Final Results

RNS Number : 9910N

Venn Life Sciences Holdings PLC

22 May 2015

 



Venn Life Sciences Holdings Plc

("Venn" the "Company" or the "Group")

FINAL RESULTS

For the Year ended 31 December 2014

Venn Life Sciences (AIM: VENN), a growing Clinical Research Organisation (CRO) providing clinical trial management and resourcing solutions to pharmaceutical, biotechnology and medical device clients, announces Its audited final results for the year ended 31 December 2014.

Financial Highlights

·     Revenue of €4.9m increase of 140% over 2013 (€2.04m)

·     Group EBITDA Loss (before exceptional items) of €1.53m (2013 €1.65m)

·     Group Loss for the year €1.8m (2013 €1.8m)

·     EBITDA Losses attributable to CRO Business down by 36% to €0.95m (2013 €1.56m)

·     EBITDA Losses attributable to investment in Innovenn €0.58m (2013 €0.09m)

·     Cash and cash equivalents of €0.8m (2013 €0.54m)

Operational Highlights

·     Acquisition of Cardinal Systems France bringing IRT, Data Management and additional clinical capabilities to Venn

·     Resource base increased from 43 to 100 personnel

·     Successful integration of German, Paris and Northern Ireland acquisitions

·     Successful deployment of resources in Mexico, Brazil, Israel and USA   

Post Period End

·     Strong rate of business wins and new proposals continues

·     €4.1m contract secured in March

·     Revenues of €2.0m booked for Q1 2015

·     First Innovenn revenues with sales of Labskin to global pharmaceutical company

·     Board strengthened with two new appointments, Gracielle Schutjens as COO and Jonathan Hartshorn as CFO (effective 15^th June 2015)

·     Completion of GBP£2m fundraise underpinning growing book of business and providing funds for systems investment and expansion of business development coverage

Commenting on the Group's outlook, David Evans, Non-Executive Chairman of Venn: 

"In 2014 we have seen key financial indicators moving in the right direction. A significant increase in revenues, reduced losses on the core business and a stronger balance sheet all point to real progress and sustainable business growth. The addition of IRT and data management services through the acquisition of Cardinal Systems has been instrumental in Venn winning larger full service contracts as evidenced by the announcement of a €4m contract in March of this year. With a healthy pipeline of project opportunities the business is poised for further growth. This can be strongly underpinned by solid execution of existing contracts, which in turn will result in repeat business.

Although we are still in a period of investment with Innovenn I am particularly pleased to see the first sales of Labskin and greatly encouraged by the calibre of initial customers.  I look forward to progress at Innovenn in 2015 through the addition of microbiology services, the launch of Clarogel and further sales of Labskin."

Enquiries:

Venn Life Sciences Holdings Plc	www.vennlifesciences.com
Tony Richardson, Chief Executive Officer	Tel: [phone]
Orla Mc Guinness, Marketing Manager	Tel: [phone]
Zeus Capital (Nominated Adviser and Broker)
Andrew Jones / Ross Andrews	Tel: [phone]
Dominic Wilson	Tel: [phone]
Walbrook PR Ltd	Tel: [phone] or [e-mail]
Paul McManus	Mob: [phone]
Lianne Cawthorne	Mob: [phone]

About Venn Life Sciences Limited:

Venn Life Sciences is a Clinical Research Organisation providing clinical trial management and resourcing solutions to pharmaceutical, biotechnology and medical device organisations. With dedicated operations in France, Germany, the Netherlands, the UK, Ireland and Europe wide representation - Venn specialises in rapid deployment and management of multisite projects. Venn recently established an innovation division - Innovenn - focused primarily on breakthrough development opportunities in Skin Science.

Chairman's Statement

Dear Fellow Shareholder,

2014 has been a year of significant progress for Venn. CRO revenues have increased substantially, losses reduced and a projects pipeline has been built to drive the business through to profitability. Venn completed and integrated a key acquisition during the year and continued to make strong progress in terms of the scale and quality of project wins. In addition Innovenn has delivered on its 2014 objectives of securing the IP and knowhow associated with Labskin and Clarogel (anti-acne compound), successful reactivation of manufacturing and engagement with the customer base resulting in initial sales.

Step Change in Scope and Scale

Scale is critical to the delivery of above normal returns to shareholders. Scale is required in terms of geographic coverage, range of services and personnel numbers. Venn has made good progress in addressing all of these ingredients. The acquisition and integration of Cardinal Systems, a France based company specialising in Biometry and IRT, has resulted in greater depth of service capability, the addition of twenty five skilled resources and a new client base to which we can now offer a full suite of services. The business now has a sufficiently strong platform on which we can generate strong organic growth, and this coupled with possibly a further strategic acquisition in Europe should see the company increase its number of preferred provider relationships.

Key Initiatives

To-date the business has developed through a combination of small acquisitions, coupled with organic growth. Key to preparing the business for the next step is the implementation of a systems infrastructure capable of accommodating a steep growth curve. We communicated to recent investors that management would commit a portion of recent placing funds to systems initiatives and I am pleased to report that these programmes are well underway.

A further key initiative is the enhancement of Venn's business development team and coverage. The current team has delivered a strong book of business however there are key markets in which we do not have any business development presence and management is committed to addressing these gaps through the appointment of business development resources in Germany and USA.

Looking Forward

The success achieved in 2014 through winning larger contracts has ensured that significant revenues are already contracted for 2015 and beyond. Management's focus on excellence of execution should ensure that a recurring revenue stream begins to grow through repeat business and broader engagement with clients as Venn's service capabilities and regions continue to grow. At 100+ personnel Venn is building a strong resource base which management plans to further strengthen by means of continued organic growth and possibly a further acquisition in 2015.

Having successfully acquired and positioned our skin-science assets in 2014, Labskin, we look forward to reaping commercial rewards during 2015 and beyond and continue to look at complementary technologies that could add further value.

David Evans

Non-Executive Chairman

Chief Executive's Review

2014 was a bumper year for investment into the biotechnology sector and signs are this will continue into 2015. While our client base remains diverse, with 50+ active clients, we have seen the development of some key biotechnology clients during 2014. These are well funded clients with a strong pipeline of compounds looking for a one stop solution for all of their clinical requirements. We have been very responsive to the needs of this sector and our challenge now is to execute the business to the highest possible standards and thereafter reap the rewards of a strong pipeline of repeat business.  

I am very pleased to see our fee income grow at such a rate (140% YOY) and with a strong book of secured business for 2015 we are well positioned to deliver further growth. Ordinarily such growth could overstretch an organisation however during 2013 and 2014 we laid a solid foundation with heavy investment in our resource base that I believe will support us through the next phase.

Results and Commentary

Fee income for the full year was up to €4.9m (2013 - €2.04m) amounting to an increase of 140% year on year. This increase in fee income is attributable to an effective business development effort delivering larger international projects coupled with an effective recruitment drive to support the workload. EBITDA loss for the year was €1.53m (2013 - €1.65m). The EBITDA loss attributable to our CRO business reduced by 36% to €0.95m (2013 - €1.56m) and what has been a year of significant investment in Innovenn has resulted in an EBITDA deficit of €0.58 attributable to that part of the business. The consolidated balance sheet as at 31 December 2014 had total net assets of €5.98m, €0.8m of which was represented by cash and cash equivalents.

Losses in 2014 are principally attributable to the time lag between building a resource base and securing the necessary work to utilise the resource pool. With larger contracts secured in H2 2014 and into 2015, resource utilisation has improved to normal industry levels and this will correspondingly flow through to our P&L. 2015 will see a sustained effort to recruit more billable personnel resulting in the business achieving a normal balance between billable and non-billable headcount. This will all contribute to greater profitability in 2015.

Plans and Outlook

We will continue to improve our geographical coverage and deepen our service capability during 2015. We are actively screening acquisition opportunities in Central and Eastern Europe as clients request capability in this region and the operating cost differential could have a beneficial impact on profit margins. We are also looking at extensions of our service offering in line with client requirements as we seek to become indispensible to our target audience. 2015 should see Innovenn make significant progress. With initial sales secured we look forward to accelerating Labskin sales and services and delivering Clarogel as a marketable product to the right partner.

Anthony Richardson

Chief Executive Officer

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2014

		2014		2013
	Notes	€'000		€'000
Continuing operations
Revenue	2	4,883		2,035
Direct Project and Administrative Costs	3	(6,817)		(3,829)
Other operating income		167		-
Operating loss		(1,767)		(1,794)
Depreciation and amortisation		(187)		(32)
Exceptional items	3	(47)		(117)
EBITDA before exceptional items	2	(1,533)		(1,645)
Finance income	4	9		12
Finance costs	4	(71)		(41)
Loss before income tax		(1,829)		(1,823)
Income tax credit	5	20		23
Loss for the year		(1,809)		(1,800)
Loss attributable
Owners of the parent		(1,533)		(1,800)
Non-controlling interest		(276)		-
Loss for the year		(1,809)		(1,800)
Currency translation differences		8		(8)
Total comprehensive loss for the year		(1,801)		(1,808)
Loss per ordinary share	6	€		€
Basic and diluted		(0.06)		(0.09)

Consolidated Statement of Financial Position

As at 31 December 2014

		2014	2013
	Notes	€'000	€'000
Assets
Non-current assets
Property, plant and equipment		194	53
Intangible assets	7	2,820	1,039
Investments		31	31
Total non-current assets		3,045	1,123
Current assets
Trade and other receivables		2,097	656
Income tax recoverable		32	52
Cash and cash equivalents		806	541
Total current assets		2,935	1,249
Total assets		5,980	2,372
Equity attributable to owners
Share capital		112	102
Share premium account		5,483	3,431
Group re-organisation reserve		(541)	(541)
Reverse acquisition reserve		45	45
Foreign currency reserves		-	(8)
Retained earnings		(3,841)	(2,308)
		1,258	721
Non-controlling interest		544	-
Total equity		1,802	721
Liabilities
Non-current liabilities
Deferred consideration		-	54
Borrowings		99	-
Total non-current liabilities		99	54
Current liabilities
Trade and other payables		3,302	1,178
Deferred taxation		271	17
Deferred consideration		213	77
Borrowings		293	325
Total current liabilities		4,079	1,597
Total liabilities		4,178	1,651
Total equity and liabilities		5,980	2,372

Consolidated Statement of Cash Flows

For the year ended 31 December 2014

		Group	Group
		2014	2013
	Notes	€'000	€'000
Cash Flow from operating activities
Cash used in operations	8	(994)	(1,804)
Interest paid		(54)	(39)
Income tax received/(paid)		20	(16)
Net cash used in operating activities		(1,028)	(1,859)
Cash flow from investing activities
Acquisition of subsidiaries, net of cash acquired		(307)	(54)
Purchase of property, plant and equipment equipment (PPE)		(99)	(31)
Proceeds from sale of property, plant and equipment		5	-
Interest received		9	12
Net cash used in investing activities		(392)	(73)
Cash flow from financing activities
Proceeds from issuance of ordinary shares		1,194	-
Payment of deferred consideration		(154)	-
Financing from non-controlling interests		800	-
Repayments on borrowings		(40)	(362)
Net cash generated by financing activities		1,800	(362)
Net increase/ (decrease) in cash and cash equivalents		380	(2,294)
Cash and cash equivalents at beginning of year		216	2,588
Exchange losses on cash and cash equivalents		-	(78)
Cash and cash equivalents at end of year		596	216

Consolidated Statement of Changes in Shareholders' Equity

	Share capital	Share premium	Group re-organisation reserve	Reverse acquisition reserve	Foreign currency reserve	Retained earnings	Total	Non-controlling interests	Total
	€'000	€'000	€'000	€'000	€'000	€'000	€'000	€'000	€'000
At 1 January 2013	102	3,431	(541)	45	-	(508)	2,529	-	2,529
Changes in equity for the year ended 31 December 2013
Loss for the year	-	-	-	-	-	(1,800)	(1,800)	-	(1,800)
Currency translation differences	-	-	-	-	(8)	-	(8)	-	(8)
Total comprehensive loss for the year	-	-	-	-	(8)	(1,800)	(1,808)	-	(1,808)
At 31 December 2013	102	3,431	(541)	45	(8)	(2,308)	721	-	721
Changes in equity for the year ended 31 December 2014
Loss for the year	-	-	-	-	-	(1,533)	(1,533)	(276)	(1,809)
Currency translation differences	-	-	-	-	8	-	8	-	8
Total comprehensive loss for the year	-	-	-	-	8	(1,533)	(1,525)	(276)	(1,801)
Transactions with the owners
Shares issued	10	2,052	-	-	-	-	2,062	820	2,882
Total contributions by and distributions to owners	10	2,052	-	-	-	-	2,062	820	2,882
At 31 December 2014	112	5,483	(541)	45	-	(3,841)	1,258	544	1,802

Notes to the final results

1. Basis of preparation

Venn Life Sciences Holdings Plc is a company incorporated in England and Wales. The Company is a public limited company listed on the AIM market of the London Stock Exchange. The address of the registered office is 4 Lombard Street, London, EC3V 9HD.

This preliminary announcement is an extract from the consolidated financial statements of the Company for the year ended 31 December 2014 and comprises the Company and its subsidiaries. The consolidated financial statements were authorised for issuance on 21 May 2015.  The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2014 or 2013 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts.  Statutory accounts for 2013 which were of the parent company only have been delivered to the Registrar of Companies and those for 2014 will be delivered soon before Companies House deadline. The auditors' reports on the statutory accounts for the years ended 31 December 2013 and 31 December 2014 were unqualified and do not contain statements under s498(2) or (3) Companies Act 2006.

This financial information has been prepared in accordance with the Group's accounting policies as disclosed in the financial statements for the year ended 31 December 2013 and International Financial Reporting Standards ("IFRSs") and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, amongst other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be construed as a profit forecast.

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 (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company will publish its full financial statements for the year ended 31 December 2014 shortly and will be available on the Company's website at www.vennlifesciences.com and at the Company's head office 19 Railway Road, Dalkey, Dublin, Ireland. The Annual General Meeting will be held on Tuesday, 30 June 2015.

2. Segmental reporting

Management has determined the Group's operating segments based on the monthly management reports presented to the Chief Operating Decision Maker ('CODM'). The CODM is the Executive Directors and the monthly management reports are used by the Group to make strategic decisions and allocate resources.

The principal activity of the Group is that of a Clinical Research Organisation (CRO) providing a suite of consulting and clinical trial services to pharmaceutical, biotechnology and medical device organisations.  This activity takes place across various countries, including France, Netherlands, United Kingdom, Ireland, and Russia and as such the Board considers the business primarily from a geographic perspective. Although not all the segments meet the quantitative thresholds required by IFRS 8, management has concluded that given the recent acquisitions, all segments should be maintained and reported, given the potential future growth of the segments.

The reportable segments derive their revenue primarily from the Group's principal activity.

Currently the key operating performance measures used by the CODM are Revenue and adjusted EBITDA.

The segment information provided to the Board for the reportable segments for the year ended 31 December 2014 is as follows:

2014	France	Netherlands	Germany	Other	Total
	€'000	€'000	€'000	€'000	€'000
Income statement
External revenue	3,531	747	418	187	4,883
Adjusted EBITDA	(51)	(263)	(53)	(1,166)	(1,533)
Exceptional items	(11)	-	(20)	(16)	(47)
EBITDA	(62)	(263)	(73)	(1,182)	(1,580)
Depreciation	(63)	(10)	(86)	(28)	(187)
Operating profit/(loss)	(125)	(273)	(159)	(1,210)	(1,767)
Net finance costs	(23)	1	-	(40)	(62)
Income tax	-	2	-	18	20
Retained profit/(loss)	(148)	(270)	(159)	(1,232)	(1,809)
Segment assets
Operating assets	3,442	265	674	5,419	9,800
Inter segment assets	(47)	(113)	-	(3,922)	(4,082)
External operating assets	3,395	152	674	1,497	5,718
Cash	275	93	62	376	806
Total assets	3,670	245	736	1,873	6,524
Segment liabilities
Operating liabilities	3,331	283	850	3,948	8,412
Inter segment liabilities	(705)	-	(735)	(2,642)	(4,082)
External operating liabilities	2,626	283	115	1306	4,330
Borrowings	205	-	-	187	392
Total liabilities	2,831	283	115	1,493	4,722
Other segmental information
Non current assets - PPE	81	11	26	76	194
Non current assets - Intangibles	1765	105	523	427	2,820

2013	France	Netherlands	Other	Total
	€'000	€'000	€'000	€'000
Income statement
External revenue	1,027	899	109	2,035
Adjusted EBITDA*	(16)	(102)	(1,527)	(1,645)
Exceptional costs	-	-	(117)	(117)
EBITDA	(16)	(102)	(1,644)	(1,762)
Depreciation	(3)	(8)	(21)	(32)
Operating profit	(19)	(110)	(1,665)	(1,794)
Net finance costs	(13)	-	(16)	(29)
Income tax	-	23	-	23
Retained loss	(32)	(87)	(1,681)	(1,800)
Segment assets
Operating assets	1,184	554	4,179	5,917
Inter segment assets	(241)	(322)	(3,523)	(4,086)
External operating assets	943	232	656	1,831
Cash and cash equivalents	-	33	508	541
Total assets	943	265	1,164	2,372
Segment liabilities
Operating liabilities	661	225	4,526	5,412
Inter segment liabilities	(275)	-	(3,811)	(4,086)
External operating liabilities	386	225	715	1,326
Borrowings	48	-	277	325
Total liabilities	434	225	992	1,651
Other segmental information
Non current assets - PPE	4	13	36	53
Non current assets - Intangibles	731	105	203	1,039

* Adjusted EBITDA excludes exceptional costs.

Other primarily relates to the holding company and head office costs.

No more than 10% of the revenues have been derived from a single external customer in 2013 and in 2014 €1.3m the equivalent of 26% of revenue was derived from 2 customers.

.

3. Exceptional items

Included within Administrative expenses are exceptional items as shown below:

	2014	2013
	€'000	€'000
Exceptional items includes:
- Transaction costs relating to business combinations and acquisitions	47	117
Total exceptional items	47	117

4. Finance income and costs

	2014	2013
	€'000	€'000
Interest expense:
- Bank borrowings	29	25
- Deferred consideration unwinding of discount	17	2
- Interest on other loans	25	14
Finance costs	71	41
Finance income
- Interest income on cash and short-term deposits	9	12
Finance income	9	12
Net finance costs	62	29

5. Income tax expense

	2014	2013
Group	€'000	€'000
Current tax:
Current tax for the year	-	(22)
Total current tax (credit)/charge	-	(22)
Deferred tax:
Origination and reversal of temporary differences	(20)	(1)
Total deferred tax	(20)	(1)
Income tax (credit)/charge	(20)	(23)

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

	2014	2013
	€'000	€'000
Loss before tax	(1,829)	(1,823)
Tax calculated at domestic tax rates applicable to UK standard rate of tax of 20% (2013 - 20%)	(366)	(365)
Tax effects of:
- Expenses not deductible for tax purposes	35	34
- Losses carried forward/(utilised)	311	308
Tax (credit)/charge	(20)	(23)

There are no tax effects on the items in the statement of comprehensive income.

6. Loss per share

(a) Basic                                               

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

	2014	2013
	€'000	€'000
Loss attributable to equity holders of the Company	(1,533)	(1,800)
Weighted average number of Ordinary Shares in issue	26,960,835	20,099,994
Basic loss per share	€0.06	€ 0.09

 (b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding to assume conversion of all dilutive potential Ordinary Shares. No share options or warrants outstanding at 31 December 2014 or 31 December 2013 were dilutive and all such potential ordinary shares are therefore excluded from the weighted average number of ordinary shares for the purposes of calculating diluted earnings per share.

7. Intangible fixed assets

Group	Customer relationships €'000	Trade secrets €'000	Goodwill €'000	Intellectual Property Rights €'000	Workforce €'000	Total €'000
Cost
At 1 January 2013	-	-	836	-	-	836
On acquisition of subsidiary undertaking	24	37	144	-	-	205
At 31 December 2013	24	37	980	-	-	1,041
Amortisation
At 1 January 2013	-	-	-	-	-	-
Charge for the year	1	1	-	-	-	2
At 31 December 2013	1	1	-	-	-	2
Net book value
At 31 December 2013	23	36	980	-	-	1,039
Cost
At 1 January 2014	24	37	980	-	-	1,041
Addition	420	-	180	224	-	824
Exchange differences	1	2	10	-	-	13
On acquisition of subsidiary undertaking (note 9)	160	670	150	-	104	1,084
At 31 December 2014	605	709	1,320	224	104	2,962
Amortisation
At 1 January 2014	1	1	-	-	-	2
Charge for the year	94	32	-	5	9	140
At 31 December 2014	95	33	-	5	9	142
Net book value
At 31 December 2014	510	676	1,320	219	95	2,820

No amortisation charge has been charged on the goodwill in the income statement.

On 13 January 2014 the Group completed the acquisition of trade and certain business assets and liabilities of a German based CRO for €600,000 satisfied through issue of 1,962,583 Ordinary shares of 0.01p each. Fair value exercise has conducted on the acquisition of German based CRO.

On 13 March 2014 the Group acquired intellectual property rights in Labskin™ for €224,000 satisfied through issue of 864,706 Ordinary shares of 0.01p each.

Goodwill is allocated to the Group's cash-generating units (CGU's) identified according to geographic operating segment. An operating segment-level summary of the goodwill allocation is presented below.

	2014	2013
	€'000	€'000
France	881	731
Netherlands	105	105
UK	154	144
Germany	180	-
Total	1,320	980

Goodwill is tested for impairment at the balance sheet date. The recoverable amount of goodwill at 31 December 2014 was assessed on the basis of value in use. As this exceeded carrying value no impairment loss was recognised.

The key assumptions in the calculation to assess value in use are the future revenues and the ability to generate future cash flows. The most recent financial results and initial budgets approved by management for the next year were used and forecasts for two further years, followed by an extrapolation of expected cash flows at a constant growth rate of each unit. The projected results were discounted at a rate which is a prudent evaluation of the pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the cash-generating units.

The key assumptions used for value in use calculations in 2014 for all the units were as follows:

		%
Longer-term growth rate (after 2015)		5
Discount rate		13

The Group has been loss making for the last 3 years and in 2014 the Directors have transformed the infrastructure and capabilities of the Group in order to work as a Group in providing services to clinical research and development markets as one unit rather than separate units. This meant that the impairment review is prepared on the group basis rather than a single unit basis. The Directors have made significant estimates on future revenues and EBITDA growth over the next three years based on the Group's budgeted investment in recruiting key employees and marketing the services.

The Directors have performed a sensitivity analysis to assess the impact of downside risk of the key assumptions underpinning the projected results of the Group. The projections and associated headroom used for the group is sensitive to the EBITDA growth assumptions that have been applied. A 50% reduction in EBITDA growth; in the first five years of the management projections would not result in any impairment at the group level.

8. Cash used in operations

	2014	2013
	€'000	€'000
Loss before income tax	(1,829)	(1,823)
Adjustments for:
- Depreciation and amortisation	187	32
- Foreign currency translation of net assets	25	70
- Net finance costs	62	29
Changes in working capital
- Trade and other receivables	(892)	97
- Trade and other payables	1,453	(209)
Net cash used in operations	(994)	(1,804)

Non-cash transactions

The principal non-cash transactions related to share issue in respect to acquisition of intangible assets of €824,000 and payment of deferred consideration of €44,000

9.         Business Combinations

Acquisition of Cardinal Systems S.A.S.

On 5 August 2014, the Company acquired 85.2% of Cardinal Systems S.A.S, a French based business, for a total consideration of €670,000.

The goodwill of €150,000 arising from the acquisition is attributable to the expected future profitability of the acquired business and synergies expected to arrive from the incorporation of the business within the Group.

The following table summarises the consideration paid for Cardinal Systems S.A.S. and the amounts of the assets acquired and liabilities assumed recognised at the acquisition date.

	€'000
Fair value consideration at 5 August 2014
Cash	400
Deferred consideration	252
Total fair value consideration	652
Recognised amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents	93
Property, plant and equipment	93
Customer relations -  included in intangibles  (note 7)	160
Trade secrets - included in intangibles  (note 7)	670
Workforce - included in intangibles (note 7)	104
Trade and other receivables	549
Trade and other payables	(671)
Borrowings	(222)
Deferred tax liabilities	(274)
Total identifiable net assets	502
Goodwill	150

The additional deferred consideration arrangement requires the Company to pay the former owners of Cardinal Systems Limited an additional consideration of €270,000. The additional consideration has been discounted to its present value to €252,000 using rate to reflect the time value of money. Unwinding of discount in the post-acquisition period totals  €4,000 and has been included in the finance expense in the income statement (note 4).

The Company has also option to acquire the remaining interest of 14.8% in Cardinal Systems S.A.S.  based on performance of the acquired business for the year ended 30 September 2015.

The revenue included in the consolidated statement of comprehensive income since 5 August 2014 contributed by Cardinal Systems S.A.S. was €988,000. Cardinal Systems S.A.S. also contributed a profit of €15,000 over the same period.  Had Cardinal Systems S.A.S. had been consolidated from 1 January 2014, the consolidated statement of comprehensive income, would show approximately revenue of €2.6m and loss of €0.7m.

Cardinal Systems S.A.S.  changed its name to Venn Life Sciences (France) S.A.S.

10.    Post balance sheet events

The following events have taken place since the year end:

(a)    On 28 January 2015 the Company granted options to 2 Executive Directors and key employees of the Group over 2,870,000 Ordinary shares of 0.01p per share at an exercise price of 25p per share. The options will be exercisable between the third and tenth anniversary of grant date. The 1,680,000 options granted to the Directors will vest when the share price reaches 40p per share and the remaining 1,190,000 options granted to key employees there are no performance criteria.

(b)    2 April 2015 the Company raised €2.06m through issue of 10,868,411 Ordinary shares of 0.01p at 19p per share.

(c)     Mars S.A.S (formerly known as Venn Life Science S.A.S.) was voluntarily liquidated after the year end as part of a streamlining of entities.

11.    Annual Report & Accounts

Copies of the audited Annual Report & Accounts for the year ended 31 December 2014 will be posted to shareholders  shortly and may also be obtained from the Company's head office at 19 Railway Road, Dalkey, Dublin, Ireland.

 

END

 

 

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