TIDMVLG
RNS Number : 2996J
Venture Life Group PLC
09 April 2020
9 April 2020
VENTURE LIFE GROUP PLC
("Venture Life" "VLG" or the "Group")
Final Results
Record revenues and continued growth
Venture Life (AIM: VLG), a leader in developing, manufacturing
and commercialising products for the international self-care
market, announces its audited results for the year ended 31
December 2019.
Financial Highlights:
-- Revenues increased 7% to GBP20.2 million (2018: GBP18.8 million)
-- Gross profit increased 10% to GBP8.0 million (2018: GBP7.3 million)
-- Gross profit margin percentage increased to 39.6% (2018: 38.8%)
-- Adjusted EBITDA * increased 11% to GBP3.0 million (2018: GBP2.7 million)
-- Profit before tax, amortisation and exceptional items
increased to GBP2.2 million (2018: GBP1.5 million)
-- Profit before tax increased 92% to GBP1.4 million (2018: GBP0.7 million)
-- Adjusted earnings per share (**) of 2.18p (2018: adjusted earnings per share of 2.06p)
-- Net cash generated from operating activities of GBP3.0 million (2018: GBP2.5 million)
-- Cash at period end of GBP10.7 million (31 December 2018: GBP9.6 million)
* Adjusted for share based payments and exceptional items
** Adjusted for share based payments, amortisation and
exceptional items
Commercial Highlights:
-- Continued organic growth supported by new product launches
and 10 new international partnering agreements signed, furthering
the Group's geographical reach
-- 14 long-term development and manufacturing agreements completed
-- Venture Life Group plc was included in the 'London Stock
Exchange's 1000 Companies to Inspire Britain 2019' list, for the
fourth consecutive year
-- UltraDEX won 'Advertisement of the Year' at the FMC UK Dental
Awards in association with the BDIA
Post-period end highlights:
-- Acquisition of PharmaSource BV completed in January 2020
-- Orders received from Chinese Dentyl partner for over EUR7
million for 2020 delivery (at least EUR2 million for delivery in H1
2020), compared to sales totalling less than EUR450k in 2019
-- Six new partnering agreements signed: Myco Clear in Israel,
Procto-eze in Poland and Portugal, two new line extensions with our
Chinese Dentyl partner and an agreement on the recently acquired
PharmaSource BV products
-- The Group has instigated precautions and procedures to
protect its employees, customers and stakeholders against Covid-19,
and the business units in the UK, Netherlands and Italy are all
operational at this time
-- The Group has commenced production of sanitising gels, to
meet significant retailer demand in Europe, but also to supply on a
compassionate basis for no cost to local hospitals and pharmacies
in north Lombardy to help with the fight against the virus
-- Group order book value (excluding PharmaSource) is currently
more than 2.5 times the size of the order book at the same time
last year
Jerry Randall, CEO of Venture Life, commented: "I am delighted
to report another year of growth and continued momentum for the
Group, in which we delivered record revenues of GBP20.2 million. We
saw some challenges in relation to our partners in China, which
impacted our results for the year, but the rest of the Group
performed well. Our extensive efforts in seeking high-quality value
added synergistic acquisitions paid off at the end of the year with
the acquisition of PharmaSource BV. This immediately earnings
enhancing acquisition will benefit from the Group's operational
leverage, which will enable us to increase revenues and
profitability of this unit, whilst giving us our first
direct-to-retail presence in The Netherlands, and our second
operation in mainland Europe.
2020 has begun very well, with the order book currently more
than two and a half times the size it was at the same time last
year. The resumption of material orders, ahead of our expectations,
from our key Chinese partner since the start of the year will
significantly contribute to revenues and profits. These orders from
China have continued after the outbreak of Covid-19, with orders
placed even as recent as mid-March.
The Covid-19 outbreak is having wide reaching effects globally,
but at this time I must pay tribute to all our incredible
employees, particularly in Italy where the lockdown conditions have
been in place for many weeks, who are working hard to maintain our
business, our production and supply our customers with minimum
interruption. We have been supporting local hospitals and
pharmacies in the area of north Lombardy with free supplies of
sanitiser gel produced in-house, to support the fight against the
virus, and we are also already shipping this product to retailers
where naturally there is high demand.
With a deep long-term order book that continues to grow even
now, and significant resumption of orders from China, we have had
an excellent start to 2020. We have an exceptional team at Venture
Life, and I congratulate them all on a good 2019, but furthermore,
on a promising start to 2020 despite current circumstances. Whilst
the full global impact of Covid-19 is not known, the Group is very
well positioned to withstand the situation. We have a strong
balance sheet, dedicated and hard-working employees, a robust
orderbook and significant inventory position, which gives the Board
confidence for the year ahead in these difficult
circumstances."
For further information, please contact:
Venture Life Group PLC +44 (0) 1344 578004
Jerry Randall, Chief Executive Officer
Andrew Waters, Chief Financial Officer
+44 (0) 20 7397
Cenkos Securities plc (Nomad and Broker) 8900
Stephen Keys / Mark Connelly / Cameron MacRitchie
(Corporate Finance)
Russell Kerr / Michael Johnson (Sales)
Alma PR venturelife@almapr.co.uk or + 44 (0)
203 405 0208
Helena Bogle / Hilary Buchanan
/ Kieran Breheny
About Venture Life ( www.venture-life.com )
Venture Life is an international consumer self-care company
focused on developing, manufacturing and commercialising products
for the global self-care market. With operations in the UK, The
Netherlands and Italy, the Group's product portfolio includes some
key products such as the UltraDEX and Dentyl oral care product
ranges, food supplements for maintaining brain function, medical
devices for women's intimate healthcare, fungal infections and
proctology, and dermo-cosmetics for addressing the signs of
ageing.
The products, which are typically recommended by pharmacists or
healthcare practitioners, are available primarily through
pharmacies and grocery multiples. In the UK and The Netherlands,
these are supplied direct by the company to retailers, elsewhere
they are supplied by the Group's international distribution
partners.
Through its Development & Manufacturing business in Italy,
Biokosmes, the Group also provides development and manufacturing
services to companies for consumer healthcare products, primarily
medical devices.
Chair's Statement
Venture Life continued the momentum built in 2018 to deliver
record revenues of GBP20.2 million and adjusted EBITDA of GBP3.0
million (before exceptional items). This performance was delivered
against a mixed global economic backdrop and demonstrates the
strength of the Group's business model and niche focus.
In 2019, we were again included as one of the companies listed
in the London Stock Exchange's publication '1000 Companies to
Inspire Britain' for the fourth consecutive year - a publication
that recognises businesses across the UK that outperform their
peers. This is a strong testament to the continued growth and
development achieved by the whole team at Venture Life.
The practical Brexit challenges and uncertainties during 2019
for the Group centred around supply chain and making sure our UK
customers did not suffer any interruption to the supply of product
made in our factory in Italy, in the event of UK border related
issues. This also included maintaining back up manufacturers in the
UK for the relevant products. The whole Venture Life team worked
tirelessly and effectively to manage this potential issue and,
although there still remains uncertainty over how the UK will
conclude trade deals with its international counterparts, the Group
is well positioned to manage all outcomes with limited impact on
the business, if any.
Despite the slower than expected first half of the year,
impacted by one-off costs related to finance department
restructuring and an M&A project we terminated in the due
diligence stage, the business once again delivered a typically
strong second half to the year, with revenues of GBP10.8 million
(H1 GBP9.4 million), gross margin of 41.5% (H1 37.4%), and adjusted
EBITDA of GBP2.3 million (H1 GBP0.7 million). The stronger margin
in H2 reflected the effect of higher revenues through our fixed
cost base, demonstrating the Group's operational leverage. Revenues
in the second half were weighted towards the back end of the year
and were impacted slightly by the weakening euro in November and
December.
In May, we welcomed Andrew Waters, FCA, to the Board of Venture
Life as Chief Financial Officer. Andrew has been a welcome addition
to the team as we pursue our ambitious growth plans.
Our growth strategy continues to be focused on achieving
sustainable organic growth through our existing business, combined
with the selective acquired growth of assets that would benefit the
Group's operational leverage. Despite reviewing a significant
number of potential acquisition opportunities, we did not exchange
contracts on a transaction until late December, when the Group
acquired PharmaSource BV based in Breda, Netherlands subject to the
fulfilment of certain critical requirements, which were
subsequently met on 24 January 2020. The Group is in a solid
financial position, with sufficient cash on the balance sheet and
available debt facilities that we can deploy. We will continue to
consider acquisitions that complement our existing business and
satisfy our due diligence requirements.
On 24 January 2020, we completed the acquisition of PharmaSource
BV, a Netherlands based development and distribution company. This
is a successful, profitable and fast growing business that has
excellent product assets and customer channels that we can continue
to develop and grow within the Group. Additionally, PharmaSource BV
provides direct access to the Dutch retail pharmacy and grocery
channels. I am confident that this will be a valuable addition to
the Group. The financial results for 2019 and the statement of
financial position at 31 December 2019 exclude the results and
financial position of PharmaSource BV.
The impact of Covid-19 is being felt around the globe at this
time, and we at Venture Life are not immune from this impact.
However, the Group has instigated precautions and safety procedures
at all of its locations to protect its employees and its
operations. The safety of all our employees has been our utmost
priority, and we have been able to successfully achieve this to
date whilst maintaining production in Italy, and supply of raw
materials, to be able to meet our customers' requirements. This has
all been achieved by our amazing team of dedicated and committed
employees, particularly those in Italy that have been operating
under lock down conditions, and on behalf of the Board, I give them
our sincerest thanks and congratulations for this.
I would like to thank all our shareholders, employees and other
stakeholders for their support and wise counsel during this year
and into 2020. We start the new financial year with a record order
book and strong balance sheet, in addition to our recently acquired
PharmaSource BV business, which puts the business on the strongest
possible footing to weather the current Covid-19 situation and one
which will allow us to emerge even stronger once we are all through
this.
Dr Lynn Drummond
Non-Executive Chair
8 April 2020
Chief Executive's Statement
Introduction
The Group has once again delivered growth in revenues and
profits, combined with another immediately earnings enhancing
acquisition post period end. Despite facing a number of macro level
challenges during the period , the Group reported an increase in
revenues of 7%, an increase in adjusted EBITDA of 10%, as well as
an increase in operating cash generation of 20%.
The Group acquires, develops and manufactures products at its
facility in Italy. These products are sold either direct to
retailers in the UK and The Netherlands, through the Group's sales
operations, or via distributors in all other territories. The
products are split into two categories: Venture Life Brands (VLG
Brands), assets and brands that the Group owns, which represented
33% of the revenues in 2019 (2018: 35%); and Customer Brands,
customer-owned assets and brands, developed and manufactured by the
Group. This represented 65% of the revenues during 2019 (2018:
65%). By developing the Customer Brands, the Group is able to lock
in long-term manufacturing revenues.
The Group's products are registered either as medical devices or
cosmetics, with medical devices representing approximately 59% of
total Group revenues. This will increase in 2020 through organic
growth and with the addition of the PharmaSource products, which
are mostly medical devices.
Revenues for the year increased to GBP20.2 million (2018:
GBP18.8 million), helped by growth in both our VLG Brands business,
which was up 1% to GBP6.7 million (2018: GBP6.6 million) and our
Customer Brands business, up 11% to GBP13.5 million (2018: GBP12.2
million). We are satisfied with the progress achieved in our VLG
Brands business given that both of our Chinese customers purchased
significantly less product in 2019 compared to 2018, and that we
were still dealing with the annualisation of the legacy UK delists
of Dentyl that we inherited when we bought the brand.
As is normal for the business, due to historic customer ordering
patterns, second half revenues were higher (+14%) than in the first
half. This resulted in a significantly higher gross margin of 41.5%
in the second half (H1 37.4%), demonstrating the strong operational
leverage effect of higher revenues.
Our Customer Brands business, through Biokosmes in Italy,
continued to perform well with an 11% increase in revenues over
2018, delivering more volume through our facility and utilising the
significant operational leverage that we have there.
The Group is well positioned to capitalise on the growing
self-care market, which is being driven by an expanding ageing
population, with people living longer and having to take greater
responsibility for their own health.
Growth strategy
Our growth strategy is centred on increasing revenues, which
then accelerate profitability through operational leverage. We grow
revenues through:
- Existing customers growing revenues in their markets
- Increasing the geographic penetration of our products through existing or new partners
- Product innovation and development available to all markets
- Acquisition of product assets that we can then expand
geographically and transfer to our manufacturing facility
Operating review
Acquisition of PharmaSource BV
In line with our stated strategy of acquisitive growth alongside
organic growth, on 19 December 2019 we exchanged contracts to
acquire the entire issued share capital of PharmaSource BV, a
privately held consumer self-care products company based in The
Netherlands, subject to completion of certain critical actions. The
acquisition was completed on 24 January 2020 and will be
immediately earnings enhancing. This innovative, fast growing and
profitable business is selling some proven medical devices in the
areas of fungal nail infections, wart removal, oral and women's
health. The products are sold direct through retail and grocery
chains in The Netherlands, and also through some key international
distributors in Europe.
PharmaSource delivered revenues of EUR2.6 million in the year
ended 31 December 2019, and profit before tax of EUR0.9 million.
These results are not included in Venture Life Group's results in
the year ended 31 December 2019. The consideration for the
acquisition was a total of EUR6.5 million, although EUR1.3 million
of this is deferred, related to the confirmation of the 2019
results and a small product approval.
The acquisition brings many benefits and opportunities for the
Group:
-- A new range of products with limited current international exposure that we can partner
-- Direct access to the retail channels in The Netherlands, that
we can look to exploit further with existing Venture Life
products
-- New international partners that we can now consider for some of the Venture Life products
-- Utilising our operational leverage and facilities to create
profit and cost synergies going forward.
The integration is progressing well and we plan to maintain and
build on the operations in The Netherlands as we grow the business
there. We have already achieved our first new partner agreement for
products from PharmaSource BV, with Lloyds Pharmacy in the UK
agreeing to take the wart pen for distribution throughout their UK
pharmacy outlets, having already launched Venture Life's Myco Clear
nail fungal brush product in 2019.
Venture Life Brands
UltraDEX
Revenues remained steady at GBP3.2 million (2018: GBP3.2
million) across all markets. Sales in the UK and Ireland, where we
sell direct into retail remained flat at GBP2.6 million (2018:
GBP2.6 million) - a solid performance given the UK mouthwash market
declined at rate of 5% in 2019.
Despite a decline in the mouthwash market, we have secured new
distribution points with ASDA and Well Pharmacy for UltraDEX. Now
available in key UK pharmacies and grocery retailers including
Boots, Superdrug, Lloyds Pharmacies, Tesco, ASDA and Sainsbury's,
amongst others, we have increased UltraDEX's UK points of
distribution significantly since the acquisition in 2016 by 34%.
Our marketing in 2020 will continue to focus increasingly on
digital and social media aspects, following the effective
"Smellephant" campaign in 2019.
Internationally, the brand is partnered in 17 countries, with
revenues outside of the UK and Ireland of GBP0.6 million (2018:
GBP0.6 million). Revenues were flat in 2019, as 2018 included some
first orders for partners, which included both initial stocking and
anticipated sell through. However, good progress has been made post
period end and we expect 2020 to deliver exceptional growth
internationally compared to 2019.
Dentyl
We received a first full year of revenues from Dentyl in 2019
(mouthwash and fresh breath beads), having acquired the brand in
August 2018. Revenues in 2019 for the brand were GBP2.2 million
(2018 for 5 months: GBP1.6 million). This first full year was
mixed, with a consolidation of the UK business, which contained a
number of legacy delists and one-offs that had been initiated
before we acquired the brand, and issues with sales to our Chinese
partner due to quality issues on externally manufactured products.
However, these one-off delists have now run their course, and the
order book for China in 2020 is growing significantly.
In the UK & Ireland, revenues rose 135% to GBP1.9 million
(2018 for 5 months: GBP0.8 million). Dentyl had been neglected in
the hands of the previous owner, and our focus has been on
rebuilding trust in the brand through retailer and public
engagement, refreshing the brand image and partly bringing
manufacturing and development in-house. As a result, we have been
able to reverse some of the delistings that occurred in the hands
of the previous owners, including BodyCare Plus. Additionally,
Superdrug has increased its listings, while Lloyds Pharmacy
launched the mouthwash in 2019. We are confident in the growth
opportunity for Dentyl and have invested in a number of new product
development ideas that will come to market in 2020, both in the UK
and internationally. As with UltraDEX, good progress has also been
made post period end and we expect 2020 to deliver very good growth
internationally compared to 2019.
As reported previously, internationally, the brand did not meet
our expectations in 2019, with revenues of GBP0.3 million (2018 for
5 months: GBP0.8 million), and these 2019 sales were predominantly
of the Dentyl fresh breath beads. In 2018, our Chinese partner for
this brand launched the mouthwash in China and achieved good early
success. However, as previously mentioned, quality problems at the
external contract manufacturer caused our partner to halt sales and
marketing in January 2019 until the issues were resolved. Transfer
of production in-house to our Italian facility and changes to the
packaging solved the issues by mid 2019, but the break in sales and
marketing activities affected sell through of the product in
China.
However, it is pleasing to report that since our partner
restarted the sales and marketing activities in late 2019, sales
have escalated rapidly and at the time of writing, we received
orders totalling over EUR7.0 million from this partner for delivery
in 2020, for Dentyl mouthwash, Dentyl Fresh Breath Beads and other
products. Of this, more than EUR2.0 million is expected to be
delivered in H1 2020. This partner also expects to launch the newly
developed Dentyl toothpaste range in 2020 as well as the two new
limited editions mouthwash that will launch mid 2020. As a result,
whilst 2019 was a disappointing year for the Dentyl brand in China,
our partner is now making excellent progress and we expect to see
considerable growth in 2020 and beyond. This partner has also
reported that sell out in China has not been noticeably affected by
the recent coronavirus issue, as sales are purely online.
Additionally, we have continued to partner Dentyl in new
geographies, such as France, and we will continue to see further
developments in 2020.
Lubatti
This skincare product range is only partnered in China, with a
different partner from that which sells Dentyl and sales during
2019 amounted to GBP0.1 million. Prior to 2019, sales of Lubatti to
this partner totalled GBP2.3 million over five years. The retail
markets are changing rapidly in China and online sales are growing
at a faster rate than expected. Our partner has over 2,000 high
street stores focused on skincare, but in the past three years it
reported that its footfall through these stores fell by 60%. Our
partner has consequently decided to halt any further high street
store expansion, instead investing in online sales. This change in
strategy midway through 2019 has meant the Lubatti brand will now
be sold exclusively online and orders resumed in late 2019. Our
partner remains committed to the brand and to this new strategy,
and we expect revenues to increase throughout 2020. At the date of
writing, our partner for Lubatti in China reported that 90% of
their stores across mainland China had reopened with sales
gradually returning to normal levels.
Procto-Eze
This brand is gaining more prominence within our portfolio, with
revenues increasing by 8% to GBP0.5 million in 2019. The range
includes three SKUs and has gained traction with partners in nine
countries, including two further long-term partner agreements that
were signed post year-end in Poland and Portugal.
Other brands
Revenues from the rest of the branded portfolio were GBP0.7
million (2018: GBP0.2 million) including NeuroAge, Myco Clear and
Vonalei. We continue to identify new partners for these smaller
brands and signed four new long-term partner deals on these brands
in 2019.
Customer Brands
Customer Brand revenues grew 11% in the year to GBP13.5 million
(2018: GBP12.2 million), with growth from both existing and new
customers. The new Medical Device Regulations (MDR) that will be
instated in May 2021 (originally May 2020 but recently delayed by
one year due to Covid-19) have driven significant development
activities in the business, including investing in the conversion
of the existing products from the existing Medical Device Directive
(MDD). The more stringent regulations required investment to
improve the technical file for many of our own and our customers'
products, which will in turn lead to ongoing future revenues for
the Group arising from these products. As the new MDR regulations
come into force, this will improve the attractiveness and value of
these enhanced products, with less technical products from
competitors failing the tests of rigour.
Investments and R&D
We continue to invest in the plant in Italy, in order to improve
efficiency. In 2019, this included investment in upgraded filling
capability for UltraDEX and Dentyl and increased secondary
packaging areas. We have also invested in the new EDI batch
labelling system, which will become mandatory from 2023 and we are
seeing new customers attracted due to this capability.
New product development is a key contributor to growing
revenues, and at the facility in Italy we have continued the
development of new products apace in 2019. As well as developing
new products for sale under customers' own brands, we developed new
products for our own brands, including three new flavours of the
Dentyl toothpaste to be sold alongside the mouthwash range, and
some limited editions of the Dentyl mouthwash, which will launch in
mid-2020.
We have also now fully validated the manufacture of the Dentyl
mouthwash product in our facility and have already started to
deliver the product from there to international markets.
Summary & outlook
We are delighted to have delivered organic growth in revenues
and profits in 2019, despite experiencing a number of challenges
during the year. The Group continues to exploit and further invest
in its operational leverage, which we expect to bring increased
efficiency and profitability in the future.
The main challenge experienced during the period was the
performance of our two Chinese partners and it is pleasing to
report that this has been overcome. Already this year, we have
received orders from our key Chinese Dentyl partner of over EUR7
million for delivery in 2020, (of which more than EUR2 million is
due for delivery in the first half), which is well ahead of what we
had budgeted. These orders from China are contributing to a very
strong current order book overall for the business, and at the time
of writing the order book value stands at more than 2.5 times the
value at the same time last year, even excluding the order book at
PharmaSource.
We are seeing growth from many of our partners, and there is no
doubt that the new MDR will benefit the Group in the long-term,
delivering significant and sustainable long-term revenues. The
addition of the earnings enhancing PharmaSource business will
deliver additional revenue, profit and cash flow to the Group, and
provide significant opportunities for operational leverage in 2020
and beyond.
We continue to seek out and evaluate small bolt-on acquisitions,
to utilise the surplus cash and debt facilities available to us, to
further enhance Group profitability.
The Covid-19 virus has had and is having a dramatic effect on
the world at this time. Our development and production facility,
Biokosmes, is based in Bosisio Parini in the north of Lombardy and
our people and our business became subject to the severe lockdown
regulations imposed by the Italian Government to cope with impact
of the virus. Similar restrictions are now in place in the UK and
The Netherlands. However, as a Group we have implemented a number
of precautions to meet the requirements of local Governments in
relation to the Covid-19 restrictions and regard the business to be
as prepared as it could be, and we are considered an essential
supplier by the Italian Government. The precautions we have put in
place have been to protect our employees first, and then our
business, our customers, our suppliers and all of our
stakeholders.
At our Italian facility we have also initiated the manufacture
of hand sanitising gel. This has been to satisfy commercial demand
from retailers, and also we have supplied product on a
compassionate basis at no cost to hospitals and pharmacies in the
north Lombardy area to support the fight against Covid-19.
As a result of the dedication and commitment of all our
employees, in all locations of the Group, we have been able to
continue to operate our business. More specifically in Italy, our
development and manufacturing facility remains open and
operational, and processing the significant order book that we have
on hand, and shipping to our customers. We cannot predict how this
issue will continue to manifest itself in the coming weeks and
months, but we have undertaken extensive financial stress tests on
our business, which confirm that we are in a strong and robust
position to deal with the current and anticipated disruption due to
the Covid-19 crisis. At this time our magnificent team in all our
locations has risen to the challenge of making sure we continue to
deliver to our customers around the world as we always have.
I would like to thank our employees for their hard work and
commitment to our business, and our shareholders, for their
continued support for the business in these challenging market
conditions. Having already completed our first quarter, and having
implemented specific procedures for our business to operate in this
difficult Covid-19 environment, the Board is confident that the
business is well positioned to continue to operate in these
challenging current conditions and emerge with a stronger business
on the other side.
Jerry Randall
Chief Executive Officer
8 April 2020
2019 Financial Review
The Group delivered robust results for the year, once again
delivering on its profitability progression driving greater
revenues through the infrastructure. All profitability measures
(gross profit, EBITDA, operating profit, pre-tax profit and
post-tax profit) increased commensurately, as did all measures of
operational cash flow.
Statement of Comprehensive Income
The Group reported 2019 revenues of GBP20.2 million, an increase
of 7% over the GBP18.8 million reported in 2018. The Venture Life
Brands business reported relatively flat revenues at GBP6.7 million
(2018: GBP6.6 million). The Dentyl brand grew by 35% to GBP2.2
million in 2019 (2018: GBP1.6 million) primarily reflecting the
full year-effect on sales in the UK market, which was significantly
offset by reduced international sales to China due to the temporary
packaging issue (which has subsequently been resolved). UltraDEX
net sales remained broadly flat at GBP3.2 million in 2019
comprising relatively stable sales of GBP2.6 million to UK &
Ireland retailers and GBP0.6 million to international partners.
Sales of the Lubatti brand to China fell by GBP0.7 million due to a
one-off change in selling strategy by the Chinese partner resulting
in a re-balancing of trade inventory levels. Sales of the group's
other branded products grew 24%, reflecting a blend of increasing
geographic footprint coupled with volume growth.
The Customer Brands business reported revenues (excluding
intercompany sales) of GBP13.5 million, an increase of 11% from
2018. This business is focused on the development and manufacture
of products on behalf of third parties to be sold under their
brands and the growth is partly attributable to newly launched
assets.
The euro fluctuated against the pound in 2019, which resulted in
slightly reduced reported revenue and administrative costs (large
elements of these are in euros). The overall impact of the changes
in foreign currency rates nevertheless had only a marginal effect
on the reported operating profit of the Group. The appreciation of
sterling at the year-end gave rise to a small gain within finance
costs resulting from the revaluation of the Group's euro
denominated loans partially offset by a small foreign exchange loss
on the Group's euro denominated assets (mostly Italian factory
plant & machinery).
The gross margin for 2019 was 39.6% (2018: 38.9%), which
resulted from higher revenues and factory throughput, partially
offset by slightly higher promotional spending behind the UK brands
especially Dentyl.
Administrative costs (pre-exceptional items) at GBP6.7 million
were 9% higher in 2019 than in 2018 (2018: GBP6.2 million) due in
part to some one-off non-recurring operating expenditures
pertaining to changes in staff. Exceptional costs of GBP208,000
(2018: GBP172,000) related to legal and professional fees incurred
in the acquisition of the PharmaSource business (announced 19
December 2019 and completed 24 January 2020), as well as
speculative due diligence activities conducted earlier in the
year.
Operating profit was GBP1.5 million (2018: GBP1.2 million)
(before exceptional items) with the profit before tax for the Group
of GBP1.4 million (2018: GBP0.7 million). The Group reported profit
after tax of GBP0.9 million (2018: profit of GBP0.2 million).
Finance costs were a credit of GBP0.1 million and reflected both
positive net interest (as interest income on sterling deposits
exceeded interest payable on euro loans) coupled with foreign
exchange gains arising principally upon settlement of euro
denominated costs during periods of sterling appreciation.
These translated into basic earnings per share of 1.08 pence
(2018: 0.42 pence), with the improvement in business performance
generating enhanced shareholder value. Adjusted earnings per share
(adjusted for exceptional items, share-based payments and
amortisation of intangible assets) were 2.18 pence (2018: adjusted
earnings per share 2.06 pence). The number of shares in issue as at
31 December 2019 was unchanged at 83,712,106 (31 December 2018:
83,712,106).
Statement of Financial Position
Intangible assets increased slightly by GBP0.2 million,
comprising further capitalisation of development costs of GBP0.8
million and continuing investment in patents and trademarks of
GBP0.1 million partially offset by ongoing amortisation.
Capitalised development costs are carried in the amount of GBP1.9
million and reflect the recent peaking in workflow assisting our
customers with formulation upgrades and changes to the Medical
Device regulations arising in 2020. Whilst consuming cash, this
investment continues to be value-enhancing through strengthening
relationships with our customer base. Property, plant and equipment
decreased as the net result of investment of GBP0.4 million in new
equipment in the Customer Brands business was more than offset by
ongoing depreciation.
Working capital was well managed during 2019, with the closing
balance at 31 December 2019 in line with the prior year and not
increasing despite the growth in the business. Specifically,
inventories increased in-line with business growth coupled with the
proactive policy to increase UK inventories in the run-up to Brexit
in order to secure supply across potentially uncertain times. Trade
debtors decreased and trade creditors increased reflecting efforts
to improve the overall working capital funds deployment.
Cash and debt
Cash and cash equivalents at the year end totalled GBP10.7
million (2018: GBP9.6 million). Net cash inflow during 2019
amounted to GBP1.4 million with the increase in cash balances
accounted for as follows:
-- Operating cash flow before movements in working capital - inflow of GBP3.0 million
-- Tax paid - outflow of GBP0.4 million
-- Net movement in working capital, including GBP1.4 million
build of UK inventory as part of Brexit preparations - offset by
debtor & creditor flux - neutral movement
-- Investment in manufacturing facility - outflow of GBP0.4 million
-- Investment in intangible development assets - outflow of GBP0.8 million
-- Repayment of Finance Leases - outflow of GBP0.6 million
-- Drawdown of new EUR1 million loan - inflow of GBP0.8 million
-- Repayment of existing term loans - outflow of GBP0.2 million
Net cash, excluding finance lease obligations, increased from
GBP5.8 million as at 31 December 2018 to GBP6.3 million as at 31
December 2019.
The Group is financed by a range of largely euro denominated
interest-bearing debt of varying maturities, comprising of invoice
financing and unsecured bank loans. During May 2019 the group
secured a further EUR1 million loan from an Italian bank at an
attractive interest rate and repayable by 2024. Given the net cash
position at the year end, the Group is comfortable with the level
of debt in the business which is being used to finance growth and
investment. The Directors have prepared detailed forecasts looking
beyond 12 months from the date of these financial statements and
expect the Group to continue to operate profitably in the
foreseeable future, generate positive operating cashflows and
comfortably meet all scheduled loan repayments as they fall
due.
The Group has delivered a robust performance in 2019 with strong
and growing operating profit, pre-tax profit, post-tax profit and
operating cashflow. The start of 2020 has been particularly strong
with the sales order book at 09 April 2020 significantly higher
than in previous years. As described in the Post Balance Sheet
Events note, the Group is managing the impact of Covid-19 on its
business and the uncertainty that this might bring. Following
analysis and consideration of even an extreme worst-case scenario,
the directors believe that the Group has sufficient resources to
continue in operational existence for the foreseeable future and to
comfortably make scheduled loan repayments as they fall due. The
Directors therefore conclude that the Going Concern basis remains
the appropriate basis upon which to prepare the Group's financial
statements.
Andrew Waters
Chief Financial Officer
8 April 2020
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
Company number 05651130
Year ended Year ended
31 December 31 December
2019 2018
Notes GBP'000 GBP'000
------------------------------------------------------ ----- ----------- -----------
Revenue 2 20,206 18,770
Cost of sales (12,203) (11,482)
------------------------------------------------------ ----- ----------- -----------
Gross profit 8,003 7,288
Administrative expenses
Operating expenses (6,101) (5,534)
Amortisation of intangible assets (579) (625)
------------------------------------------------------ ----- ----------- -----------
Total administrative expenses (6,680) (6,159)
Other income 163 94
------------------------------------------------------ ----- ----------- -----------
Operating profit before exceptional items 1,486 1,223
Exceptional costs 3 (208) (172)
------------------------------------------------------ ----- ----------- -----------
Operating profit 1,278 1,051
Finance income 152 -
Finance costs (68) (341)
------------------------------------------------------ ----- ----------- -----------
Profit before tax 1,362 710
Tax 4 (458) (474)
------------------------------------------------------ ----- ----------- -----------
Profit/(loss) for the year 904 236
Other comprehensive income which will not
be subsequently reclassified to the income
statement
Other comprehensive income which will be subsequently
reclassified to the income statement (300) 18
------------------------------------------------------ ----- ----------- -----------
Total comprehensive profit / (loss) for the
year attributable to equity holders of the
parent 604 254
------------------------------------------------------ ----- ----------- -----------
All of the profit and the total comprehensive income for the
year is attributable to equity holders of the parent.
Year ended Year ended
31 December 31 December
2019 2018
------------------------------------------ ----------- -----------
Profit/(loss) per share
Basic profit / (loss) per share (pence) 51.08 0.42
Diluted profit / (loss) per share (pence) 51.01 0.38
------------------------------------------ ----------- -----------
Adjusted profit per share (pence) version
2 - no exceptional costs 52.18 2.06
Adjusted diluted profit per share (pence) 52.04 1.83
------------------------------------------ ----------- -----------
Consolidated Statement of Financial Position
at 31 December 2019
Company number 05651130
At 31 December At 31 December
2019 2018
Note GBP'000 GBP'000
-------------------------------------------- ---- -------------- --------------
Assets
Non-current assets
Intangible assets 7 20,722 20,542
Property, plant and equipment 4,152 4,591
-------------------------------------------- ---- -------------- --------------
24,874 25,133
-------------------------------------------- ---- -------------- --------------
Current assets
Inventories 5,083 3,869
Trade and other receivables 6,363 7,020
Cash and cash equivalents 8 10,710 9,623
-------------------------------------------- ---- -------------- --------------
22,155 20,512
-------------------------------------------- ---- -------------- --------------
Total assets 47,029 45,645
-------------------------------------------- ---- -------------- --------------
Equity and liabilities
Capital and reserves
Share capital 9 251 251
Share premium account 9 30,824 30,824
Merger reserve 9 7,656 7,656
Foreign currency translation reserve (47) 252
Share-based payments reserve 624 609
Retained earnings (6,492) (7,512)
-------------------------------------------- ---- -------------- --------------
Total equity attributable to equity holders
of the parent 32,816 32,080
-------------------------------------------- ---- -------------- --------------
Liabilities
Current liabilities
Trade and other payables 5,491 4,868
Taxation 218 -
Interest-bearing borrowings 10 2,434 1,911
8,143 6,779
-------------------------------------------- ---- -------------- --------------
Non-current liabilities
Interest-bearing borrowings 10 4,591 5,157
Statutory employment provision 1,058 1,062
Deferred tax liability 421 567
-------------------------------------------- ---- -------------- --------------
6,070 6,786
-------------------------------------------- ---- -------------- --------------
Total liabilities 14,213 13,565
-------------------------------------------- ---- -------------- --------------
Total equity and liabilities 47,029 45,645
-------------------------------------------- ---- -------------- --------------
Consolidated Statement of Changes in Equity
for the year ended 31 December 2019
Foreign
Share Convertible currency Share-based
Share premium Merger bond translation payments 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
2018 111 13,289 7,656 109 234 497 (7,711) 14,185
Impact of adoption
of IFRS 9 on opening
balances - - - - - - (37) (37)
Balance at 1 January
2018 (adjusted) 111 13,289 7,656 109 234 497 (7,748) 14,148
Profit for the year - - - - - - 236 236
Foreign exchange
on translation - - - - 18 - - 18
------------------------- ------- -------- -------- ----------- ----------- ----------- -------- -------
Total comprehensive
expense - - - - 18 - 236 254
Issue of Share Capital 140 17,535 - - - - - 17,675
Repayment of convertible
bond - - - (109) - - 14 (95)
Share options charge - - - - - 112 - 112
Dividends - - - - - - (14) (14)
------- -------- -------- ----------- ----------- ----------- -------- -------
Transactions with
shareholders 140 17,535 - (109) - 112 (14) 17,678
------------------------- ------- -------- -------- ----------- ----------- ----------- -------- -------
Balance at 1 January
2019 251 30,824 7,656 - 252 609 (7,512) 32,080
Profit for the year - - - - - - 904 904
Foreign exchange
on translation - - - - (300) - - (300)
------------------------- ------- -------- -------- ----------- ----------- ----------- -------- -------
Total comprehensive
income - - - - (300) - 904 604
------------------------- ------- -------- -------- ----------- ----------- ----------- -------- -------
Share options charge - - - - - 131 - 131
Share options IFRS2
recycling - - - - - (115) 115 -
------------------------- ------- -------- -------- ----------- ----------- ----------- -------- -------
Transactions with
shareholders - - - - - 16 115 131
------------------------- ------- -------- -------- ----------- ----------- ----------- -------- -------
Balance at 31 December
2018 251 30,824 7,656 - (47) 624 (6,492) 32,816
------------------------- ------- -------- -------- ----------- ----------- ----------- -------- -------
IFRS 9 was adopted with effect from 1st January 2018. The impact
of adoption on the opening position was to increase the bad debt
provision at 1 January 2018 by GBP37,000 and accordingly reduce
retained earnings by GBP37,000.
As at 31st December 2019 the parent entity has lacked
distributable reserves and is accordingly not in a position to
declare any dividend.
During the year the second Tranche of the management long term
incentive matured but failed to meet its vesting conditions. The
accumulated provision within the Share Based Payments reserve of
GBP115,000 was discharged and recycled into retained earnings in
accordance with IFRS2
Consolidated Statement of Cash Flows
for the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
-------------------------------------------------------------- ----------- -----------
Cash flow from operating activities
Profit before tax 1,362 710
Finance (income) / expense (84) 341
-------------------------------------------------------------- ----------- -----------
Operating profit 1,278 1,051
Adjustments for:
- Depreciation of property, plant and equipment 786 756
- Amortisation of intangible assets 579 625
- Finance cost 32 (276)
- Disposal of capitalised development cost 147 148
- Share-based payment expense 131 112
-------------------------------------------------------------- ----------- -----------
Operating cash flow before movements in working capital 2,953 2,452
Tax paid (412) (565)
Increase in inventories (1,373) (259)
Increase in trade and other receivables (235) (1,868)
Increase/(decrease) in trade and other payables 1,507 478
-------------------------------------------------------------- ----------- -----------
Net cash generated by operating activities 2,441 238
-------------------------------------------------------------- ----------- -----------
Cash flow from investing activities:
Acquisition of Brands - net cash payment - (4,200)
Purchases of property, plant and equipment (388) (271)
Expenditure in respect of intangible assets (757) (744)
Proceeds on disposal of tangible asset - -
-------------------------------------------------------------- ----------- -----------
Net cash used in investing activities (1,145) (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 of interest-bearing borrowings 696 200
- Leasing obligation repayments (previously in administration
costs) (585) (528)
Dividends paid - (14)
Net cash from financing activities 111 13,233
-------------------------------------------------------------- ----------- -----------
Net increase / (decrease) in cash and cash equivalents 1,406 8,256
Net foreign exchange difference (319) 6
Cash and cash equivalents at beginning of period 9,623 1,361
-------------------------------------------------------------- ----------- -----------
Cash and cash equivalents at end of period 10,710 9,623
-------------------------------------------------------------- ----------- -----------
Notes to the Consolidated Statements
for the year ended 31 December 2019
1. Basis of the announcement
The nancial information of the Group set out above does not
constitute statutory accounts for the purposes of Section 435 of
the Companies Act 2006. The nancial information for the year ended
31 December 2019 has been extracted from the Group's audited
nancial statements which were approved by the Board of directors on
7(th) April 2020 and delivered to the Registrar of Companies for
England and Wales following the Company's 2020 Annual General
Meeting.
The nancial information for the year ended 31 December 2019 has
been extracted from the Group's nancial statements for that period.
The report of the auditor on the 2019 nancial statements was
unquali ed, did not include any references to any matters to which
the auditors drew attention by way of emphasis without qualifying
their report and did not contain a statement under Section 498(2)
or Section 498(3) of the Companies Act 2006.
Whilst the nancial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards ('IFRSs') as adopted by the European Union, this
announcement does not itself contain su cient information to comply
with those IFRSs. This nancial information has been prepared in
accordance with the accounting policies set out in the 2019 Report
and Accounts and updated for new standards adopted in the current
year.
Items included in the nancial information 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 nancial information is presented in UK sterling
(GBP), which is the Group's presentational currency.
The Company is a public limited company incorporated and
domiciled in England & Wales and whose shares are quoted on
AIM, a market operated by The London Stock Exchange.
The principal activity of Venture Life Group plc and its
subsidiaries is the development and commercialisation of healthcare
products, including food supplements, medical devices and
dermo-cosmetics for the ageing population, and the manufacture of a
range of topical products for the healthcare and cosmetics
2.1 Segment revenue and results
The following is an analysis of the Group's revenue and results
by reportable segment.
Venture
Life Customer Consolidated
Brands Brands Group
GBP'000 GBP'000 GBP'000
-------------------------------------- ------- ---------- --------------
Year ended 31 December 2019
Revenue
Sale of goods 6,699 15,087 21,787
Sale of services - 420 420
Intercompany sales elimination - (2,001) (2,001)
-------------------------------------- ------- ---------- --------------
Total external revenue 6,699 13,507 20,206
-------------------------------------- ------- ---------- --------------
Results
Operating profit before exceptional
items
and excluding central administrative
costs 626 2,827 3,453
-------------------------------------- ------- ---------- --------------
Year ended 31 December 2018
Revenue
Sale of goods 6,627 14,476 21,103
Sale of services - 411 411
Intercompany sales elimination - (2,744) (2,744)
-------------------------------------- ------- ---------- --------------
Total external revenue 6,627 12,143 18,770
-------------------------------------- ------- ---------- --------------
Results
Operating profit before exceptional
items
and excluding central administrative
costs 404 2,333 2,737
-------------------------------------- ------- ---------- --------------
All revenue of the Group is recognised at point in time as
determined by IFRS15.
The reconciliation of segmental operating profit to the Group's
profit before tax is as follows:
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
-------------------------------------------------------- ------------ ------------
Operating profit before exceptional items and excluding
central administrative costs 3,453 2,737
Exceptional items (208) (172)
Central administrative costs (1,967) (1,514)
Finance income / (costs) 84 (341)
-------------------------------------------------------- ------------ ------------
Profit before tax 1,362 710
-------------------------------------------------------- ------------ ------------
One customer generated revenue of GBP4,083,000 which accounted
for 10% or more of total revenue (2018: one customer generated
revenue of GBP4,170,000 which accounted for 10% or more of total
revenue).
2.2 Segmental assets and liabilities
At 31 December At 31 December
2019 2018
GBP'000 GBP'000
------------------------------- -------------- --------------
Assets
Brands 8,776 8,284
Development and Manufacturing 16,657 14,078
Group consolidated assets 21,596 23,283
------------------------------- -------------- --------------
Consolidated total assets 47,029 45,645
------------------------------- -------------- --------------
Liabilities
Brands 4,148 2,249
Development and Manufacturing 9,741 10,953
Group consolidated liabilities 324 363
------------------------------- -------------- --------------
Consolidated total liabilities 14,213 13,565
------------------------------- -------------- --------------
2.3 Other segmental information
Depreciation Additions
to
and non-current
amortisation assets
GBP'000 GBP'000
------------------------------ ------------- -----------
Year ended 31 December 2019
Brands 153 64
Development and Manufacturing 1,076 1,003
Central administration 136 -
------------------------------ ------------- -----------
1,365 1,067
------------------------------ ------------- -----------
Year ended 31 December 2018
Brands 163 4,379
Development and Manufacturing 916 1,015
Central administration 301 -
------------------------------ ------------- -----------
1,380 5,394
------------------------------ ------------- -----------
2.4 Geographical information
The Group's revenue from external customers by geographical
location of customer is detailed below:
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------ ----------- -----------
Revenue
UK 7,615 7,667
Italy 6,279 4,279
Switzerland 2,987 3,388
Rest of Europe 2,238 1,421
Rest of the World 1,087 2,015
------------------ ----------- -----------
Total revenue 20,206 18,770
------------------ ----------- -----------
3. Exceptional costs
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------------------------------ ----------- -----------
Costs incurred in due diligence pertaining to aborted
acquisitions 96 -
------------------------------------------------------ ----------- -----------
Costs incurred in the acquisition of PharmaSource
BV 112 -
------------------------------------------------------ ----------- -----------
Costs incurred in the acquisition of the Dentyl brand - 172
------------------------------------------------------ ----------- -----------
Total exceptional costs 208 172
------------------------------------------------------ ----------- -----------
During the period the Group incurred legal and professional fees
in relation to prospective acquisitions including the PharmaSource
BV acquisition, which was completed shortly after the year-end.
4. Income tax expense
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
-------------------------------------------------- ----------- -----------
Current tax:
Current tax on profits for the year 627 531
Adjustments in respect of earlier years (30) -
-------------------------------------------------- ----------- -----------
Total current tax expense 597 531
-------------------------------------------------- ----------- -----------
Deferred tax:
Origination and reversal of temporary differences (139) (57)
-------------------------------------------------- ----------- -----------
Total deferred tax expense (139) (57)
-------------------------------------------------- ----------- -----------
Total income tax expense 458 474
-------------------------------------------------- ----------- -----------
Tax on the Group's profit/(loss) before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to profits and losses of the consolidated entities
as follows:
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------------------------------ ----------- -----------
Profit/(loss) before tax 1,362 710
Profit/(loss) before taxation multiplied by the local
tax rate of 19% (2018: 19%) 259 135
(Income) / Expenses not deductible for tax purposes 74 70
Change in recognised deferred tax liability (139) (57)
Change in unrecognised deferred tax asset 100 257
Higher rate on foreign taxes 165 69
------------------------------------------------------ ----------- -----------
Income tax charge 458 474
------------------------------------------------------ ----------- -----------
Changes to the UK corporation tax rates were enacted as part of
the Finance Bill 2015 on 18 November 2015. These included
reductions to the main rate to reduce the rate to 19% from 1 April
2017 and to 18% from 1 April 2020. A subsequent change to reduce
the UK corporation tax rate to 17% from 1 April 2020 was included
within the Finance Bill 2016 (enacted on 6 September 2016). In the
Spring Budget 2020, the Government announced that from 1 April 2020
the corporation tax rate would remain at 19% (rather than reducing
to 17%, as previously enacted). This new law was substantively
enacted on 17 March 2020. Whilst the proposal to keep the rate at
19% had not been substantively enacted at the balance sheet date,
its effects have been included in these financial statements. The
overall effect of the change has been to increase the tax expense
for the period by GBP34,000 and to increase the deferred tax
liability by GBP34,000.
As at the reporting date, the Group has unused tax losses of
GBP10,259,000 (2018: GBP9,257,000) available for offset against
future profits generated in the UK. No deferred tax asset has been
recognised in respect of these losses due to the uncertainty of its
recoverability.
The tax charge of the Group is driven by tax paid on the profits
of Biokosmes, offset by the release of deferred tax liabilities
generated on the acquisition of Biokosmes, Periproducts and Dentyl
businesses. In 2019 the effective tax rate of Biokosmes was 25%
(2018: 22%).
5. Earnings per share
A reconciliation of the weighted average number of ordinary
shares used in the measures is given below:
Year ended Year ended
31 December 31 December
2019` 2018
Number Number
---------------------------- ----------- -----------
For basic EPS calculation 83,712,106 55,715,531
---------------------------- ----------- -----------
For diluted EPS calculation 89,254,313 62,496,480
---------------------------- ----------- -----------
A reconciliation of the earnings used in the different measures
is given below:
GBP'000 GBP'000
-------------------------------------- ------- -------
For basic and diluted EPS calculation 904 236
-------------------------------------- ------- -------
Add back: Amortisation 579 625
-------------------------------------- ------- -------
Add back: Exceptional costs 208 172
-------------------------------------- ------- -------
Add back: Share based payments 131 112
-------------------------------------- ------- -------
For adjusted EPS calculation(1) 1,822 1,148
-------------------------------------- ------- -------
1 Adjusted EPS is profit/(loss) after tax excluding
amortisation, exceptional costs and share-based payments.
The resulting EPS measures are:
Pence Pence
--------------------------------- ----- -----
Basic EPS calculation 1.08 0.42
--------------------------------- ----- -----
Diluted EPS calculation 1.01 0.38
--------------------------------- ----- -----
Adjusted EPS calculation(1) 2.18 2.06
--------------------------------- ----- -----
Adjusted Diluted EPS calculation 2.04 1.83
--------------------------------- ----- -----
6. Dividends
Amounts recognised as distributions to equity holders in the
period:
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
--------------- ----------- -----------
Final dividend - 15
--------------- ----------- -----------
The Directors do not recommend the payment of a dividend (2018:
GBP nil pence per share).
7. Intangible assets
Other
Development Patents intangible
and
costs Brands trademarks Goodwill assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------- ------- ------------- ---------- ------------- ---------
Cost or valuation:
At 1 January 2018 2,268 - 834 13,133 2,630 18,865
Additions 579 1,089 165 3,100 89 5,122
Disposals (148) - (3) - - (151)
Foreign exchange 13 - - - - 13
-------------------- ------------- ------- ------------- ---------- ------------- ---------
At 1 January 2019 2,712 1,089 996 16,233 2,819 23,849
Additions 872 - 106 - - 978
Disposals (147) - - - - (147)
Foreign exchange (71) - - - - (71)
-------------------- ------------- ------- ------------- ---------- ------------- ---------
At 31 December 2019 3,366 1,089 1,102 16,233 2,819 24,609
-------------------- ------------- ------- ------------- ---------- ------------- ---------
Amortisation:
At 1 January 2018 908 - 503 - 1,279 2,690
Charge for the year 319 - 162 - 144 625
Foreign exchange (4) - (3) - - (7)
-------------------- ------------- ------- ------------- ---------- ------------- ---------
At 1 January 2019 1,223 - 662 - 1,423 3,307
Charge for the year 246 - 177 - 155 579
Disposals - - - - - -
Foreign exchange - - - - - -
-------------------- ------------- ------- ------------- ---------- ------------- ---------
At 31 December 2019 1,469 - 839 - 1,578 3,887
-------------------- ------------- ------- ------------- ---------- ------------- ---------
Carrying amount:
At 31 December 2018 1,489 1,089 334 16,233 1,396 20,542
-------------------- ------------- ------- ------------- ---------- ------------- ---------
At 31 December 2019 1,897 1,089 263 16,233 1,241 20,722
-------------------- ------------- ------- ------------- ---------- ------------- ---------
All trademark, licence and patent renewals are amortised over
their estimated useful lives, which is between five and ten years.
All amortisation has been charged to administrative expenses in the
Statement of Comprehensive Income.
Other intangible assets currently comprise customer
relationships and product formulations acquired through the
acquisition of Biokosmes Srl. and customer relationships acquired
through the acquisition of Periproducts. These assets were
recognised at their fair value at the date of acquisition and were
being amortised over a period of between five and ten years.
Assets with indefinite economic lives as well as associated
assets with finite economic lives are tested for impairment at
least annually or more frequently if there are indicators that
amounts might be impaired. The impairment review involves
determining the recoverable amount of the relevant cash-generating
unit, which corresponds to the higher of the fair value less costs
to sell or its value in use.
The key assumptions used in relation to the Biokosmes (Customer
Brands CGU) and Periproducts (part of the Venture Life Brands CGU)
impairment review are as follows:
-- The estimates of profit after tax for the three years to 31
December 2022 are based on management forecasts of the Biokosmes
and Periproducts businesses, with subsequent years growth
forecasted at 5% and 0-2% respectively. Management consider 5% and
0-2% conservative growth rates for the businesses, but reflective
of the operating sectors of the businesses. During 2019, Biokosmes
net sales growth was in excess of 10% due to broad organic growth
and Periproduct's main asset (UltraDEX) net sales declined by 1%
due to short term pricing pressures in the UK oral care market.
-- The Group has applied a discount rate to the future cash
flows of Biokosmes for five years, with a terminal value reflecting
future years, using a pre-tax average cost-of-capital of 12.4%.
This rate is relatively high and is derived from CAPM theory based
upon a relatively high equity risk premium applied to a low-geared
Company. These assumptions generate a significant headroom over the
assets of the business held at the balance sheet date. This
impairment assessment excluded the impact of Covid-19 on the
performance of Biokosmes. In circumstances of Covid-19 resulting in
a short-term closure of Biokosmes' Italian factory for a period of
several months there would be a commensurate reduction in sales and
profits by Biokosmes in the 2020 financial year. As remarked in
Note 32. Post Balance Sheet Events the Group has the cash resources
to bridge across an extended period of factory closure. It is the
opinion of the Directors that even in an extreme scenario of six
months of closure there might be a loss of GBP8 - GBP10 million in
net sales revenue and GBP3 - GBP4 million in profits in 2020 which
would eliminate 15-20% of the headroom in this impairment
assessment.
-- The Group has applied a discount rate to the future cash
flows of Periproducts for ten years, using a pre-tax average
cost-of-capital of 12.4% and excluding any terminal value. These
assumptions generate a significant headroom over the assets of the
business held at the balance sheet date.
-- These above impairment assessments of Biokosmes SRL and
Periproducts Ltd have included assessment of all elements of
intangible value regardless of whether their economic lives are
finite or indefinite, and include Customer Relationships, acquired
formulations and Goodwill.
These assumptions are subjective and provide key sources of
estimation uncertainty, specifically in relation to growth
assumptions, future cashflows and the determination of discount
rates. The actual results may vary and accordingly may cause
adjustments to the Group's valuation in future financial years.
Sensitivity analysis has been performed on the impairment review
and indicate sufficient headroom in the event of reasonably
possible changes in key assumptions are unlikely to result in an
impairment for intangibles.
Also included in the intangible assets balance are patents and
trademarks and these assets are recognised at their fair value at
the date of acquisition and are being amortised over a period of
between five and ten years. As a result of the significant breadth
of the patent and trademark estate coupled with its magnitude in
totality, the Directors did not conduct an impairment assessment
during 2019.
7A. Business Combinations
On 19th December 2019 the Company announced it had signed a
share purchase agreement to acquire 100% of the share capital of
PharmaSource BV, a private group of companies based in The
Netherlands engaged in the marketing and selling of anti-fungal
products to customers within Europe. This transaction was
ultimately completed on 24th January 2020 and is addressed in
section 32: Post Balance Sheet Events. As the acquisition occurred
after 31st December 2019 then these Financial Statements including
all Consolidated Statements and Notes exclude the financial
position and results of PharmaSource BV.
Revenue and profit impact of the acquisition
Pharmasource was not acquired until after 31st December 2019. It
generated net revenues of EUR2.5million and operating profit before
exceptional items and management charges of EUR0.9 million in
2019.
8. Cash and Cash Equivalents
At 31 December At 31 December
2019 2018
GBP'000 GBP'000
---------------------------------------------------- -------------- --------------
Current
Available cash and cash equivalents 5,159 9,623
Committed cash for acquisition of PharmaSource post
31 December 2019 5,551 -
Cash and Cash equivalents 10,710 9,623
---------------------------------------------------- -------------- --------------
The Group holds sterling, Chinese renminbi and euro denominated
balances in the UK. The Group's subsidiaries hold US dollar, yen
and euro accounts in Italy and a Swiss franc account in
Switzerland.
The Directors consider that the carrying value of cash and cash
equivalents approximates their fair value
At 31 December 2019 the sum of GBP5.6 million of the Group's
cash was allocated for purposes of the acquisition of Pharmasource
BV in 2020. This sum is unrestricted and has been technically
identified as an amount to fund the forthcoming acquisition.
9. Share capital and share premium
Share capital
All shares are authorised, issued and fully paid. The Group has
one class of ordinary shares which carry no fixed income.
Ordinary Ordinary
shares of shares Share Merger
of
0.3p each 0.3p each Premium reserve
Number GBP GBP'000 GBP'000
-------------------- ---------- --------- ------- --------
At 31 December 2019 83,712,106 251,136 30,824 7,656
-------------------- ---------- --------- ------- --------
At 31 December 2018 83,712,106 251,136 30,824 7,656
-------------------- ---------- --------- ------- --------
The Company issued no new shares during the year (46,875,000 new
shares in 2018).
The Group operates a Long-Term Incentive Plan. Up to the balance
sheet date, there have been three awards under this plan, in which
Executive Directors and senior management of the Group
participate.
10. Interest-bearing borrowings
At 31 December At 31 December
2019 2018
GBP'000 GBP'000
----------------------------------------- -------------- --------------
Current
Invoice financing 1,184 1,240
Leasing obligations 512 485
Unsecured bank loans due within one year 738 186
----------------------------------------- -------------- --------------
2,434 1,911
----------------------------------------- -------------- --------------
Non-current
Leasing obligations 2,139 2,741
Unsecured bank loans due after one year 2,452 2,416
----------------------------------------- -------------- --------------
4,591 5,157
----------------------------------------- -------------- --------------
All bank loans are held by the Group's Italian wholly owned
subsidiary, Biokosmes. During 2019 a new bank loan in the amount of
EUR1.0 million was secured from BPM SPA with expiry date of June
2024. Invoice financing includes the Italian RiBa (or "Ricevuta
Bancaria") facility which is a short-term facility. The balance
shown above of GBP1,184,000 (2018: GBP1,240,000) reflects the
amount that had been settled in Biokosmes' account under RiBa and
drawn against invoices in the UK as at the reporting date.
A summary showing the contractual repayment of interest-bearing
borrowings is shown below:
At 31 December 2019 At 31 December 2018
------------------------------ ------------------------------
Leasing Leasing
obligations Other 2018 obligations Other 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------------ ------- ------- ------------ ------- -------
Amounts and timing
of non-current debt
repayable
Between 1 January 2020
and 31 December 2020 - - - 491 577 1,068
Between 1 January 2021
and 31 December 2021 469 696 1,165 489 533 1,022
Between 1 January 2022
and 31 December 2022 429 695 1,124 449 533 982
Between 1 January 2023
and 31 December 2023 412 654 1,066 412 485 897
Between 1 January 2024
and 31 December 2028 829 408 1,237 900 288 1,888
----------------------- ------------ ------- ------- ------------ ------- -------
2,139 2,454 4,592 2,741 2,416 5,157
----------------------- ------------ ------- ------- ------------ ------- -------
Liabilities from Financing Other assets
activities
Net Cash
Borrowings Leases Sub-Total Cash / (Net Debt)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net cash at 01/01/2018 7,680 3,698 11,378 1,361 (10,017)
Net cashflow - - - 8,256 8,256
Finance lease
repayments - (574) (574) - 574
Drawdown/(repayments) (3,900) - (3,900) - 3,900
Foreign exchange
differences 62 102 164 6 (158)
Net cash at 31/12/2018 3,842 3,226 7,068 9,623 2,555
Net cashflow - - - 1,406 1,406
Finance lease
repayments - (585) (585) - 585
Drawdown/(repayments) 696 - 696 - (696)
Foreign exchange
differences (164) 10 (154) (319) (165)
Net cash at 31/12/2019 4,374 2,651 7,025 10,710 3,685
10. 2019 Annual Report and Accounts and 2020 Annual General Meeting
The Group's Annual Report and Accounts for the year ended 31
December 2019 will be posted to shareholders at the beginning of
May 2020. It will be available on the Company's website (
http://www.venture-life.com/investor-relations/results-reports-and-presentations/
) from 11.00am on 15th April 2020. The Annual General Meeting of
Venture Life Group plc will be held on 3 June 2020 at 10.30am and
the location and format will be communicated in due course and will
proceed with due regard to the government's restrictions in place
pertaining to Covid-19. A notice of meeting will be sent to
shareholders with the Annual Report and Accounts (
http://www.venture-life.com/investor-relations/shareholder-company-documents/
) and a copy will be available on the Company's website in due
course.
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
FR UKARRRBUSRRR
(END) Dow Jones Newswires
April 09, 2020 02:00 ET (06:00 GMT)
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