Annual
Report
and
Accounts
2019
World leading Antibody Services.
We are specialists in Antibody
Discovery through to Clinical Supply.
Fusion Antibodies plc
1 Springbank Road
Springbank Industrial Estate
Belfast
BT17 0QL
discover more at
fusionantibodies.com
Headlines
For the year
• Significant increase in orders and revenues in H2 FY 2019
• Full year revenues fell by 19% to £2.2m due to weak H1
• £1.5m revenues in H2 FY 2019 was the company’s strongest-ever 6 month period
• Loss for the year of £1.3m (2018: £0.7m)
• New Rational Affinity Maturation Platform (RAMP™) introduced in December 2018
• Capacity expansion completed
• Business development team expanded and strengthened
• Cash position at the year-end £2.0m (2018: £4.5m)
Antibody Discovery
Antibody Engineering
HYBRIDOMA GENERATION
B CELL SCREENING
ANTIBODY SEQUENCING
CDRx™ HUMANIZATION
REFORMATTING TOOLKIT
ANTIBODY DEVELOPABILITY
AFFINITY MATURATION
Supply
TRANSIENT EXPRESSION
cGMP STABLE CELL LINE
DEVELOPMENT
ANTIBODY
CHARACTERIZATION
Post year end and looking ahead
• Commercial roll out of RAMPTM
• New senior recruitment in business development and in marketing
• Mammalian antibody library on track for delivery in 2020
Fusion Antibodies plc
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01
Contents
STRATEGIC REPORT
• Fusion at a glance 2
• Chairman’s statement 3
• Company overview 5
• CEO’s report and operations review 8
• Principal risks and uncertainties 10
CORPORATE GOVERNANCE
• Board of directors 13
• Corporate governance statement 16
• Directors’ report 19
FINANCIAL STATEMENTS
• Independent auditors’ report to the members
of Fusion Antibodies plc 25
• Statement of comprehensive income 29
• Statement of financial position 30
• Statement of changes in equity 31
• Statement of cash flows 32
• Notes to the financial statements 33
• Company information 56
Financial Statements for the year ended 31 March 2019
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STRATEGIC REPORT
Fusion at a glance
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 services include:
• Discovery: the creation, screening and sequencing of novel monoclonal antibodies for therapeutic and
diagnostic applications;
• Engineering: maximising the performance of an antibody drug including CDRxTM humanisation, Antibody
Developability by Design (ADDTM) and RAMPTM, a new service for FY2020; and
• Supply: the production of material for clinical production or further research, including cGMP ready stable cell
line development and transient expression.
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.
Snapshot
• 35 staff based in Belfast, UK
• 91% of our revenues are from outside the UK
• £2.2m generated revenues
Our advantages:
• We are an established contract research organisation, providing a multi-service offering from antibody
discovery and development to clinical supply;
• Our customers are pharmaceutical, biotech and diagnostic companies seeking to develop antibody based
therapeutic drugs and diagnostics;
• We continue to invest in technological advances to ensure our offering to customers is at the industry’s
leading edge: RAMPTM was introduced in December 2018 and development of the Antibody Library is on
track for 2020; and
• Our clients have progressed their projects into clinical trials confirming the value of the work that we do.
Fusion Antibodies plc
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STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
03
STRATEGIC REPORT
Chairman’s Statement
The year has been very significant for
the company, as we delivered our
on-site expansion plans, introduced
RAMPTM and responded to new
competition which emerged towards the
end of last year. In the first half of the
financial year (H1) trading was difficult
with pricing pressures and new
competition significantly impacting
revenues. However our response has
been effective and in H2 we recorded
the company’s highest revenues for a
six month period. The combination of a
weak H1, planned expenditure on
research and investment for growth
resulted in a loss for the year of £1.3m as
is explained in the Chief Executive
Officer’s report on page 8.
Strategy and progress
As a result of difficult trading in H1
the full year revenues were 19%
lower than in FY 2018. The Board
recognised that trading was
coming under pressure in the final
quarter of FY 2018, both as a result
of the impact on management of
the AIM admission process and
also from new competitive
pressures in the market, in
particular in relation to antibody
humanisation. This resulted in a
significant downturn in our
revenues in H1.
Management and the Board
responded strongly to these
challenges. Prices were adjusted
and operational improvements
were made to improve our
efficiency and maintain margin. We
strategically realigned our broad
technology base and enhanced
antibody design with Antibody
Developability by Design (ADDTM)
as a service providing further value
to our customers. The business
development team benefited from
a post IPO expansion with new
team members recruited and
trained in H1 and coinciding with
the expansion and equipping of
laboratories improving efficiency
and throughput for our customer
offering. As a result, the H2
revenues were more than double
those for H1 demonstrating a
marked turnaround and delivering
the highest six months revenue on
record. We believe that this can be
sustained with the potential for
further growth as the use of
antibodies and the outsourcing of
specific R&D activities in the
Pharmaceutical industry continues
to grow.
As part of our growth plans, over
the past 12 months we have
invested in the facilities and
delivered a significant expansion of
our laboratory and office space on
time and well under budget. This
gives us the capacity headroom
required for future growth.
Furthermore, we continue to
expand the commercial team and
to invest in the science behind the
services to deliver ever improving
techniques to a fast moving
industry. I am pleased to report
that the launch of RAMPTM, our
advanced affinity maturation
service to improve performance of
antibody based drugs, was
announced in December 2018 and
will be commercially rolled out
fully in the current year. Our
scientific skills and creativity can
also be seen in the progress of the
Antibody Library currently under
development for human antibody
discovery and which remains on
track for 2020.
Strategically we have aligned our
business into three core services to
meet our customer needs:
• Discovery: the creation,
screening and sequencing of
novel monoclonal antibodies for
therapeutic and diagnostic
applications;
• Engineering: maximising the
performance of an antibody
drug including CDRxTM
humanisation, ADDTM and
RAMPTM; and
• Supply: the production of
material for clinical production
or further research, including
cGMP ready stable cell line
development and transient
expression.
Financial Statements for the year ended 31 March 2019
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STRATEGIC REPORT
Chairman’s Statement continued
Antibody Library will continue
throughout the coming financial
year.
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
1 July 2019
More details on financial
performance are given in the Chief
Executive Officer’s report on
pages 8 to 9.
Corporate governance
The long-term success of the
business and delivery on strategy
depends on good governance. The
company complies with the
Quoted Companies Alliance
Corporate Governance Code 2018
as explained more fully in the
Governance Report.
Current trading
The company had a challenging
first six months with disappointing
revenues in H1 FY2019. Order levels
picked up significantly from
October 2018 onwards and
revenues in H2 FY2019 exceeded
all previous six-month periods. To
complement the record H2
revenues, order intake also
exceeded previous periods. The
introduction of the new RAMPTM
service towards the end of FY 2019
has been well received by potential
customers and is expected to
contribute to revenues in the
coming year. As explained in the
financial results section of the
CEO’s report, the company
returned a loss for the year and
the combined use of cash in
operations and invested in capital
expenditure was £2.5m.
Post year end trading has been in
line with expectation. Order
acquisition has remained firm and
revenue levels maintained
incorporating initial contributions
from RAMPTM. The company
continues to innovate and develop
its services, and in particular the
development of the Mammalian
Fusion Antibodies plc
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STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
05
STRATEGIC REPORT
Company Overview
Fusion Antibodies is an established
Contract Research Organisation
(CRO), 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.
Why antibodies?
Since the development of biologic
drugs such as human growth
hormone and insulin several
decades ago, the number of drug
targets has increased
exponentially. This is driven by the
discovery of new genetic
information and a better
understanding of disease
processes and this has led to a
need for more targeted therapies.
Antibodies are naturally occurring
biological molecules which are
produced by the immune system
in the body to neutralise
pathogens such as bacteria and
viruses circulating in the blood
stream or to remove other foreign
bodies. These antibodies are made
in the laboratory by identical
immune cells, which are
intentionally generated, isolated
and engineered to ensure they are
as specific and homogeneous as
possible. Monoclonal antibodies
are specialised in targeting a very
specific structure on the surface of
a cell. For example, in cancer
therapy, antibodies can be used to
bind selectively to the receptors of
the cancer cells, making it possible
to mark and to fight specific
abnormal cells. Healthy cells are
not usually attacked in this process
so there are often fewer side
effects than in classic
chemotherapy. This has led to the
rapid growth in the search for, and
development of, monoclonal
antibodies to target many clinical
conditions.
The 2018 Nobel Prizes in Chemistry
and in Physiology were both given
for work that is highly relevant to
antibody therapeutics research
and development in recognition of
the huge advances created by
antibodies in medical treatment.
Antibody based drugs are
approved at twice the success rate
of small molecule therapies:
• 81 approved antibody therapies
on the market at December
2018 (increased from 67 when
the company listed in December
2017);
• Over 570 antibody therapies in
clinical development; and
• Of those antibody drugs
entering phase 1 clinical trials,
1 in 4 is approved for use as a
drug, twice the rate of 1 in 8 for
small molecules.
The global antibody therapeutic
market in 2018 was valued at
£115bn with the top eight antibody
drugs accounting for $64bn, a
year on year increase of 11%. The
record breaking drug Humira alone
had sales of $20bn. Of the 15 top
selling drugs in 2018, 11 were
antibody based. The therapeutic
market is forecast to expand to
$240bn by 2025.
The companies engaged in
antibody therapeutic research
represent the market for Fusion
Antibodies. They range from global
pharmaceutical companies,
through to asset-centric “virtual”
companies to smaller research
institutes and university-based
research teams. The directors
believe that the company’s direct
addressable research market in the
year was approximately $100m
(growing annually at 4-8%) and
adding RAMPTM potentially
increases this by $68m for FY2020.
Development of the company’s
fully human antibody library, due in
2020, will greatly expand the
discovery service it can offer to
organisations in its current market.
This would be expected to
increase the company’s directly
addressable market to $2.0bn
through custom products and
licencing activities.
Current services
The company (“Fusion”) offers a
range of antibody engineering
services to companies in research,
development and commercialisation
of monoclonal antibodies. Key
services offered include:
Antibody discovery: the creation
and screening of novel antibodies
for therapeutic and diagnostics
applications. A key to success in
this area is to design a suitable
toxin or foreign substance
(antigen) to induce well targeted
antibodies. Fusion uses a
combination of extensive 3D
modelling and scientific expertise
to design effective antigens to
successfully generate the specific
immune response required.
As this service is at the early stage
of drug discovery it ensures that
the company is well positioned to
provide downstream antibody
engineering and expression
services as the customer
progresses with their development
programme;
Financial Statements for the year ended 31 March 2019
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STRATEGIC REPORT
Company Overview continued
CDRxTM Antibody Humanisation
Platform: genetic engineering
techniques are used to convert
antibodies from other species so
that they are suitable for human
applications. This process makes
these antibodies more similar to
human antibodies and thereby
reduces the likelihood of rejection
before the patient receives the
therapeutic benefit.
The company’s proprietary CDRxTM
platform enables the rapid,
accurate and detailed analysis of
the variable part of the antibody
that gives it its unique specificity
(CDR). This platform utilises
bespoke software and in-depth
knowhow which provides a market
leading solution for antibody
humanisation. This is borne out in
the percentage of customer
projects which have progressed to
clinical trials;
RAMPTM: This is a technically
advanced platform to improve
performance of antibody-based
drugs which the company initially
showcased in December 2018. A
key aspect of the platform is to
improve the binding strength, or
affinity, of an antibody to its target.
Even modest increases in affinity
can greatly improve the efficacy of
an antibody, improving its
therapeutic effectiveness, and
could reduce the dosage of
antibody required to have a
therapeutic effect thereby
reducing the cost. Affinity is not
the only factor in the
developability or manufacturability
of a drug and our rational design
approach allows for the
optimisation of other biophysical
properties; and
Stable cell line development:
Progressing a drug through
development into cGMP
production requires the
development of a stable cell line. A
stable cell line is an everlasting cell
line used to express large amounts
of the given antibody required for
production. Fusion has expertise in
the identification of high
expressing, stable clones which are
necessary for downstream
development. The company offers
a range of cell lines including
CHOvolutionTM and has a cGMP
partnership with Celonic AG which
offers our customers the option to
seamlessly transfer cell lines to a
cGMP facility so we can support
our customers throughout the
entire course of their drug
development process.
Future services
The company continues to
innovate to develop new services.
The most significant project under
way is the development of a
mammalian antibody library, due in
2020. This will not only remove the
need for animal hosts in drug
discovery but also reduce the
number of development steps and
remove the limitations of the
alternative approach, phage-
display, which is restricted to the
use of non-mammalian cells. This
restriction can lead to the selection
of antibodies which perform
poorly when transferred to a
mammalian system. The Board
believes this would provide
significant scientific and
commercial benefits for drug
developers in terms of speed,
therapeutic effectiveness and
manufacturability.
Additionally, the company will
explore making its proprietary
discovery platforms available to
drug developers under licence.
Licencing drug discovery
operations can offer licencees time
and cost related benefits. As
demand for therapeutic products
increases and as future services
are developed and marketed, the
opportunities for the company are
expected to increase in the
foreseeable future.
What are the company’s
competitive advantages?
• A broad range of services from
discovery to clinical supply
• High quality client base
• Proprietary humanisation
CDRxTM platform
• Proprietary affinity maturation
RAMPTM platform
• Technical expertise and
scientific know-how
• Continuous improvement in
services including those
currently under development:
new drug discovery
technologies including a
Mammalian Library Platform
The discovery of antibodies is a
long, arduous and cost intensive
process. As a result, many
developers opt to outsource all or
parts of these operations. Fusion
Antibodies has developed a suite
of service platforms that addresses
the need to produce highly
manufacturable, scalable
therapeutic antibodies from the
discovery phase through to the
production of stable, high yielding
CHO cell lines for clinical supply.
Fusion Antibodies plc
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STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
07
Business model
Fusion performs all its operations through a single trading entity. Initial engagement with prospective customers
is usually through a business development (BD) team member although both BD and scientists are involved
throughout the client engagement. Our approach throughout the selling and project delivery phases is to work
closely alongside the customer team to help them to achieve their desired outcomes.
Understanding the client requirements involves BD staff as well as scientist-to-scientist conversations to arrive
at a tailored approach and job specification, with the range of services offered giving the flexibility desired by
our customers to accelerate their drug development programmes. This process can last for several months as a
customer plans and brings their project to the point where Fusion becomes involved. It is the nature of the
industry that some customer projects are cancelled or postponed prior to this point.
A client order is usually divided into a number of development stages, each dependent on the results of the
previous stage. On more complex projects there may be points where the customer reviews their project, this
can lead to a decision to continue, to proceed on an amended programme of work or to stop.
Recombinant
Protein
Expression
Monoclonal
Antibody
Discovery and
Development
Antibody
Sequencing
Antibody
Engineering
Antibody
humanization
& RAMP
Stable Cell Line
Development
and cGMP
scale up
Discovery
Engineering
Supply
This structure means that there is significant scientific and commercial uncertainty in forecasting the
commencement date of a project and the timing of later stages. The company uses its extensive experience of
these uncertainties when scheduling projects, planning purchases and staff and equipment allocation as well as
forecasting revenues but the inherent uncertainty in forecasting activity and hence revenue cannot be
eliminated.
Financial Statements for the year ended 31 March 2019
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STRATEGIC REPORT
CEO’s Report and Operations Review
This year has been our first full year
as a listed company and has come
with some early challenges as well
as good reason for optimism. Weak
H1 revenues required a strong
management response while we
also implemented the actions
planned at the time of listing. As a
result of the weak H1 and investment
for growth, losses increased this
year to £1.3m (2018: £0.7m loss).
I am delighted to report a full
recovery of revenues in H2 along
with the expansion of laboratories,
targeted recruitment and continued
delivery from our research and
development programme. This is an
exciting time for the company and
I am pleased to work in a team of
talented people well equipped to
capture the full value of
opportunities presented by the
growing market in global drug
research.
Business review
Revenue performance across the
financial year to 31 March 2019
divides very clearly into two
six month periods. In the second
six months (H2) the company
delivered revenues of £1.5m, a new
high for the company and indicates
a strong recovery from the weak
trading (£0.7m) in the first six
months (H1). However, revenues for
the full year were 19% lower than the
previous financial year as a result.
Sales from our humanisation service
were again the main contributor to
revenues. Our newly introduced
Antibody Developability by Design
also began to generate modest
revenues in the year.
In terms of geographical
performance, revenues from North
America grew by 23% to become
our largest market in the year with a
reduction in revenues recorded for
the UK, rest of Europe and rest of
world. During the year the business
development team welcomed new
recruits who have been increasing
our client contact for increased
order acquisition. In particular
several trips have been made to
Asia as the company builds
relationships in Japan and South
Korea and develops new
opportunities in China.
In addition to the fees charged for
performing services, several
contracts now carry a royalty or
success payment which becomes
payable when the customer project
reaches a certain milestone. Having
received a small milestone payment
in FY 2018, the company did not
receive any milestone payments in
FY 2019. We maintain our interest in
several molecules humanised by the
company and developed by others,
including Mab Discovery, and have
added new milestones for work
performed this year which will
crystallise if these projects proceed
to clinical trials in the coming years.
In August 2018 we completed the
expansion of our laboratory
capacity which has improved the
workflows and efficiency so that we
maintained our gross profit margin
in H2 in the face of competitive
pressures. Our newly equipped
laboratories provide bespoke
facilities for delivery of our RAMPTM
service, research and development
of new services and a foundation for
the future growth of all the
company’s services.
We continued to invest in both
RAMPTM and the development of the
fully human antibody library during
the year. We view these as a source
of substantial growth over the next
few years. Following the
introduction of RAMPTM we will
produce more scientific data in
parallel with, and to support, the
commercial roll out.
Inventory of consumables was
increased at the year end to allow
for any supply chain disruption from
the UK’s planned exit from the
European Union, which has now
been deferred to October 2019. In
the year, 30% of the company’s
revenues arose from exports to the
EU countries. The company
continues to monitor potential risks
and opportunities arising from
leaving the EU. We also continue to
develop other export markets to
mitigate risks of overexposure to
any one geographical market.
Net current assets of £2.5m at
31 March 2019 mainly comprised
inventories and cash and cash
equivalents.
The company ended the year with
£2.0m of cash, having used £1.1m of
cash in operations during the year
and invested almost £1.4m in
property, plant and equipment. This
cash level puts the company in a
strong position to progress plans for
growth in existing services and the
introduction of new services in
2020.
Post-period end events
• First RAMPTM revenues
• Recruitment of Director of
Business Development and
Director of Marketing
• Mammalian antibody library on
track for delivery in 2020
Fusion Antibodies plc
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STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
09
Financial Results
The decline in revenues seen in the second half of FY 2018 accelerated sharply in H1 FY 2019 for the reasons
discussed above. However, the Board addressed the factors contributing to this and H2 FY 2019 recovered strongly
to record our strongest ever six month period and a resumption in our organic revenue growth seen in recent years.
However, revenues for the year in total were down 19% to £2.2m (2018: £2.7m). Revenues were lower in all
geographical markets apart from North America which grew by 23%.
Half-yearly revenues
0
0
0
£
'
1600
1400
1200
1000
800
600
400
200
0
H1 2017 H2 2017 H1 2018 H2 2018 H1 2019 H2 2019
The EBITDA loss for the year was £1.1m (2018: £0.6m loss) as a result of the lower than expected revenues in H1 and the
investment the company has made in future growth, investing in employees, facilities and research which are expected
to deliver further significant revenue growth. The company produced a loss before tax of £1.5m (2018: £0.7m loss).
The company used £1.1m of cash in operations (2018: £0.1m generated) and invested £1.4m in expenditure on capital
equipment and intangible assets. Cash and cash equivalents as at 31 March 2019 totalled £2.0m (2018: £4.5m).
The company’s full results are set out in the financial statements included with this report.
Key performance indicators
The key performance indicators (KPIs) regularly reviewed by the Board are:
KPI
Revenue change year on year
EBITDA
Adjusted EBITDA
Cash (used in)/generated from operations
Outlook
2019
(19)%
(£1.1m)
(£1.1m)
(£1.1m)
2018
41%
(£0.6m)
£0.1m
£0.1m
The directors remain confident that order levels seen in the second half of FY 2019 can be maintained in
FY 2020 augmented by new orders for the RAMPTM service, such that significant revenue growth is achievable
in the current financial year.
Dr Paul Kerr
Chief Executive Officer
1 July 2019
Financial Statements for the year ended 31 March 2019
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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 21 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 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, transient protein
expression and affinity maturation.
It is also developing 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.
Fusion Antibodies plc
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11
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.
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. 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. 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
Financial Statements for the year ended 31 March 2019
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STRATEGIC REPORT
Principal Risks and Uncertainties continued
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 12 was approved by the Board
on 1 July 2019 and signed on its
behalf by:
Dr Paul Kerr
Director
Fusion Antibodies plc
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13
CORPORATE GOVERNANCE
Board of Directors
Dr Simon Douglas
Non-executive Chairman
Dr Paul Kerr
CEO
Dr Richard Buick
CTO
Paul, 47, 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, 42, 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 and in
2018 he was made Honorary
Senior Lecturer in Queen’s
University, Belfast.
Simon, 60, 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 (now GE),
ICI and Zeneca (now Astra
Zeneca), 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 has been the
CEO/Executive Chairman on three
other venture capital backed Life
Science companies, and headed up
the trade sale of two of these. He is
currently a non-executive director
on C-Major Medical, a venture
capital backed Medical Device
Company. Simon is not considered
to be independent as he formerly
held the position of CEO.
Financial Statements for the year ended 31 March 2019
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CORPORATE GOVERNANCE
Board of Directors continued
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, 48, 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, 77, 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
Fusion Antibodies plc
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15
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.
1 member of the Remuneration Committee
2 member of the Audit Committee
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.
Financial Statements for the year ended 31 March 2019
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CORPORATE GOVERNANCE
Corporate Governance Statement
• 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.
Board composition
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
skillsets 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.
The Senior Independent Director
serves as a key sounding board for
the Chairman and acts as an
intermediary for other directors,
including in respect of appraisal of
the Chairman’s performance. The
Company Secretary advises the
Board, through the Chairman, on
legal, governance and procedural
matters. The Chairman and the
Company Secretary together
review the company’s governance
processes and consider
improvements and initiatives to
maintain standards at a high level.
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
Compliance Statement
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 will set 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. There have
been no key governance related
matters, or changes in governance
arrangements during the year. The
main features of the company’s
corporate governance
arrangements are:
• The chairman retains
responsibility for, and takes the
lead on, all matters of corporate
governance;
• 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
Fusion Antibodies plc
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17
required to seek election at the
next Annual General Meeting and
directors retire annually in
accordance with the company’s
articles of association in order that
every director has been elected or
re-elected within the last three
years. This enables the
shareholders to decide on the
election of the company’s Board.
annual 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 chairman performs annual one
to one interviews with all directors
to appraise individual
effectiveness. The mix of skills
required on the Board is aligned to
the needs of the company and
delivery of current strategy.
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
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. The
CEO and CFO are invited to
attend as appropriate and the
auditors have the opportunity for
direct access to the committee
without executive directors
present.
Since the last Annual Report, the
audit committee has met three
times with both members in
attendance, in November 2018,
March 2019 and June 2019. The
auditors were in attendance at all
three of these meetings. At the
November 2018 meeting the main
agenda items were to review the
draft financial statements for the
six months ended 30 September
2018 and initial planning of the
audit for the financial year ended
31 March 2019. In March 2019, the
committee reviewed the Audit Plan
in detail and also reviewed the
company’s internal control
procedures and the risk
management procedures and
risk register.
Regarding the financial statements
for the year ended 31 March 2019,
the key areas of focus for the audit
committee at these meetings have
been:
• Revenue recognition: the
company transitioned to IFRS 15
“Revenues from contracts with
customers” on 1 April 2018
involving adoption of a new
accounting policy. Management
carried out on an impact
assessment which identified an
adjustment to retained earnings
of £20,234;
• The recognition of the deferred
tax asset. The recoverability of
the deferred tax asset depends
on profits generated from future
sales growth which will be
underpinned by RAMPTM and
the human library. Management
have prepared forecasts
demonstrating a return to
taxable profits in coming years
and on that basis the committee
agreed with the decision to
recognise the deferred tax
asset; and
• Going concern. Management
have prepared forecasts
demonstrating that the
company has sufficient
resources to continue as a
going concern.
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
Financial Statements for the year ended 31 March 2019
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CORPORATE GOVERNANCE
Corporate Governance Statement continued
monitoring strategy. Principal risks and uncertainties are discussed in the Strategic Report and financial risk
management policies are detailed in note 21 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.
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
Board
11
Audit Remuneration
committee
committee
4
2
11/11
11/11
11/11
10/11
10/11
10/11
10/11
10/11
2/2
2/2
4/4
4/4
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-committee meetings. 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 13 to 18 was approved by the Board on 1 July 2019 and signed on its
behalf by:
Dr Simon Douglas
Chairman
Fusion Antibodies plc
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19
CORPORATE GOVERNANCE
Directors’ Report for the year ended 31 March 2019
The directors present their annual
report and the audited financial
statements of the company for
the year ended 31 March 2019.
The company is incorporated and
domiciled in the United Kingdom,
and its shares are 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 13.
In accordance with the company’s
Articles of Association Dr Simon
Douglas and Dr Richard Buick will
retire and offer themselves for
re-election at the 2019 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 three share based reward
schemes, two of which are now
closed to new awards. Details of
options issued are included in
note 9. Company policy is no
longer to award share options to
non-executive directors.
The share options granted during
the year all contained 1-3 year
vesting periods with the options
used to motivate and retain key
individuals.
Financial Statements for the year ended 31 March 2019
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CORPORATE GOVERNANCE
Directors’ Report for the year ended 31 March 2019 continued
Movement in options held by directors are as follows:
At Exercised Awarded At Exercise Exercise price
1 April 2018 in Year in year 31 March 2019 period per share
Paul Kerr
2017 Share scheme 125,000 – – 125,000 2018-2027 £0.04
2017 EMI and Unapproved
Employee Share
Option Scheme – – 200,000 200,000 2019-2028 £0.545
125,000 – 200,000 325,000
Richard Buick
2017 Share Scheme 125,000 – – 125,000 2018-2027 £0.04
2017 EMI and Unapproved
Employee Share
Option Scheme – – 200,000 200,000 2019-2028 £0.545
125,000 – 200,000 325,000
James Fair
2017 Unapproved Share Scheme 75,000 – – 75,000 2018-2027 0.04
2017 EMI and Unapproved
Employee Share Option Scheme – – 200,000 200,000 2019-2028 £0.545
75,000 – 200,000 275,000
Sonya Ferguson
2017 Unapproved Share Scheme 25,000 – – 25,000 2018-2027 £0.04
Fusion Antibodies plc
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21
Directors’ remuneration
The remuneration of Directors for the year ended 31 March 2019 was as follows:
Company
Salary pension
& fees Benefits Bonus contributions Total
£ £ £ £ £
Executive directors
Paul Kerr 2019 96,500 389 – 5,490 102,379
2018 87,500 64 – 4,375 91,939
Richard Buick 2019 96,500 366 14,500 5,490 116,856
2018 87,500 60 – 4,375 91,935
James Fair1 2019 86,850 469 – 4,941 92,260
2018 52,500 77 10,000 2,559 65,136
Non – Executive Directors
Simon Douglas 2019 30,000 – – – 30,000
2018 22,897 – – – 22,897
Sonya Ferguson 2019 23,000 – – 690 23,690
2018 7,301 – – 146 7,447
Alan Mawson2 2019 23,000 – – – 23,000
2018 6,663 – – – 6,663
Colin Walsh3 2019 27,000 – – – 27,000
2018 7,786 – – – 7,786
Tim Watts4 2019 27,000 – – – 27,000
2018 7,821 – – – 7,821
Sir John Cadogan5 2019 – – – – –
2018 11,250 – – – 11,250
Total 2019 409,850 1,224 14,500 16,611 442,185
2018 291,218 201 10,000 11,455 312,874
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
3 Prior to 18 December 2017 Crescent Capital NI Limited were paid for the services of Colin Walsh
4 Tim Watts was appointed on 18 December 2017
5 Sir J Cadogan resigned effective 11 December 2017
Financial Statements for the year ended 31 March 2019
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CORPORATE GOVERNANCE
Directors’ Report for the year ended 31 March 2019 continued
Directors and their interests
Paul Kerr
Richard Buick
James Fair
Simon Douglas
Sonya Ferguson
Alan Mawson
Colin Walsh
Tim Watts
Results and dividends
At
1 April 2018
% issued share
capital
Shareholding at
31 March 2019
% issued share
capital
532,500
512,125
–
255,800
15,593
30,488
–
12,195
2.41%
2.32%
–
1.16%
0.07%
0.14%
–
0.06%
532,500
515,125
–
255,800
30,900
43,988
–
27,575
2.41%
2.33%
–
1.16%
0.14%
0.20%
–
0.12%
The loss before tax for the year was £1,500k (2018: £711k loss) and Loss Before Interest Taxation Depreciation
and Amortisation (EBITDA) of £1,079k (2018: £641k loss).
After an income tax credit of £235k (2018: £11k) the loss for the financial year of £1,264k (2018: £700k loss) has
been transferred to reserves. The results for the year are set out the statement of comprehensive income.
No dividends were paid (2018: £nil). The directors do not recommend payment of a final dividend (2018: £nil).
Principal shareholders
At the close of business on 19 June 2019 (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
2,652,325 12.01
1,831,500 8.29
1,414,939 6.41
1,341,463 6.07
1,317,325 5.96
1,219,512 5.52
1,219,512 5.52
1,219,512 5.52
974,450 4.41
731,707 3.31
709,375 3.21
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
The company operates a defined contribution pension scheme.
Fusion Antibodies plc
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STRATEGIC REPORT
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FINANCIAL STATEMENTS
23
Research and development
Payments to suppliers
During the year ended 31 March
2019 the company has invested
£240k (2018: £69k) in research
and development. This is incurred
in the development of existing and
new antibody engineering services
and is expensed until the
development project meets the
criteria in IAS 38.
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 company has returned a loss
of £1,264,382 for the year and at
the year-end had net current
assets of £2,510,135 including
£1,984,338 of cash and cash
equivalents. 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.
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.
Political donations
There were no political donations
made by the company during the
year (2018: none).
Corporate governance
The Corporate Governance Report
on pages 13 to 18 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 on the financial
statements;
• make judgements and
accounting estimates that are
reasonable and prudent; and
Financial Statements for the year ended 31 March 2019
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CORPORATE GOVERNANCE
Directors’ Report for the year ended 31 March 2019 continued
Independent Auditors
PricewaterhouseCoopers LLP has
expressed its willingness to
continue in office as auditor.
On behalf of the Board
James Fair
Company Secretary
1 July 2019
Company registration number
NI039740
• prepare the financial statements
on the going concern basis
unless it is inappropriate to
presume that the company will
continue in business.
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
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.
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 of
information 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.
Fusion Antibodies plc
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FINANCIAL STATEMENTS
25
Independent Auditor’s 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 2019 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 and Accounts (the “Annual
Report”), which comprise: the Statement of Financial Position as at 31 March 2019; the Statement of
Comprehensive Income, the Cash Flow Statement, 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: £74,000 based on 5% of loss before tax (2018: £3,120, based on adjusted
loss before tax).
• 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.
• Recognition of deferred tax assets.
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 whole, and in forming our opinion
Financial Statements for the year ended 31 March 2019
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Independent Auditor’s Report to the
Members of Fusion Antibodies plc continued
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
Recognition of deferred tax assets
The company has recognised a deferred tax asset of
£1,342,385 as at 31 March 2019, principally in respect of
cumulative tax losses of approximately £8,165,000 as at
31 March 2019. The recognition of the deferred tax
assets requires a degree of judgement, particularly in
light of the company's losses during the current and
preceding year.
The recognition of the deferred tax asset is
dependent on the company's ability to make future
taxable profits. We obtained the company's profit and
cash flow forecasts for the 3 year period ending
31 March 2022 and:
• We checked the mathematical accuracy of the
forecasts and assessed the reasonableness of the
key assumptions. The key assumptions included; i)
revenue growth and ii) operating expenditure; and
• We held discussions with management on the
reasonableness of those forecasts and the key
assumptions.
As part of our procedures we considered the
sensitivity of the forecasts to changes in key
assumptions. Based on the forecasts, we agreed with
the company's assessment that they expect to make
sufficient taxable profits in future years against which
the deferred tax can be utilised.
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.
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.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality £74,000 (2018: £3,120).
How we determined it 5% of loss before tax (2018: 5% of adjusted loss before tax).
Rationale for
benchmark applied
We believe that loss before tax is the primary measure used by the Directors is
assessing the performance of the entity, and is a generally accepted auditing
benchmark. For the year ended 31 March 2018 adjusted loss before tax, which reflects
the add back of IPO related costs and acceleration of share based payment charges on
IPO, was considered to be the primary measure used by the Directors is assessing the
performance of the entity.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit
above £3,700 (2018: £152) as well as misstatements below that amount that, in our view, warranted reporting
for qualitative reasons.
Fusion Antibodies plc
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FINANCIAL STATEMENTS
27
Conclusions relating to going concern
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.
We have nothing to report in respect of the above matters.
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. For example, the terms on which the United Kingdom
may withdraw from the European Union are not clear, and it is difficult to evaluate all of the potential
implications on the company’s trade, customers, suppliers and the wider economy.
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 2019 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.
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 pages 23 and 24, 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.
Financial Statements for the year ended 31 March 2019
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28
Independent Auditor’s Report to the
Members of Fusion Antibodies plc continued
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
1 July 2019
Fusion Antibodies plc
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FINANCIAL STATEMENTS
29
Statement of Comprehensive Income
For the year ended 31 March 2019
2019 2018
Before Non-recurring After Before Non-recurring After
non-recurring items non-recurring non-recurring items non-recurring
Notes items (note 29) items items (note 29) items
£ £ £ £ £ £
Revenue 4 2,181,838 – 2,181,838 2,690,744 – 2,690,744
Cost of sales (1,377,836) – (1,377,836) (1,207,331) – (1,207,331)
Gross profit 804,002 – 804,002 1,483,413 – 1,483,413
Other operating income 86,406 – 86,406 54,626 – 54,626
Administrative expenses (2,398,842) – (2,398,842) (1,475,646) (772,936) (2,248,582)
Operating (loss)/profit 5 (1,508,434) – (1,508,434) 62,393 (772,936) (710,543)
Finance income 8 12,596 – 12,596 4,043 – 4,043
Finance costs 8 (4,033) – (4,033) (4,862) – (4,862)
(Loss)/profit before tax (1,499,871) – (1,499,871) 61,574 (772,936) (711,362)
Income tax credit/(expense) 10 235,489 – 235,489 (63,883) 75,304 11,421
Loss for the financial year (1,264,382) – (1,264,382) (2,309) (697,632) (699,941)
Total comprehensive expense for the year (1,264,382) – (1,264,382) (2,309) (697,632) (699,941)
Pence Pence
Loss per share
Basic 11 (5.7) (4.3)
The statement of comprehensive income has been prepared on the basis that all operations are continuing
operations.
The accompanying notes on pages 33 to 55 form an integral part of the financial statements.
Financial Statements for the year ended 31 March 2019
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30
Statement of Financial Position
As at 31 March 2019
Assets
Non-current assets
Intangible 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
(Accumulated losses)/retained earnings
Total equity
Notes
2019
£
2018
£
12
13
15
16
17
18
19
19
20
22
6,214
1,587,999
1,342,385
2,936,598
242,669
1,056,382
22,645
1,984,338
3,306,034
6,242,632
–
546,734
1,156,047
1,702,781
81,815
926,220
6,906
4,490,931
5,505,872
7,208,653
729,360
66,539
795,899
536,299
33,758
570,057
2,510,135
4,935,815
72,636
20,000
92,636
888,535
43,529
20,000
63,529
633,586
5,354,097
6,575,067
883,648
4,872,327
(401,878)
883,648
4,872,327
819,092
5,354,097
6,575,067
The accompanying notes on pages 33 to 55 form an integral part of these financial statements.
The financial statements on pages 29 to 55 were approved by the Board on 1 July 2019, and signed on its behalf:
Dr Paul Kerr James Fair
Director Director
Registered in Northern Ireland, number NI039740
Fusion Antibodies plc
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FINANCIAL STATEMENTS
31
Statement of Changes in Equity
For the year ended 31 March 2019
Share (Accumulated
Called up premium losses)/retained Total
equity
share capital
£
£
reserve earnings
£ £
At 1 April 2018 883,648
Restatement (see note 30) –
At 1 April 2018 restated 883,648
Loss and total comprehensive expense for the year –
4,872,327
–
4,872,327
–
Share options – value of employee services –
Tax charge relating to share option scheme –
Total transactions with owners, recognised
directly in equity –
–
–
–
819,092
(23,632)
6,575,067
(23,632)
795,460
(1,264,382)
6,551,435
(1,264,382)
97,634
(30,590)
97,634
(30,590)
67,044
67,044
At 31 March 2019 883,648
4,872,327
(401,878)
5,354,097
At 1 April 2017 547,655
6,161,269
(5,003,002)
1,705,922
Loss and total comprehensive expense for the year –
–
(699,941)
(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)
–
–
6,161,269
–
–
330,176
30,590
–
5,606,352
(398,032)
330,176
30,590
(1,288,942)
6,522,035
5,569,086
At 31 March 2018 883,648
4,872,327
819,092
6,575,067
The accompanying notes on pages 33 to 55 form an integral part of these financial statements.
Financial Statements for the year ended 31 March 2019
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32
Statement of Cash Flows
For the year ended 31 March 2019
Cash flows from operating activities
Loss for the year
Adjustments for:
Share based payment expense
Cost of raising capital
Depreciation
Amortisation of intangible assets
Finance income
Finance costs
Income tax credit
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash (used in)/generated from operations
Income tax received
Net cash (used in)/generated from operating activities
Cash flows from investing activities
Purchase of intangible assets
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 (used in)/generated from financing activities
2019
£
2018
£
(1,264,382)
(699,941)
97,634
–
429,385
1,830
(12,596)
4,033
(235,489)
(160,854)
(157,938)
193,061
(1,105,316)
6,966
(1,098,350)
330,176
609,836
69,625
–
(4,043)
4,862
(11,421)
(11,554)
(225,322)
14,974
77,192
–
77,192
(8,044)
–
(1,372,533)
(444,595)
(1,380,577)
(444,595)
–
(36,229)
12,596
(4,033)
4,598,650
(25,182)
4,043
(4,862)
(27,666)
4,572,649
Net (decrease)/increase in cash and cash equivalents
(2,506,593)
4,205,246
Cash and cash equivalents at the beginning of the year
4,490,931
285,685
Cash and cash equivalents at the end of the year
1,984,338
4,490,931
The accompanying notes on pages 33 to 55 form an integral part of these financial statements.
Fusion Antibodies plc
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FINANCIAL STATEMENTS
33
Notes to the Financial Statements
For the year ended 31 March 2019
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 company has returned a loss of £1,264,382 for the year and at the year-end had net current assets of
£2,510,135 including £1,984,338 of cash and cash equivalents. 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 2019, and have not been applied in preparing these financial statements. One
of these, IFRS 16 ‘Leases’, is expected to have a significant effect on the financial statements of the
company as set out below:
•
IFRS 16, ‘Leases’ replaces IAS17 ‘Leases’ and related interpretations. It will introduce a single lessee
accounting model, eliminating the previous classification of leases as either operating or finance. This
will result in operating leases previously treated solely through profit and loss being recorded in the
statement of financial position in the form of a right-of-use asset and a lease liability, subject to certain
exemptions. 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.
Financial Statements for the year ended 31 March 2019
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Notes to the Financial Statements continued
For the year ended 31 March 2019
2 Significant accounting policies continued
Management are in the process of assessing the full impact of the new standard but expects that the only
lease currently in force that will be affected is for the company premises in Belfast. At 31 March 2019
minimum future lease payments on this property total £250,000.
The nature of the expense of the above cost will change for being an operating expense to predominantly
depreciation with an interest expense on the lease liability.
On application of the standard, the company expects that operating costs would be lower by approximately
£75,000 per annum and depreciation would be higher by a similar amount compared to the results reported
under IAS17.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the provision of services in the
ordinary course of the company’s activities. Revenue is shown net of value-added tax.
The company’s performance obligations for its revenue streams are deemed to be the provision of specific
services or materials to the customer. Revenue billed to the customer is allocated to the various performance
obligations, based on the relative fair value of those obligations, and is then recognised as follows:
• Where a contractual right to receive payment exists, revenue is recognised as over the period services are
provided using the percentage of completion method, based on the input method using time spent; and
• Where no contractual right to receive payment exists, revenue is recognised upon completion of each
separate performance obligation, which is typically when implementation services are complete or data
has been provided to the customer.
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:
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.
•
Fusion Antibodies plc
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2 Significant accounting policies continued
Intangible assets
Software
Software developed for use in the business is initially recognised at historical costs, net of amortisation and
provision for impairment. Subsequent development 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 company and the cost of the item can be measured reliably.
Software is amortised over its expected useful economic life, which is currently estimated to be 4 years.
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
company 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 the operation 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 straight line 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
4 years
Fixtures, fittings & equipment
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.
Financial Statements for the year ended 31 March 2019
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Notes to the Financial Statements continued
For the year ended 31 March 2019
2 Significant accounting policies continued
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 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 recoverable amount of the cash-generating unit or individual asset 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.
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.
Fusion Antibodies plc
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37
2 Significant accounting policies continued
Financial assets
Classification
The company classifies its financial assets in the following measurement categories:
•
•
Those to be measured at amortised costs; and
Those to be measured subsequently at fair value (either through Other Comprehensive Income of
through profit and loss).
The classification depends on the company’s business model for managing the financial assets and the
contractual terms of the cash flows. The company reclassifies its financial assets when and only when its
business model for managing those assets changes.
Recognition and measurement
At initial recognition, the company measures a financial asset at its fair value plus transaction costs that are
directly attributable to the acquisition of the financial asset.
Subsequent measurement of financial assets depends on the company’s business model for managing
those financial assets and the cash flow characteristics of those financial assets. The company only has
financial assets classified at amortised cost. These assets are those held for contractual collection of cash
flows, where those cash flows represent solely payments of principal and interest and are held at amortised
cost. Any gains or losses arising on derecognition is recognised directly in profit or loss. Impairment losses
are presented as a separate line in the profit and loss account.
Impairment
The company assesses on a forward looking basis, the expected credit losses associated with its debt
instruments carried at amortised cost. For trade receivables the company applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be recognised from the initial recognition of
the receivables. For other receivables the company applies the three stage model to determine expected
credit losses.
Inventories
Inventories comprise consumables.
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
Financial liabilities comprise Trade and other payables and borrowings due within one year end after one
year, which are recognised initially at fair value and subsequently carried at amortised cost using the
effective interest method. The company does not use derivative financial instruments or hedge account for
any transactions. Trade payables represent obligations to pay for goods or services that have been acquired
in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if
payment is due within one year. If not, they are presented as non-current liabilities.
Financial Statements for the year ended 31 March 2019
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Notes to the Financial Statements continued
For the year ended 31 March 2019
2 Significant accounting policies continued
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.
(Accumulated losses)/retained earnings
(Accumulated losses)/retained earnings 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.
Fusion Antibodies plc
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39
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. The directors expect profits to be generated from future sales growth which will be
underpinned by RAMPTM and the human library. Therefore, 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.
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
2019
£
202,666
658,399
1,008,586
312,187
2,181,838
2018
£
278,414
934,877
817,933
659,520
2,690,744
In the year there were no customers to whom sales exceeded 10% of revenues. In 2018 one customer exceeded
10% of revenues, that customer accounted for £308,049 or 11.45% of revenues.
Financial Statements for the year ended 31 March 2019
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40
Notes to the Financial Statements continued
For the year ended 31 March 2019
5 Operating (loss)/profit is stated after charging/(crediting):
Employee benefit costs
- wages and salaries
- social security costs
- other pension costs
- share based payments
2019 2018
£ £
1,246,833 887,383
118,006 96,072
49,167 33,915
97,634 330,176
1,511,640 1,347,546
Depreciation of property, plant and equipment
429,385 69,625
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
- non-audit services
- for the provision of reporting accountants’
services in respect of the IPO
Raw materials and consumables used
Increase in inventories
Patent costs
Marketing costs
(Profit)/loss on foreign exchange
Costs associated with IPO other than reporting accountants’ services
Other expenses
Total cost of sales and administrative expenses
6 Average staff numbers
Employed in UK
(including executive directors)
Non-executive directors
74,861 73,224
66,032 36,126
16,212 17,236
19,250 18,350
6,750 –
– 222,000
26,000 240,350
912,589 628,428
(160,854) (11,554)
7,300 15,601
162,144 132,347
(158) 36,892
– 387,836
731,527 482,256
3,776,678 3,455,913
2019 2018
33 24
5 6
38 30
Fusion Antibodies plc
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FINANCIAL STATEMENTS
41
7 Remuneration of directors and key senior management
Directors
Emoluments
Pension contributions
Fees paid to third parties for services of directors
Highest paid director
The highest paid director received the following emoluments:
Emoluments
Pension contributions
Key senior management
2019
£
425,574
16,611
–
442,185
2019
£
111,366
5,490
116,856
2018
£
301,419
11,455
50,525
363,399
2018
£
87,564
4,375
91,939
Key senior management is considered to be the directors of the company with total remuneration for the
year of £442,185 (2018: £363,399).
8 Finance income and costs
Income
Bank interest receivable
Costs
Interest expense on other borrowings
Bank interest payable
9 Share based payments
2019
£
12,596
2019
£
4,033
–
4,033
2018
£
4,043
2018
£
4,857
5
4,862
At the reporting date the company had three share based reward schemes: two schemes under which
options were previously granted and are now closed to future grants and a third scheme in place in which
grants were made in the current year:
•
•
•
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”.
Financial Statements for the year ended 31 March 2019
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42
Notes to the Financial Statements continued
For the year ended 31 March 2019
9 Share based payments continued
Options awarded during the year under the 2017 EMI and Unapproved Employee Share Option Scheme
have no performance conditions other than the continued employment within the company. Options vest
one, two and three 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.
The total share-based remuneration recognised in the Statement of Comprehensive Income was £97,634
(2018: £330,176). The most recent options granted in the year were valued using the Black-Scholes method.
The share price on grant used the share price of open market value, expected volatility of 35.0% and a
compound risk free rate assumed of 0.88%.
2019
Weighted
average
exercise price
£
2018
Weighted
average
2018 exercise price
£
Number
Outstanding at beginning of the year 0.040
505,000
Subdivision of each £1 into £0.04 shares –
–
Granted during the year 0.545
Exercised during the year –
Lapsed during the year 0.040
1,230,000
–
(16,250)
Outstanding at the end of the year 0.401
1,718,750
1.60
0.06
0.04
0.06
0.08
0.04
2018
Number
74,300
1,857,500
508,750
(1,692,500)
(168,750)
505,000
The options outstanding at the end of each year were as follows:
Nominal Exercise price
£
Expiry share value
May 2027 £0.04
December 2028 £0.04
0.040
0.545
Total
2019
Number
488,750
1,230,000
1,718,750
2018
Number
505,000
–
505,000
Of the total number outstanding 244,375 (2018: none) had vested at the year end.
Fusion Antibodies plc
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FINANCIAL STATEMENTS
43
10 Income tax (credit)/expense
Current tax – UK corporation tax
Deferred tax – origination and reversal of temporary differences
Income tax credit
2019
£
(22,705)
(212,784)
(235,489)
2018
£
(4,828)
(6,593)
(11,421)
The difference between loss before tax multiplied by the base rate of 19% and the income tax credit is
explained in the reconciliation below:
Factors affecting the tax charge for the year
Loss before tax
Loss before tax multiplied by standard rate of UK corporation tax of 19%
Provisions and expenditure not deductible for tax purposes – permanent
Provisions and expenditure not deductible for tax purposes – temporary
RDEC/R&D tax credit
Adjustment in recognition of deferred tax
Income tax credit
11 Earnings per share
Loss for the financial year
Loss per share
Basic
Issued ordinary shares at the end of the year
Weighted average number of shares in issue during the year
2019
£
2018
£
(1,499,871)
(284,975)
14,020
(32,432)
(22,705)
90,603
(235,489)
(711,362)
(135,159)
119,665
(210,784)
(4,828)
219,685
(11,421)
2019
£
2018
£
(1,264,382)
(699,941)
pence
(5.7)
Pence
(4.3)
Number
Number
22,091,192
22,091,192
22,091,192
16,117,206
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.
Financial Statements for the year ended 31 March 2019
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44
Notes to the Financial Statements continued
For the year ended 31 March 2019
12 Intangible assets
Cost
At 1 April 2018
Additions
At 31 March 2019
Accumulated amortisation
At 1 April 2018
Amortisation charged in the year
At 31 March 2019
Net book value
At 31 March 2019
At 31 March 2018
13 Property, plant and equipment
Assets under Leasehold
construction improvements
£ £
Plant &
machinery
£
Fixtures,
fittings &
equipment
£
Software
£
–
8,044
8,044
–
1,830
1,830
6,214
–
Total
£
Cost
At 1 April 2018 205,129 156,059
Additions – 350,799
Assets brought into use (205,129) 205,129
Disposals – –
691,245
1,016,608
–
(1,587)
107,687
103,243
–
(8,545)
1,160,120
1,470,650
–
(10,132)
At 31 March 2019 – 711,987
1,706,266
202,385
2,620,638
Accumulated depreciation
At 1 April 2018 – 156,059
Depreciation charged in the year – 127,233
Disposals – –
At 31 March 2019 – 283,292
430,851
260,886
(1,587)
690,150
26,476
41,266
(8,545)
613,386
429,385
(10,132)
59,197
1,032,639
Net book value
At 31 March 2019 – 428,695
At 31 March 2018 205,129 –
1,016,116
260,394
143,188
1,587,999
81,211
546,734
Fusion Antibodies plc
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45
13 Property, plant and equipment continued
Assets under Leasehold
construction improvements
£ £
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
Plant &
machinery
£
Fixtures,
fittings &
equipment
£
483,770
229,220
(21,745)
691,245
389,532
63,064
(21,745)
430,851
60,723
74,757
(27,793)
107,687
47,708
6,561
(27,793)
26,476
Total
£
700,552
509,106
(49,538)
1,160,120
593,299
69,625
(49,538)
613,386
Net book value
At 31 March 2018 205,129 –
At 31 March 2017 – –
260,394
94,238
81,211
13,015
546,734
107,253
Plant & machinery with a net book value of £185,818 is held under hire purchase agreements or finance
leases (2018: £100,303).
The depreciation expense is included in administrative expenses in the statement of comprehensive income
in each of the financial years shown.
14 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
2019
£
1
2018
£
1
Group accounts are not prepared on the basis that the subsidiary company is dormant and not material to
the financial statements.
15 Deferred tax assets
At 1 April
Restatement (see note 30)
Credited to the statement of comprehensive income in the year
(Charged)/credited to equity in the year
At 31 March
2019
£
2018
£
1,156,047
1,118,864
4,144
212,784
(30,590)
–
6,593
30,590
1,342,385
1,156,047
Financial Statements for the year ended 31 March 2019
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46
Notes to the Financial Statements continued
For the year ended 31 March 2019
15 Deferred tax assets continued
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
Deferred tax assets depreciation Tax losses
and liabilities £ £
At 1 April 2017 (638) 984,247
(Charged)/credited to
Statement of
Comprehensive Income (40,126) 155,058
Credited to equity – –
Share
based
payments
£
134,735
(109,546)
30,590
At 1 April 2018 (40,764) 1,139,305
55,779
Restatement (see note 30) – 4,144
(Charged)/credited to
Statement of
Comprehensive Income (31,440) 244,538
Charged to equity – –
At 31 March 2019 (72,204) 1,387,987
–
(5,626)
(30,590)
19,563
RDEC
tax credit
£
Total
£
520
1,118,864
1,207
–
1,727
–
5,312
–
7,039
6,593
30,590
1,156,047
4,144
212,784
(30,590)
1,342,385
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 £8,164,633 (2018: £6,596,169) is dependent on future taxable profits arising in the UK. The directors
expect profits to be generated from future sales growth which will be underpinned by RAMPTM and the
human library. Therefore, 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: £1,379,086 (2018:
£1,136,487).
16 Inventories
Raw materials and consumables
2019
£
242,669
2018
£
81,815
The cost of inventories recognised as an expense for the year was £751,735 (2018: £616,874).
Fusion Antibodies plc
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47
17 Trade and other receivables
Trade receivables
Loss allowance
Trade receivables – net
Other receivables
Prepayments and accrued income
2019
£
728,584
(2,271)
726,313
90,498
239,571
1,056,382
2018
£
513,870
(2,994)
510,876
133,357
281,987
926,220
The fair value of trade and other receivables approximates to their carrying value.
At the reporting date trade receivables loss allowance/impairment as follows:
Individually impaired
Expected credit loss allowance
2019
£
–
2,271
2,271
The carrying amount of trade and other receivables are denominated in the following currencies:
2018
£
2,994
–
2,994
2018
£
504,568
72,489
42,119
28,051
647,227
Total
2019
£
613,045
95,497
110,540
–
819,082
More than
120 days
past due
2.1%
51,608
1,067
728,584
2,271
UK pound
Euros
US dollar
Japanese Yen
The expected credit loss allowance has been calculated as follows:
More than More than
30 days 60 days
Current past due past due
Expected loss rate 0.1% 0.2% 0.2%
Gross carrying
amount (£) 321,048 246,971 2,401
Loss allowance (£) 439 376 5
More
than
90 days
past due
0.4%
106,556
384
Financial Statements for the year ended 31 March 2019
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48
Notes to the Financial Statements continued
For the year ended 31 March 2019
17 Trade and other receivables continued
Movements on trade receivables loss allowance is as follows:
At 1 April
Restatement for IFRS 9 (note 30)
At 1 April (restated)
Movement in loss allowance
Write off as uncollectible
At 31 March
2019
£
2,994
3,398
6,392
(1,127)
(2,994)
2,271
2018
£
17,045
–
17,045
2,994
(17,045)
2,994
The creation and release of the loss allowance for trade receivables has been included in administrative
expenses in the Statement of Comprehensive Income. Other receivables are considered to have low credit
risk and the loss allowance recognised during the year was therefore limited to trade receivables.
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.
18 Trade and other payables
Trade payables
Social security and other taxes
Other payables
Accruals and deferred income
2019
£
461,824
–
25,205
242,331
729,360
2018
£
281,284
28,493
15,654
210,868
536,299
The fair value of trade and other 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 £24,901 (2018: £6,879) was due
to Invest Northern Ireland.
19 Borrowings
Hire purchase contracts
At 1 April
Additions in year
Interest charged in year
Repayments
At 31 March
Amounts due in less than 1 year
Amounts due after more than 1 year
Fusion Antibodies plc
2019
£
77,287
98,117
4,033
(40,262)
139,175
66,539
72,636
139,175
2018
£
–
102,469
4,097
(29,279)
77,287
33,758
43,529
77,287
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49
19 Borrowings continued
All borrowings are denominated in UK pounds. Using a discount rate of 6.0% per annum the fair value of
borrowings at the reporting date is £131,845 (2018: £72,502 discounted at 5.5%).
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.
20 Provisions for other liabilities and charges
Due after more than 1 year
2019
£
2018
£
20,000
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.
21 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 instruments by category
Financial instruments categories are as follows:
As at 31 March 2019
Trade receivables
Other receivables
Accrued income
Cash and cash equivalents
Total
As at 31 March 2018
Trade receivables
Other receivables
Cash and cash equivalents
Total
Amortised
cost
£
726,313
90,498
2,264
1,984,338
Total
£
726,313
90,498
2,264
1,984,338
2,803,413
2,803,413
Loans and
receivables
£
510,876
133,357
4,490,931
5,135,164
Total
£
510,876
133,357
4,490,931
5,135,164
The categories of financial assets changed as a result of the introduction of IFRS 9. The company has not
changed its classification of financial assets and financial assets previously categorised as “Loans and
receivables” are now categorised as “Amortised cost”.
Financial Statements for the year ended 31 March 2019
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Notes to the Financial Statements continued
For the year ended 31 March 2019
21 Financial instruments continued
As at 31 March 2019
Trade payables
Other payables
Accruals
Borrowings
Total
As at 31 March 2018
Trade payables
Other payables
Accruals
Borrowings
Total
Capital management
Other
financial
liabilities at
amortised cost
£
461,824
25,205
242,331
139,175
868,535
Other
financial
liabilities at
amortised cost
£
281,284
15,654
200,197
77,287
574,422
Total
£
461,824
25,205
242,331
139,175
868,535
Total
£
281,284
15,654
200,197
77,287
574,422
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.
Fusion Antibodies plc
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21 Financial instruments continued
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 occasions 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 or Euro had been 10% higher/lower at the reporting
date the effect on profit and equity would have been approximately £13,855 (2018: £7,393) higher/lower and
£15,534 (2018: £23,017) higher/lower respectively.
22 Called up share capital
Allotted, called up and fully paid
– 22,091,192 Ordinary shares of £0.04
There were no changes in the issued share capital during the year.
2019
£
2018
£
883,648
883,648
Financial Statements for the year ended 31 March 2019
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Notes to the Financial Statements continued
For the year ended 31 March 2019
23 Capital commitments
At 31 March 2019 the company had contracted for but not incurred capital expenditure of £27,657
(2018: £232,653).
24 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
2019
£
75,000
75,000
100,000
250,000
2018
£
75,000
75,000
175,000
325,000
25 Retirement benefits obligations
The company operates a defined contribution scheme, the assets of which are managed separately from the
company. During the year the company charged £49,167 to the Statement of Comprehensive Income
(2018: £33,915) in respect of company contributions to the scheme. At the reporting date there was £8,282
(2018: £5,779) payable to the scheme and included in other payables.
26 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 £85,711 (2018: £78,957). A balance of £7,185 (2018: £6,879) was due and
payable to Invest NI at the reporting date. The company claimed various grants during the year from Invest
NI amounting to £86,406 (2018: £47,591). A balance of £64,436 was due on submitted claims from Invest NI
(2018: £2,660).
Director Colin Walsh is also a director of Crescent Capital NI Limited. During the year Crescent Capital NI
Limited charged the company £3,028 (2018: £10,800) for other consultancy work and at the reporting date
an amount of £nil (2018: £2,000) was payable to Crescent Capital NI Limited.
27 Events after the reporting date
There have been no events from the reporting date to the date of approval which need to be reported.
28 Ultimate controlling party
There is no ultimate controlling party.
29 Adjusted results
Loss before tax
Accelerated share based payment charge (note a)
IPO costs (note b)
Adjusted (loss)/profit before tax
Fusion Antibodies plc
2019
£
(1,499,871)
–
–
(1,499,871)
2018
£
(711,362)
163,100
609,836
61,574
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29 Adjusted results continued
(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 year 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.
(b) In the year ended 31 March 2018 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.
30 Changes in accounting policies
This note explains the impact of the adoption of IFRS 9 Financial Instruments (“IFRS 9”) and IFRS 15
Revenue from Contracts with Customers (“IFRS 15”) on the company’s financial statements.
(a) Impact on financial statements
As a result of the adoption of IFRS 9 and IFRS 15, a restatement of prior year financial statements was not
required. As explained later in this note, the company elected to adopt IFRS 9 and IFRS 15 without restating
comparative information. The reclassifications and the adjustments arising from adoption of these standards
are therefore not reflected in Statement of Financial Position as at 31 March 2018, nor in the Statement of
Comprehensive Income for the year ended 31 March 2018, but are recognised in the opening Statement of
Financial Position on 1 April 2018.
The following tables show the adjustments recognised for each individual line item. Line items that were not
affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be
recalculated from the numbers provided. The adjustments are explained in more detail by standard below.
Impact on the opening balance on the statement of financial as at 1 April 2018:
IFRS 15
£
31 March
Balance 2018 IFRS 9
sheet extract £ £
As originally Accounting Presentation/ Accounting Presentation/
presented adjustment reclassification adjustment reclassification
Non-current assets
Deferred tax assets 1,156,047 – –
Current assets
Trade receivables 510,876 (3,398) –
Contract assets – – –
Other receivables 133,357 – –
Equity
Retained earnings 819,092 (3,398) –
–
(24,378)
–
24,378
(24,378)
(20,234)
4,144
–
–
1 April
2018
£
Restated
1,160,191
507,478
–
108,979
795,460
Financial Statements for the year ended 31 March 2019
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Notes to the Financial Statements continued
For the year ended 31 March 2019
30 Changes in accounting policies continued
(b) IFRS 9 Financial Instruments – impact of adoption
IFRS 9 replaces the provisions of IAS 39 that relate to the classification and measurement of financial assets
and financial liabilities, financial instruments, impairment of financial assets and hedge accounting.
The adoption of IFRS 9 ‘Financial Instruments’ from 1 April 2018 resulted in changes in accounting policies
and adjustments to the amounts recognised in the financial statements. The new accounting policies are set
out in note 2. In accordance with the transitional provisions in IFRS 9 (7.2.15), comparative figures have not
been restated.
The total impact on the company’s retained earnings is shown in 30(a) above.
Impairment of financial assets
Trade receivables is the only financial asset of the company that is subject to the new expected credit loss
model of IFRS 9, as other receivables are considered to be very low credit risk.
The company was required to revise its impairment methodology for trade receivables under IFRS 9. The
impact of the change in impairment methodology on retained earnings and equity is shown in the table in
30(a) above.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, no impairment
loss was identified.
The company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a
lifetime expected loss allowance for all trade receivables and contract assets.
To measure the expected credit losses, trade receivables and contract assets have been grouped on shared
credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and
have substantially the same risk characteristics as the trade receivables for the same types of contracts. The
company has therefore concluded that the expected loss rate for trade receivables are a reasonable
approximation of the loss rates for the contract assets.
On that basis, the loss allowance as at 1 April 2018 was determined as follows for both trade receivables and
contract assets:
More than More than
30 days 60 days
1 April 2018 Current past due past due
Expected loss rate 0.3% 0.4% 0.5%
Gross carrying
amount (£) 276,905 181,617 13,345
Loss allowance (£) 879 636 61
More
than
90 days
past due
0.9%
More than
120 days
past due
4.9%
Total
1,761
15
37,158
1,807
510,786
3,398
Trade receivables and contract assets are written off when there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a
debtor to engage in a repayment plan with the company, and a failure to make contractual payments for a
period of greater than 120 days past due.
Fusion Antibodies plc
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30 Changes in accounting policies continued
(c) IFRS 15 Revenue from Contracts with Customers – impact of adoption
The adoption of IFRS15 ‘Revenue from Contracts with Customers’ from 1 April 2018 resulted in changes in
accounting policies and adjustments to the amounts recognised in the financial statements. The new
accounting policies are set out in note 2. In accordance with the transitional provisions in IFRS 15
(Appendix C 7), comparative figures have not been restated.
The total impact on the company’s retained earnings is shown in 30(a) above. At 31 March 2018 the
company had recognised an amount of £24,378 included in other debtors, which was reclassified as
Contract assets upon adoption of IFRS 15 and then reduced to £nil as it no longer met the recognition
criteria of the new accounting policy. As a result of this adjustment, the deferred tax asset arising from the
taxable losses of the company increased by £4,144 being £24,378 at an expected corporation tax rate
of 17%.
Accounting for performance obligations within a customer contract
Each contract between the company and a customer may comprise a number of distinct performance
obligations, i.e. a transfer of a service to the customer. As each of these performance obligations is met the
company recognises the revenues to which it is entitled to under the contract. Customer contracts are
typically set out in stages which align with scientific processes or procedures. In recognition of the scientific
uncertainty of research and development, within each stage there may be one or more distinct performance
obligations whereby the company will perform certain actions or meet certain milestones within a stage.
Where such an action entitles the company to receive revenues from the customer regardless of the
ultimate success of the entire contract, each of these is treated as a performance obligation and accordingly
revenue is recognised. This represents a change in accounting policy as in the year ended 31 March 2018,
and previous periods, the company recognised services provided on a percentage of completion method
applied to each stage of its agreements with customers.
Financial Statements for the year ended 31 March 2019
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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 MBE (Non-Executive Director)
Mr Timothy 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
Fusion Antibodies plc
Perivan 255483
Annual
Report
and
Accounts
2019
World leading Antibody Services.
We are specialists in Antibody
Discovery through to Clinical Supply.
Fusion Antibodies plc
1 Springbank Road
Springbank Industrial Estate
Belfast
BT17 0QL
discover more at
fusionantibodies.com