REG - Fusion Antibodies - Final Results
23/08/2022 07:00
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RNS Number : 8408W Fusion Antibodies PLC 23 August 2022
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse (amendment)
(EU Exit) Regulations 2019/310 ("MAR"). With the publication of this
announcement via a Regulatory Information Service, this inside information is
now considered to be in the public domain.
Fusion Antibodies plc
("Fusion" or the "Company")
Final results
Fusion Antibodies plc (AIM: FAB), specialists in pre-clinical antibody
discovery, engineering and supply for both therapeutic drug and diagnostic
applications, announces its final results for the year ended 31 March 2022.
Commercial and operational highlights
· Full year revenues increased by 15% to £4.8m (2021: £4.2m)
· Loss for the year of £1.2m (2021: loss £2.9m)
· Investment in R&D £0.7m (2021: £0.6m)
· First success milestones received from clients
· Cash position at the year-end £2.0m (2021: £2.7m)
Post period end highlights
· Appointment of Adrian Kinkaid as CEO in August 2022
Simon Douglas, Chairman of Fusion Antibodies commented: "We are pleased with
our overall performance in the year given the challenges that still exist with
Covid-19. Our full year revenues increased, and we have strengthened our Board
with the additions of Dr Matthew Barker as a Non-Executive Director and more
recently, the appointment of Dr Adrian Kinkaid as our new CEO. We are
delighted Adrian has come on board and we look forward to fully integrating
him into the business. On behalf of the whole team, I would like to thank our
shareholders for their continued support, and we feel positive for the next 12
months."
Investor briefing
Fusion will host an online live presentation open to all investors on
Thursday, 1 September 2022 at 11.00am, delivered by Dr Adrian Kinkaid, CEO and
James Fair, CFO via the Investor Meet Company platform. The Company is
committed to providing an opportunity for all existing and potential investors
to hear directly from management on its results whilst additionally providing
an update on the business and current trading.
Investors can sign up to Investor Meet Company for free and add to meet Fusion
Antibodies plc via the following
link: https://www.investormeetcompany.com/fusion-antibodies-plc/register-investor
(https://www.investormeetcompany.com/fusion-antibodies-plc/register-investor)
Enquiries:
Fusion Antibodies plc www.fusionantibodies.com
Simon Douglas, Chairman Via Walbrook PR
James Fair, Chief Financial Officer
Adrian Kinkaid, Chief Executive Officer
Allenby Capital Limited Tel: +44 (0)20 3328 5656
James Reeve/Vivek Bhardwaj (Corporate Finance)
Tony Quirke (Sales and Corporate Broking)
Walbrook PR Tel: +44 (0)20 7933 8780 or fusion@walbrookpr.com
Anna Dunphy Mob: +44 (0)7876 741 001
About Fusion Antibodies plc
Fusion is a Belfast-based Collaborative Research Organisation ("CRO") company,
listed on AIM, providing a range of antibody engineering services for the
development of antibodies for both therapeutic drug and diagnostic
applications.
Fusion provides a broad range of services in antibody generation, development,
characterisation, optimisation, and small-scale production. These services
include antigen expression, purification and sequencing, antibody humanisation
using Fusion's proprietary CDRxTM platform and cell line development,
producing antibody generating stable cell lines optimised for use downstream
by the customer to produce material for clinical trials. Since 2012, the
Company has successfully sequenced and expressed over 250 antibodies and
successfully completed over 200 humanisation projects for its international
customer base, which has included eight of the top 10 global pharmaceutical
companies by revenue.
At every stage, our client's vision is central to how we work in combining the
latest technological advances with cutting edge science. In this work our
world-class humanization and antibody optimization platforms harness the power
of natural somatic hypermutation (SHM) to ensure the best molecule goes to the
clinic. Fusion Antibodies' growth strategy is based on enabling Pharma and
Biotech companies get to the clinic more effectively, using molecules with
optimized therapeutic profile and enhanced potential for successful
development and approval and, ultimately, on speeding up the drug discovery
and development process. Fusion's use of SHM to create a fully human antibody
library to capture the human antibody repertoire will address a continuing
market need in antibody discovery,
Fusion Antibodies' emphasis on antibody therapeutics is based on the size and
growth rate in the sector, with the market valued at $135.4 billion in 2018
and forecast to surpass $300 billion by 2025, a CAGR of 14.26%. As of May
2021, there were 100 approved antibody therapies on the market and more than
570 antibody therapies in clinical development.
Chairman's Statement
The last twelve months have seen the effects of the Covid-19 pandemic on both
our staff and the business diminish and the vaccination programme has made a
significant difference to how we can carry out our business. Northern
Ireland has been slower to ease Covid-19 restrictions than other parts of the
UK and our business development and financial teams continued to work from
home for most of the year. However, the whole team have continued to work well
together and shown a level of commitment that I am proud of and something for
which I would like to thank them.
Availability of some reagents and consumables have occasionally been affected
but overall, the Company was able to meet the challenges presented and has
demonstrated good growth over the financial period concerned.
Revenues increased for FY2022 delivering year on year revenue growth of 15%
with revenue of £4.8m for the year marginally above market expectation. This
growth came from a good performance in our transient expression service
significantly outperforming on the previous year. The revenue included two
milestone payments totalling £300,000 from projects carried out in 2016 and
2018. The loss for the year was £1.2m (FY2021: £2.9m loss) as is explained
in the Executive's report on page 10 of the annual report.
Our Optimas(TM) service continues to give us a unique edge in the market. This
service covers a range of antibody engineering benefits based on the RAMP(TM)
platform, which encompasses affinity maturation, the potential to optimize the
manufacturing efficiency and improve the antibody yield from cell culture thus
reducing the overall cost of goods. Additionally, in many cases the overall
stability of the antibody can be improved and the immunogenicity reduced, with
the opportunity to maximise the efficiency of a client's therapeutic antibody.
Although not yet in itself a significant contributor to revenue, this service
attracts customers as a powerful option that is available, if required,
downstream of our humanization and discovery services.
We have begun to position ourselves as more of an outsourced full development
partner, collaborating in project planning, and acting as a natural extension
of our customer's business, promoting our world class scientific expertise
across the range of services which covers the drug development programme from
discovery to supply. This change resulted in our first and significant
collaborative research and development agreement worth a minimum of $1.83m
over a two-year period with a US biotechnology start-up company that has been
specifically incorporated to focus on a number of innovative early-stage
antibody discovery and development programmes. I see this as the beginning of
an exciting partnership where Fusion will provide its discovery and
engineering services in relation to the research and development of several
pre-determined projects. Should a product be successfully developed,
registered and commercialised, the Company will be entitled to both milestone
and royalty payments based on a percentage of sales figures of that product.
As part of our strategy to grow into more global territories, we entered into
a commercial collaboration agreement with Eurofins Discovery (Eurofins), a
leading provider of products and services to the drug discovery industry.
Fusion will provide comprehensive pre-clinical antibody development services
from discovery, engineering and supply to Eurofins' customers. While not
expected to have a material impact on the Company's earnings in the short
term, we consider that it demonstrates a commitment by both parties to provide
world-class scientific expertise and next-generation technology to the market.
The formation of the new Scientific Advisory Panel (the "SAP") is an exciting
next step to ensure that we remain at the cutting edge of the science involved
in antibody drug development. The SAP consists of leading experts to support
the Company's research and development across its range of antibody services,
and to provide advice regarding emerging science and technology issues and
trends. The appointment of these industry experts adds a depth of expertise
that will provide Fusion with relevant and informed technical and scientific
counsel and broadens our access to a network of clinical and scientific
advisors, as well as academic collaborators. I am delighted to welcome them
to the team.
There have been a number of changes to the Board during the financial year and
in the period since the reporting date. In March 2022 Dr Alan Mawson stepped
down as a Non-Executive Director and on behalf of the Board, I would like to
offer our sincere thanks. Alan has contributed greatly to the Company over
many years, both pre and post Fusion's admission to listing on AIM and the
Company has benefited a great deal from his wise advice and guidance.
Concurrently, I was pleased to announce the appointment of Dr Matthew Baker
who joined the Board as a Non-Executive Director. He was, and continues to
be, a member of SAP and his extensive experience of the antibody services
business, both from a technical and commercial perspective, will be a great
benefit to the Company going forward.
A search for a new CEO started when we learnt that Dr Richard Jones was moving
on to pursue other career opportunities. He added significant value to the
Company, both operationally and commercially during his short stay and I wish
him well for the future.
In July we announced the appointment of Dr Adrian Kinkaid as CEO and he has
recently taken up that post. Adrian brings a lot of experience in the life
science and biotherapeutics industries and joins at an exciting time as the
Company focuses on growing our existing services and finalising our current
development programmes, including OptiMAL(TM).
We have continued to invest in improving our current services and in the
development of new technologies to further enhance the service offered to our
customers. Improvement in our B-cell cloning services have been made and
further equipment purchased to deliver the growth in transient expression. The
Mammalian Antibody Library Discovery Platform (OptiMAL(TM)) is an ongoing
R&D programme. Since our last report processes to screen and select
antibodies have been optimised and work has commenced on extracting
neutralising antibodies to oncology targets to build a body of data with a
view to establishing commercial relationships for further validation by the
end of the financial year.
Corporate governance
The long-term success of the business and delivery on strategy depends on good
corporate governance. The Company complies with the Quoted Companies Alliance
Corporate Governance Code as explained more fully in the Governance Report.
Current trading
Despite a second uniquely challenging year due to the pandemic, we continued
to see growth and invest further in our core scientific based services. Our
commitment to new R&D projects was maintained and OptiMAL(TM) remains on
track to deliver initial revenues in the current financial year. The
Covid-19 pandemic did not have a material impact on operations as the Company
implemented procedures to protect our laboratory services. Again, my thanks
to all the staff who, as a team, were committed to maintaining the full
operations of the Company though either working from home or, for those in the
laboratories, working flexible hours in controlled conditions. I would also
like to thank the shareholders for their continued support.
Post year end trading has been in line with expectations. While conditions in
the UK have improved significantly, there remains considerable uncertainty
from current global macro conditions. Challenges remain for much of our
international customer base, but the Board believe the Company has the
expertise to meet these challenges and capitalise on opportunities as we have
done over the past year.
Dr Simon Douglas
Chairman
22 August 2022
Executive report and operations review
FY 2022 was a second year of business with challenges and restrictions for all
of us due to the COVID-19 pandemic. The Company delivered 15% revenue growth
in the year and continued to invest for growth and increased investment in
R&D by 14%. As a result of the ongoing investment strategy, the Company
continues to return losses which reduced this year to £1.2m (FY2021: £2.9m
loss for the year). Despite the challenges throughout the year, the
Company's staff were able to win a new major client contract which contributed
to delivery on the financial performance, and to enter into a commercial
collaboration with Eurofins Discovery. Once again, we recognise and thank the
staff who worked through the challenges to enable our clients to advance their
discovery and development projects and to progress our pipeline of projects.
Included in the year's results are two milestones totalling £300,000. These
arise from our clients' successes: one humanisation project performed in 2018
was successfully commercialised, and one project performed in 2016 which has
commenced clinical trials. Client success is a clear demonstration of the
value of the work done by the Company for clients developing the drugs of the
future.
Business review
The Company's revenue for the financial year to 31 March 2022 grew by 15% vs
FY2021 to £4.8m which was marginally ahead of market expectations. Growth was
seen in both H1 and H2 of FY2022 compared to the comparable periods in FY2021.
This growth has come from the expansion of our existing services in discovery,
engineering and supply, as well as recognition of two milestone receipts. We
see increasing interest in the RAMP(TM) technology service platform which
represents a key driver of growth for the business and was a major factor in
winning new business in the year. We are pleased to report that the Company
saw continued growth in our key geographical markets, in particular in North
America which represented 42% of revenues and with an increasing number of key
client accounts. Our main Asia Pacific markets such as Japan, India and Korea,
where we have appointed distributors, continue to be impacted by the global
pandemic, although client relationships and opportunities are increasing and
the appointment of distributors in earlier years has counteracted the lack of
travel to those countries from the UK.
Certain customer projects involve a significant level of contribution from
Fusion to the development programme or the intellectual property. When this
occurs, we seek to enter into a collaboration agreement structure which will
enable Fusion to access the downstream value of the services and share in the
commercial success. This will further enable Fusion to unlock the intrinsic
value that our service platforms provide to our clients and generate
additional shareholder value. During the year the Company entered into such an
agreement with a US based biotech company with a structure of milestone
success payments and royalties in addition to fee for service-based contract
value.
We continued to drive investment and innovation to improve our current
services and develop new technologies to further enhance the service offered
to our customers. Investment in R&D increased by 14% to £699,000.
Improvements in our B-cell cloning services have been made and further
equipment has been purchased to create more capacity, and hence deliver
growth, for transient expression. Our humanisation and RAMP(TM) procedures are
beginning to benefit from improved computer-based design selection. We
strongly believe that the Mammalian Antibody Library Discovery Platform
(OptiMAL(TM)) represents a key future driver of growth for the business, and
is an ongoing R&D programme.
There are several key steps in the OptiMAL(TM) programme including design; DNA
synthesis, cloning, expression, screening and lead selection. Since our last
report we have completed the process development of all of the steps, in
particular, processes to screen and select antibodies have been optimised
using a combination of a new magnetic bead system and single cell sorting. The
synthesis of the core Library oligo mix is outsourced and has been continually
improved. The latest version has additional mutational hotspots to increase
diversity. Work has been successful on extracting spiked-in control antibodies
to model oncology targets to build a body of data with a view to further
optimisation. This work is continuing post year end with a view to
establishing commercial relationships for further validation by the end of the
financial year.
The year also saw the first meeting of a Scientific Advisory Panel of industry
experts and thought leaders in the field of antibody discovery and services.
The Panel is expected to meet up to four times a year to guide the direction
of future R&D in the Company.
As reported in October 2020, the Company received grants from Invest Northern
Ireland to support Fusion's COVID-19 Discovery programme as part of the NI
COVID-19 Antibody Development Alliance (NICADA) a collaboration between Fusion
and Queen's University Belfast with an aim to develop and test antibodies to
assist in tackling the COVID-19 pandemic. A portion of the grant was used to
support the OptiMAL(TM) programme and to reinforce the work being performed at
Fusion to produce fully human antibodies targeting the SARS-CoV-2 virus which
could be used in therapeutic and diagnostic applications. The collaboration
was initially for a period of one year but was extended to April 2022. The
project did not produce any antibodies for further development and
commercialisation but provided useful material and insight in the ongoing
OptiMAL(TM) development programme.
Supply chain disruption from the UK's departure from the European Union and
the COVID-19 pandemic continued throughout the year. As a result, the quantity
and value of consumable stock held by the Company has been increased further
in the year. The Company's revenues arising from exports to EU countries
increased to £1.4m, representing 29% of total revenues. The Company continues
to monitor potential risks and opportunities arising as negotiations with the
EU continue, particularly in respect of the Northern Ireland Protocol. We also
continue to develop other export markets to mitigate risks of overexposure to
any one geographical market.
As pandemic restrictions around the world were eased the industry as a whole
saw an increase in staff turnover as individuals sought new opportunities. The
departure of a few employees during the year presented challenges but also an
opportunity to strengthen our team with new talent bringing fresh ideas and
experience. We are very grateful for the commitment, dedication and resilience
shown by our staff over the last two years.
Post year end events
· Appointment of Adrian Kincaid as CEO in August 2022
Financial Results
The Company has continued to build on the revenue growth in the second half of
FY2021 with revenue growth seen in both H1 and H2 relative to the comparable
period in the previous year. Full year revenues for the year in total were up
15% to £4.8m (FY2021: £4.2m).
The EBITDA loss for the year was £0.6m (FY2021: £0.5m loss) (see note 27).
However, excluding the R&D expenditure of £0.7m, EBITDA for the year was
marginally positive. The loss before tax was similar at £1.3m (FY2021: £1.3m
loss).
The Company held current net assets of £3.1m at 31 March 2022 (2021: £3.7m)
which mainly comprised inventories and cash and cash equivalents.
The Company ended the year with £2.0m of cash and cash equivalents, having
used £0.3m of cash in operations during the year, invested £0.3m in
property, plant and equipment and £0.1m servicing asset-based borrowings.
This cash level puts the Company in a strong position to progress plans for
growth in existing services in FY2023.
The Company's full results are set out in the financial statements included
with this report.
Key performance indicators
The key performance indicators (KPIs) regularly reviewed by the Board are:
KPI FY2022 FY2021
Revenue change year on year 15% 7%
EBITDA (£0.6m) (£0.5m)
Cash used in operations (£0.3m) (£1.1m)
Corporate strategy
The Company continues to grow by following the existing Corporate Strategy of
investing for growth through market development and the introduction of new
services developed in-house.
Fusion is at a key value inflection point in its evolution. The Company has
world class and cutting-edge Antibody Discovery, Engineering and Supply
technology platforms with the potential to generate significant future
shareholder value.
The Company's vision is to move into the next phase of its evolution as a
commercially successful antibody service provider with a diversified range of
technology platforms to enable our customers in pharma and biotech to identify
and commercialise antibodies more cost effectively, more rapidly, with a
higher probability of success and with a more competitive profile.
Outlook
Post year end trading has been in line with expectations. While conditions in
the UK have improved significantly, there remains considerable uncertainty
from current global macro conditions. Challenges remain for much of our
international customer base, but the Board believe the Company has the
expertise to meet these challenges and capitalise on opportunities as we have
done over the past year.
Richard
Buick
James Fair
Chief Scientific
Officer
Chief Financial Officer
22 August 2022
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 March 2022
Note 2022 2021
£'000 £'000
Revenue 4 4,799 4,165
Cost of sales (2,333) (2,141)
Gross profit 2,466 2,024
Other operating income 30 194
Administrative expenses (3,821) (3,467)
Operating loss 5 (1,325) (1,249)
Finance income 8 1 3
Finance expense 8 (9) (18)
Loss before tax (1,333) (1,264)
Income tax credit/(charge) 10 133 (1,635)
Loss for the financial year (1,200) (2,899)
Total comprehensive expense for the year (1,200) (2,899)
Pence Pence
Loss per share
Basic 11 (4.6) (11.4)
Statement of Financial Position
As at 31 March 2022
Notes 2022 2021
£'000 £'000
Assets
Non-current assets
Intangible assets 12 - 2
Property, plant and equipment 13 633 1,123
633 1,125
Current assets
Inventories 16 585 480
Trade and other receivables 17 1,517 1,440
Current tax receivable 131 99
Cash and cash equivalents 2,049 2,686
4,282 4,705
Total assets 4,915 5,830
Liabilities
Current liabilities
Trade and other payables 18 1,142 833
Borrowings 19 66 163
1,208 996
Net current assets 3,074 3,709
Non-current liabilities
Borrowings 19 3 67
Provisions for other liabilities and charges
20 20 20
23 87
Total liabilities 1,231 1,083
Net assets 3,684 4,747
Equity
Called up share capital 22 1,040 1,024
Share premium reserve 7,647 7,547
Accumulated losses (5,003) (3,824)
Total equity 3,684 4,747
Simon
Douglas
James Fair
Director
Director
Registered in Northern Ireland, number NI039740
Statement of Changes in Equity
For the year ended 31 March 2022
Share premium reserve Accumulated losses Total
Called up share capital
£'000 £'000 equity
£'000
£'000
At 1 April 2020 884 4,872 (944) 4,812
Loss and total comprehensive expense for the year
- - (2,899) (2,899)
Issue of share capital 140 2,879 - 3,019
Cost of issuing share capital - (204) - (204)
Share options - value of employee services
- - 19 19
Total transactions with owners, recognised directly in equity
140 2,675 19 2,834
At 31 March 2021 1,024 7,547 (3,824) 4,747
At 1 April 2021 1,024 7,547 (3,824) 4,747
Loss and total comprehensive expense for the year
- - (1,200) (1,200)
Issue of share capital 16 100 - 116
Share options - value of employee services
- - 21 21
Total transactions with owners, recognised directly in equity
16 100 21 137
At 31 March 2022 1,040 7,647 (5,003) 3,684
Statement of Cash Flows
For the year ended 31 March 2022
2022 2021
£'000 £'000
Cash flows from operating activities
Loss for the year (1,200) (2,899)
Adjustments for:
Share based payment expense 21 19
Depreciation 749 712
Amortisation of intangible assets 2 2
Finance income (1) (3)
Finance costs 9 18
Income tax (credit)/charge (133) 1,635
Increase in inventories (105) (140)
Increase in trade and other receivables (77) (553)
Increase in trade and other payables 309 5
Cash used in operations (426) (1,204)
Income tax received 101 68
Net cash used in operating activities (325) (1,136)
Cash flows from investing activities
Purchase of property, plant and equipment (258) (365)
Finance income - interest received 1 3
Net cash used in investing activities (257) (362)
Cash flows from financing activities
Proceeds from issue of share capital net of transaction costs 116 2,815
Proceeds from new borrowings - 14
Repayment of borrowings (162) (164)
Finance costs - interest paid (9) (18)
Net cash (used in)/generated from financing activities (55) 2,647
Net (decrease)/increase in cash and cash equivalents (637) 1,149
Cash and cash equivalents at the beginning of the year 2,686 1,537
Cash and cash equivalents at the end of the year 2,049 2,686
Notes to the Financial Statements
For the year ended 31 March 2022
1 General information
Fusion Antibodies plc is a company incorporated and domiciled in the United
Kingdom, and is registered in Northern Ireland having its registered office at
Marlborough House, 30 Victoria Street, Belfast BT1 3GG.
The principal activity of the Company is the research, development and
manufacture of recombinant proteins and antibodies, particularly in the areas
of cancer and infectious diseases.
2 Significant accounting policies
The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been consistently
applied to all years presented unless otherwise stated.
Basis of preparation
The financial information included in this preliminary announcement does not
constitute statutory accounts of the Company for the years ended 31 March 2022
and 31 March 2021 but is derived from those accounts. Statutory accounts for
the year ended 31 March 2021 have been delivered to the Registrar of Companies
and those for 2022 will be delivered following the Company's Annual General
Meeting. The auditors have reported on those accounts: their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report,
and (iii) did not contain a statement under section 498(2) or (3) of the
Companies Act 2006.
The financial statements have been prepared on the historical cost convention,
modified to include certain financial instruments at fair value.
The financial statements are prepared in sterling, which is the functional
currency of the Company. Monetary amounts in these financial statements are
rounded to the nearest £1,000.
On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into UK law and became UK-adopted International Accounting Standards,
with future changes being subject to endorsement by the UK Endorsement Board.
Fusion Antibodies plc transitioned to UK-adopted International Accounting
Standards in its financial statements on 1 April 2021. This change constitutes
a change in accounting framework. However, there is no impact on recognition,
measurement or disclosure in the period reported as a result of the change in
framework. The financial statements of Fusion Antibodies plc have been
prepared in accordance with UK-adopted International Accounting Standards and
with the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
International Financial Reporting Standards
The following new accounting standards, amendments and/or interpretations have
been published and have been considered by the Company but are not expected to
have a material impact on the financial statements in the current or future
reporting periods and on the foreseeable future transactions:
Amendment to IFRS 16 Leases Covid 19 - related rent concessions (effective 1
April 2021)
Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9 (effective date
1 January 2021)
Amendments to IFRS 7, IFRS 4 and IFRS 16 Interest rate benchmark reform -
phase 2 (effective 1 January 2021)
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Company's 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.
Going concern
The Company has returned a loss of £1,200,000 for the year and at the
year-end had net current assets of £3,074,000 including £2,049,000 of cash
and cash equivalents. The Company was able to remain open and operational
throughout the period of most stringent Government restrictions. The Company
continues to expend cash in a planned manner to both grow the trading aspects
of the business and to develop new services through research and
development projects. The directors have, at the time of approving the
financial statements, a reasonable expectation that the Company has adequate
resources to continue in operational existence for 12 months from the
reporting date. Thus, they continue to adopt the going concern basis of
accounting in preparing the financial statements. In arriving at this
conclusion, the directors have reviewed detailed forecast models for the
Company. These models are based on best estimates of future performance and
have been adjusted to reflect various scenarios and outcomes that could
potentially impact the forecasts.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable
for the provision of services in the ordinary course of the Company's
activities. Revenue is shown net of value added tax and where a contractual
right to receive payment exists
The Company's performance obligations for its revenue streams are deemed to be
the provision of specific services or materials to the customer. Performance
obligations are identified on the basis of distinct activities or stages
within a given contract that the customer can benefit from, independent of
other stages in the contract, The transaction price is allocated to the
various performance obligations, based on the relative fair value of those
obligations, and then revenue is recognised as follows:
· revenue is recognised over the period that services are provided
using the percentage of completion method, based on the input method using
costs incurred to date relative to the expected total costs for each
performance obligation; and
· Where a contract includes a payment contingent upon the customer
subsequently achieving a pre-defined milestone with their development
programme, revenue in the amount of the total success payment due is
recognised when the pre-defined condition(s) have been met.
Contract assets arise on contracts with customers for which performance
obligations have been satisfied (or partially satisfied on an over time basis)
but for which the related amounts have not yet been invoiced or received.
Contract liabilities arise in respect of amounts invoiced during the year for
which the relevant performance obligations have not been met by the year-end.
The Company's contracts with customers are typically less than one year in
duration and any contract liabilities would be expected to be recognised as
revenue in the following year.
Grant income
Revenue grants received by the Company are recognised in a manner consistent
with the grant conditions. Once conditions have been met, grant income is
recognised in the Statement of Comprehensive Income as other operating income.
Research and development
Research expenditure is written off as incurred. Development expenditure is
recognised in the Statement of Comprehensive Income as an expense until it can
be demonstrated that the following conditions for capitalisation apply:
· it is technically feasible to complete the scientific
product so that it will be available for use;
· management intends to complete the product and use or
sell it;
· there is an ability to use or sell the product;
· it can be demonstrated how the product will generate
probable future economic benefits;
· adequate technical, financial and other resources to
complete the development and to use or sell the product are available; and
· the expenditure attributable to the product during its
development can be reliably measured.
Intangible assets
Software
Software developed for use in the business is initially recognised at
historical costs, net of amortisation and provision for impairment. Subsequent
development costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Company and the
cost of the item can be measured reliably.
Software is amortised over its expected useful economic life, which is
currently estimated to be 4 years. Amortisation expense is included within
administrative expenses in the Statement of Comprehensive Income.
Property, plant and equipment
Property, plant and equipment are initially recognised at historical cost, net
of depreciation and any impairment losses.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Company and the
cost of the item can be measured reliably. The carrying amount of the replaced
part is de-recognised. All other repairs and maintenance are charged to the
statement of comprehensive income during the financial year in which they are
incurred.
Subsequently, property plant and equipment are measured at cost or valuation
net of depreciation and any impairment losses.
Costs associated with maintaining computer software programmes are recognised
as an expense as incurred. Software acquired with hardware is considered to be
integral to the operation of that hardware and is capitalised with that
equipment. Software acquired separately from hardware is recognised as an
intangible asset and amortised over its estimated useful life.
Depreciation is provided on all property, plant and equipment at rates
calculated to write off the cost less estimated residual value of each asset
on a straight line basis over its expected economic useful life as follows:
Right of use
assets The
remaining length of the lease
Leasehold improvements The lesser of the asset
life and the remaining length of the lease
Plant and machinery 4
years
Fixtures, fittings & equipment 4 years
Leases
Leases in which a significant portion of the risks and rewards of ownership
remain with the lessor are deemed to give the Company the right-of-use and
accordingly are recognised as property, plant and equipment in the statement
of financial position. Depreciation is calculated on the same basis as a
similar asset purchased outright and is charged to profit or loss over the
term of the lease. A corresponding liability is recognised as borrowings in
the statement of financial position and lease payments deducted from the
liability. The difference between remaining lease payments and the liability
is treated as a finance cost and taken to profit or loss in the appropriate
accounting period.
Impairment of non-financial assets
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are largely independent cash inflows (cash-generating
units). As a result, some assets are tested individually for impairment and
some are tested at cash-generating unit level.
All individual assets or cash-generating units
are tested whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
An impairment loss is recognised for the amount
by which the asset's or cash-generating unit's amount exceeds its recoverable
amount. The recoverable amount is the higher of fair value, reflecting market
conditions less costs to sell, and value in use. Value in use is based on
estimated future cash flows from each cash-generating unit or individual
asset, discounted at a suitable rate in order to calculate the present value
of those cash flows. The data used for impairment testing procedures is
directly linked to the Company's latest approved budgets, adjusted as
necessary to exclude any restructuring to which the Company is not yet
committed. Discount rates are determined individually for each cash-generating
unit or individual asset and reflect their respective risk profiles as
assessed by the directors. Impairment losses for cash-generating units are
charged pro rata to the assets in the cash-generating unit. Cash generating
units and individual assets are subsequently reassessed for indications that
an impairment loss previously recognised may no longer exist. Impairment
charges are included in administrative expenses in the Statement of
Comprehensive Income. An impairment charge that has been recognised is
reversed if the recoverable amount of the cash-generating unit or individual
asset exceeds the carrying amount.
Current tax and deferred tax
The tax expense for the year comprises current and deferred tax. Tax is
recognised in the statement of comprehensive income, except to the extent that
it relates to items recognised directly in equity.
The current tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the reporting date in the UK, where the Company
operates and generates taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred tax is recognised on temporary differences arising between the
carrying amounts of assets and liabilities and their tax bases. Deferred tax
is determined using tax rates (and laws) that have been enacted, or
substantively enacted, by the reporting date and are expected to apply when
the related deferred tax asset is realised or the deferred tax liability is
settled.
Deferred tax assets are recognised only to the extent that it is probable that
future taxable profit will be available against which the temporary
differences can be utilised.
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to offset current tax assets against
current tax liabilities.
Share based employee compensation
The Company operates equity-settled share-based compensation plans for
remuneration of its directors and employees.
All employee services received in exchange for the grant of any share-based
compensation are measured at their fair values. The fair value is appraised at
the grant date and excludes the impact of any non-market vesting conditions
(e.g. profitability and remaining an employee of the Company over a specified
time period).
Share based compensation is recognised as an expense in the Statement of
Comprehensive Income with a corresponding credit to equity. If vesting periods
or other vesting conditions apply, the expense is allocated over the vesting
period, based on the best available estimate of the number of share options
expected to vest.
Non-market vesting conditions are included in assumptions about the number of
options that are expected to become exercisable. Estimates are subsequently
revised if there is any indication that the number of share options expected
to vest differs from previous estimates.
The proceeds received net of any directly attributable transaction costs are
credited to share capital and share premium when the options are exercised.
Financial assets
Classification
The Company classifies its financial assets in the following measurement
categories:
§ Those to be measured at amortised costs; and
§ Those to be measured subsequently at fair value (either through Other
Comprehensive Income or through profit and loss).
The classification depends on the Company's business model for managing the
financial assets and the contractual terms of the cash flows. The Company
reclassifies its financial assets when and only when its business model for
managing those assets changes.
Recognition and measurement
At initial recognition, the Company measures a financial assets at its fair
value plus transaction costs that are directly attributable to the acquisition
of the financial asset.
Subsequent measurement of financial assets depends on the Company's business
model for managing those financial assets and the cash flow characteristics of
those financial assets. The Company only has financial assets classified at
amortised cost. Cash and cash equivalents represent monies held in bank
current accounts and bank deposits. These assets are those held for
contractual collection of cash flows, where those cash flows represent solely
payments of principal and interest and are held at amortised cost. Any gains
or losses arising on derecognition is recognised directly in profit or loss.
Impairment losses are presented as a separate line in the profit and loss
account.
Impairment
The Company assesses on a forward-looking basis, the expected credit losses
associated with its debt instruments carried at amortised cost. For trade
receivables the Company applies the simplified approach permitted by IFRS 9,
which requires expected lifetime losses to be
recognised from the initial recognition of the receivables. For other
receivables the Company applies the three stage model to determine expected
credit losses.
Inventories
Inventories comprise consumables. Consumables inventory is stated at the lower
of cost and net realisable value. Cost is determined using the first-in,
first-out (FIFO) method. Cost represents the amounts payable on the
acquisition of materials. Net realisable value represents the estimated
selling price less all estimated costs of completion and costs to be incurred
in selling and distribution.
Financial liabilities
Financial liabilities comprise Trade and other payables and borrowings due
within one year and after one year, which are recognised initially at fair
value and subsequently carried at amortised cost using the effective interest
method. The Company does not use derivative financial instruments or hedge
account for any transactions. Trade payables represent obligations to pay
for goods or services that have been acquired in the ordinary course of
business from suppliers. Trade payables are classified as current
liabilities if payment is due within one year. If not, they are presented as
non-current liabilities.
Provisions
A provision is recognised in the Statement of Financial Position when the
Company has a present legal or constructive obligation as a result of a past
event, that can be reliably measured and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a pre-tax rate
that reflects risks specific to the liability. The increase in the provision
due to the passage of time is recognised as a finance cost. Provisions for
dilapidation charges that will crystallise at the end of the period of
occupancy are provided for in full.
Employee benefits - Defined contribution plan
The Company operates a defined contribution pension scheme which is open to
all employees and directors. The assets of the schemes are held by investment
managers separately from those of the Company. The contributions payable to
these schemes are recorded in the Statement of Comprehensive Income in the
accounting year to which they relate.
Foreign currency translation
The Company's functional currency is the pound
sterling. Transactions in foreign currencies are translated at the exchange
rate ruling at the date of transaction. Monetary assets and liabilities in
foreign currencies are translated at the rates of exchange ruling at the
reporting date. Exchange differences arising on the settlement or on
translating monetary items at rates different from those at which they were
initially recorded are recognised in administrative expenses in the Statement
of Comprehensive Income in the year in which they arise.
Equity
Equity comprises the following;
Called up share capital
Share capital represents the nominal value of equity shares.
Share premium
Share premium represents the excess over nominal value of the fair value of
consideration received of equity shares, net of expenses of the share issue.
Accumulated losses
Accumulated losses represent retained profits
and losses.
3 Critical accounting estimates and judgements
Many of the amounts included in the financial statements involve the use of
judgement and/or estimates. These judgements and estimates are based on
management's best knowledge of the relevant facts and circumstances, having
regard to prior experience, but actual results may differ from the amounts
included in the financial statements. Information about such judgements and
estimation is contained in the accounting policy and/or the notes to the
financial statements and the key areas are summarised below:
Critical judgements in applying accounting policies
· Revenue recognition. The Company typically enters into a contract
comprising one or more stages for each customer project. In the application of
IFRS 15 "Revenue from Contracts with Customers" and the accounting policy set
out in Note 2 to these accounts, significant judgement is required to identify
the individual performance obligations contained within each contract,
particularly when a set-up charge is made relating to the initial
collaboration with the customer to formulate a programme of development work,
or when the pattern of sales invoices does not align with those stages
explicit in the contract.
Many customer contracts contain a non-refundable set up charge of up to 30% of
contract value which becomes payable upon commencement of the project. This
represents the value of the transfer of knowledge involved in design, planning
and preparation for the work to be done, and for the time and consumables
committed to commence work on the project. As this work is distinct and of
benefit to the customer independent of later stages within the contract, it is
therefore judged to be a separate performance obligation within the meaning of
IFRS 15 and is recognised as revenue in line with the accounting policy.
The remaining performance obligations are based on the stages with defined
deliverables which are explicitly outlined in the customer contracts.
During the process of delivering the contract, where delivery is part way
through a stage at the reporting date, an estimate is made of the amount of
revenue to recognise for that stage to reflect the work performed up to that
date. This amount is estimated on a percentage completion basis
Critical accounting estimates and assumptions
· Deferred Taxation. The Company has accumulated tax losses of
£10,000,000 (2021: £9,042,000). In principle these losses would support a
deferred tax asset of approximately £2,000,000 (2021: £2,000,000). IAS 12
requires that a deferred tax asset relating to unused tax losses is carried
forward to the extent that future taxable profits will be available. The
company is in an investment phase, expecting to have increased expenditure on
R&D and business development over the next two years which will increase
the tax losses. After the investment period the Board expects the Company to
generate healthy profits but it is difficult at this stage to reliably
estimate the period over which profits may arise in the future. The Board has
therefore determined to not recognise the asset at the reporting date. This
approach does not affect the future availability of the tax losses for offset
against future profits.
4 Revenue
All of the activities of the Company fall within one business segment, that of
research, development and manufacture of recombinant proteins and antibodies.
2022 2021
Geographic analysis £'000 £'000
UK 724 711
Rest of Europe 1,394 1,125
North America 2,000 1,714
Rest of World 681 615
4,799 4,165
In the year there was one customer (2021: none) to whom sales exceeded 10% of
revenues, that customer accounted for £693,000 or 14.4% of revenues.
5 Operating loss is stated after
charging/(crediting):
2022 2021
£'000 £'000
Employee benefit costs
-wages and salaries 2,126 2,005
-social security costs 205 194
-other pension costs 103 113
-share based payments 21 19
2,455 2,331
Depreciation of property, plant and equipment 749 712
Other operating expenses
Rates, utilities and property maintenance 100 66
IT costs 16 23
Fees payable to the Company's auditors
- for the audit of the financial statements 40 30
Raw materials and consumables used 1,276 1,245
Increase in inventories (105) (140)
Patent costs 84 2
Marketing costs 115 143
(Loss)/profit on foreign exchange (23) 64
Other expenses 1,447 1,132
Total cost of sales and administrative expenses 6,154 5,608
Included in the costs above is expenditure on research and development
totalling £699,000 (2021: £613,000).
6 Average staff numbers
2022 2021
Employed in UK No. No.
(including executive directors) 53 49
Non-executive directors 5 5
58 54
7 Remuneration of directors and key senior
management
Directors
2022 2021
£'000 £'000
Emoluments 518 562
Pension contributions 22 23
540 585
Highest paid director
The highest paid director received the following emoluments:
2022 2021
£'000 £'000
Emoluments 153 151
Compensation for loss of office - 30
Pension contributions 9 9
162 190
The highest paid director did not exercise any share option in the year.
Key senior management
Key senior management is considered to comprise the directors of the Company
with total remuneration for the year of £540,000 (2021: £585,000). Share
based payments for the year attributable to key senior management totalled
£15,000 (2021: £5,000).
8 Finance income and expense
2022 2021
Income £'000 £'000
Bank interest receivable 1 3
2022 2021
Expense £'000 £'000
Interest expense on other borrowings 9 18
9 Share based payments
At the reporting date the Company had three share based reward schemes: two
schemes under which options were previously granted and are now closed to
future grants and a third scheme in place in which grants were made in the
current year:
· A United Kingdom tax authority approved scheme for executive
directors and senior staff;
· An unapproved scheme for awards to those, such as non-executive
directors, not qualifying for the approved scheme; and
· A United Kingdom tax authority approved scheme for executive
directors and senior staff which incorporates unapproved options for grants to
be made following listing of the Company shares, "2017 EMI and Unapproved
Employee Share Option Scheme".
Options awarded during the year under the 2017 EMI and Unapproved Employee
Share Option Scheme have no performance conditions other than the continued
employment within the Company. Options vest one, two and three years from the
date of grant, which may accelerate for a change of control. Options lapse if
not exercised within ten years of grant, or if the individual leaves the
Company, except under certain circumstances such as leaving by reason of
redundancy.
The total share-based remuneration recognised in the Statement of
Comprehensive Income was £21,000 (2021: £19,000). The most recent options
granted in the year were valued using the Black-Scholes method. The share
price on grant used the share price of open market value, expected volatility
of 24.0% and a compound risk free rate assumed of 0.62%.
2022 2021
Weighted average exercise price £ Weighted average exercise price £
2022 2021
Number Number
Outstanding at beginning of the year 0.421 1,266,666 0.400 1,685,417
Granted during the year 1.275 250,000 - -
Exercised during the year 0.288 (404,587) 0.510 (185,834)
Lapsed during the year 1.107 (324,996) 0.103 (232,917)
Outstanding at the end of the year 0.478 787,083 0.421 1,266,666
The options outstanding at the end of each year were as follows:
Expiry Nominal share value Exercise price £ 2022 2021
Number Number
May 2027 £0.04 0.040 103,750 310,000
December 2028 £0.04 0.545 683,333 956,666
Total 787,083 1,266,666
Of the total number outstanding 787,083 (2021: 939,996) had vested at the
reporting date.
10 Income tax (credit)/charge
2022 2021
£'000 £'000
Current tax - UK corporation tax (133) (129)
Deferred tax asset derecognised - 1,764
Income tax (credit)/charge (133) 1,635
The difference between loss before tax multiplied by the standard rate of 19%
(2021: 19%) and the income tax (credit)/charge is explained in the
reconciliation below:
2022 2021
£'000 £'000
Factors affecting the tax (credit)/charge for the year
Loss before tax (1,333) (1,264)
Loss before tax multiplied by standard rate of UK corporation tax of 19%
(2021: 19%)
(253) (240)
Deferred tax not recognised on current year losses 253 240
Deferred tax not recognised on prior year losses - 1,764
RDEC/R&D tax credit (131) (99)
RDEC/R&D tax credit - adjustment relating to prior year (2) (30)
Total income tax (credit)/charge (133) 1,635
11 Loss per share
2022 2021
£'000 £'000
Loss for the financial year (1,200) (2,899)
Loss per share pence Pence
Basic (4.6) (11.4)
Number Number
Issued ordinary shares at the end of the year 26,014,946 25,610,359
Weighted average number of shares in issue during the year 25,945,780 25,458,761
Basic earnings per share is calculated by dividing the basic earnings for the
year by the weighted average number of shares in issue during the year.
12 Intangible assets
2022 2021
Software Software
£'000 £'000
Cost
At 1 April 8 8
At 31 March 8 8
Accumulated amortisation
At 1 April 6 4
Amortisation charged in the year
2 2
At 31 March 8 6
Net book value
At 31 March - 2
At 1 April 2 4
13 Property, plant and equipment
Fixtures, fittings & equipment
Right of use assets Leasehold Plant & £'000
£'000 improvements machinery Total
£'000 £'000 £'000
Cost
At 1 April 2021 240 784 2,181 247 3,452
Additions - 30 175 54 259
At 31 March 2022 240 814 2,356 301 3,711
Accumulated depreciation
At 1 April 2021 139 583 1,446 161 2,329
Depreciation charged in the year
71 169 445 64 749
At 31 March 2022 210 752 1,891 225 3,078
Net book value
At 31 March 2022 30 62 465 76 633
At 31 March 2021 101 201 735 86 1,123
Fixtures, fittings & equipment
Right of use assets Leasehold Plant & £'000
£'000 improvements machinery Total
£'000 £'000 £'000
Cost
At 1 April 2020 226 725 1,916 220 3,087
Additions 14 59 265 27 365
At 31 March 2021 240 784 2,181 247 3,452
Accumulated depreciation
At 1 April 2020 68 425 1,015 109 1,617
Depreciation charged in the year
71 158 431 52 712
At 31 March 2021 139 583 1,446 161 2,329
Net book value
At 31 March 2021 101 201 735 86 1,123
At 31 March 2020 158 300 901 111 1,470
Plant & machinery with a net book value of £85,000 is held under hire
purchase agreements or finance leases (2021: £216,000).
The carrying value of right of use assets at the reporting date comprises
leasehold property of £22,000 and fixtures, fittings and equipment of
£8,000.
The depreciation expense is included in administrative expenses in the
statement of comprehensive income in each of the financial years shown.
14 Investment in subsidiary
The Company has the following investment in a subsidiary:
2022 2021
£ £
Fusion Contract Services Limited 1 1
100% subsidiary
Dormant company
Marlborough House, 30 Victoria Street, Belfast BT1 3GG
Group financial statements are not prepared on the basis that the subsidiary
company is dormant and not material to the financial
statements.
15 Deferred tax assets
2022 2021
£'000 £'000
At 1 April - 1,764
Charged to the statement of comprehensive income in the year
- (1,764)
At 31 March - -
The movement in deferred tax assets and liabilities during the financial year,
without taking into consideration the offsetting of balances within the same
tax jurisdiction, is as follows:
Accelerated tax depreciation £'000 Share RDEC tax credit £'000
based
Deferred tax assets and liabilities Tax losses payments Total
£'000 £'000 £'000
At 1 April 2020 (6) 1,614 140 16 1,764
Credited/(charged) to Statement of Comprehensive Income
6 (1,614) (140) (16) (1,764)
At 31 March 2021 - - - - -
Credited/(charged) to Statement of Comprehensive Income
- - - - -
At 31 March 2022 - - - - -
16 Inventories
2022 2021
£'000 £'000
Raw materials and consumables 585 480
The cost of inventories recognised as an expense for the year was £1,171,000
(2021: £1,105,000).
17 Trade and other receivables
2022 2021
£'000 £'000
Trade receivables 900 673
Loss allowance (124) (81)
Trade receivables - net 776 592
Other receivables 117 90
Prepayments and accrued income 624 758
1,517 1,440
The fair value of trade and other receivables approximates to their carrying
value.
At the reporting date trade receivables loss allowance/impairment as follows:
2022 2021
£'000 £'000
Individually impaired 71 71
Expected credit loss allowance 53 10
124 81
The carrying amount of trade and other receivables are denominated in the
following currencies:
2022 2021
£'000 £'000
UK pound 664 409
Euros 1 -
US dollar 235 264
900 673
The expected credit loss allowance has been calculated as follows:
More than 90 days past due
More than 30 days past due More than 60 days past due More than 120 days past due
Current Total
Expected loss rate 1% 1.1% 1.4% 2.5% 13.8%
Gross carrying amount (£'000)
304 133 19 - 373 829
Loss allowance (£'000)
3 1 - - 49 53
Movements on trade receivables loss allowance is as follows:
£'000 £'000
At 1 April 2021/2020 10 1
Movement in loss allowance 43 9
At 31 March 2022/2021 53 10
The creation and release of the loss allowance for trade receivables has been
included in administrative expenses in the Statement of Comprehensive Income.
Other receivables are considered to have low credit risk and the loss
allowance recognised during the year was therefore limited to trade
receivables.
The maximum exposure to credit risk at the reporting date is the carrying
value of each class of receivables mentioned above. The Company does not hold
any collateral as security.
18 Trade and other payables
2022 2021
£'000 £'000
Trade payables 466 344
Social security and other taxes 68 71
Other payables 47 45
Accruals and deferred income 561 373
1,142 833
The fair value of trade and other payables approximates to their carrying
value.
Invest Northern Ireland hold a mortgage dated 9 December 2009 for securing all
monies due or to become due from the Company on any account. At the reporting
date a balance of £nil (2021: £23,000) was due to Invest Northern Ireland.
19 Borrowings
Lease liabilities Hire Purchase
£'000 Contracts Total
£'000 £'000
At 1 April 2021 100 130 230
Interest charged in year 4 5 9
Repayments (77) (93) (170)
At 31 March 2022 27 42 69
Amounts due in less than 1 year 24 42 66
Amounts due after more than 1 year 3 - 3
27 42 69
Lease Hire Purchase
liabilities Contracts Total
£'000 £'000 £'000
At 1 April 2020 155 225 380
Additions in year 14 - 14
Interest charged in year 8 10 18
Repayments (77) (105) (182)
At 31 March 2021 100 130 230
Amounts due in less than 1 year 75 88 163
Amounts due after more than 1 year 25 42 67
100 130 230
All borrowings are denominated in UK pounds. Using a discount rate of 5.5% per
annum the fair value of borrowings at the reporting date is £65,000 (2021:
£219,000 discounted at 5.5%).
Borrowings are secured by a fixed and floating charge over the whole
undertaking of the Company, its property, assets and rights in favour of
Northern Bank Ltd trading as Danske Bank.
20 Provisions for other liabilities and charges
2022 2021
£'000 £'000
Due after more than 1 year 20 20
Leasehold dilapidations relate to the estimated cost of returning a leasehold
property to its original state at the end of the lease in accordance with the
lease terms. The Company's premises are held under a lease expiring 31 July
2022 and which is expected to be renewed. The costs of dilapidations would be
incurred on vacating the premises.
21 Financial instruments
The Company is exposed to risks that arise from its use of financial
instruments. This note describes the Company's objectives, policies and
processes for managing those risks and methods used to measure them. There
have been no substantive changes in the Company's exposure to financial
instrument risks and the methods used to measure them from previous years
unless otherwise stated in this note.
The principal financial instruments used by the Company, from which the
financial instrument risk arises, are trade receivables, cash and cash
equivalents and trade and other payables. The fair values of all the Company's
financial instruments are the same as their carrying values.
Financial instruments by category
Financial instruments categories are as follows:
Amortised
cost
As at 31 March 2022 £'000
Trade receivables 776
Other receivables 117
Accrued income 397
Cash and cash equivalents 2,049
Total 3,339
Amortised
cost
As at 31 March 2021 £'000
Trade receivables 592
Other receivables 90
Accrued income 504
Cash and cash equivalents 2,686
Total 3,872
Other financial liabilities at amortised cost
£'000
As at 31 March 2022
Trade payables 466
Other payables 115
Accruals 279
Borrowings 69
Total 929
Other financial liabilities at amortised cost
£'000
As at 31 March 2021
Trade payables 344
Other payables 116
Accruals 252
Borrowings 230
Total 942
Capital management
The Company's objectives when managing capital are to safeguard its ability to
continue as a going concern in order to provide returns for shareholders and
benefits for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may issue
new shares or sell assets to provide working capital.
Consistent with others in the industry at this stage of development, the
Company has relied on issuing new shares and cash generated from operations.
General objectives, policies and processes - risk management
The Company is exposed through its operations to the following financial
instrument risks: credit risk; liquidity risk and foreign currency risk. The
policy for managing these risks is set by the Board following recommendations
from the Chief Financial Officer. The overall objective of the Board is to set
policies that seek to reduce risk as far as possible without unduly affecting
the Company's competitiveness and flexibility. The policy for each of the
above risks is described in more detail below.
Credit risk
Credit risk arises from the Company's trade and other receivables, and from
cash at bank. It is the risk that the counterparty fails to discharge their
obligation in respect of the instrument.
The Company is mainly exposed to credit risk from credit sales. It is Company
policy to assess the credit risk of new customers before entering contracts.
Also, for certain new customers the Company will seek payment at each stage of
a project to reduce the amount of the receivable the Company has outstanding
for that customer.
At the year end the Company's bank balances were all held with Northern Bank
Ltd trading as Danske Bank (Moody's rating P-1).
Liquidity risk
Liquidity risk arises from the Company's management of working capital, and is
the risk that the Company will encounter difficulty in meeting its financial
obligations as they fall due.
At each Board meeting, and at the reporting date, the cash flow projections
are considered by the Board to confirm that the Company has sufficient funds
and available funding facilities to meet its obligations as they fall due.
Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of
a financial instrument will fluctuate because of changes in foreign exchange
rates.
The Company seeks to transact the majority of its business in its reporting
currency (£Sterling). However, many customers and suppliers are outside the
UK and a proportion of these transact with the Company in US Dollars and
Euros. For that reason, the Company operates current bank accounts in US
Dollars and Euros as well as in its reporting currency. To the maximum extent
possible receipts and payments in a particular currency are made through the
bank account in that currency to reduce the amount of funds translated to or
from the reporting currency. Cash flow projections are used to plan for those
occasions when funds will need to be translated into different currencies so
that exchange rate risk is minimised.
If the exchange rate between Sterling and the Dollar or Euro had been 10%
higher/lower at the reporting date the effect on profit and equity would have
been approximately £32,000 (2021: £34,000) higher/lower and £5,000 (2021:
£4,000) higher/lower respectively.
22 Called up share capital
2022 2021
£'000 £'000
Allotted, called up and fully paid
- 25,610,359 Ordinary shares of £0.04 1,024
- 26,014,946 Ordinary shares of £0.04 1,040
During the year the Company issued and allotted 404,587 ordinary shares for
gross proceeds of £116,000.
23 Capital commitments
At 31 March 2022 the Company had contracted for but not incurred capital
expenditure of £17,000 (2021: £nil).
24 Retirement benefits obligations
The Company operates a defined contribution scheme, the assets of which are
managed separately from the Company. During the year the Company charged
£103,000 to the Statement of Comprehensive Income (2021: £113,000) in
respect of Company contributions to the scheme. At the reporting date there
was £18,000 (2021: £20,000) payable to the scheme and included in other
payables.
25 Transactions with related parties
The Company had the following transactions with related parties during the
year:
Invest Northern Ireland ("Invest NI") is a shareholder in the Company. The
Company received invoices for rent and estate services amounting to £78,000
(2021: £78,000). A balance of £nil (2021: £23,000) was due and payable to
Invest NI at the reporting date.
26 Ultimate controlling party
There is no ultimate controlling party.
27 Reconciliation of loss to EBITDA
2022 2021
£'000 £'000
Loss before tax (1,333) (1,264)
Finance income (1) (3)
Finance expense 9 18
Depreciation and amortisation 751 714
EBITDA (574) (535)
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