Final Results

RNS Number : 3521O

Venn Life Sciences Holdings PLC

17 May 2018

 

17 May 2018

Venn Life Sciences Holdings Plc

("Venn", "Venn Life Sciences" or the "Company")

Preliminary Final Results for the year ended 31 December 2017

Venn Life Sciences (AIM: VENN), an Integrated Drug Development Partner offering a combination of drug development expertise and clinical trial design and management to pharmaceutical, biotechnology and medical device clients, announces its audited results for the year ended 31 December 2017.

Financial Highlights

·     Total income was €17.8m (2016: €18.2m)

·      EBITDA (before exceptional items) of €1.0m (2016: €0.4m)

·      Operating profit of €0.1m (2016: Loss €0.6m)

·     Loss for the year after tax of €1.5m (2016: profit of €0.6m) after a charge of €1.7m (2016: €0.4m) being share of losses and investment write-down on Integumen PLC in 2017

·     Cash and cash equivalents of €1.2m as at 31 December 2017 (2016: €3.5m)

Operational Highlights

·     Continued progress on key systems infrastructure implementation and operational efficiency delivering improvements in operating margins

·     Strategic review concluded that following a period of investment and operational consolidation, the Company would look to identify both organic and in-organic growth opportunities

·     Key project milestones achieved leading to client endorsements and increased repeat business 

·     Strengthening of the Board and operations with the appointment of Christian Milla as Chief Operating Officer as well as new leadership hires in Information Technology and Quality Assurance

·     Finalisation of Kinesis acquisition with no further consideration payable

Post period-end

·     Retirement of Jonathan Hartshorn as Chief Financial Officer

·     Acquisition of minority interest in VLS France

·     Dilution of stake in Integumen PLC to below associate threshold

Commenting on the Group's outlook, Tony Richardson, CEO of Venn, said: "During 2017 our focus has been on the delivered improved underlying EBITDA in the business through improved operational efficiencies. Additional investment in systems means that we now have both the expertise and infrastructure to profitably execute new business in scale and our focus is now on the generation of new business opportunities. We have invested significantly in business development and engaged creatively with clients to develop deeper, longer lasting partnerships and our pipeline of opportunities is healthy. We continue to see an increasing number of opportunities that require the full range of services now on offer in Venn. Continued strong investment in the biotech sector and the clear emergence of virtual drug companies both represent a significant opportunity for Venn. Our size, flexibility, deep expertise and breadth of service capability leaves us well positioned to benefit from this shift in the drug development landscape."

Enquiries:

Venn Life Sciences Holdings Plc	Tel: [phone]
Allan Wood, Non-Executive Chairman
Tony Richardson, Chief Executive Officer
Cenkos (Nominated adviser and joint broker)	Tel: [phone]
Mark Connolly/Steve Cox (Corporate Finance)
Davy (Nominated adviser and broker)	Tel: [phone]
Fergal Meegan/Matthew de Vere White (Corporate Finance)
Hybridan (Joint broker)	Tel: [phone]
Claire Louise Noyce
Walbrook PR
Paul McManus/Anna Dunphy	Tel: [phone]

Chairman's Statement

For the year ended 31 December 2017

Dear Fellow Shareholder,

I am pleased to report that 2017 has been another year of progress for Venn, delivering improved EBITDA and a differentiated positioning for the business that we believe will drive sustainable order book growth. The completion of certain key integration initiatives during 2017 has delivered a strong common identity across all service lines and facilitated the generation of new opportunities utilising the full spectrum of services on offer in Venn. We continue to invest in knowledge development in order to increase our value-add for clients and secure longer lasting relationships. 

We have underpinned our initiatives on integration and business positioning with a significant investment in business development and marketing, adding experienced new business professionals with proven track records and supporting them with additional lead generation resources. Our plan includes the broadening of our revenue base and delivering a better balanced book of business. I am pleased to report that we are making progress in this regard with the progression of certain smaller accounts to key account status. 

During the year we completed a strategic review of growth options for the business and concluded that it makes sense to better leverage the infrastructure we have, through delivering both organic and inorganic business growth. We will look at inorganic opportunities that extend both our footprint and service lines, consistent with our objective of positioning the business as full service and full coverage in Europe.    

Allan Wood

Chairman

17 May 2018

Chief Executive's Statement

For the year ended 31 December 2017

Dear Fellow Shareholder,

Results and Commentary

Total income for the full year was €17.8m (2016: €18.2m). The revenue mix remained similar year on year across the two principal service lines in the business. Early Development Services (EDS) delivered revenues of €6m and Clinical Research Services (CRS) delivered revenues of €11.8m. EBITDA before exceptional charges was €1.0m (2016: €0.4m). Improved EDBITDA was driven principally by greater operational efficiency resulting in improved project margins. We expect that increased billable resources and continued improvements in operational efficiency will drive further growth in EBITDA during 2018. Exceptional charges have been minimised at €0.03m (2016: €0.1m).  The consolidated balance sheet as at 31 December 2017 had gross assets of €12.2m (2016: €14.7m), €1.2m (2016: €3.5m) of which was represented by cash and cash equivalents.

Group operating profit for the year was €0.1m (2016: loss €0.6m). Loss after tax was €1.5m (2016: Loss €0.7m) accounted for by our share of losses in Integumen plc and a write down to market value in the carrying value of our investment. The combined share of losses and investment write down was €1.7m (2016: €0.36m). In future periods we will mark this investment to market.

We continue to see benefits and opportunities from the integration of EDS and CRS and have secured projects spanning all service areas of the business. We have strengthened our business development team and now have a fully integrated offering with a common Venn identity.

We are focussed on deepening our connections and engagement with our clients offering higher value adding consulting in the early days of the engagement resulting in committed, longer lasting relationships. There are clear opportunities with a number of clients to develop a genuine partner relationship. In recent months we have participated in consortia focussed on collaborative drug development initiatives. This approach supports an innovative business model moving from transactional relations with our clients to R&D partnerships supported by our unique drug development capabilities.

Anthony Richardson

Chief Executive Officer

17 May 2017

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2017

		2017		2016
		€'000		€'000
Continuing operations
Revenue		17,405		17,909
Direct Project and Administrative Costs		(17,763)		(18,805)
Other operating income		410		335
Operating profit/(loss)		52		(561)
Depreciation		(99)		(133)
Amortisation		(792)		(689)
Exceptional items		(25)		(125)
EBITDA before exceptional items		968		386
Finance income		-		12
Finance costs		-		-
Share of loss of investments accounted for using the equity method		(923)
Impairment of fixed asset investments		(794)		(364)
Profit/(loss) before income tax		(1,665)		(913)
Income tax credit		127		169
Profit/(loss) for the year from continuing operations		(1,538)		(744)
Discontinued operations
Profit for the year from discontinued operations		-		1,295
Profit/(loss) for the year		(1,538)		551
Profit for the year is attributable to:
Owners of the parent		(1,538)		532
Non-controlling interests		-		19
		(1,538)		551
Other comprehensive income
Currency translation differences		60		(36)
Total comprehensive gain/(loss) for the year		(1,478)		515
Total comprehensive gain/(loss) for the year is attributable to:
Owners of the parent		(1,478)		496
Non-controlling interests		-		19
		(1,478)		515
Total comprehensive gain/(loss) for the year attributable to owners of the parent arises from:
Continuing operations		(1,478)		(799)
Discontinued operations		-		1,295
		(1,478)		496
Earnings per share from continuing and discontinued operations attributable to owners of the parent during the year
Basic profit/(loss) per ordinary share
From continuing operations		(2.55c)		(1.26c)
From discontinued operations		-		2.14c
From profit/(loss) for the year		(2.55c)		0.88c
Diluted profit/(loss) per ordinary share
From continuing operations		(2.35c)		(1.14)
From discontinued operations		-		1.93c
From profit/(loss) for the year		(2.35c)		0.79c

Consolidated and Company's Statement of Financial Position

As at 31 December 2017

		Group	Group	Company	Company
		2017	2016	2017	2016
		€'000	€'000	€'000	€'000
Assets
Non-current assets
Property, plant and equipment		312	191	-	-
Intangible assets		4,034	4,499	-	-
Investments in subsidiaries		-	-	7,778	7,908
Assets held for sale		680
Investments		31	2,038	31	31
Total non-current assets		5,057	6,728	7,809	7,939
Current assets
Trade and other receivables		5,874	4,402	8,960	8,664
Income tax recoverable		107	43	-	-
Cash and cash equivalents		1,175	3,541	15	206
Total current assets		7,156	7,986	8,975	8,870
Total assets		12,213	14,714	16,784	16,809
Equity attributable to owners
Share capital		155	155	155	155
Share premium account		14,026	14,026	14,026	14,026
Group re-organisation reserve		(541)	(541)	-	-
Merger relief reserve		-	-	3,531	3,531
Reverse acquisition reserve		45	45	-	-
Foreign currency reserves		(48)	13	-	-
Share option reserve		-	28	-	28
Retained earnings		(4,882)	(3,294)	(1,312)	(1,824)
		8,755	10,432	16,400	15,916
Non-controlling interest		-	-	-	-
Total equity		8,755	10,432	16,400	15,916
Liabilities
Non-current liabilities
Borrowings		-	25	-	-
Total non-current liabilities		-	25	-	-
Current liabilities
Trade and other payables		2,999	3,661	384	893
Deferred taxation		434	561	-	-
Deferred consideration		-	-	-	-
Borrowings		25	35	-	-
Total current liabilities		3,458	4,257	384	893
Total liabilities		3,458	4,282	384	893
Total equity and liabilities		12,213	14,714	16,784	16,809

Consolidated and Company's Statement of Cash Flows

For the year ended 31 December 2017

		Group	Group	Company	Company
		2017	2016	2017	2016
	Notes	€'000	€'000	€'000	€'000
Cash Flow from operating activities
Continuing operations
Cash used in operations		(1,255)	(219)	(321)	(377)
Income tax received/(paid)		(64)	38	-	-
Net cash used in operating activities		(1,319)	181	(321)	(377)
Cash flow from investing activities
Investment in associate		(465)	-	-	-
Purchase of intellectual property		(327)	(79)	(7)	-
Purchase of property, plant and equipment		(220)	-	-	-
Refund of Escrow		-	-	137	-
Interest received		-	12	-	-
Net cash used in investing activities		(1,012)	(67)	130	-
Cash flow from financing activities
Proceeds from issuance of ordinary shares		-	15	-	30
Repayments on borrowings		(35)	(27)	-	-
Net cash generated by financing activities		(35)	(12)	-	30
Net increase/ (decrease) in cash and cash equivalents		(2,366)	(260)	(191)	(347)
Cash and cash equivalents at beginning of year		3,541	3,798	206	554
Exchange losses on cash and cash equivalents		-	3	-	1
Cash and cash equivalents at end of year		1,175	3,541	15	206

Consolidated and Company's Statement of Changes in Shareholders' Equity

	Group
		Share capital			Share premium		Re-organisation  & Reverse acquisition reserve			Share Option reserve			Foreign currency reserve		Retained earnings			Total			Non-controlling interests			Total
		€'000			€'000		€'000			€'000			€'000		€'000			€'000			€'000			€'000
	At 1 January 2016	155			14,011		(496)			13			49		(3,826)			9,906			327			10,233
	Changes in equity for the year ended 31 December 2016
	Profit/ (Loss) for the year	-			-		-			-			-		532			532			(327)			205
	Currency translation differences	-			-		-			-			(36)		-			(36)			-			(36)
	Total comprehensive profit /(loss) for the year	-			-		-			-			(36)		532			496			(327)			169
	Transactions with the owners
	Shares issued	-			15		-			-			-		-			15			-			15
	Options issued	-			-		-			15			-		-			15			-			15
	Total contributions by and distributions to owners	-			15		-			15			-		-			30			-			30
	At 31 December 2016	155			14,026		(496)			28			13		(3,294)			10,432			-			10,432
	Changes in equity for the year ended 31 December 2017
	Profit/ (Loss) for the year	-			-		-			-			-		(1,538)			(1,538)			(-)			(1,538)
	Prior year adjustment														(78)			(78)						(78)
	Currency translation differences	-			-		-			-			(61)		-			(61)			-			(61)
	Total comprehensive profit /(loss) for the year	-			-		-			-			(61)		(1,616)			(1,677)			(-)			(1,677)
	Transactions with the owners
	Shares issued	-			-		-			-			-		-			-			-			-
	Share option provision reversed	-			-		-			(28)			-		28			(-)			-			(-)
	Total contributions by and distributions to owners	-			-		-			-			-		-			-			-			-
	At 31 December 2017	155			14,026		(496)			-			(48)		(4,882)			8,755			(-)			8,755
Company				Share capital				Share premium			Share Option reserve					Merger relief reserve			Retained earnings			Total
				€'000				€'000			€'000					€'000			€'000			€'000
As at 1 January 2016				155				14,011			13					3,531			(2,351)			15,359
Changes in equity for the year ended 31 December  2015
Total comprehensive loss for the year				-				-			-					-			527			527
Issued in year				-				15			15					-			-			30
At 31 December 2016				155				14,026			28					3,531			(1,824)			15,916
Changes in equity for the year ended 31 December 2017
Total comprehensive gain for the year				-				-			(28)					-			512			484
Issued in year				-				-			-					-			-			-
At 31 December 2017				155				14,026			-					3,531			(1,340)			16,372

1. General information

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. On 18 January 2016, the company also listed on the ESM market of the Irish Stock Exchange. The address of the registered office is 1 Berkeley Street, London, W1J 8DJ.

The principal activity of the Group is that of a Clinical Research Organisation providing a suite of consulting and clinical trial services to pharmaceutical, biotechnology and medical device organisations. The Group has a presence in the UK, Ireland, France, Netherlands, Germany and Singapore.

The financial statements are presented in Euros, the currency of the primary economic environment in which the Group's trading companies operate. The Group comprises Venn Life Sciences Holdings Plc and its subsidiary companies.

The registered number of the Company is 07514939.

2. Exceptional items

Included within Administrative expenses are exceptional items as shown below:

		2017	2016
		€'000	€'000
Exceptional items includes:
- Transaction costs relating to business combinations and acquisitions		25	79
- office relocation		-	46
Total exceptional items		25	125

3. Finance income and costs

	2017	2016
	€'000	€'000
Interest expense:
- Bank borrowings	-	-
- Interest on other loans	-	-
Finance costs	-	-
Finance income
- Interest income on cash and short-term deposits	-	12
Finance income	-	12
Net finance costs	-	12

4. Income tax expense

	2017	2016
Group	€'000	€'000
Current tax:
Current tax for the year	-	(38)
Overprovision of prior year tax charge	(127)
Total current tax (credit)/charge	(127)	(38)
Deferred tax:
Origination and reversal of temporary differences	-	(131)
Total deferred tax	-	(131)
Income tax (credit)/charge	(127)	(169)

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:

	2017	2016
	€'000	€'000
Loss before tax	(1,665)	(913)
Tax calculated at domestic tax rates applicable to UK standard rate of tax of 19% (2016 - 20%)	(316)	(183)
Tax effects of:
- Expenses not deductible for tax purposes	28	26
- Temporary timing differences	(127)	(131)
- Losses carried forward/(utilised)	288	118
Tax (credit)/charge	(127)	(169)

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

5. 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.

	2017	2016
	€'000	€'000
Profit/(loss) from continuing operations attributable to equity holders of the Company	(1,538)	(763)
Profit from discontinued operations attributable to equity holders of the Company	-	1,295
Total	(1,538)	532
Weighted average number of Ordinary Shares in issue	60,284,263	60,264,907
Basic profit/ (loss) per share	(2.55c)	0.88c

(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.

Weighted average number of shares used as the denominator

	2017	2016
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share	60,284,263	60,264,907
Adjustments for calculation of diluted earnings per share:
Options	4,985,288	3,675,000
Warrants	166,000	166,000
Total	65,436,117	64,106,573

6. Intangible fixed assets

Group	Customer relationships €'000	Trade secrets €'000	Goodwill €'000	Intellectual Property Rights €'000	Workforce €'000	Total €'000
Cost
At 1 January 2016	1,639	712	1,400	740	1,449	5,940
Addition	-	29	440	-	-	469
Exchange differences	(5)	(6)	(22)	(57)	-	(90)
On Disposal	-	-	-	(683)	-	(683)
At 31 December 2016	1,634	735	1,818	-	1,449	5,636
Amortisation
At 1 January 2016	258	104		54	86	502
Charge for year	328	71	-	-	290	689
Disposal of subsidiary	-	-	-	(54)	-	(54)
At 31 December 2016	586	175	-	-	376	1,137
Net book value
At 31 December 2016	1,048	560	1,818	-	1,073	4,499
Cost
At 1 January 2017	1,634	735	1,818	-	1,449	5,636
Addition	-	-	-	360		360
Exchange differences	2	(2)	(3)	-	1	(2)
On disposal	-	(28)	-	-	-	(28)
At 31 December 2017	1,636	705	1,815	360	1,450	5,966
Amortisation
At 1 January 2016	586	175	-	-	376	1,137
Charge for the year	327	71	-	105	292	792
On disposal of subsidiary	-	-	-	-	-	-
At 31 December 2017	913	246	-	105	668	1,932
Net book value
At 31 December 2017	723	459	1,815	255	782	4,034

No amortisation charge has been charged on the goodwill in the income statement (2016 - €nil).

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

	2017	2016
	€'000	€'000
CRO	1,815	1,818
Total	1,815	1,818

Goodwill is tested for impairment at the balance sheet date. The recoverable amount of goodwill at 31 December 2017 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 forecast approved by management for the next three years were used followed by an extrapolation of expected cash flows at a constant growth rate for a further two years. 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 2017 were as follows:

		%
Longer-term growth rate (after 2019)		5
Discount rate		20

The Group has been loss making for the last 6 years and in 2014 the Directors 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.

The Company has no intangible assets.

7. Investments in associates

Company	2017	2016
Shares in associated undertakings	€'000	€'000
At 1 January	2,007	-
Additions	465	2,371
Share of losses	(923)	(364)
Impairment	(869)	-
At 31 December 2017	680	2,007

On 24 October 2016 the Company's wholly owned subsidiary Venn Life Sciences Limited acquired a 41.51% holding in Integumen Limited, as consideration for the disposal of its holding in Innovenn UK Limited.

After the  IPO of Integumen Plc on 5^th April 2017, Venn Life Sciences invested an additional €465k to offset dilution of the original stake post IPO down to 25.59%.  The stake was further diluted to 22.19% after a round 2 investment in which  Venn Life Sciences did not participate .

The final valuation of the Integument Plc investment of €680k was determined based on the market price as at 31 December 2017.

The group has no other associates.

Name of Company                                             Note   Proportion Held     Class of Shareholding           Nature of Business

Integumen Limited                                                     1            22.19% (indirect)   Ordinary                      Human Surface Science

Notes

1.     Incorporated and registered in England and Wales.

8. Cash used in operations

	Group	Group	Company	Company
	2017	2016	2017	2016
	€'000	€'000	€'000	€'000
(Loss)/Profit before income tax	(1,665)	(913)	484	565
Discontinued operations	-	1,295	-	-
Adjustments for:
- Depreciation and amortisation	891	822	-	-
- Foreign currency translation of net assets	(61)	134	-	(38)
- Exceptional Item	25	79	-	137
- Net finance costs	-	(12)	-	-
- Share options charge	(28)	15	-	-
- Share in associated undertakings	923	(364)	-	-
Changes in working capital
- Financial assets	794	(2,007)	-	-
- Trade and other receivables	(1,424)	1,289	(296)	(967)
- Trade and other payables	(662)	(557)	(509)	(74)
Net cash used in operations	(1,255)	(219)	(321)	(377)

9. Post balance sheet events

An additional 11.0% of the shares in Venn Life Sciences (France) S.A.S  were purchased with effect from 1 January 2018, bringing the total proportion of shares held in that company to 100%. 277,550 Shares in Venn Life Sciences Holdings Plc were issued in consideration for the purchase

The percentage holding in Integumen PLC fell from 22.19% to 18.89%  on 6 January 2018 as a result of Integumen PLC issuing new shares.

10. Annual Report and Accounts

Copies of the audited Annual Report and Accounts for the year ended 31 December 2017 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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