REG - hVIVO plc - Half-year Report <Origin Href="QuoteRef">HVO.L</Origin> - Part 2
22/09/2016 07:07
- Part 2: For the preceding part double click ID:nRSV5083Ka
Total comprehensive income (6,277) - (241)
6. Taxation
6 Months 6 Months ended30 Jun 2015Unaudited£'000 Year
ended30 Jun 2016Unaudited£'000 ended31 Dec 2015Audited£'000
Tax Benefit:
R&D tax credit (1,649) (2,212) (3,749)
Adjustments in respect of prior periods (473) 31 31
Foreign current tax 24 - 2
(2,098) (2,181) (3,716)
The Group continues to account for its recurring annual SME R&D tax credit as
an income tax benefit due to the requirement to surrender tax losses in
exchange for recoverable R&D credits.
The Group has not recognised any deferred tax assets including carried forward
losses and other temporary differences. These deferred tax assets have not
been recognised as the Group's management considers that there is insufficient
taxable income, taxable temporary differences and feasible tax planning
strategies to utilise all of the cumulative losses and it is probable that the
deferred tax assets will not be realised in full.
7. Loss per share (LPS)
The calculation of the basic and diluted LPS is based on the following data:
6 Months ended30 Jun 2016Unaudited£'000 6 Months Year
ended30 Jun 2015Unaudited£'000 ended31 Dec 2015Audited£'000
Loss:
Loss for the period (9,665) (9,783) (17,909)
Number of shares:
Weighted average number of ordinary shares for the purpose of basic LPS 78,064,355 68,106,047 68,943,581
Effect of dilutive potential ordinary shares:
- share options - - -
- warrants - - -
Weighted average number of ordinary shares for the purpose of diluted LPS 78,064,355 68,106,047 68,943,581
In the six months ended 30 June 2016 and in the comparative periods presented,
the potential ordinary shares were not treated as dilutive as the Group is
loss making, therefore the weighted average number of ordinary shares for the
purposes of the basic and diluted loss per share were the same.
8. Investment in associates and joint ventures
At 30 June 2016 the Group held investments in one associate, PrEP Biopharm
Limited, and one joint venture, Imutex Limited. A reconciliation of the
carrying value of the Group's investments in joint ventures and associates is
as follows:
2016 2015
£'000 £'000
At 1 January 14,254 -
Additions 7,139 -
Loss after tax recognised in the consolidated statement of comprehensive income (3,868) -
Other comprehensive income recognized in the consolidated income statement (29) -
At 30 June 17,496 -
2015
£'000
At 1 January -
Additions 14,405
Loss after tax recognised in the consolidated statement of comprehensive income (146)
Share of other comprehensive loss (5)
At 31 December 14,254
Summarised combined balance sheet information in respect of PrEP Biopharm
Limited and Imutex Limited as at 30 June 2016, 31 December 2015 and 30 June
2015 is shown below:
30 June 2016Unaudited 30 June 2015Unaudited 31 Dec
2015Audited
£'000 £'000 £'000
Current assets 12,342 - 15,298
Non-current assets 17,314 - 5,076
Current liabilities (1,436) - (123)
Net assets 28,220 - 20,251
Interest in associate and joint venture 15,765 - 12,681
Goodwill 1,731 - 1,573
Carrying value of Group's interest in associate and joint venture 17,496 - 14,254
In assessing the level of control hVIVO holds in respect of equity
investments, management consider a number of factors including control of
voting rights at board level and the power to direct relevant activities.
PrEP Biopharm Limited
On 1 November 2015 hVIVO acquired 62.62% of the share capital of PrEP Biopharm
Limited for cash consideration of £14.0 million. Acquisition costs of £0.4
million have been capitalised as part of the cost of investment. PrEP Biopharm
Limited is a UK based, development stage biopharmaceutical company which is
developing infectious disease products. At the same time as the transaction,
PrEP Biopharm Limited entered into contractual arrangements with hVIVO
Services Limited to the value of £10.0 million. Revenue recognised by hVIVO in
respect of these contractual arrangements is disclosed within Note 2 as
revenue from related party transactions.
Although hVIVO holds more than 50% of the equity of PrEP Biopharm Limited,
hVIVO's voting rights are limited to 49.98% under the Investment and
Shareholders' Agreement ("ISHA"). The effect is that the voting rights hVIVO
is entitled to exercise are less than half of the total voting rights that are
able to be exercised.
As at 30 June 2016, hVIVO had appointed two of the four Directors of PrEP,
including the Chair, with equal votes and no casting vote. Accordingly, hVIVO
does not control the Board. On 9 August 2016, the Board was expanded to five
Directors, with hVIVO continuing to be represented by two Directors.
hVIVO has concluded that despite having significant influence, the terms of
the ISHA mean that it does not have the power to direct the relevant
activities of PrEP Biopharm Limited. Accordingly, hVIVO's investment in PrEP
Biopharm Limited has been accounted for as an investment in an associate.
Imutex Limited
On 21 April 2016 hVIVO acquired 49.0% of the share capital of Imutex Limited
for £7.0 million consideration under the terms of a Joint Venture Arrangement
with PepTcell Limited. Acquisition costs of £0.2 million have been capitalised
as part of the investment. Imutex Limited is UK based company developing
vaccines against influenza and mosquito borne diseases. As part of the
transaction PepTcell Limited entered into a contractual arrangement with hVIVO
Services Limited for a clinical study to the value of £5.5 million.
Due to the linked nature of hVIVO plc's equity investment in Imutex Limited
and the clinical services contracted to be provided by hVIVO Services Limited
to PepTcell Limited, the consideration of the £7.0 million equity investment
in Imutex Limited has been accounted for as £1.5 million consideration settled
in cash, combined with an obligation to provide services of £5.5 million. The
obligation to perform these services is presented in trade and other
payables.
hVIVO holds 49.0% of the equity of Imutex Limited and, under the terms of the
Joint Venture Agreement, appoints two of the current four Directors. hVIVO
management have concluded that the relevant activities of Imutex Limited are
jointly controlled by the investors and therefore it is appropriate for hVIVO
to equity account for the investment as a joint venture with joint control.
9. Current intangible asset
30 Jun 2016Unaudited£'000 30 Jun 2015Unaudited£'000 31 Dec 2015Audited£'000
Opening Balance 2,935 - -
Additions 1,982 - 2,935
Released to cost of sales (3,523) - -
Closing balance 1,394 - 2,935
During 2015 hVIVO commenced two clinical studies with a view to the study data
generating future economic benefit through licensing agreements. Accordingly,
the cost of performing these studies has been capitalised where the future
economic benefit is forecast to be greater than cost. As revenue is recognised
on completion of the study, the cost is released to cost of sales.
10. Trade and other payables
30 Jun 2016Unaudited£'000 30 Jun 2015Unaudited£'000 31 Dec 2015Audited£'000
Trade payables 1,903 1,941 2,265
Other taxes and social security 367 360 382
VAT payable 233 - 984
Other payables 89 79 5,134
Accruals 1,023 1,224 1,303
Obligation to provide services 5,233 - -
Deferred income 5,943 1,248 7,434
14,791 4,852 17,502
As at 31 December 2015, other payables included deferred consideration of £5.0
million in respect of the equity investment in PrEP Biopharm Limited. The
deferred consideration was paid in January 2016.
Deferred income as at 30 June 2016 includes £4.6 million in respect of
licensing and service arrangements with PrEP Biopharm Limited (30 June 2015:
£nil, 31 December 2015: £6.8 million).
Obligation to provide services is part consideration for hVIVO's equity
investment in Imutex Limited (see Note 8).
11. Net cash used in operations
6 months ended 6 months ended Year
Ended
30 June2016 30 June2015 31 December2015
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flow from operating activities
Loss before taxation (11,763) (11,964) (21,625)
Adjustments for:
Gain on provision of services to joint venture (114) - -
Share of loss of associate 3,868 - 146
Depreciation of property, plant and equipment 682 658 1,342
Amortisation of intangible assets 158 273 318
Share-based payment expense 57 22 78
Payment of Non-Executive Director fees by issue of shares 36 35 68
Finance costs 9 9 17
Finance income (188) (200) (387)
Gain on foreign exchange (64) - (8)
(Decrease)/increase in provisions (502) (609) 10
Changes in working capital:
Decrease/(increase) in inventories 114 (171) 1,590
Decrease/(Increase) in current intangible asset 1,541 - (2,935)
Increase in R&D Expenditure Credit asset (170) (167) (352)
(Increase)/decrease in trade and other receivables (847) (114) 249
(Decrease)/increase in trade and other payables (2,944) 235 7,885
Cash used in operations (10,127) (11,993) (13,604)
Finance costs (9) (9) (17)
Income tax refund - 3,775 3,775
Net cash used in operating activities (10,136) (8,227) (9,846)
12. Acquisition of associate and joint venture
6 Months ended30 June2016Unaudited£'000 6 Months ended30 June2015Unaudited£'000 Year Ended 31 December2015Audited£'000
Acquisition cash flows of associate 5,000 - 9,405
Acquisition cash flows of joint venture 1,792 - -
6,792 - 9,405
In January 2016, hVIVO paid £5.0 million cash as deferred consideration in
respect of the equity investment in its associate, PrEP Biopharm Limited.
On 21 April 2016 hVIVO acquired 49.0% of the share capital of Imutex Limited
for £7.0 million consideration under the terms of a Joint Venture Arrangement
with PepTcell Limited (see Note 8). The acquisition cash flows of joint
venture are £1.5 million cash consideration plus legal expenses, together with
the costs of performing services in kind in the period.
Independent review report to hVIVO plc
We have been engaged by the Company to review the condensed set of Financial
Statements in the interim financial report for the six months ended 30 June
2016 which comprise the Condensed Consolidated Statement of Comprehensive
Income, the Condensed Consolidated Statement of Financial Position, the
Condensed Consolidated Statement of Changes in Equity, the Condensed
Consolidated Statement of Cash Flows and related notes 1 to 12. We have read
the other information contained in the interim financial report and considered
whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of interim Financial Statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
issued by the Auditing Practices Board. Our work has been undertaken so that
we might state to the Company those matters we are required to state to it in
an independent review 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, for our review work, for this report, or for the conclusions
we have formed.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the interim
financial report in accordance with the AIM Rules of the London Stock
Exchange. As disclosed in note 1, the annual Financial Statements of the Group
are prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of Financial Statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of Financial Statements in the interim financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of Financial Statements in the interim
financial report for the six months ended 30 June 2016 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the AIM Rules of the London Stock Exchange.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
21 September 2016
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