244539 Proteome cover 3mm Spine 30/03/2017 09:34 Page ofc1
Proteome Sciences plc
Registered number: 02879724
Report and Financial Statements
for the year ended 31 December 2016
244539 Proteome cover 3mm Spine 30/03/2017 09:34 Page IBC1
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244539 Proteome p01-p19 29/03/2017 21:05 Page 1
CONTENTS
BUSINESS REVIEW
Chief Executive Officer’s Statement
Strategic Report
GOVERNANCE
Board of Directors
Directors’ Report
Independent Auditors’ Report
FINANCIAL STATEMENTS
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Company Balance Sheet
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated and Company Cash Flow Statements
Notes to the Consolidated Financial Statements
AGM INFORMATION – NOTICE OF MEETING
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244539 Proteome p01-p19 29/03/2017 21:05 Page 2
CHIEF EXECUTIVE OFFICER’S STATEMENT
In my first annual statement as Chief Executive for
the Company I am very pleased to report a strong
12 months ending 31 December 2016, with
revenue increased 46% to £2.74m including a 57%
increase in sales of TMT® reagents, and results in
line with expectations. This was achieved in the
context of a turbulent financial environment,
challenging market conditions across
the
bioscience sector, and a significant transition taking
place within the Group itself.
a
by
properly
A change in leadership in June prompted a revision
of strategy: our ambition is to become a premium
contract, service-based proteomics business, with
sufficient capacity to meet Thermo Scientific’s
demand for Tandem Mass Tag (TMT) reagents, and
resourced
underpinned
bioinformatics unit to take advantage of the value
to be derived from data analyses and interpretation.
These three operational pillars, coupled with a plan
to drive the Group beyond cash-flow break even in
the next two financial years, enabled a successful
fundraise in the fourth quarter during which we
raised £3.3m and broadened our shareholder
register with additional institutions. Investment was
sought
regulatory
to
compliance across our sites, strengthen our
commercialisation capability, and consolidate our
footprint appropriately for an organisation of our
size.
specifically
ensure
Fewer service contracts generated greater
revenues than in 2015 demonstrating an important
increase in the average value of our project
portfolio. In addition, due diligence was initiated on
our casein kinase 1 delta (CK1D) inhibitors by a
European biopharmaceutical company and our
partner, Randox Laboratories, optimised a new
class of antibodies for use in the forthcoming stroke
diagnostic. Cost containment has been a priority,
although administrative expenses during the period
remained flat as deliberate reductions in our
intellectual property (IP) portfolio were balanced by
higher depreciation charges in relation to a new
Fusion mass spectrometer and recruitment in the
first half of the year. Success also requires that we
simplify our message and communicate more
directly: in support of this we have significantly
2
Proteome Sciences plc
revised our website content and are adopting a
faster financial reporting cycle to ensure that
customers, investors and partners are all better
appraised of our progress.
Despite major fluctuations in foreign exchange
since the Brexit vote in June, compounded by an
unpredictable political landscape, the Group has
been relatively unaffected with increases in our
foreign denominated revenues largely balanced by
the costs associated with our Frankfurt based
facility. More impactful has been the general
malaise in biopharmaceuticals, predicated on an
understandable but overwhelming focus on value
and price which threatens to suppress innovation
and promote risk aversion in the sector. Market
indices struggled to regain the ground lost early in
the year, and while this may bode ill for the provision
of healthcare in the longer term, it does afford
opportunity for companies such as ours: the
the
importance of
development of targeted therapeutics and the
justification of precision medicine is irresistible, as
is the trend of large companies to de-risk their
portfolios by outsourcing core technologies to
specialist service providers, reducing internal
investment in discovery, and promoting strategic
collaborations and acquisitions.
technologies
-omic
in
I would like to thank all the staff at Proteome
Sciences for their unstinting support during 2016,
and our many shareholders who continue to believe
in the mission of the Company.
towards
Services
Our services business performed well during 2016
reflecting a 57% increase, with new inquiries
significantly directed
the use of
TMTcalibrator™ as clients search for specific
biomarkers to support their drug development
programs. SysQuant® continues to perform well as
the advent of precision medicine fuels the need to
understand changes in protein expression and
activity. However, conversion of client interest into
formal contract work, and particularly repeat
business, has been less reliable than anticipated
for our service platforms and must now become a
focus of attention. Moreover, some
greater
244539 Proteome p01-p19 29/03/2017 21:05 Page 3
CHIEF EXECUTIVE OFFICER’S STATEMENT
established service contracts have been slower to
reach agreed milestones than expected, delaying
some revenues into 2017. Managing the progress
and delivery of these core projects remains
fundamental to the performance of our business.
in
The increasing adoption of proteomics as a critical
enabling technology is inevitably attracting new
entrants to this service market which requires us to
be more competitive with our offering and more
efficient
the use of our resources. The
appointment of a Chief Compliance Officer to
oversee our Good Clinical Laboratory Practice
(GCLP) accreditation and
to
consolidate our laboratory capabilities on a single
site are both actions directly inspired by this
competition.
the decision
recognition of
Licences
Our exclusive license to provide Thermo Scientific
with isobaric tagging reagents (TMT®) continues
to be mutually beneficial. Robust sales and
associated royalty payments remain fundamental
to our revenue growth and likely reflect an
the benefits of
increasing
multiplexing samples. However, such tags are
being used in only a small part of the total
proteomics market and scope
for
considerable further growth as adoption by key
opinion leaders spreads to the wider research
community. Work continues to develop new ‘higher
plexing’ reagents, enabling even more efficient
sample analyses, and we are working very closely
with our partners at Thermo Scientific to introduce
such improvements as soon as possible. Progress
than originally
has been somewhat slower
envisaged, but it remains a high priority for both
companies.
remains
Launch of a CE (Conformité Européene) marked
stroke diagnostic is now scheduled for the second
half of 2017, allowing for the incorporation of a new
class of antibodies against our patented stroke
biomarkers. These antibodies were generated early
in the year by our partner Randox Laboratories and
have improved the overall performance of the
panel. Trials to create registration data will be
performed after assembly of the final array and a
Research Use Only product is still anticipated
ahead of the CE marked assay. Given the global
incidence of stroke, and the therapeutic liability
associated with inaccurate clinical diagnosis, the
market opportunity for such a diagnostic is
considerable.
Bioinformatics
We understand the importance of simplifying data
outputs from our principal service platforms, and
have completed the production and testing of a
suite of new bioinformatics tools which can extract
the most pertinent knowledge from high-complexity
proteomics studies with minimal user interaction.
We are now able to reduce the data processing
and analysis times of internal research programs
by more than 50% while improving the quality of
information generated. We anticipate that these
new bioinformatics products will enhance the value
of SysQuant® and TMTcalibrator™, and open up
new commercial opportunities for the analysis of
third-party data sets. These advances, coupled
with the realisation that ultimately insight and
interpretation is significantly more valuable than
data generation (however complex that might be),
form the basis of our strategy to resource a
dedicated bioinformatics business unit capable of
accommodating data from sources other than just
our own laboratories.
Research
Our intention to focus on service provision in the
near term will inevitably limit the extent of our
research activities as we seek to rebalance our
finite resources, but we remain indisputably a
science-based company with a commitment to
research through partnership and collaboration.
Primary areas of interest, neurodegeneration and
oncology, are chosen specifically to generate
evidence validating the utility of proteomics in the
development of targeted therapeutics.
investment
Increasing public and private
in
Alzheimer’s disease (AD) research over recent
years has led to some optimism about the potential
for disease-modifying agents, and to a spate of
publications about the critical importance of
identifying blood-borne predictors of early disease
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CHIEF EXECUTIVE OFFICER’S STATEMENT
Following the £3.3m fundraise in October the
Company has put itself on a stronger financial
footing but remains in a transition phase. While we
are satisfied with progress in 2016, there is much
yet to do if we want to realise the full value of our
proteomic
forthcoming
consolidation of all laboratory capabilities at our
existing facility in Frankfurt will enable efficiencies
in resource allocation and quicker adherence to the
GCLP accreditation necessary for future business.
technologies.
The
a
highly
created
the challenge of developing
When I joined the Company last June I remarked
targeted
that
therapeutics for patient populations with increasing
expectations
receptive
environment for enabling technologies such as
ours, and afforded us a tremendous opportunity
should we be able to seize it. I maintain this view
and, despite the rather unpredictable operating
environment, am confident that we now have
appropriate skills in the right locations pursuing a
viable strategy for success. I look forward to further
progress and substantial revenue growth in 2017.
Jeremy Haigh
Chief Executive Officer
27 March 2017
progression. An example is the protein clusterin,
about which we retain valuable IP within our
broader biomarker portfolio, and we continue to
develop a general diagnostic test for AD on behalf
of the Genting TauRx Diagnostic Centre.
While the high-profile failure of molecules directed
at
the amyloid hypothesis, most notably
solanezumab, once again illustrates the difficulty
associated with interdicting AD, such failures also
serve to divert investment to other drug targets,
such as tau, in which we have a long-standing
interest. Unfortunately, the widely anticipated Phase
3 trial results, released in July for the potential AD
drug, LMTX, proved equivocal. generating media
enthusiasm despite the failure to meet co-primary
endpoints. The consequence of this outcome for
deeper biopharmaceutical interest in the tau
pathway is still unclear, but it now seems certain
that a multi-targeted approach to this disease will
be required. CK1D inhibition remains a mechanism
favoured by some, and our molecules have entered
a due diligence review with an EU-based
biopharmaceutical company; however,
their
treatment potential of these inhibitors has yet to be
assessed and is not something we are equipped
to undertake ourselves.
reference
Outlook
The shift towards personalised healthcare is
undeniable. Despite challenges in diagnostic
regulatory policy, reimbursement and clinical
adoption, over 25% of new medicines approved by
the FDA in 2016 were ‘personalised’ – their labels
including
to specific biomarkers.
Proteomics is becoming routinely employed as a
tool critical to the provision of such medicines and
the prediction of treatment response, and we
anticipate that the number and scale of our service
contracts will increase as more companies embed
this philosophy at the heart of their research and
development activities. To achieve this there is a
fundamental need for us to broaden our customer
base in an increasingly competitive sector, to
initiate durable contracts with established
pharmaceutical and diagnostic companies, and to
attract more repeat business.
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Proteome Sciences plc
244539 Proteome p01-p19 29/03/2017 21:05 Page 5
STRATEGIC REPORT
The directors present their Strategic Report on
Proteome Sciences plc (the “Company”) and its
subsidiary undertakings (together the “Group”) for
the year ended 31 December 2016.
Review of the Business
Proteome Sciences is a leading provider of
contract research services for the identification,
validation and application of protein biomarkers.
Our clients are predominantly pharmaceutical
companies but we also perform services for other
sectors including academic research. During 2016
we added several new customers but generation
of repeat business from existing clients was slower
than expected after a promising start in the first
quarter. We deliver our services through dedicated
research laboratories in Frankfurt (Germany) and
London (UK), although we will be consolidating
these into a single site in Frankfurt during 2017.
While the nature of our services is complex,
requiring highly qualified staff and sophisticated
equipment, it is also scalable allowing a substantial
increase in revenue-generating projects with only
minor increases in operating costs.
This year we initiated a program of work, due for
completion in mid-2017, to make our Frankfurt
laboratory compliant with GCLP regulations. This is
an important initiative for the Group as we start to
transition our services into the clinical research
domain where project sizes and values are
generally much larger than for pre-clinical studies.
In the last quarter of 2015 we invested in a second
Orbitrap Fusion mass spectrometer to meet the
expected demand
for our SysQuant® and
TMTcalibrator™ services. The revenue growth
reported in 2016 reflects the impact of this
increased capacity and the growing demand for
proteomics within our client base. However,
machine utilisation during the second half of the
year was not as high as expected due to delays in
closing orders, but we anticipate the opportunity for
further revenue growth as these orders are
concluded in the coming months.
We are not aware of any significant technological
developments that would be disruptive to our
business and continue to see solid interest in our
SysQuant® and TMTcalibrator™ services. We have
also observed a move towards higher value
projects having completed 25% fewer service
contracts generating 57% more revenues than
in 2015.
Progress During 2016
Biomarker Services
Revenues from Biomarker services increased by
£0.46m to £1.25m during 2016.
In 2016 we completed the discovery phase of the
diagnostic panel for a multi-stage project with
Genting TauRx Diagnostics Centre which was
originally signed in 2014; the first assay validation
phase was also initiated. Completion of each
phase triggers milestone payments and we expect
to complete the three validation phases for this
assay in 2017. We also hope to undertake the
companion diagnostic discovery project in the
second half of 2017, with milestone payments due
on initiation and completion.
SysQuant® and TMTcalibrator™ were our two main
service products in terms of numbers of projects
and overall value during 2016. In February, we
announced repeat business from two clients for
SysQuant® and TMTcalibrator™ projects that were
collectively worth more than £500,000. We have
successfully completed the bulk of the SysQuant®
project with only a small bioinformatics work
package to be finished in 2017. We also completed
the TMTcalibrator™ project and were able to detect
a very low abundance fluid biomarker for our client.
Based on customer feedback we have also
enhanced our data analysis, both simplifying and
strengthening project outputs to deliver a better
experience for clients. These improvements have
been well received and offer further differentiation
of our products and services.
A number of significant projects which were under
negotiation in the second half of 2016 could not be
closed before the year end, but we have since
closed two of these, will shortly close a third, and
have received inquiries about a broad portfolio of
new projects. The arrival of our new Chief
Commercial Officer in 2017 should stimulate further
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STRATEGIC REPORT
interest and improve conversion into committed
work orders during the remainder of the year and
beyond.
We have seen the first examples of our work being
international
communicated by clients at
conferences. Two companies presented results
from SysQuant® studies that had helped progress
through pre-clinical
their drug candidates
development, while a third company showed
pre-clinical data from a TMTcalibrator™ analysis of
tau in cerebrospinal fluid (CSF). These are
important endorsements of the value which our
Biomarker Services can provide to clients and we
anticipate follow-up studies with all three of them
in 2017.
Tandem Mass Tags®
Sales of the currently available TMT® continued to
show strong growth of 57% in 2016, an increase of
£0.51m to £1.39m, driven in part by established
users. Perhaps more significantly, a number of key
opinion leaders involved in academic proteomics
have been adopting TMT® in their research
projects leading to higher level uptake in the
broader community. However, there remains a large
section of the proteomics research market that has
yet to switch to TMT® and a major goal for 2017 will
be supporting our exclusive licensee, Thermo
Scientific, to increase the rate of TMT® adoption.
As a result of increasing sales and strong future
projections, we started making an additional batch
of the standard TMT® 10-plex reagents in the
second half of 2016. This re-stocking will be
completed in 2017 and we have sufficient material
on hand to meet Thermo Scientific’s requirements
until then.
Development of higher plexing-rate tags continued
in 2016 with an expanded set of prototypes due for
external testing early in 2017. The new tag structure
is expected to deliver a set of 16-plex reagents.
Importantly, this will also include a sub-set of
10-plex reagents that can be used on more basic
mass spectrometers which currently cannot use
our standard 10-plex reagents.
6
Proteome Sciences plc
Stroke Biomarkers
We have been supporting our non-exclusive
licensee, Randox Laboratories, to expedite the
launch of a research grade stroke biomarker assay
in the first half of 2017 followed by a CE-marked
clinical test later in the year. Randox has invested
significantly
the performance of
reagents used to detect these stroke biomarkers
and is progressing well with formulation of the final
assay and initiation of clinical trials.
improve
to
Alzheimer’s Disease
Our focus on AD over the last decade has improved
our understanding of the mechanisms underlying
this disease as well as suggesting a diverse range
of blood and CSF biomarkers. This expertise has
attracted various commercial clients developing
drugs against AD and other neurodegenerative
conditions. During 2016 we were primarily engaged
in using SysQuant® to profile changes in cell
biology caused by increasing tau pathology in the
brains of patients with AD. This work, performed in
collaboration with the University of Eastern Finland,
has confirmed increased CK1D activity as well as
tau,
providing
neuroinflammation and the metabolic changes
related to mechanisms of cell death.
between
amyloid,
links
We also focused on developing our clusterin assay
as a blood biomarker for stratification of patients
with AD. Analysis of a further 18 patients replicated
the original findings and we initiated the final
development assay prior to a planned launch in
2017. With the anticipated upgrade to GCLP
compliance in Frankfurt we will soon be able to
provide this assay to support patient profiling in
clinical trials, a major area of unmet need. We will
complete development of this clusterin biomarker
assay and our analysis of brain SysQuant® data
during 2017 and anticipate both activities
supporting revenue generation.
Several publications in the scientific literature,
including from our collaborators at the Institute of
Psychiatry, have further validated a number of our
main candidate proteins. In particular, the potential
of various complement pathway proteins for the
stratification of patients with AD has been
244539 Proteome p01-p19 29/03/2017 21:05 Page 7
STRATEGIC REPORT
confirmed. These publications add further value to
our panel of blood biomarkers and the related IP.
Two landmark papers authored by Proteome
Sciences were published in 2016. These are the
first to describe the application of TMTcalibrator™
with TMT® 10-plex to the analysis of CSF in AD
patients. In the first paper, we demonstrated the
ability to detect and quantify 30 phosphorylation
sites on CSF tau, the first time many of these sites
have been detectable by mass spectrometry. In the
second paper, we identified over 50 proteins with
different levels in CSF from AD patients compared
with non-diseased controls. Many of these proteins
had not been detected previously and are
correlated with activation of immune cells in the
brain, a current hot topic in early AD research.
tauopathies. During 2016,
CK1D Inhibitors
We have been investigating inhibitors of CK1D as
potential therapeutic agents for the treatment of AD
and other
further
discouraging results from trials of amyloid-targeted
therapies in AD patients prompted a steady increase
in the attention being paid to strategies targeting tau.
We expected this to drive further interest in our
CK1D inhibitors and in July announced that we had
entered a due diligence process with a European-
focused on
based biotechnology company
neurological disorders. During the second half of
the year this company completed their analysis of
our documentation and has now initiated laboratory
testing. We expect further developments in the
second quarter of 2017.
Hepatocellular Carcinoma
After a prolonged delay in gaining appropriate
clinical samples from our collaborators at King’s
College Hospital, we were finally able to apply
SysQuant® to the analysis of 13 patients who had
undergone surgery and follow-up treatment for
hepatocellular carcinoma (HCC). The level of
proteome coverage was excellent and we were
able to differentiate clearly the tumour samples
from the background liver. Using a panel of recently
developed bioinformatics tools we have identified
a wide range of changes in protein expression
relating to HCC, including changes associated with
activation of the raf-family of kinases that are the
target of sorafenib (a kinase inhibitor approved for
the treatment of advanced renal cell carcinoma).
We also saw many changes within the whole group
of HCC patients, as well as unique patterns within
each patient, which have the potential to help
clinicians select the most appropriate treatment
and avoid those drugs that lack proteomic
evidence of target activity. We are now awaiting
more detailed clinical information, including the
final outcomes of
to enable an
assessment of the potential value of SysQuant® in
managing HCC patients.
treatment,
Other Research Programs
In addition to our main research interests in AD and
HCC, we have been involved in three projects to
develop blood biomarkers for amyotrophic lateral
sclerosis (ALS; motor neurone disease). These
projects have delivered panels of biomarkers to aid
stratification of ALS phenotypes which may
ultimately lead to better treatment outcomes.
Further validation work is required to test fully the
utility of these panels and this work will be
completed by our partners at Queen Mary’s
University, London.
Our collaboration with the Moffitt Cancer Centre in
Florida also progressed well in the last year. The
SysQuant® study in melanoma drug resistance
was submitted
(and has
subsequently been published in February 2017). A
second project, using TMTcalibrator™ for renal
carcinoma biomarker discovery in urine, has been
initiated and we anticipate the first candidates to
be identified in the early part of 2017.
for publication
Grants
With greater commercial activity our participation
in grant-funded research has decreased over the
last two years. In 2016 we completed the Denamic
project which has delivered various candidate
biomarkers for detection of nerve damage in
children following exposure to environmental toxins.
Denamic was funded by the European Commission
under the Framework 7 Programme and we
received over 500,000 € in direct funding.
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STRATEGIC REPORT
In November, we joined the PROMETOV consortium
which will use multiple -omics approaches to study
tumour heterogeneity in ovarian cancer in order to
deliver better blood biomarkers for diagnosis and
treatment selection. We will perform analysis of
blood samples using TMTcalibrator™ and support
the analysis of tumour tissue using SysQuant®,
work for which we will receive 104,000 € paid over
three years.
Patent Applications and Proprietary Rights
Our patent portfolio has undergone continual
review resulting in the abandonment of over 10%
of the patents with the aim of maximising resources
on key disease, application and technology areas.
This has justified the creation of an IP group to deal
with patent matters in-house, and has brought an
estimated saving of at least 20% in patent costs.
Notwithstanding this overall reduction, another
23 patents were granted in 2016 with a further
31 applications filed over the period. Securing and
developing out IP assets will translate into license
fees, milestones and royalties. Our business is built
on IP and these assets remain essential for
generating future shareholder value.
Board Changes
On 1 June 2016, the company announced that Dr
Jeremy Haigh had joined as Chief Executive.
Jeremy has worked in the biopharmaceutical
sector, with 30 years in clinical and operational
research and development, principally at Merck
Research Laboratories and Amgen where most
recently he was European Chief Operating Officer,
R&D. He is currently the Chairman of Cogent Skills
Limited and a member of Imperial College Health
Partners Advisory Council.
Financial Review
Results and Dividends
The loss after tax for the year was £2.28m
(2015: £2.72m). The directors do not recommend
the payment of a dividend (2015: Nil). The Group
results are stated in the consolidated income
statement on page 20 and are reviewed in the
Chief Executive’s Statement on pages 2 to 4 and
the Strategic Report on pages 5 to 10.
8
Proteome Sciences plc
Key Performance Indicators (KPI’s)
(i) The directors consider that revenue and
profit/(loss) before tax are KPI’s in measuring
group performance, as the profile of the group
licencing
changes as a
agreements that have already been entered into
and as future licences and other commercial
agreements are concluded. The performance
of the group in this latter area is set out in detail
in the Chief Executive’s Statement on page 3.
result of
the
(ii) In a small business with a high proportion of
well qualified and experienced staff the rate of
staff turnover is seen as an important KPI. In
FY2016 two members of staff resigned and
three retired upon reaching retirement age. The
retirees and one resignee were successfully
replaced with a proper handover of
responsibilities; the other resignee was not
replaced as a cost containment measure and
role were
the
redistributed.
responsibilities of
their
(iii) In addition, the directors believe that a further
important KPI is the Group’s rate of cash
expenditure and its effect on Group cash
resources. Net cash outflows from operating
activities
for FY 2016 were £1.99m
(2015: £2.36m). Further details of cash flows in
2016 are set out in the Group’s Cash Flow
Statement on page 26.
(iv) As we become a more commercially oriented
business, the average value of the service
contracts in our portfolio and the proportion of
repeat business will become KPI’s. In 2016 we
generated 57% more revenues from 25% fewer
contracts than in 2015 indicating a move
towards higher value projects. Repeat business
with clients constituted 53% of our work by
contract (63% by revenue) and is a focus for the
future.
Financial Performance
Compared to the previous year our revenues
showed strong growth. Revenue
the
twelve-month period ended 31 December 2016
increased 46% to £2.74m (2015: £1.88m).
for
244539 Proteome p01-p19 29/03/2017 21:05 Page 9
STRATEGIC REPORT
(cid:129) Sales and Services revenue rose 57% to
£2.64m (2015: £1.68m). This is comprised of
two revenue streams, TMT® and Biomarker
Services. TMT® revenues increased by 57%
through a mix of increased sales of TMT® tags
and a marked increase in the associated royalty
payments due from our exclusive distribution
partner Thermo Scientific. Biomarker Services
revenue also increased by 57%, driven by
strong year on year increases from both
SysQuant® and TMTcalibrator™ and the first
stage of a significant assay development
project. It is worth noting that the average value
of service contracts increased year on year.
(cid:129) Grant services were £0.11m (2015: £0.21m).
Grant service income dipped in 2016 due
primarily to a postponement in the delivery of
samples from one of our collaborators and a
slight delay in the start of a new project at the
end of the year.
(cid:129)
The loss before tax was £2.94m (2015: £3.33m).
Costs and Available Cash
The Group maintained a positive cash balance in
2016 and continues to seek improved cash flows
from commercial income streams. Despite the rise
in revenues, our operating costs have been
contained.
the adverse effect of
(cid:129) Administrative expenses in 2016 were £4.24m
(2015: £4.17m). This is an increase of less than
2% despite
the
depreciation of sterling against the euro on our
Frankfurt Laboratory costs. In real terms costs
reduced in a year of material revenue growth.
We expect 2017 to be a transitionary year as
the UK Laboratory is relocated to Frankfurt and
the head office to London. The full benefit of
this consolidation will take effect for 2018
onwards.
(cid:129) Staff costs for the year increased by £0.3m to
£2.92m. This was primarily due to foreign
exchange in Germany and to the cost of
changes in senior management.
(cid:129) Property costs of £0.3m were in line with
previous years.
(cid:129) Other overheads decreased by £0.23m as a
result of cost containment initiatives driven by
a review of patent obligations.
(cid:129)
Finance costs arise as a result of interest due
to the Non-Executive Chairman, Christopher
Pearce, from his loan to the company. Costs of
£0.26m are in line with the prior year.
(cid:129) After the tax credit of £0.66m (2015: £0.61m),
the loss after taxation for the period was £2.28m
(2015: £2.72m). The net cash outflow from
operating activities was £1.99m (2015: £2.36m).
Cash at the year-end was £2.88m (2015: £1.81m).
The improved cash position is primarily due to a
placing of ordinary shares which was completed
in November 2016. The placing raised £3.3m
before expenses from a mixture of existing and
new shareholders.
Principal activity and business review
The principal activity of the Group is protein
biomarker research and development. As a leader
in applied proteomics and workflows we use high
sensitivity proprietary techniques to detect and
characterise differentially expressed proteins in
diseases for diagnostic, prognostic and therapeutic
applications.
PS Biomarker Services® provides integrated
proteomic services
for biomarker discovery,
validation and assay development for use in clinical
trials and in vitro diagnostics. Key features include
proprietary isobaric tandem mass tag (TMT®)
technology for accurate and reliable biomarker
quantification and the ability to rapidly develop
highly reproducible quantitative biomarker assays.
The main focus of research is neurodegenerative,
cardiovascular and oncological conditions. Blood
biomarkers in Alzheimer’s disease, stroke, brain
damage and solid organ transplant rejection have
been discovered.
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STRATEGIC REPORT
Details of the Group’s performance during the year
and expected future developments are contained
in the Chief Executive Officer’s Statement on pages
2 to 4.
Principal Risks and Uncertainties
Licencing Arrangements and Commercialisation
The Group intends to sub-license its discoveries
and products to third parties, but there can be no
assurance that such licencing arrangements will be
successful. It is also uncertain whether our
commercial services will ultimately be successful
in the market.
Management of Risk: The Group manages this risk
by a thorough investigation of proposed research
projects to assess their scientific and commercial
feasibility.
It has an experienced board and
management team to carry out this process and
also aims to spread this risk by distributing its
resources on multiple projects. Recruitment of a
Chief Commercial Officer is intended to strengthen
our commercialisation capability.
Competition and Technology
The international biotechnology industry is subject
to rapid and substantial technological change.
There can be no assurance that developments by
others will not render the Group’s developments
obsolete or uncompetitive. Proteomics is a growth
area attracting new companies with competitive
offerings.
research
scientists
Management of Risk: The Group employs highly
qualified
senior
management who monitor and are aware of
developments in technology that might affect its
research capability
to
scientific publications and attendance at
conferences.
their access
through
and
Dependence on Key Personnel
The Group depends on its ability to attract and
retain qualified management and scientific
personnel. Competition for such personnel is
intense. Whilst
into
employment arrangements with its key personnel
with the aim of securing their services for minimum
terms, the retention of their services cannot be
guaranteed.
the Group has entered
10 Proteome Sciences plc
Management of Risk: The Group has a policy of
organising its research so that its projects are not
dependent on any one individual. It also seeks to
retain staff by the grant of share options and
through annual reviews of remuneration packages.
Patent Applications and Proprietary Rights
The Group seeks patent protection for identified
protein biomarkers which may be of diagnostic,
prognostic or therapeutic value and for its chemical
mass tags. Successful commercialisation of such
biomarkers and chemical mass tags may depend
on the establishment of such patent protection. The
Group also seeks patent protection
its
proprietary technology.
for
There is no assurance that the Group’s pending
applications will result in the grant of patents, or
that the scope of protection offered by any patents
will be as planned, or whether any such patents
ultimately will be upheld as valid by a court of
competent jurisdiction in the event of a legal
challenge. If the Group fails to obtain patents for its
technology and is required to rely on unpatented
proprietary technology, no assurance can be given
that the Group can meaningfully protect its rights
in such unpatented proprietary products and
techniques.
Management of Risk: The Group has an
experienced patent department which has
established controls to avoid the release of
patentable material before it has filed patent
applications.
By Order of the Board
Coveham House,
Downside Bridge Road,
Cobham
Surrey KT11 3EP
G. Ellis
Company Secretary
27 March 2017
244539 Proteome p01-p19 29/03/2017 21:05 Page 11
BOARD OF DIRECTORS
For the year ended 31st December 2016
Dr. Jeremy Haigh
in a variety of clinical
Chief Executive Officer
Jeremy Haigh has spent 30 years in the bioscience
sector
research,
development, operational and leadership roles,
experiencing both traditional pharmaceutical and
biotechnology environments at Merck Research
Laboratories and at Amgen where most recently he
was the European Chief Operating Officer for
Research & Development. He retains a particular
interest in precision medicine and in neurological
diseases
in
neuropharmacology. He has been a strong
advocate for the biopharmaceutical industry over
many
involvement
in healthcare policy and government affairs in both
the UK and Europe. He is currently Chairman of
Cogent SSC Ltd and a member of the Advisory
Council for Imperial College Health Partners.
his basic training
years, with
significant
reflecting
Geoff Ellis
Finance Director
Geoff Ellis is a Chartered Accountant with over
30 years’ experience in a range of senior financial,
general management and sales and business
development roles. He spent almost 15 years at
Walt Disney where his roles included Chief
Financial Officer of Disney Channels in Europe, the
Middle East and Africa, a $500m turnover business.
Dr. Ian Pike
Chief Scientific Officer
Ian Pike has over 20 years’ experience working in
the diagnostics and biotechnology sectors. Having
gained a PhD in Medical Microbiology, he joined
Wellcome Diagnostics as a research group leader
and spent eight years working on new diagnostic
assays, particularly for hepatitis. In December
1999, he joined the Technology Transfer Office of
the UK Medical Research Council with
responsibility for patents and commercialisation of
a wide portfolio of technologies related to the
biomedical sector. Most recently, Ian worked for
Cancer Research Ventures managing intellectual
property and performing business development
activities in Europe and the US.
Non-executive Directors:
Christopher Pearce
Non-executive Chairman
Christopher Pearce has built the Group since
inception and has been responsible for the
formulation and
implementation of strategy,
collaborative and licensing agreements, and
intellectual property. He was co-founder and
Executive Chairman of Fitness First plc.
Professor William Dawson
Non-executive Director (i) (ii) (iii)
Professor William Dawson retired from Eli Lilly and
Company in August 1996 after 27 years’ service,
14 as Research Director in the UK and latterly as
Director of Technology Acquisition, Europe. He is
a Director of Bionet Limited and is a Fellow of the
Royal Pharmaceutical Society and of the Royal
Society of Chemistry.
Roger McDowell
Non-executive Director (i) (ii)
Roger McDowell has a highly successful career as
a businessman and entrepreneur. He was
Managing Director of Oliver Ashworth for eighteen
years before its sale to St. Gobain. He is currently
the Chairman or a non-executive director of seven
listed companies, namely Avingtrans plc, Servelec
Group plc, Renovo plc, Alkane Energy plc,
Swallowfield plc, IS Solutions plc and Augean plc.
He brings considerable commercial experience
with him and is a keen exponent of growing
shareholder value.
Martin Diggle
Non-executive Director (i) (ii)
Martin Diggle has worked in finance for over
30 years. He was a director and partner of
UBS/Brunswick in Russia until 2003, after which he
joined Vulpes Investment Management, where he
is currently a director and partner. He is an
experienced specialist investor in life sciences and
manages the Vulpes Life Sciences Fund, the
registered holder of 18.33% of Proteome Sciences’
ordinary share capital.
(i) Member of Audit Committee
(ii) Member of Remuneration Committee
(iii) Member of Nomination Committee
Proteome Sciences plc 11
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DIRECTORS’ REPORT
for the year ended 31 December 2016
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.
Website publication
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 company’s website in
accordance with legislation in the United Kingdom
governing the preparation and dissemination of
from
financial statements, which may vary
legislation in other jurisdictions. The maintenance
and integrity of the company’s website is the
responsibility of the directors. The directors’
responsibility also extends to the ongoing integrity
of the financial statements contained herein.
Financial instruments and liquidity risks
Information about the use of financial instruments
by the Company and its subsidiaries and the
Group’s financial risk management policies are
given in note 24 of the financial statements.
The directors present their annual report on the
affairs of the Group, together with the consolidated
financial statements and independent auditor’s
report, for the year ended 31 December 2016.
Directors’ responsibilities
The directors are responsible for preparing the
annual report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare
financial statements for each financial year. Under
the 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 and applicable law. 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 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.
In preparing these financial statements, the
directors are required to:
(cid:129)
select suitable accounting policies and then
apply them consistently;
(cid:129) make judgements and accounting estimates
that are reasonable and prudent
(cid:129)
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;
(cid:129) prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the company will continue in
business
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the company’s transactions and disclose
12 Proteome Sciences plc
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DIRECTORS’ REPORT
for the year ended 31 December 2016
Directors and their interests
The Directors who served during the year are as shown below:
C.D.J. Pearce
Non-Executive Chairman
(From 1 June 2016; CEO from 1 January to 31 May 2016)
Dr. J.R.M. Haigh (appointed 1 June, 2016) Chief Executive Officer
G. Ellis
Dr. I.H. Pike
Professor W. Dawson
R. McDowell
M. Diggle
Finance Director
Chief Scientific Officer
Non-Executive
Non-Executive
Non-Executive
In accordance with the Company’s articles R. McDowell and G. Ellis retire by rotation at the next Annual
General Meeting and, being eligible, offer themselves for re-election.
The Directors at 31st December 2016 and their interests in the share capital of the Company were as
follows:
a) Beneficial interests in Ordinary Shares:
Name of Director
C.D.J. Pearce
Dr. J.R.M. Haigh (appointed 1st June, 2016)
G. Ellis
Dr. I.H. Pike
Professor W. Dawson
R. McDowell
M. Diggle
31 December 2016
Number of
Ordinary Shares
of 1p each
31 December 2015
Number of
Ordinary Shares
of 1p each
36,915,059
400,000
–
–
20,372
2,500,000
–
36,915,059
–
–
–
20,372
500,000
–
Note
M. Diggle is a director and partner in Vulpes Investment Management and manages the Vulpes Life
Sciences Fund which is the registered holder of 18.33% of Proteome Sciences’ ordinary share capital.
No changes took place in the beneficial interests of the Directors between 31st December 2016 and
27 March 2017.
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244539 Proteome p01-p19 29/03/2017 21:05 Page 14
DIRECTORS’ REPORT
for the year ended 31 December 2016
b) Directors’ interests in the Long-Term Incentive Plan (“LTIP”):
The maximum number of shares to be allocated to the Directors under the 2004 and 2011 LTIP schemes, in
each case for an aggregate consideration of £1, are as follows:
(i) C.D.J. Pearce
(ii) G. Ellis
(iii) Dr. I.H. Pike
(a)
(a)
(a)
Awards made have no performance retesting facility.
Number at
31 December 2016
277,704
300,000
165,583
Number at
31 December 2015
277,704
300,000
165,583
The numbers shown in (i)(a), and(iii)(a) at 31 December 2016 relate to awards that have vested but have
not yet been exercised.
The market price at the date of grant of the above awards numbered (i)(a) and (iii) (a) was 49.75p, and
for the award numbered (ii)(a) was 35.75p.
c) As set out in note 18(b) (i) to (iii) in these financial statements, C.D.J. Pearce has made a loan facility
available to the Company which can be converted, at Mr. Pearce’s option, into Ordinary Shares of
the Company at the lower of market price on the date of conversion or the average price over the
lowest consecutive ten day trading period since 29th June 2006 (the date on which details of the
original loan agreement were disclosed).
d) The market price of the Ordinary Shares at 31 December 2016 was 5.6p and the range during the
year was 5.6p to 22.3p.
Substantial shareholdings
As at 27 March 2017, the Company had received notification of the following significant interests in the
ordinary share capital of the Company:
Name of Holder
C.D.J. Pearce
Vulpes Life Science Fund
M. Staveley
Helium Special Situations Fund
Henderson Global Investors Ltd
Number of
Ordinary Shares
Percentage of issued
Ordinary Share Capital
36,915,059
53,943,715
9,820,829
19,212,273
20,000,000
12.54
18.33
3.34
6.53
6.80
Corporate governance
The Company has formalised the following matters by Board resolution:
–
–
–
–
a formal schedule of Board responsibilities;
the procedure for Directors to take independent professional advice if necessary, at the Company’s
expense;
the procedure for the nomination and appointment of non-executive Directors, for specified periods
and without automatic re-appointment; and
establishment of and written terms of reference for an audit, nominations and remuneration
committees.
14 Proteome Sciences plc
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DIRECTORS’ REPORT
for the year ended 31 December 2016
Internal control
The Board has overall responsibility for ensuring
that the Group maintains a system of internal
control to provide its members with reasonable
assurance regarding the reliability of financial
information used within the business and for
publication and that assets are safeguarded. There
are inherent limitations in any system of internal
control and accordingly even the most effective
system can provide only reasonable, and not
absolute, assurance with respect to the preparation
of accurate
the
safeguarding of assets.
information and
financial
The key features of the internal control system that
operated throughout the year are described under
the following headings:
(cid:129) Control environment: particularly the definition
of
the
the organisation structure and
appropriate delegation of responsibility to
operational management.
(cid:129)
Identification and evaluation of business risks
and control objectives: particularly through a
formal process of consideration and
documentation of risks and controls which is
periodically undertaken by the Board.
(cid:129) Main control procedures: which include the
setting of annual and longer term budgets and
the monthly reporting of performance against
them, agreed
treasury management and
physical security procedures, formal capital
expenditure and investment appraisal approval
procedures and the definition of authorisation
limits (both financial and otherwise).
(cid:129) Monitoring: particularly through the regular
review of performance against budgets and the
progress of research activities undertaken by
the Board.
The Board reviews the operation and effectiveness
of this framework on a regular basis. The directors
consider that there have been no weaknesses in
internal controls that have resulted in any losses,
contingencies
requiring
uncertainties
or
disclosures in the financial statements.
Going concern
The Group’s business activities, together with the
factors likely to affect its future development,
performance and position are set out in the CEO’s
Statement on page 2 to 4 and Strategic Report on
pages 5 to 10 and the financial position of the
Group, its cash flows, liquidity position and
borrowing facilities are described in the notes to
the financial statements, in particular in the
consolidated cash flow statement on page 26 and
in notes 18 (b) (Financial liabilities) and 24
(Financial instruments).
The Group’s financial statements have been
prepared on the going concern basis which
remains reliant on the group achieving an adequate
level of sales in order to maintain sufficient working
capital to support its activities. The directors have
reviewed the Group’s going concern position
taking account of its equity raise in October 2016,
current business activities, budgeted performance
and
future
development, are set out in the Annual report, and
include the Group’s objectives, policies and
processes for managing its working capital, its
financial risk management objectives and its
exposure to credit and liquidity risks.
to affect
factors
likely
the
its
The directors have prepared cash-flow forecasts
covering a period of at least 12 months from the
date of approval of the financial statements, which
foresees that the Group will be able to operate
within its existing working capital facilities, however
the timeline required to close sales contracts and
the order value of individual sales continues to vary
considerably, which constrain
to
performance.
revenue
accurately
Furthermore, the Group’s products are still in the
research and development phase and as such the
directors consider that costs could exceed income
in the short term. The directors intend that the
Group will continue to pursue its sales strategy and
focus its operational plans on the importance of
achieving sustained positive cash-flow generation.
the ability
predict
The Group is also dependent on the unsecured
loan facility provided by the Chairman of the Group,
which under the terms of the facility, is repayable
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DIRECTORS’ REPORT
for the year ended 31 December 2016
on demand. Further details of this facility are set
out in note 18(b) to the financial statements. The
directors have received confirmation from the
Chairman that he has no intention of seeking its
repayment, with the facility continuing to be made
available to the Group, on the existing terms, for at
least 12 months from the date of approval of these
financial statements.
Overall, the directors are of the view that the Group
has adequate financing to be able to meet its
financial obligations for a period of at least
12 months from the date of approval of the annual
report and financial statements.
Events after the balance sheet date
There have been no significant events which have
occurred subsequent to the reporting date.
The release of shares in respect of the awards still
outstanding to participants will depend upon the
growth of Proteome Sciences’ Total Shareholder
Return (“TSR”) over a three year performance
period relative to the AIM Healthcare Index. No
shares will be released unless the Company’s TSR
performance exceeds that of the Index, in which
case 30% of the award will vest. The full award will
vest only if the Company’s TSR performance
exceeds that of the Index by 10%, with a pro-rata
award between 30% to 100% for each percentage
point of out-performance up to 10%.
Before awards vest the Remuneration Committee
will satisfy itself that the TSR performance is a
genuine reflection of the Company’s underlying
performance over the three-year performance
period.
Research and development
Details of the group’s activities on research and
development during the year are set out in the
Strategic Report and CEO’s Statement.
Auditor
Each of the persons who are Directors of the
Company at the date when this report was
approved confirms that:
Remuneration committee report
The Remuneration Committee is made up of
three non-executive Directors, Professor W. Dawson,
M. Diggle and R. McDowell. The role of the
Committee is to make recommendations to the
Board, within its agreed terms of reference, on the
Company’s framework of executive remuneration
and its cost and to determine specific remuneration
packages for each of the executive Directors. The
remuneration of non-executive Directors is fixed by
the Board as a whole.
(cid:129)
(cid:129)
so far as the Director is aware, there is no
relevant audit information (as defined in the
Companies Act 2006) of which the Company’s
auditor is unaware; and
the Director has taken all steps that he ought to
have taken as a Director to make himself aware
of any relevant audit information (as defined in
the Companies Act 2006) and to establish that
the Company’s auditor is aware of that
information.
The remuneration policy for Executive Directors and
senior employees is to ensure that they are
rewarded competitively and in line with their
individual performance. Full details of
the
remuneration packages of individual Directors and
information on share options and long-term
incentive schemes are set out in note 10 to the
financial statements and in the Directors’ Report.
is given and should be
This confirmation
interpreted in accordance with the provisions of
s418 of the Companies Act 2006.
The directors will place a resolution before the
Annual General Meeting to appoint BDO LLP as
auditor for the following year.
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DIRECTORS’ REPORT
for the year ended 31 December 2016
Liability insurance for Company officers
As permitted by section 233 of the Companies Act
2006, the Company has purchased insurance
cover for the directors against liabilities that might
arise in relation to the Group.
By Order of the Board
Coveham House,
Downside Bridge Road,
Cobham
Surrey KT11 3EP
G. Ellis
Company Secretary
27 March 2017
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INDEPENDENT AUDITORS’ REPORT
for the year ended 31 December 2016
To the Members of Proteome Sciences plc
We have audited the financial statements of Proteome Sciences plc for the year ended 31 December
2016 which comprise the Consolidated income statement, the Consolidated statement of comprehensive
income, the Consolidated and Company balance sheets, the Consolidated and Company statement of
changes in equity, the Consolidated and Company cash flow statements, 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 the financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial
Reporting Council’s (FRC’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 FRC’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
the financial statements give a true and fair view of the state of the group’s and the parent company’s
affairs as at 31 December 2016 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
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, based on the work undertaken in the course of the audit:
(cid:129)
(cid:129)
the information given in the strategic report and directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the strategic report and directors’ report have been prepared in accordance with applicable legal
requirements.
18 Proteome Sciences plc
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INDEPENDENT AUDITORS’ REPORT
for the year ended 31 December 2016
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its
environment obtained in the course of the audit, we have not identified material misstatements in the
strategic report or the directors’ report.
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:
(cid:129)
(cid:129)
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
(cid:129)
certain disclosures of directors’ remuneration specified by law are not made; or
(cid:129) we have not received all the information and explanations we require for our audit.
Iain Henderson (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
27 March 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
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CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2016
Revenue
Sales and services
Grant services
Revenue – Total
Cost of sales
Gross profit
Administrative expenses
Operating loss
Finance income
Finance costs
Loss before taxation
Tax
Loss for the year
Loss per share
Basic and diluted
Year ended
Year ended
31 December 31 December
2015
£’000
2016
£’000
2,636
108
2,744
(1,196)
1,548
(4,235)
(2,687)
1
(257)
1,675
207
1,882
(791)
1,091
(4,172)
(3,081)
5
(250)
(2,943)
(3,326)
663
(2,280)
608
(2,718)
Notes
5, 6
7(i)
7(ii)
11
12
(0.96p)
(1.23p)
The accompanying notes 1 to 26 are an integral part of the financial statements
20 Proteome Sciences plc
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CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 31 December 2016
Year ended
Year ended
31 December 31 December
2015
£’000
2016
£’000
Loss for the year
Other comprehensive income for the year
Exchange differences on translation of foreign operations
(2,280)
(2,718)
84
18
Loss and total comprehensive income for the year
(2,196)
(2,700)
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CONSOLIDATED BALANCE SHEET
as at 31 December 2016
Non-current assets
Goodwill
Property, plant and equipment
Equipment on loan
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Borrowings
Net current liabilities
Non-current liabilities
Hire purchase payables
Provisions
Total liabilities
Net liabilities
Equity
Share capital
Share premium account
Share-based payment reserve
Other reserve
Translation reserve
Retained loss
Total equity (deficit)
Notes
13
14
14
16
17(a)
17(b)
18(a)
18(b)
18(a)
19
20
22
2016
£’000
4,218
592
–
4,810
600
1,406
2,884
4,890
9,700
(662)
(8,700)
(9,362)
(4,472)
(166)
(361)
(527)
(9,889)
(189)
2,943
51,451
3,436
10,755
(104)
(68,670)
(189)
2015
£’000
4,218
857
237
5,312
291
1,318
1,808
3,417
8,729
(779)
(8,443)
(9,222)
(5,805)
(386)
(276)
(662)
(9,884)
(1,155)
2,280
48,986
3,402
10,755
(188)
(66,390)
(1,155)
The financial statements of Proteome Sciences plc, registered number 02879724, were approved by the
board of directors and authorised for issue on 27 March 2017. They were signed on its behalf by:
J.R.M. Haigh
G. Ellis
27 March 2017
Director
Director
The accompanying notes 1 to 26 are an integral part of the financial statements.
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COMPANY BALANCE SHEET
as at 31 December 2016
Non-current assets
Investment in subsidiaries
Current assets
Cash and cash equivalents
Total assets
Current liabilities
Payables from other group entity
Borrowings
Non-current liabilities
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium account
Merger reserve
Share-based payment reserve
Retained loss
Total equity
Notes
15
17(b)
18(b)
19
20
2016
£’000
2015
£’000
10,033
10,033
28,404
28,404
2,152
2,152
12,185
(306)
(1,461)
(1,767)
(5)
(1,772)
10,413
2,943
51,451
–
3,436
(47,417)
10,413
1,064
1,064
29,468
(264)
(1,418)
(1,682)
(15)
(1,697)
27,771
2,280
48,986
1,082
3,402
(27,979)
27,771
The company generated a loss for the year ended 31 December 2016 of £20.52m (2015: £20.724m).
The financial statements of Proteome Sciences plc, registered number 02879724, were approved by
the board of directors and authorised for issue on 27 March 2017. They were signed on its behalf by:
J.R.M. Haigh
G. Ellis
27 March 2017
Director
Director
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CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the year ended 31 December 2016
Share
Share
based
Share
capital
£’000
premium payment Translation
reserve
reserve
account
£’000
£’000
£’000
Other
reserve
£’000
Retained
loss
£’000
Total
equity/
(deficit)
£’000
At 1 January 2015
Loss for the year
Exchange differences
on translation of
foreign operations
Loss and total
comprehensive income
for the year
Issue of share capital
Share issue expenses
Credit to equity for
share-based payment
At 31 December 2015
2,141
–
46,737
–
3,367
–
(206)
–
10,755
–
(63,672)
(2,718)
(878)
(2,718)
–
–
–
139
–
–
2,258
(9)
–
–
–
–
18
18
–
–
–
–
–
–
–
18
(2,718)
–
–
(2,700)
2,397
(9)
–
2,280
–
48,986
35
3,402
–
(188)
–
10,755
–
(66,390)
35
(1,155)
At 1 January 2016
2,280
48,986
3,402
(188)
10,755
(66,390)
(1,155)
Loss for the year
Exchange differences
on translation of
foreign operations
Loss and total
comprehensive
income for the year
Issue of share capital
Share issue expenses
Credit to equity for
share-based payment
At 31 December 2016
–
–
–
–
663
–
2,650
(185)
–
–
–
–
–
84
84
–
–
–
–
–
–
–
(2,280)
(2,280)
–
84
(2,280)
–
–
(2,196)
3,313
(185)
–
2,943
–
51,451
34
3,436
–
(104)
–
10,755
–
(68,670)
34
(189)
The accompanying notes 1 to 26 are an integral part of the financial statements.
24 Proteome Sciences plc
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COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Company
Share
capital
£’000
Share
premium
account
£’000
Share
based
Merger
reserve
£’000
payment Retained
earnings
reserve
£’000
£’000
Total
equity
£’000
At 1 January 2015
2,141
46,737
1,082
3,367
(7,255)
46,072
Loss and total comprehensive
income for the year
Credit to equity for
share-based payment
Issue of share capital
Share issue expenses
At 31 December 2015
–
–
139
–
–
–
2,258
(9)
–
–
–
–
–
(20,724)
(20,724)
35
–
–
–
–
–
35
2,397
(9)
2,280
48,986
1,082
3,402
(27,979)
27,771
At 1 January 2016
2,280
48,986
1,082
3,402
(27,979)
27,771
Loss and total comprehensive
income for the year
Credit to equity for
share-based payment
Transfer during year
Issue of share capital
Share issue expenses
At 31 December 2016
–
–
–
663
–
–
–
–
2,650
(185)
2,943
51,451
–
–
(1,082)
–
–
–
–
(20,520)
(20,520)
34
–
–
–
–
1,082
–
–
34
–
3,313
(185)
3,436
(47,417)
10,413
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CONSOLIDATED AND COMPANY
CASH FLOW STATEMENTS
for the year ended 31 December 2016
Group Company
2016
£’000
2016
£’000
Group Company
2015
£’000
2015
£’000
Note
Loss before tax
(2,943)
(20,520)
(3,326)
(20,724)
Adjustments for:
Net finance costs
Depreciation of property, plant and equipment
Impairment of investments in subsidiaries
Share-based payment expense
Operating cash flows before movements
in working capital
(Increase)/decrease in inventories
(Increase) in receivables
(Decrease)/increase in payables
Increase/(decrease) in provisions
Cash used in operations
Tax refunded
Net cash outflow from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Loans advanced to subsidiary undertakings
Interest received
Net cash outflow from investing activities
Financing activities
Proceeds on issue of shares
Share issue costs
Repayment of HP creditors
Net cash inflow from financing activities
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
257
553
–
34
44
–
20,340
–
245
395
–
35
41
–
20,600
–
(2,099)
(309)
(183)
(144)
85
(2,650)
656
(1,994)
(136)
–
–
–
(11)
(147)
–
(147)
(2,651)
54
(233)
258
(349)
(2,921)
563
(2,358)
(83)
–
–
–
(11)
(94)
–
(94)
(33)
–
1
(32)
–
(1,894)
1
(1,893)
(52)
–
5
(47)
–
(2,742)
–
(2,742)
3,313
(185)
(220)
2,908
882
1,808
194
3,313
(185)
–
3,128
1,088
1,064
–
2,388
–
(55)
2,333
(72)
1,869
11
2,388
–
–
2,388
(448)
1,512
–
Cash and cash equivalents at end of year
17b
2,884
2,152
1,808
1,064
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
1 GENERAL INFORMATION
Proteome Sciences plc is a company incorporated in the United Kingdom. These financial statements
are the consolidated financial statements of Proteome Sciences plc and its subsidiaries (“the Group”)
and the company financial statements for Proteome Sciences plc (“the Company”). The financial
statements are presented in pounds sterling because that is the currency of the primary economic
environment in which the Group operates.
2 ADOPTION OF NEW AND REVISED STANDARDS
New standards and amendments to existing standards that have been published and are mandatory
for the first time for the financial year beginning 1 January 2016 have been adopted but had no
significant impact on the Group and Company. New standards, amendments to standards and
interpretations which have been issued but are not yet effective (and in some cases had not been
adopted by the EU) for the financial year beginning 1 January 2016 have not been early adopted in
preparing these financial statements. The implications of these new accounting standards on the
Group and Company has not yet been fully evaluated. The main accounting standards which may
be relevant to the Group are set out below:
IFRS 9 “Financial Instruments”– (effective for 2019 financial report)
IFRS 9 is applicable retrospectively and includes revised requirements for the classification and
measurement of financial instruments, as well as recognition and de-recognition requirements for
financial instruments. Key changes to accounting requirements under IFRS 9 which may be relevant
to Proteome Sciences Plc include the requirement to apply a new impairment model based on
expected loss in recognising impairment of financial assets including current receivables and loans
to related parties. This may result in the recognition of additional impairment losses against the
carrying values of these financial assets, at a point in time which is earlier than under the current
accounting policies.
IFRS 15 “Revenue from Contracts with Customers”– (effective for 2018 financial report)
IFRS 15 was issued in May 2014 and establishes a five step model to account for revenue arising
from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the
consideration to which an entity expects to be entitled in exchange for transferring goods or services
to a customer.
In applying IFRS 15, the company’s initial views on the key changes to accounting requirements
under IFRS 15 which may be relevant to Proteome Sciences Plc include:
(a) Sale of goods
Contracts with customers in which sale of TMT goods are the only performance obligation are not
expected to result in changes for the Group. The Group expects the revenue recognition to occur at
a point in time when control of the asset is transferred to the customer, generally on delivery of the
goods.
(b) Biomarker services
Contracts with customers in which biomarker services are provided over a period of time may result
in revenue being recognised later than the current treatment under the current accounting policy.
Revenue recognition could change to a point in time at which the customer has received final
deliverables rather than over time.
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
2 ADOPTION OF NEW AND REVISED STANDARDS continued
IFRS 16 “Leases” – (effective for 2019 financial report)
IFRS 16 will require the Group to recognise the lease on its UK and Frankfurt (Germany) premises as
both an asset and a rental commitment in its consolidated statement of financial position, but is not
expected to have material effect on the Group’s results.
The implications of these accounting standards on Proteome Sciences are expected to be evaluated
in more detail during the financial year 2017.
3 SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
Basis of preparation – going concern
These financial statements have been prepared on the going concern basis. The directors have
reviewed the Company’s and the Group’s going concern position taking account of its equity raise
in October 2016, its current business activities, budgeted performance and the factors likely to affect
its future development, set out in the Annual report, and include the Group’s objectives, policies and
processes for managing its working capital, its financial risk management objectives and its exposure
to credit and liquidity risks.
As at 31 December 2016, the Group had cash resources of £2.9 m (2015: £1.8m), realised a loss for
the year of £2.2m (2015: a loss of £2.7m, a reduction of 18%), had net cash outflows from operating
activities of £1.99m (2015: net cash outflow of £2.4m) and had net current liabilities of £4.5m (2015:
£5.8m).
The financial statements have been prepared on a going concern basis, which remains reliant on the
group achieving an adequate level of sales in order to maintain sufficient working capital to support
its activities. The directors have prepared cash-flow forecasts covering a period of at least 12 months
from the date of approval of the financial statements, which foresee that the Group will be able to
operate within its existing facilities, however the timeline required to close sales contracts and the
order value of individual sales continues to vary considerably, which constrain the ability to accurately
predict revenue performance. Furthermore, the Group’s products are still in the research and
development phase and as such the directors consider that costs could exceed income in the short
term.
The Group is also dependent on the unsecured loan facility provided by the Chairman of the Group,
which under the terms of the facility, is repayable on demand. Further details of this facility are set
out in note 18(b). The directors have received confirmation from the Chairman that he has no intention
of seeking its repayment, with the facility continuing to be made available to the Group, on the existing
terms, for at least 12 months from the date of approval of these financial statements.
Overall, the directors are of the view that the Group has adequate financing to be able to meet its
financial obligations for a period of at least 12 months from the date of approval of the annual report
and financial statements.
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
3 SIGNIFICANT ACCOUNTING POLICIES continued
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and
entities controlled by the Company (its subsidiaries) made up to 31 December each year. The
company controls an investee if, and only if the company has the following:
(cid:129)
(cid:129)
(cid:129)
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee);
Exposure of rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated
income statement from the effective date of acquisition or up to the effective date of disposal, as
appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the
accounting policies used into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Goodwill
Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any
accumulated impairment.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating
units expected to benefit from the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or more frequently when there is an
indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less
than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the
basis of the carrying amount of each asset in the unit. Any impairment is recognised immediately in
the income statement and is not subsequently reversed.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
Group and can be reliably measured. Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods and services provided in the
normal course of business, net of discounts, VAT and other sales-related taxes.
Sales and services
Sales of goods including TMT kits are recognised when goods are delivered and title has passed to
the customer. Licence income is recognised when the benefit has been transferred to the licensee
and the group has satisfied performance requirements under the terms of the relevant agreement.
Grants services revenues and biomarker services revenues are recognised based on an estimate of
percentage completion of contracts completed by the reporting date relative to total contract values
for individual projects. The estimate is derived by the application of judgement and tracked progress
of work performed on each project at the reporting date relative to the total value of each project.
Grants released to the income statement are recognised within revenue, taking account of each
grant’s specific performance terms and conditions.
Proteome Sciences plc
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
3 SIGNIFICANT ACCOUNTING POLICIES continued
Leasing
Rentals payable under operating leases are charged to income on a straight-line basis over the term
of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease
are also spread on a straight-line basis over the same term.
Foreign Currencies
The individual financial statements of each Group company are prepared in the currency of the
primary economic environment in which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial position of each Group company are
expressed in pounds sterling which is the functional currency of the Company and the presentation
currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other
than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange
prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities
that are denominated in foreign currencies are retranslated at the rates prevailing on the balance
sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency
are not retranslated.
Exchange differences arising on the settlement of monetary items, are included in profit or loss for
the period except for differences arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in equity. For such non-monetary items, any exchange
component of that gain or loss is also recognised directly in equity.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the
Group’s foreign operations are translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange rates for the period, unless
exchange rates fluctuate significantly during that period, in which case the exchange rates at the
date of transactions are used. Exchange differences arising, if any, are classified as equity and
transferred to the Group’s translation reserve. Such translation differences are recognised as income
or as expenses in the period in which the operation is disposed of.
Borrowing costs
All borrowing costs are recognised in profit or loss in the period in which they are incurred.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall
due. Payments made to state-managed retirement benefit schemes are dealt with as payments to
defined contribution schemes where the Group’s obligations under the schemes are equivalent to
those arising in a defined contribution retirement benefit scheme.
As a result of the acquisition of Proteome Sciences R&D Verwaltungs GmbH and Proteome Sciences
R&D GmbH & Co KG during financial year 2002, the Group makes contributions in Germany to a
funded defined contribution plan and to a funded defined benefit plan. These plans are operated in
their entirety by the Pensionskasse der Mitarbeiter der Hoechst-Gruppe VVaG (Hoeschst Group), an
independent German mutual insurance company which is required to comply with German insurance
company regulations.
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
3 SIGNIFICANT ACCOUNTING POLICIES continued
The schemes’ assets are held in multi-employer funds, and the other employers who contribute to
the schemes are not members of the Group. The Group has not been able to identify its share of the
underlying assets and liabilities of the defined benefit scheme and accordingly it has also been
accounted for as a defined contribution scheme. The Group’s contributions to the schemes are
included within the amount charged to the income statement in respect of pension contributions.
Funding contributions paid by the Group are based on annual contributions determined by Hoechst
Group, the administrator for the pension plans. The Group does not have any information about any
deficit or surplus in the defined benefit plan that may affect the amount of future contributions,
including the basis used to determine that deficit or surplus and the implications, if any for the entity.
The Group also has a direct pension obligation (defined benefit obligation) for its German subsidiary
for which it provides in full at the balance sheet date. This scheme has no separable assets. The
company uses the projected unit credit method to determine the present value of its unfunded defined
benefit obligation.
Taxation
Any tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported
in the income statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The
Group’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
The Group is entitled to make claims for UK tax credit income on qualifying R&D expenditure each
year under the Corporation and Taxes Act 2009. As an SME qualifying entity, tax credits are claimed
at the rate of 230% of the tax effect of tax losses generated from qualifying R&D expenditure. Tax
credits income is recognised on an accruals basis through profit or loss within taxation
benefit/expense when there is reasonable assurance that the tax credits will be received from the
UK Tax Authorities. A corresponding R&D Tax credits receivable is recognised in Receivables until
such time as the receivable is settled in cash.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used
in the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such assets and liabilities are not recognised
if the temporary difference arises from the initial recognition of goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities in a transaction that affects neither
the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in
subsidiaries and associates, and interests in joint ventures, except where the Group is able to control
the reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
3 SIGNIFICANT ACCOUNTING POLICIES continued
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability
is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except
when it relates to items charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any recognised
impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful
lives, using the straight-line method, on the following bases:
Laboratory equipment, fixtures and fittings
20%
Equipment on loan
In December 2013 the Company was provided with mass spectrometry equipment for a period of at
least three years, pursuant to a licence and research collaboration agreement made with Thermo
Fisher Scientific during 2013. The directors considered the requirements of IFRS in determining how
this equipment should be recognised in the financial statements. The directors took into account the
fact that the machine has been provided to the Group with no restrictions on its use, and the fact that
the three year period of the loan is considered to represent substantially the entire useful economic
life of the asset. The directors concluded that the economic risks and rewards of ownership of the
equipment were therefore, transferred to the Group, and recognised the equipment within Property,
Plant and Equipment. The value at which the directors recognised the asset is considered to be
represented by the fair value of the MS3 licence transferred at the commencement of the agreement
less the cash consideration received. The equipment is being depreciated over the three year period
of the loan agreement.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference
between the sales proceeds and the carrying amount of the asset and is recognised in income.
Internally-generated intangible assets – research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Development expenditure, where it meets certain criteria (given below), is capitalised and amortised
on a straight-line basis over its useful life. Asset lives are subject to regular review and an impairment
exercise carried out at least once a year. Where no internally-generated intangible asset can be
recognised, development expenditure is written-off in the period in which it is incurred.
An asset is recognised only if all of the following conditions are met:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
the product is technically feasible and marketable;
the company has adequate resources to complete the development of the product;
it is probable that the asset created will generate future economic benefits; and
the development cost of the asset can be measured reliably.
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
3 SIGNIFICANT ACCOUNTING POLICIES continued
The directors do not consider that any Research and Development intangible assets have been
created in 2016 or the prior year on the basis that it is uncertain whether the intangible assets will
generate future revenue cash flows.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the asset does not generate cash flows
that are independent from other assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is
tested for impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable
amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised as an expense through profit and loss.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials
and, where applicable, direct labour costs and those overheads that have been incurred in bringing
the inventories to their present location and condition. Cost is calculated using the weighted average
method. Net realisable value represents the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling and distribution.
Trade receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at
amortised cost using the effective rate method. Appropriate allowances for estimated irrecoverable
amounts are recognised in the income statement when there is objective evidence that the asset is
impaired. The allowance recognised is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows discounted at the effective rate
computed at initial recognition.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term
highly liquid investments with an original maturity date of fewer than three months that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in
the assets of the Group after deducting all of its liabilities.
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
3 SIGNIFICANT ACCOUNTING POLICIES continued
Borrowings
Interest-bearing loans are recorded initially at fair value, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and direct issue costs, are accounted for
on an accruals basis in profit or loss using the effective interest rate method and are added to the
carrying amount of the instrument to the extent that they are not settled in the period in which they
arise.
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost,
using the effective interest rate method.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and
it is probable that the Group will be required to settle that obligation. Provisions are measured at the
directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date
and are discounted to present value where the effect is material. Further details of the pension
provision policy are set out in the paragraph above headed Retirement benefit costs.
Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled
share-based payments are measured at fair value (excluding the effect of non-market vesting
conditions) 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 based on the effect of non-market vesting
conditions. Share based payments are recognised as an additional cost of investment in subsidiary
undertakings in the company where the company issues share options to executives employed by
its subsidiaries.
Fair value is measured by use of the Black Scholes model and for the LTIP awards the Monte Carlo
model has been used. 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.
4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year, are discussed below.
Internally-generated intangible assets – research and development expenditure
The directors do not consider that any Research and Development intangible assets have been
created in 2016 or the prior year on the basis that it is uncertain whether the intangible assets will
generate future revenue cash flows.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the fair value less costs to sell of
the cash-generating units to which goodwill has been allocated. The fair value less costs to sell
calculation requires the entity to estimate the future cash flows expected to arise from the
34 Proteome Sciences plc
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY continued
cash-generating unit. The carrying amount of goodwill at the balance sheet date was £4.2m. Details
of the estimates used in the calculation are set out in note 13.
Investments in subsidiary companies
The carrying cost of the company’s investments in subsidiary companies is reviewed at each balance
sheet date by reference to the income that is projected to arise therefrom. From a review of these
projections the directors have made a provision against their carrying values as shown in note 15 to
the financial statements and the directors therefore believe that the investments concerned will
generate sufficient economic benefits to justify their revised carrying values, despite the inevitable
uncertainties over timing of the receipt of income and the size of the markets from which income is
anticipated.
5 REVENUE
An analysis of the Group’s revenue is as follows:
Sales of goods and biomarker services
Grant services income
6 SEGMENT INFORMATION
2016
£’000
2,636
108
2,744
2015
£’000
1,675
207
1,882
The Group’s operations are organised into two geographic segments, being the EU (United Kingdom
and Germany) and US. Internal reporting on costs and performance is segregated into these
segments. The results, assets and liabilities for the US segment for 2016 and 2015 were nominal
amounts. The US segment had no revenues in either year and incurred a loss of £1,000 for 2016
(2015: £5,000). All revenues and other results per the Consolidated Income Statement relates to the
EU segment.
In identifying the operating segments, management has considered internal reports about
components of the Group that are used by the Chief Executive, who is the Chief Operating Decision
Maker, to determine allocation of resources and to assess their performance.
Revenues from major products and services
The Group’s revenues from its major products and services were as follows:
TMT® revenues
Biomarker services
Revenues from sales and services
2016
£’000
1,387
1,249
2,636
2015
£’000
882
793
1,675
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
6 SEGMENT INFORMATION continued
Geographical Information
The Group’s revenue from external customers by their geographical location is derived as follows:
US
EU
Other
Total
Grant services income
EU
Revenues and other income from major products and services
2016
£’000
2,123
257
256
2,636
108
2,744
2015
£’000
1,320
196
159
1,675
207
1,882
Included in revenues arising from sales into the US market are revenues of approximately £1.387m
(2015: £0.982m) which arose from sales to the Group’s largest customer: Thermo Fisher Scientific Inc.
7 (i) FINANCE INCOME
Income arising from bank deposits
(ii) FINANCE COSTS
Interest on loans (note 18)
8 OPERATING LOSS
Operating loss is stated after charging/(crediting):
Depreciation charge
– owned
– on loan
Research and development costs
Operating lease rentals
– other
Auditor’s remuneration (see below)
Foreign exchange losses/(gains)
(Increase)/decrease in cost of inventories
(credited)/charged as an expense
36 Proteome Sciences plc
2016
£’000
1
2016
£’000
257
2016
£’000
316
237
1,075
319
80
12
(309)
2015
£’000
5
2015
£’000
250
2015
£’000
158
237
1,248
290
86
(15)
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
8 OPERATING LOSS continued
The analysis of auditor’s remuneration is as follows:
Fees payable to the Company’s auditor for the
audit of the Company’s annual accounts
Fees payable to the Company’s auditor
for other services to the Group
– The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Tax compliance services
Other tax compliance services – VAT, grants,
share schemes, income tax advice
Total non-audit fees
Total fees
9 STAFF COSTS
2016
£’000
2015
£’000
44
11
55
26
(1)
25
80
42
13
55
18
13
31
86
The average monthly number of employees (including executive directors) was:
2016
Number
2015
Number
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Research and development
Administration
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8
36
Their aggregate remuneration (including that of executive directors) comprised:
Wages and salaries
Social security costs
Other pension costs
2016
£’000
2,188
320
211
2,719
28
7
35
2015
£’000
2,005
316
130
2,451
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Social security costs shown above include a credit of £10,000 (2015: £11,000) from the provision for
notional National Insurance contributions payable upon the exercise of vested LTIP options.
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
10 DIRECTORS’ REMUNERATION AND TRANSACTIONS
The directors’ emoluments in the year ended 31 December 2016, were:
Executive Directors
Dr. J.R.M. Haigh (appointed 1 June 2016)
G. Ellis
Dr. I. Pike
Non-Executive Directors
C.D.J. Pearce
Prof. W. Dawson
R. McDowell
M. Diggle
Basic Benefits
in kind
salary
2016
2016
£’000
£’000
Pension
Costs
2016
£’000
Total
2016
£’000
Total
2015
£’000
144
161
150
144
28
25
–
652
2
3
3
5
–
–
–
–
4
15
–
–
–
–
13
19
146
168
168
149
28
25
–
674
–
169
168
287
28
25
–
–
677
(i) The remuneration of the executive directors is decided by the Remuneration Committee.
(ii) Aggregate emoluments disclosed above do not include any amounts for the value of options to
subscribe for Ordinary Shares in the Company granted to or held by the directors.
(iii) No options were exercised by directors during the year (2015: none).
(iv) Details of the options in place and of awards under the Company’s Long-Term Incentive Plan
are given in note 20.
(v) The number of directors in pension schemes is as follows:
Defined contribution pension schemes
Pension costs in the year ended 31 December 2016 were as follows:
C.D.J. Pearce
G. Ellis
Dr. I. Pike
Dr. J.R.M. Haigh
2016
2015
2
3
2016
£’000
2015
£’000
–
4
15
–
19
–
15
15
–
30
(a) Professor W. Dawson is a shareholder in Bionet Ltd. which provided consultancy services to the
company in 2015 at a cost of £2,000. No services were provided in 2016.
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
10 DIRECTORS’ REMUNERATION AND TRANSACTIONS continued
Directors’ transactions
(b) Other than as disclosed in (a) above and in note 18(b), no director had a material interest in any
contract of significance with the Company in either year.
(c) C.D.J. Pearce has a consultancy agreement with the company at a rate of £70,000 per annum.
The agreement started on the 1 June 2016 and fees of £40,833 were paid for the seven months
to the 31 December 2016.
11 TAX CREDIT ON LOSS BEFORE TAXATION ON ORDINARY ACTIVITIES
UK Corporation tax – R&D tax credit
Overseas tax charge
Group tax credit for the year
Adjustments re previous years
2016
£’000
2015
£’000
745
(62)
683
(20)
663
625
(17)
608
–
608
The UK Corporation tax credit relates to research and development tax credits claimed under the
Corporation Taxes Act 2009.
At 31 December 2016 there were tax losses available for carry forward of approximately £42.0m
(2015: £42.6m).
The tax credit and trading losses to be carried forward for the year are subject to the agreement of
HM Revenue & Customs.
Factors affecting the tax credit/ (charge) for the year
The tax credit for the year is lower (2015: lower) than the standard rate of corporation tax in the UK.
The differences are explained below:
Loss before tax
Income tax credit calculated at 20% (2015: 20.25%)
Effects of:
Expenses that are not deductible in determining taxable profit
Fixed asset timing differences
Effect of concessions (Research and Development)
Losses surrendered for R&D tax credit
Unrecognised tax losses carried forward
Effect of overseas tax
R&D tax credit claimed
Other taxable income
Group tax credit for the year
Adjustment re prior year
2016
£’000
(2,943)
589
(27)
(111)
782
(1,157)
(27)
(62)
746
(50)
683
(20)
663
2015
£’000
(3,326)
674
(14)
(78)
533
(871)
(184)
(17)
625
(60)
608
–
608
Proteome Sciences plc
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
11 TAX CREDIT ON LOSS BEFORE TAXATION ON ORDINARY ACTIVITIES continued
Unrecognised deferred tax
The following deferred tax assets and liability have not
been recognised at the balance sheet date:
Tax losses – revenue
Depreciation in excess of capital allowances
Provisions
Total
2016
£’000
7,141
(85)
6
7,062
2015
£’000
7,348
(78)
3
7,273
The deferred tax assets have not been recognised as the directors are uncertain of their recovery.
The assets will be recovered if the Group makes sufficient taxable profits in the future against which
losses can be utilised.
Changes to tax legislation
The main rate of UK corporation tax reduced from 21% to 20% from 1 April 2015. This rate will also
be effective for the tax year 2016/17. This rate will fall to 19% for the year beginning 1 April 2017, and
to 17% for the year beginning 1 April 2020.
12 LOSS PER ORDINARY SHARE
The calculations of basic and diluted loss per ordinary share are based on the following losses and
numbers of shares.
Loss for the financial year
Basic and Diluted
2015
2016
£’000
£’000
(2,280)
(2,718)
2016
Number of
shares
2015
Number of
shares
Weighted average number of ordinary shares for
the purposes of calculating basic earnings per share:
236,451,654 221,036,176
In 2016 and 2015 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 ordinary share. This is because the exercise of share options
that are out of the money would have the effect of reducing the loss per ordinary share and is
therefore not dilutive.
13 GOODWILL
Cost and carrying amount
1 January 2016 and 31 December 2016
Goodwill
£’000
4,218
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
13 GOODWILL continued
The goodwill has been allocated to the EU CGU, which comprises the UK and German businesses
in the group. For the purpose of testing goodwill, the recoverable value of the CGU is determined
from fair value less estimated costs of disposal. In assessing the fair value of the CGU, management
and the directors have considered and assessed the following evidence:
(a) As at 31 December 2016, the market capitalisation for the group was £16.5m based on the quoted
share price of the company of 5.6p per ordinary share; and
(b) During the year raised new equity finance of £3.313m at 5p per ordinary share;
The directors have concluded that based on the above, recoverable value exceeds the carrying value
of the goodwill at 31 December 2016.
14 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise laboratory equipment, fixtures and fittings and motor vehicles
held by and equipment on loan to the Group. The movement in the year was as follows:
1 January 2015
Exchange adjustments
Additions during the year
31 December 2015
Exchange adjustments
Additions during the year
31 December 2016
Depreciation
1 January 2015
Exchange adjustments
Charge for the year
At 31 December 2015
Exchange adjustments
Charge for the year
At 31 December 2016
Carrying amount
31 December 2015
31 December 2016
Laboratory
equipment,
fixtures and
fittings
£’000
Equipment
on loan
£’000
710
–
–
710
–
–
710
236
–
237
473
–
237
710
237
–
3,692
(127)
713
4,278
374
33
4,685
3,378
(115)
158
3,421
356
316
4,093
857
592
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Included within Property, Plant and Equipment is mass spectrometry equipment with a net book value
of £Nil (2015: £0.237m) which was provided to the Group for a period of at least three years, pursuant
to the licence and research collaboration agreement made with Thermo Fisher Scientific in 2013. The
equipment is being depreciated over the three year period of the loan agreement.
The Company owned no fixed assets during either the current or preceding financial year.
Proteome Sciences plc
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
15 INVESTMENT IN SUBSIDIARIES
Company
At 1 January 2015
Additional investment in the year
Provisions for impairment during the year
At 31 December 2015
At 1 January 2016
Additional investment in the year
Provisions for impairment during the year
At 31 December 2016
Cost of shares
in subsidiary
undertakings
£’000
Loans to
subsidiary
undertakings
£’000
4,376
35
–
4,411
4,411
34
(1,961)
2,484
41,865
2,728
(20,600)
23,993
23,993
1,935
(18,379)
7,549
Total
£’000
46,241
2,763
(20,600)
28,404
28,404
1,969
(20,340)
10,033
(i) The increase in the cost of shares in subsidiary undertakings of £34,000 (2015: £35,000
represents a capital contribution between the Company and certain of its subsidiaries, reflecting
the provision of equity instruments in the Company to subsidiary company employees.
(ii) The increase in loans to subsidiary companies in 2016 arose from the provision of further funds
to the company’s trading subsidiary and German subsidiary company.
(iii) A provision for impairment of £20.34m (2015: £20.6 m) has been recognised during 2016 against
the carrying value of loans advanced to the UK subsidiary Electrophoretics Limited and the cost
of investment in shares for Electrophoretics. The recoverable value of the asset at 31 December
2016, which is based on fair value less costs to sell, has fallen since the prior year consistent
with the decrease in the Company’s share price during the year.
42 Proteome Sciences plc
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
15 INVESTMENT IN SUBSIDIARIES continued
Principal Group investments
The Company has investments in the following subsidiary undertakings, which contribute to the net
assets of the Group:
Principal subsidiary
undertakings
Country of
incorporation
and operation
Proteome Sciences R&D
Verwaltungs GmbH
Proteome Sciences R&D
GmbH & Co. KG
Germany
Germany
Principal activity
Administrative
Company
Research
Company
Description and proportion
of shares held by the
Company Group
100% Share 100% Share
Capital
Capital
100%
100%
Partnership Partnership
Interest
Interest
Xzillion GmbH & Co. KG
Germany
Administrative
Company
100%
Partnership Partnership
100%
Proteome Sciences, Inc.
U.S.A.
Research Company
100%
Common
Stock
Electrophoretics Limited
United
Kingdom
Administrative and
Research Company Ordinary
100%
Veri-Q Inc.
U.S.A.
Research Company
Phenomics Limited
United
Kingdom
Dormant
Shares
76.9%
Common
Stock
100%
Ordinary
Shares
100%
Common
Stock
100%
Ordinary
Shares
76.9%
Common
Stock
100%
Ordinary
Shares
(i) The investments in Proteome Sciences, Inc., Electrophoretics Limited and Phenomics Limited
comprise the entire issued share capital of each subsidiary undertaking and carry 100% of the
voting rights.
The registered offices of the companies above are;
Proteome Sciences R&D Verwaltungs GmbH, Proteome Sciences R&D GmbH & Co. KG, Xzillion
GmbH & Co. KG – Althenhöferallee 3, 60438 Frankfurt am Main, Germany
Electrophoretics Limited and Proteome Sciences plc and Phenomics Limited – Coveham House,
Downside Bridge Road, Cobham, Surrey KT11 3EP, UK
Proteome Sciences Inc PO Box 2767 Humble, Texas, 77347. USA Veri-Q Inc 2711 Centerville Road,
Suite 400, Wilmington, Delaware 19808-1645, USA.
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16 INVENTORIES
Work-in-progress
Finished goods
2016
£’000
140
460
600
2015
£’000
129
162
291
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
17 OTHER CURRENT ASSETS
a) Trade and other receivables
Trade debtors
R&D tax credit recoverable
Other debtors
Prepayments
Group
2016
£’000
399
745
192
70
1,406
Company
2016
£’000
–
–
–
–
–
Group
2015
£’000
364
659
243
52
1,318
Company
2015
£’000
–
–
–
–
–
No allowance for doubtful debts was recognised in 2016 or 2015.
b) Cash and cash equivalents
Group
2016
£’000
Company
2016
£’000
Group
2015
£’000
Company
2015
£’000
Cash and cash equivalents
2,884
2,152
1,808
1,064
The directors consider that the carrying amount of trade receivables and cash and cash equivalents
approximates to their fair value.
18 FINANCIAL LIABILITIES
(a) Trade and other payables
Due within one year
Trade creditors
Other payables and accruals
Hire purchase payables
Due after one year
Hire purchase payables
Group
2016
£’000
Company
2016
£’000
Group
2015
£’000
Company
2015
£’000
28
414
220
662
166
–
–
–
-
–
18
541
220
779
386
Hire purchase payables have the following maturity profile at 31 December 2016
Due within one year
Due in more than one year but not more than 2 years
Due in more than two years but not more than 3 years
2016
£’000
220
166
–
386
44 Proteome Sciences plc
–
–
–
–
–
2015
£’000
220
220
166
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
18 FINANCIAL LIABILITIES continued
Trade creditors and other payables principally comprise amounts outstanding for trade purchases
and continuing costs. The average credit period taken for trade purchases is between 30 and 45 days.
For most suppliers no interest is charged on the trade payables for the first 30 days from the date of
the invoice. The Group has financial risk management policies in place to ensure that all payables
are paid within the credit time frame.
The directors consider that the carrying amount of trade payables approximates to their fair value.
(b) Short term borrowings
Group
2016
£’000
Company
2016
£’000
Group
2015
£’000
Company
2015
£’000
Loan from related party (Director)
8,700
1,461
8,443
1,418
The directors consider that the carrying amount of borrowings approximates to their fair value.
Note:
(i) The loan from related party represents a loan from Mr C D J Pearce, Non-Executive Director and
the former the Chief Executive of the Company. The loan is secured by a fixed charge over the
Company’s patent portfolio and a floating charge over the Company’s stock in trade. The loan
bears interest at 2.5% above the base rate of Barclays Bank plc. Loan amounts representing
£5m may be converted into ordinary share capital at the option of Mr Pearce at the lower of
market price on the date of conversion or the average price over the lowest consecutive ten day
trading period since 29th June 2006. Electrophoretics Ltd, the company’s subsidiary has
assumed all obligations for the loan. The Company has also guaranteed the subsidiary’s payment
obligations.
(ii) The loan is repayable on seven days notice, or immediately in the event of:
(a)
(b)
C.D.J. Pearce ceasing to be an Executive Director of the company.
A general offer to the shareholders of the Company being announced to acquire its
issued share capital.
(c)
The occurrence of any of the usual events of default attaching to this sort of agreement.
(iii) The amounts shown above as outstanding under short term borrowings include accrued interest.
19 PROVISIONS
Group
At 1 January
Additional provision in the year
Reduction of provision
At 31 December
Pensions
provisions
£’000
Other
provisions
£’000
261
95
–
356
15
–
(10)
5
2016
Total
£’000
276
95
(10)
361
2015
Total
£’000
652
–
(376)
276
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
19 PROVISIONS continued
Company – long term provision
At 1 January
Reduction in provision in the year
At 31 December
2016
£’000
15
(10)
5
2015
£’000
26
(11)
15
(i) The pension provision relates to pension costs which may become payable in connection with
the group’s Frankfurt employees, under the pension scheme arrangements set out in note 19 (iii).
This provision will be utilised as members of the scheme reach retirement age and draw down
their pensions.
(ii) Long term provisions include £5,000 (2015: £15,000) for National Insurance contributions payable
upon the exercise of vested LTIP options.
(iii) Pension arrangements
As a result of the acquisition of Proteome Sciences R&D Verwaltungs GmbH and Proteome Sciences
R&D GmbH & Co KG from Aventis Research & Technologies GmbH & Co KG, the Group makes
contributions in Germany to a funded defined contribution plan and to a funded defined benefit plan.
These plans are operated in their entirety by the Pensionskasse der Mitarbeiter der Hoechst-Gruppe
VVaG (Hoechst Group), an independent German mutual insurance company, which is required to
comply with German insurance company regulations.
The schemes assets are held in multi-employer funds, and the other employers who contribute to the
schemes are not members of the Group. The Group has not been able to identify its share of the
underlying assets and liabilities of the defined benefit scheme and accordingly it has also been
accounted for as defined contribution scheme. The Group’s contributions to the scheme are included
within the amount charged to the income statement in respect of pension contributions.
Funding contributions paid by the Group are based on annual contributions determined by Hoechst
Group, the administrator for the pension plans. For the year ending 31 December 2017, funding
contributions payable by the Group are based on employee contributions at the rate of 1.5%-2.5%
(2016: 1.5%-2.5%) of wages and salaries and employer contributions at the rate of 5 times
(2016: 5 times) employee contributions.
The amount charged to the income statement in respect of the contributions to the scheme in 2016
was £115,796 (2015: £49,507).
As at 31 December 2016, an actuarial deficit did not exist for the multi-employer scheme. The Group’s
contributions to the scheme during 2016 represented 0.01% of total contributions to the scheme by
employers and employees (2015: 0.03%). Under the terms of the multi-employer plan, the group’s
obligations are limited to the original promise/commitment that it has given to its own employees. The
group does not have an exposure to liability in relation to other third party employers’ obligations. The
Group does not have any information about how the actuarial status of the plan may affect the
amounts of future contributions to the plan.
The Group also has a direct pension obligation for which it provides in full at the balance sheet date.
This scheme has no separable assets. The company uses the projected unit credit method to
determine the present value of its unfunded defined benefit obligation. Demographic assumptions
46 Proteome Sciences plc
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
19 PROVISIONS continued
are based on Prof. Klaus Heubeck’s mortality table “Richttafeln 2005 G”, the standard German
actuarial table, with full recognition for fluctuations in mortality rates on account of gender and current
age. Pensionable age has been set at 60.
The company has applied a discount rate for the year of 1.5 % (2015: 2%). The company has
assumed an income increase of 2.75 % (2015: 2.75%) and German inflation of 2% (2015: 2.25%).
Provisions for future unfunded pension liabilities at 31 December 2016 amounted to £356,575
(2015: £260,241). Amounts recognised through the consolidated income statement for the year to
31 December 2016 included service costs of £94,947 (2015: £11,800), interest costs of £6,506
(2015: £5,644) and an actuarial loss of £33,400 (2015: actuarial gain of £27,374).
(c) Other pension costs in relation to defined contribution schemes for United Kingdom employees
amounted to £95,652 (2015: £97,955)
20 SHARE CAPITAL
i) Authorised
330,000,200 (2015: 330,000,200) Ordinary Shares of 1p each
49,998 Redeemable Ordinary Shares of £1 each
1,063,822 5% (gross) Redeemable Preference
Shares of £1 each (voting)
786,178 5% (gross) Redeemable Preference
Shares of £1 each (non-voting)
2016
£’000
3,300
50
1,064
786
5,200
2015
£’000
3,300
50
1,064
786
5,200
No Redeemable Preference shares of either class had been allotted and called up at the
31 December 2016 and 2015. At the 31 December 2019 any redeemable preference shares then in
issue must be redeemed at par by that date. The redeemable preference shares have been classified
as equity as the substance and legal form of the arrangement is equity, with no debt component.
ii) Allotted and called-up
Ordinary Shares of 1p each
The increase in the number of shares in issue in 2016 arose as follows:
As at 1 January 2016
Issued on exercise of LTIP award in October 2016
Issued in share placing in November 2016
At 31 December 2016
2016
£’000
2,943
2015
£’000
2,280
2016
Number
227,966,732
100,000
66,258,100
294,324,832
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
20 SHARE CAPITAL continued
iii) Options
Options under the schemes noted below may be exercised from the date on which any shares in the
Company are first admitted to the Official List of the London Stock Exchange.
An option over 150,000 of the company’s ordinary shares which was granted under a separate option
deed in the year to the 31 December, 2010 and was fully vested by 30 September 2013, lapsed in
the year
(iv) 2004 and 2011 Long-Term Incentive Plan (“LTIP”)
At 31 December 2016, the maximum number of the Company’s Ordinary Shares of 1p each to be
potentially allocated or issued under the LTIP was as follows:
Number at
31 December
2015
700,965
300,000
Awarded
in the
year
–
–
Exercised
in the
year
(100,000)
–
Lapsed
Number at
in the 31 December
2016
600,965
300,000
year
–
–
Latest
Exercise
Date
2 July 2017
–
Vesting
Date
–
2 October
2017
1,000,965
–
(100,000)
–
900.965
At 31 December 2015, the maximum number of the Company’s Ordinary Shares of 1p each to be
potentially allocated or issued under the LTIP was as follows:
Latest
Exercise
Date
2 July 2017
–
–
Vesting
Date
–
24 February
2015
2 October
2017
Number at
31 December
2014
700,965
328,105
Awarded
in the
year
–
–
Exercised
in the
year
–
(328,105)
Lapsed
Number at
in the 31 December
2015
700,965
–
year
–
–
300,000
1,329,070
–
–
–
–
–
300,000
(328,105)
1,000,965
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
20 SHARE CAPITAL continued
(v) 2004 Share Option Plan
At 31 December 2016 options had been granted, had fully vested in prior reporting periods and were
still outstanding (exercisable) in respect of the Company’s Ordinary Shares of 1p each under the
Company’s 2004 Share Option Plan as follows:
Number of shares
Amount of Capital
(£)
Exercise Price
(p)
Dates
Exercisable
67,650
40,590
8,118
52,767
33,825
202,950
676.50
405.90
81.18
527.67
338.25
2,029.50
36.77
36.77
27.72
27.72
15.52
2.7.10 – 2.7.17
2.7.10 – 2.7.17
10.4.11 – 10.4.18
10.4.11 – 10.4.18
14.7.11 – 14.7.18
At 31 December 2015 options had been granted, had fully vested in prior reporting periods and were
still outstanding (exercisable) in respect of the Company’s Ordinary Shares of 1p each under the
Company’s 2004 Share Option Plan as follows:
Number of shares
Amount of Capital
(£)
Exercise Price
(p)
20,295
67,650
40,590
12,177
56,826
33,825
231,363
202.95
676.50
405.90
121.77
568.26
338.25
2,313,63
31.78
36.77
36.77
27.72
27.72
15.52
Dates
Exercisable
9.6.09 – 9.6.16
2.7.10 – 2.7.17
2.7.10 – 2.7.17
10.4.11 – 10.4.18
10.4.11 – 10.4.18
14.7.11 – 14.7.18
(vi) 2011 Share Option Plan
At 31 December 2016 options had been granted and were still outstanding in respect of the
Company’s Ordinary Shares of 1p each under the Company’s 2011 Share Option Plan as follows:
Number of Amount of Capital
shares
111,000
70,000
50,000
25,000
125,000
63,000
444,000
(£)
1,110
700
500
250
1,250
630
4,440
Exercise Price
(p)
Vesting Date
Dates
Exercisable
36.50
49.87
33.75
36.25
15.50
16.75
17.2.15
25.6.16
9.6.17
25.6.17
29.2.19
18.3.19
17.2.15 – 17.2.22
25.6.16 – 25.6.26
9.6.17 – 9.6.24
25.6.17 – 25.6.24
28.2.19 – 28.2.26
18.3.19 – 18.3.26
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
20 SHARE CAPITAL continued
At 31 December 2015 options had been granted and were still outstanding in respect of the
Company’s Ordinary Shares of 1p each under the Company’s 2011 Share Option Plan as follows:
Number of Amount of Capital
shares
144,000
85,000
50,000
25,000
304,000
(£)
1,440
850
500
250
3,040
Exercise Price
(p)
Vesting Date
Dates
Exercisable
36.50
49.87
33.75
36.25
17.2.15
25.6.16
9.6.17
25.6.17
17.2.15 – 17.2.22
25.6.16 – 25.6.26
9.6.17 – 9.6.24
25.6.17 – 25.6.24
21 SHARE BASED PAYMENTS
The Company issues equity-settled share based payments under the 2004 and 2011 Share Option
Plans. The vesting period is three years. If the options remain unexercised after a period of 10 years
from the date of grant, the options expire. Options are usually forfeited if the employee leaves the
Group before the options vest.
In addition, in 2004 the Company entered into a Long Term Incentive Plan for its directors and some
of its staff. The plan was accounted for as an equity settled scheme and had potential vesting dates
from 2 July 2010 to 31 July 2011 with any award being linked to share performance related targets.
At the 31 December 2016 awards over 600,965 shares (31 December 2015:700,965) had vested and
were capable of exercise.
The 2004 LTIP closed during 2009 and no further awards can be made under this scheme. Details
of all the remaining awards that have not yet vested are set out in note 20 (iv) above. Awards are
usually forfeited if the employee leaves the Group before the vesting date.
A new Long Term Incentive Plan was introduced in 2011 and the maximum award under this scheme
is 300,000 shares. A charge to the income statement of £34,000 (2015: £35,000) was recognised
during the year in respect of all schemes.
The release of shares in respect of the awards still outstanding to participants will depend upon the
growth of Proteome Sciences’ total shareholder return (“TSR”) over a three year performance period
relative to the AIM Healthcare Index. No shares will be released unless the Company’s TSR
performance exceeds that of the Index, in which case 30% of the award will vest. The full award will
vest only if the Company’s TSR performance exceeds that of the Index by 10%, with a pro-rata award
between 30% to 100% for each percentage point of out-performance up to 10%.
Before awards vest the Remuneration Committee will satisfy itself that the TSR performance is a
genuine reflection of the Company’s underlying performance over the three-year performance period.
50 Proteome Sciences plc
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
21 SHARE BASED PAYMENTS continued
2004 Share Option Plan
Weighted
2004 LTIP
average Maximum
exercise Number of
price (p)
Weighted
average
fair value
Shares per share (p)
Outstanding at 1 January, 2015
Exercised in the year
Forfeited in the year
Outstanding at 31 December 2015
Forfeited in 2016
Exercised in the year
Outstanding and exercisable at
31 December 2016
Exercisable at 31 December 2015
Options
244,893
–
(13,530)
231,363
(28,413)
–
202,950
231,363
Outstanding at 1 January 2015
Granted in the year
Forfeited during the year
Outstanding at 31 December 2015
Granted in the year
Forfeited during the year
Outstanding at 31 December 2016
Exercisable at 31 December 2016
Exercisable at 31 December 2015
Outstanding at 1 January 2015
Granted in the year
Lapsing in the year
Outstanding at 31 December 2015
Granted in the year
Lapsing in the year
Outstanding at 31 December 2016
Exercisable at 31 December 2016
Exercisable at 31 December 2015
32.62
–
68.37
30.52
30.62
–
30.51
30.52
700,965
–
–
700,965
31.70
–
–
31.70
(100,000)
31.70
600,965
700,965
31.70
31.70
2011 Share Option Plan
Weighted
average
exercise
price (p)
Options
332,000
–
(28,000)
304,000
188,000
(48,000)
444,000
181,000
144,000
39.7
–
38.9
39.8
15.9
40.7
29.6
41.7
36.5
2011 LTIP
Maximum
Number of
Weighted
average
fair value
Shares per share (p)
23.6
628,105
–
–
25.6
(328,105)
300,000
–
–
21.7
–
–
300,000
300,000
–
–
–
–
Proteome Sciences plc
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
21 SHARE BASED PAYMENTS continued
The options outstanding at 31 December 2016 had a weighted average remaining contractual life as
follows:
2004 Share Option Plan
2011 Share Option Plan
LTIP
The inputs into the Black-Scholes model were:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividends
Notes
2015
No. of Months No of Months
2016
10.7
89.6
35.0
21.8
85.6
44.1
2016
2015
29.6p
29.6p
36.6p
36.6p
60.1% – 56% 60.1% – 58%
4 years
1.13% – 0.87% 1.13% – 0.87%
None
4 years
None
(i) Expected volatility is a measure of the tendency of a security price to fluctuate in a random,
unpredictable manner and is determined by calculating the historical volatility of the Company’s
share price over the previous years.
(ii) The expected life has been adjusted, based on management’s best estimate, for the effects of
non-transferability, exercise restrictions and behavioural considerations.
(iii) The company has used the Monte Carlo model to value the LTIP awards, which simulates a wide
range of possible future share price scenarios and calculates the average net present value of
the option across those scenarios and which captures the effect of the market-based
performance conditions applying to such awards.
22 RESERVES DESCRIPTION AND PURPOSE
Share premium
Amount subscribed for share capital in excess of nominal value.
Foreign exchange translation reserve
Gains/losses arising on retranslating the net assets of overseas operations into Sterling.
Retained earnings
All other net gains and losses and transactions with owners (e.g. dividends) not recognised
elsewhere.
Other Reserves
The other reserve arose in the year ended 31 December 2002 and represented the premium on the
allotment of shares issued for the acquisition of Xzillion Verwaltungs GmbH (now Proteome Sciences
R&D Verwaltungs GmbH) and Xzillion Proteomics GmbH & Co KG.
Share based payment Reserve
The amounts transferred to the Equity Reserve are for charges recognised in respect of the
requirements of IFRS 2 “Share-based payments”.
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
22 RESERVES DESCRIPTION AND PURPOSE continued
Merger Reserve
The merger reserve arose in the period to the 11 November 1994 and represented the premium on
the allotment of new ordinary shares issued in a share exchange agreement entered into by the
shareholders of Monoclonetics International Inc, (now Proteome Sciences Inc.). As the carrying value
of the investment was fully impaired at 31 December 2016, a transfer has been recognised during
the year to the company’s Retained loss reserve.
23 GUARANTEES AND OTHER FINANCIAL COMMITMENTS
Operating lease arrangements
The Group leases certain land and buildings on short-term operating leases. The rents payable under
these leases are subject to renegotiation at various intervals specified in the leases. The Group pays
insurance, maintenance and repairs of these properties. At 31 December 2016, the Company did
not have any operating lease obligations.
At the balance sheet date, the Group had outstanding commitments for future minimum lease
payments under non-cancellable operating leases, which fall due as follows:
Within 1 year
Within 2–5 years
Group
2016
£’000
Company
2016
£’000
Group
2015
£’000
Company
2015
£’000
228
311
539
–
–
–
258
508
766
61
–
61
Operating lease payments represent rentals payable by the Group for its laboratory and office
properties.
24 FINANCIAL INSTRUMENTS
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going
concern while maximising the return to stakeholders through the optimisation of the debt and equity
balance. The capital structure of the Group consists of debt, which includes borrowing disclosed in
note 18b, cash and cash equivalents and equity attributable to equity holders of the parent,
comprising issued capital, reserves and retained earnings as disclosed in the consolidated statement
of changes in equity on page 24.
Categories of financial instruments
Financial assets
Cash
Trade receivables
Financial liabilities
Other payables and accruals
Trade and other payables
Short-term borrowings
Loan from other Group entity
Hire purchase payables
Group
2016
£’000
2,884
399
(414)
(28)
(8,700)
–
(386)
Company
2016
£’000
2,152
–
–
–
(1,461)
(306)
–
Group
2015
£’000
1,808
364
(541)
(18)
(8,443)
–
(606)
Company
2015
£’000
1,064
–
–
–
(1,418)
(264)
–
Proteome Sciences plc
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
24 FINANCIAL INSTRUMENTS continued
Financial risk management objectives
The Group’s operations expose it to a variety of risks including credit risk, interest risk and liquidity
risk.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency
exchange rates and interest rates (see below).
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to
exchange rate fluctuations arise. The Group’s principal exposure is to movement in the Euro exchange
rate, but it anticipates that a significant proportion of its future income will be received in this currency,
thus helping to reduce its exposure in this area.
Foreign currency sensitivity analysis
The Group is mainly exposed to the currency of Germany (the Euro) and to the US dollar currency.
None of the Group’s companies have assets or liabilities that are denominated in a currency other
than the functional currency in which the companies operate. Hence, there is not a material exposure
to foreign exchange risk and therefore a foreign currency sensitivity analysis would not be appropriate.
Credit risk
Group
Electrophoretics Limited, the main trading company in the group, has a credit policy in place and the
exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on
customers as deemed necessary based on the nature of the prospective customer and size of order.
At the reporting date, the largest exposure was represented by the carrying value of trade debtors
of £399,000 (2015: £364,000) . No provision for impairment was recognised for FY 2016 or FY 2015
on the basis that the company’s customers are typically large companies and there is a long standing
relationship and history of payment by customers. The Group does not have significant concentrations
of credit risk on its trade receivables.
Company
The company is exposed to credit risk on loans provided to related parties. At the reporting date, the
largest exposure was represented by the carrying value of loans to Proteome Sciences R&D Gmbh
of £8m. A provision for impairment was recognised in FY 2016 of £18.4m (2015: £20.6m) against the
carrying value of loans owed by Electrophoretics Limited. At 31 December 2016, the carrying value
of loans owed by Electrophoretics Limited to the company was Nil (2015: £16m).
Interest rate risk management
The Group is exposed to interest rate risk arising from its short-term borrowings, details of which are
set out in note 18(b).
The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the
liquidity risk management section of this note.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to floating rate liabilities.
The analysis is prepared assuming the amount of liability outstanding at balance sheet date was
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
24 FINANCIAL INSTRUMENTS continued
outstanding for the whole year. A 0.5% increase or decrease is used when reporting interest rate risk
internally to key management personnel and represents management’s assessment of the reasonably
possible change in interest rates.
If interest rates had been 0.5% higher and all other variables were held constant, the Group’s loss
for the year ended 31 December 2016 would have increased by £43,000 (2015: increase in loss by
£42,000).
The Group’s sensitivity to interest rates has increased slightly during the current year due to the rise
in the amount of its short term borrowings over the year.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built
an appropriate liquidity risk management framework for the management of the Group’s short,
medium and long-term funding and liquidity management requirements. The Group manages liquidity
risk by maintaining adequate reserves and borrowing facilities, by continuously monitoring forecast
and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
Liquidity and interest risk tables
a) The following tables detail the Group and Company’s remaining contractual maturity for its
non-derivative financial liabilities. The tables have been drawn up based on the undiscounted
cash flows of financial liabilities based on the earliest date on which the Group and Company
can be required to pay.
The table includes both interest and principal cash flows.
Weighted
average
effective
interest
Rate
%
Less than 1 month
Within Within
Within
one year 1-2 years 2-3 years
Group Company
£’000
£’000
Group
£’000
Group
£’000
Group
£’000
3.0
8,700
1,461
–
–
10.8
–
–
220
166
3.00
8,443
1,418
–
–
–
–
–
10.8
–
–
220
220
166
2016
Variable interest rate
instruments – Borrowings
Fixed rate instruments
– Hire purchase
2015
Variable interest rate
instruments – Borrowings
Fixed rate instruments
– Hire purchase
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
25 RELATED PARTY TRANSACTIONS
a) Transactions between the Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and were as follows:
1) Loans advanced to subsidiary undertakings:
Proteome
Sciences R&D
£’000
Electrophoretics
Ltd
£’000
At 1 January 2015
Additional investment in the year
Provision for impairment
At 31 December, 2015
At 1 January 2016
Additional investment in the year
Provision for impairment
At 31 December, 2016
2) Loan from subsidiary undertaking:-
At 1 January, 2015
Exchange adjustment
At 31 December, 2015
At 1 January, 2016
Exchange adjustment
At 31 December, 2016
8,011
–
–
8,011
8,011
–
–
8,011
279
(15)
264
264
42
306
33,854
2,728
(20,600)
15,982
15,982
2.397
(18,379)
–
Total
£’000
41,865
2,728
(20,600)
23,993
23,993
2,397
(18,379)
8,011
Further details of the Company’s shares in and loans to its subsidiary undertakings are set out in
note 15.
b) C.D.J. Pearce, a Director of the Company and therefore a related party, has made a loan facility
available to the Company full details of which are set out in note 18 on page 45.
c) Details of the remuneration of the directors is set out in note 10, including details of pension
contributions made by the Company and information in connection with their long-term benefits
is shown in the directors’ report under the heading ‘Directors and their interests’.
d) Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Group. Key management personnel for the year-ended
31 December 2016 and the comparative period were as follows:
Christopher Pearce (Chairman from 1 June 2016, CEO from 1 January 2016 to 31 May 2016)
Jeremy Haigh (Chief Executive Officer)
Geoff Ellis (Finance Director)
Ian Pike (Chief Scientific Officer)
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2016
25 RELATED PARTY TRANSACTIONS continued
Key management personnel remuneration was as follows:
Salary
Other long-term benefits
Defined benefit scheme costs
Share based payment expense
Consultancy fee
2016
£’000
2015
£’000
599
19
–
22
41
681
576
30
–
26
–
632
The amounts charged to the income statement relating to Directors in respect of the share-based
payment charge were as follows:
2016
£’000
22
2015
£’000
26
26 EVENTS AFTER THE BALANCE SHEET DATE
There have been no significant events which have occurred subsequent to the reporting date.
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NOTICE OF MEETING
Notice is hereby given that the 23rd Annual General Meeting of Proteome Sciences plc will be held at,
finnCap, 60 New Broad Street, London, EC2M 1JJ on 25 April, 2017 at 12.00 midday for the purpose of
considering and, if thought fit, passing the following Resolutions of which numbers 1 to 6 will be proposed
as ordinary Resolutions and number 7 to 9 will be proposed as special Resolutions.
ORDINARY BUSINESS
1 To receive the financial statements and the reports of the directors and of the auditors for the year
ended 31 December 2016.
2 To re-appoint Mr R McDowell as a Director.
3 To re-appoint Mr G Ellis as a Director.
4 To appoint Dr J R M Haigh as a Director
5 To re-appoint BDO LLP as auditors of the Company in accordance with section 489 of the Companies
Act 2006 until the conclusion of the next general meeting of the Company at which audited accounts
are laid before the members and to authorise the directors to fix their remuneration.
SPECIAL BUSINESS
ORDINARY RESOLUTION
6 THAT the directors of the Company be and are hereby authorised generally and unconditionally
pursuant to and in accordance with section 551 of the Companies Act 2006 to exercise all the powers
of the Company to allot shares or to grant rights to subscribe for or convert any security into shares
in the Company up to an aggregate nominal amount of £981,082.77 until the conclusion of the next
Annual General Meeting of the Company or 30 June 2018, whichever is the earlier, but so that this
authority shall allow the Company to make offers or agreements before the expiry of this authority
which would, or might, require shares to be allotted or rights to subscribe for or to convert securities
into shares to be granted after such expiry.
SPECIAL RESOLUTION
7 THAT subject to, and upon Resolution 6 above, having been passed and becoming effective, the
directors be and are hereby authorised and empowered pursuant to section 570 of the Companies
Act 2006 (the “Act”) to allot equity securities, as defined in section 560 of the Act, as if section 561(1)
of the Act did not apply to any such allotment, provided that this power shall be limited to:
(a) the allotment of equity securities in connection with an offer by way of a rights issue, or any other
pre-emptive offer, to the holders of ordinary shares in proportion (as nearly as may be) to their
respective holdings of ordinary shares on a record date fixed by the directors and to the holders
of other equity securities as required by the rights of those securities or as the directors otherwise
consider necessary but subject to such exclusions or other arrangements as the directors may
deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates,
legal or practical problems in or under the law of any territory or the requirements of any
regulatory body or stock exchange; and
(b) the allotment (otherwise than pursuant to sub- paragraph (a) and (b)) of equity securities which
are or are to be wholly paid up in cash up to an aggregate nominal amount of £588,649.66.
58 Proteome Sciences plc
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NOTICE OF MEETING
and provided further that the authority and power conferred by this Resolution shall expire at the
conclusion of the next Annual General Meeting of the Company or on 30 June 2018, whichever is the
earlier, unless such authority is renewed or extended at or prior to such time, save that the Company may
before such expiry make any offer, agreement or other arrangement which would or might require equity
securities to be allotted after the expiry of this authority and the directors may then allot equity securities
in pursuant of such an offer or agreement as if the authority and power hereby conferred had not expired.
8 THAT, in accordance with paragraph 42(2)(b) of Schedule 2 of the Companies Act 2006
(Commencement No 8, Transitional Provisions and Savings) Order 2008, the restriction on the
authorised share capital of the Company set out in clause 6 of the memorandum of association of
the Company, which by virtue of section 28 of the Companies Act 2006 is treated as a provision of
the Company’s articles of association, is hereby revoked and deleted and that the reference to
authorised share capital contained in Article 3.1 of the Articles of Association of the company also
be deleted.
9 THAT, subject to the passing of the previous resolution the following deletions also be made in the
Articles of Association:
(i) The reference to and the definition of Redeemable Shares in Article 2 of the Articles of
Association;
(ii) The deletion of Article 3.2 and Articles 4 to 6 inclusive;
(iii) The deletion of Article 7.
By Order of the Board
Coveham House,
Downside Bridge Road,
Cobham
Surrey KT11 3EP
G. Ellis
Company Secretary
27 March 2017
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NOTICE OF MEETING
Notes:
1. A member entitled to attend and vote at the meeting is entitled to appoint more than one proxy, to
exercise all or any of his rights to attend, speak and vote in his place on a show of hands or on a poll
provided that each proxy is appointed to a different share or shares. Such proxy need not be a
member of the Company. In accordance with Article 90, any such appointment is valid only if the
instrument of proxy is deposited with the Company’s registrars not less than forty eight hours before
the time for holding by 12:00 midday on 21 April 2017 or any adjourned meeting. A proxy need not
also be a member of the Company. A form of proxy and return envelope are enclosed; completion
of an instrument of proxy will not prevent members from attending and voting in person should they
wish to do so.
2. Copies of executive directors’ service agreements, and copies of the terms and conditions of
appointment of non-executive directors are available for inspection at the Company’s registered office
during normal business hours from the date of this notice until the close of the Annual General
Meeting (Saturday, Sundays and public holidays excepted) and will be available for inspection at the
place of the Annual General Meeting for at least 15 minutes prior to and during the meeting.
3. Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies
that in order to have the right to attend and vote at the meeting (and also for the purpose of calculating
how many votes a person entitled to attend and vote may cast), a person must be entered on the
register of members of the Company by no later than the close of business two days before the date
of the meeting. Changes to entries on the register of members after this time shall be disregarded in
determining the rights of any person to attend or vote at the meeting.
Explanatory notes on the resolutions:
Resolution 1
The directors must present to members the accounts and the reports of the directors and auditors in
respect of each financial year.
Resolutions 2 and 3
In accordance with Article 118 of the Company’s articles of association at each Annual General Meeting
one third, or the number nearest to but not exceeding one-third of the directors are to retire by rotation.
Mr R McDowell and Mr G Ellis are the directors retiring by rotation at this meeting.
Resolution 4
Dr J R M Haigh was appointed as a director of the Company on 1 June 2016. Article 125 of the Articles
of Association requires that any director appointed between Annual General Meetings must retire at the
next following Annual General Meeting. Due to the timing of his appointment and the 2016 Annual General
Meeting a resolution for his re-appointment was not proposed at the 2016 Annual General Meeting.
Accordingly Dr Haigh is standing for re-election at this meeting.
Biographical details of the directors offering themselves for re-election are included on page 11 of the
annual report and accounts.
The Board of Directors considers the performance of each of the Directors standing for re-election at
the Annual General Meeting to be fully effective and they each demonstrate the commitment and
behaviours expected of a director of Proteome Sciences plc. Due to Professor W Dawson’s length of
tenure he is not considered to be an independent non-executive director by virtue of the provision of the
UK Corporate Governance Code.
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NOTICE OF MEETING
Resolution 5
BDO LLP are being proposed as the auditors of the Company until the conclusion the next general
meeting at which accounts are presented. The directors are to be given authority to fix their remuneration.
Resolution 6
The Company's power to issue additional securities is exercised by the directors. The directors must be
authorised by ordinary resolution of the shareholders to exercise that power. The resolution will give the
Directors a general authority to allot shares up to an aggregate nominal value of £981,082.77 being the
equivalent of one-third of the Company’s issued ordinary share capital at the date of this notice.
The Directors are seeking the annual renewal of this authority in accordance with best practice and to
ensure the Company has maximum flexibility in managing its capital resources.
Resolution 7
When shares are to be allotted for cash, Section 561 of the Companies Act 2006 provides that existing
shareholders have pre-emption rights and that any new shares are offered first to such shareholders in
proportion to their existing shareholdings. This resolution is seeking to authorise the Directors to allot
shares of up to an aggregate nominal amount of £588,649.66 otherwise than on a pro-rata basis. This
represents 20% of the Company’s issued share capital at the date of this notice.
The directors are seeking the annual renewal of this authority in line with the authorities granted to
dis-apply the pre-emption provisions in previous years and to ensure the Company has maximum
flexibility in managing its capital resources.
Resolutions 8 and 9
The Company’s current Articles of Association were adopted by a Special Resolution passed on 28 July
2016 and contained references to the authorised share capital of the Company. The Company is
proposing amend its Articles of Association to remove the reference to the authorised share capital and
remove other provisions relating to the authorised share capital contained in the current Articles of
Association.
A copy of the proposed amended Articles will be available for inspection during normal working hours
at the Company’s registered office (Coveham House, Downside Bridge Road, Cobham, Surrey,
KT11 3EP), from the date of this notice up until the AGM. A copy may also be downloaded from the
Company’s website (www.proteomics.com). A copy will also be available 15 minutes prior to, and during
the AGM.
The Memorandum of Association contains, amongst other things, the Company’s authorised share capital
(ie the maximum number of shares that can be in issue). All provisions that were contained in the
Memorandum of Association, including the authorised share capital are deemed by the provisions of
section 28 of the Companies Act 2006 (“2006 Act”)to be contained in the Current Articles. The Articles
of Association at Article 3.1 also contains a statement of the authorised share capital.
The retention of authorised share capital provisions creates a restriction on the number of shares that
can be issued and as the Company is approaching the limit imposed on the number of ordinary shares
it can issue. The 2006 Act permits a company not to have an authorised share capital and, hence,
enabling it to be unrestricted in the number of shares that can be in issue. Like other companies, the
Company proposes to take advantage of this and remove the authorised share capital. Special Resolution
8 proposes this removal, but one effect of this removal is that the Articles will also contain superfluous
information relating to share classes which no longer exists. Special Resolution 9 (i) and (ii) deals with
the removal of these references to share classes, which appear in the Articles of Association.
Proteome Sciences plc
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NOTICE OF MEETING
Whilst under the amended Articles, the Company will no longer have an authorised share capital, the
2006 Act still requires authority to be obtained before the directors may allot any shares, other than in
respect of employee share schemes (see Resolution 6 seeking such authority).
Article 7 of the current Articles of Association contains provisions relating to the increase of share capital.
As this is linked to the concept of authorised share capital Special Resolution 9(iii) proposes that this
provision is deleted.
If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a
proxy to exercise all or any of your rights to attend, speak and vote at the Meeting and you should have
received a proxy form with this notice of meeting. You can only appoint a proxy using the procedures set
out in these notes and the notes to the proxy form.
62 Proteome Sciences plc
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Shareholder Enquiries
+44(0) 871 664 030
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