Venture Life Group
Annual Report & Accounts 2019
Significant growth potential
in the self-care market
Strategic Report
Our Mission
We are committed to providing innovative
and efficacious products for the self-care
market, for people who want to lead a
healthier life.
Our Vision
To become a key trusted global leader in
self-care products through our knowledge,
expertise and capability.
Through sustainable organic growth and
strategic acquisitions, we will continue to
access the significant long-term potential
of the self-care market.
Strategic Review
We explain who we are, where we operate,
our business and a summary of how we performed
against our key performance indicators.
Corporate Governance
We introduce our Board, explain our approach
to corporate governance and give details of the
Group’s remuneration principles and policies.
Financial Statements
This section contains the Financial Statements,
the Auditor’s Report, the accounting policies and
the notes to the accounts.
01 Highlights 2019
02 At a Glance
04 Chair’s Statement
06 Business Model and Strategy
08 Our Investment Case
09 Key Performance Indicators
10 Development and Manufacturing
12 Chief Executive Officer’s Statement
17 Our Awards
18 Principal Risks and Uncertainties
20 Our Section 172 (1) Statement
22 Financial Review
3
Venture Life Group Annual Report 2019
24 Board of Directors
26 Statement of Corporate Governance
28 Directors’ Report
32 Remuneration Report
37 Statement of Directors’ Responsibilities
38 Independent Auditor’s Report
44 Consolidated Statement
of Comprehensive Income
45 Consolidated Statement
of Financial Position
46 Consolidated Statement
of Changes in Equity
47 Consolidated Statement
of Cash Flows
48 Notes to the Consolidated Statements
84 Parent Company Balance Sheet
85 Parent Company Statement of Changes
in Equity
86 Notes to the Parent Company
Balance Sheet
IBC Shareholder Information
Strategic Report
Our Highlights
Another year
of continued growth
Revenue (£m)
£20.2m
(2018: £18.8m) +7%
EBITDA* (£m)
£3.0m
(2018: £2.7m) +11%
Profit after tax (£m)
£0.9m
(2018: £0.2m) +287%
2019 £20.2m
2019 £3.0m
2019 £0.9m
2018 £18.8m
2018 £2.7m
2018 £0.2m
2017 £16.1m
2017 £1.8m
2017 £(0.4)m
* Before exceptional items
Distribution agreements
UltraDEX brand
New product launches
10
New distribution agreements
signed
17
14
International markets
In-market launches
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Financial
• Revenue of £20.2 million, +7% over 2018
• Gross profit increased 10% to £8.0 million
(2018: £7.3 million)
• Adjusted EBITDA* increased 11% to £3.0 million
(2018: £2.7 million)
• Profit before tax, amortisation and exceptional items
increased to £2.2 million (2018: profit £1.5 million)
• Adjusted earnings per share of 2.18 pence
(2018: 2.06 pence)
• Net cash generated from operating activities
of £3.0 million (2018: £2.5 million)
Commercial
• 10 new distribution agreements signed on key brands
• 2 new international markets signed for Dentyl
in Finland and France
• 14 new product launches, including in Israel and Poland
• ASDA and Well Pharmacy launch UltraDEX in the UK
• Dentyl launches in Lloyds Pharmacy in the UK
Post-period end
• Acquisition of PharmaSource BV, a group of companies
based in The Netherlands engaged in the manufacture
and sale of medical device self-care products to
distributors and retailers
• Gross margin percentage increase to 39.6%
• 6 new international partnering agreements signed,
(2018: 38.8%)
* Before exceptional items
including a new agreement on the recently acquired
PharmaSource BV products
Venture Life Group Annual Report 2019
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Strategic Report
At a Glance
Significant growth potential
in the self-care market
What we do
Venture Life brands
Venture Life develops, manufactures
and distributes products for the self-care
market. These are non-drug products that
consumers buy without prescription, to
help lead a healthier life.
A growing global population living longer
drives the ever-increasing demand for
self-care and preventative wellness.
Combined with global healthcare budgets
being under pressure and governments
encouraging consumers towards both
self-diagnosis and self-medication,
means the self-care market is a
continually growing market space.
Venture Life has its own portfolio of
self-care brands, which are sold without
prescription through pharmacies and
other retailers in the UK and
internationally. They address a wide range
of healthcare issues including oral
healthcare, women’s intimate health,
neurology and dermatology.
Many of our products have intellectual
property, which can include trademarks,
patents and clinical evidence proving
efficacy as well as formulation and
manufacturing expertise. Being a non-
drug company means faster regulatory
routes to market and lower regulatory
costs.
7
Key brands
14
10
New products
launched in 2019
New international
agreements in 2019
02
Venture Life Group Annual Report 2019
UK Head and Commercial Office
Netherlands Office (from January 2020)
Italian R&D and
Manufacturing Facility
Countries where products sold or partnered
Countries where no products sold or partnered
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International
Our international business follows a B2B model. We partner our own brands around the
world, focusing on key markets. Our partners have local market expertise and they cover all
in-market costs, so we have no exposure to funding sales, marketing and distribution costs.
UK & The Netherlands
Within the UK and The Netherlands (as from January 2020), we have direct access to both retail
markets, including key pharmacy and grocery multiple retailers, such as Boots, Kruidvat and
Amazon. This direct route earns us higher revenues per unit, and in return we only invest money
in UK consumer marketing to support the products.
110+
Partners
47
Markets worldwide
Venture Life Group Annual Report 2019
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Strategic Report
Chair’s Statement
Venture Life continued the momentum
built in 2018 to deliver record revenues
and an earning enhancing acquisition
Venture Life continued the momentum built in 2018 to deliver record
revenues of £20.2 million and adjusted EBITDA of £3.0 million (before
exceptional items). This performance was delivered against a mixed
global economic backdrop and demonstrates the strength of the
Group’s business model and niche focus.
In 2019, we were again included as one of the companies listed in the
London Stock Exchange’s publication ‘1000 Companies to Inspire
Britain’ for the fourth consecutive year – a publication that recognises
businesses across the UK that outperform their peers. This is a strong
testament to the continued growth and development achieved by the
whole team at Venture Life.
The practical Brexit challenges and uncertainties during 2019
for the Group centred around supply chain and making sure our UK
customers did not suffer any interruption to the supply of product
made in our factory in Italy, in the event of UK border related issues.
This also included maintaining back up manufacturers in the UK for the
relevant products. The whole Venture Life team worked tirelessly and
effectively to manage this potential issue and, although there still
remains uncertainty over how the UK will conclude trade deals with its
international counterparts, the Group is well positioned to manage all
outcomes with limited impact on the business, if any.
Despite the slower than expected first half of the year, impacted by
one-off costs related to finance department restructuring and an
M&A project we terminated in the due diligence stage, the business
once again delivered a typically strong second half to the year, with
revenues of £10.8 million (H1 £9.4 million), gross margin of 41.5%
(H1 37.4%), and adjusted EBITDA of £2.3 million (H1 £0.7 million).
The stronger margin in H2 reflected the effect of higher revenues
through our fixed cost base, demonstrating the Group’s operational
leverage. Revenues in the second half were weighted towards the
back end of the year and were impacted slightly by the weakening
euro in November and December.
In May, we welcomed Andrew Waters, FCA, to the Board of Venture
Life as Chief Financial Officer. Andrew has been a welcome addition
to the team as we pursue our ambitious growth plans.
Our growth strategy continues to be focused on achieving sustainable
organic growth through our existing business, combined with the
selective acquired growth of assets that would benefit the Group’s
operational leverage. Despite reviewing a significant number of
potential acquisition opportunities, we did not exchange contracts
on a transaction until late December, when the Group acquired
PharmaSource BV based in Breda, Netherlands subject to the
fulfilment of certain critical requirements, which were subsequently
met on 24 January 2020. The Group is in a solid financial position,
with sufficient cash on the balance sheet and available debt facilities
that we can deploy. We will continue to consider acquisitions that
complement our existing business and satisfy our due diligence
requirements.
Dr Lynn Drummond
Non-Executive Chair
Highlights
• Record revenues of £20.2 million, +7%
• Record EBITDA* £3.0 million, +11%
• Conditional acquisition of
PharmaSource BV, a self-care business
based in the Netherlands (completed
24 January 2020)
* Before exceptional items
04
Venture Life Group Annual Report 2019
On 24 January 2020, we completed the acquisition of
PharmaSource BV, a Netherlands based development and distribution
company. This is a successful, profitable and fast growing business
that has excellent product assets and customer channels that we
can continue to develop and grow within the Group. Additionally,
PharmaSource BV provides direct access to the Dutch retail
pharmacy and grocery channels. I am confident that this will be
a valuable addition to the Group. The financial results for 2019 and
the statement of financial position at 31 December 2019 exclude
the results and financial position of PharmaSource BV.
The impact of Covid-19 is being felt around the globe at this time,
and we at Venture Life are not immune from this impact. However,
the Group has instigated precautions and safety procedures at all
of its locations to protect its employees and its operations. The safety
of all our employees has been our utmost priority, and we have been
able to successfully achieve this to date whilst maintaining production
in Italy, and supply of raw materials, to be able to meet our customers’
requirements. This has all been achieved by our amazing team of
dedicated and committed employees, particularly those in Italy that
have been operating under lockdown conditions, and on behalf of the
Board, I give them our sincerest thanks and congratulations for this.
Case study:
Giuliani, Italy
Our partnership with Giuliani, an Italian pharmaceutical company,
illustrates a key company ethos of how we nurture and foster our
partner relationships. Our manufacturing division has been
working with Giuliani for over 13 years.
Our R&D team co-developed the formulation for the
dermatological repair cream, Trosyd® Repair, to which Giuliani
acquired the distribution licence. In 2019, we started manufacturing
this Medical Device for Giuliani, under a manufacturing agreement.
I would like to thank all our shareholders, employees and other
stakeholders for their support and wise counsel during this year
and into 2020. We start the new financial year with a record order
book and strong balance sheet, in addition to our recently acquired
PharmaSource BV business, which puts the business on the strongest
possible footing to weather the current Covid-19 situation and one
which will allow us to emerge even stronger once we are all through
this.
Dr Lynn Drummond
Non-Executive Chair
8 April 2020
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Venture Life Group Annual Report 2019
05
Strategic Report
Our Business Model and Strategy
Venture Life is a business with
multiple revenue growth opportunities,
both organically and through its
acquisition strategy
Our company
Our key activities
Based on a vertically integrated approach, we either acquire
or develop self-care products. These products are then manufactured
in-house and sold to a network of international partners and to key
retailers in the UK market.
h a n d
p m e n t
a r c
R e s e
de v el o
Consumer
self-care
products
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Distribution
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C reating, foste
& n urturing partn
We are committed to providing
innovative and efficacious products
for the self-care market. Key to our
growth is our continued drive to be
the “partner of choice” for self-care
products. We have the agility to
move fast, to capitalise on the
growing consumer trends and our
model is supported by the following
key components:
•
Experienced management team
• Committed and dynamic team
of 109 people
• Vertically integrated business
model
• Head office in the UK
• Commercial operations in the
UK, Italy and The Netherlands
(as of January 2020)
•
•
•
5,500m2 in-house manufacturing
and development facility in Italy
Expertise in product
development, manufacturing
and distribution
Experience in acquiring
products/brands and
reinvigorating them
• We foster and nurture
partnerships – strong
relationships with 110+ partners
06
Venture Life Group Annual Report 2019
Our key aquisitions
2010
2014
2016
2018
2020
Venture Life co-founded
by Jerry Randall and
Sharon Daly
Acquisition of Original
Bioscalin brand
Acquisition of
Biokosmes Srl,
an Italian development and
manufacturing business,
founded by Gianluca Braguti;
year of IPO
Acquisition of
Periproducts Ltd,
including UltraDEX brand
Acquisition of
Dentyl brand
Acquisition of
PharmaSource BV
Our buy and build strategy
2019 has seen our strategy deliver another year of both
organic growth and growth from acquired brands, with the
Group increasing both revenues and profit through four key
growth drivers.
w t h f
g p
evenue gr o
and existin
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Growth
drivers
w th from
g le v erage
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Pr o 昀 t g r
o p e r a t i n
Key achievements
As well as steady organic growth,
the acquisition of PharmaSource BV,
based in The Netherlands, gives the
company its first mainland European
foothold directly into the retailer
market.
2019 achievements include:
•
10 new commercial
distribution agreements
signed on key brands
• Acquisition of PharmaSource BV,
a Netherlands-based
development and distribution
company. Completed January
2020
• Units produced through our
factory in 2019 were up 13%
over 2018
• Continued internationalisation
of acquired brands – distribution
agreements for Dentyl signed
in Finland and France and for
UltraDEX in Italy and the UAE
• ASDA and Well Pharmacy launch
UltraDEX in the UK
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Venture Life Group Annual Report 2019
07
Strategic Report
Our Investment Case
We create value for shareholders
by developing, manufacturing and
commercialising products for the
self-care market
Highly capable
team with a
proven business
model
Profitable and
cash generative
Geared for
growth
Operational
leverage
£
• Adjusted EBITDA*
of £3.0 million, +11%
over 2018
• Operating cash
generative
• Strong balance sheet
* Before exceptional items
•
Experienced
management team
• Vertically integrated
business model
•
•
Expertise in product
development,
manufacturing and
distribution
Experience in
reinvigorating
acquired brands
and turning them
to growth
• Organic growth from
distribution partners
• Increased operational
leverage
• Growth from
developing innovative
products
• Additional growth
through acquisitions
• Scope for additional
revenue generation
without significant
capacity investment
Read more on page 24
Read more on page 22
Read more on pages 6 and 7
Read more on pages 10 and 11
10
Years of operation
+7%
Revenue growth
+11%
EBITDA profit
40%
Gross margin
08
Venture Life Group Annual Report 2019
Key Performance Indicators
Revenue (£m)
£20.2m
(2018: £18.8m) +7%
EBITDA* (£m)
£3.0m
(2018: £2.7m) +11%
Profit after tax (£m)
£0.9m
(2018: £0.2m) +287%
2019 £20.2m
2019 £2.9m
2019 £0.9m
2018 £18.8m
2018 £2.7m
2018 £0.2m
2017 £16.1m
2017 £1.8m
2017 £(0.4)m
EPS (p)
1.08p
(2018: 0.42p) +157%
* Before exceptional items
Adjusted EPS (p)
2.18p
(2018: 2.06p) +6%
2019 1.08p
2019 2.18p
2018 0.42p
2018 2.06p
2017 (1.00p)
2017 0.66p
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Venture Life Group Annual Report 2019
09
Strategic Report
Development and Manufacturing
Our 5,500m2 manufacturing
facility is a key differentiating
factor from our peers
Manufacturing
capabilities
Research &
development
Our in-house
manufacturing capability
is a key differentiating
factor from our competitors.
Our 5,500m2 facility is
located in Italy. This facility
manufactures both our
Venture Life Brands and
Customer Brands for
customers, which are
sold under the customers’
brand name.
With over 35 years
experience in developing
Cosmetics and Medical
Devices, we have a very
strong technical team in
place, with regulatory
expertise. This enables
us to be agile in responding
to market demand in both
the development and
manufacturing of new
products.
Quality,
environment,
health & safety
We have an integrated
quality system based on
international standards for
the assurance of quality and
safety. Our certifications
are worldwide.
Operational
leverage
Our factory has plenty
of scope for additional
revenue generation without
significant capacity
investment:
Our manufacturing
scalability
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80
60
40
Capacity
70
40
20
23
26
0
Actual
2018
Actual
2019
Potential
capacity
with £1m
capex
Potential
capacity
with £4m
capex
Additional capex (£million)
130,000
Units per day capacity
5,500m2
Manufacturing facility
north of Milan
26m
Finished products
in 2019
35+
Years of experience
in development and
regulatory affairs
6
Turbo mixers
10
Filling and packaging
lines
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Venture Life Group Annual Report 2019
Our key customers
Key to our growth is fostering and nurturing our customer partnerships, both with new and existing
customers. We strive to be “the partner of choice” in whatever we do.
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Venture Life Group Annual Report 2019
11
Strategic Report
Chief Executive Officer’s Statement
Delivering continued growth
through our organic and
acquisitive strategy
Introduction
The Group has once again delivered growth in revenues and profits,
combined with another immediately earnings enhancing acquisition
post period end. Despite facing a number of macro level challenges
during the period, the Group reported an increase in revenues of 7%,
an increase in adjusted EBITDA of 10%, as well as an increase in
operating cash generation of 20%.
The Group acquires, develops and manufactures products at its
facility in Italy. These products are sold either direct to retailers in the
UK and The Netherlands, through the Group’s sales operations, or via
distributors in all other territories. The products are split into two
categories: Venture Life Brands (VLG Brands), assets and brands that
the Group owns, which represented 33% of the revenues in 2019
(2018: 35%); and Customer Brands, customer-owned assets and
brands, developed and manufactured by the Group. This represented
65% of the revenues during 2019 (2018: 65%). By developing the
Customer Brands, the Group is able to lock in long-term
manufacturing revenues.
The Group’s products are registered either as medical devices or
cosmetics, with medical devices representing approximately 59%
of total Group revenues. This will increase in 2020 through organic
growth and with the addition of the PharmaSource BV products,
which are mostly medical devices.
Revenues for the year increased to £20.2 million (2018: £18.8 million),
helped by growth in both our VLG Brands business, which was up 1%
to £6.7 million (2018: £6.6 million) and our Customer Brands business,
up 11% to £13.5 million (2018: £12.2 million). We are satisfied with the
progress achieved in our VLG Brands business given that both of our
Chinese customers purchased significantly less product in 2019
compared to 2018, and that we were still dealing with the
annualisation of the legacy UK delists of Dentyl that we inherited when
we bought the brand.
As is normal for the business, due to historic customer ordering
patterns, second half revenues were higher (+14%) than in the first
half. This resulted in a significantly higher gross margin of 41.5% in the
second half (H1 37.4%), demonstrating the strong operational
leverage effect of higher revenues.
Our Customer Brands business, through Biokosmes in Italy, continued
to perform well with an 11% increase in revenues over 2018, delivering
more volume through our facility and utilising the significant
operational leverage that we have there.
The Group is well positioned to capitalise on the growing self-care
market, which is being driven by an expanding ageing population,
with people living longer and having to take greater responsibility
for their own health.
Jerry Randall
Chief Executive Officer
Highlights
• Continued growth through our organic
and acquisitive strategy
• Increase in operating cash generation
of 20%
• Customer brands business up 11%
to £13.5 million (2018: £12.1 million)
• PharmaSource BV acquisition
12
Venture Life Group Annual Report 2019
Growth strategy
Our growth strategy is centred on increasing revenues, which then
accelerate profitability through operational leverage. We grow
revenues through:
•
•
Existing customers growing revenues in their markets
Increasing the geographic penetration of our products through
existing or new partners
Product innovation and development available to all markets
Acquisition of product assets that we can then expand
geographically and transfer to our manufacturing facility
•
•
Operating review
Acquisition of PharmaSource BV
In line with our stated strategy of acquisitive growth alongside organic
growth, on 19 December 2019 we exchanged contracts to acquire the
entire issued share capital of PharmaSource BV, a privately held
consumer self-care products company based in The Netherlands,
subject to completion of certain critical actions. The acquisition
was completed on 24 January 2020 and will be immediately earnings
enhancing. This innovative, fast growing and profitable business
is selling some proven medical devices in the areas of fungal nail
infections, wart removal, oral and women’s health. The products
are sold direct through retail and grocery chains in The Netherlands,
and also through some key international distributors in Europe.
PharmaSource BV delivered revenues of €2.6 million in the year ended
31 December 2019, and profit before tax of €0.9 million. These results
are not included in Venture Life Group’s results in the year ended
31 December 2019. The consideration for the acquisition was a total
of €6.5 million, although €1.3 million of this is deferred, related to the
confirmation of the 2019 results and a small product approval.
The acquisition brings many benefits and opportunities for the Group:
•
A new range of products with limited current international
exposure that we can partner
•
• Direct access to the retail channels in The Netherlands, that we
can look to exploit further with existing Venture Life products
New international partners that we can now consider for some
of the Venture Life products
Utilising our operational leverage and facilities to create profit
and cost synergies going forward.
•
The integration is progressing well and we plan to maintain and build
on the operations in The Netherlands as we grow the business there.
We have already achieved our first new partner agreement for
products from PharmaSource BV, with Lloyds Pharmacy in the UK
agreeing to take the wart pen for distribution throughout their UK
pharmacy outlets, having already launched Venture Life’s Myco Clear
nail fungal brush product in 2019.
Venture Life Brands
UltraDEX
Revenues remained steady at £3.2 million (2018: £3.2 million) across
all markets. Sales in the UK and Ireland, where we sell direct into retail
remained flat at £2.6 million (2018: £2.6 million) – a solid performance
given the UK mouthwash market declined at rate of 5% in 2019.
Despite a decline in the mouthwash market, we have secured new
distribution points with ASDA and Well Pharmacy for UltraDEX.
Now available in key UK pharmacies and grocery retailers including
Boots, Superdrug, Lloyds Pharmacies, Tesco, ASDA and Sainsbury’s,
amongst others, we have increased UltraDEX’s UK points of distribution
significantly since the acquisition in 2016 by 34%. Our marketing in
2020 will continue to focus increasingly on digital and social media
aspects, following the effective “Smellephant” campaign in 2019.
Internationally, the brand is partnered in 17 countries, with revenues
outside of the UK and Ireland of £0.6 million (2018: £0.6 million).
Revenues were flat in 2019, as 2018 included some first orders
for partners, which included both initial stocking and anticipated sell
through. However, good progress has been made post period end and
we expect 2020 to deliver exceptional growth internationally compared
to 2019.
Dentyl
We received a first full year of revenues from Dentyl in 2019
(mouthwash and fresh breath beads), having acquired the brand
in August 2018. Revenues in 2019 for the brand were £2.2 million
(2018 for 5 months: £1.6 million). This first full year was mixed, with a
consolidation of the UK business, which contained a number of legacy
delists and one-offs that had been initiated before we acquired the
brand, and issues with sales to our Chinese partner due to quality
issues on externally manufactured products. However, these one-off
delists have now run their course, and the order book for China in
2020 is growing significantly.
In the UK & Ireland, revenues rose 135% to £1.9 million (2018 for 5
months: £0.8 million). Dentyl had been neglected in the hands of the
previous owner, and our focus has been on rebuilding trust in the
brand through retailer and public engagement, refreshing the brand
image and partly bringing manufacturing and development in-house.
As a result, we have been able to reverse some of the delistings that
occurred in the hands of the previous owners, including BodyCare
Plus. Additionally, Superdrug has increased its listings, while Lloyds
Pharmacy launched the mouthwash in 2019. We are confident in the
growth opportunity for Dentyl and have invested in a number of new
product development ideas that will come to market in 2020, both in
the UK and internationally. As with UltraDEX, good progress has also
been made post period end and we expect 2020 to deliver very good
growth internationally compared to 2019.
Venture Life Group Annual Report 2019
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Chief Executive Officer’s Statement
continued
Case study:
Acquisition: PharmaSource BV, Netherlands
In December 2019, Venture Life exchanged contracts to acquire
PharmaSource BV, a Netherlands-based development and
distribution business. The acquisition completed on 24 January 2020.
PharmaSource BV is an innovative, fast growing, profitable
business, which owns a number of Medical Device products in key
therapeutic areas, including fungal nail infections, wart removal
and women’s health.
Revenues 2019
€2.6m
Strategically, this acquisition enables Venture Life to broaden its
product range and extend global reach by providing additional
retailers and distributors to its existing network, as well as benefit
from the operational leverage Venture Life brings with its
manufacturing facility.
New products acquired
10
These products are distributed both through retail pharmacies
in The Netherlands and through key international distribution
partners outside of The Netherlands, including the UK, Germany,
the Nordics, Belgium and France.
“The acquisition of PharmaSource BV gives us our first mainland
European footprint directly into the retailer market. We see this
as another excellent add-on to our existing business that we
can further grow and develop within our existing structure.”
Venture Life Brands (continued)
Dentyl (continued)
As reported previously, internationally, the brand did not meet our
expectations in 2019, with revenues of £0.3 million (2018 for 5
months: £0.8 million), and these 2019 sales were predominantly of the
Dentyl fresh breath beads. In 2018, our Chinese partner for this brand
launched the mouthwash in China and achieved good early success.
However, as previously mentioned, quality problems at the external
contract manufacturer caused our partner to halt sales and marketing
in January 2019 until the issues were resolved. Transfer of production
in-house to our Italian facility and changes to the packaging solved the
issues by mid 2019, but the break in sales and marketing activities
affected sell through of the product in China.
However, it is pleasing to report that since our partner restarted the
sales and marketing activities in late 2019, sales have escalated rapidly
and at the time of writing, we received orders totalling over €7.0 million
from this partner for delivery in 2020, for Dentyl mouthwash, Dentyl
Fresh Breath Beads and other products. Of this, more than €2.0 million
is expected to be delivered in H1 2020. This partner also expects to
launch the newly developed Dentyl toothpaste range in 2020 as well
as the two new limited editions mouthwash that will launch mid 2020.
As a result, whilst 2019 was a disappointing year for the Dentyl brand
in China, our partner is now making excellent progress and we expect
to see considerable growth in 2020 and beyond. This partner has also
reported that sell out in China has not been noticeably affected by the
recent coronavirus issue, as sales are purely online.
Additionally, we have continued to partner Dentyl in new geographies,
such as France, and we will continue to see further developments in 2020.
14
Venture Life Group Annual Report 2019
Lubatti
This skincare product range is only partnered in China, with a different
partner from that which sells Dentyl and sales during 2019 amounted
to £0.1 million. Prior to 2019, sales of Lubatti to this partner totalled
£2.3 million over five years. The retail markets are changing rapidly
in China and online sales are growing at a faster rate than expected.
Our partner has over 2,000 high street stores focused on skincare,
but in the past three years it reported that its footfall through these
stores fell by 60%. Our partner has consequently decided to halt any
further high street store expansion, instead investing in online sales.
This change in strategy midway through 2019 has meant the Lubatti
brand will now be sold exclusively online and orders resumed in late
2019. Our partner remains committed to the brand and to this new
strategy, and we expect revenues to increase throughout 2020. At the
date of writing, our partner for Lubatti in China reported that 90% of
their stores across mainland China had reopened with sales gradually
returning to normal levels.
Procto-Eze
This brand is gaining more prominence within our portfolio,
with revenues increasing by 8% to £0.5 million in 2019. The range
includes three SKUs and has gained traction with partners in nine
countries, including two further long-term partner agreements that
were signed post year-end in Poland and Portugal.
Other brands
Revenues from the rest of the branded portfolio were £0.7 million
(2018: £0.2 million) including NeuroAge, Myco Clear and Vonalei.
We continue to identify new partners for these smaller brands and
signed four new long-term partner deals on these brands in 2019.
Customer Brands
Customer Brand revenues grew 11% in the year to £13.5 million
(2018: £12.2 million), with growth from both existing and new
customers. The new Medical Device Regulations (MDR) that will be
instated in May 2021 (originally May 2020 but recently delayed by one
year due to Covid-19) have driven significant development activities in
the business, including investing in the conversion of the existing
products from the existing Medical Device Directive (MDD). The more
stringent regulations required investment to improve the technical file
for many of our own and our customers’ products, which will in turn
lead to ongoing future revenues for the Group arising from these
products. As the new MDR regulations come into force, this will
improve the attractiveness and value of these enhanced products,
with less technical products from competitors failing the tests of rigour.
Investments and R&D
We continue to invest in the plant in Italy, in order to improve efficiency.
In 2019, this included investment in upgraded filling capability for
UltraDEX and Dentyl and increased secondary packaging areas.
We have also invested in the new EDI batch labelling system, which
will become mandatory from 2023 and we are seeing new customers
attracted due to this capability.
New product development is a key contributor to growing revenues,
and at the facility in Italy we have continued the development of new
products apace in 2019. As well as developing new products for sale
under customers’ own brands, we developed new products for our
own brands, including three new flavours of the Dentyl toothpaste
to be sold alongside the mouthwash range, and some limited editions
of the Dentyl mouthwash, which will launch in mid-2020.
We have also now fully validated the manufacture of the Dentyl
mouthwash product in our facility and have already started to deliver
the product from there to international markets.
Summary & outlook
We are delighted to have delivered organic growth in revenues and
profits in 2019, despite experiencing a number of challenges during
the year. The Group continues to exploit and further invest in its
operational leverage, which we expect to bring increased efficiency
and profitability in the future.
The main challenge experienced during the period was the
performance of our two Chinese partners and it is pleasing to report
that this has been overcome. Already this year, we have received
orders from our key Chinese Dentyl partner of over €7 million for
delivery in 2020, (of which more than €2 million is due for delivery
in the first half), which is well ahead of what we had budgeted.
These orders from China are contributing to a very strong current
order book overall for the business, and at the time of writing the order
book value stands at more than 2.5 times the value at the same time
last year, even excluding the order book at PharmaSource BV.
We are seeing growth from many of our partners, and there is no doubt
that the new MDR will benefit the Group in the long-term, delivering
significant and sustainable long-term revenues. The addition of the
earnings enhancing PharmaSource BV business will deliver additional
revenue, profit and cash flow to the Group, and provide significant
opportunities for operational leverage in 2020 and beyond.
We continue to seek out and evaluate small bolt-on acquisitions,
to utilise the surplus cash and debt facilities available to us, to further
enhance Group profitability.
The Covid-19 virus has had and is having a dramatic effect
on the world at this time. Our development and production facility,
Biokosmes, is based in Bosisio Parini in the north of Lombardy and
our people and our business became subject to the severe lockdown
regulations imposed by the Italian Government to cope with impact
of the virus. Similar restrictions are now in place in the UK and
The Netherlands. However, as a Group we have implemented
a number of precautions to meet the requirements of local
Governments in relation to the Covid-19 restrictions and regard the
business to be as prepared as it could be, and we are considered an
essential supplier by the Italian Government. The precautions we have
put in place have been to protect our employees first, and then our
business, our customers, our suppliers and all of our stakeholders.
Venture Life Group Annual Report 2019
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Chief Executive Officer’s Statement
continued
Case study:
UltraDEX: #youneverknow Marketing Campaign
With the 2019 #youneverknow campaign, the UltraDEX marketing
team wanted to bring the topic of bad breath to the forefront of
public discussion.
Playing on the notion of bad breath being the “elephant in the
room”, a “Smellephant” caricature was developed and used to
promote their outdoor campaign called “Catch the Smellephant”
tour. Over ten days, the tour visited ten high footfall locations in
central London.
Brand ambassadors handed out 90,000 UltraDEX mouthwash
samples, 25,000 promotional postcards and discount vouchers.
Within the first 2 weeks, there was a 538% increase in social
media traffic and the campaign was Finalist in the FMC Dental
Industry Awards 2019.
This continued dynamic marketing strategy illustrates Venture
Life’s ability to reinvigorate acquired brands such as UltraDEX.
Samples distributed
90,000
Increase in social
media traffic
538%
At our Italian facility we have also initiated the manufacture of hand
sanitising gel. This has been to satisfy commercial demand from
retailers, and also we have supplied product on a compassionate basis
at no cost to hospitals and pharmacies in the north Lombardy area to
support the fight against Covid-19.
As a result of the dedication and commitment of all our employees,
in all locations of the Group, we have been able to continue to operate
our business. More specifically in Italy, our development and
manufacturing facility remains open and operational, and processing
the significant order book that we have on hand, and shipping to our
customers. We cannot predict how this issue will continue to manifest
itself in the coming weeks and months, but we have undertaken
extensive financial stress tests on our business, which confirm that we
are in a strong and robust position to deal with the current and
anticipated disruption due to the Covid-19 crisis. At this time our
magnificent team in all our locations has risen to the challenge of
making sure we continue to deliver to our customers around the
world as we always have.
16
Venture Life Group Annual Report 2019
I would like to thank our employees for their hard work and
commitment to our business, and our shareholders, for their continued
support for the business in these challenging market conditions.
Having already completed our first quarter, and having implemented
specific procedures for our business to operate in this difficult
Covid-19 environment, the Board is confident that the business
is well positioned to continue to operate in these challenging current
conditions and emerge with a stronger business on the other side.
Jerry Randall
Chief Executive Officer
8 April 2020
Our Awards
Our team is committed to and
motivated by the success
of the company
Our team is committed to and motivated by the success of the
company. Since Venture Life was founded in 2010, we are extremely
proud to have received several awards, recognising both our fast and
dynamic growth, and strong leadership.
In June 2019, we were named one of the London Stock Exchange
“1000 Companies to Inspire Britain” for the fourth consecutive year.
This is a well-regarded award that recognises businesses across the
UK that outperform their peers. In 2019, there were 5.9 million SMEs
in the UK.
Our UltraDEX brand was a finalist for three awards in the annual
FMC Dental Industry Awards 2019. The nominated categories
included Marketing Campaign of the Year, Advertisement of the Year
and Product Launch of the Year. UltraDEX won the award for Best
Advertisement of the Year. This success illustrates the Company’s
ability to revitalise the marketing strategy of an acquired brand.
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17
Strategic Report
Principal Risks and Uncertainties
Creating quality outcomes
by managing risk
Non-financial risks
Reduction in demand
for products
The Group’s product distribution agreements generally give market exclusivity to its distribution
partners for a period of five or ten years. While 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.
Customer-specific risk
A significant proportion of revenue from our Development and Manufacturing business 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 2016, 2017, 2018 and 2019 was 54%, 56%, 50%
and 40% respectively as we diversify our customer base through growth. 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.
Delay in regulatory
approval
The Group’s products are primarily approved for use as medical devices, functional cosmetics and
food supplements that, in certain regions including Europe, require pre-market notification but not
pre-market authorisation or approval by the relevant authorities. Certain changes in Medical Device
Regulations (MDR) are taking effect in 2021.
In other regions of the world where the Group either has distribution agreements in place or is actively seeking to
establish them, 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.
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.
The Group is reliant on its 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, flooding or Brexit related issues.
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.
The Group’s revenues are 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 80% of the Group’s revenues
are denominated in euros. The Group is therefore 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 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.
Supply chain risk
Adverse foreign
exchange movements
affecting profitability
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Venture Life Group Annual Report 2019
Financial risks
Financial 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 are 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 3.14.
Financial risk factors
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 to minimise potential adverse effects on the Group’s financial performance.
Market risk
Credit risk
Liquidity risk
Capital risk
management
Brexit risk
Covid-19
No change in risk
Increase in risk
Decrease in risk
Risk management is carried out by management under policies approved by the Directors. Management
identifies and evaluates financial risks in close cooperation 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. The Group monitors market risk factors and regularly reviews business
forecasts to assess the impact of changes in market conditions.
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. The Group mitigates this risk by requiring upfront payments from new orders
with new customers and monitoring the composition of the Group’s monthly debtor book.
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, 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. 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.
The Group has operations in the UK, The Netherlands and Italy. In the event of Brexit there may be
some implications for the Group arising. At the moment there is limited clarity on the exact impact on
UK-based businesses that trade internationally. The significant proportion of the Groups operations
is based in mainland Europe so will not be affected by Brexit. In fact with the majority of our operations
based in the EU, Venture Life is more immune to the potential implications of Brexit compared to most
UK businesses. The main issue that may affect the Group could relate to import duties on products
manufactured outside of the UK, but imported into the UK for sale. Approximately 73% of the Group’s
revenues are invoiced or shipped out of Italy, in euros, and therefore do not come into the UK and would
not be subject to any import tariffs. The remaining 27% currently represents the sales of UltraDEX which
is manufactured in our plant in Italy, then imported to the UK and sold to customers. It is possible that
these imports could be subject to import duties, which would increase the cost of these items that we
sell in the UK, reducing gross margins on the product. As we manufacture these products ourselves, we
already have good gross margins on the products with which to absorb these increases. However,
if these increases become particularly onerous, we already have in place secondary suppliers in the
UK that would be able to produce the goods at a better price than that if import duties were imposed,
thus maintaining our margins on these products.
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As at 8 April 2020 the Group’s business units in the UK, The Netherlands and Italy are operational.
The Group’s Italian manufacturing facility is considered an essential business. Shipments of finished
goods to customers are continuing as are invoicing and cash collection processes. The majority of
the Group’s customers are large organisations and it is the opinion of the Directors that bad debts will
remain a relatively low risk. Accordingly the Directors have evaluated a range of scenarios all
representing varying months of closure of the business and associated losses of marginal gross
profits and forsee the company has sufficient resources to continue in operational existence for
the foreseeable future and to comfortably make scheduled loan repayments as they fall due.
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Strategic Report
Our Section 172(1) Statement
Our key stakeholders
The table below highlights our key stakeholders, and why and how we engage with them.
Who?
Why?
How?
Our key stakeholders
Their importance to our long-
term success
The methods we use to engage and
understand and their issues
The Company’s key stakeholders include
the following parties:
• Our many Shareholders
• Our dedicated workforce of more than
100 individuals
• The sell-side analysts of the market in
which we are listed
• Our many dedicated Suppliers of raw
materials, packaging, other products
and services
• Our portfolio of Customers across
the world
• The local communities in territories
in which we operate
• The environment
• The national and international regulators
applicable to our products
• Our NOMAD, auditors, legal counsel and
other professional advisors
Key Stakeholders play a major role in the
continuing operation of the business in
many forms:
Strategic decision making, including
providing input and advice in relation to
prospective activities which can include
fundraising, M&A activities, allocation of
cash across business segments and
other activities.
Operational matters, aimed at ensuring the
business operates with maximum efficiency
as well as adopting a pragmatic approach to
planning, forecasting and prioritisation.
Compliance, ensuring the company
complies fully with regulatory, legal and
other legislative requirements.
Our CEO leads the interactions with
shareholders, NOMAD, and other
professional advisors, supported by
other Executives.
Individual executives operate openly
with their teams to ensure a united and
coordinated effort by the workforce to meet
Group objectives. These executives plus their
teams of Directors and Managers also
interact with the portfolio of Customers and
Suppliers to maximise the achievement of
company operating performance.
Our CFO leads the interactions with sell-side
market analysts to ensure forward looking
market forecasts are appropriate.
The interaction with national and international
regulatory bodies is lead from our Head of
R&D & Technical in consultation with the
executives.
All Executives are experienced, qualified
individuals and act with skill and integrity.
Board Papers are prepared with diligence and
are issued several days ahead of each Board
meeting to enable attendees to thoroughly
pre-read. Training is undertaken as required
in specific areas to supplement skills and
experience.
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Venture Life Group Annual Report 2019
Strategic Report
Our principal decisions
We describe below how the directors had regard to key stakeholders when making principal decisions during the year.
Principal decisions
Key stakeholders
More information
Principal decisions included:
The Group’s strategic drivers include:
a) Revenue growth and
b) “Buy & build”, in which the Directors are
continually exploring business targets
that fit against a number of set criteria,
and
c) “Maximise automation and factory
throughput” in order to continuously
improve cost-of-goods, and
d) “Care for the environment” which
includes a range of measures
associated with the selection of ethical
and safe product ingredients, the
efficient consumption of energy
and the fair treatment of waste.
The recent acquisition of PharmaSource BV
is addressed in the CEO report and also in
Note 32 Post Balance Sheet Events.
Although this report does not focus on this
matter in this year, the cashflow statement
highlights a spend of £372k in 2019 on
factory automation.
Environmental factors are important
to the Group and our culture.
a) The decision to terminate on
prospective M&A activity following
a significant due diligence exercise;
b) The decision to focus on increasing
revenue through the business from
all sources to maximise the operational
leverage we have and hence maximise
profit and cash flow;
c) The decision to progress and ultimately
acquire PharmaSource BV (completed
24 January 2020) following a
substantial due diligence exercise.
In making this decision the directors
carefully considered the conflicting
interests expressed by some
shareholders of the short-term merits
of maintaining excess cash in the
balance sheet versus the longer-term
merits of making the acquisition.
d) The decision post year-end to supply
hand-gel free of charge to hospitals
and pharmacies in the Lombardy area
of Italy in response to Covid-19.
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Strategic Report
Financial Review
The Group reported 2019 revenues
of £20.2 million, an increase of 7% over
the £18.8 million reported in 2018.
The Group delivered robust results for the year, once again delivering
on its profitability progression driving greater revenues through the
infrastructure. All profitability measures (gross profit, EBITDA,
operating profit, pre-tax profit and post-tax profit) increased
commensurately, as did all measures of operational cash flow.
Statement of Comprehensive Income
The Group reported 2019 revenues of £20.2 million, an increase
of 7% over the £18.8 million reported in 2018. The Venture Life Brands
business reported relatively flat revenues at £6.7 million
(2018: £6.6 million). The Dentyl brand grew by 35% to £2.2 million
in 2019 (2018: £1.6 million) primarily reflecting the full year-effect
on sales in the UK market, which was significantly offset by reduced
international sales to China due to the temporary packaging issue
(which has subsequently been resolved). UltraDEX net sales remained
broadly flat at £3.2 million in 2019 comprising relatively stable sales
of £2.6 million to UK & Ireland retailers and £0.6 million to international
partners. Sales of the Lubatti brand to China fell by £0.7 million due
to a one-off change in selling strategy by the Chinese partner
resulting in a re-balancing of trade inventory levels. Sales of the
group’s other branded products grew 24%, reflecting a blend of
increasing geographic footprint coupled with volume growth.
The Customer Brands business reported revenues (excluding
intercompany sales) of £13.5 million, an increase of 11% from 2018.
This business is focused on the development and manufacture of
products on behalf of third parties to be sold under their brands
and the growth is partly attributable to newly launched assets.
The euro fluctuated against the pound in 2019, which resulted in
slightly reduced reported revenue and administrative costs (large
elements of these are in euros). The overall impact of the changes in
foreign currency rates nevertheless had only a marginal effect on the
reported operating profit of the Group. The appreciation of sterling
at the year-end gave rise to a small gain within finance costs resulting
from the revaluation of the Group’s euro denominated loans partially
offset by a small foreign exchange loss on the Group’s euro
denominated assets (mostly Italian factory plant & machinery).
The gross margin for 2019 was 39.6% (2018: 38.9%), which resulted
from higher revenues and factory throughput, partially offset by slightly
higher promotional spending behind the UK brands especially Dentyl.
Administrative costs (pre-exceptional items) at £6.7 million were
9% higher in 2019 than in 2018 (2018: £6.2 million) due in part to
some one-off non-recurring operating expenditures pertaining to
changes in staff. Exceptional costs of £208,000 (2018: £172,000)
related to legal and professional fees incurred in the acquisition of
the PharmaSource BV business (announced 19 December 2019
and completed 24 January 2020), as well as speculative due
diligence activities conducted earlier in the year.
Andrew Waters
Chief Financial Officer
Highlights
• 7% year-on-year revenue increase,
mostly organic
• H2 gross margin improved 41.5%
from 37.4% in H1, giving overall 39.6%
for the year (2018: 38.9%)
• Positive operating cash flow
• Additional €1m debt raised on
attractive terms
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Venture Life Group Annual Report 2019
Operating profit was £1.5 million (2018: £1.2 million) (before
exceptional items) with the profit before tax for the Group of
£1.4 million (2018: £0.7 million). The Group reported profit after
tax of £0.9 million (2018: profit of £0.2 million).
Finance costs were a credit of £0.1 million and reflected both positive
net interest (as interest income on sterling deposits exceeded interest
payable on euro loans) coupled with foreign exchange gains arising
principally upon settlement of euro denominated costs during periods
of sterling appreciation.
These translated into basic earnings per share of 1.08 pence
(2018: 0.42 pence), with the improvement in business performance
generating enhanced shareholder value. Adjusted earnings per share
(adjusted for exceptional items, share-based payments and
amortisation of intangible assets) were 2.18 pence (2018: adjusted
earnings per share 2.06 pence). The number of shares in issue as at
31 December 2019 was unchanged at 83,712,106 (31 December
2018: 83,712,106).
Statement of Financial Position
Intangible assets increased slightly by £0.2 million, comprising further
capitalisation of development costs of £0.8 million and continuing
investment in patents and trademarks of £0.1 million partially offset
by ongoing amortisation. Capitalised development costs are carried
in the amount of £1.9 million and reflect the recent peaking in
workflow assisting our customers with formulation upgrades and
changes to the Medical Device regulations arising in 2020. Whilst
consuming cash, this investment continues to be value-enhancing
through strengthening relationships with our customer base.
Property, plant and equipment decreased as the net result of
investment of £0.4 million in new equipment in the Customer
Brands business was more than offset by ongoing depreciation.
Working capital was well managed during 2019, with the closing
balance at 31 December 2019 in line with the prior year and not
increasing despite the growth in the business. Specifically, inventories
increased in-line with business growth coupled with the proactive
policy to increase UK inventories in the run-up to Brexit in order to
secure supply across potentially uncertain times. Trade debtors
decreased and trade creditors increased reflecting efforts to
improve the overall working capital funds deployment.
Cash and debt
Cash and cash equivalents at the year end totalled £10.7 million (2018:
£9.6 million). Net cash inflow during 2019 amounted to £1.4 million
with the increase in cash balances accounted for as follows:
• Operating cash flow before movements in working capital - inflow
•
•
of £3.0 million
Tax paid – outflow of £0.4 million
Net movement in working capital, including £1.4 million build
of UK inventory as part of Brexit preparations – offset by debtor
and creditor flux – neutral movement
Investment in manufacturing facility – outflow of £0.4 million
Investment in intangible development assets - outflow
of £0.8 million
•
Repayment of Finance Leases – outflow of £0.6 million
• Drawdown of new €1 million loan – inflow of £0.8 million
•
Repayment of existing term loans – outflow of £0.2 million
•
•
Net cash, excluding finance lease obligations, increased
from £5.8 million as at 31 December 2018 to £6.3 million
as at 31 December 2019.
The Group is financed by a range of largely euro denominated interest-
bearing debt of varying maturities, comprising of invoice financing and
unsecured bank loans. During May 2019 the group secured a further
€1 million loan from an Italian bank at an attractive interest rate and
repayable by 2024. Given the net cash position at the year end, the Group
is comfortable with the level of debt in the business which is being used
to finance growth and investment. The Directors have prepared detailed
forecasts looking beyond 12 months from the date of these financial
statements and expect the Group to continue to operate profitably in
the foreseeable future, generate positive operating cashflows and
comfortably meet all scheduled loan repayments as they fall due.
The Group has delivered a robust performance in 2019 with strong
and growing operating profit, pre-tax profit, post-tax profit and
operating cashflow. The start of 2020 has been particularly strong
with the sales order book at 9 April 2020 significantly higher than in
previous years. As described in the Post Balance Sheet Events note,
the Group is managing the impact of Covid-19 on its business and the
uncertainty that this might bring. Following analysis and consideration
of even an extreme worst-case scenario, the directors believe that the
Group has sufficient resources to continue in operational existence for
the foreseeable future and to comfortably make scheduled loan
repayments as they fall due. The Directors therefore conclude that the
Going Concern basis remains the appropriate basis upon which to
prepare the Group’s financial statements.
Andrew Waters
Chief Financial Officer
8 April 2020
Venture Life Group Annual Report 2019
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Corporate Governance
Board of Directors
Leading with
an experienced team
Dr Lynn Drummond
Non-Executive Chair
Jerry Randall
Chief Executive Officer
Sharon Daly (née Collins)
Chief Commercial Officer
Gianluca Braguti
Chief Manufacturing Officer
Sharon co-founded Venture Life
in 2010. Sharon has over 20
years’ experience within the
healthcare industry,
predominantly in marketing,
international sales and business
development roles. She worked
for a leading dental
manufacturer for seven 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 2005.
Gianluca joined the Board
in March 2014 following the
acquisition by Venture Life
of Biokosmes, the company
he founded.
Gianluca began his 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,
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.
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.
Committee memberships
Lynn chairs the Group’s
Nomination Committee and is
a member of the Audit and Risk
and Remuneration Committees.
Jerry co-founded Venture Life
in 2010. From 2000 to 2009,
Jerry was CFO and co-founder
of Sinclair Pharma plc, an AIM
listed 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. Jerry was
also on the Board of Silence
Therapeutics plc, an AIM listed
biotech development business,
from 2008 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.
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Venture Life Group Annual Report 2019
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Carl Dempsey
Non-Executive Director
Peter Bream
Non-Executive Director
Andrew Waters
Chief Financial Officer
Peter Bream joined Venture Life
in February 2016. Formerly 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.
Andrew joined Venture Life as
Chief Financial Officer in May
2019. Andrew is a Chartered
Accountant having previously
worked at PWC and then
GlaxoSmithKline plc, where
he spent 16 years in various
financial and business
management positions.
Peter has a degree in
Engineering and Management
from Cambridge University and
is a Chartered Accountant.
Committee memberships
Peter chairs the Group’s Audit
and Risk Committee and is a
member of the Remuneration
and Nomination Committees.
Following this, Andrew
co-founded two businesses,
Cubase Consulting Ltd and
Infirst Healthcare Ltd, which
he progressed as Chief Financial
Officer through three successful
funding rounds, raising in excess
of £40 million from private equity.
Carl Dempsey joined the Venture
Life board as Non-Executive
Director in September 2018.
Until recently, Carl was
Worldwide Vice President Global
Customer Management at
Johnson & Johnson (“J&J”)
where he was responsible for
global sales of US$3.6 billion
across 22 countries.
During his 29 year career at J&J,
Carl had particular responsibility
for developing the Health and
Wellness Partnership strategy.
He also led the successful
integration of Pfizer Consumer
Healthcare across Europe,
Africa and the Middle East which
included the mouthwash brand.
Committee memberships
Carl chairs the Group’s
Remuneration Committee and is
a member of the Audit and Risk
and Nomination Committees.
Giuseppe Gioffrè
Group Financial Controller
and Company Secretary
Giuseppe manages the
operational finances as Group
Financial Controller and provides
Company secretarial support to
the Board and assists with
finance matters as required.
Giuseppe started his career
as a business management
and fiscal adviser before joining
Biokosmes, the manufacturing
facility of Venture Life Group
in 2014.
Giuseppe has a Master
of Science in public
administration and international
institutions management
obtained at Bocconi University
in Milan. He is a Certified
Chartered Accountant and
certified registered auditor.
Venture Life Group Annual Report 2019
25
Corporate Governance
Statement of 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 Group 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 and has
adopted the principles of the Quoted Company Alliance (“QCA”) Code.
The ten principles of the QCA Code are detailed in the Investor
Relations section of the Group’s website (www.venture-
life.com/investor-relations/corporate- governance/). This statement
sets out the corporate governance procedures that are in place.
The Board
During the year, the Board of Venture Life Group plc comprised
of three Non-Executive Directors, one of whom chaired 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 judgement 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 they 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.
26
Venture Life Group Annual Report 2019
The Audit and Risk Committee
The Audit and Risk Committee is chaired by Peter Bream.
The other members of the Committee are Carl Dempsey and
Dr 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 auditor, 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 Carl Dempsey.
Lynn Drummond and Peter Bream are the other members
of the Committee.
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 Carl
Dempsey and Peter Bream as the other members of the Committee.
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.
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 their 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.
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 2020 AGM will be held on 3 June 2020 and a Notice of Annual
General Meeting can be found enclosed with this report.
Attendance at Board meetings and Committees
The Directors attended the following Board meetings and Committee meetings during the year:
Dr Lynn Drummond
Non-Executive Chair
8 April 2020
Director Board Audit Remuneration
Dr Lynn Drummond 5/5 2/2 2/2
Peter Bream 5/5 2/2 2/2
Jerry Randall 5/5 - -
Sharon Daly (née Collins) 5/5 - -
Carl Dempsey 5/5 2/2 2/2
Gianluca Braguti 5/5 - -
Andrew Waters2 3/5 1/2 1/2
Adrian Crockett1 1/5 0/2 0/2
Total meetings held in the year 5 2 2
1 Resigned 29 January 2019.
2 Appointed 1 May 2019.
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.
Venture Life Group Annual Report 2019
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Corporate Governance
Directors’ Report
General matters
The Directors submit their report and the financial statements
of Venture Life Group plc for the year ended 31 December 2019.
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, Italy and
Switzerland.
Results
The profit before tax for the year ended 31 December 2019 was
£1.4 million (2018: £0.7 million). The detailed results for the year
and the financial position at 31 December 2019 are shown in the
Consolidated Statement of Comprehensive Income on page 40
and the Consolidated Statement of Financial Position on page 41.
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.
Business outlook.
Going concern
The Group made a profit after tax during the year of £0.9m and
generated in excess of £3.0 million in operating cash flow, all arising
from transactions of an on-going nature and in the ordinary course
of business. The order book at 31 December 2019 remains strong.
The Company had net cash of £6.3 million at the year-end excluding
finance leases, and £3.7million including finance leases. £5.56 million
of this cash was committed at 31 December 2019 as consideration
for the acquisition of Pharmasouce BV. The residual net cash after this
committed sum was £0.8 million excluding finance leases and
£(1.8) million (i.e. a net debt) including finance leases. Business
operations are cash generative and significantly exceed investing
and financing outflows.
The Directors have prepared detailed financial forecasts and cash flows
looking beyond 12 months from the date of these financial statements,
and have made assumptions based upon their view of the current and
future economic conditions that will prevail over the forecast period.
On the basis of the above projections, the Directors believe that the
Group is well placed to manage its business risks successfully.
As described in the Post Balance Sheet Events Note 32, the Group is
managing the impact of Covid-19 pandemic on its business and the
uncertainty that this might bring which has the potential in the worse-
28
Venture Life Group Annual Report 2019
case scenario to create a significant shortfall versus the 2020
budgeted trading results and cashflows. The Group manufactures
a high proportion of its products in its own facility in Lombardy, Italy
which has been an epicentre of this pandemic outbreak. This at face
value presents a degree of risk and uncertainty given the lockdown
that has been in place across Italy since 9 March 2020. The Directors
have therefore considered the precautionary and protective actions
that have been taken by the company to protect the health and
wellbeing of the staff whilst maintaining business operations.
Specifically in Italy the company has introduced three main activities:
Introduction of stringent procedures to protect staff including the
a)
provision of masks and handwashes, the physical separation of
employees and restrictions to meeting sizes, the control of
attendees and visitors to the premises and other measures.
The administrative workforce is currently working mostly from
home and the on-site production workforce has been reduced
somewhat;
b) Procurement of critical raw materials to not only meet customer
demand for existing production but to enable additional
manufacture of handwashes and anti-microbial products;
c) Strategic prioritisation of customer orders to ensure that the
existing inventory of finished goods (and work-in-progress as it
becomes completed) is allocated appropriately to those parties
based upon need, continuity of supply and other factors in order
to ensure the demand is met.
In addition to the above, the Group has manufactured a large quantity
of handwash products and distributed these free of charge to local
hospitals and pharmacies in Lombardy in order to assist in the national
& international effort to combat the pandemic.
As at 8 April 2020 the Italian factory has remained open and producing
high volumes of product. Shipments of finished goods to customers is
continuing as are invoicing and cash collection processes.
The majority of VLG’s customers are large organisations and it is the
opinion of the Directors that bad debts will remain a relatively low risk.
Accordingly the Directors have evaluated a range of scenarios
all depicting varying months of closure of the Italian factory and
associated losses of marginal gross profits. The key findings of
this evaluation are:
a) Management does not expect the Italian factory to close, but
acknowledges that there is a clear risk that it could face the need
to close for a period of up to one month. The impact of this one-
month closure would be minor in terms of 2020/21 performance
and closing cash at 30 June 2021 is forecast to be in excess of
£8.0 million. Given the strong inventory that the company holds,
there is an expectation that such a short closure would in practice
be managed with £nil impact on 2020 and 2021 performance;
b) A scenario with a more extensive closure to the factory of 3
months yields a significantly reduced PBT for 2020 improving
in 2021 and a cash balance on 30 June 2021 in excess of
£6.0 million;
c) A dramatically more pessimistic scenario with an extensive
closure to the factory of 6 months yields a slightly negative
PBT for 2020 improving in 2021 and a positive cash balance
on 30 June 2021 in excess of £5.0 million. The Directors
consider this scenario as extremely unlikely in practice.
All of these above forecasts do not include any expenditure savings
that would be introduced in circumstances of prolonged closures.
Based upon these financial forecasts, the Directors believe that:
a) The procedures in place in Italy have been effective to date and
the company has established a pattern of operating through the
lockdown to ensure continuity of business, as well as attainment
of local authority acclaim;
b) The business has sufficient balance sheet strength to weather
even an unrealistically long stoppage and remain liquid.
Directors
The following Directors held office during the year and up to the date
of this report:
Dr Lynn Drummond Non-Executive Chair
Jerry Randall Chief Executive Officer
Sharon Daly (née Collins) Chief Commercial Officer
Gianluca Braguti Chief Manufacturing Officer
Carl Dempsey Non-Executive Director
Peter Bream Non-Executive Director
Adrian Crockett2 Chief Financial Officer
Andrew Waters1 Chief Financial Officer
1 appointed 1 May 2019.
2 resigned 29 January 2019.
Accordingly, after making enquiries the Directors foresee that even
in the most extreme scenario of a six month factory closure (which is
far beyond any contemplated worse-case scenario), the Company
has sufficient resources to continue in operational existence for
the foreseeable future and to comfortably make scheduled loan
repayments as they fall due.
Information on Directors’ remuneration, share options, long-term
executive plans, pension contributions and benefits is set out in the
Remuneration Report on pages 32 to 36.
Qualifying third-party indemnity provision is in place for the benefit
of all Directors of the Company.
Accordingly, after making enquiries the Directors foresee that even
in the most extreme scenario of a six month factory closure (which is
far beyond any contemplated worse-case scenario) the company has
sufficient resources to continue in operational existence for the
foreseeable future and to comfortably make scheduled loan
repayments as they fall due.
The Directors therefore conclude that the Going Concern basis
remains the appropriate basis upon which to prepare the Group’s
financial statements.
New product development
Details of the Group’s new product development programmes can
be found on page 15. 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.
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:
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
Srl, Biokosmes Immobiliare Srl, and Grafco2 Srl.
Andrew Waters is a Director of Cubase Consulting Ltd and ACP1 Ltd.
Political donations
The Group made no political donations in the year under review
(2018: £nil).
Peter Bream is a Director of Abramis Limited.
Carl Dempsey is a Director of Big Blue Bear Limited.
Venture Life Group Annual Report 2019
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Corporate Governance
Directors’ Report
continued
Directors’ share interests
The Directors in office at 31 December 2019 and their interests in the shares of the Company were as follows:
Number of Number of
ordinary 0.3p ordinary 0.3p
shares held at shares held at
31 December % of issued 31 December % of issued
Director Title 2019 share capital 2018 share capital
Jerry Randall1 Chief Executive Officer 3,931,129 4.7% 3,931,129 10.7%
Gianluca Braguti1 Chief Manufacturing Director 7,085,459 8.1% 7,085,459 19.2%
Sharon Daly (née Collins) Chief Commercial Director 1,665,333 2.0% 1,582,417 4.3%
Andrew Waters Chief Financial Officer - - - -
Lynn Drummond Non-Executive Chair 18,365 0.02% 18,365 0.05%
Carl Dempsey Non-Executive Director - - - -
Peter Bream Non-Executive Director 25,000 0.03% 25,000 0.07%
1 Includes indirect holdings.
Share capital
As at 31 December 2019, the authorised and issued share capital of the Company was:
Number of ordinary Amount
0.3p shares £
Issued and fully paid up 83,712,106 251,136
The average market price of the Company’s ordinary shares at close of business on 31 December 2019 was 33.50 pence. The maximum share
price during the period was 52.00 pence and the minimum price was 28.70 pence per share.
Substantial share interests
At 8 April 2020, 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:
Number %
of shares holding
J O Hambro Capital Management Limited 8,370,717 10.0%
BGF Investment Management Limited 7,880,000 9.4%
Mr Gianluca Braguti and associated holdings1 7,085,459 8.5%
Gresham House Asset Management Ltd 6,570,000 7.8%
Ennismore Fund Management Limited 6,250,000 7.5%
River & Mercantile Asset Management LLP 4,409,500 5.3%
Otus Capital Management LP 4,185,274 5.0%
Cavendish Asset Management 4,169,938 4.9%
Quilter Cheviot Ltd 3,803,275 4.5%
Mr Jerry Randall and associated holdings 3,769,729 4.5%
Dr Michael Flynn and associated holdings 2,812,577 3.3%
1 Includes 300,000 shares owned by his wife and 2,000,000 owned by his adult children. Mr Braguti retains control of the voting rights for these 2,300,000 whilst he remains a Director of Venture Life Group plc.
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Venture Life Group Annual Report 2019
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, 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.
The Board also recognises that a safe, secure and healthy working
environment contributes to productivity and improved performance.
Auditor
Grant Thornton UK LLP has expressed its willingness to continue in
office. In accordance with Section 489(4) of the Companies Act 2006,
a resolution to re-appoint Grant Thornton UK LLP as auditor will be
proposed at the forthcoming AGM.
2020 Annual General Meeting
The 2020 AGM will be held on 3 June 2020 the business of which is set
out in the Notice of Annual General Meeting enclosed with this report.
On behalf of the Board,
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.
Jerry Randall
Director
8 April 2020
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 and 19.
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.
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Corporate Governance
Remuneration Report
Remuneration Committee
As a company listed on the Alternative Investment Market (AIM),
the Company is not required to comply with Schedule 8 of the Large
and Medium-sized Companies and Group (Accounts and Reports)
Regulations 2008 as amended in August 2013 (the “Regulations”),
nor is it required to comply with the principles relating to Directors’
remuneration in the UK Corporate Governance Code 2016 (the
“Code”). This report has not been audited.
The Company’s Remuneration Committee consists of the Chair
and the other two Non-Executive Directors. The Chief Financial 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
Executive Directors 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 of Directors’ fees.
Salary
Basic salaries are reviewed annually and if revised, the change
in salary takes effect from the start of the financial year.
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.
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Venture Life Group Annual Report 2019
Corporate Governance
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 Options as at Options Options Options as at Date from
scheme 31 December granted during lapsed during 31 December which first Exercise Performance
2018 the year the year 2019 exercisable Expiry date price conditions
Jerry Randall EMI 705,700 - - 705,700 31 Dec 2012 31 Aug 2022 45p Non-market
Jerry Randall EMI 162,187 - - 162,187 1 Jul 2014 4 Nov 2023 41p Non-market
Jerry Randall Unapproved 483,333 - - 483,333 1 Jul 2014 4 Nov 2023 41p Non-market
Sharon Daly
(née Collins) EMI 705,700 - - 705,700 31 Dec 2012 31 Aug 2022 45p Non-market
Sharon Daly
(née Collins) EMI 162,187 - - 162,187 1 Jul 2014 4 Nov 2023 41p Non-market
Sharon Daly
(née Collins) Unapproved 483,333 - - 483,333 1 Jul 2014 4 Nov 2023 41p Non-market
No Directors exercised any options during the year.
Since 2016, further awards have been made under the Company’s 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.
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Corporate Governance
Remuneration Report
continued
Long-Term Incentive Plan (continued)
No awards were made during 2019. A summary of the awards made in previous years that have not yet lapsed are set out below:
Award Three Award Four
(date of grant: (date of grant:
Name 24 April 2017) 23 March 2018)
Jerry Randall 148,151 448,548
Gianluca Braguti 119,119 360,650
Sharon Daly (née Collins) 98,767 299,032
366,037 1,108,230
A full summary of the performance conditions attached to outstanding awards can be found in Note 24. To the extent that these performance
conditions are not met at the end of the vesting period, the options will lapse.
Pensions
The Group contributes to the personal pension plans of certain Executive Directors and employees. Under the scheme, the Group will make
direct contributions. The Group recently reached its “auto-enrolment staging date” and is complying with its auto-enrolment obligations in
respect of eligible employees.
Directors’ letters of appointment and contracts
All Executive Directors 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 12 December 2013 Six months’ notice to be given by the Executive Director and 30 days’ by the
Sharon Daly (née Collins) 12 December 2013 Company. In the event that the Company terminates the Executive’s
Gianluca Braguti 19 March 2019 employment without cause, then an amount equal to 50% of the employee’s
Andrew Waters 1 May 2019 salary is payable by the Company.
Executive Directors Date of contract Notice period
Lynn Drummond 22 November 2013 Three months
Peter Bream 13 February 2016 Three months
Carl Dempsey 20 September 2018 Three months
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Venture Life Group Annual Report 2019
Directors’ remuneration 2019
Social
Pension security
Salary/fees Bonus Benefits Total contributions contributions Total
£ £ £ £ £ £ £
Executive Directors
Jerry Randall 270,572 20,000 2,749 293,321 10,000 38,915 342,236
Sharon Daly (née Collins) 176,501 20,000 1,319 197,820 26,475 25,933 250,228
Adrian Crockett2 82,817 — 122 82,939 1,812 11,332 96,084
Gianluca Braguti1 214,737 20,000 - 234,737 42,947 20,526 298,210
Andrew Waters3 96,667 — 980 97,647 14,500 12,546 124,693
Non-Executive Directors - - - -
Lynn Drummond 55,000 — — 55,000 — 6,405 61,406
Peter Bream 27,000 — — 27,000 - 2,542 29,542
Carl Dempsey 27,000 — — 27,000 — 2,542 29,542
Total 950,294 60,000 5,170 1,015,464 95,735 120,742 1,231,940
1 Gianluca Braguti’s salary and fees equate to €250,000 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 (2018: €250,000 and €10,000 respectively), translated at
average exchange rate over the period.
2 Resigned 29 January 2019.
3 Appointed 1 May 2019.
The Executive Directors listed above at the reporting date are considered to be the key management of the Group.
Directors’ remuneration 2018
Social
Pension security
Salary/fees Bonus Benefits Total contributions contributions Total
£ £ £ £ £ £ £
Executive Directors
Jerry Randall 210,537 - 18,289 228,826 53,534 30,589 312,949
Sharon Daly (née Collins) 173,040 - 1,046 174,086 25,956 22,726 222,768
Adrian Crockett 145,000 - 1,632 146,632 21,750 18,856 187,238
Gianluca Braguti1 230,292 - 4,103 234,395 42,515 19,384 296,294
Non-Executive Directors -
Lynn Drummond 55,000 - - 55,000 - 6,436 61,436
John Sylvester2 19,350 - - 27,000 - 1,226 20,576
Peter Bream 27,000 - - 27,000 - 2,572 29,602
Carl Dempsey3 7,331 - 7,331 721 8,052
Total 867,550 - 25,070 892,620 143,755 102,510 1,138,885
1 Gianluca Braguti’s salary and fees equate to €250,000 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 (2017: €240,000 and €10,000 respectively), translated at
average exchange rate over the period.
2 Resigned 20 September 2018.
3 Appointed 20 September 2018.
The Executive Directors listed above at the reporting date were considered to be the key management of the Group.
Venture Life Group Annual Report 2019
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Corporate Governance
Remuneration Report
continued
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.
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.
All employees are generally eligible to receive share options under
the Company’s EMI or Unapproved share option schemes 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.
On behalf of the Board,
Carl Dempsey
Chairman of the Remuneration Committee
8 April 2020
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Venture Life Group Annual Report 2019
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 (www.venture-life.com).
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,
the 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
and profit or loss of the Group for that period. 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 IFRS have been followed with respect to
•
the Group financial statements and whether applicable UK
accounting standards have been followed with respect to 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.
•
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37
Financial Statements
Independent Auditor’s Report
to the members of Venture Life Group plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Venture Life plc (the “parent
company”) and its subsidiaries (the “group”) for the year ended 31 December
2019, which comprises the Consolidated Statement of Comprehensive
Income, the Consolidated Statement of Financial Position, the Consolidated
Statement of Changes in Equity, the Consolidated Statement of Cash Flows,
the parent company Balance Sheet, the parent company Statement of
Changes in Equity, and notes to the financial statements, including a summary
of significant accounting policies. 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, including Financial Reporting
Standard 102 “The Financial Reporting Standard applicable in the UK and
Republic of Ireland” (United Kingdom Generally Accepted Accounting
Practice).
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 2019
and of the group’s profit 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; and
• the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are
further described in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report. We are independent of the group and the parent
company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
The impact of macro-economic uncertainties on our audit
Our audit of the financial statements requires us to obtain an understanding of all
relevant uncertainties, including those arising as a consequence of the effects of
macro-economic uncertainties such as Covid-19 and Brexit. All audits assess and
challenge the reasonableness of estimates made by the directors and the related
disclosures and the appropriateness of the going concern basis of preparation of
the financial statements. All of these depend on assessments of the future
economic environment and the company’s future prospects and performance.
Covid-19 and Brexit are amongst the most significant economic events currently
faced by the UK, and at the date of this report their effects are subject to
unprecedented levels of uncertainty, with the full range of possible outcomes and
their impacts unknown. We applied a standardised firm-wide approach in response
to these uncertainties when assessing the company’s future prospects and
performance. However, no audit should be expected to predict the unknowable
factors or all possible future implications for a company associated with these
particular events.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which
the ISAs (UK) require us to report to you where:
•
the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified
material uncertainties that may cast significant doubt about the group’s or
the parent company’s ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when the
financial statements are authorised for issue.
In our evaluation of the directors’ conclusions, we considered the risks associated
with the group’s business model, including effects arising from Brexit and Covid-
19, and analysed how those risks might affect the group’s financial resources or
ability to continue operations over the period of at least twelve months from the
date when the financial statements are authorised for issue. In accordance with
the above, we have nothing to report in these respects.
However, as we cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the absence of reference to a material
uncertainty in this auditor’s report is not a guarantee that the group will continue
in operation.
Overview of our audit approach
•
Overall group materiality: £302,000, which
represents approximately 1.5% of the group’s
revenue for the year.
The key audit matters were identified as
revenue recognition, impairment of goodwill
and other intangible assets and recoverability
of investments and intercompany balances
(applicable to the parent company only).
•
• We performed a full scope audit of the
financial statements of Venture Life plc
(parent only), Venture Life Limited,
PeriProducts Limited, Lubatti Limited and
Biokosmes S.r.l. Note; the Biokosmes S.r.l
entity was audited by component auditors.
We performed analytical procedures on the
financial statements of PermaPharm AG.
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Venture Life Group Annual Report 2019
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include
the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those that had the greatest effect on:
the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matters – Group
How the matter was addressed in the audit – Group
Revenue recognition
Net revenues of £20.2m have been recognised in the year ended 31 December
2019, arising substantially from the sale of products. This consists of £21.2m
gross sales less £1m of discounts given.
There is a risk of fraudulent revenue recognition without entitlement to that
revenue under IFRS 15 “Revenue from contracts with customers”. We have
determined that, due to pressure to perform being heightened towards the end
of the year, this risk is more significant in respect of revenue recognised in the
last three months of the year.
We therefore identified revenue recognition as a significant risk, which was one
of the most significant assessed risks of material misstatement..
•
•
•
Our audit work included, but was not restricted to:
•
assessing the group’s revenue recognition policy against the financial
reporting framework, including IFRS 15, and checking management’s
assessment of IFRS 15 by comparing to underlying contracts;
we have analysing revenue postings throughout the year using our data
interrogation and analysis software to identify transactions lying outside
our expectations and then agreed these to supporting documentation (for
Venture Life Limited and PeriProducts Limited only);
testing the design effectiveness of relevant key controls on revenues; and
testing the occurrence of revenue by selecting more samples of individual
revenue items during the last three months of the year, and around the
year-end, and agreed items selected for testing through evidence of
delivery and payment for proof of performance obligations being met. We
also investigated a sample of the largest credit notes raised post year end
to determine whether revenue transactions in the year were subsequently
cancelled.
The group’s accounting policy on revenue is shown in note 3.5 to the financial
statements and related disclosures are included in note 5.
Key observation
Based on the results of our audit testing, we did not identify any materially
incorrect revenue recognition from revenue recognised on the last three months
of the year.
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39
Financial Statements
Independent Auditor’s Report
to the members of Venture Life Group plc
Key Audit Matters – Group
How the matter was addressed in the audit – Group
Our audit work included, but was not restricted to:
•
•
•
•
•
•
•
•
•
challenging management’s assessment of impairment indicators relating
to intangible assets with definite lives;
assessing the reasonableness of the assumptions used by management
in identifying the CGUs;
obtaining management’s assessment of intangible assets impairment
and recalculating the arithmetical accuracy of those calculations;
testing the assumptions utilised in the impairment models used by
management, including growth rates, discount rates, the forecast period
and terminal values and corroborating to supporting market data;
comparing current market capitalisation to carrying value of net assets
and management’s calculated value in use for the group;
completing sensitivity analysis on the impairment models used
by management;
testing the accuracy of management’s forecasting through a comparison
of budget to actual data and historical variance trends and reviewing the
cash flows for exceptional or unusual items or assumptions; and
assessing management’s analysis of the risks and short term implications
of Covid-19, together with mitigation actions that management would take.
corroborating the detailed disclosures in the financial statements for
consistency with the results of management’s impairment review and
with the requirements of IAS 36.
The group’s accounting policy on “Impairment of Intangible Assets,” is shown
in note 3.12 and related disclosures are included in Note 14.
Key observations
•
Based upon the results of our audit testing, we found that the assumptions
used by management in arriving at the value in use of goodwill and other
intangible assets were balanced.
• We agreed with management’s assessment that there are no indicators
of impairment on other intangible assets with definite lives.
• We found no mathematical errors in the impairment calculations prepared
•
by management.
Our sensitivity analysis indicated that management’s impairment
assessment was not highly sensitive to reasonably possible changes
in assumptions.
Impairment of goodwill and other intangible assets
For goodwill and other indefinite-lived intangible assets, the directors
are required to perform an annual impairment review.
The directors are also required to assess impairment indicators to determine
whether the group’s other intangible assets might be impaired. Where such
indicators exist, the directors are required to perform an impairment review.
The process for assessing whether impairment exists under International
Accounting Standard (IAS) 36 “Impairment of assets” is complex. The process
of determining the value in use, through forecasting cash flows related to cash
generating units (CGUs) and the determination of the appropriate discount rate
and other assumptions to be applied can be highly judgemental and can
significantly impact the results of the impairment review.
We therefore identified impairment of goodwill and other intangible assets as a
significant risk, which was one of the most significant assessed risks of material
misstatement.
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Venture Life Group Annual Report 2019
Key Audit Matters – Parent company
How the matter was addressed in the audit – Parent company
Recoverability of investments and intercompany balances
Investments and intercompany balances at the year-end stand at £19.1m and
£8.2m, respectively. The directors make an annual assessment to determine
whether there are indicators that these balances are impaired.
Where indicators of impairment are identified, in order to determine if these
balances are impaired, management prepare discounted cash flow forecasts.
Assumptions to be applied can be highly judgemental and can significantly
impact the results of the impairment review.
We therefore identified recoverability of investments and intercompany
balances as a significant risk, which was one of the most significant assessed
risks of material misstatement.
Our audit work included, but was not restricted to:
•
challenging management’s assessment of impairment indicators relating
to investments and intercompany balances;
obtaining management’s assessment, recalculating the arithmetical
accuracy of those calculations and testing the assumptions utilised,
including growth rates, discount rates and terminal values by corroborating
to supporting market data;
testing the accuracy of management’s forecasting through a comparison
of budget to actual data and historical variance trends and reviewing the
cash flows for exceptional or unusual items or assumptions; and
completing sensitivity analysis on the impairment models used by
management.
•
•
•
Related disclosures in the financial statements are included in Notes 5 and 8
to the parent company accounts.
Key observations
•
Based upon the results of our audit testing, we found that the assumptions
used by management in arriving at the recoverable amounts were balanced.
• We found no mathematical errors in the calculations.
•
Our sensitivity analysis indicated that management’s impairment assessment
was not highly sensitive to reasonably possible changes in assumptions.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable
person would be changed or influenced. We use materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure
Group
Parent
Financial statements as a whole
£302,000, which is approximately 1.5% of the
group’s net revenue for the year. This benchmark
is considered the most appropriate because it is
a prominent key performance indicator for the
management looking to grow organically and
through acquisition.
Materiality for the current year is higher than the
level that we determined for the year ended 31
December 2018 (£250,000) due to an increase in
the revenue generated. The benchmark of 1.5%
of revenue is consistent with the benchmark used
for the year ended 31 December 2018.
£128,000, which is approximately 1.5% of the
parent company’s total assets at year end capped
at the amount determined as component
materiality for the group materiality calculation. This
benchmark is considered the most appropriate
because the parent company is a holding company
with significant asset balances within it.
Materiality for the current year is lower than the level
that we determined for the year ended 31
December 2018 (£235,000) due to the way
component materiality was allocated’.
Performance materiality used to drive
the extent of our testing
75% of financial statement materiality, being
£226,500. This is unchanged from the prior year
performance materiality threshold.
75% of financial statement materiality, being
£96,000. This is unchanged from the prior year
performance materiality threshold.
Specific materiality
We determined a lower level of specific materiality for
Directors’ remuneration and related party transactions.
We determined a lower level of specific materiality for
Directors’ remuneration and related party transactions.
Communication of misstatements
to the audit committee
£15,100 and misstatements below that threshold that,
in our view, warrant reporting on qualitative grounds.
£6,400 and misstatements below that threshold that,
in our view, warrant reporting on qualitative grounds.
Venture Life Group Annual Report 2019
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Financial Statements
Independent Auditor’s Report
to the members of Venture Life Group plc
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough
understanding of the group’s business, its environment and risk profile
and in particular included:
•
•
•
•
evaluating the group’s internal control environment and documenting controls
relevant to the audit.
determining the scope of the group audit based on the relative contribution
of revenue of each component to the group. We performed a full scope audit
of the financial statements of Venture Life plc (parent only), Venture Life
Limited, PeriProducts Limited, Lubatti Limited and Biokosmes S.r.l. Note;
the Biokosmes S.r.l entity was audited by component auditors, which reported
to us as the Group auditors,. We performed analytical procedures on the
financial statements of PermaPharm AG.
100% of the consolidated group’s and parent company’s revenue and 100%
of the consolidated group’s total assets were included in the scope of our full
scope and specified audit procedures based on the above strategy.
rchecking the group consolidation, to confirm the accuracy of management’s
computations and to demonstrate the group financial information was
consistent with the financial information per the audited financial statements
of the significant components.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report and accounts, other than
the financial statements and our auditor’s report thereon. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
•
•
•
Our opinion on other matters prescribed by the
Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared
in accordance with applicable legal requirements.
•
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 the parent
company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which
the Companies Act 2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept by the parent company,
or returns adequate for our audit have not been received from branches not
visited by us; or
the parent company financial statements are not in agreement with the
accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
In connection with our audit of the financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information
is materially inconsistent with the financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement of the financial statements
or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors for the financial statements
As explained more fully in the statement of directors’ responsibilities set out
on page 28, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing
the group’s and the parent company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no realistic
alternative but to do so.
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Venture Life Group Annual Report 2019
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part
of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s members those matters we
are required to state to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Mark Bishop FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Oxford
8 April 2020
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43
Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
Company number 05651130
Year ended Year ended
31 December 31 December
2019 2018
Notes £’000 £’000
Revenue 5 20,206 18,770
Cost of sales (12,203) (11,482)
Gross profit 8,003 7,288
Administrative expenses
Operating expenses (6,101) (5,534)
Amortisation of intangible assets 14 (579) (625)
Total administrative expenses (6,680) (6,159)
Other income 163 94
Operating profit before exceptional items 1,486 1,223
Exceptional costs 6 (208) (172)
Operating profit 7 1,278 1,051
Finance income 152 -
Finance costs (68) (341)
Profit before tax 1,362 710
Tax 10 (458) (474)
Profit for the year 904 236
Foreign exchange gain / (loss) on translation of subsidiaries (300) 18
Total comprehensive profit for the year attributable to equity holders of the parent 604 254
All of the profit and the total comprehensive income for the year is attributable to equity holders of the parent.
Year ended Year ended
31 December 31 December
2019 2018
Profit per share
Basic profit per share (pence) 12 1.08 0.42
Diluted profit per share (pence) 12 1.01 0.38
Adjusted profit per share (pence) 12 2.18 2.06
Adjusted diluted profit per share (pence) 12 2.04 1.83
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Venture Life Group Annual Report 2019
Consolidated Statement of Financial Position
at 31 December 2019
Company number 05651130
At At
31 December 31 December
2019 2018
Notes £’000 £’000
Assets
Non-current assets
Intangible assets 14 20,722 20,542
Property, plant and equipment 15 4,152 4,591
24,874 25,133
Current assets
Inventories 16 5,082 3,869
Trade and other receivables 17 6,363 7,020
Cash and cash equivalents 18 10,710 9,623
22,155 20,512
Total assets 47,029 45,645
Equity and liabilities
Capital and reserves
Share capital 19 251 251
Share premium account 19 30,824 30,824
Merger reserve 20 7,656 7,656
Convertible bond reserve 21 - -
Foreign currency translation reserve 23 (47) 252
Share-based payments reserve 24 624 609
Retained earnings 25 (6,492) (7,512)
Total equity attributable to equity holders of the parent 32,816 32,080
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Liabilities
Current liabilities
Trade and other payables 26 5,491 4,868
Taxation 218 -
Interest-bearing borrowings 27 2,434 1,911
Convertible bond 21 - -
Vendor loan notes 22 - -
8,143 6,779
Non-current liabilities
Interest-bearing borrowings 27 4,591 5,157
Convertible bond 21 - -
Vendor loan notes 22 - -
Statutory employment provision 28 1,058 1,062
Deferred tax liability 11 421 567
6,071 6,786
Total liabilities 14,213 13,565
Total equity and liabilities 47,029 45,645
The financial statements on pages 44 to 92 were approved and authorised for issue by the Board on 8 April 2020 and signed on its behalf by:
Jerry Randall
Director
8 April 2020
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Financial Statements
Consolidated Statement of Changes in Equity
for the year ended 31 December 2019
Foreign
Share Convertible currency Share-based
Share premium Merger bond translation payments Retained Total
capital account reserve reserve reserve reserve earnings equity
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 January 2018 111 13,289 7,656 109 234 497 (7,711) 14,185
Impact of adoption of IFRS 9
on opening balances - - - - - - (37) (37)
Balance at 1 January 2018
(adjusted) 111 13,289 7,656 109 234 497 (7,748) 14,148
Profit for the year - - - - - - 236 236
Foreign exchange on translation - - - - 18 - - 18
Total comprehensive income - - - - 18 - 236 254
Issue of share capital 140 17,535 - - - - - 17,675
Repayment of convertible bond - - - (109) - - 14 (95)
Share options charge - - - - - 112 - 112
Dividends - - - - - - (14) (15)
Transactions with shareholders 140 17,535 - (109) - 112 - 17,678
Balance at 1 January 2019 251 30,824 7,656 - 252 609 (7,512) 32,080
Profit for the year - - - - - - 904 904
Foreign exchange on translation - - - - (300) - - (300)
Total comprehensive income - - - - (300) - 904 604
Share options charge - - - - - 131 - 131
Share options charge recycling
per IFRS2 - - - - - (115) 115 -
Dividends - - - - - - - -
Transactions with shareholders - - - - - 16 115 131
Balance at 31 December 2019 251 30,824 7,656 - (47) 624 (6,492) 32,816
IFRS 9 was adopted with effect from 1st January 2018. The impact of adoption on the opening position was to increase the bad debt provision at
1 January 2018 by £37,000 and accordingly reduce retained earnings by £37,000.
As at 31st December 2019 the parent entity has lacked distributable reserves and is accordingly not in a position to declare any dividend.
During the year the second tranche of the management long-term incentive matured but failed to meet its vesting conditions. The accumulated
provision within the Share Based Payments reserve of £115,000 was discharged and recycled into retained earnings in accordance with IFRS2.
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Venture Life Group Annual Report 2019
Consolidated Statement of Cash Flows
for the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
£’000 £’000
Cash flow from operating activities
Profit before tax 1,362 710
Finance (income)/expense (84) 341
Operating profit 1,278 1,051
Adjustments for:
– Depreciation of property, plant and equipment 786 756
– Amortisation of intangible assets 579 625
– Finance cost 32 (276)
– Disposal of non current assets 147 148
– Share-based payment expense 131 112
Operating cash flow before movements in working capital 2,953 2,452
Tax paid (412) (565)
Increase in inventories (1,373) (259)
Increase in trade and other receivables (235) (1,868)
Increase in trade and other payables 1,507 478
Net cash generated from operating activities 2,441 238
Cash flow from investing activities:
Acquisition of Dentyl business - (4,200)
Purchases of property, plant and equipment (388) (271)
Expenditure in respect of intangible assets (757) (744)
Net cash used in investing activities (1,145) (5,215)
Cash flow from financing activities:
Net proceeds from issuance of ordinary shares - 17,675
Repaid convertible bond - (1,900)
Repaid vendor loan note - (1,790)
Repayment of deferred consideration - (410)
Drawdown of interest-bearing borrowings 696 200
Leasing obligation repayments (previously in administration costs) (585) (528)
Dividends paid - (14)
Net cash from financing activities 111 13,233
Net increase in cash and cash equivalents 1,406 8,256
Net foreign exchange difference (319) 6
Cash and cash equivalents at beginning of period 9,623 1,361
Cash and cash equivalents at end of period 10,710 9,623
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Venture Life Group Annual Report 2019
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
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 Venture House, 2 Arlington Square, Downshire Way, Bracknell, RG12 1WA. The Company is the holding company for three wholly-owned UK
subsidiaries, one wholly-owned Italian subsidiary, Biokosmes Srl and one wholly-owned Swiss subsidiary, PermaPharm AG. These five
subsidiaries and the Company are together referred to as “the Group”.
2. Basis of preparation
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.
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 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
As described in the Post Balance Sheet Events Note 32, the company is managing the impact of Covid-19 pandemic on its business and the
uncertainty that this might bring which has the potential in the worse-case scenario to create a significant shortfall versus the 2020 budgeted
trading results and cashflows. The company manufactures a high proportion of its products in its own facility in Lombardy, Italy which has been
an epicentre of this pandemic outbreak. This at face value presents a degree of risk and uncertainty given the lockdown that has been in place
across Italy since 9 March 2020. The directors have therefore considered the precautionary and protective actions that have been taken by the
company to protect the health and wellbeing of the staff whilst maintaining business operations.
Specifically in Italy the company has introduced three main activities:
a)
Introduction of stringent procedures to protect staff including the provision of masks and handwashes, the physical separation of employees
and restrictions to meeting sizes, the control of attendees and visitors to the premises and other measures. The administrative workforce is
currently working mostly from home and the on-site production workforce has been reduced somewhat;
b) Procurement of critical raw materials to not only meet customer demand for existing production but to enable additional manufacture
of handwashes and anti-microbial products;
c) Strategic prioritisation of customer orders to ensure that the existing inventory of finished goods (and work-in-progress as it becomes
completed) is allocated appropriately to those parties based upon need, continuity of supply and other factors in order to ensure the
demand is met.
In addition to the above, the Group has manufactured a large quantity of handwash products and distributed these free of charge to local
hospitals and pharmacies in Lombardy in order to assist in the national and international effort to combat the pandemic.
As at 8 April 2020 the Italian factory has remained open and is producing high volumes of product. Shipments of finished goods to customers
are continuing as are invoicing and cash collection processes. The majority of VLG’s customers are large organisations and it is the opinion of
the Directors that bad debts will remain a relatively low risk.
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Venture Life Group Annual Report 2019
Accordingly the Directors have evaluated a range of scenarios all depicting varying months of closure of the Italian factory and associated losses
of marginal gross profits. The key findings of this evaluation are:
a) Management does not expect the Italian factory to close, but acknowledges that there is a clear risk that it could face the need to close for
a period of up to one month. The impact of this one-month closure would be minor in terms of 2020/21 performance and closing cash at
30 June 2021 is forecast to be in excess of £8.0 million. Given the strong inventory that the company holds, there is an expectation that
such a short closure would in practice be managed with £nil impact on 2020 and 2021 performance;
b) A scenario with a more extensive closure to the factory of 3 months yields a significantly reduced PBT for 2020 improving in 2021
and a positive cash balance on 30 June 2021 in excess of £6.0 million; and
c) A dramatically more pessimistic scenario with an extensive closure to the factory of 6 months yields a slightly negative PBT for 2020
improving into 2021 and a positive cash balance on 30 June 2021 in excess of £5.0 million. The Directors consider this scenario as extremely
unlikely in practice.
All of these above forecasts do not include any expenditure savings that would be introduced in circumstances of prolonged closures.
Based upon these financial forecasts, the Directors believe that:
a) The procedures in place in Italy have been effective to date and the company has established a pattern of operating through the lockdown
to ensure continuity of business, as well as attainment of local authority acclaim; and
b) The business has sufficient balance sheet strength to weather even an unrealistically long stoppage and remain liquid.
Accordingly, after making enquiries the Directors foresee that even in the most extreme scenario of a six month factory closure (which is far
beyond any contemplated worse-case scenario) the Group has sufficient resources to continue in operational existence for the foreseeable
future and to comfortably make scheduled loan repayments as they fall due.
The Directors therefore conclude that the Going Concern basis remains the appropriate basis upon which to prepare the Group’s financial
statements.
3.2 Basis of consolidation
The Group financial statements consolidate those of the parent Company and its subsidiaries as of 31 December 2019. 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. 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.
Venture Life Group Annual Report 2019
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
3. Summary of significant accounting policies (continued)
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 Group’s
presentational currency. The functional currency of the Company is also UK sterling (£), which is the currency of the Company’s 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:
Year ended Year ended
31 December 31 December
Sterling/euro exchange rates 2019 2018
Average exchange rate for the period 1.140 1.129
Exchange rate at the period end 1.171 1.121
3.5 Revenue recognition
Revenue of the Group arises mainly from the sale of goods in both the Venture Life Brands and Customer Brands segments. To determine
whether to recognise revenue, the Group follows a 5-step process:
•
•
• Determining the transaction price
•
•
Allocating the transaction price to the performance obligations
Recognising revenue when/as performance obligation(s) are satisfied.
Identifying the contract with a customer
Identifying the performance obligations
The Group typically enters into transactions involving the development and manufacture of the Group’s or customer’s own products. In each
case, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative standalone selling
prices. The transaction price for a contract excludes any amounts collected on behalf of third parties.
Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised
goods or services to its customers.
The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these
amounts as other liabilities in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it receives
the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether
something other than the passage of time is required before the consideration is due. There are neither unsatisfied performance obligations,
nor contract assets held by the Group at the balance sheet date.
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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.
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 25%-50% per annum, straight-line
Fixtures and fittings over £500 20%-50% per annum, straight-line
Manufacturing plant equipment 4%-50% per annum, straight-line
An item of property, plant and equipment is de-recognised upon disposal or when no future economic benefits are expected from its use.
The gain or loss arising on the disposal of an asset is 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
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
3. Summary of significant accounting policies (continued)
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 Group recognises value in respect of acquired intangible assets at cost less accumulated amortisation and impairment. Initial recognition
is at fair value and amortisation takes place across their useful economic lives except when such lives are determined to be infinite.
The effective life of each new class of intangible asset acquired is determined as follows:
Brands – expected cash-generating life of the name, term, design, symbol or other feature that identifies the product as distinct from those
of other sellers.
Customer relationships – expected cash-generating life of the commercial relationship.
Distribution Agreements – expected cash generating life of the commercial relationship.
Product formulations – expected cash-generating life of the particular product formulation.
The following useful economic lives are applied:
Brands: The application of an indefinite life to certain acquired brands is appropriate due to the stable long-term nature of the business and
the enduring nature of the brand. Indefinite life brands are tested at least annually for impairment. A review of the useful economic life
of brands is performed annually, to ensure that these lives are still appropriate. The carrying value of a Brand that is considered to
have a finite life is amortised over that period. In reaching a determination that an asset has an indefinite life in accordance with IAS
38 the Directors consider a number of factors including:
i) length of time the brand has been established in the marketplace;
ii) stability of the industry in which the brand is traded;
iii) potentials for obsolescence and erosion of sales;
iv) competitors and barriers to entry;
v) availability of marketing and promotional resources; and
vi) any dependencies on other assets having finite economic lives.
Many such indefinite life assets have patent protection which have finite lives. It is the opinion of the Directors that these patents do not provide
any incremental value and therefore no separate value has been placed on these patents. In reaching their determination the Directors assess
future profitability before and after patent expiry based upon past experience with similar assets.
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.
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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.
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 14 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 based upon
an expected credit loss model.. 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 30 as financial assets at amortised cost’.
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 30 as “financial assets at amortised cost”.
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
3. Summary of significant accounting policies (continued)
3.14 Financial instruments (continued)
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 30 as “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 2014 was not considered material. The vendor loan notes were fully repaid during 2018.
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. The convertible bond was fully repaid during 2018.
3.15 Leases
Under IFRS 16, all leases other than short-term and low value leases are recorded in the statement of financial position reflecting the Group’s
“right-of-use” assets and lease liabilities. Capitalised right-of-use assets have been valued as the present value of future lease payment
obligations with a lease liability computed as the present value of future lease obligations. The assets are written down on a straight-line basis
over the term of the lease contract and the sum is charged as depreciation in the Consolidated Statement of Comprehensive Income together
with a finance charge. The lease payments in the period are charged against the lease liability. Further details are given in Note 29.
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.
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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.
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
3. Summary of significant accounting policies (continued)
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 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 assets
or liabilities within the next accounting period are outlined below:
a) Judgements
i) 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.
ii) Selection of suitable accounting treatments for acquisitions
The Directors exercise judgement in their choice of accounting treatment applied to acquisitions. This judgement takes into account the
economic resources and systems acquired and the respective outputs produced and considers the extent to which such acquisition comprises
all or some of such elements. In circumstances where substantially all elements are acquired then the acquisition is treated as a business
combination in accordance with IFRS 3.
iii) Estimation of economic life of intangible assets
The Directors exercise judgement when estimating the economic life of intangible assets. This involves estimating the number of years that
the asset is expected to generate revenues and profits and makes reference to the market position, competitors, availability of marketing
promotional resources and other factors.
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b) Estimates
i) 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 generation
of estimates of 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 2018 and 2019, no impairment charge was recognised as a result of these
reviews of patents and trademarks. In the years ending 31 December 2018 and 2019, charges of £148,000 and £147,000 were recognised
in respect of impaired capitalised development costs.
ii) 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 14 to the financial statements.
The Directors considered that no impairment was necessary in respect of goodwill recognised in the years ended 31 December 2018 and
31 December 2019.
iii) 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 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.
iv) Amortisation periods
When acquiring a business, the Directors make best estimates about the future life of acquired assets. These best estimates are based on historic
trends and the future of existing commercial relationships to determine a suitable future working life of each asset. See Note 14 for further details.
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.
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
4. Accounting developments
a) New standards, amendments and interpretations issued and adopted
IFRS 16 replaces IAS 17 “Leases” and three related interpretations. Leases will be recorded in the statement of financial position in the form of
a right-of-use asset and a lease liability. Although only mandatory for annual reporting periods beginning on or after 1 January 2019, the Group
elected to apply IFRS 16 early, on 1 January 2017.
The impact of adoption of IFRS 16 mainly affected the following:
• Management has performed a full review of all lease contracts on the Group and classified and valued each leasing obligation in line
•
with the guidance of IFRS 16.
The new Standard was applied retrospectively without restatement, with the cumulative effect of initial application recognised
as an adjustment to the opening balance of retained earnings at 1 January 2017.
Further details of the adoption of IFRS 16 are included in Note 29.
b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2019 and not
adopted early
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.
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 summary, the operations of the Group are segmented as:
•
• Development and Manufacturing, which includes sales of products and services under contract development and manufacturing agreements.
Brands, which includes sales of branded healthcare and cosmetics products direct to retailers and under distribution agreement.
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5.1 Segment revenue and results
The following is an analysis of the Group’s revenue and results by reportable segment:
Venture
Life Customer Consolidated
Brands Brands Group
£’000 £’000 £’000
Year ended 31 December 2019
Revenue
Sale of goods 6,699 15,087 21,787
Sale of services - 420 420
Intercompany sales elimination - (2,001) (2,001)
Total external revenue 6,699 13,507 20,206
Results
Operating profit before exceptional items and excluding central administrative costs 626 2,827 3,453
Year ended 31 December 2018
Revenue
Sale of goods 6,627 14,476 21.103
Sale of services - 411 411
Intercompany sales elimination - (2,744) (2,744)
Total external revenue 6,627 12,143 18,770
Results
Operating profit before exceptional items
and excluding central administrative costs 404 2,333 2,737
All revenue of the Group is recognised at point in time in accordance with IFRS 15.
The reconciliation of segmental operating profit to the Group’s profit before tax is as follows:
Year ended Year ended
31 December 31 December
2019 2018
£’000 £’000
Operating profit before exceptional items and excluding central administrative costs 3,453 2,737
Exceptional items (208) (172)
Central administrative costs (1,967) (1,514)
Finance income / (costs) 84 (341)
Profit before tax 1,362 710
One customer generated revenue of £4,083,000 which accounted for 10% or more of total revenue (2018: one customer generated revenue
of £4,170,000 which accounted for 10% or more of total revenue).
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
5. Segmental information (continued)
5.2 Segmental assets and liabilities
At At
31 December 31 December
2019 2018
£’000 £’000
Assets
Venture Life Brands 8,776 8,284
Customer Brands 16,657 14,078
Group consolidated assets 21,596 23,283
Consolidated total assets 47,029 45,645
Liabilities
Venture Life Brands 4,148 2,249
Customer Brands 9,741 10,953
Group consolidated liabilities 324 363
Consolidated total liabilities 14,213 13,565
5.3 Other segmental information
Depreciation Addition to
and non-current
amortisation assets
£’000 £’000
Year ended 31 December 2019
Venture Life Brands 153 64
Customer Brands 1,076 1,003
Central administration 136 -
1,365 1,067
Year ended 31 December 2018
Venture Life Brands 163 4,379
Customer Brands 916 1,015
Central administration 301 -
1,380 5,394
5.4 Geographical information
The Group’s revenue from external customers by geographical location of customer is detailed below:
Year ended Year ended
31 December 31 December
2019 2018
£’000 £’000
Revenue
UK 7,615 7,667
Italy 6,279 4,270
Switzerland 2,987 3,388
Rest of Europe 2,238 1,421
Rest of the World 1,087 2,015
Total revenue 20,206 18,770
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6. Exceptional items
Year ended Year ended
31 December 31 December
2019 2018
£’000 £’000
Costs incurred in due diligence pertaining to aborted acquisitions 96 -
Costs incurred in the acquisition of the PharmaSource BV business (completed 24 January 2020) 112 -
Costs incurred in the acquisition of the Dentyl brand - 172
Total exceptional items 208 172
During the period the Group incurred legal and professional fees in relation to prospective acquisitions including the PharmaSource BV
acquisition which was completed shortly after the year-end.
7. Operating profit
Operating profit for the year has been arrived at after charging:
Year ended Year ended
31 December 31 December
2019 2018
£’000 £’000
Depreciation of property, plant and equipment included in operating expenses 786 756
Amortisation of intangible assets included in administrative expenses 579 625
Research and development costs included in operating expenses 194 237
Share-based payments charge 131 112
Staff costs excluding share-based payment charge (Note 8) 4,995 4,667
Auditor’s remuneration:
- Fees for the audit of the Company’s annual accounts 55 28
- Fees payable to the Company’s auditor and its associated for other services: 10 37
- Audit of the accounts of the Company’s subsidiaries 20 -
- Tax compliance services - 4
- Audit related fee - 8
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
8. Employee information
The average number of staff, including Executive Directors, employed by the Group during the year are as shown below:
Year ended Year ended
31 December 31 December
2019 2018
Number Number
Product development and manufacturing 68 72
Sales and marketing 11 13
Directors 7 7
Administration 15 14
Total 101 106
Their aggregate remuneration comprises:
Year ended Year ended
31 December 31 December
2019 2018
£’000 £’000
Wages and salaries 3,784 3,572
Social security costs 806 745
Pension costs 295 334
Other benefits 110 16
Equity settled share-based payments 131 112
Total 5,126 4,779
The equity-settled share-based payments charge for the year of £131,000 included £94,000 in respect of the Directors of the Group
(2018: £112,000). Further information on Directors remuneration is included in the Remuneration Report on page 35.
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. For the Group’s Italian subsidiary, a severance indemnity liability is created as required
under Italian law (see Note 28). The pension charge represents contributions payable by the Group including the Italian severance indemnity
liability and amounted to £415,000 (2018: £334,000). At year end an amount of £nil (2018: £nil) was payable in respect of pension contributions
charged during the year. Amounts relating to the Italian severance indemnity liability are paid when they fall due.
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10. Income tax expense
Year ended Year ended
31 December 31 December
2019 2018
£’000 £’000
Current tax:
Current tax on profits for the year 627 531
Adjustments in respect of earlier years (30) -
Total current tax expense 597 531
Deferred tax:
Origination and reversal of temporary differences (139) (57)
Total deferred tax expense (139) (57)
Total income tax expense 458 474
Tax on the Group’s profit/(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:
Year ended Year ended
31 December 31 December
2019 2018
£’000 £’000
Profit before tax 1,362 710
Profit before taxation multiplied by the local tax rate of 19% (2018: 19%) 259 135
Expenses not deductible for tax purposes 74 70
Change in recognised deferred tax liability (139) (57)
Change in unrecognised deferred tax asset 100 257
Higher rate on foreign taxes 165 69
Income tax charge 458 474
Changes to the UK corporation tax rates were enacted as part of the Finance Bill 2015 on 18 November 2015. These included reductions to the
main rate to reduce the rate to 19% from 1 April 2017 and to 18% from 1 April 2020. A subsequent change to reduce the UK corporation tax rate
to 17% from 1 April 2020 was included within the Finance Bill 2016 (enacted on 6 September 2016). In the Spring Budget 2020, the Government
announced that from 1 April 2020 the corporation tax rate would remain at 19% (rather than reducing to 17%, as previously enacted). This new
law was substantively enacted on 17 March 2020. Whilst the proposal to keep the rate at 19% had not been substantively enacted at the balance
sheet date, its effects have been included in these financial statements. The overall effect of the change has been to increase the tax expense for
the period by £34,000 and to increase the deferred tax liability by £34,000.
As at the reporting date, the Group has unused tax losses of £10,259,000 (2018: £9,257,000) 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.
The tax charge of the Group is driven by tax paid on the profits of Biokosmes, offset by the release of deferred tax liabilities generated on the
acquisition of Biokosmes, Periproducts and Dentyl businesses. In 2018 the effective tax rate of Biokosmes was 22% (2018: 22%).
Venture Life Group Annual Report 2019
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
11. Deferred tax
Deferred taxes arising from temporary differences are summarised as follows:
Movements
Arising upon attributed At 31
At 1 January Recognised in acquisitions to foreign December
2019 profit and loss in the year exchange 2019
Deferred tax liabilities/(assets) £’000 £’000 £’000 £’000 £’000
Purchased goodwill 65 - - (9) 56
Other intangibles (579) 106 - - (473)
Inventories (59) 8 - 10 (41)
Trade and other receivables 6 25 - 6 37
Deferred tax liability (567) 139 - 7 (421)
12. Earnings per share
A reconciliation of the weighted average number of ordinary shares used in the measures is given below:
Year ended Year ended
31 December 31 December
2019 2018
Number Number
For basic EPS calculation 83,712,106 55,715,531
For diluted EPS calculation 89,254,313 62,497,480
A reconciliation of the earnings used in the different measures is given below:
£’000 £’000
For basic and diluted EPS calculation 904 236
Add back: Amortisation 579 625
Add back: Exceptional costs 208 172
Add back: Share based Payments 131 115
For adjusted EPS calculation1 1,822 1,148
1 Adjusted EPS is profit after tax excluding amortisation, exceptional costs and share-based payments.
The resulting EPS measures are:
Pence Pence
Basic EPS calculation 1.08 0.42
Diluted EPS calculation 1.01 0.38
Adjusted EPS calculation1 2.18 2.06
Adjusted diluted EPS calculation 2.04 1.83
1 Adjusted EPS is profit after tax excluding amortisation, exceptional costs and share-based payments.
13. Dividends
Amounts recognised as distributions to equity holders in the period:
Year ended Year ended
31 December 31 December
2019 2018
£’000 £’000
Final dividend - 14
The parent entity does not have distributable reserves and accordingly the Directors are not in a position to recommend the payment of a dividend
in 2019 (2018: £nil pence per share).
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14. Intangible assets
Other
Development Patents and intangible
costs Brands Trademarks Goodwill assets Total
£’000 £’000 £’000 £’000 £’000 £’000
Cost or valuation:
At 1 January 2018 2,268 - 834 13,133 2,630 18,865
Additions 579 1,089 165 3,100 189 5,122
Disposals (148) - (3) - - (151)
Foreign exchange 13 - - - - 13
At 1 January 2019 2,712 1,089 996 16,233 2,819 23,849
Additions 872 - 106 - - 978
Disposals (147) - - - (147)
Foreign exchange (71) - - - - (71)
At 31 December 2019 3,366 1,089 1,102 16,233 2,819 24,609
Amortisation:
At 1 January 2018 908 - 503 - 1,279 2,690
Charge for the year 319 - 162 - 144 625
Foreign exchange (4) - (3) - - (7)
At 1 January 2019 1,223 - 662 - 1,423 3,307
Charge for the year 246 - 177 - 155 579
Disposals - - - - - -
Foreign exchange - - - - - -
At 31 December 2019 1,469 - 839 - 1,578 3,887
Carrying amount:
At 31 December 2018 1,489 1,089 334 16,233 1,396 20,542
At 31 December 2019 1,897 1,089 263 16,233 1,241 20,722
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All trademark, licence and patent renewals 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.
and customer relationships acquired through the acquisition of Periproducts. These assets were recognised at their fair value at the date of
acquisition and were being amortised over a period of between five and ten years.
Assets with indefinite economic lives as well as associated assets with finite economic lives are tested for impairment at least annually or more
frequently if there are indicators that amounts might be impaired. The impairment review involves determining the recoverable amount of the
relevant cash-generating unit, which corresponds to the higher of the fair value less costs to sell or its value in use.
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
14. Intangible assets (continued)
The key assumptions used in relation to the Biokosmes (Customer Brands CGU) and Periproducts (part of the Venture Life Brands CGU)
impairment review are as follows:
•
The estimates of profit after tax for the three years to 31 December 2022 are based on management forecasts of the Biokosmes and
Periproducts businesses, with subsequent years growth forecasted at 5% and 0-2% respectively. Management consider 5% and 0-2%
conservative growth rates for the businesses, but reflective of the operating sectors of the businesses. During 2019, Biokosmes net sales
growth was in excess of 10% due to broad organic growth and Periproduct’s main asset (UltraDEX) net sales declined by 1% due to short
term pricing presures in the UK oral care market.
The Group has applied a discount rate to the future cash flows of Biokosmes for five years, with a terminal value reflecting future years,
using a pre-tax average cost-of-capital of 12.4%. This rate is relatively high and is derived from CAPM theory based upon a relatively high
equity risk premium applied to a low-geared Company. These assumptions generate a significant headroom over the assets of the business
held at the balance sheet date. This impairment assessment excluded the impact of Covid-19 on the performance of Biokosmes. In
circumstances of Covid-19 resulting in a short-term closure of Biokosmes’ Italian factory for a period of several months there would be a
commensurate reduction in sales and profits by Biokosmes in the 2020 financial year. As remarked in Note 32, Post Balance Sheet Events
the Group has the cash resources to bridge across an extended period of factory closure. It is the opinion of the Directors that even in an
extreme scenario of six months of closure there might be a loss of £8 - £10 million in net sales revenue and £3 - £4 million in profits in 2020
which would eliminate 15-20% of the headroom in this impairment assessment.
The Group has applied a discount rate to the future cash flows of Periproducts for ten years, using a pre-tax average cost-of-capital of 12.4%
and excluding any terminal value. These assumptions generate a significant headroom over the assets of the business held at the balance
sheet date.
These above impairment assessments of Biokosmes SRL and Periproducts Ltd have included assessment of all elements of intangible value
regardless of whether their economic lives are finite or indefinite, and include Customer Relationships, acquired formulations and Goodwill.
•
•
•
These assumptions are subjective and provide key sources of estimation uncertainty, specifically in relation to growth assumptions, future
cashflows and the determination of discount rates. The actual results may vary and accordingly may cause adjustments to the Group’s valuation
in future financial years. Sensitivity analysis has been performed on the impairment review and indicate sufficient headroom in the event of
reasonably possible changes in key assumptions are unlikely to result in an impairment for intangibles.
14a. Business combinations
On 19 December 2019 the Company announced it had signed a share purchase agreement to acquire 100% of the share capital of
PharmaSource BV, a private group of companies based in the Netherlands engaged in the marketing and selling of anti-fungal products to
customers within Europe. This transaction was ultimately completed on 24 January 2020 and is addressed in section 32: Post Balance Sheet
Events. As the acquisition occurred after 31 December 2019 then these Financial Statements including all Consolidated Statements and Notes
exclude the financial position and results of PharmaSource BV.
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15. Property, plant and equipment
Plant and Other Right-of-use
equipment equipment assets Total
£’000 £’000 £’000 £’000
Cost or valuation:
At 1 January 2018 2,060 86 4,141 6,287
Additions 260 11 - 271
Disposals (18) - (15) (33)
Foreign exchange movements 15 - - 15
At 1 January 2019 2,317 97 4,126 6,540
Additions 388 - 137 525
Disposals - - - -
Foreign exchange movements - - - -
At 31 December 2019 2,705 97 4,263 7,065
Depreciation:
At 1 January 2018 667 86 465 1,218
Charge for the year 209 3 544 756
Disposals (18) - (15) (33)
Foreign exchange movements 8 - - 8
At 1 January 2019 866 89 994 1,949
Charge for the year 230 2 554 786
Disposals - - - -
Foreign exchange movements 78 - 100 178
At 31 December 2019 1,174 91 1,648 2,913
Carrying amount:
At 31 December 2018 1,451 8 3,132 4,591
At 31 December 2019 1,531 6 2,615 4,152
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All depreciation has been charged to administrative expenses in the Statement of Comprehensive Income.
Additions to right-of-use asset category reflect the recognition of the Group’s leasing obligations under IFRS 16. Further details are included
in Note 29.
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
16. Inventories
At At
31 December 31 December
2019 2018
£’000 £’000
Raw materials 3,490 2,499
Finished goods 1,592 1,370
Total 5,082 3,869
An amount of £7,550,000 (2018: £7,068,000) was recognised in respect of expenditure on inventory in the Statement of Comprehensive Income.
17. Trade and other receivables
At At
31 December 31 December
2019 2018
£’000 £’000
Trade receivables 5,985 6,412
Prepayments and accrued income 100 152
Other receivables 278 456
Total 6,363 7,020
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:
At At
31 December 31 December
2019 2018
£’000 £’000
31 to 60 days past due 183 92
60 to 90 days past due 26 4
90 to 120 days past due 155 -
>120 days past due 119 142
Overdue trade receivables gross 483 238
Provision for overdue receivables (36) (20)
Trade receivables – net 447 218
The Directors consider that the carrying value of trade and other receivables represents their fair value. As at the reporting date, a specific
provision of £36,000 for overdue receivables has been made and is included in the carrying value of trade and other receivables (2018: £20,000).
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 30(d). The Group has adopted
IFRS9 to trade receivables and considered the recoverability of amounts owing from its customers by reference to historic experience and
territorial factors. Accordingly a general provision against trade receivables of £75,000 has been made (2018: £61,000). 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 30(c). The Directors further considered the carrying value of trade and other receivables in the light of the
Covid-19 situation. Settlements since 31 December 2019 have been robust with the majority of this balance having now been settled and the
remaining sum giving no cause for concern.
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Venture Life Group Annual Report 2019
18. Cash and cash equivalents
At At
31 December 31 December
2019 2018
£’000 £’000
Available Cash and cash equivalents 5,159 9,623
Cash allocated for acquisition of PharmaSource BV post year-end 5,551 -
Cash and cash equivalents 10,710 9,623
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 30(d).
The amounts of cash and cash equivalents denominated in currencies other than pounds sterling are shown in Note 30(c).
At 31 December 2019 the sum of £5.6 million of the Group’s cash was allocated for purposes of the acquisition of PharmaSource BV in 2020.
This sum is unrestricted and has been technically identified as an amount to fund the forthcoming acquisition.
19. 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.
Ordinary Ordinary
shares of shares of Share Merger
0.3p each 0.3p each premium reserve
Number £ £’000 £’000
At 31 December 2019 83,712,106 251,136 30,824 7,656
At 31 December 2018 83,712,106 251,136 30,824 7,656
The Company did not issue any new shares during the year (46,875,000 new shares issued during 2018).
The Group operates a Long-Term Incentive Plan. Up to the balance sheet date, there have been four awards under this plan, in which Executive
Directors and senior management of the Group participate. During 2019, two of the awards matured but failed to meet vesting conditions.
Further details are included in the Directors’ Remuneration Report set out on pages 32 and 36.
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
20. 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 (2018:
£7,656,000) has arisen through the acquisition of Venture Life Limited in 2010 (£50,000), and Biokosmes in March 2014 (£7,606,000).
21. Convertible bond
Convertible bonds with a principal value of £1.9 million were issued as part of the funding for the Periproducts Ltd acquisition in 2016. The bond
carried a 9% coupon with interest payable quarterly over a three year term with full repayment of the convertible bond being due on 3 March
2019. Bondholders had the right to convert their bonds to shares in the Group at a conversion price of 87.5 pence per Venture Life share (87.5
pence representing a 25% premium to the 70 pence placing price of the new equity at the time of the acquisition) which could have been
exercised at any point before 3 March 2019.
In September 2018 the Company repaid the convertible bonds in the amount of £1.9 million. This gave rise to a £14,000 settlement loss versus
the amortised cost of the liability component and a £109,000 settlement gain versus the equity component and consequent release of the bond
reserve.
22. Vendor loan notes
Vendor loan notes totalling €2 million which pay an annual coupon of 4% were issued by the Group in March 2014 in connection with the
acquisition of Biokosmes. In September 2018 the Company repaid the full amount of the €2 million loan notes.
The agreements covering these vendor loan notes were subsequently amended such that the latest repayment date of the loan notes was
extended from July 2016 to July 2020 and the annual coupon increased to 4% effective 1 August 2017. Interest was payable on these vendor
loan notes in October and April of each year. In September 2018 the Company repaid the full amount of the €2 million loan notes including all
outstanding accrued interest.
23. 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.
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Venture Life Group Annual Report 2019
24. Share-based payments and share-based payments reserve
24.1 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 £131,000 (2018: £112,000) and is included in administrative expenditure in the Statement
of Comprehensive Income.
The IFRS2 share option provision recycling for the year was £115,000 (2018: £nil) and pertained to LTIP incentives which had failed to meet
the vesting conditions.
The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and movements in, share options during the year.
2019 2019 2018 2018
Number WAEP (p) Number WAEP (p)
Total outstanding at beginning of the year 4,108,940 46 3,845,670 50
Granted during the year - - 613,600 45
Exercised - - - -
Forfeited (41,000) 47.5 (350,330) 72
Total outstanding at 31 December 4,067,940 46 4,108,940 46
Exercisable at 31 December 3,157,440 45 3,157,440 45
The following table summarises information about the range of exercise prices for share options outstanding at 31 December:
2019 2018
Number Number
Range of exercise prices 0p–49p 3,310,040 3,351,040
50p–99p 757,900 757,900
100p–149p - -
Total 4,067,940 4,108,940
At 31 December 2019, the weighted average remaining contractual life of options exercisable is 3.22 years (2018: 4.22 years). No options were
granted in the year. The weighted average exercise price of options granted in the prior year was 45 pence.
The non-market performance conditions for all share options outstanding at 31 December 2019 and which are exercisable
at 31 December 2019 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.
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
24. Share-based payments and share-based payments reserve (continued)
24.1 Share options (continued)
The inputs into the Black-Scholes model for issuance of stock options were as follows for 2018. No issuances were made in 2019:
2019 2018
Weighted average share price (p) n/a 44.0
Weighted average exercise price (p) n/a 46.5
Weighted average expected volatility (%) n/a 30.7
Weighted average expected life (years) n/a 4
Weighted average risk free rate (%) n/a 0.88
Expected dividends (%) n/a 0.089
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.
24.2 Long-Term Incentive Plan
The Group operates a Long-Term Incentive Plan. Up to the balance sheet date, there have been four 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 of the awards made
in previous years that have not yet lapsed are set out below:
Award Three Award Four
Grant date of awards 24 April 2017 23 March 2018
Grant date fair value of award (pence per award) 64.5 46.5
Vesting date of awards 24 April 2020 23 March 2021
Maximum number of awards 897,598 1,358,806
Vesting conditions based on TSR EPS and TSR
Relevant date for determination of vesting conditions 24 April 2020 for TSR 31 December 2019 for EPS
and 23 March 2021 for TSR
Further details of vesting conditions are set out in the Directors’ Remuneration Report on pages 33 and 34. Regarding awards one and two,
the vesting conditions were not met and the awards were forfeited. Awards three and four include 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 prior
year determined using the Monte-Carlo valuation model was 46.5 pence per option. The significant inputs into the model were:
• weighted average share price of 46.5 pence 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 0.939%
The volatility measured as the standard deviation of continuously compounded share returns is based on statistical analysis of daily share prices
over the last three years.
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Venture Life Group Annual Report 2019
Movements in the number of awards outstanding, assuming maximum achievement of vesting conditions, are as follows:
2019 2018
Number Number
At 1 January 2,672,009 2,221,761
Granted - 1,358,806
Failed to meet vesting conditions (781,642) -
Forfeited (416,101) (908,558)
At 31 December 1,474,267 2,672,009
Please refer to Note 7 for disclosure of the charge to the Consolidated Statement of Comprehensive Income arising from share-based payments.
The share-based payment reserve represents cumulative charges made to the Consolidated Statement of Comprehensive income in respect of
share-based payments under the Group’s share option schemes. Where vesting conditions are not met, the associated element of share-based
payment reserve is released and recycled into retained earnings in accordance with IFRS2.
25. Retained earnings
Retained earnings represents all other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.
26. Trade and other payables
At At
31 December 31 December
2019 2018
£’000 £’000
Trade payables 4,027 3,591
Accruals and deferred income 727 868
Social security and other taxes 600 125
Other payables 137 284
Total 5,491 4,868
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.
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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 amount of trade and other payables denominated in currencies other than pounds sterling are shown in Note 30(c).
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
27. Interest-bearing borrowings
At At
31 December 31 December
2019 2018
£’000 £’000
Current
Invoice financing 1,184 1,240
Leasing obligations 512 485
Unsecured bank loans due within one year 738 186
Total 2,434 1,911
Non-current
Leasing obligations 2,139 2,741
Unsecured bank loans due after one year 2,452 2,416
Total 4,591 5,157
All bank loans are held by the Group’s Italian wholly owned subsidiary, Biokosmes. During 2019 a new bank loan in the amount of €1.0 million was
secured from BPM SPA with expiry date of June 2024. Invoice financing includes the Italian RiBa (or “Ricevuta Bancaria”) facility which is a short-
term facility. The balance shown above of £1,184,000 (2018: £1,240,000) reflects the amount that had been settled in Biokosmes’ account under
RiBa and drawn against invoices in the UK as at the reporting date.
A summary showing the contractual repayment of interest-bearing borrowings is shown below:
At 31 December 2019 At 31 December 2018
Leasing Leasing
obligations Other 2019 obligations Other 2018
£’000 £’000 £’000 £’000 £’000 £’000
Amounts and timing of non-current debt repayable
Between 1 January 2020 and 31 December 2020 - - - 491 577 1,068
Between 1 January 2021 and 31 December 2021 469 696 1,165 489 533 1,022
Between 1 January 2022 and 31 December 2022 429 695 1,124 449 533 982
Between 1 January 2023 and 31 December 2023 412 654 1,066 412 485 897
Between 1 January 2024 and 31 December 2028 829 408 1,237 900 288 1,188
Total 2,139 2,453 4,592 2,741 2,416 5,157
Liabilities from Financing activities Other assets
Net Cash /
Borrowings Leases Sub-Total Cash (Net Debt)
Net cash at 01 January 2018 7,680 3,698 11,378 1,361 (10,017)
Net cashflow - - - 8,256 8,256
Finance lease repayments - (574) (574) - 574
Drawdown/(repayments) (3,900) - (3,900) - 3,900
Foreign exchange differences 62 102 164 6 (158)
Net cash at 31 December 2018 3,842 3,226 7,068 9,623 2,555
Net cashflow - - - 1,406 1,406
Finance lease repayments - (585) (585) - 585
Drawdown/(repayments) 696 - 696 - (696)
Foreign exchange differences (164) 10 (154) (319) (165)
Net cash at 31 December 2019 4,374 2,651 7,025 10,710 3,685
Lease liability
In 2017 the Group adopted IFRS 16 which means that lease contracts that have previously been recognised as operating leases are now being
recognised as finance leases. In the Statements of Financial Position additional lease liabilities at 31 December 2019 of £2,651,000 (2018:
£3,226,000) are offsetting right-of-use assets of £2,615,000 (2018: £3,132,000), giving a net liability position of £36,000 (2018: £94,000).
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28. 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.
29. Leases
During 2017 the Group early adopted IFRS 16 “Leases”, which was applied from 1 January 2017.
IFRS 16 requires the Group, with the exception of short-term and low value leases, to value all leasing obligations disclosing right-for-use assets
and corresponding lease liabilities. As detailed below, all leases of the Group have been considered to have balance sheet leasing obligations
with the exception of a UK property lease which expired within 2017.
Right-of-use assets
Office Motor
equipment vehicles Property Total
£’000 £’000 £’000 £’000
Carrying value 1 January 2018 48 5 3,623 3,676
Additions - - - -
Depreciation charge in the year (15) (5) (524) (544)
Foreign exchange - - - -
Carrying value 31 December 2018 33 - 3,099 3,132
Interest charge in the year - - 44 44
Cash outflow for leases in the year 17 5 506 528
Carrying value 1 January 2019 33 - 3,099 3,132
Additions - - 137 137
Depreciation charge in the year (15) - (539) (554)
Foreign exchange - - (100) (100)
Carrying value 31 December 2019 18 - 2,597 2,615
Interest charge in the year - - 38 38
Cash outflow for leases in the year 15 - 570 585
Lease liabilities were calculated as the present value of the future lease obligations of the Group amounting to £2.65 million (31 December 2018:
£3.23 million). The future leasing obligations were discounted using the relevant Italian and UK local borrowing rates of 1% and 5% respectively.
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
29. Leases (continued)
The lease categories of the Group are made up of:
Office equipment
•
Photocopiers and laboratory equipment leased by the Group in Italy and the UK are rented under contract with lease terms extending
between 2019 and 2021. Each contract comes with a three-month break clause, but management do not expect that these break clauses
will be exercised.
Motor vehicles
•
A company car was provided to the Group’s Chief Executive Officer. This lease had a three-year term which ended in June 2018 where upon
the leased asset was returned.
Property
•
The Group’s Italian subsidiary has one operating location and storage location in Lecco, near to Milan. The operating location has a long-term
rental agreement which was renewed in November 2019 for a period of six years. Rental obligations on the storage location continue until
September 2020. This location has a six year extension option at the end of the initial term that is available to the Group. Due to the fixed
nature of the Italian business, management consider that this extension will be exercised.
The Group’s current UK operation is headquartered in a leased premises in Bracknell. The lease contract commenced in August 2017 and
expires in July 2022. The contract has a three year break clause, but management does not expect that this break clause will be exercised.
•
At transition IFRS 16 permits the cumulative effect of adopting the standard to be taken to retained earnings. The Group also elected to value
the right-of-use assets in line with lease liabilities at transition. There were no movements taken to retained earnings as a result of transition.
If IFRS 16 was not required, operating profit of the Group for the year would be reduced by £31,000 (2018: £30,000) and profit before tax would
be increased by £7,000 (2018: £14,000).
30. 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.
Trade and other receivables (excluding prepayments)
a) Principal financial instruments
The principal financial instruments used by the Group from which financial instrument risk arises are as follows:
•
• Cash and cash equivalents
•
•
•
•
Trade and other payables (excluding deferred revenue)
Interest-bearing debt
Leasing obligations
Invoice financing
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Venture Life Group Annual Report 2019
Set out below are details of financial instruments held by the Group as at:
31 December 2019 31 December 2018
Financial Financial
assets at Total assets at Total
amortised financial amortised financial
cost assets cost assets
£’000 £’000 £’000 £’000
Financial assets:
Trade and other receivables1 6,263 6,263 6,868 6,868
Cash and cash equivalents 10,710 10,710 9,623 9,623
Total 16,973 16,973 16,491 16,491
31 December 2019 31 December 2018
Liabilities Total Liabilities Total
(amortised financial (amortised financial
cost) liabilities cost) liabilities
£’000 £’000 £’000 £’000
Financial liabilities:
Trade and other payables2 4,164 4,164 5,107 5,107
Leasing obligations 2,651 2,651 3,226 3,226
Convertible bond - - - -
Vendor loan note - - - -
Interest-bearing debt 4,374 4,374 3,842 3,842
Total 11,189 11,189 12,175 12,175
1 Trade and other receivables excludes prepayments
2 Trade and other payables excludes deferred revenue
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During 2017 the Group adopted the lease accounting standard IFRS 16. The standard requires the recognition of leasing obligations which are
included above. See Note 29 for further details.
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 and 19.
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
30. 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$ RMB CHF Euro Total
£’000 £’000 £’000 £’000 £’000
At 31 December 2019
Assets
Trade and other receivables - - - 5,444 5,444
Cash and cash equivalents - - - 6,028 6,028
- - - 11,472 11,472
Liabilities
Trade and other payables - - - 4,210 4,210
Vendor loan notes, convertible bond and interest-bearing debt - - - 4,374 4,374
- - - 8,584 8,584
US$ RMB CHF Euro Total
£’000 £’000 £’000 £’000 £’000
At 31 December 2018
Assets
Trade and other receivables 48 3 - 4,595 4,646
Cash and cash equivalents 25 - - 1,099 1,124
73 3 - 5,694 5,770
Liabilities
Trade and other payables 63 - - 2,697 2,760
Vendor loan notes, convertible bond and interest-bearing debt - - - 3,842 3,842
63 - - 6,539 6,602
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.
£ currency £ currency
impact impact
strengthening weakening
£’000 £’000
At 31 December 2019
Assets 1,275 (1,043)
Liabilities (954) 780
At 31 December 2018
Assets 525 (525)
Liabilities (561) 561
78
Venture Life Group Annual Report 2019
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. This deposit was
used in part to fund the Dentyl brand 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 2019, the Group was also owed £1,045,000 (2018: £1,427,000) from one (2018: one) 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.
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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
that it maintains a policy covering both the categories of investment types in which it will invest, and the criteria for choosing investment
counterparties.
ii)
The interest rate risk profile of the Group’s financial assets, excluding trade and other receivables, as at 31 December was:
Fixed rate Floating rate Total
2019 2018 2019 2018 2019 2018
£’000 £’000 £’000 £’000 £’000 £’000
Sterling - - 4,682 8,499 4,682 8,499
Euro - - 6,028 1,099 6,028 1,099
RMB - - - - - -
USD - - - 25 - 25
Swiss franc - - - - - -
Total - - 10,710 9,623 10,710 9,623
Floating rate deposits in all currencies earn interest at prevailing bank rates.
Venture Life Group Annual Report 2019
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
30. Financial instruments (continued)
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.
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 27.
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 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:
At At
31 December 31 December
2019 2018
£’000 £’000
Total equity 32,816 32,080
Cash and cash equivalents (10,710) (9,623)
Capital 22,106 22,457
Total equity 32,816 32,080
Borrowings 4,374 3,842
Leasing obligations 2,651 3,226
Overall financing 39,841 39,148
Capital to overall financing ratio 0.56 0.57
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Venture Life Group Annual Report 2019
31. 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 2019 were £nil (2018: £5,061).
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). In September 2018 the whole of the convertible bond was repaid.
Gianluca Braguti, a Director and shareholder of the Group, was provided with services by the Group totalling £4,389 (2018: £3,754).
At 31 December 2019, Gianluca Braguti owed the Group £5,213 (2018: £3,700).
Gianluca Braguti, a Director and shareholder of the Group, was issued vendor loan notes by the Group for €2 million as part of the Biokosmes
acquisition in March 2014. The agreements covering these vendor loan notes were amended in the year 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 €nil (2018: €54,575) was charged on the
vendor loans note during the year. See Note 22 for further details. In September 2018 the whole of the vendor loan notes was repaid.
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 31 December 2018 the amount due to the Company
under the indemnity totalled €250,935 of which Gianluca Braguti’s liability was €248,426. During 2019 the final matter was resolved in favour of
the company in an amount slightly exceeding €250,935 which has accordingly extinguished this indemnified liability. The small net positive
surplus has been de-recognised in the statement of financial position at 31 December 2019 and will be paid out to the vendors during early 2020.
b) Transactions with other related parties
Braguti’s real estate Srl (formerly known as Biokosmes Immobiliare Srl), a company 2% owned by Gianluca Braguti, a Director and shareholder of
the Group provided property lease services to Biokosmes Srl, the Group’s Italian subsidiary, totalling £403,508 in the year to 31 December 2019
(2018: £407,368). At 31 December 2019, the Group owed Braguti’s real estate Srl £94,757 (£243,030 at 31 December 2018).
Services purchased from Biogenico Srl, a company 47% owned by Gianluca Braguti, a Director and shareholder of the Group, totalled £2,157
(2018: £651). At 31 December 2019, the Group owed Biogenico Srl £2,100 (2018: £nil). Services provided to Biogenico Srl totalled £32,935
(2018: £60,670). At 31 December 2019, Biogenico Srl owed the Group £24,295 (2018: £nil).
Services purchased from A. Erre, a company 10% owned by Gianluca Braguti, a Director and shareholder of the Group, totalled £74,032
(2018: £60,960) and services provided totalled £1,970 (2018: £nil). At 31 December 2019, the Group owed A. Erre £11,169 (2018: £11,333).
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 £1,863 (2018: £791 provided to Farmacia San Francesco). At 31 December 2019, Farmacia San Francesco owed the
Group £270 (2018: £nil).
During 2019 Andrew Waters provided professional services to the Company in the period January 2019 to April 2019 to the value of £30,400
prior to his appointment as Chief Financial Officer on 1 May 2019.
Venture Life Group Annual Report 2019
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Financial Statements
Notes to the Consolidated Statements
for the year ended 31 December 2019
32. Post balance sheet events
a) Business combination
On 24th January 2020 the Company completed the acquisition of 100% of the share capital of PharmaSource BV, a Netherlands based
healthcare products company engaged in the supply of antifungal and related products to European customers. The Company had previously
announced the signing of the share purchase agreement on 19 December 2019 subject to the completion of certain critical actions which were
completed on 18 January 2020. The acquisition consideration was €6.5 million to include €0.25 million net working capital. The Company is still
evaluating the acquired business and allocating this purchase price to the components of tangible and intangible value as per IFRS3.
The acquisition consideration of €6.5 million is entirely payable in cash of which €5.0 million was paid at completion, €1.0m will be paid on
or around 30 April 2020 and the balance of €0.5 million will be paid within 270 days of completion subject to fulfillment of certain remaining
non-critical actions. The acquisition was funded through the Company’s own resources. The Company incurred acquisition-related costs in
the amount of £219,000 which have been recognised as £112,000 expense during 2019 and £107,000 during 2020 within exceptional costs.
PharmaSource BV products are anti-fungal in nature and feature a unique trademark protected delivery system in the form of a pen. The Group
acquired the business to expand its portfolio into anti-fungal products and to broaden its customer base, especially across Europe and China.
The Group expects that the inclusion of this additional business into its portfolio will increase the leverage of its trading infrastructure and
generate improved profitability. The acquisition will be accounted for under IFRS 3 as a business combination in the Consolidated Financial
Statements in 2020. The Consolidated Financial Statements to 2019 exclude any results of the PharmaSource BV business.
Revenue and profit impact of the acquisition
PharmaSource BV was not acquired until after 31 December 2019. It generated net revenues of €2.6million and operating profit before
exceptional items and management charges of €0.9 million in 2019.
b) Covid-19
The Group is managing the impact of Covid-19 pandemic on its business and the uncertainty that this might bring which has the potential in the
worse-case scenario to create a significant shortfall versus the 2020 budgeted trading results and cashflows. The company manufactures a high
proportion of its products in its own facility in Lombardy, Italy which has been an epicentre of this pandemic outbreak. This at face value presents
a degree of risk and uncertainty given the lockdown that has been in place across Italy since 8 March 2020. The Directors have therefore
considered the precautionary and protective actions that have been taken by the company to protect the health and wellbeing of the staff whilst
maintaining business operations.
Specifically in Italy the company has introduced three main activities:
a)
Introduction of stringent procedures to protect staff including the provision of masks and handwashes, the physical separation of employees
and restrictions to meeting sizes, the control of attendees and visitors to the premises and other measures. The administrative workforce is
currently working mostly from home and the on-site production workforce has been reduced somewhat;
b) Procurement of critical raw materials to not only meet customer demand for existing production but to enable additional manufacture
of handwashes and anti-microbial products; and
c) Strategic prioritisation of customer orders to ensure that the existing inventory of finished goods (and work-in-progress as it becomes
completed) is allocated appropriately to those parties based upon need, continuity of supply and other factors in order to ensure the
demand is met.
In addition to the above, the company has manufactured a large quantity of handwash products and distributed these free of charge
to local hospitals and pharmacies in Lombardy in order to assist in the national and international efforts to combat the pandemic.
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Venture Life Group Annual Report 2019
As at 8 April 2020 the Italian factory has remained open and producing high volumes of product. Shipments of finished goods to customers is
continuing as are invoicing and cash collection processes. The majority of VLG’s customers are large organisations and it is the opinion of the
Directors that bad debts will remain a relatively low risk.
Accordingly the Directors have evaluated a range of scenarios all depicting varying months of closure of the Italian factory and associated losses
of marginal gross profits. The key findings of this evaluation are:
a) Management does not expect the Italian factory to close, but acknowledges that there is a clear risk that it could face the need to close for
a period of up to one month. The impact of this one-month closure would be minor in terms of 2020/21 performance and closing cash at
30 June 2021 is forecast to be in excess of £8.0 million. Given the strong inventory that the company holds, there is an expectation that
such a short closure would in practice be managed with £nil impact on 2020 and 2021 performance;
b) A scenario with a more extensive closure to the factory of 3 months yields a significantly reduced PBT for 2020 improving in 2021 and a cash
balance on 30 June 2021 in excess of £6.0 million;
c) A dramatically more pessimistic scenario with an extensive closure to the factory of 6 months yields a slightly negative PBT for 2020
improving in 2021 and a positive cash balance on 30 June 2021 in excess of £5.0 million. The Directors consider this scenario as extremely
unlikely in practice.
All of these above forecasts do not include any expenditure savings that would be introduced in circumstances of prolonged closures.
Based upon these financial forecasts, the Directors believe that:
a)
the procedures in place in Italy have been effective to date and the company has established a pattern of operating through the lockdown
to ensure continuity of business, as well as attainment of local authority acclaim; and
the business has sufficient balance sheet strength to weather even an unrealistically long stoppage and remain liquid;
b)
Whilst the above scenarios provide guidance to possible outcomes, the precise effect of Covid-19 cannot be estimated.
Accordingly, after making enquiries the Directors foresee that even in the most extreme scenario of a six month factory closure (which is far
beyond any contemplated worse-case scenario) the company has sufficient resources to continue in operational existence for the foreseeable
future and to comfortably make scheduled loan repayments as they fall due.
The Directors are continuing to monitor the situation carefully. Based upon the steps taken to date including the building of inventory and certain
changes to staff procedures, the Directors are of the opinion that the Company is well placed to continue to manufacture and supply products to
customers through these uncertain times with minimal disruption.
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83
Financial Statements
Parent Company Balance Sheet
for the year ended 31 December 2019
Company number 05651130
(As restated)
At At
31 December 31 December
2019 2018
Note £’000 £’000
Fixed assets
Investments 5 19,053 19,053
Intangible assets 6, 7 4,219 4,451
23,272 23,504
Current assets
Debtors 8 9,853 5,266
Cash at bank 4,293 7,331
14,146 12,597
Creditors
Amounts falling due within one year 9 (2,175) (1,015)
Net current assets 11,971 11,582
Total assets less current liabilities 35,243 35,086
Creditors
Amounts falling due after one year 10 (728) (484)
Net assets 34,515 34,602
Capital and reserves
Called up share capital 11 251 251
Share premium account 30,824 30,824
Merger reserve 7,656 7,656
Share-based payments reserve 624 609
Profit and loss account brought forward (4,623) 561
Profit and loss account for the year (217) (5,299)
Shareholders’ funds 34,515 34,602
The financial statements on pages 76 to 84 were approved and authorised for issue by the Board on 8 April 2020 and signed on its behalf by:
The Balance Sheet and accompanying Notes 8, 9 and 10 have been restated to include a prior year borrowing from a group company in the
amount of €1,200,000 which had been netted out of debtors and creditors.
Jerry Randall
Director
8 April 2020
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Parent Company Statement of Changes in Equity
for the year ended 31 December 2019
Share Share-based
Share premium Merger Convertible payments Profit and
capital account reserve bond reserve reserve loss account Total equity
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 January 2018 111 13,289 7,656 109 497 576 22,238
Loss for the year - - - - - (5,299) (5,299)
Total comprehensive income - - - - (5,299) (5,299)
Issue of share capital 140 17,535 - - - - 17,675
Repayment of convertible bond - - - (109) - 14 (95)
Share-based payments charge - - - - 112 - 112
Dividends - - - - - (14) (14)
Transactions with shareholders 140 17,535 - (109) 112 - 17,675
Balance at 31 December 2018 251 30,824 7,656 - 609 (4,738) 34,602
Loss for the year - - - - - (217) (217)
Total comprehensive expenses - - - - - (217) (217)
Share-based payments charge - - - - 130 - 130
Share based payments charge
Recycling per IFRS2 - - - - (115) 115 -
Dividends - - - - - - -
Transactions with shareholders - - - - 15 115 130
Balance at 31 December 2019 251 30,824 7,656 - 624 (4,840) 34,515
During the year the second tranche of the management long-term incentive matured but failed to meet its vesting conditions. The accumulated
provision within the Share Based Payments reserve of £115k was discharged and recycled into reserves in accordance with IFRS2.
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Venture Life Group Annual Report 2019
85
Financial Statements
Notes to the Parent Company Balance Sheet
for the year ended 31 December 2019
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 is at: Venture House, 2 Arlington Square, Downshire Way, Bracknell, Berkshire RG12 1WA. The Company’s principal place of
business is at: 12 The Courtyard, Eastern Road, Bracknell, Berkshire RG12 2XB
The principal activity of the company is the holding of the Group’s share capital and provision of management services to the Group.
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”:
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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 requirements of Section 12 Other Financial Instruments 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; and
the requirements of Section 33 Related Party Disclosures paragraph 33.7.
Going concern
On the basis of the strength of the balance sheet and performance of the business, the Directors are confident that the Company and its Group
are well placed to manage business risks successfully. Accordingly, the Directors continue to adopt the going concern basis in preparing the
financial statements.
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.
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.
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.
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.
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Venture Life Group Annual Report 2019
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.
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.
Financial instruments
Financial assets and financial liabilities are recognised in the Company’s Statement of Financial Position when the Company 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
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 the 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.
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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.
Financial liabilities and equity
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.
Vendor loan notes
The vendor loan notes were repaid during 2018.
Convertible bond
The convertible bond was repaid during 2018.
Judgements: Intercompany loan obligations
On the basis of the forecasts prepared by the Group, 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.
Venture Life Group Annual Report 2019
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Financial Statements
Notes to the Parent Company Balance Sheet
for the year ended 31 December 2019
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 loss dealt with in the financial statements of the parent Company was £209,000 (2018: loss £5,299,000).
The current auditors’ remuneration in respect of audit services provided to the Company is disclosed in Note 7 of the consolidated financial
statements.
4. Directors’ remuneration
Details of Directors’ remuneration are disclosed in the Directors’ Remuneration Report on page 35.
5. Investments
Capital
Investments in contributions
subsidiary from
undertakings share-based Other
shares payments investments Total
£’000 £’000 £’000 £’000
Cost
At 1 January 2019 18,756 297 31 19,084
Additions - - - -
Revaluation adjustment - - - -
At 31 December 2019 18,756 297 31 19,084
Accumulated impairment
At 1 January 2019 - - (31) (31)
Charge for the year - - - -
At 31 December 2019 - - (31) (31)
Net book value
At 31 December 2018 18,756 297 - 19,053
At 31 December 2019 18,756 297 - 19,053
Venture Life Group plc has three UK subsidiary undertakings, Venture Life Limited (Company number 07186207), Lubatti Limited (Company
number 06704099), and Periproducts Limited (Company number 02864374) which are all Incorporated in England and registered with the same
address as the Company. It also has one Italian subsidiary (Biokosmes Srl, registered address 20122 Milano – Via Besana, 10) and one Swiss
subsidiary (PermaPharm AG, registered address Oberallmendstrasse 24, 6304 Zug).
Name of subsidiary Class Proportion
of holding held directly Location
Venture Life Limited Ordinary 100% UK
Lubatti Limited Ordinary 100% UK
Periproducts Limited Ordinary 100% UK
PermaPharm AG Ordinary 100% Switzerland
Biokosmes Srl Ordinary 100% Italy
The former subsidiary undertaking Tracey Malone Originals Limited (Company number 06703243) was dissolved during 2018.
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Venture Life Group Annual Report 2019
6. Intangible assets
Other
intangible
Brands Goodwill assets Total
£’000 £’000 £’000 £’000
Cost or valuation:
At 1 January 2019 1,089 3,272 189 4,550
Additions - - - -
At 31 December 2019 1,089 3,272 189 4,550
Amortisation:
At 1 January 2019 23 68 8 99
Charge for the year 54 164 19 237
At 31 December 2019 77 232 27 336
Carrying amount:
At 31 December 2019 1,012 3,040 162 4,214
Other intangible assets are amortised over their estimated useful lives, which is between five and ten years. Goodwill and Brands are amortised
over 20 years.
All amortisation has been charged to administrative expenses in the Statement of Comprehensive Income.
Please refer to the impairment review within Note 14 of the Group Financial Statements for more information.
7. Business combinations
On 19 December 2019 the company announced it had signed a share purchase agreement to acquire 100% of the share capital
of PharmaSource BV, a private group of companies based in the Netherlands engaged in the marketing and selling of anti-fungal products
to customers within Europe. This transaction was ultimately completed on 24 January 2020 and is addressed in the Group Financial Statements
in Note 32: Post Balance Sheet Events.
8. Debtors
(As restated)
2019 2018
£’000 £’000
Amounts falling due within one year:
Other debtors 4 3
Other taxation 16 13
Prepayments and accrued income 45 20
Amounts owed by Group undertakings - -
65 36
Amounts falling due after more than one year:
Amounts owed by Group undertakings 9,788 5,230
Aggregate amounts 9,853 5,266
Amounts owed by Group undertakings
As part of annual impairment review procedures the Directors assessed the recoverability of its loans to Group undertakings based upon
estimates of likely sales and profits from each subsidiary in turn. A Group loan to Venture Life Limited in the amount of £12.0 million was re-
assessed at 31 December 2019 and its impairment was unchanged at £5.5 million resulting in an impairment charge of £nil (2018: £5.5 million)
recognised in the Income Statement in respect of this.
Venture Life Group Annual Report 2019
89
Financial Statements
Notes to the Parent Company Balance Sheet
for the year ended 31 December 2019
9. Creditors: amounts falling due within one year
(As restated)
2019 2018
£’000 £’000
Trade creditors 162 25
Other taxation and social security costs - 33
Accruals and deferred income 288 149
Vendor loan notes - -
Convertible bond - -
Amounts owed to Group undertakings 1,716 803
Other payables 4 4
Total 2,175 1,015
10. Creditors: amounts falling due after more than one year
(As restated)
2019 2018
£’000 £’000
Amounts owed to Group undertakings 511 267
Vendor loan notes - -
Convertible bond - -
Deferred consideration - -
Deferred tax 217 217
Total 728 484
Included in Amounts owed to Group undertakings are two loans from Biokosmes srl in the amounts of €0.9 million and €1.0 million (31 December
2018: One loan totaling €1.2 million). These loans carry interest at 3% and 1.5% respectively and are repayable in installments to 2021 and 2022.
In the 2018 Annual Report the €1.2 million loan had been netted off against Amounts owed by Group undertakings. These prior year debtor and
creditor balances have been correctly restated here.
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 was subsequently extended to July 2020. The interest due on the
loan notes was also increased from 3% to 4% effective 1 August 2017. The vendor loan notes were fully repaid on 7 September 2018.
2019 2018
£’000 £’000
Amortised cost valuation of vendor loan notes at 1 January - 1,822
Repaid during the year - (1,790)
Foreign exchange movements and changes in fair value of vendor loan notes - (32)
Accrued interest not paid - -
Amortised cost valuation of vendor loan notes at 31 December - -
Current element of vendor loan notes liability - -
Non-current element of vendor loan notes liability - -
Total - -
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 2017 and 2018
was not considered material.
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Venture Life Group Annual Report 2019
Convertible bonds
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.
2019 2018
£’000 £’000
Amortised cost valuation of convertible bond at 1 January - 1,802
Repaid during the year - (1,900)
Gain on equity component recognised in income statement - 109
Loss versus amortised cost on liability component recognised in income statement - (14)
Transaction adjustment - 3
Accrued interest not paid - -
Change in fair value of convertible bonds - -
Amortised cost valuation of convertible bonds at 31 December - -
Current element of convertible bonds liability - -
Non-current element of convertible bonds liability - -
Total - -
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
was repayable in March 2019 and had an annual interest charge of 10% from September 2017. The deferred consideration was repaid fully
on 7 September 2018.
The amortised cost valuation of deferred consideration included in non-current liabilities at the balance sheet date was £nil (2018: £nil).
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Venture Life Group Annual Report 2019
91
Financial Statements
Notes to the Parent Company Balance Sheet
for the year ended 31 December 2019
11. Share capital
2019 2018
£’000 £’000
Allotted, issued and fully paid:
There were no movements in the number of shares during 2019. At the balance sheet date there were
83,712,106 (2018: 83,712,106) ordinary shares of 0.3 pence each 251 251
The Company has removed the Authorised Share capital from its Memorandum and Articles of Association as allowed by the Companies Act 2006.
12. Post balance sheet events
a) Business combination
Please refer to the Group Financial Statements Note 32 Post Balance Sheet Events.
b) Covid-19
Please refer to the Group Financial Statements Note 32 Post Balance Sheet Events.
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Venture Life Group Annual Report 2019
Shareholder Information
Company contact details and registered office
Venture House, 2 Arlington Square, Devonshire Way,
Bracknell, Berkshire RG12 1WA.
Incorporated and registered in England and Wales with No. 05651130.
Shareholder enquiries
Enquiries concerning shareholdings, change of address
or other particulars, should be directed in the first instance
to the Company’s registrars:
Company Secretary
Giuseppe Gioffrè
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.
Link 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 578 004.
Alternatively, they can e-mail their enquiry to info@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, 2 Arlington Square, Devonshire Way,
Bracknell, Berkshire RG12 1WA.
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Venture Life Group Annual Report 2019
93
Venture Life Group plc
Venture House, 2 Arlington Square, Devonshire Way,
Bracknell, Berkshire RG12 1WA.
T. +44 (0) 1344 578004
E.
info@venture-life.com
W. www.venture-life.com