s size and complexity.
Internal controls and financial risk management
The directors are responsible for the company’s system of internal controls, the setting of appropriate policies on these controls
and regular assurance that the system is functioning effectively and that it is effective in managing business risk. Risk
management is embedded as part of the Board culture and is on the agenda of every meeting to ensure that it is at the centre of
arriving at and monitoring strategy. Principal risks and uncertainties are discussed in the Strategic Report and financial risk
management policies are detailed in note 20 of the Notes to the Financial Statements. The audit committee monitors the
company’s internal control procedures, reviews the internal control procedures and reports its conclusions and
recommendations to the Board.
Remuneration Committee
The remuneration committee has responsibility for the determination of remuneration packages for each of the executive
directors, including pension rights and any compensation payments, recommending and monitoring the level and structure of
remuneration of senior management, and the implementation of the employer share option scheme, or other performance
related schemes. It meets at least twice a year. The report of the remuneration committee is included in the Directors’ Report
below.
The remuneration committee comprises two members who are non-executive directors: Colin Walsh (chair) and Sonya
Ferguson. Sir John Cadogan retired as a member of the board on 11 December 2017 and as a member of the remuneration
committee at that date.
Fusion Antibodies plc
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STRATEGIC REPORT
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FINANCIAL STATEMENTS
13
Meetings and attendance
Meetings held during the year
Attendance:
Simon Douglas
Paul Kerr
Richard Buick
James Fair
Sonya Ferguson
Alan Mawson
Colin Walsh
Tim Watts
Sir John Cadogan
David Moore
Board
13
12/13
13/13
13/13
8/8
13/13
13/13
13/13
3/3
9/9
8/9
Audit
committee
Remuneration
committee
2
3
1/1
2/2
3/3
2/2
2/2
2/2
Non-executive directors are expected to spend a minimum of one day a month on company activities in addition to preparation
for and attendance at board and sub-committees. The Chairman will spend an additional day per month although in practice
this is usually exceeded.
Communication with shareholders
Good and effective communication with shareholders is a high priority of the Board. Good communication with investors and
analysts is an essential part of the operation of the company. The company is committed to providing up to date corporate
information to existing and potential shareholders and maintains a website (www.fusionantibodies.com) which contains an
Investor Relations section. Existing and potential investors can use the website to access company information and reports and
to contact the company.
The company has introduced a programme of face to face communication. This includes one on one and group meetings with
investors in the UK as well as attendance at investor and industry conferences.
The corporate governance report on pages 8 to 13 was approved by the board on 15 August 2018 and signed on its behalf by:
Dr Simon Douglas
Chairman
Financial Statements for the year ended 31 March 2018
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CORPORATE GOVERNANCE
Directors’ Report for the year ended 31 March 2018
The directors present their annual
report and the audited financial
statements of the company for the
year ended 31 March 2018.
The company is incorporated and
domiciled in the United Kingdom. On
11 December 2017 the company
re-registered as a public limited
company and on 18 December 2017
the shares were listed on AIM, a
market operated by London Stock
Exchange.
Principal activity
The principal activity of the company is
the research, development and
manufacture of recombinant proteins
and antibodies, particularly in the areas
of cancer and infectious diseases.
Review of the business and
future developments
A review of the business and its outlook,
including commentary on the key
performance indicators, and the principal
risks and uncertainties facing the
company is included in the statements
within the Strategic Report and included
in this report by cross reference.
Directors
Biographical information on each of the
directors at the date of signing this
report is set out on page 11.
In addition, those directors who left the
board during the year are as follows:
• Professor Sir John Cadogan CBE
FRS - non-executive director,
resigned 11 December 2017; and
• Mr David Moore - non-executive
director, resigned 11 December
2017.
In accordance with the company’s
Articles of Association all the directors will
retire and offer themselves for re-election
at the 2018 Annual General Meeting.
Directors’ remuneration
The remuneration committee comprises
Colin Walsh as Chair and Sonya
Ferguson. The committee is responsible
for reviewing the company’s
remuneration policy, the emoluments of
the Executive Directors and other senior
management and the company’s
pension arrangements and for making
recommendations thereon to the Board.
The committee also makes
recommendations to the Board in
respect of awards of option under the
EMI and Unapproved Employee Share
Option Scheme under which employees
and Executive Directors may be granted
options to acquire Ordinary Shares. It
also reviews the terms of service
contracts with senior employees and
the Executive Directors and any
compensation arrangements resulting
from the termination by the company of
such contracts.
Policy on executive directors
and senior management
remuneration
When determining the Board policy for
remuneration, the Committee considers
all factors which it deems necessary
including relevant legal and regulatory
requirements and the provisions and
recommendations of relevant guidance.
The objective of this policy is to help
attract, retain and motivate the
executive and senior management of
the company without paying more than
necessary. The remuneration policy
bears in mind the company’s appetite
for risk and is aligned to the company’s
long term strategic goals. A significant
proportion of remuneration is structured
to link rewards to corporate and
individual performance and be designed
to promote the long-term success of
the company.
Bonus payments
All executive directors and senior
management are eligible for a
discretionary annual bonus. Annual
cash bonuses are paid on the
achievement of pre-set strategic
objectives. The Committee, in
conjunction with the Board, reviews and
sets these objectives at the start of
each financial year.
Long term incentives
At the reporting date the company had
two share based reward schemes (now
closed to new awards) under which
options had been granted and a third
scheme in place (“2017 EMI and
Unapproved Employee Share Option
Scheme”) under which no grants have
yet been made. Details of options
issued under the two closed schemes
are included in note 9. Since the
company’s admission to AIM, in
accordance with UK best practice on
corporate governance, company policy
has changed so that it is no longer
policy to award share options to non-
executive directors.
The share options granted during the
year all contained 1-2 year vesting
periods with the options used to
motivate and retain key individuals.
Fusion Antibodies plc
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STRATEGIC REPORT
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FINANCIAL STATEMENTS
15
Movement in options held by directors are as follows:
Note: during the year each £1 Ordinary Share of the company was subdivided into 25 Ordinary Shares of £0.04. The table
below is presented with the balance at 1 April 2017 restated to show the equivalent number and exercise price for £0.04
Ordinary Shares.
At Exercised in Awarded in At Exercise Exercise
1 April 2017 Year year 31 March 2018 period price per share
Paul Kerr
2005 Share Scheme 486,250 (486,250) – – n/a £0.04 to £0.24
2017 Share scheme – – 125,000 125,000 2018-2027 £0.04
486,250 (486,250) 125,000 125,000
Richard Buick
2005 Share Scheme 486,250 (486,250) – – n/a £0.04 to £0.24
2017 Share scheme – – 125,000 125,000 2018-2027 £0.04
486,250 (486,250) 125,000 125,000
James Fair
2017 Unapproved Share Scheme – – 75,000 75,000 2018-2027 £0.04
Simon Douglas
2005 Unapproved Share Scheme 275,000 (275,000) – – n/a £0.04
Sir John Cadogan
2005 Unapproved Share Scheme 112,500 (112,500) – – n/a £0.04
Sonya Ferguson
2017 Unapproved Share Scheme – – 25,000 25,000 2018-2027 £0.04
Financial Statements for the year ended 31 March 2018
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CORPORATE GOVERNANCE
Directors’ Report for the year ended 31 March 2018 continued
Directors’ remuneration
The remuneration of Directors for the year ended 31 March 2018 was as follows:
Company
Salary pension
& fees Benefits Bonus contributions
£ £ £ £ Total
Executive directors
Paul Kerr 2018 87,500 64 – 4,375 91,939
2017 51,750 – 12,900 15,403 80,053
Richard Buick 2018 87,500 60 – 4,375 91,935
2017 64,815 – 12,900 2,640 80,355
James Fair1 2018 52,500 77 10,000 2,559 65,136
2017 – – – – –
Non – Executive Directors
Simon Douglas 2018 22,897 – – – 22,897
2017 20,000 – – 3,029 23,029
Sonya Ferguson 2018 7,301 – – 146 7,447
2017 12,500 – – 250 12,750
Alan Mawson2 2018 6,663 – – – 6,663
2017 – – – – –
Colin Walsh3 2018 7,786 – – – 7,786
2017 – – – – –
Tim Watts4 2018 7,821 – – – 7,821
2017 - – – – –
Sir John Cadogan5 2018 11,250 – – – 11,250
2017 15,000 – – – 15,000
David Moore6 2018 – – – – –
2017 – – – – –
Total 2018 291,218 201 10,000 11,455 312,874
2017 164,065 – 25,800 21,322 211,187
1 James Fair was appointed 1 August 2017
2 Prior to 18 December 2017 Clarendon Fund Managers were paid for the services of Alan Mawson as is explained in note 25
3 Prior to 18 December 2017 Crescent Fund Managers were paid for the services of Colin Walsh as is explained in note 25
4 Tim Watts was appointed on 18 December 2017
5 Sir J Cadogan resigned effective 11 December 2017
6 David Moore resigned effective 11 December 2017
Fusion Antibodies plc
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CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
17
Directors and their interests
Note: during the year each £1 Ordinary Share of the company was subdivided into 25 Ordinary Shares of £0.04. The table
below is presented with the balance at 1 April 2017 restated to show the equivalent number and exercise price for £0.04
Ordinary Shares.
At
1 April 2017
(or date of
appointment
if later)
46,250
25,875
–
30,800
–
–
–
12,195
741,300
–
% issued shared
capital
0.34%
0.19%
–
0.22%
–
–
–
0.06%
5.41%
–
Shareholding at
31 March 2018
(or date of
resignation if
earlier)
532,500
512,125
–
255,800
15,593
30,488
–
12,195
853,800
–
% issued share
capital
2.41%
2.32%
–
1.16%
–
0.14%
–
0.06%
5.55%
–
Paul Kerr
Richard Buick
James Fair
Simon Douglas
Sonya Ferguson
Alan Mawson
Colin Walsh
Tim Watts
Sir John Cadogan
David Moore
Results and dividends
The loss before tax for the year was £711k (2017: profit £126k) after charging non recurring items (including IPO costs and
accelerated share based payment charges in respect of schemes vesting on IPO) of £773k (2017: £129k). After adjusting for
non-recurring charges (which are more fully explained in note 28 to the accounts) the company would have reported an adjusted
profit before tax of £62k (2017: £255k) and adjusted Earnings Before Interest Taxation Depreciation and Amortisation (EBITDA)
of £132k (2017: £288k).
After an income tax credit of £55k (2017: expense of £6k) the loss for the financial year of £656k (2017: profit £120k) has been
transferred to reserves. The results for the year are set out the statement of comprehensive income.
No dividends were paid (2017: £nil). The directors do not recommend payment of a final dividend (2017: £nil).
Changes in capital
During the year the company performed a capital reduction. Under this capital reduction the company’s entire share premium as
of 25 October 2017 of £6.16m was cancelled and credited to the profit and loss reserve.
During the year the company subdivided each of the Ordinary shares of £1 into 25 Ordinary shares of £0.04 each.
During the year the company had two issues of shares. 1,692,500 Ordinary shares of £0.04 were issued upon the exercise of
share options for total proceeds of £107k, including a premium of £39k. In December 2017, the company issued 6,707,317
Ordinary shares of £0.04 through the Placing and admission to AIM. The gross share proceeds raised in the Placing was £5.5m
including a share premium of £5.23m.
Financial Statements for the year ended 31 March 2018
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CORPORATE GOVERNANCE
Directors’ Report for the year ended 31 March 2018 continued
Principal shareholders
At the close of business on 14 August 2018 (being the latest practical date prior to the signing of this report) the company had
received notification of the following substantial interests representing over 3% of the issued share capital:
Number of
Ordinary 4p shares
Percentage held
Crescent II LP
Viridian Growth Fund LP
Canaccord Genuity Group Inc
Amati AIM VCT plc
Prof Jim Johnston
Unicorn AIM VCT plc
Baronsmead Venture Trust plc
Octopus Investments Ltd
Invest Northern Ireland
Crescent III LP
Qubis Ltd
Pension
2,652,325
1,831,500
1,414,939
1,341,463
1,317,325
1,219,512
1,219,512
1,219,512
974,450
731,707
709,375
12.01
8.29
6.41
6.07
5.96
5.52
5.52
5.52
4.41
3.31
3.21
The company operates a defined contribution pension scheme.
Research and development
During the year ended 31 March 2018 has incurred research and development costs of £69k (2017: £70k). This is incurred in
the development of existing and new antibody engineering services. There was no expenditure on intangible assets in the two
years ended 31 March 2018.
Financial risk management
The company’s approach to risk management is described in Principal risks and uncertainties within the Strategic Report and is
included in this report by cross reference.
Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the company has adequate
resources to continue in operational existence for 12 months from the reporting date. Thus they continue to adopt the going
concern basis of accounting in preparing the financial statements. In arriving at this conclusion the Directors have reviewed
detailed forecast models for the company. These models are based on best estimates of future performance and have been
adjusted to reflect various scenarios and outcomes that could potentially impact the forecasts.
Payments to suppliers
The company seeks to abide by the payment terms agreed with suppliers when it is satisfied that the supplier has provided the
goods or services in accordance with the agreed terms and conditions.
Directors’ indemnity
Every director and other officer of the company is entitled to be indemnified out of the assets of the company against all losses
or liabilities properly incurred by him or her in or about the discharge of the duties of his or her office. The company has
insurance cover in place to mitigate such costs.
Fusion Antibodies plc
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FINANCIAL STATEMENTS
19
Political donations
There were no political donations
made by the company during the year
(2017: none).
Corporate governance
The Corporate Governance Report on
pages 8 to 13 forms part of the
Directors’ Report and is included in this
report by cross reference.
Post balance sheet events
There were no material post balance
sheet events.
Annual general meeting
The resolutions to be proposed at the
Annual general meeting together with
the explanatory notes, will appear in the
Notice of the Annual general meeting
which will be circulated with the annual
report when sent to all shareholders.
Statement of Directors’
Responsibilities
The Directors are responsible for
preparing the Annual Report and the
financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to
prepare the financial statements for each
financial year. Under that law the
Directors have prepared the financial
statements in accordance with
International Financial Reporting
Standards (IFRSs) as adopted by the
European Union. Under company law the
Directors must not approve the financial
statements unless they are satisfied that
they give a true fair view of the state of
affairs of the company and of the profit or
loss of the company for that period.
In preparing the financial statements,
the Directors are required to
• select suitable accounting policies
and then apply them consistently;
• make judgements and accounting
estimates that are reasonable and
prudent;
• state whether applicable IFRSs as
adopted by the European Union have
been followed; subject to any material
departures disclosed and explained in
the financial statements;
• make judgements and accounting
estimates that are reasonable and
prudent; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
company will continue in business.
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the company’s transactions and
disclose with reasonable accuracy at
any time the financial position of the
company and enable them to ensure
that the financial statements comply
with the Companies Act 2006. The
Directors are also generally responsible
for safeguarding the assets of the
company and hence for taking
reasonable steps for the prevention and
detection of fraud and other
irregularities.
The Directors are responsible for the
maintenance and integrity of the
company’s website. Legislation in the
United Kingdom governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
The directors consider that the Annual
Report and Accounts, taken as a whole,
is fair, balanced and understandable
and provides the information necessary
for shareholders to assess the
company’s position, performance,
business model and strategy.
Each of the directors, whose names
and functions are listed in Board of
Directors confirm that, to the best of
their knowledge:
• the financial statements, which have
been prepared in accordance with
IFRSs as adopted by the European
Union, give a true and fair view of the
assets, liabilities, financial position
and profit of the company; and
• the Strategic Report includes a fair
review of the development and
performance of the business and the
position of the company, together
with a description of the principal
risks and uncertainties that it faces.
Statement of disclosure to
auditors
The Directors confirm that:
• so far as each Director is aware,
there is no relevant audit information
of which the company’s auditor is
unaware; and
• the Directors have taken all the steps
that they ought to have taken as
Directors in order to make
themselves aware of any relevant
audit information and to establish
that the auditor is aware of that
information.
Independent Auditors
PricewaterhouseCoopers LLP has
expressed its willingness to continue in
office as auditor.
On behalf of the Board
James Fair
Company Secretary
15 August 2018
Company registration number NI039740
Financial Statements for the year ended 31 March 2018
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Independent Auditors’ Report to the Members of
Fusion Antibodies plc
Report on the audit of the financial statements
Opinion
In our opinion, Fusion Antibodies plc’s financial statements:
• give a true and fair view of the state of the company’s affairs as at 31 March 2018 and of its loss and cash flows for the year
then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the statement of financial position
as at 31 March 2018; the statement of comprehensive income, the statement of cash flows, the statement of changes in equity
for the year then ended; and the notes to the financial statements, which include a description of the significant accounting
policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
Our audit approach
Overview
• Overall materiality: £3,120 (2017: £6,930), based on 5% of profit before tax, adjusted for non-recurring
listing costs and share based payment charges in respect of schemes that vested on IPO.
• The company is a single reporting entity. It has a subsidiary undertaking which is dormant and not
consolidated on the basis that it is not material.
• Exceptional costs.
• Share based payment charges.
• Risk of fraud in revenue recognition.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there
was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or
not due to fraud) identified by the auditors, 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, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a
Fusion Antibodies plc
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21
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete
list of all risks identified by our audit.
Key audit matter How our audit addressed the key audit matter
Exceptional costs
The company has incurred a significant amount of costs in
relation to the IPO as well as recorded a significant share based
payment charge on IPO. The nature of these costs and their size
means the company has determined these to be exceptional
costs and are added back for performance measures.
The estimation of what constitutes exceptional costs involves a
degree of judgement.
In addition there is specific guidance on the use of Alternative
Performance Measures (“APMs”) and the disclosures required.
Share based payment charges
Share based payment accounting requires a number of
estimates to be made in calculating the fair value of options at
grant date.
The most significant assumption used is the calculation of the fair
value of the underlying shares at grant date. These options were
granted pre IPO and therefore there was no market for the shares.
We agreed exceptional costs to supporting documentation
and calculation. No errors were identified.
We assessed the disclosure of these costs as exceptional and
based on their non-recurring nature and size we agreed with
the company's conclusion that they were exceptional.
We agreed that the disclosure of Alternative Performance
Measures were consistent with the guidance and
requirements, issued by the Financial Reporting Council and
the European Securities and Markets Authority, in particular
that there was no more prominence given to these APMs over
statutory measures and that the APMs were clearly reconciled
in a note to the financial statements.
We agreed the calculations of share based payment charges.
No errors were identified.
We agreed that the inputs (in particular the fair value of the
share at grant date) used in the calculation of the fair value of
the options at grant date were appropriate and supportable.
Risk of fraud in revenue recognition
Under ISAs (UK) risk of fraud in revenue recognition is considered
to be a significant risk unless rebutted.
The risk of fraud in revenue recognition relates to the cut-off
assertion as manual adjustments are required to correctly
recognise revenue in respect of services not complete as at the
year end.
We agreed pre year end (March 2018) and post year end (April
2018) revenue transactions to supporting documentation to
ensure that revenue was recognised in the correct period. In
addition we agreed the manual cut-off adjustment to
supporting documentation to ensure revenue was recognised
in the correct period. No errors were identified.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the
industry in which it operates.
The company is a single reporting entity. It has a subsidiary undertaking which is dormant and not consolidated on the basis that it is
not material. As a single entity all of the company's key transaction cycles (revenue/receivables, purchases/payables and inventory)
were a focus for our audit procedures. There were no financial statement line items that were not in scope for audit procedures.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Financial Statements for the year ended 31 March 2018
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22
Independent Auditor’s Report to the Members of
Fusion Antibodies plc continued
Materiality (continued)
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality £3,120 (2017: £6,930).
How we determined it 5% of profit before tax, adjusted for non-recurring listing costs and share based payment charges in
respect of schemes that vested on IPO.
Rationale for
benchmark applied
We believe that profit before tax (adjusted for non-recurring listing costs and share based payment
charges in respect of schemes vesting on IPO) is the primary measure used by the shareholders in
assessing the performance of the entity. It is appropriate these costs are added back as these are of
a non-recurring nature.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £150 (2017:
£350) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for issue.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company’s
ability to continue as a going concern.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on
these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included. Based on the responsibilities described above and our work undertaken in the course
of the audit, ISAs (UK) require us also to report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors’ Report for the year ended 31 March 2018 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Directors’ Report.
Fusion Antibodies plc
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Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 19, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true
and fair view. The directors are also 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.
In preparing the financial statements, the directors are responsible for assessing the 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 the
directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
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 an auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a 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
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received
from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Kevin MacAllister (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Belfast
15 August 2018
Financial Statements for the year ended 31 March 2018
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24
Statement of Comprehensive Income
For the year ended 31 March 2018
2018 2017
Before Non-recurring After Before Non-recurring After
non-recurring items non-recurring non-recurring items non-recurring
Notes items (note 28) items items (note 28) items
£ £ £ £ £ £
Revenue 4 2,690,744 – 2,690,744 1,913,956 – 1,913,956
Cost of sales (1,207,331) – (1,207,331) (952,459) – (952,459)
Gross profit 1,483,413 – 1,483,413 961,497 – 961,497
Other operating income 54,626 – 54,626 45,674 – 45,674
Administrative expenses (1,475,646) (772,936) (2,248,582) (751,688) (128,953) (880,641)
Operating (loss)/profit 5 62,393 (772,936) (710,543) 255,483 (128,953) 126,530
Finance income 8 4,043 – 4,043 – – –
Finance costs 8 (4,862) – (4,862) (615) – (615)
(Loss)/profit before tax 61,574 (772,936) (711,362) 254,868 (128,953) 125,915
Income tax credit/(expense) 10 (63,883) 75,304 11,421 (66,360) 60,399 (5,961)
(Loss)/profit for the financial year (2,309) (697,632) (699,941) 188,508 (68,554) 119,954
Total comprehensive (expense)/
income for the year (2,309) (697,632) (699,941) 188,508 (68,554) 119,954
Pence Pence
(Loss)/earnings per share
Basic 11 (4.3) 0.9
Diluted 11 (4.2) 0.8
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
The accompanying notes on pages 28 to 48 form an integral part of the financial statements.
Fusion Antibodies plc
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Statement of Financial Position
As at 31 March 2018
Assets
Non-current assets
Property, plant and equipment
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax receivable
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Net current assets
Non-current liabilities
Borrowings
Provisions for other liabilities and charges
Total liabilities
Net assets
Equity
Called up share capital
Share premium reserve
Retained earnings/(accumulated losses)
Total equity
Notes
2018
£
2017
£
12
14
15
16
17
18
18
19
21
546,734
1,156,047
1,702,781
107,253
1,118,864
1,226,117
81,815
926,220
6,906
4,490,931
5,505,872
7,208,653
70,261
571,998
2,078
285,685
930,022
2,156,139
536,299
33,758
570,057
430,217
–
430,217
4,935,815
499,805
43,529
20,000
633,586
–
20,000
450,217
6,575,067
1,705,922
883,648
4,872,327
819,092
6,575,067
547,655
6,161,269
(5,003,002)
1,705,922
The accompanying notes on pages 28 to 48 form an integral part of these financial statements.
The financial statements on pages 14 to 48 were approved by the Board on 15 August 2018, and signed on its behalf:
Dr Paul Kerr James Fair
Director Director
Registered in Northern Ireland, number NI039740
Financial Statements for the year ended 31 March 2018
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26
Statement of Changes in Equity
For the year ended 31 March 2018
Called up
share capital
£
(Accumulated
Share premium losses)/Retained
reserve earnings
£
£
Total
equity
£
At 1 April 2017 547,655
6,161,269
(5,003,002)
1,705,922
Loss for the year –
–
(699,941)
Capital reduction –
Issue of share capital 335,993
Cost of issuing share capital –
Share options – value of employee services –
Tax credit relating to share option scheme –
Total transactions with owners, recognised directly in equity 335,993
(6,161,269)
5,270,359
(398,032)
–
–
(1,288,942)
At 31 March 2018 883,648
4,872,327
6,161,269
–
–
330,176
30,590
6,522,035
819,092
(699,941)
–
5,606,352
(398,032)
330,176
30,590
5,569,086
6,575,067
At 1 April 2016 547,655
6,161,269
(5,251,909)
1,457,015
Profit for the year –
Share options – value of employee services –
Total transactions with owners, recognised directly in equity –
–
–
–
119,954
128,953
128,953
119,954
128,953
128,953
At 31 March 2017 547,655
6,161,269
(5,003,002)
1,705,922
The accompanying notes on pages 28 to 48 form an integral part of these financial statements.
Fusion Antibodies plc
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Statement of Cash Flows
For the year ended 31 March 2018
Cash flows from operating activities
(Loss)/profit for the year
Adjustments for:
Share based payment expense
Cost of raising capital
Depreciation
Finance income
Finance costs
Income tax (credit)/expense
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from/(used in) operations
Income tax received
Net cash generated from/(used in) from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Repayment of borrowings
Finance income – interest received
Finance costs – interest paid
Net cash generated from/(used in) financing activities
2018
£
2017
£
(699,941)
119,954
330,176
609,836
69,625
(4,043)
4,862
(11,421)
(11,554)
(225,322)
14,974
77,192
–
77,192
128,953
–
32,990
–
615
5,961
(70,261)
(294,373)
38,787
(37,374)
–
(37,374)
(444,595)
(444,595)
(90,271)
(90,271)
4,598,650
(25,182)
4,043
(4,862)
4,572,649
–
–
–
(615)
(615)
Net increase/(decrease) in cash and cash equivalents
4,205,246
(128,260)
Cash and cash equivalents at the beginning of the year
285,685
413,945
Cash and cash equivalents at the end of the year
4,490,931
285,685
The accompanying notes on pages 28 to 48 form an integral part of these financial statements.
Financial Statements for the year ended 31 March 2018
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Notes to the Financial Statements
For the year ended 31 March 2018
1 General information
Fusion Antibodies plc is a company incorporated and domiciled in the UK, having its registered office at Marlborough
House, 30 Victoria Street, Belfast BT1 3GG.
The principal activity of the company is the research, development and manufacture of recombinant proteins and
antibodies, particularly in the areas of cancer and infectious diseases.
2 Significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies
have been consistently applied to all years presented unless otherwise stated.
Basis of preparation
The financial statements have been prepared on the historical cost convention, modified to include certain financial
instruments at fair value.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in
these financial statements are rounded to the nearest £1.
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and
IFRS Interpretations Committee (IFRIC) as adopted by the European Union and with the Companies Act 2006 applicable to
companies reporting under IFRS.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the company’s accounting policies. The
areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed in note 3.
Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the company has
adequate resources to continue in operational existence for 12 months from the reporting date. Thus they continue to adopt
the going concern basis of accounting in preparing the financial statements. In arriving at this conclusion the Directors have
reviewed detailed forecast models for the company. These models are based on best estimates of future performance and
have been adjusted to reflect various scenarios and outcomes that could potentially impact the forecasts.
Changes in accounting policy and disclosures
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning
after 1 April 2018, and have not been applied in preparing these financial statements. None of these is expected to have a
significant effect on the financial statements of the company, except the following, set out below:
•
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and
financial liabilities. The standard is effective for accounting periods beginning on or after 1 January 2018. The company
will apply the standard retrospectively for the first time in the half year report ending 30 September 2018 and the
annual report ending 31 March 2019.
IFRS 9 is applicable to financial assets and financial liabilities, and covers classification, measurement and derecognition.
On adoption of IFRS 9, the main areas of change that are relevant for the company are:
– requirement to use an expected credit loss method for impairment calculation; and
– broadening of hedge accounting application with more focus on risk management alignment.
Fusion Antibodies plc
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2 Significant accounting policies continued
If applied at 31 March 2018 it is estimated that the credit loss impairment would have been less than £3,500. The full impact
will be subject to a further assessment and is dependent on the instruments and balances open at the transition date.
•
•
IFRS 15, ‘Revenue from contracts with customers’, deals with revenue recognition and establishes principles for
reporting useful information to users of financial statements about the nature, amount, timing, and uncertainty of
revenue and cash flows arising from an entity’s contracts with customers. The standard is effective for accounting
periods beginning on or after 1 January 2018. The company will apply the standard retrospectively for the first time in
the half year report ending 30 September 2018 and the annual report ending 31 March 2019.
The new standard will replace existing accounting standards used to determine the measurement and timing of revenue
recognition, and requires an entity to align the recognition of revenue to the transfer of goods or services at an amount that
the entity expects to be entitled to in exchange for those goods or services. The standard also requires enhanced revenue
disclosure.
For the company’s revenue streams an initial review has been performed on a sample of service agreements and upon
adoption there will be a minor delay in the recognition of revenue due to a change in the percentage of completion
method currently being used. If applied at 31 March 2018 this is estimated to reduce revenues for the year then ended
by £24,400 Given the customised nature of some of the contracts open at any given date, the company is continuing
to assess the full impact on these areas of revenue in future periods.
IFRS 16, ‘Leases’, will introduce a single lessee accounting model, eliminating the previous classification of leases as
either operating or finance. The standard is effective for accounting periods beginning on or after 1 January 2019. The
company will apply the standard retrospectively for the first time in the half year report ending 30 September 2019 and
the annual report ending 31 March 2020.
The standard will require recognition of an asset and a related liability unless the lease term is 12 months or less or the
underlying asset value is low. An initial impact review indicates that the only lease currently in force that will be affected
is for the company premises in Belfast.
Given that the transition date will be 1 April 2019, the final transition impact assessment is still in progress and will be
dependent on the transition method selected by the company and the leases in existence at the transition date.
The standard was endorsed by the EU on 31 October 2017.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents the amount receivable for
goods supplied or services rendered, net of returns, discounts and rebates allowed by the company and value added taxes.
Where the consideration receivable in cash or cash equivalents is deferred, and the arrangement constitutes a financing
transaction, the fair value of the consideration is measured as the present value of all future receipts using the imputed rate of
interest. The company recognises revenue when (i) the significant risks and rewards of ownership have been transferred to the
buyer; (ii) the company retains no continuing involvement or control over the goods; (iii) the amount of revenue can be measured
reliably; and (iv) it is probable that future economic benefits will flow to the company.
Revenue in respect of the services the company provide are recognised using the percentage of completion method applied
to each stage of its agreements with customers.
Grant income
Revenue grants received by the company are recognised in a manner consistent with the grant conditions. Once conditions
have been met, revenue is recognised in the Statement of Comprehensive Income and shown as Other Operating Income.
Research and development
Research expenditure is written off as incurred. Development expenditure is recognised in the Statement of Comprehensive
Income as an expense until it can be demonstrated that the following conditions for capitalisation apply:
Financial Statements for the year ended 31 March 2018
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Notes to the Financial Statements continued
For the year ended 31 March 2018
2 Significant accounting policies continued
It is technically feasible to complete the scientific product so that it will be available for use;
•
• Management intends to complete the product and use or sell it;
•
•
•
There is an ability to use or sell the product;
It can be demonstrated how the product will generate probable future economic benefits;
Adequate technical, financial and other resources to complete the development and to use or sell the product are
available; and
The expenditure attributable to the product during its development can be reliably measured.
•
Property, plant and equipment
Property, plant and equipment are initially recognised at historical cost, net of depreciation and any impairment losses.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be
measured reliably. The carrying amount of the replaced part is de-recognised. All other repairs and maintenance are
charged to the statement of comprehensive income during the financial period in which they are incurred.
Subsequently, property plant and equipment are measured at cost or valuation net of depreciation and any impairment
losses.
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Software
acquired with hardware is considered to be integral to that operations of that hardware and is capitalised with that equipment.
Software acquired separately from hardware is recognised as an intangible asset and amortised over its estimated useful life.
Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost less estimated residual
value of each asset on a straightline basis over its expected economic useful life as follows:
Leasehold improvements
The lesser of the asset life and the remaining length of the lease
Plant and machinery
Fixtures, fittings & equipment
4 years
4 years
Impairment of non-financial assets
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent
cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at
cash-generating unit level.
All individual assets or cash-generating units are tested 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 or cash-generating unit’s amount exceeds its
recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and
value in use. Value in use is based on estimated future cash flows from each cash-generating unit or individual asset,
discounted at a suitable rate in order to calculate the present value of those cash flows. The data used for impairment testing
procedures is directly linked to the company’s latest approved budgets, adjusted as necessary to exclude any restructuring to
which the company is not yet committed. Discount rates are determined individually for each cash-generating unit or
individual asset and reflect their respective risk profiles as assessed by the directors.
Impairment losses for cash-generating units are charged pro rata to the assets in the cash-generating unit. Cash generating
units and individual assets are subsequently reassessed for indications that an impairment loss previously recognised may
Fusion Antibodies plc
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2 Significant accounting policies continued
no longer exist. Impairment charges are included in administrative expenses in the Statement of Comprehensive Income. An
impairment charge that has been recognised is reversed if the cash-generating unit’s or individual asset’s recoverable
amount exceeds its carrying amount.
Current tax and deferred tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive
income, except to the extent that it relates to items recognised directly in equity.
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in
the UK, where the company operates and generates taxable income. Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences arising between the carrying amounts of assets and liabilities and their
tax bases. Deferred tax is determined using tax rates (and laws) that have been enacted, or substantively enacted, by the
reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities.
Share based employee compensation
The company operates equity-settled share-based compensation plans for remuneration of its Directors and employees.
All employee services received in exchange for the grant of any share-based compensation are measured at their fair
values. The fair value is appraised at the grant date and excludes the impact of any non-market vesting conditions (e.g.
profitability and remaining an employee of the company over a specified time period).
Share based compensation is recognised as an expense in the Statement of Comprehensive Income with a corresponding
credit to equity. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based
on the best available estimate of the number of share options expected to vest. Other vesting conditions include the
restriction for certain options to vest only on a takeover or listing of the company on a recognised stock market.
Non-market vesting conditions are included in assumptions about the number of options that are expected to become
exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest
differs from previous estimates.
The proceeds received net of any directly attributable transaction costs are credited to share capital and share premium
when the options are exercised.
Financial assets
The company classifies its financial assets as loans and receivables. The classification depends on the purpose for which
the asset was acquired. Management determines the classification of its financial assets at initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are included in current assets, except for maturities greater than 12 months after the end of the
reporting period. These are classified as non-current assets. The company’s loans and receivables comprise ‘trade and
other receivables’ and ‘cash and cash equivalents’ in the Statement of Financial Position.
Financial Statements for the year ended 31 March 2018
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Notes to the Financial Statements continued
For the year ended 31 March 2018
2 Significant accounting policies continued
Financial assets are initially recognised at fair value. Financial assets are derecognised when the rights to receive cash flows from
the investments have expired or have been transferred and the company has transferred substantially all risks and rewards of
ownership. Loans and receivables are subsequently measured at amortised cost using the effective interest method.
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle
the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the
normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
The company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are
incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial
recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of
the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future
cash flows, such as changes in arrears or economic conditions that correlate with defaults.
For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and
the present value of estimated future cashflows (excluding future credit losses that have not been incurred) discounted at
the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is
recognised in the statement of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate,
the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a
practical expedient, the company may measure impairment on the basis of an instrument’s fair value using an observable
market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of
the previously recognised impairment loss is recognised in the statement of comprehensive income.
Trade receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of
business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are
classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Cash and cash equivalents
In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other
short term highly liquid investments with original maturities of three months or less and bank overdrafts. In the statement of
financial position, overdrafts are shown within borrowings in current liabilities.
Inventories
Inventories comprise consumables.
Fusion Antibodies plc
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33
2 Significant accounting policies continued
Consumables inventory is stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out
(FIFO) method. Cost represents the amounts payable on the acquisition of materials. Net realisable value represents the
estimated selling price less all estimated costs of completion and costs to be incurred in selling and distribution.
Financial liabilities
All of the company’s financial liabilities are classified as financial liabilities carried at amortised cost. The company does not
use derivative financial instruments or hedge accounts for any transactions. Financial liabilities comprise Trade payables and
other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost
using the effective interest method.
Provisions
A provision is recognised in the Statement of Financial Position when the company 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. Provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects risks specific to the liability. The increase in the provision due to the passage of time is recognised as a
finance cost.
Provisions for dilapidation charges that will crystallise at the end of the period of occupancy are provided for in full.
Employee benefits – Defined contribution plan
The company operates a defined contribution pension scheme which is open to all employees and directors. The assets of
the schemes are held by investment managers separately from those of the company. The contributions payable to these
schemes are recorded in the Statement of Comprehensive Income in the accounting period to which they relate.
Foreign currency translation
The company’s functional currency is the pound sterling. Transactions in foreign currencies are translated at the exchange
rate ruling at the date of transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of
exchange ruling at the reporting date. Exchange differences arising on the settlement or on translating monetary items at
rates different from those at which they were initially recorded are recognised in administrative expenses in the Statement of
Comprehensive Income in the period in which they arise.
Equity
Equity comprises the following;
Called up share capital
Share capital represents the nominal value of equity shares.
Share premium
Share premium represents the excess over nominal value of the fair value of consideration received of equity shares, net of
expenses of the share issue.
Retained earnings/(accumulated losses)
Retained earnings/(accumulated losses) represents retained profits and losses.
Leases
Leases in which a significant portion of the risks and rewards of ownership remain with the lessor are classified as operating
leases and are charged to the Statement of Comprehensive Income on a straight-line basis over the period of the lease.
Financial Statements for the year ended 31 March 2018
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34
Notes to the Financial Statements continued
For the year ended 31 March 2018
3 Critical accounting estimates and judgements
Many of the amounts included in the financial statements involve the use of judgement and/or estimates. These judgements
and estimates are based on management’s best knowledge of the relevant facts and circumstances, having regard to prior
experience, but actual results may differ from the amounts included in the financial statements. Information about such
judgements and estimation is contained in the accounting policy and/or the notes to the financial statements and the key
areas are summarised below:
Critical judgements in applying accounting policies
The directors do not consider there are any critical judgements in applying accounting policies.
Critical accounting estimates and assumptions
•
•
•
Deferred Taxation. The company has significant tax losses which are able to be carried forward to be offset against
future profits of the company. A deferred tax asset has been calculated based on estimates of future profits against
which these losses can be utilised. Deferred tax represents a significant asset of the company and therefore
movements being charged through the Statement of Comprehensive Income also have the potential to affect
reported profit or loss. Profits may be offset at future taxation rates of either 19% or 17%. Should £100,000 of
taxable profits be forecast to be realised at the lower rate rather than the higher then the deferred taxation asset
would reduce by £2,000.
Costs associated with the IPO. During the year the company incurred significant costs in association with issuing new
shares and listing on AIM. As these two transactions occurred at the same time costs from the company’s advisers
contained elements relating to both the issue of shares and the listing of the shares. Where a clear division was
apparent costs were allocated on that basis and, for all other costs an apportionment was made based on the
directors’ estimation of the proportion of work associated with each transaction. Costs in relation to the issue of new
shares has been deducted from share premium and the remainder has been charged to the income statement.
Share Based Payments. The company operates an employee share option scheme and has recognised an annual cost
in the Income Statement. The calculation of the costs is based on a number of estimates and assumptions, of which
one has a significant impact on the amounts recorded in the financial statements:
o Fair value of the shares at date of grant. As a private company an open market share price was not available
when options were awarded so the company has historically applied the Black-Scholes method based on the
most recent price at which capital was raised. A 5% fluctuation in the fair value of shares at grant date would
have resulted in the cumulative charge to the income statement being approximately £45,000 higher or lower
(2017: £36,000).
4 Revenue
All of the activities of the company fall within one business segment, that of research, development and manufacture of
recombinant proteins and antibodies.
Geographic analysis
UK (domicile)
Rest of Europe
North America
Rest of World
2018
£
278,414
934,877
817,933
659,520
2017
£
309,150
846,628
746,405
11,773
1,913,956
In the year sales to one customer exceeded 10% of revenues, that customer accounted for £308,049 or 11.45% of revenues. In
2017 one customer exceeded 10% of revenues, that customer accounted for £198,334 or 10.37% of revenues.
2,690,744
Fusion Antibodies plc
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FINANCIAL STATEMENTS
35
5 Operating (loss)/profit is stated after charging/(crediting)
Employee benefit costs
- wages and salaries
- social security costs
- other pension costs
- share based payments
2018
£
887,383
96,072
33,915
330,176
1,347,546
2017
£
643,081
61,975
34,733
128,953
868,742
Depreciation of property, plant and equipment
69,625
32,990
Other operating expenses
Operating lease rentals – land & buildings
Rates, utilities and property maintenance
IT costs
Fees payable to the company’s auditors
- for the audit of the financial statements
- for the provision of reporting accountants’ services in respect of the IPO
Raw materials and consumables used
Increase in inventories
Patent costs
Marketing costs
Loss/(profit) on foreign exchange
Costs associated with IPO other than reporting accountants’ services
Other expenses
73,224
36,126
17,236
18,350
222,000
240,350
628,428
(11,554)
15,601
132,347
36,892
387,836
482,256
40,000
19,910
7,387
9,000
–
9,000
591,099
(70,261)
45,966
75,202
(21,113)
–
234,178
Total cost of sales and administrative expenses
3,455,913
1,833,100
6 Average staff numbers
Employed in UK
(including executive directors)
Non-executive directors
2018
2017
24
6
30
15
6
21
Financial Statements for the year ended 31 March 2018
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Notes to the Financial Statements continued
For the year ended 31 March 2018
7 Remuneration of directors and key senior management
Directors
Emoluments
Pension contributions
Fees paid to third parties for services of directors
Total
Highest paid director
The highest paid director received the following emoluments:
Emoluments
Pension contributions
Total
Key senior management
2018
£
301,419
11,455
50,525
363,399
2018
£
87,564
4,375
91,939
2017
£
189,865
21,322
38,500
249,687
2017
£
77,715
2,640
80,355
Key senior management is considered to be the directors of the company with total remuneration for the year of £363,399
(2017: £249,687).
8 Finance income and costs
Income
Bank interest receivable
Cost
Interest expense on other borrowings
Bank interest payable
9 Share based payments
2018
£
4,043
2018
£
4,857
5
4,862
2017
£
–
2017
£
615
–
615
During the year all remaining grants under the historic 2005 schemes “historic options” either lapsed or were exercised prior
to the IPO. In addition, at the reporting date the company had two share based reward schemes under which options were
granted during the year and are now closed to future grants and a third scheme in place for future use under which no
grants had been made at the reporting date:
•
•
•
A United Kingdom tax authority approved scheme for executive directors and senior staff;
An unapproved scheme for awards to those, such as non-executive directors, not qualifying for the unapproved
scheme; and
A United Kingdom tax authority approved scheme for executive directors and senior staff which incorporates
unapproved options for grants to be made following listing of the company shares, “2017 EMI and Unapproved
Employee Share Option Scheme”.
Fusion Antibodies plc
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FINANCIAL STATEMENTS
37
9 Share based payments continued
Options awarded during the year under both the approved and unapproved schemes have no performance conditions other
than the continued employment within the company. Options vest one to two years from the date of grant, which may
accelerate for a change of control. Options lapse if not exercised within ten years of grant, or if the individual leaves the
company prior to the vesting date, except under certain circumstances such as leaving by reason of redundancy.
At the reporting date no grants had been made under the 2017 EMI and Unapproved Employee Share Option Scheme.
The total share-based remuneration recognised in the Statement of Comprehensive Income was £330,176 (2017:
£128,953). The most recent options granted in the year were valued using the Black-Scholes method. With no open market
valuation, the share price on grant used a share price based on a multiple of FY 2017 revenues consistent with that used to
set the share price at listing, expected volatility of 13.4% and a compound risk free rate assumed of 1.53%.
2018
Weighted
average
exercise price
£
Outstanding at beginning of the year 1.60
2018
Number
74,300
Subdivision of each £1 into £0.04 shares 0.06
1,857,500
Granted during the year 0.04
Exercised during the year 0.06
Lapsed during the year 0.08
508,750
(1,692,500)
(168,750)
Outstanding at the end of the year 0.04
505,000
The options outstanding at the end of each year were as follows:
Nominal Exercise price
£
Expiry share value
April 2017 £1.00
February 2018 £1.00
February 2018 £1.00
September 2018 £1.00
October 2019 £1.00
October 2019 £1.00
May 2021 £1.00
November 2024 £1.00
May 2027 £0.04
Total
1.00
6.00
1.00
1.00
4.00
1.00
2.20
1.00
0.04
Of the total number outstanding none (2017: none) had vested at the year end.
2017
Weighted
average
exercise price
£
1.59
–
–
1.00
1.60
2018
Number
–
–
–
–
–
–
–
–
505,000
505,000
2017
Number
75,300
–
–
(1,000)
74,300
2017
Number
5,000
2,300
4,000
2,000
3,400
12,250
19,250
26,100
–
74,300
Financial Statements for the year ended 31 March 2018
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Notes to the Financial Statements continued
For the year ended 31 March 2018
10 Income tax (credit)/expense
Current tax – UK corporation tax
Deferred tax – origination and reversal of temporary differences
Income tax (credit)/expense
2018
£
(4,828)
(6,593)
(11,421)
2017
£
(2,078)
8,039
5,961
The difference between (loss)/profit before tax multiplied by the base rate of 19% (2017: 20%) and the income tax
credit/(expense) is explained in the reconciliation below:
Factors affecting the tax charge for the year
(Loss)/profit before tax
(Loss)/profit before tax multiplied by standard rate of UK corporation
tax of 19% (2017: 20%)
Provisions and expenditure not deductible for tax purposes – permanent
Provisions and expenditure not deductible for tax purposes – temporary
Reduction in deferred tax asset due to change in enacted rate
RDEC/R&D tax credit
Adjustment in recognition of deferred tax
Income tax (credit)/expense
11 Earnings per share
(Loss)/profit for the financial year
(Loss)/earnings per share
Basic
Diluted
Issued ordinary shares at the end of the year
Weighted average number of shares in issue during the year
Dilutive effect of share options
2018
£
2017
£
(711,362)
125,915
(135,159)
119,665
(210,784)
–
(4,828)
219,685
(11,421)
25,183
(323)
–
22,228
(2,078)
(39,049)
5,961
2018
£
2017
£
(699,941)
119,954
pence
(4.3)
(4.2)
pence
0.9
0.8
Number
22,091,192
16,117,206
399,732
Number
13,691,375
13,691,375
1,178,350
Diluted weighted average number of shares in issue during the year
16,516,938
14,869,725
Basic earnings per share is calculated by dividing the basic earnings for the year by the weighted average number of shares
in issue during the year. During the year the company subdivided its ordinary shares of £1 into 25 ordinary shares of £0.04.
The number of shares for 2017 has been restated by a factor of 25 for ease of comparison of earnings per new share.
Diluted earnings per share is calculated on the same basis as the basic earnings per share with a further adjustment to the
weighted average number of fully paid ordinary shared to reflect the effect of partially dilutive ordinary share options.
Fusion Antibodies plc
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FINANCIAL STATEMENTS
39
12 Property, plant and equipment
Assets under Leasehold
construction improvements
£ £
Plant &
machinery
£
Cost
At 1 April 2017 – 156,059
Additions 205,129 –
Disposals – –
At 31 March 2018 205,129 156,059
Accumulated depreciation
At 1 April 2017 – 156,059
Depreciation charged in the year – –
Disposals – –
At 31 March 2018 – 156,059
483,770
229,220
(21,745)
691,245
389,532
63,064
(21,745)
430,851
Fixtures,
fittings &
equipment
£
60,723
74,757
(27,793)
Total
£
700,552
509,106
(49,538)
107,687
1,160,120
47,708
6,561
(27,793)
26,476
593,299
69,625
(49,538)
613,386
Net book value
At 31 March 2018 205,129 –
At 31 March 2017 – –
260,934
94,238
81,211
13,015
546,734
107,253
Leasehold
improvements
£
Cost
At 1 April 2016 156,059
Additions –
At 31 March 2017 156,059
Accumulated depreciation
At 1 April 2016 148,123
Depreciation charged in the year 7,936
At 31 March 2017 156,059
Net book value
At 31 March 2017 –
At 31 March 2016 7,936
Plant &
machinery
£
403,456
80,314
483,770
368,048
21,484
389,532
94,238
35,408
Fixtures,
fittings &
equipment
£
50,766
9,957
60,723
44,138
3,570
47,708
13,015
6,628
Total
£
610,281
90,271
700,552
560,309
32,990
593,299
107,253
49,972
Plant & machinery with a net book value of £100,303 is held under hire purchase agreements or finance leases
(2017: none).
The depreciation expense is included in administrative expenses in the statement of comprehensive income in each for
the financial years shown.
Financial Statements for the year ended 31 March 2018
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Notes to the Financial Statements continued
For the year ended 31 March 2018
13 Investment in subsidiary
The company has the following investment in a subsidiary:
Fusion Contract Services Limited
100% subsidiary
Dormant company
Marlborough House, 30 Victoria Street, Belfast BT1 3GG
2018
£
1
2017
£
1
Group accounts are not prepared on the basis that the subsidiary company is dormant and not material to the financial
statements.
14 Deferred tax
At 1 April
Credited/(charged) to the statement of comprehensive in the year
Credited to equity in the year
At 31 March
2018
£
1,118,864
6,593
30,590
1,156,047
2017
£
1,126,903
(8,039)
–
1,118,864
The movement in deferred tax assets and liabilities during the financial year, without taking into consideration the offsetting
of balances within the same tax jurisdiction, is as follows:
Accelerated
tax
depreciation Tax losses
Deferred tax assets and liabilities £ £
At 1 April 2016 16,086 1,034,639
(Charged)/credited to Statement
of Comprehensive Income (16,724) (50,392)
At 1 April 2017 (638) 984,247
(Charged)/credited to Statement
of Comprehensive Income (40,126) 155,058
Credited to equity – –
At 31 March 2018 (40,764) 1,139,305
Share
based
payments
£
76,178
58,557
134,735
(109,546)
30,590
55,779
RDEC
tax credit
£
Total
£
–
1,126,903
520
520
1,207
–
1,727
(8,039)
1,118,864
6,593
30,590
1,156,047
Deferred tax assets are recognised for the carry forward of corporation tax losses to the extent that the realisation of a future
benefit is probable. The deferred tax asset arising from future utilisation of taxable losses of £6,596,169 (2017: £5,414,228)
is dependent on future taxable profits arising in the UK. The directors are of the opinion that it is more likely than not that
there will be sufficient future taxable profits against which the tax losses can be deducted and accordingly, a deferred tax
asset has been recognised.
Deferred tax assets are calculated at tax rates that are expected to apply to their respective period of realisation, provided
they are enacted, or substantively enacted, at the reporting date. The change of rate from 19% to 17%, effective from 1
April 2020, was substantively enacted as part of the Finance Act 2016.
Deferred tax liabilities and assets expected to reverse after more than 12 months: £1,136,487 (2017: £913,843).
Fusion Antibodies plc
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41
15 Inventories
Raw materials and consumables
Materials for sale
The cost of inventories recognised as an expense for the year was £628,428 (2017: £591,099).
16 Trade and other receivables
Trade receivables
Provision for impairment of trade receivables
Trade receivables – net
Other receivables
Prepayments and accrued income
2018
£
81,815
–
81,815
2018
£
513,870
(2,994)
510,876
133,357
281,987
926,220
2017
£
68,661
1,600
70,261
2017
£
527,092
(17,045)
510,047
49,712
12,239
571,998
The fair value of receivables approximates to their carrying value.
At the reporting date, trade receivables of £2,994 (2017: £27,045) were impaired. The individually impaired receivables
related to customers which were in unexpectedly difficult circumstances. It is assessed that £nil (2017: £10,000) is expected
to be recovered. The ageing of these receivables is as follows:
6 to 12 months
More than 12 months
The carrying amount of trade and other receivables are denominated in the following currencies:
UK pound
Euro
US dollar
Japanese Yen
2018
£
2,994
–
2,994
2018
£
501,574
72,489
42,119
28,051
644,233
2017
£
–
27,045
27,045
2017
£
343,804
51,278
164,677
–
559,759
Financial Statements for the year ended 31 March 2018
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Notes to the Financial Statements continued
For the year ended 31 March 2018
16 Trade and other receivables continued
The aging of unimpaired trade receivables which were past due at the reporting date was as follows:
Not more than 3 months
3 to 6 months
6 to 9 months
Movements on the provision for impairment of trade receivables are as follows:
At 1 April
Provision
Write off as uncollectible
At 31 March
2018
£
196,915
33,039
3,927
233,881
2018
£
17,045
2,994
(17,045)
2,994
2017
£
21,030
148
–
21,178
2017
£
44,243
17,045
(44,243)
17,045
The creation and release of provision for impaired receivables has been included in administrative expenses in the
Statement of Comprehensive Income.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned
above. The company does not hold any collateral as security.
17 Trade and other payables
Trade payables
Social security and other taxes
Other payables
Accruals and deferred income
2018
£
281,284
28,493
15,654
210,868
536,299
2017
£
245,633
34,951
16,683
132,950
430,217
The fair value of payables approximates to their carrying value.
Invest Northern Ireland hold a mortgage dated 9 December 2009 for securing all monies due or to become due from the
company on any account. At the reporting date a balance of £6,879 (2017: £24,235) was due to Invest Northern Ireland.
Fusion Antibodies plc
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FINANCIAL STATEMENTS
18 Borrowings
Hire purchase contracts
At 1 April
Additions in year
Interest
Repayments
At 31 March
Amounts due in less than 1 year
Amounts due after more than 1 year
2018
£
–
102,469
4,097
(29,279)
77,287
33,758
43,529
77,287
43
2017
£
–
–
–
–
–
–
–
–
All borrowings are denominated in UK pounds. Using a discount rate of 5.5% per annum the fair value of borrowings at the
reporting date is £72,502.
Borrowings are secured by a fixed and floating charge over the whole undertaking of the company, its property, assets and
rights in favour of Northern Bank Ltd trading as Danske Bank.
19 Provisions for liabilities
Due after more than 1 year
2018
£
20,000
2017
£
20,000
Leasehold dilapidations relate to the estimated cost of returning a leasehold property to its original state at the end of the
lease in accordance with the lease terms. The company’s premises are held under a lease expiring 31 July 2022. The costs
of dilapidations would be incurred on vacating the premises.
20 Financial instruments
The company is exposed to risks that arise from its use of financial instruments. This note describes the company’s
objectives, policies and processes for managing those risks and methods used to measure them. There have been no
substantive changes in the company’s exposure to financial instrument risks and the methods used to measure them from
previous periods unless otherwise stated in this note.
The principal financial instruments used by the company, from which the financial instrument risk arises, are trade
receivables, cash and cash equivalents and trade and other payables. The fair values of all the company’s financial
instruments are the same as their carrying values.
Financial Statements for the year ended 31 March 2018
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Notes to the Financial Statements continued
For the year ended 31 March 2018
20 Financial instruments continued
Financial instruments by category
Financial instruments categories are as follows:
Assets at fair
Loans and value through
receivables profit or loss
As at 31 March 2018 £ £
Derivatives
used for
hedging
£
Available
for sale
£
Trade receivables 510,876 –
Other receivables 133,357 –
Cash and cash equivalents 4,490,931 –
Total 5,135,164 –
–
–
–
–
Assets at fair
Loans and value through
receivables profit or loss
As at 31 March 2017 £ £
Derivatives
used for
hedging
£
Trade receivables 510,047 –
Other receivables 49,712 –
Cash and cash equivalents 285,685 –
Total 845,444 –
–
–
–
–
–
–
–
–
Available
for sale
£
–
–
–
–
Liabilities at
fair value
through
profit or loss
As at 31 March 2018 £
Trade payables –
Other payables –
Accruals –
Secured borrowings –
Total –
used
Derivatives Other financial
liabilities at
for hedging amortised cost
£
£
–
–
–
–
–
281,284
15,654
200,197
77,287
574,422
Liabilities at
fair value
through
profit or loss
As at 31 March 2017 £
Trade payables –
Other payables –
Accruals and deferred income –
Total –
Derivatives Other financial
liabilities at
amortised cost
£
used
for hedging
£
–
–
–
–
245,633
16,683
132,950
395,266
Fusion Antibodies plc
Total
£
510,876
133,357
4,490,931
5,135,164
Total
£
510,047
49,712
285,685
845,444
Total
£
281,284
15,654
200,197
77,287
574,422
Total
£
245,633
16,683
132,950
395,266
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45
20 Financial instruments continued
Capital management
The company’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
In order to maintain or adjust the capital structure, the company may issue new shares or sell assets to provide working
capital.
Consistent with others in the industry at this stage of development, the company has relied on issuing new shares and cash
generated from operations.
General objectives, policies and processes – risk management
The company is exposed through its operations to the following financial instrument risks: credit risk; liquidity risk and foreign
currency risk. The policy for managing these risks is set by the Board following recommendations from the Chief Financial
Officer. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting
the company’s competitiveness and flexibility. The policy for each of the above risks is described in more detail below.
Credit risk
Credit risk arises from the company’s trade and other receivables, and from cash at bank. It is the risk that the counterparty
fails to discharge their obligation in respect of the instrument.
The company is mainly exposed to credit risk from credit sales. It is company policy to assess the credit risk of new customers
before entering contracts. Also, for certain new customers the company will seek payment at each stage of a project to reduce
the amount of the receivable the company has outstanding for that customer.
At the year end the company’s bank balances were all held with Northern Bank Ltd trading as Danske Bank (Moody’s
rating P-1).
Liquidity risk
Liquidity risk arises from the company’s management of working capital, and is the risk that the company will encounter
difficulty in meeting its financial obligations as they fall due.
At each board meeting, and at the reporting date, the cash flow projections are considered by the Board to confirm that the
company has sufficient funds and available funding facilities to meet its obligations as they fall due.
Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates.
The company seeks to transact the majority of its business in its reporting currency (£Sterling). However, many customers and
suppliers are outside the UK and a proportion of these transact with the company in US Dollars, Euros and Japanese Yen. For
that reason the company operates current bank accounts in US Dollars and Euros as well as in its reporting currency. To the
maximum extent possible receipts and payments in a particular currency are made through the bank account in that currency
to reduce the amount of funds translated to or from the reporting currency. Cash flow projections are used to plan for those
occasion when funds will need to be translated into different currencies so that exchange rate risk is minimised.
If the exchange rate between Sterling and the Dollar, Euro or Japanese Yen had been 10% higher/lower at the reporting
date the effect on profit and equity would have been approximately £7,393 (2017: £7,300) higher/lower, £23,017 (2017:
£ 17,400) higher/lower and £2,550 (2017: £nil) higher/lower respectively.
Financial Statements for the year ended 31 March 2018
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Notes to the Financial Statements continued
For the year ended 31 March 2018
21 Called up share capital
Allotted, called up and fully paid
– 547,655 Ordinary shares of £1
– 22,091,192 Ordinary shares of £0.04
2018
£
–
883,648
883,648
2017
£
547,655
–
547,655
During the year the company subdivided each ordinary share of £1 into 25 ordinary shares of £0.04 and issued and allotted
8,399,817 shares for £5,606,352.
At 1 April 2017
Subdivision of ordinary shares
£0.04 ordinary shares issued in the year
At 31 March 2018
22 Capital commitments
Number of
shares in issue
547,655
13,691,375
8,399,817
22,091,192
Nominal value
£
547,655
547,655
335,993
883,648
At 31 March 2018 the company had contracted for but not incurred capital expenditure of £232,653 (2017: £nil).
23 Operating lease commitments
Minimum operating lease payments falling due
Within 1 year – land and property
In 1 to 2 years – land and property
In 2 to 5 years – land and property
24 Retirement benefits obligations
2018
£
75,000
75,000
175,000
2017
£
40,000
–
–
The company operates a defined contribution scheme, the assets of which are managed separately from the company.
During the year the company charged £33,915 to the Statement of Comprehensive Income (2017: £34,733) in respect of
Company contributions to the scheme. At the reporting date there was £5,779 (2017: £4,481) payable to the scheme and
included in other payables.
Fusion Antibodies plc
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47
25 Transactions with related parties
The company had the following transactions with related parties during the year:
Invest Northern Ireland (“Invest NI”) is a shareholder in the company. The company received invoices for rent and estate
services amounting to £78,957 (2017: £49,295). A balance of £6,879 (2017: £24,235) was due and payable to Invest NI at
the reporting date. The company claimed various grants during the year from Invest NI amounting to £47,591 (2017:
£45,674). A balance of £2,660 was due on submitted claims from Invest NI (2017: £nil).
Director Colin Walsh is also a director of Crescent Capital. During the year Crescent Capital charged the company £10,800
(2017: £10,000) for his services as a director and other consultancy and at the reporting date an amount of £2,000 (2017:
£5,000) was payable to Crescent Capital.
Director Alan Mawson is also a director of Clarendon Fund Managers. During the year Clarendon Fund Managers charged
the company £33,607 (2017: £33,641) for his services as a director and at the reporting date an amount of £nil (2016:
£27,000) was payable to Clarendon Fund Managers.
26 Events after the reporting date
There have been no events from the reporting date to the date of approval which need to be reported.
27 Ultimate controlling party
There is no ultimate controlling party.
28 Adjusted results
(Loss)/profit before tax
Accelerated share based payment charge (note a)
IPO costs (note b)
2018
£
(711,362)
163,100
609,836
61,574
2017
£
125,915
128,953
–
254,868
(a)
In advance of the IPO, share options granted before 31 March 2017 (historic options) were accelerated so they vested
and were exercised before the company listed on AIM. As a result the expense charged to the Statement of
Comprehensive Income for the two years ended 31 March 2018 was significantly increased over the annual charge to
profits that would be expected. In order to understand the underlying performance of the business, these exceptional
charges have been adjusted to arrive at the adjusted results. The total expense for share based payments for the year
was £330,176 (2017: £128,853) which includes the charge for options granted in the year (2017: £nil) in addition to the
£163,100 above.
(b)
In the year an expense of £609,836 was charged to the Statement of Comprehensive Income for professional fees in
relation to listing on AIM, a market operated by the London Stock Exchange. These charges are non-recurrent and do
not include ongoing adviser fees in respect of the AIM listing.
Financial Statements for the year ended 31 March 2018
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Notes to the Financial Statements continued
For the year ended 31 March 2018
28 Adjusted results continued
Reconciliation of adjusted profit to adjusted EBITDA
Profit before tax before non-recurring items
Finance income
Finance expense
Depreciation
Adjusted EBITDA
2018
£
61,574
(4.043)
4,862
69,625
132,018
2017
£
254,868
–
615
32,990
288,473
Fusion Antibodies plc
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FINANCIAL STATEMENTS
49
Company Information
Directors
Dr Simon Douglas (Non-Executive Chairman)
Dr Paul Kerr (Chief Executive Officer)
Dr Richard Buick (Chief Technical Officer)
Mr James Fair (Chief Financial Officer)
Ms Sonya Ferguson (Non-Executive Director)
Dr Alan Mawson (Non-Executive Director)
Mr Colin Walsh (Non-Executive Director)
Mr Tim Watts (Non-Executive Director)
Company secretary
Mr James Fair
Registered office
c/o Tughans Solicitors
Marlborough House
30 Victoria Street
Belfast
BT1 3GG
Website
www.fusionantibodies.com
Nominated adviser and broker
Allenby Capital Limited
5 St Helen’s Place
London
EC3A 6AB
Independent auditors
PricewaterhouseCoopers LLP
Waterfront Plaza
8 Laganbank Road
Belfast
BT1 3LR
Bankers
Danske Bank
Donegall Square West
Belfast
BT1 6JS
Solicitors
Tughans Solicitors
Marlborough House
30 Victoria Street
Belfast
BT1 3GG
Business address
1 Springbank Road
Springbank Industrial Estate
Dunmurry
Belfast
BT17 0QL
Public relations advisor
Walbrook PR
4 Lombard Street
EC3V 9HD
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
DLA Piper UK LLP
1 St Paul’s Place
Sheffield
S1 2JX
Registered in Northern Ireland, number NI039740
Financial Statements for the year ended 31 March 2018
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Perivan Financial Print 250258
Annual Report and Accounts 2018
Fusion Antibodies plc, 1 Springbank Road, Springbank Industrial Estate, Belfast BT17 0QL
www.fusionantibodies.com