Ilika plc Annual report 2012
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Ilika plc
Kenneth Dibben House
Enterprise Road
University of Southampton
Science Park
Chilworth
Southampton
SO16 7NS
United Kingdom
E info@ilika.com
T +44 (0)23 8011 1400
F +44 (0)23 8011 1401
www.ilika.com
Fast-tracking materials
discovery
Ilika at
a glance
p.02
Our investment
proposition
p.04
Commercialising
our technology
p.06
Chairman’s
review
p.08
Chief Executive’s
review
p.10
Financial
review
p.13
Ilika at a glance
Business review
01 Overview
02
04 Our investment proposition
06 Commercialising our technology
08
10
13
Chairman’s review
Chief Executive’s review
Financial review
Corporate governance
14 Board of Directors
16 Directors’ report
18
20
22
Corporate governance statement
Corporate social responsibility
Independent auditor’s report
Financial statements
23
24
25
26
27
43
44
45
46
48
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Company balance sheet
Company cash flow statement
Company statement of changes in equity
Notes to the consolidated financial statements
Corporate directory
Business review
Overview
Ilika invents, tests and selects
materials in the laboratory
that can be selected for
scale-up and everyday
commercial use.
Ilika focuses on three sectors:
> Energy where Ilika assesses materials for
their greater capacity for energy storage
and conversion efficiency, for example
in batteries
for more details p.11
> Electronics where materials created by
Ilika rapidly improve the performance
and efficiency of a range of electronic
components, such as digital memory
devices and sensors
for more details p.12
> Biomedicaldevices where Ilika’s
subsidiary Altrika has already successfully
commercialised innovative products for
the treatment of burns
for more details p.12
For more information, visit us at:
www.ilika.com
Scan here for more
information on our
business
Annual report 2012 Ilika plc 01
BUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Ilika at a glance
Generating growth
through...
Ilika’s unique process is far
quicker and more efficient
than traditional materials
discovery processes.
Ilika uses high throughput,
or combinatorial, techniques
which involve the rapid
synthesis of a large number
of different structurally
related materials in a few
automated steps.
High throughput materials
discovery
What we do
High throughput materials discovery:
• 10–100x faster and more reliable than
traditional discovery methods
• Creates output equivalent to 100s
of individual materials
• Unique patent-protected platform
• Rapid identification of materials
suitable for industrial scale-up
02 Ilika plc Annual report 2012
Combinatorial synthesis
Ilika’s High Throughput Physical Vapour Deposition
facility (‘HT-PVD’) can deposit large numbers of
films of different composition in one automated
experimental run. The deposition of all elements
occurs simultaneously and the composition profile
can be carefully varied across the substrate in a
controlled manner.
Characterisation/screening
Large numbers of samples are screened and
characterised using automated, high throughput
techniques. Unique sample arrays allow the many
different compositions synthesised to be analysed
in a rapid manner for specific, sought-after,
behaviours.
Infomatics
A range of specialised, in-house software
controls the instrumentation associated with
our workflows and also enables the rapid,
simultaneous collection of large datasets which
are then processed, analysed and presented
so that meaningful conclusions about material
properties can be drawn.
Business reviewwww.ilika.com Increased market demand
Energy
We are developing innovative new materials for lithium-
ion batteries, developing high capacity hydrogen storage
materials, developing cheaper alternatives to platinum
electrodes for use in fuel cells, and carrying out in-house
research on film photovoltaic solar cells.
Ilika can cover a wide range of different
market applications within the energy
sector to help customers advance their
materials discovery programmes. The
great breadth and large numbers of
samples that can be synthesised and
screened with respect to an identified
capability means that Ilika can optimise
materials in a much shorter timeframe.
For hydrogen storage applications,
different compositions can be
characterised with respect to their
hydrogen adsorption and desorption
behaviours including their hydrogen
storage capacity and cyclability.
For fuel cell and battery applications,
the candidate materials can be
measured for catalytic activity. For
the photovoltaic market it is possible
to screen materials for greater energy
conversion efficiency.
Electronics
We are developing lead-free piezoelectric materials
and phase change memory materials for high capacity
memory chips.
We cover a wide range of different
market applications within the
electronics sector to help customers
advance their materials discovery
programmes. The fast throughput
approach to materials synthesis
coupled with high throughput
characterisation and screening means
that Ilika can optimise materials with
respect to a desired property in a
much shorter timeframe. For phase
change memory applications, we can
monitor the phase change behaviour
of different alloys such as GeSbTe as
a function of temperature. The optical
and electrical behaviours of interesting
compositions can then be studied in
more detail.
Biomedical
We are developing polymers to enable the filtering of
somatic stem cells from blood, have been selling our
Cryoskin® and Myskin® products for the treatment of
burns and wounds in the UK and intend to commence
clinical trials of our corneal bandage candidate.
Ilika has developed an extensive library
of bio-functional materials specifically
designed to promote or deter cell
binding, enrich specific cell types from
diverse populations and promote cell
growth on tailored surfaces. We are
working together with medical device
companies to create valuable products
through the application of cell-specific
functional coatings optimised using
our high throughput techniques.
Application areas include:
• Skin Wound Care
• Cell Replacement for Organ
Regeneration
• Implants
• Diagnostic Devices
• Cell Purification
Annual report 2012 Ilika plc 03
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Enhancing value
through...
Key revenue streams
Significant progress
has been made in the
development of products
building on previous
work undertaken with
our partners.
We have collaborated with
many blue chip partners
including Toyota, Energizer
and Toshiba.
Joint
development
programmes
Product
sales
Contract
work
Grant-
funded
work
A pipeline of significant opportunities
Launch schedule
2010
2011
2012
2013
2014
Cryoskin®/Myskin®
Launched
Fuel Cells
Cell Growth Surface
Hydrogen Storage
Li-ion Batteries
Piezoelectrics
04 Ilika plc Annual report 2012
Energy
Ilika’s materials are key
to enabling the efficient
conversion and storage of
different forms of portable
energy. For example, Ilika has
developed two materials
which facilitate the use of
hydrogen as a fuel. The first
material stores hydrogen as
a solid compound from which
hydrogen can be released.
Scaled-up powder samples of
this material show promising
hydrogen capacity and
reversibility. The second
material is a lower-cost
catalyst for use in fuel cells.
Ilika’s catalyst material
achieves the same power
output for a third of the cost
of conventional platinum-
based materials.
Our investment propositionBusiness reviewwww.ilika.com Successful partnerships
Jointdevelopment
programmes(‘JDPs’)
Ilika prefers to develop
materials in collaboration
with large multinational
companies which have
the expertise to bring new
end products to market.
Collaborations typically
involve joint ownership of
intellectual property which
enables Ilika to retain a
share in end product sales.
Contractwork
Ilika does undertake high
margin, contract research
projects. Typically, these
demonstrate its capabilities
and often lead to follow on
collaborative programmes.
Productsales
Products for the treatment
of acute burns which have
been developed using Ilika’s
high throughput polymer
technology are commercially
available in the UK and these
are being rolled out to new
territories.
Grant-fundedwork
Grant funding from the
Technology Strategy
Board and the Carbon
Trust support a variety of
innovative programmes
in biomedical and energy
sector focused research.
Partnering with companies committed
to developing and commercialising
jointly developed products.
Our core competence is in the innovation of novel
materials which includes the identification of demand for
new materials and the rapid execution of experimental
programmes to develop materials to meet that demand.
We operate at the beginning of the product supply
chain, and understand that successful commercialisation
requires manufacturing capabilities, know-how in the
integration of materials into consumer products and
retailing to the mass market.
Once we have identified potential demand for a new
material, we shortlist the leading industrial companies
in the sector and seek to attract them into mutually-
beneficial joint development programmes.
2012 is expected to see
Ilika providing samples of
these materials to original
equipment manufacturers
(‘OEMs’) for inclusion in
their ongoing technology
development programmes.
On the other hand, Ilika is
developing materials for
batteries with an increased
energy density, faster charge
and discharge times as well
as improved safety. Ilika will
be working with its partners
to develop its materials
technology to the point of a
prototype solid-state battery.
Electronics
Ilika is working on a number
of programmes with materials
that satisfy the need for
increased energy efficiency of
electronic systems and a
diversification of materials
used in electronic devices.
Lead-free materials for
sensors (piezoelectrics) and
higher information storage
density materials (Phase
Change Memory) are the
closest to commercialisation.
Biomedical
Ilika launched the wound
care products Myskin®
and Cryoskin® in 2010.
Significant progress has
also been achieved in the
development of a material
to enable the cultivation of
stem cells for the cell therapy
market. Prototype products
are currently being
independently evaluated.
Expertise and experience
Ilika employs a dedicated team of specialist scientists to
undertake its world-leading research and development
programmes. We actively recruit and retain top scientists
from around the world to join our multi-disciplined team,
thereby ensuring our expertise and experience is
unrivalled in this area.
Annual report 2012 Ilika plc 05
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Commercialising our technology
Meeting market
requirements...
Solid-state batteries
Solid-state Li-ion battery performance
10,000
)
L
/
W
(
y
t
i
s
n
e
D
r
e
w
o
P
8,000
6,000
4,000
2,000
Lithium-ion batteries
w/liquid electrolyte
(NEDO target)
All-solid-state
lithium batteries
Metal-air
battery
1,000
10
Ni-MH battery
Limit of conventional
lithium-ion battery
100
Energy Density (Wh/L)
1,000
10,000
A battery is a number of
electrochemical cells connected to
provide the required voltage and
current. In a conventional cell, the
electrodes are prevented from
shorting by a permeable separator,
soaked in liquid electrolyte.
Solid-state batteries differ from
conventional batteries in that the
liquid electrolyte is replaced by
a solid electrolyte, which confers
some important benefits on
the battery.
Thermalstability
Since all the materials in the battery
are solid, heating and cooling the
battery causes less expansion and
contraction and creates less stress
on the packaging. The batteries
can be stored and operated at
high temperature.
Simpleconstruction
The critical components of the
battery can be deposited in one
process, without the need for
different assembly stations in the
production line. A separator is not
required and there is no need for a
binder in the electrodes. While air
must still be excluded from the
packages cells, there is no volatile
electrolyte to contend with.
Non-flammableelectrolyte
The solid electrolyte is non-
flammable, in contrast with liquid
electrolytes which present a fire
and explosion hazard in the event
that the battery is punctured.
Hence, solid-state batteries are
intrinsically safer.
Increasedenergydensities
Solid-state batteries are made from
thin, highly dense electrodes. The
solid electrolyte layer is very thin.
These characteristics, together
with the elimination of parasitic
components such as the separator,
binders and conducting additives,
result in an overall increase in
energy density of the battery.
06 Ilika plc Annual report 2012
Challenges
> Electrolytes with ionic
conductivities ca. 10-3 S cm-1
> Ionic and electronic
conduction networks
> Mechanical stress caused by
electrode materials ‘breathing’
> Deposition of target materials
using UHV process
> Sequential deposition of defect-
free component layers
Business reviewwww.ilika.com
Hydrogen storage materials
Hydrogen molecules (red) reacting with material.
Ilika’s solid-state hydrogen materials
are lightweight metal powders that
react with hydrogen to form a stable,
solid hydride. This allows hydrogen,
which is a light, volatile gas at normal
temperature and pressure, to be
stored in a dense state without the
need for expensive and potentially
hazardous compression to high
pressures. The hydrogen can be
released from the hydride by gentle
heating, which causes the hydride
to reversibly decompose.
Right: Gravimetric capacity
measured up to 850oK,
as determined from
temperature programmed
desorption experiments.
The capacity is low across
the ternary space but a
hot spot is observed for
a specific composition
Fuel cell materials development
35mm
At. % B
Ternary plot of the activity
of a thin film alloy catalyst
towards the oxygen
reduction reaction
Novel catalysts for low temperature fuel cells
Above: Addressable
screening chip
At. % A
At. % C
Spec. Cur. Dens./mA cm-2
Fuelcellmaterialsdevelopment
With financial support from the Carbon Trust, Ilika has
developed a lower-cost catalyst which allows fuel cells to
deliver the same electrical power output at a third of the
cost of conventional catalysts. The catalysts developed
in Ilika’s laboratory are currently being tested by an
independent fuel cell technology testing body before
being made available to automotive OEMs for inclusion
in their development programmes.
Annual report 2012 Ilika plc 07
Schematic cut-through of a
proton exchange membrane
fuel cell (‘PEM’), image from
www.wpafb.af.mil
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Chairman’s review
A clear route to
commercialisation...
Jack Boyer, Chairman
‘ As we move into the new
financial year we are
confident that we’ve firmly
established a strong base
to continue to grow the
business. We have a strong IP
portfolio and a number
of joint development
agreements with major
partners that continue
to make good progress.’
08 Ilika plc Annual report 2012
I am delighted to announce our second
strong set of full year results as a public
company. The financial year ended
30 April 2012 saw another year of
substantial growth in joint development
and contract research revenues, and
we are well positioned to broaden our
commercial pipeline and deliver full
commercial success for our portfolio.
Financialresults
Revenue from operations for the year
ended 30 April 2012 rose 30 percent to
£2.01 million (2011: £1.54 million), and
were supplemented by £0.29 million of
grant income (2011: £0.36 million). As a
result total revenue rose 21 percent to
£2.30 million (2011: £1.90 million).
Revenue from operations relate to the
payments made by Ilika’s partners for
research and development activities.
The majority of these payments are
associated with the development of
materials for applications in energy
storage and conversion, but projects
in the electronics sector have increased
significantly in the year. The Group
also has a subsidiary that handles all
biomedical products and development
programmes. The revenue breakdown
of the segmental performance is
given opposite:
Business reviewwww.ilika.com Highlights
Financialhighlights
> Revenues up 30 percent to
£2.01 million (2011: £1.54 million)
> Total revenue including other
operating income up 21 percent to
£2.30 million (2011: £1.90 million)
> Gross profit up 35 percent to
£0.82 million (2011: £0.61 million)
> Loss before tax reduced to
£2.84 million (2011: £3.15 million)
> Loss per share reduced to
0.07p (2011: 0.08p)
> Cash, cash equivalents and
bank deposits of £5.3 million
(as at 30 April 2011: £2.8 million)
Operationalhighlights
> Development of thin film battery
technology for man-portable
batteries
> Sigma-Aldrich partner has
manufactured promising samples
of hydrogen storage materials
> Full-scale testing on lower-cost
catalysts for fuel cells under way,
with batches to be provided to
automotive OEMs later in 2012
> Strong growth in electronics
sector driven by need for
increased efficiency and
diversification of materials
> Increased business development
activity in Asia, US and Europe
continues to extend sales pipeline
> Grant of a patent in the US,
Japan and Canada covering
core technology
> Strong sales of Altrika’s Myskin®
and Cryoskin® for the treatment
of burns patients in the UK –
progress made towards
international roll-out
> Placing which raised £4.6 million
after expenses in April 2012
Materials being visualised using a scanning
electron microscope
Yearended
30April
2012
£
1,005,823
656,738
348,683
Year ended
30 April
2011
£
1,101,448
291,546
151,772
2,011,244
1,544,766
Movement
percent
–9
+125
+130
+30
Outlook
As we move into the new financial year
we are confident that we’ve firmly
established a strong base to continue
to grow the business. We have a strong
IP portfolio and a number of joint
development agreements with major
partners that continue to make
good progress.
We have strengthened the international
reach of our business development
activities and with early successes in the
US and the appointment of a business
development resource in Germany, our
sales pipeline for 2013 is growing and
provides us with significant confidence
for the future.
Finally I would like to thank the staff
and Board for their hard work over
the last year and their undoubted
contribution to the growth of the
business. I look forward to reporting
on the continuing success of the Group
over the coming year.
JackBoyer
Chairman
18 July 2012
Energy
Electronics
Biomedical
Total
During the period grant funding was
received from the Carbon Trust and the
Technology Strategy Board (‘TSB’) to
support a number of the Group’s
programmes for energy conversion and
biomedical applications.
Gross profit increased by 35 percent to
£0.82 million (2011: £0.61 million).
Administration expenses in the year
decreased by around £0.195 million in
comparison to the prior year.
We recorded a reduced loss before tax
of £2.84 million (2011: £3.15 million),
resulting in a reduced loss per share of
0.07p (2011: Loss of 0.08p).
Cash
As at 30 April 2012, the Group’s cash
position was £5.3 million (2011: £2.8
million). In early April 2012 we raised
£4.6 million, after expenses through
a Placing at 55p to, amongst other
things, enable the Group to fund the
development of thin film battery
technology for man-portable batteries.
Investment in equipment in the year
was £0.2 million (2011: £0.67 million)
which has increased the Group’s
high-throughput capacity enabling
the expected revenue growth to
be achieved.
Annual report 2012 Ilika plc 09
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Chief Executive’s review
A compelling
enterprise...
Graeme Purdy, Chief Executive
‘ This year has seen great
progress in both operational
and financial aspects of the
business. This progress will
provide a springboard for
further commercialisation
of our product portfolio.’
10 Ilika plc Annual report 2012
Over the last 12 months Ilika has
continued to build its business of
developing innovative new materials
for clean tech applications, particularly
in the energy and electronics sectors.
Ilika’s proprietary high throughput
platform for the rapid development
of materials is a proven method for
the rapid innovation of new materials
and continues to strongly differentiate
Ilika’s approach from slower,
traditional methods.
Although the past year has witnessed
substantial disruption in some of the
world’s major economies, Ilika has
continued to build its business,
delivering 30 percent turnover growth
relative to last year. The geographical
revenue split shows that 79 percent
of our turnover in the year came from
Asia, up from 67 percent last year
and therefore it has been particularly
important for Ilika to work closely with
its Japanese customers to understand
the consequences of the natural
disasters that affected the region
in 2011. Due to the strength of its
relationships in the region, Ilika was able
to identify areas where it could support
its partners’ businesses, delivering
substantial added value and growing
its own business.
As economic pressures from stiffening
global competition continue to mount on
large multinationals, the market pull for
improved functional materials to be
integrated into new product lines is
stronger than ever. Consumer demand
for innovative branded products
developed by our partners remains
robust, so Ilika’s business strategy of
collaborating with large multinational
customers, who are recognised
as market leaders in their sectors,
continues to be successful. Ilika
has a portfolio of about 20 blue-chip
customers including Asahi Kasei,
CeramTec, DSTL, Energizer, NXP, Shell,
Sigma Aldrich, Toshiba and Toyota.
In addition to increased financial
momentum, Ilika’s second full year
as a public company has witnessed an
increase in the Company’s corporate
profile, a broadening of its client base
Business reviewwww.ilika.com Our strategy
The Company’s business
strategy is to use our
HTT process to discover
and commercialise novel
materials for integration
into products with high
value end-markets.
> Developing leading-
edge high throughput
development processes
> Partnering with
companies committed
to developing and
commercialising jointly
developed products
> Using high throughput
processes to invent
patentable functional
materials
An array of materials being placed in
an x-ray diffractometer
and a maturing of its portfolio of
intellectual property. In April, Ilika was
recognised by a New Energy Award at an
event hosted at the Science Museum in
London. The grant of a patent covering
Ilika’s core technology platform in the
US, Japan and Canada was confirmed
in May.
Energy
The demand for improved batteries,
particularly for hybrid and electric
vehicles, has been a major driver of
growth at Ilika in 2011. In November,
Ilika announced that it had delivered
a presentation to the 52nd Battery
Symposium in Tokyo on work that it
had been carrying out with Toyota since
February 2008 on the development
of solid-state electrolytes, one of the
most important components of an all
solid battery. Toyota is interested in
developing improved batteries for its
electric and hybrid vehicles. The next
generation of batteries is targeting
increased energy density, faster charge
and recharge times as well as improved
safety. With their increased thermal
stability, simple construction, non-
flammable electrolyte and increased
energy density, solid-state batteries
meet many of these requirements.
However, until now, making solid-state
batteries has posed technical
challenges including identifying solid
electrolytes with sufficiently high
ionic conductivities, low electronic
conductivity, low mechanical stress
resulting from electrochemical
cycling and reproducible high yield
production methods.
To date, Toyota has invested £2.5 million
on battery development through Ilika.
As a result of their joint efforts in
this field, in 2011 Toyota filed patent
applications jointly-held by Toyota and
Ilika. Under the terms of their IP sharing
agreement with Toyota, each party
has the right to commercialise the
IP independently, subject to the other
party’s consent. Toyota and the
Company have presented summaries
of this technology at international
technology symposia in Europe, Japan
and the US. In the course of these
presentations, the Company has met
with representatives from the UK and
US military who have shown specific
interest in applying Ilika’s battery
technology for their purposes.
Furthermore, these representatives of
the UK and US military have confirmed
that the expected performance of
Ilika’s battery technology meets the
development requirements for man-
portable batteries defined by the UK
and US defence forces.
Estimates of market sizes for
rechargeable batteries vary quite
significantly (some estimates for the
market size in 2010 range from $6 billion
to $36 billion), but indicate that the
addressable market is far in excess of
the $1 billion threshold criterion that the
Company typically seeks in its selected
target markets. The Company estimates
the market size for rechargeable batteries
in the defence sector in 2015 to be
approximately $2.5 billion.
Over the next 24 months, Ilika will
be working closely together with
its partners to develop its materials
technology further to the point of a
prototype battery. This development will
be accomplished in 3 key phases. During
Phase I the cell design for the battery
will be optimised using the Company’s
existing laboratory facilities. In parallel,
in cooperation with an equipment
fabricator, the Company will design the
device prototyping equipment. In Phase
II the Company will build the device
prototyping system and also build a
multilayer cell architecture (a simple
battery). Phase III involves the
production of a limited number of
prototype batteries using its prototyping
equipment and confirmation with
end-customers that the batteries meet
their requirements. At this point, the
Company intends to partner with a
suitable manufacturer to integrate the
materials into a final product and fully
commercialise the technology.
In order to support its solid state-battery
technology programme, Ilika announced
that it had successfully completed an
equity placing of £4.9 million in April
2012, with 60 percent of the funds raised
coming from new shareholders.
Annual report 2012 Ilika plc 11
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Chief Executive’s review continued
An Ilika scientist setting up the control system for
one of Ilika’s high throughput platforms
Battery technology is currently an
exciting high growth opportunity, but
Ilika has continued to progress other
energy technologies which are expected
to have a substantial commercial impact.
In particular, hydrogen is a fuel which
many analysts continue to support
inter alia because of the higher energy
density that can be achieved using
hydrogen as an energy carrier.
Ilika has a proprietary position with 2
technologies that are key to enabling
the use of hydrogen as a fuel.
The first hydrogen-related technology
is a material for storing hydrogen as a
solid compound from which hydrogen
can be released under controlled
conditions. In June 2011, Ilika announced
that it had entered into a collaboration
with the US speciality chemicals
company, Sigma Aldrich, to scale-up
and commercialise Ilika’s material.
This scale-up collaboration has made
good progress during 2011, with powder
samples being prepared that show
promising hydrogen capacity and
reversibility. This work is expected
to continue in 2012.
The second hydrogen-related technology
is a lower-cost catalyst for use in fuel
cells. Hydrogen can either be used in
an internal combustion engine, or in a
fuel cell. The former option has the
advantage that existing combustion
engines can be converted to run on
hydrogen and therefore there is less of
a hurdle for technology adoption. The
latter option achieves a more efficient
conversion of energy, but is currently
too expensive for mass market adoption.
Substantial cost reductions can be
achieved by reducing fuel cell
technology’s dependence on platinum
as a catalyst. Ilika’s fuel cell catalyst
technology has been shown to achieve
the same power output for a third of the
cost of platinum-based technology.
Ilika’s work in this area has been
supported to date by the Carbon Trust.
Full-scale catalyst testing is currently
under way with an independent fuel cell
testing organisation in the US and 2012
is expected to see Ilika providing batches
12 Ilika plc Annual report 2012
of the catalyst to automotive OEMs for
inclusion in their ongoing technology
development programmes.
Electronics
From Ilika’s perspective, the electronics
sector has become increasingly attractive
over the last year. Projects in the
electronics sector now account for around
33 percent of the total turnover (2011: 19
percent). There are a number of significant
drivers for this trend. The first is the
need for increased energy efficiency
of electronic systems. This efficiency is
requiring improved capacitors, which are
devices for storing electronic charge in
many different industrial and consumer
electronics applications. Ilika’s technology
is particularly well suited to the
manufacture of the complex oxide
materials which are ubiquitously used in
these devices. The second driver is the
gradual diversification of materials used
in electronic devices. Traditionally, most
electronic components were made using
silicon, but miniaturisation, increased data
storage density and improved processing
speeds can be achieved by incorporating
other elements into system architecture.
In September 2011 Ilika announced its
first major US electronics collaboration,
which was the start of a commercial
effort to replicate the growth story
Ilika has achieved in Japan with a similar
strategy in the US. However, Japan
remains Ilika’s major source of revenue
in this sector, which is also a result of
the fact that many of the world’s leading
electronics companies are based
there. The addition of Toshiba to Ilika’s
customer portfolio in January 2012 was
the latest success in Ilika’s business
development efforts in Asia.
It also operates a Human Tissue
Authority (‘HTA’) approved clean room
suite for the production of its wound
care products, Myskin® and Cryoskin®.
The clean room suite is validated to
meet Good Manufacturing Practice
(‘GMP’) requirements.
Altrika is fully licensed by the HTA for
the procurement, testing, processing,
distribution and storage of human cells.
In addition, Cryoskin® is licensed as
a cell therapy by the Medicines and
Healthcare products Regulatory Agency
(‘MHRA’). Over the past year, Myskin®
and Cryoskin® have been used to
successfully treat burns patients at
most of the major burns units in the UK.
Progress has been made in working with
clinicians, distributors and regulatory
authorities to support the roll-out of
these products in new jurisdictions.
Businessdevelopmentstrategy
In the US the appointment of a full time
business development resource based
in California has started to yield results,
with two substantive commercial
relationships being established there
in the last 12 months. Ilika has also
continued to work with the JGW Group
to represent its interests in acquiring
business in the US defence industry. In
addition, Ilika has reinforced its business
development efforts in Europe with the
appointment of a business development
resource in Germany. Hence, Ilika now
has direct business development
professionals, reinforced by specialist
agencies where appropriate, deployed
in the 3 most significant geographies for
its business: Japan, US and Germany.
These initiatives have broadened
Ilika’s commercial pipeline, supporting
sustained growth for the coming period.
Biomedical
Ilika operates a wholly-owned subsidiary,
Altrika Ltd, which commercialises
technology for biologically-functional
medical (biomedical) devices.
GraemePurdy
ChiefExecutive
18 July 2012
At its facilities, located in Sheffield, UK,
Altrika operates a high throughput
laboratory for the rapid development
of novel, biologically active materials.
Business reviewwww.ilika.com Financial review
Strengthening our
position...
Stephen Boydell, Finance Director
‘ The AIM Placing in
April 2012 raised
£4.6 million, to enable
the Group to develop its
thin-film battery
technology.’
Administration expenses in the year
decreased by around £0.19 million in
comparison to the prior year. This
decrease is due to a reduction in the
share-based payment charge in the year
of around £0.4 million, which has been
partially offset by an increase of around
£0.21 million in the Group’s spend on
research and development activities.
The Placing on 23 April 2012, raised
£4.6 million, after expenses, to enable
the Group to continue to develop its
thin film battery technology. It was
achieved at a share price of 55p, only
slightly below the prevailing market
price, with the majority of the funds
coming from new investors. There was
also strong participation from the
Board of Directors.
Investment in equipment in the year
was £0.2 million (2011: £0.67 million)
which has increased the Group’s
high-throughput capacity enabling the
expected revenue growth to be
achieved. As at 30 April 2012, the
Group’s cash position was £5.3 million.
SteveBoydell
FinanceDirectorand
CompanySecretary
18 July 2012
Revenue for the year ended 30 April
2012 was £2.01 million (2011: £1.54
million ), supplemented by £0.29 million
of grant income (2011: £0.36 million).
Revenues relate to the payments made
by Ilika’s partners for research and
development activities. The majority
of these payments are associated
with the development of materials for
applications in energy storage and
conversion, but projects in the
electronics sector have increased
significantly in the year and now account
for around 33 percent of the total
turnover (2011: 19 percent). Asian based
customers continue to fund the majority
of the Group’s projects and growth
in revenues of around 54 percent has
been achieved from these customers.
US-based customer funded projects
have increased significantly in the year,
by more than tenfold, which have been
generated by the US business
development resource who was
appointed halfway through the last
financial year. Revenue generated
from European-based customers has
decreased by around 63 percent in
the year and a German-based business
development resource was appointed
at the end of this financial year to
address this.
Gross margin on revenues has improved
from around 39 percent last year to
around 41 percent this year. This is
primarily due to the doubling of
biomedical product sales in the year.
Grant funding was received from the
TSB to support a number of the Group’s
programmes for biomedical applications
and the Carbon Trust funding supported
an energy conversion project.
Annual report 2012 Ilika plc 13
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Corporate governance
Board of Directors
1
3
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14 Ilika plc Annual report 2012
www.ilika.com 1JackBoyer
Chairman
Mr. Boyer joined Ilika as Chairman in
2004 and chairs subsidiary Altrika
Ltd. He previously founded and was
the CEO of pan-European engineering
group TCG, an Executive Director at
Goldman Sachs and a management
consultant at Bain & Co.
3Prof.BrianHayden
ChiefScientificOfficer
Brian is currently on secondment
to Ilika from the University of
Southampton, where he is Professor
of Physical Chemistry. He is a pioneer
of surface science and has a strong
track record in running successful
industrial collaborations.
Mr. Boyer was educated at Stanford
University (B.A. Hons), the London
School of Economics (M.Sc.) and INSEAD
(MBA). He currently leads the University
of Southampton’s corporate spin-out
and intellectual property exploitation
activities as Chair of Southampton Asset
Management and is Chairman of two
biotechnology companies.
Mr. Boyer is a Council member of
the UK Engineering and Physical
Sciences Research Council (‘EPSRC’),
the Higher Education Funding Council
for England’s Research Excellence
Framework main panel for physical
sciences, a Trustee of sustainable
development charity Forum for the
Future and deputy Chairman of
Godolphin & Latymer school
in London.
2GraemePurdy
ChiefExecutive
Graeme was appointed to head-up the
Company from the beginning of May
2004, just before completion of the
Company’s seed round of funding. He
led the Company through 2 successful
rounds of venture funding before
floating the Company on AIM in 2010.
Prior to joining Ilika, Graeme was Chief
Operating Officer of a high-technology
company in the Netherlands and before
that worked internationally in a variety
of technical and commercial roles
for Shell. Graeme holds a master’s
degree in Chemical Engineering from
Cambridge and an MBA from INSEAD
business school in France. Graeme is
a Chartered Engineer and a Sainsbury
Management Fellow. In addition to
his executive role at Ilika, Graeme is a
Non-Executive Director of Southampton
Asset Management.
Brian has published in excess of
100 papers in the fields of surface
science, surface electrochemistry and
fundamental aspects of heterogeneous
catalysis and electrocatalysis. He is a
Fellow of the Royal Society of Chemistry
and regular speaker at conferences.
4StephenBoydell
FinanceDirector
Having qualified with Deloittes in 1996,
Stephen held a number of acquisition,
treasury and group reporting roles at
both Hays plc and then AGI Media before
becoming Finance Director of Healthy
Direct, a successful Guernsey-based
group of companies. He was instrumental
in the restructuring of that group and its
subsequent trade sale to a competitor.
He joined Ilika in 2009 as Finance
Director and Company Secretary.
Stephen studied Economics at
Nottingham University and is a Fellow of
the Institute of Chartered Accountants.
5Dr.WernerBraun
Non-ExecutiveDirector
Having received a PhD in plasma
and laser physics from the Technical
University in Munich for research work
performed at the Max Planck Institute for
Plasma Physics, Dr. Braun initially worked
for Messer Griesheim before joining
Biotronik as VP of Marketing and Sales.
Over a period of 14 years, Dr. Braun
played a key role in growing Biotronik
from an early stage company to a global
provider of medical devices for use in
cardiology and cardiosurgery.
Following spells as General Manager of
Chiron Adatomed and VP of Marketing and
Sales for Medtronic Europe, Middle East
and Africa, Dr. Braun returned to Biotronik
in 2001 to become Managing Director,
further developing the Company’s market
expansion to become Europe’s largest
privately-held medical device company
in the cardiovascular arena.
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6ClareSpottiswoodeCBE
Non-ExecutiveDirector
Ms. Spottiswoode’s career started as
an economist with the Treasury before
establishing her own software company.
She is perhaps best known as Director
General of Ofgas where she oversaw the
transformation of the gas industry from a
monopoly into a deregulated, competitive
industry. In November 2006 she was
appointed as the Policyholder Advocate
for Aviva, responsible for ensuring that
around 1 million with-profits policyholders
received a fair share of the £5–6 billion
inherited estate. Policyholders received
more than double the only previous
reattribution settlement.
Ms. Spottiswoode currently chairs Gas
Strategies Limited and is a Non-Executive
Director of Energy Solutions and Tullow
Oil. Awarded a CBE for services to
industry in 1999, she holds degrees from
Cambridge and Yale Universities and an
honorary doctorate from Brunel.
7Prof.SirWilliamWakeham
Non-ExecutiveDirector
Prof. Sir William Wakeham retired as
Vice-Chancellor of the University of
Southampton in September 2009. He
studied Physics at Exeter University at
both undergraduate and doctoral level.
In 1971 he took up a lectureship in the
Chemical Engineering Department at
Imperial College London becoming
Head of Department in 1988.
By 1999 he was Pro-Rector (Research),
Deputy Rector and Pro-Rector
(Resources) at Imperial College. He
oversaw the College’s merger with a
series of medical schools and stimulated
its entrepreneurial activities.
A Fellow and International Secretary
of the Royal Academy of Engineering,
a Fellow of the Institution of Chemical
Engineers, the Institution of Engineering
and Technology, and the Institute of
Physics. He holds a higher doctorate
from Exeter University, honorary degrees
from Lisbon University, Exeter and
Southampton Solent University and is
a Fellow of Imperial College London. He
is a Council Member of the Engineering
and Physical Sciences Research Council
and Chair of its Audit Committee. He was
knighted in 2009 for services to Chemical
Engineering and Higher Education.
Annual report 2012 Ilika plc 15
www.ilika.comfinancialstatements Corporate governance
Directors’ report
The Directors present their report and
the audited financial statements for Ilika
plc (‘Ilika’) and its subsidiaries (‘the
Group’) for the year ended 30 April 2012.
Principalactivities
The principal activity of Ilika and the
Group is the discovery and development
of novel materials for the energy,
electronics and biomedical sectors.
Businessreview
A detailed review of the business, its
results and future direction, together
with the key performance indicators of
turnover by business sector and
geographical market, is included in the
Chairman’s and Chief Executive’s review.
Directors
The Directors who served on the Board
of Ilika during the year and to the date of
this report were as follows:
Executive
• Mr. S. Boydell (Financial Director
and Company Secretary)
• Prof. B.E. Hayden (Chief Scientific
Officer)
• Mr. G. Purdy (Chief Executive)
Non-Executive
• Mr. J.B. Boyer (Chairman)
• Dr. W. Braun
• Ms. C. Spottiswoode CBE
• Prof. Sir W. Wakeham
Details of the Directors’ remuneration
and share options are shown in note 4
of these accounts.
The Group maintained directors’ and
officers’ liability insurance cover
throughout the period.
Principalrisksanduncertainties
Commercialrisk
The Group is subject to competition from
competitors who may develop more
advanced and less expensive alternative
technology platforms, both for existing
materials and for those materials
currently under development. The Group
is largely dependent on its partners to
commercialise the end-products
containing the Group’s materials.
Financialrisk
The Group is reliant on a small number
of significant customers and partners.
Termination of these agreements could
have a material adverse affect on the
Group’s results or operations or financial
condition. The Group expects to incur
further operating losses as progress
on development programmes continue.
There can be no assurance that the
Group will ever achieve significant
revenues or profitability.
Intellectualpropertyrisk
The Group faces the risk that intellectual
property rights necessary to exploit
research and development efforts may
not be adequately secured or defended.
The Group’s intellectual property may also
become obsolete before the products and
services can be fully commercialised.
Regulatoryrisk
The Group’s materials and products are
subject to various European and other
legislative and regulatory requirements.
Regulatory issues could lead to delays
in development which take time and
investment to resolve.
Postbalancesheetevents
On the 22 May 2012, 60,000 Convertible
Preference Shares were converted to
Ordinary Shares.
Supplierpaymentpolicy
It is the Group’s policy to settle debts
with its creditors on a timely basis,
taking best advantage of the terms and
conditions offered by each supplier. As
at 30 April 2012, the number of creditor
days outstanding for the Group was
27 days (2011: 21 days).
Financialinstruments
The Group’s principal financial
instrument comprises cash and this is
used to finance the Group’s operations.
The Group has various other financial
instruments such as trade credit
facilities that arise directly from its
operations. The Group places deposits
surplus to short-term working
requirements with a range of reputable
UK based banks and building societies.
Graeme Purdy, Chief Executive
‘ The Directors present
their report and the
audited financial
statements for Ilika plc
and its subsidiaries
for the year ended
30 April 2012.’
16 Ilika plc Annual report 2012
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These balances are placed at fixed rates of
deposit with maturities between 1 and 9
months. See note 17 for IFRS 7 disclosure
regarding financial instruments.
Resultsanddividends
The Consolidated Statement of
Comprehensive Income for the year is
set out on page 23. The Group’s loss for
the financial year after taxation was
£2.7 million (2011: £3.0 million).
The Directors do not recommend the
payment of a dividend.
Charitableandpoliticaldonations
The Group made no charitable or
political donations during the year
(2011: Nil).
Researchanddevelopmentcosts
In accordance with the policy outlined in
note 1, the Group incurred research and
development expenditure of £1,377,000
in the year (2011: £1,167,000).
Commentary on the major activities
is given in the Chairman’s review and
Chief Executive’s review.
Auditors
All the current Directors have taken
all the steps that they ought to have
taken to make themselves aware of any
information needed by the Company’s
auditors for the purposes of their
audit and to establish that the auditors
are aware of that information. The
Directors are not aware of any relevant
audit information of which the auditors
are unaware.
A resolution to reappoint BDO LLP
will be proposed at the next Annual
General Meeting.
Substantialshareholdings
On 30 June 2012 the Company had been
notified of the holdings of 3 percent or
more of the issued share capital of the
Company, as shown in the above table.
Directors’responsibilities
The Directors are responsible for
preparing the annual report and the
financial statements in accordance with
applicable law and regulations.
Shareholder
IP Group
St Peter Port Capital
Nomura International
Ruffer LLP
Mackin Holdings Inc
Southampton Asset Management
Artemis
Southern Fox
Nortrust Nominees
Legal and General
Wyvern
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the
Directors have elected to prepare
the Group and Company 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 and fair view of the state
of affairs of the Group and Company and
of the profit or loss of the Group and
Company for that period. The Directors
are also required to prepare financial
statements in accordance with the rules
of the London Stock Exchange for
companies trading securities on the
Alternative Investment Market (‘AIM’).
In preparing these 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 they have been prepared
in accordance with IFRSs as adopted
by the European Union, subject
to any material departures disclosed
and explained in the financial
statements; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
Number of
Ordinary
Shares
%
shareholding
8,161,487
6,018,924
6,018,924
4,545,454
4,117,647
3,799,900
2,670,741
2,424,093
1,830,991
1,720,677
1,598,039
17.9
13.2
13.2
10.0
9.1
8.4
5.9
5.3
4.0
3.8
3.5
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
requirements of the Companies Act
2006. They are also responsible for
safeguarding the assets of the Company
and hence for taking reasonable steps
for the prevention and detection of fraud
and other irregularities.
Websitepublication
The Directors are responsible for
ensuring the Annual Report and the
financial statements are made available
on a website. Financial statements are
published on the Group’s website in
accordance with legislation in the United
Kingdom governing the preparation and
dissemination of financial statements,
which may vary from legislation in other
jurisdictions. The maintenance and
integrity of the Group’s website is the
responsibility of the Directors. The
Directors’ responsibility also extends to
the ongoing integrity of the financial
statements contained therein.
By order of the Board
GraemePurdy
ChiefExecutive
18 July 2012
Annual report 2012 Ilika plc 17
www.ilika.comfinancialstatements Corporate governance
Corporate governance statement
The Board is accountable to the
Company’s shareholders for good
corporate governance and it is the
objective of the Board to attain a high
standard of corporate governance. As
an AIM listed company full compliance
with the provisions of the UK Corporate
Governance Code published in May 2010
(‘the Code’) is not a formal obligation.
The Company has not sought to comply
with the full provisions of the Code,
however it has sought to adopt the
provisions that are appropriate to
its size and organisation and establish
frameworks for the achievement of
this objective. This statement sets out
the corporate governance procedures
that are in place.
BoardofDirectors
The Board of Directors (the ‘Board’)
consists of a Non-Executive Chairman,
3 Executive Directors and 3 Non-
Executive Directors.
The responsibilities of the Non-Executive
Chairman and the Chief Executive
Officer are clearly divided. The Chairman
is responsible for overseeing the running
of the Board, ensuring that no individual
or group dominates the Board’s decision
making and ensuring that the Non-
Executive Directors are properly briefed
on matters. Prior to each Board meeting,
Directors are sent an agenda and Board
papers for each agenda item to be
discussed. Additional information is
provided when requested by the Board
or individual Directors.
The Chief Executive Officer has the
responsibility for implementing the
strategy of the Board and managing the
day-to-day business activities of the
Group through his chairmanship of the
Executive Committee.
The Non-Executive Directors bring
relevant experience from different
backgrounds and receive a fixed fee for
their services and reimbursement of
reasonable expenses incurred in
attending meetings.
The Board retains full and effective
control of the Group. This includes
responsibility for determining the
Group’s strategy and for approving
budgets and business plans to fulfil
this strategy. The full Board ordinarily
meets bimonthly.
The Company Secretary is responsible
to the Board for ensuring that Board
procedures are followed and that the
applicable rules and regulations are
complied with. All Directors have access
to the advice and services of the
Company Secretary, and independent
professional advice, if required, at the
Company’s expense. Removal of the
Company Secretary would be a matter
for the Board.
Performanceevaluation
The Board has a process for evaluation
of its own performance which is carried
out annually.
BoardCommittees
As appropriate, the Board has delegated
certain responsibilities to Board
Committees as follows:
i)AuditCommittee
The Audit Committee currently
comprises Clare Spottiswoode CBE
(Chairman), Professor Sir William
Wakeham and Jack Boyer.
Jack Boyer, Chairman
‘ The Board is accountable
to the Company’s
shareholders for good
corporate governance
and it is the objective of
the Board to attain a high
standard of corporate
governance.’
18 Ilika plc Annual report 2012
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The Committee monitors the integrity
of the Group’s financial statements and
the effectiveness of the audit process.
The Committee reviews accounting
policies and material accounting
judgements. The Committee also
reviews and reports on, reports from
the Group’s auditors relating to the
Group’s accounting controls. It makes
recommendations to the Board on the
appointment of auditors and the audit
fee. It has unrestricted access to the
Group’s auditors. The Committee keeps
under review the nature and extent
of non-audit services provided by the
external auditors in order to ensure
that objectivity and independence
are maintained.
ii)RemunerationCommittee
The Remuneration Committee
currently comprises Dr. Werner Braun
(Chairman), Clare Spottiswoode CBE
and Jack Boyer. It is responsible for
making recommendations to the Board
on remuneration policy for Executive
Directors and the terms of their service
contracts, with the aim of ensuring that
their remuneration, including any share
options and other awards, is based on
their own performance and that of the
Group generally.
iii)NominationCommittee
The Nomination Committee currently
comprises Jack Boyer (Chairman),
Professor Sir William Wakeham and
Dr. Werner Braun. It is responsible
for providing a formal, rigorous
and transparent procedure for the
appointment of new Directors to the
Board and reviewing the performance
of the Board each year.
AttendanceatBoardmeetingsandcommittees
The Directors attended the following Board and committees meetings
during the year:
Board
Audit Nomination
Remuneration
7/7
7/7
7/7
7/7
7/7
7/7
6/7
–
2/2
–
–
–
2/2
2/2
–
1/1
1/1
–
–
–
1/1
–
2/2
2/2
–
–
2/2
–
Employment
The Board recognises its legal
responsibility to ensure the well-being,
safety and welfare of its employees
and maintain a safe and healthy working
environment for them and for its
visitors. A health and safety report
is reviewed at each Board meeting
and policies and procedures are
independently reviewed to ensure
compliance with best practice.
By order of the Board
JackBoyer
Chairman
18 July 2012
Attendance
Mr. S. Boydell
Mr. J.B. Boyer
Dr. W. Braun
Prof. B.E. Hayden
Mr. G. Purdy
Ms. C. Spottiswoode
Prof. Sir W. Wakeham
Riskmanagementandinternalcontrol
The Board is responsible for the systems
of internal control and for reviewing
their effectiveness. The internal controls
are designed to manage rather than
eliminate risk and provide reasonable
but not absolute assurance against
material misstatement or loss. The Audit
Committee reviews the effectiveness of
these systems primarily by discussion
with the external auditor and by
considering the risks potentially
affecting the Group.
The Group does not consider it
necessary to have an internal audit
function due to the small size of
the administration function. Instead
there is a detailed Director review
and authorisation of transactions.
The annual audit by the Group auditor,
which tests a sample of transactions,
did not highlight any significant system
improvements in order to reduce risk.
The Group maintains appropriate
insurance cover in respect of actions
taken against the Executive Directors
because of their roles, as well as against
material loss or claims of the Group.
The insured values and type of cover
are comprehensively reviewed on a
periodic basis.
Annual report 2012 Ilika plc 19
www.ilika.comfinancialstatements Corporate governance
Corporate social responsibility
Recognising our
responsibility...
Ilika recognises the importance of
approaching its responsibilities to
corporate social responsibility (‘CSR’)
in a coordinated and committed fashion
and we aim to ensure our approach
to creating business growth manages
environmental and social issues whilst
delivering value for the Company and its
shareholders and continued benefit for
society. This statement acknowledges
our ambition to include CSR in all parts
of our business.
Overall responsibility for developing
and implementing our CSR policies
on social, ethical and environmental
matters and for reviewing their
effectiveness lies ultimately with the Ilika
Board. The Board will regularly review
the scope of the Company strategy and
report to stakeholders to ensure we
remain focused on the material issues
for the business.
Ilika’s policies and procedures, including
those relating to social, environmental,
health and safety, employment and ethical
matters, are reviewed by the management
team regularly and are communicated to
all employees through the staff handbook,
email communications and regular
Company meetings. The management
team report to the Board to ensure the
members are fully apprised of the status
of the Company’s efforts in this area.
The main areas of CSR at Ilika are:
• health and safety;
• environment and sustainability;
• employee rights;
• values and ethics; and
• contribution to society.
Healthandsafety
We recognise our responsibility to
ensure the well-being, safety and welfare
of our employees and to maintain a safe
and healthy working environment for
all of our employees and visitors. We
understand that health and safety has
positive benefits for the Company and
that a commitment to a high level of
safety makes good business sense.
As a business function, health and safety
must continually progress and adapt
to change.
Health and safety is considered at the
highest level in the Company with the
ultimate responsibility resting with the
Board. Health and safety is an agenda
item at each Board meeting and a full
report is presented annually. Policies
and procedures are independently
reviewed by experts to ensure
compliance with best practice and
with the relevant health and safety
legislation.
Environmentandsustainability
Ilika is committed to achieving a real
and sustainable positive impact on
the broader community by adopting
environmentally responsible policies.
We believe that it is essential that both
as a Company and as individuals we
should operate in an environmentally
conscious manner. Our objective is to
minimise the impact of our business
activity on the environment wherever
possible. This includes ensuring that our
suppliers do likewise and we actively
seek collaborations with those who are
similarly aware of and active in this field.
This past year has seen us implement
more initiatives within the business in
furtherance of our policies. We have
obtained copies of our suppliers CSR
policies to ensure there is a good
match with our objectives; we purchase
recycled paper, preferably in bulk to
avoid multiple deliveries; our printers
are set to double-sided printing; each
work station has a recycling only bin
and we have increased the number of
international teleconferences, thereby
saving on travel.
Graeme Purdy, Chief Executive
‘ Ilika recognises the
importance of
approaching its
responsibilities to
corporate social
responsibility in a
coordinated and
committed fashion.
It is our ambition to
include CSR in all
parts of our business.’
20 Ilika plc Annual report 2012
www.ilika.com Our ongoing objectives are to:
• Consider environmental issues in all
of our decision making processes.
• Evaluate future energy usage to see
how we can use low energy systems.
• Advise staff on the efficient use of
energy and other utilities.
• Reduce travel on business by the use
of video and telephone conferencing.
• Use the most environmentally friendly
mode of transport consistent with
business needs.
• Encourage use of bicycles by offering
our employees access to the HMRC
Workcycle scheme.
• Reduce overall the resources we use.
• Promote waste minimisation by recycling
or finding other uses of by-products
whenever economically viable.
• Reduce our letters and
correspondence by using alternative
electronic mechanisms.
• Using either recycled or FSC paper
for all hard copy correspondence,
wherever possible.
• Consider environmental criteria when
choosing services and goods.
• Develop relationships with suppliers
and contractors so that we all
recognise our environmental
responsibilities.
• Fundamentally Ilika will reduce its
impact on the environment and ask
that its employees, suppliers and
customers do likewise.
Employeerights
Ilika adheres to all legislation relating
to employment rights and equal
opportunities, with particular reference
to non-discrimination on the basis of
ethnic origin, religion, gender, age,
marital status, disability or sexual
orientation. However, our policies
go beyond the legal requirements and
we acknowledge our moral right to
provide a safe and dignified working
environment. We ensure that we
maintain the highest level of integrity
with regard to employees, customers
and all others with whom we interact.
We recognise the value that our
employees create for the business and
our commitment to training and
personal development, together with
remuneration policies, are designed
to reward achievement and emphasise
the importance of retaining staff.
Ilika will not tolerate discrimination,
bullying or any kind of harassment
within our business community. The
concept of ’mutual respect’ is one of our
guiding principles. Employees are
expected to abide by Company rules and
to be honest and considerate in their
various roles. Internal procedures have
been established to report grievances or
suspected inappropriate behaviour to
other individuals or organisations.
Equally the Company will treat dishonest
actions and accusations seriously; this
may result in disciplinary action in
accordance with Company rules and
disciplinary procedures.
Ethicsandvalues
Ilika supports the principles of the
Universal Declaration of Human Rights
through its business practices. This
means that we support freedom from
torture, unjustified imprisonment
without fair trial and any other
oppression. In addition, we support the
right of any individual to have freedom
of expression and religion, political
representation or in respect of any other
matter. Accordingly, we will not support
or work with organisations which fail
to uphold basic human rights within
their influence, which are involved in
the manufacture or transfer to an
oppressive regime, or are involved in the
manufacture of equipment used in the
violation of human rights. Neither will
we work with organisations which are
involved in the funding or carrying out
of terrorist activities.
Ilika will not provide support or work
with organisations which do not conform
to the most widely accepted standards
for minimum labour rights or which
do not cover the use of under-age or
forced labour. We do not give or receive
any bribes, extra contractual gratuities,
inducements, facilitation fees or similar
payments. Any gifts, whether in cash or
kind, received by employees or the
R
E
V
I
E
W
B
U
S
I
N
E
S
S
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
Company in the course of normally
accepted business entertainment are
accepted subject to the prior written
approval of the management. We do
not donate (including sponsorship,
subscriptions or provision of employee
time or facilities) to any political party
or similar organisation.
Contributiontosociety
Ilika accepts and acknowledges that we
have a corporate responsibility towards
society not only by paying taxes and
creating and maintaining jobs but also
by using our unique research skills to
develop knowledge, skills and products
which will ultimately benefit society.
We actively support and encourage
the study of science at all levels from
pre-GCSE through to degree level.
We do this by sponsoring posters,
hosting group visits of A level students
and offering 6 and 12 month placements
to Masters students. We have accepted
an invitation to sit on an employability
panel for a local sixth form college to
give guidance to students and teaching
staff on improved employability for
students and internally we have formed
an ‘outreach group’ consisting of
representatives from both the scientific
and management teams in which we
consider and implement initiatives to
support those studying the sciences.
GraemePurdy
ChiefExecutive
18 July 2012
Annual report 2012 Ilika plc 21
www.ilika.comfinancialstatements Financial statements
Independent auditor’s report
to the members of Ilika plc
We have audited the financial statements of Ilika plc for the
year ended 30 April 2012 which comprise the consolidated
statement of comprehensive income, the consolidated balance
sheet, the parent company balance sheet, the consolidated
cash flow statement, the parent company cash flow statement,
the consolidated statement of changes in equity, the parent
company statement of changes in equity and the related notes.
The financial reporting framework that has been applied in
their preparation is applicable law and International Financial
Reporting Standards (‘IFRSs’) as adopted by the European
Union and, as regards the parent company financial
statements, as applied in accordance with the provisions
of the Companies Act 2006.
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we
might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the statement of Directors’
responsibilities, the Directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in
accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s (‘APB’s’) Ethical
Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial
statements is provided on the APB’s website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state
of the Group’s and the parent company’s affairs as at 30 April
2012 and of the Group’s loss for the year then ended;
• the Group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion the information given in the Directors’ report
for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if,
in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the parent company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations we
require for our audit.
Kim Hayward (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
Southampton
United Kingdom
18 July 2012
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
22 Ilika plc Annual report 2012
www.ilika.com
Financial statements
Consolidated statement of
comprehensive income
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating loss
Financial income
Financial expense
Loss before tax
Taxation
Loss for period/total comprehensive income attributable to owners of parent
Loss per share
Basic
Diluted
Notes
2
Year ended 30 April
2012
£
2011
£
2,011,244
(1,187,769)
1,544,766
(936,511)
823,475
(3,958,050)
293,253
608,255
(4,148,002)
357,014
5
3 (2,841,322)
(3,182,733)
16,251
(10,684)
38,239
(9,458)
(2,835,755)
125,470
(3,153,952)
106,468
(2,710,285)
(3,047,484)
6
7
8
9
(0.07)
(0.07)
(0.08)
(0.08)
Annual report 2012 Ilika plc 23
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS
Financial statements
Consolidated balance sheet
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventory
Trade and other receivables
Current tax receivable
Other financial assets – bank deposits
Cash and cash equivalents
Total current assets
Total assets
Issued capital and reserves attributable to owners of parent
Issued share capital
Share premium
Capital restructuring reserve
Retained earnings
Total equity
LIABILITIES
Current liabilities
Trade and other payables
Non-current liabilities
Other payables
Total liabilities
Total equity and liabilities
As at 30 April
2012
£
2011
£
Notes
10
11
61,863
1,380,257
61,794
2,006,479
1,442,120
2,068,273
34,135
12
660,943
13
8
125,470
14 4,000,000
1,299,072
15
34,135
748,081
122,733
1,500,000
1,303,924
6,119,620
3,708,873
7,561,740
5,777,146
18
472,638
8,677,106
6,486,077
(8,916,868)
383,548
4,169,909
6,486,077
(6,418,196)
6,718,953
4,621,338
16
835,243
1,125,631
16
7,544
30,177
842,787
1,155,808
7,561,740
5,777,146
These financial statements were approved and authorised for issue by the Board of Directors on 18 July 2012.
Mr. J.B. Boyer
Chairman
24 Ilika plc Annual report 2012
www.ilika.com
Financial statements
Consolidated cash flow statement
Cash flows from operating activities
Loss before tax
Adjustments for:
Amortisation
Depreciation
Equity-settled share-based payments
Loss/(profit) on disposal of plant, property and equipment
Loss on disposal of intangible assets
Net financial income
Operating cash flow before changes in working capital, interest and taxes
Decrease/(increase) in trade and other receivables
Increase in inventory
(Decrease/increase in trade and other payables
Cash utilised by operations
Tax received
Net cash flow from operating activities
Cash flows from investing activities
Interest received
Purchase of intangible assets
Sale of property plant and equipment
Purchase of property, plant and equipment
Increase in other financial assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of Ordinary Share capital
Share issue costs
Capital element of finance leases
Interest element of finance leases
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the start of the period
Cash and cash equivalents at the end of the period
Year ended 30 April
2012
£
2011
£
(2,835,755)
(3,153,952)
14,196
819,101
211,613
69
3,852
(5,567)
11,742
731,599
601,622
605
298
(28,782)
(1,792,491)
87,138
–
(272,198)
(1,836,868)
(128,770)
(34,135)
103,712
(1,977,551)
122,733
(1,896,061)
116,558
(1,854,818)
(1,779,503)
16,251
(14,265)
25
(196,826)
33,038
(7,298)
1,013
(603,466)
(2,500,000) (1,500,000)
(2,694,815)
(2,076,713)
4,899,991
(303,703)
(40,823)
(10,684)
5,175,611
(764,282)
(34,149)
(9,458)
4,544,781
4,367,722
(4,852)
1,303,924
511,506
792,418
1,299,072
1,303,924
Annual report 2012 Ilika plc 25
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Financial statements
Consolidated statement of changes in equity
As at 30 April 2010
Share option exercise
Share-based payment
Issue of shares
Expenses of share issue
Loss and total comprehensive income
As at 30 April 2011
Share-based payment
Issue of shares
Expenses of share issue
Loss and total comprehensive income
As at 30 April 2012
Share
premium
account
£
–
360
–
4,933,831
(764,282)
–
Capital
restructuring
reserve
£
6,479,728
(20,789)
27,138
–
–
–
Total
attributable to
equity holders
of parent
£
Retained
earnings
£
(3,945,196)
–
574,484
–
–
(3,047,484)
2,655,871
610
601,622
5,175,001
(764,282)
(3,047,484)
Share
capital
£
121,339
21,039
–
241,170
–
–
383,548
4,169,909 6,486,077
(6,418,196)
4,621,338
–
–
89,090 4,810,900
(303,703)
–
–
–
–
–
–
–
211,613
211,613
– 4,899,990
(303,703)
–
(2,710,285)
(2,710,285)
472,638
8,677,106 6,486,077 (8,916,868) 6,718,953
Share capital
The share capital represents the nominal value of the equity shares in issue.
Share premium account
When shares are issued, any premium paid above the nominal value is credited to the share premium reserve.
Capital restructuring reserve
The capital restructuring reserve arises on the accounting for the share for share exchange. It represents the difference between
the value of the issued equity instruments of Ilika Technologies Limited immediately before the share for share exchange and the
equity instruments of Ilika plc along with the shares issued to effect the share for share exchange.
Retained earnings
The retained earnings reserve records the accumulated profits and losses of the Group since inception of the business.
26 Ilika plc Annual report 2012
www.ilika.com Financial statements
Notes to the consolidated financial statements
1 Accounting policies
Basis of preparation
The financial statements have been prepared on the basis of the accounting policies which apply for the financial year to
30 April 2012 and in accordance with the recognition and measurement criteria of IFRSs adopted by the European Union.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company made up to the reporting date. Control is achieved where the Company has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits from its activities. All intra-Group transactions, balances, income
and expenses are eliminated on consolidation.
Going concern
The financial statements are prepared on a going concern basis which the Directors believe continues to be appropriate. The
Group meets its day-to-day working capital requirements through existing cash resources which, at 30 April 2012, amounted
to £5,374,072. The Directors have prepared projected cash flow information for the period ending 12 months from the date
of their approval of these financial statements. On the basis of this cash flow information the Directors believe that the Group
will be able to continue to trade for the foreseeable future.
Capital restructuring
Ilika plc was incorporated as a vehicle for flotation on AIM in order to acquire, in a share for share exchange, Ilika Technologies
Limited. These financial statements consolidate the results and financial position of Ilika Technologies Limited and its subsidiaries,
through capital restructuring accounting as required by IFRS 3 Revised ‘Business Combinations’. This means that the Group
financial statements account for the share for share exchange as if Ilika Technologies Limited was the acquirer and Ilika plc the
acquired entity.
On 6 May 2010, Ilika plc acquired, in a share for share exchange, Ilika Technologies Limited. As part of the share for share
exchange agreement, the share options and warrants in Ilika Technologies Limited were transferred to Ilika plc on the same terms
as previously held. There was no change in the fair value of the share options on the date of transfer because the terms of the
new share option agreements were the same as the old share options.
Southampton Asset Management Limited (‘SAM’) exercised 2,099,900 options immediately prior to admission at an exercise
price of £0.01 per share. This amount was in excess of the amount payable under the terms of the original option agreement held
in Ilika Technologies Limited and therefore a compensating payment of £20,789, reflecting the additional amount paid by SAM,
was made to SAM and charged to the capital restructuring reserve.
Ilika plc was admitted to AIM on 14 May 2010. 10,147,059 Ordinary Shares were issued for a total consideration of £5,175,001. The
premium arising on the issue of these shares was £4,933,831. Total issue costs incurred were £764,282. These costs have been
written off against the share premium account.
4,000 options were exercised by option holders after admission at an exercise price of £0.10 per share.
On 23 April 2012, 8,909,074 Ordinary Shares were issued for a total consideration of £4,899,990. The premium arising on the
issue of these shares was £4,810,900 and total issue costs incurred were £303,703.
(a) New standards, amendments to standards or interpretations adopted early
In the current year, there were no new or revised standards or interpretations that have been adopted and affected the amounts
reported in the financial statements.
(b) New standards, amendments to standards or interpretations not yet applied
The following standards, interpretations and amendments, which have not been applied in these financial statements, will or may
have an effect on the Group’s future financial statements:
Annual report 2012 Ilika plc 27
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Notes to the consolidated financial statements
continued
1 Accounting policies continued
International Accounting
Standards (IAS/IFRS)
IFRS 1
IFRS 7
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 1
IAS 12
IAS 19
IAS 27
IAS 28
IAS 32
Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (amendments)
Disclosures – Transfers of Financial Assets (amendments)
Financial Instruments
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Fair Value Measurement
Presentation of Items of Other Comprehensive Income (amendments)
Deferred tax: Recovery of Underlying Assets (amendments)
Employee Benefits
Separate Financial Statements
Investments in Associates and Joint Ventures
Disclosures – Offsetting Financial Assets and Financial Liabilities
Effective date
for periods
commencing
1 July 2011
1 January 2013
1 January 2015
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 July 2012
1 January 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2014
No other new standards or amendments are expected to have an effect on the Group.
The following principal accounting policies have been applied consistently in dealing with items which are considered material in
relation to the financial information.
Revenue
Revenue comprises the fair value for the sale of goods and services, net of value added tax and is recognised as follows:
Sales of goods
Sales of equipment and skin-based products are recognised when products are delivered to a customer, the customer has
accepted the products and collectability of the related receivables is reasonably assured.
Sales of services
Sales of research and development services are recognised in the accounting period in which the services are rendered, by
reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the
total services to be provided.
Leases
Where a Group company enters into a lease which entails taking substantially all the risks and rewards of ownership of an asset,
the lease is treated as a ‘finance lease’. The asset is recorded in the balance sheet as property, plant and equipment and is
depreciated over its estimated useful life or the term of the lease, whichever is shorter. Future instalments under such leases, net
of finance charges, are included within creditors. Rentals payable are apportioned between the finance element, which is charged
to the consolidated income statement, and the capital element which reduces the outstanding obligation for future instalments.
All other leases are accounted for as ‘operating leases’ and the rental charges are charged to the consolidated income statement
on a straight-line basis over the life of the lease.
Financial income and financial expense
Financial income and financial expense is recognised in the income statement as it accrues, using the effective interest method.
Pension and other post retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Share-based payment transactions
The Group issues equity-settled share-based payments to all employees. Equity-settled share-based payments are measured at
fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for
the effect of market-based and non-market based vesting conditions.
The fair value of market-based options granted by the Group is measured by use of the stochastic valuation model taking into account
the following inputs: the exercise price of the option; the life of the option; the market price on the date of grant of the option; the
expected volatility of the share price; the dividends expected on the shares; and the risk free interest rate for the life of the option.
The fair value of non-market-based options granted by the Group is measured by use of the Black-Scholes pricing model taking
into account the following inputs: the exercise price of the option; the life of the option; the market price on the date of grant of
the option; the expected volatility of the share price; the dividends expected on the shares; and the risk free interest rate for the
life of the option. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of
non-transferability, exercise restrictions, and behavioural considerations.
28 Ilika plc Annual report 2012
Financial statementswww.ilika.com 1 Accounting policies continued
Research and development expenditure
Expenditure on the research phase is charged to the income statement in the period in which it is incurred. Development
expenditure on new products is capitalised only once the criteria specified under IAS 38, Intangible Assets, have been met.
Prior to and during the year ended 30 April 2012, no development expenditure satisfied the necessary conditions of IAS 38.
Taxation
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate
ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of
property, plant and equipment.
Depreciation is charged to the profit and loss statement on a straight-line basis over the estimated useful lives of each part of an
item of property, plant and equipment. The estimated useful lives are as follows:
Leasehold improvements
Plant, machinery and equipment
Fixtures and fittings
lease term
3-5 years
3-5 years
Inventory
Inventory comprises the Group’s cell bank from which the Cryoskin® product is derived. Inventory is valued at the lower of cost
and net realisable value. Consumable stock items have been written off as an expense in the year incurred.
Impairment
The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication
of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses
are recognised in the income statement.
Intangible assets
Computer software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific
software. These costs are amortised to administrative expenses using the straight-line method over their estimated useful
lives (1-3 years).
Intellectual property
Acquired intellectual property is included at cost and is amortised to administrative expenses on a straight-line basis over its
useful economic life of 15 years.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument. The Group’s financial assets are all classified as loans and receivables and carried at
amortised cost. The Group’s financial liabilities are all classified as ‘other’ liabilities which are carried at amortised cost. Cash and
cash equivalents comprise cash balances and call deposits.
Government grants
Grants that compensate the Group for expenses incurred are recognised in the income statement on a systematic basis in the
same periods in which the expenses are recognised. Grant revenue is disclosed within other operating income. £293,297 was
received in government grants in the year (2011: £356,887).
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held on call with the bank.
Annual report 2012 Ilika plc 29
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS
Notes to the consolidated financial statements
continued
1 Accounting policies continued
Key sources of estimation uncertainty
The preparation of the Group’s financial statements, in accordance with IAS 1, Presentation of Financial Statements, requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities at the date of the Group’s financial statements. The Group’s
estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
• Depreciation of property, plant and equipment
Depreciation is provided in the consolidated financial statements so as to write-down the respective assets to their residual
values over their estimated useful lives and as such, the selection of the estimated useful lives and the expected residual values
of the assets requires the use of estimates and judgements. Details of the estimated useful lives are as shown above in the policy
note for depreciation.
• Amortisation lives
Intangible assets are recorded at their fair value at acquisition date and are amortised on a straight-line basis over their
estimated useful economic lives from the time they are available for use. Any change in the estimated useful economic lives
could affect the future results of the Group; however, no changes were made in the year.
• Revenue recognition
The Group’s revenue substantially comprised revenues from the provision of research and development services. The contracts
set out defined deliverables the achievement of which trigger milestone payments. Judgement is used to determine the stage of
completion and the point at which revenue is recognised.
• Share-based payments
The critical accounting estimates, assumptions and judgements underpinning the valuation of the option awards are disclosed in
note 22.
• Taxation
The current tax receivable is the expected tax receivable on the expenditure for the period using the tax rates and laws that
have been enacted or substantially enacted at the balance sheet date, and any adjustments to tax payable in respect of
previous years. The ultimate receivable may vary from the amounts provided and is dependent upon negotiations with the
relevant tax authorities.
2 Segment reporting
IFRS 8 requires the Group to report on operating segments on the same basis as that used by the chief operating decision maker
to assess the performance of the business segments and to allocate resources accordingly. For management purposes, the Group
is organised by market category and operational information is presented to the chief operating decision maker in the following
market categories; Energy, Electronics, Biomedical (wound care products and high throughput services).
The Group’s activities originate from the production, design and development of high throughput methods of material synthesis,
characterisation and screening. The Group has commercialised skin wound care based products, details of which are given below.
Energy
The Group has materials development programmes in the battery, fuel cell and hydrogen storage sectors.
Electronics
The Group’s technology can be applied to a wide range of electronic materials, including capacitor, ferroelectric, piezoelectric and
memory materials.
Biomedical
The biomedical business is built on the Group’s biopolymer technology. The business consists of joint development projects for a
range of biomedical products as well as the sale of wound care products and services.
30 Ilika plc Annual report 2012
Financial statementswww.ilika.com 2 Segment reporting continued
Details of the revenues from external customers by operating segment are given below:
Turnover
Analysis by class of business:
Energy
Electronics
Biomedical – high throughput services
Biomedical – wound care products and services
Turnover
Analysis by geographical market:
By destination
Belgium
United Kingdom
Germany
Taiwan
Japan
North America
Analysed as:
Rendering of services
Sales of goods
Year ended 30 April
2012
£
2011
£
1,005,823
656,738
188,611
160,072
1,101,448
291,546
18,000
133,772
2,011,244
1,544,766
Year ended 30 April
2012
£
2011
£
–
182,524
–
30,000
1,551,200
247,520
155,117
259,184
84,015
–
1,028,450
18,000
2,011,244
1,544,766
1,880,514
130,730
1,479,526
65,240
2,011,244
1,544,766
In the period to 30 April 2012, the Biomedical class of business turnover can be analysed as £130,730 (2011: £65,240) for sale
of skin-based products and £217,953 (2011: £86,482) for research and development services. All revenues associated with the
energy and electronics class of business are for research and development services.
A number of customers individually account for more than 10 percent of the total turnover of the Group. The revenues from these
companies are indicated below on a segment basis:
Turnover
Customer 1
Customer 2
Customers less than 10 percent
Energy total
Customer 3
Customers less than 10 percent
Electronics total
Customers less than 10 percent
Biomedical total
Year ended 30 April
2012
£
781,283
–
224,540
1,005,823
385,556
271,182
656,738
348,683
348,683
2011
£
820,919
155,117
125,412
1,101,448
174,457
117,089
291,546
151,772
151,772
2,011,244
1,544,766
The chief operating decision maker only reviews turnover by operating segment then reviews expenses and profit on an
aggregate basis. Therefore the segmental loss before tax information, along with the segmental total assets and liabilities
information has not been split out in this note.
The loss before tax per the management accounts is the same as the loss before tax on the consolidated statement of
comprehensive income with the exception of the share-based payment expense which is only calculated as a year end adjustment.
For details of the calculation see note 22. The total assets and liabilities per the management accounts are the same as the
consolidated balance sheet with the exception of the period end tax adjustment.
Annual report 2012 Ilika plc 31
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS
Notes to the consolidated financial statements
continued
3 Operating loss
This is arrived at after charging
Research and development expenditure in the year
Depreciation
Amortisation of intangible assets
Auditors remuneration:
Fees payable to the Group’s auditor for the audit of the Group’s accounts
Fees payable to the Group’s auditor for other services:
– The audit of the Group’s subsidiaries
– Other assurance services – interim review
– Tax services
– Reporting accountant fees in relation to the flotation and other non-recurring services
Operating lease rentals
Share-based payment charge
Foreign exchange differences
4 Employees
The average number of employees during the year, including Executive Directors, was:
Administration
Materials synthesis
Staff costs for all employees, including Executive Directors, consist of:
Wages and salaries
Social security costs
Share-based payment expense
Pension costs
Year ended 30 April
2012
£
1,377,449
819,101
14,196
2011
£
1,166,761
731,599
11,742
15,000
15,000
8,625
10,500
6,700
–
180,714
211,613
1,213
5,000
10,000
6,745
118,420
174,000
601,622
617
Year ended 30 April
2012
Number
2011
Number
9
27
36
9
21
30
Year ended 30 April
2012
£
1,587,516
160,319
204,681
111,215
2011
£
1,577,637
138,896
601,622
94,480
2,063,731
2,412,635
32 Ilika plc Annual report 2012
Financial statementswww.ilika.com
4 Employees continued
The Directors’ costs consist of:
Basic
salary
£
Fees
£
Benefits
in kind
£
Bonus
£
Year to 30 April 2012
G. Purdy
S. Boydell
B. Hayden
J. Boyer
W. Braun
W. Wakeham
C. Spottiswoode
Year to 30 April 2011
G. Purdy
S. Boydell
B. Hayden
J. Boyer
W. Braun
W. Wakeham
C. Spottiswoode
A. Marrocco
K. Seifert
150,000
90,500
50,000
60,000
–
30,000
30,000
410,500
150,197
92,722
50,000
59,835
27,417
29,917
29,637
–
–
439,725
–
–
–
–
30,000
–
–
30,000
–
–
–
–
2,500
–
–
–
–
2,500
413
271
–
–
–
–
–
684
418
267
–
–
–
–
–
–
–
Total
short-term
benefits
£
150,413
90,271
50,000
60,000
30,000
30,000
30,000
Share-based
payment
expense
£
69,318
8,096
34,659
69,318
4,630
4,630
4,630
Total
£
249,043
123,268
84,659
129,318
34,630
34,630
34,630
Pension
£
29,312
24,901
–
–
–
–
–
440,684
54,213
195,281
690,178
–
–
–
–
–
–
–
–
24,000
10,500
–
–
–
–
–
–
–
174,615
103,489
50,000
59,835
29,917
29,917
29,637
–
–
27,707
20,101
–
–
–
–
–
–
–
199,366
29,879
99,167
200,633
13,244
12,509
10,880
2,278
736
401,688
153,469
149,167
260,468
43,161
42,426
40,517
2,278
736
685
34,500
477,410
47,808
568,692
1,093,910
Benefits in kind include critical illness cover.
The unapproved share options of the Directors under the ‘Ilika plc Executive Share Option Scheme 2010’ are set out below:
G. Purdy
J. Boyer
B. Hayden
S. Boydell
W. Braun
W. Wakeham
C. Spottiswoode
2012
Number
2011
Number
1,800,000
1,800,000
900,000
205,200
115,200
115,200
100,200
1,800,000
1,800,000
900,000
205,200
115,200
115,200
100,200
The approved share options of the Directors in Ilika plc exchanged from share options in Ilika Technologies Limited. For further
details see note 22.
G. Purdy
S. Boydell
2012
Number
2011
Number
760,700
90,000
760,700
90,000
The unapproved share options of the Directors in Ilika plc exchanged from share options in Ilika Technologies Limited. For further
details see note 22.
G. Purdy
J. Boyer
W. Braun
B. Hayden
No options have lapsed in the period.
2012
Number
2011
Number
136,200
540,200
20,000
59,300
136,200
540,200
20,000
59,300
Annual report 2012 Ilika plc 33
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS 5 Other operating income
Grant income
Sundry other income
6 Financial income
Income from short-term deposits
7 Financial expense
Interest on:
Finance leases
Year ended 30 April
2012
£
2011
£
293,297
(43)
356,867
147
293,254
357,014
Year ended 30 April
2012
£
2011
£
16,251
38,239
Year ended 30 April
2012
£
2011
£
10,684
9,458
8 Taxation
(a) Tax on profit from ordinary activities
There is no taxation charge due to the losses incurred by the Group during the year. The taxation credit represents research and
development tax credit claims as follows:
Current tax on loss for the year
Adjustments to prior period
Year ended 30 April
2012
£
125,470
–
2011
£
122,733
(16,265)
125,470
106,468
(b) Factors affecting current tax charge
The tax assessed on the loss on ordinary activities for the period is different to the standard rate of corporation tax in the UK of
26 percent (2011: 28 percent). The differences are reconciled below:
Loss on ordinary activities before tax
Loss on ordinary activities before tax multiplied by the standard rate of
corporation tax in the UK of 26 percent (2011: 28 percent)
Effects of:
Expenses not deductible for corporation tax
Other temporary differences not recognised
Plant, property and equipment temporary differences not recognised
Research and development relief
Origination of unrecognised tax losses
Share options
Under provision in previous years
Total tax credit for the year
2012
£
2011
£
(2,835,755)
(3,153,952)
(737,296)
(883,107)
25,922
–
–
(51,566)
579,818
57,652
–
29,576
169,138
32,318
(2,619)
531,961
–
16,265
(125,470)
(106,468)
Unrecognised deferred taxation
There are tax losses available for carry forward against future trading profits of approximately £9,953,000 (2011: £8,269,000).
A deferred tax asset in respect of these losses of approximately £2,389,000 (2011: £2,150,000) has not been recognised in the
accounts, as the full utilisation of these losses in the foreseeable future is uncertain.
34 Ilika plc Annual report 2012
Notes to the consolidated financial statementscontinuedFinancial statementswww.ilika.com
9 Loss per share
Earnings per Ordinary Share have been calculated using the weighted average number of shares in issue during the relevant
financial periods. The weighted average number of equity shares in issue and the earnings, being profit after tax, are as follows:
Weighted average number of equity shares
Earnings, being profit after tax
Loss per share
Year ended 30 April
2012
number
2011
number
38,525,718 38,354,759
£
£
(2,710,285)
(3,047,484)
£
£
(0.07)
(0.08)
The loss attributable to Ordinary Shareholders and weighted average number of Ordinary Shares for the purpose of calculating
the diluted earnings per Ordinary Share are identical to those used for basic earnings per share. This is because the exercise of
share options would have the effect of reducing the loss per Ordinary Share and is therefore not dilutive under the terms of IAS 33.
At 30 April 2012 there were 18,514,186 options outstanding (2011: 18,388,316 options outstanding) as detailed in notes 18 and 22.
10 Intangible assets
Cost
As at 30 April 2010
Additions
Disposals
As at 30 April 2011
Additions
Disposals
As at 30 April 2012
Amortisation
As at 30 April 2010
Provided for the year
Disposals
As at 30 April 2011
Provided for the year
Disposals
As at 30 April 2012
Net book value
As at 30 April 2010
As at 30 April 2011
As at 30 April 2012
The amortisation charge of £14,196 (2011: £11,742) is included within administrative expenses.
Software
licences
£
Intellectual
property
£
75,000
–
–
75,000
33,886
7,298
(18,824)
22,360
14,265
(8,707)
Total
£
108,886
7,298
(18,824)
97,360
14,265
(8,707)
27,918
75,000
102,918
23,398
6,742
(18,324)
11,816
9,196
(8,707)
18,750
5,000
–
23,750
5,000
–
42,148
11,742
(18,324)
33,566
14,196
(8,707)
12,305
28,750
39,055
10,488
10,544
56,250
51,250
15,613
46,250
66,738
61,794
61,863
Annual report 2012 Ilika plc 35
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS
11 Property, plant and equipment
Cost
As at 30 April 2010
Additions
Disposals
As at 30 April 2011
Additions
Disposals
As at 30 April 2012
Depreciation
As at 30 April 2010
Provided for the year
Disposals
As at 30 April 2011
Provided for the year
Disposals
As at 30 April 2012
Net book value
As at 30 April 2010
As at 30 April 2011
As at 30 April 2012
Leasehold
improvements
£
Plant,
machinery and
equipment
£
Fixtures
and fittings
£
Total
£
371,667
16,232
–
387,899
33,443
–
3,170,275
648,161
(69,251)
3,749,185
156,749
(17,112)
159,165
6,972
–
166,137
6,634
–
3,701,107
671,365
(69,251)
4,303,221
196,826
(17,112)
421,342 3,888,822
172,771 4,482,935
357,379
16,154
–
373,533
19,226
–
1,177,029
683,224
(67,835)
1,792,418
770,857
(13,165)
98,570
32,221
–
130,791
29,018
–
1,632,978
731,599
(67,835)
2,296,742
819,101
(13,165)
392,759
2,550,110
159,809
3,102,678
14,288
1,993,246
60,595
2,068,129
14,366
1,956,767
35,346
2,006,479
28,583
1,338,712
12,962
1,380,257
The net book value of fixtures and fittings includes an amount of £nil (2011: £7,187) and plant, machinery and equipment includes
an amount of £44,650 (2011: £68,622) in respect of assets held under finance lease contracts.
Commitments for capital expenditure
Contracted but not provided for
12 Inventory
Inventory
Inventory comprises the Group’s cell bank from which the Cryoskin® product is derived.
13 Trade and other receivables
Trade receivables
Prepayments and accrued income
Other receivables
36 Ilika plc Annual report 2012
Year ended 30 April
2012
£
–
2011
£
43,771
As at 30 April
2012
£
2011
£
34,135
34,135
As at 30 April
2012
£
24,376
450,964
185,603
2011
£
68,052
445,642
234,387
660,943
748,081
Notes to the consolidated financial statementscontinuedFinancial statementswww.ilika.com
14 Other financial assets – bank deposits
Amounts receivable within 1 year:
Sterling fixed rate deposits of greater than 3 months’ maturity at inception
15 Cash and cash equivalents
Current bank accounts
Short-term deposits with less than 3 months’ maturity
16 Trade and other payables
Current
Trade payables
Other payables
Other taxes and social security costs
Lease purchase agreements
Accruals and deferred income
Non-current
Lease purchase agreements
Lease purchase agreements
Amounts payable
Within 1 year
In 1 year to 2 years
In 2 years to 5 years
As at 30 April
2012
£
2011
£
4,000,000
1,500,000
As at 30 April
2012
£
2011
£
389,086
909,986
184,201
1,119,723
1,299,072
1,303,924
As at 30 April
2012
£
367,669
15,223
44,441
22,633
385,277
2011
£
217,672
19,700
42,205
40,823
805,231
835,243
1,125,631
As at 30 April
2012
£
2011
£
7,544
30,177
As at 30 April
2012
£
2011
£
22,633
7,544
–
30,177
40,823
22,633
7,544
71,000
Lease purchase agreements are secured on the related assets and carry interest at fixed rates. The total amount payable under
leases as at 30 April 2012 was £35,853 (2011: £87,738).
Annual report 2012 Ilika plc 37
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS 17 Financial instruments
The Group’s principal financial instruments comprise, lease financing arrangements, cash and short-term deposits as well as other
various items arising from its operations such as trade receivables and trade payables which are shown in the table below. The main
purpose of these instruments is to finance the Group’s working capital requirements as well as funding its capital expenditure
programmes. The Group does not enter into derivative transactions such as interest rate swaps or forward exchange contracts.
Financial assets
Loans and receivables
Trade receivables
Accrued income
Other receivables
Current bank accounts
Bank deposits
Short-term deposits
Total loans and receivables
Financial liabilities
Other financial liabilities
Trade payables
Other payables
Other taxes and social security costs
Lease purchase agreements
Accruals
Total other financial liabilities (see note 16)
As at 30 April
2012
£
2011
£
24,376
211,262
185,603
389,086
4,000,000
909,986
68,052
303,405
234,387
184,201
1,500,000
1,119,723
5,720,313
3,409,768
367,669
15,223
44,441
30,177
252,760
217,672
19,700
42,205
71,000
358,258
710,270
708,835
The risks associated with these financial instruments are set out below.
Foreign currency risk
The Group buys goods and services in currencies other than Sterling. The Group’s non-Sterling liabilities and cash flows can be
affected by movements in exchange rates. These transactions are not significant and therefore no forward exchange contracts
have been entered into. It is Group policy not to engage in any speculative trading in financial instruments. Any risk is mitigated by
sales transactions being denominated in Sterling.
Credit risk
The Group’s credit risk is attributable to its trade receivables and banking deposits. The Group places its deposits with reputable
financial institutions to minimise credit risk. The maximum exposure to credit risk for each period is the amount disclosed above
as total loans and receivables. For the periods above there were no trade receivables which were past due or impaired. Risk is
further mitigated through the use of credit limits, but also through the nature of the customers, who, for the most part, are large
multinationals. There is no bad debt provision.
Liquidity risk
The Group’s policy is to maintain adequate cash resources to meet liabilities as they fall due. With the exception of its hire
purchase liabilities, which are disclosed in note 16, all other Group payable balances fall due for payment within 1 year. Cash
balances are placed on deposit for varying periods with reputable banking institutions to ensure there is limited risk of capital loss.
The Group does not maintain an overdraft facility.
Interest rate risk
The main risk arising from the Group’s financial instruments is interest rate risk. The Group placed deposits surplus to short-term
working capital requirements with a variety of reputable UK-based banks and building societies. These balances are placed at
floating rates of interest and deposits have maturities of 1 to 12 months. The Group’s cash and short-term deposits are set out in
note 15.
Fixed-rate financial liabilities comprises of a finance lease which expires in August 2013. It has a weighted average interest rate of
13.4 percent. The maturity profile is detailed in note 16. Floating-rate financial assets comprise cash on deposit and cash at bank.
Short-term deposits are placed with banks for periods of up to 12 months and are categorised as floating-rate financial assets.
Contracts in place at 30 April 2012 had a weighted average period to maturity of 166 days and a weighted average annualised rate
of interest of 1.96 percent.
Interest rate risk sensitivity analysis
It is estimated that a change in base rate to zero would have increased the Group’s loss before taxation for the year to 30 April
2012 by approximately £11,000 (2011: £16,000).
38 Ilika plc Annual report 2012
Notes to the consolidated financial statementscontinuedFinancial statementswww.ilika.com
17 Financial instruments continued
It is estimated that an increase in base rate by 1 percent would decrease the Group’s loss before taxation for the year to 30 April
2012 by approximately £15,000 (2011: £33,500).
There is no difference between the book and fair value of financial assets and liabilities.
Capital management
The primary aim of the Group’s capital management is to safeguard the Group’s ability to continue as a going concern, to support
its businesses and maximise shareholder value. The Group monitors its capital structure and makes adjustments as and when it is
deemed necessary and appropriate to do so using such methods as the issuing of new shares. At present, other than finance
leases, all funding is raised by equity. See note 1 for the fundraising that occurred during the year.
18 Share capital
Authorised
45,482,433 Ordinary Shares of £0.01 each (2011: 36,573,359)
1,781,400 Convertible Preference Shares of £0.01 each
Allotted, called up and fully paid
45,482,433 Ordinary Shares of £0.01 each (2011: 36,573,359)
1,781,400 Convertible Preference Shares of £0.01 each
As at 30 April
2012
£
2011
£
454,824
17,814
365,734
17,814
454,824
17,814
365,734
17,814
472,638
383,548
Share rights
The Ordinary Share and Preference Shares rank pari passu in all respects other than:
• The profits which the Group may determine to distribute in respect of any financial period shall be distributed only among the
holders of the Ordinary Shares. The Preference Shares shall not entitle the holders of them to any share in such distributions.
• On a return of capital or assets on a liquidation, reduction of capital or otherwise the surplus assets of the Group remaining after
payment of its obligations shall be applied:
– first, in paying to the holders of the Preference Shares the amount paid thereon, being the amount equal to the par value of
the preference shares excluding any premium; and
– secondly, the balance of such surplus assets shall belong to and be distributed amongst the holders of the Ordinary Shares.
The Preference Shareholders have the right, at any time, to convert the Preference Shares held to the same number of Ordinary Shares.
On 23 April 2012, 8,909,074 Ordinary Shares were issued for a total consideration of £4,899,990. The premium arising on the
issue of these shares was £4,810,900 and total issue costs incurred were £303,703.
On 22 May 2012, 60,000 £0.01 Convertible Preference Shares were converted to £0.01 Ordinary Shares.
Share options and warrants
Employee related share options are disclosed in note 22. In addition to these, there were 107,300 non-employee share options
over Ordinary Shares of £0.01 at the year end. The Company’s brokers also have a warrant to subscribe to 130,100 Ordinary
Shares of £0.01.
10,147,059 warrants to subscribe to Ordinary Shares of £0.01 were issued on 14 May 2010 to investors who subscribed to the
placing as one warrant for each share subscribed and the Company’s brokers were issued with a warrant to subscribe to 392,157
Ordinary Shares of £0.01.
19 Operating leases
The total future minimum rent payable under non-cancellable operating leases is as follows:
Property
Within 1 year
In 1 to 2 years
In 2 to 5 years
As at 30 April
2012
£
2011
£
–
51,749
370,613
10,217
–
366,204
422,362
376,421
Annual report 2012 Ilika plc 39
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Notes to the consolidated financial statements
continued
20 Pensions
The Group operates a defined contribution group personal pension scheme. The pension cost charge for the period represents
contributions payable by the Group to the scheme and amounted to £111,215 (2011: £94,480).
21 Related party transactions
The Directors consider that no 1 party controls the Group.
During the year ended 30 April 2012, the Company incurred costs of £295,109 (2011: £294,248) with the University of
Southampton in connection with research and development activities. The University of Southampton is the controlling
shareholder of Southampton Asset Management Limited, which has an interest in the Company. At 30 April 2012, the
amount unpaid in respect of these costs was £6,606. (2011: £8,488).
The Company incurred fees from the University of Southampton in respect of Prof. B. Hayden, a Director of the Company.
These amounts are included in the costs shown above.
22 Share-based payments expense and share options
Share-based payment expense
The Group has incentivised and motivated staff through the grant of share options under the Enterprise Management Incentive
(‘EMI’) scheme and through unapproved share option schemes.
The Group has recognised an expense to the consolidated statement of comprehensive income representing the fair value of
outstanding equity-settled share-based payment awards to employees. The fair values were charged to the consolidated
statement of total comprehensive income over the relevant vesting periods adjusted to reflect actual and expected vesting levels.
On 14 May 2010, options in the Ilika Technologies Limited share option scheme were exchanged for options in Ilika plc.
1 option in Ilika Technologies Limited was exchanged for 100 options in Ilika plc with the option price in Ilika plc shares being
one one hundreth of the price in Ilika Technologies shares.
The Group has calculated the fair market value of options which had market-based performance conditions at the time of grant,
using the stochastic valuation model. Options with no market-based performance conditions at the time of grant, have been
valued using the Black-Scholes model.
At a meeting of the Remuneration Committee on 13 July 2011, it was agreed that the market-based performance criteria applicable
to the options which were granted in May 2010, be amended to reflect a series of Company specific financial and commercial
milestones.
At 30 April 2012, the following options, whose fair values have been fully charged to the consolidated statement of total
comprehensive income, were outstanding:
Approved share options:
Date of grant
19 May 2004
29 June 2004
9 June 2005
30 March 2006
14 May 2007
15 January 2008
2 February 2009
1 December 2009
None of these options were exercised in the year.
Unapproved share options:
Date of grant
29 June 2004
1 December 2005
8 May 2006
11 July 2007
30 August 2007
11 November 2008
None of these options were exercised in the year.
40 Ilika plc Annual report 2012
Number
of shares
Period
of option
Exercise price
per share
375,000
219,700
139,500
15,200
156,100
70,400
138,000
90,000
10 years
10 years
10 years
10 years
10 years
10 years
10 years
10 years
£0.10
£0.10
£0.10
£0.10
£0.80
£1.00
£0.80
£0.80
Number
of shares
Period
of option
Exercise price
per share
273,100
280,000
115,500
195,500
151,600
40,000
10 years
10 years
10 years
10 years
10 years
10 years
£0.10
£0.10
£0.10
£0.80
£0.10
£2.4283
Financial statementswww.ilika.com 22 Share-based payments expense and share options continued
At 30 April 2012 the following share options were outstanding in respect of the approved share options granted in the year:
Date of grant
1 February 2012
Black-Scholes valuation
Outstanding:
At start of the period
100 for 1 exchange
Lapsed in the period
Exercised during the period
Granted during the period
At the end of the period
Number
of shares
Period
of option
Exercise price
per share
150,870
10 years
£0.53
Weighted average exercise price
Number
2012
£
2011
£
2012
2011
0.3499
–
–
–
0.5300
34.95 2,263,600
–
(4,000)
–
150,870
0.3495
–
0.1000
–
22,676
2,244,944
–
(4,000)
–
0.3612
0.3499
2,410,470 2,263,600
The exercise price of options outstanding at the end of the period ranged between £0.10 and £2.4283 and their weighted average
contractual life was 3.9 years (2011: 4.9 years). These share options are exercisable and must be exercised within 10 years from
the date of grant.
The following information is relevant in the determination of the fair value of options granted under the equity-settled share-based
remuneration schemes under the Black-Scholes method.
Equity-settled:
Weighted average share price at date of grant/£
Exercise price/£
Weighted average contractual life/years
Expected volatility
Expected dividend yield
Risk free interest rate
Year to
30 April
2012
Year to
30 April
2011
0.53
0.53
9.7
10%
0%
0.5%
49.50
80.00
9.7
30%
0%
0.5%
The volatility has been based on the average of the standard deviation of the daily historical share price of the Company since its
listing on AIM in May 2010. The prior period volatility was based on the annualised average of the standard deviation of the daily
historical continuously compounded returns of the share price of three companies listed on AIM which had a broadly similar
technology risk profile to the Group. The risk free rate was assumed to be the yield to maturity on a UK gilt strip with the term to
maturity equal to the expected life of the option.
Stochastic valuation
Outstanding:
At start of the period
Granted during the period
Lapsed during the period
At the end of the period
Weighted average exercise price
Number
2012
£
0.51
–
–
0.51
2011
£
–
0.51
0.51
0.51
2012
2011
5,352,100
–
– 5,365,400
(13,300)
(25,000)
5,327,100
5,352,100
The exercise price of options outstanding at the end of the period was £0.51 (2011: £0.51) and their weighted average contractual
life was 9 years (2011: 10 years).
Annual report 2012 Ilika plc 41
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Financial statements
Notes to the consolidated financial statements
continued
22 Share-based payments expense and share options continued
Ilika plc Executive Share Option Scheme 2010
At 30 April 2012 the following share options were outstanding in respect of the Ilika plc Executive Share Option Scheme 2010:
Date of grant
14 May 2010
Number
of shares
Period
of option
Exercise price
per share
126,300
10 years
£0.51
Members of staff in the Group have options in respect of Ordinary Shares in Ilika plc, which were conditional upon the achievement
of a 10 percent increase in the Company’s share price above that of the FTSE TechMARK All Share Price Index over a 3–year period.
25,000 options lapsed in the year due to employees leaving the Company. At a meeting of the Remuneration Committee on 13 July
2011, it was agreed that the performance criteria applicable to these options be amended to reflect a series of financial and
commercial milestones.
Ilika plc unapproved share options
At 30 April 2012 the following share options were outstanding in respect of Ilika plc unapproved share options:
Date of grant
14 May 2010
Number
of shares
Period
of option
Exercise price
per share
5,200,800
10 years
£0.51
Directors, Non-Executive Directors and founders of the Group were granted a total of 5,200,800 options in respect of Ordinary
Shares in Ilika plc. These options vest in 4 tranches. The 1st Tranche of 825,000 options were granted on the 14 May 2010 with no
performance conditions attached. The remaining 3 Tranches of 1,458,600 options were conditional upon the achievement of a 10
percent increase in the Company’s share price above that of the FTSE TechMARK All Share Price Index in each of the 3 years
subsequent to the flotation. At a meeting of the Remuneration Committee on 13 July 2011, it was agreed that the performance
criteria applicable to the options granted under Tranche 2 should be waived. Furthermore, it was agreed that the performance
criteria applicable to the options granted under Tranches 3 and 4 be amended to reflect a series of financial and commercial
milestones. This change in performance criteria demands that the share-based payment charge attributable to these options is
recalculated under the Black-Scholes method. The resultant charge is considerably below the stochastic charge previously
calculated and therefore, in accordance with IFRS 2, the higher stochastic share-based payment charge is retained.
No options were exercised or lapsed in the year.
The following information is relevant in the determination of the fair value of options granted under the equity-settled share-
based remuneration schemes operated by the Group under the stochastic valuation model.
Expected term. This is the most likely estimate of the period from grant until the exercise date. For these options, the assumption
of an expected term of part way between vesting and lapse for each option/tranche.
Expected volatility. The normal approach is to look at the historical volatility of the share price over the most recent period that is
generally commensurate with the expected award term. However, this approach was not possible here given that the options were
granted on the date of the Company’s admission to AIM. In such cases, IFRS 2 allows the consideration of the historical volatility of
other similar entities to determine a proxy for the Company’s volatility. Similar entities, for the purpose of calculating volatility,
have been chosen as the constituents of the Company’s comparator Index . Volatility for each of these companies has been
calculated over both 3 and 6 years resulting in median volatilities of 46.7 percent and 42.3 percent respectively. A proxy volatility
of 45 percent (being midway between these two figures) has been used for valuing these options.
Expected dividend yield. The Company does not pay, and is not currently expected to pay any dividends, so the dividend yield has
been set to zero.
Risk-free rate. This is calculated based on UK gilts with a term commensurate with the expected term.
The charge for the prior period had been calculated on the basis that the Company floated in May 2010.
Share-based payment expense:
Black-Scholes calculation
Stochastic valuation
42 Ilika plc Annual report 2012
2012
£
2011
£
891
210,722
27,138
574,484
211,613
601,622
www.ilika.com Financial statements
Company balance sheet of Ilika plc
ASSETS
Non-current assets
Investments in subsidiary undertaking
Current assets
Trade and other receivables
Cash at bank and cash equivalents
Total net assets
Equity
Issued share capital
Share premium
Retained earnings
LIABILITIES
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
As at 30 April
2012
£
2011
£
Notes
23
121,339
121,339
24 9,083,842
–
4,378,517
–
9,205,181
4,499,856
25
25
25
472,638
8,656,317
(14,345)
383,548
4,149,120
(41,011)
9,114,610
4,491,657
90,571
90,571
8,199
8,199
9,205,181
4,499,856
The notes on pages 46 to 47 form part of these financial statements.
These financial statements were approved and authorised for issue by the Board of Directors on 18 July 2012.
Mr. J.B. Boyer
Chairman
Annual report 2012 Ilika plc 43
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Financial statements
Company cash flow statement
Cash flows from operating activities
Loss before tax
Adjustments for:
Equity-settled share-based payments
Operating cash flow before changes in working capital, interest and taxes
Increase in trade and other receivables
Increase in trade and other payables
Cash utilised by operations
Cash flows from financing activities
Proceeds from issuance of Ordinary Share capital
Share issue costs
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the start of the period
Cash and cash equivalents at the end of the period
Year ended 30 April
2012
£
2011
£
(184,948)
(642,633)
211,613
601,622
26,665
(4,705,325)
82,372
(41,011)
(4,378,517)
8,199
(4,596,288)
(4,411,329)
4,899,991
(303,703)
5,175,611
(764,282)
4,596,288
4,411,329
–
–
–
–
–
–
44 Ilika plc Annual report 2012
www.ilika.com Financial statements
Company statement of changes in equity
As at 30 April 2010
Share exchange with Ilika Technologies
Share option exercise
Issue of shares
Expenses of share issue
Share-based payment
Loss and total comprehensive income
As at 30 April 2011
Issue of shares
Expenses of share issue
Share-based payment
Loss and total comprehensive income
As at 30 April 2012
Share
capital
£
–
121,339
21,039
241,170
–
–
–
Share
premium
account
£
–
–
(20,429)
4,933,831
(764,282)
–
–
Retained
earnings
£
–
–
–
–
–
601,622
(642,633)
Total
attributable
to equity
holders
£
–
121,339
610
5,175,001
(764,282)
601,622
(642,633)
383,548
4,149,120
(41,011)
4,491,657
89,091 4,810,900
(303,703)
–
–
–
–
–
– 4,899,991
(303,703)
–
211,613
211,613
(184,947)
(184,947)
383,548 8,656,317
(14,345)
9,114,611
Share capital
The share capital represents the nominal value of the equity shares in issue.
Share premium account
When shares are issued, any premium paid above the nominal value is credited to the share premium reserve.
Retained earnings
The retained earnings reserve records the accumulated profits and losses of the Company since inception of the business.
Annual report 2012 Ilika plc 45
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS 23 Accounting policies
Basis of preparation
These financial statements have been prepared in accordance with IFRSs adopted by the European Union.
No Directors report has been presented and the Directors responsibilities in respect of these financial statements are set out
on page 17.
Taxation
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised.
Related party transactions
During the year the Company made recharges of costs to Ilika Technologies Limited of £563,214 (2011: £551,325) and to Altrika
Limited of £119,441 (2011: £123,187). In addition the funds raised from the fundraising were transferred to Ilika Technologies
Limited. The balance outstanding at 30 April 2012 for Ilika Technologies limited was £9,075,927 (2011: £4,243,351) and for Altrika
Limited was £nil (2011: £123,187).
Share-based payments
The critical accounting estimates, assumptions and judgements underpinning the valuation of the option awards are disclosed in
note 22.
Financial instruments
The accounting policy relating to financial instruments is disclosed in note 1.
Profit of the parent company
Loss in the year
No profit and loss account is presented for the Company as permitted by Section 408 of the Companies Act 2006. The Company’s
loss for the year was £184,948 (2011: £642,633).
Directors’ remuneration
The remuneration of the Directors is disclosed in note 4.
Auditors’ remuneration
Auditors’ remuneration is disclosed in note 3.
24 Investment in subsidiary undertaking
Investments in Group undertakings are stated at cost.
Ilika plc has a wholly-owned subsidiary, Ilika Technologies Limited. Ilika Technologies Limited (incorporated in the UK) made a loss
for the year of £1,949,515 (2011: £1,893,139) and had net liabilities as at 30 April 2012 of £919,078 (2011: net assets of £1,030,437).
Shares in Group undertakings (at cost)
At 6 May 2011 and 30 April 2012
£
121,339
Ilika Technologies Limited has a wholly-owned subsidiary, Altrika Limited (incorporated in the UK) which made a loss for the year
of £575,817 (2011: £511,712) and had net liabilities as at 30 April 2012 of £1,355,138 (£2011: £779,319).
25 Trade and other receivables
Prepayments
Other debtors
Amounts due from subsidiary undertakings
46 Ilika plc Annual report 2012
As at 30 April
2012
£
2011
£
7,650
265
9,075,927
7,404
4,575
4,366,538
9,083,842
4,378,517
Notes to the consolidated financial statementscontinuedFinancial statementswww.ilika.com 26 Share capital
Authorised
45,482,433 Ordinary Shares of £0.01 each (2011: 36,573,359)
1,781,400 Convertible Preference Shares of £0.01 each
Allotted, called up and fully paid
45,482,433 Ordinary Shares of £0.01 each (2011: 36,573,359)
1,781,400 Convertible Preference Shares of £0.01 each
As at 30 April
2012
£
2011
£
454,824
17,814
365,734
17,814
454,824
17,814
365,734
17,814
472,638
383,548
Share rights
The Ordinary Share and Preference Shares rank pari passu in all respects other than:
• The profits which the Group may determine to distribute in respect of any financial period shall be distributed only among the
holders of the Ordinary Shares. The Preference Shares shall not entitle the holders of them to any share in such distributions.
• On a return of capital or assets on a liquidation, reduction of capital or otherwise the surplus assets of the Group remaining after
payment of its obligations shall be applied:
– first, in paying to the holders of the Preference Shares the amount paid thereon, being the amount equal to the par value of
the Preference Shares excluding any premium; and
– secondly, the balance of such surplus assets shall belong to and be distributed amongst the holders of the Ordinary Shares.
The Preference Shareholders have the right, at any time, to convert the Preference Shares held to the same number of
Ordinary Shares.
On 23 April 2012, 8,909,074 Ordinary Shares were issued for a total consideration of £4,899,990. The premium arising on the
issue of these shares was £4,810,900 and total issue costs incurred were £303,703.
On 22 May 2012, 60,000 £0.01 Convertible Preference Shares were converted to £0.01 Ordinary Shares.
Annual report 2012 Ilika plc 47
www.ilika.comBUSINESSREVIEWCORPORATEGOVERNANCEfINANCIAlSTATEmENTS Financial statements
Corporate directory
Company number
7187804
Directors
Executive
Non-Executive
Secretary
Registered office
Graeme Purdy
Stephen Boydell
Brian Hayden
Jack Boyer (Chairman)
Dr. Werner Braun
Clare Spottiswoode
Prof. William Wakeham
Stephen Boydell
Kenneth Dibben House
Enterprise Road
University of Southampton Science Park
Chilworth
Southampton
SO16 7NS
Website
www.ilika.com
Advisers
Independent auditors
Nominated adviser and broker
Registrars
Public relations
BDO LLP
Arcadia House
Maritime Walk
Ocean Village
Southampton
SO14 3TL
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Walbrook PR Ltd
4 Lombard Street
London
EC3V 9HD
48 Ilika plc Annual report 2012
Ilika at
a glance
p.02
Our investment
proposition
p.04
Commercialising
our technology
p.06
Chairman’s
review
p.08
Chief Executive’s
review
p.10
Financial
review
p.13
Ilika at a glance
Business review
01 Overview
02
04 Our investment proposition
06 Commercialising our technology
08
10
13
Chairman’s review
Chief Executive’s review
Financial review
Corporate governance
14 Board of Directors
16 Directors’ report
18
20
22
Corporate governance statement
Corporate social responsibility
Independent auditor’s report
Financial statements
23
24
25
26
27
43
44
45
46
48
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Company balance sheet
Company cash flow statement
Company statement of changes in equity
Notes to the consolidated financial statements
Corporate directory
Ilika plc Annual report 2012
I
l
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k
a
p
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c
A
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l
r
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p
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r
t
2
0
1
2
Ilika plc
Kenneth Dibben House
Enterprise Road
University of Southampton
Science Park
Chilworth
Southampton
SO16 7NS
United Kingdom
E info@ilika.com
T +44 (0)23 8011 1400
F +44 (0)23 8011 1401
www.ilika.com
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