VENTURE LIFE GROUP PLC
ANNUAL REPORT & ACCOUNTS 2016
VENTURE LIFE GROUP
Jerry Randall
Chief Executive Officer
2016 was another year of positive
developments for the Group.
Revenues grew by 57% and we generated
our first EBITDA profit in a year of
challenging markets and economic
instability in many areas of the world.
Contents
Business Summary
1 Highlights
2 Market Opportunity
4
6 Global Brands
Partners
Brands
8 Development and
Manufacturing
Strategic Report
10 Chair’s Statement
12 Chief Executive Officer’s
Statement
16 Financial Review
18 Principal Risks and
Uncertainties
21 Key Performance
Indicators
Governance
22 Directors and Advisers
24 Corporate Governance
26 Directors’ Report
28 Remuneration Report
32 Statement of Directors’
Responsibilities
Financial Information
33 Independent Auditor’s Report
34 Consolidated Statement of
Comprehensive Income
35 Consolidated Statement of Financial Position
36 Consolidated Statement of
Changes in Equity
37 Consolidated Statement of Cash Flows
38 Notes to the Consolidated
Financial Statements
66 Parent Company Balance Sheet
67 Parent Company Statement of
Changes in Equity
68 Notes to the Parent Company Balance Sheet
Other Information
ibc Shareholder Information
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
HIGHLIGHTS
We develop, manufacture and
market self-care products globally
£14.3m
Revenue increased 57% to
£14.3 million (2015: £9.1 million).
£5.5m
Gross profit increased 83% to
£5.5 million (2015: £3.0 million).
£0.8m
EBITDA profit of £0.8 million
(2015 loss: £0.6 million).
14.3
5.5
0.8
9.1
7.2
3.0
2.7
2014
2015
2016
(0.4)
2014
2015
2016
2014
2015
2016
(0.6)
UltraDEX®
Acquisition of the UltraDEX
oral care products brand in
March 2016 for £5.8 million.
New partners
China deal
New long-term distribution
partnerships in Spain, Malaysia,
China, Turkey, Jordan, Greece and
Taiwan.
Full Lubatti skincare range now
stocked and on sale through
Gialen Group, Venture Life’s
partner in China. Post-period end,
re-orders have started to flow
through.
Venture Life Group plc Annual Report & Accounts 2016
1
MARKET OPPORTUNITY
Supporting a growing awareness
of ageing healthcare needs
We create value for shareholders through developing, manufacturing
and selling self-care products to deal with the conditions associated
with ageing. The ageing population is growing and our products are
targeted at the ever increasing demand for self-care and preventative
wellness.
Creating value
We create value by
developing innovative
products and brands for the
ageing population. We sell into
the rapidly growing self-care
market, utilising our significant
operating leverage to drive
incremental gross margin
through to the bottom line,
to deliver our strategy to
become sustainably
profitable.
Our business
The process of innovating,
developing, manufacturing and
commercialising our products is
essentially the same, whether
we sell under our own brands or
our customers’ brands. We look to
develop our own brands to grow
brand equity, but will also look
to generate long-term revenues
and profits from products sold
under customers’ brands
which may bring quicker
sales velocity once launched.
Population
The ageing population
and increased awareness
amongst consumers of the
consequences of ageing and
maintaining good health, sees
the target market for Venture
Life products increasing in
future years.
Range of products
Our portfolio is targeted
towards the ageing population,
to promote healthy ageing, and
we focus on products sold
through the pharmacy channel
around the world. We have
products that address a
significant proportion of
ailments affecting the ageing
population.
Growing market
Better education, diet and
lifestyle are resulting in people
living longer. This is putting
pressure on healthcare systems
and requiring consumers to take
more responsibility for their
own healthcare, especially
financially. This coupled with the
increasing focus on preventative
wellness is growing the market
for our products worldwide.
Increased efficiency
The business has good
operational leverage, in that
we are able to put much more
revenue through the business
without significantly increasing
the cost base. This will improve
gross margins across all
products, and this incremental
gross margin will substantially
drop through to operating
profit.
Innovate
Our Brand
Develop
Manufacture
Partner
Register
Global
population
by age group
(billion)
Source:
United Nations,
Department of
Economic and Social
Affairs, Population
Division (2015). World
Population Ageing: 2015
(ST/ESA/SER.A/390)
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
Customer Brand
0-9
10-24
25-59 60+
0-9
10-24
25-59 60+
0-9
10-24
25-59 60+
2015
2030
2050
2
Venture Life Group plc Annual Report & Accounts 2016
MARKET OPPORTUNITY CONTINUED
Business Summary
Strategic Report
Governance
Financial Information
Commercial expertise
The management of Venture Life have
decades of experience between them in
partnering healthcare products around
the globe. Long-term partnerships with
strong local market partners is key to
sustainable, profitable revenue growth.
Technical expertise
Venture Life has the proven ability to
develop and register products all over
the world. We produce and sell products
registered in Europe, North America,
MENA and the Far East. Control of our
own manufacturing ensures quality and
customer service are paramount.
Innovation
Innovation is a key driver of growth as
consumers demand this to sustain
brands. Venture Life possesses a
dedicated team of five people in Italy
focused on innovation and development
of new products for ourselves and our
partners.
Partnerships
Selecting the right partner is key to
sustainably profitable revenue growth. We
have long-term exclusive agreements with
our global partners outside the UK, which
allows them to invest in the growth of the
products. Products are made to order,
without sale or return, and the partner
pays all costs of the sales team, marketing
and distribution in market. In the UK we
support the marketing of our brands.
Outcome
This strategy delivers a
network of partners with
long-term motivation and
expertise in their local
market. With all in-market
costs covered by the partner
outside the UK, Venture Life
is not exposed to funding
local sales and marketing
costs. We use local partner
expertise and experience to
build the brands of Venture
Life, which in turn builds
shareholder value through
growing profitable revenue
streams, with a diverse risk
profile where we are not
dependent on one product,
partner or market.
Objectives and
strategy
We aim to become a
leading self-care branded
products business. With
our own development,
manufacturing,
international distribution
and direct UK sales
capabilities we are able
to generate long-term
and sustainable profits
to benefit all
stakeholders.
Revenue growth
Growth in revenue comes
from both existing and new
distribution partners as they
launch and grow our products
in their market.
Develop products
The Group has an established,
proven system for rapidly
developing new products and
bringing them promptly to
market, at a relatively low cost.
This includes in-house
development, manufacturing
and regulatory capabilities.
Improve margins
Our operational leverage
means that increasing revenues
will improve both our gross
and operating margins. As well
as improving the gross margin
percentage, the significant
proportion of this incremental
gross margin will drop through
to operating profit.
Venture Life Group plc Annual Report & Accounts 2016
3
BRANDS
A growing
portfolio
Key brands
Once Venture Life has identified which market
segments to enter, our new product development
strategy is to either develop in-house or acquire.
We have a number of brands within our portfolio
that we commercialise globally through a network
of partners selling into the pharmacy channel.
Oral healthcare
UltraDEX fits into an emerging trend for research-led,
high performance oral healthcare products developed
for a specific need. Clinically proven to deliver 12-hour
fresh breath, the range eliminates bad breath instantly
whilst protecting teeth and gums at the same time.
Good oral hygiene is becoming increasingly important
to the discerning customer across the world. Evidence
shows customers are willing to pay a higher price for
effective products when compared with mass market
products.
Neurology
Developed as a range of food supplements and
indicated for improving brain function in a healthy
brain, NeuroAge is a range of products specifically for
cognitive function, improved alertness and improved
sleep. All products contain a combination of key
ingredients that provides its mode of action.
Cardiovascular
Initially developed as a functional food (e.g. yoghurt
or margarine) for lowering LDL cholesterol more than
20 years ago, Venture Life’s strategic partnership with
Raisio has led to the development of two food
supplements branded Benecol. Available either as a
capsule or a ‘once-a-day’ liquid sachet, it offers
advantages such as a two-year shelf life, does not
need to be refrigerated and is available through the
pharmacy channel with the recommendation of a
healthcare specialist.
Skincare
Lubatti is a luxury skincare range with a strong history
and heritage that dates back to the 1920s and back to
its original founder – Madame Lubatti. The products
contain a combination of fruit, plant and flower
extracts that were based on the original formulations.
The range was launched in China in early 2016
through our distributor and is available in 1,300+
retail stores across mainland China.
Women’s intimate health
Our recently developed range of women’s intimate
healthcare products address the most common
vaginal conditions and infections. As some of these
infections are commonplace, recurrent and in most
cases easy to identify, our range of products will be
sold in pharmacies without the need for a doctor’s
visit or prescription.
4
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
#1mouthwash on
HEALTHY AGEING
PHARMACY CHANNEL
80+
PARTNERS
15
BRANDS WITHIN THE VENTURE LIFE
PORTFOLIO SOLD TO PARTNERS
AROUND THE WORLD
9
NEW PRODUCT LAUNCHES
IN 2016
40+
COUNTRIES
ENTRY INTO
KEY MARKETS IN 2016
UK
Spain
India
Turkey
Venture Life Group plc Annual Report & Accounts 2016
5
GLOBAL BRANDS PARTNERS
An international
business
International business
Our international business model is to partner our brands with
reputable pharmaceutical or healthcare partners across the globe,
focusing on key markets.
Chosen partners will have the appropriate sales and marketing
infrastructure in their territory and will have access to the
pharmacy channel as well as relevant specialists. Our partners are
also responsible (under our guidance) for the sales, marketing,
distribution and promotion of our products in their territory during
the life of the long-term distribution agreement.
With the acquisition of the UltraDEX brand, Venture Life has now
started an international roll out of the brand through its partnering
model, with recent launches in Spain in late 2016 and Malaysia in
early 2017.
UK business
With the recent acquisition of the UltraDEX brand in 2016, we now
have direct relationships in the UK market with the pharmacy and
grocery channels. UltraDEX has been in key retailers such as Boots
the Chemist for almost 20 years; this clearly shows the strength of
our brand and loyalty of our customers. This new channel-to-
market will allow us to exploit some of our other brands with these
key retailers in due course.
Key partners
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Venture Life Group plc Annual Report & Accounts 2016
GLOBAL BRANDS PARTNERS CONTINUED
Business Summary
Strategic Report
Governance
Financial Information
SMS
Jordan
Headquartered in Jordan,
SMS is our exclusive
partner for Benecol food
supplements in Jordan and
is targeting both
pharmacies and healthcare
professionals with Benecol
capsules initially and later
with Benecol ‘once-a-day’
liquid sachets, registration
dependent.
Ilko Pharmaceuticals
Turkey
Ilko Pharmaceuticals is
one of Turkey’s leading
pharmaceutical companies
with its headquarters in
Istanbul. With more than
50 years of experience,
Ilko is our exclusive
partner for Benecol ‘once-
a-day’ liquid sachets in
Turkey.
Boots
UK
Boots is the UK’s leading
pharmacy-led health and
beauty retailer with over
2,500 stores operating
across the UK and Eire.
Selling a wide range of
health and beauty
products, their stores are
primarily located on the
high street. The UltraDEX
range has been sold in
Boots for almost 20 years.
Serra Pamies
Spain
Founded in 1885, Serra
Pamies’s self-care division
promotes its products to
pharmacies and
specialists. With a wealth
of experience within the
oral healthcare sector,
Serra Pamies is Venture
Life’s exclusive distributor
for UltraDEX in the
Spanish market.
Rigel Pharma
Malaysia
Rigel Pharma sells
imported ethical
healthcare products to
hospitals and clinics, in
both private and
government sectors as
well as pharmacies. Rigel
Pharma is the exclusive
distributor for UltraDEX
throughout Malaysia.
2016 – entry into some key markets
Venture Life’s reach extends to over 40 countries and more than 80 partners globally – significant opportunities remain.
UltraDEX
UK
UltraDEX
Spain
Benecol
Turkey
Benecol
Jordan
UltraDEX – China
UltraDEX – Malaysia
Venture Life Group plc Annual Report & Accounts 2016
7
Key
Countries where one product or more is sold or partnered
Countries where key deals signed/products launched in 2016
Countries where no products sold or partnered
DEVELOPMENT AND MANUFACTURING
Unrivalled expertise
in medical devices
We have invested in the manufacturing facility to support the Group’s
overall revenue growth, including specific additions to our existing
filling and warehousing capabilities. We will deliver improved profitability
as we reduce the cost of manufacture and achieve greater scale. There
continues to be considerable unutilised capacity at our facility.
Manufacturing
> 5,500m2 facility north of Milan,
Customer brands
> Strong track record of
Italy
> 100,000 unit per day capacity
> 6 turbo mixers, 10 filling and
packaging lines
developing new products and
line extensions for customers
> Uses same development team
as used for our brands
Expansion
> Good existing operating leverage
to deliver incremental gross
margin
> Still significant headroom in the
current facility
> International certification USA,
> Brings incremental revenues and
> Able to double factory footprint
EU, Far East, Middle East
> Produced 11 million finished goods
plus 7 million sachets in 2016
> Significant unutilised capacity
and hence operating leverage
margin to the business
> Utilises operating leverage
on current site
> Gives significant capacity for
growth plans
Bulk manufacturing capacity %
100
Finished units capacity %
100
Manufactured
volumes (kg)
Spare
capacity (kg)
75
50
25
2016 2017 (est.)
75
50
25
8
Units produced – 2016
Estimated units – 2017
Current capacity
Capacity – with normal capex
Venture Life Group plc Annual Report & Accounts 2016
DEVELOPMENT AND MANUFACTURING CONTINUED
Business Summary
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Governance
Financial Information
Research
> Market-led innovation around existing and new
brands
> Focus on ingredients with well-known safety
profiles
Development
> Dedicated team of five experts in medical device,
cosmetic and food supplement areas
> From pilot batch to full manufacturing scale up
> Development for Venture Life brands and customer
> Use of effective regulatory strategies to minimise
brands
cost and time to market
> Library of over 1,200 base formulations
> Particular expertise in medical devices
> ISO 13485 and ISO 9002 certification held by the
development and manufacturing facility
A dedicated team of five experienced personnel develop new
products each year for ourselves and our customers. In 2016,
this unit developed many new formulations, three of which
are new branded products to be launched in 2017.
Photo-ALL™
> Topical medical device for drug-related photo-sensitivity.
> Patent granted in Europe.
> 3-8% of patients using many drug treatments suffer photo-
sensitivity from the interaction of the drug with UVA rays.
Myco-Clear™
> Topical medical device for fungal nail infections.
> Substantial market in both Europe and US.
> Improves the appearance of the nail and treats the condition.
> Proprietary IP.
Rosacalma™
> Topical treatment for rosacea.
> Affects 30-50 year olds mostly and up to 10% of the general
population.
> Provides a long-term solution to a long-term problem.
Venture Life Group plc Annual Report & Accounts 2016
9
CHAIR’S STATEMENT
Making good
progress
‘‘2016 has been a dynamic year for
Venture Life, with the Group and
team beginning to demonstrate its
true potential.
2016 was a seminal year for Venture Life, delivering significant
revenue growth and our first EBITDA profit as a Group. The
investment of the last three years in products, team, structure
and resource is now beginning to generate the expected
operational leverage, and the business is now well placed to
exploit this and achieve its key strategic objective of becoming
sustainably profitable. The EBITDA profit of £0.8 million is a
key demonstrable step in this process.
This year the team at Venture Life has again demonstrated
its ability to successfully acquire and integrate a business into
the Venture Life Group, and to drive through the expected
operational and financial synergies. The acquisition of
Periproducts Limited (“Periproducts”), which includes the
UltraDEX brand, in March 2016 marked the successful
conclusion of a transaction started in late 2015, meeting the
key criteria for acquisition targets set out by the Board. We are
delighted by the early successes achieved in terms of self-
generated international deals and manufacturing transfer, as
well as the integration of the office based functions into the
Group structure. We are confident this investment will
generate significant and growing returns for Venture Life, and
recognise that acquisitive growth will continue to be a
strategic target of the Group, to augment and complement the
underlying organic growth of our business.
The record year we have seen in 2016 has been a result not
only of the addition of the UltraDEX brand, but also from the
whole team driving organic growth through all parts of our
business, with both new long-term partnering deals and
existing partners growing in country sales. We have a broad
range of customers across many geographies and products.
This gives the Group a stable multi-leg platform for delivering
future growth but does not rely heavily on either one product,
one customer or one territory for success. This portfolio
approach enables the Group to develop repeatable revenue
growth in a lower risk environment.
We continue to develop our portfolio, with active
development programmes through our expertise based both in
the UK and Italy, and 2017 will see the launch of our three
latest innovative products: Myco-Clear for fungal nail
infections, Rosacalma for the long-term treatment of the skin
condition rosacea and Photo-ALL for drug-related UVA
sensitivity. These programmes again demonstrate the ability of
the Group to rapidly develop innovative and clinically-proven
medical products for treating trending areas in the pharmacy
channel. The deep development capability of the business,
particularly in the medical device area, enables the Group to
move quickly into areas of high consumer interest at low cost
and in short timeframes, with products that have intellectual
property protection and proven clinical efficacy.
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Venture Life Group plc Annual Report & Accounts 2016
CHAIR’S STATEMENT CONTINUED
Business Summary
Strategic Report
Governance
Financial Information
For Venture Life, Brexit has caused limited impact to our
business. We are quite naturally hedged as a business, as our
level of euro revenues approximately match our euro cost base
in Italy, and likewise our sterling revenues and cost base in the
UK. As our UltraDEX products are now made in our Italian
facility, the appreciation in value of the euro will increase
these costs, albeit modestly. However the internalisation of
the UltraDEX production in Italy, combined with the
procurement efficiencies we have been able to introduce,
mitigate the impact of the stronger euro.
This year saw the departure of James Hunter as Chief
Financial Officer of the Group. James has moved onto a new
opportunity and the Board want to express thanks for his
services to the Group and wish him every success in his new
venture. As announced on 1 March, we are delighted to
welcome Adrian Crockett as the new Chief Financial Officer
and he joined the Group on 6 March 2017. Adrian joins
Venture Life from Abbott Diabetes Care Ltd, a division of
Abbott Laboratories with an annual turnover of approximately
$1 billion, where he had been Finance Director since October
2011. We look forward to Adrian bringing his extensive
experience to the Group.
The capital markets continue to be difficult for micro-cap
AIM-listed companies, where the risk appetite for such
companies is tested by increasing levels of regulation and
protections for investors. The Board is cogniscent of the need
to generate liquidity in its shares on the AIM market, and has
undertaken a number of initiatives to improve this, including
the appointment of Turner Pope Investments as joint broker, to
focus on the retail/high net worth investor market.
2016 has been a dynamic year for Venture Life, with the
Group and team beginning to demonstrate its true potential
as a lower risk, vertically integrated clinically-backed self-care
business. The Board is very pleased with the developments and
success of the Group in 2016 and looks forward to 2017 and
beyond with confidence. We would like to thank all of our
employees for their hard work and dedication this year, and
our shareholders for their continued support of our business.
Dr Lynn Drummond
Non-Executive Chair
22 March 2017
Venture Life Group plc Annual Report & Accounts 2016
11
CHIEF EXECUTIVE OFFICER’S STATEMENT
Our first year of
EBITDA profit
‘‘We have invested in the operational capacity of
the Group over the last three years, and now have
good operational leverage through which to
exploit profitable revenue growth.
This year has marked a significant milestone for the Group,
achieving record revenues of £14.3 million and its first EBITDA
profit of £0.8 million, driving the Group closer towards its near
term objective of becoming sustainably profitable. The
successful acquisition of the UltraDEX brand in March 2016
was a significant factor in this step up, and demonstrated the
strength of our business strategy to leverage the operating
structure we have developed over the last three years. With
capacity available within our operations, we were able to fully
integrate the Periproducts business and its UltraDEX brand
into the Group in six months, and begin to realise the
integration benefits we had targeted. We have already
validated the manufacture of the liquid UltraDEX products in
our Italian manufacturing facility, Biokosmes, and have already
manufactured and shipped products for customers.
The Group finished 2016 with revenues of £14.3 million, an
increase of 57% over 2015 of which 26% was driven by the
acquisition of UltraDEX. The addition of the UltraDEX
revenues, along with organic growth across our business,
brought additional revenues into the Group. We benefited
from a strengthening euro, as the larger part of the Group’s
revenues are denominated in that currency, although the same
is true for costs, meaning the operating profit impact of this
strengthening was limited.
We have invested in the operational capacity of the Group
over the last three years, and now have good operational leverage
through which to exploit profitable revenue growth. This has been
seen in 2016 as the additional revenues have increased our
operating profit by £1.2 million over that generated in 2015.
With capacity in our operations across the board, this means
that further revenue growth in 2017 will drive more profitability
to the bottom line. Our strategy is to continue to drive increasing
organic revenue growth through our operations to generate
increased profitability. This revenue growth will come from:
> Increasing the distribution of our current products globally,
and our partners increasing in-market sales through their
own marketing strategy;
> Developing and partnering innovative new products; and
> Making selective acquisitions of products suitable for
integration into our business, such as UltraDEX.
Our results through 2016 have shown that we are on the
trajectory to achieve our strategic objective of becoming
sustainably profitable.
UltraDEX
Well established in the UK, but with limited international
exposure, UltraDEX provides an excellent opportunity to
leverage our distribution expertise and bring additional
profitable growth into the Group. The product range is for the
treatment of halitosis (bad breath), and is presented as a rinse
or toothpaste, as well as accessories including interdental
brushes and tapes. There is also a patented line extension for
sensitive teeth. The product is covered by good clinical data
and has been on the UK market for nearly 20 years.
The rationale for the acquisition was simple, and in a very
short time has already delivered benefits to the bottom line:
> Overheads in the acquired business have been substantially
reduced as the majority of the business functions were
already present in our existing infrastructure,
e.g. regulatory, procurement, marketing etc.
> Product manufacturing has begun in Biokosmes, our
manufacturing subsidiary, delivering not only better
margins (through internalisation of manufacturing profit
and more efficient procurement) but also operational
efficiencies due to higher volumes in the factory.
In addition to tangible integration benefits, the acquisition
of the UltraDEX brand brings significant opportunity for
growth of the stable UK business from:
> More focused above and below the line marketing campaigns.
> Targeted promotional activities, both with key existing
retailers such as Boots as well as prospective new retailer
and retail channels.
> Recruitment of experienced retail sales professionals.
There are also tremendous opportunities for international
exploitation through partnering the products across the world
In the financial year prior to the acquisition, the UltraDEX
brand had only £60,000 of international sales. Within the first
six months we signed three international long-term partnering
deals (Spain, Malaysia, China) which will deliver many times
this level of revenue, even with just the first orders, and many
discussions are ongoing for other territories. As the products
are already registered in the EU, Spain has been the first to
launch the product in November 2016.
In the UK, the UltraDEX range is sold directly through the retail
pharmacy and grocer channel, including retailers such as Boots,
Tesco, Sainsbury’s, Waitrose, and in addition, through online
retailers such as Amazon and Ocado. Utilising our extensive
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CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED
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Governance
Financial Information
network, we see significant potential to penetrate the UK retail
channel further and will be focusing on this growth in 2017.
re-ordering from our partner, Gialen, confirming the
encouraging growth in sell out through late 2016.
We are delighted to announce Dr Mervyn Druian of the London
Centre for Cosmetic Dentistry as our new Brand Ambassador for
UltraDEX. An internationally renowned dentist, Dr Druian has been
a huge advocate of the UltraDEX brand for over 20 years; we
look forward to working with Dr Druian over the coming
months and years as we develop UltraDEX into a global brand.
Tim Scott
Tim Scott joined Venture Life in
November 2016 as the Group’s new
UK Sales Director. Tim has extensive
experience of the health and beauty
sector, having previously worked
within the oral care division at GSK as
well as for Sleek Cosmetics, acquired
in 2015 by the Walgreens Boots Alliance Group. Tim will be
responsible for developing our key account strategy and sales
of our branded products into the UK market. Initially this will
be focused on the UltraDEX range but we expect the scope to
be widened to include bringing more of the Group’s branded
products to the UK market.
Brands Business
The Brands business has continued to grow during 2016,
growing 253% over 2015, of which 224% was due to the
addition of the UltraDEX range. Early international deals with
this new product have vindicated our assessment of the
appetite for the product by potential partners.
During 2016 our team signed 13 new long-term partnering
deals with new customers, covering seven products in ten
countries. Some of these deals require registration as they are
outside of the EU, so first orders will be shipped in 2017 when
registration has been achieved. Notable deals that have been
completed in 2016 include:
> UltraDEX in Spain and the Far East; and
> Benecol ‘once-a-day’ liquid sachets in Turkey and Jordan.
In the first half of 2016, we shipped the remaining Lubatti
products to China to complete the range of 14 products to be
sold in their stores. After clearing customs, the full range was
rolled out into stores from August, and we saw sales growing
through the autumn and into 2017. We are beginning to see
2016 also saw our first long-term deals on the newly
developed Benecol ‘once-a-day’ liquid sachet. This is currently
going through registration in Turkey, which we expect to be
completed in the first half of 2017, and then proceeding to
launch. The Benecol capsules have been on sale now for two
years through our partner Alf Mizzi in Malta where they were
first launched, and we are seeing re-orders for these.
Additionally, the Benecol capsules have recently been launched
in Jordan and early feedback is positive.
During 2016, in addition to Tim Scott, we have appointed two
additional experienced executives to the Group, focused on sales:
Catherine Mason
Catherine is an experienced
international partner manager, who
has worked in the industry for 30
years. Catherine has previously worked
for Abbott Laboratories and EKF
Diagnostics, and both roles were within
international partner management; she
thus brings a wealth of experience to Venture Life.
Catherine will be responsible for heading up our team that
looks after all of our Brand customers, to ensure our Brands
are managed and grown in each of the territories.
Federico Bianchi
Federico joined on 1 February 2017,
and has a degree in pharmaceutical
chemistry. He is an experienced
Business Development Director, who
has worked in the industry for over 15
years. Previously Federico was with
Polichem SA (which was recently
acquired by Almiral) for seven years, where he was responsible
for all out-licensing activities.
His knowledge and experience, particularly of the European
markets, will help the Group expand its partner base and take
our products into new markets.
I am delighted to welcome these three experienced
members into our team and am sure they will have a positive
impact on our development.
Venture Life Group plc Annual Report & Accounts 2016
13
CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED
The manufacturing business produced
11 million finished goods plus 7 million
sachets in 2016.
Development and Manufacturing Business
Based in Bosisio Parini, north of Milan, Italy, our 5,500m2 facility
is the centre for our development and manufacture of new
products. 98% of the products that the Group sold in 2016
were made at the facility, with the exception of NeuroAge and
Benecol capsules. The facility produced 11 million finished
goods plus 7 million sachets during 2016, a record year. During
2016, as in every year, we invested in the maintenance and
upgrade of the facilities to grow capacity and improve margins
with more efficient manufacturing operations.
The facility in Bosisio has significant operational leverage
capacity, and this is integral to our pathway to become
sustainably profitable, with increasing economies of scale as a
high proportion of gross profit flows down to the bottom line.
With significant operational capacity in both the bulk
manufacture and filling equipment, the Group is focused on
generating more volume to put through the facility. This will
come not only from growth of the Group’s branded products:
Biokosmes has been very successful itself in generating new
business from existing customers and expanding its customer
base, delivering 32% revenue growth in 2016.
Important new customers in 2016 included Menarini
Industrie Farmaceutiche Riunite Srl, the leading Italian
pharmaceutical group, with a direct presence in
70 countries. The agreement with Menarini is
for the paid development of a suite of
dermatology products, registered as medical
devices, and the subsequent manufacture for
supply into the markets as they launch.
Our in-house development team has particular expertise in
the area of medical devices and cosmetics, and this team also
spends significant time on the development of our own products.
In 2016, the team produced three new brands for the business:
> Myco-Clear™ – a topical medical device for the treatment
of fungal nail infections. With data proving the efficacy, this
product will be registered as a medical device Class II. This is
an interesting market to enter where existing drug treatments
have many side effects and the non-drug treatments suffer
with issues of patient compliance and efficacy.
> Photo-ALL™ – a topical medical device for the treatment of
drug induced photo-sensitivity. Up to 5% of patients using
a wide range of drug treatments (including antibiotics,
chemotherapy treatments among others) suffer from
inflammation of the skin as a result of the interaction of
UVA rays with the drug. A patent in the EU has been
granted on this product and it is registered as a Class II
medical device, with clinical data supporting efficacy.
> Rosacalma™ – a topical medical device for the treatment of
the inflammatory skin condition called rosacea. Current
treatments for this condition are typically strong topical
drug products, meaning they can only be applied over short
timeframes. This novel Class II medical device is backed by
clinical data showing efficacy and can be used long-term
for the treatment of this condition.
These three products are again examples of the innovative
and effective output from our development division and will
be launched to partners during late 2017, earliest.
Outlook
2016 was a landmark year for Venture Life which saw 57%
revenue growth, further brand development and product
launches, and the successful integration of another acquisition.
The year demonstrated the ability of our operational leverage to
drive profitable revenues to the bottom line, moving us to our
first year of EBITDA profitability. We moved into January 2017
with a significantly higher order book for that month than
January 2016, and with many discussions ongoing for new
business across all of the Group. Post period end, we have seen
re-orders come through from our partner in China as our
differentiated Lubatti brand begins to get sales traction, and for
Benecol capsules where they were first launched. The new senior
staff who joined us in late 2016 and early 2017, all sales focused,
are now bedded in and driving more business for us. I am also
delighted that Adrian Crockett, our new CFO, is on board as
Adrian brings a wealth of experience from the healthcare
industry, most recently from his time at Abbott Laboratories,
including extensive experience of manufacturing and licensing.
I am delighted with the progress that we made in 2016, and
look forward to 2017 with excitement and confidence.
Jerry Randall
Chief Executive Officer
22 March 2017
14
Venture Life Group plc Annual Report & Accounts 2016
ULTRADEX
Premium
oral care
UltraDEX is a premium oral care
brand, primarily targeted at the
prevention and elimination of
bad breath, for 12-hour fresh
breath confidence. Developed,
used and recommended by
dental professionals, UltraDEX
technology is backed by
extensive scientific research.
Clinically proven, products are
alcohol free and include an
Original and Sensitive range,
along with interdental
accessories.
UltraDEX is sold primarily
through a number of UK
retailers including Boots, Tesco,
Sainsbury’s, Waitrose and
Amazon. Since acquiring the
brand in March 2016, UltraDEX
has since launched in Spain and
other countries are set to launch
in 2017.
Autumn 2016 saw the launch of
a new UltraDEX advertising
campaign. This revealed the
branding refresh and clearer
12-hour fresh breath messaging.
Advertising featured on the
London Underground and a radio
advert appeared on Heart FM, as
well as product sampling in key
London train stations.
Business Summary
Strategic Report
Governance
Financial Information
a
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EFFECTIVE
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CONFIDENT
CONFIDENT
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CONFIDENT
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Venture Life Group plc Annual Report & Accounts 2016
15
FINANCIAL REVIEW
A strong year
of growth
‘‘Additional revenues led to the
Group’s first EBITDA profit
of £0.8 million in the year.
The year saw the successful acquisition and integration of the
UltraDEX brand business into the Group. The acquisition
brought additional revenues at a strong gross profit margin,
synergy savings of administrative costs and the internalisation
of the manufacture of the acquired UltraDEX product lines,
which is expected to yield further savings to the ongoing
business. The existing Brands, and Development and
Manufacturing businesses also generated higher revenues
during the year through a mixture of existing and new
partnerships. The additional revenues led to the Group’s first
EBITDA profit of £0.8 million in the year.
Statement of Comprehensive Income
The Group reported 2016 revenues of £14.3 million, an
increase of 57% over the £9.1 million reported in 2015. The
increase includes the acquisition of the UltraDEX brand, which
we acquired in March 2016 and for which we consolidated
revenue for nine months in 2016. On a like-for-like basis
revenue increased by 23%, which was helped by a stronger
euro. The Brands segment, which includes the UltraDEX brand,
increased revenues by 253% to £3.8 million (2015: £1.1 million).
Of the total Brands revenue in 2016, £2.4 million was
generated by UltraDEX sales with UK retailers, and new
UltraDEX deals signed in Spain, Malaysia and China added a
further £0.3 million. Our Development and Manufacturing
segment reported revenues (including intercompany sales) of
£11.3 million, an increase of 32%, again helped by a stronger
euro. The euro strengthened significantly against sterling in 2016
– the average exchange rate during 2016 was EUR:GBP 1.23
compared to EUR:GBP 1.38 during 2015. This has increased
reported revenue and administrative costs where a large
element of these are in euros. The overall impact of the
changes in foreign currency rates had a minimal impact on the
reported profit after tax of the Group. The change in foreign
exchange in the year gave a slightly higher revenue offset by
higher costs and a foreign exchange charge resulting from the
revaluation of the Group’s euro loan notes. So far in 2017 the
euro has remained relatively constant at the closing rate of 2016.
Gross profit of £5.5 million was achieved in 2016 (2015:
£3.0 million), representing a gross margin of 38% (2015: 33%).
The improved gross margin in 2016 compared with 2015 is
driven by the increased margins and proportion of the higher
margin Brands business of the overall Group. The Brands
business was enhanced in the current year with the addition of
the UltraDEX brand. The addition of the UK UltraDEX business
and new UltraDEX deals signed by the Venture Life
international sales team increased the Brands gross margin to
50% (2015: 26%). The Development and Manufacturing
(including intercompany) business generated a consistent 32%
gross margin in 2016 (2015: 32%) which reflects contracts
held with existing and new customers. The increased revenue
and gross profit of the Development and Manufacturing
business was generated with minimal increase in
administrative expenses in the year.
Administrative costs (pre-exceptional items) increased in
2016 to £5.8 million (2015: £4.5 million). The increase of
£1.3 million was predominantly the inclusion of the UltraDEX
brand business for nine months of the current year (£0.8 million).
Going forwards the administration element of this cost will
reduce as a result of synergy savings, whilst the marketing costs
for UltraDEX UK are expected to increase in 2017, as we invest
further behind the brand. Other administrative cost increases
reflect increases in support costs for the higher activities of the
Development and Manufacturing business.
Loss before tax, amortisation and exceptional items in
2016 was broadly break-even at £0.07 million (2015: loss of
£0.73 million). We use loss before tax, amortisation and
exceptional items as one of our key performance indicators as
the Group currently recognises a charge each year of
£0.7 million within amortisation of intangibles in relation to
the amortisation of the intangible assets acquired with the
Biokosmes and Periproducts acquisitions. These intangible
assets are predominantly being amortised over five years from
the respective acquisition dates of March 2014 and March 2016.
Operating losses totalled £0.5 million (2015: loss of
£1.7 million) with losses after tax of £1.4 million (2015: loss of
£1.8 million). These translated into an adjusted loss per share
of 1.3p (2015: adjusted loss per share of 3.1p), with the
improvement in business performance generating enhanced
shareholder value. The number of shares in issue at 31 December
2016 was 36,837,106 (31 December 2015: 34,403,534).
Statement of Financial Position
Property, plant and equipment increased as a result of
investment of £0.2 million (2015: £0.2 million) in new
equipment in the Development and Manufacturing business
16
Venture Life Group plc Annual Report & Accounts 2016
FINANCIAL REVIEW CONTINUED
Business Summary
Strategic Report
Governance
Financial Information
during the year. The net working capital balance at 31 December
2016 increased from 31 December 2015 due to the increased
activity in the year as well as the addition of the UltraDEX
brand business. Total assets of £27.3 million at 31 December
2016 were £5.4 million higher than at 31 December 2015,
largely owing to goodwill and intangible assets generated by
the Periproducts acquisition and the related working capital
balances of this business.
The vendors of Biokosmes have agreed to extend the
Repayment Date of the Biokosmes Vendor Loan Note to
31 July 2020, and in return for extending the maturity of the
Biokosmes Vendor Loan Note, the Company has agreed to
increase the nominal interest rate from 3% p.a. to 4% p.a.,
with effect from 1 August 2017. All further terms of the
Biokosmes Vendor Loan Note remain as described in the
Admission Document.
Dividend
The Group paid a dividend in 2016 of 0.04p per share
(2015: 0.04p per share) and is recommending a dividend
of 0.04p per share be paid to shareholders in 2017.
Exceptional items
The Group incurred exceptional costs of £0.2 million in 2016
(2015: £0.2 million). Costs incurred relate to acquisition of
Periproducts which completed during the year.
Acquisition of Periproducts
The acquisition of Periproducts completed on 4 March 2016.
Consideration payable for the entire issued share capital and
the net current assets of Periproducts totalled £5.8 million.
The acquisition was funded in part with existing cash, and also
through the issue of 2,428,572 new ordinary shares which
raised £1.7 million (gross), and by the issue of three year 9%
convertible bonds, raising £1.9 million (gross).
Peter Shepherd
Group Financial Controller and Company Secretary
22 March 2017
Cash and debt
Cash and cash equivalents at year end totalled £2.0 million
(2015: £2.9 million). Net cash outflow during 2016 amounted
to £0.9 million with the reduction in cash balances accounted
for as follows:
> Operating cash flow before movements in working capital
– inflow of £0.4 million;
> Tax paid – outflow of £0.2 million;
> Net movement in working capital – outflow of £0.6 million;
> Acquisition of Periproducts – outflow of £4.3 million
(£5.2 million paid net of cash acquired);
> Proceeds from share capital and debt issuance – net inflows
of £1.5 million and £1.7 million respectively;
> Investment in manufacturing facility – outflow of £0.2 million;
> Investment in intangible assets – outflow of £0.3 million;
> Net movement in interest bearing borrowings – inflow of
£1.1 million.
Net debt levels increased from £3.3 million at 31 December
2015 to £7.1 million at 31 December 2016. This was a result
of cash spent on the Periproducts acquisition of £5.2 million,
and increased debt, again mainly for the acquisition. A
convertible bond was issued during the year (£1.7 million net)
and deferred consideration of £0.4 million agreed with the
Periproducts vendors to fund in part the acquisition of the
Periproducts business. An extension of an existing Italian term
loan with Banca Intesa from 2020 to 2024 was taken in
the year, together with an additional loan drawdown of
£0.5 million to fund planned investment in the manufacturing
business. Short-term funding was also drawn in the year with
the Italian RiBa loan facility of £0.6 million to meet short-
term working capital requirements, which was repaid in full in
January 2017. The remainder of the increase in net debt was
due to the impact of foreign exchange on the debt positions
held in euros at the balance sheet date.
Venture Life Group plc Annual Report & Accounts 2016
17
PRINCIPAL RISKS AND UNCERTAINTIES
Venture Life Group plc is a business that relies on revenues generated by its
distribution partners for international product sales, and from providing
development and manufacturing services to third parties. With the recent
acquisition of Periproducts, the Group will also be relying on its own UK-
based sales and marketing operations to generate product sales.
There are a number of risks and uncertainties which, if they were to materialise, could have an
effect on the Group’s trading performance and future prospects. The risks that the Group believe
could materially and negatively affect the Group’s ability to achieve its commercial objectives
are summarised below:
1. Reduction in demand
for products
2. Customer-specific
risk
3. Delay in regulatory
approval
The Group’s product distribution agreements
generally give market exclusivity to its
distribution partners for a period of five or
ten years. Whilst such agreements impose
minimum annual purchase obligations, if any of
the Group’s partners fails to meet its minimum
purchase obligations, the Group’s expected
revenues and profits could be negatively
affected. Such negative impact would continue
until either the partner is able to meet its
minimum purchase obligations or until the
Group is able to find an alternative commercial
partner for that market.
A significant proportion of revenue from our
Development and Manufacturing segment is
derived from a relatively small number of
customers. The percentage of this segment’s
total revenue generated by its top five
customers in the years ended 31 December
The Group’s products are primarily approved
for use as food supplements and Class I and
Class IIa medical devices, and functional
cosmetics that, in certain regions including
Europe, require pre-market notification but
not pre-market authorisation or approval by
the relevant authorities.
In other regions of the world where the
Group either has distribution agreements in
place or is actively seeking to establish them,
2014, 2015 and 2016 was 54%, 59% and 56%,
respectively. The loss of any customer or group
of customers which represents a significant
proportion of revenue could have a negative
impact on the Group’s operating results and
cash flow.
the procedure for registering and having
products authorised may differ from that in
Europe. Other jurisdictions may require more
lengthy registration and authorisation
processes and the Group will be relying on its
distribution partners to carry out this work in a
timely manner. This in turn may lead to delays
in product launches in certain territories but
the Group works closely with its partners to
support them through the process.
18
Venture Life Group plc Annual Report & Accounts 2016
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Business Summary
Strategic Report
Governance
Financial Information
4. Supply chain risk
5. Adverse foreign
exchange movements
affecting profitability
The Group relies extensively on third parties for
many of its activities, including raw material
supply, logistics, distribution and sales of its
products. The Group is therefore at risk of
under-performance by third parties,
exploitation by third parties of the Group’s
commercial dependence and by unforeseen
interruptions to third parties’ businesses. To
mitigate this risk, the Group works with a
variety of vendors and aims not to be over-
reliant on any one particular vendor.
Prior to the acquisition of Periproducts in March
2016, the Group’s revenues were primarily
denominated in euros and, in the case of Gialen
in China, in Chinese renminbi. Following the
acquisition of Periproducts, the Group’s
revenues are now denominated in euros,
Chinese renminbi and sterling. However, the
Group’s presentational currency is sterling and
therefore the reported revenues will depend on
exchange rates prevailing during the relevant
financial period.
The majority of the Group’s cost of sales are
denominated in euros and with 83% of the
Group’s revenues denominated in euros, thus
the Group is currently not unduly exposed to
adverse movements in the euro/sterling
exchange rate in relation to its gross profit. The
Group’s administrative expenses arising in Italy
The Group is very reliant on its own
Development and Manufacturing business for
supply of products and there is a risk of supply
chain interruption as a consequence of events
such as fire or flooding. The Group mitigates
this risk by observing its own Health and Safety
policies, as well as by taking practical measures
such as the installation and maintenance of a
fire alert and fire prevention system in its
factory.
represent a material component of overall
Group administrative expenses. These expenses
are denominated in euros and when reported
on a consolidated basis, they will be reported in
the Group’s presentational currency of sterling.
Consequently, there may be variability in the
presented expenses caused by variability in the
sterling/euro exchange rate.
The Group actively monitors the principal
foreign exchange rates and will adopt hedging
strategies when it is felt to be appropriate. The
Group also anticipates presenting its financial
results on a constant currency basis to enable
shareholders to compare the performance of
the Group between reporting periods with the
impact on reported results of strengthening or
weakening sterling eliminated.
Venture Life Group plc Annual Report & Accounts 2016
19
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
6. Financial Risk
6.1 Financial risk
management
6.2 Financial risk factors
6.2.1 Market risk
6.2.2 Credit risk
6.2.3 Liquidity risk
6.2.4 Capital risk
management
The Group seeks to minimise its exposure to
financial risk through issue of its own equity
instruments and debt to fund operating and
investing activities. Where it is necessary to
utilise debt funding, the terms of the financing
is reviewed against future cash flow
expectations to ensure that there are sufficient
resources for the Group to meet its obligations
under the financing arrangements. Further
details relating to the Group’s exposure to
financial instrument risks are provided in
note 31.
The Group’s activities expose it to a variety of
financial risks: market risk, credit risk and
liquidity risk. The Group’s overall risk
management programme focuses on the
unpredictability of financial markets and seeks
to minimise potential adverse effects on the
Group’s financial performance.
Risk Management is carried out by
management under policies approved by the
Directors. Management identifies and evaluates
financial risks in close co-operation with the
Group’s operating segments. The Directors
provide principles for overall risk management,
as well as policies covering specific areas, such
as interest rate risk, non-derivative financial
instruments and investment of excess liquidity.
Market risk is the risk of loss that may arise
from changes in market factors such as interest
rates and foreign exchange rates.
Credit risk is the financial loss to the Group if a
customer or counterparty to a financial
instrument fails to meet its contractual
obligation. Credit risk arises from the Group’s
cash and cash equivalents and receivables
balances.
Liquidity risk is the risk that the Group will not
be able to meet its financial obligations as they
fall due. This risk relates to the Group’s prudent
liquidity risk management and implies
maintaining sufficient cash reserves.
Management monitors rolling forecasts of the
Group’s liquidity and cash and cash equivalents
on the basis of expected cash flow.
The Group’s capital structure is comprised of
shareholders’ equity, debt in the form of loan
notes issued to the vendors of Biokosmes, a
three year convertible bond issued to part-fund
the acquisition of Periproducts, invoice
financing and unsecured commercial debt.
The Group’s objective when managing capital
is to maintain adequate financial flexibility to
preserve its ability to meet financial obligations,
both current and long-term. The capital
structure of the Group is managed and adjusted
to reflect changes in economic conditions.
The Group funds its expenditures on
commitments from existing cash and cash
equivalent balances, primarily received from
issuances of shareholders equity and loan
arrangements, some of which are linked to
equity. There are no externally imposed capital
requirements.
Financing decisions are made by the
Directors based on forecasts of the expected
timing and level of capital and operating
expenditure required to meet the Group’s
commitments and development plans.
20
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
KEY PERFORMANCE INDICATORS
Measuring
our progress
The Group uses a number of different key performance indicators
(KPIs) across the business to facilitate performance management.
The Group uses a combination of financial and operational KPIs and
the principal financial KPIs used to manage the Group’s performance
during the year are set out below:
KPI
Description
Like-for-like
revenue
growth
Revenue growth excluding
revenue growth from acquisitions
and disposals, any milestone or
one-off licence fee payments
2016
+23%
2015
+2%
Revenue
growth
Growth in revenue between
reporting periods
+57%
+26%
Gross margin
Revenue less the cost of sale,
expressed as a % of revenue
38%
33%
Comment
Revenue growth driven by additional
Manufacturing revenues with existing and
new customers
This increase is led by the inclusion of the
acquired Periproducts Limited revenues in
2016
Higher margins in the Periproducts
Limited business account for much of the
higher margin of the Group in 2016
An increase in business activity in the
year at higher margins leveraged the
existing cost base which increased at a
much lower rate
Earnings before interest, tax,
depreciation, amortisation and
share-based payment charges and
exceptional costs
£0.8m
(£0.6m)
EBITDA
Adjusted
LBTA
Total losses before tax charges
and credits, amortisation charges
for intangibles and exceptional
costs
Broadly
break-even
(Loss of
£0.07m)
(£0.73m)
An increase in operating profit offset by
higher finance cost, foreign exchange
charges and one-off exceptional items
EPS
Earnings (“LAT” – loss after tax)
per share (pence)
(3.76)
(5.12)
Adjusted EPS
LAT adjusted for amortisation and
share-based payments (pence)
(1.28)
(3.06)
Improved business performance and a
move toward profitability have driven an
improved EPS and adjusted EPS
Other financial KPIs will be employed as the business evolves and will be reported upon accordingly.
The Strategic Report is approved by the Board of Directors and signed on its behalf by:
Jerry Randall
Chief Executive Officer
22 March 2017
Venture Life Group plc Annual Report & Accounts 2016
21
DIRECTORS AND ADVISERS
An experienced team
Left to right: John Sylvester Non-Executive Director, Peter Bream Non-Executive Director,
Dr Lynn Drummond Non-Executive Chair, Jerry Randall Chief Executive Officer, Sharon Collins Commercial Director,
Peter Shepherd Group Financial Controller and Company Secretary, Gianluca Braguti Manufacturing Director.
Dr Lynn Drummond
Non-Executive Chair
Lynn joined Venture Life as Non-Executive Chair in November
2013. Lynn has been non-executive chairman of Infirst
Healthcare Limited since early 2013 and is also a non-
executive director of RPC Group plc. Previously Lynn spent
16 years at Rothschild in London, most recently as a Managing
Director within the investment banking division, with a
particular focus on transactions within the healthcare sector.
Prior to Rothschild, Lynn worked in the Cabinet Office in
London as Private Secretary to the Chief Scientific Adviser.
Lynn holds a Bachelor of Science Degree in Chemistry from
the University of Glasgow and a PhD in Biochemistry from the
University of London. She is also a Fellow of the Royal Society
of Chemistry and a Fellow of the Royal Society of Edinburgh.
Lynn chairs the Group’s Nomination Committee and is a
member of the Audit and Risk and Remuneration Committees.
Jerry Randall
Chief Executive Officer
Jerry co-founded Venture Life in 2010. From 2000 to 2009,
Jerry was CFO and co-founder of Sinclair Pharma plc, an
international specialty pharma business, now listed on the
AIM market in London. Sinclair was founded in August 2000
when Jerry completed the management buy-in with
Dr Michael Flynn.
Jerry was also on the Board of Silence Therapeutics plc, a
biotech development business, from 2005 to 2013. Initially a
non-executive director, Jerry became a non-executive
chairman in 2010 and moved to executive chairman in 2012.
Jerry enjoyed a career initially in corporate finance and was
involved in buy-ins and acted as adviser to both private and
quoted companies between 1993 and 2000, in capacities as
nominated adviser and in practice with KPMG. Jerry has been
involved in a number of flotations and transactions on the
Official List, Unlisted Securities Market and AIM, as well as
raising private equity. He qualified as a chartered accountant
with KPMG in 1990.
Sharon Collins
Commercial Director
Sharon co-founded Venture Life in 2010 with Jerry Randall.
Sharon has almost 20 years experience within the healthcare
industry, predominantly in marketing, international sales and
business development roles. She worked for a leading dental
manufacturer for eight years and launched many products
during this time.
Sharon worked for Sinclair Pharmaceuticals for five years
within the International Business Development field. She
qualified from Lancaster University in 1996 with a degree in
Marketing and gained her MBA (with Distinction) in 2003.
Gianluca Braguti
Manufacturing Director
Gianluca joined the Board in March 2014 following the
acquisition by Venture Life of Biokosmes, the company he
founded. Gianluca began this career working in his father’s
pharmacy and then, after he graduated as a pharmacist,
continued working for several years in the Milano University
cosmetic Research and Development department researching
cosmetic applications for raw materials used in different fields.
In 1990 he started developing formulations for Italian
cosmetic brands mainly in the perfumery and pharmacy area
and started his experience in contract manufacturing business,
22
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
DIRECTORS AND ADVISERS CONTINUED
Biokosmes. In 1999 Biokosmes started developing and
manufacturing medical devices, selling predominantly in
Europe. In 2002 Biokosmes passed its first FDA inspection, and
started exporting its products to the US.
Peter Shepherd
Group Financial Controller and Company Secretary
Peter joined the Venture Life Group in December 2014 and
manages the operational finances of the Group. Peter has been
assisting the board with finance matters in the interim
between James Hunter leaving at the end of 2016 and Adrian
Crockett joining in early March 2017.
Peter started his career with the actuarial team of PwC in
1999 as an already ACCA qualified accountant. In 2005 he
moved to work with Vodafone PLC in the corporate treasury
team and subsequently for Expro International Group, a
$1 billion revenue oil services company, initially within the
Group finance function and latterly heading up the finance
team of the Norway division, representing 10% of the Expro
International Group.
John Sylvester
Non-Executive Director
John Sylvester joined the Venture Life Board in November
2013. John is currently the corporate development officer at
BTG plc, following the £177 million acquisition of
Biocompatibles by BTG. John joined Biocompatibles in 2005,
taking responsibility for marketing, sales and business
development, and was appointed to the Board as an executive
director in the same year. His career covers a series of senior
commercial roles for Rio Tinto Zinc plc, ICI plc and English
China Clays plc where he was Managing Director prior to the
acquisition by Imetal for £756 million.
Immediately before Biocompatibles John was with Baxter
Healthcare working out of their European HQ in Zurich where
he was VP Marketing for their European Medication delivery
business, a $750 million portfolio spanning both drugs and
medical devices.
John chairs the Group’s Remuneration Committee and is a
member of the Audit and Risk and Nomination Committees.
Peter Bream
Non-Executive Director
Peter Bream joined Venture Life in February 2016. Currently
the Group Finance Director of Alcontrol Laboratories, Peter has
over 20 years in international business including as a CFO of
public companies in the pharmaceuticals, engineering and
chemical sectors.
Peter has a degree in Engineering and Management from
Cambridge University and is a Chartered Accountant.
Peter chairs the Group’s Audit and Risk Committee and is a
member of the Remuneration and Nomination Committees.
Directors
Dr Lynn Drummond Non-Executive Chair
Jerry Randall Chief Executive Officer
Sharon Collins Commercial Director
Adrian Crockett Chief Financial Officer
Gianluca Braguti Manufacturing Director
John Sylvester Non-Executive Director
Peter Bream Non-Executive Director
Registered Office
Venture House, 2 Arlington Square,
Bracknell, Berkshire RG12 1WA
www.venture-life.com
Company Secretary
Peter Shepherd
Company number
05651130
Nominated Adviser and Broker
Panmure Gordon and Co
One New Change, London EC4M 9AF
Joint Broker – Retail
Turner Pope Investments Limited
1st Floor, 5 Old Bailey, London EC4M 7BA
Auditor
Grant Thornton UK LLP
No.1 Dorset Street, Southampton, Hampshire SO15 2DP
Solicitors
Simmons & Simmons LLP
CityPoint, One Ropemaker Street, London EC2Y 9SS
Registrars
Capita Registrars Limited
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Principal Bankers
NatWest Commercial Banking
30 Market Place, Newbury, Berkshire RG14 5AG
HSBC Bank plc
Home Counties Business Banking Centre
1st Floor, Sunningdale, The Belfry Business Park, Colonial Way,
Watford WD24 4WH
Venture Life Group plc Annual Report & Accounts 2016
23
CORPORATE GOVERNANCE
Introduction
The Board is accountable to the Group’s shareholders for good
corporate governance and it is the objective of the Board to
attain a high standard of corporate governance. As an AIM-
quoted company, full compliance with The UK Corporate
Governance Code (the “Code”) is not a formal obligation. The
Company has not sought to comply with the full provisions of
the Code, however it has sought to adopt the provisions that are
appropriate to its size and organisation and establish frameworks
for the achievement of this objective. This statement sets out the
corporate governance procedures that are in place.
The Board
The Board of Venture Life Group plc comprises of three Non-
Executive Directors, one of whom chairs the Board, and four
Executive Directors. The roles of Chairman and Chief Executive
Officer are distinct and are held by different people to ensure
a clear division of responsibility. The role of the Non-Executive
Directors is to bring valuable judgment and insight to Board
deliberations and decisions. The Non-Executive Directors are
experienced and influential individuals whose blend of skills
and business experience contributes to the proper functioning
of the Board and its Committees, ensuring that matters are
fully debated and that no individual or group dominates the
Board’s decision-making processes.
All Directors have access to the advice and services of the
Company Secretary and are able in the course of their duties,
if necessary, to take independent professional advice at the
Company’s expense. Committees have access to such
resources as are required to fulfil their duties.
The Board receives regular reports detailing the progress of
the Group’s business, the Group’s financial position and
projections, as well as business development activities and
operational issues, together with any other material deemed
necessary for the Board to discharge its duties. The Chairman
is primarily responsible for the effective operation and chairing
of the Board and for ensuring that it receives appropriate
information to make informed judgements.
The Board has a formal schedule of matters reserved to it
for decision but otherwise delegates specific responsibilities to
Committees, as described below. The terms of reference of the
Committees are available on request from the Company
Secretary. The Board is responsible for decisions, and the
review and approval of key policies and decisions in respect of
business strategy and operations, Board appointments,
budgets, items of substantial investment and acquisitions.
Board Committees
The Board has established an Audit and Risk Committee, a
Nomination Committee and a Remuneration Committee with
written terms of delegated responsibilities for each.
The Audit and Risk Committee
The Audit and Risk Committee was chaired by Ian Mackinnon
until his resignation in February 2016, when Peter Bream took
over as Committee chairman. The other members of the
Committee are John Sylvester and Lynn Drummond.
The Committee has responsibility for considering all
matters relating to financial controls and reporting, internal
and external audits, the scope and results of the audits, the
independence and objectivity of the auditors and keeping
under review the effectiveness of the Company’s internal
controls and risk management.
The Audit and Risk Committee is expected to meet at least
twice a year.
The Remuneration Committee
The Remuneration Committee is chaired by John Sylvester.
Lynn Drummond and Peter Bream are the other members of
the Committee, after Peter Bream succeeded Ian Mackinnon to
the Committee in February 2016.
The Committee has responsibility for making
recommendations to the Board on the Company’s policy for
remuneration of senior executives, for reviewing the
performance of Executive Directors and senior management
and for determining, within agreed terms of reference, specific
remuneration packages for each of the Executive Directors and
members of senior management, including pensions rights,
any compensation payments and the implementation of
executive incentive schemes.
The Remuneration Committee meets at least once a year.
Further details of Directors’ remuneration are disclosed in the
Directors’ Remuneration Report.
The Nomination Committee
The Nomination Committee is chaired by Lynn Drummond with
John Sylvester and Peter Bream as the other members of the
Committee. Ian Mackinnon served on the committee until his
resignation in February 2016 and was replaced by Peter Bream.
The Committee has responsibility for considering the size,
structure and composition of the Board, and the retirement
and appointment of Directors, and will make appropriate
recommendations to the Board about these matters. The
Nomination Committee is expected to meet at least once a year.
Attendance at Board meetings and committees
The Directors attended the following Board meetings and
Committee meetings during the year:
Director
Board
Audit
Remuneration
7/7
6/7
2/7
5/7
7/7
7/7
7/7
7/7
7
3/3
3/3
–
3/3
–
–
3/3
–
3
2/2
2/2
–
2/2
2/2+
–
–
–
2
Dr L Drummond
Mr J Sylvester
Mr I Mackinnon*
Mr P Bream†
Mr J Randall
Ms S Collins
Mr J Hunter‡
Mr G Braguti
Total meetings held
in the year
* resigned 17 February 2016
† appointed 17 February 2016
‡ resigned 30 November 2016
+ by invitation
24
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
Shareholder relations
Venture Life aims to ensure a timely, open, comprehensive and
consistent flow of information to investors and the financial
community as a whole. By this approach we aim to help
investors understand the Group’s strategic objectives, its
activities and the progress it makes.
Shareholders are welcome to attend the Group’s Annual
General Meeting (“AGM”), where they have the opportunity to
meet the Board. All shareholders will have at least 21 days’
notice of the AGM at which the Directors will be available to
discuss aspects of the Group’s performance and answer
questions from shareholders. The Company also meets with its
institutional shareholders and analysts as appropriate and uses
the AGM to further encourage communication with
shareholders. In addition, the Company uses the Annual Report
and Accounts, Interim Statement and website to disseminate
information to shareholders.
The 2017 AGM will be held at 10.30am on 23 May 2017
and a Notice of Annual General Meeting can be found
enclosed with this report.
Dr Lynn Drummond
Non-Executive Chair
22 March 2017
CORPORATE GOVERNANCE CONTINUED
Under the Articles of Association all Directors must offer
themselves for re-election at least once every three years.
One-third of the Directors shall retire by rotation at every
Annual General Meeting. All Directors who retire by rotation
are eligible for re-appointment.
Internal control and risk management
The Board has ultimate responsibility for the systems of risk
management and internal control maintained by the Group
and for reviewing its effectiveness.
The Board’s approach is designed to manage rather than
eliminate risk and can provide only reasonable and not
absolute assurance against material misstatement or loss. It
operates with principles and procedures designed to achieve
the accountability and control appropriate to the business.
The Group does not consider it necessary to have an
internal audit function due to the small size of the
administrative function. Instead there is a detailed Director
review and authorisation of agreements and transactions. A
comprehensive budgeting process is completed once a year
and is reviewed and approved by the Board. The Group’s
results, compared with the budget, are reported to the Board
on a regular basis and discussed in detail.
The Group maintains appropriate insurance cover in respect
of actions taken against the Directors because of their roles, as
well as against material loss or claims against the Group. The
insured values and type of cover are comprehensively reviewed
on a periodic basis.
The principal features of the Group’s internal control
system are as follows:
> an organisational structure is in place with clearly drawn
lines of accountability and delegation of authority;
> Group employees are required to adhere to specified codes
of conduct, policies and procedures;
> financial results and key operational and financial
performance indicators are reported regularly throughout
the year and variances from plans and budgets are
investigated and reported;
> financial control protocols are in place to safeguard the
assets and maintain proper accounting records; and
> risk management is monitored on an ongoing basis to
identify, quantify and manage risks facing the Group.
Venture Life Group plc Annual Report & Accounts 2016
25
DIRECTORS’ REPORT
General matters
The Directors submit their report and the financial statements
of Venture Life plc for the year ended 31 December 2016.
Venture Life Group plc is a public limited company quoted on
AIM, incorporated and domiciled in the United Kingdom. It has
subsidiary companies in the United Kingdom and Italy.
New product development
Details of the Group’s new product development programmes
can be found on page 14. The accounting treatment in respect
of costs incurred in carrying out the new product development
programmes can be found in note 3.8 to the financial
statements.
Results
The loss before tax for the year ended 31 December 2016 was
£1.1 million (2015: £1.6 million). The detailed results for the
year and the financial position at 31 December 2016 are
shown in the Consolidated Statement of Comprehensive
Income on page 34 and the Consolidated Statement of
Financial Position on page 35.
Principal activities
The principal activities of Venture Life Group plc and its
subsidiaries are the development and commercialisation of
healthcare products, including oral care products, food
supplements, medical devices and dermo-cosmetics for the
ageing population, the development and commercialisation of
cosmetic products, and the manufacturing of a range of topical
products for the healthcare and cosmetic sectors.
Business review and future developments
There are a number of items required to be included in the
Directors’ Report, which are covered elsewhere in this report.
The following are covered in the Strategic Report:
> financial risk and management objectives and policies.
Going concern
The Directors recognise that the Group has reported a loss for
the year ended 31 December 2016, as it did in the year ended
31 December 2015. The Directors have prepared detailed
financial forecasts and cash flows looking beyond 12 months
from the date of these financial statements, as they did
immediately prior to the acquisition of Periproducts. With the
acquisition of Periproducts and evidence of growth in the
Group’s Brands business and continued growth in the
Development and Manufacturing business, the Directors
expect the Group to move to overall profitability in the
foreseeable future. In developing these forecasts the Directors
have made assumptions based upon their view of the current
and future economic conditions that will prevail over the
forecast period, together with the current performance and
prospects of the Group’s operating segments.
On the basis of the above projections, the Directors are
confident that the Company and its Group have sufficient
working capital to honour all of its obligations to creditors as
and when they fall due. Accordingly, the Directors continue to
adopt the going concern basis in preparing the financial
statements.
Political donations
The Group made no political donations in the year under
review (2015: £nil).
Dividends
The Directors recommend the payment of a dividend of 0.04p
per share (2016: 0.04p per share) payable 23 June 2017.
Directors
The following directors held office during the year and up to
the date of this report:
Dr Lynn Drummond Chair
Jerry Randall Chief Executive
Sharon Collins Commercial Director
Gianluca Braguti Manufacturing Director
James Hunter Chief Financial Officer
(resigned 30 November 2016)
John Sylvester Non-Executive Director
Ian Mackinnon Non-Executive Director
(resigned 17 February 2016)
Peter Bream Non-Executive Director
(appointed 17 February 2016)
Information on Directors’ remuneration, share options, long-
term executive plans, pension contributions and benefits is set
out in the Remuneration Report on pages 28 to 31.
Qualifying third-party indemnity provision is in place for
the benefit of all directors of the Company.
External directorships
It is the Group’s policy that its Directors may take up other
directorships provided that such appointments do not conflict
with their employment with the Group. Individuals may retain
any remuneration received from such services. External
directorships held by the Directors who are in office as at the
date of this report are detailed below:
Dr Lynn Drummond is a director of RPC Group plc and
Infirst Healthcare Limited.
John Sylvester is a director of Biocompatibles International
Limited, Biocompatibles UK Limited, and Provensis Limited.
Peter Bream is a director of Alcontrol Group Laboratories
Limited and various Alcontrol subsidiaries.
Jerry Randall is a director of Avantis UK Limited.
Gianluca Braguti is a director of Immobiliare Cremasca di
Parati Lucia e C. S.a.s. (“socio accomandante”), Farmacia S.
Francesco dei dott. Braguti A. – L.G. S.n.c. (“socio
amministratore”), Biogenico Worldwide S.r.l, Biokosmes
Immobiliare Srl, and Grafco2 Srl.
26
Venture Life Group plc Annual Report & Accounts 2016
DIRECTORS’ REPORT CONTINUED
Business Summary
Strategic Report
Governance
Financial Information
Directors share interests
The Directors in office at 31 December 2016 and their interests in the shares of the Company were as follows:
Director
Title
Jerry Randall*
Gianluca Braguti
Sharon Collins
Lynn Drummond
John Sylvester
Chief Executive Officer
Manufacturing Director
Commercial Director
Non-Executive Chair
Non-Executive Director
* Includes indirect holdings
Number of 0.3p
Ordinary Shares held
at 31 December 2016
% of issued
share capital
Number of 0.3p
Ordinary Shares held
at 31 December 2015
% of issued
share capital
3,931,129
7,085,459
1,582,417
18,365
10,000
10.7%
19.2%
4.3%
0.03%
0.03%
3,781,129
6,942,602
1,384,166
11,222
10,000
11.0%
20.2%
4.0%
0.03%
0.03%
Share capital
As at 31 December 2016, the authorised and issued share
capital of the Company was:
The Board also recognises that a safe, secure and healthy
working environment contributes to productivity and
improved performance.
Number
of Ordinary
0.3p shares
Amount
£
Issued and fully paid up
36,837,106
110,511
The average market price of the Company’s ordinary shares at
close of business on 30 December 2016 was 52p.
The maximum share price during the period was 78p
(1 January 2016) and the minimum price was 44p per share
(8 September 2016).
Substantial share interests
At 22 March 2017, the Company had been advised or is aware
of the following interests, held directly or indirectly, of 3% or
more in the Company’s issued share capital:
Mr Gianluca Braguti
J O Hambro
Mr Jerry Randall and
associated holdings
Aviva plc and its subsidiaries
Dr Michael Flynn and
associated holdings
Quilter Cheviot Limited
Mrs Sharon Collins
Mr Anthony Ahearne and
associated holdings
Number
of shares
7,085,459
4,400,892
3,931,129
3,523,143
2,927,077
2,574,200
1,582,417
1,531,369
%
holding
19.2%
12.0%
10.7%
9.6%
8.0%
7.0%
4.3%
4.2%
Employees
The Group is committed to providing equal opportunities in
employment. All job applicants and employees receive equal
treatment regardless of sex, race, colour, age, and nationality
or ethnic origin.
The motivation of staff and the maintenance of an
environment where innovation and team working is
encouraged are seen as key objectives by the Board and all
employees are given the opportunity to participate in the
Company’s share option scheme. We promote internal
communication of the Group’s progress by means of regular
meetings held with staff where issues are discussed in an open
manner.
Environment
The Group is conscious of its responsibilities in respect of the
environment and follows a Group-wide environmental policy.
The Group disposes of its waste products through regulated
channels using reputable agents.
Principal risks and uncertainties
A summary of the principal risks and uncertainties and
financial risk management objectives and policies are set out
on pages 18 to 20.
Statement as to disclosure of information to the auditor
The Directors who were in office on the date of approval of these
financial statements have confirmed that, as far as they are
aware, there is no relevant audit information of which the auditor
is unaware. Each of the Directors have confirmed that they have
taken all the steps that they ought to have taken as Directors in
order to make themselves aware of any relevant audit information
and to establish that it has been communicated to the auditor.
Auditor
Grant Thornton UK LLP have expressed their willingness to
continue in office. In accordance with section 489 (4) of the
Companies Act 2006, a resolution to reappoint Grant Thornton
UK LLP as auditor will be proposed at the forthcoming AGM.
2017 Annual General Meeting
The 2017 AGM will be held at 10.30am on 23 May 2017, the
business of which is set out in the Notice of Annual General
Meeting enclosed with this report.
On behalf of the Board,
Jerry Randall
Director
22 March 2017
Venture Life Group plc Annual Report & Accounts 2016
27
REMUNERATION REPORT
Remuneration Committee
The Company’s Remuneration Committee consists of the Chairman and the two Non-Executive Directors. The Chief Executive
Officer is invited to attend meetings of the Committee but no Director is involved in any decisions relating to their own
remuneration.
None of the Committee has any personal financial interest (other than as shareholders), conflicts of interests arising from
cross directorships, or day-to-day involvement in running the business.
The Committee is responsible for the consideration and approval of the terms of service, remuneration, bonuses, share options
and other benefits of the other Directors. All decisions made are after giving due consideration to the size and nature of the
business and the importance of retaining and motivating management. The Committee will meet at least once a year and at
other times as appropriate.
The Committee keeps itself informed of all relevant developments and best practice in the field of remuneration and seeks
advice from external advisers when it considers it is appropriate. New Bridge Street were engaged during the financial year to
provide independent advice to the Committee in respect of the new Long-Term Incentive Plan.
Remuneration Policy
The Group’s remuneration policy is designed to ensure that the remuneration packages attract, motivate and retain Directors and
senior managers of high calibre and to reward them for enhancing value to shareholders. The Company’s policy is that a
substantial proportion of the total potential remuneration of the Executive Directors should be performance-related and aligned
to performance measures that benefit all shareholders and promote the long-term success of the Company. The performance
measurement of the Executive Directors and the determination of their annual remuneration package, including performance
targets, are undertaken by the Remuneration Committee.
There are four main elements of the remuneration package for Executive Directors and other senior management:
> basic annual salary and benefits;
> annual bonus payments;
> long-term incentives; and
> pension arrangements.
The remuneration of the Non-executive Directors comprises only Directors’ fees.
1. Salary
Basic salaries are reviewed annually and if revised, the change in salary takes effect from the start of the financial year.
2. Annual bonuses
The Board believes that bonuses are an important incentive for executives to achieve the Group’s objectives, and as such should
represent a significant element of the total compensation awards for the executives.
All the Executive Directors currently participate in the same bonus scheme and achievement of bonuses is aligned to the
achievement of the Group’s financial targets. The bonus scheme enables executives to earn a bonus of up to 100% of salary for
achieving stretching financial targets and, where appropriate, stretching operational targets, which have been set at a level
perceived appropriate to provide the necessary incentives. In the event of over- or under-achievement of the Group financial
performance against those targets, appropriate adjustments may be made to the bonus payable.
28
Venture Life Group plc Annual Report & Accounts 2016
REMUNERATION REPORT CONTINUED
Business Summary
Strategic Report
Governance
Financial Information
3. Long-Term Incentive Plan
Prior to 2016, the Company used market value share options as its primary senior executive incentive arrangement to motivate
and retain selected senior executives within the Group. Under that arrangement the Directors were granted the following share
options:
Share option
scheme
Options as at
31 December
2015
Options
granted
during
the year
Jerry Randall
Jerry Randall
Jerry Randall
Sharon Collins
Sharon Collins
Sharon Collins
James Hunter
James Hunter
EMI
EMI
Unapproved
EMI
EMI
Unapproved
EMI
EMI
705,700
162,187
483,333
705,700
162,187
483,333
300,000
300,000
–
–
–
–
–
–
–
–
No directors exercised any options during the year.
Options
lapsed
during
the year
–
–
–
–
–
–
–
100,000
Options as at
31 December
2016
Date from which
first exercisable
Expiry date
Exercise
price
Performance
conditions
705,700 31 Dec 2012 31 Aug 2022
162,187
4 Nov 2023
1 Jul 2014
4 Nov 2023
1 Jul 2014
483,333
705,700 31 Dec 2012 31 Aug 2022
4 Nov 2023
1 Jul 2014
162,187
4 Nov 2023
1 Jul 2014
483,333
4 Nov 2023
9 Sep 2014
300,000
4 Nov 2023
1 Nov 2015
200,000
45p Non-market
41p Non-market
41p Non-market
45p Non-market
41p Non-market
41p Non-market
82p Non-market
82p Non-market
During 2016 the Company introduced the Venture Life Group plc Long-Term Incentive Plan (“LTIP” or the “Plan”) as its primary
senior executive incentive arrangement to replace market value share options. The key terms of the LTIP are as follows:
> awards will normally be granted annually and will vest after three years;
> awards will normally be structured as nil cost options or conditional awards;
> awards will normally be granted annually immediately following the release of the Group’s financial results each year;
> the maximum annual value of nominal cost options that can be made to an individual is equivalent to 200% of basic salary at
the date of grant;
> awards will only normally vest subject to continued service and to the extent that relevant performance targets are met; and
> performance targets will normally be based on Earnings Per Share and/or Total Shareholder Return targets.
The Remuneration Committee administers the LTIP and the grant of nominal cost options under the LTIP.
Whilst the LTIP was originally intended to be introduced during 2015, the acquisition of Periproducts resulted in the
postponement of the Plan’s introduction and grant of awards until 2016. Consequently, the Remuneration Committee made two
awards of nominal cost share options in 2016.
A summary of the awards made during 2016 are set out below:
Name
Jerry Randall
Gianluca Braguti
Sharon Collins
Award One
(date of grant:
28 September 2016)
Award Two
(date of grant:
28 September 2016)
203,390
153,971
135,593
492,954
340,183
264,237
226,789
831,209
James Hunter, the Group’s former Chief Financial Officer was awarded 118,644 nominal cost share options under Award One and
198,440 nominal cost share options under Award Two. These nominal cost share options have now lapsed following the
resignation of James Hunter on 30 November 2016.
A full summary of the performance conditions attaching to outstanding awards can be found in note 25.2 on page 58. To the
extent that these performance conditions are not met at the end of the vesting period, the options will lapse.
4. Pensions
The Group contributes to the personal pension plans of certain Executive Directors and employees. Under the scheme, the Group
and employee will make contributions or the Group will make direct contributions under a ‘salary sacrifice’ arrangement. The
Group recently reached its ‘auto-enrolment staging date’ and is complying with its auto-enrolment obligations in respect of
eligible employees.
Venture Life Group plc Annual Report & Accounts 2016
29
REMUNERATION REPORT CONTINUED
Directors’ letters of appointment and contracts
All Executive Directors (with the exception of Gianluca Braguti who has a five year fixed term contract) have rolling service
contracts with six months’ notice. The Non-Executive Directors do not have service contracts but have letters of appointment.
Executive Directors
Date of contract
Notice period
Jerry Randall
Sharon Collins
12 December 2013
Gianluca Braguti
27 March 2014
Six months’ notice to be given by the executive and thirty days by the
Company. In the event that the Company terminates the executive’s
employment without Cause, then an amount equal to 50% of the
employee’s salary is payable by the Company.
No notice period. Under the terms of the acquisition agreement signed
between the Company and the vendors of Biokosmes, Gianluca Braguti has
a contract as Managing Director of Biokosmes for a fixed five year term
until 28 March 2019. In the event that Gianluca Braguti is asked to leave
the Group as a Good Leaver he would be entitled to receive his annual
salary until 28 March 2019.
Non-Executive Directors
Date of letter
Notice period
Lynn Drummond
22 November 2013
Three months
John Sylvester
11 November 2013
Three months
Peter Bream
17 February 2016
Three months
Directors’ remuneration 2016
Executive Directors
Jerry Randall
Sharon Collins
James Hunter1
Gianluca Braguti2
Non-Executive Directors
Lynn Drummond
John Sylvester
Ian Mackinnon3
Peter Bream4
Salary/fees
£
Bonus
£
Benefits
£
Total
£
Pension
contributions
£
Social
security
contributions
£
185,400
164,800
135,788
202,510
55,000
27,000
3,600
23,435
55,620
49,440
–
60,767
17,294
912
2,149
3,412
–
–
–
–
–
–
–
–
258,314
215,152
137,937
266,689
55,000
27,000
3,600
23,435
55,620
24,720
19,828
38,898
–
–
–
–
36,642
28,859
17,931
17,137
6,750
2,886
497
2,244
Total
£
350,576
268,731
175,696
322,724
61,750
29,886
4,097
25,679
Total
797,533
165,827
23,767
987,127
139,066
112,946
1,239,139
1 Resigned on 30 November 2016.
2 Gianluca Braguti’s salary and fees equates to €240,000 in respect of his role as managing director of Biokosmes and €10,000
in respect of his role as a director of Venture Life Group plc (2015: €240,000 and €10,000 respectively), translated at average
exchange rate over the period.
3 Resigned 17 February 2016.
4 Appointed 17 February 2016.
The Executive Directors listed above at the reporting date are considered to be key management of the Group.
30
Venture Life Group plc Annual Report & Accounts 2016
REMUNERATION REPORT CONTINUED
Business Summary
Strategic Report
Governance
Financial Information
Directors’ remuneration 2015
Executive Directors
Jerry Randall
Sharon Collins
James Hunter
Gianluca Braguti
Non-Executive Directors
Lynn Drummond
John Sylvester
Ian Mackinnon
Salary/fees
£
Bonus
£
Benefits
£
Total
£
Pension
contributions
£
Social
security
contributions
£
180,000
160,000
136,750
181,6862
55,000
27,000
27,000
50,0001
15,0001
–
–
19,169
1,029
2,166
3,258
–
–
–
–
–
–
249,169
176,029
138,916
184,944
55,000
27,000
27,000
54,000
24,000
24,699
34,884
–
–
–
33,244
22,827
17,742
14,932
6,364
2,334
2,334
Total
£
336,413
222,856
181,357
234,760
61,364
29,334
29,334
Total
767,436
65,000
25,622
858,058
137,583
99,777
1,095,418
1 The bonus amounts were paid in accordance with the bonus scheme in operation for 2014 under which bonus payments were
related to Venture Life’s share price performance between IPO in March 2014 and the date of publication of the 2014 audited
financial results relative to the AIM All Share index over the same period. This bonus scheme has since been discontinued and
replaced with the scheme detailed on page 29. No bonuses were payable to any Directors in respect of performance in 2015.
2 Gianluca Braguti’s salary and fees equates to €240,000 in respect of his role as managing director of Biokosmes and €10,000
in respect of his role as a director of Venture Life Group plc (2014: €240,000 and €10,000 respectively), translated at average
exchange rate over the period.
Share options
The Company currently issues share options to staff to reward performance, to encourage loyalty and to enable valued
employees to share in the success of the Company.
In setting up the share option schemes, the Remuneration Committee took into account the recommendations of shareholder
bodies on the number of options to issue, the criteria for vesting and the desirability of granting share options to Executive and
Non-Executive Directors.
All employees are generally eligible to receive share options under the Company’s EMI or Unapproved share option scheme
after three months’ service. Option awards for employees are recommended by the Executive Directors and approved by the
Remuneration Committee.
Other benefits
Some benefits, such as private medical insurance, are available to all Executive Directors and certain other employees. Death in
service benefit is provided to all Executive Directors and employees.
Non-executive directors
The Non-Executive Directors have entered into letters of engagement with the Company, with the Board determining the fees
paid to the Non-Executive Directors. Non-Executive Directors do not participate in the Group’s pension or bonus schemes in their
capacity as Non-Executive Directors. The appointments can be terminated upon three months’ notice being given by either party.
On behalf of the Board,
John Sylvester
Chairman of the Remuneration Committee
22 March 2017
Venture Life Group plc Annual Report & Accounts 2016
31
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain the
Group’s transactions and disclose with reasonable accuracy at
any time the financial position of the Group and enable them
to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for
safeguarding the assets of the Group 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 the Venture Life Group plc website. Legislation in the
United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
The Directors are responsible for preparing the Strategic
Report, Directors’ Report, and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the
Directors have elected to prepare the Group financial
statements in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted by the EU and have
elected to prepare Company financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice including FRS 102 ‘The Financial Reporting
Standard applicable in the UK and Republic of Ireland’. 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 of the profit
or loss of the Group for that year. In preparing these 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 applicable International Financial Reporting
Standards have been followed with respect the Group
financial statements and whether applicable UK accounting
standards have been followed with respect the Company
financial statements; and,
> prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will
continue in business.
32
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
Opinion 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 Directors’
Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements.
> the Strategic Report and Directors’ Report has been
prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the
Companies Act 2006
In the light of the knowledge and understanding of the Group
and parent Company and its environment obtained in the
course of the audit, we have not identified any material
misstatements in the Strategic Report and Directors’ Report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if,
in our opinion:
> adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
> the parent Company financial statements are not in
agreement with the accounting records and returns; or
> certain disclosures of Directors’ remuneration specified by
law are not made; or
> we have not received all the information and explanations
we require for our audit.
Norman Armstrong
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Southampton
22 March 2017
INDEPENDENT AUDITOR’S REPORT
to the members of Venture Life Group plc
We have audited the financial statements of Venture Life
Group plc for the year ended 31 December 2016 which
comprise the Consolidated Statement of Financial Position and
Parent Company Balance Sheet, the Consolidated Statement of
Comprehensive Income, the Consolidated Statement of Cash
Flows, the Consolidated and Parent Company Statements of
Changes in Equity, and the related notes. The financial reporting
framework that has been applied in the preparation of the
Group financial statements is applicable law and International
Financial Reporting Standards (“IFRSs”) as adopted by the
European Union. The financial reporting framework that has
been applied in the preparation of the parent Company financial
statements is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting
Practice), including FRS 102 ‘The Financial Reporting Standard
applicable in the UK and Republic of Ireland’.
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Company’s members those matters
we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company and the Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditor
As explained more fully in the Statement of Directors’
Responsibilities set out on page 32, the Directors are
responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
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 2016 and of the Group’s loss for the year
then ended;
> the Group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union; the parent Company financial statements
have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice, including
FRS 102 ‘The Financial Reporting Standard applicable in the
UK and Republic of Ireland’; and
> the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Venture Life Group plc Annual Report & Accounts 2016
33
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Company number 05651130
for the year ended 31 December 2016
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating expenses
Amortisation of intangible assets
Total administrative expenses
Other income
Operating loss before exceptional items
Exceptional costs
Operating loss
Finance income
Finance costs
Loss before tax
Tax
Notes
5
6
7
10
Loss for the year
Other comprehensive income which will not be subsequently reclassified to the income statement
Other comprehensive income/(expense) which will be subsequently reclassified to the
income statement
Total comprehensive loss for the year attributable to equity holders of the parent
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
14,280
(8,789)
5,491
(4,979)
(862)
(5,841)
65
(285)
(180)
(465)
–
(644)
(1,109)
(260)
(1,369)
–
317
(1,052)
9,077
(6,073)
3,004
(3,853)
(658)
(4,511)
59
(1,448)
(246)
(1,694)
152
(95)
(1,637)
(124)
(1,761)
–
(119)
(1,880)
All of the loss and the total comprehensive income for the year is attributable to equity holders of the parent.
Loss per share
Basic and diluted loss per share (pence)
Adjusted loss per share (pence)
Year ended
31 December
2016
Year ended
31 December
2015
12
12
(3.76)
(1.28)
(5.12)
(3.06)
34
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Company number 05651130
at 31 December 2016
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Taxation
Cash and cash equivalents
Total assets
Equity and liabilities
Capital and reserves
Share capital
Share premium account
Merger reserve
Convertible bond reserve
Foreign currency translation reserve
Share-based payments reserve
Retained earnings
Total equity attributable to equity holders of the parent
Liabilities
Current liabilities
Trade and other payables
Taxation
Interest bearing borrowings
Convertible bond
Vendor loan notes
Non-current liabilities
Interest bearing borrowings
Convertible bond
Vendor loan notes
Statutory employment provision
Deferred tax liability
Total liabilities
Total equity and liabilities
At 31 December
2016
£’000
At 31 December
2015
£’000
Note
15
16
17
18
19
20
20
21
22
24
25
26
27
28
22
23
28
22
23
29
11
16,272
1,279
17,551
3,141
4,656
–
1,998
9,795
12,527
1,120
13,647
2,235
3,173
5
2,857
8,270
27,346
21,917
111
13,289
7,656
109
113
409
(7,329)
14,358
4,347
195
687
171
54
5,454
2,986
1,546
1,700
795
507
7,534
12,988
27,346
103
11,826
7,656
–
(204)
367
(5,946)
13,802
3,718
–
38
–
43
3,799
1,806
–
1,373
586
551
4,316
8,115
21,917
The financial statements on pages 34 to 65 were approved and authorised for issue by the Board on 22 March 2017 and signed
on its behalf by:
Jerry Randall
Director
Venture Life Group plc Annual Report & Accounts 2016
35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Share capital
£’000
Share
premium
account
£’000
Merger
reserve
£’000
Convertible
bond reserve
£’000
Foreign
currency
translation
reserve
£’000
Share-based
payments
reserve
£’000
Retained
earnings
£’000
Total equity
£’000
Balance at 1 January 2015
Loss for the year
Foreign exchange on
translation
Total comprehensive
expense
Share options charge
Dividends
Transactions with
shareholders
Balance at 1 January 2016
Loss for the year
Foreign exchange on
translation
Total comprehensive
expense
Issue of share capital
Share options charge
Issue of convertible bond
Dividends
Transactions with shareholders
103
–
11,826
–
7,656
–
–
–
–
–
–
–
–
–
–
–
–
–
–
103
–
–
11,826
–
–
7,656
–
–
–
8
–
–
–
8
–
–
1,463
–
–
–
1,463
–
–
–
–
–
–
–
Balance at 31 December 2016
111
13,289
7,656
–
–
–
–
–
–
–
–
–
–
–
–
–
109
–
109
109
(85)
–
(119)
(119)
–
–
–
(204)
–
317
317
–
–
–
–
–
113
318
–
(4,171)
(1,761)
15,647
(1,761)
–
–
49
–
49
367
–
–
–
–
42
–
–
42
–
(119)
(1,761)
–
(14)
(14)
(5,946)
(1,369)
(1,880)
49
(14)
35
13,802
(1,369)
–
317
(1,369)
–
–
–
(14)
(14)
(1,052)
1,471
42
109
(14)
1,608
409
(7,329)
14,358
36
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2016
Cash flow from operating activities
Loss before tax
Finance income
Finance expense
Operating loss
Adjustments for:
– Depreciation of property, plant and equipment
– Amortisation of intangible assets
– Finance cost
– Share-based payment expense
Operating cash flow before movements in working capital
Tax paid
Increase in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Net cash used in operating activities
Cash flow from investing activities:
Interest received
Acquisition of subsidiary – net cash payment
Purchases of property, plant and equipment
Expenditure in respect of intangible assets
Proceeds on disposal of tangible asset
Net cash used in investing activities
Cash flow from financing activities:
Net proceeds from issuance of ordinary shares
Net proceeds from issuance of convertible bond
Drawdown of new interest-bearing borrowings
Repayment of existing interest-bearing borrowings
Dividends paid
Net cash from financing activities
Net decrease in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
(1,109)
–
644
(465)
176
862
(212)
42
403
(251)
(263)
(251)
(95)
(457)
–
(4,258)
(185)
(355)
7
(4,791)
1,471
1,750
1,140
(41)
(14)
4,306
(942)
83
2,857
1,998
(1,637)
(152)
95
(1,694)
171
658
(80)
49
(896)
(231)
(492)
(125)
635
(1,109)
5
–
(303)
(289)
16
(571)
–
–
–
(313)
(14)
(327)
(2,007)
(69)
4,933
2,857
Venture Life Group plc Annual Report & Accounts 2016
37
NOTES TO THE CONSOLIDATED STATEMENTS
for the year ended 31 December 2016
1. General information
Venture Life Group plc (‘the Company”) was incorporated on
12 December 2005 and is domiciled in the UK, with its
registered office located at 2 Arlington Square, Downshire Way,
Bracknell RG12 1WA. The Company is the holding company for
four wholly-owned UK subsidiaries, one wholly-owned Italian
subsidiary, Biokosmes Srl, and one wholly-owned Swiss
subsidiary PermaPharm AG (together with the Company “the
Group”).
2. Basis of preparation
The principal activity of Venture Life Group plc and its
subsidiaries is the development and commercialisation of
healthcare products, including food supplements, medical
devices and dermo-cosmetics for the ageing population, and
the manufacture of a range of topical products for the
healthcare and cosmetics sectors.
The financial statements have been prepared on a going
concern basis under the historical cost convention and in
accordance with International Financial Reporting Standards
(“IFRSs”) as adopted by the EU, the International Financial
Reporting Interpretations Committee (“IFRIC”), interpretations
issued by the International Accounting Standards Boards
(“IASB”) that are effective or issued and early adopted as at
the time of preparing these financial statements, and in
accordance with the provisions of the Companies Act 2006
that are relevant to companies that report under IFRSs.
The preparation of the Group’s financial statements
requires management to exercise its judgements in the
process of applying accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial
statements, are disclosed in note 3.22.
3. Summary of significant accounting policies
The principal accounting policies adopted are set out below.
3.1. Going concern
The Directors recognise that the Group has reported a loss and
cash outflow for the year ended 31 December 2016, as it did
in the year ended 31 December 2015. The Directors have
prepared detailed financial forecasts and cash flows looking
beyond 12 months from the date of these financial
statements with the recent acquisition of Periproducts and the
growth of the Group’s Brands business expected to enable the
Group to move to profitability in the foreseeable future. In
developing these forecasts the Directors have made
assumptions based upon their view of the current and future
economic conditions that will prevail over the forecast period,
together with the current performance and prospects of the
Group’s operating segments.
On the basis of the above projections, the Directors are
confident that the Company and its Group have sufficient
working capital to honour all of its obligations to creditors as
and when they fall due. Accordingly, the Directors continue to
adopt the going concern basis in preparing the financial
statements.
3.2. Basis of consolidation
The Group financial statements consolidate those of the parent
Company and its subsidiaries as of 31 December 2016. All
subsidiaries have a reporting date of 31 December. All
transactions and balances between Group companies are
eliminated on consolidation, including unrealised gains and
losses between Group companies. Where unrealised losses on
intra-group asset sales are realised on consolidation, the
underlying asset is also tested for impairment from a Group
perspective. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of
subsidiaries acquired or disposed of during the year are
recognised from the effective date of acquisition, or up to the
effective date of disposal, as applicable.
The Group attributes total comprehensive income or loss of
subsidiaries between owners of the parent and the controlling
interest based on their respective ownership interests.
3.3. Business combinations
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method. The consideration for each
acquisition is measured at the aggregate of the fair values (at
the date of exchange) of assets given, liabilities incurred or
assumed including contingent liabilities, and equity
instruments issued by the Group in exchange for control of the
acquiree. Acquisition-related costs are recognised in profit or
loss as incurred.
Where applicable, the consideration for the acquisition
includes any asset or liability resulting from a contingent
consideration arrangement, measured at its acquisition-date
fair value. Subsequent changes in such fair values are adjusted
against the cost of acquisition where they qualify as
measurement period adjustments. All subsequent changes in
the fair value of contingent consideration classed as an asset
or liability are accounted for in accordance with relevant IFRSs.
Changes in the fair value of contingent consideration classified
as equity are not recognised.
3.4. Foreign currencies
(a) Functional and presentational currency
Items included in the financial information of each of the
Group’s entities are measured using the currency of the
primary economic environment in which the entity operates
(“the functional currency”). The consolidated financial
information is presented in UK sterling (£), which is the
38
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
3. Summary of significant accounting policies continued
Group’s presentational currency. The functional currency of
the Company is also UK sterling (£), which is the currency of
the Company’s funding arrangements and operating
expenditure.
(b) Transactions and balances
Foreign currency transactions are translated into the
functional currency using the average exchange rate of the
month. At each statement of financial position date, monetary
assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing at that date.
Foreign exchange gains and losses resulting from such
transactions are recognised in profit or loss.
Non-monetary items carried at fair value that are
denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical
cost in a foreign currency are not retranslated.
In the Group’s financial statements, all assets, liabilities and
transactions of Group entities with a functional currency other
than sterling are translated into sterling upon consolidation.
The functional currency of the entities in the Group has
remained unchanged during the period.
On consolidation, assets and liabilities have been translated
into sterling at the closing rate at the reporting date. Goodwill
and fair value adjustments arising on the acquisition of a
foreign entity are held at historic cost less accumulated
impairment losses. Income and expenses have been translated
into sterling at the average rate each month over the reporting
period. Exchange differences are charged or credited to other
comprehensive income and recognised in the currency
translation reserve in equity. On disposal of a foreign
operation, the related cumulative translation differences
recognised in equity are reclassified to profit or loss and are
recognised as part of the gain or loss on disposal.
The sterling/euro exchange rates used in the Interim
Financial Statements and the prior reporting period are as
follows:
Sterling/euro exchange rates
Average exchange rate for the
period
Exchange rate at the period end
Year ended
31 December
2016
Year ended
31 December
2015
1.234
1.167
1.376
1.357
3.5. Revenue recognition
(a) Product sales
Revenue comprises the fair value of the consideration received
or receivable for the sale of goods in the ordinary course of the
Group’s activities. Revenue is shown net of value added tax,
returns, rebates and discounts and after eliminating sales
within the Group.
Revenue from the sale of goods is recognised when the
Group has transferred to the buyer or to the buyer’s agent the
significant risks and rewards of ownership of the goods. The
transfer of risk and reward is typically at the point of customer
collection of goods or, delivery of the goods by the Group to
the customer. Both the Brands segment and Manufacturing
segment currently recognise revenue from product sales.
(b) Services rendered
Revenue represents the value of services provided to third
parties. Revenue is derived from services related to the
development of new topical formulations for customers.
Services are generally provided through specific agreements,
each with a typical duration of two to four weeks. Revenue is
shown net of value added tax, rebates and discounts and after
eliminating sales within the Group.
Revenue from these services is recognised on a percentage
to completion basis. Percentage to completion is based on the
proportion of activity completed on a project as a proportion
of the entire project. Revenue is recognised so as to reflect the
right to consideration as contract activity progresses by
reference to the value of work performed. The amount by
which revenue exceeds payments on account is included in
trade and other receivables; to the extent that payments on
account exceed relevant revenue, the excess is included as
deferred income. Provisions for estimated losses, if any, on
uncompleted contracts are recognised in the period in which
the likelihood of such losses is determined.
The Development and Manufacturing segment currently
recognises revenue from formulation and development
services rendered.
(c) Grant income
Grant income is recognised on a gross basis when received or
where there is reasonable assurance that the grant will be
received and all attached conditions will be complied with. A
grant relating to research and development is recognised as
income over the period necessary to match the grant on a
systematic basis to the costs that it is intended to
compensate.
Grant income arising from the generation of electricity by
the Development and Manufacturing segment through photo-
voltaic panels installed on the manufacturing facility roof is
recognised as ‘Other Income’.
The Development and Manufacturing segment currently
recognises revenue from Grant income.
3.6. Exceptional items
Items that are material because of their size or nature, and
which are non-recurring and whose significance is sufficient to
warrant separate disclosure and identification within the
consolidated financial statements are referred to as
exceptional items. The separate reporting of exceptional items
helps to provide an understanding of the Group’s underlying
performance.
Venture Life Group plc Annual Report & Accounts 2016
39
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
3. Summary of significant accounting policies continued
3.7. Property, plant and equipment
Equipment is stated at cost less accumulated depreciation and
any provision for impairment.
Cost includes the original purchase price of the asset and
the costs attributable to bringing the asset to its working
condition for its intended use. Depreciation is charged so as to
write off the costs of assets over their estimated useful lives,
on the following basis:
Office equipment over £500
Fixtures and fittings over £500
Manufacturing plant equipment
25%-50% per annum,
straight-line
20%-50% per annum,
straight-line
4%-50% per annum,
straight-line
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected from its use.
3.9. Licences and trademarks intangible assets
Patents, trademarks and licences are measured at purchase
cost less accumulated amortisation and provision for
impairment. Amortisation is provided on a straight-line basis
over the estimated useful lives of the assets ranging from 5-10
years.
Amortisation for the year has been charged to
administrative expenses in the Statement of Comprehensive
Income.
3.10. Acquired intangible assets
The effective life of each new class of intangible asset acquired
is determined as follows:
Customer relationships – expected cash generating life of
underlying manufacturing contracts.
Product formulations – expected cash generating life of the
particular product formulation.
The gain or loss arising on the disposal of an asset is
The following useful economic lives are applied:
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit or loss.
The assets’ residual values, useful lives and methods of
depreciation are all reviewed at each financial year end and
adjusted prospectively, if appropriate.
Depreciation for the year has been charged to administrative
expenses in the Statement of Comprehensive Income.
3.8. Internally-generated development intangible assets
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
An internally-generated development intangible asset
arising from the Group’s product development is recognised if,
and only if, the Group can demonstrate all of the following:
> the technical feasibility of completing the intangible asset
so that it will be available for use or sale;
> its intention to complete the intangible asset and use or
sell it;
> its ability to use or sell the intangible asset;
> how the intangible asset will generate probable future
economic benefits;
> the availability of adequate technical, financial and other
resources to complete the development and to use or sell
the intangible asset; and
> its ability to measure reliably, the expenditure attributable
to the intangible asset during its development.
Where no internally-generated intangible asset can be
recognised, development expenditure is recognised as an
expense in the period in which it is incurred.
Internally-generated development intangible assets are
recognised at cost less accumulated amortisation and
provisions for impairment. Amortisation is provided on a
straight-line basis over the useful lives of the assets,
commencing from the point where the final marketable
product is completed, at the following rates:
Development costs
20% per annum, straight-line
Customer relationships:
Product formulations:
Trademarks:
Patents:
5 years
5 years
5 years
10 years
3.11. Goodwill
Goodwill represents the future economic benefits arising from
a business combination that are not individually identified and
separately recognised. Goodwill is carried at cost less
accumulated impairment losses. Refer to Note 3.12 for a
description of impairment testing.
3.12. Impairment of tangible and intangible assets
At each reporting date, the Group reviews the carrying amounts
of its assets, including those acquired in Business Combinations,
to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the
asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs. An
intangible asset, such as goodwill, with an indefinite useful life is
tested for impairment at least annually and whenever there is
an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. 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 cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced
to its recoverable amount. An impairment loss is recognised as
an expense immediately.
40
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
3. Summary of significant accounting policies continued
The Directors have carried out an impairment review of the
Group’s tangible and intangible assets as at the reporting date,
as is its normal practice. They have assessed the likely cash
flows to be generated by those assets and determined that
they are stated at fair value and that consequently no
impairment is necessary. See note 15 on intangible assets for
further details.
3.13. Inventories
Inventories are stated at the lower of historical cost and net
realisable value. Costs comprise direct materials and, where
applicable, direct labour costs and those overheads that have
been incurred in bringing the inventories to their present
location and condition. Cost is calculated using the average
cost method. Net realisable value represents the estimated
selling prices less all estimated costs of completion and costs
to be incurred in marketing, selling and distribution.
3.14. Financial Instruments
Financial assets and financial liabilities are recognised in the
Group’s Statement of Financial Position when the Group
becomes party to the contractual provisions of the instrument.
Financial assets are de-recognised when the contracted rights
to the cash flows from the financial asset expire or when the
contracted rights to those assets are transferred. Financial
liabilities are de-recognised when the obligation specified in
the contract is discharged, cancelled or expired.
Financial assets
(a) Trade and other receivables
Trade and other receivables are recognised initially at fair value
and subsequently measured at amortised cost using the
effective interest method less provision for impairment.
Appropriate provisions for estimated irrecoverable amounts are
recognised in profit or loss when there is objective evidence
that the assets are impaired. The amount of the provision is the
difference between the carrying amount and the present value
of estimated future cash flows. Interest income is recognised by
applying the effective interest rate, except for short-term
receivables when the recognition of interest would be
immaterial. Trade and other receivables are classified in the
financial instruments note 31 as ‘loans and receivables’.
(b) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand
deposits held on call with banks, and other short-term highly
liquid investments with original maturities of three months or
less that are readily convertible to a known amount of cash
and are subject to an insignificant risk of changes in value.
Cash and cash equivalents are classified in the financial
instruments note 31 as ‘loans and receivables’.
Financial liabilities and equity
(a) Trade and other payables
Trade payables are initially measured at their fair value and are
subsequently measured at their amortised cost using the
effective interest rate method; this method allocates interest
expense over the relevant period by applying the ‘effective
interest rate’ to the carrying amount of the liability. Trade and
other payables are classified in the financial instruments note
31 as ‘other financial liabilities’.
(b) Vendor loan notes
The carrying value of the vendor loan notes is determined with
reference to the present value of the principal amount of the loan
note to be settled in the future, together with the present value
of the future interest payments to be made under the terms of
the loan note. The equity element of the Group’s vendor loan
notes issued in the 2014 was not considered material.
(c) Statutory employment provision
Statutory employment provision includes the liability for
severance indemnities related to employees of the Group’s
Italian subsidiary. The severance indemnity liability arises under
Italian law and is calculated with reference to each employee’s
length of service, employment category and remuneration.
There is no vesting period or funding requirement associated
with the liability. The liability recorded at the reporting date is
based on the aggregate amount that the employees of the
Group’s Italian subsidiary would be entitled to on termination
of employment for whatever reason.
(d) Convertible bond
The carrying value of the convertible bond is determined with
reference to the present value of the principal amount of the
bond to be settled in the future, together with the present
value of the future interest payments to be made under the
terms of the loan note. The equity element of the convertible
bond has been recognised within shareholders’ funds as a
convertible loan note reserve.
3.15. Leases
Operating Lease
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases (net
of any incentives received from the lessor) are charged to
profit or loss on a straight-line basis over the period of the
lease, except where another more systematic basis is more
representative of the time pattern in which economic benefits
from the lease asset are consumed.
3.16. Current and deferred tax
The tax expense represents the sum of the tax currently
payable and deferred tax.
(a) Current tax
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability
for current tax is calculated using tax rates that have been
enacted or substantively enacted by the reporting date.
Venture Life Group plc Annual Report & Accounts 2016
41
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
3. Summary of significant accounting policies continued
(b) Deferred tax
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amounts of assets and
liabilities in the financial information and the corresponding
tax bases used in the computation of taxable profit, and is
accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised
to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can
be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at
each statement of financial position date and reduced to the
extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or the asset
is realised based on tax laws and rates that have been enacted
or substantively enacted at the Statement of Financial
Position date. Deferred tax is charged or credited in the
income statement, except when it relates to items charged or
credited in other comprehensive income, in which case the
deferred tax is also dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net basis.
3.17. Employee benefits
All employee benefit costs, notably holiday pay, bonuses and
contributions to personal pension plans are charged to the
Consolidated Statement of Comprehensive Income on an
accruals basis.
3.18. Pension contributions
The Group contributes to the Group stakeholder pension
arrangement or personal pension plans of certain employees.
Contributions are charged to the Consolidated Statement of
Comprehensive Income as they become payable.
3.19. Share-based payments
The Company issues equity-settled share-based payments to
certain employees and others under which the Group receives
services as consideration for those equity instruments in the
Company. Equity-settled share-based payments are measured
at fair value at the date of grant by reference to the fair value
of the equity instruments granted. The fair value determined
at the grant date of equity-settled share-based payments is
recognised as an expense in the Group’s Statement of
Comprehensive Income over the vesting period on a straight-
line basis, based on the Group’s estimate of the number of
instruments that will eventually vest with a corresponding
adjustment to equity. The expected life used in the valuation is
adjusted, based on management’s best estimate, for the effect
of non-transferability, exercise restrictions, and behavioural
considerations.
Non-vesting and market vesting conditions are taken into
account when estimating the fair value of the awards at grant
date. Service and non-market vesting conditions are taken into
account by adjusting the number of share options expected to
vest at each reporting date.
Options over the Company’s shares granted to employees
of subsidiaries are recognised as a capital contribution by the
Company to the subsidiaries.
When the share options are exercised the Company issues
new shares. The proceeds received net of any directly
attributable transaction costs are credited to share capital
(nominal value) and share premium.
When an agreement is reached for the settlement of a fixed
liability for a fixed number of the Company’s shares (“Fixed for
Fixed”) the value of the liability is de-recognised and is
recognised in the share-based payments reserve at the date of
the agreement.
3.20. Fair value estimation of financial assets and
liabilities
The carrying value less impairment provision of trade
receivables and payables are assumed to approximate their fair
values because of the short-term nature of such assets.
3.21. Equity, reserves and dividend payments
Share capital represents the nominal (par) value of shares that
have been issued.
Share premium includes any premiums received on issue of
share capital. Any transaction costs associated with the issuing
of shares are deducted from share premium, net of any related
income tax benefits.
Other components of equity include the following reserves:
> merger reserve comprising the non-statutory premium
arising on shares issued as consideration for acquisition of
subsidiaries where merger relief under section 612 of the
Companies Act 2006 applies less subsequent realised losses
relating to those acquisitions.
> convertible bond reserve arising on the initial valuation of
the convertible bond.
> share-based payments reserve comprising cumulative
amounts charged in respect of employee share-based
payment arrangements which have not been settled by
means of an award of shares to the employee.
> foreign currency translation reserve comprising all foreign
exchange differences arising from the translation of the
financial statements of foreign operations where their
functional currency is different to the Group’s presentation
currency.
Retained earnings includes all current and prior period
retained profits and losses. All transactions with owners of the
parent are recorded separately within equity. Dividend
42
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
3. Summary of significant accounting policies continued
distributions payable to equity shareholders are included in
other liabilities when the dividends have been approved in a
general meeting prior to the reporting date.
3.22. Critical accounting estimates and judgements
The preparation of these financial statements requires
management to make judgements and estimates that affect
the reported amounts of assets and liabilities at each
Statement of Financial Position date and the reported
amounts of revenue during the reporting periods. Actual
results could differ from these estimates. Information about
such judgements and estimations are contained in individual
accounting policies. The key judgements and sources of
estimation uncertainty that could cause an adjustment to be
required to the carrying amount of asset or liabilities within
the next accounting period are outlined below:
(a) Capitalisation of internally generated development costs
Expenditure on Group product development is reviewed
throughout each of the years represented in these financial
statements to assess whether it meets the six accounting
criteria referenced in note 3.8. Where the Group can
demonstrate that the expenditure meets each of the criteria it
is capitalised, with the balance of expenditure expensed to the
income statement. Costs are amortised over five years once
the projects are recorded as complete.
(b) Recoverability of internally-generated intangible assets
In each of the years represented in these financial statements,
there is a considerable balance relating to non-current assets,
including development costs, patents and trademarks. The
Group’s accounting policy covering the potential impairment
of intangible assets is covered in note 3.12 to these financial
statements.
An impairment review of the Group’s patent and trademark
balances is undertaken at each year end. This review involves
the use of judgement to consider the future projected income
streams that will result from the ownership of the
development costs, patents and trademarks. The expected
future cash flows are modelled over the remaining useful life
of the respective assets and discounted present value in order
to test for impairment. In each of the years ended 31 December
2015 and 2016, no impairment charge was recognised as a
result of these reviews.
(c) Impairment of other non-financial assets
The Group conducts annual impairment reviews of assets, such
as goodwill, when events or changes in circumstances indicate
that their carrying amounts may not be recoverable, or in
accordance with the relevant accounting standards. An
impairment loss is recognised when the carrying amount of an
asset is higher than the greater of its net selling price or the
value in use. In determining the value in use, management
assesses the present value of the estimated future cash flows
expected to arise from the continuing use of the asset and
from its disposal at the end of its useful life. Estimates and
judgements are applied in determining these future cash flows
and the discount rate. These assumptions relate to future
events and circumstances. The actual results may vary and
may cause adjustments to the Group’s assets in future
financial years. Details of the estimates and assumptions made
in respect of the potential impairment of goodwill are detailed
in note 15 to the financial statements.
The Directors considered that no impairment was
necessary in respect of goodwill recognised in the year ended
31 December 2016.
(d) Share-based payments charge
During 2016, the Group issued share options to 67 employees.
There are certain non-market performance conditions
attached to the vesting of these options, with vesting taking
place over the three year period to 31 December 2018. The
Black-Scholes model was used to calculate the appropriate
expense.
During 2016 the Company introduced the Venture Life
Group plc Long-Term Incentive Plan as its primary senior
executive incentive arrangement to replace market value share
options. There are certain market and non-market
performance conditions attached to the vesting of these
options, with vesting taking place over the three year period to
31 December 2018. The Monte-Carlo stochastic model was
used to calculate the appropriate expense.
Both the Black-Scholes and Monte-Carlo stochastic models
used to calculate an annual charge involve the use of a
number of estimates and judgements to establish the
appropriate inputs to be entered into the model, covering
areas such as the use of an appropriate interest rate and
dividend rate, exercise restrictions, share price volatility,
comparator company performance and behavioural
considerations. A significant element of judgement is therefore
involved in the calculation of the charge.
(e) Provisions
Where intangible assets are acquired on a deferred
consideration basis, the Directors analyse the terms of each
agreement and model the expected consideration payable in
the future. This involves the use of judgements by the
Directors on expected future product revenue streams and the
timing of those revenue streams, and the use of an appropriate
discount rate.
Statutory employment provisions are calculated with
reference to each employee’s length of service, employment
category and remuneration. The Directors have to make
judgements on the expected date of employment termination
(for whatever reason) in calculating a provision to represent
the aggregate amount that the employees of the Group’s
Italian subsidiary would be entitled to on termination of
employment.
(f) Fair values on acquisition
When acquiring a business, the Directors have to make
judgements and best estimates about the fair value of the
assets, liabilities and contingent liabilities acquired. These are
estimated regardless of whether or not they were recognised
Venture Life Group plc Annual Report & Accounts 2016
43
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
3. Summary of significant accounting policies continued
in the financial statements of the subsidiary prior to
acquisition. The valuation of externally acquired assets such as
products, data or technologies requires judgements regarding
the estimated future cash outflows required to commercialise
the asset(s) and the cash inflows expected to arise from such
commercialisation, discounted at a suitable rate reflecting the
time value of money and the risks inherent in such activities.
The valuation of other acquired intangible assets such as
customer relationships and product formulations also requires
judgements regarding estimated future cash flows arising from
those established assets, discounted to reflect the time value
of money.
3.23. Segmental reporting
Operating segments are reported in a manner consistent with
the internal reporting provided to the Chief Operating
Decision Maker (“CODM”). The CODM, who is responsible for
allocating resources and assessing performance of the
operating segments, has been identified as the Group
Directors.
4. Accounting developments
a) New standards, amendments and interpretations issued and adopted
No amendments to these financial statements have been made as a result of adopting new and revised standards and
interpretations.
b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January
2016 and not early adopted
At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards have
been published by the IASB that are not yet effective, and have not been adopted early by the Group. Information on those
expected to be relevant to the Group’s financial statements is provided below.
Management anticipates that all relevant pronouncements will be adopted in the Group’s accounting policies for the first
period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not either
adopted or listed below are not expected to have a material impact on the Group’s financial statements.
IFRS 9, Financial Instruments
The IASB released IFRS 9 ‘Financial Instruments’, representing the completion of its project
to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’. The new standard
introduces extensive changes to IAS 39’s guidance on the classification and measurement of
financial assets and introduces a new ‘expected credit loss’ model for the impairment of
financial assets. IFRS 9 also provides new guidance on the application of hedge accounting.
The Group’s management has yet to assess the impact of IFRS 9 on these consolidated
financial statements. The new standard is required to be applied for annual reporting periods
beginning on or after 1 January 2018.
IFRS 15, Revenue from Contracts
with Customers
IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18
‘Revenue’, IAS 11 ‘Construction Contracts’, and several revenue-related Interpretations.
IFRS 16, Leases
The new standard establishes a control-based revenue recognition model and provides
additional guidance in many areas not covered in detail under existing IFRSs, including how
to account for arrangements with multiple performance obligations, variable pricing,
customer refund rights, supplier repurchase options, and other common complexities.
IFRS 15 is effective for reporting periods beginning on or after 1 January 2018. The
Group’s management has not yet assessed the impact of IFRS 15 on these consolidated
financial statements.
IFRS 16 has recently been published by the IASB which covers accounting for leases. The new
standard will require leases to be account for ‘on-balance sheet’ by recognising the ‘right or
use’ asset and lease liability. The standard will have a greater impact for the accounts of
lessees of property and high value properties, with all leases being accounted for on balance
sheet, other than short-term or low value leases.
IFRS 16 is effective for accounting periods beginning on or after 1 January 2019. We
acknowledge that IFRS 16 will have an impact on the assets and liabilities presented,
however the Group’s management has not yet quantified the impact of this.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on
the Group.
The impact of the above interpretations have not been quantified for the periods to which they will apply.
44
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
5. Segmental Information
IFRS 8, Operating Segments requires operating segments to be identified on the basis of internal reports about components of
the Group that are regularly reviewed by the CODM to allocate resources to the segments and to assess their performance.
Management has determined the operating segments based on the reports reviewed by the Group Board of Directors (Chief
Operating Decision Maker) that are used to make strategic decisions. The Board considers the business from a line-of-service
perspective and uses operating profit/(loss) as its profit measure. The operating profit/(loss) of operating segments is prepared on
the same basis as the Group’s accounting operating profit.
In the 2015 Consolidated Financial Statements, the operations of the Group were segmented as Brands, which includes sales
of healthcare and skin care products under distribution agreements and direct to UK retailers, and Manufacturing. In the 2016
Consolidated Financial Statements, the Manufacturing segment has been renamed as Development and Manufacturing to reflect
more accurately the nature of operations at the Group’s facility in Italy (Biokosmes). The Periproducts business which was
acquired during the period is included within the Brands reporting segment.
In summary, the operations of the Group are segmented as:
> Brands, which includes sales of branded healthcare and cosmetics products direct to retailers and under distribution
agreement, and
> Development and Manufacturing, which includes sales of products and services under contract development and manufacturing
agreements.
5.1 Segment revenue and results
The following is an analysis of the Group’s revenue and results by reportable segment.
Year ended 31 December 2016
Revenue
Sale of goods
Sale of services
Intercompany sales elimination
Total external revenue
Results
Operating (loss)/profit before exceptional items and excluding central
administrative costs
Year ended 31 December 2015
Revenue
Sale of goods
Sale of services
Intercompany sales elimination
Total external revenue
Results
Operating (loss)/profit before exceptional items and excluding central
administrative costs
Brands
£’000
Development and
Manufacturing
£’000
Consolidated
Group
£’000
3,764
–
–
3,764
11,099
243
(826)
10,516
14,863
243
(826)
14,280
(139)
1,665
1,526
1,067
–
–
1,067
8,371
242
(603)
8,010
9,438
242
(603)
9,077
(826)
1,090
264
Venture Life Group plc Annual Report & Accounts 2016
45
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
5. Segmental Information continued
5.1 Segment revenue and results continued
The reconciliation of segmental operating loss to the Group's loss before tax is as follows:
Operating profit before exceptional items and excluding central administrative costs
Exceptional items
Central administrative costs
Finance income
Finance costs
Loss before tax
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
1,526
(180)
(1,811)
–
(644)
(1,109)
264
(246)
(1,712)
152
(95)
(1,637)
One customer generated revenue of £3,388,000 which accounted for 10% or more of total revenue (2015: one customer
generated revenue of £2,854,000 which accounted for 10% or more of total revenue).
5.2 Segmental assets and liabilities
Assets
Brands
Development and Manufacturing
Group consolidated assets
Consolidated total assets
Liabilities
Brands
Development and Manufacturing
Group consolidated liabilities
Consolidated total liabilities
5.3 Other segmental information
Year ended 31 December 2016
Brands
Development and Manufacturing
Central administration
Year ended 31 December 2015
Brands
Development and Manufacturing
Central administration
At 31 December
2016
£’000
At 31 December
2015
£’000
2,431
9,820
15,095
27,346
1,059
7,336
4,593
12,988
2,743
7,276
11,898
21,917
321
5,268
2,526
8,115
Depreciation
and amortisation
£’000
Additions to
non-current
assets
£’000
79
258
701
1,038
72
189
568
829
81
463
4,189
4,733
24
639
–
663
46
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
5. Segmental Information continued
5.4 Geographical information
The Group’s revenue from external customers by geographical location of customer is detailed below:
Revenue
UK
Europe
Rest of the World
Total revenue
6. Exceptional items
Costs incurred in the acquisition of Periproducts
Total exceptional items
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
4,762
8,574
944
14,280
1,970
6,270
837
9,077
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
(180)
(180)
(246)
(246)
During the period the Group incurred legal and professional fees in relation to the Periproducts acquisition, as well as certain
restructuring costs.
7. Operating loss
Operating loss for the year has been arrived at after charging:
Depreciation of property, plant and equipment included in operating expenses
Amortisation of intangible assets included in administrative expenses
Research and development costs included in operating expenses
Operating lease rentals
Share-based payments charge
Staff costs (note 8)
Auditor’s remuneration
– Fees for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and its associated for other services:
– Audit of the accounts of the Company’s subsidiaries
– Tax compliance services
– Tax advisory services
– Other assurance services
– Corporate finance services
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
176
862
426
493
42
4,262
20
44
12
–
4
5
171
658
326
473
49
3,555
20
24
10
10
6
14
Venture Life Group plc Annual Report & Accounts 2016
47
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
8. Employee information
The average numbers of staff, including Executive Directors, employed by the Group during the year are as shown below:
Product development and manufacturing
Sales and marketing
Directors
Administration
Their aggregate remuneration comprises:
Wages and salaries
Social security costs
Other pension costs
Other
Equity settled share-based payments
Year ended
31 December
2016
Number
Year ended
31 December
2015
Number
55
13
7
15
90
51
11
7
13
82
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
3,443
632
282
28
42
4,427
2,630
514
239
22
49
3,454
9. Pension costs and other post-retirement benefits
The Group operates a stakeholder pension scheme to which it makes contributions. As an alternative, the Group also makes
contributions into the personal pension schemes of certain employees. The pension charge represents contributions payable by
the Group and amounted to £282,000 (2015: £239,000). At year end an amount of £1,194 (2015: £nil) was payable in respect of
pension contributions charged during the year.
48
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
10. Income tax expense
Current tax:
Current tax on profits for the year
Adjustments in respect of earlier years
Total current tax expense
Deferred tax:
Origination and reversal of temporary differences
Total deferred tax expense
Total income tax expense
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
455
(21)
434
(174)
(174)
260
266
11
277
(153)
(153)
124
Tax on the Group’s loss before tax differs from the theoretical amount that would arise using the weighted average tax rate
applicable to profits and losses of the consolidated entities as follows:
Loss before tax
Loss before taxation multiplied by the local tax rate of 20% (2015: 20.25%)
Expenses not deductible for tax purposes
Research and development tax credit from earlier years
Research and development tax credit for current year
Change in recognised deferred tax liability
Change in unrecognised deferred tax asset
Higher rate on foreign taxes
Income tax charge
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
(1,109)
(222)
248
–
(21)
(174)
342
87
260
(1,637)
(331)
155
11
–
(153)
359
83
124
There are no enacted or substantively enacted changes to the small profits tax rate.
As at the reporting date, the Group has unused tax losses of £7,195,000 (2015: £5,328,000) available for offset against future
profits generated in the UK. No deferred tax asset has been recognised in respect of these losses due to the uncertainty of its
recoverability.
11. Deferred tax
Deferred taxes arising from temporary differences are summarised as follows:
Deferred tax liabilities/(assets)
Purchased goodwill
Other intangibles
Inventories
Trade and other receivables
Deferred tax liability
At 1 January
2016
£’000
Generated
on acquisition
of Periproducts
Limited
£’000
Recognised in
profit and loss
£’000
Movements
attributed to
foreign exchange
£’000
At 31 December
2016
£’000
87
(580)
(68)
10
(551)
–
(141)
–
–
(141)
(9)
175
17
(9)
174
13
–
(2)
–
11
91
(546)
(53)
1
(507)
Venture Life Group plc Annual Report & Accounts 2016
49
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
12. Earnings per share
A reconciliation of the weighted average number of ordinary shares used in the measures is given below:
For basic and diluted EPS calculation
A reconciliation of the earnings used in the different measures is given below:
For basic and diluted EPS calculation
For adjusted EPS calculation*
* Adjusted EPS is loss after tax excluding amortisation and share-based payments.
The resulting EPS measures are:
Basic and diluted EPS calculation
Adjusted EPS calculation
Year ended
31 December
2016
Number
Year ended
31 December
2015
Number
36,409,340
34,403,534
£’000
£’000
(1,369)
(1,761)
(465)
(1,054)
Pence
Pence
(3.76)
(1.28)
(5.12)
(3.06)
The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the
diluted loss per ordinary share are identical to those used for basic loss per share. This is because the exercise of share options
and conversion of the vendor loan notes would have the effect of reducing the loss per ordinary share and is therefore not
dilutive under the terms of IAS 33.
13. Dividends
Amounts recognised as distributions to equity holders in the period:
Final dividend
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
14
14
The Directors recommend the payment of a dividend of 0.04p per share (2016: 0.04p per share) in 2017 and a resolution will be
put to shareholders at the 2017 Annual General Meeting.
50
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
14. Business combinations
On 4 March 2016 the Company completed the acquisition of 100% of the share capital of Periproducts, a UK-based oral
healthcare products company. The acquisition consideration paid was £5.8 million, comprising £4 million plus the value at the
date of completion of current net assets of Periproducts of some £1.8 million. The acquisition was funded through the Company’s
own resources and by way of a Placing of new ordinary shares raising £1.7 million (gross) and the issue of a 3 year 9%
Convertible Bond raising £1.9 million.
The Group acquired Periproducts because it expands its existing product portfolio into an attractive area of the consumer
healthcare market. The Group also expects to generate a number of synergies from the acquisition to improve the profitability of
the acquired entity and the Group as a whole. The acquisition has been accounted for using the acquisition method. The
Consolidated Financial Statements include the results of Periproducts for the period from 4 March 2016 to 31 December 2016.
The fair values of the identifiable assets and liabilities of Periproducts as at the date of acquisition were:
Assets
Non-current assets:
Customer relationships*
Patents and trademarks*
Current assets:
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities:
Trade and other payables
Non-current liabilities:
Deferred tax liabilities†
Total liabilities
Net assets acquired
Goodwill
Total consideration
Satisfied by:
Cash paid on completion
Deferred consideration in the form of a loan from the vendors
Cash payment due on finalisation of completion accounts
Total consideration
Cash flows from business combination during the period
Cash and cash equivalents included in undertaking acquired
Cash paid on completion
Net cash outflow arising on acquisition and in cash flow statement
* Intangible assets identified as part of the Periproducts acquisition. See note 3.10 for further details.
† Deferred tax liability identified as part of the Periproducts acquisition.
Unless otherwise stated the book value of the assets and liabilities of Periproducts are the same as their fair value.
Fair value
£m
0.6
0.3
0.3
0.8
0.9
2.9
(0.3)
(0.1)
(0.4)
2.5
3.3
5.8
5.2
0.4
0.2
5.8
0.9
(5.2)
(4.3)
Revenue and profit impact of the acquisition
Periproducts contributed revenues of £2.3 million and operating profit before exceptional expenses and management charges of
£0.6 million in the period from 4 March 2016 (the date of acquisition) to 31 December 2016.
If the acquisition had taken place on 1 January 2016, the first day of the reporting period under review, total Group revenue
and operational profit before exceptional items and management charges for the period would have been £2.9 million and
£0.7 million respectively.
Venture Life Group plc Annual Report & Accounts 2016
51
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
15. Intangible assets
Cost or valuation:
At 1 January 2015
Additions
Disposals
Foreign exchange
At 1 January 2016
Additions
Disposals
Foreign exchange
At 31 December 2016
Amortisation:
At 1 January 2015
Charge for the year
Disposals
Foreign exchange
At 1 January 2016
Charge for the year
Disposals
Foreign exchange
At 31 December 2016
Carrying amount:
At 31 December 2015
At 31 December 2016
Development
costs
£’000
Patents and
trademarks
£’000
Goodwill
£’000
Other intangible
assets
£’000
9,796
–
–
–
9,796
3,337
–
–
13,133
–
–
–
–
–
–
–
–
–
1,995
–
–
–
1,995
546
–
–
2,541
299
399
–
–
698
490
–
–
1,188
Total
£’000
13,657
289
(120)
(41)
13,785
4,538
(80)
139
18,382
675
658
(45)
(30)
1,258
862
(48)
38
2,110
9,796
1,297
12,527
13,133
1,353
16,272
1,322
267
(10)
(41)
1,538
231
(34)
139
1,874
141
194
–
(30)
305
248
–
38
591
1,233
1,283
544
22
(110)
–
456
424
(46)
–
834
235
65
(45)
–
255
124
(48)
–
331
201
503
All trademarks, licences and patents are amortised over their estimated useful lives, which is between five and ten years.
All amortisation has been charged to administrative expenses in the Statement of Comprehensive Income.
Other intangible assets currently comprise customer relationships and product formulations acquired through the acquisition
of Biokosmes Srl. These assets were recognised at their fair value at the date of acquisition and are being amortised over a period
of five years. Also included in the intangible assets balance are patents and trademarks and customer relationships acquired
through the acquisition of Periproducts.
Goodwill represents the future economic benefits arising from the acquisitions of Biokosmes and Periproducts that are not
individually identified and separately recognised. To determine the value in use of the goodwill, the Directors have produced
detailed monthly profit and loss and cash flow forecasts for the three years ended December 2019 and produced annual
estimates of profit after tax for the seven year period from 1 January 2020 to 31 December 2026 given the long-term and stable
nature of the expected cash flows.
The key judgements used in relation to the Biokosmes (Development and Manufacturing CGU) impairment review are as follows:
> The estimates of profit after tax for Biokosmes for the three year period from 1 January 2017 to 31 December 2019 are based
on the expectation that Biokosmes will grow its revenues and profitability more quickly than in previous years in the three
year period to 31 December 2019 and at 5% for the final years. The above average growth is expected to be achieved in part
through increasing volumes and value of manufacturing orders being fulfilled for other Group companies, in part through
excess manufacturing capacity being utilised to generate improved gross margins, and in part through investment in new
business development resource and manufacturing capacity enabled through funding made available by the Group to
Biokosmes. This growth assumption is a key driver of the impairment review. In undertaking the impairment review at
31 December 2016, sensitivity analysis was carried out on the assumptions underpinning the growth forecasts and if growth
of the profit after tax for Biokosmes between 1 January 2017 and 31 December 2019 was reduced from 67% to 45%, this
would result in there being no difference between the discounted value of profit before tax cash flows and intangibles asset
value held on the balance sheet.
> The estimates of profit after tax from 1 January 2020 onwards assume that Biokosmes is capable of achieving 5% per annum
growth in profit after tax, which the Directors estimate to be a conservative growth rate but appropriate given the nature of
the contract manufacturing industry in which of which Biokosmes operates.
52
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
15. Intangible assets continued
> The Group has applied a discount rate to the future cash flows of Biokosmes using a pre-tax weighted average cost of capital
of 15%. This assumption is a key driver of the impairment review. In undertaking the impairment review at 31 December
2016, sensitivity analysis was carried out on assumptions underpinning the pre-tax weighted average cost of capital and if the
discount rate is increased from 15% to 19%, there would be no difference between the discounted value of profit before tax
cash flows and intangibles asset value held on the balance sheet.
The impairment review of the Periproducts (part of the Brands CGU) intangible assets completed by management yielded
significant headroom and as such the key assumptions are not covered in detail here.
These estimates and judgments are subjective and relate to future events and circumstances. The actual results may vary, and
accordingly may cause adjustments to the Group’s valuation in future financial years.
16. Property, plant and equipment
Plant and
equipment
£’000
Other
equipment
£’000
Cost or valuation:
At 1 January 2015
Additions
Disposals
Foreign exchange movements
At 1 January 2016
Additions
Disposals
Foreign exchange movements
At 31 December 2016
Depreciation:
At 1 January 2015
Charge for the year
Foreign exchange movements
At 1 January 2016
Charge for the year
Disposals
Foreign exchange movements
At 31 December 2016
Carrying amount:
At 31 December 2015
At 31 December 2016
1,038
374
(6)
(45)
1,361
185
(21)
204
1,729
113
136
3
252
164
(5)
39
450
1,109
1,279
79
–
–
(4)
75
–
–
11
86
29
35
–
64
12
–
10
86
11
–
All depreciation has been charged to administrative expenses in the Statement of Comprehensive Income.
Total
£’000
1,117
374
(6)
(49)
1,436
185
(21)
215
1,815
142
171
3
316
176
(5)
49
536
1,120
1,279
Venture Life Group plc Annual Report & Accounts 2016
53
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
17. Inventories
Raw materials
Finished goods
At 31 December
2016
£’000
At 31 December
2015
£’000
2,051
1,090
3,141
1,538
697
2,235
An amount of £5,695,000 (2015: £3,685,404) was recognised in respect of expenditure on inventory in the Statement of
Comprehensive Income.
18. Trade and other receivables
Trade receivables
Prepayments and accrued income
Other taxation recoverable
Other receivables
At 31 December
2016
£’000
At 31 December
2015
£’000
4,264
92
25
275
4,656
2,534
250
97
292
3,173
Contractual payment terms with the Group’s customers are typically 60-90 days.
The following is an analysis of trade receivables that are past due, but not impaired. These relate to a number of customers for
whom there is no recent history of defaults. The ageing analysis of these trade receivables is as follows:
31 to 60 days past due
60 to 90 days past due
90 to 120 days past due
> 120 days past due
Overdue trade receivables gross
Provision for overdue receivables
Trade receivables – net
At 31 December
2016
£’000
At 31 December
2015
£’000
70
4
4
72
150
(7)
143
4
7
19
161
191
(39)
152
The Directors consider that the carrying value of trade and other receivables represents their fair value. As at the reporting date, a
provision of £7,000 for overdue receivables has been made and is included in the carrying value of trade and other receivables
(2015: £39,000). In determining the recoverability of trade receivables the Group considers any change in the credit quality of the
receivable from the date credit was granted up to the reporting date. For details on the Group’s credit risk management policies,
refer to note 31(d). No allowance has been made against the overdue receivables based on historic default experience. The Group
does not hold any collateral as security for its trade and other receivables. The amounts of trade and other receivables
denominated in currencies other than pounds sterling are shown in note 31(c).
54
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
19. Cash and cash equivalents
Cash and cash equivalents
At 31 December
2016
£’000
At 31 December
2015
£’000
1,998
2,857
The Group holds sterling, Chinese renminbi and euro denominated balances in the UK. The Group’s subsidiaries hold US dollar,
yen and euro accounts in Italy and a Swiss franc account in Switzerland.
The Directors consider that the carrying value of cash and cash equivalents approximates their fair value. For details on the
Group’s credit risk management policies, refer to note 31(d).
The amounts of cash and cash equivalents denominated in currencies other than pounds sterling are shown in note 31(c).
20. Share capital and share premium
Share capital
All shares are authorised, issued and fully paid. The Group has one class of ordinary shares which carry no fixed income.
At 1 January 2016
New shares issued for cash
New shares issued to settle a liability
At 31 December 2016
Ordinary shares of
0.3p each
Number
Share premium
£’000
Merger reserve
£’000
£
34,403,534
2,428,572
5,000
103,210
7,286
15
36,837,106
110,511
11,826
1,463
–
13,289
7,656
–
–
7,656
The Company issued shares for cash in March 2016 as part of the financing for the Periproducts acquisition and shares to settle a
liability in September 2016 in connection with revenues generated form the contract with Gialen Group Co. Ltd in China.
The Group operates a Long-Term Incentive Plan. Up to the balance sheet date, there have been two awards under this plan, in
which Executive Directors and senior management of the Group participate. Further details are included in the Directors’
Remuneration Report set out on pages 28 to 31.
21. Merger reserve
In 2010 the Company acquired 100% of the issued share capital of Venture Life Limited from shareholders of the company. This
combination gave rise to a merger reserve in the consolidated statement of financial position, being the difference between the
nominal value of new shares issued by the Company for the acquisition of the shares of the subsidiary and the subsidiary’s own
share capital and share premium account.
The merger reserve is also used where more than 90% of the shares in a subsidiary are acquired and the consideration
includes the issue of new shares by the Company, thereby attracting merger relief under the Companies Act 2006. The balance on
the reserve of £7,656,000 (2015: £7,656,000) has arisen through the acquisition of Venture Life Limited in 2010 (£50,000), and
Biokosmes in March 2014 (£7,606,000).
Venture Life Group plc Annual Report & Accounts 2016
55
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
22. Convertible bond
During the period a convertible bond with a principal value of £1.9 million was issued as part of the funding for the Periproducts
acquisition. The bond carries a 9% coupon with interest payable quarterly over a three year term with full repayment of the
convertible bond due on 3 March 2019. Bondholders have the right to convert their bonds to shares in the Group at a conversion
price of 87.5p per Venture Life share (87.5p representing a 25% premium to the 70 pence placing price of the new equity at the
time of the acquisition) which can be exercised at any point before 3 March 2019.
Under IAS 32, this convertible bond is accounted for as a compound financial instrument. The fair value of the convertible
bond is determined using a discounted cash flow method. The difference between the £1.9 million principal value of the bond and
the present value of the future fixed interest payments and capital repayment is recorded in equity as a convertible bond reserve,
representing the value of the convertible element of the bond.
Bond issue fees incurred have been allocated between liabilities and equity as a proportion of the value of each element. The
fees held against the liability element are released to the Income Statement over the three year life of the bond.
The value of the liability and associated costs are held on the balance sheet at amortised cost. The initial amortised cost
valuation gave a carrying value, net of fees, of £1.6 million which was recorded as a liability at 4 March 2016. This will increase to
its principal value of £1.9 million over the life of the bond to 3 March 2019, with interest costs being taken to the Income
Statement on a monthly basis. The resulting equity value is £0.1 million which is recorded as a convertible bond reserve.
23. Vendor loan notes
Vendor loan notes totalling €2 million which pay an annual coupon of 3% were issued by the Group in March 2014 in
connection with the acquisition of Biokosmes. Interest amounting to £12,000 accrued during the period is still payable on these
vendor loan notes at the period end. Interest is payable on these vendor loan notes in October and April. The agreements covering
these vendor loan notes were amended following the balance sheet date such that the latest repayment date of the loan notes
was extended from July 2016 to July 2020 and the annual coupon increase to 4% effective 1 August 2017.
24. Foreign currency translation reserve
The Foreign currency reserve represents unrealised cumulative net gains and losses arising on the translation and consolidation of
the Group’s Italian subsidiary.
56
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
25. Share-based payments and share-based payments reserve
25.1 Share options
Share options are held by option holders in either the Venture Life Group plc Enterprise Management Incentive Share Option Plan
(“EMI Plan”) or under the Venture Life Group plc Unapproved Share Option Plan (“Unapproved Plan”). All options in both plans are
settled in equity when the options are exercised.
Options under both Plans vest according to time employed at Venture Life. Additionally some options granted under the EMI
Plan vest according to achievement of certain non-market performance targets.
The maximum term of options granted under both Plans is ten years.
The IFRS 2 share option charge for the year was £42,000 (2015: £49,000) and is included in administrative expenditure in the
Statement of Comprehensive Income.
The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and movements in, share options
during the year.
Total outstanding at beginning of the year
Granted during the year
Exercised
Forfeited
Total outstanding at 31 December
Exercisable at 31 December
2016
Number
2016
WAEP (p)
2015
Number
2015
WAEP (p)
3,653,770
455,660
–
(228,760)
3,880,670
3,367,440
54
56
––
80
53
51
3,629,412
244,541
–
(220,183)
3,653,770
2,753,762
53
109
109
54
49
The following table summarises information about the range of exercise prices for share options outstanding at 31 December:
Range of exercise prices
0p-49p
50p-99p
100p-149p
Total
2016
Number
2015
Number
2,827,440
956,900
96,330
2,852,440
660,000
141,330
3,880,670
3,653,770
At 31 December 2016, the weighted average remaining contractual life of options exercisable is 6.31 years (2015: 7.61 years).
The weighted average fair value of options granted in the year is 56p (2015: 109p).
The non-market performance conditions for all share options outstanding at 31 December 2016 and which are exercisable at
31 December 2016 or before have been achieved.
The share-based payment charge has been calculated using the Black-Scholes model to calculate the fair value of the share
options that vest according to non-market performance conditions. An appropriate valuation model has been used to calculate
the fair value of share options with market performance-related vesting. Disclosure of those valuation assumptions is not made
on the basis that the related charge is immaterial.
The inputs into the Black-Scholes model are as follows:
Weighted average share price (p)
Weighted average exercise price (p)
Weighted average expected volatility (%)
Weighted average expected life (years)
Weighted average risk free rate (%)
Expected dividends (%)
2016
2015
59.3
59.6
18.5
4
1.19
0.004
87.5
109
17.5
4
1.19
0.004
a. The risk-free rate is based on the UK Gilt rate as at the grant date with a period to maturity commensurate with the expected
term of the relevant option tranche.
b. The fair value charge is spread evenly over the period between the grant of the option and the earliest exercise date.
c. The expected volatility is based on the historical volatility of similar companies share prices over the previous three years. The
expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations. The range of comparable companies has been reviewed for grants in the
current year resulting in the decrease in expected volatility.
Venture Life Group plc Annual Report & Accounts 2016
57
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
25. Share-based payments and share-based payments reserve continued
25.2 Long-Term Incentive Plan
The Group operates a Long-Term Incentive Plan. Up to the balance sheet date, there have been two awards under this plan, in
which Executive Directors and senior management of the Group participate.
Awards under the Plan are granted in the form of nominal cost share options, and are to be satisfied either using market-
purchased shares or by the issuing of new shares. The awards vest in full or in part dependent on the satisfaction of specified
performance targets at the end of the vesting period applying to each plan. The number of awards that vest is dependent upon
either the Earnings Per Share (“EPS”) achieved for the relevant year and the Group’s Total Shareholder Return (“TSR”) during the
vesting period within a comparator group. Details are set out below:
Grant date of awards
Grant date fair value of award (pence per award)
Vesting date of awards
Maximum number of awards
Vesting conditions based on
Relevant date for determination of vesting conditions
Award One
Award Two
28 September 2016
54.5
25 March 2018
492,954
EPS and TSR
31 December 2017
for EPS and
25 March 2018 for TSR
28 September 2016
54.5
28 September 2019
831,209
EPS and TSR
31 December 2018
for EPS and
28 September 2019 for TSR
Further details of vesting conditions are set out in the Directors’ Remuneration Report on pages 28 to 31. The fair value at grant
date of Award One was estimated based on the share price of the Group at grant date. Award Two includes vesting conditions
that are market based, and allowance for these are included within the fair value at grant date. The weighted average fair value of
options granted during the period determined using the Monte-Carlo valuation model was £0.53 per option. The significant
inputs into the model were:
> weighted average share price of £0.55 at the grant date.
> exercise price shown above.
> dividend yield assumed nil for the basis of the calculation.
> options are assumed to be exercised at point of vesting.
> an annual risk-free interest rate of 0.021%.
The volatility measured at the standard deviation of continuously compounded share returns is based on statistical analysis of
daily share prices over the last three years. See note 7 for the total expense recognised in the income statement for share options
granted to Directors and employees.
Movements in the number of awards outstanding, assuming maximum achievement of vesting conditions, are as follows:
At 1 January
Granted
Forfeited
At 31 December
2016
Number
2015
Number
–
1,641,247
(317,084)
1,324,163
–
–
–
–
The 317,084 nominal cost share options granted to James Hunter on 28 September 2016 were forfeited by James Hunter on his
resignation from the Group in 2016.
Please refer to note 7 for disclosure of the charge to the Consolidated Income Statement arising from share-based payments.
The share-based payment reserve represents charges made to the Income Statement in respect of share-based payments
under the Group’s share option schemes.
58
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
26. Retained earnings
Retained earnings represents all other net gains and losses and transactions with owners (e.g. dividends) not recognised
elsewhere.
27. Trade and other payables
Trade payables
Accruals and deferred income
Social security and other taxes
Other payables
At 31 December
2016
£’000
At 31 December
2015
£’000
2,528
1,360
90
369
4,347
2,030
1,288
105
295
3,718
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. They are non-interest bearing
and are normally settled on 60-day terms.
The Directors consider that the carrying value of trade and other payables approximates their fair value.
The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe and
no interest has been charged by any suppliers as a result of late payment of invoices during the year.
The amounts of trade and other payables denominated in currencies other than pounds sterling are shown in note 31(c).
28. Interest bearing borrowings
Current
RiBa financing
Finance lease
Unsecured bank loans due within one year
Non-current
Deferred consideration
Unsecured bank loans due after one year
At 31 December
2016
£’000
At 31 December
2015
£’000
629
–
58
687
416
2,570
2,986
–
1
37
38
–
1,806
1,806
All bank loans are held by the Group’s Italian wholly-owned subsidiary, Biokosmes. During the year, an existing bank loan held
with Banca Intesa for €1.4 million, due to expire in November 2020, was extended. The loan principal value was increased to
€2.0 million and the expiry date extended to November 2024. RiBa (or “Ricevuta Bancaria”) is a means of payment settlement
used on occasions by Biokosmes by which it entrusts one of its banks with responsibility for sending an instruction to a
participating Italian customer authorising the customer’s bank to settle an invoiced debt by an agreed due date. The balance
shown above of £629,000 (2015: £nil) reflects the amount that had been settled in Biokosmes’s account under RiBa as at the
reporting date.
Deferred consideration reflects the fair value of a loan held by the Company with the vendors of Periproducts. The loan
principal of £400,000 is repayable in March 2019 and has an annual interest charge of 10% from September 2017.
Venture Life Group plc Annual Report & Accounts 2016
59
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
28. Interest bearing borrowings continued
A summary showing the contractual repayment of interest bearing borrowings is shown below:
Amounts and timing of non-current debt repayable
Between 1 January 2017 and 31 December 2017
Between 1 January 2018 and 31 December 2018
Between 1 January 2019 and 31 December 2019
Between 1 January 2020 and 31 December 2020
Between 1 January 2021 and 31 December 2024
Analysis of net debt
Cash at bank and in hand
Balance on RiBa (invoice discounting with recourse)
Finance lease
Unsecured bank loans due within one year
Unsecured bank loans due after one year
Convertible bond
Vendor loan notes
Net debt
At 31 December
2016
£’000
At 31 December
2015
£’000
–
742
473
400
1,371
2,986
196
934
344
332
–
1,806
At 31 December
2016
£’000
At 31 December
2015
£’000
1,998
(629)
–
(58)
(2,986)
(1,717)
(1,754)
(5,146)
2,857
–
(1)
(37)
(1,806)
–
(1,416)
(403)
29. Statutory employment provision
The statutory employment provision includes the liability for severance indemnities related to employees of the Group’s Italian
subsidiary. The severance indemnity liability arises under Italian law and is calculated with reference to each employee’s length of
service, employment category and remuneration. There is no vesting period or funding requirement associated with the liability.
The liability recorded at the reporting date is based on the aggregate amount that the employees of the Group’s Italian
subsidiary would be entitled to on termination of employment for whatever reason.
30. Operating lease arrangements
At the reporting date, the Group had outstanding commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
Within one year
After one year and within five years
At 31 December
2016
£’000
At 31 December
2015
£’000
506
876
1,382
441
1,146
1,587
The operating lease payments are in respect of:
> The Group’s UK head office in Bracknell which is renewable on an annual basis in November each year and does not have any
contingent lease payments or restriction
> The company car provided to the Group’s Chief Executive Officer. This lease has a three year term whereupon the leased asset
is required to be returned to the lessor.
> The Group Italian’s subsidiary has one operating location and storage location in Lecco, near to Milan. The operating location
has a long-term rental agreement until November 2019. Rental obligations on the storage location continue until September
2020.
60
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
31. Financial instruments
The Group is exposed to the risks that arise from its use of financial instruments. This note describes the objectives, policies and
processes of the Group for managing those risks and the methods used to measure them.
a. Principal financial instruments
The principal financial instruments used by the Group from which financial instrument risk arises are as follows:
> Trade and other receivables (excluding prepayments).
> Cash and cash equivalents.
> Trade and other payables (excluding accruals and deferred revenue).
> Convertible bond.
> Vendor loan notes.
> Interest bearing debt.
> RiBa.
Set out below are details of financial instruments held by the Group as at:
Financial assets:
Trade and other receivables (a)
Cash and cash equivalents
Total
Financial liabilities:
Trade and other payables (b)
Convertible bond
Vendor loan note
Interest bearing debt
Total
31 December 2016
Loans and
receivables
£’000
Total financial
assets
£’000
31 December 2015
Loans and
receivables
£’000
Total financial
assets
£’000
4,564
1,998
6,562
4,564
1,998
6,562
3,030
2,857
5,887
3,030
2,857
5,887
31 December 2016
31 December 2015
Liabilities
(amortised cost)
£’000
Total financial
liabilities
£’000
Liabilities
(amortised cost)
£’000
Total financial
liabilities
£’000
2,987
1,717
1,754
3,673
2,987
1,717
1,754
3,672
10,131
10,131
2,430
-
1,416
1,844
5,690
2,430
-
1,416
1,844
5,690
(a) Trade and other receivables excludes prepayments.
(b) Trade and other payables excludes accruals and deferred revenue.
During the period, the treatment of the vendor loan notes was reviewed and as a result the classification has been revised to
reflect it as a financial instrument at amortised cost rather than fair value through profit or loss.
Disclosures in respect of the Group’s financial risks are set out below:
b. Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk of foreign exchange fluctuations, credit risk and liquidity
risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group’s financial performance. The Group’s policies for financial risk management are outlined in
the section on Principal Risks and Uncertainties in the Strategic Report on pages 18 to 20.
Venture Life Group plc Annual Report & Accounts 2016
61
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
31. Financial instruments continued
c. Market risk
Foreign exchange risk
The Group is exposed to foreign exchange risk on sales, purchases, and translation of assets and liabilities that are in a currency
other than the functional currency of its operating units.
The carrying amount of the Group’s foreign currency denominated monetary assets and liabilities in euros, US dollars, Chinese
renminbi and Swiss francs are shown below in the Group’s presentational currency, (£).
US$
£’000
RMB
£’000
SFr
£’000
Euro
£’000
Yen
£’000
Total
£’000
At 31 December 2016
Assets
Trade and other receivables
Cash and cash equivalents
Liabilities
Trade and other payables
Vendor loan notes, convertible bond
and interest bearing debt
Net position
At 31 December 2015
Assets
Trade and other receivables
Cash and cash equivalents
Liabilities
Trade and other payables
Vendor loan notes and interest
bearing debt
Net position
–
41
41
–
–
–
41
–
91
91
90
–
90
1
23
5
28
–
–
–
28
–
150
150
–
–
–
150
–
1
1
–
–
–
1
–
1
1
1
–
1
–
3,227
1,490
4,717
3,052
5,011
8,063
–
–
–
46
–
46
3,250
1,537
4,787
3,098
5,011
8,109
(3,346)
(46)
(3,322)
3,091
957
4,048
1,911
3,260
5,171
(1,123)
–
–
–
–
–
–
–
3,091
1,199
4,290
2,002
3,260
5,262
(972)
The following table details the Group’s sensitivity to a 10% increase and decrease in the foreign currencies used by the Group
against sterling. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel
and represents management’s assessment of the reasonable possible change in foreign exchange rates. The sensitivity analysis
includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a
10% weakening or strengthening of the foreign currencies against sterling.
At 31 December 2016
Assets
Liabilities
At 31 December 2015
Assets
Liabilities
£ currency impact
strengthening
£’000
£ currency impact
weakening
£’000
435
(737)
368
(470)
(435)
737
(368)
470
62
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
31. Financial instruments continued
d. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from customers and deposits with financial institutions.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group has an
established credit policy under which each new customer is analysed for creditworthiness before the Group’s standard payment
and delivery terms and conditions are offered. The Group’s review includes external ratings, and in some cases bank references.
An allowance for impairment is made when there is an identified loss event, which based on previous experience, is evidenced in
the recoverability of the cash flows. Management considers the above measures to be sufficient to control the credit risk exposure.
The Group gives careful consideration to which organisations it uses for its banking services in order to minimise credit risk. At
the previous reporting date, the Group had a significant concentration of cash held on deposit with certain banks in the United
Kingdom of £2,191,218. This deposit was used in part to fund the Periproducts acquisition during the year and so the cash
concentration is no longer held.
The Group considers its credit risk by counterparty and geography.
At 31 December 2016, the Group was also owed £1,351,542 (2015: £1,239,283) from 1 (2015: 2) of its major customers, the
balance being shown under trade receivables.
No impairment was made against any of the above amounts at any of the Statement of Financial Position dates.
The carrying amount of financial assets recorded represents the Group’s maximum exposure to credit risk without taking into
account the value of any collateral obtained. In the Director’s opinion there have been no impairments of financial assets in the
periods in this financial information.
No collateral is held by the Group in relation to any of its financial assets.
Interest rate risk
The Group’s principal interest-bearing assets are its cash balances.
The main principles governing the Group’s investment criteria are the security and liquidity of its investments before yield,
although the yield (or return) is also a consideration. The Group will also ensure:
i) that it has sufficient liquidity in its investments. For this purpose it will use its cash flow forecasts for determining the
maximum periods for which funds may prudently be committed; and
ii) that it maintains a policy covering both the categories of investment types in which it will invest, and the criteria for choosing
investment counterparties.
The interest rate risk profile of the Group’s financial assets, excluding trade and other receivables, as at 31 December 2016 was:
Sterling
Euro
RMB
USD
Swiss franc
Total
Fixed rate
Floating rate
Total
2016
£’000
2015
£’000
–
–
–
–
–
–
–
–
–
–
–
–
2016
£’000
461
1,490
5
41
1
1,998
2015
£’000
1,658
957
150
91
1
2,857
2016
£’000
461
1,490
5
41
1
1,998
2015
£’000
1,658
957
150
91
1
2,857
Floating rate deposits in all currencies earn interest at prevailing bank rates.
e. Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or damage to the Group’s reputation.
The Directors manage liquidity risk by regularly reviewing the Group’s cash requirements by reference to short-term cash flow
forecasts and medium-term working capital projections prepared by management.
Venture Life Group plc Annual Report & Accounts 2016
63
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
31. Financial instruments continued
f. Maturity of financial assets and liabilities
All of the Group’s financial assets and financial liabilities at each reporting date are either payable or receivable within one year,
with the exception of the non-current interest-bearing borrowings as detailed in note 28.
g. Capital management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to
shareholders. The Group is funded by interest bearing borrowings, loan notes and equity comprising issued capital and retained
profits. The capital structure of the Group consists of cash and cash equivalents and equity, comprising issued capital and retained
profits. The Group has no externally imposed capital requirements, but maintains an efficient overall financing structure while
avoiding excessive leverage.
The amounts managed as capital by the Group for the reporting periods under review are summarised as follows:
Total equity
Cash and cash equivalents
Capital
Total equity
Borrowings
Overall financing
Capital to overall financing ratio
At 31 December
2016
£’000
At 31 December
2015
£’000
14,358
(1,998)
12,360
14,358
7,144
21,502
13,802
(2,857)
10,945
13,802
3,260
17,062
0.57
0.64
32. Related party transactions
The following transactions were carried out with related parties:
(a) Transactions with Directors
Total dividends paid to Directors in the year ending 31 December 2016 were £5,051 (2015: £4,872).
In March 2016 the Company issued a 9% convertible bond for £1.9 million. The bond was issued to a number of bondholders
including Jerry Randall and Gianluca Braguti, both Directors of the Company. Both Directors subscribed to £200,000 of the issued
bond. Interest is accrued on the bond at 9% and is paid in March, June, September and December each year (which are the same
terms as the other bondholders).
Gianluca Braguti, a Director and shareholder of the Group, was provided with services by the Group totalling £2,977 (2015:
£2,669). At 31 December 2016, Gianluca Braguti owed the Group £3,839 (2015: £3,304).
Gianluca Braguti, a director and shareholder of the Group, was issued a vendor loan note by the Group for €2 million as part of the
Biokosmes acquisition in March 2014. The agreements covering these vendor loan notes were amended following the balance sheet
date such that the latest repayment date of the loan notes was extended from July 2017 to July 2020. The interest rate on the loan
was also increased from 3% in the initial loan agreement to 4%, effective from 1 August 2017 and for the remainder of the loan notes
term. Interest totalling €60,000 (2015: €60,000) was charged on the vendor loan note during the year. See note 23 for further details.
Under the terms of the Share Purchase Agreement dated 28 November 2013 and signed between the Company and the
vendors of Biokosmes, one of whom was Gianluca Braguti, the vendors agreed to indemnify the Company in full for any net
liability arising from certain litigation cases which had not settled at the time of completion of the acquisition on 27 March
2014. At the year end the amount due to the Company under the indemnity totalled €250,935 (2015: €250,935), of which
Gianluca Braguti’s liability is €248,426 (2015: €248,426). There is still one litigation case outstanding, upon settlement of which,
Gianluca Braguti will clear any outstanding liability with the Group.
(b) Transactions with subsidiaries:
Venture Life Limited:
During the year the Company charged Venture Life Limited £565,000 (2015: £855,000) for corporate services provided and
Venture Life Limited repaid funding totalling £2,345,000 (2015: provided funding to Venture Life of £1,226,000). The Company
charged Venture Life Limited interest on long-term intercompany positions of £255,262 (2015: £284,409). At year end an amount
of £5,418,531 (2015: £8,138,153) was due from Venture Life Limited.
64
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE CONSOLIDATED STATEMENTS CONTINUED
for the year ended 31 December 2016
32. Related party transactions continued
Lubatti Limited:
During the year the Company charged Lubatti Limited £3,000 (2015: £95,000) for corporate services provided. The Company
charged Lubatti Limited interest on long-term intercompany positions of £31,265 (2015: £29,517). At year end an amount of
£660,173 (2015: £626,907) was due from Lubatti Limited.
Periproducts Limited:
During the year the Company charged Periproducts Limited £982,215 (2015: £Nil) for corporate services provided. The Company
charged Periproducts Limited interest on long-term intercompany positions of £39,616 (2015: £nil). At year end an amount of
£1,021,831 (2015: £Nil) was due from Periproducts Limited.
Biokosmes Srl:
During the year the Company received a dividend from Biokosmes Srl of €325,000 (2015: €208,000). At year end an amount of
£nil (2015: £nil) was due from Biokosmes Srl.
(c) Transactions between subsidiaries
Venture Life Limited and Lubatti Limited:
During the year Venture Life Limited provided funding to Lubatti Limited totalling £2,000 (2015: £10,000). Lubatti Limited
charged royalties during the year under a licensing agreement with Venture Life for £79,000 (2015: £108,000). At year end an
amount of £5,863 (2015: £75,529 due to Venture Life Limited) was due from Venture Life Limited
Venture Life Limited and Biokosmes Srl:
During the year Biokosmes provided products and services to Venture life Limited totalling £719,574 (2015: £603,479). Venture
Life Limited provided services to Biokosmes Srl during the year totalling £28,275 (2015: £25,547). At year end an amount of
£801,143 (2015: £330,549) was due to Biokosmes Srl.
Venture Life Limited and Periproducts Limited:
During the year Periproducts provided funding to Venture life Limited totalling £1,687,947 (2015: £nil). Periproducts Limited
charged Venture Life Limited interest on long-term intercompany positions of £84,229 (2015: £nil). At year end an amount of
£1,768,799 (2015: £Nil) was due to Periproducts Limited from Venture Life Limited.
Periproducts Limited and Biokosmes Srl:
During the year Biokosmes provided products and services to Periproducts Limited totalling £107,109 (2015: £nil). At year end an
amount of £67,118 (2015: £nil) was due to Biokosmes Srl from Periproducts Limited.
Lubatti Limited and Tracey Malone Originals Limited:
During 2015 and 2016 there were no transactions. At year end an amount of £5,951 (2015: £5,951) was due to Lubatti Limited.
(d) Transactions with other related parties
Biokosmes Immobiliare Srl, a company 100% owned by Gianluca Braguti, a director and shareholder of the Group provided
property lease services to Biokosmes Srl, the Group’s Italian subsidiary, totalling €460,000 in the year to 31 December 2016
(2015: €492,000). At 31 December 2016, the Group owed Biokosmes Immobiliare Srl €692,000 (€870,000 at 31 December
2015).
Services purchased from Biogenico Srl, a company 47% owned by Gianluca Braguti, a director and shareholder of the Group,
totalled £4,016 (2015: £13,185). At 31 December 2016, the Group owed Biogenico Srl £8,189 (2015: £17,786). Services provided
to Biogenico Srl totalled £17,466 (2015: £26,151). At 31 December 2016, Biogenico Srl owed the Group £14,318 (2015: £7,331).
Services purchased from A. Erre, a company 10% owned by Gianluca Braguti, a director and shareholder of the Group, totalled
£71,784 (2015: £7,331). At 31 December 2016, the Group owed A. Erre £4,682 (2015: £8,402).
Services purchased from Farmacia San Francesco, a company 10% owned by Gianluca Braguti, a director and shareholder of
the Group, who is also a director, totalled £381 (2015: £372 provided to Farmacia San Francesco). At 31 December 2016,
Farmacia San Francesco owed the Group £nil (2015: £nil).
33. Post balance sheet events
There were no material events after the balance sheet date.
Venture Life Group plc Annual Report & Accounts 2016
65
PARENT COMPANY BALANCE SHEET
Company number 05651130
at 31 December 2016
Fixed assets
Investments
Current assets
Debtors
Cash at bank
Creditors
Amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors
Amounts falling due after one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Convertible bond reserve
Merger reserve
Share-based payments reserve
Profit and loss account
Shareholders’ funds
At 31 December
2016
£’000
At 31 December
2015
£’000
Note
5
6
7
8
9
19,033
19,033
13,265
13,265
7,219
210
7,429
(739)
6,690
25,723
(3,662)
(3,662)
22,061
111
13,289
109
7,656
409
487
22,061
8,881
19
8,900
(438)
8,462
21,727
(1,373)
(1,373)
20,354
103
11,826
–
7,656
368
401
20,354
The financial statements on pages 66 to 72 were approved and authorised for issue by the Board on 22 March 2017 and signed
on its behalf by:
Jerry Randall
Director
66
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Merger
reserve
£’000
Convertible
bond reserve
£’000
Share–based
payments
reserve
£’000
Profit and
loss account
£’000
Total equity
£’000
Balance at 1 January 2014
Restated profit for the year
Comprehensive income
Share-based payments charge
Issue of share capital
IPO and other fund raising costs
recognised through equity
Dividends
Transactions with shareholders
Balance at 1 January 2015
Profit for the year
Total comprehensive income
Share-based payments charge
Dividends
Transactions with shareholders
Balance at 1 January 2016
Profit for the year
Total comprehensive income
Share-based payments charge
Convertible bond reserve
Issue of share capital
Dividends
Transactions with shareholders
Share
capital
£’000
51
–
–
–
52
–
–
52
103
–
–
–
–
–
103
–
–
–
–
8
–
8
Share
premium
account
£’000
2,668
–
–
–
10,137
(979)
–
9,158
11,826
–
–
–
–
–
11,826
–
–
–
–
1,463
–
1,463
50
–
–
–
7,606
–
–
7,606
7,656
–
–
–
–
–
7,656
–
–
–
–
–
–
–
Balance at 31 December 2016
111
13,289
7,656
39
–
–
–
(39)
–
–
(39)
–
–
–
–
–
–
–
–
–
–
109
–
–
109
109
338
–
–
130
(150)
–
–
(20)
318
–
–
50
–
50
368
–
–
41
–
–
–
41
409
41
293
293
–
–
–
(12)
(12)
322
93
93
–
(14)
(14)
401
100
100
–
–
–
(14)
(14)
487
3,187
293
293
130
17,606
(979)
(12)
16,745
20,225
93
93
50
(14)
36
20,354
100
100
41
109
1,471
(14)
1,607
22,061
Venture Life Group plc Annual Report & Accounts 2016
67
NOTES TO THE PARENT COMPANY BALANCE SHEET
for the year ended 31 December 2016
1. Company Information
Venture Life Group Plc is a publicly traded company on the UK
alternative investments market (“AIM”), incorporated in the
United Kingdom whose registered office, and principal place of
business, is at:
Venture House, 2 Arlington Square, Downshire Way
Bracknell, Berkshire RG12 1WA
2. Accounting convention
These financial statements have been prepared in accordance
with applicable United Kingdom accounting standards,
including Financial Reporting Standard 102 – ‘The Financial
Reporting Standard applicable in the United Kingdom and
Republic of Ireland’ (“FRS 102”), and with the Companies Act
2006. The financial statements have been prepared on the
historical cost basis.
Financial Reporting Standard 102 – reduced disclosure
exemptions
The Company has taken advantage of the following disclosure
exemptions in preparing these financial statements, as
permitted by the FRS 102 ‘The Financial Reporting Standard
applicable in the UK and Republic of Ireland’:
> the requirements of Section 4 Statement of Financial
Position paragraph 4.12(a)(iv);
> the requirements of Section 7 Statement of Cash Flows;
> the requirements of Section 3 Financial Statement
Presentation paragraph 3.17(d);
> the requirements of Section 11 Financial Instruments
paragraphs 11.39 to 11.48A;
The principal activity of the company is the holding of the
Group’s share capital and provision of management services to
the Group.
Share-based payments
The Company issues equity-settled share-based payments to
certain employees and others under which the Group receives
services as consideration for those equity instruments in the
Company. Equity-settled share-based payments are measured
at fair value at the date of grant by reference to the fair value
of the equity instruments granted. The fair value determined
at the grant date of equity-settled share-based payments is
recognised as an expense in the Group’s Statement of
Comprehensive Income over the vesting period on a straight-
line basis, based on the Group’s estimate of the number of
instruments that will eventually vest with a corresponding
adjustment to equity. The expected life used in the valuation is
adjusted, based on management’s best estimate, for the effect
of non-transferability, exercise restrictions, and behavioural
considerations.
Non-vesting and market vesting conditions are taken into
account when estimating the fair value of the awards at grant
date. Service and non-market vesting conditions are taken into
account by adjusting the number of share options expected to
vest at each reporting date.
> the requirements of Section 12 Other Financial Instruments
When the share options are exercised the Company issues
paragraphs 12.26 to 12.29;
> the requirements of Section 26 Share-based Payment
paragraphs 26.18(b), 26.19 to 26.21 and 26.23;
> the requirements of Section 33 Related Party Disclosures
paragraph 33.7.
Investment in subsidiary undertakings and impairment
review
Investments in subsidiary undertakings where the Company
has control are stated at cost less any provision for
impairment. Control is achieved where the Company has the
power to govern the financial and operating policies of an
investee entity so as to obtain benefits from its activities.
Investments are reviewed for impairment if events or changes
in circumstances indicate that the carrying amount may not
be recoverable. Impairments are calculated such that the
carrying value of the investment is the lower of its cost or
recoverable amount. Recoverable amount is the higher of its
net realisable value and its value in use.
new shares. The proceeds received net of any directly
attributable transaction costs are credited to share capital
(nominal value) and share premium.
When an agreement is reached for the settlement of a fixed
liability for a fixed number of the Company’s shares (“Fixed for
Fixed”) the value of the liability is de-recognised and is
recognised in the share-based payments reserve at the date of
the agreement.
When the Company grants options over equity instruments
directly to the employees of a subsidiary undertaking, the
effect of the share-based payment, as calculated, is capitalised
as part of the investment in the subsidiary as a capital
contribution, with a corresponding increase in equity.
Taxation
Current tax is recognised for the amount of income tax
payable in respect of the taxable profit for the current or past
reporting periods using the tax rates that have been enacted
or substantively enacted by the reporting date.
Deferred tax is recognised in respect of all timing differences
at the reporting date, except as otherwise indicated. Deferred
tax assets are only recognised to the extent that it is probable
that they will be recovered against the reversal of deferred tax
liabilities or other future taxable profits.
68
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE PARENT COMPANY BALANCE SHEET CONTINUED
for the year ended 31 December 2016
2. Accounting convention continued
Deferred tax is measured at the rates that are expected to
apply in the period when the timing differences are expected
to reverse, based on the tax rates and law enacted or
substantively enacted at the balance sheet date.
Foreign currency
Assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the reporting date.
Transactions in foreign currencies are recorded at the rate
ruling at the date of the transaction. All differences are
charged/credited to the profit and loss account.
3. Profit attributable to members of the parent Company
As permitted by s408 of the Companies Act 2006, the Company’s profit and loss account has not been included in these financial
statements. The profit dealt with in the financial statements of the parent Company was £100,000 (2015: profit of £93,000).
The current auditors’ remuneration in respect of audit services provided to the Company is disclosed in note 7.
4. Directors’ remuneration
Details of Directors’ remuneration are disclosed in the Directors’ Remuneration Report on pages 28 to 31.
5. Investments
Cost
At 1 January 2015
Additions
At 1 January 2016
Additions
At 31 December 2016
Accumulated Impairment
At 1 January 2015
Charge for the year
At 1 January 2016
At 31 December 2016
Net book value
At 31 December 2015
At 31 December 2016
Investments in
subsidiary
undertakings
Shares
£’000
Capital
contributions from
share-based
payments
£’000
Other
investments
£’000
12,993
–
12,993
5,763
18,756
–
–
–
–
12,993
18,756
268
4
272
5
277
–
–
–
–
272
277
31
–
31
–
31
(31)
–
(31)
–
–
–
Total
£’000
13,292
4
13,296
5,768
19,064
(31)
–
(31)
–
13,265
19,033
Venture Life Group plc Annual Report & Accounts 2016
69
NOTES TO THE PARENT COMPANY BALANCE SHEET CONTINUED
for the year ended 31 December 2016
5. Investments continued
Venture Life Group plc has four UK subsidiary undertakings, Venture Life Limited (Company number 07186207), Lubatti Limited
(Company number 06704099), Tracey Malone Originals Limited (Company number 06703243) and Periproducts Limited
(Company number 02864374) which are all incorporated in England. It also has one Italian subsidiary and one Swiss subsidiary.
Name of subsidiary
Class of holding
Proportion held directly
Venture Life Limited
Lubatti Limited
Tracey Malone Originals Limited
Periproducts Limited*
PermaPharm AG
Biokosmes SRL
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
* Periproducts Limited was acquired on 4 March 2016. See note 14 for further information.
6. Debtors
Amounts falling due within one year:
Other debtors
Other taxation
Prepayments and accrued income
Amounts owed by Group undertakings
Amounts falling due after more than one year:
Amounts owed by Group undertakings
Aggregate amounts
7. Creditors: amounts falling due within one year
Trade creditors
Other taxation and social security costs
Accruals and deferred income
Vendor loan notes
Convertible bond
Other payables
Location
UK
UK
UK
UK
Switzerland
Italy
2015
£’000
67
–
44
2,171
2,282
6,599
8,881
2015
£’000
76
25
249
43
–
45
438
2016
£’000
48
47
18
252
365
6,854
7,219
2016
£’000
88
23
356
54
171
47
739
70
Venture Life Group plc Annual Report & Accounts 2016
Business Summary
Strategic Report
Governance
Financial Information
NOTES TO THE PARENT COMPANY BALANCE SHEET CONTINUED
for the year ended 31 December 2016
8. Creditors: Amounts falling due after more than one year
Vendor loan notes
Pursuant to the acquisition of Biokosmes Srl in March 2014, the Company issued to the vendors of Biokosmes vendor loan notes
with a face value of €2.0 million and which paid an annual coupon of 3%. Under the terms of the loan notes, the loan notes were
due to be repaid in full at the latest by the Company in July 2016. The repayment date of these loan notes has been extended to
July 2020 following the period end. The interest due on the loan notes was also increased from 3% to 4% effective 1 August 2017.
Fair value of loan vendor notes at 31 December 2015
Foreign exchange movements
Accrued interest not paid
Change in fair value of vendor loan notes
Fair value of vendor loan notes at 31 December 2016
Current element of vendor loan note liability
Non-current element of vendor loan notes liability
£’000
1,416
237
12
89
1,754
54
1,700
1,754
The interest expensed for the year is calculated by applying an effective interest rate of 3% from the date the loan notes were
issued (subsequently updated to 4%, effective 1 August 2017). The carrying value of the vendor loan notes is determined with
reference to the present value of the principal amount of the loan note to be settled in the future, together with the present
value of the future interest payments to be made under the terms of the loan note. The equity element of the Group’s vendor
loan notes included in 2015 and 2016 was not considered material.
Convertible bonds
During the period a convertible bond with a principal value of £1.9 million was issued as part of the funding for the Periproducts
acquisition. The bond carries a 9% coupon with interest payable quarterly over a three year term with full repayment of the
convertible bond due on 3 March 2019. Bondholders have the right to convert their bonds to shares in the Group at a conversion
price of 87.5p per Venture Life share (87.5p representing a 25% premium to the 70 pence placing price of the new equity at the
time of the acquisition) which can be exercised at any point before 3 March 2019.
Under IAS 32, this convertible bond is accounted for as a compound financial instrument. The fair value of the convertible
bond is determined using a discounted cash flow method. The difference between the £1.9 million principal value of the bond and
the present value of the future fixed interest payments and capital repayment is recorded in equity as a convertible bond reserve,
representing the value of the convertible element of the bond.
Bond issue fees incurred have been allocated between liabilities and equity as a proportion of the value of each element. The
fees held against the liability element are released to the Income Statement over the three year life of the bond.
The value of the liability and associated costs are held on the balance sheet at amortised cost. The initial amortised cost
valuation gave a carrying value, net of fees, of £1.6 million which was recorded as a liability at 4 March 2016. This will increase to
its principal value of £1.9 million over the life of the bond to 3 March 2019, with interest costs being taken to the Income
Statement on a monthly basis. The resulting equity value is £0.1 million which is recorded as a convertible bond reserve.
Fair value of convertible bond at inception (4 March 2016)
Accrued interest not paid
Change in fair value of convertible bonds
Fair value of convertible bonds at 31 December 2016
Current element of convertible bonds liability
Non-current element of convertible bonds liability
£’000
1,640
14
63
1,717
171
1,546
1,717
Deferred consideration
Deferred consideration reflects the fair value of a loan held by the Company with the vendors of Periproducts. The loan principal
of £400,000 is repayable in March 2019 and has an annual interest charge of 10% from September 2017.
The fair value of deferred consideration included in non-current liabilities at the balance sheet date was £416,000 (2015: £nil).
Venture Life Group plc Annual Report & Accounts 2016
71
NOTES TO THE PARENT COMPANY BALANCE SHEET CONTINUED
for the year ended 31 December 2016
9. Share capital
Allotted, issued and fully paid:
36,837,106 (2015: 34,403,534) Ordinary shares of 0.3p each
2016
£’000
111
2015
£’000
103
The Company has removed the Authorised Share capital from its Memorandum and Articles of Association as allowed by
Companies Act 2006.
10. Post balance sheet events
There were no material events after the balance sheet date.
72
Venture Life Group plc Annual Report & Accounts 2016
SHAREHOLDER INFORMATION
Company contact details and registered office
Venture House
2 Arlington Square
Bracknell
Berkshire
RG12 1WA
Incorporated and registered in England and Wales with
No. 05651130
Company Secretary
Peter Shepherd
Website
Further information on the Group can be found on our website
at www.venture-life.com
Share price information
The latest Venture Life share price can be obtained via a
number of financial information websites.
Venture Life’s London stock exchange code is VLG.
Shareholder enquiries
Enquiries concerning shareholdings, change of address or other
particulars, should be directed in the first instance to the
Company’s registrars:
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Telephone: 0870 162 3100
(Calls cost 10p/minute plus network extras. Lines are open
8.30am-5.30pm Mon-Fri. If calling from outside the UK please
dial: +44 (0)20 8639 3399)
Investor relations
Any shareholders with enquiries regarding the Group are
welcome to contact Jerry Randall on +44 (0)1344 742 870.
Alternatively, they can e-mail their enquiry to
ir@venture-life.com.
Copies of this report are being sent to all shareholders.
Copies are also available at the registered office of the
Company, Venture House, Arlington Square, Bracknell,
Berkshire RG12 1WA.
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Venture Life Group plc Annual Report & Accounts 2016
Venture Life Group plc
Venture House
2 Arlington Square
Bracknell
Berkshire
RG12 1WA
T +44 (0) 1344 742 870
E info@venture-life.com
W www.venture-life.com