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Allergy Therapeutics - Half-year Report

RNS Number : 9227E
Allergy Therapeutics PLC
04 March 2020
 

 

 

 

Allergy Therapeutics plc

("Allergy Therapeutics", "ATL" or the "Group")

Interim Results for the six months ended 31 December 2019

 

-     Record level of operating profit pre R&D supported by strong sales

-     Strong cash position with Grass MATA MPL Phase III programme fully funded for H2 2020 start

-     Publication of promising preclinical data from VLP Peanut candidate

 

4 March 2020 Allergy Therapeutics plc (AIM: AGY), the fully integrated commercial biotechnology company specialising in allergy immunotherapy, today announces its unaudited interim results for the six months ended 31 December 2019.

 

Highlights

 

Financial highlights

·      Revenue increased by 9% at constant rate* and 8% in actual terms to £50.5m (H1 2019: £46.7m)

·      10% growth in pre-R&D operating profit to £17.3m (H1 2019: £15.7m) largely as a result of

continued sales growth

·      Operating profit pre R&D margin of 34% (H1 2019 34%)

·      R&D expenditure lower at £1.3m (H1 2019: £5.0m) due to receipt of Inflamax legal costs (£3.2m)

·      Strong cash balance of £39.7m (30 June 2019: £27.4m)

 

Operational highlights

·      Good growth across all key products in the portfolio with small increase in market share in European business

·      First stage of Grass MATA MPL Phase III programme to start in H2 2020 in EU and USA

·      Preclinical VLP Peanut data published in highly respected journal post period end

 

 

Manuel Llobet, CEO at Allergy Therapeutics, stated: "The Group has made a steady start to the year with good sales growth supporting our strategy. The regulatory environment remains uncertain but we continue to perform well commercially and to progress our high potential pipeline."

 

*Constant currency uses prior year weighted average exchange rates to translate current year foreign currency denominated revenue to give a year on year comparison excluding the effects of foreign exchange movements. See table in finance review for an analysis of revenue.

 

 

This announcement contains inside information for the purposes of Article 7 of Regulatory (EU) No596/2014.

- ENDS -

 

Analyst briefing and webcast today

Manuel Llobet, Chief Executive Officer, and Nick Wykeman, Chief Financial Officer, will host a meeting and webcast for analysts to provide an update on the Group, followed by a Q&A session, at 09.30am GMT today at the offices of Panmure Gordon & Co, One New Change, London, EC4M 9AF.

Dial-in details are:

Webcast link: https://edge.media-server.com/mmc/p/mhc6ku2o

UK dial-in: +44 (0) 2071 928000
US dial-in: +16315107495
Conference ID: 3622619

 

 

 

For further information, please contact:

 

Allergy Therapeutics

+44 (0) 1903 845 820

Manuel Llobet, Chief Executive Officer

Nick Wykeman, Chief Financial Officer

 

Panmure Gordon

+44 (0) 20 7886 2500

Freddy Crossley, Emma Earl, Corporate Finance

James Stearns, Corporate Broking

 

Consilium Strategic Communications

+44 20 3709 5700

Mary-Jane Elliott / David Daley / Nicholas Brown / Olivia Manser

[email protected]

 

Stern Investor Relations, Inc.

+1 212 362 1200

Christina Tartaglia

[email protected]

 

Notes for editors:

 

About Allergy Therapeutics

 

Allergy Therapeutics is an international commercial biotechnology company focussed on the treatment and diagnosis of allergic disorders, including aluminium free immunotherapy vaccines that have the potential to cure disease. The Group sells proprietary and third party products from its subsidiaries in nine major European countries and via distribution agreements in an additional ten countries. Its broad pipeline of products in clinical development include vaccines for grass, tree and house dust mite, and peanut allergy vaccine in pre-clinical development. Adjuvant systems to boost performance of vaccines outside allergy are also in development.

 

Formed in 1999 out of Smith Kline Beecham, Allergy Therapeutics is headquartered in Worthing, UK with more than 11,000m2 of state-of-the-art MHRA-approved manufacturing facilities and laboratories.  The Group, which has achieved over 9% compound annual growth since formation, employs c.600 employees and is listed on the London Stock Exchange (AIM:AGY). For more information, please see www.allergytherapeutics.com.

 

 

 

 

 

Joint Statement from the Chairman and Chief Executive Officer

 

Operating Review

 

Overview

 

The Group performed well in a challenging market and continued to drive growth in operating profit before R&D (10% up on 2019). There has been increased regulatory activity across Europe in the period creating uncertainty in the market.  The growth achieved in the last six months highlights the quality and convenience of our products, our robust supply chain and strong marketing and sales team.

 

The Market

 

Allergy Therapeutics achieved sales growth in constant terms1 of 9% (8% at actual rates). This growth came from across the portfolio with particularly strong performances by Pollinex, Venomil and Pollinex Quattro. The strong 2019 tree season has driven a strong demand for our tree allergy products while the grass season was less pronounced.

 

We have seen a strong performance in H1 2020 from Germany, Spain, Netherlands and Switzerland, driven by improved market positions, promotion of our ultra-short course products and more focus on key products in the portfolio. The market is generally becoming more aware of the importance of data-driven products, which benefits the Group's products which use advanced science and technology to validate performance.

 

 

Regulatory Affairs & Clinical Development

 

The first half of FY 2020 has been a very busy time for the clinical team with the analysis of the Birch MATA MPL Phase III (B301) trial results leading to a revised approach to the Grass MATA MPL trial. The upcoming Grass development study will now take a stepwise approach, with two stages covering both the 2021 and 2022 pollen seasons. The stepwise approach has been designed with input from regulatory consultants. It enables a phase III-scale development to begin in 2020 and includes a data review to gain insights into the trial, before continuing to the second part of the Phase III development.  The first stage of the Grass MATA MPL phase III programme will start in the autumn of this year with read out in 2021.

 

A significant amount of work has been carried out by the Group in relation to the German TAV (Therapy Allergy Ordinance) process and the products that are part of that process. The German TAV process is in response to EU legislation relating to named patient products which requires immunotherapies to the most common allergens to undergo a market authorisation process. This is also starting to apply to the Italian and Spanish markets and is likely, in time, to affect the whole EU market. Further trials are not expected to be needed for each additional country.   

 

The Group is in dialogue with the German regulatory authorities about the results of the Birch MATA MPL Phase III trial. The team will focus first on applying the lessons to the Grass MATA MPL trials before returning to a further clinical trial in relation to Birch.

 

The Group announced the publication, in January 2020, of encouraging preclinical results of its peanut allergy vaccine candidate in The Journal of Allergy and Clinical Immunology (JACI), the most frequently cited allergy and immunology journal in the field.

 

The study, which used the Group's novel virus like particle (VLP) platform, potentially offers an effective way to treat peanut allergies and prevent anaphylaxis. It provided validation of proof of concept for the generation of sustained immunity and protection through vaccination. The study illustrated that a single injection protected against systemic anaphylaxis, as demonstrated via subsequent in vivo challenge, skin prick testing and oral challenge.

 

 

 

 

1Constant currency uses prior year weighted average exchange rates to translate current year foreign currency denominated revenue to give a year on year comparison excluding the effects of foreign exchange movements. See table in finance review for an analysis of revenue.

 

 

 

 

 

With manufacturing scale-up of the product now underway and following agreement with several regulatory authorities on the clinical trial design, the programme to initiate first-in-human studies is progressing well. Given the importance of the trial and scale of the opportunity, the Group is implementing robust protocols with the regulatory authorities and plans to introduce additional in vitro human cell testing to its preclinical programme to ensure the initial studies will support global registration plans. Submission of the clinical trial application is anticipated in 2021. 

 

The Group is evaluating further opportunities in the immunology field that could utilise VLP technology alongside the adjuvant systems that the Group owns.

 

 

Financial Review

Reported revenues for the first half of the financial year were £50.5m (H1 2019: £46.7m), representing a growth of 9% at constant currency (see table below) and 8% in actual terms. The sales growth has been driven primarily by the Group's investment in marketing and sales teams and broadening of the product portfolio as it continues to increase its market share in all of its main markets. Rebates were higher this period due to increased sales and price rises of certain products.

 

A reconciliation between reported revenues and revenues in constant currency1 is provided in the table below:

 

 

6 months to

6 months to

Increase

Increase

 

31-Dec-19

31-Dec-18

 

 

 

£m

£m

£m

%

 

 

 

 

 

Revenue

50.5

46.7

3.8

8.1%

Adjustment to retranslate to prior year foreign exchange rate

0.3

                 -  

 0.3

 

Revenue at constant currency1

50.8

46.7

4.1

8.8%

Add rebates at constant currency

3.3

2.4

        0.9

 

Gross revenue at constant currency

54.1

49.1

5.0

10.2%

 

 

As in previous years, owing to the seasonality of the pollen allergy market, between 60% to 70% of Allergy Therapeutics' revenues are generated in the first half of the financial year and, as a consequence, the Group typically reports profits in the first half of the year and losses in the second half.

 

Cost of goods sold increased in the period to £11.4m (H1 2019: £9.4m), mainly due to higher volumes being sold, Brexit costs and reversal of stock provisions in the prior year. Gross profit increased to £39.1m (H1 2019: £37.3m), which represents a gross margin of 77% (H1 2019: 80%).

 

Sales, marketing and distribution costs of £13.6m (H1 2019: £13.6m) were in line with the previous period.  Administration expenses of £8.2m (H1 2019: £8.1m) were broadly in line with the previous period.

 

Research and development costs of £1.3m (H1 2019: £5.0m) reflected the lower level of activity in H1 2020 with the key Grass MATA MPL trials starting in autumn 2020 and included the £3.2m received in settlement of legal costs relating to the litigation with Inflamax.

 

The tax charge in the period of £0.6m (H1 2019: £0.4m) relates to overseas subsidiaries. It should be noted that IFRIC 23 (Uncertainty over income tax treatment) has been implemented in the period ended 31 December 2019. The Group prepares provisions against uncertain tax positions in accordance with IFRIC 23. IFRIC 23 has been adopted by the Group with effect from 1 July 2019, with the modified retrospective approach being applied (i.e. the cumulative effect of initially applying the Interpretation is recognised as an adjustment to the opening balance of retained earnings, with no change being made to the prior year comparative numbers).   

 

The effect of IFRIC 23 provisions in these interim financial statements amounts to £0.7m and this has been dealt with through retained earnings.

 

Property, plant and equipment excluding IFRS16 increased by £1.3m to £11.3m compared to the year before, mainly as a result of investment in new storage facilities as part of our Brexit contingency planning. IFRS16 additions amounted to £9m and depreciation of £0.7m. Goodwill was £3.3m (H1 2019: £3.4m) and was lower than the prior year due to changes in the foreign exchange rates. Other intangible assets have decreased by £0.2m due to the amortisation charge being in excess of additions.

 

Total current assets excluding cash have decreased by £1.6m to £17.8m (H1 2019: £19.4m) mainly due to a reduction in debtor days.  

 

Retirement benefit obligations, which relate solely to the German pension scheme, increased to £12.3m (H1 2019: £10.5m) due to a decrease in the discount rate primarily as a result of lower corporate bond yields in Germany.

 

Net cash generated by operations was strongly positive, due to lower R&D spending in the first half of the year 2020 as well as the strong trading result, with an inflow of £14.3m (H1 2019: £6.8m).

 

It should be noted that the financial results for H1 2020 now incorporate IFRS16, the new accounting standard on leased assets. This requires companies reporting under International Accounting Standards to place operating lease assets on the balance sheet with an accompanying liability. Furthermore, depreciation is charged on these assets (£0.7m) as well as a finance charge (£0.2m) with removal of lease charges (£0.9m). The impact of this is that lease costs in the P&L reduce and depreciation increases. Hence, the measure of earnings before interest, tax and depreciation and amortisation has benefited to the order of £0.9m. There is no material impact on the operating profit. 

 

Financing

 

The Group had cash of £39.7m (30 June 2019 £27.4m) and debt on its balance sheet at the close of the period relating to loans held in the Spanish subsidiary of £2.0m (H1 2019: £2.8m). The seasonal overdraft was not used during the calendar year 2019 but the Group expects to renew its banking facilities when they are due for review in August 2020.

 

The Directors believe that the Group will have sufficient facilities for the foreseeable future and, accordingly, they have applied the going concern principle in preparing these interim financial statements.

 

Movements in the currency markets between the respective values of the euro and sterling have an effect on the Group's operations. The Group manages its cash exposure in this respect by foreign currency hedges. Over 90% of our gross sales are denominated in euros whereas approximately 60% of costs are incurred in the United Kingdom and denominated in sterling.

 

 

Outlook

 

This calendar year is key in order to prepare for several important trials for the 2021 financial year.  

 

The Board and management team expect that net sales will continue to grow in line with market expectations in the second half of the year and have confidence in the future of the business. The gross margin is expected to be lower in the second half of the year compared with the first, as volumes through the factory are likely to be lower, leaving gross margin for the whole year in line with last year. As planned, research and development costs, excluding the Inflamax legal cost recovery, are expected to double in the second half of the year compared with the first half, reflecting the period of higher activity of the Grass MATA MPL trial and further work on peanut study as well as TAV costs. Other costs for the full year are expected to be in line with market expectations due to phasing and Brexit.

 

As noted in the Group Risks section of the 2019 Annual Report, management has taken action to try to mitigate the impact of Brexit. It will be difficult to determine precisely what impact Brexit will have on the business until a trade deal is concluded. 

 

The Group continues to grow well while developing a very exciting and valuable pipeline of products.

 

The regulatory environment is a challenge but the Group is best placed to meet it with its strong portfolio of products and high potential pipeline.

 

 

Peter Jensen

Chairman

 

 

Manuel Llobet

Chief Executive Officer

 

4 March 2020

 

 

 

ALLERGY THERAPEUTICS PLC

 

 

 

 

 

Consolidated income statement

 

 

 

 

 

Note

6 months to

 31 Dec

6 months to

 31 Dec

12 months to

 30 Jun

 

 

2019

2018

2019

 

2

£'000

£'000

£'000

 

 

unaudited

unaudited

audited

 

 

 

 

 

Revenue

 

50,472

46,713

       73,717

Cost of sales

 

(11,414)

(9,411)

(18,379)

 

 

 

 

 

Gross profit

 

39,058

37,302

55,338

 

 

 

 

 

Sales, marketing and distribution costs

 

(13,614)

(13,563)

(26,995)

 

 

 

 

 

Administration expenses - other

 

(8,177)

(8,063)

(17,595)

Research and development costs (includes £3.2m received relating to the litigation with Inflamax. FY19:£6.0m received)

 

(1,273)

(4,968)

(6,950)

Administration expenses

 

(9,450)

(13,031)

(24,545)

Other income

 

-

31

593

 

 

 

 

 

Operating profit

 

15,994

10,739

4,391

 

 

 

 

 

Finance income

 

152

118

103

Finance expense

 

(291)

(124)

(201)

 

 

 

 

 

Profit before tax

 

15,855

10,733

4,293

Income tax

 

(579)

(408)

(826)

 

 

 

 

 

Profit for the period

 

15,276

10,325

3,467

 

 

 

 

 

 

 

 

 

 

Earnings per share

3

 

 

 

Basic (pence per share)

 

2.40p

1.64p

0.55p

Diluted (pence per share)

 

2.27p

1.55p

0.52p

 

 

 

 

 

             

 

Consolidated statement of comprehensive income

 

 

 

 

 

 

6 months to 31 Dec

6 months to

 31 Dec

 

 

12 months to

 30 Jun

 

 

 

2019

2018

2019

 

 

£'000

£'000

£'000

 

 

unaudited

unaudited

audited

 

 

 

 

 

Profit for the period

 

15,276

10,325

3,467

Items that will not be reclassified subsequently to profit or loss:

 

 

 

 

Remeasurement of net defined benefit liability

 

 

(1,060)

206

(906)

 

Remeasurement of investments-retirement benefit

assets

 

65

 

(83)

 

(42)

 

 

 

 

 

Revaluation gains - freehold land and buildings

 

-

-

312

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

Exchange differences on translation of foreign operations

 

(286)

131

130

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

13,995

10,579

2,961

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated balance sheet

 

31 Dec

31 Dec

30 Jun

 

 

 

2019

2018

2019

 

 

 

£'000

£'000

£'000

 

 

 

unaudited

unaudited

audited

 

Assets

 

 

 

 

 

Non-current assets

 

 

 

 

 

Property, plant and equipment

 

11,336

10,034

11,481

 

Right of use assets (property, plant and equipment)

 

9,004

-

-

 

Intangible assets - goodwill

 

3,324

3,438

3,432

 

Intangible assets - other

 

1,245

1,437

1,408

 

Investment - retirement benefit asset

 

5,479

5,369

5,551

 

 

 

 

 

 

 

Total non-current assets

 

30,388

20,278

21,872

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

Inventories

 

8,716

9,033

9,409

 

Trade and other receivables

 

8,769

10,324

9,776

 

Cash and cash equivalents

 

39,725

31,642

27,440

 

Derivative financial instruments

 

324

-

-

 

 

 

 

 

 

 

Total current assets

 

57,534

50,999

46,625

 

 

 

 

 

 

 

Total assets

 

87,922

71,277

68,497

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

 

(12,903)

(12,892)

(15,736)

 

Current borrowings

 

(659)

(664)

(694)

 

Lease liabilities

 

(1,457)

-

-

 

Derivative financial instruments

 

-

(65)

(429)

 

 

 

 

 

 

 

Total current liabilities

 

(15,019)

(13,621)

(16,859)

 

 

 

 

 

 

 

Net current assets

 

42,515

37,378

29,766

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Retirement benefit obligations

 

(12,299)

(10,477)

(11,747)

 

Deferred taxation liability

 

(284)

(304)

(318)

 

Non-current provisions

 

(264)

(306)

(273)

 

Lease liabilities

 

(7,536)

-

-

 

Long term borrowings

 

(1,317)

(2,092)

(1,742)

 

 

 

 

 

 

 

Total non-current liabilities

 

(21,700)

(13,179)

(14,080)

 

 

 

 

 

 

 

Total liabilities

 

(36,719)

(26,800)

(30,939)

 

 

 

 

 

 

 

Net assets

 

51,203

44,477

37,558

 

 

 

 

 

 

 

Equity

 

 

 

 

 

Capital and reserves

 

 

 

 

 

Issued share capital

 

646

646

646

 

Share premium

 

112,576

112,576

112,576

 

Merger reserve - shares issued by subsidiary

 

40,128

40,128

40,128

 

Reserve - share based payments

 

3,368

2,324

3,023

 

Revaluation reserve

 

1,207

949

1,207

 

Foreign exchange reserve

 

(1,131)

(844)

(845)

 

Retained earnings

 

(105,591)

(111,302)

(119,177)

 

 

 

 

 

 

 

Total equity

 

51,203

44,477

37,558

 

 

 

 

 

 

                     

 

 

 

 

 

 

 

Consolidated statement of changes in equity

 

 

 

Issued Capital

Share premium

Merger reserve - shares issued by subsidiary

Reserve - share based payment

 

Revaluation reserve

 

 

Foreign exchange reserve

Retained earnings

 

 

Total      equity

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 31 December 2018

646

112,576

40,128

2,324

949

(844)

(111,302)

44,477

 

Exchange differences on translation of foreign operations

-

-

-

-

-

(1)

-    

(1)

Valuation gains taken to equity (land and buildings)

-

-

-

-

312

-

-

312

Remeasurement of net defined benefit liability

-

-

-

-

-

-

(1,112)

(1,112)

Remeasurement of investments - retirement benefit assets

-

-

-

-

-

-

41

41

Total other comprehensive income

-

-

-

-

312

(1)

(1,071)

(760)

Loss  for the period after tax

-

-

-

-

-

-

(6,858)

(6,858)

Total comprehensive income

-

-

-

-

312

(1)

(7,929)

(7,618)

Share based payments

-

-

-

699

-

-

-

699

Transfer of depreciation on revalued property

-

-

-

-

(54)

-

54

-

At 30 June 2019

646

112,576

40,128

3,023

1,207

(845)

(119,177)

37,558

 

 

Exchange differences on translation of foreign operations

-

-

-

-

-

(286)

-    

Remeasurement of net defined benefit liability

-

-

-

-

-

-

(1,060)

(1,060)

Remeasurement of investments - retirement benefit assets

-

-

-

-

-

-

65

65

Total other comprehensive income

-

-

-

-

-

(286)

(995)

(1,281)

Profit for the period after tax

-

-

-

-

-

-

15,276

15,276

Total comprehensive income

-

-

-

-

-

(286)

14,281

13,995

Share based payments

-

-

-

345

-

-

-

345

IFRIC 23 tax provision

-

-

-

-

-

-

(695)

(695)

(See Note 2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2019

      646

112,576

40,128

3,368

1,207

(1,131)

(105,591)

51,203

 

 

 

 

 

 

 

 

 

 

 

Condensed consolidated cash flow statement

 

 

 

 

 

 

6 months to

 31Dec

6 months to

 31Dec

12 months to

 30Jun

 

 

2019

2018

2019

 

 

£'000

£'000

£'000

 

 

unaudited

unaudited

audited

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Profit before tax

 

15,855

10,733

4,293

 

 

 

 

 

Adjustments for:

 

 

 

 

Finance income

 

(152)

(118)

(103)

Finance expense

 

291

124

201

 

Non cash movements on defined benefit pension plan

 

  81

79

273

 

Depreciation and amortisation

 

1,922

1,014

2,090

 

Net monetary value of above the line R&D tax credit

 

-

(31)

(593)

 

Charge for share based payments

 

345

668

1,367

 

Movement in fair value of derivative financial instruments

 

(753)

(32)

332

 

Foreign exchange revaluation on US dollar cash deposits

 

53

4

(36)

 

(Increase) in trade and other receivables

 

(178)

(4,024)

(1,864)

 

Decrease/(increase) in inventories

 

571

(183)

(543)

 

(Decrease)/increase in trade and other payables

 

(3,727)

(1,441)

162

 

 

 

 

 

 

 

Net cash generated by operations

 

14,308

6,793

5,579

 

 

 

 

 

 

 

Bank loan fees and Interest paid

 

(291)

(124)

(204)

 

Income tax received

 

572

353

225

 

 

 

 

 

 

 

Net cash generated by operating activities

 

14,589

7,022

5,600

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Interest received

 

152

119

151

 

Payments for retirement benefit investments

 

(101)

(231)

(405)

 

Payments for intangible assets

 

(53)

(7)

(289)

 

Payments for property plant and equipment

 

(998)

(722)

(2,810)

 

 

 

 

 

 

 

Net cash used in investing activities

 

(1,000)

(841)

(3,353)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from issue of equity shares

 

-

10,600

10,600

 

Share issue costs

 

-

(404)

(404)

 

Repayment of bank loan borrowings

 

(350)

(346)

(651)

 

Repayments of lease creditor

 

(683)

-

-

 

 

 

 

 

 

 

Net cash (used in)/generated by financing activities

 

(1,033)

9,850

9,545

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

12,556

16,031

11,792

 

Effects of exchange rates on cash and cash equivalents

 

(271)

78

115

 

Cash and cash equivalents at the start of the period

 

27,440

15,533

15,533

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

39,725

   31,642

27,440

           
 

 

1. Interim financial information

 

The unaudited consolidated interim financial information is for the six month period ended 31 December 2019. The financial information does not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 June 2019, which were prepared under International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).

 

The interim financial information has not been audited nor has it been reviewed under ISRE 2410 of the Auditing Practices Board. The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Company's statutory financial statements for the year ended 30 June 2019 prepared under IFRS have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498(2) of the Companies Act 2006.

 

2. Basis of preparation

 

The interim financial statements have been prepared in accordance with applicable accounting standards and under the historical cost convention except for land and buildings and derivative financial instruments which have been measured at fair value. The accounting policies adopted in this report are consistent with those of the annual financial statements for the year to 30 June 2019 as described in those financial statements. There are no accounting standards that have become effective in the current period that would have a material impact upon the financial statements except for IFRS16 "Leases" and IFRIC 23, "Uncertainty over income tax treatments" as below.

 

IFRS16 "Leases"

 

IFRS 16 "Leases" was published by the IASB and adopted by the EU. It came into effect from 1 January 2019. The Group adopted the standard with effect from 1 July 2019 and included related transactions in these interim financial statements.

 

The effects of IFRS16 on the balance sheet at the reporting date is to increase lease liabilities by £9.0m of which £7.5m are within non-current liabilities and £1.5m within current liabilities and correspondingly a Right-of-Use Asset of £9.0m  under tangible assets net of related depreciation costs of £0.7m.

 

The impact of IFRS16 on the income statement in these interim financial statements is an increase in EBITDA*** of £0.9m with no net effect on the profit before tax.

 

IFRIC 23 "Uncertainty over income tax treatments"

 

The Group prepares provisions against uncertain tax positions in accordance with IFRIC 23. IFRIC 23 has been adopted by the Group with effect from 1 July 2019, with the modified retrospective approach being applied (i.e. the cumulative effect of initially applying the interpretation is recognised as an adjustment to the opening balance of retained earnings, with no change being made to the prior year comparative numbers).   

 

The effect of IFRIC 23 provisions in these interim financial statements amounts to a £0.7m adjustment dealt with through opening retained earnings and a current period additional tax charge of £0.1m.

 

Going Concern

 

The Group has been profit making in the six months to 31 December 2019, as it was in the corresponding period ending 31 December 2018.

 

Detailed budgets have been prepared, including cash flow projections for the periods ending 30 June 2020 and 30 June 2021. These projections include assumptions on the trading performance of the operating business and the continued availability of the existing bank facilities. The Group had a cash balance of £39.7m at 31 December 2019 and expects to renew its banking facilities when they are due for renewal in August 2020. After making appropriate enquiries, which included a review of the annual budget and latest forecast, by considering the cash flow requirements for the foreseeable future and the effects of sales and other sensitivities on the Group's funding plans, the Directors continue to believe that the Group will have sufficient resources to continue in operational existence for the foreseeable future and accordingly have applied the going concern principle in preparing these interim financial statements.

 

***EBITDA Profit before interest, tax, depreciation and amortisation.
 

3. Earnings per share

 

 

6 months to 31 Dec 2019

6 months to 31 Dec 2018

12 months to 30 Jun 2019

 

unaudited

unaudited

audited

 

£'000

£'000

£'000

Profit after tax attributable to equity shareholders

15,276

10,325

3,467

 

 

 

 

 

Shares

Shares

Shares

 

'000

'000

'000

 

 

 

 

Issued ordinary shares at start of the period

636,169

596,169

596,169

Ordinary shares issued in the period

-

40,000

40,000

Issued ordinary shares at end of the period

636,169

636,169

636,169

 

 

 

 

Weighted average number of shares in issue for the period

636,169

629,502

632,835

Weighted average number of shares for diluted earnings per share

672,321

667,845

669,703

 

 

 

 

Basic earnings per ordinary share (pence)

2.40p

1.64p

0.55p

Diluted earnings per ordinary share (pence)

2.27p

1.55p

0.52p

 

 

 

4. Contingent liabilities

 

On 23 February 2015, the Company received notification that The Federal Office for Economics and Export ("BAFA") had made a decision to reverse their preliminary exemption to the increased manufacturers rebate in Germany for the period July to December 2012. The Company was granted a preliminary exemption to the increased rebate for this period by BAFA in 2013. The Company recognised revenue of €1.4m (£1.1m at that time, now £1.2m) against this exemption in the year ended 30 June 2013. All other preliminary exemptions (granted for periods up to 30 June 2012) have previously been ratified as final by BAFA. After taking legal advice, the Company has lodged an appeal against this decision and is confident that the exemption will be re-instated. Therefore, as at 31 December 2019, no provision has been recognised for the repayment of the rebate refund. This position will be kept under review.

 

In respect of net revenue relating to certain products, there is a risk that up to £5.8m cumulative revenue (2019: £3.5m) recorded in periods up to and including December 2019 may be subject to a retrospective change.  This is due to the level of rebate being applied.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
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