Venture Life Group PLC Half-year Report - Amendment

Data : 20/09/2019 @ 08:00
Fonte : UK Regulatory (RNS & others)
Titolo : Venture Life Group Plc (VLG)
Quotazione : 28.8  -0.2 (-0.69%) @ 13:22
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Venture Life Group PLC Half-year Report - Amendment

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RNS Number : 0377N

Venture Life Group PLC

20 September 2019

This announcement replaces RNS number 8813M issued on 19 September 2019, correcting note 4.1. All other information in the announcement remains unchanged.

19 September 2019

VENTURE LIFE GROUP PLC

("Venture Life" or the "Group")

Unaudited interim results for the six months ended 30 June 2019

Venture Life Group plc (AIM: VLG), a leader in developing, manufacturing and commercialising products for the self-care market, presents its unaudited interim results for the six months ended 30 June 2019.

Financial highlights:

   --      Revenues increased 14% to GBP9.4 million (H1 2018: GBP8.3 million) 
   --      Gross profit increased 18% to GBP3.5 million (H1 2018: GBP3.0 million) 
   --      Gross profit margin percentage increased to 37.3% (H1 2018: 36.0%) 
   --      Increased investment in Dentyl marketing and new medical devices 
   --      Adjusted EBITDA increased 5.5% to GBP0.7 million (H1 2018: GBP0.7 million) 

-- Profit before tax, amortisation and exceptional items increased to GBP0.3 million (H1 2018: GBP0.1 million)

   --      Adjusted profit per share[1] of 0.04p (H1 2018: adjusted loss of 0.3p) 
   --      Net cash generated from operating activities of GBP1.3 million (H1 2018: GBP0.2 million) 
   --      Cash at period end of GBP10.9 million (31 December 2018: GBP9.6 million) 

Commercial highlights:

   --      Lloyds Pharmacy to launch Dentyl in the UK 
   --      Increased distribution of Dentyl in Superdrug 
   --      BB Mints launch into Morrisons 

-- Launch of UltraDEX in ASDA grocery chain and Well Pharmacy, the 3(rd) largest pharmacy chain in the UK, behind Boots and Lloyds

   --      UltraDEX Whitening mouth rinse launched in Superdrug 
   --      UltraDEX and Dentyl marketing campaigns launched to UK consumers 
   --      4 long-term development and manufacturing agreements completed 
   --      7 new international partnering agreements signed, including Dentyl line extensions in China 
   --      VLG's products launched with 11 international partners in H1 2019 

Post-period end highlights:

   --      Long-term international agreement signed on Dentyl in France 

-- Venture Life Group plc was once again included in the 'London Stock Exchange's 1000 Companies to Inspire Britain 2019' list, for the fourth consecutive year

[1]Adjusted profit per share is loss after tax excluding amortisation, exceptional items and share-based payments.

Jerry Randall, Chief Executive Officer of Venture Life, commented: "In the first half of 2019 we saw revenue growth of 14% with strong cash generation from operating activities of GBP1.3 million. Despite a challenging trading environment, I am pleased with the Group's continued commercial progress, particularly the seven new international partnering agreements signed, which further expand the Venture Life footprint and reach. These agreements include increased distribution of the Dentyl range in China as well as the launch of UltraDEX in ASDA and Well Pharmacy, and the launch of Dentyl into Lloyds Pharmacy in the UK. Traditionally, we enjoy a stronger second half and, with a very healthy order book, we expect that to be the case this year.

Meanwhile, our development and manufacturing business has made positive headway in the first half of 2019. Revenues grew 10% to GBP6.6 million with four long-term agreements completed.

As the UK moves closer towards a possible Brexit at the end of October, we have undertaken significant mitigation planning against associated risk and remain well-prepared to manage possible disruptions to the business, including ensuring there is adequate UK stock and good short-term supply. Despite the challenges, Venture Life has a strong pipeline ahead and we approach the future with confidence."

For further information, please contact:

Venture Life Group PLC

   Jerry Randall, Chief Executive Officer                                        +44 (0) 1344 578004 

Andrew Waters, Chief Financial Officer

   Cenkos Securities Ltd (Nomad and Broker)                              +44 (0) 20 7397 8900 

Stephen Keys / Cameron MacRichie (Corporate Finance)

Russell Kerr / Michael Johnson (Sales)

Alma PR +44 (0) 203 405 0208

   Helena Bogle/ Hilary Buchanan / Jessica Joynson                   venturelife@almapr.co.uk 

Non-Executive Chair's and Chief Executive Officer's Statement

Overview

The Group is pleased to report significant progress across all areas of the business. In the first half of 2019, revenues grew by 14% to GBP9.4 million (H1 2018: GBP8.3 million), with improvements in EBITDA, profit before tax and profit after tax. Significantly, there has been strong cash generation from operating activities of GBP1.3 million (H1 2018: GBP0.2 million).

Revenues for the Venture Life brands business were GBP2.8 million, a 22% increase on the first half of 2018, while revenues from the Development and Manufacturing business, where we develop and manufacture products on behalf of third parties, grew 10% to GBP6.6 million. The growth in the Venture Life brands revenue has been driven by the impact of full year revenues from the Dentyl brand, which was acquired by the Group in August 2018. The increased revenue growth, combined with our current product offering, has also improved the gross profit margin, which rose to 37.3%, up from 36.0% in the first half of 2018. Increased investment in Dentyl marketing and higher investment in product assets for the new medical device regulations offset this increased gross margin, along with some one-off costs incurred within the period.

Revenues in the first half were ahead of last year, although they have been lower than anticipated, primarily due to delayed orders from two of our Chinese partners, as referenced in our 2018 Full Year Results, which did not generate any revenue during the period, due to specific market reasons. Our Chinese partner for Dentyl experienced some product packaging issues in the first half of 2019 that affected its sell-through, and consequently delayed new orders from Venture Life. However, we are pleased to report that these issues have been resolved, sell out in China has resumed. Additionally, we have signed new agreements with this partner on Dentyl Toothpaste and Dentyl Fresh Breath Beads (formally BB Mints), the latter of which will start contributing revenue in the second half of 2019 and we expect them to continue to be important contributors to our revenues and profitability going forward.

Our Chinese partner for Lubatti bought a significant amount of stock in H1 2018 (GBP0.6 million); whilst there were no orders in H1 2019, we are beginning to see new orders come through and there is further commitment to the brand as we move into H2 and beyond. For some of their key brands, there has been a strategic shift from off line to online stores exclusively, as footfall declines and the rise in online sales has an ever greater impact; Lubatti is one of these brands and is responding well to this new approach.

Even after taking account of these challenges, the Group had strong cash generation in the first half and, consistent with prior years, has a strong order book (35% higher than at the same point last year), meaning that we expect to see second half revenues significantly higher than those in the first half.

To ensure our product supply to the UK market remains uninterrupted, we prepared ourselves for a possible Brexit impact in March 2019, which entailed minor cost. We are preparing for a similar situation in October 2019, chiefly by ensuring that there is adequate stock in the UK and that our international manufacturers are able to continue supply in the short term. In the longer term, with a major part of the Group's operations based in Italy and distributing to multiple countries, we believe the operational impact of Brexit will be limited. Even with the pressurised sales environment of the UK grocery and high street retailers, we are pleased our UK brands continue to have robust sales and hold their position.

Following on from the 2018 fundraise, we continue to review strategic M&A opportunities. During the period we considered an opportunity for a potentially transformational transaction for the Group in terms of size and scope. As shareholders would expect, we conducted extensive due diligence which, on this occasion, led us to ultimately decide not to proceed with this transaction, with there being an exceptional cost of GBP90,000. We will update shareholders on any future opportunities as appropriate.

Venture Life Brands

The Venture Life brands business revenues for the first half of 2019 were GBP2.8 million, a 22% increase on first half of 2018. Of this, GBP2.4 million came from UltraDEX and Dentyl in the UK, with the remainder from international sales.

The two largest Venture Life brands are our oral care products - UltraDEX and Dentyl, which are mainly sold in the UK.

UK - UltraDEX

UltraDEX revenues for the first half were GBP1.3 million (H1 2018: GBP1.4 million), outperforming the oral market generally, which, whilst still declining, is expected to do so at slower rate in 2019. We believe that UltraDEX's out-performance is a result of loyal customer retention, a premium, well-developed product and our efforts to obtain new listings for the product. Whilst the wider market conditions in the UK are expected to remain challenging, taking these strengths together, we expect to outperform the UK mouthwash market again in 2019.

Confirmation was received in H1 2019 that UltraDEX (both rinse and spray) will launch in ASDA from September onwards, in addition to Well Pharmacy, the third largest pharmacy chain in the UK. Superdrug has also confirmed they will launch UltraDEX Spray both on and off-shelf as well as launch UltraDEX Whitening. We believe these developments further demonstrate the strength of our brands.

As well as there being many reasons to be satisfied with the brands performance, this has to be balanced with one de-list of the brand in one of our smaller grocer distributors and no repeat of the new product pipe fill seen last year. With the oral care sector under pressure, it has been difficult to gain new users into the new products in the consumer setting, and the One-Go and Fresh Breath Kit will be delisted from two of the larger pharmacy distributors from July 2019. Management have been quick to identify better opportunities and the Fresh Breath Kit will instead be positioned towards the dental channel, as this presents a practical solution for dental practitioners and patients alike.

It is pleasing to report that Alliance (the wholesale arm of Walgreens Boots Alliance) will launch UltraDEX Whitening later in 2019. There are also a number of initiatives in place for the remainder of the year that we anticipate will positively impact H2 2019. The new UltraDEX marketing campaign began towards the end of the period, with a focus on sampling to drive trial and purchase, and initiatives for increasing brand awareness via social media. Further marketing initiatives are planned for H2 2019.

UK - Dentyl

Dentyl revenues were GBP1.1 million in the first half of 2019, in line with management's expectations. The impact of order patterns before we acquired the brand acquisition and legacy delists/one-offs seen in 2018 prior to the acquisition continued to affect the business in the first half and are expected to continue throughout 2019. However, we have seen some positive gains in the UK market; a key pharmacy retailer increased distribution of Dentyl in H1 2019 and ASDA increased distribution of the Dentyl Fresh Clove during H1 2019. Additionally, Morrisons launched BB Mints and AAH, a pharmacy wholesaler, agreed to list both Dentyl and BB Mints - with the latter paving the way for Dentyl to be launched in pharmacies. Furthermore, Lloyds pharmacy also launched Dentyl Smooth Mint and will promote Dentyl Fresh Clove in store also.

International

The International Brands business delivered revenues of GBP0.5m during the period (H1 2019: GBP0.9m), with the decline mainly due to the lack of orders from our Chinese partner for Lubatti, as mentioned.

With the acquisition of Dentyl in August 2018, we also acquired a new partner in China. As previously announced, there have been some issues with product packaging, which have now been resolved. This has however impacted the promotion of Dentyl in China during H1 2019, and the partner is now rebuilding momentum through a fresh marketing approach. We expect orders of Dentyl mouthwash to resume by the end of the year or early next year. We are pleased to report that we have strengthened our relationship with our key partner and new agreements were signed on Dentyl Fresh Breath Beads (previously BB Mints) and Dentyl Toothpaste (to launch in 2020). We expect further newsflow from this partner as we move into the second half of the year.

We have a strong order book for H2 2019, with seven new long-term distribution agreements having been signed in H1 2019, and one post-period end, which will have a positive impact on H2 2019 and beyond. Our first significant deal on Dentyl was signed in France with our existing partner La Brosse et Dupont, that will launch Dentyl into the mass market in Q1 2020. Dentyl is now present in eight markets and interest remains strong.

Customer Brands

Development and Manufacturing

Our Development and Manufacturing business (Biokosmes) in Italy services both our own Venture Life brands as well as our customer brands. We continue to increase output through the plant, which in turn will utilise the operational leverage we have and deliver increased profitability to the business.

The revenues for the customer brands business grew 10% to GBP6.6 million in the first half of 2019, with growth coming from existing partners and new partners. Some of the highlights include:

-- A range of new products developed for Menarini in 2018, launched in Italy in 2019. These products will begin to be launched internationally, including Asia, and we are expecting to see growing revenues from this partner.

-- A new long-term agreement signed with Athena Cosmetics Corporation in the US, to manufacture two products. First production will commence from August 2019 and a second manufacturing order is expected before the end of 2019.

-- A new long-term agreement has been signed with AlfaSigma in Italy, to develop and manufacture a new product. Development is due to finish in October 2019, with first production confirmed by the end of 2019.

-- A manufacturing order to produce a new product to be sold by Italfarmaco in Chile, with potential to expand to further international markets.

   --      Development and production of a new product for B3Glam, Italy, to be sold in the US. 
   --      Development has commenced for Logus Pharma in Italy, to produce a Medical Device. 

-- A new long-term agreement with Italian pharmaceutical company Giellepi S.P.A, to develop and manufacture a new Medical Device by the end of 2019.

In addition, we have developed a new medical device - DermaRisOn(R) which helps to restore the skin barrier and to prevent and treat various dermatitis, irritations and skin inflammations. We are now promoting this product to pharmaceutical partners in the international business arena.

Our Development and Manufacturing business has built an excellent reputation within our industry for the development and manufacture of products for sale globally, validated by the approvals from regulatory authorities in many markets. This regulatory expertise allows Venture Life and our customers to develop new products with the assurance that these can be sold in the major global markets.

The recent changes in the regulatory rules for medical devices also represent a significant opportunity for Venture Life. It is obligatory for customers to undertake a review of their medical devices in order to ensure they comply with new regulations. We are undertaking these reviews both for our own products and customers' products, which will enhance the value for our business in the future and we are investing heavily in 2019 in order to maximise this opportunity. We believe that this new compliance will secure significant future revenues for the Group.

In addition we have invested in the facility's product labeling capabilities. We have implemented procedures, machinery and internal skills to be aligned with new UDI (unique device identification) labeling requirements, to ensure we offer the highest level of manufacturing expected by customers. The first UDI operations have been successfully implemented and we expect new business opportunities to arise from this investment.

Outlook

Whilst the market conditions for retailers in the UK remain challenging, we believe that Venture Life has the brands and the expertise to continue to perform strongly. The marketing initiatives that have been put in place are expected to have an impact in the second half of the year, which is traditionally our stronger period, and the Company is well set to capitalise on opportunities and deliver a positive outcome for the year.

Financial Review

Statement of comprehensive income

Group revenue for the six-month period was GBP9.4 million, an increase of 14% on the GBP8.3 million reported for the same period in 2018. The growth included the Dentyl sales following the brand's acquisition during H2 2018. On a like-for-like basis, Group revenue was flat in the six-month period compared to the first six months of 2018.

The Venture Life Brands business, including Dentyl, increased 22%, with revenues for the six-month period of GBP2.8 million compared to GBP2.3 million reported in H1 2018.

The Development and Manufacturing business continued to represent the larger proportion of Group revenue. Revenues were GBP6.6 million in H1 2019 compared to GBP6.0 million for H1 2018 (up 10%) and reflecting different revenue phasing compared to the prior year. The current manufacturing order book is well ahead of the same period last year, and the Group expects a stronger H2 2019.

The Group generated gross profit of GBP3.5 million, representing a gross margin of 37.3%. This compares to a gross margin of 36.0% for the same period in 2018 on a reported basis. This slight improvement was due to the counteracting effects of cost increases for raw materials and other components offset by a higher margin product mix.

Administrative expenses increased in the period to GBP3.6 million from GBP3.0 million in H1 2018 due to several factors, some of which were one-off, including our marketing campaign for Dentyl in the UK. We have also incurred higher R&D expenditures as a result of changes to the medical device regulations. We will continue to have this higher level of R&D expenditure in the second half of the year, however the Group will benefit from this short-term cost through securing long-term future revenues for the Group. The Group had some significant changes in the finance function at the start of 2019, which precipitated some one-off costs in the first half. Of the total increase in administrative costs of GBP0.6 million, we estimate more than half to be one-off in nature in 2019 with the balance representing small administrative cost growth and investment in Dentyl marketing.

H1 2019 generated a positive adjusted EBITDA of GBP0.7 million, up 5.5% compared to H1 2018 of GBP0.7 million.

The loss after tax remained slightly ahead of the prior year at GBP0.4m (H1 2018: loss of GBP0.5 million). Loss per share was 0.45p (H1 2018: loss of 1.35p).

The Adjusted profit per share was 0.15p compared to an adjusted loss per share of 0.36p in H1 2018.

Unaudited Interim Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2019

 
                                                     Six months    Six months     Year ended 
                                                          ended         ended    31 December 
                                                        30 June       30 June           2018 
                                             Note          2019          2018 
                                                    (Unaudited)   (Unaudited)      (Audited) 
                                                        GBP'000       GBP'000        GBP'000 
 Revenue                                     4.1          9,394         8,260         18,770 
 Cost of sales                                          (5,891)       (5,284)       (11,482) 
                                                   ------------  ------------  ------------- 
 Gross profit                                             3,503         2,977          7,288 
 
 Operating expenses                                     (3,217)       (2,727)        (5,534) 
 Amortisation of intangible assets            5           (338)         (277)          (625) 
                                                   ------------  ------------  ------------- 
 Total administrative expenses                          (3,555)       (3,004)        (6,159) 
 
 Other income                                                41            27             94 
 
 Operating (loss)/profit before 
  exceptional items                                        (11)             -          1,223 
                                                   ------------  ------------  ------------- 
 
 Exceptional items                            6            (90)          (54)          (172) 
 
 Operating (loss)/profit                                  (101)          (54)          1,051 
                                                   ------------  ------------  ------------- 
 
 Finance costs                                             (17)         (223)          (341) 
 
 (Loss)/profit before tax                                 (118)         (277)            710 
                                                   ------------  ------------  ------------- 
 
 Tax                                          7           (255)         (221)          (474) 
 
 (Loss)/Profit for the period 
  attributable to the equity shareholders 
  of the parent                                           (374)         (498)            236 
                                                   ------------  ------------  ------------- 
 
 
 Other comprehensive (loss)/income 
  which may be subsequently reclassified 
  to the income statement                     8               -           (4)             18 
 
 Total comprehensive (loss)/profit 
  for the period attributable 
  to equity shareholders of the 
  parent                                                  (374)         (502)            254 
                                                   ------------  ------------  ------------- 
 
 Basic (loss)/profit per share 
  (pence) attributable to equity 
  shareholders of the parent                  9          (0.45)        (1.35)           0.42 
 Diluted Basic (loss)/profit 
  per share (pence) attributable 
  to equity shareholders of the 
  parent                                      9          (0.45)        (1.35)           0.38 
 
 Adjusted profit/(loss) per share             9            0.15        (0.36)           2.06 
 Diluted Adjusted profit /(loss) 
  per share                                   9            0.14        (0.36)           1.83 
 

Unaudited Interim Condensed Consolidated Statement of Financial Position

As at 30 June 2019

 
                                   Note       30 June       30 June   31 December 
                                                 2019          2018          2018 
                                          (Unaudited)   (Unaudited)     (Audited) 
 ASSETS                                       GBP'000       GBP'000       GBP'000 
 Non-current assets 
 Intangible assets                  11         20,486        16,131        20,542 
 Property, plant and equipment                  4,394         4,811         4,591 
                                               24,880        20,942        25,133 
                                         ------------  ------------  ------------ 
 Current assets 
 Inventories                                    4,326         4,327         3,869 
 Trade and other receivables                    6,345         5,170         7,020 
 Cash and cash equivalents                     10,932         1,496         9,623 
                                         ------------  ------------  ------------ 
                                               21,603        10,993        20.512 
                                         ------------  ------------  ------------ 
 
 TOTAL ASSETS                                  46,483        31,935        45,645 
                                         ------------  ------------  ------------ 
 
 EQUITY & LIABILITIES 
 Capital and reserves 
 Share capital                      12            251           111           251 
 Share premium account              12         30,824        13,289        30,824 
 Merger reserve                     12          7,656         7,656         7,656 
 Convertible bond reserve                           -           109             - 
 Foreign currency translation 
  reserve                                         252           230           252 
 Share-based payment reserve                      678           586           609 
 Retained earnings                            (7,886)       (8,224)       (7,512) 
                                         ------------  ------------ 
 Total equity attributable 
  to equity holders of the 
  parent                                       31,775        13,757        32,080 
                                         ------------  ------------  ------------ 
 
 Liabilities 
 Current liabilities 
 Trade and other payables                       5,364         4,794         4,868 
 Taxation                                         255           334             - 
 Interest bearing borrowings                    1,136         2,063         1,911 
 Convertible bond                                   -         1,847             - 
 Vendor loan notes                                  -            71             - 
                                         ------------  ------------  ------------ 
                                                6,755         9,109         6,779 
                                         ------------  ------------  ------------ 
 Non-current liabilities 
 Interest bearing borrowings                    6,390         6,039         5,157 
 Vendor loan notes                                  -         1,740             - 
 Statutory employment provision                   994           944         1,062 
 Deferred tax liability                           569           346           567 
                                         ------------  ------------  ------------ 
                                                7,953         9,069         6,786 
                                         ------------  ------------  ------------ 
 
 Total liabilities                             14,708        18,178        13,565 
                                         ------------  ------------  ------------ 
 
 TOTAL EQUITY & LIABILITIES                    46,483        31,935        45,645 
                                         ------------  ------------  ------------ 
 
 
 

Unaudited Interim Condensed Consolidated Statement of Changes in Equity

As at 30 June 2019

 
                                                                Foreign 
                               Share           Convertible     currency  Share-based 
                      Share  premium   Merger         bond  translation      payment  Retained     Total 
                    capital  account  reserve      reserve      reserve      reserve  earnings    equity 
                    GBP'000  GBP'000  GBP'000      GBP'000      GBP'000      GBP'000   GBP'000   GBP'000 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Balance at 1 
 January                111   13,289    7,656          109          234          497   (7,711)    14,185 
Impact of 
 adoption of 
 IFRS9 on opening 
 balances                 -        -        -            -            -            -      (37)      (37) 
 
Balance at 1 
 January 2018 
 (Audited)              111   13,289    7,656          109          234          497   (7,748)    14,148 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Loss for the 
 period                   -        -        -            -            -            -     (461)     (461) 
Foreign exchange 
 for period               -        -        -            -          (4)            -         -       (4) 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Total 
 comprehensive 
 income/(expense)         -        -        -            -          (4)            -     (498)     (502) 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Transactions with 
shareholders: 
Share options 
 charge                   -        -        -            -            -           89         -        89 
Dividends                 -        -        -            -            -            -      (15)      (15) 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Balance at 30 
 June 2018 
 (Unaudited)            111   13,289    7,656          109          230          586   (8,224)    13,757 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
 
 Profit for the 
 period                   -        -        -            -            -            -       712       712 
Foreign exchange 
 for period               -        -        -            -           22            -         -        22 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Total 
 comprehensive 
 income                   -        -        -            -           22            -       712       734 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Transactions with 
shareholders: 
Issue of share 
 capital                140   17,535        -            -            -            -         -    17,675 
Repayment of Bond         -        -        -        (109)            -            -        14      (95) 
Share options 
 charge                   -        -        -            -            -           23         -        23 
Dividend                  -        -        -            -            -            -      (14)      (14) 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Balance at 31 
 December 2018 
 (Audited)              251   30,824    7,656            -          252          609   (7,512)    32,080 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Loss for the 
 period                   -        -        -            -            -            -     (374)     (374) 
Foreign exchange          -        -        -            -            -            -         -         - 
for period 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Total 
 comprehensive 
 (expense)                -        -        -            -            -            -     (374)     (374) 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Transactions with 
shareholders: 
Share options 
 charge                   -        -        -            -            -           69         -        69 
Dividends                 -        -        -            -            -            -         -         - 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
Balance at 30 
 June 2019 
 (Unaudited)            251   30,824    7,656            -          252          678   (7,886)    31,775 
                   --------  -------  -------  -----------  -----------  -----------  --------  -------- 
 

Unaudited Interim Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2019

 
                                                 Six months          Six months          Year ended 
                                                      ended               ended 
                                                    30 June             30 June         31 December 
                                                       2019                2018                2018 
                                                (Unaudited)         (Unaudited)           (Audited) 
                                                    GBP'000             GBP'000             GBP'000 
 Cash flow from operating activities: 
 (Loss)/profit before tax                             (119)               (277)                 710 
 Finance cost                                            17                 223                 341 
 Operating (loss)/profit                              (102)                (54)               1,051 
 
 Adjustments for: 
   - Depreciation of property, plant 
    and equipment                                       352                 343                 756 
   - Amortisation of intangible assets                  338                 277                 625 
   - Finance costs                                     (17)               (162)               (276) 
   - Disposal of capitalised development 
    costs                                                 -                   -                 148 
   - Share-based payment expense                         69                  89                 112 
                                              -------------       -------------       ------------- 
 Operating cash flow before movements 
  in working capital                                    641                 493               2,452 
 
 Taxation received/(paid)                                 -                   -               (565) 
 (Increase) in inventories                            (457)               (766)               (259) 
 Decrease/(Increase) in trade and 
  other receivables                                     675                (38)             (1,868) 
 Increase in trade and other payables                   428                 511                 478 
                                              -------------       -------------       ------------- 
 Net cash generated by operating activities           1,286                 200                 238 
                                              -------------       -------------       ------------- 
 
 Cash flow from investing activities: 
 Acquisition of Dentyl Business                           -                   -             (4,200) 
 Purchases of property, plant and 
  equipment                                           (155)               (152)               (271) 
 Development expenditure in respect 
  of intangible assets                                (282)               (233)               (744) 
 Net cash used by investing activities                (437)               (385)             (5,215) 
                                              -------------       -------------       ------------- 
 
 Cash flow from financing activities: 
 Net proceeds from issuance of ordinary 
  shares                                                  -                   -              17,675 
 Repaid Convertible Bond                                  -                   -             (1,900) 
 Repaid vendor loan note                                  -                   -             (1,790) 
 Repayment of deferred consideration                      -                   -               (410) 
 Drawdown in interest-bearing borrowings                701                 586                 200 
 Leasing obligation repayments                        (242)               (251)               (528) 
 Dividends paid                                           -                (15)                (14) 
                                              -------------       ------------- 
 Net cash from financing activities                     459                 320              13,233 
                                              -------------       -------------       ------------- 
 
 Net increase in cash and cash equivalents            1,308                 135               8,256 
 Net foreign exchange difference                          1                   -                   6 
 Cash and cash equivalents at beginning 
  of period                                           9,623               1,361               1,361 
                                              -------------       -------------       ------------- 
 Cash and cash equivalents at end 
  of period                                          10,932               1,496               9,623 
                                              -------------       -------------       ------------- 
 

Notes to the Unaudited Interim Condensed Consolidated Financial Statements for the six months ended 30 June 2019

   1.            Corporate information 

The Interim Condensed Consolidated Financial Statements of Venture Life Group plc and its subsidiaries (collectively, the Group) for the six months ended 30 June 2019 ("the Interim Financial Statements") were approved and authorised for issue in accordance with a resolution of the directors on 18 September 2019.

Venture Life Group plc ("the Company") is domiciled and incorporated in the United Kingdom, and is a public company whose shares are publicly traded. The Group's principal activities are the development, manufacture and distribution of healthcare and dermatology products.

   2.            Basis of preparation 

The Interim Financial Statements have been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union. The Interim Financial Statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's Consolidated Financial Statements for the year ended 31 December 2018 ("the 2018 Consolidated Financial Statements") which have been prepared in accordance with IFRS as adopted by the European Union.

The financial information contained in the Interim Financial Statements, which are unaudited, does not constitute statutory accounts in accordance with the Companies Act 2006. The financial information for the year ended 31 December 2018 is extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies and on which the auditor issued an unqualified opinion that did not include an emphasis of matter reference or statement made under section 498(2) or (3) of the Companies Act 2006.

   3.            Accounting policies 

The accounting policies adopted in the preparation of the Interim Financial Statements are consistent with those followed in the preparation of the 2018 Consolidated Financial Statements.

Foreign currencies

The assets and liabilities of foreign operations are translated into sterling at exchange rates ruling at the balance sheet date. Revenues generated and expenses incurred in currencies other than sterling are translated into sterling at rates approximating to the exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation of assets and liabilities of foreign operations are recognised directly in the foreign currency translation reserve.

The sterling/euro exchange rates used in the Interim Financial Statements and prior reporting periods are as follows:

 
                                     Six months            Six months            Year ended 
                                          ended                 ended           31 December 
 Sterling/euro exchange rates      30 June 2019          30 June 2018                  2018 
 Average exchange rate for 
  the period                               1.14                 1.136                 1.129 
 Exchange rate at the period 
  end                                      1.14                 1.129                1.121 
 
   4.            Segmental Information 

Management has determined the operating segments based on the reports reviewed by the Group Board of Directors (Chief Operating Decision Maker) that are used to make strategic decisions. The Board considers the business from a line-of-service perspective and uses operating profit/(loss) as its profit measure. The operating profit/(loss) of operating segments is prepared on the same basis as the Group's accounting operating profit/(loss).

In line with the 2018 Consolidated Financial Statements, the operations of the Group are segmented as Brands, which includes sales of healthcare and skin care products under distribution agreements and direct to UK retailers, and Development and Manufacturing.

   4.1          Segment Revenue and Results 

The following is an analysis of the Group's revenue and results by reportable segment.

 
                                                                 Development                  Consolidated 
                                                 Brands    and Manufacturing   Eliminations          Group 
                                                GBP'000              GBP'000        GBP'000        GBP'000 
 Six months to 30 June 2019 
  Revenue 
 External sales                                   2,786                6,608              -          9,394 
 Inter-segment sales                                  -                  680          (680)              - 
                                               --------  -------------------  -------------  ------------- 
 Total revenue                                    2,786                7,288          (680)          9,394 
                                               --------  -------------------  -------------  ------------- 
 Results 
 Operating (loss)/profit 
  before exceptional items 
  and excluding central administrative 
  costs                                             109                  860              -            969 
                                               --------  -------------------  -------------  ------------- 
 
 
 
                                                                 Development                  Consolidated 
                                                 Brands    and Manufacturing   Eliminations          Group 
                                                GBP'000              GBP'000        GBP'000        GBP'000 
 Six months to 30 June 2018 
  Revenue 
 External sales                                   2,279                5,981              -          8,260 
 Inter-segment sales                                  -                1,357        (1,357)              - 
                                               --------  -------------------  -------------  ------------- 
 Total revenue                                    2,279                7,338        (1,357)          8,260 
                                               --------  -------------------  -------------  ------------- 
 Results 
 Operating (loss)/profit 
  before exceptional items 
  and excluding central administrative 
  costs                                            (68)                  842              -            774 
                                               --------  -------------------  -------------  ------------- 
 
 
 
                                                       Development                  Consolidated 
                                       Brands    and Manufacturing   Eliminations          Group 
 Year to 31 December 2018             GBP'000              GBP'000        GBP'000        GBP'000 
 Revenue 
  External sales                        6,627               14,887              -         21,514 
 Inter-segment sales                        -              (2,744)        (2,744)        (2,744) 
                                     --------  -------------------  -------------  ------------- 
 Total revenue                          6,627               12,143        (2,744)         18,770 
                                     --------  -------------------  -------------  ------------- 
 
 Results 
 Operating profit before 
  exceptional items and excluding 
  central administrative 
  costs                                   404                2,333              -          2,737 
                                     --------  -------------------  -------------  ------------- 
 

The reconciliation of segmental operating loss to the Group's operating loss before exceptional items excluding central administrative costs is as follows:

 
                                                     Six months        Six months         Year ended 
                                                          ended 
                                                        30 June             ended        31 December 
                                                           2019 
                                                    (Unaudited)           30 June               2018 
                                                                             2018 
                                                                      (Unaudited)          (Audited) 
                                                        GBP'000           GBP'000            GBP'000 
Operating profit before exceptional 
 items and excluding central administrative 
 costs                                                      969               774              2,737 
Central administrative costs                              (980)             (774)            (1,514) 
Exceptional expenses                                       (90)              (54)              (172) 
Operating (loss)/profit                                   (101)              (54)              1,051 
Net finance cost                                           (17)             (223)              (341) 
                                                   ------------      ------------      ------------- 
(Loss)/profit before tax                                  (118)             (277)                710 
                                                   ------------      ------------      ------------- 
 
   5.            Amortisation of intangible assets 
 
                                                       Six months                Six months         Year ended 
                                                            ended 
                                                          30 June                     ended        31 December 
                                                             2019 
                                                      (Unaudited)                   30 June               2018 
                                                                                       2018 
                                                                                (Unaudited)          (Audited) 
Amortisation of:                                          GBP'000                   GBP'000            GBP'000 
Acquired intangible assets                                   (77)                     (151)              (144) 
Patents, trademarks and other intangible 
 assets                                                      (75)                      (79)              (162) 
Capitalised development costs                               (186)                      (47)              (319) 
                                                     ------------              ------------      ------------- 
                                                            (338)                     (277)              (625) 
                                                     ------------              ------------      ------------- 
 
   6.            Exceptional items 
 
                                             Six months                Six months         Year ended 
                                                  ended 
                                                30 June                     ended        31 December 
                                                   2019 
                                            (Unaudited)                   30 June               2018 
                                                                             2018 
                                                                      (Unaudited)          (Audited) 
                                                GBP'000                   GBP'000            GBP'000 
Costs incurred in acquisitions                     (90)                      (54)              (172) 
Total exceptional items                            (90)                      (54)              (172) 
                                           ------------              ------------      ------------- 
 

Exceptional items in the period related to fees incurred in the exploration of acquisition opportunities.

   7.            Taxation 

The Group calculates the income tax expense for the period using the tax rate that would be applicable to the expected total annual earnings. The major components of income tax expense in the Interim Condensed Statement of Comprehensive Income are as follows:

 
                                               Six months        Six months         Year ended 
                                                    ended             ended        31 December 
                                             30 June 2019           30 June               2018 
                                                                       2018 
                                              (Unaudited)       (Unaudited)          (Audited) 
                                                  GBP'000           GBP'000            GBP'000 
Current income tax                                    255               278                531 
Deferred income tax expense related 
 to origination and reversal of 
 timing differences                                     -              (57)               (57) 
                                           --------------      ------------      ------------- 
Income tax expense recognised 
 in statement of comprehensive 
 income                                               255               221                474 
                                           --------------      ------------      ------------- 
 

The current income tax expense is based on the profits of the Development and Manufacturing business based in Italy. The UK based businesses on a combined basis are currently loss making and so there are no UK income tax charges due in respect of trading for the first six months to 30 June 2019.

The Group has not recognised the deferred tax asset on losses made by the UK based businesses on a combined basis as although management are expecting the UK based businesses on a combined basis to become profitable, it is not currently certain when there will be sufficient taxable profits against which to offset such losses.

At the period end the estimated tax losses amounted to GBP9,888,000 (30 June 2018: GBP9,472,000; 31 December 2018: GBP9,257,000).

   8.            Other comprehensive income/(expense) 

Other comprehensive income/(expense) represents the foreign exchange difference on the translation of the assets, liabilities and reserves of Biokosmes which has a functional currency of Euros. The movement is shown in the foreign currency translation reserve between the date of acquisition of Biokosmes, when the GBP/EUR rate was 1.193 and the balance sheet date rate at 30 June 2019 of 1.14 (at 31 December 2018 of 1.121 and at 30 June 2018 of 1.129) and is an amount that may subsequently be reclassified to profit and loss.

   9.            Earnings per share 
 
                                          Six months   Six months                  Year ended 
                                               ended        ended                 30 December 
                                        30 June 2019      30 June                        2018 
                                                             2018 
                                         (Unaudited)  (Unaudited)                   (Audited) 
Weighted average number of ordinary 
 shares in issue                          83,711,106   36,837,106                  55,715,531 
(Loss)/Profit attributable to 
 equity holders of 
 the Company (GBP'000)                         (374)        (498)                         254 
Basic (loss)/profit per share 
 (pence)                                      (0.45)       (1.35)                        0.42 
Diluted (loss)/profit per share 
 (pence)                                      (0.45)       (1.35)                        0.38 
Adjusted profit /(loss) per share 
 (pence)                                        0.15       (0.36)                        2.06 
Diluted Adjusted profit /(loss) 
 per share (pence)                              0.14       (0.36)                        1.83 
 

In circumstances where the Basic and Adjusted results per share attributable to ordinary shareholders are a loss then the respective diluted figures are identical to the undiluted figures. This is because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore not dilutive under the terms of IAS 33.

   10.          Dividends 

Amounts recognised as distributions to equity holders in the period:

 
                          Six months         Six months         Year ended 
                               ended              ended        31 December 
                                                                      2018 
                        30 June 2019       30 June 2018          (Audited) 
                         (Unaudited)        (Unaudited) 
                             GBP'000            GBP'000            GBP'000 
Final dividend                     -                 15                 14 
                      --------------      -------------      ------------- 
 
   11.          Intangible assets 

The intangible assets of the group of GBP20.5 million (31 December 2018: GBP16.1m) include goodwill, development costs, patents and trademarks and customer relationships.

At the reporting date goodwill generated from the acquisitions of Biokosmes Srl in March 2014 and Periproducts Limited in March 2016 accounted for GBP13.1 million of the intangible assets of the Group (GBP13.1 million at 31 December 2018). There were no movements in goodwill during the period (increase in goodwill of GBP Nil in the 6 months to June 2018), nor have there been any impairment of goodwill during this time (6 months to June 2018: GBP Nil).

   12.          Share capital and share premium 
 
                                    Ordinary  Ordinary     Share    Merger 
                                   shares of    Shares   premium   reserve 
                                   0.3p each 
                                         No.   GBP'000   GBP'000   GBP'000 
Audited at 31 December 2018 
 and Unaudited at 30 June 2019    83,712,106       251    30,824     7,656 
                                  ----------  --------  --------  -------- 
 
 

There were no movements in share capital or share premium between 31 December 2018 and 30 June 2019.

   13.          Related party transactions 

The following transactions with related parties are considered by the Directors to be significant for the interpretation of the Interim Condensed Financial Statements for the six-month period to 30 June 2019 and the balances with related parties at 30 June 2019 and 31 December 2018:

Under the terms of the Share Purchase Agreement dated 28 November 2013 and signed between the Company and the vendors of Biokosmes, one of whom was Gianluca Braguti, the vendors agreed to indemnify the Company in full for any net liability arising from certain litigation cases which had not settled at the time of completion of the acquisition on 27 March 2014. At the period end the amount due to the Company under the indemnity totalled EUR250,935, of which Gianluca Braguti's liability is EUR248,426. Settlement of this liability will be made when the final outstanding case is concluded.

Key transactions with other related parties

Braguts' Real Estate Srl (formally known as Biokosmes Immobiliare Srl), a company 100% owned by Gianluca Braguti a director and shareholder of the Group provided property lease services to the Development and Manufacturing business totalling EUR230,000 in the six months to 30 June 2019 (EUR230,000 in the six months to 30 June 2018). At 30 June 2019, the Group owed Braguts' Real Estate Srl EUR297,000 (EUR297,000 at 31 December 2018).

   14.                  Financial instruments 

Set out below is an overview of financial instruments held by the Group as at:

 
                                    30 June 2019                   30 June 2018               31 December 2018 
                                                  -----------------------------  ----------------------------- 
                      Loans and  Total financial     Loans and  Total financial     Loans and  Total financial 
                    receivables           assets   receivables           assets   receivables           assets 
                        GBP'000          GBP'000       GBP'000          GBP'000       GBP'000          GBP'000 
Financial assets: 
Trade and other 
 receivables 
 (a)                      6,345            6,345         5,055            5,055         6,868            6,868 
Cash and cash 
 equivalents             10,932           10,932         1,496            1,496         9,623            9,623 
Total                    17,277           17,277         6,551            6,551        16,491           16,491 
                   ------------  ---------------  ------------  ---------------  ------------  --------------- 
 
 
                                30 June 2019                 30 June 2018             31 December 2018 
                 ---------------------------  ---------------------------  --------------------------- 
                 Liabilities           Total  Liabilities           Total  Liabilities           Total 
                  (amortised       financial   (amortised       financial   (amortised       financial 
                       cost)     liabilities        cost)     liabilities        cost)     liabilities 
                     GBP'000         GBP'000      GBP'000         GBP'000      GBP'000         GBP'000 
Financial 
liabilities: 
Trade and other 
 payables (b)          5,636           5,636        4,794           4,794        5,107           5,107 
Leasing 
 obligations           2,984           2,984        3,470           3,470        3,226           3,226 
Convertible 
 bond                      -               -        1,847           1,847            -               - 
Vendor loan 
 notes                     -               -        1,811           1,811            -               - 
Interest 
 bearing 
 debt                  4,543           4,543        4,632           4,632        3,842           3,842 
                 -----------  --------------  -----------  --------------  -----------  -------------- 
Total                 13,162          13,162       16,554          16,554       12,175          12,175 
                 -----------  --------------  -----------  --------------  -----------  -------------- 
 
 

(a) Trade and other receivables excludes prepayments

(b) Trade and other payables excludes deferred revenue

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 rns@lseg.com or visit www.rns.com.

END

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