Audited 2012 Preliminary Results

RNS Number : 9662B

Retroscreen Virology Group PLC

10 April 2013

 



For immediate release 07.00: 10 April 2013

RETROSCREEN VIROLOGY GROUP PLC

("Retroscreen" or the "Company" or the "Group")

AUDITED PRELIMINARY RESULTS

 FOR THE YEAR ENDED 31 DECEMBER 2012

Retroscreen Virology Group plc (AIM: RVG), the viral challenge and "virometrics" specialist, is pleased to announce its preliminary results for the year ended 31 December 2012.

Financial Highlights

§ Revenue increased by 237% to £14.4 million (2011: £4.3 million);

§ Gross profit was £3.70 million and gross margin 25.7% (2011: gross profit £0.61 million and gross margin 14.4%);

§ Loss before taxation was £0.43 million (2011: £1.16 million);

§ Profit for the year was £0.53 million (2011: Loss of £0.66 million);

§ Strong balance sheet with cash and cash equivalents at 31 December 2012 of £16.34 million (2011: £1.59 million) and net current assets of £15.0 million (2011:1.2 million);

§ Admitted to AIM on 3 May 2012 with net fundraise of £14.12 million.

Operational Highlights

§ Conducted Retroscreen's largest VCM study to-date, with a total of six quarantines and over 100 volunteers recruited, achieving proof-of-concept for our client within ten months of the first subject entering the study;

§ Reached an important milestone when we safely inoculated our 1,000^th volunteer on 10 December 2012, solidifying Retroscreen's position as the pioneer of the VCM with unrivalled experience and safety record;

§ Continued focus on building solid foundations for significant revenue growth and improvement in margins:

-         opened both a new FluCamp screening centre and a second challenge unit in Cambridgeshire, towards the end of 2012

-         moved our support functions to our newly developed open-plan office facilities on the 3rd floor of QMB in March 2013

-         invested in technology and established Retroscreen's molecular biology capability for qPCR

-         selected and commenced implementation of a leading-edge professional services automation ERP system, which should prove transformational in Retroscreen's resource planning and financial management

§ Investment in challenge virus inventory:

-         Acquired a complete bulk stock of commercially available RSV challenge virus from a contract manufacturer

-         Commenced manufacturing activities for a new flu challenge virus, which should be ready for use by the end of 2013, with plans to manufacture an additional alternative flu virus to be available in 2014

-         On track for bringing our new HRV-16 cold virus into human use in the first half of 2013, in line with our development plans for an Airways Disease Viral Exacerbation Challenge model in asthma

§ Made significant strides forward in defining the Group's focus for drug discovery, narrowing down our requirement for collaborators and key opinion leaders in the fields of immunology, infection, respiratory, genomics and bioinformatics;

§ The momentum of 2012 is set to continue, with our sales pipeline continuing to grow at pace and the first quarter of 2013 seeing Retroscreen operating concurrent VCM studies in two quarantine units for the first time, one being the largest ever investigation into flu transmission in humans (funded by the US CDC)

§ Our trading since the year end has been in line with the Board's expectations and we continue to focus on achieving VCM study contract signatures for the second half of 2013 and beyond.

Kym Denny, Chief Executive Officer, said:

"I am absolutely delighted by Retroscreen's financial results for the year ended 31 December 2012 which demonstrate the strength of our business model and the pharmaceutical industry's increasing adoption of the VCM in accelerating the development of next generation antivirals and vaccines.  We remain focused on our important client VCM engagements, growing our VCM sales pipeline, crafting our virometrics discovery and research strategy, and building the staff, infrastructure and capability to take Retroscreen to its full potential.

I am pleased that we are starting to deliver against the objectives we set out for ourselves at our IPO in May 2012 and I am confident that Retroscreen continues to be well placed to meet its growth plans, both in our existing market space and our target expansion areas."

For further information please contact:

Retroscreen Virology Group plc                                                         [phone]

Kym Denny (CEO)

Graham Yeatman (FD)

Numis Securities Limited                                                                   [phone]

Michael Meade / Freddie Barnfield (Nominated Adviser)

James Black / Michael Burke (Corporate Broking)

CHIEF EXECUTIVE OFFICER'S STATEMENT

I am delighted to present Retroscreen's maiden preliminary results as a publicly listed company. Since being admitted to the AIM market of the London Stock Exchange on 3 May 2012, a little less than a year ago, Retroscreen has focused its resources and exceptional medical and scientific talent on expanding our clinical trials service capabilities, while simultaneously building the foundations to unlocking the potential for drug discovery inherent within our proprietary virometric data and biological samples.

Background

Retroscreen is a virology healthcare business that provides clinical services, focused on the Viral Challenge Model ("VCM"), and pre‑clinical analytical services to global pharmaceutical companies, biotechnology organisations, academic and government institutions. Retroscreen has grown and developed the VCM for evidencing the efficacy of antiviral and viral therapeutics in influenza, RSV and HRV (common cold). In addition to our established viral clinical research service platform, Retroscreen aims to develop human challenge models for research into asthma and chronic obstructive pulmonary disease ("COPD"), leading ultimately to a translational medicine platform that isolates patterns in the human response to major disease causing viruses and translates these patterns into revolutionary new treatments and diagnostics.

Overview

2012 has proven to be a transformational year for Retroscreen, as evidenced by our 237% growth in revenues from £4.3 million in 2011 to £14.4 million this year, together with the improvement in our margins. Scaling our VCM operations to meet client demand has been the primary focus of the Group, and has included opening both a new FluCamp screening centre and a second challenge unit in Cambridgeshire. In order to accommodate our significant employee growth, our support functions moved to our newly developed open‑plan office facilities on the 3rd floor of the Queen Mary BioEnterprises Innovation Centre in March 2013. For the first time we have custom built, fit‑for‑purpose office space and meeting room facilities. We have expanded our laboratory operations, launching a new molecular virology service and opening a secondary laboratory site in North London.  We have also selected and commenced implementation of a leading-edge professional services automation ERP system, which should prove transformational in Retroscreen's resource planning and financial management.

2012 saw us completing our largest VCM study ever, achieving proof‑of‑concept for our client within ten months of the first subject entering the study. Towards the end of 2012, armed with funding from the United States Centers for Disease Control and Prevention ("CDC"), we embarked on study set‑up for the largest investigation ever into how flu is transmitted in humans with viral challenge studies commencing in Q1 2013. 2012 also saw Retroscreen reaching an important milestone when we safely inoculated our 1,000th volunteer, solidifying our position as the most experienced scientific research group performing viral challenge studies in the commercial and academic arena.

Our sales pipeline continues to grow at pace, as the VCM becomes more widely recognised as an important tool in early phase antiviral and vaccine development. Indeed, one of our key clients increased the number of quarantine sessions they had scheduled for their Retroscreen VCM study in 2013, after their conversations with the US Food and Drug Administration ("FDA") prompted them to maximise the unique opportunity afforded by the VCM to collect important product data at an earlier stage in the drug development timeline. Similarly, our longer term sales pipeline signals a wider uptake: currently we have 65% more leads in this category than we did this time last year. In addition, we are currently working on six fully qualified VCM study opportunities with an estimated total contract value of £29 million, of which one is in final contract negotiation and four others are under Start‑up Agreement and well progressed in contract discussions.

In order to maintain our market leading position in the conduct of VCMs, in 2012 we acquired a complete bulk stock of commercially available RSV challenge virus from a contract manufacturer. We also began manufacturing activities for a new flu challenge virus, which should be ready for use by the end of 2013, and we have plans to develop an alternative flu virus to be available in 2014. We remain on track for bringing our new HRV‑16 cold virus into human use in the first half of 2013, in line with our development plans for an Airways Disease Viral Exacerbation Challenge model ("AD‑VCM") in asthma.

We have made enormous strides forward in defining our intended focus for drug discovery, narrowing down our requirement for collaborators and key opinion leaders in the fields of immunology, infection, respiratory, genomics and bioinformatics. We are actively engaged in building the panel of internal and external experts who will define Retroscreen's discovery strategy.

I am extremely pleased by Retroscreen's results for the year ended 31 December 2012, which were due in no small part to our exceptionally hard working and dedicated staff base, in addition to a highly competent set of clients. Indeed, all of our 2012 clients managed their product development timelines to target, thereby ensuring their VCM studies could begin without the sorts of project delays that often tend to be experienced with early phase clinical research. As a result, Retroscreen was able to undertake a full complement of sessions in our quarantine schedule, without any significant delays or drop‑offs out of the financial period. This, despite a slowdown in subject recruitment over the summer, which I explained in my H1 2012 statement and caused us to proactively delay several sessions by a few weeks.

Outlook

The momentum we established in 2012 is set to continue, with the first quarter in 2013 seeing Retroscreen operating concurrent VCM studies in two quarantine units for the first time. Our VCM pipeline continues to grow and we are developing plans for further units and satellite screening centres to meet this demand, together with our development plans for an AD‑VCM in asthma.

We continue to focus on building solid foundations for significant revenue growth, promoting subject safety and high-quality science, while simultaneously furthering our plans for exploiting the innovation potential inherent within our human models of disease. I am confident that Retroscreen continues to be well placed to meet our growth plans, both in our existing market space and our target expansion areas.

Kym Denny
Chief Executive Officer
9 April 2013

 

 

FINANCE DIRECTOR'S REPORT

The preliminary annoucement for the year ended 31 December 2012 is presented in accordance with the Group's accounting policies based on International Financial Reporting Standards ("IFRS") as adopted by the European Union.

Consolidated statement of comprehensive income

Revenue for the year ended 31 December 2012 was £14.39 million (2011: £4.27 million). Revenue was primarily from two large VCM client engagements, together with the study set‑up of new VCM engagements with quarantines commencing in the next twelve months.

Gross profit was £3.70 million and gross margin 25.7% (2011: gross profit £0.61 million and gross margin 14.4%).

Loss before taxation was £0.43 million (2011: £1.16 million).

Profit for the year was £0.53 million (2011: loss of £0.66 million).

Research and development expenses

The Group's separate independent research and development expenses were £0.31 million this year (2011: £0.12 million), primarily in respect of scientific studies developing the VCM, virus and assays, together with the Group starting to invest in crafting its virometrics and research strategy.

In addition, significant research and development was undertaken as a natural consequence of operating and pioneering the VCM during client VCM studies and which are included within cost of sales.

Administrative expenses

Administrative expenses were £3.87 million (2011: £1.64 million). The increase is primarily due to the Group's significant growth, increasing staff cost base and expanding infrastructure.

Share option expense

A share option expense of £48k has been charged for the year (2011: £3k).

Finance income

The Group invests its surplus funds in bank deposits and money market investments of up to one year. In the year ended 31 December 2012 interest receivable was £0.11 million (2011: £3k). The increase is due to the Group's increased cash balances, primarily as a result of £14.12 million (net) raised on admission to AIM on 3 May 2012.

Taxation

The Group makes claims each year for research and development tax credits and, as it is loss‑making, elects to surrender these tax credits for a cash rebate. The amount credited to the consolidated income statement in respect of amounts receivable for the surrender of research and development expenditure is £0.96 million for the year ended 31 December 2012 (2011: £0.50 million).

Consolidated statement of financial position

As at 31 December 2012 net assets amounted to £16.34 million (2011: £1.63 million) including cash and cash equivalents of £16.34 million (2011: £1.59 million). The principal movements in the consolidated statement of financial position during the year were:

§ purchases of property, plant and equipment of £1.21 million;

§ increase in inventories of £0.17 million;

§ increase in research and development tax credit receivable of £0.57 million;

§ increase in cash and cash equivalents of £14.75 million; and

§ increase in trade and other payables of £1.94 million.

Cash flow

The principal cash flows in the year were as follows:

Inflows:

§ cash generated by operating activities of £2.10 million (2011: £0.25 million);

§ proceeds on issue of shares of £14.13 million (2011: £1.15 million); and

§ finance income of £0.11 million (2011: £3k).

Outflows:

§ purchases of property, plant and equipment of £1.21 million (2011: £0.24 million); and

§ loans repaid of £0.37 million (2011: loans advanced of £0.12 million).

Key performance indicators

The Directors consider the principal financial performance indicators of the Group to be:

§ revenue;

§ gross margin;

§ net profit; and

§ cash and cash equivalents.

The Directors consider the principal non-financial performance indicators of the Group to be:

§ the expansion of the VCM and its increasing acceptance by global pharmaceutical companies and regulatory authorities;

§ organic growth and building of capacity (people and facilities);

§ expansion of the VCM into adjacent areas; and

§ development of a discovery business and investment in research and development programmes.

Graham Yeatman
Finance Director
9 April 2013

Retroscreen Virology Group plc

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2012

	Note		Year ended 31 Dec 12 £'000	Year ended 31 Dec 11 £'000
Revenue			14,395	4,271
Cost of sales			(10,694)	(3,657)
Gross profit			3,701	614
Research and development			(307)	(121)
Administration expenses			(3,873)	(1,644)
Share-based payment charge			(48)	(3)
Loss from operations			(527)	(1,154)
Finance income			111	3
Finance costs			(12)	(13)
Loss before taxation			(428)	(1,164)
Taxation	4		957	501
Profit/ (Loss) for the year			529	(663)
Other comprehensive income, net of tax			-	-
Total comprehensive profit/ (loss) for the year attributable to owners of the Company			529	(663)
Earnings/ (loss) per share - basic (pence)	5		1.5p	(3.6)p
Earnings/ (loss) per share - diluted (pence)	5		1.4p	(3.6)p

All income is derived from continuing operations.

Retroscreen Virology Group plc

Consolidated Statement of Financial Position

at 31 December 2012

	Note		31 Dec 12 £'000	31 Dec 11 £'000
Assets
Property, plant and equipment	6		1,377	395
Non-current assets			1,377	395
Inventories	7		1,613	1,445
Trade and other receivables	8		2,695	2,887
R&D tax credit receivable			1,075	500
Cash and cash equivalents	9		16,338	1,593
Current assets			21,721	6,425
Total assets			23,098	6,820
Liabilities
Trade and other payables	10		(6,762)	(4,820)
Financial liabilities			-	(374)
Current liabilities			(6,762)	(5,194)
Net current assets			14,959	1,231
Net assets			16,336	1,626
Equity
Share capital	11		2,049	1,096
Share premium account			13,013	-
Share-based payment reserve			217	5
Merger reserve			4,199	4,196
Retained earnings			(3,142)	(3,671)
Total equity			16,336	1,626

The preliminary results of Retroscreen Virology Group plc (registered number 08008725) were approved and authorised for issue by the Board on 9 April 2013 and signed on its behalf by:

Kym Denny Chief Executive Officer

Graham Yeatman Finance Director

Retroscreen Virology Group plc

Consolidated Statement of Changes in Equity

for the year ended 31 December 2012

	Ordinary Share Capital	Preference share Capital	Share Premium Account	Share-Based Payment Reserve	Merger  Reserve	Retained Earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2011 as previously stated	-	2,340	1,802	6	-	(3,012)	1,136
Merger adjustment	390	(2,340)	(1,802)	-	3,752	-	-
At 1 January 2011 as restated	390	-	-	6	3,752	(3,012)	1,136
Issued equity share capital	706	-	-	-	444	-	1,150
Total transactions with owners in their capacity as owners	706	-	-	-	444	-	1,150
Total comprehensive loss for the year	-	-	-	-	-	(663)	(663)
Transfer on lapse of options	-	-	-	(4)	-	4	-
Share based payment expense	-	-	-	3	-	-	3
Balance at 31 December 2011	1,096	-	-	5	4,196	(3,671)	1,626
Issued equity share capital
- Issued in subsidiary undertakings - Placing on admission to AIM	6 947	- -	- 13,177	- -	3 -	- -	9 14,124
Total transactions with owners in their capacity as owners	953	-	13,177	-	3	-	14,133
Total comprehensive profit for the year	-	-	-	-	-	529	529
Share based payment expense	-	-	-	48	-	-	48
Warrants issued	-	-	(164)	164	-	-	-
Balance at 31 December 2012	2,049	-	13,013	217	4,199	(3,142)	16,336

Retroscreen Virology Group plc

Consolidated Statement of Cash Flows

for the year ended 30 June 2012

		Year ended 31 Dec 12 £'000	Year ended 31 Dec 11 £'000
Cash flow from continuing operating activities
Loss before taxation		(428)	(1,164)
Adjustments for:
Depreciation of plant, property and equipment		230	132
Loss on disposal of plant, property and equipment		2	-
Share based compensation		48	3
Increase in inventories		(168)	(292)
Decrease/ (increase) in trade and other receivables		192	(1,954)
Increase in trade and other payables		1,941	2,690
Finance costs		12	13
Finance income		(111)	(3)
Cash from / (used in) operations		1,718	(575)
Corporation tax refund		383	825
Net cash generated by operating activities		2,101	250
Investing activities
Acquisition of plant, property and equipment		(1,214)	(244)
Finance income		111	3
Cash used in investing activities		(1,103)	(241)
Financing activities
Proceeds on issue of ordinary shares		14,133	1,150
Loans (repaid)/ advanced		(374)	115
Finance costs		(12)	(4)
Cash inflow from financing		13,747	1,261
Net increase in cash and cash equivalents		14,745	1,270
Cash and cash equivalents at the beginning of the year		1,593	323
Cash and cash equivalents at the end of the year		16,338	1,593

Retroscreen Virology Group plc

Notes to the preliminary financial information

for the year ended 30 June 2012

1.         Summary of significant accounting policies

The principal accounting policies adopted are:

Basis of preparation

The preliminary results are presented in pounds Sterling (£) and all values are rounded to the nearest thousand (£'000) except where indicated otherwise.

The preliminary results have been prepared under the historical cost convention.

Going concern

In determining the appropriate basis of preparing the preliminary results, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of the approval of the financial statements.  During the year ended 31 December 2012, the Group has continued to focus on building solid foundations for significant revenue growth and a strong pipeline of VCM client engagements.  As at 31 December 2012 the Group had cash and cash equivalents of £16.3 million (2011: £1.6 million) and net current assets of £15.0 million (2011: £1.2 million).

Management prepares detailed working capital forecasts which are reviewed by the Board on a regular basis.  The forecasts include assumptions regarding the status of client engagements and sales pipeline, future revenues and costs together with various scenarios which reflect growth plans, opportunities, risks and mitigating actions.  Whilst there are inherent uncertainties regarding the cashflows associated with the development of the VCM, together with the timing of signature and delivery of VCM client engagements, the Directors are satisfied that there is sufficient discretion and control as to the timing and quantum of cash outflows to ensure that the Company and Group are able to meet their liabilities as they fall due for at least the next twelve months.

As part of its going concern review the Board has followed the guidelines published by the Financial Reporting Council entitled "Going Concern and Liquidity Risk Guidance for UK Companies 2009".  Having made relevant and appropriate enquiries, including consideration of the Company's and Group's current cash resources and the working capital forecasts, the Directors have a reasonable expectation that the Company and Group will have adequate cash resources to continue to meet the requirements of the business for at least the next twelve months.  Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.

Basis of consolidation

The preliminary results incorporate the results of the Company and its subsidiary undertakings. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date of their acquisition.

The purchase method of accounting is used for the acquisition of subsidiaries. The cost of acquisition is measured at the aggregate fair values of assets given, equity instruments issued and liabilities incurred or assumed by the Group to obtain control and any directly attributable acquisition costs.

Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the preliminary results.

Retroscreen Virology Group plc acquired Retroscreen Virology Limited on 20 April 2012 through a share for share exchange that does not meet the definition of a business combination. It is noted that such transactions are outside the scope of IFRS 3 and there is no other guidance elsewhere in IFRS covering such transactions.

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors requires that where IFRS does not include guidance for a particular issue, the Directors may also consider the most recent pronouncements of other standard setting bodies that use a similar conceptual framework to develop accounting standards when developing an appropriate accounting policy.

In this regard, it is noted that the UK Accounting Standards Board has, in issue, an accounting standard covering business combinations (FRS 6) that permits the use of the merger accounting principles for such transactions.  The Directors have therefore chosen to adopt these principles and the accounts have been prepared as if Retroscreen Virology Limited had been owned and controlled by the Company throughout the year ended 31 December 2011 and the year ended 31 December 2012.  Accordingly, the assets and liabilities of Retroscreen Virology Limited have been recognised at their historical carrying amounts, the results for the periods prior to the date the Company legally obtained control have been recognised and the financial information and cash flows reflect those of Retroscreen Virology Limited.

Revenue recognition

Revenue is recognised at the fair value of the consideration received or receivable for sale of goods and services in the ordinary course of business and is shown net of Value Added Tax. The Group primarily earns revenues by undertaking VCM client engagements.  A VCM engagement typically comprises of a number of quarantines.  Each quarantine lasts two to three weeks, but the timeline of work involved in building up to undertaking a quarantine is in the range of three to twelve months.  Whether a VCM engagement is for one quarantine or for a number of quarantines the overall timeline of the VCM is much the same, apart from the additional time for the quarantines themselves and the time lags in between quarantines (since sequential), as a lot of the upfront work is the same whether for one or a number of quarantines. VCM revenue is recognised on a percentage of completion method.  Depending on the contractual terms, revenue is recognised based on the level of work completed to date in respect of each individual element of the VCM contract.

Contracts generally contain provisions for renegotiation in the event of changes in the scope, nature, duration, volume of services or conditions of the contract.  Renegotiated amounts are recognised as revenue by revision to the total contract value arising as a result of an authorised customer change order.  Provisions for losses to be incurred on contracts are recognised in full in the period in which it is determined that a loss will result from performance of the contractual arrangement.

The difference between the amount of revenue recognised and the amount invoiced on a particular contract is included in the consolidated statement of financial position as deferred income.  Normally amounts become billable in advance upon the achievement of certain milestones, in accordance with pre-agreed payment schedules included in the contract or on submission of appropriate detail.  Any cash payments received as a result of this advanced billing are not representative of revenue earned on the contract as revenues are recognised over the period in which the specified contractual obligations are fulfilled.  Amounts included in deferred income are expected to be recognised within one year and are included within current liabilities.

In the event of contract termination, if the value of work performed and recognised as revenue is greater than aggregate milestone billings at the date of termination, cancellation clauses provide for the Group to be paid for all work performed to the termination date.

The Group also provides translational research (laboratory) services and other consultancy to clients. Laboratory and consulting revenue is recognised on a fee-for-service basis. 

Inventories

Inventories are reported at the lower of cost (purchase price and/ or production cost) and net realisable value.  In determining net realisable value, any costs of completion and selling costs are deducted from the realisable value. 

Inventories are comprised of completed GMP manufactured and research grade viruses, work in process in relation to the manufacture of viruses, and laboratory and clinical consumables.  The cost of Virus inventory is calculated using the weighted average cost method for each individual strain. The cost included within inventories comprises direct materials and, where applicable, direct labour costs and an attributable portion of production overheads that have been incurred in bringing the inventories to their present location and condition. Adjustments are made for any inventories with a lower net realisable value or which are considered to be obsolete.  Any inventories which Management consider are not useable on future commercial engagements are fully written off to profit or loss. 

2.         Critical accounting estimates and judgements

Details of the Group's significant accounting judgements and critical accounting estimates are set out in this financial information and include:

Going concern

The assessment of the Group's ability to execute its strategy by funding future working capital requirements involves judgement. The Directors monitor future cash requirements to assess the Group's ability to meet these future funding requirements. Further information regarding going concern is outlined in note 1.

Revenue, deferred income and accrued income

Revenue is recognised based on the level of work completed to date. The recognition of revenue (and hence the related deferred and accrued income balances) requires Management to make assumptions in relation to the level of work done to date and the costs to complete each project.

In carrying out this task, Management considers the contract value for each individual element of the contract and splits this amount on a straight line basis over the anticipated time period in which that element is to be completed.

At each period end, Management reviews each individual contract to assess whether any anticipated losses should be recognised immediately.

Research and development tax credit

The Group's research and development tax claim is complicated and requires Management to make significant assumptions in building the methodology for the claim, interpreting research and development tax legislation to the Group's specific circumstances, and agreeing the basis of the Group's tax computations with HM Revenue and Customs.

Virus Inventory

The cost of inventories requires a number of assumptions to be made in relation to the absorption of directly attributable overheads in relation to the internal costs in preparing virus strains for commercial use. These assumptions are based primarily on Management's estimates of employee utilisation and annual working days.

In valuing virus inventory, Management are required to make assumptions in relation to the future commercial use for each virus strain. This includes consideration of both the current business pipeline and Management's best estimates of the future client requirements based on its significant knowledge and experience in the field of virology.

Recoverability of deferred tax assets

Deferred tax assets are recognised only to the extent that it is considered probable that those assets will be recoverable. This involves an assessment of when those deferred tax assets are likely to reverse, and a judgement as to whether or not there will be sufficient taxable profits available to offset the tax assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the level of deferred tax assets recognised which can result in a charge or credit to the consolidated statement of comprehensive income in the period in which the change occurs.

3.         Segmental information

The Directors consider that there are no identifiable business segments that are engaged in providing individual products or services or a group of related products and services that are subject to risks and returns that are different to the core business. The information reported to the Chief Executive Officer, who is considered the chief operating decision maker, for the purposes of resource allocation and assessment of performance is based wholly on the overall activities of the Group. The Group has therefore determined that it has only one reportable segment under IFRS8, which is 'medical and scientific research services'. The Group's revenue, results and assets for this one reportable segment can be determined by reference to the Group's statement of comprehensive income and statement of financial position.

The Group carries out all its activities from the UK and as such only has a single geographic segment.

During the year ended 31 December 2012 the Group had three customers in which revenues generated were greater than 10% of total revenue.  These customers respectively generated 54%, 26% and 12% of revenue.

During the year ended 31 December 2011 the Group had three customers in which revenues generated were greater than 10% of total revenue.  These customers respectively generated 40%, 26% and 11% of revenue.

4.         Taxation on ordinary activities

				Year ended 31 December 2012		Year ended 31 December 2011
				£'000		£'000
Current tax:
R&D tax credit				(947)		(500)
Adjustments in respect of previous periods				(10)		(1)
				(957)		(501)
Factors affecting the tax charge for the period: The tax assessed for the period is lower than the UK corporate tax rate of 25% (2011: 26.5%), as explained below:
Loss before taxation				(428)		(1,164)
Tax at the UK corporate tax rate of 25% (2011: 26.5%)				(107)		(308)
Expenses not deductible for tax purposes				4		13
Fixed asset timing differences not recognised				3		-
R&D relief				(857)		(276)
Movement on unrecognised deferred tax balances				10		21
Change in deferred tax rate				-		50
Adjustments in respect of prior periods				(10)		(1)
Tax for the year				(957)		(501)

As at 31 December 2012, the Group had unrecognised deferred tax assets totalling £0.57 million (2011: £0.62 million) which primarily relates to losses. The Group has not recognised this as an asset in the consolidated statement of financial position due to the uncertainty in the timing of its crystallisation.

5.         Earnings/ (loss) per share

The calculation of the basic and diluted EPS/ (LPS) is based on the following data:

		31 December 2012		31 December 2011
		£'000		£'000
Earnings
Earnings/ (loss) for the purposes of basic and diluted EPS/ (LPS) being net profit/ (loss) attributable to owners of the parent company		529		(663)
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS/ LPS		34,580,451		18,447,280
Effect of dilutive potential ordinary shares:
- share options		3,582,103		-
- warrants		56,596		-
Weighted average number of ordinary shares for the purposes of diluted EPS/ LPS		38,219,150		18,447,280

In the prior year, the potential ordinary shares were not treated as dilutive as the Group was loss making, therefore the weighted average number of ordinary shares for the purposes of the basic and diluted loss per share were the same.

6.         Property, plant and equipment

	Leasehold improvements	Plant & machinery	Long term plant and equipment		Computer equipment		Total
	£'000	£'000	£'000		£'000		£'000
Cost:
At 1 January 2011	116	330	91		86		623
Additions	123	78	-		43		244
At 31 December 2011	239	408	91		129		867
Additions	479	503	-		232		1,214
Disposals	-	(105)	(1)		(2)		(108)
At 31 December 2012	718	806	90		359		1,973
Accumulated depreciation:
At 1 January 2011	-	264	24		52		340
Charge for the year	40	54	9		29		132
At 31 December 2011	40	318	33		81		472
Charge for the period	65	99	10		56		230
Disposals	-	(104)	(1)		(1)		(106)
At 31 December 2012	105	313	42		136		596
Carrying amount:
At 1 January 2011	116	66	67		34		283
At 31 December 2011	199	90	58		48		395
At 31 December 2012	613	493	48		223		1,377

7.         Inventories

			31 December 2012		31 December 2011
			£'000		£'000
Laboratory and clinical consumables			89		63
Virus - Finished goods			1,122		1,117
Virus - Work in progress			402		265
			1,613		1,445

Inventories expensed in the consolidated statement of comprehensive income are shown within cost of sales. All inventories are carried at the lower of cost and net realisable value. In the year to 31 December 2012 inventories with a book value of £352,000 were written down (31 Dec 2011: £nil) and this expense is recognised in cost of sales.

8.         Trade and other receivables

			31 December 2012		31 December 2011
			£'000		£'000
Trade receivables			633		2,384
Allowance for impairment losses			-		(105)
			633		2,279
VAT recoverable			223		100
Other receivables			346		155
Prepayments			409		310
Accrued income			1,084		43
			2,695		2,887

Contractual payment terms with the Group's clients are typically 30 or 45 days.

At 31 December 2012 the Group had a debt due to it of £454,000 from a single client which has been received in full since that date. There were no other significant concentrations of credit risk at the reporting date.

The movement on the allowance for impairment losses on trade and other receivables is as follows:

			31 December 2012		31 December 2011
			£'000		£'000
Balance at beginning of the year			(105)		(74)
Impairment losses recognised through the consolidated statement of comprehensive income for the year			-		(92)
Amounts written off as unrecoverable during the year			105		61
			-		(105)

The Directors believe that the carrying value of trade and other receivables represents its fair value. In determining the recoverability of trade receivables the Group considers any change in the credit quality of the receivable from the date credit was granted up to the reporting date.

The Group does not hold any collateral as security for its trade and other receivables.

9.         Cash and cash equivalents

			31 December 2012		31 December 2011
			£'000		£'000
Cash and cash equivalents			16,338		1,593

All of the Group's cash and cash equivalents at 31 December 2012 are at floating interest rates. Included in the cash and cash equivalents of the Group at 31 December 2012 was the equivalent of £157,000 (31 December 2011: £275) denominated in US dollars and £7,000 denominated in Euros (31 December 2011: £nil); the balance was denominated in pounds sterling (£).

The Directors consider that the carrying value of cash and cash equivalents approximates their fair value.

10.        Trade and other payables

			31 December 2012		31 December 2011
			£'000		£'000
Trade payables			1,690		446
Other tax and social security			305		121
Other payables			22		1,242
Accruals			1,102		384
Deferred income			3,643		2,627
			6,762		4,820

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. They are non-interest bearing and are typically settled on 30 to 45 day terms.

As at 31 December 2011, other payables included the sum of £1,211,826 which had been overpaid in error by a client. This was repaid by the Group immediately following the 2011 year end.

The Directors consider that the carrying value of trade and other payables approximates their fair value. All trade and other payables are denominated in Sterling.

The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe and no interest has been charged by any suppliers as a result of late payment of invoices during the year.

11.        Share capital

		No.	£'000
Issued and fully paid:
Issued subscriber shares		1	-
Issued to former shareholders of Retroscreen Virology Limited		1,101,970	1,102
Subdivision of ordinary shares		20,937,449	-
Issued under placing agreement		18,937,500	947
		40,976,920	2,049

On 27 March 2012 the Company was incorporated with one ordinary share of £1.00 subscribed for £nil paid.

On 20 April 2012 the Company entered into an agreement to acquire the entire share capital of Retroscreen Virology Limited, satisfied by the issue of 1,101,970 ordinary shares of £1.00 and the original one ordinary share credited as being fully paid.

On 25 April 2012 each of the issued ordinary shares of £1.00 were subdivided into 20 ordinary shares of 5 pence each.

On 3 May 2012 following admission to the Alternative Investments Market of the London Stock Exchange, 18,937,500 ordinary shares of 5 pence were issued at a price of 80 pence per ordinary share raising £15.15 million which after share issue expenses of £1.03 million gave net consideration of £14.12 million.

12.        Basis of the announcement

The audited preliminary results for the year ended 31 December 2012 were approved by the Board of Directors on 9 April 2013. The preliminary results do not constitute full accounts within the meaning of section 434 of the Companies Act 2006 but are derived from accounts for the year ended 31 December 2012.

The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year ended 31 December 2012. Those accounts upon which the auditors issued an unqualified opinion, also had no statement under section 498(2) or (3) of the Companies Act 2006. 

The results for the year ended 31 December 2011 are in abbreviated form and have been extracted from the published financial statements of Retroscreen Virology Limited. These were audited and reported upon without qualification by Baker Tilly UK Audit LLP and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards, as adopted by the European Union (EU) (IFRS), this announcement does not in itself contain sufficient information to comply with IFRS. 

The Company is a limited liability company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange. The consolidated financial information of Retroscreen Virology Group plc is presented in pounds Sterling (£), which is also the functional currency of the Group.

The statutory accounts for the financial year ended 31 December 2012 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

 

END

 

 

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