Annual Report & Accounts
for the year ended 31 December
2020
CONTENTS
Strategic Report
Corporate, Financial and Operational Highlights
Executive Chairman’s Review
Chief Financial Officer’s Review
Strategic Report
Corporate Governance
The Board of Directors
Corporate Governance Statement
Report of the Directors
Report of the Audit Committee
Report of the Remuneration Committee
Statement of Directors’ Responsibilities
Financial Statements
Independent Auditor’s Report
Consolidated Statement of Profit and Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Company Statement of Financial Position
Statements of Changes in Equity
Statements of Cash Flows
Notes to the Financial Statements
Shareholder information
Notice of Annual General Meeting
Explanatory notes to the Notice of Annual General Meeting
Directors
Advisors
02
04
11
14
28
30
36
42
46
51
53
59
60
61
62
63
64
101
104
108
108
SourceBio International plc (“SourceBio”) is a leading
international provider of integrated state-of-the-art laboratory
services and products to clients in the healthcare, clinical,
life science research and biopharma industries, with a focus
on improving patient diagnosis, management and care.
The Group is headquartered in Nottingham, UK with
additional facilities in the UK, Ireland and the USA.
The Group’s revenues are derived from four core businesses areas:
Infectious Disease Testing - Since May 2020, COVID-19 Antigen RT-PCR
testing services to the NHS, private healthcare providers and private industry.
It is expected that the Group’s COVID-19 testing focus in 2021 will transition to
a wider portfolio of offerings.
Healthcare Diagnostics - histopathology and clinical diagnostic services for
the NHS and private healthcare across the UK and Ireland.
Genomics - DNA sequencing services for pharmaceutical and biotechnology
companies, academia, contract research organisations (CROs) and other
research groups in the UK, Europe and North America.
Stability Storage - shelf-life testing services and equipment for
pharmaceutical and biotechnology companies, contract manufacturers and
analytical testing companies from around the world but primarily in the UK,
Ireland and the USA.
CORPORATE, FINANCIAL
AND OPERATIONAL HIGHLIGHTS
Corporate highlights
• Company’s successful Admission to AIM completed in October 2020
Financial highlights
• Revenue increased by 139% to £50.7 million (2019: £21.2 million)
• Gross profit increased by 135% to £20.5 million (2019: £8.7 million)
• Adjusted EBITDA1 increased by 369% to £14.2 million (2019: £3.0 million)
•
Adjusted EPS2 increased nearly twelve-fold on a like-for-like basis to 19.8 pence per share
(2019: 1.7 pence per share)
• Cash generated from operations increased by 120% to £6.4 million (2019: £2.9 million)
•
Cash balance of £8.4 million (2019: £1.2 million) with bank and shareholder borrowings eliminated
(2019: £95.9 million)
1 Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation (EBITDA) adjusted for exceptional items (see note 7)
2 Adjusted EPS is earnings per share (“EPS”) adjusted for shareholder loan and PIK loan note interest payable, exceptional items and the tax effects
of these items (see note 14)
Operational highlights
2020
•
•
•
In May 2020 SourceBio established a new business unit, Infectious Disease Testing, with the launch
of COVID-19 Antigen RT-PCR testing services, through high volume laboratory based testing
SourceBio progressively expanded its laboratory capacity at its facility in Nottingham to 10,500 tests
per day by the year-end date
In November 2020, the Group announced that it had been accepted into the Increasing Capacity
Framework Agreement for cancer test services to NHS England, an initiative to reduce the significant
backlog of procedures built up during 2020
•
In December 2020, SourceBio signed a strategic partnership agreement with Oxford Nanopore to
offer a new generation of rapid COVID-19 test, LamPORE, for use in both traditional laboratory and
more localised settings
Post period end
•
•
•
•
In January 2021, the Group signed a supply agreement with a leading UK high street retail and
pharmacy group, to provide COVID-19 testing services to support roll-out in their stores
In February 2021, the Group signed an agreement with Mitie Security Limited to manage the delivery
of community based COVID-19 testing services through Department of Health and Social Care
(“DHSC”) mobile testing trailers
In March 2021, the Group announced its laboratory expansion in San Diego, USA, to include
COVID-19 PCR testing services
In March 2021, the Group announced it had entered into an agreement with the Rugby
Football Union and Premiership Rugby Limited to provide COVID-19 screening testing services
for elite rugby in England
•
Trading in the early months of 2021 has been solid. It is expected that the Group’s COVID-19 testing
focus in 2021 will transition from exclusively RT-PCR testing to a wider portfolio of offerings
2
SourceBio International plcAnnual Report & Accounts 2020 Revenue Increase
Gross Profit Increase
£50.7
million
£21.2
million
£20.5
million
£8.7
million
2019
2020
2019
2020
+139%
+135%
Adjusted EBITDA increase
Adjusted EPS increase
£14.2
million
£3.0
million
2019
2020
+369%
19.8p
per share
1.7p
per share
2019
2020
+1094%
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sourcebiointernational.comLSE Code: SBI
EXECUTIVE CHAIRMAN’S REVIEW
I am very pleased to report significant
revenue growth and dramatically
increased underlying profitability in
an extremely busy year for SourceBio
that included a successful AIM listing
in October. The results have been
dominated by the provision of
COVID-19 testing services which the
Board now sees as a longer term
potential given the ongoing need for
testing. The Group remains strongly
capitalised with no borrowings, which
positions us well to deliver further
growth in 2021 and beyond.
Jay LeCoque
Executive Chairman
4
SourceBio International plcAnnual Report & Accounts 2020 Summary of 2020
I am pleased to report a year of significant growth and achievement in the business, indeed a transformational
year which also included the Company’s Admission to AIM in October 2020.
It is with pleasure that I welcome new shareholders and sincerely thank existing shareholders for their continued
strong support. I am encouraged to report that the Group has delivered substantial progress and has reported strong
financial results for 2020. It continues to perform well, with excellent growth in revenues, earnings and
cash generation.
The key performance indicators currently used by the Group are revenue, gross profit, adjusted EBITDA and cash
resources. In this regard, revenues for the year increased to £50.7 million, an increase of 139% on the prior year
revenues of £21.2 million, gross profit has increased to £20.5 million, an increase of 135% on the prior year gross
profit of £8.7 million, and adjusted EBITDA has increased to £14.2 million, a level almost five-fold that of the prior
year adjusted EBITDA of £3.0 million. Cash balances at the year-end date totalled £8.4 million with no bank and
shareholder borrowings, compared to cash of £1.2 million and bank and shareholder borrowings of £95.9 million at
the prior year-end date.
Further details of the financial performance can be found in the Chief Financial Officer’s Review and within the
financial statements.
Cash generated
from operations
2019
£2.9 million
2020
£6.4 million
+ 120%
Cash
Balance
2019
£1.2
million
2020
£8.4 million
+ 583%
The arrival and sustained impact of the COVID-19 pandemic has clearly provided ongoing challenges across the
globe. SourceBio was early to see significant opportunities to help mitigate these challenges and indeed has been
able to more than make up for any adverse impacts to the Group’s long standing business units by introducing large
scale laboratory based COVID-19 testing services from its Nottingham facility. A more detailed review of the year, by
business unit, is presented on pages 6 to 10.
The Board is very grateful for the significant hard work and dedication of the entire SourecBio team in 2020 and for
the many achievements in what has certainly been a uniquely challenging backdrop.
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sourcebiointernational.comLSE Code: SBI
EXECUTIVE CHAIRMAN’S REVIEW (continued)
Business review
The business comprises four business units – Healthcare
Diagnostics, Genomics, Stability Storage and a fourth business
unit, Infectious Disease Testing, which was created in May
2020 as the Group launched its COVID-19 testing service.
Starting with Infectious Disease Testing, a brief review of each
business unit is detailed below:
Infectious Disease Testing
In a swift response to the global COVID-19 pandemic,
SourceBio quickly leveraged its scientific capabilities,
existing accreditations with the NHS for pathology
services, reconfigured laboratory space and
capitalised on its staff expertise to set up a COVID-19
Antigen RT-PCR testing capability which launched in
May 2020. The testing capacity was grown in modular
steps through the year to a targeted 10,500 tests per
day capacity ahead of the year-end date. The Group
performed over 758,000 tests by the end of 2020 (and
exceeded one million tests in the first quarter of 2021).
Test volumes were initially dominated by the demand
from DHSC but, as their requirements have become
more variable, the customer mix has become less
polarised. The customer base in the year comprised
the DHSC, certain NHS trusts and other NHS
constituents, as well as private healthcare groups
and commercial clients.
High volume COVID-19 Antigen RT-PCR laboratory-
based tests formed the entire revenues for 2020
but, as highlighted at the time of Admission, the
Board anticipates that, whilst PCR based testing will
remain the gold standard test, the Group will offer
additional testing capabilities during 2021. The Group
has already reviewed a number of complementary
applications, technologies and routes to market.
This is evidenced by the announcement of the
collaboration with Oxford Nanopore in December
2020, which increases the Group’s offering to include
LamPORE rapid testing both in a traditional laboratory
setting and in more localised environments.
These services generated revenues totalling £34.5
million in the year (2019: £nil) and a gross profit of
£13.7 million (2019: £nil), equating to a gross margin
percentage in the year of 39.6%.
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SourceBio International plcAnnual Report & Accounts 2020 t
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Healthcare Diagnostics
Healthcare Diagnostics provides a complete
histopathology and clinical diagnostics service for the
sectioning, processing, staining and analysis of tissue
samples on self-prepared and pre-prepared slides.
SourceBio operates ISO 15189 accredited medical
laboratories and has built a significant network of
specialist consultant pathologists, all registered with
the Royal College of Pathologists and the General
Medical Council. SourceBio maintains service level
agreements with over 130 NHS departments,
private healthcare providers and pharma and
biotech customers.
The principal revenue stream within Healthcare
Diagnostics is Cellular Pathology testing, which
involves the examination of patient tissue pre- and
post-operative. This business had rapidly grown in
the previous two years at approximately 40% per
annum and indeed grew at approaching 80% in the
first quarter of 2020 compared to the first quarter
in 2019. The arrival of the COVID-19 pandemic in
the first quarter of 2020 and its continued impact
had a material effect on the quantity of elective
surgeries in the UK which reduced the levels of
business throughput. This meant that average
monthly revenues in the latter nine months of the
year averaged approximately 21% of the average
monthly revenues in the first quarter, although there
was a noticeable, but modest, uplift in activity in the
latter months of the year. The growing size of elective
surgery waiting lists has been well publicised in the
media and the Group has devoted time in the year
to plan and prepare for a material scale-up in activity
that it believes will be required when this very large
amount of anticipated demand is released.
SourceBio also offers through its Reference Laboratory
enhanced molecular diagnostic tests to further
investigate the more complex cases. This revenue
stream was also impacted by COVID-19 but, by the
second half of 2020, was able to return to almost
similar levels of activity as pre-COVID-19.
In aggregate, these services generated revenues
totalling £4.4 million (2019: £7.3 million) and a gross
profit of £1.0 million (2019: £2.9 million), equating to a
gross margin percentage of 23.6% (2019: 40.0%), the
reduction caused by the reduced volumes of business.
sourcebiointernational.comLSE Code: SBI
EXECUTIVE CHAIRMAN’S REVIEW (continued)
Genomics
Genomics is the study of genes to help progress
research and clinical discovery for the pharmaceutical
and healthcare industries. SourceBio offers both
traditional Sanger Sequencing, which for many
years has been the industry accepted standard for
sequencing single strands of DNA at a time, and Next
Generation Sequencing (“NGS”), which allows the
sequencing of millions of strands of DNA at once.
NGS sequencing projects are typically larger in scale,
complexity and profitability but fewer in number.
The Group was disappointed with its revenue mix in
2019, with 75% of Genomics business being Sanger
Sequencing and only 25% being NGS. Following the
strategic investment in state-of-the-art equipment in
late 2019, the 2020 results have positively increased
the NGS component to 33% of total Genomics
revenues. Whilst both revenue streams were impacted
by COVID-19, both bounced back within approximately
three months, with Sanger Sequencing in the second
half of the year operating at almost similar levels of
activity as pre-COVID-19, and NGS in the second half of
the year operating at levels approximately 30% higher
than pre-COVID.
In aggregate, these services generated revenues
totalling £4.2 million (2019: £4.5 million) and a gross
profit of £1.7 million (2019: £1.8 million), equating to
a gross margin percentage of 41.1% (2019: 39.3%).
8
SourceBio International plcAnnual Report & Accounts 2020 Stability Storage
The Stability Storage business unit comprises four
offerings: Stability Storage Services, Manufacturing,
Service and Validation and Analytical Testing Services
primarily for the purpose of shelf-life testing.
The largest of these offerings is Stability Storage
Services, which generated 52% (2019: 49%) of
this business unit’s revenues. SourceBio delivers
outsourced temperature and humidity-controlled
environment storage services for stability trials at
all ICH (International Council for Harmonization of
Technical Requirements for Pharmaceuticals for
Human Use) specified conditions as well as at bespoke
conditions as required. Environmentally controlled
stability storage is the gateway for a number of
products to be released and to stay on the market.
These products range from drug products, medical
devices, consumer products and packaging. The Group
is well established in this market with accredited
facilities in Rochdale, UK. The Group has invested in
additional capacity in the Tramore, Ireland facility
and completed its fit-out and relocation to a larger
site in San Diego, USA, to support growth. Business
is secured on recurring contracts which are typically
of three year duration, so whilst there has been a
reduction in revenue of £0.3 million versus prior year,
this has been caused by the predicted natural expiry
of contracts. By its nature, this business line
therefore provides highly visible recurring revenue
at gross margin levels of approximately 80% - indeed
this business line has been relatively robust as
regards COVID-19.
For those clients wishing to perform shelf-life testing
in-house, the Group manufactures temperature and
humidity-controlled equipment such as cabinets (low
volume storage), reach-in rooms and walk-in rooms
(high volume storage) for installation at customers’
premises. This activity generated 16% of this business
unit’s revenue (2019: 21%). Sales of capital equipment
are naturally variable and subject to economic
confidence, but the Board was pleased to secure solid
new business in the year and to have an attractive
pipeline of further opportunities.
SourceBio also provides Service and Validation
services to established clients which have previously
purchased and installed SourceBio equipment. These
services comprise regular and periodic servicing and
testing of installed storage equipment at customer
premises to ensure adherence to relevant regulatory
standards. This activity generated 32% (2019: 30%)
of this business unit’s revenue, although there was a
modest reduction in revenue of £0.1 million versus
prior year, caused by the travel restrictions caused by
the ongoing COVID-19 pandemic.
The Group established its new Analytical Testing
service in 2020, allowing SourceBio to undertake the
required periodic withdrawal and testing of customers’
product samples held within the Group’s temperature
and humidity controlled storage facilities. This activity
generated initial token revenues in 2020.
In aggregate, these activities generated revenues
totalling £6.9 million (2019: £7.9 million) and a gross
profit of £3.9 million (2019: £4.3 million), equating to
a gross margin percentage of 56.1% (2019: 54.8%).
Other non-core services
The Group offers additional legacy products that
it sees as non-core. These products comprised the
supply of a set of library clones for research purposes,
the market for which is generally declining, and
the manufacture and supply of blood and tissue
serological products to a limited customer base.
In aggregate, these activities generated revenues
totalling £0.8 million (2019: £0.9 million) and a gross
profit of £0.2 million (2019: £0.4 million), equating
to a gross margin percentage of 20.4% (2019: 43.3%).
Board and Governance
The Board was enhanced in contemplation of
Admission to AIM in October 2020. We were delighted
to welcome Simon Constantine to the Board as
Independent Non-Executive Director and Chair of the
Audit Committee. Having worked with Tony Ratcliffe
for some months, we were also pleased to formally
invite him to join the Board as Chief Financial Officer.
The Board extends its thanks to both James Agnew
and Carlo Sgarbi for their efforts and support over
a number of years prior to their retirement as Non-
Executive Directors this year.
The Board continues to believe that the current
make-up of the Board is appropriate to the Group’s
needs and to meet its governance commitments. The
Board is committed to high standards of governance
and has adopted the QCA (Quoted Companies
Alliance) Code. Further details of compliance can
be found in the Corporate Governance Statement
within the Annual Report and Accounts and on the
Company’s website.
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sourcebiointernational.comLSE Code: SBI
EXECUTIVE CHAIRMAN’S REVIEW (continued)
COVID-19 testing market backdrop
A very large proportion of the Group’s business in
2020 was derived from high volume laboratory
based COVID-19 Antigen RT-PCR testing, the Group’s
only COVID-19 offering. The Board is mindful
that the COVID-19 landscape is rapidly evolving and
that this brings both uncertainty and opportunity. The
Group believes that, whilst PCR based testing will likely
remain the gold standard, it will be essential for the
Group to offer additional testing services during 2021
and beyond. There has already been a shift in focus
from many customers towards screening initiatives
using rapid lateral flow testing, as one example - the
need for testing is clearly evolving and expanding.
The Group has reviewed and validated a number of
complementary testing applications, technologies
and routes to market and will be launching these
progressively, as evidenced by the announcement of
the Group’s collaboration with Oxford Nanopore in
December 2020, which increases the Group’s offering
to include LamPORE rapid testing both in a traditional
laboratory setting and in mobile trailers to provide
for more localised community focused testing. It is
therefore expected that the Group’s COVID-19 testing
focus in 2021 will transition from exclusively RT-PCR
testing to a wider portfolio of offerings, including
rapid testing. Indeed, the Group has already seen
multiple COVID-19 revenue streams in the first
quarter of 2021, including revenues generated from
mobile based testing units operated on behalf of the
DHSC and Mitie.
The Group has established a number of new COVID-19
testing initiatives, some of which are in anticipation
of the expected lifting of travel restrictions, where
significant business is expected to be secured as travel
related testing gains momentum. The Group also
recently announced the configuring of its San Diego
facility to provide COVID-19 testing services to the USA
market. This is expected to launch mid-year which,
together with the seasonal nature of travel, means
that the Group anticipates a significant proportion of
2021 revenues and earnings to be generated from the
third quarter of the year onwards, giving a second half
bias to the expected results for 2021.
SourceBio is planning for demand for COVID-19 testing
services to continue potentially longer than was
initially anticipated at the start of the pandemic and
before the multiple waves of infections and emergence
of new virus variants. Whilst the vaccination roll-out
to date has been very successful, the Group believes
that this will not negate the ongoing need for testing.
Indeed, a recent analysis in the USA and a number
of European countries completed by the Boston
Consulting Group concluded “ . . . with peak demand
occurring in the seasonally affected first quarters of 2021
and 2022. Although we expect testing volumes to decline
after 2021, we expect a continued need for testing in 2023
and 2024 as the disease enters a more endemic phase”.
Airports, airlines, cruise lines and hotels are already
looking to establish testing services for passengers
and guests. Similarly, the sports and entertainment
industries are also building on-site testing capabilities
and tests are expected to continue to be sold in
leading high street pharmacy outlets.
Outlook
The Group has been through a transformational year
in 2020 and starts the new year with a strong cash
balance, no borrowings, and a business that is rapidly
growing whilst generating substantial earnings and
cash. Trading in the early months of 2021 has been
solid and in line with the Board’s expectation.
The Group is working hard in all the COVID-19 testing
initiatives described above and the Board believes
the Group is well placed to capture attractive new
business opportunities.
The Board also believes that its long-standing three
business units, Healthcare Diagnostics, Genomics and
Stability Storage offer both near-term and longer-
term sustained growth potential. Whilst elective
surgeries continue to be significantly and quite
publicly delayed, the backlog of potential work for
our Cellular Pathology teams appears to be growing
very substantially. Whilst the timing of a return to
substantial volumes of work cannot be accurately
predicted, the Board believes that the volumes will be
very high when they do return, and the teams have
prepared plans to cope with the significant volume
growth expected in due course.
Given the current macro environment, the Board
believes that SourceBio is well positioned to deliver
further substantial growth in revenue, earnings
and cash generation in 2021. It will also continue to
consider potential acquisition opportunities. We look
forward to updating shareholders further during
the year.
Jay LeCoque
Executive Chairman
12 April 2021
10
SourceBio International plcAnnual Report & Accounts 2020
CHIEF FINANCIAL OFFICER’S REVIEW
Revenue
Revenue for 2020 was £50.7 million (2019: £21.2 million), an increase of 139%.
Revenue across the four core business units is summarised below:
Business unit
Infectious Disease Testing
Healthcare Diagnostics
Genomics
Stability Storage
Core operations
Non-core operations
Sub total
Wound down operations
Total
2020
£‘000
34,463
4,424
4,219
6,880
2019
£‘000
-
7,293
4,523
7,934
49,986
19,750
751
916
50,737
20,666
-
568
50,737
21,234
The Group established a new business unit in 2020, Infectious Disease Testing, following its launch of COVID-19
Antigen RT-PCR testing services in May. During 2020 the Group rapidly built capacity at its Nottingham facility and
secured total revenues of £34.5 million (2019: £nil).
The three established business units, Healthcare Diagnostics, Genomics and Stability Storage, were all to a degree
impacted by COVID-19 during 2020:
•
•
•
The Healthcare Diagnostics business unit delivered revenues of £2.7 million (2019: £5.6 million) from Cellular
Pathology testing, where volumes were heavily impacted by well publicised delays in elective surgeries. These
delays continued through 2020 whilst the backlog of potential work has reportedly dramatically increased.
The Reference Laboratory delivered revenues of £1.7 million (2019: £1.7 million), with work in this area quickly
recovering from an initial impact from COVID-19;
Genomics comprises traditional Sanger Sequencing, which delivered revenues of £2.8 million (2019: £3.4 million)
and NGS (Next Generation Sequencing), which delivered revenues of £1.4 million (2019: £1.1 million).
The Company invested in state-of-the-art equipment in 2019 as part of the strategic objective of skewing business
towards a greater proportion of generally higher value and high margin NGS work, which proved successful in
2020. Both revenue streams within Genomics recovered quickly following a modest impact from COVID-19; and
Stability Storage comprises Stability Storage Services which delivered revenues of £3.6 million (2019: £3.9 million),
Service and Validation which delivered revenues of £2.2 million (2019: £2.3 million) and Manufacturing which
delivered revenues of £1.1 million (2019: £1.7 million). Stability Storage Services, which are sold on a recurring
revenue model, were relatively robust. Service and Validation work was impacted by the restrictions to travel,
whilst equipment sales, being capital purchase items, were naturally affected by general economic uncertainties.
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sourcebiointernational.comLSE Code: SBI
CHIEF FINANCIAL OFFICER’S REVIEW (continued)
interest charges in relation to the PIK loan notes and
loans provided by shareholders. Prior to Admission,
the PIK loan notes were redeemed and converted into
equity. Shortly after Admission, the Group settled the
shareholder loans outstanding, which then amounted
to £26.0 million, from the proceeds of the share
placing. In addition, the Company incurred interest
charges of £0.2 million (2019: £0.2 million) in relation
to bank borrowings. Shortly after Admission, the
Group settled the bank borrowings outstanding, which
then amounted to £5.1 million, from the proceeds of
the share placing and sale and leaseback transaction.
The remaining finance costs of £0.3 million (2019:
£0.1 million) related to finance leases charges. At the
year-end date the Group had no borrowings other
than leases.
Tax
An income tax credit arose amounting to £0.2 million
(2019: charge of £0.1 million). The vast majority of the
earnings were generated in the UK, where the Group
was able to utilise its brought forward tax losses to
reduce its overall income tax charge. The Group has
trading losses of £1,115,000 in its USA subsidiary
available for carry forward beyond the year-end date.
Earnings per share
The Board believes that adjusted earnings per share
provides the clearest measure of underlying earnings
performance. Adjusted earnings per share is an
Alternative Performance Measure and calculated by
dividing the result for the year attributable to ordinary
shareholders, excluding interest expense attributable
to the shareholder loans and PIK loan notes and
expenses related to exceptional items, as well as the
tax effect of these items, by the weighted average
number of ordinary shares in issue during the year.
The adjusted earnings per share in the year amounted
to 19.8 pence per share (2019: 1.7 pence per share),
a more than ten-fold growth.
The Group had no share options in issue thus its
basic and diluted earnings per share were the same.
The basic and diluted earnings per share in the year
amounted to 5.3 pence per share (2019: 16.4 loss
pence per share).
Gross profit
Overall gross profit for the year was £20.5 million
(2019: £8.7 million), representing a gross margin
percentage of 40.3% (2019: 40.9%). Although the
quantum and mix of revenue dramatically changed in
2020, gross margin percentage levels were
maintained overall.
Expenses
Total expenses for the year were £9.8 million
(2019: £7.7 million), an increase of £2.1 million. The
biggest cause of the increase was £1.5 million of
exceptional expenses in relation to the Company’s
Admission to AIM in October. The remaining
£0.6 million of increase occurred across a number
of areas but reflected a general containment of
expenditures in spite of the dramatic increase in
business throughput and revenues generated.
Management was largely able to utilise existing
infrastructure to establish and build COVID-19
testing capacity.
The total charge for depreciation of tangible fixed
assets and amortisation of intangible fixed assets
increased to £2.0 million (2019: £1.8 million) due
primarily to increased laboratory equipment
depreciation.
EBITDA
The Board’s key measure of underlying business
profitability and addressing trends across periods is
adjusted earnings before interest, tax, depreciation
and amortisation, share based payments and
exceptional items (adjusted EBITDA). In 2020, the
Group achieved an adjusted EBITDA of £14.2 million
(2019: £3.0 million), an increase of 369%. This
translated to an adjusted EBITDA percentage in the
year of 27.9% (2019: 14.2%), an almost doubling in
adjusted EBITDA margin. There were no share based
payments in the year or in the comparative period and
exceptional items in the year amounted to
£1.5 million (2019: £0.2 million). The principal
driver for the material growth in adjusted EBITDA
was the level of COVID-19 test revenues and gross
profit secured in the year, which did not require
corresponding increases in expenses.
Finance costs
Total finance costs for the year were £7.9 million
(2019: £9.1 million), a decrease of £1.2 million. The
largest component was £7.5 million (2019: £8.8
million) in relation to the compounding (non-cash)
12
SourceBio International plcAnnual Report & Accounts 2020 Intangible assets
Lease liabilities
Goodwill at the year-end date remained at £10.0
million, with no impairment charged in the year and
other intangible assets remained at a net book value
of £0.3 million.
Property, plant and equipment
Net book value of property, plant and equipment at
the year-end date amounted to £7.0 million (2019:
£6.5 million), an overall increase of £0.5 million.
Additions in the year totalled £3.9 million, comprising
mainly laboratory equipment of £1.8 million,
fixtures and fittings of £1.4 million and leasehold
improvements of £0.7 million, which were primarily
required to support the creation and capacity build-up
of COVID-19 testing services. During the year, the
freehold facility at Nottingham was sold and leased
back, thus there was a disposal from property, plant
and equipment and an addition to right-of-use assets.
At the time of disposal, the property had a net book
value of £2.2 million and it was sold for £5.0 million.
Under IFRS 16, the profit realised of £2.8 million was
offset against the right-of-use asset value created.
Right-of-use assets
As a result of the implementation of IFRS 16 “Leases”,
the Group recorded at the balance sheet date
£9.5 million of right-of-use assets (2019: £4.3 million),
an overall increase of £5.2 million which represented
the creation of a right-of-use asset as a consequence
of the new lease on the Nottingham property.
Inventories
Inventories at the year-end date amounted to
£3.6 million (2019: £0.8 million), the increase due
to the stockholding requirements of COVID-19 testing
following the establishment of the Infectious Disease
Testing business unit.
Trade and other receivables
Trade and other receivables at the year-end date
amounted to £10.5 million (2019: £5.2 million),
the increase driven by the receivables within the
Infectious Disease Testing business unit. The credit
losses provision at the year-end date amounted
to £34,000 (2019: £282,000), the reduction driven
by the increased proportion of Government work
undertaken. Overall, debtor days outstanding at the
year-end date were 42 days (2019: 47 days) and during
the year averaged 37 days (2019: 53 days).
Total lease liabilities at the year-end date amounted
to £12.1 million (2019: £4.1 million), an increase of
£8.0 million. This increase was primarily driven by the
inclusion of the right-of-use liability of £8.6 million in
relation to the Nottingham property, following the sale
and leaseback transaction in October 2020.
Cash and working capital
Cash generation from operations was strong at
£6.4 million (2019: £2.9 million). Cash and cash
equivalents at the year-end date amounted to
£8.4 million (2019: £1.2 million). Borrowings (excluding
leases) at the year-end date were £nil (2019: £95.9
million) as the Group redeemed and converted its
outstanding PIK loan notes into equity and repaid all
its bank and shareholder borrowings. The improved
funding position of the Group was driven principally
by the increased cash generation of the business,
fuelled by the growth in COVID-19 testing services, by
the funds raised from the placing on the Company’s
Admission to AIM which amounted to gross proceeds
of £35.0 million, and from the proceeds of the sale and
leaseback transaction of the Nottingham facility, which
amounted to £5.0 million.
The Group currently has no bank borrowing facilities.
Net assets
Net assets at the year-end date amounted to
£31.8 million (2019: net liabilities of £77.2 million),
the improved position arising from the settlement
of borrowings made possible by the £35.0 million
of funds raised on Admission to AIM and also as a
consequence of the reorganisation ahead of the
AIM Admission where the shareholder PIK loan
notes of £72.7 million were redeemed and
converted into equity.
Tony Ratcliffe
Chief Financial Officer
12 April 2021
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sourcebiointernational.comLSE Code: SBI
STRATEGIC REPORT
The Directors present their Strategic Report
for the year ended 31 December 2020.
Review of the business
A review of the business is contained in the Executive Chairman’s Review on pages 4 to 10 and the Chief Financial
Officer’s Review on pages 11 to 13.
Strategy and business model
SourceBio’s strategy is to grow each of its four business units through a combination of organic and inorganic
initiatives. Specifically, the Directors have identified clear strategic initiatives to generate shareholder value:
•
•
•
•
to maximise COVID-19 Antigen RT-PCR testing capacity and to explore other testing technologies,
offerings and routes to market based on demand;
to target organic growth by capitalising on the market and growth opportunities identified in all
three of the well-established business units, Healthcare Diagnostics, Genomics and Stability Storage;
to selectively execute on attractive and relevant acquisition opportunities; and
to increase its international presence through a combination of organic and acquisitive growth.
Infectious
Disease Testing
Healthcare
Diagnostics
Genomics
Stability
Storage
The following areas are some of the key drivers of potential organic growth:
Infectious Disease Testing
Whilst the focus in 2020 has been to scale up high
volume COVID-19 Antigen RT-PCR testing from the
Nottingham facility, the Group continues to respond
to market demand by reviewing areas to expand
its capabilities, offerings and routes to market. The
COVID-19 landscape is rapidly evolving and the Group
remains committed to exploring other complementary
testing protocols as they become available which
could provide incremental revenue generation.
Healthcare Diagnostics
Digital pathology
The Group has invested in a Philips Digital Pathology
system. This is currently being validated prior to its
anticipated rollout in 2021 and, once implemented,
this technology will enable the electronic distribution
of tissue sample images instead of the physical
movement of tissue samples held on a slide. This
would allow shorter turnaround times, allowing a
potentially greater throughput of samples, as well
as cost savings through reduced carriage costs.
In addition, this may allow Artificial Intelligence to
automate the reporting of the more routine
sample cases.
14
SourceBio International plcAnnual Report & Accounts 2020 Private healthcare providers
The Group’s historic focus on Cellular Pathology
services has primarily been driven by demand from
the NHS. Whilst significant growth is ultimately
expected from NHS customers due to recent delays
in elective surgeries and the backlog of testing as a
result of the COVID-19 pandemic, the Group sees a
further opportunity with private healthcare providers
who may potentially increase the outsourcing of their
Cellular Pathology functions, which are currently
largely performed in-house.
Expand oncology specialities
With an ageing population and cancer case diagnoses
becoming increasingly complex, SourceBio has built
a strong reputation with its complementary leading
Reference Laboratory. The Group expects to continue
building its portfolio of specialist diagnostics services,
bringing further tests in-house. The Group works with
leading research groups from pharma and global
diagnostics companies to provide additional testing
services for patients diagnosed with cancer, enabling
clinicians to provide clear patient management
programmes in quick turnaround times. This area
of the market is expected to expand as demand
grows, particularly as the backlog of elective surgeries
unwinds after the COVID-19 related delays.
Genomics
NGS
The Group recently invested in the latest Illumina
technology for high throughput NGS. With the
complementary Sanger Sequencing providing an
entry point service to research groups, NGS
represents an attractive upselling opportunity.
The recent establishment of a Genomics base in
Dublin, Ireland, provides SourceBio with another
foothold, which offers potential cross-selling and
up-selling opportunities.
Personalised medicine
There are strong synergies between the Healthcare
Diagnostics business and services and the technology
utilised in NGS in the Genomics business unit and
the market is shifting to increase its focus on a
personalised medicine approach to improving patient
treatment whilst also looking to reduce costs borne
by healthcare providers on wasted or unnecessary
treatment decisions. There has been a significant
increase in clinical diagnostics companies focusing
on various high impact and common cancer types
affecting the global population and the Group expects
to be able to partner with clinical diagnostics test
providers to provide bespoke services.
Expand presence in USA and Ireland
The Group has made recent investments to expand
its new facility in San Diego, USA and Tramore, Ireland
and to establish a further new facility in Dublin,
Ireland, deliberately sited close to high concentration
areas of customer catchment. As with the Group’s
Centre of Excellence in Cambridge, market penetration
and customer service benefits are expected given the
concentration of potential customers in those areas.
San Diego
- Stability Storage
- Service & Validation
- Infectious Disease Testing
Rochdale
- Stability Storage
- Manufacturing
- Service & Validation
Dublin
- Genomics
Tramore
- Stability Storage
- Service & Validation
Nottingham | HQ
- Healthcare Diagnostics
- Infectious Disease Testing
Cambridge
- Genomics
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STRATEGIC REPORT (continued)
Stability Storage
Acquisition model
Tramore, Ireland, and San Diego,USA,
facility expansions
Following recent investment in both facilities, the
Group now has additional Stability Storage capacity
available for customers, which is expected to generate
incremental revenues at modest additional cost.
Service capability in USA
The Group currently has no service headcount able to
support the installed base of the Group’s temperature
and humidity-controlled equipment within the USA but
the intention is to look to partner with an existing non-
competitive service team to bring in a revenue stream
at modest cost.
Upgrade of manufactured equipment
The Group has recently standardised a number of
components to allow the manufacture and sale of a
portfolio of products and added technology upgrades,
for example the launch of iStorage, a mobile based
app allowing customers to monitor the status of the
environments containing their products remotely.
The inclusion of this and similar enhancements offers
the potential to add extra value to the customer
proposition and to retrofit such enhancements to
existing installations.
As well as the focus on organic growth, SourceBio will
consider suitable attractive acquisition opportunities
in due course. Areas may include Cellular Pathology
laboratories to give better access to healthcare in
London, additional oncology specialities, further
expansion within the USA into Cellular Pathology and
Healthcare Diagnostics, and further Infectious Disease
Testing services. In any event, a robust filtering
process will be deployed to screen and analyse
potential prospects.
Corporate social responsibility
The Board has responsibility for all matters relating to
corporate social responsibility. The Directors recognise
the importance of corporate social responsibility
and aim to consider the interests of all stakeholders,
including its shareholders, customers, suppliers and
employees. The Board believes that encouraging an
environment where employees act in an ethical and
socially responsible way is critical to the Group’s long-
term success. The Group respects the laws of all the
countries in which it operates.
People
The Group believes that attracting, motivating and
rewarding employees is key to its long-term success.
Policies established by the Group are in line with
best practice and define that there should be no
discrimination, but equal opportunities for all. The
Group employs staff on the basis of their abilities and
qualifications with no regard to their age, disability,
gender, marriage or civil partnership, pregnancy or
maternity, or their race, religion or sexual orientation.
Promotion is on the basis of merit only. Applications
for employment by disabled persons are always fully
considered, bearing in mind the specific aptitudes of
the applicant involved.
Values
The Group’s values comprise:
•
•
•
Integrity, to act with honesty and fairness;
Energy, hard work and commitment;
Recognition, to recognise individual and team
efforts in achieving the Group’s goals; and
• Quality, to deliver high quality results.
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SourceBio International plcAnnual Report & Accounts 2020
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Involvement
Ethical, community and social policies
The Group is a laboratory services and products
provider and, as such, operates in highly regulated
ethical environments. The Board recognises that the
Group has a duty to be a good corporate citizen and to
respect the laws, and where appropriate the customs
and culture of the territories in which it operates.
The Group has a clear anti-bribery policy and is
committed to combatting slavery and human
trafficking. Its Modern Slavery Act statement is
published on its website.
The Group places great value on the involvement of
its employees and they are regularly briefed on the
Group’s activities. The Group closely monitors staff
attrition rates which it seeks to keep at low levels
and aims to structure staff compensation levels at
competitive rates in order to attract and retain high
calibre personnel. Employees are regularly provided
with information and progress updates about the
Group, through monthly newsletters or through line
management briefings.
Health and safety
The Group is committed to protecting the health and
safety of its employees and works hard to build and
maintain an effective and safe working environment
and culture. The Group continually monitors its health
and safety procedures to ensure they are adequate
and reflect latest best practice.
sourcebiointernational.comLSE Code: SBI
STRATEGIC REPORT (continued)
Environment
The Directors consider that the nature of the Group’s activities is not inherently detrimental to the environment.
The Group is committed to minimising any effect on the environment caused by its operations and it actively seeks
to make energy savings which are environmentally responsible and cost effective and to comply with applicable
environmental legislation.
Greenhouse gas emissions
In order to determine the emissions of carbon dioxide in tonnes, the Group uses the GHG Protocol Corporate
Accounting and Reporting Standard and reports on emissions arising from sources over which the Group has
operational control. The disclosures below encompass:
Scope 1
Includes emissions from combustion of fuel and operation of facilities (excluding combustion from Group vehicles)
Scope 2
Includes emissions from purchased electricity for the Group’s own use
Scope 3
The Group has not included Scope 3, emissions from vehicles and any purchased electricity and gas that are not
included in Scope 2, as they are immaterial
Scope 1 (tonnes)
Scope 2 (tonnes)
Total carbon footprint (tonnes of CO2e)
Intensity Ratio
(tonnes of CO2e per £ million of revenue)
Revenue, in £ millions
% relates
to UK
100%
75%
% relates
to UK
100%
73%
2020
190.6
788.6
979.2
19.3
50.7
2019
229.3
681.7
911.0
42.9
21.2
In order to express emissions in a quantifiable factor, an intensity ratio has been calculated which shows emissions
reported per £ million of revenue generated by the Group. The Board recognised that whilst the Group’s carbon
footprint increased as it expanded its facilities, the increased revenue throughput drove a reduction in the intensity
ratio to 19.3 (2019: 42.9).
Consumed energy
The kWh data in the table below are the quantities of energy from activities for which the Group is responsible
worldwide and the annual quantity of energy consumed resulting from the purchase of electricity, gas and vehicle
fuel by the Group for its own use and arising from those sources over which it has operational control. No significant
new initiatives were introduced during the year.
Scope 1
Scope 2
Total kWh
18
2020
% relates
to UK
2019
% relates
to UK
171,300
100%
196,600
3,115,400
73%
2,934,200
100%
75%
3,286,700
3,130,800
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STRATEGIC REPORT (continued)
Section 172 Statement
The Directors are required by the Companies Act 2006 to act in the way they consider, in good faith, would be most
likely to promote success of the Group for the benefit of its stakeholders as a whole and in doing so are required to
have regard for the following:
•
•
•
•
•
•
the likely long term consequences of any decision;
the interests of the Group’s employees;
the need to foster the Group’s business relationships with suppliers, customers and others;
the impact of the Group’s operations on the community and the environment;
the desirability of the Group maintaining a reputation for high standards of business conduct; and
the need to act fairly as between shareholders of the Group.
The Group effected a number of new policies and procedures during the year to safeguard employees during the
COVID-19 pandemic whilst at the same time progressively building a new Infectious Disease Testing business unit.
The Group has adopted the Corporate Governance Code for Small and Mid-Size Quoted Companies from the QCA
Code. The QCA Code is an appropriate code of conduct for the Group’s size and stage of development.
The Executive Chairman’s Review on pages 4 to 10 describes the Group’s activities, strategy and future prospects,
including the considerations for long-term decision making. The Corporate Social Responsibility Statement detailed
earlier describes the Group’s view and actions across a number of areas.
The Board considers its major stakeholders to be its employees, its suppliers, customers, and shareholders. When
making decisions, the interests of these stakeholders is considered informally as part of the Board’s discussions.
The Board has a good relationship with the Group’s employees. The Board maintains constructive dialogue with
employees through the Executive Directors. Appropriate remuneration schemes are maintained to align employees’
objectives with those of the Group.
The Board ensures that the Group endeavours to maintain good relationships with its suppliers by contracting on
their standard business terms and paying them promptly, within agreed and reasonable terms. The Group discusses
arrangements and any issues with key suppliers regularly and where required audit their activities to ensure that
materials are delivered effectively in a timely and cost-efficient manner. These principles ensure that the Group’s and
key significant suppliers’ interests are aligned.
The Executive Directors and Executive Management team meet key customers and partners regularly and encourage
a dialogue with them and commercial teams as appropriate. The Board receives regular reports on progress with
significant customer relationships to ensure that their decision making takes into account the needs of the
customer base.
The Board does not believe that the Group has a significant impact on the communities and environments within
which it operates. The Board recognises that the Group has a duty to minimise harm to the environment and to
contribute as far as is practicable to the local communities in which it operates.
The Board recognises the importance of maintaining high standards of business conduct with its customers,
suppliers and with other business partners. The Group operates appropriate policies on business ethics and provides
mechanisms for whistle blowing and complaints and operates in accordance with Section 172.
The Board endeavours to maintain good relationships with its shareholders and treat them equally. This is described
in more detail in the Corporate Governance Statement on pages 30 to 35.
The Group completed a sale and leaseback transaction in October 2020 in parallel with the Company’s Admission to
AIM, raising £5 million of cash. The transaction is summarised in note 32. The Directors believe that this transaction
was in all shareholders’ interests as it allowed the Group to secure the same aggregate cash inflow of £40 million,
including the proceeds of the share placing, but without the full dilutive effect of raising all £40 million through a
share placing.
20
SourceBio International plcAnnual Report & Accounts 2020 Group’s business, prospects, results of operations and
financial condition.
The Group relies on its suppliers being in a position
to keep pace with the increased levels of testing
being carried out. A failure in the global supply
chain could have an adverse impact on the Group’s
business, prospects, results of operations and
financial condition.
In addition, the COVID-19 testing services require
investment and could distract management focus
from other parts of the Group’s business which
could also have an adverse effect on the Group’s
business, prospects, results of operations and
financial condition.
There is also a risk that further prolongation of COVID-
19 (and a continued postponement of non-urgent
appointments and surgeries) will result in the volume
of pathology testing not returning to pre-COVID-19
levels, which would result in a reduction in revenues
for the Group’s established business units.
Risk management
The Board recognises that effective risk management
is essential to the successful delivery of the Group’s
strategy. As the business continues to grow, the
Board believes that it is important to further develop
and enhance the risk management processes and
control environment on an ongoing basis and ensure
it remains fit for purpose. The Board is committed to
continuing to identify and manage risks across the
Group in a consistent and robust manner.
Overview of risk management approach
Each business area is responsible for identifying,
assessing and managing the risks in their respective
area. Risks are identified and assessed by all business
areas on a periodic basis, and are measured against
a defined set of criteria, considering likelihood of
occurrence, and potential impact.
The Executive Board members have also conducted a
strategic risk identification and assessment exercise
to identify risks, including those that could impact
the business model, future performance, solvency
or liquidity. This risk information is combined with
a consolidated view of the business area risks. The
Board has the overall accountability for ensuring
that risk is effectively managed across the Group
and therefore ensuring that it is comfortable with
the nature and extent of the principal risks faced in
achieving its strategic objectives.
Principal risks and uncertainties
Set out below are the principal risks which we believe
could materially affect the Group’s ability to achieve
its financial and operating objectives and control or
mitigating activities adopted to manage them. The
risks are not listed in order of significance.
COVID-19 testing
A major commercial opportunity has arisen for the
Group in the form of COVID-19 Antigen RT-PCR testing
services but the size and duration of this opportunity
is uncertain, being linked inter alia to timing of the
successful mass roll-out of COVID-19 vaccines,
and/or alternative testing solutions being brought
to the market by competitors in the intervening
period, as well as the general demand for testing
services. These events could result, and indeed are
ultimately expected to result, in a drop in demand
for the Group’s Infectious Disease Testing services.
This could therefore have an adverse impact on the
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STRATEGIC REPORT (continued)
Specific risks relating to terms of key contracts
Certainty of contracts and pipeline
Although the Group has visibility over a proportion of
its revenues, in particular in relation to the signed up
contracted work of the well-established business units
within the core business of the Group, such contracted
work may fail to be awarded or can be subject to
cancellations and delays. Any cancellations, delays,
material amendments and uncertainty around the
Group’s contracts could have an adverse impact on
the Group’s business, prospects, results of operations
and financial condition. None of the contracts relating
to COVID-19 testing or cellular pathology testing have
minimum volumes.
The Group currently has an agreement with Spire
Healthcare Limited (“Spire”) for the provision of
COVID-19 Antigen RT-PCR testing services. The terms
of this key contract expire in June 2021 and whilst this
contract has been renewed or extended historically,
there is no guarantee that it will be extended after this
date. As this contract is currently a key contract for the
Group, the non-extension of the contract could have
an adverse impact on the Group’s business, prospects,
results of operations and financial condition.
Contractual arrangements with pathologists
Within the Group’s Healthcare Diagnostics business
unit, the Group uses a network of self-employed
specialist pathologists, contracting with the Group
as contractors or consultants. The Directors believe
that the self-employed, contractor status of these
pathologists is based not only on the contractual
structure of these arrangements but also on the
way in which the arrangements operate in practice.
Notwithstanding the Directors’ belief as to the proper
classification of these individuals as contractors, there
is a risk however that these pathologists could be
deemed by tax and other governmental authorities
in the relevant jurisdictions to be employees of the
relevant member of the Group instead of contractors
or consultants. This would result in additional future
costs to the Group as well as potential historical
liabilities for the Group in terms of PAYE and national
insurance contributions (or the equivalent in any
relevant jurisdiction) and associated interest and
penalty charges. This would be likely to have an
adverse effect on the Group’s financial performance
and position and more generally on the Group’s
business model. If some of the Group’s pathologists
are deemed to be workers or employees they would
be entitled to additional rights including, but not
limited to, paid annual leave and sick pay, overtime
pay, employee benefits, rights to claim for unfair
dismissal, unemployment insurance and workers
compensation. Furthermore, if there is a change in
employment or tax law which means that the nature
of the relationship which exists between the Group
and its pathologists is not one of self-employment,
this would be likely to have an adverse impact on the
Group’s business, prospects, results of operations and
financial condition and more generally on the business
model of the Healthcare Diagnostics business unit.
22
SourceBio International plcAnnual Report & Accounts 2020 Medical data handled by the Group could contain
sensitive details extracted from patients’ medical
records
The General Data Protection Regulation (“GDPR”) came
into force on 25 May 2018 and introduced a number
of more onerous obligations on data controllers and
rights for data subjects, as well as new and increased
fines and penalties for breaches of the data privacy
obligations of data controllers.
Holding sensitive customer data poses a risk for the
Group (including negative publicity associated with,
for instance, a breach of customer confidentiality or
unauthorised disclosure of personal data). Whilst the
Group has procedures to minimise the occurrence
of such events, any associated negative publicity or
threat of litigation against the Group could have a
material adverse effect on the Group’s performance,
financial condition or business prospects.
In addition, if any personal data (whether relating to
patients or other data subjects such as employees)
were to be stolen or leaked to a third-party, then
there is the potential for consequences for both the
data subject and the Group. The penalties for loss
of personal data are extremely high reflecting the
seriousness of such a breach. For example, penalties
for non-compliance with GDPR include fines of up to
4% of annual global turnover or €20 million, whichever
is greater. Other corrective powers and sanctions
include imposing a temporary or permanent ban on
data processing, ordering the rectification, restriction
or erasure of data, and suspending data transfers to
third parties or other countries. If the Group were to
experience a data breach or a loss of personal data,
then any sanctions imposed, as well as associated
loss in customer confidence and reputational
damage could have an adverse impact on the
Group’s business, prospects, results of operations
and financial condition.
Further, the recent Court of Justice of the European
Union judgement in Schrems II has implications for
international data transfers to countries outside of
the EEA. Companies can no longer rely upon (i) the US
Privacy Shield, (ii) standard contractual clauses or (iii)
Binding Corporate Rules to ensure compliance with
GDPR without specific consideration being given to a
country’s domestic laws and whether those supersede
an individual’s data rights under GDPR.
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Risks specific to the Group’s Healthcare Diagnostics
and Infectious Disease Testing business units
The Group’s diagnostic activities for public
healthcare applications are dependent upon the
ability to maintain ISO 15189 accredited status.
Whilst operations could still continue without this
accreditation, it is the accreditation that provides the
Group with significant commercial and operational
advantages within the competitive landscape and is
a key factor for clients to work with the Group. The
Group has implemented clear policies and procedures
throughout its business aimed at ensuring compliance
with ISO 15189 requirements as well as other quality
standards and the UK National External Quality
Assessment Service scheme. Whilst responsibility
for compliance with such policies and procedures
rests with operational management, the Group also
employs a Quality Manager who oversees compliance.
The Group is also subject to regular audits and
inspections from the regulatory bodies responsible
for such accreditations. The Group’s ISO 15189
accreditation was renewed in March 2018 following
a satisfactory audit inspection. Although the Group
currently has ISO 15189 accredited status there is no
guarantee that the Group will have in the future or
indeed retain its accreditation of any other quality
standards or that quality standards advisory boards
will not increase the level of standards for compliance
potentially resulting in the loss of the Group’s
accreditation or in the Group incurring additional costs
in maintaining such accreditations.
sourcebiointernational.comLSE Code: SBI
There is no guarantee that changes, if any, in funding
policies for healthcare or shifts in political attitudes to
healthcare in countries in which the Group currently
operates, or may operate in the future, would not
materially adversely affect the Group’s business. The
occurrence of such changes cannot be accurately
predicted and could have an adverse impact on the
Group’s business, prospects, results of operations and
financial condition.
Competition
The Group’s current and potential competitors have
established, or may establish, financial and strategic
relationships amongst themselves or with existing or
potential customers or other third parties to increase
the ability of their products to address customer
needs. Accordingly, it is possible that new competitors
or alliances amongst competitors could emerge and
acquire significant market share. Existing
and/or increased competition could, therefore,
adversely affect the Group’s market share and/or
force the Group to reduce the price of its products,
which could have an adverse impact on the Group’s
business, prospects, results of operations and
financial condition.
Management of growth
The Group’s growth plans may place a significant
strain on its management and operational, financial
and personnel resource. Further, the ability of the
Group to implement its strategy requires effective
planning and management control systems.
Therefore, the Group’s future growth and prospects
will depend on its ability to manage this growth. The
value of an investment in the Company is dependent
upon the Group achieving the aims set out in this
document. There can be no guarantee that the Group
will achieve or manage the level of success that the
Board expects.
STRATEGIC REPORT (continued)
Reputational risk arising from a number of factors,
including failure to deal appropriately with legal
and regulatory requirements, ethical practices,
fraud, privacy, record-keeping, and other trading
practices, as well as market risks inherent in the
Group’s business
The Group’s reputation is central to its future success
in terms of the services and products it provides,
the way in which it conducts its business and the
financial results which it achieves. Issues that give
rise to reputational risk include, but are not limited
to, failure (or allegations or perceptions of failure)
to deal appropriately with legal and regulatory
requirements, ethical practices in relation to access
to and use of patient data and the commercialisation
of opportunities arising from its access to and use of
patient data, money-laundering, fraud prevention,
privacy, record-keeping, sales and trading practices
and the credit, liquidity and market risks inherent in
the Group’s business.
If the Group fails, or appears or is alleged to fail, to
deal with various issues that give rise to reputational
risk, this could lead to adverse publicity, press
attention and Government (including Parliamentary)
and regulatory scrutiny, which could materially harm
its business prospects. Also, failure to meet the
expectations of the press and the general public,
as well as its customers, suppliers, employees,
shareholders and other business partners, may have
an adverse impact on the Group’s business, prospects,
results of operations and financial condition.
The Group’s performance is linked to political
attitudes and decisions affecting healthcare
There are numerous factors which may affect the
success of the Group’s business which are beyond
its control, including changes in political conditions
and attitudes towards the funding of healthcare.
In many countries, healthcare is centrally funded
by governments, such as the funding of the NHS
by the UK Government, and if there is a change in
government, there may be a shift in government
policy in relation to the funding of healthcare. For
example, if there is a change in government in the
UK, it is likely that a new government would alter the
amount of funding available for healthcare and/or the
allocation of resources available to the NHS, including
the potential for a reduction in the amount of services
outsourced to the private sector. These outcomes
may result in some of the Group’s key contracts being
terminated, not renewed or negatively impacted.
24
SourceBio International plcAnnual Report & Accounts 2020
a cyber-attack, whether by a third-party or an insider,
it may incur significant costs, including liability for
stolen assets or information, as well as repairing any
damage caused to the Group’s network infrastructure
and systems. The Group may also suffer reputational
damage and loss of investor confidence. If the Group
suffers a cyber-attack, this could expose the Group to
potential financial and reputational harm.
Highly skilled management and personnel
The Group depends to a significant degree on the
continued services of the Directors, its Executive
Management team as well as all other staff. Their
knowledge of both the market and their skills and
experience are crucial elements to the success of the
Group’s business. The loss of significant numbers of
personnel or the Group’s inability to attract, develop
and retain additional qualified management and
other personnel could have an adverse impact on the
Group’s business, prospects, results of operations and
financial condition.
Multi-jurisdictional operations and regulation
The Group operates and intends to continue to
operate in numerous jurisdictions, which have
different regulatory, fiscal and legal environments that
could change in the future and could impact how the
Group conducts its business in these jurisdictions.
The Group’s operations will be reliant on it identifying
and adhering to the regulatory requirements in
those jurisdictions. There can be no guarantee
that the Group will always be able to identify such
requirements or put in place the necessary licences
and/or approvals. If a member of the Group was
found not to have the appropriate licences and/or
approvals or to have violated the terms of such licence
or any local laws and/or regulations, the Group could
incur a fine (the amount dependent on the nature of
the violation), the relevant member of the Group could
be subject to financial liability, required to change its
business practices or forced to suspend or terminate
operations in the relevant territory. Alternatively, a
member of the Group could be required to obtain
new or different licences or regulatory approvals.
Such eventualities could result in costs or other
consequences that could have an adverse impact on
the Group’s business, prospects, results of operations
and financial condition.
Cyber-attacks and other risks relating to
data security
The Group relies on information technology
systems to conduct its operations. Because of this,
the Group and its software are at risk from cyber-
attacks. Cyber-attacks can result from deliberate
attacks or unintentional events and may include (but
are not limited to) malicious third parties gaining
unauthorised access to the Group’s software for
the purpose of misappropriating financial assets,
intellectual property or sensitive information
(such as patient data), corrupting data, or causing
operational disruption.
Whilst the Directors consider that the Group has taken
appropriate steps to protect its systems, there can
be no assurance that its efforts will prevent service
interruptions or security breaches in its systems or
the unauthorised or inadvertent wrongful access or
disclosure of confidential information that could have
an adverse impact on the Group’s business, prospects,
results of operations and financial condition or result
in the loss, dissemination, or misuse of critical or
sensitive information. If the Group suffers from
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26
SourceBio International plcAnnual Report & Accounts 2020 STRATEGIC REPORT (continued)
IT infrastructure
Due to the nature of its operations, the Group is
highly dependent on the effective operation of its IT
systems and infrastructure. Any major systems failure,
including failures relating to the Group’s network,
software, laboratory information management system
(“LIMS”), internet or hardware could have a material
adverse effect on the Group’s ability to fulfil its
obligations to customers and to maintain the platform,
in addition to harming customer relationships and
diminishing the Group’s goodwill. Such an event could
therefore have an adverse impact on the Group’s
business, prospects, results of operations and
financial condition.
For practical reasons, the Group may continue to
house some or all of its own computer installations
in dedicated third-party hosting facilities or employ
preconfigured computer hardware from third-party
providers. These computing resources by their nature
will include electronic records containing confidential
information and other operational information.
Any failure in the security systems employed to
protect such information or any other exposure of
the electronic information contained in the Group’s
computing resources could enable others to produce
competing products and/or services, use the Group’s
proprietary technology and/or adversely affect its
business position.
Reliance on a limited number of key suppliers
The Group’s reliance on its suppliers being in a
position to keep pace with the increasing levels
of demand is not specific to the rapidly growing
Infectious Disease Testing business unit. The potential
for delays and bottlenecks at key suppliers could
delay the installation of equipment. A lack of supplier
competition could potentially also raise the Group’s
input costs. There is no guarantee that the suppliers
of key components and parts will continue to supply
these components and parts or even continue
trading which may adversely affect the Group’s
ability to supply customers with its products and
services and could potentially lead to contractual
penalties and/or the loss of customers. As a
consequence, this could have an adverse impact on
the Group’s business, prospects, results of operations
and financial condition.
Regulatory risk
The Group’s products and services are regulated
by national and regional medical regulations.
Additionally, the Group is required to comply with
ongoing regulatory requirements such as to maintain
a quality system pursuant to these regulations which
subjects it to periodic inspections, scheduled and
unscheduled. Failure to pass an inspection, recall or
the loss of clearance to market a particular service
or product, could have an immediate and negative
impact on the Group’s revenues, prospects and its
share price. The Group’s prospects for the foreseeable
future will depend heavily on its ability to successfully
obtain regulatory approval necessary for it to be able
to provide its products and services.
The applicable rules, regulations and guidance in the
various countries also change frequently and are
subject to interpretation. Change of rules applicable
to a new product or service or as related to a currently
marketed product or service could mean that the
Group needs to conduct additional studies and
re-submit products to the regulatory authorities for
re-examination/re-assessment, which may impact the
Group’s ability to generate revenue in certain markets.
Furthermore, if any examination/assessment is not
favourable, the Group may not be able to continue to
market and sell the product or service.
There is a risk that the Group’s employees, consultants
and commercial partners may engage in misconduct
or other improper activities, including non-compliance
with regulatory standards and/or applicable law. It is
not always possible to identify and deter misconduct
by employees, independent contractors, consultants,
suppliers, commercial partners and vendors, and the
precautions the Group takes to detect and prevent this
activity may not be effective in controlling unknown or
unmanaged risks or losses, or in protecting the Group
from governmental investigations or other actions or
claims stemming from a failure to be in compliance
with such laws or regulations. If any such actions
are initiated against the Group, and the Group is not
successful in defending itself or asserting its rights,
those actions could have an adverse impact on the
Group’s business, prospects, results of operations
and financial condition, including the imposition of
significant fines or other sanctions, and its reputation.
The Strategic Report was approved by the Board on
12 April 2021 and signed on its behalf by:
Jay LeCoque
Executive Chairman
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sourcebiointernational.comLSE Code: SBI
THE BOARD OF DIRECTORS
The Board of Directors comprises two Executive Directors and four Non-Executive Directors, as below:
Executive Directors
Jay LeCoque
Executive Chairman, aged 58
Jay is the Executive Chairman of SourceBio. He has over 20 years of senior
management experience mainly focused on listed UK life sciences companies. Jay
joined the Group in 2016 initially as Non-Executive Chairman and was appointed
Executive Chairman in 2017. Jay was also an Executive Director of Bioquell plc from
2016 until its acquisition by ECOLAB in 2019. Prior to that, he was CEO of Celsis
International plc from 2000 to 2009, and remained CEO following a public to private
transaction in 2009 to form Celsis International Ltd until its acquisition in 2015. Jay
gained an MBA from The Kellogg School of Management.
Tony Ratcliffe
Chief Financial Officer and Company Secretary, aged 57
Tony joined SourceBio on Admission in October 2020. Tony has over 20 years
senior financial management experience with fast growing technology companies
in a variety of sectors. His healthcare and biotechnology experience includes Celsis
International plc, Gemini Genomics plc (where he led their Nasdaq IPO) and as
founding CFO of Lab 21. In other technology businesses, Tony led significant growth
through the execution of six acquisitions whilst CFO of AIM quoted Brady plc and
as its first Finance Director, he helped to significantly grow i2, a law enforcement
software house. Tony qualified as a Chartered Accountant with KPMG and has an
MBA from Heriot-Watt University, Edinburgh.
Sir Ian Carruthers OBE
Senior Independent Non-Executive Director, aged 70
Sir Ian joined SourceBio as Senior Independent Non-Executive Director in 2019.
Sir Ian holds a number of chair and non-executive board and advisory roles in
the public and private sectors. He was previously Chief Executive of NHS South of
England, comprising three health bodies: South West, South Central and South East
and his career in the National Health Services spans over 40 years. He was awarded
the Order of the British Empire for services to health in 1997 and a Knighthood in
2003 for services to the NHS and in 2006 he took over as Interim Chief Executive of
NHS England, amongst the largest organisations in the world, with over 1.3 million
employees and a budget in excess of £100 billion. He has been the lead author on
several papers on reviewing and improving the NHS and is seen as an international
expert on healthcare systems and service delivery. Sir Ian is currently Chancellor
of the University of the West of England, and was formerly Chair of Healthcare UK,
Chair of the Innovation Health and Wealth Implementation Board, Co-Chair of the
Prime Minister’s Challenge on Dementia and Non-Executive Director of Bioquell plc.
Non-Executive Directors
28
SourceBio International plcAnnual Report & Accounts 2020 Simon Constantine
Independent Non-Executive Director, aged 62
Simon joined SourceBio on Admission in October 2020. Simon is a Chartered
Accountant and has extensive business management and acquisition experience
at board level, particularly in the healthcare and life sciences sectors. He co-led
the management buy-in and subsequent trade sale of Life Sciences International
plc, where he led the acquisition of 18 companies in 10 years. He has served as a
non-executive director of a number of venture capital and private equity-backed
businesses as well as having had more than 30 years’ experience as a director of
publicly listed companies, including at Bioquell plc. Simon is Chairman of Northern
Venture Trust Plc and Capstone Foster Care Limited, another buy and build of 16
businesses over 13 years.
Christopher Mills
Non-Executive Director, aged 68
Christopher is a director and the sole shareholder of Harwood Capital Management
Limited, which is the designated corporate member and the controller of Harwood
Capital. He formed the Harwood Capital Management Group in 2011 on his
acquisition of Harwood Capital from the J O Hambro Capital Management Group.
Christopher is also the CEO and director of North Atlantic Smaller Companies Trust
plc, a UK listed investment trust and a director and investment manager of Oryx.
He has a long and successful investing track record and is a non-executive director
of a number of both public and private companies. Prior to joining the J O Hambro
Capital Management Group (which he co-founded in 1993), he worked from 1975
to 1993 for Samuel Montagu Limited, Montagu Investment Management Limited
and its successor company, Invesco MIM, latterly as Head of North American
Investments and Head of North American Venture Capital.
Marco Fumagalli
Non-Executive Director, aged 50
Marco is a Founding Partner of Continental, having co-founded the business in
2013, following a successful career in private equity spanning over 15 years. He
worked from 1996 to 2010 at 3i SgR S.p.A. (part of the 3i Group), where he became a
Partner and Managing Director before serving as Chief Executive Officer from 2005,
following which he joined Leponte S.A., as Head of Private Equity. He has also held a
number of directorships of both public and private companies. He is currently non-
executive director of CIP Merchant Capital plc, an AIM listed investment company
which he co-founded in 2017. Marco holds a Business Administration Degree from
Bocconi University in Milan.
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sourcebiointernational.comLSE Code: SBI
CORPORATE GOVERNANCE STATEMENT
Compliance
The Board of Directors as a whole is collectively accountable to the Company’s shareholders for good corporate
governance and recognises the importance of sound corporate governance commensurate with the size and nature
of the Group and the interests of all its shareholders. The Quoted Companies Alliance has published the QCA Code,
a set of corporate governance guidelines, which include a code of best practice, comprising principles intended as a
minimum standard, and recommendations for reporting corporate governance matters. The Board has adopted the
QCA Code with effect from the date of Admission. Details of the Code can be obtained from the Quoted Companies
Alliance’s website (www.theqca.com) and fuller text in relation to the Company’s compliance can be found in the
Corporate Governance Statement on the Company’s website (www.sourcebiointernational.com).
Set out below describes how the Group, as at 31 December 2020, sought to address the principles underlying
the Code.
Principle 1
Establish a strategy and business model promoting long-term value for shareholders
As described in the Strategic Report, the Board is
responsible to shareholders for setting the Group’s
strategy by maintaining the policy and decision-
making process around which the strategy is
implemented, ensuring that necessary financial and
human resources are in place to meet strategic aims,
monitoring performance against key financial and
non-financial indicators; providing leadership whilst
maintaining the controls for managing risk; overseeing
the system of risk management; and setting values
and standards in corporate governance matters.
The Group’s strategy is to grow each of the four
business units (Infectious Disease Testing, Healthcare
Diagnostics, Genomics and Stability Storage) by a
combination of organic and inorganic initiatives.
Principle 2
Seek to understand and meet shareholder needs and expectations
The Board endeavours to engage in clear and
consistent dialogue with both existing and potential
shareholders to understand their needs and
expectations and to ensure that the Group’s strategy,
business model and progress are clearly understood.
The Board also maintains regular contact with its
advisors to ensure that the Board develops an
understanding of the views of the investor community.
The Board communicates with shareholders through
a number of means. Unpublished price sensitive
information is disclosed in as timely a manner as
possible and within regulatory requirements. The
Board views the Company’s Annual General Meeting
as an important forum for communication between
the Company and its shareholders and encourages
shareholders to express their views on the Company’s
business activities and performance. Regular meetings
will be held between the Executive Chairman, Chief
Financial Officer and institutional investors and
analysts to ensure that the Group’s strategy,
financials and business developments are
communicated effectively.
30
SourceBio International plcAnnual Report & Accounts 2020 Principle 3
Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board recognises the importance of corporate
social responsibility and seeks to take account of
the interests and feedback from all the Group’s
stakeholders, including its investors, customers,
suppliers, partners and employees when operating the
Group’s business. The Board believes that fostering
an environment in which employees act in an ethical
and socially responsible fashion is critical to its long-
term success. The Group seeks to ensure continued
engagement with its employees, clients, suppliers,
shareholders and the wider public via regular
discussions, having processes in place designed to
ensure regular dialogue between employees and
senior management, and by technological means,
using the functionality of social media platforms and
software to gain insights and feedback from its clients,
suppliers, partners and the public.
Principle 4
Embed effective risk management, considering both opportunities and threats throughout the organisation
The Group recognises that risk is inherent in all of
its business activities and is an important part of the
Board’s formulation of strategy. The overall objective
of the Board is to set policies that seek to reduce
risk as far as possible without unduly affecting the
Group’s competitiveness and flexibility. The Board is
assisted in this matter by the Audit Committee. The
Board routinely monitors risks that could materially
and adversely affect the Group’s ability to achieve
its strategic goals, financial condition and results
of operations. The effectiveness and adequacy of
mitigating controls are assessed and if additional
controls are required, these will be identified and
responsibilities assigned. The Board is supported
by senior management who collectively play a key
role in risk management. Each year the Company’s
Annual Report and Accounts will contain a section
setting out what the Board considers to be the most
significant risks faced by the Group. The Group
maintains commercial insurance at a level it believes is
appropriate against certain risks commonly insured in
the industry in which the Group operates.
Principle 5
Maintain the Board as a well-functioning, balanced team led by the Chairman
The Board comprises six Directors, of whom Jay
LeCoque and Tony Ratcliffe are Executive Directors
and Sir Ian Carruthers, Simon Constantine,
Christopher Mills and Marco Fumagalli are Non-
Executive Directors. Sir Ian Carruthers and Simon
Constantine are independent Non-Executive Directors.
Christopher Mills and Marco Fumagalli have been
appointed as the Board representatives of Harwood
and Continental respectively, pursuant to the
Relationship Agreements. Each member of the Board
is committed to spending sufficient time to enable
them to carry out their duties, being a minimum
of two days per month. The Board is responsible
for the management of the Group’s business
(Including formulating, reviewing and approving the
Group’s strategy, financial activities and operating
performance), for which purpose the Directors may
exercise all the powers of the Group.
The Directors may delegate such powers to any
person or Committee as they think fit and those
powers may be sub-delegated with the authority of the
Directors. The Directors may revoke any delegation of
powers. The Board acknowledges that, in having an
Executive Chairman (effectively combining the roles
of Chairman and CEO), best practice as stated in the
QCA Code is not being followed. In light of the Group’s
current size and development stage, the Board
considers however that the current arrangements are
appropriate but will keep this under regular review.
The Board has established Audit, Remuneration and
Nomination committees with formally delegated
duties and responsibilities. The Executive Chairman
does not sit on any of these Committees and each
Committee is currently comprised entirely of
Non-Executive Directors.
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sourcebiointernational.comLSE Code: SBI
CORPORATE GOVERNANCE STATEMENT (continued)
Principle 6
Ensure that between them Directors have the necessary up-to-date experience, skills and capabilities
The Directors come from a range of backgrounds and
have a wide variety of experience and traits which
means that the Board as a whole is well balanced and
has the skills and other attributes necessary to deliver
the Company’s strategy. Brief details of the Directors’
backgrounds and experience are available on pages
28-29. The Nomination Committee is responsible
for continuing to evaluate the balance of skills,
knowledge and experience and the size, structure
and composition of the Board and its committees,
retirements and appointments of additional and
replacement Directors and Committee members and
making appropriate recommendations to the Board
on such matters. The Company Secretary will provide
Directors with updates on key developments relating
to the Company, the sectors in which the Group
operates, and legal and governance matters (including
advice from the Company’s broker, lawyers and
advisors) and will also support the Executive Chairman
and the Nomination Committee in identifying and
addressing the training and development needs
of Directors.
Principle 7
Evaluate Board performance based on clear and relevant objectives seeking continuous improvement
The Company’s process for evaluating the
performance of the Board, its Committees and
individual Directors, will primarily be undertaken
by the Nomination Committee. The Nomination
Committee will regularly review the structure, size
and composition (including the skills, knowledge,
experience and diversity) of the Board and make
recommendations and review the results of any Board
performance evaluation process that relate to the
composition of the Board. The Nomination Committee
shall also make recommendations to the Board
concerning plans for succession for both Executive
and Non-Executive Directors and in particular for
the current key role of Executive Chairman (and
specifically whether that role should be split between
a Non-Executive Chairman and a CEO).
Principle 8
Promote a corporate culture that is based on ethical values and behaviours
The Company is committed to ensuring that the
Group operates according to the highest ethical
standards and the Board has primary responsibility
for achieving this. The Directors believe that the main
determinant of whether a business behaves ethically
and with integrity is the quality of its people and the
Board, together with the Group’s HR function, takes
great care to ensure that all individuals employed by
the Group demonstrate the required high levels of
integrity. The Group has also adopted formal policies
addressing, inter alia, bribery and corruption, the use
of social media and dealing in the Company’s shares.
The Group strives to be a good corporate citizen and
respects the laws of the countries in which it operates.
Each year the Company’s Annual Report and Accounts
will contain a Corporate and Social Responsibility
section which will address its people, values, diversity,
employee welfare and involvement, employment,
training, career development and promotion of
disabled persons, health and safety, ethical and social
policies, human rights, product development, impact
on the environment, greenhouse gas emission and
slavery and human trafficking.
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SourceBio International plcAnnual Report & Accounts 2020 Principle 9
Maintain governance structure and processes that are fit for purpose and support good decision-making
by the Board
The Board is collectively responsible for the long-term
success of the Company and provides leadership to
the Company within a framework of effective controls,
checks and balances. The Executive Management
team, led by the Executive Chairman, is responsible
for the day to day running of the business, with key
decisions (including those considered to directly relate
to implementation of the Group’s strategy) being
reserved for the Board. In conjunction with senior
management, the Executive Chairman is responsible
for the execution of strategy approved by the Board
and the implementation of Board decisions. The Board
has established an Audit Committee, a Remuneration
Committee and a Nomination Committee. Relevant
matters are considered by each Committee and
recommendations are taken to the full Board. Further
details of each Committee are detailed below.
Principle 10
Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders
and other relevant stakeholders
The Board recognises that it is accountable to
shareholders for the performance and activities of the
Group and to this end is committed to maintaining
good communication and having constructive dialogue
with its shareholders. The Board communicates with
shareholders in a number of ways, including via the
Company’s Annual Report and Accounts, its interim
and full-year results announcements, trading updates
(where required or appropriate), the Company’s
Annual General Meetings and the investor relations
section of the Company’s website. More details of how
the Company communicates with shareholders
is explained below.
The Board recognises that the Company is not fully compliant with Principle 5 of the QCA Code which requires the
Company to have an appropriate balance between Executive and Non-Executive Directors and recommends that
the Chairman and CEO positions are separate roles. At present the Company has two Independent Non-Executive
Directors, namely Sir Ian Carruthers and Simon Constantine, and Jay LeCoque is Executive Chairman. The Board
believes that the balance between the Executive and Non-Executive Directors is sufficient to ensure good corporate
governance with a balanced approach to decisions at this time. However, it also recognises that the roles of Chairman
and CEO are currently both carried out by the Executive Chairman. The Board will be mindful of this as the Company
grows and is in a position to appoint additional Directors. The Nomination Committee of the Board is specifically
tasked in its terms of reference with keeping this matter under regular review. Other than in these areas, the
Company is fully compliant with the QCA Code.
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sourcebiointernational.comLSE Code: SBI
CORPORATE GOVERNANCE STATEMENT (continued)
Board attendance
The number of full scheduled Board and Committee meetings and the attendance records of each Director attending
meetings since the date of Admission to the year-end date is indicated below:
Number of meetings attended:
Jay LeCoque1
Tony Ratcliffe1
Sir Ian Carruthers
Simon Constantine
Marco Fumagalli1
Christopher Mills
Board
meetings
Audit
Committee
meetings
2/2
2/2
2/2
2/2
2/2
2/2
1/2
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1 Jay LeCoque, Marco Fumagalli and Tony Ratcliffe attended the meeting of the Audit Committee by invitation with Tony Ratcliffe also attending as
Secretary to the Audit Committee
There were no meetings of the Remuneration or Nomination Committees during the year.
Committees of the Board
Further details of the Board Committees are described below:
Audit Committee
The work of the Audit Committee is addressed in more detail on pages 42 to 45 by its Chairman, Simon Constantine.
Remuneration Committee
The work of the Remuneration Committee is addressed in more detail on pages 46 to 50 by its Chairman,
Sir Ian Carruthers.
Nomination Committee
The Nomination Committee plans to meet twice a year, or more as the need arises.
The Nomination Committee recommends the appointment of new Directors to the Board and makes
recommendations on Board composition and balance.
The terms of reference of the Nomination Committee have been documented and agreed by the Board of Directors
and are available from the Company Secretary. The key terms are as follows:
34
SourceBio International plcAnnual Report & Accounts 2020 •
•
•
to review and evaluate the Board structure, size and composition and to make recommendations to the Board
with regard to any changes that are deemed necessary;
to consider succession planning for Directors, in particular the Executive Chairman and other senior management
and membership of the Audit and Remuneration Committees; and
to prepare a description of the roles and capabilities required for a particular appointment and to be responsible
for identifying and nominating candidates for approval of the Board to fill Board vacancies.
The Directors seek to build on a mutual understanding
of objectives between the Group and its shareholders,
in particular by communicating regularly throughout
the year and encouraging them to participate in the
Annual General Meeting, which all the Directors would
normally attend. The Non-Executive Directors are
available to meet with shareholders, should this be
desired, and each communicates regularly with the
Group’s Nominated Advisor.
The Executive Chairman ensures that the views of
shareholders are communicated to the Board as a
whole. All meetings with shareholders are held in a
manner which ensures price sensitive information
which has not been made available to shareholders
generally, is protected from disclosure.
The Executive Chairman and Chief Financial Officer will
give annual and bi-annual presentations to institutional
investors and analysts. These presentations will be
made available on the Company’s website. Annual
and interim reports as well as regulatory and press
releases are also published on the website as are the
terms of reference of the three Board Committees.
Paper copies of the Annual Report and Accounts are
mailed to those shareholders who have elected to
receive them in hard copy form.
By order of the Board
Tony Ratcliffe
Company Secretary
12 April 2021
The Nomination Committee is made up of
independent Non-Executive Directors and comprises
Sir Ian Carruthers and Simon Constantine, with Sir
Ian Carruthers as Chairman. Between the date of
Admission and the year-end date, the Committee
has not met.
Executive Management team
The Executive Management team comprises the
two Executive Directors, the Chief Operating Officer
together with a number of functional heads. The team
is chaired by Jay LeCoque and normally meets every
Monday plus a longer meeting once each month to
discuss the performance of the Group’s business
units, its commercial and financial prospects and any
other issues as they arise in the course of the
Group’s activities.
The Board has delegated the following responsibilities
to the Executive Management team:
•
•
•
•
•
the development and recommendation of
strategic and operational plans to be presented
for consideration by the Board that reflect the
objectives and priorities established by the Board;
the implementation and execution of the
strategies and policies, as reflected in approved
strategic and operational plans, as determined by
the Board;
the monitoring of the operational and financial
results against agreed plans, budgets and
forecasts;
the prioritising and allocation of financial,
technical and human resources in order to deliver
on agreed plans, budgets and forecasts; and
the development and implementation of
appropriate risk management systems.
Dialogue with shareholders
The Executive Chairman is responsible for the day-to-
day management of the Group and for implementing
the strategy as reviewed and approved by the Board,
as well as for ensuring effective communication with
shareholders, brokers and analysts.
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sourcebiointernational.comLSE Code: SBI
REPORT OF THE DIRECTORS
In accordance with the Companies Act 2006, the Directors are
pleased to present their Annual Report together with the audited
consolidated financial statements of SourceBio International plc
for the year ended 31 December 2020.
Corporate details and change of name
The Company changed its name from Sherwood Holdings Limited to SourceBio International Limited on 21 October
2020 and then re-registered from a private company to a public limited company, SourceBio International plc,
on 21 October 2020.
SourceBio International plc is incorporated and registered in England and Wales with registration number 10269474.
The registered office is 1 Orchard Place, Nottingham Business Park, Nottingham, NG8 6PX.
Principal activities
The Group is a leading international provider of integrated state-of-the-art laboratory services and products to clients
in the healthcare, clinical, life science research and biopharma industries, with a focus on improving patient diagnosis,
management and care. The Group’s revenues are derived from four core business units:
•
Infectious Disease Testing - since May 2020, the Group has provided COVID-19 testing services. It is intended
that this new business unit will potentially provide a broad range of infectious disease testing across the NHS,
private healthcare and commercial sectors in the future.
• Healthcare Diagnostics – histopathology and clinical diagnostic services for the NHS and private healthcare
across the UK and Ireland.
• Genomics – DNA sequencing services for pharmaceutical and biotechnology companies, academia, contract
research organisations (CROs) and other research groups in the UK, Europe and North America.
•
Stability Storage – shelf-life testing services and equipment for pharmaceutical and biotechnology companies,
contract manufacturers and analytical testing companies from around the world but primarily in the UK, Ireland
and the USA.
Information included in other reports
The Company has chosen, in accordance with the Companies Act 2006 s414C(11), to set out in the Strategic Report
and Corporate Governance Statement, certain information required by the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 Sch. 7 to be contained in the Directors’ Report (Financial risk
management disclosures are detailed in note 29). The Company’s Strategic Report and the other reports shown
on pages 1 to 27 include information on likely future developments of the business, employee involvement and
disclosures concerning greenhouse gas emissions that would otherwise be required to be disclosed in this
Directors’ Report. The Company endeavours to maintain good relationships with partners, customers and suppliers
and is in regular communication with all.
Corporate Governance Statement
The information that meets the requirements of the Corporate Governance Statement can be found on pages 30 to 35.
36
SourceBio International plcAnnual Report & Accounts 2020 Results and dividend
Revenue for the year was £50.7 million (2019: £21.2 million). Adjusted EBITDA for the year was £14.2 million (2019:
£3.0 million) and profit after tax was £3.0 million (2019: loss of £8.1 million).
The detailed results for the year and the financial position as at 31 December 2020 are shown in the Consolidated
Statement of Comprehensive Income and the Statement of Financial Position. A review of the results of the year is
shown in the Chief Financial Officer’s Review.
The Directors do not recommend the payment of a dividend for the year to 31 December 2020 (2019: £nil).
Directors
The Directors of the Company who held office during the year, and at the year-end, are as follows:
Executive Directors
Jay LeCoque
Non-Executive Directors
Trevor Nolan
(resigned 28 February 2020)
Tony Ratcliffe
(appointed 23 October 2020)
James Agnew
(resigned 23 October 2020)
Simon Constantine
(appointed 23 October 2020)
Christopher Mills
Sir Ian Carruthers
Marco Fumagalli
Carlo Sgarbi
(resigned 23 October 2020)
Their biographical details are shown in the Board of Directors section on pages 28 and 29.
As permitted by sections 232 to 235 of the Companies Act 2006, and consistent with the Company’s Articles of
Association, the Company has maintained insurance cover for its Directors and Officers under a Directors’ and
Officers’ Liability Policy. The Directors may exercise their powers pursuant to the Articles of Association, the
Companies Act 2006 and related legislation, as well as any resolution of the shareholders. The Articles of Association
are available for review at the Company’s registered office.
Due to the recent formation of the current Board, the Directors have not yet been subject to evaluation during this
period, but the Board is committed to evaluation of each Director at least annually.
The Company Secretary is Tony Ratcliffe.
Directors’ interests
A number of shareholder’s loans made available to the Company and totalling £26.0 million were repaid shortly
after Admission from the proceeds of the share placing on Admission. An additional £1.0 million was repaid prior
to Admission.
On 29 October 2020 the Group completed the sale of its freehold property at 1 Orchard Place, Nottingham for the
sum of £5 million to 1 Orchard Place (Freehold) Limited a company related to Christopher Mills being a common
director. A lease was granted to the Group for a term of 25 years at an initial rent of £350,000 per annum (excluding
VAT) to increase annually at 3%.
Prior to his appointment as an employee and Director of the Company on 23 October 2020, Tony Ratcliffe provided
consultancy services to the Group via Consilium Financial limited, of which he was a director and shareholder.
Amounts totalling £128,000 were charged to the Group and all were paid in the year.
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sourcebiointernational.comLSE Code: SBI
REPORT OF THE DIRECTORS (continued)
Other than these transactions and other transactions detailed in note 32, no contract existed during the year,
or at the year-end, in which any Director of the Company had an interest, other than service contracts.
None of the Directors have a service contract with the Company requiring more than six months’ notice of
termination to be given. The details of the Directors’ contracts are provided in the Report of the Remuneration
Committee on pages 46 to 50.
The interests (including the interests of their immediate families and persons connected with the Directors)
of the Directors who held office at the end of the year in the ordinary shares of the Company at 31 March 2021,
31 December 2020 and 1 January 2020 were:
Beneficial interest:
Sir Ian Carruthers
Simon Constantine2
Marco Fumagalli2,3
Jay LeCoque
Christopher Mills4
Tony Ratcliffe2
At 31
March
2021
-
At 31
December
2020
-
123,456
123,456
At 1
January
20201
-
-
17,010,740
17,010,740
16,856,420
2,202,497
2,202,497
2,202,497
21,625,197
21,625,197
16,856,421
30,864
30,864
-
1 Shareholdings at 1 January 2020 have been calculated as if the share reorganisation that took place in October 2020 had also been in effect
as at 1 January 2020
2 On Admission, Simon Constantine purchased 123,456 shares, Marco Fumagalli purchased 154,320 shares and Tony Ratcliffe purchased 30,864
shares, all in their personal capacities and at the issue price of 162p per share
3 Marco Fumagalli’s interests include beneficial interests held by Continental Funds which are associated with Marco Fumagalli as he is Founding
Partner of Continental; and owns 60% of the issued share capital of Protea. Marco also owns 154,320 ordinary shares personally
4 Christopher Mills’ beneficial interests are held through Harwood Funds and NASCIT which are both associated with Christopher Mills as he is a
director and the sole shareholder of Harwood Capital Management Limited, which is the designated corporate member and the controller of Harwood
Capital; and is a director and the CEO of NASCIT and is NASCIT’s largest shareholder. These groups subscribed to 4,760,000 shares in the placing and
acquired further shares subsequently
Share capital
The Company had 290,549,917 ordinary shares of 1p each and 32,283,324 A ordinary shares of 0.001p each on
1 January 2020. The share movements in the year, which are more fully detailed in note 22, are summarised below:
On 13 October 2020, the share capital was increased by 7,265,790,769 ordinary shares of 1p in consideration for the
redemption of the outstanding PIK loan notes. All 1p ordinary shares were then consolidated into 50,375,603 ordinary
shares of 0.15p.
On 16 October 2020, all 0.15p A ordinary shares were then consolidated into 215,222 ordinary shares of 0.15p.
On 26 October 2020, the share capital was increased by 1,987,275 ordinary shares of 0.15p issued at par to
Jay LeCoque in order to effect economic parity of his contractual interest following the share reorganisation.
On 28 October 2020, the share capital was increased by 21,604,938 ordinary shares of 0.15p as a result of shares
issued at 162p per share, in a share placing on Admission to AIM.
38
SourceBio International plcAnnual Report & Accounts 2020 Following the share reorganisation completed in contemplation of Admission, the Company only had one class
of share which carry no right to fixed income. Each share carries the right to one vote at general meetings of the
Company. There are no restrictions on voting rights or on the holding or transfer of these securities. On Admission
to AIM and for a period of 12 months, a total of 49,022,039 ordinary shares of 0.15p beneficially owned by Harwood
Funds, Continental Funds, Lombard Funds and Jay LeCoque are subject to orderly market arrangements with the
Company and its Nominated Advisor in relation to any permitted disposals of their shares.
The Company had 74,183,038 ordinary shares of 0.15p each on 31 December 2020.
Share price
From Admission on 29 October 2020, the share price ranged from a high of 232.5p to a low of 153.5p. The average
price for the period was 169.9p and the mid-market price of an ordinary share was 173.5p on 31 December 2020.
Treasury management
The Company holds all cash balances in no-notice accounts. The Company’s policy on the use of financial instruments
and the management of financial risks is set out in note 29 of the financial statements.
Stakeholder engagement
The Company’s approach to shareholder engagement is shown in the Corporate Governance Statement on page 30.
Substantial shareholdings
At 31 March 2021, the Company had been notified of the following interests of 3% or more in the Company’s ordinary
share capital:
Harwood (held by the Harwood Group and NASCIT)1
Continental (held by the Continental Funds)
Lombard (held by the Lombard Funds)
Killick & Co LLP
Number of
ordinary shares
% of issued
share capital
21,625,197
16,856,420
15,884,478
2,246,403
29.2%
22.7%
21.4%
3.0%
1 Christopher Mills, a Director in the Company, is beneficially interested in Harwood Funds and NASCIT which are both associated with Christopher
Mills as he is a director and the sole shareholder of Harwood Capital Management Limited, which is the designated corporate member and the
controller of Harwood Capital; and is a director and the CEO of NASCIT and is NASCIT’s largest shareholder. These groups subscribed to 4,760,000
shares in the placing and acquired further shares subsequently.
Annual General Meeting
The Annual General Meeting of the Company will be held by electronic facility at 1pm on 14 June 2021. All ordinary
and special resolutions to be proposed at that meeting are detailed in the Notice of Annual General Meeting sent to
shareholders with this Annual Report and Accounts.
The Directors believe that all the proposals to be considered at the Annual General Meeting are in the best interests
of the Company and its shareholders. They recommend that you vote in favour of the proposed resolutions. The
Directors will be voting in favour of the proposed resolutions in respect of their own shareholdings in the Company.
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sourcebiointernational.comLSE Code: SBI
REPORT OF THE DIRECTORS (continued)
Going Concern Statement
The Directors have prepared detailed budgets and
forecasts covering the period to 31 December 2022
which are based on the medium-term strategic
business plan prepared for the period to 31 December
2023. These plans take into account all reasonably
foreseeable circumstances and include consideration
of trading results and cash flows on a month-by-
month basis. This forecasting has been undertaken
following the impact of COVID-19 and has considered
both the negative impact on the core business and the
positive impact derived from the recently established
Infectious Disease Testing business unit which is
expected to continue to materially contribute to the
financial results going forward.
The Group is expected to generate cash and operating
profits sufficient to meet its day-to-day operating
needs and to support its planned capital expenditure.
Taking into account the proceeds from the recent
Placing on Admission to AIM and based on their
enquiries and the information available to them in
respect of the other risks and uncertainties set out
herein, the Directors have a reasonable expectation
that the Group has adequate resources to continue
operating for the foreseeable future. Thus, they have
adopted the going concern basis of accounting in
preparing these financial statements.
Employment and equal opportunities
The Group places considerable importance on
involving its employees in the evolution of the Group’s
policies and procedures and matters affecting them
as employees. The Board strives to keep employees
informed on such matters to the extent regulations
allow and good practice indicates. Participation
of employees in contributing to the growth of the
Group is encouraged through meetings between
management and staff who have an opportunity
to discuss progress, plans, performance and issues
affecting them or the Group.
The Group has an equal opportunities policy under
which SourceBio is committed to ensuring that
everyone should have the same opportunities
for employment and promotion based on their
ability, qualifications and suitability for the work in
question; seeking excellence in employees through
the implementation of recruitment, incentivisation,
performance review, development and promotion
processes that are fair to all; and capitalising on the
added value that diversity brings. Discrimination in
the workplace on the basis of age, gender, disability,
ethnic origin, nationality, sexual orientation, gender
reassignment, religion or belief, marital status and
pregnancy and maternity is unacceptable and will not
be tolerated.
Supplier payments
The Group is committed to obtaining the best terms
for all types of business. Consequently there is no
single policy as to the terms used. It is the Group’s
policy to confirm the terms of payment with suppliers
when agreeing the terms of the transaction to ensure
that suppliers are aware of these terms and abide by
them. The number of days purchases represented by
Group trade creditors at 31 December 2020 was 29
days (2019: 46 days).
Financial risk management
Details of the Group’s policy for the management of
financial risk are given in note 29 to the consolidated
financial statements.
Bribery Act
In response to the Bribery Act 2010, the Board
continues to risk assess all the relevant procedures
and processes, implementing and reinforcing the
Group’s Anti Bribery and Corruption Policy with
employees, suppliers and customers.
Independent auditors
RSM UK Audit LLP has been appointed as auditor and,
in accordance with section 489 of the Companies Act
2006, a resolution to approve their re-appointment
will be put to the members at the forthcoming Annual
General Meeting.
The Directors who held office at the date of approval
of this Report confirm that so far as they are each
aware, there is no relevant information of which the
Group’s auditor is unaware, and each Director has
taken all steps that ought to be taken as a Director
to make themselves aware of any relevant audit
information and to establish that the Group’s auditor
is aware of that information.
By order of the Board
Tony Ratcliffe
Company Secretary
12 April 2021
40
SourceBio International plcAnnual Report & Accounts 2020 e
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sourcebiointernational.comLSE Code: SBI
REPORT OF THE AUDIT COMMITTEE
The responsibilities and work carried out by the Audit Committee
in the year under review are set out in the following report.
Composition and governance
The Audit Committee comprises two independent Non-Executive Directors - Simon Constantine (Chairman of the
Committee) and Sir Ian Carruthers and one non-independent Non-Executive Director, Christopher Mills. All have the
skills and experience required to fully discharge their duties. Simon Constantine meets the requirements of recent
and relevant financial experience.
The Executive Chairman, Chief Financial Officer and Group Financial Controller also generally join at least part of all
Audit Committee meetings, by invitation.
The Committee Chairman may call a meeting at the request of any member of the Committee or at the request of the
Company’s external auditor. The Audit Committee meets privately with the external auditor at least twice a year. The
external auditor has direct access to the Chairman of the Committee outside formal Committee meetings.
The primary role of the Committee, which reports its findings to the Board, is to ensure the integrity of the financial
reporting and audit process and the maintenance of sound internal control and risk management systems. The
Committee:
•
reviews the integrity of the Group’s financial statements and any formal announcements relating to its financial
performance;
• monitors and reviews the Group’s internal financial controls and internal control and risk management systems;
•
•
•
•
•
•
reviews the effectiveness of the external audit process and makes recommendations to the Board on the
appointment, re-appointment and removal of the external auditor;
reviews the policy on the engagement of the external auditor to supply non-audit services;
supports the Board’s role in overseeing a business wide approach to risk identification, risk management and risk
mitigation;
advises the Board on whether the Committee believes the Annual Report and Accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary for shareholders to assess the Group’s
performance, business model and strategy;
periodically considers the need for an internal audit function; and
ensures that the Group has arrangements in place for the investigation and follow-up of any concerns raised
confidentially by staff in relation to the propriety of financial reporting or other matters.
The Committee reviews its terms of reference and its effectiveness annually and recommends to the Board any
changes required as a result of the review. Its terms of reference are available on request from the Company
Secretary.
The Audit Committee is entitled to obtain, at the reasonable expense of the Company, such external advice as it sees
fit on any matters falling within its terms of reference.
42
SourceBio International plcAnnual Report & Accounts 2020 Activities during 2020
The Audit Committee was formed on Admission of the Company to AIM on 29 October 2020 and has met once
prior to the year-end date and once since the year-end date. The external auditor, RSM UK Audit LLP, attended both
meetings. The future meetings of the Committee are scheduled to coincide with key dates in the financial reporting
and audit cycle. The Audit Committee discharged its responsibilities by:
•
reviewing the Group’s draft financial statements and draft Annual Report and Accounts prior to Board approval
and reviewing the external auditor’s detailed reports thereon and also reporting to the Board the significant
issues that the Committee considered in relation to the financial statements and how those issues were
addressed, having regard to matters communicated to it by the auditor;
•
in particular reviewing the final Annual Report and Accounts with reference to its knowledge of the activities of
the Group during the year, concluding that, taken as a whole it is fair, balanced and understandable;
•
•
reviewing the appropriateness of the Group’s accounting policies;
reviewing and approving the audit fee and reviewing non-audit fees payable to the Group’s external auditor in
accordance with the policy it has adopted;
•
reviewing the external auditor’s plan for the audit of the Group’s accounts, which included key areas of focus on
the accounts’ confirmations of auditor independence and proposed audit fee;
•
reviewing the Group’s internal financial controls operated in relation to the business and assessing the
effectiveness of those controls in minimising the impact of key risks;
•
reviewing a report on the Group’s Risk Management Framework and system of internal control, assessing its
effectiveness and reporting to the Board on the results of the review;
•
assisting the Board with overseeing a business wide approach to risk identification, management and mitigation;
and
•
reviewing the arrangements by which staff of the Group may, in confidence, raise concerns about possible
improprieties in matters of financial reporting or other matters.
Financial reporting and significant areas of judgement
The Audit Committee reviewed a wide range of financial reporting and related matters in respect of the Company’s
annual results statements and the Annual Report and Accounts prior to their consideration by the Board.
The following key areas of risk and judgement have been identified and considered by the Audit Committee with
management and the external auditor in relation to the business activities and financial statements of the Group:
•
revenue recognition with particular reference to the adoption of IFRS 15 for the first time;
• management override of controls; and
•
the adoption of IFRS for the first time, in particular the treatment under IFRS 16 of the sale and leaseback
transaction in October 2020.
Reports highlighting key accounting matters and significant judgements were received from RSM UK Audit LLP in
respect of the year-end financial statements and discussed by the Committee. In particular, the areas of audit focus
included revenue recognition, management override of controls, impairments and provisioning, taxation as well as
two transactions unique to 2020, the sale and leaseback of the Nottingham facility and the Admission to AIM.
Analysis to support the Going Concern Statement given on page 40 was also reviewed by the Committee after
receiving reports from management on this matter.
The Group’s management and auditor confirmed to the Audit Committee that they were not aware of any material
misstatements in the financial statements. Having reviewed the reports received from management and the auditor
and discussed the same with them, the Committee is satisfied that the key areas of risk and judgement have been
appropriately addressed in the financial statements and that the significant assumptions used in determining the
value of assets and liabilities have been properly appraised, are sufficiently robust and that the financial reporting
disclosures made were appropriate. The Committee therefore believes the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the
Group’s performance, business model and strategy.
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sourcebiointernational.comLSE Code: SBI
REPORT OF THE AUDIT COMMITTEE (continued)
External auditor
Non-audit work
The Audit Committee is responsible for ensuring that an appropriate relationship between the Group and the
external auditor is maintained, including reviewing non-audit services and fees. On Admission to AIM, the supply of
non-audit services previously supplied by the external auditor, in particular tax advisory and tax compliance, were
transferred to Crowe UK LLP to ensure the objectivity and independence of the auditor, RSM UK Audit LLP. The
Committee is satisfied that the provision by RSM UK Audit LLP of non-audit services prior to Admission did not impair
their independence or objectivity.
During 2020 the fees for non-statutory audit services provided by RSM UK Audit LLP amounted to £231,000 (including
£193,000 in relation to fees incurred as Reporting Accountants), all of which were incurred prior to Admission. These
fees compared with the audit fee for 2020 of £113,000.
Auditor independence
The Committee received and reviewed written confirmation from the external auditor that there were no
relationships that, in their judgement, may bear on their independence. The external auditor has also confirmed that
they consider themselves independent within the meaning of UK regulatory and professional requirements.
Performance and effectiveness of the external auditor
The performance and effectiveness of the external auditor was formally reviewed by the Committee taking into
account the views of Directors and senior management on such matters as independence, objectivity, proficiency,
resourcing and audit strategy and planning. The Committee concluded that the performance of the external auditor
remained satisfactory following the review. The performance of the external auditor will continue to be reviewed
annually. The Committee has recommended to the Board that RSM UK Audit LLP should be re-appointed as the
Company’s external auditor for the next financial year. Following this recommendation, the Board is tabling a
resolution for the re-appointment of the external auditor to shareholders at the forthcoming
Annual General Meeting.
Internal control and risk management systems
In applying the QCA Code, the Board recognises the need to maintain a sound system of internal control to safeguard
shareholders’ investment and the Group’s assets. The Directors have overall responsibility for ensuring that the
Group maintains a system of internal control and risk management to provide them with reasonable assurance
regarding effective and efficient operations, internal control and compliance with laws and regulations. The system
of internal control and risk management is designed to manage rather than eliminate the risk of failure to observe
business objectives and can only provide reasonable and not absolute assurance against material misstatement
or loss.
The Group views the careful management of risk as a key management activity. Managing business risk to deliver
results from opportunities is a key part of all activities.
The Directors have continued to review the effectiveness of the Group’s system of internal controls, including
strategic, commercial, operational, compliance and financial controls and risk management systems. These were
44
SourceBio International plcAnnual Report & Accounts 2020 updated, enhanced, consolidated and presented within the Company’s Financial Position, Prospects and Procedures
(“FPPP”) document ahead of Admission. The FPPP document included an assessment of internal controls, in particular
internal financial controls. In addition, as part of its reporting to the Audit Committee and Board, the external
auditor’s report following its audit work included matters identified in the course of its statutory audit work which
were reviewed by the Audit Committee. Procedures are in place to take appropriate action if any significant failings or
weaknesses are identified in the Board’s review of internal controls or are otherwise brought to the Board’s attention.
There is a clearly defined organisational structure. The Group operates a comprehensive annual planning and
budgeting process, which is updated by monthly forecast revisions. Corporate objectives are defined at the start of
each year and cascaded to the Executive Management team and then throughout the organisation. The performance
of each business unit and the business as a whole is reviewed by the Executive Management team and the Board. Any
corrective actions are taken where required.
As would be expected of a group of similar size, scale or complexity, the Group does not have an independent
internal audit department. It is felt that the financial record keeping is robust and capable of highlighting significant
departures from procedures. Other areas of risk review and management that may otherwise be conducted by an
independent internal audit department are covered by the Board and its Committees, as highlighted above. The
Board reviews this position annually.
Simon Constantine
Non-Executive Director and
Chairman of the Audit Committee
On behalf of the Board of Directors
12 April 2021
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sourcebiointernational.comLSE Code: SBI
REPORT OF THE REMUNERATION COMMITTEE
This Report sets out details of the remuneration policy for
Executive and Non-Executive Directors, describes how the current
remuneration policy has been implemented and discloses the
amounts paid relating to the year ended 31 December 2020.
This Report also proposes a remuneration policy for the consideration by shareholders of the Company at the
forthcoming Annual General Meeting which, if approved, will be implemented in 2021.
The following information is unaudited unless otherwise stated.
Current remuneration policy, as applied to 2020
The Remuneration Committee was formed on Admission on 29 October 2020 and did not formally meet during
the year.
The current remuneration policy for Executive Directors, the Executive Management team and selected senior
managers comprises the following elements:
•
•
•
base salary;
discretionary cash bonus; and
employment-related benefits - pension contributions, private healthcare and life assurance.
Base salary arrangements are detailed below and amounts paid in the year are included in the table below.
2020 has been a busy and challenging year and, in order to reflect the strong performance achieved, a discretionary
cash bonus amounting to 30% of annual base salary has been awarded to Executive Directors and the Executive
Management team.
Non-Executive Director fees have been set at a level to reflect the amount of time and level of involvement
required in order to carry out their duties as members of the Board and relevant Board Committees, and to attract
and retain Non-Executive Directors of the highest calibre and with relevant experience. The fee levels are set by
reference to Non-Executive fees payable at companies of similar size and complexity and are determined by the
Board as a whole. Non-Executive Directors are not eligible to participate in any cash or equity incentive schemes that
may be in place and do not receive any pension entitlements.
46
SourceBio International plcAnnual Report & Accounts 2020 Directors’ remuneration – audited
The remuneration of the Directors in the year ended 31 December 2020 is shown below:
Executive
Jay LeCoque
Trevor Nolan
Tony Ratcliffe
Non-Executive
James Agnew
Sir Ian Carruthers
Simon Constantine
Marco Fumagalli
Christopher Mills
Carlo Sgarbi
Total fees and emoluments
Salary
and fees
£’000
Bonus
£’000
Benefits-
in-kind
£’000
Pension
contributions
£’000
2020
Total
£’000
2019
Total
£’000
176
20
35
231
-
35
7
6
6
-
54
285
75
-
57
132
-
-
-
-
-
-
-
29
2
-
31
-
-
-
-
-
-
-
132
31
5
1
-
6
-
-
-
-
-
-
-
6
285
23
92
400
-
35
7
6
6
-
54
454
183
127
-
310
-
-
-
-
-
-
-
310
Notes to the Directors’ remuneration – audited
Trevor Nolan resigned on 28 February 2020. James Agnew and Carlo Sgarbi resigned on 23 October 2020.
In addition to amounts shown above, Jay LeCoque benefitted from the valuation uplift arising following the purchase
of 32,283,324 A ordinary shares of 0.001p in the Company which were acquired at par value in 2019. The shares
were converted into 2,202,497 ordinary shares of 0.15p in the Company as part of the capital reorganisation in
contemplation of the Company’s Admission to AIM. The gain in value, being classified as share based compensation,
amounted to £3,568,000, calculated at the Admission price of 162p per share.
Tony Ratcliffe became an employee and was appointed to the Board on 23 October 2020. Prior to his employment, he
provided his services to the Group on a consultancy basis via Consilium Financial Limited, who billed the Group a total
of £128,000 during the year (2019: £nil).
Sir Ian Carruthers was appointed to the Board in September 2019, but he received no remuneration until May 2020,
at which point his remuneration was backdated. No other Non-Executive Director received any remuneration prior to
Admission to AIM on 29 October 2020.
Directors’ share options and long-term incentive plans
There currently are no share option or long-term incentive plans in place.
Directors’ interests in the share capital of the Company are disclosed in the Directors’ report on pages 38 and 39.
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sourcebiointernational.comLSE Code: SBI
REPORT OF THE REMUNERATION COMMITTEE
(continued)
Directors’ remuneration terms
Remuneration policy
Executive Directors
The base salary for Jay LeCoque, Executive Chairman,
is £250,000 per annum, which is converted for
payment into US Dollars. Prior to Admission to AIM
in October 2020, his base salary was US$250,000
per annum.
The base salary for Tony Ratcliffe, Chief Financial
Officer, who joined on Admission in October 2020,
is £190,000 per annum.
Both Executive Directors have entered into service
agreements with the Group. Each service agreement
is subject to termination by the Group or the
individual upon serving six month’s notice. The service
agreements contain a payment-in-lieu clause which is
limited to base salary and there is no contractual loss
of office payment due.
The remit of the Remuneration Committee is to
oversee the development and implementation of
the remuneration policy as agreed by the Board and
as approved by shareholders. The overall aim of the
remuneration policy for employees of the Group as
a whole is to ensure that the Executive Directors,
Executive Management team, senior managers and all
employees are fairly and competitively rewarded for
the short-term and long-term performance of
the Group.
A review of the remuneration policy has been
undertaken since the year-end date and the proposed
remuneration policy is summarised below.
This proposed remuneration policy will be presented
for approval at the Annual General Meeting of the
Company on 14 June 2021 and, subject to shareholder
approval, is expected to be implemented during 2021.
The agreements also include pension and ancillary
healthcare and life assurance benefits.
Proposed remuneration policy,
expected to be applied in 2021
Non-Executive Directors
Following Admission in October 2020, the fee for Sir
Ian Carruthers, Senior Independent Non-Executive
Director, is £40,000 per annum. Prior to Admission,
his fee was £25,000 per annum.
The fee for Simon Constantine, Independent Non-
Executive Director, who joined on Admission in
October 2020, is £40,000 per annum.
The fee for Christopher Mills, is £35,000 per annum,
payable from Admission in October 2020.
The fee for Marco Fumagalli, is £35,000 per annum,
payable from Admission in October 2020.
All Non-Executive Directors’ letters of appointment
are for an initial period of three years from the date of
Admission, with a three month notice period. Non-
Executive Directors are expected to make themselves
available for at least two days per month.
All Director service agreements or letters of
appointment are available for inspection at the
Company’s registered office.
The proposed remuneration policy is detailed below.
Guiding principles
The guiding principles of the remuneration policy
centre on:
•
aligning the interests of the Executive Directors
and Executive Management team with those of
the shareholders;
•
providing competitive remuneration that will
motivate and retain key employees and attract
high quality individuals to the Group at a level
commensurate to the size (revenue and market
capitalisation) of the Group;
encouraging and supporting a high performing
culture throughout the Group;
rewarding the delivery of ambitious business
targets which align to strategic goals and add
substantial value to the Group;
promoting good, effective remuneration
practice; and
being flexible to maximise opportunity in a rapidly
changing business environment.
•
•
•
•
48
SourceBio International plcAnnual Report & Accounts 2020 Levels of remuneration
Pension contributions
The levels of remuneration are based on:
•
competitive, but not excessive, base salary levels
which reflect the levels of responsibility and are
comparable to peer companies of equivalent size
and complexity;
•
performance related pay comprising annual cash
bonuses and share options. Payments under these
schemes will be dependent on meeting aggressive
targets, based on growth of the Company’s share
price and on delivering the strategic goals of the
Group; and
•
an appropriate balance between short and
longer-term performance targets based on the
The Executive Chairman, Executive Directors and senior
managers are eligible for pension contributions that
vary between 5% to 10% of annual salary. The Group
complies with the national scheme for workplace
pensions and makes contributions of at least 3% of
annual salary for relevant employees.
Other benefits
The Executive Chairman, other Executive Directors
and selected senior managers are entitled to receive
benefits which may include private healthcare, life
assurance and in some cases a vehicle allowance.
opportunities available, the expectations of the
Cash bonuses
Board and of the shareholders.
Implementation
The Remuneration Committee oversees the
implementation of the remuneration policy and
will seek to ensure that the Executive Chairman,
other Executive Directors, Executive Management
and senior managers and indeed all employees are
fairly rewarded based on the short and long-term
performance of the Group.
The remuneration framework
The remuneration framework intended to deliver
this remuneration policy for the Executive Chairman,
other Executive Directors and Executive Management
team is a combination of base salary, cash bonus and
an executive share options plan. The details of these
components of the framework are outlined below:
Base salaries
Base salaries will be reviewed annually as will
the overall levels of remuneration generally.
Consideration will be given to the performance
of the Group, the performance of individuals, any
changes in responsibilities or role, as well as practices
in comparative companies of a broadly similar size
and complexity with due account taken of market
capitalisation and scale of revenues. The base salary
for the Executive Chairman is currently £250,000 per
annum, Chief Financial Officer £190,000 per annum
and Chief Operating Officer £175,000 per annum.
The Executive Chairman, Executive Directors and
selected senior managers are eligible to participate in
the Discretionary Executive and Management Bonus
Scheme. Targets under this bonus scheme will be based
on the achievement of EBITDA targets with a sliding
scale of payment for increasing levels of performance.
The performance measures may include other
performance objectives and will be set annually. The
maximum percentage for the Executive Chairman and
Chief Financial Officer is capped at 75% of base salary.
Executive share options plan
The Executive Chairman, Chief Financial Officer, Chief
Operating Officer, Executive Management team and
selected senior managers will be eligible to participate
in the executive share options plan. The overall pool
for share options is 8% of issued share capital. The
exercise of options under the executive share options
plan will be subject to the continued employment of the
individual at the date of vesting as well as subject to the
achievement of appropriate performance criteria.
Save as You Earn Scheme (“SAYE”)
A SAYE scheme will be available for all employees.
The overall pool for the SAYE scheme is 2% of issued
share capital.
There will be a combined 10% pool for the executive
share options plan and SAYE scheme.
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sourcebiointernational.comLSE Code: SBI
REPORT OF THE REMUNERATION COMMITTEE
(continued)
Service agreements
Pay reviews
The Executive Chairman and Chief Financial Officer
have entered into service agreements with the Group.
Each service agreement is subject to termination by
the Group or the individual on six months’ written
notice. The agreements contain a payment-in-lieu of
notice clause which is limited to base salary only and
there is no loss of office payment due. Copies of the
service agreements are available for inspection at the
Company’s registered office.
The service agreements of any other Executive
Director will comply with this policy.
External board appointments
Where Board approval is given for an Executive
Director or a senior manager to accept an outside
directorship the individual is entitled to retain any
fees received. No Executive Directors are currently
members of any external publicly listed
company boards.
Recruitment remuneration policy
Any new Executive Director and selected senior
manager hires, including those promoted internally,
will be offered remuneration packages in line with the
remuneration policy in force at the time.
Non-Executive Director letters of appointment
Non-Executive Director fees have been set at a level
to reflect the amount of time and level of involvement
required in order to carry out their duties as members
of the Board and Board Committees and to attract
and retain Non-Executive Directors of the highest
calibre and with relevant experience. Fee levels are set
by reference to non-executive fees at companies of
similar size and complexity and are determined by the
Board as a whole. All Non-Executive Directors’ letters
of appointment are for an initial period of three years
from the date of Admission, with a three month notice
period. These letters of appointment are available for
inspection at the Company’s registered office.
Non-Executive Directors are not eligible to participate
in any of the incentive arrangements of the Group and
do not receive any pension contributions.
The Remuneration Committee considers pay and
employment conditions across the Group when
reviewing the remuneration of the Executive
Chairman, Executive Directors and other senior
managers.
Review of remuneration policy
The Remuneration Committee will review the policy
annually and it will be presented for approval by the
Board and shareholders at the Annual
General Meeting.
Statement of shareholder voting
Since the Admission of the Company to AIM on
29 October 2020, the Company has not yet held
an Annual General Meeting but in 2021 and in
future years it will report on votes received from
shareholders.
Specific resolutions will be tabled at the forthcoming
Annual General Meeting on 14 June 2021 to effect the
proposed remuneration policy to be applied in 2021
and in particular to seek shareholder approval to
implement the proposed executive share options plan
and SAYE scheme. I look forward to your continuing
support at the 2021 Annual General Meeting.
Sir Ian Carruthers
Senior Non-Executive Director and
Chairman of the Remuneration Committee
On behalf of the Board
12 April 2021
50
SourceBio International plcAnnual Report & Accounts 2020 STATEMENT OF DIRECTORS’ RESPONSIBILITIES
In respect of the Annual Report and the financial statements
The Directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial
statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group
and Company financial statements for each financial year. The Directors have elected under company law, and are
required under the AIM rules of the London Stock Exchange, to prepare the Group financial statements in accordance
with international accounting standards in conformity with the requirements of the Companies Act 2006 and other
applicable laws and regulations and have elected under company law to prepare the Company financial statements in
accordance with international accounting standards in conformity with the requirements of the Companies Act 2006
and applicable laws.
The Group and Company financial statements are required by law and international accounting standards in
conformity with the requirements of the Companies Act 2006 to present fairly the financial position of the Group
and the Company and the financial performance of the Group. The Companies Act 2006 provides in relation to such
financial statements that references in the relevant part of that Act to financial statements giving a true and fair view
are references to their achieving a fair presentation.
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 their profit or loss of the Group for
that period.
In preparing each of the Group and Company financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
•
•
state whether they have been prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group
and the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Group and 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 Group and the Company and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on SourceBio International plc’s website. Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Approved by the Board and signed on its behalf by:
Jay LeCoque
Executive Chairman
12 April 2021
Tony Ratcliffe
Chief Financial Officer
12 April 2021
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sourcebiointernational.comLSE Code: SBI
52
SourceBio International plcAnnual Report & Accounts 2020 INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SOURCEBIO INTERNATIONAL PLC
Opinion
We have audited the financial statements of SourceBio International plc (the ‘parent Company’) and its subsidiaries
(the ‘Group’) for the year ended 31 December 2020 which comprise the Consolidated Statement of Profit and Loss
and Other Comprehensive Income, Consolidated and Company Statements of Financial Position, Statements of
Changes in Equity, Statements of Cash Flows and notes to the financial statements, including significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable law and
International Accounting Standards in conformity with the requirements of the Companies Act 2006 and, as regards
the parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs
as at 31 December 2020 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with International Accounting
Standards in conformity with the requirements of the Companies Act 2006;
the parent Company financial statements have been properly prepared in accordance with International
Accounting Standards in conformity with the requirements of the Companies Act 2006 and as applied in
accordance with the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are independent of the Group and parent Company in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to SME listed entities and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment
of the Group’s and parent Company’s ability to continue to adopt the going concern basis of accounting included:
•
•
•
understanding how the cash flow forecasts for the going concern period had been prepared and the assumptions
adopted;
testing of the integrity of the forecast model to ensure it was operating as expected; and
challenging the key assumptions within the forecast with agreement to supporting data where possible.
We note the strength of the balance sheet at 31 December 2020 with £8.4 million of cash and cash equivalents which
along with projected revenue growth mean that the Group is expected to be able to comfortably operate within its
existing banking facilities.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Group’s or the parent Company’s
ability to continue as a going concern for a period of at least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the
relevant sections of this report.
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sourcebiointernational.comLSE Code: SBI
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SOURCEBIO INTERNATIONAL PLC (continued)
Summary of our audit approach
Key audit matters
Group
•
•
Revenue recognition
Sale and leaseback transaction
Parent Company
• No key audit matters noted
Materiality
Group
• Overall materiality: £502,000 (2019: £322,000)
•
Performance materiality: £376,000 (2019: £241,000)
Parent Company
• Overall materiality: £280,000 (2019: £160,000)
•
Performance materiality: £210,000 (2019: £120,000)
Scope
Our audit procedures covered 98% of revenue, 96% of total assets and 91% of profit
before tax.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
Group and parent Company financial statements of the current period and include the most significant assessed risks
of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on
the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the Group and parent Company financial statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue recognition
Key audit matter
description
Under International Auditing Standards there is a rebuttable presumed risk of fraud that
revenue may be misstated due to improper revenue recognition.
For the more complex contracts involving multiple services, there is management judgement
required to determine the distinct performance obligations, allocate the consideration to each
of these obligations and determine if income should be recognised over time or at a point in
time in line with the requirements of IFRS 15 “Revenue from Contracts with Customers”.
How the matter was
addressed in the audit
We performed cut-off testing and substantive testing procedures over revenue including the
use of financial data analytics software to identify unusual transactions for testing.
We challenged and tested management’s assessment of the revenue recognition on the more
complex contracts in progress at the year-end.
We also considered the adequacy of the disclosure of the Group’s revenue recognition
accounting policy in note 2 and the critical accounting estimates and judgements in note 4.
54
SourceBio International plcAnnual Report & Accounts 2020 Sale and leaseback transaction
Key audit matter
description
During October 2020, the group sold its head office premises in Nottingham for £5 million
which was subsequently leased back for 25 years.
This transaction is accounted for under IFRS 16 “Leases”. There is judgement involved in
determining whether a sale and leaseback transaction has occurred which impacts on
the level of profit that can be recognised on the sale. There is also judgement involved in
determining the discount rate that is used to calculate the lease liability.
How the matter was
addressed in the audit
We reviewed the legal agreements for the freehold property sale and the lease and confirmed
that they were connected and hence should be accounted for as a sale and leaseback
transaction.
We challenged the appropriateness of the discount rate adopted for determining the lease
liability. We then audited the calculation of the lease liability, right of use asset and level of
profit recognised on the sale.
We considered whether the transaction had been appropriately disclosed in notes 4, 17, 26
and 32.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing
and extent of our audit procedures. When evaluating whether the effects of misstatements, both individually and
on the financial statements as a whole, could reasonably influence the economic decisions of the users we take
into account the qualitative nature and the size of the misstatements. Based on our professional judgement, we
determined materiality as follows:
Group
Parent Company
Overall materiality
£502,000 (2019: £322,000)
£280,000 (2019: £160,000)
Basis for determining
overall materiality
5% of profit before tax and
shareholder loan interest.
0.8% of total assets
Rationale for benchmark
applied
Profit before tax is focused upon
by investors as a measure of the
performance of the Group with
shareholder loan interest added back
as non-recurring as arising due to
the ownership prior to the Group’s
Admission to AIM.
Total assets was chosen as the entity is a non-
trading holding company.
Performance materiality
£376,000 (2019: £241,000)
£210,000 (2019: £120,000)
Basis for determining
performance materiality
Reporting of
misstatements to the Audit
Committee
75% of overall materiality
75% of overall materiality
Misstatements in excess of £25,000
and misstatements below that
threshold that, in our view, warranted
reporting on qualitative grounds.
Misstatements in excess of £14,000 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
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sourcebiointernational.comLSE Code: SBI
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SOURCEBIO INTERNATIONAL PLC (continued)
An overview of the scope of our audit
The Group consists of 8 components, operating mainly from the United Kingdom but also in the Republic of Ireland
and the United States of America.
The coverage achieved by our audit procedures was:
Full scope audit
7
98%
96%
91%
Number of
components
Revenue
Total assets
Profit before tax
Analytical procedures at group level were performed for the remaining component.
Other information
The other information comprises the information included in the Annual Report, other than the financial statements
and our auditor’s report thereon. The Directors are responsible for the other information contained within the Annual
Report. Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable
legal requirements.
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 their 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 in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
•
adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent Company financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
•
• we have not received all the information and explanations we require for our audit.
56
SourceBio International plcAnnual Report & Accounts 2020 Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 51, the Directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
The extent to which the audit was considered capable of detecting irregularities,
including fraud
Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain
sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the
determination of material amounts and disclosures in the financial statements, to perform audit procedures to help
identify instances of non-compliance with other laws and regulations that may have a material effect on the financial
statements, and to respond appropriately to identified or suspected non-compliance with laws and regulations
identified during the audit.
In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the
financial statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud through designing and implementing appropriate responses and to respond
appropriately to fraud or suspected fraud identified during the audit.
However, it is the primary responsibility of management, with the oversight of those charged with governance, to
ensure that the entity’s operations are conducted in accordance with the provisions of laws and regulations and for
the prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit
engagement team:
•
•
•
obtained an understanding of the nature of the industry and sector, including the legal and regulatory
frameworks that the Group and parent Company operate in and how the Group and parent Company are
complying with the legal and regulatory frameworks;
inquired of management, and those charged with governance, about their own identification and assessment of
the risks of irregularities, including any known actual, suspected or alleged instances of fraud;
discussed matters about non-compliance with laws and regulations and how fraud might occur including
assessment of how and where the financial statements may be susceptible to fraud.
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sourcebiointernational.comLSE Code: SBI
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SOURCEBIO INTERNATIONAL PLC (continued)
The most significant laws and regulations were determined as follows:
Legislation / Regulation
International Accounting
Standards and the
Companies Act 2006
Additional audit procedures performed by the audit engagement team
included:
Review of the financial statement disclosures and testing to supporting
documentation; and
Completion of disclosure checklists to identify areas of non-compliance.
Tax compliance regulations
Inspection of advice received from external tax advisors.
ISO standards for medical
services and GDPR
ISAs limit the required audit procedures to identify non-compliance with these laws
and regulations to inquiry of management and where appropriate, those charged with
governance (as noted above) and inspection of legal and regulatory correspondence,
if any.
The areas that we identified as being susceptible to material misstatement due to fraud were:
Risk
Audit procedures performed by the audit engagement team:
Revenue recognition
See key audit matters above; and
Management override of
controls
We reviewed revenue journals for appropriateness using financial data analytics
software.
Testing the appropriateness of journal entries and other adjustments;
Assessing whether the judgements made in making accounting estimates are
indicative of a potential bias; and
Evaluating the business rationale of any significant transactions that are unusual or
outside the normal course of business.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
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.
Neil Stephenson
(Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
Suite A, 7th Floor
East West Building
2 Tollhouse Hill
Nottingham
NG1 5FS
12 April 2021
58
SourceBio International plcAnnual Report & Accounts 2020 CONSOLIDATED STATEMENT OF PROFIT AND
LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
Continuing operations:
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Adjusted EBITDA
Depreciation
Amortisation
Exceptional costs
Operating profit
Finance costs
Profit / (loss) before tax
Taxation
Profit / (loss) attributable to equity shareholders of the Company
Other comprehensive income
Items that may be reclassified to profit or loss:
- Exchange differences on translation of foreign operations
Total comprehensive income attributable to equity shareholders
of the Company
Note
5,6
5
17
16
7
8
12
13
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
50,737
(30,284)
21,234
(12,548)
20,453
(1,573)
(8,181)
14,155
(1,890)
(102)
(1,464)
10,699
(7,908)
2,791
201
2,992
208
3,200
8,686
(1,465)
(6,193)
3,016
(1,556)
(255)
(177)
1,028
(9,057)
(8,029)
(116)
(8,145)
(37)
(8,182)
Earnings per share
Basic and diluted earnings / (loss) per ordinary share
14
5.3p
(16.4)p
The notes on pages 64 to 100 are an integral part of these consolidated financial statements.
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sourcebiointernational.comLSE Code: SBI
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Assets
Non-current assets
Intangible assets – goodwill
Intangible assets – other
Property, plant and equipment
Right-of-use assets
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets classified as held for resale
Total current assets
Total assets
Equity attributable to equity shareholders of the
Company
Share capital
Share premium account
Foreign exchange reserve
Retained earnings
Total equity
Liabilities
Non-current liabilities
Trade and other payables
Borrowings
Lease liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Corporation tax payable
Lease liabilities
Provisions
Total current liabilities
Total liabilities
Total equity and liabilities
31 December
2020
£’000
31 December
2019
£’000
1 January
2019
£’000
Note
16
16
17
17
27
19
20
21
17
22
23
23
23
24
25
26
27
28
24
25
26
28
9,993
349
6,959
9,478
395
27,174
3,598
10,472
8,435
22,505
475
22,980
50,154
111
33,189
171
(1,637)
31,834
394
–
11,602
–
141
12,137
5,494
–
126
547
16
6,183
18,320
50,154
9,993
311
6,480
4,257
–
9,993
486
7,134
1,388
–
21,041
19,001
816
5,227
1,235
7,278
475
7,753
28,794
2,906
–
(37)
(80,117)
(77,248)
365
71,537
3,449
30
160
1,398
6,559
1,038
8,995
–
8,995
27,996
2,905
–
–
(71,972)
(69,067)
400
62,924
857
10
216
75,541
64,407
5,389
24,403
38
656
15
30,501
106,042
28,794
6,422
25,331
25
454
424
32,656
97,063
27,996
The notes on pages 64 to 100 are an integral part of these consolidated financial statements. The financial statements
were approved by the Board on 12 April 2021 and signed on its behalf by:
Jay LeCoque
Executive Chairman
Tony Ratcliffe
Chief Financial Officer
Company registered number: 10269474
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SourceBio International plcAnnual Report & Accounts 2020
COMPANY STATEMENT OF
FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Assets
Non-current assets
Investments in subsidiary undertakings
Total non-current assets
Current assets
Trade and other receivables
Total current assets
Total assets
Equity attributable to equity shareholders of the
Company
Share capital
Share premium account
Retained earnings
Total equity
Liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Total current liabilities
Total liabilities
Total equity and liabilities
31 December
2020
£’000
31 December
2019
£’000
Note
1 January
2019
£’000
18
20
22
23
23
25
24
25
15,184
15,184
19,782
19,782
34,966
111
33,189
1,602
34,902
–
–
64
–
64
–
34,966
15,184
15,184
4,153
4,153
19,337
2,906
–
(74,659)
(71,753)
67,687
67,687
–
23,403
23,403
91,090
19,337
15,184
15,184
3,688
3,688
18,872
2,905
–
(66,438)
(63,533)
61,674
61,674
–
20,731
20,731
82,405
18,872
The notes on pages 64 to 100 are an integral part of these consolidated financial statements.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present its
individual statement of comprehensive income and related notes. The profit for the parent Company for the year was
£773,000 (2019: £8,221,000 loss).
The financial statements were approved by the Board on 12 April 2021 and signed on its behalf by:
Jay LeCoque
Executive Chairman
Tony Ratcliffe
Chief Financial Officer
Company registered number: 10269474
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sourcebiointernational.comLSE Code: SBI
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
Consolidated
Balance at 1 January 2019
Loss for the year
Other comprehensive expense
Total comprehensive expense for the year
Transactions with owners, recorded directly in equity
- Proceeds from shares issued
Total transactions with owners
Balance at 31 December 2019
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners recorded directly in equity
Share
capital
£’000
2,905
–
–
–
1
1
2,906
–
–
–
- Redemption of PIK loan notes in consideration for
72,658
issuance of shares
- Reduction in share capital
- Proceeds from shares issued
- Proceeds from shares issued on Admission to AIM
- Costs of share issue
Total transactions with owners
Balance at 31 December 2020
(75,488)
3
32
–
(2,795)
111
Company
Balance at 1 January 2019
Loss for the year
Total comprehensive expense for the year
Transactions with owners, in their capacity as owners
- Proceeds from shares issued
Total transactions with owners
Balance at 31 December 2019
Profit for the year
Total comprehensive income for the year
Transactions with owners, in their capacity as owners
Share
capital
£’000
2,905
–
–
1
1
2,906
–
–
- Redemption of PIK loan notes in consideration for
72,658
issuance of shares
- Reduction in share capital
- Proceeds from shares issued
- Proceeds from shares issued on Admission to AIM
- Costs of share issue
Total transactions with owners
Balance at 31 December 2020
(75,488)
3
32
–
(2,795)
111
Share
premium
account
£’000
Foreign
exchange
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
(71,972)
(69,067)
(8,145)
(8,145)
–
(37)
(8,145)
(8,182)
–
–
1
1
–
–
(37)
(37)
–
–
(37)
(80,117)
(77,248)
–
208
208
2,992
–
2,992
2,992
208
3,200
–
–
–
–
–
–
–
72,658
75,488
–
–
–
–
3
35,000
(1,779)
75,488
105,882
171
(1,637)
31,834
Retained
earnings
£’000
Total
Equity
£’000
(66,438)
(63,533)
(8,221)
(8,221)
(8,221)
(8,221)
–
–
1
1
(74,659)
(71,753)
773
773
773
773
–
72,658
75,488
–
–
–
75,488
1,602
–
3
35,000
(1,779)
105,882
34,902
–
–
–
–
–
–
–
–
–
–
–
–
–
34,968
(1,779)
33,189
33,189
Share
premium
account
£’000
–
–
–
–
–
–
–
–
–
–
–
34,968
(1,779)
33,189
33,189
The notes on pages 64 to 100 are an integral part of these consolidated financial statements
62
SourceBio International plcAnnual Report & Accounts 2020 STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
Group
Company
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
2,992
(8,145)
773
(8,221)
Cash flows from operating activities
Profit / (loss) for the year
Adjustments for:
Depreciation of property, plant and equipment and
1,890
right-of-use assets
Amortisation
Reversal of past impairment
Foreign exchange
Profit on disposal of property, plant and equipment
Finance costs
Taxation
Issue costs of new shares
Working capital adjustments:
(Increase) / decrease in inventories
(Decrease) in provisions
(Increase) / decrease in trade and other receivables
Increase / (decrease) in trade and other payables
Cash generated from / (used in) operations
Income tax paid
Net cash inflows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds on disposal of property, plant and
equipment
Net cash generated by / (used in)
investing activities
Cash flows from financing activities
Gross proceeds from issue of shares
Costs of Admission to AIM and new share issuance
New borrowings secured
Repayment of borrowings
Interest paid
Payment of lease liabilities
Net cash (used in) / generated from financing
activities
Net increase in cash and cash equivalents
Net foreign exchange difference on cash and cash
equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year
102
–
253
–
7,908
(201)
1,464
(2,782)
(18)
(5,245)
25
6,388
(48)
6,340
(3,870)
(140)
5,000
990
35,003
(3,243)
2,000
(30,253)
(2,750)
(894)
(137)
7,193
7
1,235
8,435
1,556
255
(36)
(142)
(106)
9,057
116
–
582
(465)
1,306
(1,068)
2,910
(57)
2,853
(907)
(80)
406
(581)
–
–
–
(1,000)
(303)
(763)
(2,066)
206
(9)
1,038
1,235
–
–
–
–
–
7,520
1
1,464
–
–
(15,629)
61
(5,810)
–
–
–
–
–
–
35,003
(3,243)
–
(23,403)
(2,547)
–
5,810
–
–
–
The notes on pages 64 to 100 are an integral part of these consolidated financial statements
–
–
–
–
–
8,221
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. General Information
SourceBio International plc (the “Company” or “SourceBio”) was incorporated on 8 July 2016 as Sherwood Holdings
Limited and changed its name, and re-registered as a public limited company, SourceBio International plc, on
21 October 2020. SourceBio is a company incorporated in England and Wales and domiciled in the UK. The ordinary
shares of the Company are traded on the AIM Market of the London Stock Exchange. The address of the registered
office is 1 Orchard Place, Nottingham Business Park, Nottingham, NG8 6PX.
SourceBio is the ultimate parent Company of a number of subsidiaries whose principal activity is as an international
provider of integrated state-of-the-art laboratory services and products to the healthcare and clinical, life and applied
sciences and biopharma industries.
Two significant changes have occurred in this financial reporting period:
•
•
Firstly, the COVID-19 global pandemic materially impacted on the trading results of the long established core
business, most notably the Cellular Pathology services within the Healthcare Diagnostics business unit. The Group
more than made up the revenue and profit shortfall through the establishment of a new Infectious Disease
Testing business unit, which generated significant revenues and earnings from the provision of large scale
laboratory RT-PCR based COVID-19 testing services; and
Secondly, the Company listed on AIM on 29 October 2020 and raised £35 million gross funds. Shortly before this
transaction the Company completed a capital reorganisation. The net result was that the Group settled its PIK
loan notes and repaid all of its shareholder loans and bank borrowings during the year.
2. Summary of significant accounting policies
Accounting policies for the year ended 31 December 2020
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out
below. These policies have been applied consistently to all the years presented, unless otherwise stated.
Basis of preparation
The parent Company and consolidated accounts of SourceBio International plc have been prepared in accordance
with International Accounting Standards in conformity with the requirements of the Companies Act 2006 (IFRS).
The consolidated financial statements have been prepared under the historical cost convention.
The consolidated financial statements are presented in Sterling which is the functional and presentational currency
of the Group and Company and are rounded to the nearest thousand, £’000, except where otherwise indicated.
New standards, amendments and interpretations issued but not effective for the financial year
beginning 1 January 2020 and not early adopted
Certain new standards, amendments and interpretations to existing standards have been published that are
mandatory for the Group’s accounting periods beginning on or after 1 January 2021 or later periods and which
the Group has decided not to adopt early. The Group has considered the impact of these new standards and
interpretations in future periods on profit, earnings per share and net assets. None of these new standards or
interpretations is expected to have a material impact.
Going concern
The Directors have prepared detailed budgets and forecasts covering the period to 31 December 2022 which are based
on the medium-term strategic business plan prepared for the period to 31 December 2023. These plans take into account
all reasonably foreseeable circumstances and include consideration of trading results and cash flows on a month-by-
month basis. This forecasting has been undertaken following the impact of COVID-19 and has considered both the
64
SourceBio International plcAnnual Report & Accounts 2020 negative impact on the core business and the positive impact derived from the recently established Infectious Disease
Testing business unit which is expected to continue to materially contribute to the financial results going forward.
The Group is expected to generate cash and operating profits sufficient to meet its day-to-day operating needs and
to support its planned capital expenditure. Taking into account the proceeds from the recent IPO and based on their
enquiries and the information available to them in respect of the other risks and uncertainties set out herein, the Directors
have a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future.
Thus, they have adopted the going concern basis of accounting in preparing these financial statements.
Basis of consolidation
The Group’s consolidated financial statements include the results of the Company and all its subsidiaries. Subsidiaries
are all entities over which the Group has control. The Group controls an entity where the Group is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the Group.
Investments in subsidiaries
Investments in subsidiaries are recorded at cost less any impairment provisions in the Statement of Financial
Position. They are tested for impairment when there is objective evidence of impairment. Any impairment losses are
recognised in profit or loss in the period they occur.
Intangible assets
Goodwill
Goodwill is initially measured at fair value, being the excess of the aggregate of the consideration transferred over
the fair value of the net assets acquired, and any previous interest held over the net identifiable assets acquired and
liabilities assumed. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. The
goodwill is tested annually for impairment irrespective of whether there is an indication of impairment.
For the purposes of impairment testing, goodwill is allocated to the cash generating units (“CGUs”) expected to benefit
from the acquisition. CGUs to which goodwill has been allocated are tested for impairment at least annually, or more
frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU 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.
Intangible assets (other than goodwill)
Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at
cost less accumulated amortisation and accumulated impairment losses. Intangible assets acquired on business
combinations are recognised separately from goodwill at the acquisition date if the fair value can be measured reliably.
Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful
lives on the following bases:
Software: 5 years
•
• Development costs: 4 years
• Customer relationships: 4 to 6 years
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
2. Summary of significant accounting policies (continued)
Research and development expenditure
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development
expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
Development costs relate to a laboratory information management system that was developed internally by the Group.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment
losses. Cost comprises purchase cost together with any incidental cost of acquisition.
Depreciation is provided to write down the cost less estimated residual value of all tangible fixed assets by equal
instalments over their expected useful economic lives on a straight-line basis. The following useful lives are applied:
Freehold buildings: 50 years
Leasehold improvements: remaining lease term
Plant, fixtures, fittings and equipment: 3 to 15 years
•
•
•
• Motor vehicles: 4 years
Right-of-use assets (included within property, plant and equipment) relate to leasehold buildings and office
equipment and are depreciated over the lease term.
Impairment of non-current assets
At each reporting period end date, the Group and Company reviews the carrying amounts of its non-current 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 it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the CGU to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount
of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognised immediately in the
Statement of Comprehensive Income.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply.
Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset or CGU in prior years.
A reversal of an impairment loss is recognised immediately in profit or loss.
Inventories
Inventory is stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on a first in, first
out basis and includes costs associated with bringing the items to their present location and condition. Net realisable
value is the estimated selling price less costs to complete and sell.
Financial instruments
The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a
financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial
66
SourceBio International plcAnnual Report & Accounts 2020 instruments are recognised on the date the Group becomes a party to the contractual provisions of the instrument.
Financial instruments are recognised initially at fair value plus, in the case of a financial instrument not a fair value
through profit and loss, transaction costs that are directly attributable to the acquisition or issue of the financial
instrument. Financial instruments are derecognised on the trade date when the Group is no longer a party to the
contractual provisions of the instrument.
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and
borrowings, lease liabilities and trade and other payables.
Trade and other receivables and trade and other payables
Trade and other receivables are initially recognised at fair value and subsequently at amortised cost using the
effective interest method less any allowance for expected credit losses. Trade receivables are generally due for
settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which
uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped
based on days overdue.
Trade and other payables are recognised initially at transaction price plus attributable transaction costs. Subsequent
to initial recognition they are measured at amortised cost using the effective interest method, less any expected
credit losses in the case of trade receivables. If the arrangement constitutes a financing transaction, for example if
payment is deferred beyond normal business terms, then it is measured at the present value of future payments
discounted at a market rate of interest for a similar debt instrument.
Contract assets
Contract assets are recognised when revenue is recognised but payment is conditional on a basis other than the
passage of time. Contract assets are included in trade and other receivables.
Contract liabilities
Contract liabilities are recognised when payment from a customer is received in advance of performance obligations
being satisfied. Contract liabilities are recognised in trade and other payables.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at the present value of future payments discounted at a market
rate of interest. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised costs using the
effective interest method, less any impairment losses.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on
demand and form an integral part of the Group’s cash management are included as a component of cash and cash
equivalents for the purpose only on the cash flow statement.
Provisions
A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive
obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects risks specific to the liability. Where the effect of the time value of money is
material, the amount expected to be required to settle the obligation is recognised at present value. When a provision
is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the
period in which it arises.
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
2. Summary of significant accounting policies (continued)
Employee benefits
The Group operates a defined contribution money purchase pension scheme under which it pays contributions
based upon a percentage of the members’ basic salary. Contributions to defined contribution pension schemes are
charged to the Statement of Comprehensive Income and differences between contributions payable in the year and
contributions actually paid are shown as either accruals or prepayments.
Leases
The Group leases various office and laboratory facilities, warehousing, as well as certain laboratory, IT and office
equipment and a number of vehicles. Rental contracts are typically made for fixed periods of variable lengths. Assets
and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
•
•
•
•
•
fixed payments, less any lease incentives receivable;
variable lease payments based on an index or a rate, initially measured using the index or rate as at the
commencement date;
amounts expected to be payable by the Group under residual value guarantees;
the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the
liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases held by the Group, the Group uses an estimated incremental
borrowing rate, being the rate that the individual lessee is estimated to have to pay to borrow the funds necessary
to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms,
security and conditions.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are
not included in the lease liability until they take effect. When adjustments to lease payments based on an index or
rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period.
Right-of-use assets are measured at cost comprising the following:
•
•
•
•
the amount of the initial measurement of lease liability;
any lease payments made at or before the commencement date less any lease incentives received;
any initial direct costs; and
any potential restoration costs.
The Group leases properties in Nottingham and Cambridge in the UK, San Diego in the USA, as well as Tramore and
Dublin in Ireland. All such leases are accounted for by recognising a right-of-use asset and a lease liability.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on
a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset’s useful life.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are
recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of
12 months or less without a purchase option. Low-value assets comprise IT equipment and small items
of office equipment.
68
SourceBio International plcAnnual Report & Accounts 2020 Finance income and expenses
Finance expenses comprise interest payable (including lease liability interest) and is recognised in the profit or loss
using the effective interest method.
Finance income is recognised in the profit or loss as it accrues.
Revenue recognition
Revenue is recognised when control of a service or product provided by the Group is transferred to the customer,
in line with the Group’s performance obligations in the contract, and at an amount reflecting the consideration the
Group expects to receive in exchange for the provision of services.
The Group recognised revenue from the following activities:
Services
Revenues received or receivable for services, typically provided under contract pathology, COVID testing, Sanger
Sequencing services, Stability Storage and Analytical Testing Services, are recognised when the services are provided,
which may be when a test result is delivered or (for an extended service contract) on a pro-rata basis in line with the
committed period to provide that service.
Products
Revenue from sales of products, typically provided under processed human tissue, genomic reagents and antibodies
and serology is recognised when goods are delivered to and accepted by the customer.
Service agreements
Revenue relating to service contracts invoiced at the inception of the agreements is deferred such that the income
is recognised over the contract life. The revenue is recognised in line with the provision of the services or, where the
quantum and timing of the services cannot be reliably predicted, evenly over the period of the agreement.
Contracts recognised over time and with multiple elements
The Group enters into certain contracts that are performed over time. These include Genomics, Validation Services
and Manufacturing.
Under these contracts revenue is recognised based on the stage of completion. The assets created do not have
an alternative use and the Group has an enforceable right to payment for performance completed to date on
such contracts.
Where the Group enters into contracts for the supply and installation of products, revenue is recognised based on
the specific terms of each contract. In some instances, this requires the allocation of the transaction price between
the supply of the product and the installation and commissioning. Where contracts require separation, the revenue is
allocated based on the fair values attributable to the separate elements and the performance obligations being met.
Testing kits
The price charged for the testing kits is specified in agreements negotiated with each customer. The price for the
testing kits comprises an amount for laboratory consumables and reagents required to perform the tests and, where
the systems are supplied on a rental basis, an equipment premium, which is equivalent to a rental charge, and an
amount for maintenance of the systems during the term of the agreement. All contracts are for a fixed price and do
not include variable consideration.
Revenue associated with the laboratory consumables and reagents is recognised when the testing kits are delivered
and accepted by the customer. Revenue from the equipment premium and maintenance element is recognised over
the period in which the customer is expected to benefit from the provision of these elements of the supply.
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
2. Summary of significant accounting policies (continued)
Pre-paid vouchers
Vouchers are sold to customers in advance in return for the right to receive certain sequencing services in the future.
These are not cash refundable. The revenue associated with these voucher sales is recognised when the services
are performed and obligations met with an estimate made for a proportion of vouchers that are not expected to be
redeemed, based on prior period redemption rates.
Taxes
Corporation tax, where payable, is provided on taxable profits at the current rate.
Deferred tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised. 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 profit will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities, and when the deferred tax assets and liabilities relate to taxes levied by the same
taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the
balances on a net basis.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset
is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the balance sheet date.
Foreign currency translation
Transactions in currencies other than the functional currency (foreign currency) are initially recorded at the exchange
rate prevailing on the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the
reporting date. Non-monetary assets and liabilities denominated in foreign currencies are translated at the rate ruling
at the date of the transaction, or, if the asset or liability is measured at fair value, the rate when that fair value was
determined.
All translation differences are taken to profit or loss, except to the extent that they relate to gains or losses on
non-monetary items recognised in other comprehensive income, when the related translation gain or loss is also
recognised in other comprehensive income.
The functional currency of the Group is Sterling. Exchange differences arising from the translation of foreign
operations are recognised in other comprehensive income and accumulated in a foreign currency translation reserve
within equity.
Equity instruments
Equity instruments issued by the Group are recorded as the value of the proceeds received net of direct issue costs.
70
SourceBio International plcAnnual Report & Accounts 2020 Exceptional costs
The Group presents as exceptional items on the face of the Statement of Comprehensive Income those material
items of income and expense which, because of the nature, expected infrequency and materiality of the events
giving rise to them, merit separate presentation to allow shareholders to better understand the elements of financial
performance in the year, so as to facilitate comparison with prior years.
3. First time adoption of IFRS
These financial statements, for the year ended 31 December 2020, are the first the Group has prepared in
accordance with IFRS. For periods up to and including the year ended 31 December 2019, the Group prepared
its financial statements in accordance with generally accepted accounting principles (UK GAAP). Accordingly, the
Group has prepared financial statements that comply with IFRS applicable as at 31 December 2020, together with
the comparative period data for the year ended 31 December 2019, as described in the summary of significant
accounting policies. In preparing the financial statements, the Group’s opening statement of financial position was
prepared as at 1 January 2019, the Group’s date of transition to IFRS. This note explains the principal adjustments
made by the Group in restating its UK GAAP financial statements, including the Statement of Financial Position as at
1 January 2019 and the financial statements as of, and for, the year ended 31 December 2019.
IFRS 1 allows first-time adopters certain exemptions from the retrospective application of certain requirements under
IFRS. The Group has applied the following exemptions and principles:
•
•
IFRS 3 Business Combinations has not been applied to the acquisitions of subsidiaries that are considered
businesses under IFRS that occurred before 1 January 2019. Use of this exemption means that the UK GAAP
carrying amount of assets and liabilities, that are required to be recognised under IFRS, are their deemed costs at
the date of the acquisition. After the date of the acquisition, measurement is in accordance with IFRS. Assets and
liabilities that do not qualify for recognition under IFRS are excluded from the opening IFRS Statement of Financial
Position. The Group did not recognise any assets or liabilities that were not recognised under UK GAAP or exclude
any previously recognised amounts as a result of IFRS recognition requirements;
IFRS 1 also requires that the UK GAAP carrying amount of goodwill must be used in the opening IFRS Statement of
Financial Position (apart from adjustments for goodwill impairment and recognition or derecognition of intangible
assets). In accordance with IFRS 1, the Group has tested goodwill for impairment at the date of transition to IFRS.
There was no impairment recognised on goodwill at 1 January 2019;
•
• Cumulative currency translation differences for all foreign operations are deemed to be zero as at 1 January 2019;
The Group assessed all contracts existing at 1 January 2019 to determine whether a contract contains a lease
•
based upon the conditions in place as at 1 January 2019;
Lease liabilities were measured at the present value of the remaining lease payments, discounted using the
lessee’s incremental borrowing rate at 1 January 2019, which was a weighted average of 3.64%. Right-of-use
assets were measured at the amount equal to the lease liabilities, adjusted by the amount of any pre-paid or
accrued lease payments relating to that lease recognised in the Statement of Financial Position immediately
before 1 January 2019. The lease payments associated with leases for which the lease term ends within 12
months of the date of transition to IFRS and leases for which the underlying asset is of low value have been
recognised as an expense on either a straight-line basis over the lease term or another systematic basis; and
The Group has applied the transitional provisions in IAS 23 Borrowing Costs and capitalises borrowing costs
relating to all qualifying assets after the date of transition. Similarly, the Group has not restated for borrowing
costs capitalised under UK GAAP on qualifying assets prior to the date of transition to IFRS.
•
The estimates at 1 January 2019 and 31 December 2019 are consistent with those made for the same dates in
accordance with UK GAAP (after adjustments to reflect any differences in accounting policies). The estimates used
by the Group to present these amounts in accordance with IFRS reflect conditions at 1 January 2019, the date of
transition to IFRS and as at 31 December 2019.
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
3. First time adoption of IFRS (continued)
Group reconciliation of equity as at 1 January 2019 (the date of transition to IFRS)
UK GAAP
£’000
Reclassification and
remeasurements
£’000
Note
IFRS as at
1 January
2019
£’000
Assets
Non-current assets
Intangible assets - goodwill
Intangible assets - other
Property, plant and equipment
Right-of-use assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity attributable to equity
shareholders of the Company
Share capital
Retained earnings
Total equity
Liabilities
Non-current liabilities
Trade and other payables
Borrowings
Lease liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Corporation tax payable
Lease liabilities
Provisions
Total current liabilities
Total liabilities
Total equity and liabilities
72
B
B
D
D
B
D
B
9,993
486
7,954
–
18,433
1,398
6,559
1,038
8,995
27,428
2,905
(71,864)
(68,959)
400
62,924
433
10
216
63,983
6,422
25,331
25
202
424
32,404
96,387
27,428
–
–
(820)
1,388
568
–
–
–
–
568
–
(108)
(108)
–
–
424
–
–
424
–
–
–
252
–
252
676
568
9,993
486
7,134
1,388
19,001
1,398
6,559
1,038
8,995
27,996
2,905
(71,972)
(69,067)
400
62,924
857
10
216
64,407
6,422
25,331
25
454
424
32,656
97,063
27,996
SourceBio International plcAnnual Report & Accounts 2020
Group reconciliation of equity as at 31 December 2019
Assets
Non-current assets
Intangible assets – goodwill
Intangible assets – other
Property, plant and equipment
Right-of-use assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets classified as held for resale
Total current assets
Total assets
Equity attributable to equity
shareholders of the Company
Share capital
Foreign exchange reserve
Retained earnings
Total equity
Liabilities
Non-current liabilities
Trade and other payables
Borrowings
Lease liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Corporation tax payable
Lease liabilities
Provisions
Total current liabilities
Total liabilities
Total equity and liabilities
Note
A
B,C
B
D
C
E
D
B
D
B
UK GAAP
£’000
Reclassification and
remeasurements
£’000
IFRS as at
31 December
2019
£’000
8,536
311
8,125
–
16,972
816
5,227
1,235
7,278
–
7,278
24,250
2,906
–
(81,626)
(78,720)
365
71,537
676
30
160
72,768
5,389
24,403
38
357
15
30,202
102,970
24,250
1,457
–
(1,645)
4,257
4,069
–
–
–
–
475
475
4,544
–
(37)
1,509
1,472
–
–
2,773
–
–
2,773
–
–
–
299
–
299
3,072
4,544
9,993
311
6,480
4,257
21,041
816
5,227
1,235
7,278
475
7,753
28,794
2,906
(37)
(80,117)
(77,248)
365
71,537
3,449
30
160
75,541
5,389
24,403
38
656
15
30,501
106,042
28,794
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
3. First time adoption of IFRS (continued)
Group reconciliation of total comprehensive income for the year ended 31 December 2019
Continuing operations:
Note
A,B
B
A
B
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Adjusted EBITDA
Depreciation
Amortisation
Exceptional costs
Operating (loss) / profit
Finance costs
Loss before tax
Taxation
Loss attributable to equity shareholders
of the Company
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss:
- Exchange differences on translation of
foreign operations
Total comprehensive income
attributable to equity shareholders
of the Company
UK GAAP
£’000
21,234
(12,548)
8,686
(1,465)
(7,842)
2,499
(1,231)
(1,712)
(177)
(621)
(8,988)
(9,609)
(116)
(9,725)
(37)
(9,762)
IFRS for the year
ended
31 December
2019
£’000
Remeasurements
£’000
–
–
–
–
1,649
517
(325)
1,457
–
1,649
(69)
1,580
–
1,580
–
1,580
21,234
(12,548)
8,686
(1,465)
(6,193)
3,016
(1,556)
(255)
(177)
1,028
(9,057)
(8,029)
(116)
(8,145)
(37)
(8,182)
Notes to the reconciliation of equity as at 1 January 2019 and 31 December 2019 and total comprehensive
income for the year ended 31 December 2019
A Intangible assets
Under UK GAAP, the Group amortised goodwill. Under IFRS, goodwill is not amortised. After initial recognition,
goodwill is measured at cost less any accumulated impairment losses. The goodwill is tested annually for impairment
irrespective of whether there is an indication of impairment. At the date of transition to IFRS on 1 January 2019, the
Group adopted the carrying value of goodwill of £9,993,000. Under IFRS, there has been no impairment in the year
(2019: £nil).
The goodwill shown as at 1 January and 31 January 2019 within the Company’s Admission Document to AIM
amounted to £11,450,000. The difference of £1,457,000 arose from the assumption of an effective date of transition
to IFRS being 1 January 2017 rather than 1 January 2019.
B Leases
Under UK GAAP, a lease is classified as a finance lease or an operating lease. Operating lease payments are
recognised as an operating expense in the statement of profit or loss on a straight-line basis over the lease term.
Under IFRS, a lessee applies a single recognition and measurement approach for all leases, except for short-term
74
SourceBio International plcAnnual Report & Accounts 2020 leases and leases of low-value assets and recognises lease liabilities to make lease payments and right-of-use
assets representing the right to use the underlying assets. At the date of transition to IFRS, the Group applied the
transitional provision and measured lease liabilities at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate at the date of transition to IFRS. Right-of-use assets were measured at
the amount equal to the lease liabilities adjusted by the amount of any pre-paid or accrued lease payments.
As a result, at the date of conversion to IFRS, the Group recognised an increase of £676,000 (and at 31 December
2019: £3,072,000) of lease liabilities included under interest-bearing loans and borrowings and £1,388,000 (and at
31 December 2019: £4,257,000) of right-of-use assets. The difference between lease liabilities and right-of-use assets
has been recognised in retained earnings.
Under UK GAAP, assets held under finance leases are capitalised and included in property, plant and equipment.
Under IFRS, they are presented in right-of-use assets. At the date of transition to IFRS, £820,000 (and at 31 December
2019: £1,170,000) was reclassified from tangible fixed assets to right-of-use assets. In addition, lease charges included
within administrative expenses under UK GAAP are removed under IFRS. Additionally, depreciation increased by
£325,000 and finance costs increased by £69,000 for the year ended 31 December 2019.
C Assets classified as held for resale
Under UK GAAP, assets held for resale are included in property, plant and equipment. Under IFRS, they are
separately presented within current assets as assets held for resale. There were no such assets at the date of
transition to IFRS, but at 31 December 2019 £475,000 was reclassified from tangible fixed assets to right-of-use
assets within current assets.
D Contract assets and contract liabilities
Under UK GAAP, the Group recognised trade receivables, even if the receipt of the total consideration was
conditional on successful completion of installation services. Under IFRS, any earned consideration that is conditional
should be recognised as a contract asset rather than a receivable. Therefore, at the date of transition to IFRS,
1 January 2019, the Group reclassified £588,000 and at 31 December 2019 it reclassified £431,000 from trade
receivables to contract assets.
No adjustment has been made to revenue in applying IFRS 15: Revenue from Contracts with Customers.
Under UK GAAP, the Group recognised deferred revenue for an obligation to transfer goods or services to a customer
for which the entity has received consideration or the amount is due from the customer. Under IFRS, the obligation
should be recognised as a contract liability rather than deferred revenue. Therefore, at the date of transition to IFRS,
1 January 2019, the Group reclassified £2,700,000 and at 31 December 2019 it reclassified £2,305,000 from deferred
revenue to contract liabilities.
E Foreign exchange reserve
Under UK GAAP, the Group recognised translation differences on foreign operations in the retained earnings reserve.
Under IFRS, cumulative currency translation differences for all foreign operations are recognised in a separate
component of equity. The cumulative translation differences are deemed to be zero as at 1 January 2019.
Statement of Cash Flows
Under UK GAAP, a lease is classified as a finance lease or an operating lease. Cash flows arising from operating
lease payments are classified as operating activities. Under IFRS, a lessee generally applies a single recognition
and measurement approach for all leases and recognises lease liabilities. Cash flows arising from payments of the
principal portion of lease liabilities are classified as financing activities. Therefore, cash outflows from operating
activities decreased by £375,000 and cash outflows from financing activities increased by the same amount for the
year ended 31 December 2019.
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
4. Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting
policies. The preparation of the financial statements requires the Directors to make estimates and judgements
that affect the reported amounts of assets, liabilities, costs and revenue in the historical consolidated financial
information. Actual results could differ from these estimates. The judgements, estimates and associated assumptions
are based on historical experience and other factors that are considered to be relevant. Key areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated
financial statements are disclosed below:
Depreciation and amortisation
The assessment of the useful economic lives, residual values and the method of depreciating or amortising tangible
and intangible (excluding goodwill) fixed assets requires judgement. Depreciation and amortisation are charged to
profit or loss based on the useful economic life selected, which requires an estimation of the period and profile over
which the Group expects to consume the future economic benefits embodied in the assets. Useful economic lives and
residual values are re-assessed, and amended as necessary, when changes in their circumstances are identified.
The carrying value of tangible assets at the year-end is £16,912,000 (2019: £11,212,000) including assets classified
as held for resale of £475,000 (2019: £475,000). The carrying value of intangible assets (excluding goodwill) at the
year-end is £349,000 (2019: £311,000). There was depreciation in the year of £1,890,000 (2019: £1,556,000) and
amortisation in the year of £102,000 (2019: £255,000).
Revenue: Deferred voucher income
An assessment is made of the amount of revenue to be recognised in relation to payments received. For example, where
customers purchase pre-paid vouchers for Sanger Sequencing services, an assessment is made of the likely future
redemption rate to estimate the quantum of deferred income to be recognised as a liability and revenue to be recognised.
Revenue: manufacturing
An assessment is made of the level of completion of manufactured Stability Storage equipment and, given an
enforceable right to payment, this level of completion drives the amount of revenue to be recognised.
Impairment of trade receivables
The Group’s policy on recognising an impairment of the trade receivables balance is based on a review of individual
receivable balances, their ageing and management’s assessment of realisation. This review and assessment
is conducted on a continuing basis and any material change in management’s assessment of trade receivable
impairment is reflected in the carrying value of the asset.
Impairment of goodwill
Impairment tests have been undertaken in respect of goodwill using an assessment of the value in use of the
respective CGUs. This assessment requires a number of assumptions and estimates to be made including the
allocation of assets of CGUs, the expected future cash flows from each CGU and also the selection of a suitable
discount rate in order to calculate the present value of those cash flows. There was no impairment in the year.
The carrying value of goodwill at the year-end was £9,993,000 (2019: £9,993,000).
Lease liabilities
The Group makes judgements to estimate the incremental borrowing rate used to measure lease liabilities based on
expected third-party financing costs when the interest rate implicit in the lease cannot be readily determined.
This is explained further in the Leases accounting policy. The rates used have varied between 3.1% and 4.4% per
annum. Where leases include break dates the management have made a judgement that these will not be exercised.
For the sale and leaseback transaction referred to in note 32, there was no profit recognised on the disposal given
that the discounted lease commitments of £8.6 million exceeded the £5.0 million sale price. Instead, a right-of-use
76
SourceBio International plcAnnual Report & Accounts 2020 asset of £5.8 million was recognised which was based on the discounted lease commitments less £2.8 million which
was the difference between the book value of the property prior to sale and the £5 million of sale price received.
5. Operating segments
Operating segments description
IFRS 8 requires that operating segments be identified on the basis of internal reporting and decision-making.
Management has determined the Group’s operating segments based on the monthly management reports presented
to the Chief Operating Decision Maker (“CODM”). The CODM is the Executive Chairman and the monthly management
reports are used by the Group to make strategic decisions and allocate resources. For the purposes of management
reporting to the CODM, the commercial activities of the Group are organised into four business segments:
-
Infectious Disease Testing;
- Healthcare Diagnostics;
- Genomics; and
- Stability Storage.
The Infectious Disease Testing business unit was formed in May 2020 when the Group launched COVID-19 testing
services in response to the unfolding global pandemic. In addition to these four business segments, the Group has
modest continuing non-core operations, which are presented separately and modest wound down operations (in
2019 only) which are also presented separately.
Revenue and gross profit by business segment
Revenues and gross profits are presented for each business segment but, due to the shared nature of many
expenses, expenses are not separately allocated across the business segments.
There have been immaterial sales between business segments, and where these do occur they are at arm’s length pricing.
Unallocated costs represent common costs.
Infectious Disease Testing
Healthcare Diagnostics
Genomics
Stability Storage
Unallocated
Core operations
Non-core operations
Sub total
Wound down operations
Total
2020
Revenue
£’000
34,463
4,424
4,219
6,880
–
49,986
751
50,737
–
50,737
Gross profit
£’000
Revenue
£’000
Gross profit
£’000
2019
13,663
1,046
1,734
3,857
–
20,300
153
20,453
–
20,453
–
7,293
4,523
7,934
–
19,750
916
20,666
568
21,234
–
2,919
1,779
4,349
(547)
8,500
397
8,897
(211)
8,686
Due to the shared nature of many assets, assets and liabilities are not able to be separately allocated across the
business segments, but are reported to the CODM on an aggregate basis.
Adjusted EBITDA (Alternative Performance Measure)
The CODM, Board and Executive Management team primarily use a measure of adjusted earnings before interest,
tax, depreciation and amortisation and exceptional items (EBITDA before exceptional costs, or adjusted EBITDA)
to assess the performance of the overall business. This is an Alternative Performance Measure. The reconciliation
of adjusted EBITDA to operating profit is shown on the face on the Consolidated Statement of Profit and Loss.
Exceptional items are summarised in note 7.
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
6. Revenue
Geographical segments
The Group manages its business segments on a global basis. The operations are based primarily in the UK, with
additional facilities in Europe and the USA.
The revenue analysis in the table below is based on the location of the customer.
United Kingdom
Europe
USA
Total
2020
£’000
46,657
2,349
1,731
50,737
The Group details below significant customers who have contributed to more than 10% of Group revenue:
Department of Health and Social Care
Spire Healthcare Limited
Group revenue has been recognised according to time as below:
Recognised at a point in time
Recognised over time
Total
2020
£’000
17,200
10,700
2020
£’000
44,984
5,753
50,737
The Group has recognised the following assets and liabilities in relation to contracts with customers:
Assets
Contract assets relating to Healthcare Diagnostics contracts
Contract assets relating to Infectious Disease Testing contracts
Contract assets relating to Stability Storage contracts
Contract assets relating to Genomics contracts
Total
Liabilities
Contract liabilities relating to pre-paid Sanger Sequencing vouchers in Genomics
Contract liabilities relating to Stability Storage contracts
Total
2020
£’000
68
814
76
157
1,115
2020
£’000
978
1,030
2,008
2019
£’000
15,438
3,631
2,165
21,234
2019
£’000
–
–
2019
£’000
16,104
5,130
21,234
2019
£’000
126
–
138
167
431
2019
£’000
1,329
976
2,305
The principal increase in the contract assets arose from the inclusion of £814,000 in the newly established Infectious
Disease Testing business unit.
Set out below is the amount of revenue recognised from amounts previously included within contract liabilities at the
start of the year:
Total
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2020
£’000
1,634
2019
£’000
1,374
SourceBio International plcAnnual Report & Accounts 2020
Management expects that approximately 95% (2019: 95%) of the contract liabilities relating to pre-paid Sanger
Sequencing vouchers at the year-end date will be recognised as revenue during 2021, the balance in 2022.
Management expects that approximately 64% (2019: 69%) of the contract liabilities relating to Stability Storage
contracts at the year-end date will be recognised as revenue during 2021, the balance is expected to be recognised
over the life of the contract periods.
7. Exceptional items
Costs in relation to the Company’s Admission to AIM
Restructuring and other costs
Goodwill and asset impairment
Legal claim accrual
Release of employment matters provision
Total
2020
£‘000
1,464
–
–
–
–
1,464
2019
£‘000
–
161
(36)
206
(154)
177
The Company was admitted to AIM on 29 October 2020 and incurred total professional fees and transaction costs
(including unrecoverable VAT) of £3,243,000, of which £1,779,000 was charged to the share premium account and
£1,464,000 was recorded as exceptional costs in the profit and loss.
8. Operating profit
Group
The following items have been charged / (credited) in arriving at operating profit:
Depreciation of property, plant and equipment owned
Depreciation of property, plant and equipment leased
Amortisation of intangible assets
Reversal of past impairment of tangible assets
Profit on disposal of tangible assets
Expenses relating to short-term leases (included within cost of sales)
Exchange differences
2020
£’000
1,194
696
102
–
–
55
253
2019
£’000
1,175
381
255
(36)
(106)
25
(142)
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
9. Staff costs
Staff costs during the year
Wages and salaries
Social security costs
Pension costs - defined contribution
Total
Average monthly employees
Laboratory Services
Products
Central services
Total
Group
Company
2020
£’000
6,675
675
217
7,567
2019
£’000
6,051
475
238
6,764
2020
£’000
147
18
–
165
2019
£’000
–
–
–
–
Group
Company
2020
Number
2019
Number
2020
Number
2019
Number
120
32
42
194
81
37
49
167
–
–
6
6
–
–
6
6
Since Admission to AIM in 2020, staff costs in the Company derive from the costs of the Non-Executive Directors
and the Chief Financial Officer. The Executive Chairman is employed by a wholly owned subsidiary company, Source
BioScience Inc.
10. Key Management and Directors
Consolidated
Key management remuneration
Salaries and short-term employee benefits
Pension costs - defined contribution
Total
2020
£’000
663
17
680
2019
£’000
450
21
471
The key management figures given above comprise Executive and Non-Executive Directors together with the Chief
Operating Officer.
Directors’ remuneration
Salaries and fees
Bonuses
Benefits-in-kind
Pension costs – defined contribution
Total
2020
£’000
285
132
31
6
454
At the year-end one Director (2019: one) had retirement benefits accruing under defined contribution pension
schemes. Remuneration above includes the following amounts paid to the highest paid Director:
Highest paid Director’s remuneration
Salary
Bonus
Benefits-in-kind
Pension costs – defined contribution
Total
80
2020
£’000
176
75
29
5
285
2019
£’000
245
23
30
12
310
2019
£’000
143
13
23
4
183
SourceBio International plcAnnual Report & Accounts 2020 11. Pension commitments
The Group operates a number of defined contribution pension schemes and makes payments to other, personal
defined contribution pension scheme arrangements on behalf of certain employees. The charges in the year
amounted to:
Group
Defined contribution schemes
The year-end creditor amounted to £38,000 (2019: £29,000).
2020
£’000
217
2019
£’000
238
12. Finance costs
Group
On bank and other loans
On lease liabilities
Total
13. Taxation
Current tax
UK corporation tax on profits for the current year
Adjustment in respect of previous years
Foreign taxation
Foreign taxation adjustment in respect of previous years
Total
Deferred tax
Origination and reversal of timing differences
Adjustments in respect of prior periods
Effect of tax rate change on opening balance
Total
Total (credit) / charge
2020
£’000
(7,677)
(231)
(7,908)
2020
£‘000
232
(62)
54
–
224
(431)
–
6
(425)
(201)
2019
£’000
(8,961)
(96)
(9,057)
2019
£‘000
–
16
90
(10)
96
10
10
–
20
116
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
13. Taxation (continued)
Reconciliation of tax expense
The tax assessed on the profit / (loss) on ordinary activities for the year is lower than the standard rate of corporation
tax in the UK of 19% (2019: 19%)
Profit / (loss) on ordinary activities before taxation
Profit / (loss) on ordinary activities by rate of tax
Expenses not deductible for tax purposes
Ineligible depreciation
Movement in deferred tax not recognised
Adjustment in respect of prior periods
Leases including sale and leaseback
Interest not deductible under thin capitalisation rules
Effect of change in corporation tax rate
Losses eliminated
Other
Tax (credit) / charge on profit or loss
2020
£‘000
2,791
530
422
23
(1,402)
(62)
(559)
898
6
-
(57)
(201)
2019
£‘000
(8,029)
(1,526)
173
181
(292)
16
-
1,578
(27)
83
(70)
116
The Group had £274,000 of deferred tax assets arising from tax losses within Source BioScience Inc and other short-
term timing differences which, based on the anticipated future profitability of the entity, have not been recognised.
14. Earnings / (loss) per share
Basic earnings per share is calculated by dividing the result for the year attributable to ordinary shareholders of the
Company by the weighted average number of shares in issue during the year. For 2019 and 2020, the share numbers
used have been calculated consistently to take into account the 2020 share reorganisation, i.e. by assuming the
various steps of the share reorganisation had been in effect through 2019 and 2020.
Diluted earnings per share is calculated by dividing the result for the year attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the year adjusted for the effects of dilutive options.
As there are no options in issue, diluted earnings per share is the same as basic earnings per share.
The calculation of basic earnings per share for the year was based on the profit attributable to ordinary shareholders
of £2,992,000 (2019: £8,145,000 loss) and 56,307,171 ordinary shares (2019: 49,711,000 ordinary shares) being the
weighted average number of ordinary shares in issue.
Adjusted earnings per share, an Alternative Performance Measure, is calculated by dividing the result for the year
attributable to ordinary shareholders, excluding interest expense attributable to the shareholder loans and PIK loan
notes and expenses related to exceptional items, as well as the tax effect of these items, by the weighted average
number of ordinary shares in issue during the year.
82
SourceBio International plcAnnual Report & Accounts 2020 The calculation of adjusted earnings per share for the year was based on the adjusted profit attributable to ordinary
shareholders of £11,169,000 (2019: £826,000) and 56,307,171 ordinary shares (2019: 49,711,000 ordinary shares)
being the weighted average number of ordinary shares in issue.
The calculation of adjusted earnings, which includes any impact of taxation is as below:
Profit / (loss) for the year
Interest payable on shareholder loans and PIK loan notes
Exceptional items
Tax effect of the above
Adjusted profit for the year
2020
£‘000
2,992
7,677
1,464
(964)
11,169
2019
£‘000
(8,145)
8,961
177
(167)
826
The reconciliation of the earnings and weighted average number of shares used in the calculations is set out below:
2020
Weighted
average
number
of
shares
000’s
Earnings
£’000
2019
Weighted
average
number of
shares
000’s
Per
share
amount
(pence)
Per
share
amount
(pence)
Earnings
£’000
2,992
56,307
5.3p
(8,145)
49,711
(16.4)p
11,169
56,307
19.8p
826
49,711
1.7p
Basic and Diluted EPS
Earnings attributable to ordinary
shareholders of the Company
Adjusted basic EPS
Adjusted earnings attributable to
ordinary shareholders of the Company
15. Services provided by the Group’s auditor and network firms
During the year the Group obtained the following services from the Group’s auditor as detailed below:
Audit services:
Statutory audit of Company’s and subsidiaries’ financial statements
Non-statutory audit of Company as part of the re-registration as a plc
Tax services:
Compliance services
Advisory services prior to Admission to AIM
Other non-audit services:
Transaction related services relating to Admission to AIM
Other
2020
£’000
2019
£’000
113
7
–
31
193
–
100
–
36
–
–
22
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
16. Goodwill and other intangible assets
Consolidated
Cost
At 1 January 2019
Additions
At 31 December 2019
Additions
At 31 December 2020
Amortisation and
impairment
At 1 January 2019
Amortisation charge
At 31 December 2019
Amortisation charge
At 31 December 2020
Net book value
At 1 January 2019
At 31 December 2019
At 31 December 2020
Goodwill
£‘000
Software
£‘000
Development
costs
£‘000
Customer
relationships
£‘000
Total other
intangible
assets
£’000
61,331
–
61,331
–
61,331
51,338
–
51,338
–
51,338
9,993
9,993
9,993
–
22
22
12
34
–
–
–
6
6
–
22
28
1,117
58
1,175
128
1,303
631
255
886
96
982
486
289
321
185
–
185
–
185
185
–
185
–
185
–
–
–
1,302
80
1,382
140
1,522
816
255
1,071
102
1,173
486
311
349
Total
£‘000
62,633
80
62,713
140
62,853
52,154
255
52,409
102
52,511
10,479
10,304
10,342
Amortisation is charged within administrative expenses in the Statement of Comprehensive Income.
Following initial recognition, goodwill is subject to impairment reviews, at least annually, and measured at cost
less accumulated impairment losses. Any impairment is recognised immediately in the Consolidated Statement of
Comprehensive Income and is not subsequently reversed.
A business unit summary of the allocation of goodwill is shown below:
Healthcare Diagnostics
Genomics
Stability Storage
Total
2020
£’000
1,458
2,596
5,939
9,993
2019
£’000
1,458
2,596
5,939
9,993
In accordance with IAS 36, a CGU to which goodwill has been allocated shall be tested for impairment annually and
whenever there is indication of impairment by comparing the carrying amount of the unit, including the goodwill, with
the recoverable amount of the unit.
84
SourceBio International plcAnnual Report & Accounts 2020
Number of years of cash flows used and budgeted growth rate
The recoverable amount of the CGU is based on a value in use calculation using specific cash flow projections over a
five year period and a terminal growth rate thereafter.
The five year forecast is prepared considering the Directors’ expectations based on market knowledge, numbers
of new engagements and the pipeline of opportunities. The principal assumptions are that underlying growth is
expected in the Healthcare Diagnostics, Genomics and Storage Stability business units, from a reduced level in 2020.
In particular, a return of substantial levels of elective surgeries is anticipated to drive growth in Cellular Pathology
testing services, the backlog of work having been caused by COVID-19. Infectious Disease Testing revenues are
forecasted to peak in 2021, but to continue beyond 2021. Estimates have been forecasted of gross margin
trends, expense growth and cash generation on a line-by-line monthly basis at least through 2022, then
extrapolated thereafter.
Discount rate
The Group’s pre-tax weighted average cost of capital has been used to calculate a discount rate, which reflects current
market assessments of the time value of money for the period under review and the risks specific to the Group.
The discount rate used in each of the periods under review is 12.3% (2019: 18.3%).
Terminal growth rate
An appropriate terminal growth rate is selected, based on the Directors’ expectations of growth beyond the five year
period. The growth rate used post the forecast period is 3.5% (2019: 1.4%) based on published GDP growth rates.
The following table shows the theoretical discount rate or growth rate before the recoverable amount of the CGU
would reduce to the carrying value of goodwill.
Discount rate
Growth rate
2020
33.5%
n/a
2019
37.6%
(103.6%)
The growth rate for 2020 beyond the five year period is not applicable because the discounted cashflows in this
period are forecasted to exceed the carrying value of the investment.
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
17. Property, plant and equipment
Freehold
property
£‘000
Leasehold
property
£‘000
Plant,
fixtures,
fittings and
equipment
£‘000
Motor
vehicles
£‘000
Right-of-use
assets
£‘000
Consolidated
Cost
Total
£‘000
14,015
4,539
(1,707)
(132)
16,715
9,787
(2,907)
-
(55)
16
-
-
-
16
-
-
-
-
2,051
3,251
(129)
-
5,173
5,917
(148)
-
-
16
10,942
23,540
12
4
-
-
-
16
-
-
-
-
663
381
-
5,493
1,556
(36)
(128)
(1,405)
-
916
696
(148)
-
-
(105)
5,503
1,890
(756)
-
(9)
16
1,464
6,628
4
-
-
1,388
4,257
9,478
8,522
11,212
16,912
At 1 January 2019
5,576
350
Additions
Disposals
Exchange differences
At 31 December 2019
Additions
Disposals
Transfer to correct analysis
Exchange differences
At 31 December 2020
Depreciation
At 1 January 2019
Charge for the year
Reversal of past impairment
Disposals
Exchange adjustments
At 31 December 2019
Charge for the year
Disposals
Transfer
Exchange differences
At 31 December 2020
Net book value
At 1 January 2019
At 31 December 2019
At 31 December 2020
-
-
-
5,576
-
(2,360)
499
-
3,715
844
109
-
-
-
953
63
(209)
208
-
1,015
4,732
4,623
2,700
-
-
-
350
616
-
-
(29)
937
118
50
-
-
-
168
65
-
-
(2)
231
232
182
706
6,022
1,288
(1,578)
(132)
5,600
3,254
(399)
(499)
(26)
7,930
3,856
1,012
(36)
(1,277)
(105)
3,450
1,066
(399)
(208)
(7)
3,902
2,166
2,150
4,028
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SourceBio International plcAnnual Report & Accounts 2020
The net book value has been allocated in the balance sheet as below:
Non-current assets
Property, plant and equipment
Right-of-use assets
Current assets
Assets classified as held for resale
Total net book value
The net book value of right-of-use assets by asset type is as below:
Leasehold property
Plant, fixtures, fittings and equipment
Total net book value
The Company holds no tangible fixed assets (2019: £nil).
Depreciation is charged to administrative expenses within profit or loss.
2020
£‘000
6,959
9,478
475
16,912
8,436
1,042
9,478
2019
£‘000
6,480
4,257
1 January
2019
£’000
7,134
1,388
475
–
11,212
8,522
2,940
1,317
4,257
446
942
1,388
Included within property, plant and equipment above is freehold property with a net book value of £475,000 (2019:
£475,000) which has been classified as ‘held for sale’. The property has, since 2019, been actively marketed at an
amount in excess of the value held in the accounts and was sold in February 2021.
18. Investments in subsidiaries
Company
Cost
At 1 January 2019, 31 January 2019 and at 31 December 2020
Impairment
At 1 January 2019, 31 January 2019 and at 31 December 2020
Net book value
At 1 January 2019, 31 January 2019 and at 31 December 2020
Shares in Group
undertakings
£’000
65,898
(50,714)
15,184
The registered office of all subsidiaries is 1 Orchard Place, Nottingham Business Park, Nottingham, NG8 6PX
except for:
Source BioScience Inc
6696 Mesa Ridge Road, San Diego, CA 92121, USA
Source BioScience Ireland Limited
Riverstown 5 Complex, Riverstown Industrial Estate, Tramore, Co. Waterford, Ireland
Select Pharma Laboratories Limited, Select Storage Solutions (Scotland) Limited and Source BioScience Scotland Limited
First Floor, Quay 2, 139 Fountainbridge, Edinburgh, EH3 9QG
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
18. Investments in subsidiaries (continued)
The subsidiary undertakings (all of which the Company owns a 100% interest in) and their respective activities were as
follows as at 31 December 2020:
Subsidiary undertaking
Country of incorporation
Principal activity
Source BioScience Inc
United States
Provision of controlled environment storage
and provision of diagnostic and genomic
services and products
Source BioScience Germany GmbH1
Germany
Intermediate holding company
Source BioScience GmbH1
Germany
Non-trading
Source BioScience Ireland Limited
Ireland
Provision of controlled environment storage
services and products
Select Pharma Laboratories Limited
Scotland
Non-trading
Source BioScience (Storage) Limited
England and Wales
Provision of controlled environment storage,
services and products
Source BioScience (Orchard Place)
Limited
England and Wales
Formerly property owning
Source BioScience UK Limited
England and Wales
Provision and distribution of diagnostic and
genomic services and products
Source BioScience (Cryobank) Limited
England and Wales
Geneservice Limited
Fairfield Imaging Limited
England and Wales
England and Wales
Fairfield Telepathology Limited
England and Wales
Kinetic Imaging Limited
England and Wales
Medical Solutions (Leeds) Limited
England and Wales
Cryobank Guarantor Limited
England and Wales
Quinoderm Limited
England and Wales
Source BioScience (Healthcare) Limited
England and Wales
Select Storage Solutions (Scotland)
Limited
Scotland
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Source BioScience Limited
England and Wales
Holding Company
Source BioScience Scotland Limited
Scotland
Non-trading
1 These companies, both being dormant and superfluous, were liquidated following the year-end date.
19. Inventories
Group
Raw materials
Finished goods and goods for resale
Total
2020
£’000
3,598
–
3,598
2019
£’000
775
41
816
1 January
2019
£’000
1,287
111
1,398
Inventories recognised as an expense during the year ended 31 December 2020 amounted to £20,991,000 (2019:
£3,706,000). These were included in cost of sales. There is no material difference between the replacement cost of
inventories and the amounts stated above. Inventory provisions of £18,000 for the year (2019: £nil) were deducted
from gross stocks in the amounts above.
88
SourceBio International plcAnnual Report & Accounts 2020 20. Trade and other receivables
Amounts falling due within one year:
Trade receivables
Less: provision for impairment of receivables
Net trade receivables
Amounts owed by subsidiary undertakings
Other receivables
Contract assets
Prepayments and accrued income
Group
Company
2020
£’000
8,686
(34)
8,652
–
148
1,115
557
2019
£’000
3,437
(282)
3,155
–
1,028
431
613
1 January
2019
£’000
2020
£’000
1 January
2019
£’000
2019
£’000
5,320
(182)
5,138
–
534
588
299
–
–
–
–
–
–
–
–
–
19,782
4,153
3,688
–
–
–
–
–
–
–
–
–
Total
10,472
5,227
6,559
19,782
4,153
3,688
Intra-Group borrowings are interest-free with amounts due repayable on demand. No provision is considered to
be required on the amounts owed by subsidiary undertakings under IFRS 9 as expected losses are estimated to be
immaterial given the strength of trading of the subsidiaries.
Credit risk is assessed by reference to the customer base and is considered low. Any trade receivables that are
overdue are assessed for impairment and provision made where applicable. Historically low default levels give rise
to specific provision only where responses to collection methods have given rise to such a view. In determining the
recoverability of accounts receivable, the Group considers any changes in the credit quality of the accounts receivable
from the date credit was initially granted up to the reporting date. The accounts receivables that are neither past due
nor impaired relates to customers that the Group has assessed to be creditworthy based on the credit evaluation
process performed by management, which considers both customers’ overall credit profile and its payment history
with Group. Having considered the impact of IFRS 9 the Directors concluded that the implementation would not
materially impact on the provision already recognised. There was also no provision considered to be required on the
contract assets in the current or prior year.
An analysis of the Group trade receivables is as follows:
2020
Net of
impairment
£’000
2020
provision
applied
%
2019
Net of
impairment
£’000
2019
provision
applied
%
6,292
1,906
321
94
39
0.1%
0.1%
–
–
0.4%
0.6%
Not past due
Past due 0 – 30 days
Past due 31 – 60 days
Past due 61 – 90 days
Past due 90+ days
2020
Gross
£’000
6,298
1,908
321
94
65
Total
8,686
8,652
The movement in the provision is summarised below:
Group
Provision at start of the year
Charge for the year
Utilised in the year
Provision at end of the year
2019
Gross
£’000
1,829
923
287
96
302
1,829
920
263
61
82
3,437
3,155
2020
£’000
282
10
(258)
34
–
0.1%
0.7%
1.0%
6.4%
8.2%
2019
£’000
182
100
–
282
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
21. Cash and cash equivalents
Cash and cash equivalents
Cash at bank
Group
Company
2020
£’000
2019
£’000
1 January
2019
£,000
2020
£’000
2019
£’000
1 January
2019
£’000
8,435
1,235
1,038
–
–
–
During the period all cash balances were held in non-interest bearing accounts but, following the year-end date,
arrangements were completed to place the majority of the Group’s cash balances within interest bearing accounts.
22. Share capital
Group and Company
Issued and fully paid
Ordinary shares of 1p each
A ordinary shares of 0.001p each
Ordinary shares of 0.15p each
At 31 December
2020
2019
1 January 2019
Number
£’000
Number
£’000
Number
–
–
74,183,038
74,183,038
–
–
111
111
290,549,917
2,905
290,549,917
32,283,324
–
1
–
–
–
322,833,241
2,906
290,549,917
2,905
The share movements in 2019 and 2020 are detailed below:
Issued and fully paid
At 1 January 2019
1p and 0.001p
ordinary
shares
Number
290,549,917
0.001p
A ordinary
shares
Number
0.15p
ordinary
shares
Number
Issuance of ordinary shares of 0.001p each
–
32,283,324
At 31 December 2019
290,549,917
32,283,324
Redemption of PIK loan notes, issuance of 1p shares
7,265,790,769
Capital reduction 1p to 0.001p shares
–
Consolidation into 0.15p ordinary shares
(7,556,340,686)
–
–
–
Consolidation into 0.15p A ordinary shares and
subsequent conversion into 0.15p ordinary shares
Allotment of 0.15p ordinary shares to Jay LeCoque
Total prior to Admission to AIM
Allotment of shares on Admission to AIM
At 31 December 2020
–
–
–
–
–
(32,283,324)
–
–
–
–
–
–
–
–
–
50,375,603
215,222
1,987,275
52,578,100
21,604,938
74,183,038
£’000
2,905
–
–
£’000
2,905
1
2,906
72,658
(75,488)
–
–
3
79
32
111
In October 2020 the PIK loan notes issued by the Company were redeemed and delisted from the Cayman Stock
Exchange on the same day. Such redemption was satisfied by the allotment of ordinary shares of 1p each in the
capital of the Company. This resulted in an allotment of a total of 7,265,790,769 ordinary shares of 1p each in the
capital of the Company, issued and credited as fully paid.
Following this, the Company undertook a capital reduction of the nominal value of the ordinary shares of the
Company, reducing the nominal value of such ordinary shares from 1p to 0.001p. The amount by which the
Company’s capital was reduced was treated as a realised profit and therefore was used to increase the retained
earnings of the Company and therefore created distributable reserves.
90
SourceBio International plcAnnual Report & Accounts 2020
In October 2020, following the capital reduction by the Company referred to above, the following consolidations of
shares took place:
(a) the ordinary shares of 0.001p each in the capital of the Company were consolidated into ordinary shares of
0.15p each; and
(b) the A ordinary shares of 0.001p each in the capital of the Company were consolidated into A ordinary shares of
0.15p each.
In October 2020, following the consolidation of shares in the Company referred to above, the A ordinary shares
in the Company were converted into ordinary shares of 0.15p each, thereby resulting in the Company having only
one class of share. Following the above steps, an allotment of 1,987,275 ordinary shares of 0.15p each was made to
Jay LeCoque. Following the above allotment, the entire issued share capital of the Company comprised 52,578,100
ordinary Shares.
On Admission to AIM in October 2020, a total of 21,604,938 new ordinary shares were issued for cash consideration
totalling £35 million. All 0.15p ordinary shares carry equal rights in all respects including rights to vote, receive
dividends and participate in any distribution on a winding up.
23. Description of the nature of each reserve within equity
Share capital
Share capital represents the value of all called up, allotted and fully paid shares of the parent Company.
Share premium account
The share premium account represents amounts received in excess of the nominal value of shares on the issue of
new shares, net of any direct costs of any shares issued.
Foreign exchange reserve
The foreign exchange reserve records the cumulative exchange differences arising from the translation of the
financial statements of overseas subsidiaries.
Retained earnings
Retained earnings comprises the Group’s cumulative annual profits and losses.
24. Trade and other payables
Group
Company
Current
Trade payables
Other payables
Other tax and social security
Accruals
Contract liabilities
Total
Non-current
Contract liabilities
1 January
2019
£’000
2020
£’000
2019
£’000
1 January
2019
£’000
2020
£’000
2,400
69
614
797
1,614
5,494
2019
£’000
1,575
245
361
1,268
1,940
5,389
1,911
194
597
1,420
2,300
6,422
394
365
400
–
–
–
64
–
64
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The fair value of trade and other payables approximates to book value at each year-end. Trade payables are
non-interest bearing and are normally settled monthly.
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
25. Borrowings
Current
Bank loans and overdrafts
Other loans
Total
Non-current
Bank loans and overdrafts
Other loans
Total
Bank loans and overdrafts
Group
Company
2019
£’000
1,000
23,403
24,403
3,850
67,687
71,537
1 January
2019
£’000
4,600
20,731
25,331
1,250
61,674
62,924
2020
£’000
–
–
–
–
–
–
2019
£’000
–
23,403
23,403
–
67,687
67,687
1 January
2019
£’000
–
20,731
20,731
–
61,674
61,674
2020
£’000
–
–
–
–
–
–
As at 31 December 2020, the Group owed a total of £nil (2019: £4,850,000) in respect of a term loan and revolving
credit facility with Barclays Bank plc.
As at 31 December 2020, £nil (2019: £1,250,000) was owed in respect of the term loan. The term loan issued was for a
value of £5,000,000, repayable in quarterly instalments of capital and interest commencing on 24 June 2016.
As of 31 December 2020, the revolving credit facility available to the Group was £2,800,000 which has since lapsed.
As at 31 December 2020 £nil (2019: £3,600,000) was drawn.
The rate of interest applicable to each loan/facility is the aggregate of the applicable margin and LIBOR. The
applicable margin varies between 2.9% and 3.75%.
Bank loans and overdrafts of the Group, including the latterly undrawn facility, were secured by fixed and floating
charges over certain assets of the Group.
Other loans
PIK loan notes
Prior to conversion into equity, the Company had unsecured PIK loan notes of £49,400,000 issued to certain
shareholders. These were repayable on 31 December 2023, or earlier in the event of an exit, and interest accrued at
10%, which was rolled up with the principal sum and payable on the repayment date.
In October 2020 the PIK loan notes issued by the Company were redeemed and delisted from the Cayman Stock
Exchange on the same day. Such redemption was satisfied by the allotment of ordinary shares of 0.0001p each in the
capital of the Company. This resulted in an allotment of a total of 7,265,790,769 ordinary shares of £0.0001p each in
the capital of the Company, issued and credited as fully paid. Further details are provided in note 22.
Unsecured loan notes
Prior to settlement during the year, other unsecured loan notes include £16,600,000, which were all originally
repayable on 31 December 2018. Interest accrued and was rolled-up with the principal sum as follows:
•
•
•
•
5% per annum up to 31 March 2017;
8% per annum from 1 April 2017 to 31 May 2017;
10% per annum from 1 June 2017 to 30 June 2017; and
12.5% per annum thereafter.
92
SourceBio International plcAnnual Report & Accounts 2020 In October 2018, the Company re-negotiated the repayment date of the £16,600,000 unsecured loan notes so that
there was no fixed repayment date. During the year, the unsecured loan notes were repaid, thus the balance at the
year-end was £nil (2019: £23,403,000).
26. Lease liabilities
This note provides information for leases where the Group is a lessee. The balance sheet includes the following
amounts in relation to leases:
Current
Non-current
Total
Group
Company
2020
£’000
547
11,602
12,149
2019
£’000
656
3,449
4,105
1 January
2019
£’000
454
857
1,311
2020
£’000
2019
£’000
1 January
2019
£’000
–
–
–
–
–
–
–
–
–
The Group had total cash outflows for leases of £992,000 in 2020 (2019: £866,000). The lease liabilities are calculated
based on a discounted total of future lease payments and therefore include an element of financing costs.
27. Deferred tax
The following are the deferred tax assets and liabilities recognised by the Group:
Group
Deferred tax assets / (liabilities)
At 1 January 2019
Credited to the profit and loss account
At 31 December 2019
(Credited) / charged to the profit and loss
account
At 31 December 2020
Tax
losses
£’000
Accelerated
tax
depreciation
£’000
Leases
£’000
Other
£’000
–
–
–
–
–
10
20
30
204
234
–
–
–
(559)
(559)
–
–
–
(70)
(70)
28. Provisions
Group
At 1 January 2019
Reversal in the year
Utilisation of provision
At 31 December 2019
Utilisation of provision
At 31 December 2020
Onerous
contracts
£‘000
Employment
matters
£‘000
240
–
(65)
175
(18)
157
400
(154)
(246)
–
–
–
Total
£’000
10
20
30
(425)
(395)
Total
£‘000
640
(154)
(311)
175
(18)
157
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
28. Provisions (continued)
Group
Due in less than one year
Due in more than one year
At 1 January 2019
Due in less than one year
Due in more than one year
At 31 December 2019
Due in less than one year
Due in more than one year
At 31 December 2020
Onerous
contracts
£‘000
Employment
matters
£‘000
24
216
240
15
160
175
16
141
157
400
–
400
–
–
–
–
–
–
Total
£‘000
424
216
640
15
160
175
16
141
157
The provisions disclosed above comprise of:
•
•
an onerous contract provision relating to future expected losses on a long-term cryogenic storage contract where
the associated direct costs over the contract period are expected to be in excess of the revenue. The provision is
expected to be utilised over the next 20 years.
the other provisions related to employment related matters.
There were no provisions recorded in the Company (2019: £nil).
29. Financial instruments and risk management
The Group’s financial instruments may be analysed as follows:
Financial assets measured at amortised cost
Cash and cash equivalents
Trade receivables
Other receivables
Total
Financial liabilities measured at amortised cost
Trade payables
Other payables
Accruals
Bank loans
Other loans
Lease liabilities
Total
94
2020
£‘000
8,435
8,652
148
17,235
2,400
69
797
–
–
12,149
15,415
2019
£‘000
1,235
3,155
1,028
5,418
1,575
245
1,268
4,850
91,090
4,105
103,133
SourceBio International plcAnnual Report & Accounts 2020 Financial assets measured at amortised cost comprise cash, trade receivables, other receivables and contract assets.
Financial liabilities measured at amortised cost comprise bank loans and overdrafts, other loans, trade payables,
other payables, accruals and lease liabilities.
The debt instruments were initially recognised at fair value, and subsequently they were measured at amortised cost
using the effective interest rate method, whereby the fair value of the debt approximates their carrying value.
The Group is exposed to a variety of financial risks through its use of financial instruments which result from its
operating activities. All of the Group’s financial instruments are classified as loans and receivables.
The Group does not actively engage in the trading of financial assets for speculative purposes. The most significant
financial risks to which the Group is exposed are described below:
Credit risk
Generally, the Group’s maximum exposure to credit risk is limited to the carrying amount of the financial assets
recognised at the reporting date, as summarised below:
Trade receivables
Other receivables
Contract assets
Cash and cash equivalents
Total
2020
£‘000
8,652
148
1,115
8,435
18,350
2019
£‘000
3,155
1,028
431
1,235
5,849
Credit risk is the risk of financial risk to the Group if a counter party to a financial instrument fails to meets its
contractual obligation. The nature of the Group’s receivable balances, the time taken for payment by entities and the
associated credit risk are dependent on the type of engagement.
Credit risk is minimised substantially by ensuring the credit worthiness of the entities with which it carries on
business. Credit terms are provided on a case-by-case basis. The Group’s trade and other receivables are actively
monitored. The Group has not experienced any significant instances of non-payment from its customers.
Provisions made against receivables at the year-end were £34,000 (2019: £282,000).
Unbilled revenue is recognised by the Group only when all conditions for revenue recognition have been met in line
with IFRS 15.
Liquidity risk
Liquidity risk represents the contingency that the Group is unable to gather the funds required with respect to
its financial obligations at the appropriate time and under reasonable conditions in order to meet their current
obligations. The Group attempts to manage this risk so as to ensure that it has sufficient liquidity at all times to be
able to honour its current and future financial obligations under normal conditions and in exceptional circumstances.
Financing strategies to ensure the management of this risk include the issuance of equity or debt securities as
deemed necessary.
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
29. Financial instruments and risk management (continued)
The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual
maturities. The amounts disclosed in the tables are the contractual undiscounted cash flows. Contractual maturities
of financial liabilities as at 31 December 2020 are as follows:
Trade and other payables
Lease liabilities
Total
Less than 1
year
£’000
Between 1
and 5 years
£’000
Over 5 years
£’000
2,400
923
3,323
–
3,650
3,650
–
12,539
12,539
Contractual maturities of financial liabilities as at 31 December 2019 are as follows:
Trade and other payables
Borrowings
Lease liabilities
Total
Less than 1
year
£’000
Between 1
and 5 years
£’000
Over 5 years
£’000
1,575
24,403
761
26,739
–
71,537
2,171
73,708
–
–
1,924
1,924
Impact of discounting on lease liabilities
Total lease liabilities showing the impact of discounting on cash flows are as follows:
Undiscounted lease liabilities
Effects of discounting
Discounted lease liabilities
Carrying
value per
balance
sheet
£’000
2,400
12,149
14,549
Carrying
value per
balance
sheet
£’000
1,575
95,940
4,105
Total
£’000
2,400
17,112
19,512
Total
£’000
1,575
95,940
4,856
102,371
101,620
2020
£‘000
17,112
(4,963)
12,149
2019
£‘000
4,856
(751)
4,105
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market rates. The Group’s exposure to interest rate risk is based on short-term fixed interest rates for
both cash and convertible debt.
The loan facilities that the Group had in place during part of 2020 were exposed to interest rate risk. Included within
loans and borrowings for the prior year is a bank loan, which is exposed to interest rate risk as interest is charged on
the bank loan at the aggregate of the applicable margin and LIBOR. The applicable margin varies between 2.9% and
3.75%. The balance on the term loan and credit facility was £nil at the year-end date (2019: £4,850,000).
96
SourceBio International plcAnnual Report & Accounts 2020 For the prior year, the Group has used a sensitivity analysis technique that measured the estimated change to the
Statement of Comprehensive Income and Equity of a 1% increase or decrease in interest rates for each class of
financial instrument, with other variables remaining unchanged. The sensitivity analysis is based on the assumptions
that changes in market interest rates affect the interest of variable interest financial instruments.
Under these assumptions, a 1% increase or decrease in market interest rate for all financial liabilities held by the
Group would have increased/(decreased) the profit before tax and equity by the following amounts:
1% increase
1% decrease
Foreign currency risk
2020
£‘000
–
–
2019
£‘000
(49)
49
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily US Dollars and Euros. The Group monitors exchange rate movements closely and ensure adequate funds
are maintained in appropriate currencies to meet known liabilities.
The Group exposure to foreign currency risk at the end of the respective reporting period was as follows:
Cash
Other monetary assets and liabilities
2020
2019
USD’000
EUR’000
USD’000
EUR’000
100
301
238
607
138
948
179
3,679
Assets and liabilities include the monetary assets and liabilities of subsidiaries denominated in foreign currency.
The Group is exposed to foreign currency risk on the relationship between the functional currencies of Group
companies and the other currencies in which the Group’s material assets and liabilities are denominated. The table
below summarises the effect on profit before tax and on equity had each foreign currency relevant to the Group
weakened or strengthened against the Group’s functional currency, with all other variables held constant.
10% weakening versus functional currency
USD’000
EUR’000
USD’000
EUR’000
2020
2019
Profit before tax
Equity
28
(484)
(38)
500
15
157
31
442
2020
2019
10% strengthening versus functional currency
USD’000
EUR’000
USD’000
EUR’000
Profit before tax
Equity
(23)
396
(35)
(409)
(12)
(128)
29
(361)
The impact of a change of 10% has been selected as this has been considered reasonable given the current level of
exchange rates and the volatility observed both on a historical basis and market expectations for future movements.
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
29. Financial instruments and risk management (continued)
Fair value of financial instruments
The fair values of all financial assets and liabilities approximates their carrying value.
Capital management
The Group’s objectives when maintaining capital are:
•
•
to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
to provide an adequate return to shareholders by pricing products and services commensurately with
the level of risk.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and
makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying
assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares, or sell assets.
Consistent with others in the industry, the Group monitors capital on the basis of the debt to capital ratio. This ratio
is calculated as net debt to capital as defined above. Net debt, being a negative number, is calculated as total debt (as
shown in the Group Statement of Financial Position) less cash and cash equivalents.
Group
Borrowings
Lease liabilities
Cash and cash equivalents
Net debt
Share capital
Debt to equity ratio
Group
Gross borrowings - fixed interest rates
Gross borrowings - variable interest rates
Cash and cash equivalents
Net debt
2020
£’000
–
(12,149)
8,435
(3,714)
111
3,346%
2020
£’000
–
(12,149)
8,435
(3,714)
2019
£’000
(95,940)
(4,105)
1,235
(98,910)
2,906
3,403%
2019
£’000
(91,090)
(8,955)
1,235
(98,910)
98
SourceBio International plcAnnual Report & Accounts 2020 This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
Liabilities from financing activities
Bank
borrowings
£’000
Shareholder
borrowings
£’000
Shareholder
PIK notes
£000
Leases
£’000
Subtotal
£’000
Other assets
Cash and
cash
equivalents
£’000
Total
£’000
(5,850)
(20,731)
(61,674)
(1,311)
(89,566)
1,038
(88,528)
1,000
–
–
–
–
–
–
–
–
–
–
(2,672)
(6,013)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,000
(1,000)
–
(8,685)
(3,557)
(3,557)
763
763
(763)
–
–
(8,685)
(3,557)
–
(9)
(9)
2,853
2,853
(987)
(987)
406
406
(303)
(303)
–
–
–
–
–
–
–
–
–
–
(4,850)
(23,403)
(67,687)
(4,105)
(100,045)
1,235
(98,810)
–
–
(1,000)
(1,000)
5,850
24,403
–
–
–
–
31,760
31,760
(2,000)
2,000
30,253
(30,253)
–
–
(2,549)
(4,971)
(7,520)
–
–
–
–
–
–
–
–
–
–
(8,938)
(8,938)
894
894
(894)
–
–
(7,520)
(8,938)
–
7
7
6,340
6,340
(4,010)
(4,010)
5,000
5,000
–
–
–
–
2,549
72,658
(2,750)
(201)
–
72,658
–
–
–
–
–
–
–
72,658
–
(12,149)
(12,149)
8,435
(3,714)
–
–
–
–
–
–
2,549
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Group
Net (debt) / cash at 1 January
2019
Cash flows - borrowings
repaid
Accrued interest added to
borrowings
New leases
Capital repayment of lease
liabilities
Net foreign exchange on
cash and cash equivalents
Cash flows from operating
activities
Purchase of tangible and
intangible assets
Proceeds on disposal of
tangible assets
Interest paid
Net (debt) / cash at
31 December 2019
Cash flows - net proceeds
from share issues
Cash flows - new borrowings
secured
Cash flows - borrowings
repaid
Accrued interest added to
borrowings
New leases
Capital repayment of lease
liabilities
Net foreign exchange on
cash and cash equivalents
Cash flows from operating
activities
Purchase of tangible and
intangible assets
Proceeds on disposal of
tangible assets
Interest paid
Redemption in exchange for
issuance of shares
Net cash / (debt) at
31 December 2020
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sourcebiointernational.comLSE Code: SBI
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
30. Financial commitments
Group
Contracted, but not provided, capital commitments at the year-end was £154,000 (2019: £nil).
Company
The Company had no capital commitments at the year-end (2019: £nil).
31. Contingent liabilities
Under the terms of the Group’s banking facilities, the Company was liable for the repayment and discharge of all
monies owing in respect of the bank borrowings of certain subsidiary undertakings. At the year-end this amounted to
£nil (2019: £4,900,000).
32. Related party disclosures
Transactions with related parties
These relate to interest accrued on PIK loan notes and other loan notes, detailed as follows:
2020
£‘000
2019
£‘000
Entities with control, joint control or significant influence over the Group
5,183
6,792
Amounts due to related parties
Entities with control, joint control or significant influence over the Group
–
66,619
Remuneration
The remuneration of key management personnel of the Group, which includes the Directors, is disclosed in note 10.
Related companies
On 29 October 2020, the Group completed the sale of the freehold property at 1 Orchard Place, Nottingham Business
Park, Nottingham NG8 6PX for the sum of £5 million to 1 Orchard Place (Freehold) Limited, a company incorporated
in England and Wales, which was related by virtue of Christopher Mills being a common director. A lease was granted
by 1 Orchard Place (Freehold) Limited to Source BioScience UK Limited for a term of 25 years at an initial annual rent
of £350,000 (excluding VAT) to increase annually at rate of 3% on each anniversary of the lease term. During the year
the Group incurred rental costs from 1 Orchard Place (Freehold) Limited totalling £55,000 which was paid in the year.
The Group was related to EKF Diagnostics Holdings PLC (“EKF”), a company incorporated in England and Wales, by
virtue of Christopher Mills being a common director. During the year the Group made purchases of COVID-19 related
consumables from EKF totalling £140,000. An amount of £70,000 was due to EKF at the year-end date.
The Group was related to Consilium Financial Limited, a company incorporated in England and Wales, by virtue of
Tony Ratcliffe being a common director. During the year prior to his appointment to the Board on 23 October 2020,
the Group made purchases of outsourced financial consulting services from Consilium Financial Limited of £128,000.
The Group was related to Growth Financial Services Limited, a company incorporated in England and Wales, by virtue
of Christopher Mills being a common director. During the year the Group received an interest-free working capital
advance of £1,000,000 during the year to support the establishment of the Infectious Disease Testing business unit.
This advance was fully repaid in September 2020.
All transactions with related parties are measured at the exchange amounts, which are the amounts of consideration
established and agreed to by the related parties.
100
SourceBio International plcAnnual Report & Accounts 2020 NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting (“AGM” or “Meeting”) of SourceBio International plc (the
“Company”) will be held at 1 Orchard Place, Nottingham Business Park, Nottingham, NG8 6PX and by means of
electronic facility on 14 June 2021 at 1pm.
Introduction
In light of the COVID-19 related Government measures which are presently in place to restrict social gatherings, and
overriding health and safety concerns, the Company has decided to hold this year’s AGM as a closed physical meeting.
A very limited number of Company personnel will be present to conduct the Meeting such that the minimum quorum
requirements can be met. Shareholders will not be entitled to attend the Meeting in person.
Shareholders wishing to vote on any of the matters of business are strongly advised to appoint the Chairman of
the Meeting as their proxy. If you attempt to appoint a named individual other than the Chairman of the Meeting,
such individual will not be permitted to attend the Meeting and instead you will be deemed to have appointed the
Chairman of the Meeting as your proxy. Shareholders may appoint a proxy through completion of a form of proxy,
which can be submitted to the Company’s Registrar online at sharevote.co.uk. Alternatively, should you wish to vote
via the CREST system, please see the instructions in the Explanatory Notes to the Notice of Meeting. For your vote to
be valid please ensure it is received no later than 1pm on 10 June 2021.
The Company will provide a facility for shareholders to join the AGM either online or telephonically virtually via
the Investor Meet Company (“IMC”) platform and the Company’s Executive Chairman, Jay LeCoque, will provide
shareholders with a short presentation after the formal business of the AGM concludes, which will be made available
on the Company’s website after the event. There will be an opportunity for shareholders to ask questions. In order
to facilitate the process, the Board would request that shareholders register for the Meeting and submit questions
in advance, before 5pm on 10 June 2021. The Company is committed to ensuring that there are appropriate
communication structures for all elements of its shareholder base so that its strategy, business model and
performance can be clearly understood. Questions can be submitted pre-event via your IMC dashboard or at any
time during the live presentation via the “Ask a Question” function. Although the Company may not be in a position to
answer every question it receives, it will address the most prominent ones within the confines of information already
disclosed to the market. Responses to the Q&A from the live presentation will be published at the earliest opportunity
on the IMC platform.
Investors can sign up to IMC for free and add to meet SourceBio International plc via:
https://www.investormeetcompany.com/sourcebio-international-plc/register-investor
Investors who have already registered for the IMC platform and added to meet the Company will be
automatically invited.
Investors who have already registered via Walbrook PR, are encouraged to sign up to the IMC platform
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NOTICE OF ANNUAL GENERAL MEETING (continued)
You will be asked to consider and vote on the resolutions below. All resolutions will be proposed as ordinary
resolutions save for resolutions 14 and 15 which will be proposed as special resolutions.
1. To receive and approve the Company’s Annual Report and Accounts for the financial year ended 31 December
2020 together with the Directors’ Report (including the Strategic Report) and the Auditor’s Report.
2. To receive and approve the Directors’ Remuneration Report for the financial year ended 31 December 2020,
excluding the proposed remuneration policy, executive share options plan and Save As You Earn (“SAYE”) scheme
(all as set out on pages 46 to 50 of the Annual Report and Accounts).
3. To approve the proposed remuneration policy expected to be applied in 2021, the full text of which is set out on
pages 48 to 50 of the Annual Report and Accounts.
4. To approve the establishment and implementation of a proposed executive share options plan, the principal
terms of which are set out on page 49 of the Annual Report and Accounts.
5. To approve the establishment and implementation of a proposed SAYE scheme, the principal terms of which are
set out on page 48 to 50 of the Annual Report and Accounts.
6. To re-elect Jay LeCoque, Executive Chairman, who pursuant to the Articles of Association of the Company and
this being the first AGM of the Company, and being eligible, offers himself for re-election as a Director.
7. To re-elect Tony Ratcliffe, Chief Financial Officer, who pursuant to the Articles of Association of the Company and
this being the first AGM of the Company, and being eligible, offers himself for re-election as a Director.
8. To re-elect Sir Ian Carruthers, Senior Independent Non-Executive Director, who pursuant to the Articles of
Association of the Company and this being the first AGM of the Company, and being eligible, offers himself for
re-election as a Director.
9. To re-elect Simon Constantine, Independent Non-Executive Director, who pursuant to the Articles of Association
of the Company and this being the first AGM of the Company, and being eligible, offers himself for re-election as
a Director.
10. To re-elect Marco Fumagalli, Non-Executive Director, who pursuant to the Articles of Association of the Company
and this being the first AGM of the Company, and being eligible, offers himself for re-election as a Director.
11. To re-elect Christopher Mills, Non-Executive Director, who pursuant to the Articles of Association of the Company
and this being the first AGM of the Company, and being eligible, offers himself for re-election as a Director.
12. To re-appoint RSM UK Audit LLP as auditor of the Company to hold office from the conclusion of the Meeting
until the conclusion of the next meeting at which the accounts are laid before the Company and to authorise the
Directors to fix their remuneration.
13. That in substitution for any existing such authority, the Directors be and are hereby generally and
unconditionally authorised pursuant to section 551 of the Companies Act 2006 (the “2006 Act”) to allot equity
securities (as defined by section 560 of the 2006 Act) of the Company:
i.
up to a maximum nominal amount of £11,128 (in pursuance of the exercise of outstanding share options
and any other potential shares granted by the Company (pursuant to an “employees’ share scheme” (as
defined by 1166 CA 2006)) but not for any other purpose);
up to an aggregate nominal amount of £33,772 (in addition to the authorities conferred in sub-paragraphs
(i) above) representing approximately 33% of the Company’s Issued Share Capital,
ii.
such authorities (unless previously renewed, revoked or varied) to expire at the conclusion of the next AGM of
the Company to be held in 2022, save that the Company may, before such expiry, make an offer or agreement
which would or might require equity securities (as defined by section 560 of the 2006 Act) to be allotted after
such expiry and the Directors may allot such equity securities in pursuance of such an offer or agreement as if
the authority conferred hereby had not expired.
14. That, subject to the passing of the above resolution the Directors be given the general power to allot equity
securities (as defined in section 560 of the 2006 Act) pursuant to the authority conferred by the resolution above
as if section 561(1) of the 2006 Act did not apply to any such allotments provided that this power shall be limited
to:
(i)
(ii)
the allotment of equity securities on the exercise of the share options granted by the Company;
the allotment of equity securities (otherwise than pursuant to sub-paragraph (i) above) for cash in
connection with any rights issue or pre-emptive offer in favour of holders of equity securities generally;
and
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SourceBio International plcAnnual Report & Accounts 2020
(iii)
the allotment (otherwise than pursuant to sub-paragraphs (i) and (ii) above) of equity securities for cash
up to an aggregate nominal amount of £11,128 representing approximately 10% of the Company’s Issued
Share Capital;
provided that such power (unless previously renewed, revoked or varied) shall expire at the conclusion of
the AGM of the Company to be held in 2022, save that the Company may, before such power expires, make
an offer or enter into an agreement which would or might require equity securities to be allotted after such
power expires and the Directors may allot equity securities in pursuance of any such offer or agreement
notwithstanding that the power conferred by this resolution has expired.
15. That with effect from the conclusion of the Meeting the Articles of Association of the Company be amended by
deleting article 35.2 and replacing it with the following new article 35.2:
“Article 35.2 Every notice calling a meeting shall specify
35.2.1
35.2.2
35.2.3
whether the meeting shall be a physical or electronic meeting or a hybrid meeting;
in the case of a physical meeting and/or hybrid meeting, the place, date and time of the meeting; and
in the case of an electronic and/or hybrid meeting, the date, time and electronic platform for the meeting,
which electronic platform may vary from time to time and from meeting to meeting as the Board, in its
sole discretion, sees fit.”
By order of the Board
Tony Ratcliffe
Company Secretary
Registered office:
1 Orchard Place
Nottingham Business Park
Nottingham
NG8 6PX
14 May 2021
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EXPLANATORY NOTES TO THE NOTICE OF
ANNUAL GENERAL MEETING
1. As a result of the public safety measures introduced by the UK Government in response to the COVID-19
pandemic, shareholders are not permitted to attend the AGM in person. Every eligible shareholder is, however,
entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at
the AGM. Shareholders who wish to participate in the Meeting should appoint the Chairman of the Meeting as
their proxy in order to do so. No other person(s) purported to be appointed as proxy will be permitted to attend
the Meeting in person. In such circumstances, if a shareholder appoints some other person or persons as proxy,
such shareholder shall be deemed to have appointed the Chairman of the Meeting and not the other named
person(s) as proxy.
2. The right to vote at the Meeting shall be determined by reference to the register of members of the Company.
Only those persons whose names are entered on the register of members of the Company at 6:30pm on 10 June
2021, or, if the Meeting is adjourned, at 6:30pm on the date falling two days prior to the date of the adjourned
Meeting, shall be entitled to attend and vote in respect of the number of shares registered in their names at
that time. Changes to entries on the register of members after the times specified above shall be disregarded in
determining the rights of any person to attend and/or vote at the relevant meeting.
3. The Company will provide a facility for members to join the Meeting either online or telephonically and there
will be an opportunity for shareholders to ask questions. In order to facilitate this process, the Board would
request that Members register for the Meeting and submit questions in advance, before 5pm on 10 June
2021. To register for dial-in details and to submit any questions, please contact the Company Secretary at
companysecretary@sourcebioscience.com.
4. The information which the Company is required to publish in advance of the Meeting by virtue of section 311A of
the Act can be accessed via www.sourcebiointernational.com
5. As a member of the Company you are entitled to attend and vote at the Meeting convened by this Notice and are
entitled to appoint one or more proxies to exercise any of your rights to attend, speak and vote at that Meeting
on your behalf. If a member appoints more than one proxy, each proxy must be entitled to exercise the rights
attached to different shares held by that member. You may not appoint more than one proxy to exercise rights
attaching to any one share. To appoint more than one proxy, you must complete a separate Form of Proxy, or
alternatively, additional proxy forms can be obtained from Equiniti Limited on telephone 0371 384 2030
(lines open 8:30am to 5:30pm, Monday to Friday) or for overseas shareholders +44(0)121 415 7047. If the proxy
instruction is one of multiple instructions being given, please tick the box provided beneath the resolutions.
You should also indicate the number of shares for which each proxy is authorised in respect of your full voting
entitlement. A proxy need not be a member of the Company. Please note that as a result of the public safety
measures introduced by the UK Government in response to the COVID-19 pandemic, shareholders are not
permitted to attend the AGM in person and are strongly encouraged to appoint the Chairman of the Meeting
as their proxy to exercise all or any of their rights to attend and speak and vote on their behalf at the AGM. For
more information, please see Note 1 above.
6. A proxy may only be appointed using the procedures set out in the notes to the Notice of AGM and these notes.
To appoint a proxy, a member may complete, sign and date the enclosed proxy form and deposit it at the office
of the Company’s Registrar, Equiniti, at Aspect House, Spencer Road, Lancing BN99 6DA no later than 48 hours
before the start of the Meeting. Any power of attorney or any other authority under which the proxy form is
signed (or a duly certified copy of such power or authority) must be enclosed with the proxy form. In the case
of a shareholder which is a company, the proxy form must be executed under its common seal or signed on its
behalf by an officer of the Company or an attorney for the Company. If you have not received a proxy form and
believe that you should have one, or if you require additional proxy forms, please contact Equiniti on
0371 384 2030 (+44 (0)121 415 7047 if you are calling from outside the UK). Calls are charged at the standard
geographic rate and will vary by provider. Calls outside the UK will be charged at the applicable international
rate. Please note that due to the Government restrictions as a result of the COVID-19 pandemic, shareholders
wishing to appoint a proxy are strongly encouraged to appoint the Chairman of the Meeting as their proxy.
For more information please refer to Note 1 above.
7. You may, if you wish, register the appointment of a proxy electronically by logging on to www.sharevote.co.uk.
To use this service you will need your Voting ID, Task ID and Shareholder Reference Number, printed on the
proxy form. Full details of the procedure are given on the website. For an electronic proxy appointment to be
valid, your appointment must be received by Equiniti no later than 48 hours before the start of the Meeting.
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SourceBio International plcAnnual Report & Accounts 2020 Please note that due to the Government restrictions as a result of the COVID-19 pandemic, shareholders wishing
to appoint a proxy are strongly encouraged to appoint the Chairman of the Meeting as their proxy. For more
information please refer to Note 1 above.
8. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment
9.
service may do so by utilising the procedures described in the CREST manual (available via www.euroclear.com).
CREST personal members or other CREST sponsored members, and those CREST sponsors who have appointed
a voting service provider(s), should refer to their CREST sponsors or voting service providers, who will be able to
take the appropriate action on their behalf. Please note that due to the Government restrictions as a result of the
COVID-19 pandemic, shareholders wishing to appoint a proxy are strongly encouraged to appoint the Chairman
of the Meeting as their proxy. For more information please refer to Note 1 above.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (CREST
Proxy Instruction) must be properly authenticated in accordance with the specifications of Euroclear UK &
Ireland Limited (Euroclear UK & Ireland) and must contain the information required for such instructions as
described in the CREST manual. The message must be transmitted so as to be received by the Company’s agent
(ID RA19) by the latest time for receipt of proxy appointments specified in the Notice. For this purpose, the time
of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST
Application Host) from which the Company’s agent is able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means.
10. CREST members and, where applicable, their CREST sponsors and voting service providers should note that
Euroclear UK & Ireland does not make available special procedures in CREST for any particular messages. Normal
system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member
or sponsored member or has appointed a voting service provider(s) to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means
of the CREST system by any particular time. In this connection, CREST members and, where applicable, their
CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST manual
concerning practical limitations of the CREST system and timings.
11. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of
the Uncertificated Securities Regulations 2001.
12. In the case of joint holders, where more than one of the joint holders completes a proxy appointment, only the
appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which
the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the
first-named being the most senior).
13. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes
for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or
her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter
which is put before the Meeting.
14. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold
their vote.
15. A corporation which is a member of the Company may authorise one or more persons (who need not be a
member of the Company) to attend, speak and vote at the Meeting as the representative of that corporation,
provided that they do not do so in relation to the same shares. A certified copy of the Board resolution of the
corporation appointing the relevant person as the representative of that corporation in connection with the
Meeting must be deposited at the office of the Company’s Registrar prior to the commencement of the Meeting.
16. Completion of the proxy form does not preclude attendance at the Meeting. If you wish to attend the Meeting
in person, only those persons whose names are entered on the register of members of the Company at 6:30pm
on 10 June 2021 or, if the Meeting is adjourned, at 6:30pm on the date falling two days prior to the date of the
adjourned Meeting, shall be entitled to attend and vote in respect of the number of shares registered in their
names at that time. Changes to entries on the register of members after the times specified above shall be
disregarded in determining the rights of any person to attend and/or vote at the relevant meeting. Please note
that anyone seeking to physically attend the AGM will be refused entry.
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EXPLANATORY NOTES TO THE NOTICE OF
ANNUAL GENERAL MEETING (continued)
17. Members who wish to communicate with the Company by electronic means in connection with the matters set
out in this Notice may do so by contacting the Company at companysecretary@sourcebioscience.com on or
before 6:30pm on 10 June 2021. Shareholders who have general queries about the Meeting should contact the
Company Secretary at companysecretary@sourcebioscience.com.
18. It is not permissible to use any electronic address provided either in this Notice of Meeting or any related
documents (including the Form of Proxy) to communicate with the Company for any purposes other than those
expressly stated.
19. As at 12.00pm on 12 April 2021 (the date on which the Report of the Directors was signed), the Company’s
issued share capital comprised 74,183,038 ordinary shares of 0.15p each. Each ordinary share carries the right to
one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company
as at 12.00pm on 12 April 2021 is 74,183,038. The Company’s website will include information on the number of
shares and voting rights.
20. Subject to the provisions of section 319A of the Act, at the Meeting the Company must cause to be answered any
question relating to the business being dealt with at the Meeting put by a member attending the Meeting.
An answer need not be given if:
•
answering the question would interfere unduly with the preparation for the meeting or involve the
disclosure of confidential information;
the answer has already been given on a website in the form of an answer to a question; or
it is undesirable in the interests of the Company or the good order of the Meeting that the question
be answered.
•
•
21. Copies of the service contracts and letters of appointment of the Directors and the Non-Executive Directors of
the Company are available for inspection at the Company’s registered office during normal business hours.
22. If you are in any doubt as to what action you should take, you are recommended to seek your own financial
advice from your stockbroker or other independent adviser authorised under the Financial Services and Markets
Act 2000.
23. If you have sold or transferred all of your shares in the Company, please forward this document, together with
the accompanying documents, as soon as possible either to the purchaser or transferee or to the person who
arranged the sale or transfer so they can pass these documents to the person who now holds the shares.
Ordinary Resolutions
Resolution 1 - Annual Report and Accounts
This is a standard resolution common to all Annual General Meetings.
Resolution 2 - Remuneration report
The Directors’ Remuneration Report in the 2020 Annual Report and Accounts contains:
•
•
the annual statement by Sir Ian Carruthers, Chairman of the Remuneration Committee
the annual report on remuneration which sets out payments made during the financial year ended 31 December
2020 and explains how the remuneration policy was implemented in 2020
Sir Ian Carruthers’ annual statement and the annual report on remuneration are set out on pages 46 to 50 of the
Annual Report and Accounts.
Resolution 3 - Remuneration policy
The proposed remuneration policy can be found on pages 48 to 50 of the Annual Report and Accounts. It sets out the
proposed policy of the Company to be adopted with respect to the making of remuneration payments and includes
details of the proposed executive share options plan and SAYE scheme.
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SourceBio International plcAnnual Report & Accounts 2020 Resolution 4 - Executive share options plan
Resolution 4 is to approve the establishment and implementation of the proposed executive share options plan, the
principal terms of which are set out at page 49 of the Annual Report and Accounts.
In summary, it is proposed that the Executive Directors, Executive Management team and selected senior managers
will be eligible for share options granted under the plan. Approval over a total of 8% of the issued share capital is
sought for the proposed executive share options plan.
Resolution 5 - SAYE Scheme
Resolution 5 is to approve the establishment and implementation of the proposed SAYE scheme, which would
be open to all employees, the principal terms of which are set out at page 49 of the Annual Report and Accounts.
Approval over a total of 2% of the issued share capital is sought for the proposed SAYE Scheme.
Resolutions 6 to 11 - Election of Directors
Under the Articles of Association and in accordance with the UK Corporate Governance Code, all Directors will stand
for re-election at this, the first Annual General Meeting of the Company.
Each of the Directors have indicated their willingness to offer themselves for election. The Board, having considered
the mix of skills, knowledge and experience of the Directors confirms that each Director continues to perform their
duties effectively, showing integrity and high ethical standards whilst maintaining sound, independent judgement in
respect of all decisions taken at both Board and, where applicable, Committee level.
Biographical details for each of the Directors are located on pages 28 and 29 of the Annual Report and Accounts.
Resolution 12 - Re-Appointment of auditor
The Company is required to appoint an auditor at each meeting at which accounts are presented. RSM UK Audit LLP
have indicated their willingness to be re-appointed to office. Accordingly, resolution 12, subject to the approval of the
shareholders of the Company, appoints RSM UK Audit LLP as auditor of the Company and authorises the Directors to
determine the remuneration of the auditor.
Resolution 13 - Directors’ power to allot equity securities
Generally, the Directors may only allot shares in the Company (or grant rights to subscribe for, or to convert any
security into, shares in the Company) if they have been authorised to do so by shareholders.
Special Resolutions
Resolution 14 - Disapplication of pre-emption rights
The right of pre-emption will not apply to allotments made under resolution 13.
Resolution 15 - Amendment to Company’s articles of association
The Company’s articles are to be changed to explicitly allow general meetings (including AGMs) to be held by partly
electronic facilities.
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DIRECTORS, OFFICERS AND ADVISORS
Directors
Advisors
Jay LeCoque
Executive Chairman
Tony Ratcliffe
Chief Financial Officer
Sir Ian Carruthers OBE
Senior Independent
Non-Executive Director
Simon Constantine
Independent Non-Executive Director
Marco Fumagalli
Non-Executive Director
Christopher Mills
Non-Executive Director
Company Secretary
Tony Ratcliffe
Registered Office
1 Orchard Place
Nottingham Business Park
Nottingham
NG8 6PX
Tel: +44 (0) 115 973 9012
sourcebiointernational.com
Registered Number
10269474
Group Locations
UK
Nottingham (Head Office)
1 Orchard Place
Nottingham Business Park
Nottingham
NG8 6PX
Rochdale
John Boyd Dunlop Drive
Kingsway Business Park
Rochdale
OL16 4NG
Auditor
RSM UK Audit LLP
Suite A, 7th Floor
East West Building
2 Tollhouse Hill
Nottingham
NG1 5FS
Nominated Advisor
and Broker
Liberum Capital Limited
Ropemaker Place
Level 12
25 Ropemaker Street
London EC2Y 9LY
Principal Banker
Barclays Bank plc
3 Hardman Street
1st Floor
Spinningfields
Manchester
M3 3HF
Cambridge
William James House
Cowley Road
Cambridge
CB4 0WU
Ireland
Riverstown 5 Complex
Riverstown Industrial Estate
Tramore
Co. Waterford
Republic of Ireland
Dublin City University
NRF Building
Glasnevin Campus
Dublin 9
Republic of Ireland
Legal Advisor
BDB Pitmans LLP
One Bartholomew Close
London
EC1A 7BL
Registrar
Equiniti Limited
Aspect House
Spencer Road Lancing
BN99 6DA
USA
6696 Mesa Ridge Road
San Diego
CA 92121
USA
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SourceBio International plcAnnual Report & Accounts 2020 NOTTINGHAM
CAMBRIDGE
ROCHDALE
IRELAND
SAN DIEGO
1 Orchard Place
Nottingham Business Park
Nottingham
NG8 6PX
United Kingdom
William James House
Cowley Road
Cambridge
CB4 0WU
United Kingdom
John Boyd Dunlop Drive
Kingsway Business Park
Rochdale
OL16 4NG
United Kingdom
6696 Mesa Ridge Road
San Diego
CA 92121
USA
Riverstown 5 Complex
Tramore
Co. Waterford
Republic of Ireland
Dublin City University
NRF Building
Glasnevin Campus
Dublin 9
Republic of Ireland