Preliminary results for the year ended 30 June 2017

1.       Accounting policies

1.1.     Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.

 

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies.

 

The following principal accounting policies have been applied:

 

1.2.    Revenue

Turnover is recognised for product supplied or services rendered to the extent that it is probable that the economic benefits will flow to the Company and the turnover can be reliably measured. Turnover is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria determine when turnover will be recognised: Direct sales

Direct sales are recognised at the date of dispatch.

R&D income

Subcontracted R&D income is recognised based upon the stage of completion at the year‑end. Licence revenue

Annual licence revenue is recognised, in full, based upon the date of the invoice, and royalties are accrued over the period to which they relate.

 

 

1.3.    Intangible assets

Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.

 

All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.

 

The estimated useful lives range as follows:

Goodwill                10 years

Know how                             10 years

 

 

1.4.    Tangible fixed assets

Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

 

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives on the following basis:

 

Freehold property               2%           straight line

Plant and equipment           25%        reducing balance

Motor Vehicles                     25%        straight line

Equipment                             25%        straight line

 

 

1.5.    Valuation of investments

Investments in unlisted Company shares, whose market value can be reliably determined, are remeasured to market value at each balance sheet date. Gains and losses on remeasurement are recognised in the Statement of comprehensive income for the period. Where market value cannot be reliably determined, such investments are stated at historic cost less impairment.

 

 

1.6.     Stocks

Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost includes all direct costs and an appropriate proportion of fixed and variable overheads. At each balance sheet date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.

 

 

1.7.    Debtors

Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.

 

1.8.    Cash and cash equivalents

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

 

In the Statement of cash flows, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management.

 

 

1.9.    Financial instruments

The Company only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in non‑puttable ordinary shares.

 

 

1.10.Creditors

Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.

 

1.11.Foreign currency translation

 

Functional and presentation currency

The Company’s functional and presentational currency is GBP.

 

Transactions and balances

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.

 

At each period end foreign currency monetary items are translated using the closing rate. Non‑monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non‑monetary items measured at fair value are measured using the exchange rate when fair value was determined.

1.12.Finance costs

Finance costs are charged to the Statement of comprehensive income over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

 

 

1.13.Dividends

Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting. Dividends on shares recognised as liabilities are recognised as expenses and classified within interest payable.

 

1.14.Employee benefits‑share‑based compensation

The company operates an equity‑settled, share‑based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense over the vesting period. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted. At each balance sheet date, the company will revise its estimates of the number of options are expected to be exercisable. It will recognise the impact of the revision of original estimates, if any, in the profit and loss account, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

 

1.15. Pensions

 

Defined contribution pension plan

 

The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.

 

The contributions are recognised as an expense in the Statement of comprehensive income when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of financial position. The assets of the plan are held separately from the Company in independently administered funds.

 

 

1.16.Interest income

Interest income is recognised in the Statement of comprehensive income using the effective interest method.

 

 

1.17.Provisions for liabilities

Provisions are made where an event has taken place that gives the Company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.

Provisions are charged as an expense to the Statement of comprehensive income in the year that the Company becomes aware of the obligation, and are measured at the best estimate at the Statement of financial position date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.

When payments are eventually made, they are charged to the provision carried in the Statement of financial position.

 

1.18.Current and deferred taxation

The tax expense for the year comprises current and deferred tax. Tax is recognised in the Statement of comprehensive income, except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

 

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Company operates and generates income.

 

Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Statement of financial position date, except that:

·                The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and

·                Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.

 

Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.

 

1.19.Research and development

Research and development expenditure is written off in the year in which it is incurred.

 

 

2.       Judgments in applying accounting policies and key sources of estimation uncertainty

In the application of the company’s accounting policies (as described in note 1), management is required to make judgments, estimates and assumptions. These estimates and underlying assumptions are reviewed on an ongoing basis. There are no sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements.

 

3.              Turnover

 

An analysis of turnover by class of business is as follows:

 

 

20172016
££
 

Product revenue and R&D income

        1,925,059         1,389,061
 

Royalty and licence fee income

        5,320,803         4,128,156
                          

        7,245,862

                          

        5,517,217

 

20172016
££
 

United Kingdom

            305,609             313,712
 

Other EU

        2,378,988         1,754,400
 

Rest of the world

        4,561,265         3,449,104
                          

        7,245,862

                          

        5,517,216

 

4.              Operating profit

 

The operating profit is stated after charging:

 

20172016
££
 

Depreciation of tangible fixed assets

              39,479               41,729
 

Fees payable to the Company’s auditor and its associates for the audit of the Company’s annual financial statements

                9,654                 9,240
 

Exchange differences

              (5,747)            (75,512)
 

Research and development costs

            764,480             713,715

 

5.              Taxation

 

20172016
££
 

Corporation tax

 

 

Current tax on profits for the year

            851,386             726,862
 

 

                          

            851,386

                          

                          

            726,862

                          

 

Total current tax

                          

            851,386

                          

            726,862

 

Deferred tax

 

 

Origination and reversal of timing differences

              (1,835)               (2,369)
 

Total deferred tax

                          

              (1,835)

                          

              (2,369)

 

Taxation on profit on ordinary activities

                          

            849,551

                          

            724,493

 

 

Factors affecting tax charge for the year

 

The tax assessed for the year is higher than (2016 ‑ lower than) the standard rate of corporation tax in the UK of 19% (2016 ‑ 20%). The differences are explained below:

 

20172016
££
 

 

Profit on ordinary activities before tax

        5,771,840         4,218,921
 

 

Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2016 ‑ 20%)

        1,096,650             843,784
 

Effects of:

 

 

Expenses not deductible for tax purposes, other than goodwill amortisation and impairment

              12,946               10,898
 

Capital allowances for year in excess of depreciation

                3,146                 3,855
 

Short term timing difference leading to an increase (decrease) in taxation

              (1,835)               (2,368)
 

Adjustment in research and development tax credit leading to an increase (decrease) in the tax charge

         (131,939)          (131,676)
 

Tax deduction arising from exercise of employee options

         (161,775)                      –    
 

Other differences leading to an increase (decrease) in the tax charge

              32,358                      –    
 

Total tax charge for the year

                          

            849,551

                          

            724,493

 

 

Factors that may affect future tax charges

 

There were no factors that may affect future tax charges.

 

6.              Dividends

 

20172016
££
 

 

Dividends paid

        3,373,116         1,924,405
                          

        3,373,116

                          

        1,924,405

 

 

7.              Share capital

 

20172016
££
Shares classified as equity

 

Allotted, called up and fully paid
5,138,674 (2016 ‑ 5,050,931) Ordinary shares of £0.05 each            256,934             252,547

 

The holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.

 

 

8.              Share based payments

 

During the year the company operated an Approved Share Option Scheme (the “Option Scheme”), to incentivise employees. The company has applied the requirements of FRS 102 Section 26 Share‑based Payment to all the options granted. The Option Scheme provides for a grant price equal to the market value of the Company’s shares on the date of the grant, as agreed with HMRC Shares and Assets Valuation Division.

The contractual life of an option is 10 years from the date of grant. Options granted become exercisable on the third anniversary of the date of grant. Exercise of an option is normally subject to continued employment, but there are also considerations for good leavers. All share based remuneration is settled in equity shares.

Weighted average exercise price (pence)

2017

Number

2017

Weighted average exercise price (pence)

2016

Number

2016

Outstanding at the beginning of the year

 

                £3.99

 

              91,743

 

                £3.66

 

              87,743

 

Granted during the year

 

              £13.50

 

              85,938

 

              £11.15

 

                4,000

 

Exercised during the year

 

                £3.66

 

           (87,743)

 

                          

 

                     –    

 

Outstanding at the end of the year                          

              £13.40

 

                          

              89,938

 

                          

                £3.99

 

                          

              91,743

 

 

20172016
Option pricing model used

 

 

                 Black Scholes            

 

   Black Scholes

 

Issue price

 

 

  £3.12‑£13.50

 

  £3.12‑£11.60

 

Exercise price (pence)

 

 

  £3.12‑£13.50

 

  £3.12‑£11.60

 

Option life

 

 

           10 years

 

           10 years

 

Expected volatility

 

 

             25.15%

 

  17.47%‑33.82%

 

Fair value at measurement date

 

 

     £1.72‑£4.66

 

     £1.50‑£3.08

 

Risk‑free interest rate

 

 

               1.02%

 

               0.84%

 

 

Expected volatility was based on past volatility since the shares have been listed on AIM.

The expense recognised for share‑based payments during the year ended 30 June 2017 was £67,005 (Year ended 30 June 2016 : £53,225).

The number of staff and officers holding share options at 30 June 2017 was 15. The share options have been issued to underpin staff service conditions.

 

  

 

9.              Earnings per share

The weighted average number of shares in issue for the basic earnings per share calculation is 5,108,026 (2016: 5,050,931) and for the diluted earnings per share, assuming the exercise of all share options is 5,197,961 (2016: 5,142,673). The calculation of the basic earnings per shares is based on the profit for the period of £4,922,289 (2016: £3,494,428) divided by the weighted average number of shares in issue of 5,108,026 (2016: 5,505,931), the basic earnings per share is 96.36p (2016: 69.18p). The diluted earnings per share, assuming the exercise of all of the share options is based on 5,197,961 (2016: 5,142,673) shares and is 94.70p (2016: 67.95p).

 

10.           Publication of Non-Statutory Accounts

The financial information set out in this preliminary announcement does not constitute the Group’s financial statements for the year ended 30 June 2017. The financial statements for the year ended 30 June 2016 have been delivered to the Registrar of Companies. The financial statements for the year ended 30 June 2017 will be delivered to the Registrar of Companies following the Company’s Annual General Meeting. The auditors’ report on both accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under sections 498(2) or (3) of the Companies Act 2006.  The audited financial statements of Bioventix plc for the period ended 30 June 2017 are expected to be posted to shareholders shortly, will be available to the public at the Company’s registered office, 7 Romans Business Park, East Street, Farnham, Surrey, GU9 7SX and available to view on the Company’s website at www.bioventix.com once posted.