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Integumen PLC - Final Results

RNS Number : 5384D
Integumen PLC
27 June 2019
 

AIM share code: SKIN

 

27 June 2019

 

Integumen PLC

 

("Integumen" or "Company")

 

FINAL RESULTS

 

Integumen today announces its final results for the year ended 31 December 2018.

 

Highlights:

·      Total revenue £501k (including discontinued operations) increased 111% (FY 2017: £238k);

·      Revenue from continued operations £274k increased 294% (FY 2017: £93k) following Labskin test kit sales move to full skincare product test services;

·      EBITDA losses before exceptional items reduced by 13% to £1,221,000 (FY 2017: (£1,398,000);

·      Operating loss reduced to £2,082,000 (2017: £5,397,000) after providing for:

Depreciation of £22,000 (2017: £37,000);

Amortisation of £172,000 (2017: £439,000);

Impairment to intangible assets of £423,000 (2017: £3,238,000); and,

Exceptional costs of £244,000 (2017: £285,000) were one-off transaction costs relating to the disposal of non-performing assets;

·      Disposal of TSPro GmbH saving £1.19m in short and long-term liabilities;

·      The Company acquired 9.35% of Cellulac plc in exchange for shares in Integumen;

·      STOER For Men skin care range at monthly break-even by year-end 2018.

 

Post Year-End 2018 Events

 

·      Transformational £3m all-share Acquisition of Rinocloud Limited enabling scale-up of the business as it moves from a physical laboratory to an automated, real-time, real-world digital data platform;

·      Successful fundraising of £2.75m (gross); of which,

£232k was Vendor sale to allow 100% of Rinocloud to be acquired;

·      Additional strategic reduction of the indebtedness of the business:

Disposal of Visible Youth Group - saving £245k of future contractual liabilities;

Debt conversions - Venn £421k carried over since April 2017 IPO;

Cellulac debt conversion - £400k for hi-tech laboratory equipment;

Litigation issues settled - saving £250k of future liabilities.

 

 

Ross Andrews, Chairman of Integumensaid:

 

"2018 was a pivotal year for Integumen. In August, with a reduced board of directors and new management the Company set about converting the business model from the high volume, low-margin sale of consumer personal and healthcare products, to low-volume, high margin test services for manufacturers of skincare consumer products. The results to year-end were transformational. The increase in revenue per client and the current level of pipeline activity significantly higher than the Company has experienced in the past, provides the Board confidence that the accelerated growth, seen in 2018, will continue throughout the rest of 2019."

 

Contacts

 

Integumen plc

Gerard Brandon, CEO

 

+44 (0) 7340 055 643

SPARK Advisory Partners Limited

(Nominated Adviser)

 

Neil Baldwin/Andrew Emmott

+44 (0) 113 370 8974

Turner Pope Investments (TPI) Limited (Broker)

Andy Thacker

+44 (0) 20 3621 4120

 

Copies of the audited Annual Report and Accounts for the year ended 31 December 2018 will be posted to shareholders shortly and will also be available on the Company's website www.integumen.com/investors/

 

Chairman's Statement

For the year ended 31 December 2018

 

Dear Fellow Shareholder,

 

I was appointed as Chairman on 21 May 2019 and have pleasure presenting the Company's report and results for the year ended 31 December 2018.

 

Our Business

Integumen Plc ("Integumen", "Group" or "the Company") was incorporated and registered in England and Wales on 28 May 2016 and was admitted to trading on the AIM market of London Stock Exchange plc on 5 April 2017. Integumen has completed a number of strategic acquisitions and disposed of non-performing assets over the last 12 months. These include the commercial technology licensing from Cellulac of a solvent free extraction process for oils specifically intended for skincare products and nutritional food supplements and within the Company's core physical skincare testing business, the addition of a digital platform which has created Labskin AI. This cloud-based eco-system validates skincare products and ingredients, remotely for clients, and has been the focus of the strategic change in the Company business model since August 2018. 

 

This physical laboratory-grown 3D human skin equivalent, developed specifically to host bacteria, virus and fungi on human skin in our test laboratories, incorporates a digital artificial intelligence to enhance clinical research, medical device and life science testing in physical real-world and virtual digital simulated form. Labskin allows our clients in skincare, healthcare, pharmaceutical manufacturers and the cosmetic industry to test and validate their product claims on human-like skin in a real-world environment with full access to multiple state-of-the-art partner technologies.

 

Results

This has been a transformational year for Integumen attributable to a change of management, change of business model, better than expected growth in sales from higher revenues per client, lower management overhead from disposal of non-performing assets and increased employees in the core Labskin subsidiary laboratories. 

 

Highlights:

·      Total revenue £501k (including discontinued operations) increased 111% (FY 2017: £238k);

·      Revenue from continued operations £274k increased 294% (FY 2017: £93k) following Labskin test kit sales move to full skincare product test services;

·      EBITDA losses before exceptional items reduced by 13% to £1,221,000 (FY 2017: (£1,398,000);

·      Operating loss reduced to £2,082,000 (2017: £5,397,000) after providing for:

Depreciation of £22,000 (2017: £37,000);

Amortisation of £172,000 (2017: £439,000);

Impairment to intangible assets of £423,000 (2017: £3,238,000); and,

Exceptional costs of £244,000 (2017: £285,000) were one-off transaction costs relating to the disposal of non-performing assets;

·      Disposal of TSPro GmbH saving £1.19m in short and long-term liabilities;

·      The Company acquired 9.35% of Cellulac plc in exchange for shares in Integumen;

·      STOER For Men skin care range at monthly break-even by year-end 2018.

 

Post Year-End 2018 Events

 

·      Transformational £3m all-share Acquisition of Rinocloud Limited enabling scale-up of the business as it moves from a physical laboratory to an automated, real-time, real-world digital data platform;

·      Successful fundraising of £2.75m (gross); of which,

£232k was Vendor sale to allow 100% of Rinocloud to be acquired;

·      Additional strategic reduction of the indebtedness of the business:

Disposal of Visible Youth Group - saving £245k of future contractual liabilities;

Debt conversions - Venn £421k carried over since April 2017 IPO;

Cellulac debt conversion - £400k for hi-tech laboratory equipment;

Litigation issues settled - saving £250k of future liabilities.

 

Further information on our products and technologies can be found in the Chief Executive's Report.

 

 

Corporate governance

I believe that good corporate governance is important to support our future growth and the Board, which has extensive experience in publicly listed companies and running companies in the personal healthcare sector, is committed to the highest standards. 

 

Outlook

The current level of pipeline activity is significantly higher than the Company has experienced in the past. Having acquired Rinocloud and integrated the data analytics and AI systems into the Labskin AI eco-system, the Board is satisfied that it is meeting its objective of increasing the average revenue per client as the Company continues to evolve into a clinical trial and medical device support services company for skin related diseases, treatments and therapies. 

 

 

Ross Andrews

Chairman

26 June 2019

 

 

 

Chief Executive's Statement

For the year ended 31 December 2018

 

Dear Fellow Shareholder,

 

I present the Company's results for the year ended 31 December 2018.

 

Labskin (Innovenn)

The Labskin business unit has demonstrated its ability to move away from selling single animal-free laboratory grown human skin test kits, to a fully-fledged service provider for skincare, healthcare, personal-hygiene, pharmaceutical manufacturers and the cosmetic industry companies. While revenue for Labskin in H1 2018 amounted to a total of £49k, by year end this had increased by 327% to £209k. Invoices for clinical tests for clients were reaching up to 25 times the average price of selling single test kits by year end. The network of the new management team has opened an exciting expansion and collaboration partnership plan.

 

By the end of the 3rd quarter Labskin needed automation to deal with the expected demand and so a collaboration agreement with Rinocloud was put in place for a shared revenue model with Rinocloud investment and development that had been ongoing for 2 years, to deliver a digital virtual laboratory in the form of an artificial intelligence platform for skin-care clients. By year-end the test platform had been partially integrated into skincare test equipment to allow remote viewing of test results in real-time.

 

Post year-end Rinocloud had completed the integration and revenues had begun in Q1 2019, and in May 2019 Rinocloud was acquired by Integumen for £3m in an all-share transaction. This is now contributing to revenues that continue to accelerate into H2 2019 on top of the growth in physical services of the Labskin laboratories.

 

Life Science Hub

Having Labskin in the group with such accumulated knowledge and expertise allows us to identify markers on the skin (microbiome) for many skin related conditions. Laboratory analysis allows the Labskin team to see, for example, what happens on the skin with too much sun damage or what biomarkers trigger acne, eczema, psoriasis, ageing, dandruff and, in the case of "WoundPhase", wound healing.

 

Labskin and WoundPhase are combining technologies to identify biology (triggers) and chemistry that allows changes in wound dressing colour depending on what is happening to the skin. In addition, consumers will be able to match skincare products to their skin types based on the Labskin dressing as well as health applications that include visually monitoring of body temperature, without electronic devices or attaching monitors on infants or elderly patients.

 

STOER Skincare

This award-winning men's skincare brand was acquired in November 2017. STOER was a winner of the best Facial Cleanser/Exfoliators at Shortlist Men's Grooming Awards 2018. On the back of the award and additional media coverage small quantities of sales occurred from retailers have begun. However, new management, who have had experience in consumer sales of skin care products across multiple continents negotiated higher volumes for the STOER range of products that increased sales in H2 2018 that resulted in breakeven. The greatest benefit of STOER products are the use as a control range of skin care products that offer Labskin clients' proof of concept for their products to be tested. The most notable result was completion of test protocols for the inclusion of Cannabinoid ("CBD") in client products, which resulted in bringing in our first CBD client in May 2019.

 

Disposals of non-performing assets

The Board undertook the task of disposing of under-performing assets. This resulted in an impairment of £500k in 2018 as provided for in the Interims published in August. In December 2018, we completed the disposal of TSPro GmbH and eliminated £1.19m of short and long-term liabilities to the Company. In the Post year-end the Company disposed of the Visible Youth Group which saved £245,000 of future contractual liabilities.

 

Disruptive Business Model

Integumen has advanced its core business model with Labskin AI platform to create a fundamental change in topical skin related clinical and medical device trial costs. Changes go far beyond incremental savings resulting in:

 

·      Human volunteer numbers are reduced by 50%;

·      Swab of test subject's skin is taken and applied to Labskin, instantly creating twin test subject;

·      Recruitment time is shorter;

·      Project management and supervision time and personnel are reduced in half;

·      AI integration delivers comparative analytical data plus human test response data;

·      Reduces error - highlighting test subjects who are not sticking to test regime;

·      Increases accuracy from combined twin tests;

·      Clients win, Clinical Research Organisation wins and Labskin wins extra revenues

 

 

 

3-Step Strategic Plan

 

1.      Grow Profits Across Related Markets

We will continue to leverage existing blue-chip clients and collaboration partner relationships to secure additional high value product test service contracts with additional sales resources. We are building more client relationships across skincare, healthcare, wound care, personal hygiene and pharmaceuticals industries.

 

2.      Product & Service Investment

Roll-out of physical and digital cloud-based reporting services to keep our Labskin AI offering competitive and relevant to our clients is key to delivering more value to our clients and increasing revenue per client in return. We maintain this approach by extending our technical resources to enhance product and service development. The addition and continued development of AI data analytics capabilities from our recent Rinocloud acquisition, and the increase in revenue because of that, shows we are on the right track.

 

3.      Collaboration & Acquisition

We actively pursue a broader portfolio of services through revenue shared collaboration and acquisition options. These areas have been previously mentioned in RNS announcements and include, but are not limited to, data analytics, software and biophysics integration services. All of these lead to extending our Labskin AI eco-system. As mentioned above the key criteria in our collaboration and partner targets are to increase revenue per client and earnings from repurposed assets to enhance shareholder value.

 

We look forward to updating you on the progress of this strategy as we go forward.

 

 

 

Gerry Brandon

Chief Executive Officer

26 June 2019

 

 

The Board

Ross Andrews, Non-Executive Chairman

Ross was appointed Chairman on 21 May 2019, having been a non-executive director since April 2017. He is a corporate financier with over 30 years' experience, has a strong understanding of corporate governance regimes and is chairman and non-executive director of several UK listed companies. In 2018, he established Guild Financial Advisory, a corporate finance boutique focused on ambitious and fast-growing companies.

 

Gerry Brandon (Chief Executive Officer)

Gerard was appointed Director and CEO of Integumen in August 2018. Previously, he joined Cellulac Limited (Ireland) as its Chief Executive Officer in May 2012 and assumed the same role for Cellulac plc in October 2013. In 1996 he became founder and CEO of Alltracel Pharmaceuticals PLC, where he built a team that oversaw numerous patents granted on refined cellulose. Alltracel was admitted to trading on AIM in 2001. In 2004, he was appointed as a Managing Partner for Farmabrand Private Equity. In 2009, he was appointed as an Executive Consultant to Eplixo Limited. He is a Fellow of the Ryan Academy of Entrepreneurs in Dublin.

 

Camillus Glover (Chief Financial Officer and Chief Operating Officer)                 

Camillus was appointed Director and COO of Integumen in August 2018. on the 29th of August he took over as Chief Financial Officer. Previously, he joined Cellulac Limited (Ireland) as Chief Financial Officer in May 2012 and assumed the same role for Cellulac plc in October 2013. He is a member of the Institute of Chartered Accountants Ireland. In 2003, he joined Alltracel as Commercial Director and was appointed Chief Operations Officer in 2005 until it was acquired in 2008 by Hemcon Medical Technologies ("Hemcon"). Between 2009 and 2012, he was VP of Global Business Development for Hemcon prior to joining Cellulac.

 

Fionan (Fin) Murray, Group Sales Director

Fionan is the founder of Rinocloud Limited. He is a seasoned sales executive with more than 30 years' experience in worldwide distribution deals, selling complex software solutions into the multi-national corporate sectors in financial services, biotech, utilities and government departments. He is former CEO of LeT Systems Ltd and a senior executive at KBC Bank and Kindle Banking systems.

 

 

Strategic Report

For the year ended 31 December 2018

 

Review of the business

A comprehensive review of the year is given in the Chairman's and Chief Executive's Statements on pages 2 to 6.

 

Principal risks and uncertainties

The Directors continually identify, monitor and manage the risks and uncertainties of the Group. Risk is inherent in all businesses. Set out below are certain risk factors which could have an impact on the Group's long-term performance and mitigating factors adopted to alleviate these risks. This list does not purport to be an exhaustive summary of the risks affecting the Group.

 

Management and employees

The Group's future success will be dependent on key employees and their on-going relationships with customers. The Group encourages customer contacts to be maintained by more than one individual. Key employees are incentivised through a mixture of competitive remuneration and sales commission. Main Board Directors are incentivised as detailed in the Directors' Remuneration Report.

 

Early stage of operations

Integumen is an early stage company, having been incorporated in 2016. Recently, the Group has experienced increased pipeline activity significantly higher than the Company has been used to in the past. This is still a relatively short-term track record of product sales and new service offerings. Therefore, for now, it is difficult to predict with accuracy the rate of market adoption and so forecasting of sales is likely to prove challenging for some time.

 

Delay in product launches

The Group has a number of identified product development projects to take products to market, some of which may require specific funding to proceed. There is no guarantee that these projects will be completed within anticipated timescales, or that they will result in viable products. The Group's strategy involves, inter alia, running clinical studies on its products to create verifiable data which can be used in marketing campaigns to differentiate the Group's products from competitors. If these clinical studies take longer than expected, or fail to establish these credentials, this could be damaging to the Group's prospects.

 

Potential funding requirement for further development

Any future collaboration, partnership, joint venture expansion, activity, acquisitions and/or business development may require additional capital and the Group may seek to raise additional funds through equity or debt financings or from other sources. There can be no guarantee that the necessary funds will be available on a timely basis, on favourable terms, or at all, or that such funds if raised, would be sufficient.

 

Competition risk

The Group's current and future potential competitors include, amongst others, major multinational pharmaceutical and healthcare companies with substantially greater resources than those of the Group. There can be no assurance that competitors will not succeed in developing systems and products that are more effective or economic than any of those developed by the Group, which would render the Group's products obsolete or otherwise non-competitive. The Group seeks to reduce this risk by ensuring that a professional and high standard product and service is provided to its customers, maintaining confidentiality agreements and selecting leading businesses in their respective fields as collaboration and joint development partners capable of addressing significant competition, should it arise.

 

Currency exchange risk

The Company's financial statements are denominated in pounds sterling, its functional currency. The Company plans to increase its sales and activities in the USA and the EU which may be impacted by exchange rate fluctuations in future.

 

Financial risk management

The Group has instigated certain financial risk management policies and procedures which are set out in note 3 to the financial statements.

 

Outlook

The current level of pipeline activity is significantly higher than the Company has experienced in the past. Having acquired Rinocloud and integrated the data analytics and AI systems into the Labskin AI eco-system, the Board is satisfied that it is meeting its objective of increasing the average revenue per client as the Company continues to evolve into a clinical trial and medical device support services company for skin related diseases, treatments and therapies. 

 

Key Performance Indicators (KPIs)

The key performance indicators currently used by the Group are revenue, adjusted EBITDA and cash resources. The Group intends to establish other key performance indicators in due course once the Group has matured sufficiently. The Group does not use and does not at present intend to use non-financial key performance indicators.

 

Review of strategy and business model

Integumen Plc has completed a number of strategic acquisitions and disposed of non-performing assets over the last 12 months. These include the commercial technology licensing from Cellulac of a solvent free extraction process for oils specifically intended for skincare products and nutritional food supplements and within the Company's core physical skincare testing business, the addition of a digital platform which has created Labskin AI. This cloud-based eco-system validates skincare products and ingredients, remotely for clients, and has been the focus of the change in the Company business model since August 2018. 

 

This physical laboratory-grown 3D human skin equivalent, developed specifically to host bacteria, virus and fungi on human skin in our test laboratories, incorporates a digital artificial intelligence to enhance clinical research, medical device and life science testing in physical real-world and virtual digital simulated form. Labskin allows our clients in skincare, healthcare, pharmaceutical manufacturers and the cosmetic industry to test and validate their product claims on human-like skin in a real-world environment with full access to multiple state-of-the-art partner technologies.

 

Because of the changes to the business model the Company is seeing an improved pipeline of activity. The Rinocloud acquisition and its development team has integrated well, as much of the work in collaboration had commenced prior to completion of the transaction. Moving to a higher value service offering and entering the clinical and medical device trial sector is both exciting and challenging. With an increased order pipeline, the Company requires additional infrastructure and expertise. The announcement on 20 June 2019 of increased laboratory space and personnel has secured immediate organic growth. The Labskin Human Volunteer skin cloning capabilities opens opportunities to explore options of collaboration, partnership and acquisitive growth to achieve Company goals of meeting increased demands from our clients, regulatory compliance and enhance shareholder value.

 

Environment

The Directors consider that the nature of the Group's activities is not inherently detrimental to the environment.

 

Employees

The Group places value on the involvement of its employees and they are regularly briefed on the Group's activities. The Group closely monitors staff attrition rates which it seeks to maintain at current low levels and aims to structure staff compensation levels at competitive rates in order to attract and retain high calibre personnel.

 

Disabled employees

Applications for employment by disabled persons are always fully considered, bearing in mind the specific aptitudes of the applicant involved. It is the policy of the Group that the training, career development and promotion of disabled persons, as far as possible, be identical with that of other employees.

 

Social, community, and human rights

The Board recognises that the Group has a duty to be a good corporate citizen and to respect the laws, and where appropriate the customs and culture of the territories in which it operates. It contributes as far as is practicable to the local communities in which it operates and takes a responsible and positive approach to employment practices.

 

The Strategic Report was approved by the Board on 26 June 2018 and signed on its behalf by:

 

 

Gerry Brandon

Chief Executive Officer

 



Report of the Directors

For the year ended 31 December 2018

 

The Directors have pleasure in submitting this report together with the audited financial statements of Integumen Plc for the year ended 31 December 2018.

 

2017 Financial Accounts Restated

 

On 21 December 2018, the Company disposed of its 100% holding of TSpro GmbH for a consideration of €1. The 2017 financial accounts have been restated to reflect the discontinued operation.

 

Corporate details

Integumen Plc is incorporated in England and Wales with registration number 10205396. The registered office is Sand Hutton Applied Innovation Campus, Sand Hutton, York, North Yorkshire, YO41 1LZ.

 

Directors

The Directors who held office during the year and as at the date of signing the financial statements were as follows:

 

Gerard Brandon                                                   (Appointed on 6 August 2018)

Camillus Glover                                                    (Appointed on 6 August 2018)

Ross Andrews                                                       (Appointed Chairman on 21 May 2019)

Fionan Murray                                                      (Appointed on 2 May 2019)

Declan Service                                                      (Resigned on 5 April 2018)               

Chris Bell                                                                (Resigned on 29 August 2018)

Donald Nicholson                                                 (Resigned on 29 August 2018)

Helmut Schlieper                                                  (Resigned on 6 August 2018)

Paul Kennedy                                                         (Resigned on 6 August 2018)

Tony Richardson                                                    (Resigned on 21 May 2019)

 

Principal activities

The principal activity of the Group is that of developing technologies in the skin industry. The Group has a presence in the UK and Ireland.

 

Dividends

There were no dividends paid or proposed by the Company during the period.

 

Going concern

The Directors have considered the applicability of the going concern basis in the preparation of these financial statements.

 

On 2 May 2019, the Company raised £2,519,000 by issuing new shares. Following the settlement of certain liabilities, the Company has allocated the remaining funds to sales and marketing investment and general working capital purposes.

 

Also, on 2 May 2019, the Company successfully converted £1,182,000 of liabilities to ordinary shares, of which £752,000 was payable as at 31 December 2018

 

The Directors have prepared cash flow projections to determine funding requirements of the Group. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt a going concern basis in preparing the annual report and consolidated financial statements.

 

Creditors' payment policy

It is the policy of the Group to agree appropriate terms and conditions for its transactions with suppliers (ranging from standard written terms to individual negotiated contracts) and for payment to be made in accordance with these terms provided the supplier has complied with its obligations.

 

 

Directors' interests

The interests of the Directors who served during the year, previous year and as at the date of signing of these financial statements, all of which are beneficial, in the share capital of the Company were as follows:                  

                                                                                                                                                                                                                                                                                                                                                                                                                Ordinary Shares of 0.01p each                                                                        

Tony Richardson                                                                                                        2,850,414                                                  

Gerard Brandon                                                                                                       49,114,501                                                  

Camillus Glover                                                                                                        41,422,194                                                  

Ross Andrews                                                                                                              2,238,462                                                                    

Fionan Murray                                                                                                          86,783,068                                                                    

Declan Service                                                                                                             1,301,952                                                                    

Chris Bell                                                                                                                          200,000                                                                    

Paul Kennedy                                                                                                                  700,000                                                                    

 

Substantial shareholdings

At the date of signing of these financial statements, the following interests in 3% or more of the issued Ordinary Share capital had been notified to the Company:

   Percentage

                                                                                                                                                     Number                                                     of issued
Shareholder                                                                                                                             of shares                                               share capital

Helium Rising Stars Fund                                                                                                                       72,333,723                                                          7.46%

Cellulac plc1                                                                                                                               38,205,127                                                          3.94%

Enhance Skin Products Inc.2                                                                                                   37,927,216                                                         3.91%

Venn Life Sciences Limited3                                                                                                    30,205,127                                                          3.10%

 

1 Gerard Brandon and Camillus Glover are directors and shareholders of Cellulac plc.   2 Donald Nicholson is a director and a shareholder of Enhance. 3 Tony Richardson is a director of Venn.

 

Post balance sheet events

The following events have taken place since the year end:

 

Ordinary shares issued

 

-       On 8 March 2019, Hybridan LLP exercised warrants over 1,846,154 ordinary shares of 0.01p each at an exercise price of 0.65p per ordinary share of 0.01p raising a total of £12,000 for the Company.

 

-       On 22 March 2019, share option holders exercised options over 17,777,776 ordinary shares of 0.01p each at an exercise price of 0.01p per ordinary share of 0.01p raising a total of £1,778.

 

-       On 26 March 2019, placing subscribers exercised warrants over 2,000,000 ordinary shares of 0.01p each at an exercise price of 0.65p per ordinary share of 0.01p raising a total of £30,000.

 

-       On 2 May 2019, the Company issued the 476,722,882 ordinary shares of 0.01p each at the following placing prices per ordinary share:

 

Description

No. of shares

Price

Purpose

Placing and Subscription shares

179,918,788

1.4p

Raised £2,519,000 in cash

Consideration shares

214,285,714

1.4p

Consideration for the acquisition of Rinocloud Ltd for £3,000,000

Settlement shares

23,637,429

1.4p

Settlement of £331,000 of liabilities as part of Visible Youth disposal

Loan Note Conv. shares

26,666,666

1.5p

Issued as repayment of a Loan Note due to Cellulac Ltd of £400,000

Venn Debt shares

30,071,428

1.4p

Issued as a loan repayment to Venn Life Sciences Holdings Plc of £421,000

Fee shares

2,142,857

1.4p

Issued to settle certain professional fees associated with the above of £30,000

Total shares issued

476,722,882

 

 

 

-       On 31 May 2019, placing subscribers exercised warrants over 1,000,000 ordinary shares of 0.01p each at an exercise price of 1.5p per ordinary share of 0.01p raising a total of £15,000.

 

-       On 14 June 2019, share option holders exercised options over 1,111,111 ordinary shares of 0.01p each at an exercise price of 0.01p per ordinary share of 0.01p raising a total of £177.

 

-       On 14 June 2019, placing subscribers exercised warrants over 5,000,000 ordinary shares of 0.01p each at an exercise price of 1.5p per ordinary share of 0.01p raising a total of £75,000.

 

-       On 25 June 2019, placing subscribers exercised warrants over 2,500,000 ordinary shares of 0.01p each at an exercise price of 1.5p per ordinary share of 0.01p raising a total of £37,500.

 

-       On 26 June 2019, placing subscribers exercised warrants over 6,766,667 ordinary shares of 0.01p each at an exercise price of 1.5p per ordinary share of 0.01p raising a total of £101,500.

 

As at date of signing of these financial statements, the Company had an issued share capital of 969,551,462 ordinary shares of 0.01p each and 223,685,232 deferred shares of 0.99p each.

 

 

Share warrants issued

 

-       On 2 May 2019, the Company granted warrants over:

-     98,2142,85 ordinary shares of 0.01p each to placing subscribers which are exercisable at 2p per ordinary share of 0.01p at any time until 2 May 2021.

-     8,142,857 ordinary shares of 0.01p each to Turner Pope Investments (TPI) Ltd which are exercisable at 1.4p per ordinary share of 0.01p at any time until 2 May 2022.

 

Business combinations

 

On 2 May 2019, the Company acquired 100% of Rinocloud Ltd in an all share transaction for £3,000,000, The purchase consideration was paid by the Company by issuing 214,285,714 ordinary shares of 0.01p each at a price of 1.4p per share. Rinocloud Ltd is a company registered in Ireland providing specialised data management services to a global scientific and lab testing sector. Following the acquisition, Fionan Murray, became a director of the Company.

 

Discontinued operations

 

On 2 May 2019, the Company disposed of its subsidiary Visible Youth Ltd. to Enhance Skin Products Inc. for zero consideration. The sale includes the two subsidiaries of Visible Youth Ltd, Visible Youth Ireland Ltd and Integumen Inc. The Visible Youth companies own the rights to a range of female cosmetic products. As part of the sale, the Company agree to settle certain Visible Youth liabilities of £569,000 by:

-     arranging cash payments of £238,000 and

-     issuing 23,637,429 ordinary shares of 0.01p each at a placing price of 1.4p totalling £331,000.

 

 

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Parent Company and of the profit or loss of the Group and the Parent Company for that period. In preparing these financial statements, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

 

 

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Parent Company and enable them to ensure that the financial statements comply with the Companies Act 2006.

 

They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities

 

The Directors are responsible for the maintenance and integrity of the Parent Company's website (www.integumen.com). Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

The Directors are responsible for the maintenance and integrity of the Parent Company's website (www.integumen.com). Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

The Directors consider that the annual report and the accounts, taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group and the Parent Company's performance, business model and strategy.

 

Each of the Directors, whose names and functions are listed in the Report of the Directors confirm that, to the best of their knowledge:

·      the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Parent Company;

·      the Parent Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Parent Company; and

·      the Chairman's Statement and Chief Executive's Statement include a fair review of the development of the business and the position of the Group and the Parent Company, together with a description of the principal risks and uncertainties that it faces.

 

Directors' liability insurance

The Company maintains Directors and Officers liability insurance, which is reviewed annually and is considered to be adequate by the Company and its insurance advisers.

 

Independent auditors

Jeffreys Henry LLP were appointed during the year and have expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

 

Disclosure of information to the Auditors

The Directors who hold office at the date of approval of this report confirm that so far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make him aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

 

Annual General Meeting

A copy of the notice convening the Annual General Meeting will be sent out shortly under separate cover.

 

The Directors' report was approved by the Board on 26 June 2019 and signed on its behalf by:

 

 

 

Gerry Brandon

Chief Executive Officer
 

 

Corporate Governance Statement

For the year ended 31 December 2018

 

Compliance

The Directors recognise the value of the principles of the Corporate Governance Code for Small and Mid-Size Quoted Companies issued by the Quoted Companies Alliance (QCA).

 

The following statement describes how the Group seeks to address the principles underlying the Code where practicable and appropriate for a company of this size.

 

Board composition and responsibility

The Board currently comprises a non-executive Chairman, three executive Directors. The Board has determined that Ross Andrews is independent in character and judgement and that there are no relationships or circumstances which could materially affect or interfere with the exercise of their independent judgement. The Board is satisfied with the balance between executive and non-executive Directors which allows it to exercise objectivity in decision making and proper control of the Group's business. The Board considers this composition is appropriate in view of the size and requirements of the Group's business and the need to maintain a practical balance between executives and non-executives. The Board will seek to appoint a further independent non-executive Director in due course.

 

All Directors are subject to election by shareholders at the first Annual General Meeting after their appointment and are subject to re-election at least every three years. The Board does not automatically re-nominate non-executive Directors for election by shareholders. The terms of appointment of the non-executive Directors can be obtained by request to the Company Secretary.

 

The Board's primary objective is to focus on adding value to the assets of the Group by identifying and assessing business opportunities and ensuring that potential risks are identified, monitored and controlled. Matters reserved for Board decisions include strategic long-term objectives and capital structure of major transactions. There is a division of responsibilities between the Non-Executive Chairman, who is responsible for the overall strategy of the Group, and the CEO, who is responsible for implementing the strategy and day to day running of the Group. He is assisted by the CFO.

 

Board meetings

15 Board meetings were held during the period. The Director's attendance record during the period is as follows:

 

Tony Richardson                                    (Resigned 21 May 2019)                  13

Gerard Brandon                                     (Appointed on 6 August 2018)        7

Camillus Glover                                      (Appointed on 6 August 2018)        7

Ross Andrews                                                                                                      12

Declan Service                                       (Resigned on 5 April 2018)              -

Chris Bell                                                 (Resigned on 29 August 2018)        8

Donald Nicholson                                   (Resigned on 29 August 2018)        7

Helmut Schlieper                                   (Resigned on 6 August 2018)          6

Paul Kennedy                                         (Resigned on 6 August 2018)          6

 

Audit and Risk Committee

This comprises Ross Andrews as Chairman and Fin Murray as the other member of the committee. Ross Andrews is the Company Chairman and sits on the board of a number of listed plc's. The principal duties of the committee are to review the half-yearly and annual financial statements before their submission to the Board and to consider any matters raised by the auditors. The Committee also reviews the independence and objectivity of the auditors. The terms of reference of the Committee reflect current best practice, including authority to:

 

·      Recommend the appointment, re-appointment and removal of the external auditors;

·      Ensure the objectivity and independence of the auditors including occasions when non-audit services are provided; and

·      Ensure appropriate 'whistle-blowing' arrangements are in place.

 

The Chairman may seek information from any employee of the Group and obtain external professional advice at the expense of the Company if considered necessary. Due to the relatively low number of personnel employed within the Group, the nature of the business and the current control and review systems in place, the Board has decided not to establish a separate internal audit department.

 

 

Remuneration Committee

The Company has established a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors. No Director is involved in deciding his own remuneration.

 

This committee comprises Ross Andrews as Chairman and Fin Murray as the other member of the committee. The committee considers the employment and performance of individual executive Directors and determine their terms of service and remuneration. It also has authority to grant options under the Company's Executive Share Option Scheme. The Committee intends to meet at least twice a year.

 

Board appointments

The Nomination Committee comprises Ross Andrews as Chairman and Fin Murray as the other member of the committee. It identifies and nominates for the approval of the Board, candidates to fill Board vacancies as and when they arise. The Nomination Committee intends to meet at least twice a year.

 

Internal control

The Directors are responsible for ensuring that the Group maintains a system of internal control to provide them with reasonable assurance regarding the reliability of financial information used within the business and for publication and that the assets are safeguarded. There are inherent limitations in any system of internal control and accordingly even the most effective system can provide only reasonable, but not absolute, assurance with respect to the preparation of financial reporting and the safeguarding of assets.

 

The Group, in administering its business has put in place strict authorisation, approval and control levels within which senior management operates. These controls reflect the Group's organisational structure and business objectives. The control system includes clear lines of accountability and covers all areas of the organisation. The Board operates procedures which include an appropriate control environment through the definition of the above organisation structure and authority levels and the identification of the major business risks.

 

Internal financial reporting

The Directors are responsible for establishing and maintaining the Group's system of internal reporting and as such have put in place a framework of controls to ensure that the on-going financial performance is measured in a timely and correct manner and that risks are identified as early as is practicably possible. There is a comprehensive budgeting system and monthly management accounts are prepared which compare actual results against both the budget and the previous year. They are reviewed and approved by the Board, and revised forecasts are prepared on a regular basis.

 

Relations with shareholders

The Company reports to shareholders twice a year. The Company dispatches the notice of its Annual General Meeting, together with a description of the items of special business, at least 21 days before the meeting. Each substantially separate issue is the subject of a separate resolution and all shareholders have the opportunity to put questions to the Board at the Annual General Meeting. The Chairman of the Audit and Remuneration Committees normally attend the Annual General Meeting and will answer questions which may be relevant to their work. The Chairman advises the meeting of the details of proxy votes cast on each of the individual resolutions after they have been voted on in the meeting.

 

The Chairman and the non-executive Directors intend to maintain a good and continuing understanding of the objectives and views of the shareholders.

 

Corporate social responsibility

The Board recognises that it has a duty to be a good corporate citizen and is conscious that its business processes minimise harm to the environment, contributes as far as is practicable to the local communities in which it operates and takes a responsible and positive approach to employment practices.

 

With effect from the financial period to 31 December 2016, the Group became subject to the requirements of the Modern Slavery Act 2015. The Group will publish the required statement on its website in due course.

 

 

Report of the Remuneration Committee

For the year ended 31 December 2018

 

Statement of compliance

This report does not constitute a Directors Remuneration Report in accordance with the Directors Remuneration Regulations 2007 which do not apply to the Company as it is not fully listed. This report sets out the Group policy on Directors' remuneration, including emoluments, benefits and other share-based awards made to each Director.

 

Policy on Executive Directors' remuneration

Remuneration packages are designed to motivate and retain executive Directors to ensure the continued development of the Company and to reward them for enhancing value to shareholders. The main elements of the remuneration package for executive Directors are basic salary or fees, performance related bonuses, benefits and share option incentives.

 

Directors' remuneration

The remuneration of the Directors of the Company for the year ended 31 December 2018 and 2017 is shown below:

 

2018

2017

 

£'000

£'000

Non-Executive Directors

 

 

Tony Richardson (resigned 21 May 2019)

17

13

Ross Andrews (appointed on 5 April 2017)

47

28

Paul Kennedy (appointed on 5 April 2017, resigned on 6 August 2018)

25

28

 

89

69

Executive Directors

 

 

Declan Service (resigned on 5 April 2018)

72

198

Chris Bell (resigned on 29 August 2018)

111

181

Donald Nicholson (appointed on 5 April 2017, resigned on 29 August 2018)

8

9

Helmut Schlieper (appointed on 5 April 2017, resigned on 6 August 2018)

6

9

Gerry Brandon (appointed on 6 August 2018) 1

46

-

Camillus Glover (appointed on 6 August 2018) 1

42

-

 

285

397

Total fees and emoluments

374

466

1 The salary of Gerry Brandon and Camillus Glover is for non-cash consideration and these Directors may elect to have accrued salary settled by the allotment of new ordinary shares subject to certain conditions.

 

Directors' share options

 

In 2017, the Company awarded options to key management over 6,720,000 ordinary shares of 1p each. These options were exercisable after two years provided that the holder of the options is still an employee of the Company. Of these, 3,360,000 have an exercise price of 5p and 3,360,000 have an exercise price of 6p each.

 

During the year, options over 5,118,000 ordinary shares of 1p each lapsed when option holders left the employment of the Company.

 

Following the subdivision of ordinary shares on 2 August 2018, when each ordinary existing share of 1p was sub-divided into one deferred share of 0.99p and one ordinary share of 0.01p, the outstanding options granted were as follows at 31 December 2018:

Director

Date granted

No. of ordinary shares under option

Exercise
price

Exercise period

Ross Andrews

5 April 2017

638,400

5p-6p

From 5 April 2017 to 5 April 2027

 

(1) 50% of the shares will vest at an exercise price of 5p and 50% at an exercise price of 6p
 

Independent Auditor's Report to the Members of Integumen Plc

For the year ended 31 December 2018

 

Opinion

We have audited the financial statements of Integumen Plc (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2018 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statements of cash flows, the consolidated and company statements of changes in equity and notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

In our opinion:

•     the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2018 and of the group's loss for the year then ended;

•     the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

•     the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

•     the financial statements have been prepared in accordance with the requirements of the Companies Act 2006

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to SME listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

•     the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

•     the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

 

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.

 

 

 

Key audit matter

How our audit addressed the key audit matter

Impairment of intangible assets and investments

 

During the year the group carried intangible assets of £718,000 (2017: £1,979,000) relating to intellectual property and development costs and long-term investments of £729,000 (2017: £1,479,000).

 

EBITDA, which is considered by management to be a key metric and is included as a KPI in the strategic report, is directly impacted by the amount of costs capitalised.

 

The directors have assessed intangible assets and investments in subsidiaries for any indicators of impairment. Based on their analysis, a further impairment of £923k above amortisation recognized in the period. This includes £500k amortisation of intangibles disposed of with TSpro Gmbh.

 

 

 

We considered the profitability of the components of the group and whether they have the ability to trade successfully in the future.

 

We reviewed the assumptions underlying management's impairment review for investments, which used a discounted cash flow forecasts.

 

 

We reviewed the latest management accounts and cash flow forecasts to gauge how trading was progressing in 2019.

 

Recoverability of amounts due by subsidiaries

 

The company had amounts owed by subsidiary undertakings of £1,404,000 (2017: £1,854,000) at the year end.

 

The directors have assessed the recoverability of intercompany balances and have concluded that they are recoverable.

 

 

 

We evaluated the inter-group transactions that occurred during the year to gain an understanding of their purpose.

 

We reviewed management's assumption that the loans are recoverable and repayable on demand, by assessment of managements' forecasts, and comparison of the net asset position of the subsidiaries to the value of the asset held by the parent.

 

 

Our application of materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.  These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

 

Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:

 

 

Group financial statements

Company financial statements

Overall materiality

£158,000 (2017: £112,000).

£46,000 (2017: £69,600).

How we determined it

Based on 5% net loss before tax (2017: average of 3% of revenue, 10% of net profit and 2% of gross assets).

Based on 5% net loss before tax and impairments (2017: average of 3% of revenue, 10% of net profit and 1% of gross assets).

Rationale for

benchmark applied

 

We believe that profit before tax is a primary measure used by shareholders in assessing the performance of the group and is a generally accepted auditing benchmark.

 

We believe that profit before tax is a primary measure used by shareholders in assessing the performance of the group and is a generally accepted auditing benchmark.

 

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between £106 and £196,000.

We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £7,900 (Group audit) (2017: £5,600 and £2,300 (Company audit) (2017: £3,500) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.

 

An overview of the scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgments, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

 

How we tailored the audit scope

 

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.

 

The Group financial statements are a consolidation of ten reporting units, comprising the Group's operating businesses and holding companies.

 

We performed audits of the complete financial information Integumen Plc, Innovenn UK Limited, Integumen Ireland Limited, Lifesciencehub UK Limited, Lifesciencehub Ireland Limited, and Stoer Ireland Limited, reporting units, which were individually financially significant and accounted for 55% of the Group's revenue and 90% of the Group's absolute loss before tax (i.e. the sum of the numerical values without regard to whether they were profits or losses for the relevant reporting units). We also performed specified audit procedures over goodwill and other intangible assets, as well as certain account balances and transaction classes that we regarded as material to the Group at one further reporting unit, based in The United Stated of America.

 

The Group engagement team performed all audit procedures, with the exception of the audits of Lifesciencehub UK Limited and Lifesciencehub Ireland Limited which were performed by a component auditor in The Republic of Ireland.

 

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

 

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

 

•      the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

•      the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

 

 

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

•      adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

•      the parent company financial statements are not in agreement with the accounting records and returns; or

•      certain disclosures of directors' remuneration specified by law are not made; or

•      we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out on page 10, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the directors are responsible for assessing the group's and parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

 

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at:

www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

 

Other matters which we are required to address

We were appointed by the company at the Annual General Meeting on 9 August 2018 to audit the financial statements for the period ending 31 December 2018. Our total uninterrupted period of engagement is 3 years, covering the periods ending 31 December 2016 to 31 December 2018.

 

The non-audit services prohibited by the FRC's Ethical Standard were not provided to the group or the parent company and we remain independent of the group and the parent company in conducting our audit.

 

Our audit opinion is consistent with the additional report to the audit committee.

 

Use of this report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

 

Sanjay Parmar (Senior Statutory Auditor)

For and on behalf of Jeffreys Henry LLP, Statutory Auditor

Finsgate

5-7 Cranwood Street

London EC1V 9EE

26 June 2019

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2018

 

 

 

 

 

 

2018

2017 (restated)*

 

Notes

£'000

£'000

Continuing operations

 

 

 

Revenue

5

274

93

Costs of sales

 

(126)

(45)

Gross profit

 

148

48

Administrative Costs

6,9

(2,230)

(5,445)

Operating loss

 

(2,082)

(5,397)

  Depreciation

6,16

22

37

  Amortisation

6,15

172

439

  Impairment of intangible assets

6,15

423

3,238

  Exceptional items

7

244

285

EBITDA before exceptional items

 

(1,221)

(1,398)

Finance income

11

-

7

Finance costs

11

(38)

(63)

Loss before income tax

 

(2,120)

(5,453)

Income tax credit

12

55

210

Loss for the year from continuing operations

 

(2,065)

(5,243)

Loss for the year from discontinued operations

35

(637)

(3,397)

Loss for the year

 

(2,702)

(8,640)

 

 

 

 

Other comprehensive income

 

 

 

Currency translation differences

 

(12)

(218)

Total comprehensive loss for the year

 

(2,714)

(8,858)

 

 

 

 

 

Loss per share from continuing and discontinued operations attributable to owners of the parent during the year

 

Pence

Pence

Basic and diluted loss per ordinary share

 

 

 

From continuing operations

13

0.8p

3.5p

From discontinued operations

13

0.2p

2.3p

From loss for the year

13

1.0p

5.8p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*2017 restated to reflect discontinued operations

 

The notes on pages 26 to 61 are an integral part of these consolidated financial statements.

 

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company income statement account.

 

The loss for the parent Company for the year was £3,913,000 (2017: £9,899,000).
 

Consolidated and Company's Statement of Financial Position

As at 31 December 2018

 

 

 

 

 

 

 

 

Group

Group

Company

Company

 

 

2018

2017

2018

2017

 

 Notes

£'000

£'000

£'000

£'000

Assets

 

 

 

 

 

Non-current assets

 

 

 

 

 

Intangible assets

15

718

1,979

75

-

Property, plant and equipment

16

32

241

-

-

Investments in subsidiaries

17

-

-

729

1,479

Loan to subsidiary undertaking

17

-

-

-

500

Other investments

17

708

-

708

-

Total non-current assets

 

1,458

2,220

1,512

1,979

 

 

 

 

 

 

Current assets

 

 

 

 

 

Inventories

19

135

174

-

-

Trade and other receivables

20

185

140

1,473

1,920

Cash and cash equivalents

21

26

40

21

33

Total current assets

 

346

354

1,494

1,953

Total assets

 

1,804

2,574

3,006

3,932

 

 

 

 

 

 

Equity attributable to owners

 

 

 

 

 

Share capital

25

2,260

1,904

2,260

1,904

Share premium account

27

3,662

2,075

3,662

2,075

Retained loss

26

(13,221)

(10,553)

(13,778)

(9,899)

Foreign currency reserve

27

(251)

(239)

-

-

Reverse acquisition reserve

27

(2,843)

(2,843)

-

-

Capital redemption reserve

27

9,519

9,519

9,519

9,519

Share based equity reserve

27

90

24

90

24

Total equity

 

(784)

(113)

1,753

3,623

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Deferred tax liabilities

23

80

212

-

-

Borrowings

24

334

509

-

-

Total non-current liabilities

 

414

721

-

-

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

22

1,979

1,751

1,253

309

Deferred tax liabilities

23

10

26

-

-

Borrowings

24

185

189

-

-

Total current liabilities

 

2,174

1,966

1,253

309

Total liabilities

 

2,588

2,687

1,253

309

Total equity and liabilities

 

1,804

2,574

3,006

3,932

 

The notes on pages 26 to 61 are an integral part of these financial statements.

 

The financial statements were approved and authorised for issue by the Board on 26 June 2019.

 

 

 

 

Camillus Glover                                                                                                                                                  Integumen Plc

Chief Financial Officer                                                                                                                                      Registered no: 10205396

 

 

Consolidated and Company's Statement of Cash Flows

For the year ended 31 December 2018

 

 

 

 

 

 

 

 

Group

Group

Company

Company

 

 

2018

2017

(restated)

2018

2017

 

Notes

£'000

£'000

£'000

£'000

Cash Flow from operating activities

 

 

 

 

 

Cash used in operations

28

(957)

(1,977)

(1,167)

(2,241)

Taxation

      12

45

126

-

-

Net Interest (paid)/received

      11

(38)

(56)

5

5

Net cash used in operating activities

 

(950)

(1,907)

(1,162)

(2,236)

 

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

 

Acquisition of investments

17

(708)

(63)

(708)

-

Disposal of investments in subsidiaries

35

41

-

-

-

Payments to acquire intangibles

15

(75)

(179)

(75)

-

Purchase of property, plant and equipment

16

(1)

(2)

-

-

Net cash used in investing activities

 

(743)

(244)

(783)

-

 

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

 

Proceeds from issuance of ordinary shares

 

1,943

2,269

1,943

2,269

Capital element of finance lease

 

(14)

(24)

 

 

Repayments on borrowings

 

(165)

(136)

-

-

Net cash generated by financing activities

 

1,764

2,109

1,943

2,269

 

 

 

 

 

 

Net increase/ (decrease) in cash and cash equivalents

 

71

(42)

(12)

33

Cash and cash equivalents at beginning of year

 

(45)

30

33

-

Effects of exchange rate changes on cash and cash equivalents

 

-

(33)

-

-

Cash and cash equivalents at end of year

21

26

(45)

21

33

               

 

 

 

Consolidated Statement of Changes in Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

Group

 

Share capital

 

Share

premium

 

Retained

earnings

Foreign currency reserve

Reverse acquisition reserve

Capital redemption reserve

Share based equity reserve

 

 

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2017

7,365

                   -

(1,913)

(21)

(2,843)

-

-

2,588

Changes in equity for the year

ended 31 December 2017

 

 

 

 

 

 

 

 

Loss for the year

-

-

(8,640)

-

-

-

-

(8,640)

Currency translation

differences

-

-

-

(218)

-

-

-

(218)

Total comprehensive loss

for the year

-

-

(8,640)

(218)

-

 

-

 

-

(8,858)

Transactions with the owners

 

 

 

 

 

 

 

 

Shares issued during the year

4,058

2,187

-

-

-

-

-

6,245

Costs of Share issue

-

(112)

-

-

-

-

-

(112)

Cancelled Shares

(9,519)

  -

-

-

-

9,519

-

-

Share option-based charge

-

  -

-

-

-

-

24

24

Total contributions by and

distributions to owners

(5,461)

2,075

-

-

-

 

9,519   

 

24

6,157

At 31 December 2017

1,904

2,075

(10,553)

(239)

(2,843)

9,519

24

(113)

Changes in equity for the year

ended 31 December 2018

 

 

 

 

 

 

 

 

Loss for the year

-

-

(2,702)

-

-

-

-

(2,702

Currency translation

differences

-

-

-

(12)

-

-

-

(12)

Total comprehensive loss

for the year

-

-

(2,702)

(12)

-

 

-

 

-

(2,714)

Transactions with the owners

 

 

 

 

 

 

 

 

Shares issued during the year

356

1,634

-

-

-

-

-

1,990

Costs of Share issue

-

(47)

-

-

-

-

-

(47)

Share option-based charge

-

  -

-

-

-

-

100

100

Transferred from Share based equity

reserve

-

  -

34

-

-

-

(34)

-

Total contributions by and

distributions to owners

356

1,587

34

-

-

 

-   

 

66

2,043

At 31 December 2018

2,260

3,662

(13,221)

(251)

(2,843)

9,519

90

(784)

 

 

Company

 

 

 

Share capital

 

Share

premium

 

Retained

earnings

Capital redemption reserve

Share based equity reserve

 

 

Total

 

 

 

£'000

£'000

£'000

£'000

£'000

£'000

At 31 December 2016

 

 

7,365

                   -

-

-

-

7,365

Changes in equity for the year

ended 31 December 2017

 

 

 

 

 

 

 

 

Loss for the year

 

 

-

-

(9,899)

-

-

(9,899)

Total comprehensive loss

for the year

 

 

-

-

(9,899)

 

-

 

-

(9,899)

Transactions with the owners

 

 

 

 

 

 

 

 

Shares issued during the year

 

 

4,058

2,187

-

-

-

6,245

Costs of Share issue

 

 

-

(112)

-

-

-

(112)

Cancelled Shares

 

 

(9,519)

  -

-

9,519

-

-

Share option-based charge

 

 

-

  -

-

-

24

24

Total contributions by and

distributions to owners

 

 

(5,461)

2,075

-

 

9,519   

 

24

6,157

At 31 December 2017

 

 

1,904

2,075

(9,899)

9,519

24

3,623

Changes in equity for the year

ended 31 December 2018

 

 

 

 

 

 

 

 

Loss for the year

 

 

-

-

(3,913)

-

-

(3,913)

Total comprehensive loss

for the year

 

 

-

-

(3,913))

 

-

 

-

(3,913)

Shares issued during the year

 

 

356

1,634

-

-

-

1,990

Costs of Share issue

 

 

-

(47)

-

-

-

(47)

Share option-based charge

 

 

-

  -

-

-

100

100

Transferred from Share based equity reserve

 

 

 

 

34

 

(34)

-

Total contributions by and

distributions to owners

 

 

356

1,587

-

 

-   

 

66

2,019

At 31 December 2018

 

 

2,260

3,662

(13,778)

9,519

90

1,753

 

Notes to the Financial Statements

For the year ended 31 December 2018

 

1. General information

Integumen Plc is a company incorporated in England and Wales. The Company is a public limited company admitted to trading on the AIM market of the London Stock Exchange since 5 April 2017. The address of the registered office is Sand Hutton Applied Innovation Campus, Sand Hutton, York, North Yorkshire, YO41 1LZ.

 

The principal activity of the Group is that of providing laboratory testing services and collaborating with the Labskin technology platform with customers in artificial intelligence, clinical research, medical device and life science. The Group has a presence in the UK and Ireland.

 

The financial statements are presented in pounds sterling, the currency of the primary economic environment in which the Group's trading companies operate. The Group comprises Integumen Plc and its subsidiary companies as set out in note 17.

 

The registered number of the Company is 10205396.

 

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. The policies have been consistently applied throughout the year, unless otherwise stated.

 

Basis of preparation

The consolidated financial statements of Integumen Plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. Practice is continuing to evolve on the application and interpretations of IFRS.

 

The consolidated financial statements have been prepared under the historical cost convention.

 

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 Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

 

Changes in accounting policies and disclosures

The Group has adopted any applicable new standards, amendments to standards and interpretations that are mandatory for the financial year beginning 1 January 2018 including IFRS 9 and IFRS 15. However, none of them has had a material impact on the Group's Consolidated Financial Statements.

 

 IFRS 9 'Financial Instruments'

IFRS 9 replaced the classification and measurement models for financial instruments contained in IAS 39 Financial Instruments: Recognition and Measurement.

 

Impact of IFRS 9 - Classification of financial assets and liabilities

Classification and measurement of debt assets will be driven by the entity's business model for managing the financial assets and the contractual cash flow characteristics of those financial assets.

 

There are three principal classification categories for financial assets: (i) amortised cost, (ii) fair value through other comprehensive income (FVOCI) and (iii) fair value through profit and loss (FVTPL). IFRS 9 classification is generally based on the business model in which a financial asset is manged and its contractual cash flows. The standard eliminates the previous IAS 39 categories of held-to-maturity, loans and receivables and available-for-sale.

 

For an explanation of how the Group classifies financial assets and liabilities under IFRS 9, See Note 2

 

Impact of IFRS 9 - Impairment

IFRS 9 also introduces a new expected credit loss impairment model, as opposed to the incurred credit loss model implemented under IAS 39 in previous years. This requires entities to account for expected credit losses at initial recognition and changes to expected credit losses at each reporting date to reflect changes in credit risk since initial recognition.

 

 

In applying IFRS 9 both in the current period and retrospectively in previous periods, there were no reclassifications in the measurement category.  As a result, there has been no financial adjustment in transitioning to IFRS 9 with respect to adopting the revised measurement categories.

 

IFRS 15 'Revenue from contracts with customers'

Revenue is recognised in according with the requirements of IFRS 15 'Revenue from Contracts with Customers'. The Company recognises revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is delivered in a five-step model framework:

1. Identify the contract(s) with the customer;               

2. Identify the performance obligations in the contract;            

3. Determine the transaction price;

4. Allocate the transaction price to the performance obligations in the contract; and         

5. Recognise revenue when (or as) the entity satisfy a performance obligation.

 

Revenue is recognised when control of the products have been transferred to the customer. Control is considered to have transferred once products have been received by the customer unless shipping terms dictate any different. Revenues exclude intra-group sales and value added taxes and represent net invoice value less estimated rebates, returns and settlement discounts. The net invoice value is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied.

 

 

New, amended standards, interpretations not adopted by the Group

The following Adopted IFRSs have been issued but have not been applied by the Group in these Financial Statements. The full impact of their adoption has not yet been fully assessed; however, management do not expect the changes to have a material effect on the Financial Statements unless otherwise indicated:

 

     Annual Improvements to IFRSs - 2015-2017 Cycle (1 January 2019)

     Amendments to IAS 1 and IAS 8 - on definition of materiality (1 January 2019)

     Amendments to IAS 19 - employees benefits plan amendments, curtailments or settlements

     Amendments to IAS 28 on long term interests in associates and joint ventures

     Amendments to IFRS 3 "Business combinations" on definition of a business

     Amendments to IFRS 9, financial instruments on prepayment features with negative compensation

        IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration (effective date to be confirmed)

     Amendments to IAS 40 Investment Property (effective date to be confirmed)

     IFRIC 23 Uncertainty over Income Tax Treatments (1 January 2019)

     Amendments to IAS 28 Investments in Associates and Joint Ventures (effective date to be confirmed)

     IFRS 16 Leases (1 January 2019)

     IFRS 17 Insurance contracts (1 January 2021).

 

Going concern

The Directors have considered the applicability of the going concern basis in the preparation of these financial statements.

 

The financial statements have been prepared on the assumption that the company is a going concern. When assessing the foreseeable future, the Directors have looked at the forecast for the next 12 months from the date of this report, expected growth in revenues, the cash at bank available and existing liabilities as at the date of approval of this report and are satisfied that the Group should be able to cover its working capital requirements.

 

The Directors have considered the applicability of the going concern basis in the preparation of these financial statements.

 

On 2 May 2019, the Company raised £2,519,000 by issuing new shares. Following the settlement of certain liabilities, the Company has allocated the remaining funds to sales and marketing investment and general working capital purposes.

 

Also, on 2 May 2019, the Company successfully converted £1,182,000 of liabilities to ordinary shares, of which £752,000 was payable as at 31 December 2018

 

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt a going concern basis in preparing the annual report and consolidated financial statements.

 

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiary and associated undertakings. Subsidiaries are all entities over which the Group has the power to govern their financial and operating policies generally accompanying a shareholding of more than fifty per cent of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

 

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

The Group's share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in the comprehensive income with a corresponding adjustment in the carrying amount of the investment.

 

(a) Acquisition accounting

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred, and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets.

 

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.

 

Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments.

 

 (b) Reverse acquisition accounting

The acquisition of Innovenn UK Limited and its subsidiary by Integumen Plc on 17 November 2016 has been accounted using the principles of reverse acquisition accounting. Although the Group financial statements have been prepared in the name of the legal parent, Integumen Plc, they are in substance a continuation of the consolidated financial statements of the legal subsidiary, Innovenn UK Limited. The following accounting treatment has been applied in respect of the reverse accounting:

 

The assets and liabilities of the legal subsidiary, Innovenn UK Limited are recognised and measured in the Group financial statements at the pre-combination carrying amounts, without restatement of fair value. The retained earnings and other equity balances recognised in the Group financial statements reflect the retained earnings and other equity balances of Innovenn UK Limited immediately before the business combination and the results of the period from 1 January 2014 to the date of the business combination are those of Innovenn UK Limited. However, the equity structure appearing in the Group financial statements reflects the equity structure of the legal parent, Integumen Plc, including the equity instruments issued in order to affect the business combination.

 

Foreign currency translation

(a) Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in sterling, which is the functional and presentational currency of the main operating entities.

 

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement within 'administrative expenses', except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.

 

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentational currency as follows:

·      assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

·      income and expenses for each income statement are translated at average exchange rates; and

·      all resulting exchange differences are recognised in other comprehensive income.

 

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

 

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Directors who make strategic decisions.

 

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and any provision for impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the asset and bringing the asset to its working condition for its intended use.

 

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only where it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Any borrowing costs associated with qualifying property plant and equipment are capitalised and depreciated at the rate applicable to that asset category.

 

Depreciation on assets is calculated using the straight-line method or reducing balances method to allocate their cost to its residual values over their estimated useful lives, as follows:

 

Fixtures and fittings                                     20% - 33%

Plant and machinery                                    16% - 20%

 

The assets' residual values and useful economic lives are reviewed regularly, and adjusted if appropriate, at the end of each reporting period.

 

An asset's carrying value is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

 

Gains and losses on the disposal of assets are determined by comparing the proceeds with the carrying amount and are recognised in administration expenses in the income statement.

 

Intangible assets

Intellectual property rights

Intellectual property rights relate to patents acquired by the Group. Amortisation is calculated using the straight-line method over the expected life of 10 years and is charged to administrative expenses in the income statement.

 

Development costs

Development costs that are directly attributable to the design and testing of identifiable and unique products controlled by the group are recognised as intangible assets when the following criteria are met:

· it is technically feasible to complete the 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 project

· it can be demonstrated how the products 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. Directly attributable costs that are capitalised as part of the product include employee costs and an appropriate portion of relevant overheads.

 

Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use.

 

Impairment of non-financial assets

Assets that have an indefinite life such as goodwill are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment 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 carrying amount exceeds its recoverable amount.

 

The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of the money and the risks specific to the asset which the estimates of future cash flows have not been adjusted.

 

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in the prior period. A reversal of an impairment loss is recognised in the income statement immediately. If goodwill is impaired however, no reversal of the impairment is recognised in the financial statements.

 

Inventories

Inventories are stated at the lower of cost and net realisable value.  Cost is based on the first-in first-out method and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.  Net realisable value is

based on estimated selling price in the ordinary course of business, less further costs expected to be incurred to completion and disposal.  Provision is made for obsolete, slow-moving or defective items where appropriate.

 

Financial instruments

i. Recognition and initial measurement                                                                                                           

Financial assets and financial liabilities are initially classified as measured at amortised cost, fair value through other comprehensive income, or fair value through profit and loss when the group becomes a party to the contractual provisions of the instrument.                                                                                              

Financial assets at amortised cost

The group's financial assets at amortised cost comprise trade and other receivables. These represent debt instruments with fixed or determinable payments that represent principal or interest and where the intention is to hold to collect these contractual cash flows.

 

They are initially recognised at fair value, included in current and non-current assets, depending on the nature of the transaction, and are subsequently measured at amortised cost using the effective interest method less any provision for impairment.

 

Financial liabilities at amortised cost

Financial liabilities at amortised cost comprise trade and other payables, and borrowings. They are classified as current and non-current liabilities depending on the nature of the transaction, are subsequently measured at amortised cost using the effective interest method.

 

Financial assets at fair value through other comprehensive income (FVOCI)

Financial assets at fair value through other comprehensive income are comprised of the investment in Cellulac plc. The election has been made to designate this asset as FVOCI. FVOCI assets are recognised and measured at fair value with gains and losses recognised in OCI.

 

The fair value measurement of the group's financial and non- financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the 'fair value hierarchy').

 

Level 1 - Quoted prices in active markets

Level 2 - Observable direct or indirect inputs other than Level 1 inputs

Level 3 - Inputs that are not based on observable market data

 

 The group measures financial instruments relating to other investments at fair value using Level 3, as the investment is not listed, and has no readily available market price.

 

ii. Derecognition

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

 

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

 

iii. Impairment

In accordance with IFRS 9 an expected loss provisioning model is used to calculate an impairment provision. We have implemented the IFRS 9 simplified approach to measuring expected credit losses ('ECL') arising from trade and other receivables, being a lifetime

expected credit loss. In the previous year the incurred loss model is used to calculate the impairment provision.

 

Research and development

Research expenditure is written off to the statement of comprehensive income in the year in which it is incurred. Development expenditure is written off in the same way unless the Directors are satisfied as to the technical, commercial and financial viability of individual projects. In this situation, the expenditure is deferred and amortised over the period during which the company is expected to benefit.

 

Trade and other receivables

Trade receivables are initially recognised at fair value, being the original invoice amount, and subsequently measured at amortised cost less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. Trade receivables that are less than three months past due date are not considered impaired unless there are specific financial or commercial reasons that lead management to conclude that the customer will default. Older debts are considered to be impaired unless there is sufficient evidence to the contrary that they will be settled. The amount of the provision is the difference between the asset's carrying value and the present value of the estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within administrative expenses. When a trade receivable is uncollectible it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against administrative expenses in the income statement.

 

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of less than three months, reduced by overdrafts to the extent that there is a right of offset against other cash balances.

 

For the purposes of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits as defined above net of outstanding bank overdrafts.

 

Share capital

Ordinary Shares and Deferred shares are classified as equity. Proceeds in excess of the nominal value of shares issued are allocated to the share premium account and are also classified as equity. Incremental costs directly attributable to the issue of new Ordinary Shares or options are deducted from the share premium account.

 

Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

 

Borrowings

Borrowings are recognised initially at the fair value of proceeds received, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

 

Borrowing costs are expensed in the consolidated Group income statement under the heading 'finance costs'. Arrangement and facility fees together with bank charges are charged to the income statement under the heading 'administrative costs'.

 

Current and deferred income tax

The tax expense comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income where the associated tax is also recognised in other comprehensive income.

 

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

 

Deferred tax is recognised, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised in respect of all temporary differences except where the deferred tax liability arises from the initial recognition of goodwill in business combinations.

 

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and tax losses, to the extent that they are regarded as recoverable. They are regarded as recoverable where, on the basis of available evidence, there will be sufficient taxable profits against which the future reversal of the underlying temporary differences can be deducted.

 

The carrying value of the amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all, or part, of the tax asset to be utilised.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been substantively enacted at the balance sheet date.

 

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

 

Exceptional items

These are items of an unusual or non-recurring nature incurred by the Group and include transactional costs and one-off items relating to business combinations, such as acquisition expenses.

 

Leases

Leases which transfer substantially all the risks and rewards of ownership of an asset are treated as a finance lease. Assets held under finance leases are capitalised at their fair value at the inception of the lease and depreciated over the estimated useful economic life of the asset or lease term if shorter. The finance charges are allocated to the income statement in proportion to the capital amount outstanding.

 

All other leases are classified as operating leases. Operating lease rentals are charged to the income statement in equal annual amounts over the lease term.

 

Employee benefits

Pension obligations

Group companies operate a pension scheme with defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity with the pension cost charged to the income statement as incurred. The Group has no further obligations once the contributions have been paid.

 

Revenue recognition

(a) Revenue from sale of goods

Revenue represents the fair value of consideration received or receivable for goods delivered to customers in the normal course of business, net of trade discounts and VAT

 

(b) Revenue from services to customers

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured. Revenue represents the fees and commissions, net of discounts, derived from services provided to and invoiced to customers. Revenue is recognised in the period in which the service is performed, in accordance with contractual arrangements. Income billed in advance of the performance of service is deferred and income in respect of work carried out but not billed at the period end is accrued. In these cases, revenue is recognised by reference to the stage of completion which is measured by reference to labour hours incurred to the period end as a percentage of the total estimated labour hours for the contract. Where the contract outcome cannot be measured reliably, revenue is recognised to the extent of the expenses recognised that are recoverable.

 

(c) Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

 

(d) Royalty and licence income

Royalty and licence income is recognised on an accruals basis in accordance with the substance of the relevant agreements.

 

Dividend distribution

Dividend distributions to the Company's shareholders are recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid.

 

3. Financial risk management

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (foreign exchange risk and cash flow interest rate risk), credit risk, liquidity risk, capital risk and fair value risk. The Group's overall risk management programme focuses on the unpredictability of the financial markets and seeks to minimise the potential adverse effects on the Group's financial performance. The Group does not use derivative financial instruments to hedge risk exposures.

 

Risk management is carried out by the head office finance team. It evaluates and mitigates financial risks in close co-operation with the Group's operating units. The Board provides principles for overall risk management whilst the head office finance team provides specific policy guidance for the operating units in terms of managing foreign exchange risk, credit risk and cash and liquidity management.

 

(a) Market risk

 

(i) Foreign exchange - cash flow risk

The Group's presentational currency is sterling although it operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily between Euro, USD and the GBP such that the Group's cash flows are affected by fluctuations in the rate of exchange between sterling and the aforementioned foreign currencies.

 

Management do not use derivative financial instruments to mitigate the impact of any residual foreign currency exposure not mitigated by the natural hedge within the business model. The Group does not speculate in foreign currencies and no operating Company is permitted to take unmatched positions in any foreign currency.

 

(ii) Foreign exchange - Fair value risk

Translation exposures that arise on converting the results of overseas subsidiaries are not hedged. Net assets held in foreign currencies are hedged wherever practical by matching borrowings in the same currency. The principal exchange rates used by the Group in translating overseas profits and net assets into Euro are set out in the table below.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Compared to Sterling                                      Average rate             Year end rate              Average rate                   Year end rate                                                                                     2018                             2018                            2017                                      2017

Euro                                                                             0.89                              0.90                              0.88                                       0.89

US Dollar                                                                     0.75                              0.79                              0.78                                       0.74

 

A 5% strengthening of the foreign exchange rates as at 31 December 2018, and for the year then ended, would have increased the net liabilities by c.£220k. A 5% weakening would have had an equal and opposite reaction.

 

(iii) Cash flow and fair value interest rate risk

The Group has assets in the form of cash and cash equivalents and limited interest-bearing liabilities which relate to long-term borrowing. Interest rates on cash and cash equivalents are currently zero whilst interest rates on bank borrowings are 4.25% over the banks Cost of Funds Rate and therefore expose the Group to fair value interest rate risk. The Group does not speculate on future changes in interest rates.

 

Where overseas acquisitions are made, it is the Group's policy to arrange any borrowings required in local currency.

 

It is the Group's policy not to trade in derivative financial instruments. The Group does not use interest rate swaps.

 

(b) Credit risk

Credit risk is managed on a Group basis, except for credit risk relating to accounts receivable balances. Each local subsidiary and operating business unit is responsible for managing and analysing the credit risk for each of their new customers before standard payment and delivery terms and conditions are offered. Credit risk is managed at the operating business unit level and monitored at the Group level to ensure adherence to Group policies. If there is no independent rating, local management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored.

 

Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers.

 

(c) Liquidity risk

Cash flow forecasting is performed in the individual operating entities of the Group and is aggregated by Group finance. Group finance monitors cash and cash flow forecasts and it is the Group's liquidity risk management policy to maintain sufficient cash and available funding through an adequate amount of cash and cash equivalents and committed credit facilities from its bankers. Due to the dynamic nature of the underlying businesses, the head office finance team aims to maintain flexibility in funding by keeping sufficient cash and cash equivalents available to fund the requirements of the Group.

 

The Group's policy in relation to the finance of its overseas operations requires that sufficient liquid funds be maintained in each of its subsidiaries to support short and medium-term operational plans. Where necessary, short-term funding is provided by the parent Company. Typically, excess funds are placed as short-term deposits, to provide a balance between interest earnings and flexibility.

 

The table below analyses the Group's non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

 

                                                                                                             Less than            Between            Between       More than
                                                                             Notes                      one year    1 and 2 years    2 and 5 years             5 years           Total
                                                                                                                    £'000                  £'000                  £'000                £'000          £'000

At 31 December 2018:                         

Borrowings                                                               24                               185                     193                     141                          -                519

Trade and other payables                                      22                            1,979                        -                          -                            -              1,979

At 31 December 2017:                         

Borrowings                                                               24                               189                     182                     327                         -                 698

Trade and other payables                                      22                           1,751                           -                         -                           -               1,751

 

 (d) Capital risk management

The Group's objectives when managing capital are to safeguard the 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.

 

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including "current and non-current borrowings" as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is the sum of net debt plus equity.

 

4. Critical accounting estimates and judgements

In the process of applying the Group's accounting policies, management has made accounting judgements in the determination of the carrying value of certain assets and liabilities. Due to the inherent uncertainty involved in making assumptions and estimates, actual outcomes will differ from those assumptions and estimates. The following judgements have the most significant effect on the amounts recognised in the financial statements.

 

(a) Business combinations

The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets

acquired to be allocated to the assets and liabilities of the acquired entity. The Group makes judgements and estimates in relation to the fair value allocation of the purchase price. If any unallocated portion is positive it is recognised as goodwill.

 

(b) Impairment of goodwill and cost of investments

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates as set out in note 15. In addition, the Group has also considered the impairment of the investments in the subsidiary undertakings.

 

(c) Impairment of receivables

Trade and other receivables are carried at the contractual amount due less any estimated provision for non-recovery. Provision is made based on a number of factors including the age of the receivable, previous collection experience and the financial circumstances of the counterparty.

 

 (d) Intangible assets

The Group amortises intangible assets over their estimated useful life.  The useful lives of Goodwill and Intellectual Property Rights have been estimated by the Group as stated in note 2. The Group tests annually whether there is any indication that Intangible assets have been impaired.

 

5. Segmental reporting

Management has determined the Group's operating segments based on the monthly management reports presented to the Chief Operating Decision Marker ('CODM'). The CODM is the Executive Directors and the monthly management reports are used by the Group to make strategic decisions and allocate resources. At the year-end, no separate segments are being reported by the Executive Directors. In the future, separate segments will be established as the Group's operations develop.

 

Currently the key operating performance measures used by the CODM are revenue, adjusted EBITDA and cash resources. Disclosure of group revenue by geographical location is follows:

 

2018

2017 (restated)

 

£'000

£'000

United Kingdom

52

5

Europe

187

76

United States of America

12

12

Rest of World

23

-

Total revenue

274

93

 

Revenues of £109,000 (2017: £137,000) are derived from 2 (2017: 2) customers each representing more than 10% of the group revenue.

 

 

6. Expenses - analysis by nature

 

2018

2017

(restated)

 

£'000

£'000

Employee benefit expense (note 9)

602

734

Depreciation (note 16)

22

37

Amortisation (note 15)

172

439

Impairment of intangible assets (note 15)

423

3,238

Exceptional items (note 7)

244

285

Auditors remuneration - audit of the parent company and consolidation

15

15

Auditors remuneration - other services

30

30

Foreign exchange differences

(26)

70

Operating lease payments

55

50

Share option-based charge

100

24

Other expenses

593

523

Total administrative costs

2,230

5,445

 

7. Exceptional items

 

Included within administrative expenses are exceptional items as shown below:

 

 

2018

2017

(restated)

 

 

£'000

£'000

Exceptional items include:

 

 

 

- Transaction costs relating to AIM listing and business acquisitions

 

244

285

Total exceptional items

 

244

335

 

8. Directors' remuneration

 

The remuneration of the Directors in Integumen Plc who held office during the year ended 31 December 2018 was as follows:

 

 

2018

2017

(restated)

 

£'000

£'000

Aggregate emoluments

330

399

Contribution to defined contribution pension scheme

21

43

Share option-based charge

23

24

Total Directors' remuneration

374

466

 

Aggregate contributions paid or payable during the year as noted above were in respect of 1 director (2017: 2 directors) to defined contribution schemes.

 

A breakdown of Directors' remuneration has been provided on page 16.

 

 

9. Employee benefit expense

 

2018

2017

(restated)

 

£'000

£'000

Wages and salaries

521

693

Social security costs

50

85

Pension costs

31

47

Total employee benefit expense

602

825

 

Included in staff costs is £Nil that was capitalised during the year to intangible assets (2017: £91,000). The net employee benefit expense therefore charged to the Statement of Comprehensive Income for the year was £602,000 (2017: £734,000).

 

 

10. Average number of people employed

 

2018

2017

 

No

No

Average number of people (including Executive Directors) employed was:

 

 

Administration

3

3

Operations and research

6

6

Sales and marketing

1

1

Total average number of people employed

10

10

 

The total number of employees at 31 December 2018 was 11 (2017: 11)

 

11. Finance income and costs

 

2018

2017

(restated)

 

£'000

£'000

Interest expense:

 

 

- Bank borrowings

(30)

(38)

- Interest on finance leases

(3)

(5)

- Other interest

(5)

(20)

Finance costs

(38)

(63)

Finance income:

 

 

- Interest income on loan to subsidiary undertaking pre-acquisition

-

7

Finance income

-

7

Net finance income/(expense)

(38)

(56)

 

 

 

12. Income tax expense

 

2018

2017

(restated)

Group

£'000

£'000

Current tax:

 

 

Current tax for the year

-

-

Research and development tax credit

(45)

(126)

Total current tax (credit)/charge

(45)

(126)

 

 

 

Deferred tax (note 23):

 

 

Origination and reversal of temporary differences

(10)

(84)

Total deferred tax

(10)

(84)

Income tax (credit)/charge

(55)

(210)

 

The Finance Act 2015 which was substantially enacted in 2015 included legislation to reduce the main rate of UK corporation tax to 19% from 1 April 2019 and the Finance Act 2016 which was substantially enacted in 2016 included legislation to reduce the main rate of UK Corporation tax to 17% from 1 April 2020.

The tax on the Group's results before tax differs from the theoretical amount that would arise using the standard tax rate applicable to the profits of the consolidated entities as follows:

 

2018

2017

(restated)

 

£'000

£'000

Loss before tax

(2,120)

(5,454)

 

 

 

Tax calculated at domestic tax rates applicable to UK standard rate of tax of 19% (2017 - 19%)

(403)

(1,036)

Tax effects of:

 

 

- Impact of actual tax rates

4

(608)

- Expenses not deductible for tax purposes

121

1,212

- Research and development tax credit

(45)

(126)

- Losses carried forward

268

348

Tax (credit)/charge

(55)

(210)

 

 

There are no tax effects on the items in the statement of comprehensive income. The effect of losses is discussed in note 23.

 

 

13. Loss per share

(a) Basic                                                

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

 

2018

2017

Loss from continuing operations

£2,065,000

£5,243,000

Loss from discontinued operations

£637,000

£3,397,000

Loss attributable to owners of the parent

£2,702,000

£8,640,000

 

 

 

Weighted average number of Ordinary Shares in issue

258,730,165

148,000,464

 

 

 

Basic loss per ordinary share

 

 

From continuing operations

0.8p

3.5p

From discontinued operations

0.2p

2.3p

From loss for the year

1.0p

5.8p

 

 (b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The options and warrants are anti-dilutive in view of the losses in the year. Details of warrants outstanding are given in note 25.

 

 

14. Dividends

There were no dividends paid or proposed by the Company in either year.
 

15. Intangible fixed assets

Group

 

Development Costs and Intellectual Property Rights

£'000

Total

£'000

Cost

 

 

At 1 January 2017

4,689

4,689

On acquisition of subsidiary (note 34)

5,044

5,044

Additions1

179

179

Exchange differences

(277)

(277)

At 31 December 2017

9,635

9,635

 

 

 

Amortisation

 

 

At 1 January 2017

131

131

On acquisition of subsidiary (note 34)

11

11

Charge for the year - continuing operations

439

439

Charge for the year - discontinued operations (note 35)

349

349

Impairment - continuing operations

3,238

3,238

Impairment - discontinued operations (note 35)

3,502

3,502

Exchange differences

(14)

(14)

At 31 December 2017

7,656

7,656

 

 

 

Net book value

 

 

At 31 December 2017

1,979

1,979

 

 

 

Cost

 

 

At 1 January 2018

9,635

9,635

On disposal of subsidiary (note 35)

(4,614)

(4,614)

Additions1

75

75

Exchange differences

191

191

At 31 December 2018

5,287

5,287

 

 

 

Amortisation

 

 

At 1 January 2018

7,656

7,656

On disposal of subsidiary (note 35)

(4,451)

(4,451)

Charge for the year - continuing operations

172

172

Charge for the year - discontinued operations (note 35)

87

87

Impairment - continuing operations

423

423

Impairment - discontinued operations (note 35)

500

500

Exchange differences

182

182

At 31 December 2018

4,569

4,569

 

 

 

Net book value

 

At 31 December 2018

718

179

 

1Additions are development costs capitalised during the period

 

At 31 December 2018, the Group had intangible assets arising from intellectual property recognised on acquisitions and development costs on certain research and development projects relating to skincare testing.

Management performed an impairment analysis to determine the fair value of the intangible assets.  In assessing fair value, the estimated future cash flows of each underlying business unit were discounted to their present value that reflects management's current market assessments of the time value of the money and were adjusted for risks specific to each business.

As a result of the impairment analysis, the Directors have decided to impair the value of intangible assets by charging £923,000 to the income statement (£500,000 relates to discontinued operations, see Note 15).

 

The Company had no intangible assets.

 

 

16. Property, plant and equipment

Group

 

Fixtures and fittings

£'000

Plant and machinery

£'000

Total

£'000

Cost

 

 

 

At 1 January 2017

145

-

145

Additions

2

-

2

On acquisition of subsidiary (note 34)

-

296

296

Exchange differences

-

11

11

At 31 December 2017

149

307

456

Amortisation

 

 

 

At 1 January 2017

57

-

57

On acquisition of subsidiary (note 34)

-

77

77

Charge for the year - continuing operations

37

-

37

Charge for the year - discontinued operations (note 35)

-

39

39

Exchange differences

1

4

5

At 31 December 2017

95

120

215

 

Net book value

 

 

 

At 31 December 2017

54

187

241

 

 

 

 

Cost

 

 

 

At 1 January 2018

149

307

456

Additions

1

-

1

On disposal of subsidiary (note 35)

-

(311)

(311)

Exchange differences

(1)

4

3

At 31 December 2018

149

-

149

Amortisation

 

 

 

At 1 January 2018

95

120

215

On disposal of subsidiary (note 35)

-

(173)

(173)

Charge for the year - continuing operations

22

-

22

Charge for the year - discontinued operations (note 35)

-

52

52

Exchange differences

-

1

1

At 31 December 2018

117

-

117

 

Net book value

 

 

 

At 31 December 2018

32

-

32

 

 

Fixtures and fittings include the following amounts where the group is a lessee under a finance lease (note 24):

 

2018

2017

 

£'000

£'000

Cost

-

92

Accumulated depreciation

-

44

Net book value

-

48

 

Bank borrowings as detailed in note 24 are secured with a floating charge against the assets of Innovenn UK Limited, which include the above fixtures and fittings.

 

The Company had no property, plant and equipment.

 

 

17. Investments

(a) Investments in subsidiaries

 

 

Investments

Loan to Subsidiary

Company

2018

2018

Carrying amount:

£'000

£'000

At 1 January

1,479

500

Disposals during the year (note 35)

(750)

-

Impairment provision

-

(500)

End of the year

729

-

 

Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid, less impairments.

 

On 21 December 2018, the Company disposed of its shares in TSpro GmbH (note 35).

At 31 December 2018, the Group had Investments in and loans to subsidiaries with a book value of £1,229,000 arising from acquisitions.

Management performed an impairment analysis to determine the fair value of the investments in and loans to subsidiaries.  In assessing fair value, the estimated future cash flows of each investment were discounted to their present value that reflects management's current market assessments of the time value of the money and were adjusted for risks specific to each investment.

The result of the impairment analysis showed a fair value of £729,000 for the Company's Investments in and loans to subsidiaries at 31 December 2018. As a result, the Directors have decided to impair the value of the Investments in subsidiaries by charging £500,000 to the income statement of the Company.

The subsidiaries of Integumen Plc are as follows:

                               

Name of Company                                                          Proportion Held     Class of Shareholding           Country of Incorporation

Innovenn UK Limited                                                               100% (direct)          Ordinary                      United Kingdom

Integumen Ireland Limited                                                     100% (indirect)       Ordinary                      Ireland

Lifesciencehub UK Limited                                                     100% (direct)          Ordinary                      United Kingdom

Lifesciencehub Ireland Limited                                             100% (indirect)       Ordinary                      Ireland

Integumen Inc.                                                                          100% (indirect)       Ordinary                      United States of America

Visible Youth Limited                                                               100% (direct)          Ordinary                      United Kingdom

Visible Youth Ireland Limited                                                  100% (indirect)       Ordinary                      Ireland

STOER Ireland Limited                                                             100% (direct)          Ordinary                      Ireland

 

 

All the subsidiaries are included in the consolidation. The proportions of voting shares held by the parent Company do not differ from the proportion of Ordinary Shares held.

 

The loan to Integumen Inc. arises on the acquisition of the trade, assets and certain liabilities of Enhance Skin Products Inc. in exchange for the issue of shares of the Company.

 

(b) Other investments

 

 

 

Company

2018

2017

Carrying amount:

£'000

£'000

At 1 January

-

-

Additions during the year

708

-

End of the year

708

-

 

 

During the year, the Company acquired 9.35% of the ordinary shares of Cellulac plc for a consideration of £708,000 through the issue of 82,844,388 ordinary shares of 0.01p each (note 25)

 

Other investments are held at fair value through other comprehensive income. The Directors view carrying value as a reasonable approximation of fair value due to the recency of the acquisition, and lack of significant change in operation.

 

 

18. Financial instruments by category

(a) Assets

 

Group

Group

Company

Company

 

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

31 December

 

 

 

 

Assets as per balance sheet

 

 

 

 

Trade and other receivables excluding prepayments and corporation tax

143

75

1,447

1,889

Cash and cash equivalents

26

40

21

33

Total

169

115

1,468

1,922

 

(b) Liabilities

 

Group

Group

Company

Company

 

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

31 December

 

 

 

 

Liabilities as per balance sheet

 

 

 

 

Borrowings

519

698

-

-

Trade and other payables

1,979

1,751

1,254

309

Total

2,498

2,449

1,254

309

 

Liabilities in the analysis above are all categorised as 'other financial liabilities at amortised cost' for the Group and Company.

 

 (c) Credit quality of financial assets

The Group is exposed to credit risk from its operating activities (primarily for trade receivables and other receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

 

The Group's maximum exposure to credit risk, due to the failure of counter parties to perform their obligations as at 31 December 2016, in relation to each class of recognised financial assets, is the carrying amount of those assets as indicated in the accompanying balance sheets.

 

Trade receivables

The credit quality of trade receivables that are neither past due date nor impaired have been assessed based on historical information about the counterparty default rate. The Group does not hold any other receivable balances with customers, whose past default has resulted in the non-recovery of the receivables balances.

 

Cash at bank

The credit quality of cash has been assessed by reference to external credit ratings, based on reputable credit agencies' long-term issuer ratings:

 

2018

2017

 Rating

£'000

£'000

A - AAA

26

40

Total

26

40

 

 

19. Inventories

 

Group

Group

 

2018

2017

 

£'000

£'000

Raw materials and finished goods

135

174

Inventory

135

174

 

There are no inventories in the Company. The Directors consider that the carrying amount of inventory approximates to their fair value.

 

 

20. Trade and other receivables

 

Group

Group

Company

Company

 

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

Trade receivables

85

18

-

-

Less: provision for impairment of trade receivables

-

-

-

-

Trade receivables - net

85

18

-

-

Prepayments and accrued income

42

65

26

31

Amounts owed by subsidiary undertakings

-

-

1,404

1,854

Taxation

45

42

30

20

Other receivables

13

15

13

15

 

185

140

1,473

1,920

 

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

 

The carrying amounts of the Group's trade and other receivables denominated in foreign currencies were as follows:

 

 

Group

Group

Company

Company

 

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

Sterling

185

99

1,473

1,472

Euro

-

41

-

448

 

185

140

1,473

1,920

 

 

21. Cash and cash equivalents

 

Group

Group

Company

Company

 

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

Cash at bank and on hand

26

40

21

33

Cash and cash equivalents (excluding bank overdrafts)

26

40

21

33

 

The Group's cash and cash equivalents are held in non-interest-bearing accounts. The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.

 

i.              Reconciliation to cash flow statement

 

 

Group

Group

Company

Company

 

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

Balances as above

26

40

21

33

Bank overdrafts (see note 22 below)

-

(85)

-

-

Balances per statement of cash flows

26

(45)

21

33

 

 

22. Trade and other payables

 

Group

Group

Company

Company

 

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

Bank overdraft

-

85

-

-

Trade payables

365

249

250

116

Amounts due to group companies (note 29)

-

-

557

20

Amounts due to connected parties (note 29)

550

610

76

-

Social security and other taxes

63

42

1

6

Accrued expenses and deferred income

438

262

370

167

Assets/liabilities held for sale (note 37)

563

-

-

-

Other creditors

-

503

-

-

 

1,979

1,751

1,254

 309

 

 

 

23. Deferred income tax

 

Deferred tax liabilities

Deferred tax balances were as follows:

Group

Group

 

2018

2017

 

£'000

£'000

Deferred tax liability to be recovered after more than one year

80

212

Deferred tax liability to be recovered within one year

10

26

 

90

238

 

 

 

Deferred tax liabilities were made up as follows:

 

 

Accelerated tax depreciation

90

238

 

90

238

 

The movement on the deferred tax income tax account is as follows:

Group

Group

 

2018

2017

 

£'000

£'000

At 1 January

238

103

On acquisition of subsidiary

-

950

Income statement movement - continuing operations (note 12)

(10)

(84)

Income statement movement - discontinued operation (note 35)

(138)

(731)

 

90

238

 

 

 

There were no deferred tax liabilities in the Company

 

Deferred tax assets

Deferred income tax assets are recognised to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets of approximately £885,000 (2017: £782,000) mainly in respect of tax losses amounting to approximately £4,944,000 (2017: £3,865,000) that can be carried forward against future taxable income. An average tax rate of 18% (2017: 20%) has been used.

 

There was no deferred tax asset recognised for the Company.

 

 

24. Borrowings

 

Group

Group

 

2018

2017

 

£'000

£'000

Non-current

 

 

Bank borrowings

334

509

 

334

509

 

 

 

Current

 

 

Bank borrowings

185

175

Finance leases

-

14

 

185

189

 

The Company has no borrowings.

 

The maturity profile of bank borrowings was as follows:

 

Group

Group

 

2018

2017

 

£'000

£'000

Amounts falling due

 

 

Within 1 year

185

175

Between 1 and 2 years

193

182

Between 2 and 5 years

141

327

Total bank borrowings

519

684

 

 

Bank borrowings

Bank borrowings mature in 2021 and bear a fixed coupon of 4.33% annually over the bank's cost of funds.

 

Bank borrowings are secured with a floating charge against the assets of Innovenn UK Limited. Venn Life Sciences Holdings plc has also provided guarantees against those bank borrowings.

 

The Company has been compliant with its banking covenants throughout the year.

 

The bank borrowings are repayable by monthly instalments. The Company is not exposed to interest rate changes or contractual re-pricing dates at the end of the reporting period, as the borrowings are fixed in nature.

 

The fair value of both current and non-current borrowings equals their carrying amount, as the impact of discounting is not significant.

 

The Group's bank borrowings are denominated in Euro.

 

 

Finance leases

Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

 

 

 

 

 

 

2018

 

2017

 

 

 

 

 

£'000

 

£'000

Gross finance lease liabilities - minimum payments

 

 

 

No later than 1 year

 

 

 

 

-

 

17

Later than 1 and no later than 5 years

 

 

 

-

 

-

 

 

 

 

 

-

 

17

Future finance charges on finance leases

 

 

 

-

 

(3)

Present value of finance lease liabilities

 

 

 

-

 

14

 

 

 

 

 

 

 

 

Present value of finance lease liabilities is as follows:

 

 

 

 

No later than 1 year

 

 

 

 

-

 

14

Later than 1 and no later than 5 years

 

 

 

-

 

-

 

 

 

 

 

-

 

14

 

25. Share capital

 

Group

Group

Company

Company

 

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

454,826,872 (2017: 190,351,899) Ordinary shares of 0.01p

 (2017: 1p)

46

1,904

              46

1,904

 

 

 

 

 

223,685,232 (2017: Nil) Deferred shares of 0.99p

2,214

-

2,214

-

Total

2,260

1,904

2,260

1,904

 

During the year, the following ordinary shares were issued:

 

-       On 5 January 2018, the Company issued 21,666,668 ordinary shares of 1p each at a placing price of 1.5p per ordinary share raising a total of £325,000.

 

-       On 11 January 2018, the Company issued 3,333,333 ordinary shares of 1p each at a placing price of 1.5p per ordinary share raising a total of £50,000.

 

-       On 17 January 2018, the Company issued 8,333,332 ordinary shares of 1p each at a placing price of 1.5p per ordinary share raising a total of £125,000.

 

As at 2 August 2018, the Company had an issued share capital of 223,685,232 ordinary shares of 1p each.

 

On 2 August 2018, each ordinary existing share of 1p was sub-divided into one deferred share of 0.99p and one ordinary share of 0.01p. As a result, the Company had an issued share capital of 223,685,232 ordinary shares of 0.01p each and 223,685,232 deferred shares of 0.99p

 

Furthermore,

 

-       On 3 August 2018, the Company issued 39,923,095 ordinary shares of 0.01p each at a placing price of 0.65p per ordinary share raising a total of £141,000.

 

-       On 31 October 2018, the Company issued 21,692,307 ordinary shares of 0.01p each at a placing price of 0.65p per ordinary share raising a total of £259,500.

 

-       On 31 October 2018, the Company issued 82,844,388 ordinary shares of 0.01p each to acquire 9.35% of the shares in Cellulac plc for a consideration of £708,320 implying a price of 0.85p per ordinary share (note 17)

 

-       On 12 December 2018, the Company issued 56,000,050 ordinary shares of 0.01p each at a placing price of 0.44p per ordinary share raising a total of £246,400.

 

-       On 18 December 2018, the Company issued 30,681,800 ordinary shares of 0.01p each at a placing price of 0.44p per ordinary share raising a total of £135,000.

 

As at 31 December 2018, the Company had an issued share capital of 454,826,872 ordinary shares of 0.01p each and 223,685,232 deferred shares of 0.99p each

 

 

Share Warrants

 

As at 1 January 2018, the Company had granted warrants over:

-       22,500,000 ordinary shares of 1p to subscribers in the Placing which are exercisable at 7.5p per ordinary share of 1p at any time until 5 April 2019.

-       1,800,000 ordinary shares of 1p each to Turner Pope Investments (TPI) Ltd which are exercisable at 6.25p per ordinary share of 1p at any time until 5 April 2022.

-       1,650,602 ordinary shares of 1p each to SPARK Advisory Partners Limited which are exercisable at 5p per ordinary share of 1p at any time until 5 April 2022.

 

On 5 January 2018, the Company granted further warrants over:

-       33,333,333 ordinary shares of 1p to subscribers in the Placing which are exercisable at 1.5p per ordinary share of 1p at any time until 5 January 2023.

-       1,000,000 ordinary shares of 1p each to Hybridan LLP which are exercisable at 1.5p per ordinary share of 1p at any time until 5 January 2023.

-       300,000 ordinary shares of 1p each to Turner Pope Investments (TPI) Ltd which are exercisable at 1.5p per ordinary share of 1p at any time until 5 January 2023.

 

Following the subdivision of ordinary shares on 2 August 2018, the following warrants were outstanding:

 

Warrant holder

Date granted

Number of Ordinary shares of 0.01p each

Exercise price

Expiry date

Placing subscribers

5 April 2017

22,500,000

7.5p

5 April 2019

Turner Pope Investments (TPI) Ltd

5 April 2017

1,800,000

6.25p

5 April 2022

SPARK Advisory Partners Limited

5 April 2017

1,650,602

5.0p

5 April 2022

Placing subscribers

5 January 2018

33,333,333

1.5p

5 January 2023

Hybridan LLP

5 January 2018

1,000,000

1.5p

5 January 2023

Turner Pope Investments (TPI) Ltd

5 January 2018

300,000

1.5p

5 January 2023

 

 

On 30 October 2018, the Company granted further warrants over:

-       1,846,154 ordinary shares of 0.01p each to Hybridan LLP which are exercisable at 0.65p per ordinary share of 0.01p at any time until 30 October 2023.

-       5,846,154 ordinary shares of 0.01p each to SPARK Advisory Partners Limited which are exercisable at 0.65p per ordinary share of 0.01p at any time until 30 October 2023.

 

 

26. Retained earnings

 

 

Group

Company

 

£'000

£'000

At 1 January 2017

(1,913)

-

Loss for the year

(8,640)

(9,899)

At 31 December 2017

(10,553)

(9,899)

At 1 January 2018

(10,553)

-

Loss for the year

(2,702)

(3,913)

Transfer from Share Option reserve

34

                   34

At 31 December 2018

(13,221)

(13,778)

 

 

27. Other reserves

Group

 

 

Share premium

Foreign currency reserve

Reverse acquisition reserve

Capital

Redemption

reserve

Share based equity reserve

 

 

£'000

£'000

£'000

£'000

£'000

At 1 January 2017

 

-

(21)

(2,843)

-

-

Issue of ordinary shares (note 25)

 

2,187

-

-

-

-

Costs of Share issue

 

(112)

-

-

-

-

Currency translation differences

 

-

(218)

-

-

-

Cancelled Deferred Shares (note 25)

 

-

-

-

9,519

-

Share option-based charge (note 33)

 

-

-

-

-

24

At 31 December 2017

 

2,075

(239)

(2,843)

9,519

24

At 1 January 2018

 

2075

(239)

(2,843)

9,519

24

Issue of ordinary shares (note 25)

 

1,634

-

-

-

-

Costs of Share issue

 

(47)

-

-

-

-

Currency translation differences

 

-

(12)

-

-

-

Transfer to retained earnings (note 33)

 

-

-

-

-

(34)

Share option-based charge (note 33)

 

-

-

-

-

100

At 31 December 2018

 

3,662

(251)

(2,843)

9,519

90

 

 

The reverse acquisition reserve arose as result of the reverse acquisition of Innovenn UK Limited and its subsidiary by Integumen Plc.

 

Currency translation differences arose from the translation of the net investment in foreign subsidiaries.

 

Company

 

 

 

Share premium

Capital

Redemption

reserve

Share based equity reserve

 

 

 

£'000

£'000

£'000

At 1 January 2017

 

 

-

-

Issue of ordinary shares (note 25)

 

 

2,187

-

-

Costs of Share issue

 

 

(112)

-

-

Cancelled Deferred Shares (note 25)

 

 

-

9,519

-

Share option-based charge (note 33)

 

 

-

-

24

At 31 December 2017

 

 

2,075

9,519

24

 

 

 

 

 

 

At 1 January 2018

 

 

2,075

9,519

24

Issue of ordinary shares (note 25)

 

 

1,634

-

-

Costs of Share issue

 

 

(47)

-

-

Transfer to retained earnings (note 33)

 

 

-

-

(34)

Share option-based charge (note 33)

 

 

-

-

100

At 31 December 2018

 

 

3,662

9,519

90

 

 

28. Cash used in operations

 

Group

Group

Company

Company

 

2018

2017

(restated)

2018

2017

 

£'000

£'000

£'000

£'000

Loss for the year from continuing activities

(2,065)

(5,243)

(3,913)

(9,899)

Continuing operations

Adjustments for:

 

 

 

 

- Depreciation and amortisation

617

3,715

2,994

-

- Foreign currency translation of net assets

(71)

38

-

-

- Impairment of investments

-

-

-

9,204

- Exceptional Item on reverse acquisition accounting

-

-

-

-

- Net finance costs

38

56

5

(5)

- Taxation

(55)

(210)

-

-

- Share option-based charge

100

24

100

24

Changes in working capital

 

 

 

 

- Inventories

39

(2)

-

-

- Trade and other receivables

(86)

(44)

(740)

(1,581)

- Trade and other payables

602

23

387

16

 

Net cash used in discontinued operations (note 35)

(76)

(334)

-

-

Net cash used in operations

(957)

(1,977)

(1,167)

(2,241)

 

 

29. Related Party Disclosures

 

Amounts due to connected parties

 

Group

Group

Company

Company

 

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

Charles Service's estate

-

13

-

-

Coolford Limited

33

33

-

-

Venn Life Sciences Holdings plc and subsidiaries

441

421

-

-

MediNova AG

-

38

-

-

Cellulac Ltd

76

-

76

-

 

550

505

76

-

 

Charles Service was related to Declan Service. Declan Service was a director of the Company during the year.

Tony Richardson is a director of Coolford Limited, a company registered in the Republic of Ireland.

Tony Richardson is a director of Venn Life Sciences Holdings plc. Venn Life Sciences Limited, a subsidiary of Venn Life Sciences Holdings plc, is a shareholder in the Company.

During the year, Venn Life Sciences Holdings plc and its subsidiaries charged management charges of £26,000 (2017: £6,000) to the Company and its subsidiaries.

During the year, MediNova AG charged management charges of £319,000 (2017: £237,000) to TSpro GmbH (discontinued operations). MediNova AG is a shareholder in the Company.

The Company owns 9.35% of Cellulac plc (note 17)

The Company

 

Amounts due from group companies

 

                                                                                                                                      Company

Company 

 

                                     2018

2017

 

£'000

£'000

Innovenn UK Limited

1,020

909

Lifesciencehub UK Limited

169

156

TSpro GmbH

-

448

Integumen Ireland Limited

169

-

STOER Ireland Limited

46

-

Integumen Inc.

-

341

 

1,404

1,854

 

 

Amounts due to group companies

 

                              Company

Company

 

2018

2017

 

£'000

£'000

Integumen Ireland Limited

-                           

20

Integumen Inc.

557

-

 

557

20

 

 

During the year, the Company charged management charges of £130,000 (2017: £212,000) to Innovenn UK Limited and £Nil (2017: £50,000) to Lifesciencehub UK Limited.

 

During the year, the Company was recharged costs by Innovenn Limited of £103,000 (2017: £397,000).

 

 

30. Capital commitments

The Group had no capital commitments at 31 December 2018.

 

 

31.  Financial commitments

 

Operating Leases

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

 

Group

 

Minimum Operating Lease Payments

 

 

 

2018       

£'000

2017        

£'000

Within one year

 

 

25

50

Between 1 and 2 years

 

 

-

                 25

 

 

 

25

75

 

 

33. Share options

 

On 5 November 2018, the Company awarded options to key employees over 18,888,887 ordinary shares with a nominal value of 0.01p each at an exercise price of 0.01p per share. The options are exercisable for up to three years provided that the holder of the options is still an employee of the Company. These options were all outstanding at 31 December 2018:

 

The estimated fair value of these options issued during the year was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:

 

Date options granted

 

Options in issue 31 December 2018

18,888,887

Exercise price

0.01p

Expected volatility

44.4%

Expected dividend

0%

Expected life of options

3 years

Risk free rate

0.5%

Estimate fair value of each option

0.0041p

 

In 2017, the Company had awarded options to key management over 6,720,000 ordinary shares of 1p each. These options were exercisable after two years provided that the holder of the options is still an employee of the Company. Of these, 3,360,000 have an exercise price of 5p and 3,360,000 have an exercise price of 6p each.

 

During the year, options over 5,118,000 ordinary shares of 1p each lapsed when option holders left the employment of the Company. An amount of £34,000 was transferred from the share option-based reserve to retained earnings with respect to these lapsed options.

 

Following the subdivision of ordinary shares on 2 August 2018, when each ordinary existing share of 1p was sub-divided into one deferred share of 0.99p and one ordinary share of 0.01p, the outstanding options granted were as follows at 31 December 2018:

Director

Date granted

No. of ordinary shares under option

Exercise
price

Exercise period

Ross Andrews

5 April 2017

638,400

5.0p-6.0p

From 5 April 2017 to 5 April 2027

 

The share option-based charge with respect to all share options for the year was £100,000 (2017: £24,000)

 

34. Business combinations

 

There were no business combinations during the year.

 

Prior-year Business combinations

On 24 March 2017, 3,354,325 fully paid ordinary shares of £1 each were issued by the Company as consideration for the acquisition of 100% of the share capital of TSpro GmbH.

On 22 November 2017, 20,818,182 fully paid ordinary shares of 1p each were issued by the Company as consideration for the acquisition of 100% of the share capital of STOER Ireland Limited.

The Company's strategy is to acquire unique, complementary and undervalued brands at an early stage of commercialisation. The acquisition of TSpro GmbH enables the Company to enter the oral hygiene market while the acquisition of STOER Ireland Limited enables the Company to enter the large and growing male grooming market. Management believes that the acquisitions should provide significant economies of scale as the Company builds its infrastructure.

The following table summarises the consideration paid, and the amounts of the assets acquired, and liabilities assumed at the acquisition date of TSpro GmbH and STOER Ireland Limited:

 

TSPro

GmbH

£'000

STOER

Ireland Ltd

£'000

Fair value consideration

 

 

Deemed consideration of acquisition of share capital

3,185

510

Deemed consideration of acquisition of loans

169

-

Total fair value consideration

3,354

510

Recognised amounts of identifiable assets acquired, and liabilities assumed

 

 

Intellectual Property (note 15)

4,601

432

Plant, Property and Equipment

219

-

Trade and other receivables

11

-

Inventory

5

160

Trade and other payables

(122)

-

Bank overdraft

(63)

-

Amounts due to Group Companies

(255)

-

Other creditors

(174)

-

Deferred tax liabilities (note 23)

(868)

(82)

Total fair value of identifiable net assets

3,354

510

Excess of net assets over consideration

-

-

 

The book value of the assets acquired is the same as their fair value other than Intellectual Property, the value of which was ascribed on acquisition.

The fair value of acquired trade receivables is £11,000. The gross contractual amount for trade receivables due is £11,000, all of which is expected to be collectible.

TSpro GmbH contributed revenues of £145,000 and net losses of £252,000 to the Group for the period from 24 March to 31 December 2017. If the acquisition had occurred on 1 January 2017, consolidated pro-forma revenue and losses for the year ended 31 December 2017 would have been £278,000 and £10,323,000 respectively.

 

STOER Ireland Ltd contributed revenues of £2,000 and net losses of £29,000 to the Group for the period from 22 November to 31 December 2017. As STOER Ireland Ltd was a newly formed entity, if the acquisition had occurred on 1 January 2017, consolidated pro-forma revenue and losses for the year ended 31 December 2017 would have been the same as reported in the Group's Consolidated Statement of Comprehensive Income.

 

35. Discontinued operations

 

Disposal of TSpro GmbH

 

On 21 December 2018, the Company disposed of its 100% holding of TSpro GmbH for a consideration of €1. Financial information relating to the discontinued operation for the period to the date of the disposal is set out below.

The Company acquired its 100% holding of TSpro on 24 March 2017.

The financial performance and cash flow information presented for the current year are for the period 1 January 2018 to 21 December 2018 and the prior year for the period 24 March 2017 to 31 December 2017

Discontinued Operations

 

2018

2017

Statement of Comprehensive Income

Notes

£'000

£'000

Revenue

 

227

145

Costs of sales

 

(39)

(17)

Gross profit

 

188

128

Administrative Costs

 

(947)

(4,248)

Operating loss

 

(759)

(4,120)

  Depreciation

16

52

38

  Amortisation

15

87

349

  Impairment of intangible assets

15

500

3,502

  Exceptional items

 

(91)

50

EBITDA before exceptional items

 

(211)

(181)

Finance costs

 

(16)

(8)

Loss before income tax

 

(775)

(4,128)

Income tax credit

23

138

731

Loss for the year from discontinuing operations

 

(637)

(3,397)

               

Discontinued operations exceptional items

Included within administrative expenses are exceptional items as shown below:

 

 

2018

2017

 

 

£'000

£'000

- Transaction costs on the disposal and acquisition of subsidiary

 

65

50

- Gain on disposal of subsidiary

 

(156)

-

Total exceptional (gain)/loss

 

(91)

50

 

 

 

Details of the gain on disposal of the subsidiary are as follows:


 

£'000

Total fair value consideration

-

Recognised amounts of identifiable assets and liabilities disposed

 

Intellectual Property (note 15)

163

Plant, Property and Equipment (note 16)

138

Trade and other receivables

75

Inventory

3

Trade and other payables

(328)

Bank overdraft

(41)

Other creditors

(166)

Total fair value of identifiable net liabilities

(156)

Excess of net liabilities over consideration (gain on disposal)

(156)

 

 

Discontinued Operations

 

2018

2017

Statement of Cash Flows

 

£'000

£'000

Loss for the year from discontinuing operations

 

(637)

(3,397)

Adjustments for:

 

 

 

- Depreciation and amortisation

 

639

3,889

- Net finance costs

 

16

14

- Taxation

 

(138)

(731)

- Gain on disposal of subsidiary

 

(156)

-

Changes in working capital

 

 

 

- Inventories

 

(2)

4

- Trade and other receivables

 

(33)

(29)

- Trade and other payables

 

251

(70)

Cash Flow from operating activities

 

(60)

(320)

Interest paid

 

(16)

(14)

Net cash used in operating activities

 

(76)

(334)

 

 

 

 

Cash flow from financing activities

 

 

 

Loan from parent company

 

120

312

Net cash generated by financing activities

 

120

312

 

 

 

 

Net increase/ (decrease) in cash and cash equivalents

 

44

(22)

Cash and cash equivalents at the beginning of period

 

(85)

(63)

Cash and cash equivalents at the end of the period

 

(41)

(85)

               

    

36. Ultimate controlling party

 

There is no one controlling party.

 

 

37. Post balance sheet events

 

The following events have taken place since the year end:

 

Ordinary shares issued

 

-       On 8 March 2019, Hybridan LLP exercised warrants over 1,846,154 ordinary shares of 0.01p each at an exercise price of 0.65p per ordinary share of 0.01p raising a total of £12,000 for the Company.

 

-       On 22 March 2019, share option holders exercised options over 17,777,776 ordinary shares of 0.01p each at an exercise price of 0.01p per ordinary share of 0.01p raising a total of £1,778. (see note 33)

 

-       On 26 March 2019, placing subscribers exercised warrants over 2,000,000 ordinary shares of 0.01p each at an exercise price of 0.65p per ordinary share of 0.01p raising a total of £30,000.

 

-       On 2 May 2019, the Company issued the 476,722,882 ordinary shares of 0.01p each at the following placing prices per ordinary share:

 

Description

No. of shares

Price

Purpose

Placing and Subscription shares

179,918,788

1.4p

Raised £2,519,000 in cash

Consideration shares

214,285,714

1.4p

Consideration for the acquisition of Rinocloud Ltd for £3,000,000

Settlement shares

23,637,429

1.4p

Settlement of £331,000 of liabilities as part of Visible Youth disposal

Loan Note Conv. shares

26,666,666

1.5p

Issued as repayment of a Loan Note due to Cellulac Ltd of £400,000

Venn Debt shares

30,071,428

1.4p

Issued as a loan repayment to Venn Life Sciences Holdings Plc of £421,000

Fee shares

2,142,857

1.4p

Issued to settle certain professional fees associated with the above of £30,000

Total issued

476,722,882

 

 

 

 

-       On 31 May 2019, placing subscribers exercised warrants over 1,000,000 ordinary shares of 0.01p each at an exercise price of 1.5p per ordinary share of 0.01p raising a total of £15,000.

 

-       On 14 June 2019, share option holders exercised options over 1,111,111 ordinary shares of 0.01p each at an exercise price of 0.01p per ordinary share of 0.01p raising a total of £177. (see note 33)

 

-       On 14 June 2019, placing subscribers exercised warrants over 5,000,000 ordinary shares of 0.01p each at an exercise price of 1.5p per ordinary share of 0.01p raising a total of £75,000.

 

-       On 25 June 2019, placing subscribers exercised warrants over 2,500,000 ordinary shares of 0.01p each at an exercise price of 1.5p per ordinary share of 0.01p raising a total of £37,500.

 

-       On 26 June 2019, placing subscribers exercised warrants over 6,766,667 ordinary shares of 0.01p each at an exercise price of 1.5p per ordinary share of 0.01p raising a total of £101,500.

 

 

As at date of signing of these financial statements, the Company had an issued share capital of 969,551,462 ordinary shares of 0.01p each and 223,685,232 deferred shares of 0.99p each.

 

 

 

Share warrants issued

 

-       On 2 May 2019, the Company granted warrants over:

-     98,214,285 ordinary shares of 0.01p each to placing subscribers which are exercisable at 2p per ordinary share of 0.01p at any time until 2 May 2021.

-     8,142,857 ordinary shares of 0.01p each to Turner Pope Investments (TPI) Ltd which are exercisable at 1.4p per ordinary share of 0.01p at any time until 2 May 2022.

 

Business combinations

 

On 2 May 2019, the Company acquired 100% of Rinocloud Ltd in an all share transaction for £3,000,000, The purchase consideration was paid by the Company by issuing 214,285,714 ordinary shares of 0.01p each at a price of 1.4p per share. Rinocloud Ltd is a company registered in Ireland providing specialised data management services to a global scientific and lab testing sector. Following the acquisition, Fionan Murray, became a director of the Company, 

 

 

Discontinued operations

 

On 2 May 2019, the Company disposed of its subsidiary Visible Youth Ltd. to Enhance Skin Products Inc. for zero consideration. The sale includes the two subsidiaries of Visible Youth Ltd, Visible Youth Ireland Ltd and Integumen Inc. The Visible Youth companies own the rights to a range of female cosmetic products. As part of the sale, the Company agree to settle certain Visible Youth liabilities of £557,000 by:

-     arranging cash payments of £226,000 and

-     issuing 23,637,429 ordinary shares of 0.01p each at an issue price of 1.4p totalling £331,000.

 

 

 

 


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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